<PAGE>
As filed with the Securities and Exchange Commission on February 26, 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-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. | |
POST-EFFECTIVE AMENDMENT NO. 13 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 14
(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)
|X| on February 28, 1999 pursuant to paragraph (b)
|_| 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
March 1, 1999
================================================================================
STYLE SELECT SERIES(R)
LARGE-CAP GROWTH PORTFOLIO
MID-CAP GROWTH PORTFOLIO
AGGRESSIVE GROWTH PORTFOLIO
LARGE-CAP BLEND PORTFOLIO
LARGE-CAP VALUE PORTFOLIO
VALUE PORTFOLIO
SMALL-CAP VALUE PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
The Securities and Exchange Commission
has not approved or disapproved these
securities or passed upon the adequacy
of this prospectus. Any representation
to the contrary is a criminal offense.
[LOGO] SUNAMERICA
MUTUAL FUNDS
<PAGE>
TABLE OF CONTENTS
FUND HIGHLIGHTS................................................................3
FINANCIAL HIGHLIGHTS..........................................................21
SHAREHOLDER ACCOUNT INFORMATION...............................................26
MORE INFORMATION ABOUT THE PORTFOLIOS.........................................39
Investment Strategies.............................................39
Glossary..........................................................44
Investment Terminology................................44
Risk Terminology......................................46
FUND MANAGEMENT...............................................................48
2
<PAGE>
FUND HIGHLIGHTS
The following questions and answers are designed to give you an overview of
Style Select Series, Inc. (the "Fund"), and to provide you with information
about eight of the Fund's separate Portfolios and their investment goals,
principal strategies, and principal investment techniques. Each goal may be
changed without shareholder approval, although you will receive notice of any
change. There can be no assurance that any Portfolio's investment goal will be
met or that the net return on an investment in a Portfolio will exceed what
could have been obtained through other investment or savings vehicles. More
complete investment information is provided in chart form, under "More
Information About the Portfolios," which is on page 39, and the glossary that
follows on page 44.
Q: WHAT ARE THE PORTFOLIOS' INVESTMENT GOALS, STRATEGIES AND TECHNIQUES?
A:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Investment Principal Principal Investment Techniques
Goal Investment
Strategy
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LARGE-CAP long-term growth invests primarily in equity securities (including, when
GROWTH growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital growth criteria, issued by companies with market
capitalizations of over $5 billion at the time of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
MID-CAP long-term growth invests primarily in equity securities (including, when
GROWTH growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital growth criteria, issued by companies with market
capitalizations between $1 billion and $5 billion at the time
of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE long-term growth invests primarily in equity securities (including, when
GROWTH growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital growth criteria, issued by companies selected without
regard to market capitalizations, except that they will generally
have market capitalizations of less than $1 billion or between $1
billion and $5 billion at the time of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LARGE-CAP long-term growth and invests primarily in equity securities (including, when
BLEND growth of value appropriate, by active trading) selected to achieve a blend
PORTFOLIO capital and of growth companies, value companies and companies that
current the Advisers believe have elements of growth and value,
income issued by companies with market capitalizations of over $5
billion at the time of purchase. Each Adviser may
emphasize either a growth orientation or a value
orientation at any particular time.
- ------------------------------------------------------------------------------------------------------------------------------------
LARGE-CAP long-term value invests primarily in equity securities (including, when
VALUE growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital value criteria, issued by companies with market
capitalizations of over $5 billion at the time of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE long-term value invests primarily in equity securities (including, when
PORTFOLIO growth of appropriate, by active trading) selected on the basis of
capital value criteria, issued by companies selected without
regard to market capitalizations, except that the Portfolio as a
whole generally expects to have a significant portion of its
total assets invested in securities of companies with market
capitalizations between $1 billion and $5 billion at the time of
purchase
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP long-term value invests primarily in equity securities (including, when
VALUE growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital value criteria, issued by companies with market
capitalizations of less than $1 billion at the time of
purchase
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL long-term international invests primarily in equity securities (including, when
EQUITY growth of appropriate, by active trading) and other securities with
PORTFOLIO capital equity characteristics of non-U.S. issuers located in at least
three countries other than the U.S. and selected without
regard to market capitalization at the time of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[Margin note: A Portfolio engages in ACTIVE TRADING when it frequently
trades its portfolio securities to achieve its investment goal.]
[Margin note: The "GROWTH" ORIENTED philosophy to which the Large-Cap
Growth, Mid-Cap Growth, Aggressive Growth and Large-Cap Blend Portfolios
partly subscribe-that of investing in securities which are 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
4
<PAGE>
proven or unusual products or services; or to operate in industries
experiencing increasing demand.]
[Margin note: The "VALUE" ORIENTED philosophy to which the Large-Cap Blend,
Large-Cap Value, Value and Small-Cap Value Portfolios partly subscribe-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 with solid financial strength
and generous dividend yields that have low price-earnings ratios and have
generally been overlooked by the market.]
[Margin note: The strategy of "INTERNATIONAL" INVESTING that the
International Equity Portfolio follows involves investing in at least three
countries outside of the United States, and may incorporate, in any
combination, elements of value investing, growth investing, and country
allocation.]
[Margin note: "COUNTRY ALLOCATION" is an investment strategy by which an
Adviser purchases securities based on research involving investment
opportunities in particular countries or regions, as opposed to
opportunities in particular industries or types of stocks. This research
may include, but is not limited to, data and forecasts about general
regional economic strength, political and economic stability, and valuation
of currency.]
[Margin note: MARKET CAPITALIZATION represents the total market value of
the outstanding securities of a corporation.]
With the exception of the International Equity Portfolio, which has two
different Advisers, each portfolio provides investors with access to at least
three different professional Advisers, each with its own distinct investment
methodology within a particular investment style. Each Adviser manages a
separate portion of a Portfolio.
SunAmerica will initially allocate the assets of each 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.
SunAmerica intends, on a quarterly basis, to review the asset allocation in each
Portfolio to ensure that no portion of assets managed by an Adviser exceeds that
portion managed by any other Adviser to the Portfolio by more than 5%. If such a
condition exists, SunAmerica will then re-allocate cash flows among the
Advisers, differently from the manner described above, in an effort to effect a
re-balancing of the Portfolio's asset allocation. SunAmerica does not intend,
but reserves the right, 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, the effect of the
reallocation will be to shift assets from a better performing Adviser to a
portion of the Portfolio with a relatively lower total return.
5
<PAGE>
Q: WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIOS?
A: The following section describes the principal risks of each Portfolio,
while the chart on page 40 describes various additional risks.
RISKS OF INVESTING IN EQUITY SECURITIES
All of the Portfolios invest primarily in equity securities. As with
any equity fund, the value of your investment in any of these Portfolios
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 any of these Portfolios
may underperform the market generally.
RISKS OF NON-DIVERSIFICATION
Each Portfolio is non-diversified, which means that it can invest a
larger portion of its assets in the stock of a single company than can some
other mutual funds; by concentrating in a smaller number of stocks, the
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.
ADDITIONAL PRINCIPAL RISKS
Shares of the Portfolios are not bank deposits and are not guaranteed
or insured by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that a
Portfolio will be able to achieve its investment goals. If the value of the
assets of a Portfolio goes down, you could lose money.
ADDITIONAL RISKS SPECIFIC TO THE MID-CAP GROWTH PORTFOLIO
Stocks of smaller companies may be more volatile than, and not as
readily marketable as, those of larger companies. The Mid-Cap Growth
Portfolio may be riskier than the Large-Cap Growth, Large-Cap Blend or
Large-Cap Value Portfolios.
ADDITIONAL RISKS SPECIFIC TO THE AGGRESSIVE GROWTH PORTFOLIO AND SMALL-CAP
VALUE PORTFOLIO
Stocks of smaller companies may be more volatile than, and not as
readily marketable as, those of larger companies. These Portfolios may be
riskier than the Large-Cap Growth, Mid-Cap Growth, Large-Cap Blend or
Large-Cap Value Portfolios.
6
<PAGE>
ADDITIONAL RISKS SPECIFIC TO THE INTERNATIONAL EQUITY PORTFOLIO
While investing internationally may reduce your risk by increasing the
diversification of your overall portfolio, the value of your investment may
be affected by fluctuating currency values, changing local and regional
economic, political and social conditions, and greater market volatility,
and, in addition, foreign securities may not be as liquid as domestic
securities.
Q: HOW HAVE THE PORTFOLIOS PERFORMED HISTORICALLY?
A: The following Risk/Return Bar Charts and Tables illustrate the risks of
investing in the Portfolios by showing changes in the Portfolios'
performance from calendar year to calendar year, and compare the
Portfolios' average annual returns to those of an appropriate market index.
Sales charges are not reflected in the bar chart. If these amounts were
reflected, returns would be less than those shown. Of course, past
performance is not necessarily an indication of how a Portfolio will
perform in the future.
7
<PAGE>
Large-Cap Growth Portfolio
1998
29.80%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
25.42% (quarter ended 12/31/98) and the lowest return for a quarter was -11.64%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION****
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Growth Portfolio* Class A 23.28% 15.72%
- --------------------------------------------------------------------------------------------------------------------------------
Class B 25.80% 17.48%
- --------------------------------------------------------------------------------------------------------------------------------
Class II 27.53% 19.60%
- --------------------------------------------------------------------------------------------------------------------------------
Russell 1000 Index** 38.71% 32.66%
- --------------------------------------------------------------------------------------------------------------------------------
Morningstar Large-Cap Growth Category*** 35.99% 27.28%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The Russell 1000(Registered) Index measures the performance of the 1,000
largest companies in the Russell 3000 Index, which represents approximately
89% of the total market capitalization of the Russell 3000 Index. As of the
latest reconstitution, the average market capitalization was approximately
$9.9 billion; the median market capitalization was approximately $3.7
billion. The smallest company in the index had an approximate market
capitalization of $1,404.7 million.
*** Developed by Morningstar, the Morningstar Large-Cap Growth Category
currently reflects a group of 223 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A, B and C shares commenced offering on October 15, 1997. On December
1, 1998, the Class C shares were redesignated Class II shares.
8
<PAGE>
Mid-Cap Growth Portfolio
1997 1998
13.29% 21.33%
(Class B)
During the period shown in the bar chart, the highest return for a quarter
was 28.41% (quarter ended 12/31/98) and the lowest return for a quarter
was -18.25% (quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN SINCE INCEPTION****
---------------------------------------------------------
Average Annual Total Returns (As Russell Morningstar
Of The Calendar Year Ended Fund Mid-Cap Mid-Cap
December 31, 1998) Past One Year Index** Growth Category***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mid-Cap Growth Portfolio* Class A 15.24% 13.09% 18.97% 17.16%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B 17.33% 13.90% 18.97% 17.16%
- ------------------------------------------------------------------------------------------------------------------------------------
Class II 19.18% 20.72% 22.34% 20.18%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
Russell Mid-Cap Index** 17.03% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
Morningstar Mid-Cap Growth Category*** 19.35% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** Russell Midcap(trademark) Index measures the performance of the 800
smallest companies in the Russell 1000 Index, which represents
approximately 35% of the total market capitalization of the Russell 1000
Index. As of the latest reconstitution, the average market capitalization
was approximately $3.7 billion; the median market capitalization was
approximately $2.9 billion. The largest company in the index had an
approximate market capitalizaiton of $10.3 billion.
*** Developed by Morningstar, the Morningstar Mid-Cap Growth Category
currently reflects a group of 173 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A and B shares commenced offering on November 19, 1996. Class C
shares, which were redesignated Class II shares on December 1, 1998,
commenced offering on March 6, 1997.
9
<PAGE>
Aggressive Growth Portfolio
1997 1998
23.87% 30.58%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
32.67% (quarter ended 12/31/98) and the lowest return for a quarter was -15.85%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN SINCE INCEPTION****
-----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS Russell Morningstar
OF THE CALENDAR YEAR ENDED Fund 2500 Aggressive
DECEMBER 31, 1998) PAST ONE YEAR Growth Index** Growth Category***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth Portfolio* Class A 23.99% 24.73% 12.79% 13.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B 26.58% 25.96% 12.79% 13.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Class II 28.27% 26.92% 15.00% 16.33%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
Russell 2500 Growth Index** 9.84% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
Morningstar Aggressive Growth Category*** 13.53% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The Russell 2500(Trademark) Growth Index measures the performance of those
Russell 2500 companies with higher price-to-book ratios and higher
forecasted growth values.
*** Developed by Morningstar, the Morningstar Aggressive Growth Category
currently reflects a group of 123 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A and B shares commenced offering on November 19, 1996. Class C
shares, which were redesignated Class II shares on December 1, 1998,
commenced offering on March 6, 1997.
10
<PAGE>
Large-Cap Blend Portfolio
1998
12.38%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
18.70% (quarter ended 12/31/98) and the lowest return for a quarter was -13.91%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION****
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Blend Portfolio* Class A 6.60% 6.46%
- -----------------------------------------------------------------------------------------------------------------------------
Class B 8.38% 7.82%
- -----------------------------------------------------------------------------------------------------------------------------
Class II 10.26% 10.15%
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index** 28.57% 25.97%
- -----------------------------------------------------------------------------------------------------------------------------
Morningstar Large-Cap Blend Category*** 21.74% 18.74%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The S&P 500(R) is the Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices.
*** Developed by Morningstar, the Morningstar Large-Cap Blend Category
currently reflects a group of 429 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A, B and C shares commenced offering on October 15, 1997. On December
1, 1998, the Class C shares were redesignated Class II shares.
11
<PAGE>
Large-Cap Value Portfolio
1998
8.06%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
14.88% (quarter ended 12/31/98) and the lowest return for a quarter was -13.83%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION****
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Value Portfolio* Class A 2.48% 0.35%
- ----------------------------------------------------------------------------------------------------------------------
Class B 4.06% 1.42%
- ----------------------------------------------------------------------------------------------------------------------
Class II 5.98% 3.84%
- ----------------------------------------------------------------------------------------------------------------------
Russell 1000 Value Index** 15.43% 16.72%
- ----------------------------------------------------------------------------------------------------------------------
Morningstar Large-Cap Value Category*** 12.69% 11.06%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The Russell 1000(Registered) Value Index measures the performance of
those Russell 1000 companies with lower price-to-book ratios and lower
forecasted growth values.
*** Developed by Morningstar, the Morningstar Large-Cap Value Category
currently reflects a group of 263 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A, B and C shares commenced offering on October 15, 1997. On December
1, 1998, the Class C shares were redesignated Class II shares.
12
<PAGE>
Value Portfolio
1997 1998
28.67% -0.57%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
16.51% (quarter ended 12/31/98) and the lowest return for a quarter was -18.66%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN SINCE INCEPTION****
---------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS Russell Morningstar
OF THE CALENDAR YEAR ENDED Fund Mid-Cap Mid-Cap
DECEMBER 31, 1998) PAST ONE YEAR Value Index** Value Category***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value Portfolio* Class A -5.69% 11.04% 14.13% 14.05%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B -4.57% 11.84% 14.13% 14.05%
- ------------------------------------------------------------------------------------------------------------------------------------
Class II -2.56% 10.16% 16.58% 16.49%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
Russell Midcap Value Index** 1.32% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
Morningstar Mid-Cap Value Category*** 1.12% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The Russell Midcap(Trademark) Value Index measures the performance of those
Russell Midcap companies with lower price-to-book ratios and lower
forecasted growth values. The stocks are also members of the
Russell 1000 Value Index.
*** Developed by Morningstar, the Morningstar Mid-Cap Value Category
currently reflects a group of 141 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A and B shares commenced offering on November 19, 1996. Class C
shares, which were redesignated Class II shares on December 1, 1998,
commenced offering on March 6, 1997.
13
<PAGE>
Small-Cap Value Portfolio
1998
- -7.41%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
14.06% (quarter ended 12/31/98) and the lowest return for a quarter was -19.98%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION****
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Small-Cap Value Portfolio* Class A -12.09% -10.28%
- --------------------------------------------------------------------------------------------------------------------------
Class B -11.41% -9.83%
- --------------------------------------------------------------------------------------------------------------------------
Class II -9.26% -7.18%
- --------------------------------------------------------------------------------------------------------------------------
Russell 2000 Value Index** -6.45% -4.05%
- --------------------------------------------------------------------------------------------------------------------------
Morningstar Small-Cap Value Category*** -6.28% -7.24%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The Russell 2000 Value Index is a widely-recognized, capitalization-
weighted (companies with larger market capitalizations have more influence
than those with smaller market capitalizations) Index of the 2000 smallest
companies out of the 3000 largest U.S. companies with lower growth rates
and price-to-book ratios.
*** Developed by Morningstar, the Morningstar Small-Cap Value Category
currently reflects a group of 180 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A, B and C shares commenced offering on October 15, 1997. On December
1, 1998, the Class C shares were redesignated Class II shares.
14
<PAGE>
International Equity Portfolio
1997 1998
- -3.47% 9.60%
(Class B)
During the period shown in the bar chart, the highest return for a quarter was
15.22% (quarter ended 12/31/98) and the lowest return for a quarter was -16.47%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RETURN SINCE INCEPTION****
-----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS OF MSCI Morningstar
THE CALENDAR YEAR ENDED DECEMBER Fund EAFE Foreign
31, 1998) PAST ONE YEAR Index** Stock Category***
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity Portfolio* Class A 3.93% 0.73% 10.37% 9.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B 5.60% 1.04% 10.37% 9.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Class II 7.51% 2.35% 12.13% 10.67%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
MSCI EAFE Index** 10.56% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
Morningstar Foreign Stock Category*** 12.21% See Above
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes sales charges.
** The MSCI EAFE Index consists of foreign companies located in developed
markets of 21 different countries of Europe, Australia, Asia and the Far
East.
*** Developed by Morningstar, the Morningstar Foreign Stock Category
currently reflects a group of 302 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
**** Class A and B shares commenced offering on November 19, 1996. Class C
shares, which were redesignated Class II shares on December 1, 1998,
commenced offering on March 6, 1997.
Q: WHAT ARE THE PORTFOLIOS' EXPENSES?
A: The following table describes the fees and expenses that you may pay if you
buy and hold shares of the Portfolios.
<TABLE>
<CAPTION>
LARGE-CAP GROWTH MID-CAP GROWTH AGGRESSIVE GROWTH LARGE-CAP BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- ----------------------- --------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B II A B II A B II A B II
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES (fees paid
directly from your
investment)
Maximum Sales Charge
(Load) Imposed on Pur-
chases (as a percentage of
offering price)(1).......... 5.75% None 1.00% 5.75% None 1.00% 5.75% None 1.00% 5.75% None 1.00%
Maximum Deferred Sales
Charge (Load) (as a per-
centage of amount
redeemed)(2)................ None 4.00% 1.00% None 4.00% 1.00% None 4.00% 1.00% None 4.00% 1.00%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP GROWTH MID-CAP GROWTH AGGRESSIVE GROWTH LARGE-CAP BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- ----------------------- --------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B II A B II A B II A B II
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends........ None None None None None None None None None None None None
Redemption Fee(3)........... None None None None None None None None None None None None
Exchange Fee................ None None None None None None None None None None None None
Maximum Account Fee None None None None None None None None None None None None
GROSS ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
Management Fees............. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1)
Fees(4)..................... 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other Expenses.............. 1.15% 1.23% 1.85% .73% .76% .82% .70% .71% .87% 1.05% 1.10% 2.54%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Gross Annual Fund
Operating Expenses ......... 2.50% 3.23% 3.85% 2.08% 2.76% 2.82% 2.05% 2.71% 2.87% 2.40% 3.10% 4.54%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Expense Reimbursement (5) .72% .80% 1.42% .30% .33% .39% .27% .28% .44% .62% .67% 2.11%
Net Expenses 1.78% 2.43% 2.43% 1.78% 2.43% 2.43% 1.78% 2.43% 2.43% 1.78% 2.43% 2.43%
</TABLE>
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
(2) Purchases of Class A shares over $1 million will be subject to a contingent
deferred sales charge (CDSC) on redemptions made within one year of
purchase. The CDSC on Class B shares applies only if shares are redeemed
within six years of their purchase. The CDSC on Class II shares applies
only if shares are redeemed within eighteen months of their purchase.
(3) A $15.00 fee may be imposed on wire redemptions.
16
<PAGE>
(4) Because these fees are paid out of a Portfolio's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(5) 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.
<TABLE>
<CAPTION>
LARGE-CAP VALUE SMALL-CAP VALUE INTERNATIONAL EQUITY
PORTFOLIO VALUE PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- ----------------------- --------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B II A B II A B II A B II
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly
from your investment)
Maximum Sales
Charge (Load)
Imposed on Pur-
chases (as a per-
centage of offering
price)(1)........... 5.75% None 1.00% 5.75% None 1.00% 5.75% None 1.00% 5.75% None 1.00%
Maximum
Deferred Sales
Charge (Load) (as
a percentage of
amount
redeemed)(2)........ None 4.00% 1.00% None 4.00% 1.00% None 4.00% 1.00% None 4.00% 1.00%
Maximum Sales
Charge (Load) Im-
posed on
Reinvested
Dividends........... None None None None None None None None None None None None
Redemption Fee(3)... None None None None None None None None None None None None
Exchange Fee........ None None None None None None None None None None None None
Maximum Account None None None None None None None None None None None None
Fee
ANNUAL FUND
OPERATING EXPENSES
(expenses that are
deducted from Fund
assets)
Management Fees..... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.10% 1.10% 1.10%
Distribution (12b-
1) Fees(4).......... 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other Expenses...... 1.10% 1.04% 1.57% .60% .62% .64% 1.09% 1.05% 1.48% 1.03% 1.06% 1.13%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP VALUE SMALL-CAP VALUE INTERNATIONAL EQUITY
PORTFOLIO VALUE PORTFOLIO PORTFOLIO PORTFOLIO
--------------------- ----------------------- --------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B II A B II A B II A B II
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Annual Fund
Operating
Expenses ........... 2.45% 3.04% 3.57% 1.95% 2.62% 2.64% 2.44% 3.05% 3.48% 2.48% 3.16% 3.23%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Expense
Reimbursement (5) 0.67% 0.61% 1.14% 0.17% 0.19% 0.21% 0.66% 0.62% 1.05% 0.45% 0.48% 0.55%
Net Expenses 1.78% 2.43% 2.43% 1.78% 2.43% 2.43% 1.78% 2.43% 2.43% 2.03% 2.68% 2.68%
</TABLE>
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
(2) Purchases of Class A shares over $1 million will be subject to a contingent
deferred sales charge (CDSC) on redemptions made within one year of
purchase. The CDSC on Class B shares applies only if shares are redeemed
within six years of their purchase. The CDSC on Class II shares applies
only if shares are redeemed within eighteen months of their purchase.
(3) A $15.00 fee may be imposed on wire redemptions.
(4) Because these fees are paid out of a Portfolio's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(5) 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
Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a 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:
18
<PAGE>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
LARGE-CAP GROWTH PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
MID-CAP GROWTH PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
AGGRESSIVE GROWTH PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
LARGE-CAP BLEND PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
LARGE-CAP VALUE PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
VALUE PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
SMALL-CAP VALUE PORTFOLIO
(Class A shares) .......... $ 745 $1103 $1484 $2549
(Class B shares)* ......... $ 286 $ 788 $1316 $2531
(Class II shares) ......... $ 354 $ 850 $1383 $2839
INTERNATIONAL EQUITY PORTFOLIO
(Class A shares) .......... $ 769 $1175 $1605 $2798
(Class B shares)* ......... $ 311 $ 862 $1440 $2783
(Class II shares) ......... $ 378 $ 924 $1506 $3082
19
<PAGE>
If you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
LARGE-CAP GROWTH PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
MID-CAP GROWTH PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
AGGRESSIVE GROWTH PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
LARGE-CAP BLEND PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
LARGE-CAP VALUE PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
VALUE PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
SMALL-CAP VALUE PORTFOLIO
(Class A shares) ........ $ 745 $1103 $1484 $2549
(Class B shares)* ....... $ 246 $ 758 $1296 $2531
(Class II shares) ....... $ 344 $ 850 $1383 $2839
INTERNATIONAL EQUITY PORTFOLIO
(Class A shares) ........ $ 769 $1175 $1605 $2798
(Class B shares)* ....... $ 271 $ 832 $1420 $2783
(Class II shares) ....... $ 368 $ 924 $1506 $3082
* Class B shares convert to Class A shares approximately seven years after
purchase. Therefore, expense information for years 8, 9 and 10 is the same
for both Class A and B shares.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table for each Portfolio is intended to help you
understand the Portfolio's financial performance since inception. Certain
information reflects financial results for a single Fund share. The total
returns in each table represent the rate that an investor would have earned (or
lost) on an investment in a Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with each Portfolio's financial statements, are
included in the Fund's annual report to shareholders, which is available upon
request.
LARGE CAP GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- ----------------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97........... $12.50 $ -- $(0.71) $(0.71) $ -- $ -- $ --
10/31/98...................... 11.79 (0.11) 2.05 1.94 (0.01) -- (0.01)
Class B -- -- --
10/15/97 - 10/31/97........... 12.50 -- (0.71) (0.71) -- -- --
10/31/98...................... 11.79 (0.21) 2.04 1.83 -- -- --
Class C
10/15/97 - 10/31/97........... 12.50 -- (0.72) (0.72) -- -- --
10/31/98...................... 11.78 (0.20) 2.04 1.84 -- -- --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97........... $11.79 (5.68)% $23,609 1.78%(3) 0.34%(3) 1%
10/31/98...................... 13.72 16.42 14,390 1.78 (0.90) 30
Class B
10/15/97 - 10/31/97........... 11.79 (5.68) 773 2.43(3) (0.84)(3) 1
10/31/98...................... 13.62 15.54 26,125 2.43 (1.54) 30
Class C
10/15/97 - 10/31/97........... 11.78 (5.76) 166 2.43(3) (0.42)(3) 1
10/31/98...................... 13.62 15.64 7,317 2.43 (1.54) 30
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Large-Cap Growth A............ 0.59% 0.72%
Large-Cap Growth B............ 1.53% 0.80%
Large-Cap Growth C............ 3.29% 1.42%
21
<PAGE>
MID-CAP GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- --------------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97........... $12.50 $(0.16) $1.37 $1.21 $ -- $ -- $ --
10/31/98...................... 13.71 (0.18) 1.07 0.89 -- -- --
Class B
11/19/96 - 10/31/97........... 12.50 (0.25) 1.38 1.13 -- -- --
10/31/98...................... 13.63 (0.27) 1.06 0.79 -- -- --
Class C
3/06/97 - 10/31/97............ 11.93 (0.18) 1.89 1.71 -- -- --
10/31/98...................... 13.64 (0.27) 1.06 0.79 -- -- --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97........... $13.71 9.68% $18,404 1.85%(3) (1.19)%(3) 97%
10/31/98...................... 14.60 6.49 32,115 1.78 (1.19) 135
Class B
11/19/96 - 10/31/97........... 13.63 9.04 35,739 2.47(3) (1.92)(3) 97
10/31/98...................... 14.42 5.80 58,555 2.43 (1.84) 135
Class C
3/06/97 - 10/31/97............ 13.64 14.33 4,685 2.45(3) (1.97)(3) 97
10/31/98...................... 14.43 5.79 9,482 2.43 (1.84) 135
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Mid-Cap Growth A.............. 0.34% 0.30%
Mid-Cap Growth B.............. 0.42% 0.33%
Mid-Cap Growth C.............. 0.96% 0.39%
AGGRESSIVE GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- ----------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97........... $12.50 $(0.11) $3.51 $3.40 $ -- $ -- $ --
10/31/98...................... 15.90 (0.16) 0.87 0.71 -- (0.11) (0.11)
Class B
11/19/96 - 10/31/97........... 12.50 (0.24) 3.54 3.30 -- -- --
10/31/98...................... 15.80 (0.27) 0.87 0.60 -- (0.11) (0.11)
Class C
3/06/97 - 10/31/97............ 13.38 (0.17) 2.59 2.42 -- -- --
10/31/98...................... 15.80 (0.27) 0.88 0.61 -- (0.11) (0.11)
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97........... $15.90 27.20% $38,537 1.84%(3) (0.77)%(3) 150%
10/31/98...................... 16.50 4.55 55,925 1.78 (0.95) 142
Class B
11/19/96 - 10/31/97........... 15.80 26.40 48,594 2.47(3) (1.58)(3) 150
10/31/98...................... 16.29 3.87 74,998 2.43 (1.60) 142
Class C
3/06/97 - 10/31/97............ 15.80 18.09 5,939 2.45(3) (1.68)(3) 150
10/31/98...................... 16.30 3.94 10,568 2.43 (1.60) 142
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Aggressive Growth A........... 0.26% 0.27%
Aggressive Growth B........... 0.32% 0.28%
Aggressive Growth C........... 0.73% 0.44%
22
<PAGE>
LARGE-CAP BLEND
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97........... $12.50 $0.01 $(0.53) $(0.52) $ -- $ -- $ --
10/31/98...................... 11.98 0.03 1.04 1.07 (0.01) -- (0.01)
Class B
10/15/97 - 10/31/97........... 12.50 -- (0.54) (0.54) -- -- --
10/31/98...................... 11.96 (0.07) 1.08 1.01 (0.01) -- (0.01)
Class C
10/15/97 - 10/31/98........... 12.50 (0.53) (0.53) -- -- --
10/31/98...................... 11.97 (0.07) 1.06 0.99 (0.01) -- (0.01)
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97........... $11.98 (4.16)% $23,593 1.78%(3) 1.35%(3) 2%
10/31/98...................... 13.04 8.95 9,799 1.78 0.22 98
Class B
10/15/97 - 10/31/97........... 11.96 (4.24) 941 2.43(3) 0.29(3) 2
10/31/98...................... 12.96 8.43 16,157 2.43 (0.52) 98
Class C
10/15/97 - 10/31/98........... 11.97 (4.24) 143 2.43(3) 0.54(3) 2
10/31/98...................... 12.95 8.26 2,490 2.43 (0.53) 98
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Large-Cap Blend A............. 0.58% 0.62%
Large-Cap Blend B............. 1.26% 0.67%
Large-Cap Blend C............. 3.12% 2.11%
LARGE-CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- ----------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97........... $12.50 $0.01 $(0.65) $(0.64) $ -- $ -- $ --
10/31/98...................... 11.86 0.03 0.71 0.74 (0.01) -- (0.01)
Class B
10/15/97 - 10/31/97........... 12.50 -- (0.64) (0.64) -- -- --
10/31/98...................... 11.86 (0.04) 0.69 0.65 -- -- --
Class C
10/15/97 - 10/31/97........... 12.50 -- (0.64) (0.64) -- -- --
10/31/98...................... 11.86 (0.04) 0.69 0.65 -- -- --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97........... $11.86 (5.12)% $23,240 1.78%(3) 1.07%(3) --%
10/31/98...................... 12.59 6.22 12,921 1.78 0.22 37
Class B
10/15/97 - 10/31/97........... 11.86 (5.12) 1,325 2.43(3) 0.22(3) --
10/31/98...................... 12.51 5.52 28,149 2.43 (0.34) 37
Class C
10/15/97 - 10/31/97........... 11.86 (5.12) 172 2.43(3) 0.53(3) --
10/31/98...................... 12.51 5.52 5,823 2.43 (0.31) 37
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Large-Cap Value A............. 0.58% 0.67%
Large-Cap Value B............. 1.16% 0.61%
Large-Cap Value C............. 3.22% 1.14%
23
<PAGE>
VALUE PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- ---------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97.......... $12.50 $ -- $3.59 $3.59 $ -- $ -- $ --
10/31/98..................... 16.09 -- (0.51) (0.51) -- (0.59) (0.59)
Class B
11/19/96 - 10/31/97.......... 12.50 (0.11) 3.61 3.50 -- -- --
10/31/98..................... 16.00 (0.10) (0.50) (0.60) -- (0.59) (0.59)
Class C
03/06/97 - 10/31/97.......... 13.56 (0.08) 2.52 2.44 -- -- --
10/31/98..................... 16.00 (0.11) (0.49) (0.60) -- (0.59) (0.59)
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97.......... $16.09 28.72% $48,377 1.84%(3) --%(3) 48%
10/31/98..................... 14.99 (3.32) 71,116 1.78 (0.01) 69
Class B
11/19/96 - 10/31/97.......... 16.00 28.00 77,534 2.46(3) (0.74)(3) 48
10/31/98..................... 14.81 (3.92) 111,030 2.43 (0.66) 69
Class C
03/06/97 - 10/31/97.......... 16.00 17.99 9,384 2.45(3) (0.78)(3) 48
10/31/98..................... 14.81 (3.92) 15,260 2.43 (0.66) 69
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Value A...................... 0.28% 0.17%
Value B...................... 0.34% 0.19%
Value C...................... 0.63% 0.21%
SMALL-CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- -----------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97.......... $12.50 $0.01 $(0.37) $(0.36) $ -- $ -- $ --
10/31/98..................... 12.14 0.05 (1.36) (1.31) (0.01) -- (0.01)
Class B
10/15/97 - 10/31/97.......... 12.50 0.01 (0.38) (0.37) -- -- --
10/31/98..................... 12.13 (0.05) (1.33) (1.38) (0.01) -- (0.01)
Class C
10/15/97 - 10/31/97.......... 12.50 0.01 (0.37) (0.36) -- -- --
10/31/98..................... 12.14 (0.06) (1.33) (1.39) (0.01) -- (0.01)
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
10/15/97 - 10/31/97.......... $12.14 (2.88)% $21,346 1.78%(3) 2.57%(3) --%
10/31/98..................... 10.82 (10.79) 15,051 1.78 0.42 50
Class B
10/15/97 - 10/31/97.......... 12.13 (2.96) 3,112 2.43(3) 1.75(3) --
10/31/98..................... 10.74 (11.40) 25,954 2.43 (0.44) 50
Class C
10/15/97 - 10/31/97.......... 12.14 (2.88) 525 2.43(3) 1.75(3) --
10/31/98..................... 10.74 (11.47) 5,968 2.43 (0.48) 50
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Small-Cap Value A............ 0.57% 0.66%
Small-Cap Value B............ 0.74% 0.62%
Small-Cap Value C............ 1.42% 1.05%
24
<PAGE>
INTERNATIONAL EQUITY
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- -----------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97.......... $12.50 $0.01 $(0.05) $(0.04) $ -- $ -- $ --
10/31/98..................... 12.46 (0.01) (0.01) (0.02) -- (0.22) (0.22)
Class B
11/19/96 - 10/31/97.......... 12.50 (0.09) (0.03) (0.12) -- -- --
10/31/98..................... 12.38 (0.09) -- (0.09) -- (0.22) (0.22)
Class C
3/06/97 - 10/31/97........... 12.60 (0.07) (0.15) (0.22) -- -- --
10/31/98..................... 12.38 (0.09) -- (0.09) -- (0.22) (0.22)
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class A
<S> <C> <C> <C> <C> <C> <C>
11/19/96 - 10/31/97.......... $12.46 (0.32)% $24,365 2.10%(3) 0.07%(3) 70%
10/31/98..................... 12.22 (0.09) 28,418 2.03 (0.11) 114
Class B
11/19/96 - 10/31/97.......... 12.38 (0.96) 42,656 2.72(3) (0.69)(3) 70
10/31/98..................... 12.07 (0.67) 47,817 2.68 (0.74) 114
Class C
3/06/97 - 10/31/97........... 12.38 (1.75) 4,459 2.70(3) (0.75(3) 70
10/31/98..................... 12.07 (0.67) 7,982 2.68 (0.71) 114
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
International Equity A....... 0.37% 0.45%
International Equity B....... 0.45% 0.48%
International Equity C....... 0.87% 0.55%
25
<PAGE>
SHAREHOLDER ACCOUNT INFORMATION
SELECTING A SHARE CLASS
Each Portfolio offers three classes of shares through this Prospectus: Class A,
Class B and Class II shares.
Each class of shares has its own cost structure, so you can choose the one best
suited to your investment needs. Your broker or financial advisor can help you
determine which class is right for you.
<TABLE>
<CAPTION>
=================================================================================================================
Class A Class B Class II
=================================================================================================================
<S> <C> <C>
o Front-end sales charges, as o No front-end sales charge; o Front-end sales charge, as
described below. There are all your money goes to described below.
several ways to reduce these work for you right away.
charges, also described below. o Higher annual expenses
o Higher annual expenses than Class A shares.
o Lower annual expenses than than Class A shares.
Class B or Class II shares. o Deferred sales charge on
o Deferred sales charge on shares you sell within
shares you sell within six eighteen months of
years of purchase, as purchase, as described
described below. below.
o Automatic conversion to o No conversion to Class A.
Class A shares after
approximately seven
years, thus reducing
future annual expenses.
</TABLE>
CALCULATION OF SALES CHARGES
CLASS A Sales Charges are as follows:
Concession to
Sales Charge Dealers
===========================================
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
YOUR INVESTMENT PRICE INVESTED PRICE
===========================================
Less than $50,000 ................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000 ...... 4.75% 4.99% 4.00%
26
<PAGE>
$100,000 but less than $250,000 ..... 3.75% 3.90% 3.00%
$250,000 but less than $500,000 ..... 3.00% 3.09% 2.25%
$500,000 but less than $1,000,000 ... 2.10% 2.15% 1.35%
$1,000,000 or more .................. None None 1.00%
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. However, there is a 1% CDSC on any shares you sell within one year
of purchase.
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC on shares you sell within six
years of buying them. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
Class B deferred charges:
Years after purchase CDSC on shares being sold
1st or 2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
7th year and thereafter None
For purposes of the CDSC, we count all purchases you make during a calendar
month as having been made on the FIRST day of that month.
CLASS II Sales Charges are as follows:
Sales Charge Concession to Dealers
================================================================================
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
PRICE INVESTED PRICE
================================================================================
1.00% 1.01% 1.00%
There is also a CDSC of 1% on shares you sell within 18 months after you buy
them.
27
<PAGE>
DETERMINATION OF CDSC Each CDSC is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. There is no
CDSC on shares you purchase through reinvestment of dividends. To keep your CDSC
as low as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC. If there are not
enough of these shares available, we will sell shares that have the lowest CDSC.
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVERS FOR CERTAIN INVESTORS Various individuals and institutions may purchase
Class A shares without front-end sales charges, including:
o financial planners, institutions, broker-dealer representatives or
registered investment advisers utilizing Fund shares in fee-based
investment products under an agreement with the Distributor (this waiver
may also apply to front-end sales charges of Class II shares)
o participants in certain retirement plans that meet applicable conditions
o Fund Directors and other individuals who are affiliated with any Portfolio
or other SunAmerica Mutual Funds and their families
o selling brokers and their employees and sales representatives and their
families
o participants in "Net Asset Value Transfer Program"
We will generally waive the CDSC for CLASS B OR CLASS II shares in the following
cases:
o within one year of the shareholder's death or becoming disabled
o taxable distributions or loans to participants made by qualified retirement
plans or retirement accounts (not including rollovers) for which SunAmerica
serves as a fiduciary
o Fund Directors and other individuals who are affiliated with any Portfolio
or other SunAmerica Mutual Funds and their families
o to make taxable distributions from certain retirement plans
o to make payments through the Systematic Withdrawal Plan (subject to certain
conditions)
REDUCING YOUR CLASS A SALES CHARGES There are several special purchase plans
that allow you to combine multiple purchases of Class A shares of SunAmerica
Mutual Funds to take advantage of the breakpoints in the sales charge schedule.
For information about the "Rights of Accumulation," "Letter of Intent,"
"Combined Purchase Privilege," and "Reduced Sales Charges for Group Purchases,"
contact your broker or financial advisor, or consult the Statement of Additional
Information.
To utilize: if you think you may be eligible for a sales charge reduction or
CDSC waiver, contact your broker or financial advisor.
REINSTATEMENT PRIVILEGE If you sell shares of a Portfolio, you may invest some
or all of the proceeds in the same share class of the same Portfolio within one
year without a sales charge. If you paid a CDSC when you sold your shares, we
will credit your account with the dollar amount of the CDSC at the time of sale.
All accounts involved must be registered in the same name(s).
28
<PAGE>
12b-1 Fees
Each class of shares of each Portfolio has its own 12b-1 plan that provides for
distribution and account maintenance and service fees (payable to the
Distributor) based on a percentage of average daily net assets, as follows:
Account Maintenance and
Class Distribution Fee Service Fee
----- ---------------- -----------
A 0.10% 0.25%
B 0.75% 0.25%
II 0.75% 0.25%
Because 12b-1 fees are paid out of the Portfolio's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
OPENING AN ACCOUNT
1. Read this prospectus carefully.
2. Determine how much you want to invest. The minimum initial investments for
the Portfolios are as follows:
o non-retirement account: $500
o retirement account: $250
o dollar cost averaging: $500 to open; you must invest at least $25 a
month
The minimum subsequent investments for the Portfolios are as follows:
o non-retirement account: $100
o retirement account: $25
3. Complete the appropriate parts of the Account Application, carefully
following the instructions. If you have questions, please contact your
broker or financial advisor or call Shareholder/Dealer Services at
1-800-858-8850.
4. Complete the appropriate parts of the Supplemental Account Application. By
applying for additional investor services now, you can avoid the delay and
inconvenience of having to submit an additional application if you want to
add services later.
5. Make your initial investment using the chart on the next page. You can
initiate any purchase, exchange or sale of shares through your broker or
financial advisor.
29
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Buying shares
=================================================================================================================
<S> <C>
Opening an account Adding to an account
=================================================================================================================
By
check
=================================================================================================================
o Make out a check for the investment o Make out a check for the investment
amount, payable to the specific amount payable to the specific Portfolio or
Portfolio or SunAmerica Funds. SunAmerica Funds.
o Deliver the check and your completed o Include the stub from your Fund statement
Account Application (and or a note specifying the Portfolio name,
Supplemental Account Application, if your share class, your account number and
applicable) to your broker or financial the name(s) in which the account is
advisor, or mail them to: registered.
SunAmerica Fund Services, Inc. o Indicate the Portfolio and account number
Mutual Fund Operations, 3rd Floor in the memo section of your check.
The SunAmerica Center
733 Third Avenue o Deliver the check and your stub or note to
New York, New York 10017-3204. your broker or financial advisor, or mail
them to
Non-Retirement Accounts:
SunAmerica Fund Services, Inc.
c/o NFDS
P.O. Box 419373
Kansas City, Missouri 64141-6373
Retirement Accounts:
SunAmerica Fund Services, Inc.
Mutual Fund Operations, 3rd Floor
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
By wire
=================================================================================================================
<S> <C>
o Deliver your completed application to o Instruct your bank to wire the amount of
your broker or financial advisor or fax your investment to:
it to SunAmerica Fund Services, Inc.
at 212-551-5585. State Street Bank & Trust Company
Boston, MA
o Obtain your account number by ABA #0110-00028
referring to your statement or by DDA # 99029712
calling your broker or financial
advisor or Shareholder/Dealer Specify the Portfolio name, your share
Services at 1-800-858-8850, ext. class, your Portfolio number, account
5125. number and the name(s) in which the
account is registered. Your bank may
charge a fee to wire funds.
o Instruct your bank to wire the amount
of your investment to:
State Street Bank & Trust Company
Boston, MA
ABA #0110-00028
DDA # 99029712
Specify the Portfolio name, your choice of share
class, your new Portfolio number and account number
and the name(s) in which the account is registered.
Your bank may charge a fee to wire funds.
</TABLE>
To open or add to an account using dollar cost averaging, see
"Additional Investor Services."
31
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Selling shares
=================================================================================================================
<S> <C>
How Requirements
- -----------------------------------------------------------------------------------------------------------------
Through Your Broker or Financial Advisor
- -----------------------------------------------------------------------------------------------------------------
o Accounts of any type. o Call your broker or financial advisor to
o Sales of any amount. place your order to sell shares.
=================================================================================================================
By mail
=================================================================================================================
o Accounts of any type. o Write a letter of instruction indicating the
o Sales of any amount. Portfolio name, your share class, your account
number, the name(s) in which the account is
registered and the dollar value or number of
shares you wish to sell.
o Include all signatures and any
additional documents that may be
required (see next page).
o Mail the materials to:
SunAmerica Fund Services, Inc.
Mutual Fund Operations, 3rd Floor
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
o A check will normally be mailed on the next
business day to the name(s) and address in
which the account is registered, or otherwise
according to your letter of instruction.
=================================================================================================================
By phone
=================================================================================================================
o Most accounts.
o Sales of less than $100,000.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
<S> <C>
o Call Shareholder/Dealer Services at 1-
800-858-8850 between 8:30 a.m. and
7:00 p.m. (Eastern time) on most
business days. State the Portfolio
name, the name of the person
requesting the redemption, your share
class, your account number, the
name(s) in which the account is
registered and the dollar value or
number of shares you wish to sell.
o A check will be mailed to the
name(s) and address in which the
account is registered, or to a
different address indicated in a
written authorization previously
provided to the Portfolio by the
shareholder(s) on the account.
=================================================================================================================
By wire
=================================================================================================================
o Request by mail to sell any amount o Proceeds will normally be wired on the
(accounts of any type). next business day. A $15 fee will be
o Request by phone to sell less than deducted from your account.
$100,000.
</TABLE>
To sell shares through a systematic withdrawal plan, see "Additional Investor
Services."
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. Corporations, executors, administrators,
trustees or guardians may need to include additional items with a request to
sell shares. You may also need to include a signature guarantee, which protects
you against fraudulent orders. You will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
o you are requesting payment other than by a check mailed to the address
of record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution
o a credit union
33
<PAGE>
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each 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.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable CDSCs.
EXECUTION OF REQUESTS Each Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. We execute buy and sell requests at
the next NAV to be calculated after the Fund receives your request in good
order. If the Fund or the Distributor receives your order before the Portfolio's
close of business (generally 4:00 p.m., Eastern time), you will receive that
day's closing price. If the Fund or the Distributor receives your order after
that time, you will receive the next business day's closing price. If you place
your order through a broker or financial advisor, you should make sure the order
is transmitted to the Portfolio before its close of business. The Fund and the
Distributor reserve the right to reject any order to buy shares.
During periods of extreme volatility or market crisis, a Portfolio may
temporarily suspend the processing of sell requests, or may postpone payment of
proceeds for up to three business days or longer, as allowed by federal
securities laws.
Each 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 this Portfolio's shares may
change on days when you will not be able to purchase or redeem your shares.
If the Fund determines that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of redemption proceeds wholly
or partly in cash, the Fund may pay the redemption price by a distribution in
kind of securities from the Fund in lieu of cash. However, the Fund has made an
election that requires it to pay a certain portion of redemption proceeds in
cash.
TELEPHONE TRANSACTIONS For your protection, telephone requests are recorded in
order to verify their accuracy. In addition, Shareholder/Dealer Services will
take measures to verify the identity of the caller, such as asking for name,
account number, social security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, the Fund is responsible for
any losses that may occur to
34
<PAGE>
any account due to an unauthorized telephone call. Also for your protection,
telephone transactions are not permitted on accounts whose names or addresses
have changed within the past 30 days. At times of peak activity, it may be
difficult to place requests by phone. During these times, consider sending your
request in writing.
EXCHANGES You may exchange shares of a Portfolio for shares of the same class of
any other SunAmerica Mutual Fund. Before making an exchange, you should review a
copy of the prospectus of the fund into which you would like to exchange. All
exchanges are subject to applicable minimum investment requirements. A
Systematic Exchange Program is described under "Additional Investor Services."
If you exchange shares that were purchased subject to a CDSC, the CDSC will
continue to apply following the exchange. In determining the CDSC applicable to
shares being sold after an exchange, we will take into account the length of
time you held those shares prior to the exchange. Your CDSC schedule will not
change if you exchange Class C or Class II shares that you purchased prior to
December 1, 1998 for another Portfolio or fund's Class II shares (which
currently have a longer CDSC schedule).
To protect the interests of other shareholders, we may cancel the exchange
privileges of any investors that, in the opinion of the Fund, are using market
timing strategies or making excessive exchanges. A Portfolio may change or
cancel its exchange privilege at any time, upon 60 days' written notice to its
shareholders. A Portfolio may also refuse any exchange order.
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please call Shareholder/Dealer Services at
1-800-858-8850 for further information. You may sell or exchange certificated
shares only by returning the certificates to the Portfolios, along with a letter
of instruction and a signature guarantee. The Portfolios do not issue
certificates for fractional shares.
MULTI-PARTY CHECKS The Fund may agree to accept a "multi-party check" in payment
for Fund shares. This is a check made payable to the investor by another party
and then endorsed over to the Fund by the investor. If you use a multi-party
check to purchase shares, you may experience processing delays. In addition, the
Fund is not responsible for verifying the authenticity of any endorsement and
assumes no liability for any losses resulting from a fraudulent endorsement.
ADDITIONAL INVESTOR SERVICES
To select one or more of these additional services, complete the relevant
part(s) of the Supplemental Account Application. To add a service to an existing
account, contact your broker or financial advisor, or call Shareholder/Dealer
Services at 1-800-858-8850.
DOLLAR COST AVERAGING lets you make regular investments from your bank account
to the SunAmerica Mutual Funds of your choice. You determine the frequency and
amount of your investments, and you can terminate your participation at any
time.
35
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN may be used for routine bill payment or periodic
withdrawals from your account. To use:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s) and amount(s). The payee may be yourself or any
other party, and there is no limit to the number of payees you may
have, as long as they are all on the same payment schedule. Each
withdrawal must be at least $50.
o Determine the schedule: monthly, quarterly, semi-annually, annually or
in certain selected months.
o Make sure your dividends and capital gains are being reinvested.
You cannot elect the systematic withdrawal plan if you have requested
certificates for your shares.
SYSTEMATIC EXCHANGE PROGRAM may be used to exchange shares of a Portfolio
periodically for the same class of shares of one or more other SunAmerica Mutual
Funds. To use:
o Specify the SunAmerica Mutual Fund(s) from which you would like money
withdrawn and into which you would like money invested.
o Determine the schedule: monthly, quarterly, semi-annually, annually or
in certain selected months.
o Specify the amount(s). Each exchange must be worth at least $25.
o Accounts must be registered identically; otherwise a signature
guarantee will be required.
ASSET PROTECTION PLAN (OPTIONAL) Anchor National Life Insurance Company offers
an Asset Protection Plan to certain investors in the Fund. The benefits of this
optional coverage payable at death will be related to the amounts paid to
purchase Fund shares and to the value of the Fund shares held for the benefit of
the insured persons. However, to the extent the purchased shares are redeemed
prior to death, coverage with respect to these shares will terminate.
Purchasers of the Asset Protection Plan are required to authorize periodic
redemptions of Fund shares to pay the premiums for this coverage. These
redemptions will not be subject to CDSCs, but will have the same tax
consequences as any other Fund redemptions.
The Asset Protection Plan will be available to eligible persons who enroll for
the coverage within a limited time period after shares in any Portfolio are
initially purchased or transferred. In addition, coverage cannot be made
available unless Anchor National knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides Anchor National with information
regarding the beneficial owners of the shares. In addition, coverage is
available only to shares purchased on behalf of natural persons between 21 and
75 years of age; coverage is not available with respect to shares purchased for
a retirement account. Other restrictions on the
36
<PAGE>
coverage apply. This coverage may not be available in all states and may be
subject to additional restrictions or limitations. Purchasers of shares should
also make themselves familiar with the impact on the Asset Protection Plan
coverage of purchasing additional shares, reinvestment of dividends and capital
gains distributions and redemptions.
Anchor National is a SunAmerica company.
Please call 1-800-858-8850 for more information, including the cost of the Asset
Protection Plan option.
RETIREMENT PLANS SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Simple IRAs, Roth IRAs, SARSEPs, 401(k) plans, 403(b)
plans and other pension and profit-sharing plans. Using these plans, you can
invest in any SunAmerica Mutual Fund with a low minimum investment of $250 or,
for some group plans, no minimum investment at all. To find out more, call
Shareholder/Dealer Services at 1-800-858-8850.
DIVIDEND AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
o after every transaction that affects your account balance (except a
dividend reinvestment or automatic purchase from your bank account)
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.
DIVIDENDS The Portfolios generally distribute most or all of their net earnings
in the form of dividends. Income dividends, if any, are paid quarterly by the
LARGE-CAP BLEND PORTFOLIO and annually by the other Portfolios. Capital gains
distributions, if any, are paid annually by the Portfolios.
DIVIDEND REINVESTMENTS Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same Portfolio and share
class on which they were paid. Alternatively, dividends and distributions may be
reinvested in any other SunAmerica Mutual Fund or paid in cash (if more than
$10). 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.
TAXABILITY OF DIVIDENDS As long as a Portfolio meets the requirements for being
a tax-qualified regulated investment company, which each Portfolio has in the
past and intends to in the future, it pays no federal income tax on the earnings
it distributes to shareholders.
37
<PAGE>
Consequently, dividends you receive from a Portfolio, whether reinvested or
taken as cash, are generally considered taxable. Distributions of a Portfolio's
long-term capital gains are taxable as capital gains; dividends from other
sources are generally taxable as ordinary income.
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions. If you hold Class B shares, you will not have a taxable event when
they convert into Class A shares.
SMALL ACCOUNTS If you draw down an account so that its total value is less than
$500 ($250 for retirement plan accounts), you may be asked to purchase more
shares within 60 days. If you do not take action, the Fund may close out your
account and mail you the proceeds. Alternatively, you may be charged a $2.00
monthly charge to maintain your account. Your account will not be closed if its
drop in value is due to Portfolio performance or the effects of sales charges.
38
<PAGE>
MORE INFORMATION ABOUT THE PORTFOLIOS
[Sidebar: INVESTMENT STRATEGIES Each Portfolio has its own investment goal and a
strategy for pursuing it. The chart summarizes information about each
Portfolio's investment approach. We have included a glossary to define the
investment and risk terminology used in the chart.]
39
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO BLEND PORTFOLIO
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What is the Portfolio's Long-term growth Long-term growth of Long-term growth of Long-term growth of
investment goal? of capital capital capital capital and reasonable
level of current income
What are the growth growth growth growth and value
Portfolio's principal
investment strategies?
What are the investment investment investment investment (including,
Portfolio's principal (including, when (including, when (including, when when appropriate,
investment appropriate, active appropriate, active appropriate, active active trading) in
techniques? trading) in stocks of trading) in stocks of trading) in stocks of stocks of large
large companies medium-size small and medium companies that offer
that offer the companies that offer sized companies that the potential for long-
potential for long- the potential for long- offer the potential for term growth of capital
term growth of term growth of long-term growth of and reasonable level of
capital capital capital current income
What are the equity securities of equity securities of equity securities of equity securities of
Portfolio's principal large companies (at medium-sized companies selected large companies (at
investments (under least 65% of total companies (at least through a growth least 65% of total
normal market assets) selected 65% of total assets) strategy; generally assets), consisting of a
conditions)? through a growth selected through a invests in small and blend of growth
strategy growth strategy medium-sized companies, value
companies companies, and
companies with
elements of both
growth and value
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO EQUITY PORTFOLIO
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What is the Portfolio's Long-term growth of Long-term growth of Long-term growth of Long-term growth of
investment goal? capital capital capital capital
What are the value value value international
Portfolio's principal
investment strategies?
What are the investment (including, investment investment investment (including,
Portfolio's principal when appropriate, active (including, when (including, when when appropriate, active
investment trading) in stocks of appropriate, active appropriate, active trading) in stocks of
techniques? large companies that trading) in stocks of trading) in stocks of foreign securities that
offer the potential for medium-size small companies that offer the potential for
long-term growth of companies that offer offer the potential for long-term growth of
capital the potential for long- long-term growth of capital
term growth of capital
capital
What are the equity securities of large equity securities of equity securities of equity and other
Portfolio's principal companies (at least 65% companies selected small companies (at securities with equity
investments (under of total assets) selected through a value least 65% of total characteristics securities
normal market through a value strategy strategy; a significant assets) selected of issuers in at least 3
conditions)? portion of Portfolio through a value countries other than the
as a whole will strategy United States
generally be invested
in medium-sized
companies
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO BLEND PORTFOLIO
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What are the o stock market o stock market o stock market o stock market
Portfolio's principal volatility volatility volatility volatility
risks? o securities o securities o securities o securities selection
selection selection selection o non-diversification
o non- o non- o small market
diversification diversification capitalization
o non-
diversification
What other
investment strategies
can the Portfolio use?
o Large company
stocks see principal Yes Yes see principal
investments above investments above
o Medium-sized
company stocks Yes see principal see principal Yes
investments above investments above
o Small company
stocks Yes Yes see principal Yes
investments above
o Fixed income
securities
Investment
grade Yes Yes Yes Yes
Junk bonds Yes No Yes Yes
Asset-backed
Securities Yes Yes Yes Yes
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO EQUITY PORTFOLIO
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What are the o stock market o stock market o stock market o stock market
Portfolio's principal volatility volatility volatility volatility
risks? o securities selection o securities o securities o securities selection
o non-diversification selection selection o foreign exposure
o non- o small market o currency volatility
diversification capitalization o emerging markets
o non- o non-diversification
diversification
What other
investment strategies
can the Portfolio use?
o Large company
stocks see principal Yes Yes Yes
investments above
o Medium-sized
company stocks Yes see principal Yes Yes
investments above
o Small company
stocks Yes Yes see principal Yes
investments above
o Fixed income
securities
Investment
grade Yes Yes Yes Yes
Junk bonds No Yes Yes Yes
Asset-backed
Securities Yes Yes Yes Yes
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO BLEND PORTFOLIO
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
o REITs No No No Yes
o Short-term
investments Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
o Defensive
investments Yes Yes Yes Yes
o Foreign securities Yes (up to 30%) Yes (up to 30%) Yes (up to 30%) Yes (up to 30%)
ADRs/EDRs/ Yes Yes Yes Yes
GDRs
Foreign
Investment
Companies Yes (up to 10%) No Yes (up to 10%) No
o Currency Yes Yes Yes Yes
Transactions
o Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
o Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
o Borrowing for Yes (up to 33 1/3%) Yes (up to 33 1/3) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
temporary or
emergency
purposes
o Options and Yes Yes Yes Yes
futures
o Hybrid Yes Yes Yes Yes
Instruments
o Short sales Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO EQUITY PORTFOLIO
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
o REITs Yes Yes Yes No
o Short-term
investments Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
o Defensive
investments Yes Yes Yes Yes
o Foreign securities Yes (up to 30%) Yes (up to 30%) Yes (up to 30%) See principal
investments above
ADRs/EDRs/ Yes Yes Yes Yes
GDRs
Foreign
Investment
Companies No No No Yes (up to 10%)
o Currency Yes Yes Yes Yes
Transactions
o Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
o Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
o Borrowing for Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
temporary or
emergency
purposes
o Options and Yes Yes Yes Yes
futures
o Hybrid Yes Yes Yes Yes
Instruments
o Short sales Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Large-Cap Mid-Cap Aggressive Large-Cap
Growth Portfolio Growth Portfolio Growth Portfolio Blend Portfolio
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
o Short sales Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
(against-the-box)
o Special Situations Yes Yes Yes Yes
What other potential
risks can affect a o interest rate o interest rate o interest rate o Interest rate
Portfolio? fluctuations fluctuations fluctuations fluctuations
o small market o small market o foreign exposure o small market
capitalization capitalization o illiquidity capitalizations
o foreign o foreign exposure o derivatives o foreign exposure
exposure o illiquidity o hedging o illiquidity
o illiquidity o derivatives o credit quality o derivatives
o derivatives o hedging o emerging markets o hedging
o hedging o credit quality o euro conversion o credit quality
o credit quality o emerging markets o prepayment o emerging markets
o emerging o euro conversion o euro conversion
markets o prepayment o prepayment
o euro conversion
o prepayment
<CAPTION>
Large-Cap Small-Cap International
Value Portfolio Value Portfolio Value Portfolio Equity Portfolio
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
o Short sales Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
(against-the-box)
o Special Situations Yes Yes Yes Yes
What other potential
risks can affect a o interest rate o interest rate o interest rate o small market
Portfolio? fluctuations fluctuations fluctuations capitalizations
o small market o small market o foreign exposure o interest rate
capitalization capitalization o illiquidity fluctuations
o foreign exposure o foreign exposure o derivatives o illiquidity
o illiquidity o illiquidity o hedging o derivatives
o derivatives o derivatives o credit quality o hedging
o hedging o hedging o emerging markets o credit quality
o credit quality o credit quality o euro conversion o euro conversion
o emerging markets o emerging markets o prepayment o prepayment
o euro conversion o euro conversion
o prepayment o prepayment
</TABLE>
43
<PAGE>
GLOSSARY
INVESTMENT TERMINOLOGY
GROWTH OF CAPITAL is growth of the value of an investment.
ACTIVE TRADING means that a Portfolio may engage in frequent trading of
portfolio securities to achieve its investment goal. In addition, because a
Portfolio may sell a security without regard to how long it has held the
security, active trading may have tax consequences for certain shareholders,
involving a possible increase in short-term capital gains or losses. Active
trading may result in high portfolio turnover and correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by a Portfolio. During periods of increased market volatility, active trading
may be more pronounced.
EQUITY SECURITIES include common and preferred stocks, convertible securities,
warrants and rights.
CONVERTIBLE SECURITIES are bonds or preferred stocks that may be exchanged for
common stock of the same or a different company.
LARGE COMPANIES have market capitalizations of over $5 billion.
MEDIUM-SIZED COMPANIES have market capitalizations ranging from $1 billion to $5
billion.
SMALL COMPANIES have market capitalizations of $1 billion or less.
[Margin note: LARGE COMPANIES and MEDIUM-SIZED COMPANIES generally have a
substantial record of operations (i.e., in business for at least five years) and
are listed for trading on the New York Stock Exchange or another national or
international stock exchange or, in some cases, are traded over the counter.
SMALL COMPANIES generally will be companies that have been in business for a
shorter period of time.]
FIXED INCOME SECURITIES provide consistent interest or dividend payments. They
include corporate bonds, notes, debentures, preferred stocks, convertible
securities, U.S. government securities and mortgage-backed and asset-backed
securities. The issuer of a senior fixed income security is obligated to make
payments on this security ahead of other payments to security holders. An
INVESTMENT GRADE fixed income security is rated in one of the top four ratings
categories by a debt rating agency (or is considered of comparable quality by
SunAmerica or a Subadviser).
[Margin note: The two best-known debt rating agencies are Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc. and Moody's
Investors Service, Inc. "Investment grade" refers to any security rated "BBB" or
above by Standard & Poor's or "Baa" or above by Moody's.]
A "JUNK BOND" is a high yield, high risk bond that does not meet the credit
quality standards of investment grade securities.
44
<PAGE>
ASSET-BACKED SECURITIES represent an interest in a pool of consumer or other
types of loans. Payments of principal and interest on the underlying loans are
passed through to the holders of asset-backed securities over the life of the
securities.
REAL ESTATE INVESTMENT TRUSTS ("REITS") are trusts that invest primarily in
commercial real estate or real estate related loans. The value of an interest in
a REIT may be affected by the value and the cash flows of the properties owned
or the quality of the mortgages held by the trust.
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Portfolio
with sufficient liquidity to meet redemptions and cover expenses.
DEFENSIVE INVESTMENTS include high quality fixed income securities and money
market instruments. A Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When a
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, a Portfolio may not achieve its
investment goal.
FOREIGN SECURITIES are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary
Receipts (ADRS) or other similar securities that convert into foreign
securities, such as European Depositary Receipts (EDRS) and Global Depositary
Receipts (GDRS).
It may be necessary under certain foreign laws, less expensive, or more
expedient to invest in FOREIGN INVESTMENT COMPANIES, which invest in certain
foreign markets, including emerging markets. Investing through such vehicles may
involve frequent or layered fees or expenses, and the Advisers will not invest
in such investment companies unless, in their judgment, the potential benefits
justify the payment of any associated fees and expenses.
CURRENCY TRANSACTIONS include the purchase and sale of currencies to facilitate
securities transactions and forward currency contracts, which are used to hedge
against changes in currency exchange rates.
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.
SECURITIES LENDING involves a loan of securities by a Portfolio in exchange for
cash or collateral. The Fund earns interest on the loan while retaining
ownership of the security.
The Fund may BORROW for temporary or emergency purposes including to meet
redemptions. Borrowing may exaggerate changes in the net asset value of Fund
shares and in the yield on a Portfolio's portfolio.
45
<PAGE>
Borrowing will cost the Fund interest expense and other fees. The cost of
borrowing may reduce a Portfolio's return.
A DERIVATIVE instrument is a contract, such as an option or a future, whose
value is based on the performance of an underlying asset.
OPTIONS AND FUTURES are contracts involving the right to receive or obligation
to deliver assets or money depending on the performance of one or more
underlying assets or a market or economic index.
HYBRID INSTRUMENTS, including indexed or structured securities, can combine the
characteristics of securities, futures, and options. For example, the principal
amount, redemption, or conversion terms of a security could be related to the
market price of some commodity, currency, or securities index. Such securities
may bear interest or pay dividends at below market (or even relatively nominal)
rates. Under certain conditions, the redemption value of such an investment
could be zero.
A SHORT SALE is the sale of a security that you do not own, but which you intend
to borrow in order to make delivery. A short sale is "AGAINST THE BOX" when a
Portfolio sells short a security that it owns in its portfolio to lock in
appreciation on that security.
A SPECIAL SITUATION arises when, in the opinion of the Adviser, the securities
of a particular issuer will be recognized and appreciated in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investments in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
RISK TERMINOLOGY
MARKET VOLATILITY: The stock and/or bond markets as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Portfolio's portfolio.
SECURITIES SELECTION: A strategy used by a Portfolio, or securities selected by
its Adviser, may fail to produce the intended return.
SMALL MARKET CAPITALIZATION: Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. It may be difficult to obtain reliable
information and financial data about these companies. Consequently, the
securities of smaller companies may not be as readily marketable and may be
subject to more abrupt or erratic market movements.
NON-DIVERSIFICATION: By concentrating in a smaller number of stocks, a
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.
46
<PAGE>
FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as 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.
CURRENCY VOLATILITY: The value of a Portfolio's foreign portfolio investments
may fluctuate due to changes in currency rates. A 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.
INTEREST RATE FLUCTUATIONS: Volatility of the bond market is due principally to
changes in interest rates. As interest rates rise, bond prices typically fall;
and as interest rates fall, bond prices typically rise. Longer-term and lower
coupon bonds tend to be more sensitive to changes in interest rates.
ILLIQUIDITY: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.
DERIVATIVES: Derivatives are subject to general risks relating to heightened
sensitivity to market volatility, interest rate fluctuations, illiquidity and
creditworthiness of the counterparty to the derivatives transactions.
HEDGING: Hedging is a strategy in which the Adviser uses a derivative security
to reduce certain risk characteristics of an underlying security or portfolio of
securities. While hedging strategies can be very useful and inexpensive ways of
reducing risk, they are sometimes ineffective due to unexpected changes in the
market. Moreover, while hedging can reduce or eliminate losses, it can also
reduce or eliminate gains.
CREDIT QUALITY: The creditworthiness of the issuer is always a factor in
analyzing fixed income securities. An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise become unable to
honor its financial obligations. This type of issuer will typically issue junk
bonds. In addition to the risk of default, junk bonds may be more volatile, less
liquid, more difficult to value and more susceptible to adverse economic
conditions or investor perceptions than other bonds.
EMERGING MARKETS: 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
47
<PAGE>
problems and is coordinating efforts to prevent or alleviate their adverse
impact on the Portfolios. There can be no assurance that a Portfolio will not
suffer any adverse consequences as a result of the euro conversion.
PREPAYMENT: Prepayment risk is the possibility that the principal of the loans
underlying asset-backed securities may be prepaid at any time. As a general
rule, prepayments increase during a period of falling interest rates and
decrease during a period of rising interest rates. As a result of prepayments,
in periods of declining interest rates a Portfolio may be required to reinvest
its assets in securities with lower interest rates. In periods of increasing
interest rates, prepayments generally may decline, with the effect that the
securities subject to prepayment risk held by a Portfolio may exhibit price
characteristics of longer-term debt securities.
FUND MANAGEMENT
MANAGER SunAmerica Asset Management Corp. selects the Advisers for the
Portfolios, may manage certain portions of Portfolios, provides various
administrative services, and supervises the daily business affairs of each
Portfolio. The Advisers are responsible for decisions to buy and sell securities
for the Portfolios, selection of broker-dealers and negotiation of commission
rates for their respective portion of the relevant Portfolio. SunAmerica may
terminate any agreement with another Adviser without shareholder approval.
Moreover, SunAmerica has received an exemptive order from the Securities and
Exchange Commission that permits SunAmerica, subject to certain conditions, to
enter into agreements relating to the 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 Portfolios, change the
terms of particular agreements with Advisers or continue the employment of
existing Advisers after events that would otherwise cause an automatic
termination of a subadvisory agreement. Shareholders of a Portfolio have the
right to terminate an agreement with an Adviser for that Portfolio at any time
by a vote of the majority of the outstanding voting securities of such
Portfolio. Shareholders will be notified of any Adviser changes. The order also
permits the Fund to disclose to shareholders the Advisers' fees only in the
aggregate for each Portfolio. For the fiscal year ended October 31, 1998, each
Portfolio paid SunAmerica a fee equal to 1.00% of average daily net assets
except the International Equity Portfolio, which paid a fee equal to 1.10% 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 the Portfolios, 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.
48
<PAGE>
The Advisers and Portfolio Managers for each Portfolio are described below:
Portfolio Portfolio management allocated among the
following Advisers
Large-Cap Growth Portfolio Janus Capital Corporation ("Janus")
L. Roy Papp & Associates ("Papp")
Montag & Caldwell, Inc. ("Montag & Caldwell")
Mid-Cap Growth Portfolio Miller Anderson & Sherrerd, LLP ("MAS")
T. Rowe Price Associates, Inc. ("T. Rowe
Price") Wellington Management Company, LLP
("Wellington Management")
Aggressive Growth Portfolio Janus
SunAmerica
Warburg Pincus Asset Management, Inc.
("Warburg")
Large-Cap Blend Portfolio Lazard Asset Management ("Lazard")
Morgan Stanley Dean Witter Investment
Management ("MSDW Investment Management")
T. Rowe Price
Large-Cap Value Portfolio David L. Babson & Co., Inc. ("Babson")
Davis Selected Advisers, L.P. ("Davis")
Wellington Management
Value Portfolio Davis
Neuberger Berman, LLC ("Neuberger Berman")
American Century Investment Management, Inc.
("American Century")
Small-Cap Value Portfolio Berger Associates, Inc. ("Berger")
(subcontracted to Perkins, Wolf, McDonnell &
Company ("PWM") The Glenmede Trust Company
("Glenmede") Lazard
International Equity Portfolio Bankers Trust Company ("BT")
Rowe Price-Fleming International, Inc. ("Rowe-
Fleming")
49
<PAGE>
INFORMATION ABOUT ADVISERS
Description of the Advisers
AMERICAN CENTURY INVESTMENT, INC. American Century is a Delaware corporation
with principal offices at the American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. As of October 28, 1998, American Century had approximately
$70 billion in total assets under management.
DAVID L. BABSON & CO., INC. Babson is a Massachusetts corporation, located at
One Memorial Drive, Cambridge, Massachusetts 02142. Babson provides investment
advisory services to a substantial number of institutional and other investors,
including other registered investment companies. As of December 31, 1998, Babson
had over $21.1 billion in assets under management.
BANKERS TRUST COMPANY. BT has principal offices at 130 Liberty Street, New York,
New York 10006. BT conducts a variety of general banking and trust activities
and is a major wholesale supplier of financial services to the international and
domestic institutional market. As of December 31, 1998, BT managed approximately
370 billion in assets globally.
BERGER ASSOCIATES, INC. Berger is a Delaware corporation, located at 210
University Boulevard, Suite 900, Denver, Colorado 80206, and serves as
investment adviser, sub-adviser, administrator, or sub-administrator to mutual
funds, and institutional and private investors.
DAVIS SELECTED ADVISERS, L.P. Davis is a Colorado limited partnership, located
at 124 East Marcy Street, Santa Fe, New Mexico 87501. As of March 31, 1998,
Davis had assets under management of approximately $17.9 billion.
THE GLENMEDE TRUST COMPANY. Glenmede is a privately-owned, independent trust
company devoted exclusively to investment management and trust services, taxable
and tax exempt funds and institutions and individuals investing in U.S. and
International equity and fixed income securities. Glenmede is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
As of December 31, 1998, Glenmede had approximately $14.0 billion in assets
under management.
JANUS CAPITAL CORPORATION. Janus is a Colorado corporation located at 100
Fillmore Street, Denver, Colorado 80206-4923, and serves as investment adviser
or subadviser to mutual funds and individual, corporate, charitable and
retirement accounts. As of December 31, 1998, Janus had under management
approximately $108 billion.
L. ROY PAPP & ASSOCIATES. Papp is an Arizona partnership located at 6225 North
24th Street, Suite 150, Phoenix, Arizona 85016. Papp serves as investment
adviser to individuals, trusts, retirement plans, endowments, and foundations.
As of December 31, 1998, assets under management exceeded $1.5 billion.
LAZARD ASSET MANAGEMENT. Lazard is a division of Lazard Freres & Co. LLC, a New
York limited liability company. Located at 30 Rockefeller Plaza, New York, New
York 10112, Lazard provides
50
<PAGE>
investment management services to individual and institutional clients. As of
March 31, 1998, Lazard and its affiliated companies managed client
discretionary accounts with assets totaling approximately $67 billion.
MILLER ANDERSON & SHERRERD, LLP. MAS, a Pennsylvania limited liability
partnership founded in 1969, is located at One Tower Bridge, West Conshohocken,
Pennsylvania 19428. MAS provides investment services to employee benefit plans,
endowment funds, foundations and other institutional investors. As of March
31, 1998, MAS had in excess of $67.1 billion in assets under management.
MONTAG & CALDWELL, INC. Montag & Caldwell is a Georgia corporation located at
3343 Peachtree Road, Suite 1100, Atlanta, Georgia 30326-1022. Montag & Caldwell
was founded in 1945 and serves as investment adviser to employee benefit,
endowment, charitable and other institutional clients, as well as high net worth
individuals. As of March 31, 1998, Montag & Caldwell had in excess of $20
billion in assets under management.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT MSDW Investment
Management offers investment management and fiduciary services to taxable and
tax-exempt funds and institutions, international organizations and individuals
investing in U.S. and international equity and fixed income securities. As of
March 31, 1998, MSDW Investment Management, together with its institutional
investment management affiliates, had approximately $166.0 billion of combined
assets under management as investment managers or fiduciary advisers. MSDW
Investment Management is located at 1221 Avenue of the Americas, New York, New
York 10020.
NEUBERGER BERMAN, LLC. Neuberger Berman is a Delaware limited liability company
located at 605 Third Avenue, New York, New York 10158-0180. Neuberger Berman has
been in the investment advisory business since 1939. As of March 31, 1998,
Neuberger Berman and its affiliates had assets under management of approximately
$59 billion.
PERKINS, WOLF, MCDONNELL & COMPANY. PWM, located at 53 West Jackson Boulevard,
Suite 818, Chicago, Illinois 60604, was organized as a Delaware corporation in
1980. PWM is a member of the National Association of Securities Dealers, Inc.
and, in 1984, registered with the Securities and Exchange Commission as an
investment adviser. As of March 31, 1998, PWM had assets under management of
approximately $325 million.
ROWE PRICE-FLEMING INTERNATIONAL, INC. Rowe-Fleming is a Maryland corporation,
incorporated in 1979. It is located at 100 East Pratt Street, Baltimore,
Maryland 21202. As of December 31, 1998, Rowe-Fleming managed over $32 billion
of foreign assets.
T. ROWE PRICE ASSOCIATES, INC. T. Rowe Price is a Maryland corporation located
at 100 East Pratt Street, Baltimore, Maryland 21202. Founded in 1937, T. Rowe
Price and its affiliates managed over $148 billion for over six million
individual and institutional investor accounts as of December 31, 1998.
WARBURG PINCUS ASSET MANAGEMENT, INC. Warburg is a professional investment
advisory firm which provides investment services to investment companies,
employee benefit plans, endowment funds,
51
<PAGE>
foundations and other institutions and individuals. As of December 31, 1998,
Warburg managed approximately $21.5 billion in assets. Warburg is located at 466
Lexington Avenue, New York, NY 10017-3147.
WELLINGTON MANAGEMENT COMPANY, LLP. Wellington Management is a Massachusetts
limited liability partnership, located at 75 State Street, Boston, Massachusetts
02109. Wellington Management is a professional investment counseling firm which
provides investment services to investment companies, employee benefit plans,
endowments, foundations, and other institutions and individuals. As of December
31, 1998, Wellington Management had investment management authority with
respect to approximately $211.3 billion of assets.
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Large-Cap Growth Portfolio Marc Pinto Mr. Pinto has been a Vice
Portfolio Manager and Vice President and Portfolio Manager
President of Portfolio of Janus since 1997. He joined
Management (Janus) Janus in 1994. From 1993 to 1994,
he was Co-President of Creative
Retail Technology, a producer of
hardware for retail clients. From
1991 to 1993, Mr. Pinto was an
equity analyst at Priority
Investments Ltd., a family owned
business.
L. Roy Papp Mr. Papp has been in the money
Partner, Portfolio Manager management field since 1955.
(Papp) He has served as managing
general partner of Papp since
1989.
Rosellen C. Papp Ms. Papp has been the Director
Partner, Portfolio Manager of Research of Papp since 1981.
(Papp)
Ronald E. Canakaris Mr. Canakaris has been in the
(Investment Management Team) money management business
President and Chief Investment since 1968 and has served as
Officer (Montag & Caldwell) President and Chief Investment
Officer of Montag & Caldwell
since 1984.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Mid-Cap Growth Portfolio Arden C. Armstrong Ms. Armstrong joined MAS as a
Portfolio Manager (MAS) Portfolio Manager in 1986.
Brian W. H. Berghuis Mr. Berghuis joined T. Rowe
(Investment Advisory Price in 1985.
Committee)
Managing Director and Equity
Portfolio Manager (T. Rowe
Price)
Marc L. Baylin Mr Baylin joined T. Rowe Price
(Investment Advisory in 1993.
Committee)
Vice President and Investment
Analyst (T. Rowe Price)
James A. C. Kennedy Mr. Kennedy joined T. Rowe Price in
(Investment Advisory 1978. He is Chairman of the Equity
Committee) Steering Committee and is
Managing Director and Director Director of the Equity Division, as
(T. Rowe Price) well as Director of Research. He has
responsibility for the equity
trading department and is Chairman
of the Brokerage Control Committee.
John F. Wakeman Mr. Wakeman joined T. Rowe
(Investment Advisory Price in 1989.
Committee)
Vice President and Portfolio
Manager (T. Rowe Price)
Frank V. Wisneski Mr. Wisneski is a Senior Vice
Senior Vice President President and has 29 years of
(Wellington Management) professional experience with
Wellington Management.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Aggressive Growth Portfolio Scott W. Schoelzel Mr. Schoelzel joined Janus
Executive Vice President and Capital in January 1994.
Portfolio Manager (Janus)
Donna Calder (Domestic Equity Prior to joining SunAmerica as a
Investment Team) Portfolio Manager in February
Portfolio Manager (SunAmerica) 1998, Ms. Calder served as a
General Partner of Manhattan
Capital Partners, L.P.
Elizabeth B. Dater Ms. Dater has been with
Managing Director (Warburg) Warburg since 1978.
Stephen J. Lurito Mr. Lurito has been with
Managing Director (Warburg) Warburg since 1987.
Large-Cap Blend Portfolio Herbert W. Gullquist Mr. Gullquist has been with Lazard
(Investment Team) since 1982. He is a Managing
Vice Chairman, Head of Director, a Vice-Chairman and the
Investment Team (Lazard) Chief Investment Officer.
Michael S. Rome (Investment Mr. Rome is a Managing Director of
Team)Managing Director (Lazard) Lazard and has been a U.S./Global
Equity Portfolio Manager of Lazard
since 1991.
Kurt A. Feuerman Mr. Feuerman has been a
Managing Director (MSDW Managing Director in MSDW
Investment Management) Investment Management's
Institutional Equity Group since
1993. From 1990 to 1993, he
was a Managing Director in
Morgan Stanley & Co.'s Equity
Research Department.
Margaret Kinsley Johnson Ms. Johnson has been a
Principal, Portfolio Manager portfolio manager at MSDW
(MSDW Investment Investment Management since
Management) 1989 and is a Chartered
Financial Analyst.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Stephen W. Boesel (Investment Mr. Boesel has been managing
Advisory Committee) investments since joining
Chairman (T. Rowe Price) T. Rowe Price in 1973.
Andrew M. Brooks (Investment Mr. Brooks joined T. Rowe
Advisory Committee) Price in 1980. He has been head
Vice President (T. Rowe Price) of the Equity trading desk for
T. Rowe Price and has been a
Governor of the Security Trader's
Association. He has been a member
of the Market Performance Committee
of the New York Stock Exchange
and a member of the NASDAQ Stock
Market's Quality of Markets
Committee.
Arthur B. Cecil III (Investment Mr. Cecil joined T. Rowe Price
Advisory Committee) in 1968. He had been a Vice
Vice President and Investment President and Investment Analyst.
Analyst (T. Rowe Price)
Gregory A. McCrickard Mr. McCrickard joined T. Rowe
(Investment Advisory Price in 1986.
Committee)
Managing Director and Portfolio
Manager (T. Rowe Price)
Mark J. Vaselkiv (Investment Mr. Vaselkiv joined T. Rowe
Advisory Committee) Price in 1988.
Vice President and Portfolio
Manager (T. Rowe Price)
Richard T. Whitney (Investment Mr. Whitney joined T. Rowe
Advisory Committee) Price in 1985.
Managing Director and Portfolio
Manager (T. Rowe Price)
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Large-Cap Value Portfolio Roland W. Whitridge Mr. Whitridge has been
Portfolio Manager (Babson) employed by Babson in portfolio
management for over twenty
years.
Christopher C. Davis Mr. Davis joined Davis in
Portfolio Manager (Davis) September 1989 as an assistant
portfolio manager and research
analyst.
John R. Ryan (Value/Yield Mr. Ryan has been a portfolio
Team) manager with Wellington Management's
Senior Vice President, Managing Value/Yield investment team since
Partner and Head of Value/Yield 1981 and has held the position of
Team (Wellington Management) Senior Vice President of Wellington
Management since 1987. Mr. Ryan
became a Managing Partner on
January 1, 1996.
Value Portfolio Christopher C. Davis See above.
Portfolio Manager (Davis)
Shelby M. C. Davis Since 1968, Mr. Davis has been a
Former Co-Manager (Davis) director of Venture Advisers, Inc.
He is also a director and officer
of all investment companies managed
by Davis.
Michael M. Kassen Mr. Kassen has been Managing
Portfolio Manager, Managing Director since January 1994 and
Director, Vice President and a Vice President and Portfolio
Principal (Neuberger Berman) Manager since June 1990, of
Neuberger Berman Management
Inc. and a principal of
Neuberger Berman since
January 1993.
Robert I. Gendelman Mr. Gendelman has been a
Senior Portfolio Manager, principal of Neuberger Berman
Assistant Vice President and since December 1996. He was a
Principal (Neuberger Berman) portfolio manager for another
mutual fund manager from 1992
to 1993.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Scott A. Moore Mr. Moore has been a member
Portfolio Manager (American Century) of the team that manages
the Portfolio since October 1996
and Portfolio Manager since
February 1999. He joined
American Century in August
1993 as an Investment Analyst.
Small-Cap Value Portfolio Robert H. Perkins Robert Perkins has been an
President, Chief Investment investment manager since 1970. Mr.
Officer and Director (PWM) Perkins owns 49% of PWM's outstanding
common stock and serves as President
and Chief Investment Officer and as
a director of PWM.
Herbert W. Gullquist See above.
(Investment Team)
Vice Chairman (Lazard)
Eileen D. Alexanderson Ms. Alexanderson is a Managing
(Investment Team) Managing Director of Lazard responsible for
Director, Portfolio Manager U.S./global equity management and
(Lazard) overseeing the day-to-day operations
of the U.S. small-cap and U.S.
mid-cap equity investment teams. Ms.
Alexanderson joined the firm in 1979
and has 18 years of investment
experience. She is a CFA and holds a
B.S. from St. John's University.
Robert J. Mancuso, CFA Mr. Mancuso has been with Glenmede
Vice President and Lead since 1992.
Portfolio Manager (Glenmede)
Scott R. Abernethy, CFA Mr. Abernathy has been with Glenmede
Vice President and Portfolio since 1991.
Manager (Glenmede)
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Thomas R. Angers, CFA Mr. Angers has been with Glenmede
Vice President and Director of since 1995. Before joining Glenmede,
Equity Research (Glenmede) he was a Vice President, Portfolio
Manager and securities analyst for
Independence Capital Management, Inc.
Larry R. Bernstein, CFA Mr. Bernstein joined Glenmede
Vice President (Glenmede) in 1998 as a Vice President in the
Investment Policy and Strategy
department. Prior to joining
Glenmede, he was a Vice President
at the Provident Capital Management
unit of PNC Bank in Philadelphia.
Barry D. Kohout, CFA Mr. Kohout has been with Glenmede
Vice President and Equity since 1996. Before joining Glenmede,
Research Analyst (Glenmede) he was an investment manager for
Constellation Investments, Inc. and
senior equity research analyst for
Independence Capital Management, Inc.
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Robert T. Niemeyer, Sr., CFA Mr. Niemeyer has been with
Vice President and Equity Glenmede since 1997. Prior
Research Analyst (Glenmede) to joining Glenmede, he served as
Vice President, Senior Investment
Officer, Equity Research Analyst,
Assistant Vice President and Senior
Investment Officer during his
twenty-one years at PNC Bank.
Anthony J. Albuquerque Mr. Albuquerque has been with
Equity Research Associate Glenmede since 1995. Prior to
(Glenmede) joining Glenmede, he was a research
associate at Bloomberg Financial
Markets.
International Equity Portfolio Michael Levy (International Mr. Levy's experience prior to
Equity Team) joining BT includes investment
Managing Director of Bankers banking and equity analysis with
Trust Funds Management, Head Oppenheimer & Company and he has
of International Equity Team more than twenty-six years of
(BT) business experience, of which
sixteen years have been in the
investment industry.
Robert L. Reiner (International Mr. Reiner has 16 years of
Equity Team) investment industry experience,
Managing Director of Bankers previously at Scudder, Stevens
Trust Funds Management (BT) & Clark where he was responsible
for providing equity research and
macroeconomic/market
coverage.
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Martin G. Wade Mr. Wade joined Rowe-Fleming
Portfolio Manager (Rowe- in 1979 and he has 28 years
Fleming) of experience with the Fleming
Group in research, client service,
and investment management. (Fleming
Group includes Flemings and/or
Jardine Fleming)
Robert W. Smith Mr. Smith joined Rowe-Fleming
Portfolio Manager (Rowe- in 1996. He joined T. Rowe Price
Fleming) in 1992 and has 12 years of
experience in financial analysis.
Mark C. J. Bickford-Smith Mr. Bickford-Smith joined Rowe-
Portfolio Manager (Rowe- Fleming in 1995 and has 14 years
Fleming) years of experience in equity
research and portfolio management.
John R. Ford Mr. Ford joined Rowe-Fleming
Portfolio Manager (Rowe- in 1982 and has 17 years of
Fleming) experience with Fleming Group
in research and portfolio
management.
James B. M. Seddon Mr. Seddon joined Rowe-Fleming in
Portfolio Manager (Rowe- 1987 and has 12 years of experience
Fleming) in portfolio management.
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
David J. L. Warren Mr. Warren joined Rowe-
Portfolio Manager (Rowe- Fleming in 1984 and has
Fleming) 17 years of experience in equity
research, fixed income research,
and portfolio management.
</TABLE>
DISTRIBUTOR SunAmerica Capital Services, Inc. distributes each Portfolio's
shares. The Distributor, a SunAmerica company, receives the initial and deferred
sales charges, all or a portion of which may be re-allowed to other
broker-dealers. In addition, the Distributor receives fees under each
Portfolio's 12b-1 plans.
The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances, affiliates of the
Distributor) in connection with sales of shares of a Portfolio. This
compensation may include (i) full re-allowance of the front-end sales charge on
Class A shares; (ii) additional compensation with respect to the sale of Class
A, Class B or Class II shares; or (iii) financial assistance to broker-dealers
in connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding one or more of the
Portfolios, and/or other broker-dealer sponsored special events. In some
instances, this compensation will be made available only to certain
broker-dealers whose representatives have sold a significant number of shares of
the Portfolio. Compensation may also include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In addition, the
following types of non-cash compensation may be offered through sales contests:
(i) travel mileage on major air carriers; (ii) tickets for entertainment events
(such as concerts or sporting events); or (iii) merchandise (such as clothing,
trophies, clocks, pens or other electronic equipment). Broker-dealers may not
use sales of the Portfolios' shares to qualify for this compensation to the
extent receipt of such compensation may be prohibited by applicable law or the
rules of any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. Dealers who receive bonuses or other incentives may be
deemed to be underwriters under the Securities Act of 1933.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Distributor based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to
investment companies of the type contemplated by the Portfolios' 12b-1 plans.
Banks and other financial services firms may be subject to various state laws
regarding these services, and may be required to register as dealers pursuant to
state law.
ADMINISTRATOR SunAmerica Fund Services, Inc. assists the Portfolios' transfer
agent in providing shareholder services. The Administrator, a SunAmerica
company, is paid a monthly fee by each Fund for its services at the annual rate
of .22% of average daily net assets. This fee represents the full cost of
providing shareholder and transfer agency services to the Fund.
61
<PAGE>
SunAmerica, the Distributor and Administrator are all located in The SunAmerica
Center, 733 Third Avenue, New York, New York 10017.
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. The Fund's management fully anticipates that
their systems will be adapted in time for the year 2000, and to further this
goal they have coordinated a plan to repair, adapt or replace their systems as
necessary. They have also obtained representations from their outside service
providers that they are doing the same. The Fund's management completed their
plan significantly by the end of the 1998 calendar year and expects to perform
appropriate systems testing during the 1999 calendar year. If the problem has
not been fully addressed, however, the Fund could be negatively impacted. The
Year 2000 Issue could also have a negative impact on the companies in which the
Fund invests, which could hurt the Fund's investment returns.
62
<PAGE>
(OUTSIDE BACK COVER)
FOR MORE INFORMATION
The following documents contain more information about the Portfolios and
are available free of charge upon request:
ANNUAL 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
a Portfolio's performance during the last
applicable period.
STATEMENT OF ADDITIONAL INFORMATION (SAI).
Contains additional information about the
Portfolios' policies, investment restrictions and
business structure. This prospectus incorporates
the SAI by reference.
You may obtain copies of these documents or ask questions about the
Portfolios by contacting:
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 Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549-6009.
You should rely only on the information contained in this prospectus. No
one is authorized to provide you with any different information.
63
<PAGE>
[LOGO] SUNAMERICA
MUTUAL FUNDS
DISTRIBUTOR: SunAmerica Capital Services
INVESTMENT COMPANY ACT
File No. 811-07797
<PAGE>
================================================================================
PROSPECTUS
March 1, 1999
================================================================================
STYLE SELECT SERIES(R)
FOCUS PORTFOLIO:
A Concentrated Approach to Stock Selection
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......................................................8
SHAREHOLDER ACCOUNT INFORMATION...........................................9
MORE INFORMATION ABOUT THE PORTFOLIO.....................................22
Investment Strategies.....................................22
Glossary..................................................24
Investment Terminology............................24
Risk Terminology..................................25
PORTFOLIO MANAGEMENT.....................................................26
2
<PAGE>
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 22, and the glossary that follows on page 24.
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
growth of active trading) in equity securities,
capital without regard to 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 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.]
3
<PAGE>
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 22 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.
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.
4
<PAGE>
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 a
Portfolio will be able to achieve its investment goal. If the value of the
assets of a Portfolio does 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 shares of the Portfolio:
FOCUS PORTFOLIO
---------------------------------
CLASS CLASS CLASS
A B II
----- ----- -----
SHAREHOLDER FEES (fees paid
directly from your investment)
Maximum Sales Charge
(Load) Imposed on Pur-
chases (as a percentage of
offering price)(1)................. 5.75% None 1.00%
Maximum Deferred Sales
Charge (Load) (as a per-
centage of amount
redeemed)(2)....................... None 4.00% 1.00%
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends............... None None None
Redemption Fee(3).................. None None None
Exchange Fee....................... None None None
Maximum Account Fee................ None None None
ANNUAL FUND OPERATING
EXPENSES (expenses that are
deducted from Portfolio assets)
Management Fees.................... 0.85% 0.85% 0.85%
Distribution (12b-1) Fees(4)....... 0.35% 1.00% 1.00%
Other Expenses 0.57% 0.57% 0.57%
---- ---- ----
Total Annual Fund Operating
Expenses........................... 1.77% 2.42% 2.42%
==== ==== ====
Expense Reimbursement(5) 0.32% 0.32% 0.32%
==== ==== ====
Net Expenses 1.45% 2.10% 2.10%
==== ==== ====
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
5
<PAGE>
(2) Purchases of Class A shares over $1 million will be subject to a contingent
deferred sales charge (CDSC) on redemptions made within one year of
purchase. The CDSC on Class B shares applies only if shares are redeemed
within six years of their purchase. The CDSC on Class II shares applies
only if shares are redeemed within eighteen months of their purchase.
(3) A $15.00 fee may be imposed on wire redemptions.
(4) Because these fees are paid out of a Portfolio's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(5) 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.
6
<PAGE>
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:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FOCUS PORTFOLIO
(Class A shares)........... $ 714 $1007 $ 1322 $ 2210
(Class B shares)*.......... $ 253 $ 688 $ 1149 $ 2188
(Class II shares).......... $ 321 $ 751 $ 1218 $ 2507
7
<PAGE>
If you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FOCUS PORTFOLIO
(Class A shares)........... $ 714 $ 1017 $ 1322 $ 2210
(Class B* shares).......... $ 213 $ 668 $ 1129 $ 2188
(Class II shares).......... $ 311 $ 751 $ 1218 $ 2507
* Class B shares convert to Class A shares approximately seven years after
purchase. Therefore, expense information for years 8, 9 and 10 is the same
for both Class A and B shares.
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). 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 DIVIDENDS DISTRIBU-
VALUE, MENT REALIZED NET INVEST- FROM NET TIONS FROM
PERIOD BEGINNING INCOME AND UN- MENT INVESTMENT CAPITAL
ENDED OF PERIOD (LOSS)(1) REALIZED INCOME INCOME GAINS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A
06/08/98 - 10/31/98................. $12.50 $(0.01) $0.11 $0.10 $ -- $ --
Class B
06/08/98 - 10/31/98................. 12.50 (0.04) 0.10 0.06 -- --
Class II
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
TOTAL NET ASSET END OF EXPENSES TO (LOSS) TO
PERIOD DISTRI- VALUE, END TOTAL PERIOD AVERAGE NET AVERAGE NET PORTFOLIO
ENDED BUTIONS OF PERIOD RETURN (2) (000'S) ASSETS (4) ASSETS (4) TURNOVER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/08/98 - 10/31/98................. $ -- $12.60 0.80% $29,770 1.45%(3) (0.21)%(3) 106%
06/08/98 - 10/31/98................. -- 12.56 0.48 45,817 2.10(3) (0.92)(3) 106
06/08/98 - 10/31/98................. -- 12.56 0.48 35,387 2.10(3) (0.93)(3) 106
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Focus A........................... -- 0.32%
Focus B........................... -- 0.32%
Focus II.......................... -- 0.32%
8
<PAGE>
SHAREHOLDER ACCOUNT INFORMATION
SELECTING A SHARE CLASS
The Portfolio offers three class of shares: Class A, Class B and Class II
shares.
Each class of shares has its own cost structure, so you can choose the one best
suited to your investment needs. Your broker or financial advisor can help you
determine which class is right for you.
<TABLE>
<CAPTION>
================================================================================
Class A Class B Class II
================================================================================
<S> <C> <C>
o Front-end sales charges, o No front-end sales o Front-end sales
as described below. charge; all your charge, as described
There are several ways money goes to work below.
to reduce these charges, for you right away.
also described below. o Higher annual
o Higher annual expenses than Class
o Lower annual expenses expenses than Class A shares.
than Class B or Class II A shares.
shares. o Deferred sales charge
o Deferred sales on shares you sell
charge on shares within eighteen
you sell within six months of purchase,
years of purchase, as as described below.
described below.
o No conversion to
o Automatic Class A.
conversion to Class
A shares after
approximately seven
years, thus reducing
future annual
expenses.
</TABLE>
9
<PAGE>
CALCULATION OF SALES CHARGES
CLASS A SALES Charges are as follows:
Concession to
Sales Charge Dealers
====================================
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
YOUR INVESTMENT PRICE INVESTED PRICE
====================================
Less than $50,000........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000.............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000............. 3.00% 3.09% 2.25%
$500,000 but less than $1,000,000........... 2.10% 2.15% 1.35%
$1,000,000 or more.......................... None None 1.00%
INVESTMENTS OF $1 MILLION OR MORE Class A shares are available with no front-end
sales charge. However, there is a 1% CDSC on any shares you sell within one year
of purchase.
CLASS B Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC on shares you sell within six
years of buying them. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
Class B deferred charges:
Years after purchase CDSC on shares being sold
1st or 2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
7th year and thereafter None
For purposes of the CDSC, we count all purchases you make during a calendar
month as having been made on the FIRST day of that month.
10
<PAGE>
CLASS II Sales Charges are as follows:
Sales Charge Concession to Dealers
=========================================================================
% of % of Net % of
Offering Amount Offering
Price Invested Price
=========================================================================
1.00% 1.01% 1.00%
There is also a CDSC of 1% on shares you sell within 18 months after you buy
them.
DETERMINATION OF CDSC Each CDSC is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. There is no
CDSC on shares you purchase through reinvestment of dividends. To keep your CDSC
as low as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC. If there are not
enough of these shares available, we will sell shares that have the lowest CDSC.
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVERS FOR CERTAIN INVESTORS Various individuals and institutions may purchase
Class A shares without front-end sales charges, including:
o financial planners, institutions, broker-dealer representatives or
registered investment advisers utilizing Style Select shares in fee-based
investment products under an agreement with the Distributor (this waiver
may also apply to front-end sales charges of Class II shares)
o participants in certain retirement plans that meet applicable conditions
o Style Select Directors and other individuals who are affiliated with Style
Select or other SunAmerica Mutual Funds and their families
o selling brokers and their employees and sales representatives and their
families
o participants in "Net Asset Value Transfer Program"
We will generally waive the CDSC for CLASS B OR CLASS II shares in the following
cases:
o within one year of the shareholder's death or becoming disabled
o taxable distributions or loans to participants made by qualified retirement
plans or retirement accounts (not including rollovers) for which SunAmerica
serves as a fiduciary
o Style Select Directors and other individuals who are affiliated with Style
Select or other SunAmerica Mutual Funds and their families
o to make taxable distributions from certain retirement plans
o to make payments through the Systematic Withdrawal Plan (subject to certain
conditions)
11
<PAGE>
REDUCING YOUR CLASS A SALES CHARGES There are several special purchase plans
that allow you to combine multiple purchases of Class A shares of SunAmerica
Mutual Funds to take advantage of the breakpoints in the sales charge schedule.
For information about the "Rights of Accumulation," "Letter of Intent,"
"Combined Purchase Privilege," and "Reduced Sales Charges for Group Purchases,"
contact your broker or financial advisor, or consult the Statement of Additional
Information.
To utilize: if you think you may be eligible for a sales charge reduction or
CDSC waiver, contact your broker or financial advisor.
REINSTATEMENT PRIVILEGE If you sell shares of the Portfolio you may invest some
or all of the proceeds in the same share class of the Portfolio within one year
without a sales charge. If you paid a CDSC when you sold your shares, we will
credit your account with the dollar amount of the CDSC at the time of sale. All
accounts involved must be registered in the same name(s).
12b-1 FEES
Each class of shares of the Portfolio has its own 12b-1 plan that provides for
distribution and account maintenance and service fees (payable to the
Distributor) based on a percentage of average daily net assets, as follows:
Account Maintenance and
Class Distribution Fee Service Fee
----- ---------------- -----------
A 0.10% 0.25%
B 0.75% 0.25%
II 0.75% 0.25%
Because 12b-1 fees are paid out of the Portfolio's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
OPENING AN ACCOUNT
5. Read this prospectus carefully.
6. Determine how much you want to invest. The minimum initial investments for
the Portfolio is as follows:
o non-retirement account: $500
o retirement account: $250
o dollar cost averaging: $500 to open; you must invest at least $25 a
month
12
<PAGE>
The minimum subsequent investments for the Portfolio are as follows:
o non-retirement account: $100
o retirement account: $25
7. Complete the appropriate parts of the Account Application, carefully
following the instructions. If you have questions, please contact your
broker or financial advisor or call Shareholder/Dealer Services at
1-800-858-8850.
8. Complete the appropriate parts of the Supplemental Account Application. By
applying for additional investor services now, you can avoid the delay and
inconvenience of having to submit an additional application if you want to
add services later.
9. Make your initial investment using the chart on the next page. You can
initiate any purchase, exchange or sale of shares through your broker or
financial advisor.
13
<PAGE>
================================================================================
Buying shares
================================================================================
Opening an account Adding to an account
================================================================================
By check
================================================================================
<TABLE>
<S> <C>
o Make out a check for the investment o Make out a check for the investment amount
amount, payable to the "Focus Portfolio" payable to the Portfolio or SunAmerica Funds.
or SunAmerica Funds
o Deliver the check and your completed o Include the stub from your Fund statement or
Account Application (and Supplemental a note specifying the Portfolio name, your
Account Application, if applicable) to share class, your account number and the
your broker or financial advisor, or mail name(s) in which the account is registered.
them to:
o Indicate the Portfolio and account number in
SunAmerica Fund Services, Inc. the memo section of your check.
Mutual Fund Operations, 3rd Floor
The SunAmerica Center o Deliver the check and your stub or note to
733 Third Avenue your broker or financial advisor, or mail them
New York, New York 10017-3204. to
Non-Retirement Accounts:
SunAmerica Fund Services, Inc.
c/o NFDS
P.O. Box 419373
Kansas City, Missouri 64141-6373
Retirement Accounts:
SunAmerica Fund Services, Inc.
Mutual Fund Operations, 3rd Floor
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
</TABLE>
================================================================================
By wire
================================================================================
14
<PAGE>
<TABLE>
<S> <C>
o Instruct your bank to wire the amount of your
o Deliver your completed application to investment to:
your broker or financial advisor or fax it
to SunAmerica Fund Services, Inc. at State Street Bank & Trust Company
212-551-5585. Boston, MA
ABA #0110-00028
o Obtain your account number by referring DDA # 99029712
to your statement or by calling your
broker or financial advisor or Specify the Portfolio name, your share class,
Shareholder/Dealer Services at 1-800- your Portfolio number, account number and
858-8850, ext. 5125. the name(s) in which the account is registered.
Your bank may charge a fee to wire funds.
</TABLE>
o Instruct your bank to wire the amount of
your investment to:
State Street Bank & Trust Company
Boston, MA
ABA #0110-00028
DDA # 99029712
Specify the Portfolio name, your
choice of share class, your new
Portfolio number and account number
and the name(s) in which the
account is registered. Your bank
may charge a fee to wire funds.
To open or add to an account using dollar cost averaging, see "Additional
Investor Services."
================================================================================
Selling shares
================================================================================
How Requirements
================================================================================
Through Your Broker or Financial Advisor
================================================================================
<TABLE>
<S> <C>
o Accounts of any type. o Call your broker or financial advisor to place
o Sales of any amount. your order to sell shares.
</TABLE>
================================================================================
By mail
================================================================================
<TABLE>
<S> <C>
o Accounts of any type. o Write a letter of instruction indicating the
o Sales of any amount. Portfolio name, your share class, your account
number, the name(s) in which the account is
registered and the dollar value or number of
shares you wish to sell.
o Include all signatures and any additional
documents that may be required (see next
page).
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
o Mail the materials to:
SunAmerica Fund Services, Inc.
Mutual Fund Operations, 3rd Floor
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
o A check will normally be mailed on the next
business day to the name(s) and address in
which the account is registered, or otherwise
according to your letter of instruction.
</TABLE>
================================================================================
By phone
================================================================================
o Most accounts.
o Sales of less than $100,000.
o Call Shareholder/Dealer Services at 1-
800-858-8850 between 8:30 a.m. and 7:00 p.m.
(Eastern time) on most business days. State the
Portfolio name, the name of the person requesting
the redemption, your share class, your account
number, the name(s) in which the account is
registered and the dollar value or number of
shares you wish to sell.
o A check will be mailed to the name(s) and address
in which the account is registered, or to a
different address indicated in a written
authorization previously provided to the
Portfolio by the shareholder(s) on the account.
================================================================================
By phone
================================================================================
<TABLE>
<S> <C>
o Request by mail to sell any amount o Proceeds will normally be wired on the next
(accounts of any type). business day. A $15 fee will be deducted
o Request by phone to sell less than from your account.
$100,000.
</TABLE>
To sell shares through a systematic withdrawal
plan, see "Additional Investor Services."
SELLING SHARES IN WRITING In certain circumstances, you will need to make your
request to sell shares in writing. Corporations, executors, administrators,
trustees or guardians may need to include additional items with a request to
sell shares. You may also need to include a signature guarantee, which protects
you against fraudulent orders. You will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $100,000 worth of shares
16
<PAGE>
o you are requesting payment other than by a check mailed to the address
of record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution o a credit union
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each class of the
Portfolio is determined each business day at the close of regular trading on the
New York Stock Exchange (generally 4:00 p.m., Eastern time) by dividing 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
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.
BUY AND SELL PRICES When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable CDSCs.
EXECUTION OF REQUESTS The Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. We execute buy and sell requests at
the next NAV to be calculated after Style Select receives your request in good
order. If Style Select or the Distributor receives your order before Style
Select's close of business (generally 4:00 p.m., Eastern time), you will receive
that day's closing price. If Style Select or the Distributor receives your order
after that time, you will receive the next business day's closing price. If you
place your order through a broker or financial advisor, you should make sure the
order is transmitted to Style Select before its close of business. Style Select
and the Distributor reserve the right to reject any order to buy shares.
During periods of extreme volatility or market crisis, Style Select 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.
17
<PAGE>
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
Portfolio does not price its shares. As a result, the value of the Portfolios
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 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.
TELEPHONE TRANSACTIONS For your protection, telephone requests are recorded in
order to verify their accuracy. In addition, Shareholder/Dealer Services will
take measures to verify the identity of the caller, such as asking for name,
account number, social security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, Style Select is responsible
for any losses that may occur to any account due to an unauthorized telephone
call. Also for your protection, telephone transactions are not permitted on
accounts whose names or addresses have changed within the past 30 days. At times
of peak activity, it may be difficult to place requests by phone. During these
times, consider sending your request in writing.
EXCHANGES You may exchange shares of the Portfolio for shares of the same class
of any other SunAmerica Mutual Fund. Before making an exchange, you should
review a copy of the prospectus of the fund into which you would like to
exchange. All exchanges are subject to applicable minimum investment
requirements. A Systematic Exchange Program is described under "Additional
Investor Services."
If you exchange shares that were purchased subject to a CDSC, the CDSC will
continue to apply following the exchange. In determining the CDSC applicable to
shares being sold after an exchange, we will take into account the length of
time you held those shares prior to the exchange. Your CDSC schedule will not
change if you exchange Class II shares that you purchased prior to December 1,
1998 for another Portfolio or fund's Class II shares (which currently have a
longer CDSC schedule).
To protect the interests of other shareholders, we may cancel the exchange
privileges of any investors that, in Style Select's opinion, are using market
timing strategies or making excessive exchanges. The Portfolio may change or
cancel its exchange privilege at any time, upon 60 days' written notice to its
shareholders. The Portfolio may also refuse any exchange order.
18
<PAGE>
CERTIFICATED SHARES Most shares are electronically recorded. If you wish to have
certificates for your shares, please call Shareholder/Dealer Services at
1-800-858-8850 for further information. You may sell or exchange certificated
shares only by returning the certificates to the Portfolio, along with a letter
of instruction and a signature guarantee. The Portfolio does not issue
certificates for fractional shares.
MULTI-PARTY CHECKS Style Select may agree to accept a "multi-party check" in
payment for Portfolio shares. This is a check made payable to the investor by
another party and then endorsed over to Style Select by the investor. If you use
a multi-party check to purchase shares, you may experience processing delays. In
addition, Style Select is not responsible for verifying the authenticity of any
endorsement and assumes no liability for any losses resulting from a fraudulent
endorsement.
ADDITIONAL INVESTOR SERVICES
To select one or more of these additional services, complete the relevant
part(s) of the Supplemental Account Application. To add a service to an existing
account, contact your broker or financial advisor, or call Shareholder/Dealer
Services at 1-800-858-8850.
DOLLAR COST AVERAGING lets you make regular investments from your bank account
to the SunAmerica Mutual Funds of your choice. You determine the frequency and
amount of your investments, and you can terminate your participation at any
time.
SYSTEMATIC WITHDRAWAL PLAN may be used for routine bill payment or periodic
withdrawals from your account. To use:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s) and amount(s). The payee may be yourself or any
other party, and there is no limit to the number of payees you may
have, as long as they are all on the same payment schedule. Each
withdrawal must be at least $50.
o Determine the schedule: monthly, quarterly, semi-annually, annually or
in certain selected months.
o Make sure your dividends and capital gains are being reinvested.
You cannot elect the systematic withdrawal plan if you have requested
certificates for your shares.
19
<PAGE>
SYSTEMATIC EXCHANGE PROGRAM may be used to exchange shares of the Portfolio
periodically for the same class of shares of one or more other SunAmerica Mutual
Funds. To use:
o Specify the SunAmerica Mutual Fund(s) from which you would like money
withdrawn and into which you would like money invested.
o Determine the schedule: monthly, quarterly, semi-annually, annually or
in certain selected months.
o Specify the amount(s). Each exchange must be worth at least $25.
o Accounts must be registered identically; otherwise a signature
guarantee will be required.
ASSET PROTECTION PLAN (optional) Anchor National Life Insurance Company offers
an Asset Protection Plan to certain investors in the Portfolio. The benefits of
this optional coverage payable at death will be related to the amounts paid to
purchase Portfolio shares and to the value of the Portfolio shares held for the
benefit of the insured persons. However, to the extent the purchased shares are
redeemed prior to death, coverage with respect to these shares will terminate.
Purchasers of the Asset Protection Plan are required to authorize periodic
redemptions of Portfolio shares to pay the premiums for this coverage. These
redemptions will not be subject to CDSCs, but will have the same tax
consequences as any other Portfolio redemptions.
The Asset Protection Plan will be available to eligible persons who enroll for
the coverage within a limited time period after shares in any Portfolio are
initially purchased or transferred. In addition, coverage cannot be made
available unless Anchor National knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides Anchor National with information
regarding the beneficial owners of the shares. In addition, coverage is
available only to shares purchased on behalf of natural persons between 21 and
75 years of age; coverage is not available with respect to shares purchased for
a retirement account. Other restrictions on the coverage apply. This coverage
may not be available in all states and may be subject to additional restrictions
or limitations. Purchasers of shares should also make themselves familiar with
the impact on the Asset Protection Plan coverage of purchasing additional
shares, reinvestment of dividends and capital gains distributions and
redemptions.
Anchor National is a SunAmerica company.
Please call 1-800-858-8850 for more information, including the cost of the Asset
Protection Plan option.
20
<PAGE>
RETIREMENT PLANS SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Roth IRAs, Simple IRAs, SARSEPs, 401(k) plans, 403(b)
plans and other pension and profit-sharing plans. Using these plans, you can
invest in any SunAmerica Mutual Fund with a low minimum investment of $250 or,
for some group plans, no minimum investment at all. To find out more, call
Shareholder/Dealer Services at 1-800-858-8850.
DIVIDEND AND ACCOUNT POLICIES
ACCOUNT STATEMENTS In general, you will receive account statements as follows:
o after every transaction that affects your account balance (except a
dividend reinvestment or automatic purchase from your bank account)
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.
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.
DIVIDEND REINVESTMENTS Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same share class of the
Portfolio on which they were paid. Alternatively, dividends and distributions
may be reinvested in any other SunAmerica Mutual Fund or paid in cash (if more
than $10). 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.
TAXABILITY OF DIVIDENDS As long as the Portfolio meets the requirements for
being a tax-qualified regulated investment company, which the Portfolio has in
the past and intends to in the future, it pays no federal income tax on the
earnings it distributes to shareholders.
Consequently, dividends you receive from the Portfolio, whether reinvested or
taken as cash, are generally considered taxable. Distributions of the
Portfolio's long-term capital gains are taxable as capital gains; dividends from
other sources are generally taxable as ordinary income.
21
<PAGE>
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions. If you hold Class B shares, you will not have a taxable event when
they convert into Class A shares.
SMALL ACCOUNTS If you draw down an account so that its total value is less than
$500 ($250 for retirement plan accounts), you may be asked to purchase more
shares within 60 days. If you do not take action, Style Select may close out
your account and mail you the proceeds. Alternatively, you may be charged a
$2.00 monthly charge to maintain your account. Your account will not be closed
if its drop in value is due to Portfolio performance or the effects of sales
charges.
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)?
- --------------------------------------------------------------------------
22
<PAGE>
- ---------------------------------------------------------------------------
Focus Portfolio
- ---------------------------------------------------------------------------
What are the Portfolio's principal o market volatility
risks? o securities selection
o non-diversification
- ---------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------
23
<PAGE>
GLOSSARY
INVESTMENT TERMINOLOGY
GROWTH OF CAPITAL is growth of the value of an investment.
ACTIVE TRADING means that a 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 Portfolio. 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.
24
<PAGE>
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide 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.
25
<PAGE>
SunAmerica is aware of such potential problems and is coordinating 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.
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,
26
<PAGE>
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.
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. distributes the Portfolio's
shares. The Distributor, a SunAmerica company, receives the initial and deferred
sales charges, all or a portion of which may be re-allowed to other
broker-dealers. In addition, the Distributor receives fees under the Portfolio's
12b-1 plans.
27
<PAGE>
The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances, affiliates of the
Distributor) in connection with sales of shares of the Portfolio. This
compensation may include (i) full re-allowance of the front-end sales charge on
Class A shares; (ii) additional compensation with respect to the sale of Class
A, Class B or Class II shares; or (iii) financial assistance to broker-dealers
in connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding the Portfolio, and/or
other broker-dealer sponsored special events. In some instances, this
compensation will be made available only to certain broker-dealers whose
representatives have sold a significant number of shares of Style Select.
Compensation may also include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
for meetings or seminars of a business nature. In addition, the following types
of non-cash compensation may be offered through sales contests: (i) travel
mileage on major air carriers; (ii) tickets for entertainment events (such as
concerts or sporting events); or (iii) merchandise (such as clothing, trophies,
clocks, pens or other electronic equipment). Broker-dealers may not use sales of
the Portfolio's shares to qualify for this compensation to the extent receipt of
such compensation may be prohibited by applicable law or the rules of any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. Dealers who receive bonuses or other incentives may be deemed to be
underwriters under the Securities Act of 1933.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Distributor based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to
investment companies of the type contemplated by the Portfolio's 12b-1 plans.
Banks and other financial services firms may be subject to various state laws
regarding these services, and may be required to register as dealers pursuant to
state law.
ADMINISTRATOR SunAmerica Fund Services, Inc. assists the Portfolio's transfer
agent in providing shareholder services. The Administrator, a SunAmerica
company, is paid a fee, accrued daily and payable monthly, by the Portfolio for
its services at the annual rate of .22% of average daily net assets. This fee
represents the full cost of providing shareholder and transfer agency services
to Style Select.
SunAmerica, the Distributor and Administrator are all located in The SunAmerica
Center, 733 Third Avenue, New York, New York 10017.
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
28
<PAGE>
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 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.
29
<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.
30
<PAGE>
[LOGO] SUNAMERICA
MUTUAL FUNDS
DISTRIBUTOR: SunAmerica Capital Services
INVESTMENT COMPANY ACT
File No. 811-07797
<PAGE>
================================================================================
PROSPECTUS
March 1, 1999
================================================================================
STYLE SELECT SERIES(R)
AGGRESSIVE GROWTH PORTFOLIO
LARGE-CAP VALUE PORTFOLIO
VALUE PORTFOLIO
SMALL-CAP VALUE PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
(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
FUND HIGHLIGHTS................................................................3
FINANCIAL HIGHLIGHTS..........................................................13
SHAREHOLDER ACCOUNT INFORMATION...............................................16
MORE INFORMATION ABOUT THE PORTFOLIOS.........................................18
Investment Strategies.............................................18
Glossary..........................................................23
Investment Terminology................................23
Risk Terminology......................................24
FUND MANAGEMENT...............................................................27
2
<PAGE>
FUND HIGHLIGHTS
The following questions and answers are designed to give you an overview of the
Fund, and to provide you with information about five of the Fund's separate
Portfolios and their investment goals, principal strategies, and principal
investment techniques. Each goal may be changed without shareholder approval,
although you will receive notice of any change. There can be no assurance that
any Portfolio's investment goal will be met or that the net return on an
investment in a Portfolio will exceed what could have been obtained through
other investment or savings vehicles. More complete investment information is
provided in chart form, under "More Information About the Portfolios," which is
on page 18, and the glossary that follows on page 23.
Q: WHAT ARE THE PORTFOLIOS' INVESTMENT GOALS, STRATEGIES AND TECHNIQUES?
A:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Investment Principal Principal Investment Techniques
Goal Investment
Strategy
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGGRESSIVE long-term growth invests primarily in equity securities (including, when
GROWTH growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital growth criteria, issued by companies selected without
regard to market capitalizations, except that they will
generally have market capitalizations of less than $1
billion or between $1 billion and $5 billion at the time of
purchase
- ------------------------------------------------------------------------------------------------------------------------------------
LARGE-CAP long-term value invests primarily in equity securities (including, when
VALUE growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital value criteria, issued by companies with market
capitalizations of over $5 billion at the time of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
VALUE long-term value invests primarily in equity securities (including, when
PORTFOLIO growth of appropriate, by active trading) selected on the basis of
capital value criteria, issued by companies selected without regard
to market capitalizations, except that the Portfolio as a
whole generally expects to have a significant portion of
its total assets invested in securities of companies with
market capitalizations between $1 billion and $5 billion at
the time of purchase
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SMALL-CAP long-term value invests primarily in equity securities (including, when
VALUE growth of appropriate, by active trading) selected on the basis of
PORTFOLIO capital value criteria, issued by companies with market
capitalizations of less than $1 billion at the time of
purchase
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL long-term international invests primarily in equity securities (including, when
EQUITY growth of appropriate, by active trading) and other securities with
PORTFOLIO capital equity characteristics of non-U.S. issuers located in at
least three countries other than the U.S. and selected
without regard to market capitalization at the time of
purchase
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[Margin note: A Portfolio engages in ACTIVE TRADING when it frequently
trades its portfolio securities to achieve its investment goal.]
[Margin note: The "GROWTH" ORIENTED philosophy to which the Aggressive
Growth Portfolio partly subscribes-that of investing in securities which
are 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: The "VALUE" ORIENTED philosophy to which the Large-Cap Value,
Value and Small-Cap Value Portfolios partly subscribe-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 with solid financial strength and generous
dividend yields that have low price-earnings ratios and have generally been
overlooked by the market.]
[Margin note: The strategy of "INTERNATIONAL" INVESTING that the
International Equity Portfolio follows involves investing in at least three
countries outside of the United States, and may incorporate, in any
combination, elements of value investing, growth investing, and country
allocation.]
[Margin note: "COUNTRY ALLOCATION" is an investment strategy by which an
Adviser purchases securities based on research involving investment
opportunities in particular countries or regions, as opposed to
opportunities in particular industries or types of stocks. This research
may include, but is not limited to, data and forecasts about general
regional economic strength, political and economic stability, and valuation
of currency.]
[Margin note: MARKET CAPITALIZATION represents the total market value of
the outstanding securities of a corporation.]
4
<PAGE>
With the exception of the International Equity Portfolio, which has two
different Advisers, each portfolio provides investors with access to at
least three different professional Advisers, each with its own distinct
investment methodology within a particular investment style. Each Adviser
manages a separate portion of a Portfolio.
SunAmerica will initially allocate the assets of each 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.
SunAmerica intends, on a quarterly basis, to review the asset allocation in
each Portfolio to ensure that no portion of assets managed by an Adviser
exceeds that portion managed by any other Adviser to the Portfolio by more
than 5%. If such a condition exists, SunAmerica will then re-allocate cash
flows among the Advisers, differently from the manner described above, in
an effort to effect a re-balancing of the Portfolio's asset allocation.
SunAmerica does not intend, but reserves the right, 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, 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 PORTFOLIOS?
A: The following section describes the principal risks of each Portfolio,
while the chart on page 19 describes various additional risks.
RISKS OF INVESTING IN EQUITY SECURITIES
All of the Portfolios invest primarily in equity securities. As with any
equity fund, the value of your investment in any of these Portfolios 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 any of these Portfolios may
underperform the market generally.
RISKS OF NON-DIVERSIFICATION
Each Portfolio is non-diversified, which means that it can invest a larger
portion of its assets in the stock of a single company than can some other
mutual funds; by concentrating in a smaller number of stocks, the
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.
5
<PAGE>
ADDITIONAL PRINCIPAL RISKS
Shares of the Portfolios are not bank deposits and are not guaranteed or
insured by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that a
Portfolio will be able to achieve its investment goals. If the value of the
assets of a Portfolio goes down, you could lose money.
ADDITIONAL RISKS SPECIFIC TO THE AGGRESSIVE GROWTH PORTFOLIO AND SMALL-CAP
VALUE PORTFOLIO
Stocks of smaller companies may be more volatile than, and not as readily
marketable as, those of larger companies. These Portfolios may be riskier
than the Large-Cap Value Portfolio.
ADDITIONAL RISKS SPECIFIC TO THE INTERNATIONAL EQUITY PORTFOLIO
While investing internationally may reduce your risk by increasing the
diversification of your overall portfolio, the value of your investment may
be affected by fluctuating currency values, changing local and regional
economic, political and social conditions, and greater market volatility,
and, in addition, foreign securities may not be as liquid as domestic
securities.
Q: HOW HAVE THE PORTFOLIOS PERFORMED HISTORICALLY?
A: The following Risk/Return Bar Charts and Tables illustrate the risks of
investing in the Portfolios by showing changes in the Portfolios'
performance from calendar year to calendar year, and compare the
Portfolios' average annual returns to those of an appropriate market index.
Sales charges are not reflected in the bar chart. If these amounts were
reflected, returns would be less than those shown. Of course, past
performance is not necessarily an indication of how a Portfolio will
perform in the future.
6
<PAGE>
Aggressive Growth Portfolio
1997 1998
23.87% 30.58%
(Class B)*
During the period shown in the bar chart, the highest return for a quarter was
32.67% (quarter ended 12/31/98) and the lowest return for a quarter was -15.85%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED RETURN SINCE
DECEMBER 31, 1998) PAST ONE YEAR INCEPTION*****
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Aggressive Growth Portfolio** Class B 26.58% 25.96%
- ---------------------------------------------------------------------------------------------
Russell 2500 Growth Index*** 9.84% 12.79%
- ---------------------------------------------------------------------------------------------
Morningstar Aggressive Growth Category **** 13.53% 13.92%
- ---------------------------------------------------------------------------------------------
</TABLE>
* The returns shown in the bar chart are for Class B shares, which are not
offered in this Prospectus. Class B shares were used in preparing the bar
chart because Class B has the longest performance record. 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. The Class B sales charges
are not reflected in the bar chart and, if these amounts were reflected,
returns would be less than those shown.
** Includes sales charges.
*** The Russell 2500(Trademark) Growth Index measures the performance of those
Russell 2500 companies with higher price-to-book ratios and higher
forecasted growth values.
**** Developed by Morningstar, the Morningstar Agressive Growth Category
currently reflects a group of 123 mutual funds that have portfolios
with median market capitalizations, price/earnings ratios, and
price/book ratios similar to those of the Portfolio.
***** Class B shares commenced offering on November 19, 1996. Class Z
shares commenced offering on April 1, 1998.
7
<PAGE>
Large-Cap Value Portfolio
1998
8.06%
(Class B)*
During the period shown in the bar chart, the highest return for a quarter was
14.88% (quarter ended 12/31/98) and the lowest return for a quarter was -13.83
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION****
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Value Portfolio** Class B 4.06% 1.42%
- ----------------------------------------------------------------------------------------------------------
Russell 1000 Value Index*** 15.43% 16.72%
- ----------------------------------------------------------------------------------------------------------
Morningstar Large-Cap Value Category**** 12.69% 11.06%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* The returns shown in the bar chart are for Class B shares, which are not
offered in this Prospectus. Class B shares were used in preparing the bar
chart because Class B has the longest performance record. 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. The Class B sales charges
are not reflected in the bar chart and, if these amounts were reflected,
returns would be less than those shown.
** Includes sales charges.
*** The Russell 1000(Registered) Value Index measures the performance of those
Russell 1000 companies with lower price-to-book ratios and lower
forecasted growth values.
**** Developed by Morningstar, the Morningstar Large-Cap Value Category
currently reflects a group of 263 mutual funds that have portfolios
with median market capitalizations, price/earnings ratios, and
price/book ratios similar to those of the Portfolio.
***** Class B shares commenced offering on October 15, 1997. Class Z
shares commenced offering on April 1, 1998.
8
<PAGE>
Value Portfolio
1997 1998
28.67% -0.57%
(Class B)*
During the period shown in the bar chart, the highest return for a quarter was
16.51% (quarter ended 12/31/98) and the lowest return for a quarter was -18.66%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION*****
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Value Portfolio** Class B -4.57% 11.84%
- -----------------------------------------------------------------------------------------------------------
Russell Midcap Value Index*** 1.32% 14.13%
- -----------------------------------------------------------------------------------------------------------
Morningstar Mid-Cap Value Category**** 1.12% 14.05%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* The returns shown in the bar chart are for Class B shares, which are not
offered in this Prospectus. Class B shares were used in preparing the bar
chart because Class B has the longest performance record. 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. The Class B sales charges
are not reflected in the bar chart and, if these amounts were reflected,
returns would be less than those shown.
** Includes sales charges.
*** The Russell Midcap(Trademark) Value Index measures the performance of
those Russell Midcap companies with lower price-to-book ratios and lower
forecasted growth values. The stocks are also members of the Russell 1000
Value Index.
**** Developed by Morningstar, the Morningstar Mid-Cap Value Category currently
reflects a group of 141 mutual funds that have portfolios with median
market capitalizatins, price/earnings ratios, and price/book ratios
similar to those of the Portfolio.
***** Class B shares commenced offering on November 19, 1996. Class Z
shares commenced offering on April 1, 1998.
9
<PAGE>
Small-Cap Value Portfolio
1998
- -7.41%
(Class B)*
During the period shown in the bar chart, the highest return for a quarter was
14.06% (quarter ended 12/31/98) and the lowest return for a quarter was -19.98%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS
OF THE CALENDAR YEAR ENDED
DECEMBER 31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION*****
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Small-Cap Value Portfolio** Class B -11.41% -9.83%
- -------------------------------------------------------------------------------------------------------------
Russell 2000 Value Index*** -6.45% -4.05%
- -------------------------------------------------------------------------------------------------------------
Morningstar Small-Cap Value Category**** -6.28% -7.24%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* The returns shown in the bar chart are for Class B shares, which are not
offered in this Prospectus. Class B shares were used in preparing the bar
chart because Class B has the longest performance record. 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. The Class B sales charges
are not reflected in the bar chart and, if these amounts were reflected,
returns would be less than those shown.
** Includes sales charge.
*** The Russell 2000 Value Index is a widely-recognized, capitalization-
weighted (companies with larger market capitalizations have more influence
than those with smaller market capitalizations) index of the 2000 smallest
companies out of the 3000 largest U.S. companies with lower growth rates
and price-to-book ratios.
**** Developed by Morningstar, the Morningstar Small-Cap Value Category
currently reflects a group of 180 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book
ratios similar to those of the Portfolio.
***** Class B shares commenced offering on October 15, 1997. Class Z shares
commenced offering on April 1, 1998.
10
<PAGE>
International Equity Portfolio
1997 1998
- -3.47% 9.60%
(Class B)*
During the period shown in the bar chart, the highest return for a quarter was
15.22% (quarter ended 12/31/98) and the lowest return for a quarter was -16.47%
(quarter ended 9/30/98).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (AS OF
THE CALENDAR YEAR ENDED DECEMBER
31, 1998) PAST ONE YEAR RETURN SINCE INCEPTION*****
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Portfolio** Class B 5.60% 1.04%
- ---------------------------------------------------------------------------------------------------------------
MSCI EAFE Index*** 10.56% 10.37%
- ---------------------------------------------------------------------------------------------------------------
Morningstar Foreign Stock Category**** 12.21% 9.13%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* The returns shown in the bar chart are for Class B shares, which are not
offered in this Prospectus. Class B shares were used in preparing the bar
chart because Class B has the longest performance record. 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. The Class B sales charges
are not reflected in the bar chart and, if these amounts were reflected,
returns would be less than those shown.
** Includes sales charges.
*** The MSCI EAFE Index consists of foreign companies located in developed
markets of 21 different countries of Europe, Australia, Asia and the Far
East.
**** Developed by Morningstar, the Morningstar Foreign Stock Category currently
reflects a group of 302 mutual funds that have portfolios with median
market capitalizations, price/earnings ratios, and price/book ratios
similar to those of the Portfolio.
***** Class B shares commenced offering on November 19, 1996. Class Z
shares commenced offering on April 1, 1998.
Q: WHAT ARE THE PORTFOLIOS' EXPENSES?
A: The following table describes the fees and expenses that you may pay if
you buy and hold Class Z Shares of the Portfolios.
11
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH LARGE-CAP VALUE SMALL-CAP VALUE INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO VALUE PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly
from your investment)
Maximum Sales
Charge (Load)
Imposed on
Purchases (as a
percentage of
offering price) None None None None None
Maximum
Deferred Sales
Charge (Load)
(as a percentage
of amount
redeemed) None None None None None
Maximum Sales
Charge (Load)
Imposed on
Reinvested
Dividends None None None None None
Redemption Fee None None None None None
Exchange Fee None None None None None
ANNUAL FUND
OPERATING EXPENSES
(expenses that are
deducted from Fund
assets)
Management
Fees 1.00% 1.00% 1.00% 1.00% 1.10%
Distribution
(12b-1) Fees None None None None None
Other
Expenses 7.83% 11.98% 29.04% 20.58% 16.61%
--------------------------------------------------------------------------------------------------------
Total Annual
Fund
Operating
Expenses 8.83% 12.98% 30.04% 21.58% 17.71%
========================================================================================================
Expense
Reimbursement (1) 7.62% 11.77% 28.83% 20.37% 16.25%
Net Expenses 1.21% 1.21% 1.21% 1.21% 1.46%
</TABLE>
(1) 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,
12
<PAGE>
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
Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a 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>
AGGRESSIVE GROWTH PORTFOLIO
(Class Z shares)........................... $123 $384 $665 $1466
LARGE CAP VALUE PORTFOLIO
(Class Z shares)........................... $123 $384 $665 $1466
VALUE PORTFOLIO
(Class Z shares)........................... $123 $384 $665 $1466
SMALL-CAP VALUE PORTFOLIO
(Class Z shares)........................... $123 $384 $665 $1466
INTERNATIONAL EQUITY PORTFOLIO
(Class Z shares)........................... $149 $462 $797 $1746
</TABLE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table for each Portfolio is intended to help you
understand the Portfolio's financial performance since inception. Certain
information reflects financial results for a single Fund share. The total
returns in each table represent the rate that an investor would have earned (or
lost) on an investment in a Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with each Portfolio's financial statements, are
included in the Fund's annual report to shareholders, which is available upon
request.
13
<PAGE>
AGGRESSIVE GROWTH
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C> <C>
04/03/98 - 10/31/98......... 18.30 (0.03) (1.70) (1.73) $ -- $ -- $ --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C>
04/03/98 - 10/31/98......... 16.57 (9.45) 346 1.21(3) (0.36)(3) 142
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Aggressive Growth Z............. -- 7.62%
LARGE-CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- -------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C> <C>
04/16/98 - 10/31/98............. 13.86 0.06 (1.27) (1.21) (.01) $ -- $ --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C>
04/16/98 - 10/31/98............. 12.64 (8.72) 207 1.21(3) 0.97(3) 37
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Large-Cap Value Z............... -- 11.77%
VALUE PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C> <C>
04/03/98 - 10/31/98............. 17.62 0.05 (2.63) (2.58) $ -- $ -- $ --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C>
04/03/98 - 10/31/98............. 15.04 (14.64) 101 1.21(3) 0.62(3) 69
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Value Z......................... 28.83%
--
14
<PAGE>
SMALL-CAP VALUE
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C> <C>
04/03/98 - 10/31/98............. 13.63 0.04 (2.80) (2.76) (0.02) $ -- $ --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C>
04/03/98 - 10/31/98............. 10.85 (20.30) 142 1.21(3) 0.70(3) 50
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
Small-Cap Value Z............... 20.37%
--
INTERNATIONAL EQUITY
PORTFOLIO
<TABLE>
<CAPTION>
Net gain
(loss) on
Invest-
Net ments
Net Asset Invest- (both Total from Dividends Distributions
Value, ment realized net Invest- from net from Total
Period beginning Income and un- ment Investment capital distri-
Ended of period (loss)(1) realized Income Income gains butions
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C> <C>
04/06/98 - 10/31/98............. 13.87 0.03 (1.63) (1.60) $ -- $ -- $ --
<CAPTION>
Ratio of
net Invest-
ment
Ratio of Income
Net Assets expenses (loss) to
Net Asset end of to average average
Period Value, end Total period net assets net assets Portfolio
Ended of period Return (2) (000's) (4) (4) turnover
- --------------------------------------------------------------------------------------------------------------------
Class Z
<S> <C> <C> <C> <C> <C> <C>
04/06/98 - 10/31/98............. 12.27 (11.54) 145 1.46(3) 0.40(3) 114
</TABLE>
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net assets):
10/31/97 10/31/98
-------- --------
International Equity Z.......... -- 16.25%
15
<PAGE>
SHAREHOLDER ACCOUNT INFORMATION
SELECTING A SHARE CLASS
Each 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 each 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
each 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.
EXECUTION OF REQUESTS Each 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
16
<PAGE>
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, a 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.
If the Fund determines that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of redemption proceeds wholly
or partly in cash, the Fund may pay the redemption price by a distribution in
kind of securities from the Fund in lieu of cash. However, the Fund 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.
DIVIDENDS The Portfolios generally distribute most or all of their net earnings
in the form of dividends. Income dividends and capital gains distributions, if
any, are paid annually by the Portfolios.
DIVIDEND REINVESTMENTS Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same Portfolio and 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
17
<PAGE>
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 PORTFOLIOS
[Sidebar: INVESTMENT STRATEGIES Each Portfolio has its own investment goal and a
strategy for pursuing it. The chart summarizes information about each
Portfolio's investment approach. We have included a glossary to define the
investment and risk terminology used in the chart.]
18
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE LARGE-CAP
GROWTH PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
What is the Portfolio's Long-term growth of Long-term growth of Long-term growth of
investment goal? capital capital capital
What are the growth value value
Portfolio's principal
investment strategies?
What are the investment investment (including, investment
Portfolio's principal (including, when when appropriate, (including, when
investment appropriate, active trading) in stocks appropriate,
techniques? active trading) in of large companies that active trading) in
stocks of small and offer the potential for stocks of medium-
medium sized long-term growth of size companies that
companies that offer capital offer the potential
the potential for for long growth of
long-term growth of capital
capital
What are the equity securities of equity securities of equity securities of
Portfolio's principal companies selected large companies (at companies selected
investments (under through a growth least 65% of total through a value
normal market strategy; generally assets) selected through strategy; a
conditions)? invests in small and a value strategy significant portion of
medium-sized Portfolio as a whole
companies will generally be
invested in medium-
sized companies
What are the o stock market o stock market o stock market
Portfolio's principal volatility volatility volatility
risks? o securities o securities selection o securities
selection o non-diversification selection
o small market o non-
capitalization diversification
o non-
diversification
<CAPTION>
SMALL-CAP INTERNATIONAL
VALUE PORTFOLIO EQUITY PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
What is the Portfolio's Long-term growth of Long-term growth of
investment goal? capital capital
What are the value international
Portfolio's principal
investment strategies?
What are the investment investment (including,
Portfolio's principal (including, when when appropriate,
investment appropriate, active trading) in stocks
techniques? active trading) in of foreign securities
stocks of small that offer the potential
companies that offer for long-term growth of
the potential for capital
long-term growth of
capital
What are the equity securities of equity and other
Portfolio's principal small companies (at securities with equity
investments (under least 65% of total characteristics
normal market assets) selected securities of issuers in
conditions)? through a value at least 3 countries
strategy other than the United
States
What are the o stock market o stock market
Portfolio's principal volatility volatility
risks? o securities o securities selection
selection o foreign exposure
o small market o currency volatility
capitalization o emerging markets
o non- o non-diversification
diversification
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE LARGE-CAP SMALL-CAP INTERNATIONAL
GROWTH PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
What other
investment strategies
can the Portfolio use?
o Large company
stocks Yes see principal Yes Yes Yes
investments above
o Medium-sized
company stocks see principal Yes see principal Yes Yes
investments above investments above
o Small company
stocks see principal Yes Yes see principal Yes
investments above investments above
o Fixed income
securities
Investment
grade Yes Yes Yes Yes Yes
Junk bonds Yes No Yes Yes Yes
Asset-backed
securities Yes Yes Yes Yes Yes
o REITs No Yes Yes Yes No
o Short-term
investments Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
o Defensive
investments Yes Yes Yes Yes Yes
o Foreign securities Yes (up to 30%) Yes (up to 30%) Yes (up to 30%) Yes (up to 30%) See principal
investments above
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE LARGE-CAP SMALL-CAP INTERNATIONAL
GROWTH PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADRs/EDRs/ Yes Yes Yes Yes Yes
GDRs
Foreign
investment
companies Yes (up to 10%) No No No Yes (up to 10%)
o Currency Yes Yes Yes Yes Yes
transactions
o Illiquid securities Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
o Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
o Borrowing for Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
temporary or
emergency
purposes
o Options and Yes Yes Yes Yes Yes
futures
o Hybrid Yes Yes Yes Yes Yes
Instruments
o Short sales Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
o Short sales
(against-the-box) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%) Yes (up to 25%)
o Special Situations Yes Yes Yes Yes Yes
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE LARGE-CAP SMALL-CAP INTERNATIONAL
GROWTH PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO VALUE PORTFOLIO EQUITY PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
What other potential
risks can affect a o interest rate o interest rate o interest rate o interest rate o small market
Portfolio? fluctuations fluctuations fluctuations fluctuations capitalizations
o foreign exposure o small market o small market o foreign exposure o interest rate
o illiquidity capitalization capitalization o illiquidity fluctuations
o derivatives o foreign exposure o foreign exposure o derivatives o illiquidity
o hedging o illiquidity o illiquidity o hedging o derivatives
o credit quality o derivatives o derivatives o credit quality o hedging
o emerging o hedging o hedging o emerging o credit quality
markets o credit quality o credit quality markets o euro conversion
o euro conversion o emerging markets o emerging o euro conversion o prepayment
o prepayment o euro conversion markets o prepayment
o prepayment o euro conversion
o prepayment
</TABLE>
22
<PAGE>
GLOSSARY
INVESTMENT TERMINOLOGY
GROWTH OF CAPITAL is growth of the value of an investment.
ACTIVE TRADING means that a Portfolio may engage in frequent trading of
portfolio securities to achieve its investment goal. In addition, because a
Portfolio may sell a security without regard to how long it has held the
security, active trading may have tax consequences for certain shareholders,
involving a possible increase in short-term capital gains or losses. Active
trading may result in high portfolio turnover and correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by a Portfolio. During periods of increased market volatility, active trading
may be more pronounced.
EQUITY SECURITIES include common and preferred stocks, convertible securities,
warrants and rights.
CONVERTIBLE SECURITIES are bonds or preferred stocks that may be exchanged for
common stock of the same or a different company.
LARGE COMPANIES have market capitalizations of over $5 billion.
MEDIUM-SIZED COMPANIES have market capitalizations ranging from $1 billion to $5
billion.
SMALL COMPANIES have market capitalizations of $1 billion or less.
[Margin note: LARGE COMPANIES and MEDIUM-SIZED COMPANIES generally have a
substantial record of operations (i.e., in business for at least five years) and
are listed for trading on the New York Stock Exchange or another national or
international stock exchange or, in some cases, are traded over the counter.
SMALL COMPANIES generally will be companies that have been in business for a
shorter period of time.]
FIXED INCOME SECURITIES provide consistent interest or dividend payments. They
include corporate bonds, notes, debentures, preferred stocks, convertible
securities, U.S. government securities and mortgage-backed and asset-backed
securities. The issuer of a senior fixed income security is obligated to make
payments on this security ahead of other payments to security holders. An
INVESTMENT GRADE fixed income security is rated in one of the top four ratings
categories by a debt rating agency (or is considered of comparable quality by
SunAmerica or a Subadviser).
[Margin note: The two best-known debt rating agencies are Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc. and Moody's
Investors Service, Inc. "Investment grade" refers to any security rated "BBB" or
above by Standard & Poor's or "Baa" or above by Moody's.]
23
<PAGE>
A "JUNK BOND" is a high yield, high risk bond that does not meet the credit
quality standards of investment grade securities.
ASSET-BACKED SECURITIES represent an interest in a pool of consumer or other
types of loans. Payments of principal and interest on the underlying loans are
passed through to the holders of asset-backed securities over the life of the
securities.
REAL ESTATE INVESTMENT TRUSTS ("REITS") are trusts that invest primarily in
commercial real estate or real estate related loans. The value of an interest in
a REIT may be affected by the value and the cash flows of the properties owned
or the quality of the mortgages held by the trust.
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Portfolio
with sufficient liquidity to meet redemptions and cover expenses.
DEFENSIVE INVESTMENTS include high quality fixed income securities and money
market instruments. A Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When a
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, a Portfolio may not achieve its
investment goal.
FOREIGN SECURITIES are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary
Receipts (ADRS) or other similar securities that convert into foreign
securities, such as European Depositary Receipts (EDRS) and Global Depositary
Receipts (GDRS).
It may be necessary under certain foreign laws, less expensive, or more
expedient to invest in FOREIGN INVESTMENT COMPANIES, which invest in certain
foreign markets, including emerging markets. Investing through such vehicles may
involve frequent or layered fees or expenses, and the Advisers will not invest
in such investment companies unless, in their judgment, the potential benefits
justify the payment of any associated fees and expenses.
CURRENCY TRANSACTIONS include the purchase and sale of currencies to facilitate
securities transactions and forward currency contracts, which are used to hedge
against changes in currency exchange rates.
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.
24
<PAGE>
SECURITIES LENDING involves a loan of securities by a Portfolio in exchange for
cash or collateral. The Fund earns interest on the loan while retaining
ownership of the security.
The Fund may BORROW for temporary or emergency purposes including to meet
redemptions. Borrowing may exaggerate changes in the net asset value of Fund
shares and in the yield on a Portfolio's portfolio. Borrowing will cost the Fund
interest expense and other fees. The cost of borrowing may reduce a Portfolio's
return.
A derivative instrument is a contract, such as an option or a future, whose
value is based on the performance of an underlying asset.
OPTIONS AND FUTURES are contracts involving the right to receive or obligation
to deliver assets or money depending on the performance of one or more
underlying assets or a market or economic index.
HYBRID INSTRUMENTS, including indexed or structured securities, can combine the
characteristics of securities, futures, and options. For example, the principal
amount, redemption, or conversion terms of a security could be related to the
market price of some commodity, currency, or securities index. Such securities
may bear interest or pay dividends at below market (or even relatively nominal)
rates. Under certain conditions, the redemption value of such an investment
could be zero.
A SHORT SALE is the sale of a security that you do not own, but which you intend
to borrow in order to make delivery. A short sale is "against the box" when a
Portfolio sells short a security that it owns in its portfolio to lock in
appreciation on that security.
A SPECIAL SITUATION arises when, in the opinion of the Adviser, the securities
of a particular issuer will be recognized and appreciated in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investments in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
RISK TERMINOLOGY
MARKET VOLATILITY: The stock and/or bond markets as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Portfolio's portfolio.
SECURITIES SELECTION: A strategy used by a Portfolio, or securities selected by
its Adviser, may fail to produce the intended return.
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
25
<PAGE>
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.
FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as 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.
NON-DIVERSIFICATION: By concentrating in a smaller number of stocks, a
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.
CURRENCY VOLATILITY: The value of a Portfolio's foreign portfolio investments
may fluctuate due to changes in currency rates. A 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.
INTEREST RATE FLUCTUATIONS: Volatility of the bond market is due principally to
changes in interest rates. As interest rates rise, bond prices typically fall;
and as interest rates fall, bond prices typically rise. Longer-term and lower
coupon bonds tend to be more sensitive to changes in interest rates.
ILLIQUIDITY: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.
DERIVATIVES: Derivatives are subject to general risks relating to heightened
sensitivity to market volatility, interest rate fluctuations, illiquidity and
creditworthiness of the counterparty to the derivatives transactions.
HEDGING: Hedging is a strategy in which the Adviser uses a derivative security
to reduce certain risk characteristics of an underlying security or portfolio of
securities. While hedging strategies can be very useful and inexpensive ways of
reducing risk, they are sometimes ineffective due to unexpected changes in the
market. Moreover, while hedging can reduce or eliminate losses, it can also
reduce or eliminate gains.
CREDIT QUALITY: The creditworthiness of the issuer is always a factor in
analyzing fixed income securities. An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise become unable to
honor its financial obligations. This type of issuer will typically issue junk
bonds. In addition to the risk of default, JUNK BONDS may be more volatile, less
26
<PAGE>
liquid, more difficult to value and more susceptible to adverse economic
conditions or investor perceptions than other bonds.
EMERGING MARKETS: 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 is coordinating efforts to
prevent or alleviate their adverse impact on the Portfolios. There can be no
assurance that a Portfolio will not suffer any adverse consequences as a result
of the euro conversion.
PREPAYMENT: Prepayment risk is the possibility that the principal of the loans
underlying asset-backed securities may be prepaid at any time. As a general
rule, prepayments increase during a period of falling interest rates and
decrease during a period of rising interest rates. As a result of prepayments,
in periods of declining interest rates a Portfolio may be required to reinvest
its assets in securities with lower interest rates. In periods of increasing
interest rates, prepayments generally may decline, with the effect that the
securities subject to prepayment risk held by a Portfolio may exhibit price
characteristics of longer-term debt securities.
FUND MANAGEMENT
MANAGER SunAmerica Asset Management Corp. selects the Advisers for the
Portfolios, may manage certain portions of Portfolios, provides various
administrative services, and supervises the daily business affairs of each
Portfolio. The Advisers are responsible for decisions to buy and sell securities
for the Portfolios, selection of broker-dealers and negotiation of commission
rates for their respective portion of the relevant Portfolio. SunAmerica may
terminate any agreement with another Adviser without shareholder approval.
Moreover, SunAmerica has received an exemptive order from the Securities and
Exchange Commission that permits SunAmerica, subject to certain conditions, to
enter into agreements relating to the 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 Portfolios, change the
terms of particular agreements with Advisers or continue the employment of
existing Advisers after events that would otherwise cause an automatic
termination of a subadvisory agreement. Shareholders of a Portfolio have the
right to terminate an agreement with an Adviser for that Portfolio at any time
by a vote of the majority of the outstanding voting securities of such
Portfolio. Shareholders will be notified of any Adviser changes. The order also
permits the Fund to disclose to shareholders the Advisers' fees only in the
aggregate for each
27
<PAGE>
Portfolio. For the fiscal year ended October 31, 1998, each Portfolio paid
SunAmerica a fee equal to 1.00% of average daily net assets except the
International Equity Portfolio, which paid a fee equal to 1.10% 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 the Portfolios, 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 and Portfolio Managers for each Portfolio are described below:
Portfolio Portfolio management allocated among
- --------- the following
Advisers
--------
Aggressive Growth Portfolio Janus Capital Corporation ("Janus")
SunAmerica
Warburg Pincus Asset Management, Inc.
("Warburg")
Large-Cap Value Portfolio David L. Babson & Co., Inc. ("Babson")
Davis Selected Advisers, L.P. ("Davis")
Wellington Management Company
("Wellington Management")
Value Portfolio Davis
Neuberger Berman, LLC ("Neuberger Berman")
American Century Investment Management,
Inc. ("American Century")
Small-Cap Value Portfolio Berger Associates, Inc. ("Berger")
(subcontracted to Perkins, Wolf, McDonnell
& Company ("PWM") The Glenmede Trust
Company ("Glenmede") Lazard
International Equity Portfolio Bankers Trust Company ("BT")
Rowe Price-Fleming International, Inc.
("Rowe-Fleming")
INFORMATION ABOUT ADVISERS
- --------------------------
Description of the Advisers
---------------------------
28
<PAGE>
AMERICAN CENTURY INVESTMENT, INC. American Century is a Delaware corporation
with principal offices at the American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. As of October 28, 1998, American Century had approximately
$70 billion in total assets under management.
DAVID L. BABSON & CO., INC. Babson is a Massachusetts corporation, located at
One Memorial Drive, Cambridge, Massachusetts 02142. Babson provides investment
advisory services to a substantial number of institutional and other investors,
including other registered investment companies. As of December 31, 1998, Babson
had over $21.1 billion in assets under management.
BANKERS TRUST COMPANY. BT has principal offices at 130 Liberty Street, New York,
New York 10006. BT conducts a variety of general banking and trust activities
and is a major wholesale supplier of financial services to the international and
domestic institutional market. As of December 31, 1998, BT managed approximately
$370 billion in assets globally.
BERGER ASSOCIATES, INC. Berger is a Delaware corporation, located at 210
University Boulevard, Suite 900, Denver Colorado 80206, and serves as investment
adviser, sub-adviser, administrator, or sub-administrator to mutual funds, and
institutional and private investors.
DAVIS SELECTED ADVISERS, L.P. Davis is a Colorado limited partnership, located
at 124 East Marcy Street, Santa Fe, New Mexico 87501. As of March 31, 1998,
Davis had assets under management of approximately $17.9 billion.
THE GLENMEDE TRUST COMPANY. Glenmede is a privately-owned, independent trust
company devoted exclusively to investment management and trust services, taxable
and tax exempt funds and institutions and individuals investing in U.S. and
International equity and fixed income securities. Glenmede is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
As of December 31, 1998, Glenmede had approximately $14.0 billion in assets
under management.
JANUS CAPITAL CORPORATION. Janus is a Colorado corporation located at 100
Fillmore Street, Denver, Colorado 80206-4923, and serves as investment adviser
or subadviser to mutual funds and individual, corporate, charitable and
retirement accounts. As of December 31, 1998, Janus had under management
approximately $108 billion.
LAZARD ASSET MANAGEMENT. Lazard is a division of Lazard Freres & Co. LLC, a New
York limited liability company. Located at 30 Rockefeller Plaza, New York, New
York 10112, Lazard provides investment management services to individual and
institutional clients. As of March 31, 1998, Lazard and its affiliated
companies managed client discretionary accounts with assets totaling
approximately $67 billion.
NEUBERGER BERMAN, LLC. Neuberger Berman is a Delaware limited liability company
located at 605 Third Avenue, New York, New York 10158-0180. Neuberger Berman has
been in the
29
<PAGE>
investment advisory business since 1939. As of March 31, 1998, Neuberger
Berman and its affiliates had assets under management of approximately $59
billion.
PERKINS, WOLF, MCDONNELL & COMPANY. PWM, located at 53 West Jackson Boulevard,
Suite 818, Chicago, Illinois 60604, was organized as a Delaware corporation in
1980. PWM is a member of the National Association of Securities Dealers, Inc.
and, in 1984, registered with the Securities and Exchange Commission as an
investment adviser. As of March 31, 1998, PWM had assets under management of
approximately $325 million.
ROWE PRICE-FLEMING INTERNATIONAL, INC. Rowe-Fleming is a Maryland corporation,
incorporated in 1979. It is located at 100 East Pratt Street, Baltimore,
Maryland 21202. As of December 31, 1998, Rowe-Fleming managed over $32 billion
of foreign assets.
WARBURG PINCUS ASSET MANAGEMENT, INC. Warburg is a professional investment
advisory firm which provides investment services to investment companies,
employee benefit plans, endowment funds, foundations and other institutions and
individuals. As of December 31, 1998, Warburg managed approximately $211.3
billion in assets. Warburg is located at 466 Lexington Avenue, New York, NY
10017-3147.
WELLINGTON MANAGEMENT COMPANY, LLP. Wellington Management is a
Massachusetts limited liability partnership, located at 75 State Street, Boston,
Massachusetts 02109. Wellington Management is a professional investment
counseling firm which provides investment services to investment companies,
employee benefit plans, endowments, foundations, and other institutions and
individuals. As of December 31, 1998, Wellington Management had investment
management authority with respect to approximately $211.3 billion of assets.
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Aggressive Growth Portfolio Scott W. Schoelzel Mr. Schoelzel joined Janus
Executive Vice President and Capital in January 1994.
Portfolio Manager (Janus)
Donna Calder (Domestic Prior to joining SunAmerica
Equity Investment Team) as a Portfolio Manager in
Portfolio Manager February 1998, Ms. Calder
(SunAmerica) served as a General Partner of
Manhattan Capital Partners,
L.P.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Elizabeth B. Dater Ms. Dater has been with
Managing Director (Warburg) Warburg since 1978.
Stephen J. Lurito Mr. Lurito has been with
Managing Director (Warburg) Warburg since 1987.
Large-Cap Value Portfolio Roland W. Whitridge Mr. Whitridge has been
Portfolio Manager (Babson) employed by Babson in
portfolio management for
over twenty years.
Christopher C. Davis Mr. Davis joined Davis in
Portfolio Manager (Davis) September 1989 as an
assistant portfolio manager
and research analyst.
John R. Ryan (Value/Yield Mr. Ryan has been a portfolio manager
Team) with Wellington Management's
Senior Vice President, Value/Yield investment team since
Managing Partner and Head of 1981 and has held the position of
Value/Yield Team Senior Vice President of Wellington
(Wellington Management) since 1987. Mr. Ryan became a
Managing Partner on January 1, 1996.
Value Portfolio Christopher C. Davis See Above.
Portfolio Manager (Davis)
Shelby M. C. Davis Since 1968, Mr. Davis, has been a
Former Co-Manager (Davis) director of Venture Advisers, Inc.
He is also a director and officer of
all investment companies managed by
Davis.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Michael M. Kassen Mr. Kassen has been
Portfolio Manager, Managing Managing Director since
Director, Vice President and January 1994 and a Vice
Principal (Neuberger Berman) President and Portfolio
Manager since June 1990, of
Neuberger Berman
Management Inc. and a
principal of Neuberger
Berman since January 1993.
Robert I. Gendelman Mr. Gendelman has been a
Senior Portfolio Manager, principal of Neuberger
Assistant Vice President and Berman since December
Principal (Neuberger Berman) 1996. He was a portfolio
manager for another mutual
fund manager from 1992 to
1993.
Scott A. Moore Mr. Moore has been a member of
Portfolio Manager (American Century) the team that manages the Portfolio
since October 1996 and Portfolio
Manager since February 1999. He
joined American Century in August
1993 as an Investment Analyst.
Small-Cap Value Portfolio Robert H. Perkins Robert Perkins has been an
President, Chief Investment investment manager since 1970. Mr.
Officer and Director (PWM) Perkins owns 49% of PWM's outstanding
common stock and serves as President
and Chief Investment Officer and as
a director of PWM.
Herbert W. Gullquist Mr. Gullquist has been with Lazard
(Investment Team) since 1982. He is a Managing Director,
Vice Chairman a Vice-Chairman and the Chief
(Lazard) Investment Officer.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Eileen D. Alexanderson Ms. Alexanderson is a Managing
(Investment Team) Managing Director of Lazard responsible for
Director, Portfolio Manager U.S./global equity management and
(Lazard) overseeing the day-to-day operations
of the U.S. small-cap and U.S.
mid-cap equity investment teams. Ms.
Alexanderson joined the firm in 1979
and has 18 years of investment
experience. She is a CFA and holds
a B.S. from St. Johns' University.
Robert J. Mancuso, CFA Mr. Mancuso has been with Glenmede
Vice President and Lead since 1992.
Portfolio Manager (Glenmede)
Scott R. Abernethy, CFA Mr. Abernathy has been with
Vice President and Portfolio Glenmede since 1991.
Manager (Glenmede)
Thomas R. Angers, CFA Mr. Angers has been with Glenmede
Vice President and Director of since 1995. Before joining Glenmede,
Equity Research (Glenmede) he was a Vice President, Portfolio
Manager and securities analyst for
Independence Capital Management, Inc.
Larry R. Bernstein, CFA Mr. Bernstein joined
Vice President (Glenmede) Glenmede in 1998 as a Vice
President in the Investment Policy and
Strategy department. Prior to joining
Glenmede, he was a Vice President at
the Provident Capital Management unit
of PNC Bank in Philadelphia.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
Barry D. Kohout, CFA Mr. Kohout has been with
Vice President and Equity Glenmede since 1996. Before
Research Analyst joining Glenmede, he was an
(Glenmede) investment manager for
Constellation Investments,
Inc. and senior equity research
analyst for Independence Capital
Management, Inc.
Robert T. Niemeyer, Sr., CFA Mr. Niemeyer has been
Vice President and Equity with Glenmede since 1997.
Research Analyst Prior to joining Glenmede, he
(Glenmede) served as Vice President, Senior
Investment Officer, Equity
Research Analyst, Assistant Vice
President and Senior Investment
Officer during his twenty-one
years at PNC Bank.
Anthony J. Albuquerque Mr. Albuquerque has been with
Equity Research Associate Glenmede since 1995. Prior to
(Glenmede) joining Glenmede, he was a research
associate at Bloomberg
Financial Markets.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Portfolio Name, Title and Affiliation of Experience
- --------- ------------------------------ ----------
Portfolio Manager
-----------------
<S> <C> <C>
International Equity Portfolio Michael Levy (International Mr. Levy's experience prior to
Equity Team) joining BT includes investment
Managing Director of Bankers banking and equity analysis
Trust Funds Management, with Oppenheimer & Company
Head of International Equity and he has more than twenty-six
Team (BT) years of business experience, of
which sixteen years have been in
the investment industry.
Robert L. Reiner Mr. Reiner has 16 years of
(International Equity Team) investment industry
Managing Director of Bankers experience, previously at
Trust Funds Management Scudder, Stevens & Clark
(BT) where he was responsible for
providing equity research and
macroeconomic/market
coverage.
Martin G. Wade Mr. Wade joined Rowe-Fleming in
Portfolio Manager (Rowe- 1979 and he has 28 years of
Fleming) experience with the Fleming Group in
research, client service, and
investment management. (Fleming
Group includes Flemings and/or
Jardine Fleming)
Robert W. Smith Mr. Smith joined Rowe-Fleming in
Portfolio Manager (Rowe- 1996. He joined T. Rowe Price in
Fleming) in 1992 and has 12 years of
experience in financial analysis.
</TABLE>
35
<PAGE>
<TABLE>
<S> <S> <C>
Mark C. J. Bickford-Smith Mr. Bickford-Smith joined
Portfolio Manager (Rowe- Rowe-Fleming in 1995 and has 14 years
Fleming) of experience in equity research and
portfolio management.
John R. Ford Mr. Ford joined Rowe-
Portfolio Manager (Rowe- Fleming in 1982 and
Fleming) has 17 years of experience
with Fleming Group in
research and portfolio
management.
James B. M. Seddon Mr. Seddon joined Rowe-
Portfolio Manager (Rowe- Fleming in 1987 and
Fleming) has 12 years of experience in
portfolio management.
David J. L. Warren Mr. Warren joined Rowe-Fleming
Portfolio Manager (Rowe- in 1984 and has 17 years of
Fleming) experience in equity research,
fixed income research, and portfolio
management.
</TABLE>
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
36
<PAGE>
the importance of the Year 2000 Issue and are taking appropriate steps necessary
in preparation for the year 2000. The Fund's management fully anticipates that
their systems will be adapted in time for the year 2000, and to further this
goal they have coordinated a plan to repair, adapt or replace their systems as
necessary. They have also obtained representations from their outside service
providers that they are doing the same. The Fund's management completed their
plan significantly by the end of the 1998 calendar year and expects to perform
appropriate systems testing during the 1999 calendar year. If the problem has
not been fully addressed, however, the Fund could be negatively impacted. The
Year 2000 Issue could also have a negative impact on the companies in which the
Fund invests, which could hurt the Fund's investment returns.
37
<PAGE>
(OUTSIDE BACK COVER)
FOR MORE INFORMATION
The following documents contain more information about the Portfolios and
are available free of charge upon request:
ANNUAL 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 a Portfolio's performance
during the last applicable period.
STATEMENT OF ADDITIONAL INFORMATION (SAI). Contains additional
information about the Portfolios' policies, investment restrictions
and business structure. This prospectus incorporates the SAI by
reference.
You may obtain copies of these documents or ask questions about the
Portfolios by contacting:
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 Portfolios (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549- 6009.
You should rely only on the information contained in this prospectus. No
one is authorized to provide you with any different information.
38
<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 March 1, 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. 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
Page
The Fund ....................................................................B-3
Investment Objectives and Policies...........................................B-3
Investment Restrictions.................................................... B-38
Directors and Officers......................................................B-39
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
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
<PAGE>
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
and International Equity Portfolio each also offers Class Z shares, which
commenced offering on April 1, 1998.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of each of the Portfolios are
described in the Fund's Prospectus. Certain types of securities in which the
Portfolios may invest and certain investment practices 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 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
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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 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.
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<PAGE>
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 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.
B-5
<PAGE>
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 these 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
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
B-6
<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
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 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
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<PAGE>
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 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
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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 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
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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.
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
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high-yield bonds without regard to their investment merits, thereby
decreasing the asset base upon which expenses can be spread and
possibly reducing the Portfolio's rate of return.
LIQUIDITY AND VALUATION - There may be little trading in the
secondary market for particular bonds, which may affect adversely a
Portfolio's ability to value accurately or dispose of such bonds.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of
high-yield bonds, especially in a thin market.
ASSET-BACKED SECURITIES. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose corporations,
are backed by a pool of assets, such as credit card and automobile loan
receivables, representing the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors to make payments on underlying assets, the
securities may contain elements of credit support that fall into two categories:
(i) liquidity protection and (ii) protection against losses resulting from
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that the receipt of payments on the underlying pool
occurs in a timely fashion. Protection against losses resulting from ultimate
default ensures payment through insurance policies or letters of credit obtained
by the issuer or sponsor from third parties. A Portfolio will not pay any
additional or separate fees for credit support. The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquency or
loss in excess of that anticipated or failure of the credit support could
adversely affect the return on an investment in such a security.
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
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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, 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
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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 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
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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 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
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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 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.
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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 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.
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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 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
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effect to a Portfolio as writing a covered call. The premium a Portfolio
receives from writing a put option represents a profit as long as the price of
the underlying investment remains above the exercise price. However, a Portfolio
has also assumed the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even though the
value of the investment may fall below the exercise price. If the put expires
unexercised, a Portfolio (as the writer of the put) realizes a gain in the
amount of the premium. If the put is exercised, a Portfolio must fulfill its
obligation to purchase the underlying investment at the exercise price, which
will usually exceed the market value of the investment at that time. In that
case, a Portfolio may incur a loss, equal to the sum of the sale price of the
underlying investment and the premium received minus the sum of the exercise
price and any transaction costs incurred.
A Portfolio may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an underlying
security from being put. Furthermore, effecting such a closing purchase
transaction will permit a Portfolio to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments by the
Portfolio. A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the option.
When a Portfolio purchases a put, it pays a premium and has the right
to sell the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment a Portfolio owns enables the Portfolio to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling such underlying investment at the exercise price to a
seller of a corresponding put. If the market price of the underlying investment
is equal to or above the exercise price and as a result the put is not exercised
or resold, the put will become worthless at its expiration date, and the
Portfolio will lose its premium payment and the right to sell the underlying
investment pursuant to the put. The put may, however, be sold prior to
expiration (whether or not at a profit).
Buying a put on an investment a Portfolio does not own permits the
Portfolio either to resell the put or buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not exercised,
the put will become worthless on its expiration date. In the event of a decline
in the stock market, a Portfolio could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio securities.
When writing put options on securities, to secure its obligation to pay
for the underlying security, a Portfolio will deposit in escrow liquid assets
with a value equal to or greater than the exercise price of the underlying
securities. A Portfolio therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of a Portfolio as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring a Portfolio to take delivery of the underlying security against
payment of the exercise price. A Portfolio has no control over when it may be
required to purchase 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
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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) 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
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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.
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
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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 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
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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.
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
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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.
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
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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.
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.
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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.
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
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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 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
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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 (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)
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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 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.
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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.
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
B-31
<PAGE>
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.
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
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<PAGE>
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.
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.
B-33
<PAGE>
BORROWING. As a matter of fundamental policy each Portfolio is authorized to
borrow up to 331/3% 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 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
331/3% of total assets to brokers, dealers and other financial institutions,
provided, that such loans are callable at any time by the Portfolio and are at
all times secured by cash or equivalent collateral. In lending its portfolio
securities, a Portfolio receives income while retaining the securities'
potential for capital appreciation. The advantage of such loans is that a
Portfolio continues to receive the interest and dividends on the loaned
securities
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<PAGE>
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 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
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<PAGE>
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.
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
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<PAGE>
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.
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.
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<PAGE>
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.
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 331/3% 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.
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<PAGE>
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 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
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<PAGE>
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.
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, since
The SunAmerica Center April 1996; Director and President, SACS,
733 Third Avenue since April 1996; formerly, Executive Vice
New York, NY 10017-3204 President, New England Funds, L.P. from July
1990 to April 1996.
</TABLE>
B-40
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
Peter C. Sutton, *34 Treasurer Senior Vice President, SunAmerica, since The
The SunAmerica Center April 1997; Treasurer, SAMF and AST, since
733 Third Avenue February 1996; Vice President and Assistant
New York, NY 10017-3204 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
The SunAmerica Center Compliance Officer Counsel, SunAmerica, since April 1993;
733 Third Avenue Executive Vice President, General Counsel
New York, NY 10017-3204 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 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.
B-41
<PAGE>
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
Porfolio - 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%;
Aggresive 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 32246 - 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,
Jacksonville, FL 32246 - owned of record 11%; Large-Cap Blend 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 voluntarily agreed to waive fees or reimburse
expenses, if necessary, to keep operating expenses at or below an annual rate of
1.78% of the assets of Class A shares and 2.43% of the assets of Class B and
Class 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 voluntarily 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. SunAmerica may terminate all such waivers and/or
reimbursements at any time. Further, any waivers or reimbursements made by
SunAmerica with respect to a Portfolio are subject to recoupment from that
Portfolio within the following two years, provided that the Portfolio is able to
effect such payment to SunAmerica and remain in compliance with the foregoing
expense limitations. The potential reimbursements are accounted for as possible
contingent liabilities that are not recordable on the balance sheet of a
Portfolio until collection is probable, but appear as footnote disclosure to
each Portfolio's financial statements. At such time as it appears probable that
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
B-45
<PAGE>
shareholders, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
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.
- --------------------------------------------------------------------------------
PORTFOLIO PORTFOLIO MANAGEMENT ALLOCATED
AMONG THE FOLLOWING ADVISERS
- --------------------------------------------------------------------------------
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
B-46
<PAGE>
- --------------------------------------------------------------------------------
Small-Cap Value Portfolio Berger*
Lazard
Glenmede
- --------------------------------------------------------------------------------
International Equity Portfolio BT
Rowe-Fleming
- --------------------------------------------------------------------------------
Focus Portfolio Bramwell
Jennison
Marsico
- --------------------------------------------------------------------------------
* 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
B-47
<PAGE>
redemption requests will be made equally among the Advisers of each Portfolio
unless SunAmerica determines, subject to the review of the Directors, that a
different allocation of assets would be in the best interests of a Portfolio and
its shareholders. The Fund expects that differences in investment returns among
the portions of a Portfolio managed by different Advisers will cause the actual
percentage of a Portfolio's assets managed by each Adviser to vary over time. In
general, a Portfolio's assets once allocated to one Adviser will not be
reallocated (or "rebalanced") to another Adviser for the Portfolio. However,
SunAmerica reserves the right, subject to the review of the Board, to reallocate
assets from one Adviser to another when deemed in the best interests of a
Portfolio and its shareholders 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
B-48
<PAGE>
- -------------------------------------------------------------------------------------------------------------------
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.
** 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
- --------------------------------------------------------------------------------
PORTFOLIO SUBADVISORY FEES
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
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
B-49
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio $527,676 $259,404
- --------------------------------------------------------------------------------
Focus Portfolio* $112,346 --
- --------------------------------------------------------------------------------
- ----------------------
* From date of inception of June 1, 1998.
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 and International Equity 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
B-50
<PAGE>
is approved at least annually by the Directors, including a majority of the
Disinterested Directors. The Fund and the Distributor each has the right to
terminate the Distribution Agreement with respect to a Portfolio on 60 days'
written notice, without penalty. The Distribution Agreement will terminate
automatically in the event of its assignment as defined in the 1940 Act and the
rules thereunder.
The Distributor may, from time to time, pay additional commissions or
promotional incentives to brokers, dealers or other financial services firms
that sell shares of the Portfolios. In some instances, such additional
commissions, fees or other incentives may be offered only to certain firms,
including Royal Alliance Associates, SunAmerica Securities, Inc., Koegler Morgan
& Company, Financial Service Corporation and Advantage Capital Corporation,
affiliates of the Distributor, that sell or are expected to sell during
specified time periods certain minimum amounts of shares of the Portfolios, or
of other funds underwritten by the Distributor. In addition, the terms and
conditions of any given promotional incentive may differ from firm to firm. Such
differences will, nevertheless, be fair and equitable, and based on such factors
as size, geographic location, or other reasonable determinants, and will in no
way affect the amount paid to any investor.
DISTRIBUTION PLANS. As indicated in the Prospectus, the Directors of the Fund
have adopted Distribution Plans (the "Class A Plan," the "Class B Plan" and the
"Class 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.
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
B-52
<PAGE>
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 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
B-53
<PAGE>
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>
<TABLE>
<CAPTION>
1997
- ----------------------------------------------------------------------------------------------------------------------------
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 $341,296
Portfolio - $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).
- --------------------------------------------------------------------------------
AFFILIATED BROKER NON-AFFILIATED BROKER
DEALERS DEALERS
CLASS II CLASS II
- --------------------------------------------------------------------------------
Focus Portfolio $48,486 $464,727
- --------------------------------------------------------------------------------
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 of business will be executed at the offering price determined at the close
of regular trading on the
B-58
<PAGE>
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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<PAGE>
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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<PAGE>
Each Portfolios' average annual total return for the 1-, 5- and 10-year
periods (or from date of inception, if sooner) ended October 31, 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/A2 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/A2 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 Portfolio3 N/A3 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
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<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
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<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
B-75
<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
B-77
<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,
the Large-Cap Blend Portfolio and the Focus 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 and International Equity Portfolio are divided into four classes
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<PAGE>
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 be personally liable to the
Fund or to stockholders for money damages. The Articles provide that
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<PAGE>
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
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
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 Price.......... $17.51 -- - $16.57 $13.84 -- --
</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.
B-83
<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+
------- ------- ---------
<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 (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.
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.
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.
Appendix-1
<PAGE>
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.
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,
Appendix-2
<PAGE>
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.
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
Appendix-3
<PAGE>
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 economic
conditions would likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied BB or BB- rating.
Appendix-4
<PAGE>
CCC Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business, financial
and economic conditions to meet timely payments of interest
and repayments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt
that is assigned an actual or implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to
senior debt 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.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Appendix-5
<PAGE>
Debt Obligations of Issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the credit-worthiness of the obligor but do not take
into account currency exchange and related uncertainties.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA," "AA," "A," "BBB," commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS.
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of not more
than 365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest.
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category
are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety.
A-1 This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those
issues 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.
D This rating indicates that the issue is either in default or
is expected to be in default upon maturity.
Appendix-6
<PAGE>
The commercial paper rating is not a recommendation to purchase or sell
a security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
Appendix-7
<PAGE>
PART C
OTHER INFORMATION
Item 23: Exhibits.
(a) (i) Articles of Incorporation, as Amended. Incorporated herein
by reference to Exhibit 1(A) of the Registrant's Registration
Statement on Form N-1A (File No. 333-11283) filed on
August 30, 1996.
(ii) Articles Supplementary dated August 1, 1996. Incorporated
herein by reference to Exhibit 1(B) of the Registrant's
Registration Statement on Form N-1A (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) of the Registrant's
Registration Statement on Form N-1A (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-1A
(File No. 333-11283) filed on November 14, 1996.
(b) By-Laws. Incorporated herein by reference to Exhibit 2 of the
Registrant's Registration Statement on Form N-1A (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 and Management Agreement between
Registrant and SunAmerica Asset Management Corp
("SunAmerica").
(ii) Form of Subadvisory Agreement between SunAmerica and American
Century Investment Management, Inc.
(iii) Form of Subadvisory Agreement between SunAmerica and Bankers
Trust Company.
(iv) Form of Subadvisory Agreement between SunAmerica and Berger
Associates, Inc.
(v) Form of Subadvisory Agreement between SunAmerica and David L.
Babson & Co., Inc.
(vi) Form of Subadvisory Agreement between SunAmerica and Davis
Selected Advisers, L.P.
(vii) Form of Subadvisory Agreement between SunAmerica and Bramwell
Capital Management, Inc.
(viii) Form of Subadvisory Agreement between SunAmerica and The
Glenmede Trust Company.
(ix) Form of Subadvisory Agreement between SunAmerica and Janus
Capital Corporation.
(x) Form of Subadvisory Agreement between SunAmerica and Jennison
Associates LLC.
(xi) Form of Subadvisory Agreement between SunAmerica and Lazard
Asset Management.
(xii) Form of Subadvisory Agreement between SunAmerica and L. Roy
Papp & Associates.
(xiii) Form of Subadvisory Agreement between SunAmerica and
Marsico Capital Management, LLC.
(xiv) Form of Subadvisory Agreement between SunAmerica and Miller
Anderson & Sherrerd, LLP.
(xv) Form of Subadvisory Agreement between SunAmerica and Montag &
Caldwell, Inc.
(xvi) Form of Subadvisory Agreement between SunAmerica and Morgan
Stanley Asset Management Inc. (now known as Morgan Stanley
Dean Witter Investment Management).
(xvii) Form of Subadvisory Agreement between SunAmerica and
Neuberger Berman, LLC.
(xviii) Form of Subadvisory Agreement between SunAmerica and Rowe
Price-Fleming International, Inc.
(xix) Form of Subadvisory Agreement between SunAmerica and T. Rowe
Price Associates, Inc.
<PAGE>
(xx) Form of Subadvisory Agreement between SunAmerica and Warburg
Pincus Asset Management, Inc.
(xxi) Form of Subadvisory Agreement between SunAmerica and
Wellington Management Company, LLP.
(e) (i) Distribution Agreement.
(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-1A (File No.
333-11283) 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-1A (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-1A (File No. 333-11283) filed on November 14, 1996.
(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-1A (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-1A (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-1A (File No.
333-11283) filed on November 14, 1996.
(j) Consent of Independent Accountants.
(k) Not applicable.
(l) Not applicable.
(m) (i) Form of Rule 12b-1 Plan for Class A Shares.
(ii) Form of Rule 12b-1 Plan for Class B Shares.
(iii) Form of Rule 12b-1 Plan for Class II Shares.
(n) Financial Data Schedules.
(o) (i) 18f-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.
333-11283) filed on June 15, 1998.
<PAGE>
(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 in money, property or services,
or (C) in the case of any criminal proceeding, the Covered Person had reasonable
cause to believe that the act or omission was unlawful, and (ii) liability to
the Corporation or its security holders to which the Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office (any or all of the conduct referred to in clauses (i) and (ii) being
hereinafter referred to as "Disabling Conduct").
5.02 Procedure for Indemnification. Any indemnification under Section
5.01 shall (unless ordered by a court) be made by the Corporation only as
authorized for a specific proceeding by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of the proceeding against the Covered Person for insufficiency of
evidence of any Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, by a majority of a quorum of the directors who are
neither "interested persons" of the Corporation as defined in the Investment
Company Act of 1940 nor parties to the proceeding ("Disinterested Non-Party
Directors"), or an independent legal counsel in a written opinion, that the
Covered Person was not liable by reason of Disabling Conduct. The termination of
any proceeding by judgment, order or settlement shall not create a presumption
that the Covered Person did not meet the required standard of conduct; the
termination of any proceeding by conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, shall create
a rebuttable presumption that the Covered Person did not meet the required
standard of conduct. Any determination pursuant to this Section 5.02 shall not
prevent recovery from any Covered Person of any amount paid to him in accordance
with this By-Law as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to be liable by reason of
Disabling Conduct.
5.03 Advance Payment of Expenses. Reasonable expenses (including
attorneys' fees) incurred by a Covered Person may be paid or reimbursed by the
Corporation in advance of the final disposition of an action, suit or proceeding
upon receipt by the Corporation of (i) a written affirmation by the Covered
Person of his good faith belief that the standard of conduct necessary for
indemnification under this By-Law has been met and (ii) a written undertaking by
or on behalf of the Covered Person to repay the amount if it is ultimately
determined that such standard of conduct has not been met, so long as either (A)
the Covered Person has provided a security for his undertaking, (B) the
Corporation is insured against losses arising by reason of any lawful advances,
or (C) a majority of a quorum of the Disinterested Non-Party Directors, or an
independent legal counsel in a written opinion,
<PAGE>
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.
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.
<PAGE>
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:
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. 801-31648
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-1A (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-1A (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
<PAGE>
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
- -----------------------------------------------------------------------------------------------------------------
J. Steven Neamtz President and Director Vice President
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
- -----------------------------------------------------------------------------------------------------------------
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. Harris Secretary None
SunAmerica, Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022
- -----------------------------------------------------------------------------------------------------------------
Debbie Potash-Turner Controller None
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
- -----------------------------------------------------------------------------------------------------------------
</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.
<PAGE>
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.
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, Ilinois 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, 10017- 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.
<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 certifies that it meets all of the requirements for effectiveness of
this Post-Effective Amendment No. 13 to the Registration Statement under Rule
485 (b) under the 1933 Act and has duly caused this Post-Effective Amendment No.
13 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
25th of February 1999.
Style Select Series, Inc.
By: /s/ Peter A. Harbeck
---------------------------
Peter A. Harbeck
President
Pursuant to the requirements of the 1933 Act, the Post-Effective
Amendment No. 13 to the Registrant's Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated:
<TABLE>
<S> <C> <C>
/s/ Peter A. Harbeck President and Director February 25, 1999
- ------------------------------ (Principal Executive Officer)
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 February 25, 1999
- ------------------------------
Attorney-in-Fact
Robert M. Zakem
</TABLE>
<PAGE>
STYLE SELECT SERIES, INC.
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
(d) (i) Investment Advisory and Management Agreement between
Registrant and SunAmerica Asset Management Corp
("SunAmerica").
(ii) Form of Subadvisory Agreement between SunAmerica and
American Century Investment Management, Inc.
(iii) Form of Subadvisory Agreement between SunAmerica and Bankers
Trust Company.
(iv) Form of Subadvisory Agreement between SunAmerica and Berger
Associates, Inc.
(v) Form of Subadvisory Agreement between SunAmerica and David
L. Babson & Co., Inc.
(vi) Form of Subadvisory Agreement between SunAmerica and Davis
Selected Advisers, L.P.
(vii) Form of Subadvisory Agreement between SunAmerica and
Bramwell Capital Management, Inc.
(viii) Form of Subadvisory Agreement between SunAmerica and The
Glenmede Trust Company
(ix) Form of Subadvisory Agreement between SunAmerica and Janus
Capital Corporation
(x) Form of Subadvisory Agreement between SunAmerica and Jennison
Associates LLC.
(xi) Form of Subadvisory Agreement between SunAmerica and Lazard
Asset Management
(xii) Form of Subadvisory Agreement between SunAmerica and L. Roy
Papp & Associates.
(xiii) Form of Subadvisory Agreement between SunAmerica and Marsico
Capital Management, LLC.
(xiv) Form of Subadvisory Agreement between SunAmerica and Miller
Anderson & Sherrerd, LLP.
(xv) Form of Subadvisory Agreement between SunAmerica and Montag
& Caldwell, Inc.
(xvi) Form of Subadvisory Agreement between SunAmerica and Morgan
Stanley Asset Management Inc. (now known as Morgan Stanley
Dean Witter Investment Management).
(xvii) Form of Subadvisory Agreement between SunAmerica and
Neuberger Berman, LLC.
(xviii) Form of Subadvisory Agreement between SunAmerica and Rowe
Price-Fleming International, Inc.
(xix) Form of Subadvisory Agreement between SunAmerica and T. Rowe
Price Associates, Inc.
(xx) Form of Subadvisory Agreement between SunAmerica and Warburg
Pincus Asset Management, Inc.
(xxi) Form of Subadvisory Agreement between SunAmerica and
Wellington Management Company, LLP.
(e) (i) Distribution Agreement.
(j) Consent of Independent Accountants.
(m) (i) Form of Rule 12b-1 Plan for Class A Shares.
(ii) Form of Rule 12b-1 Plan for Class B Shares.
(iii) Form of Rule 12b-1 Plan for Class II Shares.
(n) Financial Data Schedules.
<PAGE>
STYLE SELECT SERIES, INC.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is dated as of January 1,
1999, by and between Style Select Series, Inc., a Maryland corporation (the
"Corporation"), and SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation
(the "Adviser").
W I T N E S S E T H:
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated Portfolio representing separate funds with their own investment
objectives, policies and purposes (each, a "Fund" and collectively, the
"Funds"); and
WHEREAS, the Adviser is engaged in the business of rendering investment
management, advisory and administrative services and is registered as an
investment adviser under the Investment Advisers Act of 1940; and
WHEREAS, the Corporation desires to retain the Adviser to furnish
investment management, advisory and administrative services to the Corporation
and the Funds and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Adviser. The Adviser shall manage the affairs of the Funds
including, but not limited to, continuously providing the Funds with investment
management, including investment research, advice and supervision, determining
which securities shall be purchased or sold by the Funds, making purchases and
sales of securities on behalf of the Funds and determining how voting and other
rights with respect to securities owned by the Funds shall be exercised, subject
in each case to the control of the Board of Directors of the Corporation (the
"Directors") and in accordance with the objectives, policies and principles set
forth in Corporation's Registration Statement and the Funds' current Prospectus
and Statement of Additional Information, as amended from time to time, the
requirements of the Act and other applicable law. In performing such duties, the
Adviser (i) shall provide such office space, such bookkeeping, accounting,
clerical, secretarial and administrative services (exclusive of, and in addition
to, any such service provided by any others retained by the Funds or Corporation
on behalf of the Funds) and such executive and other personnel as shall be
necessary for the operations of the Funds, (ii) shall be responsible for the
financial and accounting records required to be maintained by the Funds
(including those maintained by Corporation's custodian) and (iii) shall oversee
the performance of services provided to the Funds by others, including the
custodian, transfer and shareholder servicing agent. The Corporation understands
that the Adviser also acts as the manager of other investment companies.
Subject to Section 36 of the Act, the Adviser shall not be liable to the
Funds or Corporation for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the management of
the Funds and the performance of its duties under this
<PAGE>
Agreement except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under this Agreement.
2. Retention by Adviser of Sub-Advisers, etc. In carrying out its
responsibilities hereunder, the Adviser may employ, retain or otherwise avail
itself of the services of other persons or entities including, without
limitation, affiliates of the Adviser, on such terms as the Adviser shall
determine to be necessary, desirable or appropriate. Without limiting the
generality of the foregoing, and subject to the requirements of Section 15 of
the Act, the Adviser may retain one or more sub-advisers to manage all or a
portion of the investment portfolio of a Fund, at the Adviser's own cost and
expense. Retention of one or more sub-advisers, or the employment or retention
of other persons or entities to perform services, shall in no way reduce the
responsibilities or obligations of the Adviser under this Agreement and the
Adviser shall be responsible for all acts and omissions of such sub-advisers, or
other persons or entities, in connection with the performance of the Adviser's
duties hereunder.
3. Expenses. The Adviser shall pay all of its expenses arising from the
performance of its obligations under Section 1 and shall pay any salaries, fees
and expenses of the Corporation's Directors and Officers who are employees of
the Adviser. The Adviser shall not be required to pay any other expenses of the
Funds, including, but not limited to, direct charges relating to the purchase
and sale of portfolio securities, interest charges, fees and expenses of
independent attorneys and auditors, taxes and governmental fees, cost of share
certificates and any other expenses (including clerical expenses) of issue,
sale, repurchase or redemption of shares, expenses of registering and qualifying
shares for sale, expenses of printing and distributing reports, notices and
proxy materials to shareholders, expenses of data processing and related
services, shareholder recordkeeping and shareholder account service, expenses of
printing and filing reports and other documents filed with governmental
agencies, expenses of printing and distributing prospectuses, expenses of annual
and special shareholders meetings, fees and disbursements of transfer agents and
custodians, expenses of disbursing dividends and distributions, fees and
expenses of Directors who are not employees of the Adviser or its affiliates,
membership dues in the Investment Company Institute, insurance premiums and
extraordinary expenses such as litigation expenses.
4. Compensation of the Adviser. (a) As full compensation for the services
rendered, facilities furnished and expenses paid by the Adviser under this
Agreement, the Corporation agrees to pay to the Adviser a fee at the annual
rates set forth in Schedule A hereto with respect to each Fund indicated
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
is applied to each prior days' net assets in order to calculate the daily
accrual). For purposes of calculating the Adviser's fee with respect to any
Fund, the average daily net asset value of a Fund shall be determined by taking
an average of all determinations of such net asset value during the month. If
the Adviser shall serve for less than the whole of any month the foregoing
compensation shall be prorated.
(b) Upon any termination of this Agreement on a day other than the
last day of the month, the fee for the period from the beginning of the
month in which termination occurs to the date of termination shall be
prorated according to the proportion which such period bears to the full
month.
- 2 -
<PAGE>
5. Portfolio Transactions. The Adviser is responsible for decisions to buy
or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Adviser may employ or
deal with such broker-dealers or futures commission merchants as may, in the
Adviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Adviser shall consider
all relevant factors including price (including the applicable brokerage
commission, dealer spread or futures commission merchant rate), the size of the
order, the nature of the market for the security or other investment, the timing
of the transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and operational
facilities of the firm involved, and, in the case of securities, the firm's risk
in positioning a block of securities. Subject to such policies as the Directors
may determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), the Adviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of the Adviser's having caused a Portfolio to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to such Portfolio and to other clients as to which the Adviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Adviser may engage its affiliates or any other subadviser to the Corporation and
its respective affiliates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Adviser will promptly communicate to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Adviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Adviser or its
affiliated persons. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Adviser in the manner the Adviser determines to be equitable and consistent with
its and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. The Adviser hereby acknowledges that such aggregation of orders may not
result in more favorable pricing or lower brokerage commissions in all
instances.
6. Term of Agreement. This agreement shall continue in full force and
effect for two years from the date hereof, and shall continue in full force and
effect from year to year thereafter if such continuance is approved in the
manner required by the Act and the Adviser has not notified the Corporation in
writing at least 60 days prior to the anniversary date of the previous
continuance that it does not desire such continuance. With respect to each Fund,
this Agreement may be terminated at any time, without payment of penalty by the
Fund or the Corporation, on 60 days written notice to the Adviser, by vote of
the Directors, or by vote of a majority of the outstanding voting securities (as
defined by the Act) of the Fund, voting separately from any other Portfolio of
the Corporation. The termination of this Agreement with respect to any Fund or
the addition of any
- 3 -
<PAGE>
Fund to Schedule A hereto (in the manner required by the Act) shall not affect
the continued effectiveness of this Agreement with respect to each other Fund
subject hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act).
The Corporation hereby agrees that if (i) the Adviser ceases to act as
investment manager and adviser to the Corporation and (ii) the continued use of
the Corporation's present name would create confusion in the context of the
Adviser's business, then the Corporation will use its best efforts to change its
name in order to delete the word "SunAmerica" from its name.
7. Liability of the Adviser. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Adviser) the Adviser shall not be subject
to liability to the Corporation or to any shareholder of the Corporation for any
act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Corporation shall indemnify the Adviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Adviser) (collectively, the "Indemnified Parties")
from any liability arising from the Adviser's conduct under this Agreement.
Indemnification to the Adviser or any of its personnel or affiliates shall
be made when (i) a final decision on the merits rendered, by a court or other
body before whom the proceeding was brought, that the person to be indemnified
was not liable by reason of disabling conduct or, (ii) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that the
person to be indemnified was not liable by reason of disabling conduct, by (a)
the vote of a majority of a quorum of the Directors who are neither "interested
persons" of the Corporation as defined in section 2(a)(19) of the Act nor
parties to the proceeding ("disinterested, non-party Directors") or (b) an
independent legal counsel in a written opinion. The Corporation may, by vote of
a majority of the disinterested, non-party Directors advance attorneys' fees or
other expenses incurred by an Indemnified Party in defending a proceeding upon
the undertaking by or on behalf of the Indemnified Party to repay the advance
unless it is ultimately determined that he is entitled to indemnification. Such
advance shall be subject to at least one of the following: (1) the person to be
indemnified shall provide a security for his undertaking, (2) the Corporation
shall be insured against losses arising by reason of any lawful advances, or (3)
a majority of a quorum of the disinterested, non-party Directors or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts, that there is reason to believe that the
person to be indemnified ultimately will be found entitled to indemnification.
8. Non-Exclusivity. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Adviser who may also be a
Director, officer or employee of the Corporation to engage in any other business
or devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Adviser to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
- 4 -
<PAGE>
9. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
10. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
apply.
11. Separate Portfolio. Pursuant to the provisions of the Declaration, each
Fund is a separate Portfolio of the Corporation, and all debts, liabilities,
obligations and expenses of a particular Fund shall be enforceable only against
the assets of that Fund and not against the assets of any other Fund or of the
Corporation as a whole.
IN WITNESS WHEREOF, the Corporation and the Adviser have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
STYLE SELECT SERIES, INC.
By: /s/ Peter A. Harbeck
-------------------------------
Name: Peter A. Harbeck
Title: President
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Robert M. Zakem
-------------------------------
Name: Robert M. Zakem
Title: Senior Vice President
- 5 -
<PAGE>
SCHEDULE A
FEE RATE
(as a % of average
PORTFOLIO daily net asset value)
- --------- ----------------------
Large-Cap Growth Portfolio 1.00% net assets
Mid-Cap Growth Portfolio 1.00% first $750 million
.95% next $750 million
.90% thereafter
Aggressive Growth Portfolio 1.00% first $750 million
.95% next $750 million
.90% thereafter
Large-Cap Blend Portfolio 1.00% net assets
Large-Cap Value Portfolio 1.00% net assets
Value Portfolio 1.00% first $750 million
.95% next $750 million
.90% thereafter
Small-Cap Value Portfolio 1.00% net assets
International Equity Portfolio 1.10% first $750 million
1.05% next $750 million
1.00% thereafter
Focus Portfolio .85% net assets
<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC., a Delaware corporation (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
<PAGE>
Consistent with 9(c), the Subadviser represents and warrants to the Adviser
that the portion of the assets which it manages of the Portfolio set forth in
Schedule A will at all times be operated and managed in compliance with all
applicable federal and state laws governing its operations and investments as if
it were a separate operating portfolio. Without limiting the foregoing, the
Subadviser represents and warrants (1) qualification, election and maintenance
of such election by each Portfolio to be treated as a "regulated investment
company" under Subchapter M, chapter 1 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (2) compliance with (a) the provisions of the Act and
rules adopted thereunder; (b) applicable federal and state securities,
commodities and banking laws; and (c) the distribution requirements necessary to
avoid payment of any excise tax pursuant to Section 4982 of the Code. The
Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions or
professional liability insurance coverage that is from time to time satisfactory
to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that
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<PAGE>
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member of an exchange, broker
or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affilates, the
Adviser and its affiliates or any other subadviser to the corporation and its
respective affilates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the Directors of the Corporation such information relating to
Portfolio transactions as they may reasonably request. To the extent consistent
with applicable law, the Subadviser may aggregate purchase or sell orders for
the Portfolio with contemporaneous purchase or sell orders of other clients of
the Subadviser or its affilated persons. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
determines to be equitable and consistent with its and its affilates' fiduciary
obligations to the Portfolio and to such other clients. The Adviser hereby
acknowledges that such aggregation of orders may not result in more favorable
pricing or lower brokerage commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statement, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
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<PAGE>
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser and
its affiliates and each of its directors and officers and each person, if any,
who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any an all losses, claims, damages, liabilities or litigation (including
legal and other expenses), to which the Adviser or its affiliates or such
directors, officers or controlling person may become subject under the 1933 Act,
under other statutes, at common law or otherwise, which may be based upon (i)
any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
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<PAGE>
(c) The Subadviser shall not be liable to the Adviser for (i) any acts of
the Adviser or any other subadviser to the Portfolio with respect to the portion
of the assets of a Portfolio not managed by Subadviser and (ii) acts of the
Subadviser which result from acts of the Adviser, including, but not limited to,
a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by or otherwise available to
the Subadviser upon reasonable request. The adviser agrees that Subadviser shall
manage the portion of the assets of a Portfolio allocated to it as if it was a
separate operating Portfolio and shall comply with subsections (a) and (b) of
Section 1 of this Subadvisory Agreement (including, but not limited to, the
investment objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the Code)
with respect to the portion of assets of a Portfolio allocated to Subadviser.
The Adviser shall indemnify the Indemnified Parties from any liability arising
from the conduct of the Adviser and any other subadviser with respect to the
portion of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the corporation; provide, however, that this Agreement may not be terminated
by the Subadviser unless another subadvisory agreement has been approved by the
Corporation in accordance with the Act, or after six months' written notice,
whichever is earlier. The termination of this Agreement with respect to any
Portfolio or the addition of any Portfolio to Schedule A hereto (in the manner
required by the Act) shall not affect the continue effectiveness of this
Agreement with respect to each other Portfolio subject hereto. This Agreement
shall automatically terminate in the event of its assignment (as defined by the
Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
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<PAGE>
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: American Century Investment Management, Inc.
4500 Main Street, 12th Floor
Kansas City, Missouri 64111
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _____________________________________
Name: Peter A. Harbeck
Title: President
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
By: _____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
BANKERS TRUST COMPANY (the "Subadviser"), a wholly owned subsidiary of Bankers
Trust New York Corporation.
WITNESSETH:
WHEREAS, the Adviser and Style Select Series Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is a "bank" as defined under the Investment Advisers Act
of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine, in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments.
<PAGE>
Without limiting the foregoing, the Subadviser represents and warrants (1)
qualification, election and maintenance of such election by each Portfolio to be
treated as a "regulated investment company" under Subchapter M, chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (2) compliance with
(a) the provisions of the Act and rules adopted thereunder; (b) applicable
federal and state securities, commodities and banking laws; and (c) the
distribution requirements necessary to avoid payment of any excise tax pursuant
to Section 4982 of the Code. The Subadviser further represents and warrants that
to the extent any statements or omissions made in any Registration Statement for
shares of the corporation, or any amendment or supplement thereto, are made in
reliance upon and in conformity with information furnished by the Subadviser
expressly for use therein, such Registration Statement and any amendments or
supplements thereto will, when they become effective, conform in all material
respects to the requirements of the Securities Act of 1933 and the rules and
regulations of the Commission thereunder (the "1933 Act") and the Act and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees: (i) to maintain a level of errors and omissions
or professional liability insurance coverage that, at all times during the
course of this Agreement, is appropriate given the nature of its business, and
(ii) from time to time and upon reasonable request, to supply evidence of such
coverage to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that
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<PAGE>
particular transaction or the Subadviser's overall responsibilities with respect
to such Portfolio and to other clients as to which the Subadviser exercises
investment discretion. In accordance with Section 11(a) of the 1934 Act and Rule
11a2-2(T) thereunder, and subject to any other applicable laws and regulations
including Section 17(e) of the Act and Rule 17e-1 thereunder, the Subadviser may
engage its affiliates, the Adviser and its affiliates or any other subadviser to
the corporation and its respective affiliates, as broker-dealers or futures
commission merchants to effect Portfolio transactions in securities and other
investments for a Portfolio. The Subadviser will promptly communicate to the
Adviser and to the officers and the Directors of the Corporation such
information relating to Portfolio transactions as they may reasonably request.
To the extent consistent with applicable law, the Subadviser may aggregate
purchase or sell orders for the Portfolio with contemporaneous purchase or sell
orders of other clients of the Subadviser or its affiliated persons. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser determines to be equitable and consistent with its and its
affiliates' fiduciary obligations to the Portfolio and to such other clients.
The Adviser hereby acknowledges that such aggregation of orders may not result
in more favorable pricing or lower brokerage commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rate set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for the Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation office
facilities, equipment, personnel and other services in order to facilitate
meetings or other similar functions. Such office facilities, equipment,
personnel and services shall be provided for or rendered by the Subadviser and
billed to the Corporation or the Adviser at the Subadviser's cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statement, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the
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form and for the period required by Rule 31a-2 under the Act, all records
relating to the investments of the Portfolio that are required to be maintained
by the Corporation pursuant to the requirements of Rule 31a-1 of that Act. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser and
its affiliates and each of its directors and officers and each person, if any,
who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts of
the
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<PAGE>
Adviser or any other subadviser to the Portfolio with respect to the portion of
the assets of a Portfolio not managed by Subadviser and (ii) acts of the
Subadviser which result from acts of the Adviser, including, but not limited to:
(A) a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by or otherwise available to
the Subadviser upon reasonable request; and (B) acts of the Subadviser that were
made in reasonable reliance upon information provided to it by the Adviser. The
Adviser agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and shall
comply with subsections (a) and (b) of Section 1 of this Subadvisory Agreement
(including, but not limited to, the investment objectives, policies and
restrictions applicable to a Portfolio and qualifications of a Portfolio as a
regulated investment company under the Code) with respect to the portion of
assets of a Portfolio allocated to Subadviser. The Adviser shall indemnify the
Indemnified Parties from any liability arising from the conduct of the Adviser
and any other subadviser with respect to the portion of a Portfolio's assets not
allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to the Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continue effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by
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<PAGE>
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Bankers Trust Company
130 Liberty Street, 26th Floor, Mail Stop 2265
New York, New York 10006
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ________________________________
Name: Peter A. Harbeck
Title: President
BANKERS TRUST COMPANY
By: ________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
BERGER ASSOCIATES, INC., a Colorado corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants (1) qualification, election
and maintenance of such election by each Portfolio to be treated as a "regulated
investment company" under Subchapter M, chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) compliance with (a) the provisions of
the Act and rules adopted thereunder; (b) applicable federal and state
securities, commodities and banking laws; and (c) the distribution requirements
necessary to avoid payment of any excise tax pursuant to Section 4982 of the
Code. The Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions
or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research
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<PAGE>
services provided by such member of an exchange, broker or dealer viewed in
terms of either that particular transaction or the Subadviser's overall
responsibilities with respect to such Portfolio and to other clients as to which
the Subadviser exercises investment discretion. In accordance with Section 11(a)
of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the Act and Rule
17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and its
affiliates or any other subadviser to the corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statement, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the
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<PAGE>
form and for the period required by Rule 31a-2 under the Act, all records
relating to the investments of the Portfolio that are required to be maintained
by the Corporation pursuant to the requirements of Rule 31a-1 of that Act. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the
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<PAGE>
Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by Adviser or
any other subadviser to a Portfolio, which records are not also maintained
by or otherwise available to the Subadviser upon reasonable request. The
adviser agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and
shall comply with subsections (a) and (b) of Section 1 of this Subadvisory
Agreement (including, but not limited to, the investment objectives,
policies and restrictions applicable to a Portfolio and qualifications of a
Portfolio as a regulated investment company under the Code) with respect to
the portion of assets of a Portfolio allocated to Subadviser. The Adviser
shall indemnify the Indemnified Parties from any liability arising from the
conduct of the Adviser and any other subadviser with respect to the portion
of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continue effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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<PAGE>
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Berger Associates, Inc.
210 University Boulevard, Suite 900
Denver, CO 80206
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _____________________________________
Name: Peter A. Harbeck
Title: President
Berger Associates, Inc.
By: _____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
DAVID L. BABSON & CO., INC., a Massachusetts corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Advisory Agreement with the Corporation.
Pursuant to this Subadvisory Agreement and subject to the oversight and review
of the Adviser, the Subadviser will manage the investment and reinvestment of a
portion of the assets of each Portfolio listed on Schedule A attached hereto.
The Subadviser will determine in its discretion and subject to the oversight and
review of the Adviser, the securities to be purchased or sold, will provide the
Adviser with records concerning its activities which the Adviser of the
Corporation is required to maintain, and will render regular reports to the
Adviser and to officers and Directors of the Corporation concerning its
discharge of the foregoing responsibilities. The Subadviser shall discharge the
foregoing responsibilities subject to the control of the officers and the
Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies and limitations for the Portfolio set forth in
the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser agrees to manage that portion of the assets of the
Portfolio allocated to it (1) so that it qualifies to be treated as a "regulated
investment company" under Subchapter M, Chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) in compliance with (a) the provisions
of the Act and rules adopted thereunder; and (b) applicable federal and state
securities, commodities and banking laws. The Subadviser further represents and
warrants that to the extent that any statements or omissions made in any
Registration Statement for shares of the Corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such parts of such
Registration Statement and any amendments or supplements thereto consisting of
such statements or omissions will, when they become effective, conform in all
material respects to the requirements of the Securities Act of 1933 and the
rules and regulations of the Commission thereunder (the "1933 Act") and the Act
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a reasonable level of errors and
omissions or professional liability insurance coverage.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research
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<PAGE>
services provided by such member of an exchange, broker or dealer viewed in
terms of either that particular transaction or the Subadviser's overall
responsibilities with respect to such Portfolio and to other clients as to which
the Subadviser exercises investment discretion. In accordance with Section 11(a)
of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the Act and Rule
17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and its
affiliates or any other subadviser to the Corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affilates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the
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<PAGE>
form and for the period required by Rule 31a-2 under the Act, all records
relating to the investments of the Portfolio that are required to be maintained
by the Corporation pursuant to the requirements of Rule 31a-1 of the Act. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser), the Subadviser shall
not be subject to liability to the Corporation or to any shareholder of the
Corporation for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the extent specified
in Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, the Adviser shall indemnify the Subadviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) (collectively, the
"Indemnified Parties") from any liability arising from the Subadviser's conduct
under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser and
its affiliates and each of its directors and officers and each person, if any,
who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any breach of this Agreement by the Subadviser, or (ii) any failure by the
Subadviser to comply with the representations and warranties set forth in
Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the
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<PAGE>
Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by the Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by the Adviser
or any other subadviser to a Portfolio, which records are not also
maintained by or otherwise available to the Subadviser upon reasonable
request. The Adviser agrees that the Subadviser shall manage the portion of
the assets of a Portfolio allocated to it as if it was a separate operating
Portfolio and shall comply with subsections (a) and (b) of Section 1 of
this Subadvisory Agreement (including, but not limited to, the investment
objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the
Code) with respect to the portion of assets of a Portfolio allocated to the
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser
with respect to the portion of a Portfolio's assets not allocated to the
Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers or shareholders, or otherwise; directors, partners, officers,
agents and shareholders of the Subadviser are or may be interested in the
Corporation as Directors, or otherwise; and the Subadviser (or any successor) is
or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act), shall not affect the continued
effectiveness of this Agreement with respect to each other Portfolio subject
hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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<PAGE>
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: David L. Babson & Co. Inc
One Memorial Drive
Cambridge, MA 02142-1300
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _____________________________________
Name: Peter A. Harbeck
Title: President
DAVID L. BABSON & CO., INC.
By: _____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
DAVIS SELECTED ADVISERS, L.P., a Colorado limited partnership (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser or the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio
<PAGE>
set forth in the Corporation's current prospectus and statement of additional
information, and (b) applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with the current prospectus and
statement of additional information. The Subadviser further represents and
warrants that to the extent that any statements or omissions made in any
Registration Statement for shares of the Corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such Registration
Statement and any amendments or supplements thereto will, when they become
effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) In performing its investment advisory services, Subadviser, while
remaining ultimately responsible for management of the portion of the
assets of the Portfolio allocated to it, may draw on the research and
market expertise of its affiliate offices, including Davis Selected
Advisers - NY, Inc., its New York affiliate, for portfolio decisions and
management.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities
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<PAGE>
transaction in excess of the amount of commission another member of an exchange,
broker or dealer would have charged for effecting that transaction, if the
Subadviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer viewed in terms of
either that particular transaction or the Subadviser's overall responsibilities
with respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of the
Corporation such information relating to Portfolio transactions as they may
reasonably request. To the extent consistent with applicable law, the Subadviser
may aggregate purchase or sell orders for the Portfolio with contemporaneous
purchase or sell orders of other clients of the Subadviser or its affiliated
persons. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Subadviser
in the manner the Subadviser determines to be equitable and consistent with its
and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. The Adviser hereby acknowledges that such aggregation of orders may not
result in more favorable pricing or lower brokerage commissions in all
instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at a mutually
agreed-upon fee.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
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<PAGE>
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation, which are
not otherwise available to the Corporation, are the property of the Corporation
and will be surrendered promptly to the Corporation or the Adviser on request.
The Subadviser agrees that all accounts, books and other records relating
to the Corporation, or any Portfolio thereof, maintained and preserved by it as
required hereby shall be subject at any time, and from time to time, to such
reasonable periodic, special and other examinations by the Securities and
Exchange Commission, the Corporation's auditors, the Corporation or any
representative of the Corporation, the Adviser, or any governmental agency or
other instrumentality having regulatory authority over the Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its
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<PAGE>
affiliates and each of its directors and officers and each person, if any,
who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its
affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by Adviser or
any other subadviser to a Portfolio, which records are not also maintained
by or otherwise available to the Subadviser upon reasonable request. The
Adviser agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and
shall comply with subsections (a) and (b) of Section I of this Subadvisory
Agreement (including, but not limited to, the investment objectives,
policies and restrictions applicable to a Portfolio and qualifications of a
Portfolio as a regulated investment company under the Code) with respect to
the portion of assets of a Portfolio allocated to Subadviser. The Adviser
shall indemnify the Indemnified Parties from any liability arising from the
conduct of the Adviser and any other subadviser with respect to the portion
of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the
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<PAGE>
Directors, or by vote of a majority of the outstanding voting securities (as
defined in the Act) of the Portfolio, voting separately from any other series of
the Corporation, or by the Adviser, on not less than 30 nor more than 60 days'
written notice to the Subadviser. With respect to each Portfolio, this Agreement
may be terminated by the Subadviser at any time, without the payment of any
penalty, on 90 days' written notice to the Adviser and the Corporation;
provided, however, that this Agreement may not be terminated by the Subadviser
unless another subadvisory agreement has been approved by the Corporation in
accordance with the Act, or after six months' written notice, whichever is
earlier. The termination of this Agreement with respect to any Portfolio or the
addition of any Portfolio to Schedule A hereto (in the manner required by the
Act) shall not affect the continued effectiveness of this Agreement with respect
to each other Portfolio subject hereto. This Agreement shall automatically
terminate in the event of its assignment (as defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
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<PAGE>
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Davis Selected Advisers, L.P.
124 E. Marcy Street
P.O. Box 1688
Sante Fe, NM 87504-1688
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ____________________________________
Name: Peter A. Harbeck
Title: President
DAVIS SELECTED ADVISERS, L.P.
By: ____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
BRAMWELL CAPITAL MANAGEMENT, INC., a Delaware corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
Consistent with 9(c), the Subadviser represents and warrants to the Adviser
that the portion of the assets which it manages of the Portfolio set forth in
Schedule A will at all times be operated and managed in compliance with all
applicable federal and state laws governing its operations and investments as if
it were a separate operating portfolio. Without limiting the foregoing, the
Subadviser represents and warrants (1) qualification, election and maintenance
of such
<PAGE>
election by each Portfolio to be treated as a "regulated investment company"
under Subchapter M, chapter 1 of the Internal Revenue Code of 1986, as amended
(the "Code"), and (2) compliance with (a) the provisions of the Act and rules
adopted thereunder; (b) applicable federal and state securities, commodities and
banking laws; and (c) the distribution requirements necessary to avoid payment
of any excise tax pursuant to Section 4982 of the Code. The Subadviser further
represents and warrants that to the extent that any statements or omissions made
in any Registration Statement for shares of the corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such Registration
Statement and any amendments or supplements thereto will, when they become
effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions or
professional liability insurance coverage that is from time to time satisfactory
to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable
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<PAGE>
laws and regulations including Section 17(e) of the Act and Rule 17e-1
thereunder, the Subadviser may engage its affiliates, the Adviser and its
affiliates or any other subadviser to the corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statement, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or
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<PAGE>
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser and
its affiliates and each of its directors and officers and each person, if any,
who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts of
the Adviser or any other subadviser to the Portfolio with respect to the portion
of the assets of a Portfolio not managed by Subadviser and (ii) acts of the
Subadviser which result from acts of the Adviser, including, but not limited to,
a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by or otherwise available to
the Subadviser upon reasonable request.
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<PAGE>
The adviser agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and shall
comply with subsections (a) and (b) of Section 1 of this Subadvisory Agreement
(including, but not limited to, the investment objectives, policies and
restrictions applicable to a Portfolio and qualifications of a Portfolio as a
regulated investment company under the Code) with respect to the portion of
assets of a Portfolio allocated to Subadviser. The Adviser shall indemnify the
Indemnified Parties from any liability arising from the conduct of the Adviser
and any other subadviser with respect to the portion of a Portfolio's assets not
allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continue effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
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<PAGE>
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Bramwell Capital Management, Inc
745 Fifth Avenue
New York, New York 10151
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _____________________________________
Name: Peter A. Harbeck
Title: President
BRAMWELL CAPITAL MANAGEMENT, INC.
By: _____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and THE GLENMEDE TRUST COMPANY, a Pennsylvania Trust Company (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland
corporation (the "Corporation"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory Agreement"),
pursuant to which the Adviser has agreed to provide investment management,
advisory and administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company
and may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is a bank, qualified to act, and exempt from
registration as an investment adviser under the Investment Advisers Act of 1940,
as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the
services of the Subadviser in furtherance of its Advisory Agreement with the
Corporation. Pursuant to this Subadvisory Agreement and subject to the oversight
and review of the Adviser, the Subadviser will manage the investment and
reinvestment of a portion of the assets of each Portfolio listed on Schedule A
attached hereto. The Subadviser will determine in its discretion and subject to
the oversight and review of the Adviser, the securities to be purchased or sold,
will provide the Adviser with records concerning its activities which the
Adviser of the Corporation is required to maintain, and will render regular
reports to the Adviser and to officers and Directors of the Corporation
concerning its discharge of the foregoing responsibilities. The Subadviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies and limitations for the Portfolio set forth in
the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the portion
of the assets which it manages of the Portfolio set forth in Schedule A will at
all times be managed in compliance with all applicable federal and state laws
governing its operations and investments. Without limiting the foregoing, the
Subadviser agrees to manage that portion of the assets of the Portfolio
allocated to it (1) so that it qualifies to be treated as a "regulated
investment company" under Subchapter M, chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) in compliance with (a) the provisions
of the Act and rules adopted thereunder; (b) and applicable federal and state
securities, commodities and banking laws. The Subadviser further represents and
warrants that to the extent that any statements or omissions made in any
Registration Statement for shares of the Corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with written
information furnished by the Subadviser expressly for use therein, such parts of
such Registration Statement and any amendments or supplements thereto consisting
of such statements or omissions will, when they become effective, conform in all
material respects to the requirements of the Securities Act of 1933 and the
rules and regulations of the Commission thereunder (the "1933 Act") and the Act
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense,
to render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a reasonable level of errors and
omissions or professional liability insurance coverage.
2. Portfolio Transactions. The Subadviser is responsible for
decisions to buy or sell securities and other investments for a portion of the
assets of each Portfolio, broker-dealers and futures commission merchants'
selection, and negotiation of brokerage commission and futures commission
merchants' rates. As a general matter, in executing Portfolio transactions, the
Subadviser may employ or deal with such broker-dealers or futures commission
merchants as may, in the Subadviser's best judgment, provide prompt and reliable
execution of the transactions at favorable prices and reasonable commission
rates. In selecting such broker-dealers or futures commission merchants, the
Subadviser shall consider all relevant factors including price (including the
applicable brokerage commission, dealer spread or futures commission merchant
rate), the size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that
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<PAGE>
particular transaction or the Subadviser's overall responsibilities with respect
to such Portfolio and to other clients as to which the Subadviser exercises
investment discretion. In accordance with Section 11(a) of the 1934 Act and Rule
11a2-2(T) thereunder, and subject to any other applicable laws and regulations
including Section 17(e) of the Act and Rule 17e-1 thereunder, the Subadviser may
engage its affiliates, the Adviser and its affiliates or any other subadviser to
the Corporation and its respective affiliates, as broker-dealers or futures
commission merchants to effect Portfolio transactions in securities and other
investments for a Portfolio. The Adviser will provide to the Subadviser a list
of its affiliated broker/dealers and the affiliated broker/dealers of the other
subadvisers to the Portfolio. The Subadviser will promptly communicate to the
Adviser and to the officers and the Directors of the Corporation such
information relating to Portfolio transactions as they may reasonably request.
To the extent consistent with applicable law, the Subadviser may aggregate
purchase or sell orders for the Portfolio with contemporaneous purchase or sell
orders of other clients of the Subadviser or its affiliated persons. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser determines to be equitable and consistent with its and its
affiliates' fiduciary obligations to the Portfolio and to such other clients.
The Adviser hereby acknowledges that such aggregation of orders may not result
in more favorable pricing or lower brokerage commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be
entitled to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser
a fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser,
the Subadviser in its discretion may make available to the Corporation or the
Adviser, office facilities, equipment, personnel and other services. Such office
facilities, equipment, personnel and services shall be provided for or rendered
by the Subadviser and billed to the Corporation or the Adviser at the
Subadviser's cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the
Adviser and the Corporation are not be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
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<PAGE>
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of the
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the Adviser,
or any governmental agency or other instrumentality having regulatory authority
over the Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the
Adviser or any affiliate or agent thereof shall make reference to or use the
name of the Subadviser or any of its affiliates in any advertising or
promotional materials without the prior approval of the Subadviser, which
approval shall not be unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties ("disabling conduct") hereunder on the part of the Subadviser (and its
officers, directors, partners, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Subadviser), the
Subadviser shall not be subject to liability to the Corporation, the Adviser, to
any shareholder of the Corporation or to any shareholder of the Adviser for any
act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any and all losses, claims, damages, liabilities or litigation (including
legal and other expenses) arising from the Subadviser's conduct under this
Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person, if
any, who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of the Adviser, its affiliates or of any person
deemed to protect the Adviser, its affiliates or of any such other person
against any liability to which such
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<PAGE>
entity or person would otherwise be subject by reasons of willful misfeasance,
bad faith, or gross negligence in the performance of his, her or its duties or
by reason of his, her or its reckless disregard of obligation and duties under
this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i)
any acts of the Adviser or any other subadviser to the Portfolio with respect to
the portion of the assets of a Portfolio not managed by Subadviser and (ii)
liability arising from or in connection with acts of the Adviser, including, but
not limited to, a failure of the Adviser to provide accurate and current
information with respect to any records maintained by Adviser or any other
subadviser to a Portfolio, which records are not also maintained by or otherwise
available to the Subadviser upon reasonable request. The Adviser agrees that the
Subadviser shall manage the portion of the assets of a Portfolio allocated to it
as if it was a separate operating Portfolio and shall comply with Section 1 of
this Subadvisory Agreement with respect to the portion of assets of a Portfolio
allocated to the Subadviser. The Adviser shall indemnify the Indemnified Parties
from any and all losses, claims, damages, liabilities or litigation (including
legal and other expenses) arising from the conduct of the Adviser and any other
subadviser with respect to the portion of a Portfolio's assets not allocated to
the Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are
or may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers or shareholders, or otherwise; directors, partners, officers,
agents and shareholders of the Subadviser are or may be interested in the
Corporation as Directors, or otherwise; and the Subadviser (or any successor) is
or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force
and effect with respect to each Portfolio until two years from the date hereof,
and from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of a penalty by the Portfolio or the Corporation,
by vote of a majority of the Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, voting
separately from any other series of the Corporation, or by the Adviser, on not
less than 30 nor more than 60 days' written notice to the Subadviser. With
respect to each Portfolio, this Agreement may be terminated by the Subadviser at
any time, without the payment of any penalty, on 90 days' written notice to the
Adviser and the corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. In the event of such a termination, the
Adviser will use its best efforts, and will cause the Corporation to use its
best efforts, to engage another subadviser for the Portfolio as soon as
possible. The termination of this Agreement with respect to any Portfolio or the
addition of any Portfolio to Schedule A hereto (in the manner required by the
Act) shall not affect the continued effectiveness of this Agreement with respect
to each other Portfolio subject hereto. This Agreement shall automatically
terminate in the event of its assignment (as defined by the Act).
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<PAGE>
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the Act.
To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: The Glenmede Trust Company
1 Liberty Place
1650 Market Street
Suite 1200
Philadelphia, PA 19103-7391
Attention: James S. Lobb
First Vice President
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ___________________________________
Name: Peter A. Harbeck
Title: President
THE GLENMEDE TRUST COMPANY
By: ___________________________________
Name: James S. Lobb
Title: First Vice President
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
JANUS CAPITAL CORPORATION, a Colorado corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. (a) Duties of the Subadviser. The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, and shall furnish the Adviser with such
monthly, quarterly, and annual reports concerning transactions and performance
of each Portfolio in the form as reasonably requested by the Adviser. The
Subadviser shall also provide the Adviser with such other information and
reports as may reasonably be requested by the Adviser from time to time, other
than proprietary information, and provided the
<PAGE>
Subadviser shall not be responsible for portfolio accounting, nor shall it be
required to generate information derived from portfolio accounting data. The
Subadviser shall discharge the foregoing responsibilities subject to the control
of the officers and the Directors of the Corporation and in compliance with such
policies as the Directors of the Corporation may from time to time establish,
and in compliance with (a) the objectives, policies, and limitations for the
Portfolio set forth in the Corporation's current prospectus and statement of
additional information, and (b) applicable laws and regulations.
The Subadviser agrees to manage the portion of the assets allocated to it
of each of the Portfolio set forth in Schedule A (1) in compliance with all
applicable federal and state laws governing its operations and investments.
Without limiting the foregoing, the Subadviser agrees to manage each Portfolio
(1) so that it qualifies to be treated as a "regulated investment company" under
subchapter M, chapter 1 of the Code, and (2) in compliance with (a) the
provisions of the Act and rules adopted thereunder; (b) applicable federal and
state securities, commodities and banking laws; and (c) the distribution
requirements necessary to avoid payment of any excise tax pursuant to Section
4982 of the Code. For purposes of compliance with this paragraph, the Subadviser
shall be entitled to treat the portion of the assets of each Portfolio that it
manages as though such portion constituted the entire Portfolio, and the
Subadviser shall not be responsible in any way for the compliance of other
portions of the Portfolio or for compliance of the Portfolio as a whole with
this paragraph.
(b) The Subadviser shall be responsible for the preparation and filing
of Schedule 13G and Form 13F on behalf of the Portfolio. The Subadviser
shall not be responsible for the preparation or filing of any reports
required of the Portfolio by any governmental or regulatory agency, except
as expressly agreed to in writing. The Subadviser shall vote proxies
received in connection with securities held by the Portfolio.
(c) The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
(d) The Adviser shall timely furnish Subadviser with such information
as may be reasonably necessary for or requested by Subadviser to perform
its responsibilities under this Agreement. The Subadviser shall establish
and maintain brokerage accounts or other accounts necessary for the
purchase or sale of various forms of securities and the Adviser shall take
such actions as Subadviser deems advisable or necessary to enable
Subadviser to establish such account on behalf of the Corporation.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures
<PAGE>
commission merchants' rates. As a general matter, in executing portfolio
transactions, the Subadviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Subadviser's best judgement, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Subadviser shall consider all relevant factors
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Directors may determine and
consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), the Subadviser shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of the Subadviser's having caused a Portfolio to pay a member of an
exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker or dealer would have charged for effecting that transaction, if the
Subadviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer viewed in terms of
either that particular transaction or the Subadviser's overall responsibilities
with respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of the
Corporation such information relating to portfolio transactions as they may
reasonably request.
3. (a) Compensation of the Subadviser. The Subadviser shall not be entitled
to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser
a fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
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<PAGE>
(b) Expenses. Adviser, the Corporation and the Portfolio shall assume
and pay their respective organizational, operational, and business expenses
not specifically assumed or agreed to be paid by Subadviser pursuant to
this Agreement. Subadviser shall pay its own organizational, operational,
and business expenses but shall not be obligated to pay any expenses of
Adviser, the Corporation, or the Portfolio, including without limitation,
(a) interest and taxes; (b) brokerage commissions and other costs in
connection with the purchase or sale of securities or other investment
instruments for the Portfolio; and (c) custodian fees and expenses.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation. The Subadviser may provide
advice to or take action with respect to other clients, which advice or action,
including the timing and nature of such action, may differ from or be identical
to advice given or action taken with respect to the Portfolio. In the event of
such activities, the transactions and associated costs will be allocated among
such clients (including the Portfolio) in a manner that the Subadviser believes
to be equitable to the accounts involved and consistent with such accounts'
objectives, policies and limitations.
7. Certain Records. While the Subadviser is not being engaged to serve as
the Corporation's official record keeper, the Subadviser nevertheless hereby
undertakes and agrees to maintain, in the form and for the period required by
Section 204 of the Advisers Act and Rule 204-2 thereunder, all records relating
to the investments of the Portfolio that are required to be maintained by the
Subadviser pursuant to the requirements of Rule 204-2 under the Advisers Act.
The Subadviser will also, in connection with the purchase and sale of securities
for each Portfolio, arrange for the transmission to the custodian for the
Corporation on a daily basis, such confirmation, trade tickets, and other
documents and information, that identify securities to be purchased or sold on
behalf of the Portfolio, as may be reasonably necessary to enable the custodian
to perform its administrative and recordkeeping responsibilities with respect to
the Portfolio.
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<PAGE>
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it with respect to the Portfolio as required hereby shall be
subject at any time, and from time to time, to such reasonable periodic, special
and other examinations by the Securities and Exchange Commission, the
Corporation's auditors, the Corporation or any representative of the
Corporation, the Adviser, or any governmental agency or other instrumentality
having regulatory authority over the Corporation.
8. Confidentiality and Proprietary Rights. The Adviser will not, directly
or indirectly, and will not permit its affiliates, employees, officers,
directors, agents, contractors, or the Corporation to, in any form or by any
means, use, disclose, or furnish, to any person or entity, records or
information concerning the business of the Subadviser, except as necessary for
the performance of its duties under this Agreement or the Advisory Agreement, or
as required by law upon prior written notice to the Subadviser. The Subadviser
is the sole owner of the name and mark "Janus." The Adviser shall not, and shall
not permit the Corporation to, without prior written consent of the Subadviser,
use the name or mark "Janus" or make representations regarding the Subadviser or
its affiliates. Upon termination of this Agreement for any reasons, the Adviser
shall immediately cease, and the Adviser shall cause the Corporation to
immediately cease, all use of the Janus name or any Janus mark.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) neither the Subadviser nor its
officers, directors, agents, employees, controlling persons, shareholders, and
any other person or entity affiliated with the Subadviser shall be subject to
liability for any act or omission in the course of, or connected with, rendering
services hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this Agreement relates, except to the extent specified in
Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, the Adviser shall indemnify the Subadviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) (collectively, the
"Indemnified Parties") from any liability arising from (1) the Subadviser's
conduct under this Agreement, or (2) any untrue statement of a material fact in
the Corporation's registration statement or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance on information
furnished by the Adviser.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages,
-5-
<PAGE>
liabilities or litigation (including legal and other expenses), to which
the Adviser or its affiliates or such directors, officers or controlling
person may become subject under the 1933 Act, under other statutes, at
common law or otherwise, which may be based upon (i) any wrongful act or
material breach of this Agreement by the Subadviser resulting from
Subadviser's disabling conduct , or (ii) any untrue statement of a material
fact in the Corporation's registration statement or omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance on information furnished by the Subadviser; provided, however,
that in no case is the Subadviser's indemnity in favor of any person deemed
to protect such other persons against any liability to which such person
would otherwise be subject by reasons of willful misfeasance, bad faith, or
gross negligence in the performance of his, her or its duties or by reason
of his, her or its reckless disregard of obligation and duties under this
Agreement.
(c) The Subadviser shall not be liable for (i) any acts of the Adviser
or any other subadviser to the Portfolio with respect to the portion of the
assets of a Portfolio not managed by the Subadviser and (ii) acts of the
Subadviser which result from acts of the Adviser, including, but not
limited to, a failure of the Adviser to provide accurate and current
information with respect to any records maintained by the Adviser or any
other subadviser to a Portfolio, which records are not also maintained by
the Subadviser. The Adviser agrees that the Subadviser shall manage the
portion of the assets of a Portfolio allocated to it as if it was a
separate operating portfolio and shall comply with subsections (a) and (b)
of Section I of this Subadvisory Agreement (including, but not limited to,
the investment objectives, policies and restrictions applicable to a
Portfolio and qualifications of a Portfolio as a regulated investment
company under the Code) with respect to the portion of assets of a
Portfolio allocated to the Subadviser. The Adviser shall indemnify the
Indemnified Parties from any liability arising from the conduct of the
Adviser and any other subadviser with respect to the portion of a
Portfolio's assets not allocated to the Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other Portfolio of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the
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<PAGE>
Directors, or by vote of a majority of the outstanding voting securities (as
defined in the Act) of the Portfolio, voting separately from any other series of
the Corporation, or by the Adviser, on not less than 30 nor more than 60 days'
written notice to the Subadviser. With respect to each Portfolio, this Agreement
may be terminated by the Subadviser at any time, without the payment of any
penalty, on 90 days' written notice to the Adviser and the Corporation.
Notwithstanding the foregoing, the Subadviser may terminate the Agreement upon
60 days' written notice in the event of a breach of the Agreement by the
Adviser. The termination of this Agreement with respect to any Portfolio or the
addition of any Portfolio to Schedule A hereto (in the manner required by the
Act) shall not affect the continued effectiveness of this Agreement with respect
to each other Portfolio subject hereto. This Agreement shall automatically
terminate in the event of its assignment (as defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated. The obligations
contained in Section 9 shall survive termination of this Agreement.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation, each Portfolio is a separate Portfolio of the Corporation, and
all debts, liabilities, obligations and expenses of a particular Portfolio shall
be enforceable only against the assets of that Portfolio and not against the
assets of any other Portfolio or of the Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Janus Capital Corporation
100 Fillmore Street
Denver, CO 80206-4923
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ____________________________________
Name: Peter A. Harbeck
Title: President
JANUS CAPITAL CORPORATION
By: ____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
JENNISON ASSOCIATES LLC, a Delaware Limited Liability Company (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, as amended from time to time (the
"Advisory Agreement"), pursuant to which the Adviser has agreed to provide
investment management, advisory and administrative services to the Corporation;
and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed
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in compliance with all applicable federal and state laws governing its
operations and investments. Without limiting the foregoing, the Subadviser
represents and warrants compliance with: (a) the provisions of the Act and rules
adopted thereunder; and (b) applicable federal and state securities, commodities
and banking laws. The Subadviser further represents and warrants that to the
extent that any statements or omissions made in any Registration Statement for
shares of the corporation, or any amendment or supplement thereto, are made in
reliance upon and in conformity with information furnished by the Subadviser
expressly for use therein, such Registration Statement and any amendments or
supplements thereto will, when they become effective, conform in all material
respects to the requirements of the Securities Act of 1933 and the rules and
regulations of the Commission thereunder (the "1933 Act") and the Act and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided that the Subadviser is given an opportunity to
review such information relating to the Subadviser contained in the Registration
Statement and any amendments or supplements thereto.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions
or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with
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Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any
other applicable laws and regulations including Section 17(e) of the Act and
Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and
its affiliates or any other subadviser to the corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statement, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
5. Status of the Subadviser. The services of the Subadviser to the Adviser
and the corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
6. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request. The Adviser agrees that the Subadviser may retain
copies of records that are required to be maintained by Subadviser by applicable
rules or laws.
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The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
7. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
8. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser,
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including, but not limited to, a failure of the Adviser to provide accurate
and current information with respect to any records maintained by Adviser
or any other subadviser to a Portfolio, which records are not also
maintained by or otherwise available to the Subadviser upon reasonable
request. The adviser agrees that Subadviser shall manage the portion of the
assets of a Portfolio allocated to it as if it was a separate operating
Portfolio and shall comply with subsections (a) and (b) of Section 1 of
this Subadvisory Agreement (including, but not limited to, the investment
objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the
Code) with respect to the portion of assets of a Portfolio allocated to
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser
with respect to the portion of a Portfolio's assets not allocated to
Subadviser.
9. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
10. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
11. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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12. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
13. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
14. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
15. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Jennison Associates LLC
466 Lexington Avenue
New York, New York 10017
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ___________________________________
Name: Peter A. Harbeck
Title: President
JENNISON ASSOCIATES LLC
By: ___________________________________
Name:
Title:
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SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999 by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
LAZARD ASSET MANAGEMENT A DIVISION OF LAZARD FRERES & CO. LLC (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999 (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Advisory Agreement with the Corporation.
Pursuant to this Subadvisory Agreement and subject to the oversight and review
of the Adviser, the Subadviser will manage the investment and reinvestment of a
portion of the assets of each Portfolio listed on Schedule A attached hereto.
The Subadviser will determine in its discretion and subject to the oversight and
review of the Adviser, the securities to be purchased or sold, will provide the
Adviser with records concerning its activities which the Adviser of the
Corporation is required to maintain, and will render regular reports to the
Adviser and to officers and Directors of the Corporation concerning its
discharge of the foregoing responsibilities. The Subadviser shall discharge the
foregoing responsibilities subject to the control of the officers and the
Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies and limitations for the Portfolio set forth in
the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
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The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants (1) qualification, election
and maintenance of such election by each Portfolio to be treated as a "regulated
investment company" under Subchapter M, chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) compliance with (a) the provisions of
the Act and rules adopted thereunder; (b) applicable federal and state
securities, commodities and banking laws; and (c) the distribution requirements
necessary to avoid payment of any excise tax pursuant to Section 4982 of the
Code. The Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
Corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions
or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research
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services provided by such member of an exchange, broker or dealer viewed in
terms of either that particular transaction or the Subadviser's overall
responsibilities with respect to such Portfolio and to other clients as to which
the Subadviser exercises investment discretion. In accordance with Section 11(a)
of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the Act and Rule
17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and its
affiliates or any other subadviser to the Corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the
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form and for the period required by Rule 31a-2 under the Act, all records
relating to the investments of the Portfolio that are required to be maintained
by the Corporation pursuant to the requirements of Rule 31a-1 of the Act. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser), the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the
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Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by the Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by the Adviser
or any other subadviser to a Portfolio, which records are not also
maintained by or otherwise available to the Subadviser upon reasonable
request. The Adviser agrees that the Subadviser shall manage the portion of
the assets of a Portfolio allocated to it as if it was a separate operating
Portfolio and shall comply with subsections (a) and (b) of Section 1 of
this Subadvisory Agreement (including, but not limited to, the investment
objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the
Code) with respect to the portion of assets of a Portfolio allocated to the
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser
with respect to the portion of a Portfolio's assets not allocated to the
Subadviser. Nothing stated herein shall be deemed to waive any rights the
Adviser or the Corporation may have against the Subadviser under federal or
state securities laws.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers or shareholders, or otherwise; directors, partners, officers,
agents and shareholders of the Subadviser are or may be interested in the
Corporation as Directors, or otherwise; and the Subadviser (or any successor) is
or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
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<PAGE>
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Lazard Asset Management
a division of Lazard Freres & Co. LLC
30 Rockefeller Plaza - 58th floor
New York, NY 10020
Attn:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _____________________________________
Name: Peter A. Harbeck
Title: President
LAZARD ASSET MANAGEMENT,
A DIVISION OF LAZARD FRERES & CO. LLC
By: _____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999 by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
L. ROY PAPP & ASSOCIATES, an Arizona Partnership (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Advisory Agreement with the Corporation.
Pursuant to this Subadvisory Agreement and subject to the oversight and review
of the Adviser, the Subadviser will manage the investment and reinvestment of a
portion of the assets of each Portfolio listed on Schedule A attached hereto.
The Subadviser will determine in its discretion and subject to the oversight and
review of the Adviser, the securities to be purchased or sold, will provide the
Adviser with records concerning its activities which the Adviser of the
Corporation is required to maintain, and will render regular reports to the
Adviser and to officers and Directors of the Corporation concerning its
discharge of the foregoing responsibilities. The Subadviser shall discharge the
foregoing responsibilities subject to the control of the officers and the
Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies and limitations for the Portfolio set forth in
the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants (1) qualification, election
and maintenance of such election by each Portfolio to be treated as a "regulated
investment company" under Subchapter M, Chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) compliance with (a) the provisions of
the Act and rules adopted thereunder; (b) applicable federal and state
securities, commodities and banking laws; and (c) the distribution requirements
necessary to avoid payment of any excise tax pursuant to Section 4982 of the
Code. The Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
Corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees that it will maintain adequate professional
liability insurance coverage.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research
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<PAGE>
services provided by such member of an exchange, broker or dealer viewed in
terms of either that particular transaction or the Subadviser's overall
responsibilities with respect to such Portfolio and to other clients as to which
the Subadviser exercises investment discretion. In accordance with Section 11(a)
of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the Act and Rule
17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and its
affiliates or any other subadviser to the Corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the
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<PAGE>
form and for the period required by Rule 31a-2 under the Act, all records
relating to the investments of the Portfolio that are required to be maintained
by the Corporation pursuant to the requirements of Rule 31a-1 of the Act. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser), the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the
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<PAGE>
Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by Adviser or
any other subadviser to a Portfolio, which records are not also maintained
by or otherwise available to the Subadviser upon reasonable request. The
Adviser agrees that the Subadviser shall manage the portion of the assets
of a Portfolio allocated to it as if it was a separate operating Portfolio
and shall comply with subsections (a) and (b) of Section 1 of this
Subadvisory Agreement (including, but not limited to, the investment
objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the
Code) with respect to the portion of assets of a Portfolio allocated to the
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser
with respect to the portion of a Portfolio's assets not allocated to the
Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers or shareholders, or otherwise; directors, partners, officers,
agents and shareholders of the Subadviser are or may be interested in the
Corporation as Directors, or otherwise; and the Subadviser (or any successor) is
or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected
-5-
<PAGE>
thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: L. Roy Papp & Associates
4400 North 32nd Street - Suite 280
Phoenix, AZ 85018
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _______________________________
Name: Peter A. Harbeck
Title: President
L. ROY PAPP & ASSOCIATES
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<PAGE>
By: _______________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and MARSICO CAPITAL MANAGEMENT, LLC, a Delaware Limited Liability
Company (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland
corporation (the "Corporation"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory Agreement"),
pursuant to which the Adviser has agreed to provide investment management,
advisory and administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company
and may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Corporation. Pursuant to this Subadvisory
Agreement and subject to the oversight and review of the Adviser, the Subadviser
will manage the investment and reinvestment of a portion of the assets of each
Portfolio listed on Schedule A attached hereto. The Subadviser will determine in
its discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser of the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser represents and warrants to the Adviser that the
portion of the assets
<PAGE>
which it manages of the Portfolio set forth in Schedule A will at all times be
operated and managed in compliance with all applicable federal and state laws
governing its operations and investments. Without limiting the foregoing, the
Subadviser represents and warrants compliance with: (a) the provisions of the
Act and rules adopted thereunder; and (b) applicable federal and state
securities, commodities and banking laws. The Subadviser further represents and
warrants that to the extent that any statements or omissions made in any
Registration Statement for shares of the corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such Registration
Statement and any amendments or supplements thereto will, when they become
effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and
omissions or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions
to buy or sell securities and other investments for a portion of the assets of
each Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable
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<PAGE>
laws and regulations including Section 17(e) of the Act and Rule 17e-1
thereunder, the Subadviser may engage its affilates, the Adviser and its
affiliates or any other subadviser to the corporation and its respective
affilates, as broker-dealers or futures commission merchants to effect Portfolio
transactions in securities and other investments for a Portfolio. The Subadviser
will promptly communicate to the Adviser and to the officers and the Directors
of the Corporation such information relating to Portfolio transactions as they
may reasonably request. To the extent consistent with applicable law, the
Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affilated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affilates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled
to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser
a fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser,
the Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statement, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. (a) The services of the Subadviser to the
Adviser and the corporation are not to be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
(b) Subadviser hereby consents to and grants a non-exclusive
license for the use by the Corporation and the Adviser to the phrase "Marsico
Capital" or "Marsico Capital Management," the identifying word "Marsico" in the
name of the Portfolio and any logo or symbol authorized by the Subadviser
(collectively, the "Marsico Identification"). Such consent is conditioned upon
the employment of the Subadviser or its affiliates for the Portfolio pursuant to
the terms hereof.
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<PAGE>
Subadviser may, from time to time, use the Marsico Identification in other
connections and for other purposes, including without limitation in the names of
other investment companies, corporations or businesses that it may manage,
advise, sponsor or own or in which it may have a financial interest. Subadviser
may require the Corporation and the Adviser to cease using the Marsico
Identification if the Adviser ceases to employ Subadviser hereunder.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the Adviser,
or any governmental agency or other instrumentality having regulatory authority
over the Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser
or any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties ("disabling conduct") hereunder on the part of the Subadviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) the Subadviser shall
not be subject to liability to the Corporation or to any shareholder of the
Corporation for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the extent specified
in Section 36(b) of the Act concerning loss resulting from a beach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, the Adviser shall indemnify the Subadviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) (collectively, the
"Indemnified Parties") from any liability arising from the Subadviser's conduct
under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any an all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) breach of this Agreement by the Subadviser, or (ii) any failure by the
Subadviser to comply with the representations and warranties
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<PAGE>
set forth in Section 1 of this Agreement; provided, however, that in no case is
the Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any
acts of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii) acts of
the Subadviser which result from acts of the Adviser, including, but not limited
to, a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by or otherwise available to
the Subadviser upon reasonable request. The adviser agrees that Subadviser shall
manage the portion of the assets of a Portfolio allocated to it as if it was a
separate operating Portfolio and shall comply with subsections (a) and (b) of
Section 1 of this Subadvisory Agreement (including, but not limited to, the
investment objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the Code)
with respect to the portion of assets of a Portfolio allocated to Subadviser.
The Adviser shall indemnify the Indemnified Parties from any liability arising
from the conduct of the Adviser and any other subadviser with respect to the
portion of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are
or may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force
and effect with respect to each Portfolio until two years from the date hereof,
and from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of a penalty by the Portfolio or the Corporation,
by vote of a majority of the Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, voting
separately from any other series of the Corporation, or by the Adviser, on not
less than 30 nor more than 60 days' written notice to the Subadviser. With
respect to each Portfolio, this Agreement may be terminated by the Subadviser at
any time, without the payment of any penalty, on 90 days' written notice to the
Adviser and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
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<PAGE>
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory
Agreement by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Marsico Capital Management, LLC
1200 17th Street - Suite 1300
Denver, Colorado 80202
Attention: Barbara Japha, Esq.
President and General Counsel
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ____________________________________
Name: Peter A. Harbeck
Title: President
MARSICO CAPITAL MANAGEMENT, LLC
By: ____________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
MILLER ANDERSON & SHERRERD, LLP, a Pennsylvania limited liability partnership
(the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. The Adviser hereby engages the services of the
Subadviser in furtherance of its Investment Advisory and Management Agreement
with the Corporation. Pursuant to this Subadvisory Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of a portion of the assets of each Portfolio listed on Schedule
A attached hereto. The Subadviser will determine in its discretion and subject
to the oversight and review of the Adviser, the securities to be purchased or
sold, will provide the Adviser with records concerning its activities which the
Adviser or the Corporation is required to maintain, and will render regular
reports to the Adviser and to officers and Directors of the Corporation
concerning its discharge of the foregoing
<PAGE>
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants (1) qualification, election
and maintenance of such election by each Portfolio to be treated as a "regulated
investment company" under subchapter M, chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) compliance with (a) the provisions of
the Act and rules adopted thereunder; (b) applicable federal and state
securities, commodities and banking laws; and (c) the distribution requirements
necessary to avoid payment of any excise tax pursuant to Section 4982 of the
Code. The Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
Corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstance under which they
were made not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, the selection of broker-dealers and futures commission merchants',
and negotiation of brokerage commission and futures commission merchants' rates.
As a general matter, in executing Portfolio transactions, the Subadviser may
employ or deal with such broker-dealers or futures commission merchants as may,
in the Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the
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<PAGE>
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and operational
facilities of the firm involved, and, in the case of securities, the firm's risk
in positioning a block of securities. Subject to such policies as the Directors
may determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), the Subadviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of the Subadviser's having caused a Portfolio to pay
a member of an exchange, broker or dealer an amount of commission for effecting
a securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Subadviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer viewed in terms of
either that particular transaction or the Subadviser's overall responsibilities
with respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of the
Corporation such information relating to Portfolio transactions as they may
reasonably request. To the extent consistent with applicable law, the Subadviser
may aggregate purchase or sell orders for the Portfolio with contemporaneous
purchase or sell orders of other clients of the Subadviser or its affiliated
persons. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Subadviser
in the manner the Subadviser determines to be equitable and consistent with its
and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. The Adviser hereby acknowledges that such aggregation of orders may not
result in more favorable pricing or lower brokerage commissions in all
instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
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<PAGE>
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser as agreed upon by the
Corporation or the Adviser and the Subadviser.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Subadviser (and its officers, directors, employees,
controlling persons, shareholders and any
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<PAGE>
other person or entity affiliated with the Subadviser) the Subadviser shall not
be subject to liability to the Corporation or to any shareholder of the
Corporation for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the extent specified
in Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services.
(b) The Adviser agrees to indemnify and hold harmless the Subadviser
and its affiliates and each of their directors and officers and each
persons, if any, who controls the Subadviser within the meaning of Section
15 of the 1933 Act against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses), to which the
Subadviser or its affiliates or such directors, officers or controlling
person may become subject under the 1933 Act, under an other statute, at
common law or otherwise, which may be based upon any breach of this
Agreement by the Adviser; provided, however, that in no case is the
Adviser's indemnity in favor of any persons deemed to protect such person
against any liability to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of his, here or its duties or by reasons of his, her or its
reckless disregard of obligations and duties under this Agreement.
(c) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or its affiliates or such directors, officers or controlling person
may become subject under the 1933 Act, under other statutes, at common law
or otherwise, which may be based upon (i) breach of this Agreement by the
Subadviser, or (ii) any failure by the Subadviser to comply with the
representations and warranties set forth in Section 1 of this Agreement;
provided, however, that in no case is the Subadviser's indemnity in favor
of any person deemed to protect such other persons against any liability to
which such person would otherwise be subject by reasons of willful
misfeasance, bad faith, or gross negligence in the performance of his, her
or its duties or by reason of his, her or its reckless disregard of
obligation and duties under this Agreement.
(d) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser or (ii) acts
of the Subadviser which result from acts of the Adviser, including, but not
limited to, a failure of the Adviser to provide accurate and current
information with respect to any records maintained by Adviser or any other
subadviser to a Portfolio, which records are not also maintained by or
otherwise available to the Subadviser upon reasonable request. The Adviser
agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and
shall comply with
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<PAGE>
subsections (a) and (b) of Section I of this Subadvisory Agreement
(including, but not limited to, the investment objectives, policies and
restrictions applicable to a Portfolio and qualifications of a Portfolio as
a regulated investment company under the Code) with respect to the portion
of assets of a Portfolio allocated to Subadviser. The Adviser shall
indemnify the Indemnified Parties from any liability arising from the
conduct of the Adviser and any other subadviser with respect to the portion
of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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<PAGE>
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, PA 19428-0868
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
------------------------------------
Name: Peter A. Harbeck
Title: President
MILLER ANDERSON & SHERRERD, LLP
By:
------------------------------------
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and MONTAG & CALDWELL, INC., a Georgia corporation (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland
corporation (the "Corporation"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory Agreement"),
pursuant to which the Adviser has agreed to provide investment management,
advisory and administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company
and may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the
services of the Subadviser in furtherance of its Advisory Agreement with the
Corporation. Pursuant to this Subadvisory Agreement and subject to the oversight
and review of the Adviser, the Subadviser will manage the investment and
reinvestment of a portion of the assets of each Portfolio listed on Schedule A
attached hereto. The Subadviser will determine in its discretion and subject to
the oversight and review of the Adviser, the securities to be purchased or sold,
will provide the Adviser with records concerning its activities which the
Adviser of the Corporation is required to maintain, and will render regular
reports to the Adviser and to officers and Directors of the Corporation
concerning its discharge of the foregoing responsibilities. The Subadviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies and limitations for the Portfolio set forth in
the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the
portion of the assets which it manages of the Portfolio set forth in Schedule A
will at all times be operated and managed in compliance with all applicable
federal and state laws governing its operations and investments. Without
limiting the foregoing, the Subadviser represents and warrants (1)
qualification, election and maintenance of such election by each Portfolio to be
treated as a "regulated investment company" under Subchapter M, chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (2) compliance with
(a) the provisions of the Act and rules adopted thereunder; (b) applicable
federal and state securities, commodities and banking laws; and (c) the
distribution requirements necessary to avoid payment of any excise tax pursuant
to Section 4982 of the Code. The Subadviser further represents and warrants that
to the extent that any statements or omissions made in any Registration
Statement for shares of the Corporation, or any amendment or supplement thereto,
are made in reliance upon and in conformity with information furnished by the
Subadviser expressly for use therein, such Registration Statement and any
amendments or supplements thereto will, when they become effective, conform in
all material respects to the requirements of the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder (the "1933
Act") and the Act and will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and
omissions or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions
to buy or sell securities and other investments for a portion of the assets of
each Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research
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<PAGE>
services provided by such member of an exchange, broker or dealer viewed in
terms of either that particular transaction or the Subadviser's overall
responsibilities with respect to such Portfolio and to other clients as to which
the Subadviser exercises investment discretion. In accordance with Section 11(a)
of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the Act and Rule
17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser and its
affiliates or any other subadviser to the Corporation and its respective
affiliates, as broker-dealers or futures commission merchants to effect
Portfolio transactions in securities and other investments for a Portfolio. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Directors of the Corporation such information relating to Portfolio transactions
as they may reasonably request. To the extent consistent with applicable law,
the Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Subadviser in the manner the Subadviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such aggregation
of orders may not result in more favorable pricing or lower brokerage
commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled
to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser
a fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser,
the Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the
Adviser and the Corporation are not be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the
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form and for the period required by Rule 31a-2 under the Act, all records
relating to the investments of the Portfolio that are required to be maintained
by the Corporation pursuant to the requirements of Rule 31a-1 of the Act. Any
records required to be maintained and preserved pursuant to the provisions of
Rule 31a-1 and Rule 31a-2 promulgated under the Act which are prepared or
maintained by the Subadviser on behalf of the Corporation are the property of
the Corporation and will be surrendered promptly to the Corporation or the
Adviser on request.
The Subadviser agrees that all accounts, books and other
records maintained and preserved by it as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the Adviser,
or any governmental agency or other instrumentality having regulatory authority
over the Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser
or any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties ("disabling conduct") hereunder on the part of the Subadviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser), the Subadviser shall
not be subject to liability to the Corporation or to any shareholder of the
Corporation for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the extent specified
in Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, the Adviser shall indemnify the Subadviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) (collectively, the
"Indemnified Parties") from any liability arising from the Subadviser's conduct
under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i)
any acts of the
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<PAGE>
Adviser or any other subadviser to the Portfolio with respect to the portion of
the assets of a Portfolio not managed by Subadviser and (ii) acts of the
Subadviser which result from acts of the Adviser, including, but not limited to,
a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by or otherwise available to
the Subadviser upon reasonable request. The Adviser agrees that the Subadviser
shall manage the portion of the assets of a Portfolio allocated to it as if it
was a separate operating Portfolio and shall comply with subsections (a) and (b)
of Section 1 of this Subadvisory Agreement (including, but not limited to, the
investment objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the Code)
with respect to the portion of assets of a Portfolio allocated to the
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser with
respect to the portion of a Portfolio's assets not allocated to the Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are
or may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers or shareholders, or otherwise; directors, partners, officers,
agents and shareholders of the Subadviser are or may be interested in the
Corporation as Directors, or otherwise; and the Subadviser (or any successor) is
or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force
and effect with respect to each Portfolio until two years from the date hereof,
and from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be
terminated at any time, without payment of a penalty by the Portfolio or the
Corporation, by vote of a majority of the Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Act) of the Portfolio,
voting separately from any other series of the Corporation, or by the Adviser,
on not less than 30 nor more than 60 days' written notice to the Subadviser.
With respect to each Portfolio, this Agreement may be terminated by the
Subadviser at any time, without the payment of any penalty, on 90 days' written
notice to the Adviser and the Corporation; provided, however, that this
Agreement may not be terminated by the Subadviser unless another subadvisory
agreement has been approved by the Corporation in accordance with the Act, or
after six months' written notice, whichever is earlier. The termination of this
Agreement with respect to any Portfolio or the addition of any Portfolio to
Schedule A hereto (in the manner required by the Act) shall not affect the
continued effectiveness of this Agreement with respect to each other Portfolio
subject hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected
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<PAGE>
thereby.
13. Amendments. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Montag & Caldwell, Inc.
3343 Peachtree Road, Suite 1100
Atlanta, GA 30326-1022
Attention: Debra Bunde Comsudes
Vice President
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _____________________________________
Name: Peter A. Harbeck
Title: President
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<PAGE>
MONTAG & CALDWELL, INC.
By: _____________________________________
Name: David F. Seng
Title: Executive Vice President
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999 by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, a Delaware corporation (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. The Adviser hereby engages the services of the
Subadviser in furtherance of its Investment Advisory and Management Agreement
with the Corporation. Pursuant to this Subadvisory Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of a portion of the assets of each Portfolio listed on Schedule
A attached hereto. The Subadviser will determine in its discretion and subject
to the oversight and review of the Adviser, the securities to be purchased or
sold, will provide the Adviser with records concerning its activities which the
Adviser or the Corporation is required to maintain, and will render regular
reports to the Adviser and to officers and Directors of the Corporation
concerning its discharge of the foregoing responsibilities. The Subadviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies, and limitations for the Portfolio set forth
in the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants (1) qualification, election
and maintenance of such election by each Portfolio to be treated as a "regulated
investment company" under subchapter M, chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) compliance with (a) the provisions of
the Act and rules adopted thereunder; (b) applicable federal and state
securities, commodities and banking laws; and (c) the distribution requirements
necessary to avoid payment of any excise tax pursuant to Section 4982 of the
Code. The Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
Corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstance under which they
were made not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, the selection of broker-dealers and futures commission merchants',
and negotiation of brokerage commission and futures commission merchants' rates.
As a general matter, in executing Portfolio transactions, the Subadviser may
employ or deal with such broker-dealers or futures commission merchants as may,
in the Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
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<PAGE>
amount of commission for effecting a securities transaction in excess of the
amount ofcommission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the
Adviser and its affiliates or any other subadviser to the Corporation and its
respective affiliates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the Directors of the Corporation such information relating to
Portfolio transactions as they may reasonably request. To the extent consistent
with applicable law, the Subadviser may aggregate purchase or sell orders for
the Portfolio with contemporaneous purchase or sell orders of other clients of
the Subadviser or its affiliated persons. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
determines to be equitable and consistent with its and its affiliates' fiduciary
obligations to the Portfolio and to such other clients. The Adviser hereby
acknowledges that such aggregation of orders may not result in more favorable
pricing or lower brokerage commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser as agreed upon by the
Corporation or the Adviser and the Subadviser.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other
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<PAGE>
information with regard to their affairs and that of the Corporation as each may
reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Subadviser (and its officers, directors, employees,
controlling persons, shareholders and any other person or entity affiliated with
the Subadviser) the Subadviser shall not be subject to liability to the
Corporation or to any shareholder of the Corporation for any act or omission in
the course of, or connected with, rendering services hereunder, including
without limitation, any error of judgment or mistake of law or for any loss
suffered by any of them in connection with the matters to which this Agreement
relates, except to the extent specified in Section 36(b) of the Act concerning
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services.
(b) The Adviser agrees to indemnify and hold harmless the Subadviser
and its affiliates and each of their directors and officers and each
persons, if any, who controls the
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Subadviser within the meaning of Section 15 of the 1933 Act against any and
all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses), to which the Subadviser or its
affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under an other statute, at common law or
otherwise, which may be based upon any breach of this Agreement by the
Adviser; provided, however, that in no case is the Adviser's indemnity in
favor of any persons deemed to protect such person against any liability to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his, here
or its duties or by reasons of his, her or its reckless disregard of
obligations and duties under this Agreement.
(c) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or its affiliates or such directors, officers or controlling person
may become subject under the 1933 Act, under other statutes, at common law
or otherwise, which may be based upon (i) breach of this Agreement by the
Subadviser, or (ii) any failure by the Subadviser to comply with the
representations and warranties set forth in Section 1 of this Agreement;
provided, however, that in no case is the Subadviser's indemnity in favor
of any person deemed to protect such other persons against any liability to
which such person would otherwise be subject by reasons of willful
misfeasance, bad faith, or gross negligence in the performance of his, her
or its duties or by reason of his, her or its reckless disregard of
obligation and duties under this Agreement.
(d) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser or (ii) acts
of the Subadviser which result from acts of the Adviser, including, but not
limited to, a failure of the Adviser to provide accurate and current
information with respect to any records maintained by Adviser or any other
subadviser to a Portfolio, which records are not also maintained by or
otherwise available to the Subadviser upon reasonable request. The Adviser
agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and
shall comply with subsections (a) and (b) of Section I of this Subadvisory
Agreement (including, but not limited to, the investment objectives,
policies and restrictions applicable to a Portfolio and qualifications of a
Portfolio as a regulated investment company under the Code) with respect to
the portion of assets of a Portfolio allocated to Subadviser. The Adviser
shall indemnify the Indemnified Parties from any liability arising from the
conduct of the Adviser and any other subadviser with respect to the portion
of a Portfolio's assets not allocated to Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
-5-
<PAGE>
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
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<PAGE>
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
-------------------------------------
Name: Peter A. Harbeck
Title: President
MORGAN STANLEY ASSET MANAGEMENT INC.
By:
-------------------------------------
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999 by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
NEUBERGER&BERMAN, LLC, a New York limited partnership (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to a portion of the investment series of the Corporation
listed on Schedule A attached hereto (the "Portfolio"), and the Subadviser is
willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. The Adviser hereby engages the services of the
Subadviser in furtherance of its Investment Advisory and Management Agreement
with the Corporation. Pursuant to this Subadvisory Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of a portion of the assets of each Portfolio listed on Schedule
A attached hereto. The Subadviser's responsibility with regard to the management
of assets shall commence and end as it receives notice that assets had been
allocated to or removed from the Subadviser's management. The daily report to
the Subadviser of the custodian for the Portfolio showing the net increase or
decrease in the assets allocated to the Subadviser for management shall normally
constitute such notice. The Subadviser will determine
<PAGE>
in its discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser or the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information which are communicated to the
Subadviser, and (b) applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants its management of such portion
of the assets will meet requirements for (1) qualification, election and
maintenance of such election by the Portfolio of which it is part to be treated
as a "regulated investment company" under subchapter M, chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (2) compliance with
(a) the provisions of the Act and rules adopted thereunder; (b) applicable
federal and state securities, commodities and banking laws; and (c) the
distribution requirements necessary to avoid payment of any excise tax pursuant
to Section 4982 of the Code. The Subadviser further represents and warrants that
to the extent that any statements or omissions made in any Registration
Statement for shares of the Corporation, or any amendment or supplement thereto,
are made in reliance upon and in conformity with information furnished by the
Subadviser expressly for use therein, such Registration Statement and any
amendments or supplements thereto will, when they become effective, conform in
all material respects to the requirements of the Securities Act of 1933 and the
rules and regulations of the Commission thereunder (the "1933 Act") and the Act
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is responsible for and shall make
all investment decisions and shall enter all orders to buy or sell securities
and other investments using such broker-dealers and futures commission
merchants' as it shall select. The Subadviser is responsible for the negotiation
of brokerage commission and futures commission merchants' rates for such
transactions. As a general matter, in effecting portfolio transactions, the
Subadviser may employ or deal with such broker-dealers or futures commission
merchants as may, in the Subadviser's best judgement, provide prompt and
reliable execution of the transactions at favorable prices and reasonable
commission rates. In selecting such broker-dealers or futures commission
<PAGE>
merchants, the Subadviser shall consider all relevant factors including price
(including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of execution, the
execution capabilities and operational facilities of the firm involved, and, in
the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Subadviser's having caused a Portfolio to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Subadviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular transaction
or the Subadviser's overall responsibilities with respect to such Portfolio and
to other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage itself, its
affiliates, the Adviser and its affiliates or any other subadviser to the
Corporation and its respective affiliates, as broker-dealers or futures
commission merchants to effect Portfolio transactions in securities and other
investments for a Portfolio. The Subadviser will promptly communicate to the
Adviser and to the officers and the Directors of the Corporation such
information relating to Portfolio transactions as they may reasonably request.
To the extent consistent with applicable law, the Subadviser may aggregate
purchase or sell orders for the Portfolio with contemporaneous purchase or sell
orders of other clients of the Subadviser or its affiliated persons. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser determines to be equitable and consistent with its and its
affiliates' fiduciary obligations to the Portfolio and to such other clients.
The Adviser hereby acknowledges that such aggregation of orders may not result
in more favorable pricing or lower brokerage commissions in all instances and
that in some instances the price paid or received may be less favorable and/or
the number of shares purchased or sold may be less than the number of shares
which would otherwise be purchased or sold for such portion of the assets.
3. Compensation of the Subadviser. Aside from commissions on securities
transactions effected by the Subadviser or its affiliates in its capacity as
broker, the Subadviser shall not be entitled to receive any payment from the
Corporation and shall look solely and exclusively to the Adviser for payment of
all fees for the services rendered, facilities furnished and expenses paid by it
hereunder. As full compensation for the Subadviser under this Agreement, the
Adviser agrees to pay to the Subadviser a fee at the annual rates set forth in
Schedule A hereto with respect to the portion of the assets managed by the
Subadviser for each Portfolio listed thereon. Such fee shall be
-3-
<PAGE>
accrued daily and paid monthly as soon as practicable after the end of each
month (i.e., the applicable annual fee rate divided by 365 applied to each prior
days' net assets in order to calculate the daily accrual). If the Subadviser
shall provide its services under this Agreement for less than the whole of any
month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request except that Subadviser may keep and use copies thereof
to comply with its legal ad regulatory obligations including its record keeping
obligations with regard to performance statistics.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its
-4-
<PAGE>
affiliates in any advertising or promotional materials without the prior
approval of the Subadviser, which approval shall not be unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) and except when such
exculpation is otherwise prohibited as a matter of law, the Subadviser shall not
be subject to liability to the Corporation or to any shareholder of the
Corporation for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in connection
with the matters to which this Agreement relates, except to the extent specified
in Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, or except as otherwise prohibited as a matter of law, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case shall the Subadviser's
indemnity in favor of any person indemnify such other person against any
liability to which such person would otherwise be subject a) by reason of
willful misfeasance, bad faith, or gross negligence in the performance of
his, her or its duties or b) by reason of his, her or its reckless
disregard of obligation and duties under this Agreement or c) for which
indemnification or exculpation is not permitted as a matter of law.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by Adviser or
any other subadviser to a Portfolio, which records are not also maintained
by or otherwise available to the Subadviser upon reasonable request. The
Adviser agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating Portfolio and
shall comply with subsections (a) and (b) of
-5-
<PAGE>
Section I of this Subadvisory Agreement (including, but not limited to, the
investment objectives, policies and restrictions applicable to a Portfolio
and qualifications of a Portfolio as a regulated investment company under
the Code) with respect to the portion of assets of a Portfolio allocated to
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser
with respect to the portion of a Portfolio's assets not allocated to
Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
-6-
<PAGE>
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-0001
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
-------------------------------------
Name: Peter A. Harbeck
Title: President
NEUBERGER&BERMAN, LLC
By:
-------------------------------------
Name:
Title:
-8-
<PAGE>
-9-
<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
ROWE PRICE-FLEMING INTERNATIONAL, INC., a Maryland corporation (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended;
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services; and
WHEREAS, one-third of all purchases into the Portfolio listed on Schedule A
attached hereto and one-third of all redemptions from such Portfolio will be
allocated to the Subadviser;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. The Adviser hereby appoints the Subadviser, in
furtherance of its Investment Advisory and Management Agreement with the
Corporation, to manage the investment and reinvestment of a portion of the
assets of each Portfolio listed on Schedule A attached hereto. The Subadviser
will determine in its discretion and subject to the oversight and review of the
Adviser, the securities to be purchased or sold, will provide the Adviser with
records concerning the Portfolio's investment activity which the Subadviser is
required to maintain in connection therewith, and will render regular reports to
the Adviser and to officers and Directors of the Corporation concerning its
discharge of the foregoing responsibilities. The Subadviser shall discharge the
foregoing responsibilities subject to the control of the officers and the
Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies, and
<PAGE>
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser agrees that it will operate and manage the portion of the
assets allocated to it of each of the Portfolio set forth in Schedule A at all
times in compliance with applicable federal and state laws governing its
operations and investments. The Subadviser agrees to manage such allocated
assets in the Portfolio in compliance with (a) the provisions of the Act and
rules adopted thereunder; (b) the diversification requirements specified in
Subchapter M, Chapter 1 of the Code; and (c) applicable federal and state
securities, commodities and banking laws, provided that the Adviser shall
provide the Subadviser with written direction as to the requirements of
applicable federal and state banking laws. For purposes of the preceding
sentence, disclosure in the Corporation's prospectus and/or statement of
additional information of applicable state insurance laws and regulations and
applicable federal and state banking laws and regulations shall constitute
"written direction" thereof. The Subadviser represents and warrants that to the
extent that any statements or omissions regarding the Subadviser made in any
Registration Statement for the shares of the Corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with written
information furnished by the Subadviser expressly for use therein, such
Registration Statement and any amendments or supplements thereto will, when they
become effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. In
addition, the Adviser represents and warrants that the Registration Statement
for the shares of the Corporation, or any amendment or supplement thereto, other
than statements or omissions regarding the Subadviser provided in writing by the
Subadviser expressly for use therein, will, when they become effective, conform
in all material respects to the requirements of the 1933 Act and the Act and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
The Subadviser accepts such appointment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the
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transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and operational
facilities of the firm involved, and, in the case of securities, the firm's risk
in positioning a block of securities. Subject to such policies as the Directors
may determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), the Subadviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of the Subadviser's having caused a Portfolio to pay
a member of an exchange, broker or dealer an amount of commission for effecting
a securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Subadviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer viewed in terms of
either that particular transaction or the Subadviser's overall responsibilities
with respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of the
Corporation such information relating to Portfolio transactions as may be
mutually agreed with the Subadviser.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay the Subadviser a fee
at the annual rates set forth in Schedule A hereto with respect to the portion
of the assets managed by the Subadviser for each Portfolio listed thereon. Such
fee shall be accrued daily and paid monthly as soon as practicable after the end
of each month (i.e., the applicable annual fee rate divided by 365 applied to
each prior days' net assets in order to calculate the daily accrual), but in no
event later than the 15th day of the following month. If the Subadviser shall
provide its services under this Agreement for less than the whole of any month,
the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
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<PAGE>
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Services to Other Clients. Nothing contained in this Agreement shall
limit or restrict (i) the freedom of the Subadviser, or any affiliated persons
thereof, to render investment management and corporate administrative services
to other investment companies, to act as investment manager or investment
counselor to other persons, firms, or corporations, or to engage in any other
business activities, or (ii) the right of any director, officer, or employee of
the Subadviser, who may also be a director, officer, or employee of the Company,
to engage in any other business or to devote his or her time and attention in
part to the management or other aspects of any other business, whether of a
similar nature or a dissimilar nature.
8. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of the
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, or any governmental agency or other
instrumentality having regulatory authority over the Corporation, and upon
reasonable request and during normal business hours the Corporation's auditors,
the Corporation or any representative of the Corporation, the Adviser.
9. Reference to the Subadviser. Subject to the terms of a separate Logo
Licensing Agreement, neither the Corporation nor the Adviser or any affiliate or
agent thereof shall make reference to or use the name of the Subadviser or any
of its affiliates in any advertising or promotional materials without the prior
approval of the Subadviser, which approval shall not be unreasonably withheld.
10. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in
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connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct, the Adviser shall indemnify the
Subadviser (and its officers, directors, partners, agents, employees,
controlling persons, shareholders and any other person or entity affiliated with
the Subadviser) (collectively, the "Indemnified Parties") from any liability
arising from the Subadviser's conduct under this Agreement. Subadviser hereby
indemnifies, defends and protects Adviser and holds Adviser harmless, from and
against any and all liability arising out of Subadviser's disabling conduct.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or material breach
of this Agreement by the Subadviser arising from the Subadviser's disabling
conduct, or (ii) any failure by the Subadviser to comply with the
representations and warranties set forth in Section 1 of this Agreement;
provided, however, that in no case is the Subadviser's indemnity in favor
of any person deemed to protect such other persons against any liability to
which such person would otherwise be subject by reasons of willful
misfeasance, bad faith, or gross negligence in the performance of his, her
or its duties or by reason of his, her or its reckless disregard of
obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by the Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by the Adviser
or any other subadviser to a Portfolio, which records are not also
maintained by the Subadviser. The Adviser agrees that the Subadviser shall
manage the portion of the assets of a Portfolio allocated to it as if it
was a separate operating Portfolio and shall comply with subsections (a)
and (b) of Section I of this Subadvisory Agreement (including, but not
limited to, the investment objectives, policies and restrictions applicable
to a Portfolio and qualifications of a Portfolio as a regulated investment
company under the Code) with respect to the portion of assets of a
Portfolio allocated to the Subadviser as if it was a separate operating
Portfolio. The Adviser shall defend, indemnify and hold harmless the
Indemnified Parties from any liability arising from the conduct of the
Adviser or other subadviser with respect to the portion of a Portfolio's
assets not allocated to the Subadviser.
11. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
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<PAGE>
12. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. In the event of such a termination, the
Adviser will use its best efforts, and cause the Corporation to use its best
efforts, to engage another subadviser for the Portfolio as soon as possible.
Notwithstanding the foregoing, the Subadviser may terminate the Agreement on 60
days' written notice to the Adviser and the Corporation, in the event of a
breach of this Agreement by the Adviser. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
13. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
14. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
15. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
16. Separate Series. Pursuant to the provisions of the Articles of
Incorporation, each Portfolio is a separate series of the Corporation, and all
debts, liabilities, obligations and expenses
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<PAGE>
of a particular Portfolio shall be enforceable only against the assets of that
Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
18. Notices. All notices shall be in writing and deemed properly given when
delivered or express delivery service by United States certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
Subadviser:
with a copy to:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
----------------------------------
Name: Peter A. Harbeck
Title: President
ROWE PRICE-FLEMING INTERNATIONAL, INC.
By:
----------------------------------
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
T. ROWE PRICE ASSOCIATES, INC., a Maryland corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended;
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services; and
WHEREAS, one-third of all purchases into the Portfolios listed on Schedule
A attached hereto and one-third of all redemptions from such Portfolio will be
allocated to the Subadviser;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby appoints the
Subadviser, in furtherance of its Investment Advisory and Management Agreement
with the Corporation, to manage the investment and reinvestment of a portion of
the assets of each Portfolio listed on Schedule A attached hereto. The
Subadviser will determine in its discretion and subject to the oversight and
review of the Adviser, the securities to be purchased or sold, will provide the
Adviser with records concerning the Portfolio's investment activity which the
Subadviser is required to maintain in connection therewith, and will render
regular reports to the Adviser and to officers and Directors of the Corporation
concerning its discharge of the foregoing responsibilities. The Subadviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time
<PAGE>
to time establish, and in compliance with (a) the objectives, policies, and
limitations for the Portfolio set forth in the Corporation's current prospectus
and statement of additional information, and (b) applicable laws and
regulations.
The Subadviser agrees that it will operate and manage the portion of the
assets allocated to it of each of the Portfolio set forth in Schedule A at all
times in compliance with applicable federal and state laws governing its
operations and investments. The Subadviser agrees to manage such allocated
assets in the Portfolio in compliance with (a) the provisions of the Act and
rules adopted thereunder; (b) the diversification requirements specified in
Subchapter M, Chapter 1 of the Code; and (c) applicable federal and state
securities, commodities and banking laws, provided that the Adviser shall
provide the Subadviser with written direction as to the requirements of
applicable federal and state banking laws. For purposes of the preceding
sentence, disclosure in the Corporation's prospectus and/or statement of
additional information of applicable state insurance laws and regulations and
applicable federal and state banking laws and regulations shall constitute
"written direction" thereof. The Subadviser represents and warrants that to the
extent that any statements or omissions regarding the Subadviser made in any
Registration Statement for the shares of the Corporation, or any amendment or
supplement thereto, are made in reliance upon and in conformity with written
information furnished by the Subadviser expressly for use therein, such
Registration Statement and any amendments or supplements thereto will, when they
become effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. In
addition, the Adviser represents and warrants that the Registration Statement
for the shares of the Corporation, or any amendment or supplement thereto, other
than statements or omissions regarding the Subadviser provided in writing by the
Subadviser expressly for use therein, will, when they become effective, conform
in all material respects to the requirements of the 1933 Act and the Act and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
The Subadviser accepts such appointment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions
or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the
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<PAGE>
Subadviser may employ or deal with such broker-dealers or futures commission
merchants as may, in the Subadviser's best judgement, provide prompt and
reliable execution of the transactions at favorable prices and reasonable
commission rates. In selecting such broker-dealers or futures commission
merchants, the Subadviser shall consider all relevant factors including price
(including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of execution, the
execution capabilities and operational facilities of the firm involved, and, in
the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Subadviser's having caused a Portfolio to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Subadviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular transaction
or the Subadviser's overall responsibilities with respect to such Portfolio and
to other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the
Adviser and its affiliates or any other subadviser to the Corporation and its
respective affiliates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the Directors of the Corporation such information relating to
Portfolio transactions as may be mutually agreed with the Subadviser.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay the Subadviser a fee
at the annual rates set forth in Schedule A hereto with respect to the portion
of the assets managed by the Subadviser for each Portfolio listed thereon. Such
fee shall be accrued daily and paid monthly as soon as practicable after the end
of each month (i.e., the applicable annual fee rate divided by 365 applied to
each prior days' net assets in order to calculate the daily accrual), but in no
event later than the 15th day of the following month. If the Subadviser shall
provide its services under this Agreement for less than the whole of any month,
the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and
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<PAGE>
other services. Such office facilities, equipment, personnel and services shall
be provided for or rendered by the Subadviser and billed to the Corporation or
the Adviser at the Subadviser's cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Services to Other Clients. Nothing contained in this Agreement shall
limit or restrict (i) the freedom of the Subadviser, or any affiliated persons
thereof, to render investment management and corporate administrative services
to other investment companies, to act as investment manager or investment
counselor to other persons, firms, or corporations, or to engage in any other
business activities, or (ii) the right of any director, officer, or employee of
the Subadviser, who may also be a director, officer, or employee of the Company,
to engage in any other business or to devote his or her time and attention in
part to the management or other aspects of any other business, whether of a
similar nature or a dissimilar nature.
8. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of the
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, or any governmental agency or other
instrumentality having regulatory authority over the Corporation, and upon
reasonable request and during normal business hours the Corporation's auditors,
the Corporation or any representative of the Corporation, the Adviser.
9. Reference to the Subadviser. Subject to the terms of a separate Logo
Licensing Agreement, neither the Corporation nor the Adviser or any affiliate or
agent thereof shall make reference to or use the name of the Subadviser or any
of its affiliates in any advertising or
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<PAGE>
promotional materials without the prior approval of the Subadviser, which
approval shall not be unreasonably withheld.
10. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
Subadviser hereby indemnifies, defends and protects Adviser and holds Adviser
harmless, from and against any and all liability arising out of Subadviser's
disabling conduct.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or material breach
of this Agreement by the Subadviser arising from the Subadviser's disabling
conduct, or (ii) any failure by the Subadviser to comply with the
representations and warranties set forth in Section 1 of this Agreement;
provided, however, that in no case is the Subadviser's indemnity in favor
of any person deemed to protect such other persons against any liability to
which such person would otherwise be subject by reasons of willful
misfeasance, bad faith, or gross negligence in the performance of his, her
or its duties or by reason of his, her or its reckless disregard of
obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by the Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by the Adviser
or any other subadviser to a Portfolio, which records are not also
maintained by the Subadviser. The Adviser agrees that the Subadviser shall
manage the portion of the assets of a Portfolio allocated to it as if it
was a separate operating Portfolio and shall comply with subsections (a)
and (b) of Section I of this Subadvisory Agreement (including, but not
limited to, the investment objectives, policies and restrictions applicable
to a
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<PAGE>
Portfolio and qualifications of a Portfolio as a regulated investment
company under the Code) with respect to the portion of assets of a
Portfolio allocated to the Subadviser as if it was a separate operating
Portfolio. The Adviser shall defend, indemnify and hold harmless the
Indemnified Parties from any liability arising from the conduct of the
Adviser or other subadviser with respect to the portion of a Portfolio'
assets not allocated to the Subadviser.
11. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
12. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. In the event of such a termination, the
Adviser will use its best efforts, and cause the Corporation to use its best
efforts, to engage another subadviser for the Portfolio as soon as possible.
Notwithstanding the foregoing, the Subadviser may terminate the Agreement on 60
days' written notice to the Adviser and the Corporation, in the event of a
breach of this Agreement by the Adviser. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
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<PAGE>
13. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
14. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
15. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
16. Separate Series. Pursuant to the provisions of the Articles of
Incorporation, each Portfolio is a separate series of the Corporation, and all
debts, liabilities, obligations and expenses of a particular Portfolio shall be
enforceable only against the assets of that Portfolio and not against the assets
of any other Portfolio or of the Corporation as a whole.
18. Notices. All notices shall be in writing and deemed properly given when
delivered or express delivery service by United States certified or registered
mail, return receipt requested, postage prepaid, addressed as follows:
Subadviser: T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 20202
Attention: John H. Cammack
Vice President
with a copy to: T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 20202
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
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<PAGE>
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: ________________________________
Name: Peter A. Harbeck
Title: President
T. ROWE PRICE ASSOCIATES, INC.
By: ________________________________
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
WARBURG, PINCUS COUNSELLORS, INC., a Delaware corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement") pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. The Adviser hereby engages the services of the
Subadviser in furtherance of its Investment Advisory and Management Agreement
with the Corporation. Pursuant to this Subadvisory Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of a portion of the assets of each Portfolio listed on Schedule
A attached hereto. The Subadviser will determine in its discretion and subject
to the oversight and review of the Adviser, the securities to be purchased or
sold, will provide the Adviser with records concerning its activities which the
Adviser or the Corporation is required to maintain, and will render regular
reports to the Adviser and to officers and Directors of the Corporation
concerning its discharge of the foregoing responsibilities. The Subadviser shall
<PAGE>
discharge the foregoing responsibilities subject to the control of the officers
and the Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish and communicate to
Subadviser, and in compliance with (a) the objectives, policies, and limitations
for the Portfolio set forth in the Corporation's current prospectus and
statement of additional information as provided to Subadviser, and (b)
applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that the portion of
each Portfolio set forth in Schedule A managed by it will at all times be
operated and managed in compliance with all applicable federal and state laws
governing its operations and investments. Without limiting the foregoing and
subject to Section 9(c) hereof, the Subadviser represents and warrants (1) that
the management of the assets of a Portfolio managed by it will be designed to
achieve qualification by each Portfolio to be treated as a "regulated investment
company" under subchapter M, chapter 1 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (2) compliance with (a) the provisions of the Act and
rules adopted thereunder that relate to the investment of Portfolio assets,
including depositing those assets in custody with institutions designated by the
Corporation; and (b) applicable federal and state securities and commodities
laws (other than state securities laws relating to the amount of Portfolio
shares that may be sold in a particular state); provided that for purposes of
Section 17(a), (d) and (e), Subadviser shall effect compliance only in relation
to affiliated persons identified to it by the Adviser and its own affiliates.
The Subadviser further represents and warrants that only with respect to any
statements or omissions made in any Registration Statement for shares of the
Corporation, or any amendment or supplement thereto, made in reliance upon and
in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for each Portfolio, broker-dealers
and futures commission merchants' selection, and negotiation of brokerage
commission and futures commission merchants' rates. As a general matter, in
executing Portfolio transactions, the Subadviser may employ or deal with such
broker-dealers or futures commission merchants as may, in the Subadviser's best
judgement, provide prompt and reliable execution of the transactions at
favorable prices and reasonable commission rates. In selecting such
broker-dealers or futures commission merchants, the Subadviser shall consider
all relevant factors including price (including the applicable brokerage
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<PAGE>
commission, dealer spread or futures commission merchant rate), the size of the
order, the nature of the market for the security or other investment, the timing
of the transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and operational
facilities of the firm involved, and, in the case of securities, the firm's risk
in positioning a block of securities. Subject to such policies as the Directors
may determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), the Subadviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of the Subadviser's having caused a Portfolio to pay
a member of an exchange, broker or dealer an amount of commission for effecting
a securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Subadviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer viewed in terms of
either that particular transaction or the Subadviser's overall responsibilities
with respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of the
Corporation such information relating to Portfolio transactions as they may
reasonably request. To the extent consistent with applicable law, the Subadviser
may aggregate purchase or sell orders for the Portfolio with contemporaneous
purchase or sell orders of other clients of the Subadviser or its affiliated
persons. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Subadviser
in the manner the Subadviser determines to be equitable and consistent with its
and its affiliates' fiduciary obligations to the Portfolio and to such other
clients. The Adviser hereby acknowledges that such aggregation of orders may not
result in more favorable pricing or lower brokerage commissions in all
instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
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<PAGE>
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not to be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser) the Subadviser shall not
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<PAGE>
be subject to liability to the Adviser, its officers, directors, agents,
employees, controlling persons or shareholders or to the Corporation or to any
shareholder of the Corporation for any act or omission in the course of, or
connected with, rendering services hereunder, including without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct, the Adviser shall indemnify the
Subadviser (and its officers, directors, partners, agents, employees,
controlling persons, shareholders and any other person or entity affiliated with
the Subadviser) (collectively, the "Indemnified Parties") from any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) arising from the Subadviser's providing services under this
Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or its affiliates or such directors, officers or controlling person
may become subject under the 1933 Act, under other statutes, at common law
or otherwise, which may be based upon breach of this Agreement by the
Subadviser; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
(c) The Subadviser shall not be liable to the Adviser its officers,
directors, agents, employees, controlling persons or shareholders or to the
Corporation or its shareholders for (i) any acts of the Adviser or any
other subadviser to the Portfolio with respect to the portion of the assets
of a Portfolio not managed by Subadviser and (ii) acts of the Subadviser
which result from or are based upon acts of the Adviser, including, but not
limited to, a failure of the Adviser to provide accurate and current
information with respect to any records maintained by Adviser or any other
subadviser to a Portfolio, which records are not also maintained by the
Subadviser or, to the extent such records relate to the portion of the
assets managed by the Subadviser, otherwise available to the Subadviser
upon reasonable request. The Adviser agrees that Subadviser shall manage
the portion of the assets of a Portfolio allocated to it as if it was a
separate operating portfolio and shall comply with subsections (a) and (b)
of Section I of this Subadvisory Agreement (including, but not limited to,
the investment objectives, policies and restrictions applicable to a
Portfolio and qualifications of a Portfolio as a regulated investment
company under the Code) only with respect to the portion of assets of a
Portfolio allocated to Subadviser. The Adviser shall indemnify the
Indemnified Parties from any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) arising from
the conduct of the Adviser, the Corporation and
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<PAGE>
any other subadviser with respect to the portion of a Portfolio's assets
not allocated to Subadviser and with respect to any other portfolio of the
Corporation.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested in
the Corporation as Directors, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation. The termination of this Agreement with respect to any
Portfolio or the addition of any Portfolio to Schedule A hereto (in the manner
required by the Act) shall not affect the continued effectiveness of this
Agreement with respect to each other Portfolio subject hereto. This Agreement
shall automatically terminate in the event of its assignment (as defined by the
Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. This Agreement constitutes the entire Agreement between
the parties hereto. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Survival. Section 9 and the right to receive amounts due under Section
3 shall survive termination of this Agreement.
14. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
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<PAGE>
15. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
16. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
17. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Warburg, Pincus Counsellors, Inc.
335 Madison Avenue, 15th Floor
New York, NY 10017
Attention: Brady T. Lipp
with a copy to:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
--------------------------------
Name: Peter A. Harbeck
Title: President
WARBURG, PINCUS COUNSELLORS, INC.
By:
--------------------------------
Name:
Title:
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<PAGE>
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
WELLINGTON MANAGEMENT COMPANY, LLP, a Massachusetts general partnership (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and Style Select Series, Inc., a Maryland corporation
(the "Corporation"), have entered into an Investment Advisory and Management
Agreement dated as of January 1, 1999, (the "Advisory Agreement"), pursuant to
which the Adviser has agreed to provide investment management, advisory and
administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of common stock, par value $.0001 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish investment
advisory services to the investment series of the Corporation listed on Schedule
A attached hereto (the "Portfolio"), and the Subadviser is willing to furnish
such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Subadviser. (a) The Adviser hereby engages the services of
the Subadviser in furtherance of its Advisory Agreement with the Corporation.
Pursuant to this Subadvisory Agreement and subject to the oversight and review
of the Adviser, the Subadviser will manage the investment and reinvestment of a
portion of the assets of each Portfolio listed on Schedule A attached hereto.
The Subadviser will determine in its discretion and subject to the oversight and
review of the Adviser, the securities to be purchased or sold, will provide the
Adviser with records concerning its activities which the Adviser of the
Corporation is required to maintain, and will render regular reports to the
Adviser and to officers and Directors of the Corporation concerning its
discharge of the foregoing responsibilities. The Subadviser shall discharge the
foregoing responsibilities subject to the control of the officers and the
Directors of the Corporation and in compliance with such policies as the
Directors of the Corporation may from time to time establish, and in compliance
with (a) the objectives, policies and limitations for the Portfolio set forth in
the Corporation's current prospectus and statement of additional information,
and (b) applicable laws and regulations.
<PAGE>
The Subadviser represents and warrants to the Adviser that the portion of
the assets which it manages of the Portfolio set forth in Schedule A will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing, the Subadviser represents and warrants (1) qualification, election
and maintenance of such election by each Portfolio to be treated as a "regulated
investment company" under Subchapter M, chapter 1 of the Internal Revenue Code
of 1986, as amended (the "Code"), and (2) compliance with (a) the provisions of
the Act and rules adopted thereunder; (b) applicable federal and state
securities, commodities and banking laws; and (c) the distribution requirements
necessary to avoid payment of any excise tax pursuant to Section 4982 of the
Code. The Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for shares of the
Corporation, or any amendment or supplement thereto, are made in reliance upon
and in conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own expense, to
render the services set forth herein and to provide the office space,
furnishings, equipment and personnel required by it to perform such services on
the terms and for the compensation provided in this Agreement.
(b) The Subadviser agrees to maintain a level of errors and omissions
or professional liability insurance coverage that is from time to time
satisfactory to the Adviser.
2. Portfolio Transactions. The Subadviser is responsible for decisions to
buy or sell securities and other investments for a portion of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Subadviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and, in the case
of securities, the firm's risk in positioning a block of securities. Subject to
such policies as the Directors may determine and, consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that
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<PAGE>
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member of an exchange, broker
or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the
Adviser and its affiliates or any other subadviser to the Corporation and its
respective affiliates, as broker-dealers or futures commission merchants to
effect Portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the Directors of the Corporation such information relating to
Portfolio transactions as they may reasonably request. To the extent consistent
with applicable law, the Subadviser may aggregate purchase or sell orders for
the Portfolio with contemporaneous purchase or sell orders of other clients of
the Subadviser or its affiliated persons. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
determines to be equitable and consistent with its and its affiliates' fiduciary
obligations to the Portfolio and to such other clients. The Adviser hereby
acknowledges that such aggregation of orders may not result in more favorable
pricing or lower brokerage commissions in all instances.
3. Compensation of the Subadviser. The Subadviser shall not be entitled to
receive any payment from the Corporation and shall look solely and exclusively
to the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the
Subadviser under this Agreement, the Adviser agrees to pay to the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to the
portion of the assets managed by the Subadviser for each Portfolio listed
thereon. Such fee shall be accrued daily and paid monthly as soon as practicable
after the end of each month (i.e., the applicable annual fee rate divided by 365
applied to each prior days' net assets in order to calculate the daily accrual).
If the Subadviser shall provide its services under this Agreement for less than
the whole of any month, the foregoing compensation shall be prorated.
4. Other Services. At the request of the Corporation or the Adviser, the
Subadviser in its discretion may make available to the Corporation, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Corporation or the Adviser at the Subadviser's
cost.
5. Reports. The Corporation, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. Status of the Subadviser. The services of the Subadviser to the Adviser
and the Corporation are not be deemed exclusive, and the Subadviser shall be
free to render similar services to others so long as its services to the
Corporation are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any way
or otherwise be deemed an agent of the Corporation.
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<PAGE>
7. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of the
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by the
Securities and Exchange Commission, the Corporation's auditors, the Corporation
or any representative of the Corporation, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the
Corporation.
8. Reference to the Subadviser. Neither the Corporation nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
9. Liability of the Subadviser. (a) In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Subadviser), the Subadviser shall not be
subject to liability to the Corporation or to any shareholder of the Corporation
for any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of law
or for any loss suffered by any of them in connection with the matters to which
this Agreement relates, except to the extent specified in Section 36(b) of the
Act concerning loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services. Except for such disabling conduct, the
Adviser shall indemnify the Subadviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Subadviser) (collectively, the "Indemnified Parties")
from any liability arising from the Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person,
if any, who controls the Adviser within the meaning of Section 15 of the
1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or
its affiliates or such directors, officers or controlling person may become
subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act or breach of this
Agreement by the Subadviser, or (ii) any failure by the Subadviser to
comply with the representations and warranties set forth in Section 1 of
this Agreement; provided, however, that in no case is the Subadviser's
indemnity in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
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<PAGE>
(c) The Subadviser shall not be liable to the Adviser for (i) any acts
of the Adviser or any other subadviser to the Portfolio with respect to the
portion of the assets of a Portfolio not managed by Subadviser and (ii)
acts of the Subadviser which result from acts of the Adviser, including,
but not limited to, a failure of the Adviser to provide accurate and
current information with respect to any records maintained by Adviser or
any other subadviser to a Portfolio, which records are not also maintained
by or otherwise available to the Subadviser upon reasonable request. The
Adviser agrees that the Subadviser shall manage the portion of the assets
of a Portfolio allocated to it as if it was a separate operating Portfolio
and shall comply with subsections (a) and (b) of Section 1 of this
Subadvisory Agreement (including, but not limited to, the investment
objectives, policies and restrictions applicable to a Portfolio and
qualifications of a Portfolio as a regulated investment company under the
Code) with respect to the portion of assets of a Portfolio allocated to the
Subadviser. The Adviser shall indemnify the Indemnified Parties from any
liability arising from the conduct of the Adviser and any other subadviser
with respect to the portion of a Portfolio's assets not allocated to the
Subadviser.
10. Permissible Interests. Directors and agents of the Corporation are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers or shareholders, or otherwise; directors, partners, officers,
agents and shareholders of the Subadviser are or may be interested in the
Corporation as Directors, or otherwise; and the Subadviser (or any successor) is
or may be interested in the Corporation in some manner.
11. Term of the Agreement. This Agreement shall continue in full force and
effect with respect to each Portfolio until two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those Directors of
the Corporation who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the Directors of the Corporation or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated at any
time, without payment of a penalty by the Portfolio or the Corporation, by vote
of a majority of the Directors, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Corporation, or by the Adviser, on not less than 30
nor more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Corporation; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Corporation in accordance with the Act, or after six months'
written notice, whichever is earlier. The termination of this Agreement with
respect to any Portfolio or the addition of any Portfolio to Schedule A hereto
(in the manner required by the Act) shall not affect the continued effectiveness
of this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Corporation and the Adviser is terminated.
12. Severability. If any provision of this Agreement shall be held or made
invalid by
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<PAGE>
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in writing,
but the consent of the Corporation must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the Act. To the
extent the applicable laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the Act, the latter shall
control.
15. Separate Series. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is a
separate series of the Corporation, and all debts, liabilities, obligations and
expenses of a particular Portfolio shall be enforceable only against the assets
of that Portfolio and not against the assets of any other Portfolio or of the
Corporation as a whole.
16. Notices. All notices shall be in writing and deemed properly given when
delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
Subadviser: Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Attn:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: _______________________________
Name: Peter A. Harbeck
Title: President
WELLINGTON MANAGEMENT COMPANY, LLP
By: _______________________________
Name:
Title:
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<PAGE>
STYLE SELECT SERIES, INC.
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT is dated as of January 1, 1999, by and between
STYLE SELECT SERIES, INC., a Maryland corporation (the "Corporation") and
SUNAMERICA CAPITAL SERVICES, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Corporation is authorized to issue shares of common stock, par
value $.0001 per share (the "Shares"), in separately designated series
representing separate funds with their own investment objectives, policies and
restrictions (the "Portfolios") and has registered the Shares of the Portfolios
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a registration statement on Form N-1A (the "Registration Statement"), including
a prospectus (the "Prospectus") and a statement of additional information (the
"Statement of Additional Information"); and
WHEREAS, the Corporation has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act on behalf of each Fund (the
"Distribution Plans") and may enter into related agreements providing for the
distribution of the Shares of the Portfolios; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
WHEREAS, the Corporation wishes to engage the services of the Distributor
as distributor of the Shares of the Portfolios and the Distributor is willing to
serve in that capacity;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. EXCLUSIVE DISTRIBUTOR. The Portfolios hereby agree that the Distributor
shall and for the period of this Agreement be exclusive agent for distribution
within the United States and its territories, and the Distributor agrees to use
its best efforts during such period to effect such distribution of the Shares ;
provided, however, that nothing herein shall prevent a Fund, if it so elects,
from selling or otherwise distributing its Shares directly to any persons other
than dealers. In connection therewith, it is contemplated that the Distributor
will enter into agreements with selected securities dealers. The Portfolios
understand that the Distributor also acts as agent for distribution of shares of
capital stock or beneficial interest, as the case may be, of other open-end
investment companies which have entered into management and advisory agreements
with the Portfolios' current investment adviser.
2. SALE OF THE SHARES. The Distributor is authorized as agent for the
Portfolios and not as principal, to sell the Shares to other purchasers on such
terms as may be
<PAGE>
provided in the then current Prospectus of the Portfolios; provided, however,
that no sales shall be confirmed by the Distributor at any time when, according
to advice received by the Distributor from a Fund, the officers of the
Corporation have for any reason sufficient to them temporarily or permanently
suspended or discontinued the sale and issuance of such Fund's Shares. Each sale
shall be effected by the Distributor only at the applicable price, plus the
applicable sales charge, if any, determined by a Fund in the manner prescribed
in its then current Prospectus. The Distributor shall, insofar as they concern
it, comply with all applicable laws, rules and regulations including, without
limiting the generality of the foregoing, all rules or regulations made or
adopted pursuant to Section 22 of the Act by the Securities and Exchange
Commission or any securities association registered under the Exchange Act .
The Portfolios agree, as long as the Shares may legally be issued, to fill
all orders confirmed by the Distributor in accordance with the provisions of
this Agreement.
3. EXPENSES; COMPENSATION. The Distributor agrees promptly to pay or
reimburse the Portfolios for all expenses (except expenses incurred by the
Portfolios in connection with the preparation, printing and distribution of any
prospectus or report or other communication to shareholders, to the extent that
such expenses are incurred to effect compliance with the Federal or state laws
or to enable such distribution to shareholders) (a) of printing and distributing
copies of any prospectus and of preparing, printing and distributing any other
material used by the Distributor in connection with offering the Shares for
sale, and (b) of advertising in connection with such offering. The Portfolios
agree to pay all expenses in connection with the registration of the Shares
under the Securities Act , all fees and related expenses which may be incurred
in connection with the qualification of the Shares for sale in such states (as
well as the District of Columbia, Puerto Rico and other territories) as the
Distributor may designate, and all expenses in connection with maintaining
facilities for the issue and transfer of the Shares, of supplying information,
prices and other data to be furnished by it hereunder and through its agents of
all data processing and related services related to the share distribution
activity contemplated hereby.
As compensation for its services hereunder, the Portfolios agree to pay to
the Distributor all amounts received as sales charges as described in the
Portfolios' most current Prospectus. Out of such sales charges, the Distributor
may allow such concessions or reallowances to dealers as it may from time to
time determine.
The Corporation agrees to execute such documents and to furnish such
information as may be reasonably necessary, in the discretion of the Board of
Directors ("Directors") of the Corporation, in connection with the qualification
of the Shares for sale in such states (as well as the District of Columbia,
Puerto Rico and other territories) as the Distributor may designate. The
Distributor also agrees to pay all fees and related expenses connected with its
own qualification as a broker or dealer under Federal or state laws and, except
as otherwise specifically provided in this Agreement or agreed to by the
Corporation, all other expenses incurred by the Distributor in connection with
the sale of the Shares as contemplated in this Agreement (including the expenses
of qualifying the Corporation as a dealer or broker under the laws of such
states as may be designated by the Distributor, if deemed necessary or advisable
by the Corporation).
4. PROSPECTUS AND OTHER INFORMATION. The Corporation represents and
warrants to and agrees with the Distributor that:
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<PAGE>
(a) The Registration Statement, including the Prospectus and Statement
of Additional Information, relating to the Shares has been filed under both
the Act and the Securities Act and has become effective.
(b) At all times during the term of this Agreement, except when the
officers of the Corporation have suspended or discontinued the sale and
issuance of the Shares of a Fund as contemplated by Section 2 hereof, the
Registration Statement, Prospectus and Statement of Additional Information
will conform in all material respects to the requirements of the Act and
the rules and regulations of the Securities and Exchange Commission, and
none of such documents will include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except that the
foregoing does not apply to any statements or omissions in any of such
documents based upon written information furnished to the Corporation by
the Distributor specifically for use therein.
(c) The Corporation agrees to prepare and furnish to the Distributor
from time to time, a copy of the Prospectus, and authorizes the Distributor
to use such Prospectus, in the form furnished to the Distributor from time
to time, in connection with the sale of the Shares. The Corporation also
agrees to furnish the Distributor from time to time, for use in connection
with the sale of such Shares, such information (including the Statement of
Additional Information) with respect to the Portfolios and the Shares as
the Distributor may reasonably request.
5. INDEMNIFICATION.
(a) The Corporation will indemnify and hold harmless the Distributor
and each person, if any, who controls the Distributor within the meaning of
the Act against any losses, claims, damages or liabilities to which the
Distributor or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, Prospectus or Statement of Additional Information
or any other written sales material prepared by the Corporation or the
Portfolios which is utilized by the Distributor in connection with the sale
of Shares of the Fund or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or (in the case of the Registration Statement, Prospectus and
Statement of Additional Information) necessary to make the statement
therein not misleading or (in the case of such other sales material)
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse the
Distributor and each such controlling person for any legal or other
expenses reasonably incurred by the Distributor or such controlling person
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation or the
Portfolios will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
in such Registration Statement, Prospectus or Statement of Additional
Information in conformity with written information furnished to the
Corporation by the Distributor specifically for use therein; and provided,
further, that nothing herein shall be so construed as to protect the
Distributor against any liability to the Corporation or the Portfolios, or
the security holders of the Portfolios to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence, in the performance of its duties, or by reason of the reckless
disregard by the Distributor of its obligations
-3-
<PAGE>
and duties under this Agreement. This indemnity provision will be in
addition to any liability which the Corporation may otherwise have.
(b) The Distributor will indemnify and hold harmless the Corporation,
each of its Directors and officers and each person, if any, who controls
the Corporation within the meaning of the Act, against any losses, claims,
damages or liabilities to which the Corporation or any such Director,
officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, Prospectus or Statement of Additional Information
or any sales material not prepared by the Corporation or the Portfolios
which is utilized in connection with the sale of the Shares or arise out of
or are based upon the omissions or the alleged omission to state therein a
material fact required to be stated therein or (in the case of the
Registration Statement, Prospectus and Statement) necessary to make the
statements therein not misleading or (in the case of such other sales
material) necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, in the case of the
Registration Statement, Prospectus and Statement of Additional Information
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
conformity with written information furnished to the Corporation by the
Distributor specifically for use therein; and the Distributor will
reimburse any legal or other expenses reasonably incurred by the
Corporation or any such Director, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action. This indemnity provision will be in addition to any
liability which the Distributor may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation.
6. TERM OF AGREEMENT. This Agreement shall continue in full force and
effect for two years from the date hereof, and shall continue in full force and
effect from year to year thereafter if such continuance is approved in the
manner required by the Act, and the Distributor has not have notified the
Corporation in writing at least 60 days prior to the anniversary date of the
previous continuance that it does not desire such continuance. This Agreement
may be terminated at any time, without payment of penalty by the Corporation on
60 days' written notice to the Distributor by vote of the Directors of the
Corporation or by vote of a majority of the outstanding voting securities of the
Corporation (as defined by the Act). This Agreement shall automatically
terminate in the event of its assignment (as defined by the Act).
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<PAGE>
7. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
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<PAGE>
IN WITNESS WHEREOF, the Corporation and the Distributor have caused this
Agreement to be executed by their duly authorized officers as of the date above
written.
STYLE SELECT SERIES, INC.
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
President
SUNAMERICA CAPITAL SERVICES, INC.
By: /s/ Robert M. Zakem
-------------------------
Robert M. Zakem
Executive Vice President
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<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 13 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 15, 1998, relating to the financial
statements and financial highlights appearing in the October 31, 1998 Annual
Report to Shareholders of Style Select Series, Inc., which is also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the heading "Financial Highlights" in the Prospectuses and under the
heading "Additional Information - Independent Accountants and Legal Counsel" in
the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 24, 1999
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 1st day of January, 1999, by Style
Select Series, Inc., a Maryland corporation (the "Corporation"), on behalf of
the Class A shares of its separately designated series, Focus Portfolio (the
"Portfolio").
W I T N E S S E T H:
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Portfolio is a separately designated investment series of the
Corporation with its own investment objective, policies and purposes offering
four separate classes of shares of common stock, par value $.0001 per share, of
the Corporation (the "Shares"); and
WHEREAS, the Corporation has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the
Corporation in the offer and sale of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Portfolio will pay an account maintenance fee and a distribution fee
to the Distributor with respect to Class A shares of the Portfolio; and
WHEREAS, the Board of Directors of the Corporation (the "Directors") as a
whole, and the Directors who are not interested persons of the Corporation and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreement relating hereto (the "12b- 1 Directors"), having determined,
in the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Sections 36(a) and (b) of the Act, that there
is a reasonable likelihood that this Plan will benefit the Portfolio and its
Class A shareholders, have approved this Plan by votes cast in person at a
meeting called for the purpose of voting hereon and on any agreements related
hereto;
NOW THEREFORE, the Corporation on behalf of the Portfolio hereby adopts
this Plan on the following terms:
1. Distribution Activities. The Portfolio shall pay the Distributor a
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the
Portfolio to compensate the Distributor and certain securities firms
("Securities Firms") for providing sales and promotional activities and
services. Such activities and services will relate to the sale, promotion and
marketing of the Class A shares. Such expenditures may consist of sales
commissions to financial consultants for selling Class A shares, compensation,
sales incentives and payments to sales and marketing personnel, and the payment
of expenses incurred in its sales and promotional activities, including
advertising expenditures related to the Class A shares of the Portfolio and the
costs of preparing and distributing promotional
<PAGE>
materials with respect to such Class A shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Portfolio.
2. Account Maintenance Activities. The Portfolio shall pay the Distributor
an account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Portfolio to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Portfolio hereby authorizes the
Distributor to enter into agreements with Securities Firms to provide
compensation to such Securities Firms for activities and services of the type
referred to in Sections 1 and 2 hereof. The Distributor may reallocate all or a
portion of its account maintenance fee or distribution fee to such Securities
Firms as compensation for the above-mentioned activities and services. Such
agreements shall provide that the Securities Firms shall deliver to the
Distributor such information as is reasonably necessary to permit the
Distributor to comply with the reporting requirements set forth in Section 5
hereof.
4. Related Agreements. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the 12b-1 Directors or, by vote of
a majority of the outstanding voting securities (as defined in the Act) of
Class A shares of the Portfolio, on not more than 60 days' written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
5. Quarterly Reports. The Treasurer of the Corporation shall provide to the
Directors and the Directors shall review, at least quarterly, a written report
of the amounts expended pursuant to this Plan with respect to Class A shares of
the Portfolio and any related agreement and the purposes for which such
expenditures were made.
6. Term and Termination. (a) This Plan shall become effective as of the
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of both the (i) the Directors of the
Corporation, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a majority of
the 12b- 1 Directors or by vote of a majority of the outstanding voting
securities (as defined in the Act) of Class A shares of the Portfolio.
7. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved
-2-
<PAGE>
by a vote of a majority of the outstanding voting securities (as defined in the
Act) of Class A shares of the Portfolio, and no material amendment to this Plan
shall be made unless approved in the manner provided for the annual renewal of
this Plan in Section 6(a) hereof.
8. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of those Directors of the Corporation who are not
interested persons of the Corporation shall be committed to the discretion of
such disinterested Directors.
9. Recordkeeping. The Corporation shall preserve copies of this Plan and
any related agreement and all reports made pursuant to Section 5 hereof for a
period of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Corporation or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Separate Series. Pursuant to the provisions of the Articles of
Incorporation the Portfolio is a separate series of the Corporation, and all
debts, liabilities and expenses of Class A shares of the Portfolio shall be
enforceable only against the assets of Class A shares of the Portfolio and not
against the assets of any other series or class of shares or of the Corporation
as a whole.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed as
of the day and year first written above.
STYLE SELECT SERIES, INC.
By: /s/ Peter A. Harbeck
-------------------------
Peter A. Harbeck
President
-3-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 1st day of January, 1999, by Style
Select Series, Inc., a Maryland corporation (the "Corporation"), on behalf of
the Class B shares of its separately designated series, Focus Portfolio (the
"Portfolio").
W I T N E S S E T H:
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Portfolio is a separately designated investment series of the
Corporation with its own investment objective, policies and purposes offering
four separate classes of shares of common stock, par value $.0001 per share, of
the Corporation (the "Shares"); and
WHEREAS, the Corporation has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the
Corporation in the offer and sale of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Portfolio will pay an account maintenance fee and a distribution fee
to the Distributor with respect to Class B shares of the Portfolio; and
WHEREAS, the Board of Directors of the Corporation (the "Directors") as a
whole, and the Directors who are not interested persons of the Corporation and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreement relating hereto (the "12b- 1 Directors"), having determined,
in the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Sections 36(a) and (b) of the Act, that there
is a reasonable likelihood that this Plan will benefit the Portfolio and its
Class B shareholders, have approved this Plan by votes cast in person at a
meeting called for the purpose of voting hereon and on any agreements related
hereto;
NOW THEREFORE, the Corporation on behalf of the Portfolio hereby adopts
this Plan on the following terms:
1. Distribution Activities. The Portfolio shall pay the Distributor a
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the
Portfolio to compensate the Distributor and certain securities firms
("Securities Firms") for providing sales and promotional activities and
services. Such activities and services will relate to the sale, promotion and
marketing of the Class B shares. Such expenditures may consist of sales
commissions to financial consultants for selling Class B shares, compensation,
sales incentives and payments to sales and marketing personnel, and the payment
of expenses incurred in its sales and promotional activities, including
advertising expenditures related to the Class B shares of the Portfolio and the
costs of preparing and distributing promotional
<PAGE>
materials with respect to such Class B shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributior from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Portfolio.
2. Account Maintenance Activities. The Portfolio shall pay the Distributor
an account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Portfolio to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Portfolio hereby authorizes the
Distributor to enter into agreements with Securities Firms to provide
compensation to such Securities Firms for activities and services of the type
referred to in Sections 1 and 2 hereof. The Distributor may reallocate all or a
portion of its account maintenance fee or distribution fee to such Securities
Firms as compensation for the above-mentioned activities and services. Such
agreements shall provide that the Securities Firms shall deliver to the
Distributor such information as is reasonably necessary to permit the
Distributor to comply with the reporting requirements set forth in Section 5
hereof.
4. Related Agreements. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the 12b-1 Directors or, by vote of
a majority of the outstanding voting securities (as defined in the Act) of
Class B shares of the Portfolio, on not more than 60 days' written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
5. Quarterly Reports. The Treasurer of the Corporation shall provide to the
Directors and the Directors shall review, at least quarterly, a written report
of the amounts expended pursuant to this Plan with respect to Class B shares of
the Portfolio and any related agreement and the purposes for which such
expenditures were made.
6. Term and Termination. (a) This Plan shall become effective as of the
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of both the (i) the Directors of the
Corporation, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a majority of
the 12b- 1 Directors or by vote of a majority of the outstanding voting
securities (as defined in the Act) of Class B shares of the Portfolio.
7. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved
-2-
<PAGE>
by a vote of a majority of the outstanding voting securities (as defined in the
Act) of Class B shares of the Portfolio, and no material amendment to this Plan
shall be made unless approved in the manner provided for the annual renewal of
this Plan in Section 6(a) hereof.
8. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of those Directors of the Corporation who are not
interested persons of the Corporation shall be committed to the discretion of
such disinterested Directors.
9. Recordkeeping. The Corporation shall preserve copies of this Plan and
any related agreement and all reports made pursuant to Section 5 hereof for a
period of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Corporation or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Separate Series. Pursuant to the provisions of the Articles of
Incorporation, the Portfolio is a separate series of the Corporation, and all
debts, liabilities and expenses of Class B shares of the Portfolio shall be
enforceable only against the assets of Class B shares of the Portfolio and not
against the assets of any other series or class of shares or of the Corporation
as a whole.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed as
of the day and year first written above.
STYLE SELECT SERIES, INC.
By: /s/ Peter A. Harbeck
-------------------------------------
Peter A. Harbeck
President
-3-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS II SHARES)
PLAN OF DISTRIBUTION adopted as of the 1st day of January, 1999, by Style
Select Series, Inc., a Maryland corporation (the "Corporation"), on behalf of
the Class II shares of its separately designated series, Focus Portfolio (the
"Portfolio").
WITNESSETH:
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Portfolio is a separately designated investment series of the
Corporation with its own investment objective, policies and purposes offering
four separate classes of shares of common stock, par value $.0001 per share, of
the Corporation (the "Shares"); and
WHEREAS, the Corporation has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the
Corporation in the offer and sale of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Portfolio will pay an account maintenance fee and a distribution fee
to the Distributor with respect to Class II shares of the Portfolio; and
WHEREAS, the Board of Directors of the Corporation (the "Directors") as a
whole, and the Directors who are not interested persons of the Corporation and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreement relating hereto (the "12b- 1 Directors"), having determined,
in the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Sections 36(a) and (b) of the Act, that there
is a reasonable likelihood that this Plan will benefit the Portfolio and its
Class II shareholders, have approved this Plan by votes cast in person at a
meeting called for the purpose of voting hereon and on any agreements related
hereto;
NOW THEREFORE, the Corporation on behalf of the Portfolio hereby adopts
this Plan on the following terms:
1. Distribution Activities. The Portfolio shall pay the Distributor a
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class II shares of the
Portfolio to compensate the Distributor and certain securities firms
("Securities Firms") for providing sales and promotional activities and
services. Such activities and services will relate to the sale, promotion and
marketing of the Class II shares. Such expenditures may consist of sales
commissions to financial consultants for selling Class II shares, compensation,
sales incentives and payments to sales and marketing personnel, and the payment
of expenses incurred in its sales and promotional activities, including
advertising expenditures related to the Class II shares of the Portfolio and the
costs of preparing and distributing promotional
-1-
<PAGE>
materials with respect to such Class II shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Portfolio.
2. Account Maintenance Activities. The Portfolio shall pay the Distributor
an account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class II shares
of the Portfolio to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Portfolio hereby authorizes the
Distributor to enter into agreements with Securities Firms to provide
compensation to such Securities Firms for activities and services of the type
referred to in Sections 1 and 2 hereof. The Distributor may reallocate all or a
portion of its account maintenance fee or distribution fee to such Securities
Firms as compensation for the above-mentioned activities and services. Such
agreements shall provide that the Securities Firms shall deliver to the
Distributor such information as is reasonably necessary to permit the
Distributor to comply with the reporting requirements set forth in Section 5
hereof.
4. Related Agreements. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the 12b-1 Directors or, by vote of
a majority of the outstanding voting securities (as defined in the Act) of
Class II shares of the Portfolio, on not more than 60 days' written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
5. Quarterly Reports. The Treasurer of the Corporation shall provide to the
Directors and the Directors shall review, at least quarterly, a written report
of the amounts expended pursuant to this Plan with respect to Class II shares of
the Portfolio and any related agreement and the purposes for which such
expenditures were made.
6. Term and Termination. (a) This Plan shall become effective as of the
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of both the (i) the Directors of the
Corporation, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a majority of
the 12b- 1 Directors or by vote of a majority of the outstanding voting
securities (as defined in the Act) of Class II shares of the Portfolio.
7. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved
-2-
<PAGE>
by a vote of a majority of the outstanding voting securities (as defined in the
Act) of Class II shares of the Portfolio, and no material amendment to this Plan
shall be made unless approved in the manner provided for the annual renewal of
this Plan in Section 6(a) hereof.
8. Selection and Nomination of Directors. While this Plan is in effect, the
selection and nomination of those Directors of the Corporation who are not
interested persons of the Corporation shall be committed to the discretion of
such disinterested Directors.
9. Recordkeeping. The Corporation shall preserve copies of this Plan and
any related agreement and all reports made pursuant to Section 5 hereof for a
period of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Corporation or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Separate Series. Pursuant to the provisions of the Articles of
Incorporation, the Portfolio is a separate series of the Corporation, and all
debts, liabilities and expenses of Class II shares of the Portfolio shall be
enforceable only against the assets of Class II shares of the Portfolio and not
against the assets of any other series or class of shares or of the Corporation
as a whole.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed as
of the day and year first written above.
STYLE SELECT SERIES, INC.
By: /s/ Peter A. Harbeck
Peter A. Harbeck
President
-3-
<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>
