<PAGE>
As filed with the Securities and Exchange Commission on March 19, 1999
Securities Act File No. 333-11283
Investment Company Act File Act No. 811-07797
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. 14 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 15
(Check appropriate box or boxes)
STYLE SELECT SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
The SunAmerica Center
733 Third Avenue
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 - 3rd Floor
New York, NY 10017-3204
(Name and Address for Agent for Service)
Copy to:
Margery K. Neale, Esq.
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
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)
|X| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
================================================================================
PROSPECTUS
_______, 1999
================================================================================
style select series(R)
Focus Portfolio:
A Concentrated Approach to Stock Selection
(Class Z Shares)
The Securities and Exchange Commission
has not approved or disapproved these
securities or passed upon the adequacy
of this prospectus. Any representation
to the contrary is a criminal offense.
[Logo] SunAmerica
Mutual Funds
<PAGE>
TABLE OF CONTENTS
PORTFOLIO HIGHLIGHTS....................................................... 3
FINANCIAL HIGHLIGHTS....................................................... 7
SHAREHOLDER ACCOUNT INFORMATION............................................ 8
MORE INFORMATION ABOUT THE PORTFOLIO....................................... 10
Investment Strategies................................................. 10
Glossary ............................................................. 12
Investment Terminology........................................... 12
Risk Terminology................................................. 13
PORTFOLIO MANAGEMENT....................................................... 14
FOR MORE INFORMATION ...................................................... 17
2
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PORTFOLIO HIGHLIGHTS
The Focus Portfolio is a separate investment Portfolio of Style Select Series,
Inc. ("Style Select"), a registered mutual fund. The following questions and
answers are designed to give you an overview of the Portfolio and to provide you
with information about the Portfolio's investment goal, principal strategy, and
principle investment technique. These goals may be changed without shareholder
approval, although you will receive notice of any change. There can be no
assurance that the Portfolio's investment goal will be met or that the net
return on an investment in the Portfolio will exceed what could have been
obtained through other investment or savings vehicles. More complete investment
information is provided in chart form, under "More Information About the
Portfolio," which is on page 10, and the glossary that follows on page 12.
Q: What are the Portfolio's investment goal, strategies and techniques?
- --------------------------------------------------------------------------------
Investment Principal Principal Investment Technique
Goal Investment
Strategy
- --------------------------------------------------------------------------------
long-term focus invests (including, when appropriate, by active
growth of trading) in equity securities, without regard to
capital market capitalization
- --------------------------------------------------------------------------------
[Margin Note: A focus strategy is one in which an Adviser invests in a
small number of its favorite stock-picking ideas at any given moment,
regardless of such stock's market capitalization and may include elements
of value investing and growth investing in any combination. A focus
philosophy reflects the belief that, over time, the performance of most
investment managers' "highest confidence" stocks exceeds that of their more
diversified portfolios. Each Adviser will invest in ten stocks.]
[Margin note: A "growth" oriented philosophy--that of investing in
securities believed to offer the potential for capital appreciation--
focuses on securities considered to have a historical record of
above-average growth rate; to have significant growth potential; to have
above-average earnings growth or value or the ability to sustain earnings
growth; to offer proven or unusual products or services; or to operate in
industries experiencing increasing demand.]
[Margin note: A "value" oriented philosophy--that of investing in
securities believed to be undervalued in the market--reflects a contrarian
approach, in that the potential for superior relative performance is
believed to be highest when stocks of fundamentally solid companies are out
of favor. The selection criteria is usually calculated to identify stocks
of companies
3
<PAGE>
with solid financial strength and generous dividend yields that have low
price-earnings ratios and have generally been overlooked by the market.]
[Margin note: Market capitalization represents the total market value of
the outstanding securities of a corporation.]
[Margin Note: The Portfolio engages in active trading when it frequently
trades its portfolio securities to achieve its investment goal.]
The Portfolio provides investors with access to at least three different
professional Advisers. Each Adviser manages a separate portion of the
Portfolio. SunAmerica will initially allocate the assets of the Portfolio
equally among the Advisers. SunAmerica will also allocate new cash from
share purchases and redemption requests equally among the Advisers, unless
SunAmerica determines, subject to the review of the Board, that a different
allocation of assets would be in the best interests of the Portfolio and
its shareholders.
In general, SunAmerica will not rebalance or reallocate the assets of the
Portfolio among Advisers. However, SunAmerica reserves the right, subject
to the review of the Board, to reallocate assets from one Adviser to
another when it would be in the best interests of the Portfolio and its
shareholders to do so. In some instances, where a reallocation results in
any rebalancing of the Portfolio from a previous allocation, the effect of
the reallocation will be to shift assets from a better performing Adviser
to a portion of the Portfolio with a relatively lower total return.
Q: What are the principal risks of investing in the Portfolio?
A: The following section describes the principal risks of the Portfolio, while
the chart on page 10 describes various additional risks.
Risks of Investing in Equity Securities
The Portfolio invests primarily in equity securities. As with any equity
fund, the value of your investment in the Portfolio may fluctuate in
response to stock market movements. You should be aware that the
performance of different types of equity stocks may rise or decline under
varying market conditions - for example, "value" stocks may perform well
under circumstances in which "growth" stocks in general have fallen. In
addition, individual stocks selected for the Portfolio may underperform the
market generally.
Risks of Investing in Small Companies
Stocks of smaller companies may be more volatile than, and not as readily
marketable as, those of larger companies.
4
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Risks of Non-diversification
In order to utilize its stock-picking strategy, the Portfolio is
non-diversified, which allows it to invest a larger portion of its assets
in the stock of a single company than can some other mutual funds; by
concentrating in a smaller number of stocks, the Portfolio's risk is
increased because the effect of each stock on the Portfolio's performance
is greater.
Additional Principal Risks
Shares of the Portfolio are not bank deposits and are not guaranteed or
insured by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that the
Portfolio will be able to achieve its investment goal. If the value of the
assets of the Portfolio goes down, you could lose money.
Q: What are the Portfolio's expenses?
A: The following table describes the fees and expenses that you may pay if you
buy and hold Class Z Shares of the Portfolio.
5
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<TABLE>
<CAPTION>
Focus Portfolio
-----------------------------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of
amount redeemed) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
Management Fees 1.00%
Distribution (12b-1) Fees None
Other Expenses(1)
-----------------------------------
Total Annual
Fund Operating Expenses
===================================
Expense Reimbursement(2)
Net Expenses
</TABLE>
(1) Based on estimates for the current fiscal year.
(2) The Board of Directors, including a majority of the Independent Directors,
approved the Investment Advisory and Management Agreement subject to the
net expense ratio set forth above. The Adviser may not increase such
ratios, which are contractually required by agreement with the Board of
Directors, without the approval of the Directors, including a majority of
the Independent Directors. The expense waivers and fee reimbursements will
continue indefinitely, subject to termination by the Directors, including a
majority of the Independent Directors.
Example
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Portfolio's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions and the net
expenses shown in the fee table your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Focus Portfolio
(Class Z shares)...................................................
</TABLE>
6
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If you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Focus Portfolio
(Class Z shares)...................................................
</TABLE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table for the Portfolio is intended to help you
understand the Portfolio's financial performance since inception. Certain
information reflects financial results for a single share. The total returns in
each table represent the rate that an investor would have earned (or lost) on an
investment in the Portfolio (assuming reinvestment of all dividends and
distributions). The performance shown is for Class B shares, which are not
offered in this Prospectus. Class Z shares would have had substantially similar
annual returns as those shown for Class B shares because the shares are invested
in the same portfolio of securities as the Class Z shares. The annual returns of
the Class Z shares would differ from those of the Class B shares only to the
extent that the classes do not have the same fees and expenses. This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
Portfolio's financial statements, are included in the Fund's annual report to
shareholders, which is available upon request.
FOCUS PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
ments
Net Asset Net Invest- (both Total from
Value, ment realized net Invest- Dividends from Distributions
Period beginning Income and un- ment net Investment from capital
Ended of period (loss)(1) realized Income Income gains
- ------------------------------------------------------------------------------------------------------------------
Class B
-------
<S> <C> <C> <C> <C> <C> <C>
06/08/98 - 10/31/98......... 12.50 (0.04) 0.10 0.06 $ -- $ --
<CAPTION>
Ratio of net
Invest-
ment
Net Assets Ratio of Income
Net Asset end of expenses to (loss) to
Period Total distri- Value, end Total period average net average net Portfolio
Ended butions of period Return (2) (000's) assets (4) assets (4) turnover
- ------------------------------------------------------------------------------------------------------------------------------------
Class B
-------
<S> <C> <C> <C> <C> <C> <C> <C>
06/08/98 - 10/31/98......... $ -- 12.56 0.48 45,817 2.10(3) (0.92)(3) 106
</TABLE>
o Calculated based upon average shares outstanding
o Total return is not annualized and does not reflect sales load
o Annualized
o Net of the following expense reimbursements (based on average net
assets):
<TABLE>
<CAPTION>
10/31/97 10/31/98
-------- --------
<S> <C> <C>
Focus B................ -- 0.32%
</TABLE>
7
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SHAREHOLDER ACCOUNT INFORMATION
Selecting a Share Class
The Portfolio offers Class Z shares through this prospectus. Class Z shares are
offered exclusively for sale to participants in the SunAmerica Profit Sharing
and Retirement Plan, an employee benefit plan sponsored by Fidelity Investments
(the "401(k) Plan" or the "Plan").
Opening an Account
Class Z shares of the Portfolio are offered exclusively for sale to participants
in the 401(k) Plan. Such shares may be purchased or redeemed only by the 401(k)
Plan on behalf of individual Plan participants at net asset value without any
sales or redemption charge. Class Z shares are not subject to any minimum
investment requirements. The Plan purchases and redeems shares to implement the
investment choices of individual Plan participants with respect to their
contributions in the Plan. All purchases of Portfolio shares through the Plan
will be of Class Z shares.
Inquiries regarding the purchase, redemption or exchange of Class Z shares or
the making or changing of investment choices in the 401(k) Plan should be
directed to the Fidelity Participant Center at (800) 835-5098.
Transaction Policies
Valuation of shares. The net asset value per share (NAV) for the Portfolio and
class is determined each business day at the close of regular trading on the New
York Stock Exchange (generally 4:00 p.m., Eastern time) by dividing the net
assets of each class by the number of such class's outstanding shares.
Investments for which market quotations are readily available are valued at
market at their price as of the close of regular trading on the New York Stock
Exchange for the day. All other securities and assets are valued at fair value
following procedures approved by the Directors.
Because Class Z shares are not subject to any distribution or service fees, the
net asset value per share of the Class Z shares will generally be higher than
the net asset value per share of each of Class A, Class B and Class II shares of
the Portfolio, except following the payment of dividends and distributions.
Buy and sell prices. When you buy Class Z shares, you pay the NAV. When you sell
Class Z shares, you receive the NAV.
8
<PAGE>
Execution of requests. The Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. Buy and sell requests are executed
at the next NAV to be calculated after the Fund receives your request. If your
order is received by the Fund or the Distributor before the Portfolio's close of
business (generally 4:00 p.m., Eastern time), you will receive that day's
closing price. If your order is received after that time, you will receive the
next business day's closing price. The Fund and the Distributor reserve the
right to reject any order to buy shares.
The net asset value per share at which shares of the Portfolio are purchased or
redeemed by the Plan for the accounts of individual Plan participants might be
more or less than the net asset value per share prevailing at the time that such
participants made their investment choices or made their contributions to the
Plan.
During periods of extreme volatility or market crisis, the Portfolio may
temporarily suspend the processing of sell requests, or may postpone payment of
proceeds for up to three business days or longer, as allowed by federal
securities laws.
The Portfolio may invest to a large extent in securities that are primarily
listed on foreign exchanges that trade on weekends or other days when the Fund
does not price its shares. As a result the value of the Portfolio's shares may
change on days when you will not be able to purchase or redeem your shares.
If Style Select determines that it would be detrimental to the best interests of
the remaining shareholders of Style Select to make payment of redemption
proceeds wholly or partly in cash, Style Select may pay the redemption price by
a distribution in kind of securities from Style Select in lieu of cash. However,
Style Select has made an election that requires it to pay a certain portion of
redemption proceeds in cash.
Exchanges. Class Z shareholders of one Portfolio may exchange their shares for
Class Z shares of another SunAmerica Mutual Fund on the basis of relative net
asset value per share.
Tax, Dividend and Account Policies
Account statements. In general, a shareholder will receive account statements as
follows:
o after every transaction that affects your account balance (except a
dividend reinvestment)
o after any changes of name or address of the registered owner(s)
o in all other circumstances, quarterly or annually, depending upon the
Portfolio
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
9
<PAGE>
Dividends. The Portfolio generally distributes most or all of its net earnings
in the form of dividends. Income dividends and capital gains distributions, if
any, are paid annually by the Portfolio.
Dividend Reinvestments. Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same share class on which
they were paid. Alternatively, dividends and distributions may be reinvested in
any other SunAmerica Mutual Fund that offers Class Z. You will need to complete
the relevant part of the Account Application to elect one of these other
options. For existing accounts, contact your broker or financial advisor or call
Shareholder/Dealer Services at 1-800-858-8850 to change dividend and
distribution payment options.
The per share dividends on Class Z shares will generally be higher than the per
share dividends on Class A, Class B and Class II of the same Portfolio shares as
a result of the fact that Class Z shares are not subject to any distribution or
service fee.
Taxes. As a qualified plan, the 401(k) Plan generally pays no federal income
tax. Individual participants in the 401(k) Plan should consult Plan documents
and their own tax advisers for information on the tax consequences associated
with participating in the 401(k) Plan.
MORE INFORMATION ABOUT THE PORTFOLIO
[Sidebar: Investment Strategies The Portfolio has an investment goal and a
strategy for pursuing it. The chart summarizes information about the Portfolio's
investment approach. We have included a glossary to define the investment and
risk terminology used in the chart.]
----------------------------------------------------------------------
What is the Portfolio's Long-term growth of capital
investment goal?
----------------------------------------------------------------------
What is the Portfolio's principal Focus
investment strategy?
----------------------------------------------------------------------
What is the Portfolio's principal Invests (including, when
investment technique? appropriate, by active trading) in
equity securities, without regard
to market capitalization
----------------------------------------------------------------------
What are the Portfolio's principal Equity securities
investments (under normal
market conditions)?
----------------------------------------------------------------------
What are the Portfolio's principal o market volatility
risks? o securities selection
o non-diversification
----------------------------------------------------------------------
10
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----------------------------------------------------------------------
What other investment strategies
can the Portfolio use?
o Small company stocks Yes
o Borrowing for temporary or Yes (up to 33 1/3%)
emergency purposes
o Foreign securities Yes (up to 30%)
ADRs/EDRs/GDRs Yes
o Illiquid securities Yes (up to 15%)
o Defensive investments Yes
o Short-term investments Yes (up to 25%)
----------------------------------------------------------------------
What other potential risks can o foreign exposure
affect the Portfolio? o emerging markets
o illiquidity
o small market capitalization
----------------------------------------------------------------------
11
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Glossary
Investment Terminology
Growth of capital is growth of the value of an investment.
Active trading means that the Portfolio may engage in frequent trading of
portfolio securities to achieve its investment goal. In addition, because the
Portfolio may sell a security without regard to how long it has held the
security, active trading may have tax consequences for certain shareholders,
involving a possible increase in short-term capital gains or losses. Active
trading may result in high portfolio turnover and correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by the Portfolio. During periods of increased market volatility, active trading
may be more pronounced.
Equity securities include common and preferred stocks, convertible securities,
warrants and rights.
Small companies have market capitalizations of $1 billion or less.
The Portfolio may borrow for temporary or emergency purposes including to meet
redemptions. Borrowing may exaggerate changes in the net asset value of the
Portfolio shares and in the yield on the Portfolio's securities. Borrowing will
cost the Portfolio interest expense and other fees. The cost of borrowing may
reduce the Portfolio's return.
Foreign securities are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary
Receipts (ADRs) or other similar securities that convert into foreign
securities, such as European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs).
Illiquid securities are subject to legal or contractual restrictions that may
make them difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid. Certain restricted securities (such
as Rule 144A securities) are not generally considered illiquid because of their
established trading market.
Defensive investments include high quality fixed income securities and money
market instruments. The Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When the
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, the Portfolio may not achieve its
investment goal.
Short-term investments include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of
12
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deposit. These securities provide the Portfolio with sufficient liquidity to
meet redemptions and cover expenses.
Risk Terminology
Market volatility: The stock market as a whole could go up or down (sometimes
dramatically). This could affect the value of the securities in the Portfolio's
portfolio.
Securities selection: A strategy used by the Portfolio, or securities selected
by an Adviser, may fail to produce the intended return.
Non-diversification: By concentrating in a smaller number of stocks, the
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.
Foreign exposure: While investing internationally may reduce risk, by increasing
the diversification of the Portfolio's overall portfolio, investors in foreign
countries are also subject to a number of risks. A principal risk is that
fluctuations in the exchange rates between the U.S. dollar and foreign
currencies may negatively affect an investment. In addition, there may be less
publicly available information about a foreign company and it may not be subject
to the same uniform accounting, auditing and financial reporting standards as
U.S. companies. Foreign governments may not regulate securities markets and
companies to the same degree as the U.S. government. Foreign investments will
also be affected by local political or economic developments and governmental
actions. Consequently, foreign securities may be less liquid, more volatile and
more difficult to price than U.S. securities. These risks are heightened when
the issuer is in an emerging market.
Emerging market: An emerging market country is one that the World Bank, the
International Finance Corporation, or the United Nations or its authorities has
determined to have a low or middle income economy. Historical experience
indicates that the markets of emerging market countries have been more volatile
than more developed markets; however, such markets can provide higher rates of
return to investors.
Euro conversion: Effective January 1, 1999, several European countries
irrevocably fixed their existing national currencies to a new single European
currency unit, the "euro." Certain European investments may be subject to
additional risks as a result of this conversion. These risks include adverse tax
and accounting consequences, as well as difficulty in processing transactions.
SunAmerica is aware of such potential problems and has coordinated efforts to
prevent or alleviate their adverse impact on the Portfolio. There can be no
assurance that the Portfolio will not suffer any adverse consequences as a
result of the euro conversion.
Illiquidity: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.
13
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Small market capitalization: Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. It may be difficult to obtain reliable
information and financial data about these companies. Consequently, the
securities of smaller companies may not be as readily marketable and may be
subject to more abrupt or erratic market movements.
PORTFOLIO MANAGEMENT
Manager SunAmerica Asset Management Corp. selects the Advisers for the
Portfolio, provides various administrative services, and supervises the daily
business affairs of the Portfolio. The Advisers are responsible for decisions to
buy and sell securities for the Portfolio, selection of broker-dealers and
negotiation of commission rates for their respective portion of the Portfolio.
SunAmerica may terminate any agreement with an Adviser without shareholder
approval. Moreover, SunAmerica has received an exemptive order from the
Securities and Exchange Commission that permits SunAmerica, subject to certain
conditions, to enter into agreements relating to the Portfolio with Advisers
approved by the Board of Directors without obtaining shareholder approval. The
exemptive order also permits SunAmerica, subject to the approval of the Board
but without shareholder approval, to employ new Advisers for the Portfolio,
change the terms of particular agreements with Advisers or continue the
employment of existing Advisers after events that would otherwise cause an
automatic termination of a subadvisory agreement. Shareholders of the Portfolio
have the right to terminate an agreement with an Adviser at any time by a vote
of the majority of the outstanding voting securities. Shareholders will be
notified of any Adviser changes. The order also permits Style Select to disclose
to shareholders the Advisers' fees only in the aggregate for the Portfolio. For
the fiscal year ended October 31, 1998, the Portfolio paid SunAmerica a fee
equal to 0.85% of average daily net assets.
SunAmerica, located in the SunAmerica Center, 733 Third Avenue, New York, New
York 10017, was organized in 1982 under the laws of Delaware, and managed,
advised or administered assets in excess of $15 billion as of October 31, 1998.
In addition to managing Style Select, SunAmerica serves as adviser, manager
and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Seasons
Series Trust, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc., and
SunAmerica Series Trust.
The Advisers for the Focus Portfolio are Bramwell Capital Management, Inc.
("Bramwell"), Jennison Associates LLC ("Jennison") and Marsico Capital
Management, LLC ("Marsico").
Bramwell Capital Management, Inc. Bramwell is a Delaware corporation located at
745 Fifth Avenue, New York, NY 10151. As of April 30, 1998, Bramwell had under
management approximately $605 million in assets.
14
<PAGE>
Elizabeth R. Bramwell serves as the Portfolio Manager for Bramwell's portion of
the Portfolio. Ms. Bramwell founded Bramwell in 1994 and has been the Chief
Executive Officer ever since. From 1987 until February 1994, Ms. Bramwell was
President, Chief Investment Officer, Portfolio Manager and Trustee of The
Gabelli Growth Fund.
Jennison Associates LLC. Jennison is a Delaware limited liability company
located at 466 Lexington Avenue, New York, NY 10017. As of December 31, 1998,
Jennison had approximately $46.4 billion in assets under management for
institutional and mutual fund clients.
Spiros "Sig" Segalas serves as the Portfolio Manager for Jennison's portion of
the Portfolio. Mr. Segalas is a founding director of Jennison, which was
established in 1969, and he has been a Director and Equity Portfolio Manager
ever since. In addition, Mr. Segalas has served as President and Chief
Investment Officer of Jennison since 1993 and 1971, respectively.
Marsico Capital Management, LLC. Marsico is a Colorado limited liability company
located at 1200 17th Street, Suite 1300, Denver, CO 80202. As of January 31,
1999, Marsico had approximately $4.75 billion in assets under management.
Thomas F. Marsico serves as the Portfolio Manager for Marsico's portion of the
Portfolio. Mr. Marsico has been the Chairman and Chief Executive Officer of
Marsico since he formed Marsico in 1997. From 1988 through 1997, Mr. Marsico
served as the portfolio manager of the Janus Twenty Fund and from 1991 through
1997, Mr. Marsico served as the portfolio manager of the Janus Growth & Income
Fund.
Distributor. SunAmerica Capital Services, Inc. serves as the Distributor of
Class Z shares and incurs the expenses of distributing the Portfolios' Class Z
shares under a Distribution Agreement with respect to the Portfolios, none of
which are reimbursed by or paid for by the Portfolios. There is no distribution
plan in effect for the Class Z shares.
Administrator. SunAmerica Fund Services, Inc., serves as the Administrator for
Class Z shares and receives reimbursement from the Fund of its costs, which
include all direct transfer agency fees and out-of-pocket expenses allocated to
providing services to Class Z shares.
Year 2000. Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way they encode and calculate dates. This
is popularly known as the "Year 2000 Issue." The Year 2000 Issue could
potentially have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing and account services. We recognize
the importance of the Year 2000 Issue and are taking appropriate steps necessary
in preparation for the year 2000. Style Select's management fully anticipates
that their systems will be adapted in time for the year 2000, and to further
this goal they have coordinated a plan to repair, adapt or replace their systems
as necessary. They have also obtained representations from their outside service
providers that they are doing the same. Style Select's management completed
their plan significantly by the end of the 1998 calendar year and expects to
perform
15
<PAGE>
appropriate systems testing during the 1999 calendar year. If the problem has
not been fully addressed, however, Style Select, and the Portfolio, could be
negatively impacted. The Year 2000 Issue could also have a negative impact on
the companies in which the Portfolio invests, which could hurt the Portfolio's
investment returns.
16
<PAGE>
(OUTSIDE BACK COVER)
FOR MORE INFORMATION
The following documents contain more information about the Portfolio and
are available free of charge upon request:
Annual and Semi-annual Reports. Contain financial statements,
performance data and information on portfolio holdings. The reports
also contain a written analysis of market conditions and investment
strategies that significantly affected the Portfolio's performance
during applicable period.
Statement of Additional Information (SAI). Contains additional
information about the Portfolio's policies, investment restrictions
and business structure. This prospectus incorporates the SAI by
reference.
You may obtain copies of these documents or ask questions about the
Portfolio by contacting:
SunAmerica Fund Services, Inc.
Mutual Fund Operations
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
1-800-858-8850
or by calling your broker or financial advisor.
Information about the Portfolio (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolio is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549-6009.
You should rely only on the information contained in this prospectus. No
one is authorized to provide you with any different information.
17
<PAGE>
[Logo] SunAmerica
Mutual Funds
DISTRIBUTOR: SunAmerica Capital Services
INVESTMENT COMPANY ACT
File No. 811-07797
<PAGE>
STYLE SELECT SERIES
Statement of Additional Information
dated _____, 1999
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"). Each Portfolio is managed by SunAmerica Asset Management
Corp. ("SunAmerica"). With the exception of the International Equity Portfolio,
which has two Advisers, the assets of each Portfolio are normally allocated
among at least three investment advisers (each, an "Adviser"), each of which is
independently responsible for advising its respective portion of the Portfolio's
assets. The Advisers may include SunAmerica, and otherwise will consist of
professional investment advisers selected by SunAmerica subject to the review
and approval of the Fund's Board of Directors. In choosing Advisers, SunAmerica
will seek to obtain, within each Portfolio's overall objective, a distinct
investment style.
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Fund's Prospectus dated March 1, 1999 and _____,
1999. To obtain a Prospectus free of charge, please call the Fund at (800)
858-8850. Each Prospectus is incorporated by reference into this Statement of
Additional Information and this Statement of Additional Information is
incorporated by reference into the Prospectus. The Fund's audited financial
statements are incorporated into this Statement of Additional Information by
reference to its 1998 annual report to shareholders. You may request a copy of
the annual report at no charge by calling (800) 858-8850 or writing the Fund at
SunAmerica Fund Services, Inc., Mutual Fund Operations, The SunAmerica Center,
733 Third Avenue, New York, New York 10017-3204. Capitalized terms used herein
but not defined have the meanings assigned to them in the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Fund .................................................................... B-3
Investment Objectives and Policies........................................... B-3
Investment Restrictions..................................................... B-38
Directors and Officers....................................................... B-40
Advisers, Distributor and Administrator...................................... B-44
Portfolio Transactions and Brokerage......................................... B-53
Additional Information Regarding Purchase of Shares.......................... B-56
Additional Information Regarding Redemption of Shares........................ B-63
Exchange Privilege........................................................... B-64
Determination of Net Asset Value............................................. B-65
Performance Data............................................................. B-66
Dividends, Distributions and Taxes........................................... B-72
Retirement Plans............................................................. B-77
Description of Shares........................................................ B-78
Additional Information....................................................... B-81
Financial Statements......................................................... B-88
Appendix............................................................. Appendix-1
</TABLE>
<PAGE>
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.
B-2
<PAGE>
THE FUND
The Fund, organized as a Maryland corporation on July 3, 1996, is a
non-diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund consists
of nine Portfolios; each offers Class A, Class B and Class II shares. Class A
and Class B shares of the Mid-Cap Growth Portfolio, Aggressive Growth Portfolio,
the Value Portfolio and the International Equity Portfolio commenced offering on
November 19, 1996. Class C of those Portfolios commenced offering March 6, 1997.
Class A, Class B and Class C shares of the Large-Cap Growth Portfolio, the
Large-Cap Blend Portfolio, the Large-Cap Value Portfolio and Small-Cap Value
Portfolio commenced offering October 15, 1997. On March 31, 1998, the Directors
approved the creation of the Focus Portfolio, which commenced offering on June
1, 1998. On December 1, 1998, Class C shares of each of the Portfolios except
Focus Portfolio were redesignated as Class II shares. The Aggressive Growth
Portfolio, Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value
Portfolio, International Equity Portfolio and Focus Portfolio each also offers
Class Z shares. The Class Z shares of the Aggressive Growth Portfolio, Large-Cap
Value Portfolio, Value Portfolio, Small-Cap Value Portfolio and International
Equity Portfolio commenced offering on April 1, 1998. The Class Z shares of the
Focus Portfolio commenced offering on ______, 1999.
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 the Portfolios may
employ, which are described under "More Information about the Portfolios -
Investment Strategies" in the Prospectus, are discussed more fully below. Unless
otherwise specified, each Portfolio may invest in the following securities. The
stated percentage limitations are applied to an investment at the time of
purchase unless indicated otherwise.
Warrants and Rights. 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. Rights represent a preemptive right of stockholders to
purchase additional shares of a stock at the time of a new issuance before the
stock is offered to the general public, allowing the stockholder to retain the
same ownership percentage after the new stock offering.
Convertible Securities and Preferred Stocks. Convertible securities may be
debt securities or preferred stock with a conversion feature. Traditionally,
convertible securities have paid dividends or interest at rates higher than
common stocks but lower than non-convertible securities. They generally
participate in the appreciation or depreciation of the underlying stock into
which they are convertible, but to a lesser degree. In recent years,
convertibles have been developed that
B-3
<PAGE>
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.
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. While such companies may realize more
substantial growth than larger, more established companies, they may also be
subject to some additional risks. It may be difficult to obtain reliable
information and financial data on such companies and the securities of these
small companies may not be readily marketable, making it difficult to dispose of
shares when desirable. A risk of investing in smaller, emerging companies is
that they often are at an earlier stage of development and therefore have
limited product lines, market access for such products, financial resources and
depth in management as compared to larger, more established companies, and their
securities may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. In addition, certain smaller issuers may face difficulties in obtaining
the capital necessary to continue in operation and may go into bankruptcy, which
could result in a complete loss of an investment. Smaller companies also may be
less significant factors within their industries and may have difficulty
withstanding competition from larger companies. If other investment companies
and investors who invest in such issuers trade the same securities when a
Portfolio attempts to dispose of its holdings, the Portfolio may receive lower
prices than might otherwise be obtained.
Companies with a market capitalization of $1 billion to $5 billion
("Mid-Cap Companies") may also suffer more significant losses as well as realize
more substantial growth than larger, more established issuers. Thus, investments
in such companies tend to be more volatile and somewhat speculative.
Foreign Securities. Investments in foreign securities offer potential
benefits not available from investments solely in securities of domestic issuers
by offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets.
Each Portfolio may invest in securities of foreign issuers in the form of
American Depositary Receipts (ADRs). Each Portfolio except the Focus Portfolio
may also invest in securities of foreign issuers in the form of European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) or other similar
securities convertible into securities of foreign issuers. The Focus Portfolio
may invest in U.S. dollar denominated securities of foreign companies. ADRs are
securities, typically issued by a U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by a foreign
issuer and deposited with the depository. ADRs may be sponsored or unsponsored.
A sponsored ADR is issued by a depository that has an exclusive relationship
with the issuer of the underlying security. An unsponsored ADR may be issued by
any number of U.S. depositories. Holders of unsponsored ADRs generally bear all
the costs associated with establishing
B-4
<PAGE>
the unsponsored ADR. The depository of an unsponsored ADR is under no obligation
to distribute shareholder communications received from the underlying issuer or
to pass through to the holders of the unsponsored ADR voting rights with respect
to the deposited securities or pool of securities. A Portfolio may invest in
either type of ADR. Although the U.S. investor holds a substitute receipt of
ownership rather than direct stock certificates, the use of the depository
receipts in the United States can reduce costs and delays as well as potential
currency exchange and other difficulties. The Portfolio may purchase securities
in local markets and direct delivery of these ordinary shares to the local
depository of an ADR agent bank in the foreign country. Simultaneously, the ADR
agents create a certificate that settles at the 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. Each Portfolio except the Focus 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."
Investments in foreign securities, including securities of emerging market
countries, present special additional investment risks and considerations not
typically associated with investments in domestic securities, including
reduction of income by foreign taxes; fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than the U.S.;
greater difficulties in commencing lawsuits; higher brokerage commission rates
and custodian fees than the U.S.; increased possibilities in some countries of
expropriation, confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; the imposition of foreign taxes on
investment income derived from such countries; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign economies.
The performance of investments in securities denominated in a foreign
currency ("non-dollar securities") will depend on, among other things, the
strength of the foreign currency against the dollar and the interest rate
environment in the country issuing the foreign currency. Absent other events
that could otherwise affect the value of non-dollar securities (such as a change
in the political climate or an issuer's credit quality), appreciation in the
value of the foreign currency generally can be expected to increase the value of
a Portfolio's non-dollar securities in terms of U.S. dollars. A rise in foreign
interest rates or decline in the value of foreign currencies relative to the
U.S. dollar generally can be expected to depress the value of the Portfolio's
non-dollar securities. Currencies
B-5
<PAGE>
are evaluated on the basis of fundamental economic criteria (e.g., relative
inflation levels and trends, growth rate forecasts, balance of payments status
and economic policies) as well as technical and political data.
Because the Portfolios may invest in securities that are listed primarily
on foreign exchanges that trade on weekends or other days when the Fund does not
price its shares, the value of the Portfolios' shares may change on days when a
shareholder will not be able to purchase or redeem shares.
Foreign Investment Companies. Each Portfolio except the Focus Portfolio may
invest in domestic closed-end investment companies that invest in certain
foreign markets, including developing countries or emerging markets. The
Large-Cap Growth, Aggressive Growth and International Equity Portfolios may
invest also in foreign investment companies that 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 be
permitted only 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 will not 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.
The Large-Cap Growth Portfolio, Aggressive Growth Portfolio and
International Equity Portfolio may invest in Passive Foreign Investment
Companies ("PFICs"), which are any foreign corporations that generate certain
amounts of passive income or hold certain amounts of assets for the production
of passive income. Passive income includes dividends, interest, royalties, rents
and annuities. To the extent that a Portfolio invests in PFICs, income tax
regulations may require the Portfolio to elect to recognize income associated
with the PFIC prior to the actual receipt of any such income in order to avoid
adverse tax consequences.
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
B-6
<PAGE>
amount. The interest rate on certain fixed income securities, called "floating
rate instruments," changes whenever there is a change in a designated base rate.
The market values of fixed income securities tend to vary inversely with
the level of interest rates -- when interest rates rise, their values will tend
to decline; when interest rates decline, their values generally will tend to
rise. The potential for capital appreciation with respect to variable rate
obligations or floating rate instruments will be less than with respect to
fixed-rate obligations. Long-term instruments are generally more sensitive to
these changes than short-term instruments. The market value of fixed income
securities and therefore their yield are also affected by the perceived ability
of the issuer to make timely payments of principal and interest.
The Large-Cap Growth Portfolio, Mid-Cap Growth Portfolio and Aggressive
Growth Portfolio may invest in debt securities that the Advisers expect have the
potential for capital appreciation and which are rated as low as "BBB" by
Standard & Poor's Corporation, a division of the McGraw-Hill Companies
("Standard & Poor's"), 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).
The Large-Cap Blend Portfolio may invest up to 35% of its total assets in
securities of issuers other than Large-Cap Companies, which may include debt
securities that the Advisers expect to have the potential for capital
appreciation, including debt securities rated below "BBB" by Standard & Poor's,
or "Baa" by Moody's, or, if unrated, determined by the Advisers to be of
equivalent quality (junk bonds).
The Large-Cap Value Portfolio, Value Portfolio and Small-Cap Value
Portfolio may invest in debt securities that the Advisers expect to have the
potential for capital appreciation and which are rated as low as "BBB" by
Standard & Poor's, 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).
The International 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 Standard & Poor's, or below "Baa" by
Moody's or, if unrated, determined by the Advisers to be of equivalent quality
(junk bonds).
The Focus Portfolio currently invests 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 or in instruments issued, guaranteed
or insured by the U.S. government, its agencies or instrumentalities.
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. The Focus Portfolio may
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<PAGE>
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.
Investment Grade. A designation applied to intermediate and long-term
corporate debt securities rated within the highest four rating categories
assigned by Standard & Poor's (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.
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. For these securities, the payment
of principal and interest is unconditionally guaranteed by the U.S. government.
They are of the highest possible credit quality. These securities are subject to
variations in market value due to fluctuations in interest rates, but if held to
maturity, are guaranteed by the U.S. government to be paid in full.
A Portfolio may also invest in securities issued by agencies of the U.S.
government or instrumentalities of the U.S. government. These obligations,
including those guaranteed by federal agencies or instrumentalities, may or may
not be backed by the "full faith and credit" of the United States. Obligations
of the Government National Mortgage Association ("GNMA"), the Farmers Home
Administration ("FMHA") and the Export-Import Bank are backed by the full faith
and credit of the United States.
Each Portfolio may also invest in securities issued by U.S. government
instrumentalities and certain federal agencies that are neither direct
obligations of, nor are they guaranteed by, the U.S. Treasury. However, they
involve federal sponsorship in one way or another. For example, some are backed
by specific types of collateral; some are supported by the issuer's right to
borrow from the Treasury; some are supported by the discretionary authority of
the Treasury to purchase certain obligations of the issuer; and others are
supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, the Federal National Mortgage Association ("FNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Land Banks, Central Bank for
Cooperatives, Federal Intermediate Credit Banks and Federal Home Loan Banks. In
the case of securities not backed by the full faith and credit of the United
States, a Portfolio must look principally to the agency issuing or guaranteeing
the obligation for ultimate repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitments.
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 further discussed
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
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rate mortgages. The U.S. government or the issuing agency guarantees the payment
of interest and principal of these securities. However, the guarantees do not
extend to the securities' yield or value, which are likely to vary inversely
with fluctuations in interest rates. These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments, including prepayments, on the mortgages
underlying the certificate, net of certain fees.
The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through certificates.
Mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. Thus, the
actual life of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally result from
the sale of the underlying property or the refinancing or foreclosure of
underlying mortgages. The occurrence of prepayments is affected by a wide range
of economic, demographic and social factors and, accordingly, it is not possible
to predict accurately the average life of a particular pool. Yield on such pools
is usually computed by using the historical record of prepayments for that pool,
or, in the case of newly-issued mortgages, the prepayment history of similar
pools. The actual prepayment experience of a pool of mortgage loans may cause
the yield realized by the Portfolio to differ from the yield calculated on the
basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as does the value of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise on a comparable basis with other debt securities because of the
prepayment feature of pass-through securities. The reinvestment of scheduled
principal payments and unscheduled prepayments that the Portfolio receives may
occur at higher or lower rates than the original investment, thus affecting the
yield of the Portfolio. Monthly interest payments received by the Portfolio have
a compounding effect, which may increase the yield to shareholders more than
debt obligations that pay interest semi-annually. Because of those factors,
mortgage-backed securities may be less effective than U.S. Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Accelerated prepayments adversely affect yields for pass-through
securities purchased at a premium (i.e., at a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-through securities purchased at a discount. A
Portfolio may purchase mortgage-backed securities at a premium or at a discount.
The following is a description of GNMA, FNMA and FHLMC certificates, the
most widely available mortgage-backed securities:
GNMA Certificates. GNMA Certificates are mortgage-backed securities that
evidence an undivided interest in a pool or pools of mortgages. GNMA
Certificates that a Portfolio may purchase are the modified pass-through type,
which entitle the holder to receive timely payment of
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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 FMHA, or guaranteed by the Veterans Administration. The GNMA guarantee is
authorized by the National Housing Act and is backed by the full faith and
credit of the United States. The GNMA is also empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments required
under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosure will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that a Portfolio
has purchased the certificates at a premium in the secondary market.
FHLMC Certificates. FHLMC issues two types of mortgage pass-through
securities: mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs") (collectively, "FHLMC Certificates"). PCs resemble GNMA
Certificates in that each PC represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. The FHLMC guarantees
timely monthly payment of interest (and, under certain circumstances, principal)
of PCs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. government.
FNMA Certificates. 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
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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 that are the general obligations of the issuer thereof (e.g., the U.S.
government, a U.S. government instrumentality, or a private issuer). Such bonds
generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e., the character of payments of principal and interest is not passed
through, and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
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 structured to apply principal payments and prepayments of
the mortgage assets to two or more classes concurrently on a proportionate or
disproportionate basis. These simultaneous payments are taken into account in
calculating the final distribution date of each class.
A wide variety of CMOs may be issued in the parallel pay or sequential pay
structures. These securities include accrual certificates (also known as
"Z-Bonds"), which accrue interest at a specified rate only until all other
certificates having an earlier final distribution date have been
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retired and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay CMOs that
generally require that specified amounts of principal be applied on each payment
date to one or more classes of CMOs (the "PAC Certificates"), even though all
other principal payments and prepayments of the mortgage assets are then
required to be applied to one or more other classes of the certificates. The
scheduled principal payments for the PAC Certificates generally have the highest
priority on each payment date after interest due has been paid to all classes
entitled to receive interest currently. Shortfalls, if any, are added to the
amount payable on the next payment date. The PAC Certificate payment schedule is
taken into account in calculating the final distribution date of each class of
PAC. In order to create PAC tranches, one or more tranches generally must be
created to absorb most of the volatility in the underlying mortgage assets.
These tranches tend to have market prices and yields that are much more volatile
than the PAC classes.
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 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.
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Payment Expectations - High-yield bonds may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest
rate market, a Portfolio would have to replace the security with a lower
yielding security, resulting in a decreased return for investors.
Conversely, a high-yield bond's value will decrease in a rising interest
rate market, as will the value of the Portfolio's assets. If the Portfolio
experiences unexpected net redemptions, this may force it to sell
high-yield bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and possibly
reducing the Portfolio's rate of return.
Liquidity and Valuation - There may be little trading in the secondary
market for particular bonds, which may affect adversely a Portfolio's
ability to value accurately or dispose of such bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of high-yield bonds, especially in a thin
market.
Asset-Backed Securities. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose corporations,
are backed by a pool of assets, such as credit card and automobile loan
receivables, representing the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors to make payments on underlying assets, the securities may
contain elements of credit support that fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default by
an obligor on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of assets,
to ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Protection against losses resulting from ultimate default ensures
payment through insurance policies or letters of credit obtained by the issuer
or sponsor from third parties. A Portfolio will not pay any additional or
separate fees for credit support. The degree of credit support provided for each
issue is generally based on historical information respecting the level of
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credit risk associated with the underlying assets. Delinquency or loss in excess
of that anticipated or failure of the credit support could adversely affect the
return on an investment in such a security.
Zero Coupon Bonds, Step-Coupon Bonds, Deferred Interest Bonds and PIK
Bonds. Fixed income securities in which 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 that provide that
the issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments may experience greater
volatility in market value due to changes in interest rates and other factors
than debt obligations that make regular payments of interest. A Portfolio will
accrue income on such investments for tax and accounting purposes, as required,
that is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
under disadvantageous circumstances to satisfy the Portfolio's distribution
obligations.
Loan Participations. 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 that
sold the loan participations. Because loan participations are undivided
interests in a loan made by the issuing bank, the Portfolio may not have the
right to proceed against the loan participations borrower without the consent of
other holders of the loan participations. In addition, loan participations will
be treated as illiquid if, in the judgment of the Adviser, they can not be sold
within seven days.
Short-Term Debt Securities. As described in the Prospectus, in addition to
its 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
(except that the Focus Portfolio may not invest in 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). The types of short-term and temporary defensive investments
in which a Portfolio may invest are described below:
Money Market Securities - Money market securities may include
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, repurchase agreements, commercial paper, bankers'
acceptances, time deposits and certificates of deposit. In addition, Janus
Capital Corporation, Neuberger Berman,
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LLC and T. Rowe Price may invest idle cash of the assets of the Portfolios
under their control in money market mutual funds that they manage. Such an
investment may entail additional fees.
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
purchase commercial paper only if 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 and by Moody's, or (b) other
commercial paper deemed on the basis of the issuer's creditworthiness to be
of a quality appropriate for the Portfolio. See the Appendix 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
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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 the Appendix 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
involving only securities in which it could otherwise invest and with selected
banks, brokers and securities dealers whose financial condition is monitored by
the Adviser, subject to the guidance of the Board of Directors. In such
agreements, the seller agrees to repurchase the security at a mutually
agreed-upon time and price. The period of maturity is usually quite short,
either overnight or a few days, although it may extend over a number of months.
The repurchase price is in excess of the purchase price by an amount that
reflects an agreed-upon rate of return effective for the period of time a
Portfolio's money is invested in the security. Whenever a Portfolio enters into
a repurchase agreement, it obtains 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 under the repurchase agreement defaults,
the Portfolio may incur a loss if the value of the collateral securing the
repurchase agreements has declined and may incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Portfolio may be delayed or limited. The 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
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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.
Diversification. Each Portfolio is classified as "non-diversified" for
purposes of the 1940 Act, which means that it is not limited by the 1940 Act
with regard to the portion of assets that may be invested in the securities of a
single issuer. To the extent any such Portfolio makes investments in excess of
5% of its assets in the securities of a particular issuer, its exposure to the
risks associated with that issuer is increased.
Because each Portfolio may invest, and the Focus Portfolio invests, in a
limited number of issuers, the performance of particular securities may
adversely affect the Portfolio's performance or subject the Portfolio to greater
price volatility than that experienced by diversified investment companies. Each
Portfolio intends to maintain the required level of diversification and
otherwise conduct its operations in order to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a regulated investment company under the Code, a
Portfolio must, among other things, diversify its holdings so that, at the end
of each quarter of the taxable year, (i) at least 50% of the market value of the
Portfolio's assets is represented by cash, U.S. government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Portfolio's
total assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. government securities or the
securities of other regulated investment companies).
In the unlikely event application of a Portfolio's strategy would result in
a violation of these requirements of the Code, the Portfolio would be required
to deviate from its strategy to the extent necessary to avoid losing its status
as a regulated investment company.
Derivatives 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,
except that the Focus Portfolio will not write calls on securities that are
traded on foreign securities exchanges. 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). If a call written by the
Portfolio is exercised, the Portfolio forgoes any profit from any increase in
the market price above the call price of the underlying investment on which the
call was written.
In addition, the Portfolio could experience capital losses, which might
cause previously distributed short-term capital gains to be re-characterized as
a non-taxable return of capital to shareholders.
Each Portfolio may also write put options ("puts"), which give the holder
of the option the right to sell the underlying security to the Portfolio at the
stated exercise price. A Portfolio will
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receive a premium for writing a put option that increases the Portfolio's
return. A Portfolio writes only covered put options, which means that so long as
the Portfolio is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash or liquid securities denominated
in U.S. dollars or non-U.S. currencies with a securities depository with a value
equal to or greater than the exercise price of the underlying securities.
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; and call and put options on equity and debt securities,
Futures, stock and bond indices and foreign currencies, except that the Focus
Portfolio will not use foreign currency futures contracts or forward contracts
on foreign currencies. All puts and calls on securities, interest rate Futures
or stock and bond index Futures or options on such Futures purchased or sold by
a Portfolio will normally be listed on either (1) a national securities or
commodities exchange or (2) over-the-counter markets. However, each such
Portfolio may buy and sell options and Futures on foreign equity indexes and
foreign fixed income securities. Because the markets for these instruments are
relatively new and still developing, the ability of such a Portfolio to engage
in such transactions may be limited. Derivatives may be used to attempt to: (i)
protect against possible declines in the market value of a Portfolio's portfolio
resulting from downward trends in the equity and debt securities markets
(generally due to a rise in interest rates); (ii) protect a Portfolio's
unrealized gains in the value of its equity and debt securities that have
appreciated; (iii) facilitate selling securities for investment reasons; (iv)
establish a position in the equity and debt securities markets as a temporary
substitute for purchasing particular equity and debt securities; or (v) reduce
the risk of adverse currency fluctuations.
Forward foreign currency exchange contracts, currency options and currency
swaps may be entered into 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. A Portfolio may use currency contracts
and options to cross-hedge, which involves selling or purchasing instruments in
one currency to hedge against changes in exchange rates for a different currency
with a pattern of correlation. To limit any leverage in connection with currency
contract transactions for non-hedging purposes, a Portfolio will segregate cash
or liquid securities in an amount sufficient to meet its payment obligations in
these transactions or otherwise "cover" the obligation. Initial margin deposits
made in connection with currency futures transactions or premiums paid for
currency options traded over-the-counter or on a commodities exchange may each
not exceed 5% of a Portfolio's total assets in the case of non-bona fide hedging
transactions. Each such 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 segregate, cash or liquid securities equal to the net amount, if any, of
the excess of the Portfolio's obligations over its entitlement with respect to
swap transactions. To the extent that the net amount of a swap is held in a
segregated account consisting of cash or liquid securities, the Fund believes
that swaps do not constitute senior securities under the 1940 Act and,
accordingly, they will not be treated as being
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subject to the Portfolio's borrowing restrictions. The use of currency swaps is
a highly specialized activity that 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.
A Portfolio's use of Futures and options on Futures will be incidental to
its activities in the underlying cash market. When hedging to attempt to protect
against declines in the market value of the portfolio, to permit a Portfolio to
retain unrealized gains in the value of portfolio securities that have
appreciated, or to facilitate selling securities for investment reasons, a
Portfolio could: (i) sell Futures; (ii) purchase puts on such Futures or
securities; or (iii) write calls on securities held by it or on Futures. When
hedging to attempt to protect against the possibility that portfolio securities
are not fully included in a rise in value of the debt securities market, a
Portfolio could: (i) purchase Futures, or (ii) purchase calls on such Futures or
on securities. When hedging to protect against declines in the dollar value of a
foreign currency-denominated security, a Portfolio could: (i) purchase puts on
that foreign currency and on foreign currency Futures; (ii) write calls on that
currency or on such Futures; or (iii) enter into forward contracts on foreign
currencies at a lower rate than the spot ("cash") rate. Additional information
about the derivatives 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 increase
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
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at its expiration date and a Portfolio will lose its premium payment and the
right to purchase the underlying investment.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise price
during the option period. Writing a put covered by segregated liquid assets
equal to the exercise price of the put has the same economic effect to a
Portfolio as writing a covered call. The premium a Portfolio receives from
writing a put option represents a profit as long as the price of the underlying
investment remains above the exercise price. However, a Portfolio has also
assumed the obligation during the option period to buy the underlying investment
from the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put expires unexercised, a
Portfolio (as the writer of the put) realizes a gain in the amount of the
premium. If the put is exercised, a Portfolio must fulfill its obligation to
purchase the underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that case, a
Portfolio may incur a loss, equal to the sum of the sale price of the underlying
investment and the premium received minus the sum of the exercise price and any
transaction costs incurred.
A Portfolio may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit a Portfolio to write another put option to the extent that the exercise
price thereof is secured by the deposited assets, or to utilize the proceeds
from the sale of such assets for other investments by the Portfolio. A Portfolio
will realize a profit or loss from a closing purchase transaction if the cost of
the transaction is less or more than the premium received from writing the
option.
When a Portfolio purchases a put, it pays a premium and has the right to
sell the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment a Portfolio owns enables the Portfolio to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not exercised
or resold, the put will become worthless at its expiration date, and the
Portfolio will lose its premium payment and the right to sell the underlying
investment pursuant to the put. The put may, however, be sold prior to
expiration (whether or not at a profit).
Buying a put on an investment a Portfolio does not own permits the
Portfolio either to resell the put or buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not exercised,
the put will become worthless on its expiration date. In the event of a decline
in the stock market, a Portfolio could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio securities.
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
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<PAGE>
as the put writer continues, it may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring a Portfolio to take
delivery of the underlying security against payment of the exercise price. A
Portfolio has no control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time prior to the
termination of its obligation as the writer of the put. This obligation
terminates upon expiration of the put, or such earlier time at which a Portfolio
effects a closing purchase transaction by purchasing a put of the same series as
that previously sold. Once a Portfolio has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
Each Portfolio may use spread transactions for any lawful purpose
consistent with the Portfolio's investment objective. A Portfolio may purchase
covered spread options from securities dealers. Such covered spread options are
not presently exchange-listed or exchange-traded. The purchase of a spread
option gives a Portfolio the right to put, or sell, a security that it owns at a
fixed dollar spread or fixed yield spread in relationship to another security
that the Portfolio does not own, but which is used as a benchmark. The risk to a
Portfolio in purchasing covered spread options is the cost of the premium paid
for the spread option and any transaction costs. In addition, there is no
assurance that closing transactions will be available. The purchase of spread
options will be used to protect a Portfolio against adverse changes in
prevailing credit quality spreads, i.e., the yield spread between high quality
and lower quality securities. Such protection is provided only during the life
of the spread option.
Options on Foreign Currencies. Each Portfolio except the Focus 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 the Portfolio owns or has the right to acquire and 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.
As with other kinds of option transactions, the writing of an option on
currency will constitute only a partial hedge, up to the amount of the premium
received. A Portfolio could be required to purchase or sell currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on currency may constitute an effective hedge against exchange rate
fluctuations; however, in the event of exchange rate movements adverse to a
Portfolio's position, the Portfolio may forfeit the entire amount of the premium
plus related transaction costs.
Options on Securities Indices. As noted above, each Portfolio 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)
B-21
<PAGE>
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 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.
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<PAGE>
Purchases or sales of stock or bond index futures contracts are used for
hedging purposes to attempt to protect a Portfolio's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Portfolio may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Portfolio's securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the Futures position. When a Portfolio is not fully invested
in the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Portfolio intends to purchase. As such purchases are made,
the corresponding positions in stock or bond index futures contracts will be
closed out.
As noted above, each Portfolio except the Focus Portfolio may purchase and
sell foreign currency futures contracts for hedging to attempt to protect its
current or intended investments from fluctuations in currency exchange rates.
Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. A Portfolio may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the Futures contracts. However, if the value of
the foreign currency increases relative to the dollar, the Portfolio's loss on
the foreign currency futures contract may or may not be offset by an increase in
the value of the securities since a decline in the price of the security stated
in terms of the foreign currency may be greater than the increase in value as a
result of the change in exchange rates.
Conversely, a Portfolio could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing Futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When a Portfolio purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Portfolio will sustain
losses on its futures position which could reduce or eliminate the benefits of
the reduced cost of portfolio securities to be acquired.
Options on Futures. As noted above, Portfolios may purchase and write
options on interest rate futures contracts, stock and bond index futures
contracts, forward contracts and foreign currency futures contracts, except that
the Focus Portfolio will not purchase or write options on 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
B-23
<PAGE>
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 the
Portfolio intends to purchase. If a put or call option a Portfolio has written
is exercised, the Portfolio will incur a loss that will be reduced by the amount
of the premium it receives. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
Options on Futures positions, a Portfolio's losses from exercised Options on
Futures may to some extent be reduced or increased by changes in the value of
portfolio securities.
A Portfolio may purchase Options on Futures for hedging purposes, instead
of purchasing or selling the underlying Futures contract. For example, where a
decrease in the value of portfolio securities is anticipated as a result of a
projected market-wide decline or changes in interest or exchange rates, a
Portfolio could, in lieu of selling a Futures contract, purchase put options
thereon. In the event that such decrease occurs, it may be offset, in whole or
part, by a profit on the option. If the market decline does not occur, the
Portfolio will suffer a loss equal to the price of the put. Where it is
projected that the value of securities to be acquired by a Portfolio will
increase prior to acquisition, due to a market advance or changes in interest or
exchange rates, a Portfolio could purchase call Options on Futures, rather than
purchasing the underlying Futures contract. If the market advances, the
increased cost of securities to be purchased may be offset by a profit on the
call. However, if the market declines, the Portfolio will suffer a loss equal to
the price of the call but the securities the Portfolio intends to purchase may
be less expensive.
Forward contracts on foreign currencies
A forward contract on foreign currencies 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 on
foreign currencies. The Focus Portfolio does not utilize forward contracts on
foreign currencies.
A Portfolio may use forward contracts on foreign currencies to protect
against uncertainty in the level of future exchange rates. The use of forward
contracts on foreign currencies 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 on
foreign currencies 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.
B-24
<PAGE>
A Portfolio may enter into forward contracts on foreign currencies 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 on foreign currencies, 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 on foreign currencies 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 on foreign currencies to sell an amount of that foreign currency
approximating the value of some or all of the portfolio securities denominated
in (or affected by fluctuations in, in the case of ADRs) such foreign currency,
or when a Portfolio believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward contract on
foreign currencies to buy that foreign currency for a fixed dollar amount. In
this situation a Portfolio may, in the alternative, enter into a forward
contract on foreign currencies to sell a different foreign currency for a fixed
U.S. dollar amount where the Portfolio believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. dollar value of the currency in which portfolio
securities of the Portfolio are denominated ("cross-hedged"). A Portfolio may
also hedge investments denominated in a foreign currency by entering into
forward currency contracts with respect to a foreign currency that is expected
to correlate to the currency in which the investments are denominated ("proxy
hedging").
The 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 on foreign currencies 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 on foreign currencies 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 on foreign currencies price.
Unanticipated changes in currency prices may result in poorer overall
performance for a Portfolio than if it had not entered into such contracts.
B-25
<PAGE>
The precise matching of the forward contract on foreign currencies 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 on foreign currencies 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 on foreign currencies 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 on foreign currencies
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 on
foreign currencies, requiring it to purchase a specified currency by entering
into a second contract entitling it to sell the same amount of the same currency
on the maturity date of the first contract. A Portfolio would realize a gain or
loss as a result of entering into such an offsetting forward contract on foreign
currencies 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 on foreign
currencies varies with factors such as the currencies involved, the length of
the contract period and the market conditions then prevailing. Because forward
contracts on foreign currencies 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 on foreign currencies.
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.
B-26
<PAGE>
Additional Information About Derivatives 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 that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. A Portfolio's
option activities may affect its turnover rate and brokerage commissions. The
exercise by a Portfolio of puts on securities will result in the sale of related
investments, increasing portfolio turnover. Although such exercise is within a
Portfolio's control, holding a put might cause the Portfolio to sell the related
investments for reasons that would not exist in the absence of the put. A
Portfolio will pay a brokerage commission each time it buys a put or call, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those that would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts of
leverage. The leverage offered by trading in options could result in a
Portfolio's net asset value being more sensitive to changes in the value of the
underlying investments.
In the future, each Portfolio may employ strategies that are not presently
contemplated but which may be developed, to the extent such investment methods
are consistent with a Portfolio's investment objectives, legally permissible and
adequately disclosed.
Regulatory Aspects of Derivatives
Each Portfolio 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.
B-27
<PAGE>
Transactions in options by a Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors acting in
concert, regardless of whether the options were written or purchased on the same
or different exchanges or are held in one or more accounts or through one or
more exchanges or brokers. Thus, the number of options a Portfolio may write or
hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain other
sanctions. Due to requirements under the 1940 Act, when a Portfolio purchases a
Future, the Portfolio will 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
Participation in the options or Futures markets and in currency exchange
transactions involves investment risks and transaction costs to which a
Portfolio would not be subject absent the use of these strategies. If the
Adviser's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to a
Portfolio may leave the Portfolio in a worse position than if such strategies
were not used. There is also a risk in using short hedging by selling Futures to
attempt to protect against decline in value of the portfolio securities (due to
an increase in interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of the
Portfolio's securities. The ordinary spreads between prices in the cash and
Futures markets are subject to distortions due to differences in the natures of
those markets. First, all participants in the Futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close Futures contracts through
offsetting transactions that could distort the normal relationship between the
cash and Futures markets. Second, the liquidity of the Futures markets depends
on participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the Futures markets could be reduced, thus producing distortion.
Third, from the point-of-view of speculators, the deposit requirements in the
Futures markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the Futures
markets may cause temporary price distortions.
If a Portfolio establishes a position in the debt securities markets as a
temporary substitute for the purchase of individual debt securities (long
hedging) by buying Futures and/or calls on such Futures or on debt securities,
it is possible that the market may decline; if the Adviser then determines not
to invest in such securities at that time because of concerns as to possible
further market decline or for other reasons, the Portfolio will realize a loss
on the derivatives 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
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<PAGE>
repurchase agreements that have a maturity of longer than seven days,
interest-rate swaps, currency swaps, caps, floors and collars, or in other
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale. Historically, illiquid
securities have included securities subject to contractual or legal restrictions
on resale because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), securities that 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 that have not been registered
under the Securities Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. There will generally be a lapse of time between a mutual fund's decision
to sell an unregistered security and the registration of such security promoting
sale. Adverse market conditions could impede a public offering of such
securities. When purchasing unregistered securities, each of the Portfolios will
seek to obtain the right of registration at the expense of the issuer (except in
the case of Rule 144A securities, as described below).
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
For example, restricted securities that the Board of 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, or certain private placements of
commercial paper issued in reliance on an exemption from such Act pursuant to
Section 4(2) thereof, may be deemed to be liquid for purposes of this
restriction. This investment practice could have the effect of increasing the
level of illiquidity in the Portfolio to the extent that qualified institutional
buyers (as defined in Rule 144A) become for a time uninterested in purchasing
these restricted securities. In addition, a repurchase agreement that by its
terms can be liquidated before its nominal fixed-term on seven days or less
notice is regarded as a liquid instrument. The Adviser will monitor the
liquidity of such restricted securities subject to the supervision of the
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
B-29
<PAGE>
(4) the nature of the security and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting offers and
the mechanics of the transfer). Subject to the applicable limitation on illiquid
securities investments, a Portfolio may acquire securities issued by the U.S.
government, its agencies or instrumentalities in a private placement.
Commercial paper issues in which a Portfolio's net assets may be invested
include securities issued by major corporations without registration under the
Securities Act in reliance on the exemption from such registration afforded by
Section 3(a)(3) thereof, and commercial paper issued in reliance on the
so-called private placement exemption from registration afforded by Section 4(2)
of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted
as to disposition under the federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described above. A Portfolio's 15%
limitation on investments in illiquid securities 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.
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 that accrue during the period of the
loan. To borrow the security, the Portfolio also may be required to pay a
premium, which would increase the cost of the security sold. The proceeds of the
short sale will be retained by the broker, to the extent necessary to meet
margin requirements, until the short position is closed out. Until the Portfolio
replaces a borrowed security, the Portfolio will maintain daily a segregated
account, containing cash or liquid securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the 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
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<PAGE>
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.
Hybrid Instruments; Indexed/Structured Securities. Hybrid Instruments,
including indexed or structured securities, combine the elements of futures
contracts or options with those of debt, preferred equity or a depository
instrument. The Focus Portfolio will not invest in Hybrid Instruments.
Generally, a Hybrid Instrument will be a debt security, preferred stock,
depository share, trust certificate, certificate of deposit or other evidence of
indebtedness on which a portion of or all interest payments, and/or the
principal or stated amount payable at maturity, redemption or retirement, is
determined by reference to prices, changes in prices, or differences between
prices, of securities, currencies, intangibles, goods, articles or commodities
(collectively "Underlying Assets") or by another objective index, economic
factor or other measure, such as interest rates, currency exchange rates,
commodity indices, and securities indices (collectively "Benchmarks"). Thus,
Hybrid Instruments may take a variety of forms, including, but not limited to,
debt instruments with interest or principal payments or redemption terms
determined by reference to the value of a currency or commodity or securities
index at a future point in time, preferred stock with dividend rates determined
by reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity.
Hybrid Instruments can be an efficient means of creating exposure to a
particular market, or segment of a market, with the objective of enhancing total
return. For example, a Portfolio may wish to take advantage of expected declines
in interest rates in several European countries, but avoid the transactions
costs associated with buying and currency-hedging the foreign bond positions.
One solution would be to purchase a U.S. dollar-denominated Hybrid Instrument
whose redemption price is linked to the average three year interest rate in a
designated group of countries. The redemption price formula would provide for
payoffs of greater than par if the average interest rate was lower than a
specified level, and payoffs of less than par if rates were above the specified
level. Furthermore, the Portfolio could limit the downside risk of the security
by establishing a minimum redemption price so that the principal paid at
maturity could not be below a predetermined minimum level if interest rates were
to rise significantly. The purpose of this arrangement, known as a 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.
B-31
<PAGE>
The risks of investing in Hybrid Instruments reflect a combination of the
risks of investing in securities, options, futures and currencies. Thus, an
investment in a Hybrid Instrument may entail significant risks that are not
associated with a similar investment in a traditional debt instrument that has a
fixed principal amount, is denominated in U.S. dollars or bears interest either
at a fixed rate or a floating rate determined by reference to a common,
nationally published Benchmark. The risks of a particular Hybrid Instrument
will, of course, depend upon the terms of the instrument, but may include,
without limitation, the possibility of significant changes in the Benchmarks or
the prices of Underlying Assets to which the instrument is linked. Such risks
generally depend upon factors unrelated to the operations or credit quality of
the issuer of the Hybrid Instrument 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.
Hybrid Instruments may also carry liquidity risk since the instruments are
often "customized" to meet the portfolio needs of a particular investor, and,
therefore, the number of investors that are willing and able to buy such
instruments in the secondary market may be smaller than that for more
traditional debt securities. Under certain conditions, the redemption (or sale)
value of such an investment could be zero. In addition, because the purchase and
sale of Hybrid Instruments could take place in an over-the-counter market
without the guarantee of a central clearing organization or in a transaction
between the Portfolio and the issuer of the Hybrid Instrument, the
creditworthiness of the counterparty or issuer of the Hybrid Instrument would be
an additional risk factor the Portfolio would have to consider and monitor.
Hybrid Instruments also may not be subject to regulation of the CFTC, which
generally regulates the trading of commodity futures by U.S. persons, the
Securities and Exchange Commission (the "SEC"), which regulates the offer and
sale of securities by and to U.S. persons, or any other governmental regulatory
authority.
B-32
<PAGE>
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 Agreements. Each Portfolio
except the Focus Portfolio may purchase or sell securities on a "when-issued" or
"delayed delivery" basis and may purchase securities on a firm commitment basis.
Although a Portfolio will enter into such transactions for the purpose of
acquiring securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the Portfolio may dispose of a commitment prior
to settlement. "When-issued" or "delayed delivery" refers to securities whose
terms and indenture are available and for which a market exists, but which are
not available for immediate delivery. When such transactions are negotiated, the
price (which is generally expressed in yield terms) is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. During the period between commitment by a Portfolio and settlement
(generally within two months but not to exceed 120 days), no payment is made for
the securities purchased by the purchaser, and no interest accrues to the
purchaser from the transaction. Such securities are subject to market
fluctuation, and the value at delivery may be less than the purchase price. A
Portfolio will maintain a segregated account with its Custodian, consisting of
cash or liquid securities at least equal to the value of purchase commitments
until payment is made. A Portfolio will likewise segregate liquid assets in
respect of securities sold on a delayed delivery basis.
A Portfolio will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When a Portfolio engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure to do so may result in a Portfolio losing
the opportunity to obtain a price and yield considered to be advantageous. If a
Portfolio chooses to (i) dispose of the right to acquire a when-issued security
prior to its acquisition or (ii) dispose of its right to deliver or receive
against a firm commitment, it may incur a gain or loss. (At the time a Portfolio
makes a commitment to purchase or sell a security on a when-issued or firm
commitment basis, it records the transaction and reflects the value of the
security purchased, or if a sale, the proceeds to be received in determining its
net asset value.)
To the extent a Portfolio engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objectives and policies and not for the purposes
of investment leverage. A Portfolio enters into such transactions only with the
intention of actually receiving or delivering the securities, although
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.
B-33
<PAGE>
When-issued transactions and firm commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Portfolio might sell securities in
its portfolio on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and rising
prices, a Portfolio might sell portfolio securities and purchase the same or
similar securities on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields. One form of when-issued
or delayed delivery security that 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.
Borrowing. As a matter of fundamental policy each Portfolio is authorized to
borrow up to 33-1/3% of its total assets for temporary or emergency purposes. In
seeking to enhance investment performance, each Portfolio (except the Focus
Portfolio, notwithstanding Fundamental Investment Restriction number 5) 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.
In seeking to enhance investment performance, each Portfolio except the
Focus Portfolio may increase its ownership of securities by borrowing at fixed
rates of interest up to the maximum extent permitted under the 1940 Act
(presently 50% of net assets) and investing the borrowed funds, subject to the
restrictions stated in the respective Prospectus. Any such borrowing will be
made only pursuant to the requirements of the 1940 Act and will be made only to
the extent that the value of each Fund's assets less its liabilities, other than
borrowings, is equal to at least 300% of all borrowings including the proposed
borrowing. If the value of a Portfolio's assets, so computed, should fail to
meet the 300% asset coverage requirement, the Portfolio is required, within
three business days, to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a time
when independent investment judgment would not dictate such sale. Interest on
money borrowed is an expense the Portfolio would not otherwise incur, so that it
may have little or no net investment income during periods of substantial
borrowings. Since substantially all of a Portfolio's assets fluctuate in value,
but borrowing obligations are fixed
B-34
<PAGE>
when the Portfolio has outstanding borrowings, the net asset value per share of
a Portfolio correspondingly will tend to increase and decrease more when the
Portfolio's assets increase or decrease in value than would otherwise be the
case. A Portfolio's policy regarding use of leverage is a fundamental policy,
which may not be changed without approval of the shareholders of the Portfolio.
Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio may lend portfolio securities in amounts up to
33-1/3% of total assets to brokers, dealers and other financial institutions,
provided, that such loans are callable at any time by the Portfolio and are at
all times secured by cash or equivalent collateral. In lending its portfolio
securities, a Portfolio receives income while retaining the securities'
potential for capital appreciation. The advantage of such loans is that a
Portfolio continues to receive the interest and dividends on the loaned
securities while at the same time earning interest on the collateral, which will
be invested in high-quality short-term debt securities, including repurchase
agreements. A loan may be terminated by the borrower on one business day's
notice or by a Portfolio at any time. If the borrower fails to maintain the
requisite amount of collateral, the loan automatically terminates, and the
Portfolio could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will be made only to
firms deemed by the Adviser to be creditworthy. On termination of the loan, the
borrower is required to return the securities to a Portfolio; and any gain or
loss in the market price of the loaned security during the loan would inure to
the Portfolio. Each 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 that 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 that are the subject of the loan.
Reverse Repurchase Agreements. A Portfolio may enter into reverse
repurchase agreements with brokers, dealers, domestic and foreign banks or other
financial institutions that have been determined by the 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
B-35
<PAGE>
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 that matures on
or before the forward settlement date of the dollar roll transaction. A
Portfolio will enter into only 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 the Portfolio is required to
repurchase may be worth less than an instrument 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 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.
B-36
<PAGE>
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 enter into interest-rate swaps only on a net basis,
which means that the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest-rate swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest-rate swaps is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make. If the other party to an
interest-rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that the Portfolio is contractually entitled to
receive. The use of interest-rate swaps is a highly specialized activity, 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, SunAmerica believes such obligations do not
constitute senior securities and accordingly will not treat them as being
subject to its borrowing restrictions. The net amount of the excess, if any, of
the Portfolio's obligations over its entitlements with respect to each
interest-rate swap will be accrued on a daily basis and an amount of cash or
liquid securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by a custodian that
satisfies the requirements of the 1940 Act. The Portfolio will also establish
and maintain such segregated accounts with respect to its total obligations
under any interest-rate swaps that are not entered into on a net basis and with
respect to any interest-rate caps, collars and floors that are written by the
Portfolio.
A Portfolio will enter into these transactions only with banks and
recognized securities dealers believed by the 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 a reference pool
or pools of mortgages.
B-37
<PAGE>
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.
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 that do not presently exist but may be developed in the future,
provided that each such investment is consistent with the Portfolio's investment
objectives, policies and restrictions and is otherwise legally permissible under
federal and state laws. The Prospectus and Statement of Additional Information
will be amended or supplemented as appropriate to discuss any such new
investments.
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, that
deal in real estate or interests therein); provided that a Portfolio may hold or
sell real estate acquired as a result of the ownership of securities.
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.
B-38
<PAGE>
4. Make loans to others except for (a) the purchase of debt securities; (b)
entering into repurchase agreements; (c) the lending of its portfolio
securities; and (d) as otherwise permitted by exemptive order of the SEC.
5. Borrow money, except that (i) each Portfolio may borrow 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, as described
above, and engage in similar investment strategies described in the Prospectus
and Statement of Additional Information, as they may be amended from time to
time.
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
B-39
<PAGE>
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, SunAmerica Money Market Funds, Inc. and the Fund. An
asterisk indicates those Directors who are interested persons of the Fund within
the meaning of the 1940 Act.
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
S. James Coppersmith, 66 Director Retired; formerly, President and General
7 Elmwood Road Manager, WCVB-TV, a division of the
Marblehead, MA 01945 Hearst Corporation, (1982 to 1994);
Director/ Trustee of SAMF and Anchor
Series Trust ("AST").
Samuel M. Eisenstat, 58 Chairman of the Attorney, solo practitioner; Of Counsel,
430 East 86th Street Board Kramer, Levin, Naftalis & Frankel;
New York, NY 10028 Chairman of the Boards of
Directors/Trustees of SAMF and AST.
Stephen J. Gutman, 55 Director Partner and Managing Member of B.B.
515 East 79th Street Associates LLC (menswear specialty
New York, NY 10021 retailing and other activities) since June
1988; Director/Trustee of SAMF and
AST.
Peter A. Harbeck,*45 Director and Director and President, SunAmerica Asset
The SunAmerica Center President Management Corp. ("SunAmerica");
733 Third Avenue Director, SunAmerica Capital Services,
New York, NY 10017-3204 Inc. ("SACS"), since August 1993;
Director and President, SunAmerica Fund
Services, Inc. ("SAFS"), since May 1988;
President, SAMF and AST; Executive Vice
President and Chief Operating Officer,
SunAmerica, from May 1988 to August
1995; Executive Vice President, SACS,
from November 1991 to August 1995;
Director, Resources Trust Company.
- -------------------------------------------------------------------------------------------------
</TABLE>
B-40
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
Sebastiano Sterpa, 69 Director Founder and Chairman of the Board of the
73473 Mariposa Drive Sterpa Group (real estate) since 1962;
Palm Desert, CA 92260 Director, Real Estate Business Service
and Countrywide Financial; Director/
Trustee of SAMF.
J. Steven Neamtz,*38 Vice President Executive Vice President, SunAmerica,
The SunAmerica Center since April 1996; Director and
733 Third Avenue President, SACS, since April 1996;
New York, NY 10017-3204 formerly, Executive Vice President, New
England Funds, L.P. from July 1990 to
April 1996.
Peter C. Sutton, *34 Treasurer Senior Vice President, SunAmerica, since
The SunAmerica Center April 1997; Treasurer, SAMF and AST,
733 Third Avenue since February 1996; Vice President and
New York, NY 10017-3204 Assistant Treasurer of SAST and APF,
since 1994; Vice President, Seasons,
since April 1997; formerly, Vice
President, SunAmerica, from 1994 to
1997; Controller, SAMF and AST, from
March 1993 to February 1996; Assistant
Controller, SAMF and AST, from 1990 to
1993.
Robert M. Zakem, 41 Secretary and Chief Senior Vice President and General
The SunAmerica Center Compliance Officer Counsel, SunAmerica, since April 1993;
733 Third Avenue Executive Vice President, General
New York, NY 10017-3204 Counsel and Director, SACS, since August
1993; Vice President, General Counsel
and Assistant Secretary, SAFS, since
January 1994; Vice President, SunAmerica
Series Trust, Anchor Pathway and Seasons
Series Trust; Assistant Secretary,
SunAmerica Series Trust and Anchor
Pathway Fund, since September 1993;
Assistant Secretary, Seasons Series
Trust, since April 1997; formerly, Vice
President and Associate General Counsel,
SunAmerica, from March 1992 to April
1993.
</TABLE>
The Directors of the Fund are responsible for the overall supervision of
the operation of the Fund and each Portfolio and perform various duties imposed
on directors of investment companies by the 1940 Act and under the Fund's
articles of incorporation. Directors and officers of the Fund are also Directors
and officers of some or all of the other investment companies managed,
administered or
B-41
<PAGE>
advised by SunAmerica, and distributed by SunAmerica Capital Services ("SACS" or
the "Distributor") and other affiliates.
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 SAMF and/or AST, a pro rata
portion of which, based on relative net assets, is borne by the Fund.
In addition, each Disinterested Director also serves on the Audit Committee
of the Board of Directors. The Audit Committee is charged with recommending to
the full Board the engagement or discharge of the Fund's independent
accountants; directing investigations into matters within the scope of the
independent accountants' duties; reviewing with the independent accountants the
audit plan and results of the audit; approving professional services provided by
the independent accountants and other accounting firms prior to the performance
of such services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; and preparing and submitting
Committee minutes to the full Board. Each member of the Audit Committee receives
an aggregate of up to $5,000 in annual compensation for serving on the Audit
Committees of SAMF and/or AST, 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 SAMF and AST have adopted the SunAmerica
Disinterested Trustees' and Directors' Retirement Plan (the "Retirement Plan")
effective January 1, 1993 for the Disinterested 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 SAMF or AST (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. With respect to Sebastiano Sterpa, the Disinterested
Directors have determined to make an exception to existing policy and allow Mr.
Sterpa to remain on the Board past age 70, until he has served for ten years.
Mr. Sterpa will cease accruing retirement benefits upon reaching age 70,
although such benefits will continue to accrue interest as provided for in the
Retirement Plan. 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, 1998. The Directors who are interested persons
of the Fund receive no compensation.
B-42
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from Registrant
Compensation Accrued as Part of Benefits Upon and Fund Complex
Director from Fund Fund Expenses* Retirement*+ Paid to Directors*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S. James Coppersmith $ 9,302 $41,035 $29,670 $65,000
- -----------------------------------------------------------------------------------------------------------------------
Samuel M. Eisenstat** 9,740 36,130 46,083 69,000
- -----------------------------------------------------------------------------------------------------------------------
Stephen J. Gutman 9,302 37,402 60,912 65,000
- -----------------------------------------------------------------------------------------------------------------------
Sebastiano Sterpa*** 9,399 25,201 7,900 43,333
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Information is for the five investment companies in the complex that pay
fees to these directors/trustees. The complex consists of SAMF and AST.
** 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.
As of February 15, 1999, the Directors and officers of the Fund owned in
the aggregate less than 1% of each class of each Portfolio's total outstanding
shares.
The following shareholders owned of record or beneficially 5% or more of
the indicated Portfolio Class' shares outstanding as of December 31, 1998: Value
Portfolio-Class B-Merrill, Lynch, Pierce, Fenner & Smith, Inc. ("Merrill
Lynch"), Jacksonville, FL 32246-owned of record 8%; Class II, Merrill Lynch,
Jacksonville, FL 32246-owned of record 21%; Class Z-Fidelity Investments
Institutional Operations Co. ("FIIOC") As Agent for Certain employee benefit
Plans, Covington, KY 41015-owned of record 91%; FIIOC As Agent for Certain
Non-Qualified Employee Benefit Plans, Covington, KY 41015-owned of record 8%;
Aggressive Growth Portfolio-Class B-Merrill Lynch, Jacksonville, FL 32246-owned
of record 9%; Class II-Merrill Lynch, Jacksonville, FL 32246-owned of record
35%; Class Z-FIIOC As Agent for Certain Employee Benefit Plans, Covington, KY
41015-owned of record 61%; FIIOC As Agent for Certain Non-Qualified Employee
Benefit Plans, Covington, KY 41015-owned of record 38%; Mid-Cap Growth
Portfolio-Class B-Merrill Lynch, Jacksonville, FL 32246-owned of record 9%;
Class II-Merrill Lynch, Jacksonville, FL 32246-owned of record 29%;
International Equity Portfolio-Class A-SunAmerica Inc., Account B, Los Angeles,
CA 90067-owned beneficially 5%; Class B-Merrill Lynch, Jacksonville FL
32246-owned of record 6%; Class II-Merrill Lynch, Jacksonville, FL 32246-owned
of record 23%; Class Z-FIIOC As Agent for Certain Employee Benefit Plans,
Covington, KY 41015-owned of record 47%; FIIOC As Agent for Certain
Non-Qualified Employee Benefit Plans, Covington, KY 41015-owned of record 52%;
Small Cap Value Portfolio-Class B-Merrill Lynch, Jacksonville, FL 32246-owned of
record 9%; Class II-Merrill Lynch, Jacksonville, FL 32246-owned of record 20%;
Class Z-FIIOC As Agent for Certain Employee Benefit Plans, Covington KY
41015-owned of record 43%; FIIOC As Agent for Certain Non-Qualified Employee
Benefit Plans, Covington, KY 41015-owned of record 56%; Large-Cap Value
Portfolio-Class B-Merrill Lynch, Jacksonville, FL 32246-owned of record 7%;
Class II-Merrill Lynch, Jacksonville, Fl 33246-owned of record 17%; Class
Z-FIIOC As Agent for certain Employee Benefit Plans, Covington, KY 41015-owned
of record 37%; FIIOC As Agent for Certain Non-Qualified Employee Benefit Plans,
Covington KY 41015-owned of record 62%; Large-Cap Growth Portfolio-Class
B-Merrill Lynch,
B-43
<PAGE>
Jacksonville, FL 32246-owned of record 9%; Class II-Merrill Lynch, Jacksonville,
FL 32246-owned of record 15%; Focus Portfolio-Class B-Merrill Lynch,
Jacksonville, FL 32246-owned of record 6%. 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, which was 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 a wholly-owned subsidiary of SunAmerica Inc., which in turn is a wholly-owned
subsidiary of American International Group, Inc. ("AIG"), the leading U.S.-based
international insurance organization. AIG, a Delaware corporation, is a holding
company that through its subsidiaries is primarily engaged in a broad range of
insurance and insurance related activities and financial services in the United
States and abroad. AIG, through its subsidiaries, is also engaged in a range of
financial services activities. AIG's asset management operations are carried out
primarily by AIG Global Investment Group, Inc., a direct wholly-owned subsidiary
of AIG, and its affiliates (collectively, "AIG Global"). AIG Global manages the
investment portfolios of various AIG subsidiaries, as well as third party
assets, and is responsible for product design and origination, marketing and
distribution of third party asset management products, including offshore and
private investment funds and direct investment. As of June 30, 1998, AIG Global
managed more than $86 billion of assets, of which approximately $10.8 billion
represented assets of unaffiliated third parties. AIG Capital Management Corp.,
an indirect wholly-owned subsidiary of AIG Global Investment Group, Inc., serves
as investment adviser to The AIG Money Market Fund, a separate series of The
Advisors' Inner Circle Fund, a registered investment company. In addition, AIG
Global Investment Corp., an AIG Global group company, serves as the
sub-investment adviser to an unaffiliated registered investment company. AIG
companies do not otherwise provide investment advice to any registered
investment companies.
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
B-44
<PAGE>
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 that 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.
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 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 II 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 II shares for the
International Equity Portfolio. With respect to the Focus Portfolio, SunAmerica
has agreed to waive fees or reimburse expenses, if necessary, to keep operating
expenses at or below an annual rate of 1.45% of the assets of Class A shares and
2.10% of the assets of Class B and Class II shares for the Portfolio. SunAmerica
also may voluntarily waive or reimburse additional amounts to increase the
investment return to a Portfolio's investors. Further, any waivers or
reimbursements made by SunAmerica with respect to a Portfolio are subject to
recoupment from that Portfolio within the following two 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 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 continues 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.
B-45
<PAGE>
The Advisers.
American Century Investment Management, Inc. ("American Century"), Bankers Trust
Company ("BT"), Berger Associates, Inc. ("Berger"), David L. Babson & Co., Inc.
("Babson"), Davis Selected Advisers, L.P. ("Davis"), Bramwell Capital
Management, Inc. ("Bramwell"), The Glenmede Trust Company ("Glenmede"), Janus
Capital Corporation ("Janus"), Jennison Associates LLC ("Jennison"), Lazard
Asset Management ("Lazard"), L. Roy Papp & Associates ("Papp"), Marsico Capital
Management, LLC ("Marsico"), Miller Anderson & Sherrerd, LLP ("MAS"), Montag &
Caldwell, Inc. ("Montag & Caldwell"), Morgan Stanley Dean Witter Investment
Management ("MSDW Investment Management"), Neuberger Berman, LLC ("Neuberger
Berman"), Rowe Price-Fleming International, Inc. ("Rowe-Fleming"), T. Rowe Price
Associates, Inc. ("T. Rowe Price"), Warburg Pincus Asset Management, Inc.
("Warburg"), and Wellington Management Company, LLP ("Wellington Management")
act as Advisers to certain of the portfolios pursuant to various subadvisory
agreements with SunAmerica. SunAmerica advises a portion of the Aggressive
Growth Portfolio.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO PORTFOLIO MANAGEMENT ALLOCATED
AMONG THE FOLLOWING ADVISERS
- --------------------------------------------------------------------------------
<S> <C>
Large-Cap Growth Portfolio Janus
Papp
Montag & Caldwell
- --------------------------------------------------------------------------------
Mid-Cap Growth Portfolio MAS
T. Rowe Price
Wellington Management
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio Janus
SunAmerica
Warburg
- --------------------------------------------------------------------------------
Large-Cap Blend Portfolio Lazard
MSDW Investment Management
T. Rowe Price
- --------------------------------------------------------------------------------
Large-Cap Value Portfolio Babson
Davis
Wellington Management
- --------------------------------------------------------------------------------
Value Portfolio American Century
Davis
Neuberger Berman
- --------------------------------------------------------------------------------
Small-Cap Value Portfolio Berger*
Lazard
Glenmede
- --------------------------------------------------------------------------------
International Equity Portfolio BT
Rowe-Fleming
- --------------------------------------------------------------------------------
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO PORTFOLIO MANAGEMENT ALLOCATED
AMONG THE FOLLOWING ADVISERS
- --------------------------------------------------------------------------------
<S> <C>
Focus Portfolio Bramwell
Jennison
Marsico
- --------------------------------------------------------------------------------
</TABLE>
* Pursuant to an agreement between Berger and Perkins, Wolf, McDonnell &
Company ("PWM"), PWM manages Berger's portion of the Small Cap Value
Portfolio.
Each of the other Advisers is independent of SunAmerica and discharges its
responsibilities subject to the policies of the Directors and the supervision of
SunAmerica, which pays the other Advisers' fees. American Century is a
wholly-owned subsidiary of American Century Companies, Inc. Babson is a
wholly-owned subsidiary of DLB Acquisition Corp., a holding company controlled
by MassMutual Holding Company, a holding company, and wholly-owned subsidiary of
Massachusetts Mutual Life Insurance, a mutual life insurance company. Berger is
a wholly-owned subsidiary of Kansas City Southern Industries, Inc. ("KCSI"). BT
is a wholly-owned subsidiary of Bankers Trust New York Corporation. Bramwell is
wholly-owned by Elizabeth R. Bramwell who owns all of the outstanding capital
stock. Davis' sole general partner is Venture Advisers, Inc. Shelby M.C. Davis
is the controlling shareholder of the general partner. Glenmede is a
wholly-owned subsidiary of The Glenmede Corporation. Janus is controlled by
KCSI, which owns approximately 83% of the outstanding voting stock of Janus.
KCSI is a publicly traded holding company with principal operations in rail
transportation 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.
Jennison is wholly-owned by The Prudential Insurance Company of America. Lazard
is a division of Lazard Freres & Co. LLC, a New York limited liability company.
Papp is controlled by its partners, L. Roy Papp and Rosellen C. Papp. Thomas F.
Marsico owns 50% of Marsico's voting stock and Bank of America owns 50% of
Marsico's voting stock. MAS is a wholly-owned indirect subsidiary of Morgan
Stanley Dean Witter & Co., a financial services company. MSDW Investment
Management is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
Montag & Caldwell is an indirect wholly-owned subsidiary of Alleghany
Corporation. Robert H. Perkins owns 49% of PWM's outstanding common stock.
Rowe-Fleming is owned by T. Rowe Price, Flemings and Jardine Fleming Group
Limited. T. Rowe Price is a publicly traded company. Warburg is indirectly
controlled by Warburg, Pincus & Co., which has no businesses other than being a
holding company of Warburg and its affiliates. The following persons are
managing partners of Wellington Management: Robert W. Doran, Duncan M. McFarland
and John R. Ryan.
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.
B-47
<PAGE>
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 including when the assets managed by an
Adviser exceed that portion managed by any other Adviser to the Portfolio. 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. In
addition, with respect to the Focus Portfolio, SunAmerica has agreed to pay an
additional $50,000 to the Adviser with the highest total return for its portion
of the Portfolio for each calendar year. 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, 1998, 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, 0.48%; Aggressive Growth Portfolio, 0.38%; Large-Cap
Blend Portfolio, 0.42%; Large-Cap Value Portfolio, 0.42%; Value Portfolio,
0.50%; Small-Cap Value Portfolio, 0.55%; International Equity Portfolio, 0.66%
and Focus Portfolio 0.40%.
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 years ended October 31, 1998 and 1997.
ADVISORY FEES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
ADVISORY FEES
PORTFOLIO ADVISORY FEES* WAIVED
- ------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio $ 332,529 $ 11,611 $ 248,687 $ 6,846
- ------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $ 839,531 $ 390,221 $ 384,257 $ 132,696
- ------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio $1,251,124 $ 533,055 $ 469,168 $ 136,500
- ------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio $ 287,134 $ 11,730 $ 179,837 $ 6,854
- ------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio $ 353,448 $ 11,729 $ 218,896 $ 6,854
- ------------------------------------------------------------------------------------------------------------------
Value Portfolio $1,934,440 $ 671,560 $ 508,899 $ 188,985
- ------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio $ 393,742 $ 12,079 $ 249,021 $ 6,891
- ------------------------------------------------------------------------------------------------------------------
International Equity Portfolio $ 877,072 $ 440,671 $ 492,784 $ 147,973
- ------------------------------------------------------------------------------------------------------------------
Focus Portfolio** $ 238,994 -- $ 89,221 --
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Without giving effect to fee waivers.
B-48
<PAGE>
** From date of inception of June 1, 1998.
The Subadvisory Agreements continue in effect for a period of two years
from the date of their execution, unless terminated sooner. Thereafter, they may
be renewed from year to year, 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. SunAmerica may terminate any agreement with an Adviser
without shareholder approval. Moreover, SunAmerica has received an exemptive
order from the SEC that permits SunAmerica, subject to certain conditions, to
enter into agreements relating to the Fund with Advisers approved by the Board
of Directors without obtaining shareholder approval. The exemptive order also
permits SunAmerica, subject to the approval of the Board but without shareholder
approval, to employ new Advisers for new or existing Funds, change the terms of
particular agreements with Advisers or continue the employment of existing
Advisers after events that would otherwise cause an automatic termination of a
subadvisory agreement. Shareholders will be notified of any Adviser changes.
The following table sets forth the total subadvisory fees incurred by each
Portfolio pursuant to the Subadvisory Agreements, for the fiscal years ended
October 31, 1998 and 1997.
SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO SUBADVISORY FEES
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Growth Portfolio $160,671 $ 5,613
- --------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $399,530 $195,077
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio $481,178 $199,051
- --------------------------------------------------------------------------------
Large-Cap Blend Portfolio $119,228 $ 3,714
- --------------------------------------------------------------------------------
Large-Cap Value Portfolio $147,744 $ 4,769
- --------------------------------------------------------------------------------
Value Portfolio $959,440 $333,308
- --------------------------------------------------------------------------------
Small-Cap Value Portfolio $216,474 $ 6,649
- --------------------------------------------------------------------------------
International Equity Portfolio $527,676 $259,404
- --------------------------------------------------------------------------------
Focus Portfolio* $112,346 --
- --------------------------------------------------------------------------------
</TABLE>
- ----------
* From date of inception of June 1, 1998.
B-49
<PAGE>
Personal Trading. The Fund and SunAmerica have adopted a written Code of Ethics
(the "SunAmerica 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 SunAmerica 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 SunAmerica 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 SunAmerica 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 SunAmerica 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 AIG, to act
as the principal underwriter in connection with the continuous offering of each
class of 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 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, International Equity Portfolio and Focus Portfolio,
and incurs the expenses of distributing the Portfolios' 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.
B-50
<PAGE>
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 II 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 "Fund Management - Distributor" 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 II 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 II 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 II 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 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.
B-51
<PAGE>
DISTRIBUTION AND ACCOUNT MAINTENANCE AND SERVICE FEES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class II* Class A Class B Class C*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth Portfolio $ 55,924 $ 139,218 $ 33,528 $ 3,983 $ 173 $ 59
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $ 93,555 $ 499,157 $ 73,073 $ 73,691 $ 164,888 $ 14,787
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio $ 175,991 $ 660,563 $ 86,457 $ 106,377 $ 209,795 $ 19,327
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio $ 58,296 $ 106,640 $ 13,933 $ 4,000 $ 239 $ 63
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio $ 47,457 $ 182,997 $ 34,082 $ 3,986 $ 281 $ 60
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio $ 251,405 $1,072,774 $ 143,031 $ 116,913 $ 309,027 $ 28,306
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio $ 51,869 $ 202,927 $ 42,055 $ 3,849 $ 900 $ 184
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio $ 90,504 $ 474,411 $ 63,753 $ 77,057 $ 162,796 $ 17,650
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio** $ 29,757 $ 107,744 $ 88,405 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Class II shares of all Portfolios except the Focus Portfolio were
previously designated as Class C until December 1, 1998.
** From date of inception of June 1, 1998.
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
Disinterested Directors who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans (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.
B-52
<PAGE>
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 AIG, 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.
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 that would be paid by the Fund). No portion of such fee is
paid or reimbursed by Class Z shares. Class Z shares, however, will pay all
direct transfer agency fees and out-of-pocket expenses. For the fiscal year
ending October 31, 1998, the total amount paid to the Administrator by the Fund
was $1,449,722. 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-analyses and reports concerning issuers, industries, securities,
economic factors and trends-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. The research
services consist of assessments and analysis of the business or prospects of a
company, industry or economic sector. Certain research services furnished by
brokers may be useful to the Adviser with
B-53
<PAGE>
respect to clients other than the Fund and not all of these services may be used
by the Adviser in connection with 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.
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. 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.
B-54
<PAGE>
The following tables set forth the brokerage commissions paid by the
Portfolios and the amounts of the brokerage commissions paid to affiliated
broker-dealers by the Portfolios for the fiscal years ended October 31, 1998 and
1997.
BROKERAGE COMMISSIONS
1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Percentage of
Amount of
Transactions
Percentage of Involving
Commissions Payment of
Aggregate Amount Paid to Paid to Commissions to
Brokerage Affiliated Affiliated Affiliated Broker-
PORTFOLIO Commissions Broker-Dealers Broker-Dealers Dealers
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth
Portfolio $ 32,602 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio $193,828 $ 9,497 4.90% 1.70%
- ------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth
Portfolio $289,798 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio $ 53,489 $ 1,140 2.10% 0.70%
- ------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio $ 46,791 $ 54 0.10% 0.10%
- ------------------------------------------------------------------------------------------------------------------------------
Value Portfolio $443,420 $165,995 37.40% 18.10%
- ------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio $116,577 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
International Equity
Portfolio $776,510 $ 24,201 3.10% 2.90%
- ------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio* $175,114 $ 13,770 7.90% 2.10%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* From date of inception of June 1, 1998.
B-55
<PAGE>
1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Percentage Paid
Aggregate Amount Paid to to Affiliated
PORTFOLIO Brokerage Affiliated Broker- Broker-Dealers
Commissions 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
Upon making an investment in shares of a Portfolio, an open account will be
established under which shares of such Portfolio and additional shares acquired
through reinvestment of dividends and distributions will be held for each
shareholder's account by 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.
Shareholders who have met the Portfolio's minimum initial investment may
elect to have periodic purchases made through a dollar cost averaging program.
At the shareholder's election, such purchases may be made from their bank
checking or savings account on a monthly, quarterly, semi-annual or annual
basis. Purchases can be made via electronic funds transfer through the Automated
Clearing House or by physical draft check. Purchases made via physical draft
check require an authorization card to be filed with the shareholder's bank.
Shares 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 (i) may be imposed at the time of purchase (Class A
shares), (ii) may be deferred (Class B shares, and purchases of Class A shares
in excess of $1 million) or (iii) may contain elements of a sales charge that is
both imposed at the time of purchase and deferred (Class II shares). Class C
shares, now designated as Class II shares, had sales charges imposed on a
deferred basis with no front-end sales load prior to their redesignation.
Reference is made to "Shareholder Account Information" in the Prospectus for
certain information as to the purchase of Portfolio shares.
B-56
<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 that was reallowed to affiliated broker-dealers, and the contingent
deferred sales charges with respect to Class B and Class II shares of each
Portfolio, received by the Distributor for the fiscal years ended October 31,
1998 and 1997.
1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount Contingent
Reallowed Reallowed Contingent Deferred
Front-End Sales Front-End Sales to Affiliated to Non-Affiliated Deferred Sales Sales Charge-
Concessions- Concessions- Broker-Dealers Broker-Dealers Charge- Class II
Portfolio Class A Shares Class II Shares* Class A Shares Class A Shares Class B Shares Shares**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Large-Cap Growth
Portfolio $ 490,037 -- $ 146,344 $ 277,561 $ 44,805 --
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth
Portfolio $ 642,963 -- $ 192,696 $ 358,628 $ 117,430 --
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth
Portfolio $ 781,470 -- $ 327,106 $ 350,450 $ 175,664 --
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend
Portfolio $ 426,981 -- $ 117,550 $ 254,379 $ 41,902 --
- ------------------------------------------------------------------------------------------------------------------------------------
Large-Cap Value
Portfolio $ 592,150 -- $ 148,306 $ 378,394 $ 42,369 --
- ------------------------------------------------------------------------------------------------------------------------------------
Value Portfolio $2,704,806 -- $ 641,893 $1,340,011 $ 236,910 --
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value
Portfolio $ 834,323 -- $ 192,150 $ 534,751 $ 68,098 --
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity
Portfolio $ 341,296 -- $ 145,456 $ 150,191 $ 128,111 --
- ------------------------------------------------------------------------------------------------------------------------------------
Focus Portfolio*** $1,250,948 $ 513,213 $ 191,346 $ 884,979 $ 10,686 $ 7,401
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to December 1, 1998, only Focus Portfolio's Class II shares carried a
front-end sales charge, while Class II shares with respect to the other
Portfolios (then designated as Class C shares) carried no such charge.
** Previously designated as Class C shares other than for the Focus Portfolio.
*** For the period from June 1, 1998 (commencement of offering of shares of
Focus Portfolio).
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Affiliated Broker Non-Affiliated Broker
Dealers Dealers
Class II Class II
---------------------------------------------------------------------------
<S> <C> <C>
Focus Portfolio $48,486 $464,727
---------------------------------------------------------------------------
</TABLE>
B-57
<PAGE>
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 "Shareholder
Account Information" in the Prospectus, the CDSC may be waived on redemptions of
Class B and Class II shares under certain circumstances. The conditions set
forth below are applicable with respect to the following situations with the
proper documentation:
Death. CDSCs may be waived on redemptions within one year following the
death (i) of the sole shareholder on an individual account, (ii) of a joint
tenant where the surviving joint tenant is the deceased's spouse, or (iii) of
the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfers to Minors
Act or other custodial account. The CDSC waiver is also applicable in the case
where the shareholder account is registered as community property. If, upon the
occurrence of one of the foregoing, the account is transferred to an account
registered in the name of the deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
Class B shares or Class II shares are not redeemed within one year of the death,
they will remain Class B shares or Class II shares, as applicable, 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 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 who 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
B-58
<PAGE>
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 regular trading of the NYSE on the
next trading day. The Distributor reserves the right to cancel any purchase
order for which payment has not been received by the fifth business day
following the investment. A Portfolio will not be responsible for delays caused
by dealers.
Purchase by Check. Checks should be made payable to the specific Portfolio or to
"SunAmerica Funds." If the payment is for a retirement plan account for which
SunAmerica serves as fiduciary, please note on the check that payment is for
such an account. In the case of a new account, purchase orders by check must be
submitted directly by mail to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204, together with payment for the purchase price of such shares and a
completed New Account Application. Payment for subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas
City, Missouri 64141-6373 and the shareholder's Portfolio account number should
appear on the check. For fiduciary retirement plan accounts, both initial and
subsequent purchases should be mailed to SunAmerica Fund Services, Inc., Mutual
Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204. Certified checks are not necessary but checks are accepted subject
to collection at full face value in United States funds and must be drawn on a
bank located in the United States. Upon receipt of the completed New Account
Application and payment check, the Transfer Agent will purchase full and
fractional shares of the applicable Portfolio at the net asset value next
computed after the check is received, plus the applicable sales charge.
Subsequent purchases of shares of each Portfolio may be purchased directly
through the Transfer Agent. SAFS reserves the right to reject any check made
payable other than in the manner indicated above. Under certain circumstances,
the Fund will accept a multi-party check (e.g., a check made payable to the
shareholder by another party and then endorsed by the shareholder to the Fund in
payment for the purchase of shares); however, the processing of such a check may
be subject to a delay. The Fund does not verify the authenticity of the
endorsement of such multi-party check, and acceptance of the check by the Fund
should not be considered verification thereof. Neither the Fund nor its
affiliates will be held liable for any losses incurred as a result of a
fraudulent endorsement. There are restrictions on the redemption of shares
purchased by check for which funds are being collected. (See "Shareholder
Account Information" 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:
B-59
<PAGE>
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) 551-5585.
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),
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 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 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 that has an
agreement with the Distributor with respect to such purchases and all such
transactions for the plan are executed through a single omnibus account.
Further, the sales charge is waived with respect to shares purchased by "wrap
accounts" for the benefit of clients of broker-dealers, financial institutions,
financial planners or registered investment advisers adhering to the following
standards established by the Distributor: (i) the broker-dealer, financial
institution or financial planner charges its client(s) an advisory fee based on
the assets under management on an annual basis, and (ii) such broker-dealer,
financial institution or financial planner does not advertise that shares of the
Portfolio may be purchased by clients at net asset value. Shares purchased under
this waiver may not be resold except to the Portfolio. Shares are offered at net
asset value to the foregoing persons because of anticipated economies in sales
effort and sales related expenses. Reductions in sales charges apply to
purchases or shares by a "single person" including an individual; members of a
family unit comprising husband, wife and minor children; or a trustee or other
fiduciary purchasing for a single fiduciary account. Complete details concerning
how an investor may purchase shares at reduced sales charges may be obtained by
contacting the Distributor.
Reduced Sales Charges (Class A Shares only). As discussed under "Shareholder
Account Information" 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.
B-60
<PAGE>
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:
1. an individual, or a "company" as defined in Section 2(a)(8) of the 1940
Act (which includes corporations that are corporate affiliates of each other);
2. an individual, his or her spouse and their minor children, purchasing
for his, her or their own account;
3. 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);
4. tax-exempt organizations qualifying under Section 501(c)(3) of the Code
(not including 403(b) plans);
5. employee benefit plans of a single employer or of affiliated employers,
other than 403(b) plans; and
6. group purchases as described below.
A combined purchase currently may also include shares of other funds in
SAMF (other than money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares directly with
the Distributor.
Rights of Accumulation. A purchaser of Portfolio shares may qualify for a
reduced sales charge by combining a current purchase (or combined purchases as
described above) with shares previously purchased and still owned; provided the
cumulative value of such shares (valued at cost or current net asset value,
whichever is higher), amounts to $50,000 or more. In determining the shares
previously purchased, the calculation will include, in addition to other Class A
shares of the particular Portfolio that were previously purchased, shares of the
other classes of the same Portfolio, as well as shares of any class of any other
Portfolio or of any of the other Portfolios advised by SunAmerica, as long as
such shares were sold with a sales charge or acquired in exchange for shares
purchased with such a sales charge.
The shareholder's dealer, if any, or the shareholder, must notify the
Distributor at the time an order is placed of the applicability of the reduced
charge under the Right of Accumulation. Such notification must be in writing by
the dealer or shareholder when such an order is placed by mail. The reduced
sales charge will not be granted if: (a) such information is not furnished at
the time of the order; or (b) a review of the Distributor's or the Transfer
Agent's records fails to confirm the investor's represented holdings.
Letter of Intent. A reduction of sales charges is also available to an
investor who, pursuant to a written "Letter of Intent" 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
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<PAGE>
$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 that impose a sales
charge at the time of purchase, which the investor intends to purchase or has
previously purchased during a 30-day period prior to the date of execution of
the Letter of Intent and still owns, may also be included in determining the
applicable reduction; provided, the dealer or shareholder notifies the
Distributor of such prior purchase(s).
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amounts of the investment goal. In the event the
investment goal is not achieved within the thirteen-month period, the investor
is required to pay the difference between the sales charge otherwise applicable
to the purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the Distributor
is authorized by the Letter of Intent to liquidate a sufficient number of
escrowed shares to obtain such difference. If the goal is exceeded and purchases
pass the next sales charge break-point, the sales charge on the entire amount of
the purchase that results in passing that break-point, and on subsequent
purchases, will be subject to a further reduced sales charge in the same manner
as set forth above under "Rights of Accumulation," but there will be no
retroactive reduction of sales charges on previous purchases. At any time while
a Letter of Intent is in effect, a shareholder may, by written notice to the
Distributor, increase the amount of the stated goal. In that event, shares of
the applicable Portfolio purchased during the previous 90-day period and still
owned by the shareholder will be included in determining the applicable sales
charge. The 5% escrow and the minimum purchase requirement will be applicable to
the new stated goal. Investors electing to purchase shares of one or more of the
Portfolios pursuant to this purchase plan should carefully read such Letter of
Intent.
Reduced Sales Charge for Group Purchases. Members of qualified groups may
purchase Class A shares of the Portfolios under the combined purchase privilege
as described above.
To receive a rate based on combined purchases, group members must purchase
Class A shares of a Portfolio through a single investment dealer designated by
the group. The designated dealer must transmit each member's initial purchase to
the Distributor, together with payment and completed New Account Application.
After the initial purchase, a member may send funds for the purchase of Class A
shares directly to the Transfer Agent. Purchases of a Portfolio's shares are
made at the public offering price based on the net asset value next determined
after the Distributor or the Transfer Agent receives payment for the Class A
shares. The minimum investment requirements described above apply to purchases
by any group member.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or other
organized groups of persons (the members of which may include other qualified
groups) provided that: (i) the group has at least 25 members of which at least
ten members participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some purpose in addition
to the purchase of investment company shares at a reduced sales charge; (iv) the
group's sole organizational nexus or connection
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<PAGE>
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 at least annually access to
the group's membership by means of written communication or direct presentation
to the membership at a meeting; (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 that meets the
requirements stated above and 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 that 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 "Shareholder Account Information" in the Prospectus
for certain information as to the redemption of Portfolio shares.
If the Directors determine that it would be detrimental to the best
interests of the remaining shareholders of a Portfolio to make payment wholly or
partly in cash, the Fund, having filed with the SEC a notification of election
pursuant to Rule 18f-1 on behalf of each of the Portfolios, may pay the
redemption price in whole, or in part, by a distribution in kind of securities
from a Portfolio in lieu of cash. In conformity with applicable rules of the
SEC, the Portfolios are committed to pay in cash all requests for redemption, by
any shareholder of record, limited in amount with respect to each shareholder
during any 90-day period to the lesser of (i) $250,000, or (ii) 1% of the net
asset value of the applicable Portfolio at the beginning of such period. If
shares are redeemed in kind, the redeeming shareholder would incur brokerage
costs in converting the assets into cash. The method of valuing portfolio
securities is described below in the section entitled "Determination of Net
Asset Value," and such valuation will be made as of the same time the redemption
price is determined.
The Distributor is authorized, as agent for the Portfolios, to offer to
repurchase shares that are presented by telephone to the Distributor by
investment dealers. Orders received by dealers must
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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 Portfolio'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 charge. The offer to repurchase may be suspended at any time.
EXCHANGE PRIVILEGE
Shareholders in any of the Portfolios may exchange their shares for the
same class of shares of any other Portfolio or other SunAmerica Mutual Funds
that offer such class at the respective net asset value per share. Before making
an exchange, a shareholder should obtain and review the prospectus of the fund
whose shares are being acquired. All exchanges are subject to applicable minimum
initial or subsequent investment requirements. Notwithstanding the foregoing,
shareholders may elect to make periodic exchanges on a monthly, quarterly,
semi-annual and annual basis through the Systematic Exchange Program. Through
this program, the minimum exchange amount is $25 and there is no fee for
exchanges made. All exchanges can be effected only 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
SunAmerica Mutual Fund 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 II shares through an exchange
from another SunAmerica Mutual Fund will retain liability for any deferred sales
charge 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 the timing of conversion of Class B shares to Class A. A
shareholder's CDSC schedule will not change if such shareholder exchanges Class
C or Class II shares purchased prior to December 1, 1998 for Class II shares
(which currently have a longer CDSC schedule).
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
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<PAGE>
identification number and those administered so as to redeem or purchase shares
based upon certain predetermined market indications, will be considered one
account for this purpose.
In addition, a Portfolio reserves the right to refuse any exchange purchase
order if, in the judgment of the Adviser, 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.
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. Investments
for which market quotations are readily available are valued at their price as
of the close of regular trading on the New York Stock Exchange for the day. All
other securities and assets are valued at fair value following procedures
approved by the Directors.
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 Adviser deems it appropriate to do so, an over-the-counter or exchange
quotation at the mean of representative bid or asked prices may be used.
Securities traded primarily on securities exchanges outside the United States
are valued at the last sale price on such exchanges on the day of valuation, or
if there is no sale on the day of valuation, at the last-reported bid price. If
a security's price is available from more than one foreign exchange, a Portfolio
uses the exchange that is the primary market for the security. 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 Adviser, 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.
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<PAGE>
A Portfolio's liabilities, including proper accruals of expense items, are
deducted from total assets.
PERFORMANCE DATA
Each Portfolio may advertise performance data that reflects various
measures of total return and each Portfolio may advertise data that reflects
yield. An explanation of the data presented and the methods of computation that
will be used are as follows.
A Portfolio's performance may be compared to the historical returns of
various investments, performance indices of those investments or economic
indicators, including, but not limited to, stocks, bonds, certificates of
deposit, money market funds and U.S. Treasury Bills. Certain of these
alternative investments may offer fixed rates of return and guaranteed principal
and may be insured.
Average annual total return is determined separately for Class A, Class B,
Class II 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:
(a) The maximum sales load (i.e., either the front-end sales load in
the case of the Class A or Class II 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 II shares) is deducted from the initial $1,000
purchase payment;
(b) All dividends and distributions are reinvested at net asset
value; and
(c) 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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Each Portfolios' average annual total return for the 1-, 5- and 10-year
periods (or from date of inception, if sooner) ended October 31, 1998 is as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Since One Five Ten
Class A Shares Inception Year Years Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio 3.35%(1) 9.73% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 5.06%(3) 0.37% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio 12.29%(3) (1.46)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio (1.53)%(1) 2.69% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio (4.81)%(1) 0.11% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Value Portfolio 8.53%(3) (8.88)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio (7.64)%(1) (15.92)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio (3.20)%(3) (5.84)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Focus Portfolio N/A(2) N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) From date of inception of October 15, 1997.
(2) From date of inception of June 1, 1998.
(3) From date of inception of November 19, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Since One Five Ten
Class B Shares Inception Year Years Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio 4.77%(1) 11.54% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 5.68%(3) 1.80% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio 13.19%(3) (0.13)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio (0.24)%(1) 4.43% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio (3.73)%(1) 1.52% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Value Portfolio 9.33%(3) (7.77)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio (17.46)%(1) (14.95)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio (5.55)%(3) (4.64)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Focus Portfolio N/A(2) N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) From date of inception of October 15, 1997.
(2) From date of inception of June 1, 1998.
(3) From date of inception of November 19, 1996.
B-67
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Since One Five Ten
Class II Shares (1) Inception Year Years Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large-Cap Growth Portfolio 8.59%(2) 14.64% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Portfolio 12.19% 4.79% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio 13.18% 2.94% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Large-Cap Blend Portfolio 3.51%(2) 7.26% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Large-Cap Value Portfolio 0.11%(2) 4.52% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Value Portfolio 7.88% (4.88)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Portfolio 13.48%(2) (12.36)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio (1.46)% (1.66)% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
Focus Portfolio(3) N/A(3) N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Previously designated as Class C shares other than for the Focus Portfolio.
(2) From date of inception of October 15, 1997.
(3) From date of inception of June 1, 1998.
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 Composite Stock Price 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.
c) Standard & Poor's 100 Stock Index -- an unmanaged index based on
the prices of 100 blue chip stocks, including 92 industrials, one utility,
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<PAGE>
two transportation companies, and five financial institutions. The Standard
& Poor's 100 Stock Index is a smaller, more flexible index for options
trading.
d) The NYSE composite or component indices -- unmanaged indices of all
industrial, utilities, transportation, and finance stocks listed on the
NYSE.
e) 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.
f) 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.
g) 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.
h) 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.
i) 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
that rate mutual fund performance over specified time periods.
j) 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.
k) 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.
l) Savings and Loan Historical Interest Rates as published in the U.S.
Savings & Loan League Fact Book.
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<PAGE>
m) 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.
n) 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.
o) 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.
p) Value Line Geometric Index -- broad based index made up of
approximately 1700 stocks each of which have an equal weighting.
q) 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.
r) 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.
s) 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.
t) 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.
u) 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
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<PAGE>
Japanese Yen German Deutsche Marks
v) 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.
w) 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.
x) 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.
y) 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.
z) 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.
aa) 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.
bb) Russell 2000 and 3000 Indices -- represents the top 2,000 and the
top 3,000 stocks, respectively, traded on the NYSE, American Stock Exchange
and National Association of Securities Dealers Automated Quotations, by
market capitalizations.
cc) 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 that include securities
B-71
<PAGE>
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-dividend 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 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
B-72
<PAGE>
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 (i.e., the excess of net capital gains from the sale of assets
held for more than 12 months over net short-term capital losses, and including
such gains from certain transactions in futures and options), if any, are
taxable as capital gains to the shareholders, whether or not reinvested and
regardless of the length of time a shareholder has owned his or her shares. The
maximum capital gains rate for individuals is 20% with respect to assets held
for more than 12 months. The maximum capital gains rate for corporate
shareholders currently is the same as the maximum tax rate for ordinary income.
Upon a sale or exchange of its shares, a shareholder will realize a taxable
gain or loss depending on 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, taxable at the same rates as ordinary income
if the shares were held for not more than 12 months and capital gain taxable at
the maximum rate of 20% if such shares were held for more than 12 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 loss will be treated as long-term capital
loss if such shares were held for more than 12 months. A loss recognized on the
sale or exchange of shares held for six months or less, however, will be treated
as long-term capital loss to the extent of any long-term capital gains
distribution with respect to such shares.
Generally, any loss realized on a sale or exchange of shares of a Fund will
be disallowed if other shares of such Fund 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
B-73
<PAGE>
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 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. Only the
International Equity Portfolio is anticipated to 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 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
B-74
<PAGE>
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.
Code Section 1259 requires 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
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<PAGE>
as earned by a Portfolio and therefore is subject to the distribution
requirements of the Code. Because the original issue discount earned by the
Portfolio in a taxable year may not be represented by cash income, the Portfolio
may have to dispose of other securities and use the proceeds to make
distributions to shareholders.
A Portfolio may be required to backup withhold U.S. Federal income tax at
the rate of 31% of all taxable distributions payable to shareholders who fail to
provide their correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's U.S. Federal
income tax liability. Any distributions of net investment income or short-term
capital gains made to a foreign shareholder will be subject to U.S. withholding
tax of 30% (or a lower treaty rate if applicable to such shareholder).
Each of the Large-Cap Growth Portfolio, Aggressive Growth Portfolio and
International Equity Portfolio may, from time to time, invest in "passive
foreign investment companies" (PFICs). A PFIC is a foreign corporation that, in
general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If any such Portfolio acquires
and holds stock in a PFIC beyond the end of the year of its acquisition, the
Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the stock
(collectively, PFIC income), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. A 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. 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
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<PAGE>
allocated to shareholders (i) cannot be offset by net operating losses (subject
to a limited exception for certain thrift institutions), (ii) will constitute
unrelated business taxable income to entities (including a qualified pension
plan, an individual retirement account, a 401(k) plan, a Keogh plan or other
tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisors regarding the particular tax
consequences to them of an investment in each Portfolio. Qualification as a
regulated investment company under the Code for tax purposes does not entail
government supervision of management and investment policies.
RETIREMENT PLANS
Shares of each Portfolio are eligible to be purchased in conjunction with
various types of qualified retirement plans. The summary below is only a brief
description of the federal income tax laws for each plan and does not purport to
be complete. Further information or an application to invest in shares of a
Portfolio by establishing any of the retirement plans described below may be
obtained by calling Retirement Plans at (800) 858-8850. However, it is
recommended that a shareholder considering any retirement plan consult a tax
adviser before participating.
Pension and Profit-Sharing Plans. Sections 401(a) and 401(k) of the Code permit
business employers and certain associations to establish pension and profit
sharing plans for employees. Shares of a Portfolio may be purchased by those who
would have been covered under the rules governing old H.R. 10 (Keogh) Plans, as
well as by corporate plans. Each business retirement plan provides tax
advantages for owners and participants. Contributions made by the employer are
tax-deductible, and participants do not pay taxes on contributions or earnings
until withdrawn.
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
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<PAGE>
that may be contributed, the eligibility of individuals to make contributions,
the amount if any, entitled to be contributed on a deductible basis, and the
time in which distributions would be allowed to commence. In addition, certain
distributions from some other types of retirement plans may be placed on a
tax-deferred basis in an IRA.
Salary Reduction Simplified Employee Pension (SARSEP). This plan was introduced
by a provision of the Tax Reform Act of 1986 as a unique way for small employers
to provide the benefit of retirement planning for their employees. Contributions
are deducted from the employee's paycheck before tax deductions and are
deposited into an IRA by the employer. These contributions are not included in
the employee's income and therefore are not reported or deducted on his or her
tax return.
Savings Incentive Match Plan for Employees ("SIMPLE IRA"). This plan was
introduced by a provision of the Small Business Job Protection Act of 1996 to
provide small employers with a simplified tax-favored retirement plan.
Contributions are deducted from the employee's paycheck before taxes and are
deposited into a SIMPLE IRA by the employer, who must make either matching
contributions or non-elective 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 that 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, nine 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, International Equity Portfolio and the
Focus Portfolio. The Large-Cap Growth Portfolio, the Mid-Cap Growth Portfolio
and the Large-Cap Blend Portfolio are divided into three classes of shares,
designated as Class A, Class B and Class II. The Aggressive Growth Portfolio,
Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value Portfolio,
International Equity Portfolio and Focus Portfolio are divided into
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<PAGE>
four classes of shares, designated as Class A, Class B, Class II and Class Z.
The Directors may authorize the creation of additional Portfolios of shares so
as to be able to offer to investors additional investment portfolios within the
Fund that would operate independently from the Fund's present Portfolios, or to
distinguish among shareholders, as may be necessary, to comply with future
regulations or other unforeseen circumstances. Each Portfolio of the Fund's
shares represents the interests of the shareholders of that Portfolio in a
particular portfolio of Fund assets. In addition, the Directors may authorize
the creation of additional classes of shares in the future, which may have fee
structures different from those of existing classes and/or may be offered only
to certain qualified investors.
Shareholders are entitled to a full vote for each full share held. The
Directors have terms of unlimited duration (subject to certain removal
procedures) and have the power to alter the number of Directors, and appoint
their own successors, provided that at all times at least a majority of the
Directors have been elected by shareholders. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Directors being elected, while the holders of the
remaining shares would be unable to elect any Directors. Although the Fund need
not hold annual meetings of shareholders, the Directors may call special
meetings of shareholders for action by shareholder vote as may be required by
the 1940 Act. 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 II shares are subject to an initial sales
charge, a distribution fee, an ongoing account maintenance and service fee and a
CDSC, (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, (vii) Class Z shares are not subject to
any sales charge or any distribution, account maintenance or service fee, and
(viii) 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, to the fullest extent permitted by Maryland statutory
or decisional law, as amended or interpreted (as limited by the 1940 Act) that
no Director or officer of the Fund shall
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<PAGE>
be personally liable to the Fund or to stockholders for money damages. The
Articles provide that the Fund shall indemnify (i) the Directors and officers,
whether serving the Fund or 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 (as limited by the 1940 Act), 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 Fund's By-laws and be permitted by law. The duration of the
Fund shall be perpetual.
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<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, Class II and Class Z calculations are
based on the value of each Portfolio's net assets and number of shares
outstanding on October 31, 1998.
<TABLE>
<CAPTION>
Large-Cap Growth Portfolio Mid-Cap Growth Portfolio
--------------------------------------- ---------------------------------------
Class A Class B Class II+ Class A Class B Class II+
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Assets ................... $14,390,066 $26,124,601 $ 7,316,912 $32,115,106 $58,554,908 $ 9,481,717
Number of Shares
Outstanding .................. 1,048,668 1,917,807 537,327 2,199,202 4,061,345 656,930
Net Asset Value Per
Share (net assets
divided by number of
shares) ...................... $ 13.72 $ 13.62 $ 13.62 $ 14.60 $ 14.42 $ 14.43
Sales charge for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share)* ...................... $ 0.84 ** -- $ 0.89 ** --
Sales charge for
Class II Shares:
1.00% of offering
price (1.01% of net
asset value per
share)* ...................... -- ** -- -- ** --
Offering Price ............... $ 14.56 -- -- $ 15.49 -- --
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares (previously designated as Class C shares other than for the
Focus Portfolio) may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
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<PAGE>
<TABLE>
<CAPTION>
Aggressive Growth Portfolio Large-Cap Blend Portfolio
--------------------------------------------------------- -------------------------------------
Class A Class B Class II+ Class Z Class A Class B Class II+
------- ------- --------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets ........... $55,925,401 $74,997,930 $10,567,839 $ 345,813 $ 9,798,860 $16,156,670 $ 2,490,676
Number of
Shares
Outstanding .......... 3,388,419 4,602,575 648,532 $ 20,866 751,202 1,246,409 192,271
Net Asset
Value Per
Share (net
assets
divided by
number of
shares) .............. $ 16.50 $ 16.29 $ 16.30 $ 16.57 $ 13.04 $ 12.96 $ 12.95
Sales charge
for Class A
Shares:
5.75% of
offering
price
(6.10% of
net asset
value per
share)* .............. $ 1.01 ** -- -- $ 0.80 ** --
Sales charge
for Class II
Shares:
1.00% of
offering
price
(1.01% of
net asset
value per
share)* .............. -- ** -- -- -- ** --
Offering ............. $ 17.51 -- -- $ 16.57 $ 13.84 -- --
Price
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares (previously designated as Class C shares other than for the
Focus Portfolio) may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
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<PAGE>
<TABLE>
<CAPTION>
Large-Cap Value Portfolio
-------------------------
Class A Class B Class II+ Class Z
------- ------- --------- -------
<S> <C> <C> <C> <C>
Net Assets .............................. $12,921,581 $28,149,561 $ 5,822,783 $206,982
Number of Shares
Outstanding ............................. 1,026,206 2,250,172 465,494 16,377
Net Asset Value
Per Share (net assets
divided by number
of shares) .............................. $ 12.59 $ 12.51 $ 12.51 $ 12.64
Sales charge for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per share)* ................. $ 0.77 ** -- --
Sales charge for
Class II Shares:
1.00% of offering
price (1.01% of net
asset value per share)* ................. -- ** -- --
Offering Price .......................... $ 13.36 -- -- $ 12.64
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares (previously designated as Class C shares other than for the
Focus Portfolio) may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
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<PAGE>
<TABLE>
<CAPTION>
Value Portfolio
---------------
Class A Class B Class II+ Class Z
------- ------- --------- -------
<S> <C> <C> <C> <C>
Net Assets ........................................ $ 71,155,953 $111,030,100 $ 15,260,248 $100,434
Number of
Shares
Outstanding ....................................... 4,743,248 7,498,100 1,030,596 6,680
Net Asset Value
Per Share (net assets
divided by
number of shares) ................................. $ 14.99 $ 14.81 $ 14.81 $ 15.04
Sales charge for
Class A Shares:
5.75% of
offering price
(6.10% of net
asset value per share)* ........................... $ 0.91 ** -- --
Sales charge for
Class II Shares:
1.00% of
offering price
(1.01% of net
asset value per share)* ........................... -- ** -- --
Offering Price .................................... $ 15.90 -- -- $ 15.04
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares (previously designated as Class C shares other than for the
Focus Portfolio) may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
B-84
<PAGE>
<TABLE>
<CAPTION>
Small-Cap Value Portfolio
-------------------------
Class A Class B Class II+ Class Z
------- ------- --------- -------
<S> <C> <C> <C> <C>
Net Assets .............................. $ 15,051,048 $25,953,780 $ 5,968,570 $144,837
Number of Shares
Outstanding ............................. 1,391,561 2,417,534 555,667 13,801
Net Asset Value Per
Share (net assets
divided by number of
shares) ................................. $ 10.82 $ 10.74 $ 10.74 $ 10.85
Sales charge for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share)* ................................. $ 0.66 ** -- --
Sales charge for
Class II Shares:
1.00% of offering
price (1.01% of net
asset value per
share)* ................................. -- ** -- --
Offering Price .......................... $ 11.48 -- -- $ 10.85
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares (previously designated as Class C shares other than for the
Focus Portfolio) may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
B-85
<PAGE>
<TABLE>
<CAPTION>
International Equity Portfolio
------------------------------
Class A Class B Class II+ Class Z
------- ------- --------- -------
<S> <C> <C> <C> <C>
Net Assets ....................... $ 28,417,391 $ 44,817,267 $7,982,198 $144,837
Number of Shares
Outstanding ...................... 2,324,757 3,962,716 661,550 11,801
Net Asset Value Per
Share (net assets
divided by number of
shares) .......................... $ 12.22 $ 12.07 $ 12.07 $ 12.27
Sales charge for Class
A Shares: 5.75% of
offering price (6.10%
of net asset value per
share)* .......................... $ 0.75 ** -- --
Sales charge for Class
II Shares: 1.00% of
offering price (1.01%
of net asset value per
share)* .......................... -- ** -- --
Offering Price ................... $ 12.97 -- -- $ 12.27
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares (previously designated as Class C shares other than for the
Focus Portfolio) may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
B-86
<PAGE>
<TABLE>
<CAPTION>
Focus Portfolio
---------------
Class A Class B Class II+ Class Z++
------- ------- --------- ---------
<S> <C> <C> <C>
Net Assets ................................. $29,770,444 $45,816,809 $35,386,676 --
Number of Shares
Outstanding ................................ 2,362,782 3,647,704 2,817,537 --
Net Asset Value Per
Share (net assets
divided by number of
shares) .................................... $ 12.60 $ 12.56 $ 12.56 --
Sales charge for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share)* .................................... $ 0.77 ** $ 0.13 --
Sales charge for
Class II Shares:
1.00% of offering
price (1.01% of net
asset value per
share)* .................................... -- ** -- --
Offering Price ............................. $ 13.37 -- $ 12.69 --
</TABLE>
- ----------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years
of purchase.
+ Class II shares may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
++ Class Z shares with respect to the Focus Portfolio commenced offering on
____, 1999.
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. 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. PricewaterhouseCoopers 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 Swidler Berlin Shereff Friedman,
LLP, 919 Third Avenue, New York, NY 10022, has been selected as legal counsel to
the Fund.
B-87
<PAGE>
FINANCIAL STATEMENTS
The Fund's audited financial statements are incorporated into this
Statement of Additional Information by reference to its 1998 annual report to
shareholders. You may request a copy of the annual report at no charge by
calling (800) 858-8850 or writing the Fund at SunAmerica Fund Services, Inc.,
Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New
York 10017-3204.
B-88
<PAGE>
APPENDIX
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
Description of Moody's Corporate Ratings
Aaa Bonds 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 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 that make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds rated A possess many favorable investment attributes and are
considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment sometime in the
future.
Baa Bonds 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 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 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.
Appendix-1
<PAGE>
Caa Bonds 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.
Ca Bonds rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings.
C Bonds 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.
Appendix-2
<PAGE>
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
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 that may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships that exist with the issuer; and (8) recognition by management of
obligations that may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Description of Standard & Poor's Corporate Debt Ratings
A Standard & 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 obligors 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.
Appendix-3
<PAGE>
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 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 that
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
Appendix-4
<PAGE>
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.
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
that is assigned an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt
that 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.
Appendix-5
<PAGE>
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.
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 designated
"A-1" that are 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.
Appendix-6
<PAGE>
D This rating indicates that the issue is either in default or is
expected to be in default upon maturity.
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 23: Exhibits.
(a) (i) Articles of Incorporation, as Amended. Incorporated herein
by reference to Exhibit 1(A) to the Registrant's
Registration Statement on Form N-lA (File No.333-11283)
filed on August 30, 1996.
(ii) Articles Supplementary dated August 1, 1996. Incorporated
herein by reference to Exhibit 1(B) to the Registrant's
Registration Statement on Form N-lA (File No. 333- 11283)
filed on August 30, 1996.
(iii) Articles of Amendment dated August 19, 1996. Incorporated
herein by reference to Exhibit 1(C) to the Registrant's
Registration Statement on Form N-lA (File No. 333-11283)
filed on August 30, 1996.
(iv) Articles of Amendment dated November 13, 1996. Incorporated
herein by reference to Exhibit 1(D) of Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-lA (File No. 333-11283) filed on November 14,
1996.
(b) By-Laws. Incorporated herein by reference to Exhibit 2 to the
Registrant's Registration Statement on Form N-lA (File No.
333-11283) filed on August 30, 1996.
(c) Instruments Defining Rights of Shareholders. Incorporated herein
by reference to Exhibits (a) and (b) above.
(d) (i) Investment Advisory Agreement. Incorporated herein by
reference to the identically numbered Exhibit of
Post-Effective Amendment No. 13 to the Registrant's
Registration Statement on Form N-lA (File No. 333-11283)
filed on February 26, 1999.
(ii) Subadvisory Agreements. Incorporated herein by reference to
the identically numbered Exhibit of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-lA (File No. 333-11283) filed on February 26, 1999.
(e) (i) Distribution Agreement. Incorporated herein by reference to
the identically numbered Exhibit of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-lA (File No. 333-11283) filed on February 26, 1999.
(ii) Form of Selling Agreement. Incorporated herein by reference
to Exhibit (e)(ii) of Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-lA (File No.
333-1 1283) filed on December 30, 1998.
(f) Disinterested Trustees and Directors' Retirement Plan.
Incorporated herein by reference to Exhibit 7 of Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on
Form N-lA (File No. 333-11283) filed on November 14, 1996.
(g) Custodian Agreement. Incorporated herein by reference to Exhibit
8 of Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-lA (File No. 333-11283) filed on
November 14, 1996.
C-1
<PAGE>
(h) (i) Service Agreement. Incorporated herein by reference to
Exhibit 9(a) of Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-lA (File No.
333-11283) filed on November 14, 1996.
(ii) Transfer Agency Agreement. Incorporated herein by reference
to Exhibit 9(b) of Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-lA (File No.
333-11283) filed on November 14, 1996.
(i) Opinion of Counsel to the Registrant. Incorporated herein by
reference to Exhibit 10 of Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-lA (File No.
333-11283) filed on November 14, 1996.
(j) Consent of Independent Accountants. Incorporated herein by
reference to the identically numbered Exhibit of Post-Effective
Amendment No. 13 to the Registrant's Registration Statement on
Form N-lA (File No. 333-11283) filed on February 26, 1999.
(k) Not applicable.
(1) Not applicable.
(m) Distribution Plans. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment No. 13
to the Registrant's Registration Statement on Form N-lA (File No.
333-11283) filed on February 26, 1999.
(n) Financial Data Schedules.
(o) (i) 1 8f-3 Plan. Incorporated herein by reference to Exhibit
5(b)( 15) of Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A (File No.
333-1 1283) filed on June 15, 1998.
(ii) Powers of Attorney. Incorporated herein by reference to
Exhibit 17(a) of Pre Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on November 14, 1996.
Item 24. Persons Controlled by or Under Common Control with Registrant
There are no persons controlled by or under common control with Registrant.
Item 25. Indemnification
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 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
C-2
<PAGE>
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 nob 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 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.
C-3
<PAGE>
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
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 26. Business and other Connections of Investment Adviser
SunAmerica 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.
American Century Investment Management, Inc.; Bankers Trust Company; Berger
Associates, Inc.; David L. Babson & Co., Inc.; Davis Selected Advisers,
L.P.; Bramwell Capital Management, Inc.; The Glenmede Trust Company; Janus
Capital Corporation; Jennison Associates LLC; Lazard Asset Management; L.
Roy Papp & Associates; Marsico Capital Management, LLC; Miller Anderson &
Sherrerd, LLP; Montag & Caldwell, Inc.; Morgan Stanley Dean Witter
Investment Management; Neuberger Berman, LLC.; Perkins, Wolf, McDonnell &
Company; Rowe-Price Fleming International, Inc.; T. Rowe Price Associates,
Inc.; Warburg Pincus Asset Management, Inc.; and Wellington Management
Company, LLP; the 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:
C-4
<PAGE>
File No.
--------
American Century Investment Management, Inc. 801-08174
Berger Associates, Inc. 801-09451
David L. Babson & Co., Inc. 801-00241
Davis Selected Advisers, L.P. 801-3 1648
Bramwell Capital Management, Inc. 801-46036
Janus Capital Corporation 801-13991
Jennison Associates LLC 801-05608
Lazard Asset Management 801-6568
L. Roy Papp & Associates 801-35594
Marsico Capital Management, LLC 801-54914
Miller Anderson & Sherrerd, LLP 801-10437
Montag & Caldwell, Inc. 801-15398
Morgan Stanley Dean Witter Investment Management 801-15757
Neuberger Berman, LLC 801-03908
Perkins, Wolf, McDonnell & Company 801-19974
Rowe-Price Fleming International, Inc 801-14713
T. Rowe Price Associates, Inc. 801-00856
Warburg, Pincus Asset Management, Inc. 801-07321
Wellington Management Company, LLP 801-15908
Reference is made to Post-Effective Amendment No. 26 to BT Investment
Funds' Registration Statement on Form N-lA (File No. 33-07404) filed on
October 26, 1998 for a description of the names and employment of the
directors and officers of Bankers Trust Company.
Reference is made to Post-Effective Amendment No.26 to The Glenmede Fund,
Inc.'s Registration Statement on Form N-lA (File No. 33-22884) filed on
March 2, 1998 for a description of the names and employment of the
directors and officers of The Glenmede Trust Company.
Item 27. 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:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Name and Principal
Business Address Position With Underwriter Position with the Registrant
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter A. Harbeck Director Director and President
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
- -----------------------------------------------------------------------------------------------------
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Steven Neamtz President and Director Vice President
The SunAmerica Center
733 Third Avenue
New York, NY 100 17-3204
- -----------------------------------------------------------------------------------------------------
Robert M. Zakem Executive Vice President, General Secretary and Chief Compliance
The SunAmerica Center Counsel and Director Officer
733 Third Avenue
New York, NY 10017-3204
- -----------------------------------------------------------------------------------------------------
Susan L. Hats Secretary None
SunAmerica, Inc.
I SunAmerica Center
Los Angeles, CA 90067-6022
- -----------------------------------------------------------------------------------------------------
Debbie Potash-Turner Ccntroller None
The SunAmerica Center
733 Third Avenue
New York, NY 100 17-3204
- -----------------------------------------------------------------------------------------------------
</TABLE>
(c) Not applicable.
Item 28. 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.
American Century Investment Management, Inc. is located at the American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Bankers Trust Company is located at 130 Liberty Street (One Bankers Trust
Plaza), New York 10006.
Berger Associates, Inc. is located at 210 University Boulevard, Suite 900,
Denver, Colorado 80206.
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 Marcy Street, Santa
Fe, New Mexico 87501.
Bramwell Capital Management, Inc. is located at 745 Fifth Avenue, New York,
NY 10151.
The Glenmede Trust Company is located at One Liberty Place, 1650 Market
Street, Suite 1200, Philadelphia, Pennsylvania 19103-7391.
C-6
<PAGE>
Janus Capital Corporation is located at 100 Fillmore Street, Denver,
Colorado 80206-4923.
Jennison Associates LLC is located at 466 Lexington Avenue, New York, NY
10017.
Lazard Asset Management is located at 30 Rockefeller Plaza, New York, New
York 10112.
L. Roy Papp & Associates is located at 4400 North 32nd Street, Suite 280,
Phoenix, Arizona 85018.
Marsico Capital Management, LLC is located at 1200 17th Street, Suite 1300,
Denver, CO 80202.
Miller Anderson & Sherrerd, LLP is located at One Tower Bridge, West
Conshohocken, Pennsylvania 19428.
Montag & Caldwell, Inc. is located at 3343 Peachtree Road, NE, Suite 1100,
Atlanta, Georgia 30326-1022.
Morgan Stanley Dean Witter Investment Management is located at 1221 Avenue
of the Americas, New York, NY 10020.
Neuberger Berman, LLC is located at 605 Third Avenue, New York, New York
10158-0180.
Perkins, Wolf, McDonnell & Company is located at 53 West Jackson Boulevard,
Suite 818, Chicago, Illinois 60604.
Rowe Price-Fleming International, Inc. is located at 100 East Pratt Street,
Baltimore, Maryland 21202.
T. Rowe Price Associates, Inc. is located at 100 East Pratt Street
Baltimore, Maryland 21202.
Warburg Pincus Asset Management, Inc. is located at 466 Lexington Avenue,
New York, New York, 100 17-3147.
Wellington Management Company, LLP is located at 75 State Street, Boston,
Massachusetts 02109.
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 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
(the "1933 Act") and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Post-Effective Amendment No. 14 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on 19th, of
March, 1999.
Style Select Series, Inc.
By: /s/ Robert M. Zakem
-----------------------
Robert M. Zakem
Secretary
Pursuant to the requirements of the 1933 Act, the Post-Effective Amendment
No. 14 to the Registrant's Registration Statement on Form N-lA has been signed
below by the following persons in the capacities and on the date indicated:
<TABLE>
<S> <C> <C>
* President and Director
- ----------------------------- (Principal Executive Officer) March 19, 1999
Peter A. Harbeck
* Treasurer
- ----------------------------- (Principal Financial and
Peter C. Sutton Accounting Officer)
* Director
- -----------------------------
S. James Coppersmith
* Director
- -----------------------------
Samuel M. Eisenstat
* Director
- -----------------------------
Stephen J. Gutman
* Director
- -----------------------------
Sebastiano Sterpa
*By: /s/ Robert M. Zakem March 19, 1999
- -----------------------------
Attorney-in-Fact
Robert M. Zakem
</TABLE>
C-8
<PAGE>
STYLE SELECT SERIES, INC.
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
(n) Financial Data Schedules.
C-9
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 011
<NAME> STYLE SELECT AGGRESSIVE GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 122,419,061<F1>
<INVESTMENTS-AT-VALUE> 144,972,704<F1>
<RECEIVABLES> 978,401<F1>
<ASSETS-OTHER> 32,514<F1>
<OTHER-ITEMS-ASSETS> 89,372<F1>
<TOTAL-ASSETS> 146,072,991<F1>
<PAYABLE-FOR-SECURITIES> 3,596,795<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 639,213<F1>
<TOTAL-LIABILITIES> 4,236,008<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 125,082,992<F1>
<SHARES-COMMON-STOCK> 3,388,419<F2>
<SHARES-COMMON-PRIOR> 2,424,338<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 3,914<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 5,759,950<F1>
<ACCUM-APPREC-OR-DEPREC> 22,517,855<F1>
<NET-ASSETS> 141,836,983<F1>
<DIVIDEND-INCOME> 432,776<F1>
<INTEREST-INCOME> 607,257<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,711,845<F1>
<NET-INVESTMENT-INCOME> (1,671,812)<F1>
<REALIZED-GAINS-CURRENT> (5,654,050)<F1>
<APPREC-INCREASE-CURRENT> 8,912,517<F1>
<NET-CHANGE-FROM-OPS> 1,586,655<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 291,095<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,887,998<F2>
<NUMBER-OF-SHARES-REDEEMED> (939,066)<F2>
<SHARES-REINVESTED> 15,149<F2>
<NET-CHANGE-IN-ASSETS> 48,766,622<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 588,504<F1>
<OVERDISTRIB-NII-PRIOR> 761<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,251,124<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,076,390<F1>
<AVERAGE-NET-ASSETS> 50,284,082<F2>
<PER-SHARE-NAV-BEGIN> 15.90<F2>
<PER-SHARE-NII> (.16)<F2>
<PER-SHARE-GAIN-APPREC> .87<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> .11<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.50<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 Aggressive Growth as a whole
<F2>Information given pertains to Style Select Aggressive Growth Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 012
<NAME> STYLE SELECT AGGRESSIVE GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 122,419,061<F1>
<INVESTMENTS-AT-VALUE> 144,972,704<F1>
<RECEIVABLES> 978,401<F1>
<ASSETS-OTHER> 32,514<F1>
<OTHER-ITEMS-ASSETS> 89,372<F1>
<TOTAL-ASSETS> 146,072,991<F1>
<PAYABLE-FOR-SECURITIES> 3,596,795<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 639,213<F1>
<TOTAL-LIABILITIES> 4,236,008<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 125,082,992<F1>
<SHARES-COMMON-STOCK> 4,602,575<F2>
<SHARES-COMMON-PRIOR> 3,075,503<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 3,914<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 5,759,950<F1>
<ACCUM-APPREC-OR-DEPREC> 22,517,855<F1>
<NET-ASSETS> 141,836,983<F1>
<DIVIDEND-INCOME> 432,776<F1>
<INTEREST-INCOME> 607,257<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,711,845<F1>
<NET-INVESTMENT-INCOME> (1,671,812)<F1>
<REALIZED-GAINS-CURRENT> (5,654,050)<F1>
<APPREC-INCREASE-CURRENT> 8,912,517<F1>
<NET-CHANGE-FROM-OPS> 1,586,655<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 365,194<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,426,954<F2>
<NUMBER-OF-SHARES-REDEEMED> (921,116)<F2>
<SHARES-REINVESTED> 21,234<F2>
<NET-CHANGE-IN-ASSETS> 48,766,622<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 588,504<F1>
<OVERDISTRIB-NII-PRIOR> 761<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,251,124<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,076,390<F1>
<AVERAGE-NET-ASSETS> 66,056,317<F2>
<PER-SHARE-NAV-BEGIN> 15.80<F2>
<PER-SHARE-NII> (.27)<F2>
<PER-SHARE-GAIN-APPREC> .87<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> .11<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.29<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 Aggressive Growth as a whole
<F2>Information given pertains to Style Select Aggressive Growth Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 013
<NAME> STYLE SELECT AGGRESSIVE GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 122,419,061<F1>
<INVESTMENTS-AT-VALUE> 144,972,704<F1>
<RECEIVABLES> 978,401<F1>
<ASSETS-OTHER> 32,514<F1>
<OTHER-ITEMS-ASSETS> 89,372<F1>
<TOTAL-ASSETS> 146,072,991<F1>
<PAYABLE-FOR-SECURITIES> 3,596,795<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 639,213<F1>
<TOTAL-LIABILITIES> 4,236,008<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 125,082,992<F1>
<SHARES-COMMON-STOCK> 648,532<F2>
<SHARES-COMMON-PRIOR> 375,792<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 3,914<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 5,759,950<F1>
<ACCUM-APPREC-OR-DEPREC> 22,517,855<F1>
<NET-ASSETS> 141,836,983<F1>
<DIVIDEND-INCOME> 432,776<F1>
<INTEREST-INCOME> 607,257<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,711,845<F1>
<NET-INVESTMENT-INCOME> (1,671,812)<F1>
<REALIZED-GAINS-CURRENT> (5,654,050)<F1>
<APPREC-INCREASE-CURRENT> 8,912,517<F1>
<NET-CHANGE-FROM-OPS> 1,586,655<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 45,708<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 395,453<F2>
<NUMBER-OF-SHARES-REDEEMED> (124,617)<F2>
<SHARES-REINVESTED> 1,904<F2>
<NET-CHANGE-IN-ASSETS> 48,766,622<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 588,504<F1>
<OVERDISTRIB-NII-PRIOR> 761<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,251,124<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,076,390<F1>
<AVERAGE-NET-ASSETS> 8,645,739<F2>
<PER-SHARE-NAV-BEGIN> 15.80<F2>
<PER-SHARE-NII> (.27)<F2>
<PER-SHARE-GAIN-APPREC> .88<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> .11<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.30<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 Aggressive Growth as a whole
<F2>Information given pertains to Style Select Aggressive Growth Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 014
<NAME> STYLE SELECT AGGRESSIVE GROWTH CLASS Z
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> APR-03-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 122,419,061<F1>
<INVESTMENTS-AT-VALUE> 144,972,704<F1>
<RECEIVABLES> 978,401<F1>
<ASSETS-OTHER> 32,514<F1>
<OTHER-ITEMS-ASSETS> 89,372<F1>
<TOTAL-ASSETS> 146,072,991<F1>
<PAYABLE-FOR-SECURITIES> 3,596,795<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 639,213<F1>
<TOTAL-LIABILITIES> 4,236,008<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 125,082,992<F1>
<SHARES-COMMON-STOCK> 20,866<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 3,914<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 5,759,950<F1>
<ACCUM-APPREC-OR-DEPREC> 22,517,855<F1>
<NET-ASSETS> 141,836,983<F1>
<DIVIDEND-INCOME> 432,776<F1>
<INTEREST-INCOME> 607,257<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 2,711,845<F1>
<NET-INVESTMENT-INCOME> (1,671,812)<F1>
<REALIZED-GAINS-CURRENT> (5,654,050)<F1>
<APPREC-INCREASE-CURRENT> 8,912,517<F1>
<NET-CHANGE-FROM-OPS> 1,586,655<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 21,269<F2>
<NUMBER-OF-SHARES-REDEEMED> (403)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 48,766,622<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 588,504<F1>
<OVERDISTRIB-NII-PRIOR> 761<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,251,124<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,076,390<F1>
<AVERAGE-NET-ASSETS> 217,436<F2>
<PER-SHARE-NAV-BEGIN> 18.30<F2>
<PER-SHARE-NII> (.03)<F2>
<PER-SHARE-GAIN-APPREC> (1.70)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.57<F2>
<EXPENSE-RATIO> 1.21<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Aggressive Growth as a whole
<F2>Information given pertains to Style Select Aggressive Growth Class Z
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 021
<NAME> STYLE SELECT MID-CAP GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 95,511,197<F1>
<INVESTMENTS-AT-VALUE> 100,508,935<F1>
<RECEIVABLES> 1,338,073<F1>
<ASSETS-OTHER> 28,860<F1>
<OTHER-ITEMS-ASSETS> 6,049<F1>
<TOTAL-ASSETS> 101,881,917<F1>
<PAYABLE-FOR-SECURITIES> 1,264,042<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 466,144<F1>
<TOTAL-LIABILITIES> 1,730,186<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 91,492,857<F1>
<SHARES-COMMON-STOCK> 2,199,202<F2>
<SHARES-COMMON-PRIOR> 1,342,354<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 2,748<F1>
<ACCUMULATED-NET-GAINS> 3,663,884<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 4,997,738<F1>
<NET-ASSETS> 100,151,731<F1>
<DIVIDEND-INCOME> 205,366<F1>
<INTEREST-INCOME> 287,193<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,866,314<F1>
<NET-INVESTMENT-INCOME> (1,373,755)<F1>
<REALIZED-GAINS-CURRENT> 5,170,912<F1>
<APPREC-INCREASE-CURRENT> (1,798,554)<F1>
<NET-CHANGE-FROM-OPS> 1,998,603<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,003,438<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,146,590)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 41,323,533<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 643<F1>
<OVERDIST-NET-GAINS-PRIOR> 144,564<F1>
<GROSS-ADVISORY-FEES> 839,531<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,142,510<F1>
<AVERAGE-NET-ASSETS> 26,730,018<F2>
<PER-SHARE-NAV-BEGIN> 13.71<F2>
<PER-SHARE-NII> (.18)<F2>
<PER-SHARE-GAIN-APPREC> 1.07<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 14.60<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 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> 022
<NAME> STYLE SELECT MID-CAP GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 95,511,197<F1>
<INVESTMENTS-AT-VALUE> 100,508,935<F1>
<RECEIVABLES> 1,338,073<F1>
<ASSETS-OTHER> 28,860<F1>
<OTHER-ITEMS-ASSETS> 6,049<F1>
<TOTAL-ASSETS> 101,881,917<F1>
<PAYABLE-FOR-SECURITIES> 1,264,042<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 466,144<F1>
<TOTAL-LIABILITIES> 1,730,186<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 91,492,857<F1>
<SHARES-COMMON-STOCK> 4,061,345<F2>
<SHARES-COMMON-PRIOR> 2,622,082<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 2,748<F1>
<ACCUMULATED-NET-GAINS> 3,663,884<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 4,997,738<F1>
<NET-ASSETS> 100,151,731<F1>
<DIVIDEND-INCOME> 205,366<F1>
<INTEREST-INCOME> 287,193<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,866,314<F1>
<NET-INVESTMENT-INCOME> (1,373,755)<F1>
<REALIZED-GAINS-CURRENT> 5,170,912<F1>
<APPREC-INCREASE-CURRENT> (1,798,554)<F1>
<NET-CHANGE-FROM-OPS> 1,998,603<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,411,557<F2>
<NUMBER-OF-SHARES-REDEEMED> (972,294)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 41,323,533<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 643<F1>
<OVERDIST-NET-GAINS-PRIOR> 144,564<F1>
<GROSS-ADVISORY-FEES> 839,531<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,142,510<F1>
<AVERAGE-NET-ASSETS> 49,915,714<F2>
<PER-SHARE-NAV-BEGIN> 13.63<F2>
<PER-SHARE-NII> (.27)<F2>
<PER-SHARE-GAIN-APPREC> 1.06<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 14.42<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 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> 023
<NAME> STYLE SELECT MID-CAP GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 95,511,197<F1>
<INVESTMENTS-AT-VALUE> 100,508,935<F1>
<RECEIVABLES> 1,338,073<F1>
<ASSETS-OTHER> 28,860<F1>
<OTHER-ITEMS-ASSETS> 6,049<F1>
<TOTAL-ASSETS> 101,881,917<F1>
<PAYABLE-FOR-SECURITIES> 1,264,042<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 466,144<F1>
<TOTAL-LIABILITIES> 1,730,186<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 91,492,857<F1>
<SHARES-COMMON-STOCK> 656,930<F2>
<SHARES-COMMON-PRIOR> 343,493<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 2,748<F1>
<ACCUMULATED-NET-GAINS> 3,663,884<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 4,997,738<F1>
<NET-ASSETS> 100,151,731<F1>
<DIVIDEND-INCOME> 205,366<F1>
<INTEREST-INCOME> 287,193<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,866,314<F1>
<NET-INVESTMENT-INCOME> (1,373,755)<F1>
<REALIZED-GAINS-CURRENT> 5,170,912<F1>
<APPREC-INCREASE-CURRENT> (1,798,554)<F1>
<NET-CHANGE-FROM-OPS> 1,998,603<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,037,718<F2>
<NUMBER-OF-SHARES-REDEEMED> (724,281)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 41,323,533<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 643<F1>
<OVERDIST-NET-GAINS-PRIOR> 144,564<F1>
<GROSS-ADVISORY-FEES> 839,531<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,142,510<F1>
<AVERAGE-NET-ASSETS> 7,307,350<F2>
<PER-SHARE-NAV-BEGIN> 13.64<F2>
<PER-SHARE-NII> (.27)<F2>
<PER-SHARE-GAIN-APPREC> 1.06<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 14.43<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 Mid-Cap Growth as a whole
<F2>Information given pertains to Style Select Mid-Cap Growth Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 031
<NAME> STYLE SELECT VALUE PORTFOLIO- CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 191,380,765<F1>
<INVESTMENTS-AT-VALUE> 196,832,494<F1>
<RECEIVABLES> 4,112,848<F1>
<ASSETS-OTHER> 33,347<F1>
<OTHER-ITEMS-ASSETS> 3,241<F1>
<TOTAL-ASSETS> 200,981,930<F1>
<PAYABLE-FOR-SECURITIES> 2,356,461<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,118,734<F1>
<TOTAL-LIABILITIES> 3,475,195<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 199,100,656<F1>
<SHARES-COMMON-STOCK> 4,743,248<F2>
<SHARES-COMMON-PRIOR> 3,007,062<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 5,561<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 7,040,019<F1>
<ACCUM-APPREC-OR-DEPREC> 5,451,659<F1>
<NET-ASSETS> 197,506,735<F1>
<DIVIDEND-INCOME> 2,846,714<F1>
<INTEREST-INCOME> 582,005<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 4,233,387<F1>
<NET-INVESTMENT-INCOME> (804,668)<F1>
<REALIZED-GAINS-CURRENT> (7,005,760)<F1>
<APPREC-INCREASE-CURRENT> (5,278,391)<F1>
<NET-CHANGE-FROM-OPS> (13,088,819)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 1,938,244<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 3,024,790<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,402,287)<F2>
<SHARES-REINVESTED> 113,683<F2>
<NET-CHANGE-IN-ASSETS> 62,211,289<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,393,253<F1>
<OVERDISTRIB-NII-PRIOR> 680<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,934,440<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,593,457<F1>
<AVERAGE-NET-ASSETS> 71,830,041<F2>
<PER-SHARE-NAV-BEGIN> 16.09<F2>
<PER-SHARE-NII> 0<F2>
<PER-SHARE-GAIN-APPREC> (0.51)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0.59<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 14.99<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 Value as a whole
<F2>Information given pertains to Style Select Value Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 032
<NAME> STYLE SELECT VALUE PORTFOLIO- CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 191,380,765<F1>
<INVESTMENTS-AT-VALUE> 196,832,494<F1>
<RECEIVABLES> 4,112,848<F1>
<ASSETS-OTHER> 33,347<F1>
<OTHER-ITEMS-ASSETS> 3,241<F1>
<TOTAL-ASSETS> 200,981,930<F1>
<PAYABLE-FOR-SECURITIES> 2,356,461<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,118,734<F1>
<TOTAL-LIABILITIES> 3,475,195<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 199,100,656<F1>
<SHARES-COMMON-STOCK> 7,498,100<F2>
<SHARES-COMMON-PRIOR> 4,846,859<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 5,561<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 7,040,019<F1>
<ACCUM-APPREC-OR-DEPREC> 5,451,659<F1>
<NET-ASSETS> 197,506,735<F1>
<DIVIDEND-INCOME> 2,846,714<F1>
<INTEREST-INCOME> 582,005<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 4,233,387<F1>
<NET-INVESTMENT-INCOME> (804,668)<F1>
<REALIZED-GAINS-CURRENT> (7,005,760)<F1>
<APPREC-INCREASE-CURRENT> (5,278,391)<F1>
<NET-CHANGE-FROM-OPS> (13,088,819)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 3,147,503<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 3,700,591<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,230,770)<F2>
<SHARES-REINVESTED> 181,420<F2>
<NET-CHANGE-IN-ASSETS> 62,211,289<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,393,253<F1>
<OVERDISTRIB-NII-PRIOR> 680<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,934,440<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,593,457<F1>
<AVERAGE-NET-ASSETS> 107,277,465<F2>
<PER-SHARE-NAV-BEGIN> 16.00<F2>
<PER-SHARE-NII> (0.10)<F2>
<PER-SHARE-GAIN-APPREC> (0.50)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0.59<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 14.81<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 Value as a whole
<F2>Information given pertains to Style Select Value Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 033
<NAME> STYLE SELECT VALUE PORTFOLIO- CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 191,380,765<F1>
<INVESTMENTS-AT-VALUE> 196,832,494<F1>
<RECEIVABLES> 4,112,848<F1>
<ASSETS-OTHER> 33,347<F1>
<OTHER-ITEMS-ASSETS> 3,241<F1>
<TOTAL-ASSETS> 200,981,930<F1>
<PAYABLE-FOR-SECURITIES> 2,356,461<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,118,734<F1>
<TOTAL-LIABILITIES> 3,475,195<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 199,100,656<F1>
<SHARES-COMMON-STOCK> 1,030,596<F2>
<SHARES-COMMON-PRIOR> 586,579<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 5,561<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 7,040,019<F1>
<ACCUM-APPREC-OR-DEPREC> 5,451,659<F1>
<NET-ASSETS> 197,506,735<F1>
<DIVIDEND-INCOME> 2,846,714<F1>
<INTEREST-INCOME> 582,005<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 4,233,387<F1>
<NET-INVESTMENT-INCOME> (804,668)<F1>
<REALIZED-GAINS-CURRENT> (7,005,760)<F1>
<APPREC-INCREASE-CURRENT> (5,278,391)<F1>
<NET-CHANGE-FROM-OPS> (13,088,819)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 364,243<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 649,398<F2>
<NUMBER-OF-SHARES-REDEEMED> (222,292)<F2>
<SHARES-REINVESTED> 16,911<F2>
<NET-CHANGE-IN-ASSETS> 62,211,289<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,393,253<F1>
<OVERDISTRIB-NII-PRIOR> 680<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,934,440<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,593,457<F1>
<AVERAGE-NET-ASSETS> 14,303,068<F2>
<PER-SHARE-NAV-BEGIN> 16.00<F2>
<PER-SHARE-NII> (0.11)<F2>
<PER-SHARE-GAIN-APPREC> (0.49)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0.59<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 14.81<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 Value as a whole
<F2>Information given pertains to Style Select Value Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 034
<NAME> STYLE SELECT VALUE PORTFOLIO- CLASS Z
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> APR-03-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 191,380,765<F1>
<INVESTMENTS-AT-VALUE> 196,832,494<F1>
<RECEIVABLES> 4,112,848<F1>
<ASSETS-OTHER> 33,347<F1>
<OTHER-ITEMS-ASSETS> 3,241<F1>
<TOTAL-ASSETS> 200,981,930<F1>
<PAYABLE-FOR-SECURITIES> 2,356,461<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,118,734<F1>
<TOTAL-LIABILITIES> 3,475,195<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 199,100,656<F1>
<SHARES-COMMON-STOCK> 6,680<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 5,561<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 7,040,019<F1>
<ACCUM-APPREC-OR-DEPREC> 5,451,659<F1>
<NET-ASSETS> 197,506,735<F1>
<DIVIDEND-INCOME> 2,846,714<F1>
<INTEREST-INCOME> 582,005<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 4,233,387<F1>
<NET-INVESTMENT-INCOME> (804,668)<F1>
<REALIZED-GAINS-CURRENT> (7,005,760)<F1>
<APPREC-INCREASE-CURRENT> (5,278,391)<F1>
<NET-CHANGE-FROM-OPS> (13,088,819)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 8,051<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,371)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 62,211,289<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,393,253<F1>
<OVERDISTRIB-NII-PRIOR> 680<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,934,440<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,593,457<F1>
<AVERAGE-NET-ASSETS> 57,504<F2>
<PER-SHARE-NAV-BEGIN> 17.62<F2>
<PER-SHARE-NII> 0.05<F2>
<PER-SHARE-GAIN-APPREC> (2.63)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 15.04<F2>
<EXPENSE-RATIO> 1.21<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Value as a whole
<F2>Information given pertains to Style Select Value Class Z
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 041
<NAME> STYLE SELECT INTERNATIONAL EQUITY CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 82,911,619<F1>
<INVESTMENTS-AT-VALUE> 84,478,100<F1>
<RECEIVABLES> 398,602<F1>
<ASSETS-OTHER> 608,298<F1>
<OTHER-ITEMS-ASSETS> 1,012,802<F1>
<TOTAL-ASSETS> 86,497,802<F1>
<PAYABLE-FOR-SECURITIES> 660,961<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,475,148<F1>
<TOTAL-LIABILITIES> 2,136,109<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 89,066,763<F1>
<SHARES-COMMON-STOCK> 2,324,757<F2>
<SHARES-COMMON-PRIOR> 1,955,961<F2>
<ACCUMULATED-NII-CURRENT> 265,285<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 6,017,801<F1>
<ACCUM-APPREC-OR-DEPREC> 1,047,446<F1>
<NET-ASSETS> 84,361,693<F1>
<DIVIDEND-INCOME> 1,274,293<F1>
<INTEREST-INCOME> 306,469<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,968,069<F1>
<NET-INVESTMENT-INCOME> (387,307)<F1>
<REALIZED-GAINS-CURRENT> (5,059,986)<F1>
<APPREC-INCREASE-CURRENT> 3,894,484<F1>
<NET-CHANGE-FROM-OPS> (1,552,809)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 431,326<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 3,643,759<F2>
<NUMBER-OF-SHARES-REDEEMED> (3,309,178)<F2>
<SHARES-REINVESTED> 34,215<F2>
<NET-CHANGE-IN-ASSETS> 12,881,297<F1>
<ACCUMULATED-NII-PRIOR> 122,861<F1>
<ACCUMULATED-GAINS-PRIOR> 843,851<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 877,072<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,357,373<F1>
<AVERAGE-NET-ASSETS> 25,858,222<F2>
<PER-SHARE-NAV-BEGIN> 12.46<F2>
<PER-SHARE-NII> (.01)<F2>
<PER-SHARE-GAIN-APPREC> (.01)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> .22<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.22<F2>
<EXPENSE-RATIO> 2.03<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select International Equity as a whole
<F2>Information given pertains to Style Select International Equity Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 042
<NAME> STYLE SELECT INTERNATIONAL EQUITY CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 82,911,619<F1>
<INVESTMENTS-AT-VALUE> 84,478,100<F1>
<RECEIVABLES> 398,602<F1>
<ASSETS-OTHER> 608,298<F1>
<OTHER-ITEMS-ASSETS> 1,012,802<F1>
<TOTAL-ASSETS> 86,497,802<F1>
<PAYABLE-FOR-SECURITIES> 660,961<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,475,148<F1>
<TOTAL-LIABILITIES> 2,136,109<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 89,066,763<F1>
<SHARES-COMMON-STOCK> 3,962,716<F2>
<SHARES-COMMON-PRIOR> 3,446,902<F2>
<ACCUMULATED-NII-CURRENT> 265,285<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 6,017,801<F1>
<ACCUM-APPREC-OR-DEPREC> 1,047,446<F1>
<NET-ASSETS> 84,361,693<F1>
<DIVIDEND-INCOME> 1,274,293<F1>
<INTEREST-INCOME> 306,469<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,968,069<F1>
<NET-INVESTMENT-INCOME> (387,307)<F1>
<REALIZED-GAINS-CURRENT> (5,059,986)<F1>
<APPREC-INCREASE-CURRENT> 3,894,484<F1>
<NET-CHANGE-FROM-OPS> (1,552,809)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 773,323<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,477,710<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,020,515)<F2>
<SHARES-REINVESTED> 58,619<F2>
<NET-CHANGE-IN-ASSETS> 12,881,297<F1>
<ACCUMULATED-NII-PRIOR> 122,861<F1>
<ACCUMULATED-GAINS-PRIOR> 843,851<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 877,072<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,357,373<F1>
<AVERAGE-NET-ASSETS> 47,441,091<F2>
<PER-SHARE-NAV-BEGIN> 12.38<F2>
<PER-SHARE-NII> (.09)<F2>
<PER-SHARE-GAIN-APPREC> 0<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> .22<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.07<F2>
<EXPENSE-RATIO> 2.68<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select International Equity as a whole
<F2>Information given pertains to Style Select International Equity Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 043
<NAME> STYLE SELECT INTERNATIONAL EQUITY CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 82,911,619<F1>
<INVESTMENTS-AT-VALUE> 84,478,100<F1>
<RECEIVABLES> 398,602<F1>
<ASSETS-OTHER> 608,298<F1>
<OTHER-ITEMS-ASSETS> 1,012,802<F1>
<TOTAL-ASSETS> 86,497,802<F1>
<PAYABLE-FOR-SECURITIES> 660,961<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,475,148<F1>
<TOTAL-LIABILITIES> 2,136,109<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 89,066,763<F1>
<SHARES-COMMON-STOCK> 661,550<F2>
<SHARES-COMMON-PRIOR> 360,269<F2>
<ACCUMULATED-NII-CURRENT> 265,285<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 6,017,801<F1>
<ACCUM-APPREC-OR-DEPREC> 1,047,446<F1>
<NET-ASSETS> 84,361,693<F1>
<DIVIDEND-INCOME> 1,274,293<F1>
<INTEREST-INCOME> 306,469<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,968,069<F1>
<NET-INVESTMENT-INCOME> (387,307)<F1>
<REALIZED-GAINS-CURRENT> (5,059,986)<F1>
<APPREC-INCREASE-CURRENT> 3,894,484<F1>
<NET-CHANGE-FROM-OPS> (1,552,809)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 80,350<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 446,371<F2>
<NUMBER-OF-SHARES-REDEEMED> (148,954)<F2>
<SHARES-REINVESTED> 3,864<F2>
<NET-CHANGE-IN-ASSETS> 12,881,297<F1>
<ACCUMULATED-NII-PRIOR> 122,861<F1>
<ACCUMULATED-GAINS-PRIOR> 843,851<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 877,072<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,357,373<F1>
<AVERAGE-NET-ASSETS> 6,375,370<F2>
<PER-SHARE-NAV-BEGIN> 12.38<F2>
<PER-SHARE-NII> (.09)<F2>
<PER-SHARE-GAIN-APPREC> 0<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> .22<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.07<F2>
<EXPENSE-RATIO> 2.68<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>INFORMATION GIVEN PERTAINS TO STYLE SELECT INTERNATIONAL EQUITY AS A WHOLE
<F2>INFORMATION GIVEN PERTAINS TO STYLE SELECT INTERNATIONAL EQUITY CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 044
<NAME> STYLE SELECT INTERNATIONAL EQUITY CLASS Z
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> APR-06-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 82,911,619<F1>
<INVESTMENTS-AT-VALUE> 84,478,100<F1>
<RECEIVABLES> 398,602<F1>
<ASSETS-OTHER> 608,298<F1>
<OTHER-ITEMS-ASSETS> 1,012,802<F1>
<TOTAL-ASSETS> 86,497,802<F1>
<PAYABLE-FOR-SECURITIES> 660,961<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,475,148<F1>
<TOTAL-LIABILITIES> 2,136,109<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 89,066,763<F1>
<SHARES-COMMON-STOCK> 11,801<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 265,285<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 6,017,801<F1>
<ACCUM-APPREC-OR-DEPREC> 1,047,446<F1>
<NET-ASSETS> 84,361,693<F1>
<DIVIDEND-INCOME> 1,274,293<F1>
<INTEREST-INCOME> 306,469<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,968,069<F1>
<NET-INVESTMENT-INCOME> (387,307)<F1>
<REALIZED-GAINS-CURRENT> (5,059,986)<F1>
<APPREC-INCREASE-CURRENT> 3,894,484<F1>
<NET-CHANGE-FROM-OPS> (1,552,809)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 11,801<F2>
<NUMBER-OF-SHARES-REDEEMED> 0<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 12,881,297<F1>
<ACCUMULATED-NII-PRIOR> 122,861<F1>
<ACCUMULATED-GAINS-PRIOR> 843,851<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 877,072<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,357,373<F1>
<AVERAGE-NET-ASSETS> 103,235<F2>
<PER-SHARE-NAV-BEGIN> 13.87<F2>
<PER-SHARE-NII> .03<F2>
<PER-SHARE-GAIN-APPREC> (1.63)<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.27<F2>
<EXPENSE-RATIO> 1.46<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select International Equity as a whole
<F2>Information given pertains to Style Select International Equity Class Z
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 051
<NAME> STYLE SELECT SERIES LARGE-CAP GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 43,580,995<F1>
<INVESTMENTS-AT-VALUE> 48,101,206<F1>
<RECEIVABLES> 205,921<F1>
<ASSETS-OTHER> 9,187<F1>
<OTHER-ITEMS-ASSETS> 9,875<F1>
<TOTAL-ASSETS> 48,326,189<F1>
<PAYABLE-FOR-SECURITIES> 192,450<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 302,160<F1>
<TOTAL-LIABILITIES> 494,610<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 44,540,068<F1>
<SHARES-COMMON-STOCK> 1,048,668<F2>
<SHARES-COMMON-PRIOR> 2,002,887<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 807<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,227,893<F1>
<ACCUM-APPREC-OR-DEPREC> 4,520,211<F1>
<NET-ASSETS> 47,831,579<F1>
<DIVIDEND-INCOME> 240,626<F1>
<INTEREST-INCOME> 53,880<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 704,183<F1>
<NET-INVESTMENT-INCOME> (409,677)<F1>
<REALIZED-GAINS-CURRENT> (1,043,330)<F1>
<APPREC-INCREASE-CURRENT> 5,789,617<F1>
<NET-CHANGE-FROM-OPS> 4,336,610<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 5,012<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,126,670<F2>
<NUMBER-OF-SHARES-REDEEMED> (2,081,206)<F2>
<SHARES-REINVESTED> 317<F2>
<NET-CHANGE-IN-ASSETS> 23,283,020<F1>
<ACCUMULATED-NII-PRIOR> 7,889<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 184,565<F1>
<GROSS-ADVISORY-FEES> 332,529<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 978,413<F1>
<AVERAGE-NET-ASSETS> 15,978,230<F2>
<PER-SHARE-NAV-BEGIN> 11.79<F2>
<PER-SHARE-NII> (.11)<F2>
<PER-SHARE-GAIN-APPREC> 2.05<F2>
<PER-SHARE-DIVIDEND> .01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.72<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> 052
<NAME> STYLE SELECT SERIES LARGE-CAP GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 43,580,995<F1>
<INVESTMENTS-AT-VALUE> 48,101,206<F1>
<RECEIVABLES> 205,921<F1>
<ASSETS-OTHER> 9,187<F1>
<OTHER-ITEMS-ASSETS> 9,875<F1>
<TOTAL-ASSETS> 48,326,189<F1>
<PAYABLE-FOR-SECURITIES> 192,450<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 302,160<F1>
<TOTAL-LIABILITIES> 494,610<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 44,540,068<F1>
<SHARES-COMMON-STOCK> 1,917,807<F2>
<SHARES-COMMON-PRIOR> 65,591<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 807<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,227,893<F1>
<ACCUM-APPREC-OR-DEPREC> 4,520,211<F1>
<NET-ASSETS> 47,831,579<F1>
<DIVIDEND-INCOME> 240,626<F1>
<INTEREST-INCOME> 53,880<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 704,183<F1>
<NET-INVESTMENT-INCOME> (409,677)<F1>
<REALIZED-GAINS-CURRENT> (1,043,330)<F1>
<APPREC-INCREASE-CURRENT> 5,789,617<F1>
<NET-CHANGE-FROM-OPS> 4,336,610<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 4,017<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,091,339<F2>
<NUMBER-OF-SHARES-REDEEMED> (239,375)<F2>
<SHARES-REINVESTED> 252<F2>
<NET-CHANGE-IN-ASSETS> 23,283,020<F1>
<ACCUMULATED-NII-PRIOR> 7,889<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 184,565<F1>
<GROSS-ADVISORY-FEES> 332,529<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 978,413<F1>
<AVERAGE-NET-ASSETS> 13,921,807<F2>
<PER-SHARE-NAV-BEGIN> 11.79<F2>
<PER-SHARE-NII> (.21)<F2>
<PER-SHARE-GAIN-APPREC> 2.04<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.62<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> 053
<NAME> STYLE SELECT SERIES LARGE-CAP GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 43,580,995<F1>
<INVESTMENTS-AT-VALUE> 48,101,206<F1>
<RECEIVABLES> 205,921<F1>
<ASSETS-OTHER> 9,187<F1>
<OTHER-ITEMS-ASSETS> 9,875<F1>
<TOTAL-ASSETS> 48,326,189<F1>
<PAYABLE-FOR-SECURITIES> 192,450<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 302,160<F1>
<TOTAL-LIABILITIES> 494,610<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 44,540,068<F1>
<SHARES-COMMON-STOCK> 537,327<F2>
<SHARES-COMMON-PRIOR> 14,084<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 807<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,227,893<F1>
<ACCUM-APPREC-OR-DEPREC> 4,520,211<F1>
<NET-ASSETS> 47,831,579<F1>
<DIVIDEND-INCOME> 240,626<F1>
<INTEREST-INCOME> 53,880<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 704,183<F1>
<NET-INVESTMENT-INCOME> (409,677)<F1>
<REALIZED-GAINS-CURRENT> (1,043,330)<F1>
<APPREC-INCREASE-CURRENT> 5,789,617<F1>
<NET-CHANGE-FROM-OPS> 4,336,610<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 983<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 565,584<F2>
<NUMBER-OF-SHARES-REDEEMED> (42,395)<F2>
<SHARES-REINVESTED> 54<F2>
<NET-CHANGE-IN-ASSETS> 23,283,020<F1>
<ACCUMULATED-NII-PRIOR> 7,889<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 184,565<F1>
<GROSS-ADVISORY-FEES> 332,529<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 978,413<F1>
<AVERAGE-NET-ASSETS> 3,352,809<F2>
<PER-SHARE-NAV-BEGIN> 11.78<F2>
<PER-SHARE-NII> (.20)<F2>
<PER-SHARE-GAIN-APPREC> 2.04<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.62<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> 061
<NAME> STYLE SELECT LARGE-CAP BLEND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 27,652,508<F1>
<INVESTMENTS-AT-VALUE> 28,642,976<F1>
<RECEIVABLES> 505,963<F1>
<ASSETS-OTHER> 8,993<F1>
<OTHER-ITEMS-ASSETS> 1,313<F1>
<TOTAL-ASSETS> 29,159,245<F1>
<PAYABLE-FOR-SECURITIES> 564,335<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 148,704<F1>
<TOTAL-LIABILITIES> 713,039<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 27,346,382<F1>
<SHARES-COMMON-STOCK> 751,202<F2>
<SHARES-COMMON-PRIOR> 1,969,995<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 840<F1>
<ACCUMULATED-NET-GAINS> 110,196<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 990,468<F1>
<NET-ASSETS> 28,446,206<F1>
<DIVIDEND-INCOME> 503,874<F1>
<INTEREST-INCOME> 58,330<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 589,471<F1>
<NET-INVESTMENT-INCOME> (27,267)<F1>
<REALIZED-GAINS-CURRENT> 158,020<F1>
<APPREC-INCREASE-CURRENT> 2,032,468<F1>
<NET-CHANGE-FROM-OPS> 2,163,221<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 12,655<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 710,580<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,930,218)<F2>
<SHARES-REINVESTED> 845<F2>
<NET-CHANGE-IN-ASSETS> 3,769,226<F1>
<ACCUMULATED-NII-PRIOR> 20,057<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 48,360<F1>
<GROSS-ADVISORY-FEES> 287,134<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 794,649<F1>
<AVERAGE-NET-ASSETS> 16,656,038<F2>
<PER-SHARE-NAV-BEGIN> 11.98<F2>
<PER-SHARE-NII> .03<F2>
<PER-SHARE-GAIN-APPREC> 1.04<F2>
<PER-SHARE-DIVIDEND> .01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 13.04<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 LARGE-CAP BLEND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 27,652,508<F1>
<INVESTMENTS-AT-VALUE> 28,642,976<F1>
<RECEIVABLES> 505,963<F1>
<ASSETS-OTHER> 8,993<F1>
<OTHER-ITEMS-ASSETS> 1,313<F1>
<TOTAL-ASSETS> 29,159,245<F1>
<PAYABLE-FOR-SECURITIES> 564,335<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 148,704<F1>
<TOTAL-LIABILITIES> 713,039<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 27,346,382<F1>
<SHARES-COMMON-STOCK> 1,246,409<F2>
<SHARES-COMMON-PRIOR> 78,691<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 840<F1>
<ACCUMULATED-NET-GAINS> 110,196<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 990,468<F1>
<NET-ASSETS> 28,446,206<F1>
<DIVIDEND-INCOME> 503,874<F1>
<INTEREST-INCOME> 58,330<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 589,471<F1>
<NET-INVESTMENT-INCOME> (27,267)<F1>
<REALIZED-GAINS-CURRENT> 158,020<F1>
<APPREC-INCREASE-CURRENT> 2,032,468<F1>
<NET-CHANGE-FROM-OPS> 2,163,221<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 10,889<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,318,539<F2>
<NUMBER-OF-SHARES-REDEEMED> (151,506)<F2>
<SHARES-REINVESTED> 685<F2>
<NET-CHANGE-IN-ASSETS> 3,769,226<F1>
<ACCUMULATED-NII-PRIOR> 20,057<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 48,360<F1>
<GROSS-ADVISORY-FEES> 287,134<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 794,649<F1>
<AVERAGE-NET-ASSETS> 10,663,972<F2>
<PER-SHARE-NAV-BEGIN> 11.96<F2>
<PER-SHARE-NII> (.07)<F2>
<PER-SHARE-GAIN-APPREC> 1.08<F2>
<PER-SHARE-DIVIDEND> .01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.96<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 LARGE-CAP BLEND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 27,652,508<F1>
<INVESTMENTS-AT-VALUE> 28,642,976<F1>
<RECEIVABLES> 505,963<F1>
<ASSETS-OTHER> 8,993<F1>
<OTHER-ITEMS-ASSETS> 1,313<F1>
<TOTAL-ASSETS> 29,159,245<F1>
<PAYABLE-FOR-SECURITIES> 564,335<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 148,704<F1>
<TOTAL-LIABILITIES> 713,039<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 27,346,382<F1>
<SHARES-COMMON-STOCK> 192,271<F2>
<SHARES-COMMON-PRIOR> 11,932<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 840<F1>
<ACCUMULATED-NET-GAINS> 110,196<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 990,468<F1>
<NET-ASSETS> 28,446,206<F1>
<DIVIDEND-INCOME> 503,874<F1>
<INTEREST-INCOME> 58,330<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 589,471<F1>
<NET-INVESTMENT-INCOME> (27,267)<F1>
<REALIZED-GAINS-CURRENT> 158,020<F1>
<APPREC-INCREASE-CURRENT> 2,032,468<F1>
<NET-CHANGE-FROM-OPS> 2,163,221<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 1,447<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 210,319<F2>
<NUMBER-OF-SHARES-REDEEMED> (30,059)<F2>
<SHARES-REINVESTED> 79<F2>
<NET-CHANGE-IN-ASSETS> 3,769,226<F1>
<ACCUMULATED-NII-PRIOR> 20,057<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 48,360<F1>
<GROSS-ADVISORY-FEES> 287,134<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 794,649<F1>
<AVERAGE-NET-ASSETS> 1,393,356<F2>
<PER-SHARE-NAV-BEGIN> 11.97<F2>
<PER-SHARE-NII> (.07)<F2>
<PER-SHARE-GAIN-APPREC> 1.06<F2>
<PER-SHARE-DIVIDEND> .01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.95<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 VALUE- CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 48,376,504<F1>
<INVESTMENTS-AT-VALUE> 47,185,764<F1>
<RECEIVABLES> 374,226<F1>
<ASSETS-OTHER> 12,050<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,572,040<F1>
<PAYABLE-FOR-SECURITIES> 222,367<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,766<F1>
<TOTAL-LIABILITIES> 471,133<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 48,146,569<F1>
<SHARES-COMMON-STOCK> 1,026,206<F2>
<SHARES-COMMON-PRIOR> 1,959,444<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 780<F1>
<ACCUMULATED-NET-GAINS> 145,858<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,190,740)<F1>
<NET-ASSETS> 47,100,907<F1>
<DIVIDEND-INCOME> 603,325<F1>
<INTEREST-INCOME> 124,280<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 769,795<F1>
<NET-INVESTMENT-INCOME> (42,190)<F1>
<REALIZED-GAINS-CURRENT> 151,738<F1>
<APPREC-INCREASE-CURRENT> 145,056<F1>
<NET-CHANGE-FROM-OPS> 254,604<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 8,099<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,166,196<F2>
<NUMBER-OF-SHARES-REDEEMED> (2,099,990)<F2>
<SHARES-REINVESTED> 556<F2>
<NET-CHANGE-IN-ASSETS> 22,363,557<F1>
<ACCUMULATED-NII-PRIOR> 16,631<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 353,448<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,102<F1>
<AVERAGE-NET-ASSETS> 13,559,067<F2>
<PER-SHARE-NAV-BEGIN> 11.86<F2>
<PER-SHARE-NII> 0.03<F2>
<PER-SHARE-GAIN-APPREC> 0.71<F2>
<PER-SHARE-DIVIDEND> 0.01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.59<F2>
<EXPENSE-RATIO> 1.78<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Large-Cap Value as a whole
<F2>Information 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> 072
<NAME> STYLE SELECT LARGE-CAP VALUE- CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 48,376,504<F1>
<INVESTMENTS-AT-VALUE> 47,185,764<F1>
<RECEIVABLES> 374,226<F1>
<ASSETS-OTHER> 12,050<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,572,040<F1>
<PAYABLE-FOR-SECURITIES> 222,367<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,766<F1>
<TOTAL-LIABILITIES> 471,133<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 48,146,569<F1>
<SHARES-COMMON-STOCK> 2,250,172<F2>
<SHARES-COMMON-PRIOR> 111,740<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 780<F1>
<ACCUMULATED-NET-GAINS> 145,858<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,190,740)<F1>
<NET-ASSETS> 47,100,907<F1>
<DIVIDEND-INCOME> 603,325<F1>
<INTEREST-INCOME> 124,280<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 769,795<F1>
<NET-INVESTMENT-INCOME> (42,190)<F1>
<REALIZED-GAINS-CURRENT> 151,738<F1>
<APPREC-INCREASE-CURRENT> 145,056<F1>
<NET-CHANGE-FROM-OPS> 254,604<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 10,027<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,558,635<F2>
<NUMBER-OF-SHARES-REDEEMED> (420,860)<F2>
<SHARES-REINVESTED> 657<F2>
<NET-CHANGE-IN-ASSETS> 22,363,557<F1>
<ACCUMULATED-NII-PRIOR> 16,631<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 353,448<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,102<F1>
<AVERAGE-NET-ASSETS> 18,299,652<F2>
<PER-SHARE-NAV-BEGIN> 11.86<F2>
<PER-SHARE-NII> (0.04)<F2>
<PER-SHARE-GAIN-APPREC> 0.69<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.51<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Large-Cap Value as a whole
<F2>Information 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> 073
<NAME> STYLE SELECT LARGE-CAP VALUE- CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 48,376,504<F1>
<INVESTMENTS-AT-VALUE> 47,185,764<F1>
<RECEIVABLES> 374,226<F1>
<ASSETS-OTHER> 12,050<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,572,040<F1>
<PAYABLE-FOR-SECURITIES> 222,367<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,766<F1>
<TOTAL-LIABILITIES> 471,133<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 48,146,569<F1>
<SHARES-COMMON-STOCK> 465,494<F2>
<SHARES-COMMON-PRIOR> 14,544<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 780<F1>
<ACCUMULATED-NET-GAINS> 145,858<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,190,740)<F1>
<NET-ASSETS> 47,100,907<F1>
<DIVIDEND-INCOME> 603,325<F1>
<INTEREST-INCOME> 124,280<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 769,795<F1>
<NET-INVESTMENT-INCOME> (42,190)<F1>
<REALIZED-GAINS-CURRENT> 151,738<F1>
<APPREC-INCREASE-CURRENT> 145,056<F1>
<NET-CHANGE-FROM-OPS> 254,604<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 1,868<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 509,447<F2>
<NUMBER-OF-SHARES-REDEEMED> (58,595)<F2>
<SHARES-REINVESTED> 98<F2>
<NET-CHANGE-IN-ASSETS> 22,363,557<F1>
<ACCUMULATED-NII-PRIOR> 16,631<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 353,448<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,102<F1>
<AVERAGE-NET-ASSETS> 3,408,163<F2>
<PER-SHARE-NAV-BEGIN> 11.86<F2>
<PER-SHARE-NII> (0.04)<F2>
<PER-SHARE-GAIN-APPREC> 0.69<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.51<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Large-Cap Value as a whole
<F2>Information 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> 074
<NAME> STYLE SELECT LARGE-CAP VALUE- CLASS Z
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> APR-16-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 48,376,504<F1>
<INVESTMENTS-AT-VALUE> 47,185,764<F1>
<RECEIVABLES> 374,226<F1>
<ASSETS-OTHER> 12,050<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,572,040<F1>
<PAYABLE-FOR-SECURITIES> 222,367<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 248,766<F1>
<TOTAL-LIABILITIES> 471,133<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 48,146,569<F1>
<SHARES-COMMON-STOCK> 16,377<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 780<F1>
<ACCUMULATED-NET-GAINS> 145,858<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> (1,190,740)<F1>
<NET-ASSETS> 47,100,907<F1>
<DIVIDEND-INCOME> 603,325<F1>
<INTEREST-INCOME> 124,280<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 769,795<F1>
<NET-INVESTMENT-INCOME> (42,190)<F1>
<REALIZED-GAINS-CURRENT> 151,738<F1>
<APPREC-INCREASE-CURRENT> 145,056<F1>
<NET-CHANGE-FROM-OPS> 254,604<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 197<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 19,034<F2>
<NUMBER-OF-SHARES-REDEEMED> (2,671)<F2>
<SHARES-REINVESTED> 14<F2>
<NET-CHANGE-IN-ASSETS> 22,363,557<F1>
<ACCUMULATED-NII-PRIOR> 16,631<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 353,448<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,020,102<F1>
<AVERAGE-NET-ASSETS> 142,857<F2>
<PER-SHARE-NAV-BEGIN> 13.86<F2>
<PER-SHARE-NII> 0.06<F2>
<PER-SHARE-GAIN-APPREC> (1.27)<F2>
<PER-SHARE-DIVIDEND> (0.01)<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.64<F2>
<EXPENSE-RATIO> 1.21<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Large-Cap Value as a whole
<F2>Information given pertains to Style Select Large-Cap Value Class Z
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 081
<NAME> STYLE SELECT SMALL-CAP VALUE- CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 54,239,314<F1>
<INVESTMENTS-AT-VALUE> 46,880,630<F1>
<RECEIVABLES> 583,412<F1>
<ASSETS-OTHER> 12,092<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,476,134<F1>
<PAYABLE-FOR-SECURITIES> 89,864<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 270,968<F1>
<TOTAL-LIABILITIES> 360,832<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 55,802,010<F1>
<SHARES-COMMON-STOCK> 1,391,561<F2>
<SHARES-COMMON-PRIOR> 1,758,084<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 801<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,327,223<F1>
<ACCUM-APPREC-OR-DEPREC> (7,358,684)<F1>
<NET-ASSETS> 47,115,302<F1>
<DIVIDEND-INCOME> 656,933<F1>
<INTEREST-INCOME> 155,548<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 859,777<F1>
<NET-INVESTMENT-INCOME> (47,296)<F1>
<REALIZED-GAINS-CURRENT> (1,440,075)<F1>
<APPREC-INCREASE-CURRENT> (6,590,682)<F1>
<NET-CHANGE-FROM-OPS> (8,078,053)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 16,218<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,603,110<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,970,872)<F2>
<SHARES-REINVESTED> 1,239<F2>
<NET-CHANGE-IN-ASSETS> 22,132,141<F1>
<ACCUMULATED-NII-PRIOR> 35,108<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 393,742<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,139,697<F1>
<AVERAGE-NET-ASSETS> 14,819,573<F2>
<PER-SHARE-NAV-BEGIN> 12.14<F2>
<PER-SHARE-NII> 0.05<F2>
<PER-SHARE-GAIN-APPREC> (1.36)<F2>
<PER-SHARE-DIVIDEND> 0.01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 10.82<F2>
<EXPENSE-RATIO> 1.78<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Small-Cap Value as a whole
<F2>Information given pertains to Style Select Small-Cap Value Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 082
<NAME> STYLE SELECT SMALL-CAP VALUE- CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 54,239,314<F1>
<INVESTMENTS-AT-VALUE> 46,880,630<F1>
<RECEIVABLES> 583,412<F1>
<ASSETS-OTHER> 12,092<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,476,134<F1>
<PAYABLE-FOR-SECURITIES> 89,864<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 270,968<F1>
<TOTAL-LIABILITIES> 360,832<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 55,802,010<F1>
<SHARES-COMMON-STOCK> 2,417,534<F2>
<SHARES-COMMON-PRIOR> 256,483<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 801<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,327,223<F1>
<ACCUM-APPREC-OR-DEPREC> (7,358,684)<F1>
<NET-ASSETS> 47,115,302<F1>
<DIVIDEND-INCOME> 656,933<F1>
<INTEREST-INCOME> 155,548<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 859,777<F1>
<NET-INVESTMENT-INCOME> (47,296)<F1>
<REALIZED-GAINS-CURRENT> (1,440,075)<F1>
<APPREC-INCREASE-CURRENT> (6,590,682)<F1>
<NET-CHANGE-FROM-OPS> (8,078,053)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 19,460<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,609,019<F2>
<NUMBER-OF-SHARES-REDEEMED> (449,305)<F2>
<SHARES-REINVESTED> 1,337<F2>
<NET-CHANGE-IN-ASSETS> 22,132,141<F1>
<ACCUMULATED-NII-PRIOR> 35,108<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 393,742<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,139,697<F1>
<AVERAGE-NET-ASSETS> 20,292,726<F2>
<PER-SHARE-NAV-BEGIN> 12.13<F2>
<PER-SHARE-NII> (0.05)<F2>
<PER-SHARE-GAIN-APPREC> (1.33)<F2>
<PER-SHARE-DIVIDEND> 0.01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 10.74<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Small-Cap Value as a whole
<F2>Information given pertains to Style Select Small-Cap Value Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 083
<NAME> STYLE SELECT SMALL-CAP VALUE- CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 54,239,314<F1>
<INVESTMENTS-AT-VALUE> 46,880,630<F1>
<RECEIVABLES> 583,412<F1>
<ASSETS-OTHER> 12,092<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,476,134<F1>
<PAYABLE-FOR-SECURITIES> 89,864<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 270,968<F1>
<TOTAL-LIABILITIES> 360,832<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 55,802,010<F1>
<SHARES-COMMON-STOCK> 555,667<F2>
<SHARES-COMMON-PRIOR> 43,289<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 801<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,327,223<F1>
<ACCUM-APPREC-OR-DEPREC> (7,358,684)<F1>
<NET-ASSETS> 47,115,302<F1>
<DIVIDEND-INCOME> 656,933<F1>
<INTEREST-INCOME> 155,548<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 859,777<F1>
<NET-INVESTMENT-INCOME> (47,296)<F1>
<REALIZED-GAINS-CURRENT> (1,440,075)<F1>
<APPREC-INCREASE-CURRENT> (6,590,682)<F1>
<NET-CHANGE-FROM-OPS> (8,078,053)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 4,296<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 610,407<F2>
<NUMBER-OF-SHARES-REDEEMED> (98,273)<F2>
<SHARES-REINVESTED> 244<F2>
<NET-CHANGE-IN-ASSETS> 22,132,141<F1>
<ACCUMULATED-NII-PRIOR> 35,108<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 393,742<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,139,697<F1>
<AVERAGE-NET-ASSETS> 4,205,542<F2>
<PER-SHARE-NAV-BEGIN> 12.14<F2>
<PER-SHARE-NII> (0.06)<F2>
<PER-SHARE-GAIN-APPREC> (1.33)<F2>
<PER-SHARE-DIVIDEND> 0.01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 10.74<F2>
<EXPENSE-RATIO> 2.43<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Small-Cap Value as a whole
<F2>Information given pertains to Style Select Small-Cap Value Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 084
<NAME> STYLE SELECT SMALL-CAP VALUE- CLASS Z
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> APR-03-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 54,239,314<F1>
<INVESTMENTS-AT-VALUE> 46,880,630<F1>
<RECEIVABLES> 583,412<F1>
<ASSETS-OTHER> 12,092<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 47,476,134<F1>
<PAYABLE-FOR-SECURITIES> 89,864<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 270,968<F1>
<TOTAL-LIABILITIES> 360,832<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 55,802,010<F1>
<SHARES-COMMON-STOCK> 13,084<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 801<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 1,327,223<F1>
<ACCUM-APPREC-OR-DEPREC> (7,358,684)<F1>
<NET-ASSETS> 47,115,302<F1>
<DIVIDEND-INCOME> 656,933<F1>
<INTEREST-INCOME> 155,548<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 859,777<F1>
<NET-INVESTMENT-INCOME> (47,296)<F1>
<REALIZED-GAINS-CURRENT> (1,440,075)<F1>
<APPREC-INCREASE-CURRENT> (6,590,682)<F1>
<NET-CHANGE-FROM-OPS> (8,078,053)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 183<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 13,605<F2>
<NUMBER-OF-SHARES-REDEEMED> (535)<F2>
<SHARES-REINVESTED> 14<F2>
<NET-CHANGE-IN-ASSETS> 22,132,141<F1>
<ACCUMULATED-NII-PRIOR> 35,108<F1>
<ACCUMULATED-GAINS-PRIOR> 0<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 393,742<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 1,139,697<F1>
<AVERAGE-NET-ASSETS> 96,956<F2>
<PER-SHARE-NAV-BEGIN> 13.63<F2>
<PER-SHARE-NII> 0.04<F2>
<PER-SHARE-GAIN-APPREC> (2.80)<F2>
<PER-SHARE-DIVIDEND> 0.02<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 10.85<F2>
<EXPENSE-RATIO> 1.21<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to Style Select Small-Cap Value as a whole
<F2>Information given pertains to Style Select Small-Cap Value Class Z
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 091
<NAME> STYLE SELECT FOCUS CLASS A
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-08-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 105,842,033<F1>
<INVESTMENTS-AT-VALUE> 112,477,618<F1>
<RECEIVABLES> 2,743,065<F1>
<ASSETS-OTHER> 71,904<F1>
<OTHER-ITEMS-ASSETS> 86,190<F1>
<TOTAL-ASSETS> 115,378,777<F1>
<PAYABLE-FOR-SECURITIES> 4,044,391<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 360,457<F1>
<TOTAL-LIABILITIES> 4,404,848<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 112,533,323<F1>
<SHARES-COMMON-STOCK> 2,362,782<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 8,194,979<F1>
<ACCUM-APPREC-OR-DEPREC> 6,635,585<F1>
<NET-ASSETS> 110,973,929<F1>
<DIVIDEND-INCOME> 140,993<F1>
<INTEREST-INCOME> 194,706<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 535,193<F1>
<NET-INVESTMENT-INCOME> (199,494)<F1>
<REALIZED-GAINS-CURRENT> (8,194,979)<F1>
<APPREC-INCREASE-CURRENT> 6,635,585<F1>
<NET-CHANGE-FROM-OPS> (1,758,888)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 4,937,120<F2>
<NUMBER-OF-SHARES-REDEEMED> (2,574,338)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 110,973,929<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> 238,994<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 624,414<F1>
<AVERAGE-NET-ASSETS> 21,254,942<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (.01)<F2>
<PER-SHARE-GAIN-APPREC> .11<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.6<F2>
<EXPENSE-RATIO> 1.45<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to Style Select Focus as a whole
<F2>Information given pertains to Style Select Focus Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 092
<NAME> STYLE SELECT FOCUS CLASS B
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-08-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 105,842,033<F1>
<INVESTMENTS-AT-VALUE> 112,477,618<F1>
<RECEIVABLES> 2,743,065<F1>
<ASSETS-OTHER> 71,904<F1>
<OTHER-ITEMS-ASSETS> 86,190<F1>
<TOTAL-ASSETS> 115,378,777<F1>
<PAYABLE-FOR-SECURITIES> 4,044,391<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 360,457<F1>
<TOTAL-LIABILITIES> 4,404,848<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 112,533,323<F1>
<SHARES-COMMON-STOCK> 3,647,704<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 8,194,979<F1>
<ACCUM-APPREC-OR-DEPREC> 6,635,585<F1>
<NET-ASSETS> 110,973,929<F1>
<DIVIDEND-INCOME> 140,993<F1>
<INTEREST-INCOME> 194,706<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 535,193<F1>
<NET-INVESTMENT-INCOME> (199,494)<F1>
<REALIZED-GAINS-CURRENT> (8,194,979)<F1>
<APPREC-INCREASE-CURRENT> 6,635,585<F1>
<NET-CHANGE-FROM-OPS> (1,758,888)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 4,130,135<F2>
<NUMBER-OF-SHARES-REDEEMED> (482,431)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 110,973,929<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> 238,994<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 624,414<F1>
<AVERAGE-NET-ASSETS> 26,936,102<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (.04)<F2>
<PER-SHARE-GAIN-APPREC> .10<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.56<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 Focus as a whole
<F2>Information given pertains to Style Select Focus Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001020861
<NAME> STYLE SELECT SERIES, INC.
<SERIES>
<NUMBER> 093
<NAME> STYLE SELECT FOCUS CLASS II
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-08-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 105,842,033<F1>
<INVESTMENTS-AT-VALUE> 112,477,618<F1>
<RECEIVABLES> 2,743,065<F1>
<ASSETS-OTHER> 71,904<F1>
<OTHER-ITEMS-ASSETS> 86,190<F1>
<TOTAL-ASSETS> 115,378,777<F1>
<PAYABLE-FOR-SECURITIES> 4,044,391<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 360,457<F1>
<TOTAL-LIABILITIES> 4,404,848<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 112,533,323<F1>
<SHARES-COMMON-STOCK> 2,817,537<F2>
<SHARES-COMMON-PRIOR> 0<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 0<F1>
<OVERDISTRIBUTION-GAINS> 8,194,979<F1>
<ACCUM-APPREC-OR-DEPREC> 6,635,585<F1>
<NET-ASSETS> 110,973,929<F1>
<DIVIDEND-INCOME> 140,993<F1>
<INTEREST-INCOME> 194,706<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 535,193<F1>
<NET-INVESTMENT-INCOME> (199,494)<F1>
<REALIZED-GAINS-CURRENT> (8,194,979)<F1>
<APPREC-INCREASE-CURRENT> 6,635,585<F1>
<NET-CHANGE-FROM-OPS> (1,758,888)<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 2,883,328<F2>
<NUMBER-OF-SHARES-REDEEMED> (65,791)<F2>
<SHARES-REINVESTED> 0<F2>
<NET-CHANGE-IN-ASSETS> 110,973,929<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> 238,994<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 624,414<F1>
<AVERAGE-NET-ASSETS> 22,101,275<F2>
<PER-SHARE-NAV-BEGIN> 12.50<F2>
<PER-SHARE-NII> (.04)<F2>
<PER-SHARE-GAIN-APPREC> .10<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 12.56<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 Focus as a whole
<F2>Information given pertains to Style Select Focus Class II
</FN>
</TABLE>
