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A Message From The President
- ---------------------------------------------
December 15, 1998
Dear Shareholder:
Just over two years ago, in November 1996, SunAmerica Asset Management
introduced Style Select Series, a family of style-specific, multi-managed mutual
funds. Each Style Select Series portfolio is designed to provide you with the
same approach used by many of today's largest and most successful institutional
investors, an advantage you simply cannot get by investing in traditional mutual
funds.
According to independent mutual fund ratings analyst Morningstar,
"style-based investing is an extremely useful tool, providing investors with a
clear and intuitively appealing way to negotiate the mutual-fund playing field.
It allows for a better understanding of a fund's actual investment strategy and
helps investors build portfolios of funds that are geared to their personal
risk/return preferences."*
In October 1997, we added four new Style Select Series portfolios and on
June 8, 1998, we launched our ninth portfolio of the Style Select Series, the
Focus Portfolio.
On the following pages, one Adviser from each of the nine Style Select
Series portfolios discusses the management of their portion of the Portfolio
over the past fiscal year and their investment outlook for 1999. You will also
find a complete financial summary and a listing of holdings for each portfolio.
Clearly, this has been a year of exciting opportunities for SunAmerica as we
expanded our Style Select Series and enhanced our ability to assist you and
financial consultants using the asset allocation process. But even more exciting
are the opportunities for portfolio consistency, investment style integrity,
mutual fund clarification, and the potential added value that the Style Select
Series offers our investors in what has been and will no doubt continue to be an
increasingly complex and volatile investment environment.
We thank you for being a part of the success of the Style Select Series. We
value your confidence in us and look forward to serving your investment needs in
the future.
Sincerely,
[/S/ PETER A. HARBECK]
Peter A. Harbeck
President
* "Style-Based Investing Using the Morningstar Style Box," Jon Hale, Equity-Fund
Analyst, Morningstar Funds.
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NICK WHITRIDGE
PORTFOLIO MANAGER
[LOGO]
LARGE-CAP VALUE PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: Our approach is to concentrate purchases in a group of investment grade
companies that we believe have fallen out of favor with investors at the time of
purchase, as a result of disappointments that will prove to be temporary. Such
companies tend to have low expectations built into their prices. More
specifically, we look for companies with market prices that are low relative to
earnings, assets and dividends. We also look for companies with near-term
earnings growth potential.
We are relative value, bottom-up, stock selecting managers who believe that
market timing cannot consistently add value. We keep our portfolio fully
invested and we keep a focused number of forty holdings equally weighted through
rebalancing. Rebalancing is a risk control as well as a mechanism to reduce
average costs. New stocks are purchased only if a vacancy has been created in
the portfolio by selling an existing holding, in turn creating low turnover. Our
aim is to own a stock not just from its move from undervalued to fair value, but
rather to take advantage of its momentum and own it until it reaches full value
and its relative price strength wanes. The loss of relative price strength in a
fully valued stock is our signal to sell a successful investment.
This past fiscal year, investors favored a growth style of investing over a
value style. The "Asian flu" appeared in the last quarter of 1997 and was later
feared to spread to Latin America; the "Russian contagion" rocked financial
markets in July; and Japan, once the anchor of Far East economies, continued to
deny the severe structural problems in its banking system. As the fabric of
international trade and financing showed further signs of fraying and
unraveling, hedge fund exposures and a likely slowdown in U.S. corporate
earnings and economic growth were added to investor concerns. All of this led to
a preference for big growth companies without regard to valuation
considerations.
The historically successful and disciplined process of selecting value
stocks and managing value portfolios at David L. Babson remained unchanged
through the turmoil in the stock market. Those economic sectors in which we saw
value throughout most of the fiscal year were hurt more in the summer's downturn
than the average stock. Still, we continued to believe that the historical
extreme in market narrowness -- i.e. the best performance coming from a small
number of stocks -- that had been reached was unsustainable and would reverse,
providing above average performance for large cap value managers in general and
our portfolio in particular.
Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: For some time, we have had overweightings in the consumer cyclical sector
(Sears, J.C. Penny, K-Mart, The Limited, Reebok) and the basic materials sector
(Willamette, Weyerhaeuser, Potlatch). These sectors lagged and thus negatively
impacted portfolio performance in the second calendar quarter, when the equity
markets declined. We believe that the wisdom of staying true to our disciplined
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strategy proved itself when each and every one of the worst-performing names of
the previous quarter produced double-digit positive returns for the month of
October.
Apple Computer and Texas Utilities were particularly strong stocks through
the third quarter and for the fiscal year. Apple Computer returned to
profitability, introduced two very successful new products, and stepped up its
marketing efforts with a new advertising campaign. Texas Utilities withstood the
market volatility better than most. With an above-average yield, no emerging
markets exposure, and relatively certain earnings growth for 1998, this company
- -- along with other utility stocks -- provided a comparatively safe haven for
equity investors.
The portfolio as a whole continues to have attractive valuation
characteristics. As of October 31, 1998, the average price/earnings ratio (based
on estimated earnings for 1998 for the companies in the portfolio) was only
15.7, as compared with 21.8 for the S&P 500 Index. The average price-to-book
value of the portfolio's companies was 2.0, compared to 3.8 for the S&P 500
Index.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: Our investment outlook is more of the same -- volatility. We do not see any
major catalyst for a dramatic shift upward or downward in valuation in the
immediate future. At the same time, we do believe that the schism in valuations
between the low yielding big companies and the higher yielding not quite so big
companies has become so wide that a change may not be too far off.
Either way, we have not changed the way we manage our value-oriented
portfolios for more than fourteen years and we have no plans to change it,
regardless of fluctuating market conditions. We are not market timers, because
we do not believe our skill lies in our ability to outguess the market. As
relative, rather than absolute, value managers, we are always able to find
companies that are undervalued relative to other stocks.
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HERBERT GULLQUIST AND EILEEN ALEXANDERSON
PORTFOLIO TEAM MANAGERS
[LOGO]
SMALL-CAP VALUE PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: Our investment philosophy is to create value through bottom-up stock
selection. We seek companies that are inexpensively priced, yet fundamentally
solid and financially productive. Our strategy is to look deeper than
price-to-earnings multiples and earnings projections by analyzing financial
productivity and the long-term sustainability of returns on both fundamental and
quantitative bases.
The fiscal period was a difficult one for small cap value investors. Anxiety
over the impact of the global financial crisis led to a flight to quality --
i.e. to large caps -- which disproportionately resulted in small, less liquid
stocks falling faster than larger ones. The credit crunch that began after the
Russian devaluation and default further hurt small-cap stocks. While the S&P 500
Index fell by 19% from peak to trough in calendar year 1998, the Russell 2000
Index plunged 37%, sinking to a 27-month low on October 8, 1998. But by the end
of the month, the small stock benchmark had surged over 20% from its low,
bringing its year-to-date loss to only 12.8%. The rally's roots can be
attributed primarily to the Federal Reserve Board's interest rate cuts,
perceived cheap valuations, decent earnings prospects for smaller companies, and
seasonal investor buying patterns. Markets also reacted positively to higher
than anticipated U.S. GDP growth for the third calendar quarter. While our
portfolio outpaced the Index for the month of October, it lagged for the fiscal
year.
Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: For the year, underperformance of the technology and healthcare sectors,
overweighting in the producer manufacturing sector, and a rally led by the more
growth-oriented sectors all negatively impacted portfolio performance. On the
other hand, our sector and stock positioning overall defended well during the
declines in July and August. The portfolio also benefited from strong stock
selection in the commercial services, process industries and consumer
discretionary sectors, the latter led by Ann Taylor. Pier 1 Imports benefited
from a strong U.S. housing market and lower production costs due to weak Asian
currencies.
We stayed true to our discipline throughout. We believe this proved to be
the wise strategy, as technology stocks, including Flextronics and Lattice
Semiconductor, were among our best performers during the October rally amid
easing pricing pressures and robust demand in Europe. Economically sensitive
stocks like Omniquip International and Crane Co. outperformed in October as
fears of global recession subsided slightly. Three of our process industries
also performed well -- Schulman Industries, Ferro Corp., and Wausau-Mosinee
Paper. Still, Perrigo Co., a healthcare company, Gibson Greetings and several of
our services holdings, including Bowne & Co. and Budget Group, underperformed.
We added Elder-Beerman, an attractively valued company that operates
apparel, accessories, and home furnishings retail stores. We also added Felcor
Trust, a REIT that has acquired in excess of 70
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hotel properties, including Sheraton, Embassy Suites and Hilton. And we added
H.B. Fuller, the leading U.S. manufacturer of hot-melt adhesives.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: On October 27th, THE WALL STREET JOURNAL announced the end of the bear market
for U.S. small-cap stocks, noting that the Russell 2000 Index had regained
almost 20% of its value and the NASDAQ Composite Index had recovered nearly 22%
since the small-cap trough on October 8th. There are good reasons to believe
that the positive recent performance in the small-cap arena may presage the
start of a long-awaited recovery. Among them are record low valuations, strong
relative earnings growth, falling interest rates, an easing credit crunch and
heightened insider buying and share repurchase among small-cap companies.
To give some specifics, as of October 31, 1998, small-cap companies were
trading at 82% of the S&P 500 Index's price/earnings ratio and at 52% of its
price/book ratio -- a situation unprecedented since the inception of the Russell
2000 Index in 1979. These are compelling relative valuations and we believe that
intrinsic value will soon begin to work as its own catalyst. At the same time,
small caps tend to be less exposed to weakening foreign economies, and
therefore, were able to maintain stronger earnings growth rates than their large
cap brethren over the fiscal year.
The Federal Reserve Board's two rate cuts toward the end of the fiscal
period, which came in part in response to the growing credit crunch, should
bolster the Russell 2000 even more vigorously than they do the S&P 500.
Historically, small cap stocks tend to outperform following a Fed rate
reduction. Plus, the credit crunch itself appears to be easing somewhat, which
should also help small-cap stocks substantially.
In another promising sign for small-cap investors, the perceived glut of
small cap shares is being eliminated by high levels of share buybacks and by a
drop in the number of initial public offerings. Furthermore, recent studies
indicate that insider buying has jumped dramatically lately, with the majority
of it in the last fiscal quarter coming from small companies. Heightened insider
buying is usually a sign the experts believe their own company's stock is
undervalued.
Finally, while U.S. small-caps can underperform for long periods, they have
outperformed large cap stocks since 1926 by an average of 1.3% annually.
Small-caps also tend to rebound with gusto after downturns -- on four occasions
since 1979 when the Russell 2000 declined by more than 10% in a month, it
recovered strongly and outperformed the S&P 500.
No question, there are obstacles to a full small-cap recovery, and while it
is far from certain that small-caps may be starting a recovery, it is looking
more promising today than it has in many months. If the Fed instigates further
interest rate cuts, which the market appears to be anticipating (a third rate
cut was made on November 17th after the close of the fiscal period), small-caps
may have an even sounder basis for their current rebound. We believe our value
discipline will continue to work over the long term through exploitation of
market inefficiencies and by applying vigorous company analysis.
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CHRISTOPHER C. DAVIS
PORTFOLIO MANAGER
[LOGO]
VALUE PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: Our value-oriented investment style entails bottom-up and top-down
disciplines concurrently. That is, while investments are chosen on a
company-by-company basis, we also attempt to identify broad macroeconomic trends
that may affect the long-term growth potential of different sectors or
industries. Our strategy is to focus on high quality, well-managed, mid- and
large-capitalization companies with strong potential for long-term growth and to
adhere to a rigorous price discipline that pays careful attention to the
valuations and earnings multiples of every company we own or consider for
investment. We believe in patient, long-term investment practices and are wary
of investment fads. Rather, we concentrate on the underlying economic and
business fundamentals of each investment. We further believe that managing risk
is key to delivering superior long-term investment results. So, before we
consider how much we might earn on a new investment, we always consider how much
we might lose.
This past fiscal year, large-cap value stocks trailed their growth
counterparts. Thus, our investment style was not in favor with the market during
much of this period. Our portfolio underperformed the S&P 500 Index for two
primary reasons. First, the market was led by high multiple issues like
Microsoft, Lucent Technologies and Dell Computer. Our price discipline and
wariness of high-risk/high-P/E stocks generally would not allow us to invest in
these companies; they were too pricey to be considered for inclusion in our
portfolio. Second, our exposure to discounted segments of the market, such as
oil services companies, weakened our competitive performance. The performance of
these oil services companies was hurt by the combined effects of a warm 1997-98
winter, falling oil prices and diminished demand from Asian countries due to the
lingering financial and liquidity crises in that region. However, we remain
confident both in our investment style and in our ability to outperform the
market and our peers over longer time horizons.
Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Financial services has been the most important investment theme in our
portfolio during the past fiscal year and represents almost half of the
portfolio's assets. We believe this industry is benefiting from a long secular
growth trend fueled by increased consumer demand from "baby boomers" entering
their peak saving and investment years. Several of our top positions --
Citicorp, Travelers Group, Wells Fargo, General Re., and BankAmerica --
announced colossal merger deals this past year. Interestingly, these mergers did
not command significant premiums on Wall Street, yet we believe that they will
ultimately enhance each corporation's long-term competitiveness and earnings
growth. In fact, such price weakness enabled us to continue accumulating shares
of these positions at attractive P/E multiples.
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Firms with strong global presence, such as Morgan Stanley Dean Witter and
American Express, were impacted by financial crises abroad, but we maintained or
even increased our positions in these stocks because, in our opinion, they still
have strong potential for long-term growth.
Technology stocks are the second most important component of our portfolio.
We believe businesses are increasingly and irreversibly dependent on technology
in virtually every aspect -- communications, networking, research, accounting,
operations, system integration, and more. Performance was divergent among the
sub-industries of this sector. Telecommunication and software companies posted
stronger returns through June 1998 and then declined in the third calendar
quarter on fears that capital spending on information technology might slow
during the coming year; semiconductor companies underperformed for most of the
year. We tend to focus on larger brand-name technology companies with
diversified products and revenue streams, such as IBM and Hewlett Packard, since
we believe these companies possess important scale advantages and diverse
revenue streams that help them stay competitive in up markets and survive the
down markets. In fact, these companies did fare better in the third calendar
quarter decline. We also added to our position in Texas Instruments, which
currently controls the greater share of the burgeoning market for Digital Signal
Processors. In our opinion, these computer chips will be increasingly used in
all levels of communications, household appliances and machinery in the next few
years.
As for oil services companies, we recently pared and consolidated our
allocation to these stocks. We have chosen to keep positions in only the highest
quality companies in this sector, such as Halliburton, as we believe they stand
to recover more quickly than their peers. Despite the market's short-term
uncertainty, our long-term outlook for this sector remains intact. We still
believe oil services stocks are poised for long-term growth due to technological
advances that reduce finding and extraction costs for exploration and production
and may thus improve operating margins in the future.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: While we vigilantly strive to understand how economic conditions will impact
the businesses in which we invest, as long-term investors we do not attempt to
forecast or capitalize on short-term movements in global markets or economies.
We intend to keep our portfolio fully invested in healthy, high quality
companies that we believe will have the greatest opportunity for long-term
growth.
We also remain steadfast to our investment philosophy and discipline.
Although our performance trailed the S&P 500 Index for the fiscal year, we will
not change our style. Our experience has shown that our investment process is
historically successful in outperforming the Index over longer time horizons.
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STEPHEN W. BOESEL
PORTFOLIO MANAGER
[LOGO]
LARGE-CAP BLEND PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: Our goal in this portfolio is to seek long-term growth of capital and a
reasonable level of current income through both value and growth approaches --
the "blend" style. We focus on common stocks of large companies believed to have
earnings adequate to support a growing dividend and with a growth rate expected
to exceed that of common stocks in general. We are primarily interested in
stocks with above average yield, a history of dividend increases over the course
of the business cycle, and attractive valuations that suggest the stock is
temporarily undervalued by the market.
Our approach is designed to be relatively conservative. We take a measured,
patient approach, entering an issue slowly and not selling until a suitable
replacement is found. This results in a comparatively low turnover rate. We also
remain sensitive to dividend yields and price multiples, which helps limit
portfolio volatility.
This strategy was particularly critical this past fiscal year, given the
tremendous volatility of the equity market. For example, the large cap sector of
the equity market appreciated significantly from the beginning of the
Portfolio's fiscal year through the first half of 1998, as the familiar mix of
solid economic growth, low inflation, and stable interest rates encouraged
investors. Growth stocks decisively outperformed cyclicals and value stocks
during these months. Then, mounting concern over the effects of ongoing
financial problems in the Far East, exacerbated by the collapse of the Russian
economy in July, finally brought the bull market to a halt.
U.S. stocks fell sharply over the summer, with the broad market recording
its worst quarter in eight years (as measured by the S&P 500 Index). Even during
the widespread sell-off though, investors continued to prefer large-cap blue
chips to small- and mid-cap stocks. As a result, the Russell 2000 Index fell
about 20% as compared to about a 10% decline for the S&P 500. After lagging for
much of the stock market's extended rise, income-oriented stocks then generally
outperformed their growth counterparts, boosted partially by a dramatic decline
in bond yields.
Due to its emphasis on value stocks, we consider our portion of the
portfolio to be more conservative than the typical growth and income portfolio.
This more conservative nature makes it difficult for our portfolio, then, to
keep pace during strong market advances. From July through October, though, when
the bull market stalled, our performance was somewhat better than that of the
overall market and our category average. Throughout the fiscal year, we provided
solid returns, which is precisely why the Large-Cap Blend Portfolio may be
considered an "all-weather" investment option.
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Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Performance benefited overall from our emphasis on yield-oriented stocks and
from our generally defensive strategy. During the first part of the fiscal year,
we primarily invested in companies in sectors that lagged the market's advance.
These new holdings include Amerada Hess, Norfolk Southern, and Browning-Ferris.
In contrast, virtually all major sales through the middle of 1998 were holdings
in highly favored sectors. These investments -- SmithKline Beecham,
Warner-Lambert and Pfizer in the pharmaceutical area and Wells Fargo in the
surging financial sector -- each boosted the portfolio's performance.
After the market decline, we made few changes to the portfolio, essentially
adding to the areas that lagged during the market's prior surge, particularly
utilities, energy, and real estate investment trusts (REITs). This strategy paid
off with strong relative returns. The best-performing sector in the portfolio
was utilities, which composed over 13% of our portion of the portfolio's assets.
Electric utilities were the stars, but some telephone stocks also did well. In
addition, the pharmaceutical sector, which accounts for about 6% of assets,
bucked the downtrend to a considerable degree. Energy stocks -- specifically,
integrated petroleum companies such as Amoco and Unocal -- gained modestly and
the portfolio's 6% exposure helped performance.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: We believe that while repercussions from global economic problems are being
felt in the U.S. economy, the ultimate impact will not be clear for some time.
Such uncertainty is likely to result in continued volatility in the U.S. equity
markets. Additionally, we do not expect either corporate earnings or economic
growth in the U.S. to pick up significantly until well into 1999.
The market's volatility does provide opportunities, however, and we are
seeking to take advantage of stocks that meet our investment criteria. We
further expect today's increasingly risk-averse equity investors to favor the
kinds of stocks we typically emphasize, which, in turn, may benefit the
portfolio's relative performance in coming months.
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MARC PINTO
PORTFOLIO MANAGER
[LOGO]
LARGE-CAP GROWTH PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: In seeking long-term growth of capital, Janus managers employ a bottom-up
investment strategy. We remain sensitive to macro-economic factors and cultural
trends, but we select investments on a company-by-company basis. Furthermore, as
growth investors, we believe that stock prices behave in direct correlation with
company earnings. Consequently, our research team builds detailed financial
models in an effort to predict a company's future earnings. We examine a
company's financials, but we augment this quantitative data with hands-on
research. We look for companies who are the leaders in their industry and whom
we believe we will feel comfortable owning for the long term. Often, we meet
with management, suppliers, competitors, and customers in an effort to achieve a
clearer understanding of the company. Our management team believes that the more
we understand a company, the more accurately we can predict its future
profitability.
Given this management style, the developments in the macro-environment --
which were certainly notable in this last fiscal year -- do not impact our
investment decisions as much as they would a manager employing a top-down
approach. We closely monitored the Asian slowdown, which injected a great deal
of fear into the equity marketplace, as investors grew concerned over the impact
it would have on domestic corporations that derived a meaningful percentage of
their revenues from Asia. This concern was magnified by the potential negative
impact the Asian contagion might have on the U.S. economy as a whole. On
September 29th and then again on October 15th, the Federal Reserve Board lowered
short-term interest rates in an effort to dampen the effects of the emerging
market slowdown on the domestic economy. Lower interest rates are typically good
for equities, and, as interest rates fell, stocks did rally.
Still, regardless of how the broader economy or the equity markets overall
are behaving, we strive to identify those companies that are growing their
earnings. In other words, we only consider the macro-economic picture in so far
as it impacts the earnings of individual stocks.
For the twelve months ending October 31, 1998, this bottom-up growth
investment style served our investors well. As uncertainty grew in the
marketplace, investors fled to companies with highly predictable, yet growing,
earnings. These are the types of companies that our rigorous analysis seeks to
uncover. Further, as evidence surfaced that the economic slowdown in Asia might
impact domestic corporate earnings, the market transformed from one in which
"the high tide lifted all boats" (as we had been experiencing for quite some
time) to more of a stockpicker's marketplace -- precisely our specialty.
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Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Specifically, the portfolio benefited from its positions in the technology
sector, including Dell Computer and Microsoft, and in the pharmaceuticals
sector, including Pfizer and Warner-Lambert. In each of these cases, these
stocks' outperformance was attributable to healthy earnings growth. Our
technology holdings benefited from our whole society's increasing dependence on
computers as well as the growing acceptance of the Internet as both a valid
information repository and an alternative entertainment medium. Our
pharmaceutical companies benefited from prolific research and development
pipelines, an aging population, and an increasingly sensitive and efficient FDA.
The result is an expanding market with an increasing need for a great number of
products, which are hitting the market faster than ever. Additionally, many HMOs
are appreciating the cost-effectiveness of drug therapy versus alternative
methods such as surgery. Pfizer recently launched the hugely successful Viagra,
and Warner-Lambert launched Lipitor, an anti-cholesterol drug -- both examples
of drugs that targeted huge markets.
Our cable holdings also performed well. The reason is that many cable
companies are currently in the final stage of an infrastructure upgrade, which
when completed, will substantially decrease capital expenditures. Moreover, many
cable providers are expanding their range of services to offer telephony,
Internet access, and high speed data transfer. We believe this combination of
cost-cutting and increased revenues portends a potential explosion in free cash
flow. Portfolio names in this sector include Comcast, Time Warner, and MediaOne.
On the other hand, our positions in oil services stocks, such as
Schlumberger, performed poorly after oil prices plummeted. As this suggested a
decrease in potential for earnings growth, we sold our holdings in this sector.
We also decreased our positions in financial stocks, due to limited
predictability of the sector's earnings. This limited predictability resulted
from the sector's hesitancy to disclose the magnitude of their losses
attributable to the Russian debacle. Some of the banks' losses resulted from
their proprietary Russian debt positions, while others resulted from loans to
hedge funds with substantial Russian exposure. Toward the end of the period,
these stocks did recover some of the ground they had given up in earlier months.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: We expect the equity markets to remain quite volatile, primarily because of
ongoing uncertainty in the emerging markets (i.e. Brazil and the Pacific Rim)
and their potential impact on the U.S., including fears of slower corporate
earnings growth and a possible recession. We are concerned that the Brazilian
austerity package will not stabilize its currency, the real, and that the
Japanese bank reform package will neither stabilize that nation's banking system
nor ignite its economy. However, one positive result of these fears is
potentially lower interest rates. Lower interest rates historically create a
positive backdrop for those equities that can demonstrate powerful earnings
growth. To these ends, we will continue to try to identify those companies
showing the greatest promise for above-average growth.
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FRANK V. WISNESKI
PORTFOLIO MANAGER
[LOGO]
MID-CAP GROWTH PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: We've been managing our portion of the Portfolio since May 1, 1998, and so
our discussion is from that point through the end of the fiscal year on October
31, 1998. That said, we strive to maintain a consistent investment approach in
every type of market environment. In short, our approach seeks to provide
returns above those of the Wilshire Mid Cap 750 Index and the S&P 400 Midcap
Growth Index over the long term. Our style is designed to add value through
bottom-up security selection and industry weighting decisions, based, in turn,
on independent, bottom-up, fundamental research.
Our security selection process focuses first on identifying industry niches
that offer high secular growth prospects and attractive market dynamics. We then
identify the most attractive companies within the targeted industry groups
through bottom-up research and valuation disciplines. We review a company's
fundamentals -- growth, profitability, financial quality, and appreciation
potential. We develop earnings forecast models and price targets to evaluate
investment attractiveness over a time horizon of 1 to 3 years. We make sure we
are invested in each of the ten broad sectors to maintain portfolio
diversification.
Our focus on investing in a diversified portfolio of high quality companies
with predictable, consistent earnings patterns served us well in a market
environment that rewarded higher quality companies. The six months we've been
managing a portion of the Mid-Cap Growth Portfolio have been a tumultuous period
for U.S. equities in general and even more so for mid-cap companies. Equity
markets peaked in mid-July, followed by a disastrous August, followed by a very
strong rebound in September and October. Importantly, with few exceptions, our
companies were able to deliver on solid earnings growth, and we had limited
exposure to the trouble spots around the world.
Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Our relative performance benefited from several factors, including strong
stock selection and industry exposures. For example, due to our growth bias, the
portfolio was helped by its minimal weighting in energy. The energy sector was
the worst performer during this period, primarily due to soft prices and a lack
of demand in Southeast Asia. On the other hand, performance was negatively
impacted by our underweighting in utilities, which proved to be something of a
safe haven during this volatile period. Our growth bias also led us to
significant exposures to the information technology, industrial and commercial,
finance and health care sectors.
Strong stock selection particularly helped us in the technology and health
care sectors. Two prime examples are Genzyme, a diversified biotechnology
company, and Covance, a contract research organization specializing in
conducting clinical and pre-clinical trials for major pharmaceutical companies.
We
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subsequently took some profits in these two names. Other stocks that did well
were the business services companies in the industrial and commercial sector.
These include United Rentals, which rents equipment, and G&K Services, which
rents uniforms. Stocks that were disappointing for fundamental reasons were West
Marine and Landry's Seafood, both of which have been eliminated from the
portfolio.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: We remain cautious about 1999. While many of the market averages retraced
most of their summer's decline by early November, earnings growth for the coming
year still remains uncertain. We believe that the Asian contagion may have
finally been arrested and that some signs of life are beginning to emerge in
countries and industries most impacted, such as semiconductors. Still, much of
the economic damage that has been done on the international front will take time
to work out.
In the U.S., we have begun to see some signs of a slowdown, and many
companies have guided analysts' estimates down for 1999. Some companies have
already initiated layoffs, and in our opinion, more will come. On the other
hand, we see positive signs -- inflation remains benign, the Federal Reserve
Board continues to show a willingness to cut interest rates, and consumer
spending remains healthy.
Given this outlook, we intend to continue to focus our portion of the
Mid-Cap Growth Portfolio on companies with strong, predictable earnings growth
and high quality balance sheets. Using careful stock selection and prudent
sector diversification, we will continue to seek strong performance in the
upcoming challenging environment.
<PAGE>
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DONNA CALDER
PORTFOLIO MANAGER
[LOGO]
AGGRESSIVE GROWTH PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: Our style is to use a combination of a top-down and bottom-up approach. While
we monitor general business conditions, the state of the economy, and the level
of interest rates and inflation, our primary focus is to identify emerging
leadership companies with prospects of at least 20% growth in revenues and
earnings. We follow a disciplined approach through strong and active fundamental
research that includes stringent buy and sell standards and effective risk
management.
We simultaneously are trying to identify new and emerging industry trends
early in their cycles, while seeking the leading companies that will benefit
from those trends and change the existing landscape. Sometimes we identify the
trends through the companies; sometimes we focus on those companies doing the
best within a previously identified trend.
This fiscal year was a difficult one for small-cap growth stocks overall,
and our portfolio was not immune, as reflected in its relative performance.
While U.S. equities in general experienced significant volatility, the smaller
cap sector's performance was impacted the most. Worldwide economic uncertainty,
including the effects of the Asian financial crises, and a renewed focus on
slowing growth in U.S. corporate earnings and in the economy kept a premium on
the liquidity and perceived safety of blue chip, large-cap stocks. This investor
sentiment dominated, despite a strong second quarter earnings report season from
the small cap sector in July.
The only real exception to this environment was during the first quarter of
1998, when a return to growth style investing within the small cap market helped
the portfolio. Fears of the impact of the Asian crisis temporarily subsided;
earnings growth continued to be strong; relative valuations approached record
lows; and stable to rising overall levels for all equity markets helped settle
investors' concerns. The small-cap sector rallied robustly in February and
March. Unfortunately, the portfolio did not participate fully in this relief
rally.
I took over the management of SunAmerica's portion of this portfolio on
March 1, 1998, and immediately began to restructure the portfolio and reduce the
number of holdings to concentrate on specific sectors while increasing the cash
position. Slowly, we began re-allocating assets, primarily to the technology,
consumer cyclicals and communications sectors, while decreasing allocations in
specific financial, health care, energy services and industrial stocks.
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Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Within the technology sector, we continue to focus on the Internet, where we
see explosive consumer usage growth as well as business-to-business e-commerce
as the next big growth trend. We also own companies that provide security for
the Internet and companies that enable the workings of the Internet, such as
suppliers of software infrastructure, data storage, and information technology
services. These stocks include Network Appliance Corp., Legato Systems Inc., and
Inktomi Corp.
Abercrombie and Fitch Co. is our single largest position within the consumer
cyclicals sector. From a stock performance perspective, this sector overall had
an outstanding second calendar quarter, but a disappointing September and
October, when the equity markets plunged once again. At that point, we added
significantly to our core position in the sector. Other holdings focus on cruise
lines, which we believe should experience strong growth based on current
demographics. We have positions in Carnival Corp. and Royal Caribbean Cruises
Ltd. as well as in Travel Services International Inc. and Steiner Leisure Ltd.,
both of which provide services to the cruise line industry.
We maintain holdings in several competitive local exchange carriers (CLECs),
which have been a challenging group, but which we still believe are a highly
attractive business, as they compete more effectively with the regional Bell
operating companies. These holdings include GST Telecommunications Inc., Qwest
Communications International Inc., ICG Communications Inc., Frontier Corp., and
Intermedia Communications Inc.
While we focus on small-cap companies, approximately one-third of our
portfolio is in large-cap names -- a strategy that helped performance during the
fiscal year. Most of these stocks are in the technology sector, including Dell
Computer Corp., Apple Computer Inc., America Online Inc., Yahoo! Inc., and
Compaq Computer Corp. Other large-cap names in our portfolio include Home Depot
Inc., Smith International Inc., and a selection of cable stocks.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: In 1999, we believe it is unlikely that the U.S. will go into a recession, in
light of recent Federal Reserve Board interest rate cuts, ongoing strong
consumer confidence, and a resumption of upward movement in the equity markets.
Small-cap fundamentals and earnings growth remain strong and relative valuations
attractive. At the same time, we think that more volatility is likely, coupled
with the potential for slower corporate earnings growth in general for 1999.
Thus, as we look ahead, we stand poised for changes as the U.S. economy enters
its ninth year of recovery. It is important to remember that, historically,
small-cap stocks have outperformed large-cap stocks over the long term.
Our strategy is to continue to take advantage of the many attractive
investment opportunities that have been created during the recent sell-off. We
also continue to manage risk through ongoing in-depth fundamental analysis,
extensive personal visits with individual company managements, and close
monitoring of industry trends for signs of overvaluation. Finally, we intend to
continually seek out those new industry trends and identify those companies that
we believe have the potential to change the landscape of the American economy.
<PAGE>
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MICHAEL LEVY AND ROBERT L. REINER
PORTFOLIO MANAGERS
[LOGO]
INTERNATIONAL EQUITY PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: We use the term "growth at a reasonable price" to describe our philosophy,
which combines the best of the value and growth investment styles. Our core
strategy involves seeking to identify undervalued mid- and large-cap stocks and
a catalyst that will realize the inherent value of the company in the relatively
near term. We do not seek benchmark weightings. Instead, we rely on our
bottom-up research to identify stocks that we believe offer the best potential,
regardless of country, industry, or sector. We use an array of proprietary
screening models and tools to identify companies that meet our value and growth
criteria. Value parameters include price-relative measures, such as enterprise
value to operating free cash flow and relative return-on-equity vs. relative
price-to-book value. Growth parameters include cash flow return on assets,
progression of cash flow returns, earnings momentum, and earnings estimate
revisions. We also use a currency overlay to add value to the portfolio.
Our strategy worked well. Our portion of the portfolio outperformed its
benchmark and its category average. This is particularly worth noting in what
was unquestionably a challenging year for international equity managers.
Emerging market uncertainties spoiled the record-setting pace most developed
equity markets had enjoyed through mid-July. Market watchers initially viewed
the sell-off as an over-reaction to localized events, but in time, it became
increasingly apparent that the G-7 nations would not be immune to such
contagion. Although no single event led to the massive correction experienced
this summer, several bonfires contributed in a significant way. These included
Russian political, financial and economic turmoil; Japanese indecisiveness
regarding methods for stimulating its economy and dealing with bankrupt
financial institutions; global bank exposure to foundering hedge funds; weaker
U.S. corporate earnings amidst high price/earnings multiples; moves toward
impeachment proceedings against President Clinton; potential for foreign loan
defaults in Brazil; and election jitters in Germany. Furthermore, world markets
were disappointed that the U.S. Federal Reserve Board reduced its key discount
rate by only 0.25% during the closing days of September. When the Fed did cut
rates again by another 0.25% on October 15th, the world markets reacted
positively.
Europe, led by its smaller markets as well as France and Germany, gained
over the fiscal year. Asia's performance, on the other hand, was dismal. Thus,
in our portfolio, we continued to weight toward Europe. We maintained our
substantial underweighting in Japan, but added defensive holdings there. We
significantly decreased our exposure to the Asia-Pacific region and to the
emerging markets.
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Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Our holdings in Europe are beneficiaries of both the restructuring and
consolidation underway in specific industries and the economic growth we should
witness as part of European economic and monetary union. Although underweight in
the U.K., we increased existing positions in growth companies, such as British
Aerospace, Glaxo Wellcome, Railtrack Group, and British Energy. France remains
the portfolio's largest exposure, with new positions there including media
company Canal Plus, infrastructure developer Eiffage, data networker Equant, and
industrial service firm Vivendi. We also added to our holding in the diversified
industrial and financial company Suez Lyonnaise des Eaux. In Germany, we
increased positions in insurer Allianz, regional bank Bayerische Hypo-und
Vereinsbank, and diversified utility company Viag. We purchased life sciences
company Hoechst, and one of our holdings, Daimler-Benz, announced its plan to
merge with U.S. auto maker Chrysler, creating the world's fifth-largest car
company. We continued to find exciting opportunities in Italy, Spain, Portugal,
Sweden and Ireland as well.
We added only one new name to the portfolio's Japanese holdings -- cosmetic
and toiletry manufacturer Kao Corporation. Elsewhere in the Asia-Pacific region,
we sold more than we bought. We moved out of small positions in Singapore,
Thailand and the Philippines; sold our position in Telecom Corporation of New
Zealand; took our weighting in Hong Kong to zero; and sold telecom provider SK
Telecom of Korea. In Australia, we purchased diversified financial services
leader AMP, which is domestically geared, taking profits in its competitor,
Asia-exposed National Mutual.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: The risk premium for equities has risen considerably in recent months,
reflecting concerns for slower economic growth and weaker earnings ahead. We
believe the unprecedented volatility of emerging markets and their mature
counterparts points to a need to pare risk and to revisit the fundamental facts
that can contribute to outperformance. In the difficult near-term environment
that we foresee, firms with a clear strategy for maintaining profitability and
enhancing shareholder value will likely be those rewarded with rising stock
prices.
We continue to believe that economic and monetary union will be a driver for
European earnings. We believe Japan is unlikely to enact a long-lasting
resolution to its economic quagmire and solve its financial sector's bad debt
crisis. Since September, the Asian markets (excluding Japan) have staged a mild
rally with the strengthening yen, the disappearance of short sellers due to the
decline of hedge funds and fear of further government intervention, and the
marginal allocation of monies into the region. However, Asia's economy could be
range-bound for some time, with many policy and implementation issues still
outstanding amidst a deteriorating external environment.
Caution is still the word, we believe, for emerging markets, particularly in
the global credit crunch scenario. Emerging Asia will likely perform best, since
it is furthest along in the correction process and has the lowest real interest
rates. Meanwhile, Latin America has the highest real interest rates, which
supports our negative stance on the region. Eastern Europe has been hurt by the
Russian meltdown, even though the region has, in recent years, moved more
closely to its western counterparts than to its nearby neighbors. As we seek
long-term growth of capital, it is important to note that our investment style
has not changed over the past several years and no changes are contemplated.
<PAGE>
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ELIZABETH R. BRAMWELL,
PORTFOLIO MANAGER
BRAMWELL CAPITAL MANAGEMENT, INC
FOCUS PORTFOLIO
Q: HOW DID YOU MANAGE YOUR PORTION OF THE PORTFOLIO OVER THE PAST FISCAL YEAR?
A: The Focus Portfolio's inception date was June 8, 1998. Therefore, our review
is from that date through the end of the fiscal year on October 31, 1998. The
Focus Portfolio's objective is to seek long-term growth of capital through
investments in both domestic and foreign stocks. Here, each of the three
portfolio managers emphasizes different stock-picking styles and may select
stocks of companies in different industries with varying market capitalizations.
What makes this Portfolio special is that it is a more concentrated approach to
stock selection, with each manager generally investing in ten favorite stocks.
Given this less diversified style, it must be considered an aggressive approach
to growth investing that may be subject to greater risks.
At Bramwell Capital Management, we generally focus on companies that have
strong top-line growth. We have also concentrated on companies that are
perceived as selling at favorable price/ earnings ratios to growth relative to
the S&P 500 Index. We believe that in a slowing global economy, growth --
specifically growth from new products, which intrinsically provides pricing
flexibility -- should be valued highly.
Still, the Focus Portfolio operated in a difficult investment environment
through October. Equity markets hit new highs in mid-July, as capital flowed
into equities and then deteriorated over concerns about declining economies in
Asia and Russia and decelerating profit growth in corporate America.
Disappointment in the Federal Reserve Board's modest 0.25% rate cut in late
September also contributed to the market decline, although the subsequent
incremental cuts in mid-October and again in November helped bring the market
back to a bullish mode.
Given this backdrop, we have employed several investment themes -- including
outsourcing, effective use of technology, home-related products, and
consolidation to achieve critical mass and economies of scale -- in selecting
ten equities for the Focus Portfolio.
Q: WOULD YOU GIVE US MORE SPECIFIC EXAMPLES?
A: Automatic Data Processing and CVS are both relatively consistent growers in
defensive industries -- i.e. transaction processing and drug retailing,
respectively -- that are effective users of technology and that are gaining
market share. Cardinal Health is reshaping the drug distribution industry in
part by providing incremental products and services to its historical lines. The
company is on track for significant earnings growth. Pfizer, which introduced
Viagra this past year, has a strong pharmaceutical pipeline with several other
new products in the wings that may facilitate 20% future long-term growth.
EMC's sales and earnings are also growing at impressive rates. We believe
that data storage, the company's primary business, will be increasingly
important with Y2K approaching. Computer Sciences is a computer services
outsourcing company with what we believe will be accelerating annual earnings
<PAGE>
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growth over the next few years. Another outsourcing-themed stock is Robert Half,
an employee staffing company that focuses on placing accountants. Third quarter
earnings came in above expectations, and we are looking for significant growth
going forward. This stock also sells currently at an attractive discount to
growth.
Furniture Brands is a consolidator of residential furniture brands with
double-digit earnings growth. Lower interest rates and a strong housing market
are very positive as we look ahead. Home Depot leads the home improvement
market. This stock is on target for continuing strong sales and earnings growth,
especially with lower interest rates. Finally, Washington Mutual is the leading
thrift in the Pacific Northwest, the fastest growing part of the country.
Currently impacted by the flat yield curve and consolidation of Ahmanson, we
believe that this company has the potential to achieve double-digit annual
growth.
Q: WHAT IS YOUR INVESTMENT OUTLOOK FOR 1999?
A: Looking ahead, we expect the Federal Reserve Board to focus on global
financial stability and to continue reducing interest rates. Lower interest
rates and improved credit availability would be especially helpful to emerging
countries and companies as well as to the housing market and equity valuations.
We anticipate U.S. economic growth to slow to 1%-2%, given the impact of
economic contraction in Asia and Eastern Europe on U.S. exports and previously
hoped for business opportunities. Inflation should continue to be minimal given
cheaper imports, lower oil and other commodity prices, underutilized global
capacity, and technology-driven productivity gains. Greater product
affordability, a strong housing market, and continued moderate economic gains in
Western Europe are expected to help offset the impact of economic weakness in
Asia and emerging markets worldwide.
Our portfolio focus continues to be companies that generate strong revenue
growth despite macroeconomic conditions. For those companies that deliver
superior growth, we anticipate above-average and possibly even rising
price/earnings valuations. We believe that advances in communications, computing
and medicine, the explosive growth of the Internet and electronic commerce, and
technology upgrades for the Year 2000 are driving change and creating investment
opportunities. We continue to like our existing investment themes. We will also
continue to use current market volatility to seek more attractive buying
opportunities to bolster long-term investment returns.
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*.................... $ 46,755,281 $ 92,742,343 $ 133,345,364 $ 27,415,779
Repurchase agreements (cost equals market).......... 846,000 1,510,000 7,228,000 851,000
Short-term securities*.............................. 499,925 6,256,592 4,399,340 376,197
Cash................................................ 9,875 6,049 89,372 1,313
Receivable for shares of beneficial interest sold... 158,131 345,742 470,705 21,323
Receivable from investment adviser.................. 31,817 20,786 27,831 17,897
Interest and dividends receivable................... 15,973 14,526 39,646 35,716
Deferred organizational expenses.................... 8,623 27,341 30,710 8,623
Prepaid expenses and other assets................... 564 1,519 1,804 370
Receivable for investments sold..................... -- 957,019 440,219 431,027
------------ -------------- -------------- ------------
Total assets...................................... 48,326,189 101,881,917 146,072,991 29,159,245
------------ -------------- -------------- ------------
LIABILITIES:
Payable for investments purchased................... 192,450 1,264,042 3,596,795 564,335
Other accrued expenses.............................. 144,855 216,303 298,417 71,047
Payable for shares of beneficial interest
redeemed........................................... 91,095 116,890 76,609 37,293
Investment advisory and management fees payable..... 36,711 74,094 108,559 22,737
Distribution and service maintenance fees payable... 29,499 58,857 80,578 17,627
Written call options at value (proceeds $39,262 on
Aggressive Growth Portfolio)....................... -- -- 75,050 --
------------ -------------- -------------- ------------
Total liabilities................................. 494,610 1,730,186 4,236,008 713,039
------------ -------------- -------------- ------------
Net assets...................................... $ 47,831,579 $ 100,151,731 $ 141,836,983 $ 28,446,206
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
NET ASSETS WERE COMPOSED OF:
Common Stock, $.0001 par value (1 billion shares
authorized)........................................ $ 350 $ 692 $ 866 $ 219
Paid-in capital..................................... 44,539,718 91,492,165 125,082,126 27,346,163
------------ -------------- -------------- ------------
44,540,068 91,492,857 125,082,992 27,346,382
Accumulated undistributed net investment loss....... (807) (2,748) (3,914) (840)
Accumulated undistributed net realized gain (loss)
on investments, foreign currency, and other assets
and liabilities.................................... (1,227,893) 3,663,884 (5,759,950) 110,196
Net unrealized appreciation of investments.......... 4,520,211 4,997,738 22,553,643 990,468
Net unrealized depreciation on written options
contracts.......................................... -- -- (35,788) --
------------ -------------- -------------- ------------
Net assets...................................... $ 47,831,579 $ 100,151,731 $ 141,836,983 $ 28,446,206
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
*Identified cost
Investment securities............................... $ 42,235,070 $ 87,744,605 $ 110,791,721 $ 26,425,311
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
Short-term securities............................... $ 499,925 $ 6,256,592 $ 4,399,340 $ 376,197
------------ -------------- -------------- ------------
------------ -------------- -------------- ------------
</TABLE>
See Notes to Financial Statements
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A:
Net assets............................................. $ 14,390,066 $ 32,115,106 $ 55,925,401 $ 9,798,860
Shares outstanding..................................... 1,048,668 2,199,202 3,388,419 751,202
Net asset value and redemption price per share......... $ 13.72 $ 14.60 $ 16.50 $ 13.04
Maximum sales charge (5.75% of offering price)......... 0.84 0.89 1.01 0.80
------------ ------------ ------------ ------------
Maximum offering price to public....................... $ 14.56 $ 15.49 $ 17.51 $ 13.84
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
CLASS B:
Net assets............................................. $ 26,124,601 $ 58,554,908 $ 74,997,930 $ 16,156,670
Shares outstanding..................................... 1,917,807 4,061,345 4,602,575 1,246,409
Net asset value, offering and redemption price per
share (excluding any applicable contingent deferred
sales charge)......................................... $ 13.62 $ 14.42 $ 16.29 $ 12.96
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
CLASS C:
Net assets............................................. $ 7,316,912 $ 9,481,717 $ 10,567,839 $ 2,490,676
Shares outstanding..................................... 537,327 656,930 648,532 192,271
Net asset value, offering and redemption price per
share (excluding any applicable contingent deferred
sales charge)......................................... $ 13.62 $ 14.43 $ 16.30 $ 12.95
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
CLASS Z:
Net assets............................................. -- -- $ 345,813 --
Shares outstanding..................................... -- -- 20,866 --
Net asset value, offering and redemption price per
share................................................. -- -- $ 16.57 --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY FOCUS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*............ $ 44,055,764 $ 192,285,494 $ 44,121,630 $ 77,306,409 $ 101,633,384
Repurchase agreements (cost equals
market)................................... 1,770,000 4,437,000 2,759,000 5,644,000 5,645,000
Short-term securities*...................... 1,360,000 110,000 -- 1,527,691 5,199,234
Cash........................................ -- 3,241 -- 39,174 86,190
Foreign cash................................ -- -- -- 973,628 --
Receivable for investments sold............. 135,085 3,711,946 39,412 64,117 --
Receivable for shares of beneficial interest
sold...................................... 133,570 104,254 461,682 65,965 2,641,934
Interest and dividends receivable........... 76,178 282,149 49,442 234,845 71,323
Receivable from investment adviser.......... 29,393 14,499 32,876 33,675 29,808
Deferred organizational expenses............ 11,480 30,198 11,480 30,198 70,680
Prepaid expenses and other assets........... 570 3,149 612 2,267 1,224
Foreign exchange currency contracts......... -- -- -- 513,676 --
Unrealized appreciation of foreign currency
contracts................................. -- -- -- 62,157 --
------------ -------------- ------------ ------------ --------------
Total assets.............................. 47,572,040 200,981,930 47,476,134 86,497,802 115,378,777
------------ -------------- ------------ ------------ --------------
LIABILITIES:
Payable for investments purchased........... 222,367 2,356,461 89,864 660,961 4,044,391
Other accrued expenses...................... 103,972 375,225 110,941 262,353 62,701
Payable for shares of beneficial interest
redeemed.................................. 76,314 469,184 83,190 107,791 159,549
Investment advisory and management fees
payable................................... 36,893 155,591 36,499 73,055 70,099
Distribution and service maintenance fees
payable................................... 30,149 118,734 28,851 52,104 68,108
Due to custodian bank....................... 1,438 -- 11,487 -- --
Payable for variation margin on futures
contracts................................. -- -- -- 33,654 --
Foreign exchange currency contracts......... -- -- -- 514,324 --
Unrealized depreciation of foreign currency
contracts................................. -- -- -- 431,867 --
------------ -------------- ------------ ------------ --------------
Total liabilities......................... 471,133 3,475,195 360,832 2,136,109 4,404,848
------------ -------------- ------------ ------------ --------------
Net assets.............................. $ 47,100,907 $ 197,506,735 $ 47,115,302 $ 84,361,693 $ 110,973,929
------------ -------------- ------------ ------------ --------------
------------ -------------- ------------ ------------ --------------
NET ASSETS WERE COMPOSED OF:
Common Stock, $.0001 par value (1 billion
shares authorized)........................ $ 376 $ 1,328 $ 438 $ 696 $ 883
Paid-in capital............................. 48,146,193 199,099,328 55,801,572 89,066,067 112,532,440
------------ -------------- ------------ ------------ --------------
48,146,569 199,100,656 55,802,010 89,066,763 112,533,323
Accumulated undistributed net investment
income (loss)............................. (780) (5,561) (801) 265,285 --
Accumulated undistributed net realized gain
(loss) on investments, foreign currency,
and other assets and liabilities.......... 145,858 (7,040,019) (1,327,223) (6,017,801) (8,194,979)
Net unrealized appreciation (depreciation)
of investments............................ (1,190,740) 5,451,729 (7,358,684) 1,566,481 6,635,585
Net unrealized depreciation of foreign
currency, and other assets and
liabilities............................... -- (70) -- (361,930) --
Net unrealized depreciation on futures
contracts................................. -- -- -- (157,105) --
------------ -------------- ------------ ------------ --------------
Net assets.............................. $ 47,100,907 $ 197,506,735 $ 47,115,302 $ 84,361,693 $ 110,973,929
------------ -------------- ------------ ------------ --------------
------------ -------------- ------------ ------------ --------------
*Identified cost
Investment securities....................... $ 45,246,504 $ 186,833,765 $ 51,480,314 $ 75,739,902 $ 94,997,799
------------ -------------- ------------ ------------ --------------
------------ -------------- ------------ ------------ --------------
Short-term securities....................... $ 1,360,000 $ 110,000 -- $ 1,527,717 $ 5,199,234
------------ -------------- ------------ ------------ --------------
------------ -------------- ------------ ------------ --------------
</TABLE>
See Notes to Financial Statements
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY FOCUS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
Net assets.................................. $ 12,921,581 $ 71,115,953 $ 15,051,048 $ 28,417,391 $ 29,770,444
Shares outstanding.......................... 1,026,206 4,743,248 1,391,561 2,324,757 2,362,782
Net asset value and redemption price per
share..................................... $ 12.59 $ 14.99 $ 10.82 $ 12.22 $ 12.60
Maximum sales charge (5.75% of offering
price).................................... 0.77 0.91 0.66 0.75 0.77
------------ -------------- ------------ ------------ ------------
Maximum offering price to public............ $ 13.36 $ 15.90 $ 11.48 $ 12.97 $ 13.37
------------ -------------- ------------ ------------ ------------
------------ -------------- ------------ ------------ ------------
CLASS B:
Net assets.................................. $ 28,149,561 $ 111,030,100 $ 25,953,780 $ 47,817,267 $ 45,816,809
Shares outstanding.......................... 2,250,172 7,498,100 2,417,534 3,962,716 3,647,704
Net asset value, offering and redemption
price per share (excluding any applicable
contingent deferred sales charge)......... $ 12.51 $ 14.81 $ 10.74 $ 12.07 $ 12.56
------------ -------------- ------------ ------------ ------------
------------ -------------- ------------ ------------ ------------
CLASS C:
Net assets.................................. $ 5,822,783 $ 15,260,248 $ 5,968,570 $ 7,982,198 --
Shares outstanding.......................... 465,494 1,030,596 555,667 661,550 --
Net asset value, offering and redemption
price per share (excluding any applicable
contingent deferred sales charge)......... $ 12.51 $ 14.81 $ 10.74 $ 12.07 --
------------ -------------- ------------ ------------ ------------
------------ -------------- ------------ ------------ ------------
CLASS II:
Net assets.................................. -- -- -- -- $ 35,386,676
Shares outstanding.......................... -- -- -- -- 2,817,537
Net asset value and redemption price per
share (excluding any applicable contingent
deferred sales charge).................... -- -- -- -- $ 12.56
Maximum sales charge (1.00% of offering
price).................................... -- -- -- -- 0.13
------------ -------------- ------------ ------------ ------------
Maximum offering price to public............ -- -- -- -- $ 12.69
------------ -------------- ------------ ------------ ------------
------------ -------------- ------------ ------------ ------------
CLASS Z:
Net assets.................................. $ 206,982 $ 100,434 $ 141,904 $ 144,837 --
Shares outstanding.......................... 16,377 6,680 13,084 11,801 --
Net asset value, offering and redemption
price per share........................... $ 12.64 $ 15.04 $ 10.85 $ 12.27 --
------------ -------------- ------------ ------------ ------------
------------ -------------- ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements
<PAGE>
24
STYLE SELECT SERIES LOGO
STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
LARGE-CAP MID-CAP AGGRESSIVE LARGE-CAP
GROWTH GROWTH GROWTH BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends*............................................. $ 240,626 $ 205,366 $ 432,776 $ 503,874
Interest............................................... 53,880 287,193 607,257 58,330
------------ ------------ ------------ -----------
Total investment income.............................. 294,506 492,559 1,040,033 562,204
------------ ------------ ------------ -----------
Expenses:
Investment advisory and management fees................ 332,529 839,531 1,251,124 287,134
Distribution and service maintenance fees
Class A.............................................. 55,924 93,555 175,991 58,296
Class B.............................................. 139,218 499,157 660,563 106,640
Class C.............................................. 33,528 73,073 86,457 13,933
Transfer agent fees and expenses
Class A.............................................. 44,739 80,130 150,597 46,637
Class B.............................................. 38,981 154,246 204,011 29,844
Class C.............................................. 9,912 22,565 26,690 4,599
Class Z.............................................. -- -- 7,800 --
Registration fees
Class A.............................................. 40,851 41,495 51,763 36,772
Class B.............................................. 50,250 86,257 67,535 35,881
Class C.............................................. 32,399 17,232 23,216 24,120
Class Z.............................................. -- -- 1,795 --
Audit and tax consulting fees.......................... 60,225 31,800 31,800 36,330
Custodian fees and expenses............................ 56,529 142,720 212,690 48,813
Printing expense....................................... 54,750 21,070 55,850 37,050
Legal fees and expenses................................ 21,460 14,100 24,440 21,460
Directors' fees and expenses........................... 2,986 8,185 18,353 3,019
Amortization of organizational expenses................ 2,292 8,979 13,064 2,292
Insurance expense...................................... 9 263 385 --
Miscellaneous expenses................................. 1,831 8,152 12,266 1,829
------------ ------------ ------------ -----------
Total expenses....................................... 978,413 2,142,510 3,076,390 794,649
Less: expenses waived/reimbursed by investment
adviser............................................ (274,230) (276,196) (364,545) (205,178)
------------ ------------ ------------ -----------
Net expenses......................................... 704,183 1,866,314 2,711,845 589,471
------------ ------------ ------------ -----------
Net investment loss...................................... (409,677) (1,373,755) (1,671,812) (27,267)
------------ ------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments.................. (1,043,328) 5,170,910 (5,797,473) 158,012
Net realized gain on options............................. -- -- 143,423 --
Net realized gain (loss) on foreign currency and other
assets and liabilities................................. (2) 2 -- 8
Net change in unrealized appreciation/depreciation of
investments............................................ 5,789,617 (1,798,554) 8,948,305 2,032,468
Net change in unrealized appreciation/depreciation on
written options contracts.............................. -- -- (35,788) --
------------ ------------ ------------ -----------
Net realized and unrealized gain on investments, foreign
currency and other assets and liabilities.............. 4,746,287 3,372,358 3,258,467 2,190,488
------------ ------------ ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:.... $ 4,336,610 $ 1,998,603 $ 1,586,655 $ 2,163,221
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
*Net of foreign withholding taxes on dividends of........ $ 899 $ 1,278 $ 292 $ 2,848
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
See Notes to Financial Statements
<PAGE>
25
STYLE SELECT SERIES LOGO
STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP INTERNATIONAL
VALUE VALUE VALUE EQUITY FOCUS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO+
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends*..................................... $ 603,325 $ 2,846,714 $ 656,933 $ 1,274,293 $ 140,993
Interest....................................... 124,280 582,005 155,548 306,469 194,706
----------- ------------- ------------ ------------ ------------
Total investment income...................... 727,605 3,428,719 812,481 1,580,762 335,699
----------- ------------- ------------ ------------ ------------
Expenses:
Investment advisory and management fees........ 353,448 1,934,440 393,742 877,072 238,994
Distribution and service maintenance fees
Class A...................................... 47,457 251,405 51,869 90,504 29,757
Class B...................................... 182,997 1,072,774 202,927 474,411 107,744
Class C...................................... 34,082 143,031 42,055 63,753 --
Class II..................................... -- -- -- -- 88,405
Transfer agent fees and expenses
Class A...................................... 37,925 207,768 41,495 69,722 23,806
Class B...................................... 51,239 320,795 56,810 137,564 30,168
Class C...................................... 10,023 42,661 12,342 18,489 --
Class II..................................... -- -- -- 24,753
Class Z...................................... 7,245 7,830 9,540 7,695 --
Registration fees
Class A...................................... 40,304 57,494 45,315 45,360 4,251
Class B...................................... 58,903 96,181 60,742 91,539 5,387
Class C...................................... 28,567 16,869 30,382 16,923 --
Class II..................................... -- -- -- -- 4,421
Class Z...................................... 1,792 1,801 1,805 1,802 --
Custodian fees and expenses.................... 60,086 328,855 66,936 358,802 33,740
Printing expense............................... 37,050 22,150 54,750 21,900 5,110
Audit and tax consulting fees.................. 36,330 24,825 36,330 31,800 11,680
Legal fees and expenses........................ 21,460 23,750 21,460 14,100 4,380
Amortization of organizational expenses........ 6,377 13,064 6,377 13,064 10,328
Directors' fees and expenses................... 2,977 19,607 2,980 14,469 730
Insurance expense.............................. 9 532 9 118 17
Miscellaneous expenses......................... 1,831 7,625 1,831 8,286 743
----------- ------------- ------------ ------------ ------------
Total expenses............................... 1,020,102 4,593,457 1,139,697 2,357,373 624,414
Less: expenses waived/reimbursed by
investment adviser......................... (250,307) (360,070) (279,920) (389,304) (89,221)
----------- ------------- ------------ ------------ ------------
Net expenses................................. 769,795 4,233,387 859,777 1,968,069 535,193
----------- ------------- ------------ ------------ ------------
Net investment loss.............................. (42,190) (804,668) (47,296) (387,307) (199,494)
----------- ------------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments**........ 151,733 (7,005,287) (1,440,075) (5,240,326) (8,194,979)
Net realized loss on options..................... -- -- -- (251,838) --
Net realized loss on futures contracts........... -- -- -- (27,788) --
Net realized gain (loss) on foreign currency and
other assets and liabilities................... 5 (473) -- 459,966 --
Net change in unrealized appreciation/
depreciation of investments.................... 145,056 (5,278,392) (6,590,682) 4,506,398 6,635,585
Net change in unrealized appreciation/
depreciation on futures contracts.............. -- -- -- (157,105) --
Net change in unrealized appreciation/
depreciation of foreign currency and other
assets and liabilities......................... -- 1 -- (454,809) --
----------- ------------- ------------ ------------ ------------
Net realized and unrealized gain (loss) on
investments, foreign currency and other assets
and liabilities................................ 296,794 (12,284,151) (8,030,757) (1,165,502) (1,559,394)
----------- ------------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS:............................... $ 254,604 ($ 13,088,819) ($ 8,078,053) ($ 1,552,809) ($ 1,758,888)
----------- ------------- ------------ ------------ ------------
----------- ------------- ------------ ------------ ------------
* Net of foreign withholding taxes on dividends
of............................................. $ 8,024 $ 39,264 $ 944 $ 176,466 $ --
----------- ------------- ------------ ------------ ------------
----------- ------------- ------------ ------------ ------------
**Net of foreign withholding taxes on capital
gains of....................................... $ -- $ -- $ -- $ 37,004 $ --
----------- ------------- ------------ ------------ ------------
----------- ------------- ------------ ------------ ------------
</TABLE>
- ------------------
+ Commenced operations June 8, 1998
See Notes to Financial Statements
<PAGE>
26
STYLE SELECT SERIES LOGO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LARGE-CAP GROWTH PORTFOLIO MID-CAP GROWTH PORTFOLIO
-------------------------- ----------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE OCTOBER 15, FOR THE NOVEMBER 19,
YEAR 1997* YEAR 1996*
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income (loss)........................ $ (409,677) $ 3,674 $ (1,373,755) $ (595,692)
Net realized gain (loss) on investments............. (1,043,328) (184,565) 5,170,910 208,124
Net realized gain (loss) on foreign currency and
other assets and liabilities...................... (2) -- 2 (1,597)
Net change in unrealized appreciation/depreciation
of investments.................................... 5,789,617 (1,269,406) (1,798,554) 6,796,292
------------ ------------ -------------- ------------
Net increase (decrease) in net assets resulting from
operations........................................ 4,336,610 (1,450,297) 1,998,603 6,407,127
------------ ------------ -------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (Class A)................ (5,012) -- -- --
From net investment income (Class B)................ (4,017) -- -- --
From net investment income (Class C)................ (983) -- -- --
------------ ------------ -------------- ------------
Total dividends and distributions to shareholders..... (10,012) -- -- --
------------ ------------ -------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 9).......................... 18,956,422 25,998,856 39,324,930 52,396,071
------------ ------------ -------------- ------------
TOTAL INCREASE IN NET ASSETS.......................... 23,283,020 24,548,559 41,323,533 58,803,198
NET ASSETS:
Beginning of period................................... 24,548,559 -- 58,828,198 25,000
------------ ------------ -------------- ------------
End of period [including undistributed net investment
income (loss) for October 31, 1998 and October 31,
1997 of ($807), $7,889, ($2,748) and ($643)
respectively]........................................ $ 47,831,579 $ 24,548,559 $ 100,151,731 $ 58,828,198
------------ ------------ -------------- ------------
------------ ------------ -------------- ------------
</TABLE>
- ------------------
* Commencement of Operations
See Notes to Financial Statements
<PAGE>
27
STYLE SELECT SERIES LOGO
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO LARGE-CAP BLEND PORTFOLIO
---------------------------- --------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE NOVEMBER 19, FOR THE OCTOBER 15,
YEAR 1996* YEAR 1997*
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income (loss)........................ $ (1,671,812) $ (597,946) $ (27,267) $ 15,564
Net realized gain (loss) on investments............. (5,797,473) 1,155,918 158,012 (48,360)
Net realized gain on options........................ 143,423 -- -- --
Net realized gain on foreign currency and other
assets and liabilities............................ -- -- 8 191
Net change in unrealized appreciation/depreciation
of investments.................................... 8,948,305 13,605,338 2,032,468 (1,042,000)
Net change in unrealized appreciation/depreciation
of foreign currency and other assets and
liabilities....................................... -- -- -- --
Net change in unrealized appreciation/depreciation
on written option contracts....................... (35,788) -- -- --
-------------- ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations........................................ 1,586,655 14,163,310 2,163,221 (1,074,605)
-------------- ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (Class A)................ -- -- (12,655) --
From net investment income (Class B)................ -- -- (10,889) --
From net investment income (Class C)................ -- -- (1,447) --
From net realized gains on investments (Class A).... (291,095) -- -- --
From net realized gains on investments (Class B).... (365,194) -- -- --
From net realized gains on investments (Class C).... (45,708) -- -- --
-------------- ------------ ------------ ------------
Total dividends and distributions to shareholders..... (701,997) -- (24,991) --
-------------- ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 9).......................... 47,881,964 78,882,051 1,630,996 25,751,585
-------------- ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS.......................... 48,766,622 93,045,361 3,769,226 24,676,980
NET ASSETS:
Beginning of period................................... 93,070,361 25,000 24,676,980 --
-------------- ------------ ------------ ------------
End of period [including undistributed net investment
income (loss) for October 31, 1998 and October 31,
1997 of ($3,914), ($761), ($840) and $20,057
respectively]........................................ $ 141,836,983 $ 93,070,361 $ 28,446,206 $ 24,676,980
-------------- ------------ ------------ ------------
-------------- ------------ ------------ ------------
</TABLE>
- ------------------
* Commencement of Operations
See Notes to Financial Statements
<PAGE>
28
STYLE SELECT SERIES LOGO
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
<TABLE>
<CAPTION>
LARGE-CAP VALUE PORTFOLIO VALUE PORTFOLIO
-------------------------- ------------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE OCTOBER 15, FOR THE NOVEMBER 19,
YEAR 1997* YEAR 1996*
ENDED THROUGH ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income (loss)...................... $ (42,190) $ 12,304 $ (804,668) $ (249,203)
Net realized gain (loss) on investments........... 151,733 -- (7,005,287) 5,614,072
Net realized gain (loss) on foreign currency and
other assets and liabilities.................... 5 -- (473) (19)
Net change in unrealized appreciation/
depreciation of investments..................... 145,056 (1,335,796) (5,278,392) 10,730,121
Net change in unrealized appreciation/
depreciation of foreign currency and other
assets and liabilities.......................... -- -- 1 (71)
------------ ------------ -------------- --------------
Net increase (decrease) in net assets resulting
from operations................................. 254,604 (1,323,492) (13,088,819) 16,094,900
------------ ------------ -------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (Class A).............. (8,099) -- -- --
From net investment income (Class B).............. (10,027) -- -- --
From net investment income (Class C).............. (1,868) -- -- --
From net investment income (Class Z).............. (197) -- -- --
From net realized gains on investments (Class A).. -- -- (1,938,244) --
From net realized gains on investments (Class B).. -- -- (3,147,503) --
From net realized gains on investments (Class C).. -- -- (364,243) --
------------ ------------ -------------- --------------
Total dividends and distributions to shareholders... (20,191) -- (5,449,990) --
------------ ------------ -------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL
SHARE TRANSACTIONS (NOTE 9)........................ 22,129,144 26,060,842 80,750,098 119,175,546
------------ ------------ -------------- --------------
TOTAL INCREASE IN NET ASSETS........................ 22,363,557 24,737,350 62,211,289 135,270,446
NET ASSETS:
Beginning of period................................. 24,737,350 -- 135,295,446 25,000
------------ ------------ -------------- --------------
End of period [including undistributed net
investment income (loss) for October 31, 1998 and
October 31, 1997 of ($780), $16,631, ($5,561) and
($680) respectively]............................... $ 47,100,907 $ 24,737,350 $ 197,506,735 $ 135,295,446
------------ ------------ -------------- --------------
------------ ------------ -------------- --------------
</TABLE>
- ------------------
* Commencement of Operations
See Notes to Financial Statements
<PAGE>
29
STYLE SELECT SERIES LOGO
STATEMENT OF CHANGES IN NET ASSETS -- (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FOCUS
SMALL-CAP VALUE PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- -------------------------- --------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
FOR THE OCTOBER 15, FOR THE NOVEMBER 19, JUNE 8,
YEAR 1997* YEAR 1996* 1998*
ENDED THROUGH ENDED THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income (loss)................ $ (47,296) $ 30,175 $ (387,307) $ (110,177) $ (199,494)
Net realized gain (loss) on investments..... (1,440,075) -- (5,240,326) 843,851 (8,194,979)
Net realized loss on options................ -- -- (251,838) -- --
Net realized loss on futures contracts...... -- -- (27,788) -- --
Net realized gain on foreign currency and
other assets and liabilities.............. -- -- 459,966 209,293 --
Net change in unrealized appreciation/
depreciation of investments............... (6,590,682) (768,002) 4,506,398 (4,158,649) 6,635,585
Net change in unrealized appreciation/
depreciation of futures contracts......... -- -- (157,105) -- --
Net change in unrealized appreciation/
depreciation of foreign currency and other
assets and liabilities.................... -- -- (454,809) 94,498 --
------------ ------------ ------------ ------------ --------------
Net decrease in net assets resulting from
operations................................ (8,078,053) (737,827) (1,552,809) (3,121,184) (1,758,888)
------------ ------------ ------------ ------------ --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (Class A)........ (16,218) -- -- -- --
From net investment income (Class B)........ (19,460) -- -- -- --
From net investment income (Class C)........ (4,296) -- -- -- --
From net investment income (Class Z)........ (183) -- -- -- --
From net realized gains on investments
(Class A)................................. -- -- (431,326) -- --
From net realized gains on investments
(Class B)................................. -- -- (773,323) -- --
From net realized gains on investments
(Class C)................................. -- -- (80,350) -- --
------------ ------------ ------------ ------------ --------------
Total dividends and distributions to
shareholders................................. (40,157) -- (1,284,999) -- --
------------ ------------ ------------ ------------ --------------
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9).......... 30,250,351 25,720,988 15,719,105 74,576,580 112,732,817
------------ ------------ ------------ ------------ --------------
TOTAL INCREASE IN NET ASSETS.................. 22,132,141 24,983,161 12,881,297 71,455,396 110,973,929
NET ASSETS:
Beginning of period........................... 24,983,161 -- 71,480,396 25,000 --
------------ ------------ ------------ ------------ --------------
End of period [including undistributed net
investment income (loss) for October 31, 1998
and October 31, 1997 of ($801), $35,108,
$265,285, $122,861 and $-- respectively]..... $ 47,115,302 $ 24,983,161 $ 84,361,693 $ 71,480,396 $ 110,973,929
------------ ------------ ------------ ------------ --------------
------------ ------------ ------------ ------------ --------------
</TABLE>
- ------------------
* Commencement of Operations
See Notes to Financial Statements
<PAGE>
30
STYLE SELECT SERIES LOGO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NET DIVIDENDS
NET GAIN (LOSS) TOTAL FROM DISTRI- NET
NET ASSET INVEST- ON INVEST- FROM NET BUTIONS ASSET
VALUE, MENT MENTS (BOTH INVEST- INVEST- FROM TOTAL VALUE,
PERIOD BEGINNING INCOME REALIZED AND MENT MENT CAPITAL DISTRI- END OF
ENDED OF PERIOD (LOSS)(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD
- ---------------------------------------- --------- --------- ------------ ---------- --------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LARGE-CAP GROWTH PORTFOLIO
CLASS A
10/15/97-10/31/97....................... $12.50 $ -- $(0.71) $(0.71) $ -- $ -- $ -- $11.79
10/31/98................................ 11.79 (0.11) 2.05 1.94 (0.01) -- (0.01) 13.72
CLASS B
10/15/97-10/31/97....................... 12.50 -- (0.71) (0.71) -- -- -- 11.79
10/31/98................................ 11.79 (0.21) 2.04 1.83 -- -- -- 13.62
CLASS C
10/15/97-10/31/97....................... 12.50 -- (0.72) (0.72) -- -- -- 11.78
10/31/98................................ 11.78 (0.20) 2.04 1.84 -- -- -- 13.62
- ------------------------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH PORTFOLIO
CLASS A
11/19/96-10/31/97....................... $12.50 $(0.16) $ 1.37 $ 1.21 $ -- $ -- $ -- $13.71
10/31/98................................ 13.71 (0.18) 1.07 0.89 -- -- -- 14.60
CLASS B
11/19/96-10/31/97....................... 12.50 (0.25) 1.38 1.13 -- -- -- 13.63
10/31/98................................ 13.63 (0.27) 1.06 0.79 -- -- -- 14.42
CLASS C
3/06/97-10/31/97........................ 11.93 (0.18) 1.89 1.71 -- -- -- 13.64
10/31/98................................ 13.64 (0.27) 1.06 0.79 -- -- -- 14.43
- ------------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
CLASS A
11/19/96-10/31/97....................... $12.50 $(0.11) $ 3.51 $ 3.40 $ -- $ -- $ -- $15.90
10/31/98................................ 15.90 (0.16) 0.87 0.71 -- (0.11) (0.11) 16.50
CLASS B
11/19/96-10/31/97....................... 12.50 (0.24) 3.54 3.30 -- -- -- 15.80
10/31/98................................ 15.80 (0.27) 0.87 0.60 -- (0.11) (0.11) 16.29
CLASS C
3/06/97-10/31/97........................ 13.38 (0.17) 2.59 2.42 -- -- -- 15.80
10/31/98................................ 15.80 (0.27) 0.88 0.61 -- (0.11) (0.11) 16.30
CLASS Z
4/03/98-10/31/98........................ 18.30 (0.03) (1.70) (1.73) -- -- -- 16.57
- ------------------------------------------------------------------------------------------------------------------------------------
LARGE-CAP BLEND PORTFOLIO
CLASS A
10/15/97-10/31/97....................... $12.50 $ 0.01 $(0.53) $(0.52) $ -- $ -- $ -- $11.98
10/31/98................................ 11.98 0.03 1.04 1.07 (0.01) -- (0.01) 13.04
CLASS B
10/15/97-10/31/97....................... 12.50 -- (0.54) (0.54) -- -- -- 11.96
10/31/98................................ 11.96 (0.07) 1.08 1.01 (0.01) -- (0.01) 12.96
CLASS C
10/15/97-10/31/97....................... 12.50 -- (0.53) (0.53) -- -- -- 11.97
10/31/98................................ 11.97 (0.07) 1.06 0.99 (0.01) -- (0.01) 12.95
- ------------------------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE PORTFOLIO
CLASS A
10/15/97-10/31/97....................... $12.50 $ 0.01 $(0.65) $(0.64) $ -- $ -- $ -- $11.86
10/31/98................................ 11.86 0.03 0.71 0.74 (0.01) -- (0.01) 12.59
CLASS B
10/15/97-10/31/97....................... 12.50 -- (0.64) (0.64) -- -- -- 11.86
10/31/98................................ 11.86 (0.04) 0.69 0.65 -- -- -- 12.51
CLASS C
10/15/97-10/31/97....................... 12.50 -- (0.64) (0.64) -- -- -- 11.86
10/31/98................................ 11.86 (0.04) 0.69 0.65 -- -- -- 12.51
CLASS Z
4/16/98-10/31/98........................ 13.86 0.06 (1.27) (1.21) (0.01) -- (0.01) 12.64
<CAPTION>
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME (LOSS)
PERIOD TOTAL PERIOD TO AVERAGE TO AVERAGE NET PORTFOLIO
ENDED RETURN(2) (000'S) NET ASSETS(4) ASSETS(4) TURNOVER
- ---------------------------------------- --------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
LARGE-CAP GROWTH PORTFOLIO
10/15/97-10/31/97....................... (5.68)% $23,609 1.78%(3) 0.34%(3) 1%
10/31/98................................ 16.42 14,390 1.78 (0.90) 30
10/15/97-10/31/97....................... (5.68) 773 2.43(3) (0.84)(3) 1
10/31/98................................ 15.54 26,125 2.43 (1.54) 30
10/15/97-10/31/97....................... (5.76) 166 2.43(3) (0.42)(3) 1
10/31/98................................ 15.64 7,317 2.43 (1.54) 30
- ----------------------------------------
MID-CAP GROWTH PORTFOLIO
11/19/96-10/31/97....................... 9.68% $18,404 1.85%(3) (1.19)%(3) 97%
10/31/98................................ 6.49 32,115 1.78 (1.19) 135
11/19/96-10/31/97....................... 9.04 35,739 2.47(3) (1.92)(3) 97
10/31/98................................ 5.80 58,555 2.43 (1.84) 135
3/06/97-10/31/97........................ 14.33 4,685 2.45(3) (1.97)(3) 97
10/31/98................................ 5.79 9,482 2.43 (1.84) 135
- ----------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
11/19/96-10/31/97....................... 27.20% $38,537 1.84%(3) (0.77)%(3) 150%
10/31/98................................ 4.55 55,925 1.78 (0.95) 142
11/19/96-10/31/97....................... 26.40 48,594 2.47(3) (1.58)(3) 150
10/31/98................................ 3.87 74,998 2.43 (1.60) 142
3/06/97-10/31/97........................ 18.09 5,939 2.45(3) (1.68)(3) 150
10/31/98................................ 3.94 10,568 2.43 (1.60) 142
4/03/98-10/31/98........................ (9.45) 346 1.21(3) (0.36)(3) 142
- ----------------------------------------
LARGE-CAP BLEND PORTFOLIO
10/15/97-10/31/97....................... (4.16)% $23,593 1.78%(3) 1.35%(3) 2%
10/31/98................................ 8.95 9,799 1.78 0.22 98
10/15/97-10/31/97....................... (4.32) 941 2.43(3) 0.29(3) 2
10/31/98................................ 8.43 16,157 2.43 (0.52) 98
10/15/97-10/31/97....................... (4.24) 143 2.43(3) 0.54(3) 2
10/31/98................................ 8.26 2,490 2.43 (0.53) 98
- ----------------------------------------
LARGE-CAP VALUE PORTFOLIO
10/15/97-10/31/97....................... (5.12)% $23,240 1.78%(3) 1.07%(3) --%
10/31/98................................ 6.22 12,921 1.78 0.22 37
10/15/97-10/31/97....................... (5.12) 1,325 2.43(3) 0.22(3) --
10/31/98................................ 5.52 28,149 2.43 (0.34) 37
10/15/97-10/31/97....................... (5.12) 172 2.43(3) 0.53(3) --
10/31/98................................ 5.52 5,823 2.43 (0.31) 37
4/16/98-10/31/98........................ (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):
<TABLE>
<CAPTION>
10/31/97 10/31/98 10/31/97 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Large-Cap Growth A............ .59% .72% Aggressive Growth C........... .73% .44%
Large-Cap Growth B............ 1.53% .80% Aggressive Growth Z........... -- 7.62%
Large-Cap Growth C............ 3.29% 1.42% Large-Cap Blend A............. .58% .62%
Mid-Cap Growth A.............. .34% .30% Large-Cap Blend B............. 1.26% .67%
Mid-Cap Growth B.............. .42% .33% Large-Cap Blend C............. 3.12% 2.11%
Mid-Cap Growth C.............. .96% .39% Large-Cap Value A............. .58% .67%
Aggressive Growth A........... .26% .27% Large-Cap Value B............. 1.16% .61%
Aggressive Growth B........... .32% .28% Large-Cap Value C............. 3.22% 1.14%
Large-Cap Value Z............. -- 11.77%
</TABLE>
See Notes to Financial Statements
<PAGE>
31
STYLE SELECT SERIES LOGO
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
NET DIVIDENDS
NET GAIN (LOSS) TOTAL FROM DISTRI- NET
NET ASSET INVEST- ON INVEST- FROM NET BUTIONS ASSET
VALUE, MENT MENTS (BOTH INVEST- INVEST- FROM TOTAL VALUE,
PERIOD BEGINNING INCOME REALIZED AND MENT MENT CAPITAL DISTRI- END OF
ENDED OF PERIOD (LOSS)(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD
- ---------------------------------------- --------- --------- ------------ ---------- --------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE PORTFOLIO
CLASS A
11/19/96-10/31/97....................... $12.50 $ -- $ 3.59 $ 3.59 $ -- $ -- $ -- $16.09
10/31/98................................ 16.09 -- (0.51) (0.51) -- (0.59) (0.59) 14.99
CLASS B
11/19/96-10/31/97....................... 12.50 (0.11) 3.61 3.50 -- -- -- 16.00
10/31/98................................ 16.00 (0.10) (0.50) (0.60) -- (0.59) (0.59) 14.81
CLASS C
3/06/97-10/31/97........................ 13.56 (0.08) 2.52 2.44 -- -- -- 16.00
10/31/98................................ 16.00 (0.11) (0.49) (0.60) -- (0.59) (0.59) 14.81
CLASS Z
4/03/98-10/31/98........................ 17.62 0.05 (2.63) (2.58) -- -- -- 15.04
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP VALUE PORTFOLIO
CLASS A
10/15/97-10/31/97....................... $12.50 $ 0.01 $(0.37) $(0.36) $ -- $ -- $ -- $12.14
10/31/98................................ 12.14 0.05 (1.36) (1.31) (0.01) -- (0.01) 10.82
CLASS B
10/15/97-10/31/97....................... 12.50 0.01 (0.38) (0.37) -- -- -- 12.13
10/31/98................................ 12.13 (0.05) (1.33) (1.38) (0.01) -- (0.01) 10.74
CLASS C
10/15/97-10/31/97....................... 12.50 0.01 (0.37) (0.36) -- -- -- 12.14
10/31/98................................ 12.14 (0.06) (1.33) (1.39) (0.01) -- (0.01) 10.74
CLASS Z
4/03/98-10/31/98........................ 13.63 0.04 (2.80) (2.76) (0.02) -- (0.02) 10.85
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
CLASS A
11/19/96-10/31/97....................... $12.50 $ 0.01 $(0.05) $(0.04) $ -- $ -- $ -- $12.46
10/31/98................................ 12.46 (0.01) (0.01) (0.02) -- (0.22) (0.22) 12.22
CLASS B
11/19/96-10/31/97....................... 12.50 (0.09) (0.03) (0.12) -- -- -- 12.38
10/31/98................................ 12.38 (0.09) -- (0.09) -- (0.22) (0.22) 12.07
CLASS C
3/06/97-10/31/97........................ 12.60 (0.07) (0.15) (0.22) -- -- -- 12.38
10/31/98................................ 12.38 (0.09) -- (0.09) -- (0.22) (0.22) 12.07
CLASS Z
4/06/98-10/31/98........................ 13.87 0.03 (1.63) (1.60) -- -- -- 12.27
- ------------------------------------------------------------------------------------------------------------------------------------
FOCUS PORTFOLIO
CLASS A
6/08/98-10/31/98........................ $12.50 $(0.01) $ 0.11 $ 0.10 $ -- $ -- $ -- $12.60
CLASS B
6/08/98-10/31/98........................ 12.50 (0.04) 0.10 0.06 -- -- -- 12.56
CLASS II
6/08/98-10/31/98........................ 12.50 (0.04) 0.10 0.06 -- -- -- 12.56
<CAPTION>
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
END OF EXPENSES INCOME (LOSS)
PERIOD TOTAL PERIOD TO AVERAGE TO AVERAGE NET PORTFOLIO
ENDED RETURN(2) (000'S) NET ASSETS(4) ASSETS(4) TURNOVER
- ---------------------------------------- --------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
VALUE PORTFOLIO
11/19/96-10/31/97....................... 28.72% $ 48,377 1.84%(3) --%(3) 48%
10/31/98................................ (3.32) 71,116 1.78 (0.01) 69
11/19/96-10/31/97....................... 28.00 77,534 2.46(3) (0.74)(3) 48
10/31/98................................ (3.92) 111,030 2.43 (0.66) 69
3/06/97-10/31/97........................ 17.99 9,384 2.45(3) (0.78)(3) 48
10/31/98................................ (3.92) 15,260 2.43 (0.66) 69
4/03/98-10/31/98........................ (14.64) 101 1.21(3) 0.62(3) 69
- ----------------------------------------
SMALL-CAP VALUE PORTFOLIO
10/15/97-10/31/97....................... (2.88)% $ 21,346 1.78%(3) 2.57%(3) --%
10/31/98................................ (10.79) 15,051 1.78 0.42 50
10/15/97-10/31/97....................... (2.96) 3,112 2.43(3) 1.75(3) --
10/31/98................................ (11.40) 25,954 2.43 (0.44) 50
10/15/97-10/31/97....................... (2.88) 525 2.43(3) 1.75(3) --
10/31/98................................ (11.47) 5,968 2.43 (0.48) 50
4/03/98-10/31/98........................ (20.30) 142 1.21(3) 0.70(3) 50
- ----------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
11/19/96-10/31/97....................... (0.32)% $ 24,365 2.10%(3) 0.07%(3) 70%
10/31/98................................ (0.09) 28,418 2.03 (0.11) 114
11/19/96-10/31/97....................... (0.96) 42,656 2.72(3) (0.69)(3) 70
10/31/98................................ (0.67) 47,817 2.68 (0.74) 114
3/06/97-10/31/97........................ (1.75) 4,459 2.70(3) (0.75)(3) 70
10/31/98................................ (0.67) 7,982 2.68 (0.71) 114
4/06/98-10/31/98........................ (11.54) 145 1.46(3) 0.40(3) 114
- ----------------------------------------
FOCUS PORTFOLIO
6/08/98-10/31/98........................ 0.80% $ 29,770 1.45%(3) (0.21)%(3) 106%
6/08/98-10/31/98........................ 0.48 45,817 2.10(3) (0.92)(3) 106
6/08/98-10/31/98........................ 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):
<TABLE>
<CAPTION>
10/31/97 10/31/98 10/31/97 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Value A....................... .28% .17% International Equity A........ .37% .45%
Value B....................... .34% .19% International Equity B........ .45% .48%
Value C....................... .63% .21% International Equity C........ .87% .55%
Value Z....................... -- 28.83% International Equity Z........ -- 16.25%
Small-Cap Value A............. .57% .66% Focus A....................... -- .32%
Small-Cap Value B............. .74% .62% Focus B....................... -- .32%
Small-Cap Value C............. 1.42% 1.05% Focus II...................... -- .32%
Small-Cap Value Z............. -- 20.37%
</TABLE>
See Notes to Financial Statements
<PAGE>
32
STYLE SELECT SERIES LOGO
Large-Cap Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--97.8%
BANKS--3.4%
Bank of New York Co., Inc............. 6,105 $ 192,689
BankAmerica Corp...................... 3,027 173,863
State Street Corp..................... 16,000 998,000
U.S. Bancorp.......................... 7,150 260,975
---------------
1,625,527
---------------
BROADCASTING & MEDIA--9.9%
Cablevision Systems Corp., Class A+... 8,920 430,390
CBS Corp.............................. 16,000 447,000
Comcast Corp., Class A................ 9,115 450,053
Interpublic Group of Cos., Inc........ 24,800 1,450,800
MediaOne Group, Inc.+................. 10,800 456,975
Motorola, Inc......................... 4,600 239,200
Omnicom Group, Inc.................... 11,000 543,813
Time Warner, Inc. .................... 7,705 715,120
---------------
4,733,351
---------------
BUSINESS SERVICES--3.2%
Delta & Pine Land Co.................. 11,100 370,462
Manpower, Inc......................... 22,800 550,050
Service Corp. International(1)........ 16,400 584,250
---------------
1,504,762
---------------
CHEMICALS--1.7%
Monsanto Co........................... 5,815 236,234
Sigma-Aldrich Corp.................... 9,800 301,963
Solutia, Inc.......................... 11,925 261,605
---------------
799,802
---------------
COMMUNICATION EQUIPMENT--1.0%
Tellabs, Inc.+........................ 8,500 466,969
---------------
COMPUTERS & BUSINESS EQUIPMENT--4.2%
Dell Computer Corp.+.................. 11,100 727,050
EMC Corp.+............................ 4,960 319,300
Hewlett-Packard Co.................... 16,000 963,000
---------------
2,009,350
---------------
DRUGS--12.2%
American Home Products Corp........... 10,000 487,500
Astra AB ADR.......................... 47,000 772,563
Bristol-Myers Squibb Co.(1)........... 9,480 1,048,132
Lilly (Eli) & Co.(1).................. 14,400 1,165,500
Merck & Co., Inc...................... 8,600 1,163,150
Pfizer, Inc.(1)....................... 9,675 1,038,248
SmithKline Beecham PLC ADR............ 2,800 178,500
---------------
5,853,593
---------------
ELECTRONICS--6.8%
ASM Lithography Holdings NV+.......... 7,000 178,938
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
ELECTRONICS (CONTINUED)
<TABLE>
<S> <C> <C>
Emerson Electric Co.(1)............... 5,500 $ 363,000
Intel Corp............................ 12,900 1,150,519
Linear Technology Corp................ 5,735 341,949
Molex, Inc., Class A.................. 24,000 784,500
Solectron Corp.+...................... 7,500 429,375
---------------
3,248,281
---------------
ENERGY SERVICES--0.6%
Schlumberger Ltd...................... 5,400 283,500
---------------
ENERGY SOURCES--0.4%
Exxon Corp............................ 2,900 206,625
---------------
ENTERTAINMENT PRODUCTS--2.2%
Mattel, Inc........................... 28,800 1,033,200
---------------
FINANCIAL SERVICES--5.4%
American Express Co................... 5,800 512,575
Charles Schwab Corp................... 7,850 376,310
Citigroup, Inc........................ 5,925 278,845
Federal Home Loan Mortgage Corp....... 6,650 382,375
Federal National Mortgage
Association......................... 4,350 308,034
Morgan Stanley, Dean Witter & Co...... 5,890 381,378
Newcourt Credit Group, Inc............ 10,350 340,256
---------------
2,579,773
---------------
FOOD, BEVERAGE & TOBACCO--5.1%
Bestfoods............................. 8,000 436,000
Coca-Cola Co.......................... 14,245 963,318
Coca-Cola Enterprises, Inc............ 15,950 575,197
Ralston-Purina Group.................. 14,375 479,766
---------------
2,454,281
---------------
HOUSEHOLD PRODUCTS--4.7%
Gillette Co.(1)....................... 18,200 817,862
Procter & Gamble Co................... 8,200 728,775
Warner-Lambert Co.(1)................. 9,000 705,375
---------------
2,252,012
---------------
HOUSING--1.6%
Home Depot, Inc....................... 17,990 782,565
---------------
INSURANCE--2.1%
American International Group, Inc..... 11,600 988,900
---------------
LEISURE & TOURISM--8.1%
Carnival Corp......................... 16,675 539,853
Cracker Barrel Old Country Store,
Inc................................. 6,000 154,500
Delta Air Lines, Inc.................. 1,200 126,675
</TABLE>
<PAGE>
33
STYLE SELECT SERIES LOGO
Large-Cap Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
LEISURE & TOURISM (CONTINUED)
<TABLE>
<S> <C> <C>
Disney (Walt) Co...................... 18,000 $ 484,875
Marriott International, Inc., Class
A................................... 14,000 376,250
McDonald's Corp.(1)................... 22,400 1,498,000
MGM Grand, Inc.+...................... 6,975 182,222
UAL Corp.+............................ 8,165 530,215
---------------
3,892,590
---------------
MEDICAL PRODUCTS--6.7%
Boston Scientific Corp.+.............. 9,000 489,937
Johnson & Johnson Co.................. 17,000 1,385,500
Medtronic, Inc.(1).................... 20,600 1,339,000
---------------
3,214,437
---------------
MULTI-INDUSTRY--3.3%
General Electric Co................... 17,750 1,553,125
---------------
RETAIL--3.9%
Costco Cos., Inc.+.................... 5,800 329,150
Fred Meyer, Inc.+..................... 3,200 170,600
Gap, Inc.............................. 7,500 450,937
Office Depot, Inc.+................... 37,100 927,500
---------------
1,878,187
---------------
SOFTWARE--7.5%
American Power Conversion Corp.+...... 21,000 889,875
Cadence Design Systems, Inc.+(1)...... 8,950 191,306
Cisco Systems, Inc.+.................. 14,015 883,821
Electronic Arts, Inc.+................ 7,500 306,563
Microsoft Corp.+...................... 12,600 1,334,025
---------------
3,605,590
---------------
TELECOMMUNICATIONS--3.0%
AT&T Corp............................. 3,875 241,219
Ericsson (L.M.) Telecommunications
Co., Class B ADR.................... 22,400 506,800
Hong Kong Telecommunications Ltd.
ADR................................. 12,400 248,775
Nokia Corp., Class A ADR.............. 4,675 435,067
---------------
1,431,861
---------------
TRANSPORTATION--0.8%
Air Express International Corp........ 17,000 357,000
---------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENT SECURITIES--97.8%
(cost $42,235,070).................... $ 46,755,281
---------------
SHORT-TERM SECURITIES--1.0%
Federal Home Loan Mortgage Discount
Notes
5.40% due 11/02/98
(cost $499,925)..................... $ 500 499,925
---------------
REPURCHASE AGREEMENTS--1.8%
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $541,192
collateralized by $490,000 U.S.
Treasury Note 6.25% due 8/15/23
approximate aggregate value $557,269
(cost $541,000)..................... 541 541,000
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $305,108
collateralized by $210,000 U.S.
Treasury Note 13.75% due 8/15/04
approximate aggregate value $314,171
(cost $305,000)..................... 305 305,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $846,000)....................... 846,000
---------------
TOTAL INVESTMENTS--
(cost $43,580,995).................... 100.6% 48,101,206
Liabilities in excess of other assets... (0.6) (269,627)
------- ---------------
NET ASSETS-- 100.0% $ 47,831,579
------- ---------------
------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
ADR ("American Depositary Receipt")
(1) Security is traded with rights attached
See Notes to Financial Statements
<PAGE>
34
STYLE SELECT SERIES LOGO
Mid-Cap Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--92.6%
AEROSPACE & MILITARY TECHNOLOGY--0.3%
BE Aerospace, Inc.+................... 16,700 $ 359,050
---------------
APPAREL & TEXTILES--0.6%
Warnaco Group, Inc., Class A.......... 23,600 603,275
---------------
AUTOMOTIVE--1.6%
AutoZone, Inc.+....................... 14,400 378,900
Danaher Corp.......................... 21,400 854,663
Donaldson Co., Inc.(1)................ 20,000 363,750
---------------
1,597,313
---------------
BANKS--3.1%
Associated Banc-Corp.................. 18,750 653,906
Mercantile Bankshares Corp............ 15,000 487,500
North Fork Bancorp., Inc.(1).......... 9,800 194,775
Westamerica Bancorp................... 17,000 564,188
Wilmington Trust Corp................. 15,000 821,250
Zions Bancorp......................... 7,700 408,581
---------------
3,130,200
---------------
BROADCASTING & MEDIA--6.4%
At Home Corp., Series A+.............. 9,550 421,394
Cablevision Systems Corp., Class A+... 12,400 598,300
CheckFree Holdings Corp.+............. 11,500 180,406
Cinar Films, Inc., Class B+........... 23,400 494,325
Comcast Corp., Class A................ 18,600 918,375
Heftel Broadcasting Corp., Class A+... 9,900 403,425
Imax Corp.+........................... 17,700 453,562
Jacor Communications, Inc.+........... 5,700 313,500
Liberty Media Group, Series A+........ 15,975 607,050
Outdoor Systems, Inc.+................ 49,400 1,089,887
United Video Satellite Group, Class
A+.................................. 25,700 401,563
Univision Communications, Inc., Class
A+.................................. 17,900 528,050
---------------
6,409,837
---------------
BUSINESS SERVICES--12.2%
Acxiom Corp.+......................... 29,300 736,162
ADVO, Inc.+........................... 800 20,350
Allied Waste Industries, Inc.+........ 53,425 1,145,298
American Management Systems, Inc.+.... 600 18,413
BISYS Group, Inc.+.................... 17,000 743,750
Catalina Marketing Corp.+............. 5,200 247,975
Cendant Corp.+........................ 4,700 53,756
Cintas Corp........................... 13,900 740,175
Concord EFS, Inc.+.................... 13,300 377,388
Corporate Express, Inc.+.............. 33,500 389,437
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
BUSINESS SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Dames & Moore Group................... 15,000 $ 180,000
Fiserv, Inc.+......................... 16,550 769,575
G & K Services, Inc., Class A......... 18,000 823,500
Gartner Group, Inc., Class A+......... 15,900 316,013
Interim Services, Inc.+............... 15,100 320,875
J. Ray McDermott SA+.................. 2,800 87,850
Lason, Inc............................ 5,000 272,500
Medquist, Inc......................... 6,800 183,175
National Data Corp. .................. 9,000 304,875
NOVA Corp............................. 12,700 366,713
Ritchie Brothers Auctioneers, Inc..... 17,000 425,000
Romac International, Inc.+............ 21,700 379,750
Saville Systems PLC ADR+.............. 27,900 467,325
Sodexho Marriott Services, Inc.+...... 1,800 58,050
Stewart Enterprises, Inc., Class A.... 24,400 561,200
Tetra Tech, Inc.+..................... 21,800 430,550
United Rentals, Inc.+................. 57,078 1,533,971
Waste Management, Inc................. 6,200 279,775
---------------
12,233,401
---------------
CHEMICALS--0.3%
Great Lakes Chemical Corp.(1)......... 6,600 274,725
---------------
COMMUNICATION EQUIPMENT--3.2%
3Com Corp.+(1)........................ 7,300 263,256
American Tower Corp., Class A......... 16,500 360,938
Anixter International, Inc.+.......... 8,800 135,850
Broadcom Corp., Class A+.............. 4,900 406,394
Cox Communications, Inc., Class A+.... 6,800 373,150
Loral Space & Communications Corp.+... 16,300 308,681
QUALCOMM, Inc.+....................... 7,100 394,050
Qwest Communications International,
Inc.+............................... 13,729 537,147
Tellabs, Inc.+........................ 7,500 412,031
---------------
3,191,497
---------------
COMPUTERS & BUSINESS EQUIPMENT--0.3%
Apple Computer, Inc.+................. 6,800 252,450
Security Dynamics Technologies,
Inc.+............................... 5,200 52,975
---------------
305,425
---------------
DRUGS--4.4%
Agouron Pharmaceuticals, Inc.+........ 12,100 467,362
ALZA Corp.+........................... 9,300 445,238
Biogen, Inc.+(1)...................... 9,000 624,937
</TABLE>
<PAGE>
35
STYLE SELECT SERIES LOGO
Mid-Cap Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
DRUGS (CONTINUED)
<TABLE>
<S> <C> <C>
Genzyme Corp.+........................ 21,000 $ 882,000
Gilead Sciences, Inc.+................ 15,800 449,313
Life Technologies, Inc................ 16,500 611,531
MedImmune, Inc.+...................... 4,200 282,450
Omnicare, Inc......................... 7,400 255,763
Teva Pharmaceutical Industries Ltd.
ADR................................. 10,600 416,050
---------------
4,434,644
---------------
ELECTRONICS--5.0%
Analog Devices, Inc.+(1).............. 19,100 379,613
Dallas Semiconductor Corp............. 24,000 888,000
KLA-Tencor Corp.+(1).................. 8,300 306,063
Linear Technology Corp................ 6,900 411,412
Littelfuse, Inc.+..................... 26,000 562,250
Maxim Integrated Products, Inc.+...... 12,300 438,187
Micron Electronics, Inc.+............. 18,300 382,012
PMC-Sierra, Inc.+..................... 7,100 318,613
Teleflex, Inc......................... 9,900 383,006
Xilinx, Inc.+(1)...................... 20,300 904,619
---------------
4,973,775
---------------
ENERGY SERVICES--0.4%
BJ Services Co.+...................... 18,100 369,919
---------------
ENERGY SOURCES--0.9%
Anadarko Petroleum Corp............... 8,300 281,162
Barrett Resources Corp.+.............. 6,300 148,444
EEX Corp.+............................ 16,900 65,488
Ocean Energy, Inc.+................... 33,300 416,250
---------------
911,344
---------------
ENTERTAINMENT PRODUCTS--0.1%
SFX Entertainment, Inc., Class A+..... 5,000 157,500
---------------
FINANCIAL SERVICES--3.4%
Capital One Financial Corp............ 5,600 569,800
E*TRADE Group, Inc.+.................. 3,000 53,813
FINOVA Group, Inc..................... 16,600 809,250
Franklin Resources, Inc............... 6,500 245,781
Newcourt Credit Group, Inc............ 9,600 315,600
Providian Financial Corp.............. 4,200 333,375
Tele-Communications Ventures Group,
Series A+........................... 39,376 730,917
Waddell & Reed Financial, Inc.+....... 16,300 341,281
---------------
3,399,817
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--2.5%
Beringer Wine Estates Holdings, Inc.,
Class B+............................ 22,300 $ 1,006,287
Earthgrains Co........................ 9,800 294,000
Suiza Foods Corp.+.................... 12,600 411,075
US Foodservice, Inc.+................. 15,800 750,500
---------------
2,461,862
---------------
FOREST PRODUCTS--1.0%
Bemis Co., Inc.(1).................... 19,800 735,075
Mail-Well, Inc.+...................... 21,400 279,538
---------------
1,014,613
---------------
HEALTH SERVICES--4.8%
Covance, Inc.+........................ 48,400 1,349,150
HBO & Co.(1).......................... 14,600 382,338
Health Management Associates, Inc.,
Class A+............................ 56,975 1,014,867
Lincare Holdings, Inc.+............... 28,700 1,144,412
Orthodontic Centers of America,
Inc.+............................... 22,300 422,306
Quorum Health Group, Inc.+............ 11,700 168,919
Total Renal Care Holdings, Inc.+...... 11,900 291,550
---------------
4,773,542
---------------
HOUSEHOLD PRODUCTS--2.3%
Barnett, Inc.+........................ 27,500 371,250
Bush Boake Allen, Inc.+............... 13,000 347,750
Estee Lauder Cos., Inc., Class A...... 5,900 386,819
Ionics, Inc.+......................... 20,000 620,000
Omnipoint Corp.+...................... 58,800 536,550
---------------
2,262,369
---------------
INSURANCE--2.8%
Ace Ltd............................... 21,600 731,700
Fairfax Financial Holdings Ltd.+...... 900 268,308
Frontier Insurance Group, Inc......... 33,000 538,313
PartnerRe Ltd......................... 8,400 333,900
Protective Life Corp.(1).............. 10,100 374,331
Reinsurance Group of America, Inc..... 11,000 606,375
---------------
2,852,927
---------------
LEISURE & TOURISM--3.6%
Galileo International, Inc............ 16,100 610,794
Mesaba Holdings, Inc.................. 20,000 365,000
Outback Steakhouse, Inc.+............. 11,500 398,187
Premier Parks, Inc.+.................. 32,800 727,750
Royal Caribbean Cruises Ltd........... 14,800 412,550
Speedway Motorsports, Inc.+........... 32,400 680,400
</TABLE>
<PAGE>
36
STYLE SELECT SERIES LOGO
Mid-Cap Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
LEISURE & TOURISM (CONTINUED)
<TABLE>
<S> <C> <C>
Transport World Entertainment Corp.... 19,650 $ 404,053
---------------
3,598,734
---------------
MACHINERY--1.6%
Arterial Vascular Engineering,
Inc.+............................... 6,200 189,875
MSC Industrial Direct Co., Inc., Class
A+.................................. 31,400 667,250
Nordson Corp.(1)...................... 5,000 221,250
Smith International, Inc.+(1)......... 15,100 542,656
---------------
1,621,031
---------------
MEDICAL PRODUCTS--1.6%
Biomet, Inc........................... 3,400 115,388
Centocor, Inc.+....................... 10,300 457,706
Henry Schein, Inc.+................... 8,500 327,250
Sofamor Danek Group, Inc.+............ 2,700 274,387
Sybron International Corp.+........... 17,000 420,750
---------------
1,595,481
---------------
METALS & MINERALS--1.0%
Battle Mountain Gold Co............... 27,100 147,356
Minerals Technologies, Inc............ 18,100 824,682
---------------
972,038
---------------
REAL ESTATE INVESTMENT TRUSTS--0.3%
Prologis Trust........................ 14,672 320,033
---------------
RETAIL--8.4%
AnnTaylor Stores Corp.+............... 9,600 278,400
Barnes & Noble, Inc.+................. 14,500 473,062
Bed Bath & Beyond, Inc.+.............. 6,000 165,000
BJ's Wholesale Club, Inc.+............ 10,600 380,938
Borders Group, Inc.+.................. 22,700 576,012
Circuit City Stores, Inc.(1).......... 11,700 423,394
Costco Cos., Inc. +................... 6,200 351,850
CVS Corp.............................. 18,200 831,512
eBay, Inc.+........................... 5,400 448,875
Ethan Allen Interiors, Inc............ 17,700 608,437
Fred Meyer, Inc.+..................... 8,500 453,156
General Nutrition Cos., Inc.+......... 15,200 221,350
Kohl's Corp.+......................... 1,500 71,719
Koninklijke Ahold NV ADR.............. 11,100 371,156
Micro Warehouse, Inc.+................ 19,800 431,888
OfficeMax, Inc.+...................... 24,600 224,475
Ross Stores, Inc...................... 5,000 161,563
Safeway, Inc. +....................... 9,600 459,000
Saks, Inc.+........................... 4,900 111,475
ShopKo Stores, Inc.+.................. 10,600 331,913
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
RETAIL (CONTINUED)
<TABLE>
<S> <C> <C>
Stein Mart, Inc.+..................... 40,000 $ 312,500
Whole Foods Market, Inc.+............. 17,300 690,919
---------------
8,378,594
---------------
SOFTWARE--15.1%
Affiliated Computer Services Inc.,
Class A+............................ 17,300 640,100
America Online, Inc.+................. 9,400 1,194,387
Black Box Corp.+...................... 17,800 582,950
BMC Software, Inc.+................... 16,800 806,400
Cognos, Inc.+......................... 35,000 700,000
Computer Sciences Corp.+(1)........... 8,300 437,825
Compuware Corp. +..................... 9,900 535,837
DST Systems, Inc.+.................... 24,900 1,245,000
Intuit, Inc.+......................... 3,500 175,875
Mapics, Inc........................... 17,000 314,500
Netscape Communications Corp.+........ 6,800 145,350
Networks Associates, Inc.+............ 8,200 348,500
Novell, Inc.+......................... 36,000 535,500
Parametric Technology Corp.+.......... 20,700 344,138
Pixar, Inc............................ 8,900 421,638
Policy Management Systems Corp.+...... 23,000 1,045,062
Rational Software Corp.+.............. 26,800 589,600
Renaissance Worldwide, Inc............ 13,200 124,163
Shared Medical Systems Corp........... 19,500 972,562
Sterling Commerce, Inc.+.............. 10,200 359,550
Sterling Software, Inc.+.............. 38,000 995,125
SunGard Data Systems, Inc.+........... 12,200 411,750
Synopsys, Inc.+....................... 28,800 1,297,800
Systems & Computer Technology
Corp.+.............................. 13,900 198,075
The Learning Co., Inc.+............... 15,800 407,838
Yahoo!, Inc.+......................... 2,500 327,031
---------------
15,156,556
---------------
TELECOMMUNICATIONS--3.3%
Cellular Communications International,
Inc.+............................... 8,500 524,875
General Instrument Corp.+............. 20,400 524,025
Global Crossing Ltd.+................. 15,200 433,200
Globalstar Telecommunications Ltd.+... 18,916 314,479
Level 3 Communications, Inc.+......... 12,200 397,262
Paging Network, Inc.+................. 32,400 176,175
Western Wireless Corp., Class A+...... 46,900 938,000
---------------
3,308,016
---------------
</TABLE>
<PAGE>
37
STYLE SELECT SERIES LOGO
Mid-Cap Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
<TABLE>
<S> <C> <C>
TELEPHONE--0.4%
NEXTLINK Communications, Inc., Class
A+.................................. 14,900 $ 381,813
---------------
TRANSPORTATION--1.7%
Air Express International Corp........ 25,500 535,500
C.H. Robinson Worldwide, Inc.......... 27,300 604,012
Werner Enterprises, Inc............... 30,750 553,500
---------------
1,693,012
---------------
TOTAL INVESTMENT SECURITIES--92.6%
(cost $87,744,605).................... 92,742,343
---------------
SHORT-TERM SECURITIES--6.3%
Cayman Island Time Deposit with State
Street Bank and Trust Co.
4.00% due 11/02/98.................. $ 2,997 2,997,000
Federal Home Loan Mortgage Discount
Notes
4.76% due 12/18/98.................. 1,000 993,786
Federal Home Loan Mortgage Discount
Notes
5.42% due 11/02/98.................. 1,095 1,094,835
Federal National Mortgage Association
Discount Notes
5.37% due 11/16/98.................. 1,089 1,086,563
United States Treasury Bills
3.74% due 1/07/99................... 85 84,408
---------------
TOTAL SHORT-TERM SECURITIES
(cost $6,256,592)..................... 6,256,592
---------------
REPURCHASE AGREEMENT--1.5%
Joint Repurchase Agreement (Note 3)
(cost $1,510,000)................... 1,510 1,510,000
---------------
TOTAL INVESTMENTS--
(cost $95,511,197).................... 100.4% 100,508,935
Liabilities in excess of other assets... (0.4) (357,204)
------- ---------------
NET ASSETS-- 100.0% $ 100,151,731
------- ---------------
------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
ADR ("American Depositary Receipt")
(1) Security is traded with rights attached
See Notes to Financial Statements
<PAGE>
38
STYLE SELECT SERIES LOGO
Aggressive Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--94.0%
AEROSPACE & MILITARY TECHNOLOGY--0.3%
Gulfstream Aerospace Corp.+........... 9,000 $ 398,250
---------------
APPAREL & TEXTILES--0.6%
Abercrombie & Fitch Co., Class A+..... 17,100 678,656
Gerber Childrenswear, Inc.+........... 10,600 90,100
Oakley, Inc.+......................... 16,700 147,169
---------------
915,925
---------------
AUTOMOTIVE--2.2%
Ford Motor Co......................... 57,485 3,118,561
---------------
BANKS--1.6%
City National Corp.................... 11,200 382,900
Crestar Financial Corp.(1)............ 3,400 223,975
Cullen/Frost Bankers, Inc.(1)......... 8,700 463,275
Fleet Financial Group, Inc............ 9,200 367,425
Hamilton Bancorp, Inc.+............... 13,000 344,500
Hibernia Corp., Class A............... 8,000 133,500
Peoples Heritage Financial Group,
Inc................................. 16,500 294,938
---------------
2,210,513
---------------
BROADCASTING & MEDIA--10.4%
Adelphia Communications Corp., Class
A+.................................. 9,900 372,488
At Home Corp., Series A+.............. 48,330 2,132,561
Cablevision Systems Corp., Class A+... 11,200 540,400
Central European Media Enterprises
Ltd., Class A+...................... 31,300 193,669
Cinar Films, Inc., Class B+........... 18,400 388,700
Comcast Corp., Class A................ 7,100 350,563
DoubleClick, Inc.+.................... 8,900 292,588
Getty Images, Inc.+................... 33,700 408,612
HA-LO Industries, Inc.+............... 18,500 522,625
Harte Hanks Communications Corp....... 21,000 510,562
Heftel Broadcasting Corp., Class A+... 12,200 497,150
Jacor Communications, Inc.+........... 7,000 385,000
Outdoor Systems, Inc.+................ 33,080 729,827
Scholastic Corp.+..................... 10,000 387,500
Snyder Communications, Inc.+.......... 12,100 431,819
TCA Cable TV, Inc..................... 13,700 378,462
Tele-Communications, Inc.,
Series A+........................... 49,980 2,099,160
The Petersen Cos., Inc.+.............. 20,200 536,562
Time Warner, Inc...................... 30,710 2,850,272
Wiley (John) & Sons, Inc., Class A.... 12,000 438,750
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
BROADCASTING & MEDIA (CONTINUED)
<TABLE>
<S> <C> <C>
Young & Rubicam, Inc.................. 14,100 $ 368,363
---------------
14,815,633
---------------
BUSINESS SERVICES--5.7%
Allied Waste Industries, Inc.+........ 46,700 1,001,131
AnswerThink Consulting Group, Inc.+... 14,200 273,350
Apollo Group, Inc., Class A+.......... 13,500 432,000
BISYS Group, Inc.+.................... 8,300 363,125
Concord EFS, Inc.+.................... 16,400 465,350
Fiserv, Inc.+......................... 7,300 339,450
Infoseek Corp.+....................... 25,700 759,756
META Group, Inc.+..................... 7,600 182,400
On Assignment, Inc.+.................. 5,800 190,675
Paychex, Inc.......................... 8,500 421,813
QRS Corp.+............................ 14,100 519,937
RCM Technologies, Inc. Class A+....... 27,900 418,500
Republic Services, Inc.+.............. 22,900 500,938
Robert Half International, Inc.+(1)... 18,100 726,262
Saville Systems PLC ADR+.............. 8,700 145,725
Stewart Enterprises, Inc., Class A.... 21,500 494,500
United Stationers, Inc................ 20,600 545,900
Whittman-Hart, Inc.+.................. 15,000 298,125
---------------
8,078,937
---------------
COMMUNICATION EQUIPMENT--0.8%
Ascend Communications, Inc.+.......... 9,000 433,687
FORE Systems, Inc.+................... 25,900 404,688
Qwest Communications International,
Inc.+*.............................. 9,200 359,950
---------------
1,198,325
---------------
COMPUTERS & BUSINESS EQUIPMENT--6.9%
ADAC Laboratories+.................... 8,500 249,688
Apple Computer, Inc.+................. 18,500 686,812
Compaq Computer Corp.................. 24,000 759,000
Dell Computer Corp.+.................. 98,580 6,456,990
EMC Corp.+............................ 19,540 1,257,887
Quantum Corp.+(1)..................... 24,000 420,000
---------------
9,830,377
---------------
DRUGS--5.7%
Coulter Pharmaceutical, Inc........... 10,700 302,275
Forest Labs, Inc.+.................... 9,200 384,675
Incyte Pharmaceuticals, Inc.+......... 15,700 476,888
Lilly (Eli) & Co.(1).................. 17,930 1,451,209
MedImmune, Inc.+...................... 30,775 2,069,619
Nanogen, Inc.+........................ 20,000 97,500
</TABLE>
<PAGE>
39
STYLE SELECT SERIES LOGO
Aggressive Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
DRUGS (CONTINUED)
<TABLE>
<S> <C> <C>
Pfizer, Inc.(1)....................... 14,595 $ 1,566,226
Sepracor, Inc.+....................... 14,700 1,008,787
Watson Pharmaceuticals, Inc.+......... 12,100 673,063
---------------
8,030,242
---------------
EDUCATION--0.8%
Caliber Learning Network, Inc.+....... 14,100 58,603
DeVry, Inc.+.......................... 25,900 569,800
ITT Educational Services, Inc.+....... 7,000 207,813
Sylvan Learning Systems, Inc.+........ 12,000 369,000
---------------
1,205,216
---------------
ELECTRIC UTILITIES--1.6%
DTE Energy Co......................... 12,000 511,500
FPL Group, Inc.(1).................... 6,000 375,375
Niagara Mohawk Power Corp.+........... 46,000 672,750
PP&L Resources, Inc.+................. 12,000 325,500
Texas Utilities Co.................... 9,000 393,750
---------------
2,278,875
---------------
ELECTRONICS--2.3%
Burr-Brown Corp.+..................... 21,200 393,525
Maxim Integrated Products, Inc........ 14,900 530,812
Pittway Corp., Class A................ 19,400 444,988
Uniphase Corp.+....................... 19,500 962,812
Vitesse Semiconductor Corp.+.......... 28,500 919,125
---------------
3,251,262
---------------
ENERGY SERVICES--1.8%
BJ Services Co.+...................... 19,800 404,663
Diamond Offshore Drilling, Inc........ 11,100 340,631
Friede Goldman International, Inc.+... 14,000 232,750
Global Industries Ltd.+............... 23,300 222,806
Petroleum Geo-Services ADR+........... 27,700 592,087
Transocean Offshore, Inc.............. 9,600 354,600
Weatherford International, Inc.+...... 12,400 337,125
---------------
2,484,662
---------------
ENERGY SOURCES--0.6%
Anadarko Petroleum Corp............... 11,500 389,563
Chieftain International, Inc.+........ 23,400 459,225
---------------
848,788
---------------
ENTERTAINMENT PRODUCTS--0.3%
Lumen Technologies, Inc.+............. 61,100 458,250
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES--1.9%
Donaldson, Lufkin & Jenrette, Inc..... 10,000 $ 357,500
HealthCare Financial Partners,
Inc.+............................... 4,500 137,531
Morgan Stanley, Dean Witter & Co...... 15,000 975,000
Nationwide Financial Services, Inc.,
Class A............................. 15,400 639,100
PaineWebber Group, Inc................ 10,000 334,375
Raymond James Financial, Inc.......... 10,000 229,375
---------------
2,672,881
---------------
FOOD, BEVERAGE & TOBACCO--0.8%
Aurora Foods, Inc.+................... 22,500 393,750
Consolidated Cigar Holdings, Inc.,
Class A+............................ 29,700 341,550
Suiza Foods Corp.+.................... 13,400 437,175
---------------
1,172,475
---------------
HEALTH SERVICES--3.4%
Alternative Living Services, Inc.+.... 9,200 240,350
HBO & Co.(1).......................... 17,000 445,187
Humana, Inc........................... 22,500 426,094
IMS Health, Inc....................... 39,630 2,635,395
Sunrise Assisted Living, Inc.+........ 3,200 137,200
Total Renal Care Holdings, Inc.+...... 17,900 438,550
United HealthCare Corp................ 10,000 430,000
Vision Twenty-One, Inc.+.............. 8,900 51,731
---------------
4,804,507
---------------
HOUSEHOLD PRODUCTS--1.4%
Blyth Industries, Inc.+............... 2,400 66,300
Central Garden & Pet Co.+............. 23,700 468,075
Warner-Lambert Co.(1)................. 18,220 1,427,993
---------------
1,962,368
---------------
HOUSING--3.2%
D.R. Horton, Inc...................... 16,000 254,000
Home Depot, Inc....................... 83,430 3,629,205
Krause's Furniture, Inc.+............. 23,000 27,312
Mohawk Industries, Inc.+.............. 18,500 558,469
Restoration Hardware, Inc.+........... 3,000 60,000
---------------
4,528,986
---------------
INSURANCE--2.7%
Allmerica Financial Corp.............. 15,351 767,550
AMBAC, Inc............................ 9,200 535,325
Annuity & Life Re Holdings Ltd.+...... 10,000 232,500
</TABLE>
<PAGE>
40
STYLE SELECT SERIES LOGO
Aggressive Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
INSURANCE (CONTINUED)
<TABLE>
<S> <C> <C>
Enhance Financial Services Group,
Inc................................. 17,000 $ 417,563
Protective Life Corp.(1).............. 13,800 511,462
Reinsurance Group of America, Inc..... 13,800 655,500
Reliance Group Holdings, Inc.......... 20,000 278,750
Terra Nova Bermuda Holdings Ltd.,
Class A............................. 15,700 435,675
---------------
3,834,325
---------------
LEISURE & TOURISM--3.3%
Carnival Corp., Class A............... 9,500 307,562
Championship Auto Racing Teams,
Inc.+............................... 17,400 432,825
Family Golf Centers, Inc.+............ 24,700 518,700
Outback Steakhouse, Inc.+............. 20,600 713,275
Premier Parks, Inc.+.................. 25,000 554,687
Preview Travel, Inc.+................. 6,800 91,375
Primadonna Resorts, Inc.+............. 17,000 122,188
Royal Caribbean Cruises Ltd........... 11,600 323,350
Steiner Leisure Ltd.+................. 18,650 448,766
Sunterra Corp......................... 35,900 341,050
Travel Services International,
Inc.+............................... 22,600 446,350
Vistana, Inc.+........................ 35,700 381,544
---------------
4,681,672
---------------
MACHINERY--0.3%
Smith International, Inc.+(1)......... 13,200 474,375
---------------
MEDICAL PRODUCTS--0.2%
Centocor, Inc.+....................... 7,400 328,838
---------------
MULTI-INDUSTRY--1.5%
General Electric Co................... 23,615 2,066,313
---------------
REAL ESTATE COMPANIES--0.2%
LaSalle Partners, Inc.+............... 7,700 225,225
---------------
REAL ESTATE INVESTMENT TRUSTS--0.3%
Apartment Investment & Management Co.,
Class A............................. 13,500 471,656
---------------
RETAIL--6.4%
Barnes & Noble, Inc.+................. 14,500 473,063
Borders Group, Inc.+.................. 15,300 388,238
CDnow, Inc.+.......................... 14,000 101,500
Costco Cos., Inc.+.................... 35,790 2,031,082
Dollar Tree Stores, Inc.+............. 12,050 458,653
Elder-Beerman Stores Corp.+........... 14,000 163,625
Gap, Inc.............................. 9,300 559,162
Movado Group, Inc..................... 8,800 162,800
Office Depot, Inc.+................... 12,800 320,000
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
RETAIL (CONTINUED)
<TABLE>
<S> <C> <C>
PetSmart, Inc.+....................... 52,700 $ 378,781
Protection One, Inc.+................. 38,000 418,000
SportsLine USA, Inc.+................. 5,100 71,719
Stage Stores, Inc.+................... 31,000 410,750
Staples, Inc.+........................ 24,650 802,666
Sunglass Hut International, Inc.+..... 28,100 126,450
The Kroll O'Gara Co.+................. 18,000 441,000
U.S. Vision, Inc.+.................... 10,000 77,500
Walgreen Co.(1)....................... 20,880 1,016,595
Williams Sonoma, Inc.................. 23,100 629,475
---------------
9,031,059
---------------
SOFTWARE--19.1%
America Online, Inc.+................. 55,575 7,061,498
AVT Corp.+............................ 6,100 130,388
BMC Software, Inc.+................... 23,400 1,123,200
BroadVision, Inc.+.................... 11,000 164,313
Cambridge Technology Partners,
Inc.+............................... 24,400 538,325
Cisco Systems, Inc.+.................. 44,310 2,794,299
Citrix Systems, Inc.+................. 14,200 1,003,762
CMG Information Services, Inc.+....... 7,200 408,600
Compuware Corp.+...................... 13,900 752,338
CSG Systems International, Inc.+...... 9,700 528,650
Entrust Technologies, Inc.+........... 18,600 306,900
Excite, Inc.+......................... 25,900 997,150
Icon CMT Corp.+....................... 13,200 163,350
Intuit, Inc.+......................... 7,180 360,795
J.D. Edwards & Co.+................... 14,700 477,750
Keane, Inc.+.......................... 14,000 465,500
Legato Systems, Inc.+................. 12,900 503,100
Lycos, Inc.+.......................... 25,200 1,023,750
Microsoft Corp.+...................... 34,350 3,636,806
National Instruments Corp.+........... 13,550 370,931
Network Appliance, Inc.+.............. 11,200 604,800
PeopleSoft, Inc.+..................... 36,000 760,500
Sterling Commerce, Inc.+.............. 14,200 500,550
SunGard Data Systems, Inc.+........... 25,500 860,625
Transaction Systems Architects, Inc.,
Class A+............................ 22,900 825,831
Yahoo!, Inc.+......................... 5,100 667,144
---------------
27,030,855
---------------
TELECOMMUNICATIONS--5.5%
DSET Corp.+........................... 33,200 410,850
Frontier Corp......................... 14,500 435,906
Global Crossing Ltd.+................. 3,445 98,183
GST Telecommunications., Inc+......... 57,800 399,181
</TABLE>
<PAGE>
41
STYLE SELECT SERIES LOGO
Aggressive Growth Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/ VALUE
SECURITY DESCRIPTION CONTRACTS (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
<TABLE>
<S> <C> <C>
ICG Communications, Inc.+............. 7,400 $ 152,625
Intermedia Communications, Inc........ 11,700 216,450
Level 3 Communications, Inc.+......... 50,990 1,660,362
Lucent Technologies, Inc.............. 17,750 1,423,328
McLeodUSA, Inc., Class A+............. 10,400 378,300
Nokia Corp., Class A ADR.............. 25,545 2,377,282
Paging Network, Inc.+................. 37,500 203,906
StarTek Global Communications
Corp.+.............................. 7,900 72,581
---------------
7,828,954
---------------
TELEPHONE--1.5%
Century Telephone Enterprises,
Inc.(1)............................. 12,400 704,475
MCI WorldCom, Inc.+................... 23,435 1,294,784
Primus Telecommunications Group,
Inc.+............................... 11,600 128,325
---------------
2,127,584
---------------
TRANSPORTATION--0.7%
Atlas Air, Inc.+...................... 9,000 310,500
Coach USA, Inc.+...................... 17,200 461,175
Offshore Logistics, Inc.+............. 13,700 204,644
---------------
976,319
---------------
TOTAL COMMON STOCK
(cost $110,746,691)................... 133,342,208
---------------
PUT OPTIONS--0.0%+(2)
American Disposal Services, Inc. exp.
11/98 @ $30......................... 75 469
Cablevision Systems Corp.
exp. 11/98 @ $40.................... 50 937
Comcast Corp. exp. 11/98 @ $43........ 70 1,750
---------------
TOTAL PUT OPTIONS
(cost $45,030)........................ 3,156
---------------
TOTAL INVESTMENT SECURITIES--94.0%
(cost $110,791,721)................... 133,345,364
---------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES--3.1%
Federal Home Loan Mortgage Discount
Notes
5.40% due 11/02/98
(cost $4,399,340)................... $ 4,400 $ 4,399,340
---------------
REPURCHASE AGREEMENTS--5.1%
Joint Repurchase Agreement
(Note 3)
(cost $5,055,000)................... 5,055 5,055,000
Agreement with State Street Bank and
Trust Co., bearing 5.40%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $2,173,978,
collateralized by $1,895,000 U.S.
Treasury Note 7.25% due 5/15/04
approximate aggregate value
$2,217,150
(cost $2,173,000)................... 2,173 2,173,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $7,228,000)................... 7,228,000
---------------
TOTAL INVESTMENTS--
(cost $122,419,061)................... 102.2% 144,972,704
Total written call options.............. (0.1) (75,050)
Liabilities in excess of other assets... (2.1) (3,060,671)
------- ---------------
NET ASSETS-- 100.0% $ 141,836,983
------- ---------------
------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
* The security or a portion thereof has been segregated as collateral for the
written option contracts.
ADR ("American Depositary Receipt")
(1) Security is traded with rights attached
(2) 1 option contract equals 100 shares
See Notes to Financial Statements
OPEN COVERED WRITTEN CALL OPTIONS+
<TABLE>
<CAPTION>
EXPIRATION STRIKE
CALL OPTIONS CONTRACTS(2) DATE PRICE VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Qwest Communications International,
Inc. (proceeds $39,262)............ 79 November 1998 $30.00 $ (75,050)
---------
---------
</TABLE>
<PAGE>
42
STYLE SELECT SERIES LOGO
Large-Cap Blend Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--96.4%
AEROSPACE & MILITARY TECHNOLOGY--7.0%
Allied Signal, Inc.................... 5,300 $ 206,369
Cordant Technologies, Inc............. 4,300 174,956
General Motors Corp., Class H......... 3,300 126,225
Gulfstream Aerospace Corp.+........... 8,000 354,000
Litton Industries, Inc.+.............. 4,000 261,000
Northrop Grumman Corp.(1)............. 400 31,900
United Technologies Corp.(1).......... 8,800 838,200
---------------
1,992,650
---------------
APPAREL & TEXTILES--0.2%
Unifi, Inc.+.......................... 2,800 47,250
---------------
AUTOMOTIVE--0.7%
General Motors Corp................... 2,400 151,350
Republic Industries, Inc.+............ 3,600 57,825
---------------
209,175
---------------
BANKS--4.9%
Bank One Corp......................... 1,430 69,891
BankAmerica Corp...................... 3,555 204,191
Chase Manhattan Corp.................. 6,500 369,281
First Union Corp.(1).................. 4,800 278,400
Fleet Financial Group, Inc............ 1,200 47,925
Key Corp. Ltd......................... 6,300 190,969
Mellon Bank Corp...................... 2,000 120,250
National City Corp.................... 1,200 77,175
Wells Fargo & Co...................... 100 37,000
---------------
1,395,082
---------------
BROADCASTING & MEDIA--6.0%
Clear Channel Communications, Inc.+... 8,400 382,725
Comcast Corp.......................... 1,300 63,538
Comcast Corp., Class A................ 1,400 69,125
Eastman Kodak Co...................... 2,200 170,500
Gannett Co., Inc...................... 2,900 179,437
Liberty Media Group, Series A+........ 2,500 95,000
Motorola, Inc......................... 3,800 197,600
New York Times Co., Class A........... 4,200 118,650
News Corp., Ltd. ADR.................. 3,200 77,400
Nielsen Media Research Inc............ 3,066 43,499
Pulitzer Publishing Co................ 1,000 79,000
Readers Digest Association, Inc.,
Class A............................. 3,100 67,425
Readers Digest Association, Inc.,
Class B............................. 2,300 44,850
Time Warner, Inc...................... 1,200 111,375
---------------
1,700,124
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
BUSINESS SERVICES--1.0%
Browning-Ferris Industries, Inc.(1)... 3,500 $ 124,031
Newell Co.(1)......................... 1,700 74,800
Waste Management, Inc................. 1,655 74,682
---------------
273,513
---------------
CHEMICALS--1.7%
A. Schulman, Inc...................... 1,900 37,763
Dow Chemical Co....................... 1,200 112,350
du Pont (E.I.) de Nemours & Co........ 1,500 86,250
Great Lakes Chemical Corp.(1)......... 3,200 133,200
Hercules, Inc......................... 2,800 93,275
Octel Corp.+.......................... 750 10,828
---------------
473,666
---------------
COMMUNICATION EQUIPMENT--1.5%
3Com Corp.+(1)........................ 2,900 104,581
Loral Space & Communications Corp.+... 4,500 85,219
SBC Communications, Inc............... 5,000 231,562
---------------
421,362
---------------
COMPUTERS & BUSINESS EQUIPMENT--4.4%
Compaq Computer Corp.................. 1,700 53,763
Dell Computer Corp.+.................. 1,100 72,050
Hewlett-Packard Co.................... 4,700 282,881
Ingram Micro, Inc., Class A+.......... 1,700 77,350
International Business Machines
Corp................................ 2,300 341,406
Knoll, Inc.+.......................... 5,200 140,400
NCR Corp.+............................ 4,100 137,863
Pitney Bowes, Inc..................... 2,500 137,656
---------------
1,243,369
---------------
DRUGS--6.4%
Abbott Laboratories, Inc.............. 1,200 56,325
American Home Products Corp........... 8,100 394,875
Amgen, Inc.+(1)....................... 3,300 259,256
Bristol-Myers Squibb Co.(1)........... 1,800 199,013
Lilly (Eli) & Co.(1).................. 1,300 105,219
Merck & Co., Inc...................... 2,500 338,125
Pfizer, Inc.(1)....................... 3,400 364,862
Pharmacia & Upjohn, Inc............... 2,000 105,875
---------------
1,823,550
---------------
ELECTRIC UTILITIES--3.5%
Consolidated Edison, Inc.............. 2,200 110,275
DQE, Inc.............................. 1,700 67,044
Edison International.................. 1,500 39,563
</TABLE>
<PAGE>
43
STYLE SELECT SERIES LOGO
Large-Cap Blend Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
<TABLE>
<S> <C> <C>
Entergy Corp.......................... 2,200 $ 63,250
FirstEnergy Corp...................... 4,525 135,750
FPL Group, Inc.(1).................... 1,700 106,356
GPU, Inc.............................. 2,200 94,875
Niagara Mohawk Power Corp.+........... 2,800 40,950
PacifiCorp............................ 5,800 110,562
Texas Utilities Co.................... 1,400 61,250
Unicom Corp........................... 4,200 158,287
---------------
988,162
---------------
ELECTRICAL EQUIPMENT--1.0%
Honeywell, Inc.(1).................... 2,700 215,662
Hubbell, Inc., Class B................ 2,100 83,738
---------------
299,400
---------------
ELECTRONICS--2.2%
AMP, Inc.............................. 1,308 53,710
Intel Corp............................ 4,000 356,750
Texas Instruments, Inc................ 3,300 210,993
---------------
621,453
---------------
ENERGY SERVICES--1.2%
Baker Hughes, Inc..................... 2,900 63,981
Diamond Offshore Drilling, Inc........ 1,400 42,963
Halliburton Co........................ 1,800 64,687
Schlumberger Ltd...................... 3,200 168,000
---------------
339,631
---------------
ENERGY SOURCES--4.9%
Amerada Hess Corp..................... 3,100 171,275
Amoco Corp............................ 2,900 162,762
Atlantic Richfield Co................. 1,600 110,200
British Petroleum Co. PLC ADS......... 1,200 106,125
Conoco, Inc., Class A+................ 1,300 32,338
Exxon Corp............................ 3,300 235,125
Mobil Corp.(1)........................ 3,300 249,769
Noble Affiliates, Inc................. 1,600 52,400
Texaco, Inc.(1)....................... 2,400 142,350
Unocal Corp........................... 1,400 47,512
USX-Marathon Group, Inc............... 2,900 94,794
---------------
1,404,650
---------------
FINANCIAL SERVICES--6.5%
American Express Co................... 5,000 441,875
Bear Stearns Cos., Inc................ 1,600 57,100
Citigroup, Inc........................ 10,042 472,601
Federal National Mortgage
Association......................... 2,300 162,869
H&R Block, Inc........................ 3,200 143,400
Household International, Inc.......... 4,046 147,932
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
FINANCIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Merrill Lynch & Co., Inc.(1).......... 1,000 $ 59,250
Morgan Stanley, Dean Witter & Co...... 2,800 181,300
PIMCO Advisors Holdings LP............ 2,000 62,875
Washington Mutual, Inc................ 3,400 127,075
---------------
1,856,277
---------------
FOOD, BEVERAGE & TOBACCO--9.1%
Anheuser-Busch Cos., Inc.(1).......... 1,200 71,325
Brown-Forman Corp., Class B........... 700 47,556
Coca-Cola Co.......................... 2,200 148,775
Coca-Cola Enterprises, Inc............ 4,600 165,888
ConAgra, Inc.......................... 3,200 97,400
Diageo PLC ADR........................ 3,160 138,843
General Mills, Inc.................... 1,300 95,550
Heineken NV ADR....................... 3,400 181,134
Heinz (H.J.) & Co..................... 900 52,313
Kellogg Co............................ 500 16,500
McCormick & Co., Inc.................. 1,300 40,381
Nabisco Holdings Corp., Class A....... 600 22,650
PepsiCo, Inc.......................... 7,100 239,625
Philip Morris Cos., Inc............... 13,500 690,187
Quaker Oats Co.(1).................... 1,100 64,969
Ralston-Purina Group.................. 6,500 216,937
RJR Nabisco Holdings Corp.(1)......... 1,900 54,269
Sara Lee Corp.(1)..................... 2,300 137,281
UST, Inc.............................. 3,600 122,400
---------------
2,603,983
---------------
FOREST PRODUCTS--0.6%
Fort James Corp....................... 3,100 124,969
Georgia-Pacific Corp. (Timber
Group).............................. 900 46,575
---------------
171,544
---------------
HOUSEHOLD PRODUCTS--2.5%
Colgate-Palmolive Co.................. 1,000 88,375
International Flavors & Fragrances,
Inc.(1)............................. 3,000 112,312
Kimberly-Clark Corp.(1)............... 3,600 173,700
Procter & Gamble Co................... 1,200 106,650
Tupperware Corp....................... 3,500 54,469
Unilever NV........................... 1,300 97,825
Warner-Lambert Co.(1)................. 1,100 86,213
---------------
719,544
---------------
HOUSING--0.3%
Home Depot, Inc....................... 2,100 91,350
---------------
INSURANCE--6.6%
Ace Ltd............................... 2,500 84,688
Aetna, Inc............................ 1,500 111,938
</TABLE>
<PAGE>
44
STYLE SELECT SERIES LOGO
Large-Cap Blend Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
INSURANCE (CONTINUED)
<TABLE>
<S> <C> <C>
Allstate Corp......................... 7,700 $ 331,581
American General Corp................. 1,800 123,300
General Reinsurance Corp.............. 1,200 263,625
Hartford Financial Services, Inc...... 2,700 143,437
Loews Corp............................ 5,000 469,687
Nationwide Financial Services, Inc.,
Class A............................. 400 16,600
Progressive Corp...................... 200 29,450
Reinsurance Group Of America, Inc..... 1,700 80,750
St. Paul Co., Inc.(1)................. 4,326 143,299
Travelers Property Casualty Corp.,
Class A............................. 2,300 70,581
---------------
1,868,936
---------------
LEISURE & TOURISM--2.2%
Brinker International, Inc.+.......... 1,500 36,281
Continental Airlines, Inc., Class
B+.................................. 9,800 388,325
Cracker Barrel Old Country Store,
Inc................................. 1,100 28,325
Host Marriott Corp.+.................. 2,300 33,350
McDonald's Corp.(1)................... 1,900 127,063
Wendy's International, Inc............ 700 14,700
---------------
628,044
---------------
MACHINERY--0.6%
Ingersoll-Rand Co..................... 3,400 171,700
---------------
MEDICAL PRODUCTS--1.6%
Baxter International, Inc............. 700 41,956
Genzyme Corp.+........................ 500 21,000
Johnson & Johnson Co.................. 2,300 187,450
Pall Corp.(1)......................... 5,900 148,975
Smith & Nephew PLC.................... 19,700 54,734
---------------
454,115
---------------
METALS & MINERALS--1.2%
Aluminum Co. of America(1)............ 900 71,325
Inco Ltd.............................. 5,800 61,987
Newmont Mining Corp................... 5,200 110,500
Nucor Corp............................ 600 27,188
Reynolds Metals Co.(1)................ 1,200 71,925
---------------
342,925
---------------
MULTI-INDUSTRY--4.8%
Berkshire Hathaway, Inc., Class A+.... 3 193,500
Cooper Industries, Inc................ 1,400 61,775
Corning, Inc.......................... 5,400 196,087
General Electric Co................... 4,500 393,750
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
MULTI-INDUSTRY (CONTINUED)
<TABLE>
<S> <C> <C>
Monsanto Co........................... 1,300 $ 52,813
Textron, Inc.......................... 1,200 89,250
Tomkins PLC........................... 7,000 32,394
TRW, Inc.(1).......................... 1,400 79,713
Tyco International Ltd................ 4,400 272,525
---------------
1,371,807
---------------
REAL ESTATE COMPANIES--0.2%
Rouse Co.............................. 1,700 47,706
---------------
REAL ESTATE INVESTMENT TRUSTS--1.2%
CarrAmerica Realty Corp............... 1,900 42,750
Federal Realty Investment Trust....... 2,100 47,512
Patriot American Hospitality, Inc..... 2,300 20,413
Prologis Trust........................ 900 19,631
Reckson Associates Realty Corp........ 2,000 45,375
Simon Property Group Inc.............. 2,400 71,850
Spieker Properties, Inc............... 600 20,700
Starwood Hotels & Resorts Trust....... 1,100 31,144
United Dominion Realty Trust, Inc..... 2,700 30,038
---------------
329,413
---------------
RETAIL--3.8%
American Stores Co.(1)................ 3,800 123,737
Circuit City Stores, Inc.(1).......... 2,600 94,088
Dayton Hudson Corp.(1)................ 3,500 148,312
Federated Department Stores, Inc.+.... 3,200 123,000
Gap, Inc.............................. 2,000 120,250
Limited, Inc.......................... 1,500 38,438
Office Depot, Inc.+................... 4,300 107,500
Penney (J.C.), Inc.(1)................ 1,500 71,250
Sears, Roebuck & Co................... 2,200 98,863
Staples, Inc.+........................ 1,300 42,331
Toys "R" Us, Inc.+.................... 6,100 119,331
---------------
1,087,100
---------------
SOFTWARE--2.2%
America Online, Inc................... 800 101,650
Cisco Systems, Inc.+.................. 2,475 156,080
First Data Corp....................... 5,100 135,150
Microsoft Corp.+...................... 2,100 222,337
Novell, Inc.+......................... 300 4,463
---------------
619,680
---------------
TELECOMMUNICATIONS--2.2%
AT&T Corp............................. 7,800 485,550
Frontier Corp......................... 4,400 132,275
---------------
617,825
---------------
</TABLE>
<PAGE>
45
STYLE SELECT SERIES LOGO
Large-Cap Blend Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
<TABLE>
<S> <C> <C>
TELEPHONE--2.9%
Ameritech Corp........................ 3,100 $ 167,206
Bell Atlantic Corp.................... 7,000 371,875
BellSouth Corp........................ 700 55,869
GTE Corp.............................. 1,300 76,294
MCI WorldCom, Inc.+................... 2,100 116,025
Telecomunicacoes Brasileiras S.A.
ADR+................................ 600 45,562
---------------
832,831
---------------
TRANSPORTATION--1.3%
Burlington Northern Santa Fe Corp..... 4,500 138,937
FDX Corp.+............................ 1,600 84,100
Norfolk Southern Corp................. 4,400 144,925
---------------
367,962
---------------
TOTAL INVESTMENT SECURITIES--96.4%
(cost $26,425,311).................... 27,415,779
---------------
SHORT-TERM SECURITIES--1.3%
Associates Finance Services Co.
5.50% due 11/20/98.................. $ 165 164,231
BMW US Capital Corp.
5.70% due 11/02/98.................. 212 211,966
---------------
TOTAL SHORT-TERM SECURITIES
(cost $376,197)....................... 376,197
---------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--3.0%
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $271,096,
collateralized by $210,000 U.S.
Treasury Note 10.38% due 11/15/09
approximate aggregate value $282,914
(cost $271,000)..................... $ 271 $ 271,000
Agreement with State Street Bank and
Trust Co., bearing 5.30%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $580,256,
collateralized by $415,000 U.S.
Treasury Note 11.63%, due 11/15/04
approximate aggregate value $591,677
(cost $580,000)..................... 580 580,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $851,000)....................... 851,000
---------------
TOTAL INVESTMENTS--
(cost $27,652,508).................... 100.7% 28,642,976
Liabilities in excess of other assets... (0.7) (196,770)
------- ---------------
NET ASSETS-- 100.0% $ 28,446,206
------- ---------------
------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
ADR ("American Depositary Receipt")
ADS ("American Depositary Shares")
(1) Security is traded with rights attached
See Notes to Financial Statements
<PAGE>
46
STYLE SELECT SERIES LOGO
Large-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--93.3%
AEROSPACE & MILITARY TECHNOLOGY--2.0%
Boeing Co. ........................... 11,800 $ 442,500
Lockheed Martin Corp. ................ 2,600 289,575
Northrop Grumman Corp.(1)............. 2,000 159,500
Precision Castparts Corp.(1).......... 1,600 70,400
---------------
961,975
---------------
APPAREL & TEXTILES--0.7%
Reebok International Ltd.+............ 19,700 327,513
---------------
AUTOMOTIVE--1.7%
Dana Corp. ........................... 7,000 292,687
General Motors Corp. ................. 3,000 189,188
Goodyear Tire & Rubber Co. ........... 6,200 334,025
---------------
815,900
---------------
BANKS--9.2%
Bank One Corp. ....................... 3,968 193,936
BankAmerica Corp. .................... 8,257 474,261
Chase Manhattan Corp. ................ 5,000 284,063
First Union Corp.(1).................. 7,184 416,672
Golden West Financial Corp. .......... 1,100 99,756
Mercantile Bankshares Corp. .......... 5,000 162,500
National City Corp. .................. 11,400 733,163
Norwest Corp. ........................ 1,900 70,656
State Street Corp. ................... 1,200 74,850
SunTrust Banks, Inc. ................. 900 62,719
U.S. Bancorp.......................... 14,200 518,300
Wells Fargo & Co. .................... 3,300 1,221,000
---------------
4,311,876
---------------
BROADCASTING & MEDIA--2.2%
AirTouch Communications, Inc.+........ 3,500 196,000
Eastman Kodak Co. .................... 4,300 333,250
Gannett Co., Inc. .................... 3,600 222,750
New York Times Co., Class A........... 300 8,475
News Corp., Ltd. ADR.................. 1,200 32,775
News Corp., Ltd. ADR Preferred........ 7,400 178,987
Tribune Co.(1)........................ 700 40,338
---------------
1,012,575
---------------
BUSINESS SERVICES--0.2%
Crescent Operating, Inc.+............. 300 1,481
Waste Management, Inc. ............... 2,400 108,300
---------------
109,781
---------------
CHEMICALS--1.7%
du Pont (E.I.) de Nemours & Co. ...... 5,800 333,500
IMC Global, Inc.(1)................... 10,900 283,400
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CHEMICALS (CONTINUED)
<TABLE>
<S> <C> <C>
Millenium Chemicals, Inc. ............ 8,000 $ 195,000
---------------
811,900
---------------
COMMUNICATION EQUIPMENT--0.6%
Loral Space & Communications Corp.+... 600 11,363
SBC Communications, Inc. ............. 6,000 277,875
---------------
289,238
---------------
COMPUTERS & BUSINESS EQUIPMENT--7.3%
Apple Computer, Inc.+................. 8,400 311,850
Compaq Computer Corp. ................ 5,800 183,425
Harris Corp. ......................... 2,000 70,125
Hewlett-Packard Co. .................. 18,000 1,083,375
International Business Machines
Corp. .............................. 6,700 994,531
Wallace Computer Services, Inc. ...... 19,500 426,563
Xerox Corp. .......................... 3,600 348,750
---------------
3,418,619
---------------
DRUGS--2.6%
American Home Products Corp. ......... 2,300 112,125
Bristol-Myers Squibb Co.(1)........... 600 66,338
Glaxo Wellcome PLC ADR................ 200 12,450
Lilly (Eli) & Co.(1).................. 400 32,375
Merck & Co., Inc. .................... 400 54,100
Novartis AG ADR....................... 1,200 108,117
Pfizer, Inc.(1)....................... 400 42,925
Pharmacia & Upjohn, Inc. ............. 10,200 539,962
SmithKline Beecham PLC ADR............ 4,300 274,125
---------------
1,242,517
---------------
ELECTRIC UTILITIES--2.8%
American Electric Power Co., Inc. .... 500 24,469
Central & South West Corp. ........... 4,900 136,281
Consolidated Edison, Inc. ............ 400 20,050
GPU, Inc. ............................ 5,100 219,938
Illinova Corp. ....................... 11,300 286,031
New England Electric Systems.......... 3,200 130,200
Pinnacle West Capital Corp. .......... 100 4,381
Southern Co. ......................... 5,900 166,306
Texas Utilities Co. .................. 7,100 310,625
---------------
1,298,281
---------------
ELECTRONICS--2.9%
Advanced Micro Devices, Inc.+......... 8,700 196,294
</TABLE>
<PAGE>
47
STYLE SELECT SERIES LOGO
Large-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
ELECTRONICS (CONTINUED)
<TABLE>
<S> <C> <C>
Applied Materials, Inc.+.............. 5,100 $ 176,269
Intel Corp. .......................... 3,300 294,318
Micron Technology, Inc. .............. 1,700 64,600
Molex, Inc. .......................... 3,325 118,661
Novellus Systems, Inc.+............... 400 15,500
Texas Instruments, Inc. .............. 7,600 485,925
---------------
1,351,567
---------------
ENERGY SERVICES--1.3%
Ashland, Inc. ........................ 1,200 57,750
Cooper Cameron Corp.+................. 1,800 62,550
Halliburton Co. ...................... 4,800 172,500
Noble Drilling Corp.+................. 5,600 96,250
Schlumberger Ltd...................... 4,200 220,500
---------------
609,550
---------------
ENERGY SOURCES--7.1%
Amoco Corp. .......................... 6,600 370,425
Atlantic Richfield Co. ............... 4,800 330,600
British Petroleum Co. PLC ADS......... 608 53,770
Burlington Resources, Inc.(1)......... 2,600 107,088
Conoco, Inc., Class A+................ 1,800 44,775
Devon Energy Corp. ................... 2,800 94,850
Exxon Corp. .......................... 200 14,250
Noble Affiliates, Inc. ............... 2,300 75,325
Royal Dutch Petroleum Co. NY Registry
Shares GDR.......................... 7,200 354,600
Shell Transport & Trading Co. ADR..... 2,300 84,525
Texaco, Inc.(1)....................... 4,500 266,906
Union Pacific Resources Group,
Inc. ............................... 30,800 400,400
Unocal Corp. ......................... 10,800 366,525
USX-Marathon Group, Inc. ............. 17,500 572,031
YPF Sociedad Anonima ADR.............. 7,000 202,562
---------------
3,338,632
---------------
ENTERTAINMENT PRODUCTS--0.2%
Hasbro, Inc.(1)....................... 2,100 73,631
Mattel, Inc. ......................... 1,000 35,875
---------------
109,506
---------------
FINANCIAL SERVICES--9.9%
American Express Co. ................. 13,500 1,193,062
Associates First Capital Corp., Class
A................................... 5,600 394,800
Citigroup, Inc. ...................... 28,658 1,348,717
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
FINANCIAL SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Coast Federal Litigation Contingent
Payment Rights Trust................ 1,500 $ 14,063
Donaldson, Lufkin & Jenrette, Inc. ... 1,600 57,200
Federal Home Loan Mortgage Corp. ..... 3,100 178,250
Federal National Mortgage
Association......................... 3,900 276,169
Heller Financial, Inc., Class A....... 3,000 72,000
Household International, Inc. ........ 3,100 113,344
Morgan Stanley, Dean Witter & Co. .... 4,700 304,325
ReliaStar Financial Corp. ............ 600 26,288
Ryder System, Inc.(1)................. 3,700 91,113
SLM Holding Corp. .................... 8,200 328,512
Student Loan Corp. ................... 3,500 164,062
Washington Mutual, Inc. .............. 2,740 102,407
---------------
4,664,312
---------------
FOOD, BEVERAGE & TOBACCO--3.2%
Coca-Cola Co. ........................ 100 6,762
Corn Products International, Inc.+.... 3,500 99,750
Diageo PLC ADR........................ 7,300 320,744
Flowers Industries, Inc.(1)........... 6,000 123,000
Nestle SA ADR......................... 1,600 170,151
Philip Morris Cos., Inc. ............. 11,100 567,487
Universal Corp. ...................... 5,500 205,219
---------------
1,493,113
---------------
FOREST PRODUCTS--3.0%
Bowater, Inc.(1)...................... 700 28,569
Georgia Pacific Corp. (Timber
Group).............................. 5,400 119,812
Potlatch Corp. ....................... 9,500 346,750
Sealed Air Corp.+..................... 1,500 53,156
Sonoco Products Co. .................. 2,190 62,141
Temple-Inland, Inc. .................. 600 29,138
Weyerhaeuser Co. ..................... 7,600 355,775
Willamette Industries, Inc.(1)........ 12,800 396,800
---------------
1,392,141
---------------
GAS & PIPELINE UTILITIES--0.9%
Equitable Resources, Inc. ............ 10,000 278,125
MCN Corp. ............................ 7,400 142,912
---------------
421,037
---------------
HEALTH SERVICES--3.8%
Columbia/HCA Healthcare Corp. ........ 13,700 287,700
</TABLE>
<PAGE>
48
STYLE SELECT SERIES LOGO
Large-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
HEALTH SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
HEALTHSOUTH Corp.+.................... 4,700 $ 56,988
Tenet Healthcare Corp.+............... 18,600 519,637
United HealthCare Corp. .............. 9,400 409,488
Wellpoint Health Networks, Inc., Class
A+.................................. 6,900 508,012
---------------
1,781,825
---------------
HOUSEHOLD PRODUCTS--0.4%
Gillette Co.(1)....................... 1,000 44,938
Kimberly-Clark Corp.(1)............... 3,200 154,400
---------------
199,338
---------------
HOUSING--0.6%
Foster Wheeler Corp.(1)............... 400 6,350
Masco Corp. .......................... 10,100 284,694
---------------
291,044
---------------
INSURANCE--8.6%
20th Century Industries............... 1,100 27,019
Aetna, Inc. .......................... 6,700 499,987
Allstate Corp. ....................... 13,000 559,812
American International Group, Inc. ... 750 63,938
Berkley (W.R.) Corp. ................. 1,500 45,094
Chubb Corp. .......................... 6,400 393,600
General Reinsurance Corp. ............ 5,100 1,120,406
Marsh & McLennan Cos., Inc.(1)........ 1,800 99,900
Progressive Corp. .................... 3,500 515,375
Provident Cos., Inc. ................. 1,800 52,313
Transamerica Corp. ................... 3,000 312,000
Transatlantic Holdings, Inc. ......... 4,600 358,800
UNUM Corp.(1)......................... 400 17,775
---------------
4,066,019
---------------
INVESTMENT COMPANIES--0.1%
Morgan Stanley Asia-Pacific Fund...... 7,200 50,400
---------------
LEISURE & TOURISM--3.1%
Brunswick Corp.(1).................... 8,000 155,500
Delta Air Lines, Inc. ................ 2,300 242,794
KLM Royal Dutch Airlines NV........... 12,400 374,325
McDonald's Corp.(1)................... 10,400 695,500
---------------
1,468,119
---------------
MACHINERY--1.4%
Deere & Co.(1)........................ 9,800 346,675
Dover Corp. .......................... 4,400 139,700
Kennametal, Inc. ..................... 800 16,600
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
MACHINERY (CONTINUED)
<TABLE>
<S> <C> <C>
Milacron, Inc. ....................... 2,100 $ 40,688
New Holland NV........................ 6,800 85,850
Smith International, Inc.+(1)......... 1,400 50,312
---------------
679,825
---------------
MEDICAL PRODUCTS--1.0%
Baxter International, Inc. ........... 7,100 425,556
Johnson & Johnson Co. ................ 800 65,200
---------------
490,756
---------------
METALS & MINERALS--3.1%
Aluminum Co. of America(1)............ 5,300 420,025
Hanson PLC ADR........................ 5,400 190,687
Martin Marietta Materials, Inc. ...... 7,100 348,344
USX-US Steel Group, Inc. ............. 14,000 325,500
Vulcan Materials Co. ................. 1,300 154,213
---------------
1,438,769
---------------
MULTI-INDUSTRY--0.1%
Cooper Industries, Inc. .............. 900 39,713
General Electric Co. ................. 100 8,750
---------------
48,463
---------------
REAL ESTATE COMPANIES--0.4%
Boardwalk Equities, Inc.+............. 100 1,056
Rouse Co. ............................ 6,400 179,600
Vornado Operating, Inc.+.............. 130 813
---------------
181,469
---------------
REAL ESTATE INVESTMENT TRUSTS--1.0%
CenterPoint Properties Corp. ......... 100 3,575
Crescent Real Estate Equities Co. .... 4,100 102,756
Equity Office Properties Trust........ 1,700 40,800
Equity Residential Properties Trust... 800 33,600
Federal Realty Investment Trust....... 400 9,050
Gables Residential Trust.............. 100 2,631
General Growth Properties, Inc. ...... 3,300 117,356
Home Properties of New York, Inc. .... 300 8,063
Kimco Realty Corp. ................... 100 3,981
Mack-Cali Realty Corp. ............... 800 23,700
Public Storage, Inc. ................. 1,100 29,356
Reckson Associates Realty Corp. ...... 200 4,538
United Dominion Realty Trust, Inc. ... 400 4,450
</TABLE>
<PAGE>
49
STYLE SELECT SERIES LOGO
Large-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
<TABLE>
<S> <C> <C>
Vornado Realty Trust.................. 2,600 $ 87,587
Weingarten Realty Investors........... 100 4,444
---------------
475,887
---------------
RETAIL--4.9%
Harcourt General, Inc. ............... 10,100 491,744
Kmart Corp.+.......................... 21,500 303,688
Limited, Inc. ........................ 13,500 345,937
May Department Stores Co. ............ 3,800 231,800
Penney (J.C.), Inc.(1)................ 10,500 498,750
Sears, Roebuck & Co. ................. 7,400 332,537
The Sports Authority, Inc.+........... 5,400 41,175
Toys "R" Us, Inc.+.................... 3,600 70,425
---------------
2,316,056
---------------
SOFTWARE--0.8%
First Data Corp. ..................... 14,700 389,550
---------------
TELECOMMUNICATIONS--0.7%
AT&T Corp. ........................... 5,000 311,250
Globalstar Telecommunications Ltd.+... 400 6,650
---------------
317,900
---------------
TELEPHONE--1.7%
Ameritech Corp. ...................... 3,200 172,600
Bell Atlantic Corp.(1)................ 7,500 398,437
GTE Corp. ............................ 2,400 140,850
MCI WorldCom, Inc.+................... 1,900 104,975
---------------
816,862
---------------
TRANSPORTATION--2.1%
Burlington Northern Santa Fe Corp. ... 7,800 240,825
Canadian National Railway Co. ........ 3,212 162,006
CSX Corp.(1).......................... 11,600 455,300
FDX Corp.+............................ 500 26,281
Hertz Corp., Class A.................. 500 17,906
Overseas Shipholding Group, Inc. ..... 4,000 70,500
---------------
972,818
---------------
TOTAL COMMON STOCK
(cost $45,154,757).................... 43,965,133
---------------
PREFERRED STOCK--0.2%
BROADCASTING & MEDIA--0.1%
AirTouch Communications, Inc. Series C
4.25%............................... 200 16,012
---------------
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES--0.0%
Devon Financing Trust 6.50%........... 200 $ 12,275
---------------
REAL ESTATE INVESTMENT TRUSTS--0.1%
General Growth Properties, Inc.
7.25% .............................. 2,500 62,344
---------------
TOTAL PREFERRED STOCK
(cost $91,747)........................ 90,631
---------------
TOTAL INVESTMENT SECURITIES--93.5%
(cost $45,246,504).................... 44,055,764
---------------
SHORT-TERM SECURITIES--2.9%
Cayman Island Time Deposit with State
Street Bank and Trust Co.
4.00% due 11/02/98
(cost $1,360,000)................... $ 1,360 1,360,000
---------------
REPURCHASE AGREEMENTS--3.8%
Agreement with State Street Bank and
Trust Co., bearing 5.41%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $1,185,534
collateralized by $1,170,000 Federal
National Mortgage Association 5.89%,
due 7/16/03 approximate aggregate
value $1,224,510
(cost $1,185,000)................... 1,185 1,185,000
Joint Repurchase Agreement Account
(Note 3)
(cost $585,000)..................... 585 585,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $1,770,000)..................... 1,770,000
---------------
TOTAL INVESTMENTS--
(cost $48,376,504).................... 100.2% 47,185,764
Liabilities in excess of other assets... (0.2) (84,857)
--------------- ---------------
NET ASSETS-- 100.0% $ 47,100,907
--------------- ---------------
--------------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
ADR ("American Depositary Receipt")
ADS ("American Depositary Shares")
GDR ("Global Depositary Receipt")
(1) Security is traded with rights attached
See Notes to Financial Statements
<PAGE>
50
STYLE SELECT SERIES LOGO
Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--97.1%
AEROSPACE & MILITARY TECHNOLOGY--1.8%
Boeing Co............................. 7,900 $ 296,250
LucasVarity PLC ADR+(1)............... 19,600 686,000
Northrop Grumman Corp.(1)............. 21,300 1,698,675
Raytheon Co., Class A................. 16,900 946,400
---------------
3,627,325
---------------
APPAREL & TEXTILES--0.2%
Burlington Industries, Inc.+.......... 40,500 374,625
---------------
AUTOMOTIVE--2.4%
AutoZone, Inc.+....................... 25,000 657,813
Borg-Warner Automotive, Inc........... 25,500 1,195,312
Ford Motor Co......................... 35,850 1,944,862
Goodyear Tire & Rubber Co............. 11,500 619,563
Lear Corp.+........................... 12,000 385,500
---------------
4,803,050
---------------
BANKS--9.3%
Bank One Corp......................... 46,884 2,291,455
BankAmerica Corp...................... 49,681 2,853,552
Chase Manhattan Corp.................. 42,000 2,386,125
First Union Corp.(1).................. 200 11,600
Golden West Financial Corp............ 4,900 444,369
Mellon Bank Corp...................... 19,300 1,160,412
National Bank of Canada............... 83,500 1,250,065
Norwest Corp.......................... 42,900 1,595,344
State Street Corp..................... 6,900 430,388
Summit Bancorp........................ 29,500 1,119,156
SunTrust Banks, Inc................... 5,300 369,344
U.S. Bancorp.......................... 17,400 635,100
Wells Fargo & Co...................... 10,300 3,811,000
---------------
18,357,910
---------------
BROADCASTING & MEDIA--1.4%
AirTouch Communications, Inc.+........ 14,500 812,000
Gannett Co., Inc...................... 8,300 513,562
New York Times Co., Class A........... 18,100 511,325
News Corp., Ltd. ADR.................. 6,300 172,069
Scripps (E.W) Co., Class A............ 13,000 575,250
Tribune Co.(1)........................ 3,700 213,213
---------------
2,797,419
---------------
BUSINESS SERVICES--1.2%
Crescent Operating, Inc.+............. 1,470 7,258
Owens Corning Co...................... 43,050 1,563,253
Waste Management, Inc................. 17,072 770,374
---------------
2,340,885
---------------
CHEMICALS--1.4%
Cabot Corp............................ 16,900 474,256
Morton International, Inc............. 20,800 517,400
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
CHEMICALS (CONTINUED)
<TABLE>
<S> <C> <C>
Praxair, Inc.......................... 25,400 $ 1,022,350
Raychem Corp.(1)...................... 24,000 733,500
---------------
2,747,506
---------------
COMMUNICATION EQUIPMENT--1.0%
Loral Space & Communications Corp.+... 36,800 696,900
SBC Communications, Inc............... 26,100 1,208,756
---------------
1,905,656
---------------
COMPUTERS & BUSINESS EQUIPMENT--4.0%
Hewlett-Packard Co.................... 69,600 4,189,050
International Business Machines
Corp................................ 18,200 2,701,562
Xerox Corp............................ 10,600 1,026,875
---------------
7,917,487
---------------
DRUGS--3.3%
Alza Corp.+........................... 20,500 981,437
American Home Products Corp........... 29,700 1,447,875
Biogen, Inc.+(1)...................... 14,400 999,900
Bristol-Myers Squibb Co.(1)........... 2,800 309,575
Glaxo Wellcome PLC ADR................ 1,100 68,475
Lilly (Eli) & Co.(1).................. 2,600 210,438
Merck & Co., Inc...................... 2,400 324,600
Novartis AG ADR....................... 5,700 513,554
Pfizer, Inc.(1)....................... 2,000 214,625
SmithKline Beecham PLC ADR............ 21,400 1,364,250
---------------
6,434,729
---------------
ELECTRIC UTILITIES--4.2%
Duke Energy Corp...................... 100 6,469
Edison International.................. 30,400 801,800
GPU, Inc.............................. 9,000 388,125
Illinova Corp......................... 35,000 885,937
Kansas City Power & Light Co.......... 58,700 1,691,294
Niagara Mohawk Power Corp.+........... 67,000 979,875
Pacific Gas & Electric Corp........... 16,000 487,000
Southern Co........................... 100 2,819
Texas Utilities Co.................... 23,000 1,006,250
Unicom Corp........................... 20,000 753,750
Western Resources, Inc................ 39,000 1,365,000
---------------
8,368,319
---------------
ELECTRONICS--6.3%
Applied Materials, Inc.+.............. 24,700 853,694
Arrow Electronics, Inc.+.............. 68,300 1,489,794
Avnet, Inc............................ 26,000 1,293,500
Eaton Corp............................ 4,200 284,287
Intel Corp............................ 15,300 1,364,569
Micron Technology, Inc................ 8,000 304,000
Molex, Inc............................ 15,412 550,016
</TABLE>
<PAGE>
51
STYLE SELECT SERIES LOGO
Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
ELECTRONICS (CONTINUED)
<TABLE>
<S> <C> <C>
Motorola, Inc......................... 14,000 $ 728,000
Novellus Systems, Inc.+............... 2,000 77,500
Philips Electronics NV-
NY Shares........................... 19,700 1,081,037
Quantum Corp.+(1)..................... 40,000 700,000
Texas Instruments, Inc................ 57,700 3,689,194
---------------
12,415,591
---------------
ENERGY SERVICES--2.5%
Cooper Cameron Corp.+................. 20,200 701,950
Diamond Offshore Drilling, Inc........ 38,600 1,184,537
Halliburton Co........................ 24,200 869,687
McDermott International, Inc.......... 27,900 817,819
Schlumberger Ltd...................... 19,200 1,008,000
Transocean Offshore, Inc.............. 9,800 361,988
---------------
4,943,981
---------------
ENERGY SOURCES--5.5%
Amerada Hess Corp..................... 100 5,525
Amoco Corp............................ 100 5,613
Atlantic Richfield Co................. 200 13,775
British Petroleum Co. PLC ADS......... 3,475 307,320
Burlington Resources, Inc.(1)......... 9,600 395,400
Chevron Corp.(1)...................... 8,200 668,300
Coastal Corp.......................... 9,500 334,875
Devon Energy Corp..................... 13,700 464,087
Exxon Corp............................ 700 49,875
Mobil Corp.(1)........................ 100 7,569
Noble Affiliates, Inc................. 28,700 939,925
Petroleum Geo-Services ADR+........... 19,700 421,088
Phillips Petroleum Co.(1)............. 31,900 1,379,675
R & B Falcon Corp.+................... 71,622 971,373
Repsol SA ADR......................... 27,700 1,385,000
Sonat, Inc............................ 100 3,031
Sun Co., Inc.......................... 46,400 1,592,100
Tosco Corp............................ 12,000 336,750
Ultramar Diamond Shamrock Corp........ 3,500 94,281
Unocal Corp........................... 23,300 790,744
Williams Cos., Inc.................... 26,500 727,094
---------------
10,893,400
---------------
ENTERTAINMENT PRODUCTS--1.1%
Harman International Industries,
Inc.+............................... 40,000 1,617,500
Hasbro, Inc.(1)....................... 7,500 262,969
Mattel, Inc........................... 5,900 211,662
---------------
2,092,131
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES--9.9%
American Express Co................... 42,800 $ 3,782,450
Associates First Capital Corp., Class
A................................... 9,500 669,750
Citigroup, Inc........................ 82,023 3,860,207
Countrywide Credit Industries,
Inc.(1)............................. 35,400 1,528,837
Donaldson, Lufkin & Jenrette, Inc..... 9,600 343,200
Federal Home Loan Mortgage Corp....... 14,400 828,000
Household International, Inc.......... 16,600 606,938
Merrill Lynch & Co., Inc.(1).......... 22,900 1,356,825
Morgan (J.P.) & Co., Inc.............. 200 18,850
Morgan Stanley, Dean Witter & Co...... 28,810 1,865,447
PaineWebber Group, Inc................ 43,000 1,437,813
ReliaStar Financial Corp.............. 2,300 100,769
SLM Holding Corp...................... 78,700 3,152,919
---------------
19,552,005
---------------
FOOD, BEVERAGE & TOBACCO--5.0%
Anheuser-Busch Cos., Inc.(1).......... 22,500 1,337,344
Coca-Cola Co.......................... 500 33,813
ConAgra, Inc.......................... 37,700 1,147,494
Gallaher Group PLC ADR................ 200 5,450
IBP, Inc.............................. 75,300 2,037,806
Nabisco Holdings Corp., Class A....... 31,600 1,192,900
Nestle SA ADR......................... 7,000 744,409
Philip Morris Cos., Inc............... 66,200 3,384,475
---------------
9,883,691
---------------
FOREST PRODUCTS--0.7%
Asia Pulp & Paper Ltd. ADR+........... 1,400 11,638
International Paper Co................ 100 4,644
Mead Corp............................. 10,300 325,737
Owens Illinois, Inc.+................. 23,200 709,050
Sealed Air Corp.+..................... 9,400 333,112
Union Camp Corp.(1)................... 100 4,300
---------------
1,388,481
---------------
GAS & PIPELINE UTILITIES--0.1%
KN Energy, Inc.+...................... 3,600 178,875
---------------
HEALTH SERVICES--0.9%
Tenet Healthcare Corp.+............... 38,000 1,061,625
Wellpoint Health Networks, Inc., Class
A+.................................. 11,000 809,875
---------------
1,871,500
---------------
HOUSEHOLD PRODUCTS--0.6%
Gillette Co.(1)....................... 4,600 206,713
</TABLE>
<PAGE>
52
STYLE SELECT SERIES LOGO
Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
HOUSEHOLD PRODUCTS (CONTINUED)
<TABLE>
<S> <C> <C>
Kimberly-Clark Corp.(1)............... 19,000 $ 916,750
---------------
1,123,463
---------------
HOUSING--1.8%
Armstrong World Industries, Inc....... 21,000 1,302,000
Champion Enterprises, Inc.+........... 44,900 892,387
Masco Corp............................ 49,300 1,389,644
Maytag Corp.(1)....................... 200 9,888
---------------
3,593,919
---------------
INSURANCE--11.5%
20th Century Industries............... 5,900 144,919
Ace Ltd............................... 30,000 1,016,250
Aetna, Inc............................ 18,000 1,343,250
Allstate Corp......................... 44,500 1,916,281
American International Group, Inc..... 3,325 283,456
Aon Corp.............................. 12,500 775,000
Berkley (W.R.) Corp................... 44,500 1,337,781
Chubb Corp............................ 29,400 1,808,100
CIGNA Corp.(1)........................ 21,000 1,531,688
EXEL Ltd.............................. 16,700 1,276,506
General Reinsurance Corp.............. 16,900 3,712,719
Hartford Financial Services Group,
Inc................................. 2,000 106,250
LaSalle Re Holdings Ltd............... 19,600 463,050
Old Republic International Corp....... 49,450 939,550
Orion Capital Corp.................... 15,900 543,581
PartnerRe Ltd......................... 30,000 1,192,500
Progressive Corp...................... 16,400 2,414,900
Transatlantic Holdings, Inc........... 22,800 1,778,400
UNUM Corp.(1)......................... 2,400 106,650
---------------
22,690,831
---------------
INVESTMENT COMPANIES--0.1%
Morgan Stanley Asia-Pacific Fund...... 29,800 208,600
---------------
LEISURE & TOURISM--4.4%
Continental Airlines, Inc., Class
B+.................................. 18,400 729,100
Host Marriott Corp.+.................. 76,800 1,113,600
KLM Royal Dutch Airlines NV........... 48,989 1,478,855
McDonald's Corp.(1)................... 57,400 3,838,625
Mirage Resorts, Inc.+................. 42,500 719,844
Tricon Global Restaurants, Inc.+...... 19,500 848,250
---------------
8,728,274
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
MACHINERY--1.1%
Dover Corp............................ 19,900 $ 631,825
New Holland NV........................ 75,800 956,975
Smith International, Inc.+(1)......... 17,000 610,938
---------------
2,199,738
---------------
MEDICAL PRODUCTS--0.8%
Baxter International, Inc............. 21,000 1,258,688
Johnson & Johnson Co.................. 3,700 301,550
---------------
1,560,238
---------------
METALS & MINERALS--4.5%
AK Steel Holding Corp................. 37,000 640,563
Cleveland-Cliffs, Inc.(1)............. 25,300 1,004,094
Crown, Cork & Seal Co., Inc........... 28,000 892,500
Lafarge Corp.......................... 45,200 1,522,675
Martin Marietta Materials, Inc........ 26,400 1,295,250
Southdown, Inc........................ 25,900 1,409,931
UCAR International, Inc.+............. 68,100 1,225,800
Vulcan Materials Co................... 6,700 794,787
---------------
8,785,600
---------------
MULTI-INDUSTRY--0.0%
Fortune Brands, Inc................... 200 6,613
General Electric Co................... 400 35,000
---------------
41,613
---------------
REAL ESTATE COMPANIES--0.4%
Boardwalk Equities, Inc.+............. 700 7,395
Rouse Co.............................. 27,400 768,912
Vornado Operating, Inc.+.............. 560 3,500
---------------
779,807
---------------
REAL ESTATE INVESTMENT TRUSTS--1.4%
CenterPoint Properties Corp........... 2,300 82,225
Crescent Real Estate Equities Co...... 22,100 553,881
Equity Office Properties Trust........ 7,900 189,600
Equity Residential Properties Trust... 3,200 134,400
Federal Realty Investment Trust....... 1,400 31,675
Gables Residential Trust.............. 600 15,787
General Growth Properties, Inc........ 14,300 508,544
Home Properties of New York, Inc...... 500 13,438
IndyMac Mortgage Holdings, Inc........ 50,500 552,344
Kimco Realty Corp..................... 300 11,944
Mack-Cali Realty Corp................. 4,200 124,425
Public Storage, Inc................... 5,000 133,437
Reckson Associates Realty Corp........ 3,700 83,944
</TABLE>
<PAGE>
53
STYLE SELECT SERIES LOGO
Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
<TABLE>
<S> <C> <C>
United Dominion Realty Trust, Inc..... 1,500 $ 16,687
Vornado Realty Trust.................. 11,200 377,300
Weingarten Realty Investors........... 500 22,219
---------------
2,851,850
---------------
RETAIL--2.1%
Fred Meyer, Inc.+..................... 14,700 783,694
Harcourt General, Inc................. 35,900 1,747,881
May Department Stores Co.............. 25,650 1,564,650
---------------
4,096,225
---------------
SOFTWARE--1.2%
Computer Associates International,
Inc................................. 20,100 791,437
Storage Technology Corp.+............. 44,400 1,484,625
---------------
2,276,062
---------------
TELECOMMUNICATIONS--0.2%
Globalstar Telecommunications Ltd.+... 1,244 20,682
McLeodUSA, Inc., Class A+............. 9,700 352,838
---------------
373,520
---------------
TELEPHONE--2.0%
Bell Atlantic Corp.(1)................ 17,300 919,062
GTE Corp.............................. 21,700 1,273,519
MCI WorldCom, Inc.+................... 29,000 1,602,250
NEXTLINK Communications, Inc., Class
A................................... 8,000 205,000
---------------
3,999,831
---------------
TRANSPORTATION--2.8%
Burlington Northern Santa Fe Corp..... 80,350 2,480,806
Canadian National Railway Co.......... 5,760 290,520
FDX Corp.+............................ 27,700 1,455,981
Kansas City Southern Industries,
Inc................................. 34,600 1,336,425
---------------
5,563,732
---------------
TOTAL COMMON STOCK
(cost $186,329,719)................... 191,767,869
---------------
PREFERRED STOCK--0.3%
BROADCASTING & MEDIA--0.1%
AirTouch Communications, Inc. Series C
4.25%............................... 900 72,056
FINANCIAL SERVICES--0.0%
Devon Financing Trust 6.50%........... 1,000 61,375
REAL ESTATE COMPANIES--0.0%
Rouse Co. Series B 3.00%.............. 400 18,100
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS--0.2%
General Growth Properties, Inc.
7.25%............................... 14,100 $ 351,619
Vornado Realty Trust Series A 6.50%... 300 14,475
---------------
366,094
---------------
TOTAL PREFERRED STOCK
(cost $504,046)....................... 517,625
---------------
TOTAL INVESTMENT SECURITIES--97.4%
(cost $186,833,765)................... 192,285,494
---------------
SHORT-TERM SECURITIES--0.1%
Cayman Island Time Deposit with State
Street Bank and Trust Co. 2.75% due
11/02/98
(cost $110,000)..................... $ 110 110,000
---------------
REPURCHASE AGREEMENTS--2.2%
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $2,072,734
collateralized by $1,810,000 U.S.
Treasury Note 7.25%, due 5/15/04
approximate aggregate value
$2,117,700
(cost $2,072,000)................... 2,072 2,072,000
Agreement with State Street Bank and
Trust Co., bearing 5.41%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $2,366,066
collateralized by $2,330,000 Federal
National Mortgage Association 5.89%,
due 7/16/03 approximate aggregate
value $2,438,555
(cost $2,365,000)................... 2,365 2,365,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $4,437,000)..................... 4,437,000
---------------
TOTAL INVESTMENTS--
(cost $191,380,765)................... 99.7% 196,832,494
Other assets less liabilities......... 0.3 674,241
------- ---------------
NET ASSETS-- 100.0% $ 197,506,735
------- ---------------
------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
ADR ("American Deposit Receipt")
ADS ("American Depositary Shares")
(1) Security is traded with rights attached
See Notes to Financial Statements
<PAGE>
54
STYLE SELECT SERIES LOGO
Small-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--92.8%
AEROSPACE & MILITARY TECHNOLOGY--0.7%
Moog, Inc., Class A................... 2,300 $ 70,581
REMEC, Inc.+.......................... 26,000 273,000
---------------
343,581
---------------
APPAREL & TEXTILES--3.6%
Gerber Childrenswear, Inc.+........... 30,000 255,000
Just For Feet, Inc.+.................. 8,600 145,663
Kellwood Co.(1)....................... 6,000 163,500
Nautica Enterprises, Inc.+............ 10,600 219,287
Oakley, Inc.+......................... 13,800 121,613
Spiegel, Inc., Class A+............... 60,000 183,750
Stride Rite Corp.(1).................. 16,100 146,912
Talbots, Inc.......................... 3,900 88,481
Tarrant Apparel Group, Inc.+.......... 4,000 75,500
Wolverine World Wide, Inc.(1)......... 24,000 313,500
---------------
1,713,206
---------------
AUTOMOTIVE--3.6%
Apogee Enterprises, Inc............... 14,400 151,200
Borg-Warner Automotive, Inc........... 6,800 318,750
Dura Automotive Systems, Inc.+........ 3,200 75,600
Federal Signal Corp................... 18,000 433,125
Polaris Industries, Inc............... 10,600 364,375
Titan International, Inc.............. 6,900 71,588
Tower Automotive, Inc.+............... 12,700 282,575
---------------
1,697,213
---------------
BANKS--7.5%
Astoria Financial Corp................ 2,760 118,680
Bank of Commerce / San Diego.......... 4,400 54,725
CCB Financial Corp.(1)................ 12,000 631,500
Community Bank Systems, Inc........... 8,000 224,000
First Hawaiian, Inc................... 3,300 129,113
First Source Bancorp, Inc. ........... 35,000 301,875
GBC Bancorp........................... 10,000 262,500
Greater Bay Bancorp................... 3,500 110,250
HUBCO, Inc............................ 12,810 341,066
MECH Financial, Inc................... 7,300 173,375
Peoples Heritage Financial Group,
Inc................................. 20,000 357,500
Resource Bancshares Mortgage Group,
Inc. ............................... 5,900 85,550
Riverview Bancorp, Inc.+.............. 29,000 351,625
St. Paul Bancorp, Inc................. 20,000 411,250
---------------
3,553,009
---------------
BROADCASTING & MEDIA--3.3%
Cable Design Technologies Corp........ 8,900 146,850
CellStar Corp.+....................... 14,400 99,000
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
BROADCASTING & MEDIA (CONTINUED)
<TABLE>
<S> <C> <C>
Hollinger International, Inc., Class
A................................... 25,000 $ 325,000
Jones Intercable, Inc., Class A+...... 31,000 868,000
Nielsen Media Research, Inc........... 7,733 109,712
---------------
1,548,562
---------------
BUSINESS SERVICES--3.0%
Banta Corp............................ 15,500 381,687
Bowne & Co., Inc. .................... 12,100 162,594
CDI Corp.+............................ 2,400 52,350
Cognex Corp........................... 15,200 235,600
Granite Construction, Inc............. 5,750 191,547
Pittston Brink's Group................ 11,300 336,175
SOS Staffing Services, Inc.+.......... 3,800 32,063
---------------
1,392,016
---------------
CHEMICALS--0.9%
A. Schulman, Inc...................... 5,700 113,287
Dexter Corp........................... 5,100 149,175
Ferro Corp............................ 5,600 142,800
Fuller (H.B.) Co. .................... 700 28,744
---------------
434,006
---------------
COMMUNICATION EQUIPMENT--1.0%
Anixter International, Inc.+.......... 12,700 196,056
Belden, Inc. ......................... 6,000 87,375
DSP Communications, Inc.+............. 11,300 110,881
Leasing Solutions, Inc.+.............. 6,200 63,163
---------------
457,475
---------------
COMPUTERS & BUSINESS EQUIPMENT--3.0%
Bell & Howell Co.+.................... 8,900 235,850
CHS Electronics, Inc.+................ 10,000 97,500
Hypercom Corp.+....................... 34,000 323,000
Kemet Corp.+.......................... 12,900 179,794
NeoMagic Corp.+....................... 6,100 102,175
Reynolds & Reynolds Co., Class A...... 11,300 203,400
Splash Technology Holdings, Inc.+..... 20,000 168,750
World Color Press, Inc.+.............. 3,900 118,462
---------------
1,428,931
---------------
DRUGS--1.0%
Perrigo Co.+.......................... 57,300 451,238
---------------
ELECTRIC UTILITIES--1.7%
Calpine Corp.+........................ 12,300 273,675
Eastern Enterprises................... 1,200 49,275
Eastern Utilities Associates.......... 4,400 114,125
</TABLE>
<PAGE>
55
STYLE SELECT SERIES LOGO
Small-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
<TABLE>
<S> <C> <C>
Public Service Co. of New Mexico...... 5,600 $ 123,550
Sierra Pacific Resources Co. ......... 6,300 229,556
---------------
790,181
---------------
ELECTRICAL EQUIPMENT--4.1%
Aeroquip-Vickers, Inc................. 2,300 72,450
AptarGroup, Inc....................... 5,900 157,825
Credence Systems Corp.+............... 9,900 146,025
Etec Systems, Inc.+................... 5,200 176,150
Flextronics International Ltd.+....... 3,200 166,200
Juno Lighting, Inc.(1)................ 12,000 285,000
MagneTek, Inc.+....................... 10,000 126,875
Mark IV Industries, Inc............... 13,700 210,637
Roper Industries, Inc................. 7,000 124,688
Scotsman Industries, Inc.............. 3,900 79,706
Silicon Valley Group, Inc.+........... 7,800 99,938
Watsco, Inc........................... 4,000 67,750
Watts Industries, Inc., Class A....... 12,100 222,337
---------------
1,935,581
---------------
ELECTRONICS--4.1%
Allen Telecom, Inc.+.................. 13,500 74,250
Benchmark Electronics, Inc.+.......... 3,931 92,624
Brooks Automation, Inc.+.............. 30,000 367,500
Lam Research Corp.+................... 7,000 101,063
Lattice Semiconductor Corp.+.......... 5,700 193,800
Oak Industries, Inc.+................. 4,700 127,194
Plexus Corp.+......................... 5,000 124,062
Sawtek, Inc.+......................... 13,000 262,437
SpeedFam International, Inc.+......... 28,000 448,000
VLSI Technology, Inc.+................ 14,400 138,600
---------------
1,929,530
---------------
ENERGY SERVICES--2.2%
Atwood Oceanics, Inc.+................ 3,500 98,437
Cliffs Drilling Co.+.................. 2,300 52,613
Key Energy Group, Inc................. 33,000 327,937
Marine Drilling Co., Inc.+............ 30,000 335,625
New Jersey Resources Corp............. 1,800 69,188
Pool Energy Services Co.+............. 5,900 78,544
Tuboscope, Inc.+...................... 5,700 70,537
---------------
1,032,881
---------------
ENERGY SOURCES--2.8%
Barrett Resources Corp.+.............. 6,700 157,869
Chieftain International, Inc.+........ 22,000 431,750
Devon Energy Corp..................... 5,700 193,088
Helmerich & Payne, Inc. .............. 8,400 200,025
Tesoro Petroleum Corp.+............... 11,300 167,381
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
ENERGY SOURCES (CONTINUED)
<TABLE>
<S> <C> <C>
Vintage Petroleum, Inc................ 11,700 $ 152,100
---------------
1,302,213
---------------
ENTERTAINMENT PRODUCTS--1.2%
Harman International Industries,
Inc.+............................... 11,800 477,162
Midway Games, Inc.+................... 9,894 97,085
---------------
574,247
---------------
FINANCIAL SERVICES--0.8%
E.W. Blanch Holdings, Inc............. 4,200 163,538
Life Financial Corp.+................. 8,000 32,000
Long Beach Financial Corp.+........... 8,200 58,425
Metris Cos., Inc...................... 4,402 141,960
---------------
395,923
---------------
FOOD, BEVERAGE & TOBACCO--1.3%
Canandaigua Brands, Inc., Class A..... 4,000 200,500
Lance, Inc............................ 4,000 75,000
Universal Corp........................ 5,000 186,562
Vlasic Foods International, Inc.+..... 7,000 130,813
---------------
592,875
---------------
FOREST PRODUCTS--2.3%
Albany International Corp., Class A... 1,437 26,225
Caraustar Industries, Inc............. 5,000 118,750
First Brands Corp..................... 16,400 619,100
Georgia Pacific Corp. (Timber
Group).............................. 6,000 133,125
Unisource Worldwide, Inc.............. 8,400 77,175
Wausau-Mosinee Paper Corp. ........... 7,200 125,550
---------------
1,099,925
---------------
GAS & PIPELINE UTILITIES--0.9%
Northwest Natural Gas Co.............. 2,300 63,250
Nui Corp.............................. 4,000 93,750
Piedmont Natural Gas, Inc............. 2,600 90,350
Washington Gas Light Co. ............. 2,300 60,806
WICOR, Inc............................ 4,000 97,500
---------------
405,656
---------------
HEALTH SERVICES--2.4%
Apria Healthcare Group, Inc.+......... 10,100 41,031
Genesis Health Ventures, Inc.+........ 7,200 97,200
Integrated Health Services, Inc....... 15,000 242,812
Magellan Health Services, Inc.+....... 8,700 78,844
Mariner Post-Acute Network, Inc....... 12,600 73,238
Sierra Health Services, Inc........... 21,350 497,722
</TABLE>
<PAGE>
56
STYLE SELECT SERIES LOGO
Small-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
HEALTH SERVICES (CONTINUED)
<TABLE>
<S> <C> <C>
Sun Healthcare Group, Inc.+........... 20,300 $ 119,262
---------------
1,150,109
---------------
HOUSEHOLD PRODUCTS--0.3%
Libbey, Inc........................... 3,700 114,700
---------------
HOUSING--4.1%
Bassett Furniture Industries, Inc..... 6,400 142,400
Congoleum Corp., Class A+............. 30,000 241,875
Dorel Industries, Inc.+............... 6,400 84,800
Eagle Hardware & Garden, Inc.+........ 6,600 153,037
Furniture Brands International,
Inc.+............................... 8,000 172,000
Holophane Corp.+...................... 6,000 127,875
Homebase, Inc.+....................... 8,800 59,400
Hughes Supply, Inc.................... 4,200 111,563
Kaufman & Broad Home Corp............. 6,900 197,081
Kimball International, Inc., Class
B................................... 5,500 101,750
La-Z-Boy, Inc......................... 5,900 108,413
Toll Brothers, Inc.+.................. 13,600 315,350
Walter Industries, Inc.+.............. 8,300 116,200
---------------
1,931,744
---------------
INSURANCE--5.5%
American Heritage Life Investment
Corp. .............................. 5,100 106,144
Amerin Corp.+......................... 16,500 351,656
Capital Re Corp....................... 5,000 91,563
Chartwell Re Corp..................... 3,100 77,113
CMAC Investment Corp. ................ 1,200 50,250
Delphi Financial Group Inc.+.......... 1,014 47,278
Enhance Financial Services Group,
Inc................................. 9,600 235,800
Frontier Insurance Group, Inc......... 5,940 96,896
Gallagher (Arthur J.) & Co............ 2,800 118,650
Harleysville Group, Inc............... 5,400 114,075
HCC Insurance Holdings, Inc........... 8,100 145,294
Horace Mann Educators Corp............ 3,600 103,050
LandAmerica Financial Group, Inc. .... 2,600 135,037
Liberty Corp.(1)...................... 1,386 57,519
NAC Reinsurance Corp.(1).............. 2,300 111,406
Orion Capital Corp.................... 6,400 218,800
Presidential Life Corp................ 5,000 90,625
Reliance Group Holdings, Inc.......... 23,800 331,712
Selective Insurance Group, Inc........ 5,800 105,850
---------------
2,588,718
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES--2.3%
Aim Eastern Europe Fund............... 6,865 $ 39,903
Central European Value Fund........... 22,700 235,512
Emerging Markets Telecommunications
Fund, Inc........................... 26,000 253,500
Latin America Equity Fund, Inc........ 30,000 230,625
Morgan Stanley Asia-Pacific Fund...... 45,000 315,000
---------------
1,074,540
---------------
LEISURE & TOURISM--2.8%
Alaska Air Group, Inc.+............... 1,600 57,500
Applebee's International, Inc......... 5,800 117,450
Bob Evans Farms, Inc.................. 13,000 255,125
Foodmaker, Inc........................ 4,700 74,319
Landry's Seafood Restaurants, Inc.+... 25,000 208,594
Lone Star Steakhouse & Saloon,
Inc.+............................... 11,500 89,125
Midwest Express Holdings, Inc......... 4,300 135,987
Prime Hospitality Corp.+.............. 8,400 76,650
Ryan's Family Steak Houses, Inc.+..... 13,800 148,350
Sbarro, Inc........................... 5,400 126,900
Suburban Lodges of America, Inc.+..... 6,200 49,213
---------------
1,339,213
---------------
MACHINERY--3.3%
Briggs & Stratton Corp................ 4,600 216,200
JLG Industries, Inc................... 16,600 274,937
Kaydon Corp........................... 5,500 193,187
Kennametal, Inc....................... 100 2,075
Lincoln Electric Holdings, Inc........ 4,600 97,750
Milacron, Inc. ....................... 4,300 83,313
Omniquip International, Inc........... 6,100 80,063
PPT Vision, Inc.+..................... 26,000 172,250
Regal-Beloit Corp. ................... 10,300 216,944
Wyman-Gordon Co....................... 14,900 212,325
---------------
1,549,044
---------------
MEDICAL PRODUCTS--1.6%
CONMED Corp.+......................... 5,900 156,350
Hologic, Inc.+........................ 5,600 75,600
Maxxim Medical, Inc................... 4,500 113,625
Sola International, Inc.+............. 8,900 170,769
Sunrise Medical, Inc.+................ 8,800 101,200
Wesley Jessen VisionCare, Inc.+....... 4,500 80,437
</TABLE>
<PAGE>
57
STYLE SELECT SERIES LOGO
Small-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
MEDICAL PRODUCTS (CONTINUED)
<TABLE>
<S> <C> <C>
West Co., Inc. ....................... 1,882 $ 55,872
---------------
753,853
---------------
METALS & MINERALS--2.1%
ACX Technologies, Inc.+............... 6,900 99,187
Carlisle Cos., Inc.................... 3,500 135,187
Carpenter Technology Corp............. 2,800 98,175
Cleveland-Cliffs, Inc.(1)............. 2,200 87,312
Intermet Corp......................... 7,600 118,275
Martin Marietta Materials, Inc........ 2,400 117,750
NS Group, Inc.+....................... 23,000 161,000
Reliance Steel & Aluminum Co.......... 1,300 40,219
Texas Industries, Inc. ............... 2,600 76,863
Titanium Metals Corp.................. 7,000 73,063
---------------
1,007,031
---------------
MULTI-INDUSTRY--0.4%
Crane Co.(1).......................... 6,000 172,875
Standex International Corp.(1)........ 1,300 32,094
---------------
204,969
---------------
REAL ESTATE COMPANIES--0.1%
Insigina/ESG Holdings, Inc.+.......... 3,000 38,250
---------------
REAL ESTATE INVESTMENT TRUSTS--7.0%
Amli Residential Properties Trust..... 3,200 72,000
Apartment Investment & Management Co.,
Class A............................. 3,300 115,294
Arden Realty Group, Inc............... 3,400 73,525
Bedford Property Investors, Inc....... 6,400 114,400
Bradley Real Estate, Inc.............. 4,300 90,300
Brandywine Realty Trust............... 5,300 94,738
CBL & Associates Properties, Inc...... 4,200 109,462
Chateau Communities, Inc.............. 4,200 123,375
Chelsea GCA Realty, Inc............... 3,200 110,000
FelCor Lodging Trust, Inc............. 7,400 174,362
Gables Residential Trust.............. 12,000 315,750
Glenborough Realty Trust, Inc. ....... 9,700 207,944
IRT Property Co....................... 52,000 533,000
Kilroy Realty Corp.................... 6,700 148,656
Koger Equity, Inc..................... 4,000 67,500
Liberty Property Trust................ 3,200 73,600
MGI Properties, Inc................... 1,100 32,175
Pacific Gulf Properties, Inc.......... 3,500 69,344
Prime Group Reality Trust............. 4,800 77,100
Summit Properties, Inc................ 26,600 468,825
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
<TABLE>
<S> <C> <C>
TriNet Corporate Realty Trust, Inc.... 7,000 $ 201,250
---------------
3,272,600
---------------
RETAIL--4.2%
AnnTaylor Stores Corp.+............... 3,900 113,100
BJ's Wholesale Club, Inc.+............ 4,300 154,531
Cole National Corp., Class A+......... 6,200 128,650
Fingerhut Co., Inc.................... 17,600 148,500
Fred's, Inc........................... 6,000 78,000
Gibson Greetings, Inc.+............... 6,200 64,713
Haverty Furniture Co., Inc............ 4,900 92,487
Jostens, Inc.(1)...................... 30,000 676,875
K2, Inc............................... 8,000 88,000
Movado Group, Inc..................... 5,700 105,450
Pier 1 Imports, Inc................... 9,400 86,950
ShopKo Stores, Inc.+.................. 3,700 115,856
Toro Co............................... 2,900 64,163
Wet Seal, Inc......................... 3,500 72,625
---------------
1,989,900
---------------
SOFTWARE--2.6%
Digi International, Inc.+............. 10,000 150,000
Electronics for Imaging, Inc.+........ 9,400 226,187
Hyperion Solutions Corp.+............. 6,080 182,020
Pinnacle Systems, Inc.+............... 4,200 141,225
Sterling Software, Inc.+.............. 8,500 222,594
Symantec Corp.+....................... 9,000 143,438
Wang Laboratories, Inc.+.............. 7,300 155,581
---------------
1,221,045
---------------
TELECOMMUNICATIONS--0.6%
General Communication, Inc., Class
A+.................................. 55,700 167,100
NTL, Inc.+............................ 2,400 114,900
---------------
282,000
---------------
TELEPHONE--1.4%
Centennial Cellular Corp., Class A+... 14,000 483,000
Vanguard Cellular Systems, Inc., Class
A+.................................. 7,100 162,856
---------------
645,856
---------------
TRANSPORTATION--3.1%
Budget Group, Inc., Class A+.......... 5,900 105,831
Circle International Group, Inc....... 7,700 153,038
CNF Transportation, Inc............... 5,200 157,300
</TABLE>
<PAGE>
58
STYLE SELECT SERIES LOGO
Small-Cap Value Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/ VALUE
SECURITY DESCRIPTION WARRANTS (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
TRANSPORTATION (CONTINUED)
<TABLE>
<S> <C> <C>
Expeditors International of
Washington, Inc..................... 7,000 $ 237,125
Knightsbridge Tankers Ltd............. 32,000 680,000
Pittston Burlington Co. .............. 8,800 51,150
Teekay Shipping Corp. ................ 5,200 91,000
---------------
1,475,444
---------------
TOTAL COMMON STOCK
(cost $50,964,015).................... 43,717,265
---------------
PREFERRED STOCK--0.1%
REAL ESTATE INVESTMENT TRUSTS--0.1%
Apartment Investment & Management Co.
Series E............................ 1,179 46,865
---------------
WARRANTS--0.7%+
ENERGY SERVICES--0.7%
BJ Services Co. 4/12/00............... 22,000 357,500
---------------
TOTAL INVESTMENT SECURITIES--93.6%
(cost $51,480,314).................... 44,121,630
---------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--5.9%
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $1,765,625
collateralized by $1,145,000 U.S.
Treasury Note 12.00%, due 8/15/13
approximate aggregate value
$1,804,020
(cost $1,765,000)................... $ 1,765 $ 1,765,000
Agreement with State Street Bank and
Trust Co., bearing 5.30%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $994,439
collateralized by $715,000 U.S.
Treasury Note 11.63%, due 11/15/04
approximate aggregate value
$1,019,395
(cost $994,000)..................... 994 994,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $2,759,000)..................... 2,759,000
---------------
TOTAL INVESTMENTS--
(cost $54,239,314).................... 99.5% 46,880,630
Other assets less liabilities......... 0.5 234,672
------- ---------------
NET ASSETS-- 100.0% $ 47,115,302
------- ---------------
------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
(1) Security is traded with rights attached
See Notes to Financial Statements
<PAGE>
59
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--90.7%
ARGENTINA--0.7%
Banco Frances del Rio de la Plata SA
ADR (Finance)....................... 560 $ 11,690
Banco de Galicia y Buenos Aires SA de
CV ADR (Finance).................... 834 14,230
Perez Cos. SA, Class B
(Multi-industry).................... 5,053 24,970
Telefonica de Argentina SA ADR
(Utilities)......................... 5,750 190,110
TV Azteca SA de CV ADR+
(Information & Entertainment)....... 2,100 18,375
YPF Sociedad Anonima ADR (Energy)..... 12,796 370,284
---------------
629,659
---------------
AUSTRALIA--1.5%
AMP Ltd.+ (Finance)................... 18,600 221,418
Australian Gas Light Co., Ltd.
(Utilities)......................... 5,183 37,305
Brambles Industries Ltd.
(Multi-industry).................... 13,400 294,090
Broken Hill Proprietary Co., Ltd.
(Materials)......................... 4,560 38,788
Colonial Ltd. (Finance)............... 12,176 39,920
Commonwealth Bank of Australia
(Finance)........................... 6,196 77,079
Fairfax (John) Holdings Ltd.
(Information & Entertainment)....... 14,000 24,518
Fosters Brewing Group Ltd. (Consumer
Staples)............................ 6,000 14,748
Goodman Fielder Wattie Ltd. (Consumer
Staples)............................ 15,000 19,824
Lend Lease Corp. Ltd. (Finance)....... 1,031 22,761
National Australia Bank Ltd.
(Finance)........................... 3,094 41,025
News Corp., Ltd.
(Information & Entertainment)....... 9,685 66,208
Publishing & Broadcasting Ltd.
(Information & Entertainment)....... 4,000 15,886
TABCORP Holdings Ltd. (Information &
Entertainment)...................... 32,000 213,033
Telstra Corp., Ltd.+ (Utilities)...... 21,519 85,465
Westpac Banking Corp. Ltd.
(Finance)........................... 8,173 49,738
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
AUSTRALIA (CONTINUED)
<TABLE>
<S> <C> <C>
Woodside Petroleum Ltd. (Energy)...... 5,000 $ 26,441
---------------
1,288,247
---------------
AUSTRIA--0.7%
Erste Bank Der Oesterreichischen
Sparkassen AG+ (Finance)............ 5,400 316,052
VA Technologie AG (Industrial &
Commercial)......................... 761 70,533
Wienerberger Baustoffindustrie AG
(Materials)......................... 895 186,792
---------------
573,377
---------------
BELGIUM--0.7%
Credit Dexia/Communal Holding+
(Finance)........................... 284 46,101
Fortis AG (Finance)................... 490 140,737
Kredietbank NV (Finance).............. 4,250 296,469
UCB SA (Healthcare)................... 14 81,711
---------------
565,018
---------------
BOTSWANA--0.1%
Sechaba Brewery
(Consumer Staples).................. 67,100 86,087
---------------
BRAZIL--0.7%
Compania Brasileira de Distribuidora
GDR (Industrial & Commercial)....... 1,000 16,766
Compania Energetica de Minas Gerais
ADR (Materials)..................... 1,888 36,720
Ericsson (L.M.) Telecommunications
Co., Class B ADR
(Information Technology)............ 10,600 239,825
Telecomunicacoes de Brasileiras SA ADR
(Information Technology)............ 4,000 303,750
Uniao De Banco Brasilieros SA GDR+
(Finance)........................... 1,000 17,500
---------------
614,561
---------------
</TABLE>
<PAGE>
60
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
<TABLE>
<S> <C> <C>
CANADA--0.6%
Alcan Aluminium Ltd. (Materials)...... 970 $ 24,360
Cadillac Fairview Corp.+
(Real Estate)....................... 4,100 77,058
Newcourt Credit Group, Inc.
(Finance)........................... 11,000 361,795
Royal Bank of Canada (Finance)........ 640 29,490
---------------
492,703
---------------
CHILE--0.1%
Banco Santander-Chile, Class A ADR
(Finance)........................... 9,000 83,250
Chilectra SA ADR* (Utilities)......... 422 8,302
---------------
91,552
---------------
CHINA--0.1%
Huaneng Power International, Inc. ADR+
(Industrial & Commercial)........... 4,000 55,000
---------------
DENMARK--1.4%
Den Danske Bank+ (Finance)............ 280 38,012
ISS International Service Systems A/S,
Class B (Industrial & Commercial)... 2,400 161,956
Novo-Nordisk A/S, Class B
(Healthcare)........................ 2,800 326,770
Tele Danmark A/S (Utilities).......... 2,000 217,847
Unidanmark A/S, Class A (Finance)..... 5,700 434,424
---------------
1,179,009
---------------
FINLAND--1.1%
Helsingin Puhelin Oij (Utilities)..... 4,900 268,440
Huhtamaki Oy
(Consumer Staples).................. 841 28,212
Konecranes International Corp.+
(Industrial & Commercial)........... 7,300 317,328
Nokia Corp. AB, Class A (Information
Technology)......................... 2,060 187,477
Raisio Group PLC
(Consumer Staples).................. 10,100 136,324
Rauma Oy
(Industrial & Commercial)........... 1,437 16,971
---------------
954,752
---------------
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
FRANCE--12.3%
Alcatel Alsthom Compagnie Generael D'
Electricite (Information
Technology)......................... 1,180 $ 131,467
AXA SA de CV+
(Information Technology)............ 5,134 580,311
Banque Nationale de Paris (Finance)... 7,305 462,685
Canal Plus
(Information & Entertainment)....... 1,810 439,151
Carrefour SA
(Consumer Discretionary)............ 193 128,113
Compagnie de St. Gobain (Materials)... 1,810 267,791
Credit Commerce France (Finance)...... 1,080 75,850
Credit Local de France+ (Finance)..... 95 14,004
Dassault Systemes SA ADR (Information
Technology)......................... 7,100 272,463
Eiffage
(Industrial & Commercial)........... 1,960 161,925
Establissements Economiques du Casino
Guichard-Perrachon SA
(Consumer Staples).................. 3,400 338,415
Groupe Danone
(Consumer Staples).................. 440 116,338
GTM-Entrepose
(Industrial & Commercial)........... 250 27,088
L' Oreal (Consumer Staples)........... 120 68,576
Lafarge SA (Materials)................ 422 43,143
Lapeyre (Materials)................... 340 29,986
Legrand SA
(Information Technology)............ 260 66,265
Pathe SA
(Information & Entertainment)....... 50 9,548
Peugeot SA
(Consumer Discretionary)............ 1,900 317,014
Pinault-Printemps-Redoute SA (Consumer
Discretionary)...................... 1,650 276,193
Primagaz Cie (Utilities).............. 120 10,799
Renault SA+
(Consumer Discretionary)............ 6,200 265,034
Rexel SA
(Industrial & Commercial)........... 500 45,897
Rhone-Poulenc Ltd., Class A
(Healthcare)........................ 11,892 543,669
Sanofi SA (Healthcare)................ 1,306 204,507
Schneider SA+
(Industrial & Commercial)........... 2,308 137,004
</TABLE>
<PAGE>
61
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
FRANCE (CONTINUED)
<TABLE>
<S> <C> <C>
Scor (Finance)........................ 2,200 $ 126,158
SEITA (Consumer Staples).............. 4,400 261,344
Societe Generale (Finance)............ 706 93,398
Societe Generale d'Enterprises SA+
(Industrial & Commercial)........... 19,700 946,723
Societe Nationale Elf Aquitaine SA
(Energy)............................ 5,860 678,194
Sodexho SA
(Information & Entertainment)....... 1,168 226,835
Suez Lyonnaise des Eaux (Industrial &
Commercial)......................... 5,300 949,171
Television Francais (Utilities)....... 655 108,225
Total SA, Class B (Energy)............ 7,790 898,754
Union du Credit--Bail Immobilier SA
(Real Estate)....................... 1,700 233,464
Vivendi SA
(Industrial & Commercial)........... 3,684 841,447
---------------
10,396,949
---------------
GERMANY--8.9%
Adidas AG
(Information & Entertainment)....... 2,600 304,497
Allianz AG (Finance).................. 1,450 497,193
Bayer AG (Materials).................. 2,983 121,193
Bayerische Vereinsbank AG (Finance)... 8,270 656,508
BHF-Bank AG (Finance)................. 11,400 438,726
Buderus AG
(Consumer Discretionary)............ 60 24,956
Daimler Benz AG
(Consumer Discretionary)............ 3,100 241,413
Degussa AG (Materials)................ 5,800 278,358
Deutsche Bank AG+ (Finance)........... 2,414 150,101
Deutsche Telekom AG (Information
Technology)......................... 4,366 118,922
Dresdner Bank AG (Finance)............ 3,457 134,607
Fresenius Medical Care AG
(Healthcare)........................ 5,600 258,618
Gehe AG
(Consumer Discretionary)............ 4,160 312,659
Hannover Rueckversicherungs AG
(Finance)........................... 2,800 322,849
Hoechst AG (Healthcare)............... 12,730 531,794
Mannesmann AG (Industrial &
Commercial)......................... 8,390 825,578
Munchener Ruckversicherungs AG
(Finance)........................... 554 253,506
Preussag AG (Multi-industry).......... 168 61,967
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
GERMANY (CONTINUED)
<TABLE>
<S> <C> <C>
Rhon-Klinikum AG (Consumer
Discretionary)...................... 400 $ 39,843
SAP AG
(Information Technology)............ 410 172,019
Schering AG (Healthcare).............. 3,900 459,571
Siemens AG (Multi-industry)........... 829 49,845
VEBA AG (Utilities)................... 3,250 181,482
Viag AG (Utilities)................... 1,060 719,891
Volkswagen AG
(Consumer Discretionary)............ 4,940 371,283
---------------
7,527,379
---------------
GREECE--0.1%
Stet Hellas Telecommunications ADR
(Information Technology)............ 3,100 81,375
---------------
HONG KONG--0.8%
Cheung Kong (Holdings) Ltd. (Real
Estate)............................. 3,000 20,529
CLP Holdings Ltd. (Utilities)......... 10,000 56,165
Hang Seng Bank Ltd. (Finance)......... 4,000 34,603
Henderson Land Development Co., Ltd.
(Real Estate)....................... 13,000 63,951
Hong Kong Telecommunications Ltd.
(Utilities)......................... 23,200 46,430
Hutchison Whampoa Ltd.
(Multi-industry).................... 26,000 186,314
New World Development Co., Ltd. (Real
Estate)............................. 21,000 48,806
Peregrine Investments Holdings Ltd.(1)
(Finance)........................... 91,000 0
Smartone Telecommunications
(Utilities)......................... 62,000 176,113
Sun Hung Kai Properties Ltd.+ (Real
Estate)............................. 3,000 20,917
---------------
653,828
---------------
INDIA--0.5%
Mahanagar Telephone Nigam Ltd. GDR+
(Information Technology)............ 2,000 21,950
The Indian Smaller Companies Fund
Ltd.(1) (Investment Companies)...... 44,749 369,627
---------------
391,577
---------------
</TABLE>
<PAGE>
62
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
<TABLE>
<S> <C> <C>
IRELAND--1.8%
Bank of Ireland (Finance)............. 34,900 $ 644,978
CBT Group PLC ADR+ (Information
Technology)......................... 1,106 13,203
CRH PLC
(Industrial & Commercial)........... 24,700 361,840
Esat Telecom Group PLC ADR
(Information Technology)............ 4,200 127,050
Greencore Group PLC (Consumer
Staples)............................ 26,239 102,503
Kerry Group, Class A+ (Consumer
Staples)............................ 24,300 306,690
---------------
1,556,264
---------------
ISRAEL--0.5%
Blue Square Israel Ltd. ADR (Consumer
Staples)............................ 8,200 105,575
ECI Telecommunications Ltd.
(Information Technology)............ 5,700 188,812
Orbotech Ltd.+
(Information Technology)............ 3,300 114,263
---------------
408,650
---------------
ITALY--6.8%
Alleanza Assicuraz (Finance).......... 17,600 216,840
Assicurazione Generali SpA
(Finance)........................... 13,980 500,519
Banca Commerciale Italiana+
(Finance)........................... 66,100 408,400
Banca Nazionale del Lavoro
(Finance)........................... 116,000 308,121
Banca Popolare di Bergamo Credito
Varesino SpA (Finance).............. 6,500 132,811
Banca Popolare di Milano (Finance).... 19,500 154,259
Banco di Roma SpA (Finance)........... 60,000 104,663
Credito Italiano SpA (Finance)........ 155,908 836,809
ENI SpA (Energy)...................... 68,671 408,369
First British Columbia San Paolo
(Finance)........................... 27,400 402,757
Industrie Natuzzi SpA ADR (Consumer
Discretionary)...................... 1,000 18,187
Istituto Mobiliare Italiano
(Finance)........................... 9,000 138,331
Istituto Nazionale delle Assicurazioni
(Finance)........................... 20,000 55,076
Italgas SpA+ (Utilities).............. 21,000 96,127
Mediolanum SpA (Finance).............. 2,756 68,583
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
ITALY (CONTINUED)
<TABLE>
<S> <C> <C>
Seat Pagine Gialle SpA+
(Information & Entertainment)....... 566,000 $ 353,847
Telecom Italia Mobile SpA (Information
Technology)......................... 37,000 214,727
Telecom Italia SpA (Information
Technology)......................... 184,577 1,334,047
---------------
5,752,473
---------------
JAPAN--10.4%
Advantest Corp.
(Information Technology)............ 3,200 201,750
AJL Peps Trust (Finance).............. 3,900 25,106
Alps Electric Co. Ltd. (Information
Technology)......................... 3,000 41,276
Amada Co., Ltd.
(Industrial & Commercial)........... 4,000 23,915
Canon, Inc.
(Information Technology)............ 13,000 245,883
Citizen Watch Co.
(Consumer Discretionary)............ 3,000 16,572
Daiichi Pharmaceutical (Healthcare)... 5,000 83,419
Dainippon Screen MFG Co., Ltd.
(Information Technology)............ 5,000 10,937
Daiwa House Industry Co., Ltd.
(Consumer Discretionary)............ 6,000 67,679
DDI Corp. (Utilities)................. 12 34,997
East Japan Railway Co. (Industrial &
Commercial)......................... 22 130,400
Fanuc Ltd.
(Information Technology)............ 1,400 42,031
Fuji Photo Film Co., Ltd. (Information
Technology)......................... 6,000 219,763
Fujitsu Ltd.
(Information Technology)............ 2,000 21,273
Hankyu Realty Co.
(Real Estate)....................... 17,000 69,995
Hitachi Ltd.+
(Information Technology)............ 16,000 81,386
Honda Motor Co. Ltd. (Consumer
Discretionary)...................... 5,000 150,112
Inax Corp.
(Consumer Staples).................. 2,000 9,899
Ito-Yokado Co. Ltd. (Consumer
Discretionary)...................... 3,000 174,987
KAO Corp.
(Consumer Staples).................. 24,100 487,871
Kokuyo Co. Ltd. (Materials)........... 3,000 39,887
Komatsu Ltd.
(Industrial & Commercial)........... 6,000 32,424
</TABLE>
<PAGE>
63
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
JAPAN (CONTINUED)
<TABLE>
<S> <C> <C>
Komori Co. Ltd. (Industrial &
Commercial)......................... 2,000 $ 36,713
Kuraray Co., Ltd. (Healthcare)........ 7,000 74,635
Kyocera Corp.
(Information Technology)............ 3,600 159,032
Makita Corp.
(Industrial & Commercial)........... 4,000 42,271
Marui Co. Ltd.
(Consumer Discretionary)............ 9,000 156,716
Matsushita Communication Industrial
Co.
(Information Technology)............ 6,000 277,406
Matsushita Electric Industrial Co.
Ltd.+
(Information Technology)............ 14,000 205,473
Minebea Co., Ltd. (Industrial &
Commercial)......................... 32,000 300,566
Mitsubishi Corp.
(Consumer Discretionary)............ 10,000 52,925
Mitsubishi Heavy Industries Ltd.
(Industrial & Commercial)........... 42,000 162,120
Mitsui Fudosan Co. Ltd. (Real
Estate)............................. 18,000 119,506
Murata Manufacturing Co., Ltd.
(Information Technology)............ 4,000 134,843
NEC Corp.
(Information Technology)............ 23,300 172,482
Nichei Co. Ltd.
(Industrial & Commercial)........... 600 48,482
Nintendo Co. Ltd. (Information &
Entertainment)...................... 3,000 253,731
Nippon Denso Co. Ltd. (Industrial &
Commercial)......................... 14,000 263,596
Nippon Telegraph & Telephone Mobile
Communications Corp. (Utilities).... 6 216,675
Nippon Telegraph & Telephone Corp.
(Utilities)......................... 11 86,053
Nomura Securities Co. Ltd.
(Finance)........................... 15,000 113,227
Orix Corp. (Finance).................. 7,200 515,697
Pioneer Electronic Corp. (Industrial &
Commercial)......................... 2,000 32,939
Rohm Co.
(Information Technology)............ 4,000 353,405
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
JAPAN (CONTINUED)
<TABLE>
<S> <C> <C>
Sankyo Co. Ltd. (Healthcare).......... 9,000 $ 203,037
Sekisui Chemical Co. Ltd.
(Materials)......................... 8,000 43,575
Sekisui House Ltd. (Consumer
Discretionary)...................... 6,000 59,753
Seven-Eleven Japan Co. Ltd. (Consumer
Discretionary)...................... 1,000 75,999
Shin-Etsu Chemical Co. Ltd.
(Materials)......................... 7,000 139,304
Shiseido Co. Ltd.
(Consumer Staples).................. 4,000 43,781
Shohkoh Fund & Co. Ltd. (Investment
Companies).......................... 1,150 349,696
Sony Corp.
(Information Technology)............ 7,100 450,678
Sumitomo Corp.
(Industrial & Commercial)........... 16,000 76,583
Sumitomo Electric Industries Ltd.
(Industrial & Commercial)........... 19,000 210,242
Sumitomo Forestry Co. Ltd.
(Materials)......................... 2,000 13,604
Takeda Chemical Industries Ltd.
(Healthcare)........................ 10,700 347,856
Takefuji Corp. (Finance).............. 1,400 74,575
TDK Corp.
(Information Technology)............ 7,000 461,143
Tokio Marine & Fire Insurance Co. Ltd.
(Finance)........................... 2,000 22,731
Tokyo Electron Ltd. (Information
Technology)......................... 2,000 65,020
Tokyo Steel Manufacturing Co.
(Materials)......................... 2,000 9,092
Toppan Printing Co. Ltd.
(Information & Entertainment)....... 8,000 82,004
UNY Co. Ltd.
(Consumer Staples).................. 4,000 65,191
---------------
8,783,919
---------------
KAZAKHSTAN--0.1%
Firebird Republica Fund Ltd. (1)
(Investment Companies).............. 960 52,615
---------------
LUXEMBOURG--0.0%
Societe Europeenne des Satellites SA
(Information & Entertainment)....... 100 16,350
---------------
MEXICO--0.8%
Cemex SA (Materials).................. 385 918
</TABLE>
<PAGE>
64
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
MEXICO (CONTINUED)
<TABLE>
<S> <C> <C>
Cemex SA de CV ADR (Materials)........ 3,000 $ 13,781
Cemex SA de CV Class B (Materials).... 12,834 35,805
Cifra SA de CV ADR (Consumer
Discretionary)...................... 161 2,160
Fomento Economico Mexicano SA+
(Finance)........................... 8,000 20,617
Fomento Economico Mexicano SA, Class B
ADR (Finance)....................... 9,900 258,019
Gruma SA ADR
(Consumer Staples).................. 632 6,368
Gruma SA, Class B+
(Consumer Staples).................. 5,124 12,166
Grupo Industrial Maseca SA de CV,
Class B (Industrial & Commercial)... 9,000 7,301
Grupo Modelo SA de CV, Class C
(Consumer Staples).................. 20,000 42,145
Grupo Televisa SA de CV GDR
(Information & Entertainment)....... 1,400 37,975
Kimberly-Clark de Mexico SA de CV,
Class A (Materials)................. 6,526 19,111
Panamerican Beverages, Inc., Class A
ADR
(Consumer Staples).................. 2,000 40,500
Telefonos de Mexico SA ADR
(Utilities)......................... 3,550 187,484
---------------
684,350
---------------
NETHERLANDS--8.0%
ABN Amro Holdings NV (Finance)........ 7,408 138,767
Akzo Nobel NV (Materials)............. 720 27,976
ASM Lithography Holdings NV
(Information Technology)............ 3,230 81,941
Benckiser NV Class B (Consumer
Staples)............................ 4,000 226,712
CSM NV (Consumer Staples)............. 11,650 573,631
Elsevier NV
(Consumer Discretionary)............ 17,800 250,550
Equant NV-NY Shares+ (Information
Technology)......................... 2,500 108,353
Fortis Amev NV (Finance).............. 3,080 199,954
Gucci Group NV-NY Registry Shares
(Consumer Discretionary)............ 532 20,282
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
NETHERLANDS (CONTINUED)
<TABLE>
<S> <C> <C>
ING Groep NV (Finance)................ 20,506 $ 992,128
Koninklijke Ahold NV (Consumer
Discretionary)...................... 17,896 594,793
Koninklijke Numico NV (Consumer
Staples)............................ 2,620 103,064
Koninklijke Pakhoed NV (Industrial &
Commercial)......................... 7,580 186,615
Laurus NV
(Consumer Discretionary)............ 6,440 161,995
Nutreco Holding NV (Consumer
Staples)............................ 7,418 252,104
Philips Electronics NV (Information
Technology)......................... 4,850 258,016
PolyGram NV
(Information & Entertainment)....... 2,730 160,868
Royal Dutch Petroleum Co. (Energy).... 9,370 452,340
Royal Koninklijke KPN NV
(Utilities)......................... 11,020 428,190
SGS Thomson Microelectronics NV
(Information Technology)............ 910 55,689
TNT Post Group NV+ (Industrial &
Commercial)......................... 290 7,760
Unilever PLC (Multi-industry)......... 3,990 295,975
Vedior NV+
(Industrial & Commercial)........... 10,113 257,635
Vendex Non Food
(Consumer Discretionary)............ 9,200 233,884
Wolters Kluwer NV+
(Information & Entertainment)....... 3,636 704,451
---------------
6,773,673
---------------
NEW ZEALAND--0.0%
Telecommunications Corp. of New
Zealand Ltd. (Information
Technology)......................... 7,000 28,728
Telecommunications Corp. of New
Zealand Ltd. IR (Information
Technology)......................... 5,000 9,744
---------------
38,472
---------------
NORWAY--0.6%
Norsk Hydro ASA (Energy).............. 4,420 192,083
Orkla ASA, Class A
(Multi-industry).................... 12,040 203,569
</TABLE>
<PAGE>
65
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
NORWAY (CONTINUED)
<TABLE>
<S> <C> <C>
Saga Petroleum ASA, Series A
(Energy)............................ 770 $ 9,725
Sparebanken NOR+ (Finance)............ 4,200 79,853
---------------
485,230
---------------
PORTUGAL--2.1%
Banco Comercial Portugues SA+
(Finance)........................... 7,500 234,779
Banco Mello SA (Finance).............. 12,133 133,530
BPI-SGPS SA+ (Finance)................ 5,500 168,643
Cimpor-Cimentos de Portugal SA
(Materials)......................... 8,700 300,710
Electricidad de Portugal SA
(Utilities)......................... 13,500 339,337
Jeronimo Martins SGPS SA (Consumer
Discretionary)...................... 3,156 136,705
Telecel-Comunicacaoes Pessoais SA+
(Utilities)......................... 2,600 478,945
---------------
1,792,649
---------------
RUSSIA--0.0%
Gazprom ADR (Energy).................. 1,080 10,071
Lukoil Holdings ADR (Energy).......... 120 1,950
---------------
12,021
---------------
SINGAPORE--0.1%
Overseas Chinese Banking Corp., Ltd.
alien shares (Finance).............. 5,000 21,813
Singapore Press Holdings Ltd.
(Information & Entertainment)....... 3,177 27,524
Singapore Telecommunications Ltd.+
(Information Technology)............ 13,000 22,445
---------------
71,782
---------------
SOUTH AFRICA--0.1%
Sappi Ltd. (Materials)................ 19,700 98,544
---------------
SPAIN--5.0%
Aldeasa SA
(Consumer Discretionary)............ 3,000 102,229
Banco Bilbao Vizcaya SA (Finance)..... 3,930 53,010
Banco Popular Espanol SA (Finance).... 4,500 277,936
Banco Santander SA (Finance).......... 7,766 142,243
Corporation Bancaria de Espana SA
(Finance)........................... 35,767 778,261
Endesa SA (Utilities)................. 46,900 1,181,989
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
SPAIN (CONTINUED)
<TABLE>
<S> <C> <C>
Fomento de Construcciones y Contratas
SA
(Industrial & Commercial)........... 8,000 $ 420,275
Gas Natural SDG SA (Utilities)........ 990 85,253
Iberdrola SA (Utilities).............. 6,030 97,389
Repsol SA (Energy).................... 1,084 54,408
Tabacalera SA, Class A (Consumer
Staples)............................ 17,400 419,991
Telefonica SA (Utilities)............. 13,329 601,821
---------------
4,214,805
---------------
SWEDEN--2.4%
ABB AB, Class A (Utilities)........... 5,870 62,039
ABB AG+ (Utilities)................... 110 131,646
Astra AB, Class B (Healthcare)........ 15,020 235,710
Atlas Copco AB, Class B (Industrial &
Commercial)......................... 3,450 80,217
Biora AB ADR (Healthcare)............. 4,800 83,400
Castellum AB (Real Estate)............ 18,800 166,180
Electrolux AB
(Consumer Discretionary)............ 23,225 349,595
Ericsson L.M. Telecommunications Co.,
Class B
(Information Technology)............ 12,700 286,344
Granges AB+ (Materials)............... 380 4,965
Hennes & Mauritz AB, Class B
(Consumer Discretionary)............ 3,600 253,651
Kinnevik AB, Series B
(Multi-industry).................... 4,100 106,098
Nordbanken AB (Finance)............... 29,373 176,102
Sandvik AB, Class B (Industrial &
Commercial)......................... 2,240 46,057
---------------
1,982,004
---------------
SWITZERLAND--6.1%
Adecco SA
(Industrial & Commercial)........... 430 171,327
CS Holding AG+ (Finance).............. 694 106,637
Gebrueder Sulzer AG+ (Consumer
Staples)............................ 356 204,885
Julius Baer Holdings AG (Finance)..... 35 107,172
Nestle SA (Consumer Staples).......... 310 658,747
Novartis AG (Healthcare).............. 607 1,092,806
Roche Holdings AG (Healthcare)........ 56 652,844
SIG Schweizerische Industrie-
Gesellschaft Holdings AG+
(Industrial & Commercial)........... 230 154,431
</TABLE>
<PAGE>
66
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
COMMON STOCK (CONTINUED)
SWITZERLAND (CONTINUED)
<TABLE>
<S> <C> <C>
Swisscom AG+ (Utilities).............. 2,427 $ 821,953
TAG Heuer International SA+ (Consumer
Discretionary)...................... 2,950 192,633
UBS AG+ (Finance)..................... 2,196 601,944
Zurich Allied AG+ (Finance)........... 600 364,347
---------------
5,129,726
---------------
UNITED KINGDOM--15.6%
Abbey National PLC (Finance).......... 9,000 175,036
ASDA Group PLC
(Consumer Staples).................. 33,000 88,924
Barclays PLC (Finance)................ 28,981 624,265
Bass PLC (Consumer Staples)........... 30,200 366,962
BG PLC (Utilities).................... 11,294 74,004
Biocompatibles International PLC
(Healthcare)........................ 5,900 7,307
British Aerospace PLC (Industrial &
Commercial)......................... 57,700 426,850
British Energy PLC (Utilities)........ 99,800 975,485
British Land Co. PLC
(Real Estate)....................... 27,600 221,732
British Petroleum Co. PLC (Energy).... 10,000 146,783
British Petroleum Co. PLC ADS
(Energy)............................ 3,100 274,156
Cable & Wireless PLC (Information
Technology)......................... 21,334 239,235
Cadbury Schweppes PLC (Consumer
Staples)............................ 15,000 229,715
Caradon PLC (Materials)............... 27,800 57,598
Centrica PLC+ (Utilities)............. 6,000 11,649
Colt Telecom Group PLC+ (Information
Technology)......................... 23,500 306,789
Compass Group PLC (Consumer
Staples)............................ 50,000 506,294
Diageo PLC
(Consumer Staples).................. 44,696 482,509
Electrocomponents PLC (Information
Technology)......................... 6,000 39,566
GKN PLC
(Consumer Discretionary)............ 2,000 24,302
Glaxo Wellcome PLC (Healthcare)....... 44,633 1,386,473
Guardian Royal Exchange PLC
(Finance)........................... 48,400 234,515
John Williams Industries PLC
(Materials)......................... 62,207 388,092
Kingfisher PLC
(Consumer Discretionary)............ 48,000 421,371
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
UNITED KINGDOM (CONTINUED)
<TABLE>
<S> <C> <C>
Ladbroke Group PLC
(Information & Entertainment)....... 11,000 $ 40,273
Lloyds TSB Group PLC (Finance)........ 6,600 81,467
Medeva PLC (Healthcare)............... 33,700 68,813
National Westminster Bank PLC
(Finance)........................... 47,000 793,718
Orange PLC+
(Information & Entertainment)....... 54,500 506,708
Perpetual PLC
(Investment Companies).............. 2,700 122,013
Railtrack Group PLC+ (Consumer
Discretionary)...................... 15,300 411,002
Rank Group PLC
(Information & Entertainment)....... 8,000 32,938
Reed International PLC
(Information & Entertainment)....... 76,100 643,848
Rio Tinto PLC+ (Materials)............ 12,000 145,712
Rolls Royce PLC
(Industrial & Commercial)........... 6,000 22,143
Royal & Sun Alliance Insurance Group
PLC (Finance)....................... 28,300 259,090
Safeway PLC
(Consumer Staples).................. 22,000 110,464
Shell Transport & Trading Co., PLC
(Energy)............................ 63,000 380,649
Smith (David S) Holdings PLC
(Materials)......................... 5,000 10,544
Smithkline Beecham PLC (Healthcare)... 56,800 710,144
SOCO International PLC+ (Energy)...... 35,200 50,077
Standard Chartered PLC (Finance)...... 15,000 161,303
Tesco PLC
(Consumer Staples).................. 54,000 152,290
Tomkins PLC
(Consumer Staples).................. 43,000 198,995
Unilever PLC
(Consumer Discretionary)............ 3,000 30,127
United News & Media PLC
(Information & Entertainment)....... 18,000 199,137
Vodafone Group PLC (Information
Technology)......................... 20,700 277,165
---------------
13,118,232
---------------
TOTAL COMMON STOCK
(cost $74,712,912).................... 76,552,832
---------------
</TABLE>
<PAGE>
67
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK--0.8%
AUSTRALIA--0.1%
News Corp., Ltd.
(Information & Entertainment)....... 8,162 $ 49,109
Sydney Harbour Casualty (Finance)..... 28,600 19,498
---------------
68,607
---------------
BRAZIL--0.2%
Banco Bradesco SA (Finance)........... 4,258,000 24,272
Banco Itau SA+ (Finance).............. 51,000 24,797
Companhia Cervejaraia Brahma (Consumer
Staples)............................ 63,000 29,575
Petroleo Brasileiros SA (Industrial &
Commercial)......................... 454,000 57,088
Telecomunicacoes de Sao Paulo SA
(Utilities)......................... 359,924 60,345
Telesc Celular SA (Information
Technology)......................... 275,000 13,601
---------------
209,678
---------------
GERMANY--0.5%
Fresenius AG (Healthcare)............. 100 17,144
GEA AG
(Industrial & Commercial)........... 4,800 122,572
Hornbach Holding AG (Consumer
Discretionary)...................... 250 18,835
KSB AG+
(Industrial & Commercial)........... 592 95,063
Moebel Walther AG (Consumer
Discretionary)...................... 2,000 65,198
SAP AG
(Information Technology)............ 188 91,588
---------------
410,400
---------------
TOTAL PREFERRED STOCK
(cost $888,762)....................... 688,685
---------------
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS/WARRANTS/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
PUT OPTIONS--0.1%+ (1)(2)
UNITED STATES--0.1%
Nikkei 225 Index
exp 3/99 @ $14,650.................. 26 $ 14,969
Nikkei 225 Index
exp 3/99 @ $14,843.................. 46 23,527
Nikkei 225 Index
exp 3/99 @ $16,528.................. 39 5,418
---------------
TOTAL PUT OPTIONS
(cost $112,100)....................... 43,914
---------------
WARRANTS--0.0%+
GERMANY--0.0%
Dresdner Bank AG 4/30/02 (Finance)
(cost $26,128)...................... 1,485 20,978
---------------
TOTAL INVESTMENT SECURITIES
(cost $75,739,902).................... 77,306,409
---------------
SHORT-TERM SECURITIES--1.8%
Cayman Island Time Deposit with State
Street Bank and Trust Co.
4.00% due 11/02/98.................. $ 1,399 1,399,000
United States Treasury Bills 4.55% due
1/21/99............................. 95 94,044
United States Treasury Bills 3.75% due
1/21/99............................. 25 24,748
United States Treasury Bills 4.40% due
1/21/99............................. 10 9,899
---------------
TOTAL SHORT TERM SECURITIES
(cost $1,527,717)..................... 1,527,691
---------------
</TABLE>
<PAGE>
68
STYLE SELECT SERIES LOGO
International Equity Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--6.7%
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $2,083,738
collateralized by $1,495,000 U.S.
Treasury Note 11.63%, due 11/15/04
approximate aggregate value
$2,131,461
(cost $2,083,000)................... $ 2,083 $ 2,083,000
Agreement with State Street Bank and
Trust Co., bearing 5.40%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $3,561,602
collateralized by $3,105,000 U.S.
Treasury Note 7.25%, due 5/15/04
approximate aggregate value
$3,632,850
(cost $3,561,000)................... 3,561 3,561,000
---------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
TOTAL REPURCHASE AGREEMENTS
(cost $5,644,000)..................... $ 5,644,000
---------------
TOTAL INVESTMENTS--
(cost $82,911,619).................... 100.1% 84,478,100
Liabilities in excess of other
assets.............................. (0.1) (116,407)
--------------- ---------------
NET ASSETS-- 100.0% $ 84,361,693
--------------- ---------------
--------------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
* Resale restricted to qualified institutional buyers
ADR ("American Depositary Receipt")
ADS ("American Depositary Shares")
GDR ("Global Depositary Receipt")
(1) Fair valued security, see Note 3
(2) 1 option contract equals 100 shares
See Notes to Financial Statements
OPEN FUTURES CONTRACTS
<TABLE>
<CAPTION>
VALUE AS OF
NUMBER OF EXPIRATION VALUE AT OCTOBER 31, UNREALIZED
CONTRACTS DESCRIPTION DATE TRADE DATE 1998 DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
3 Short IBEX 35 Plus Future--
Mercado de Futures Financieros................. November 1998 $ 164,695 $ 187,309 $ (22,614)
1 Short Milan MIB 30 Index Future........................ December 1998 159,733 180,895 (21,162)
1 Short IBEX 35 Plus Future--
Mercado de Futures Financieros................. December 1998 49,157 62,578 (13,421)
12 Short Marche A Terme International de France--
CAC 40 Stock Index Future...................... December 1998 379,539 382,059 (2,520)
2 Short Deutsche Terminboerse--
DAX Stock Index Future......................... December 1998 500,652 569,376 (68,724)
3 Short FTSE 100 Index Future--
London International Futures Exchange.......... December 1998 246,405 275,069 (28,664)
-----------
Net Unrealized Depreciation...................... $(157,105)
-----------
-----------
</TABLE>
<PAGE>
69
STYLE SELECT SERIES LOGO
Focus Portfolio
- -------------------------------------------
PORTFOLIO OF INVESTMENTS -- OCTOBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--91.6%
AEROSPACE & MILITARY TECHNOLOGY--1.2%
Gulfstream Aerospace Corp.+........... 29,361 $ 1,299,224
---------------
AUTOMOTIVE--3.4%
Ford Motor Co......................... 68,756 3,730,013
---------------
BANKS--2.7%
Chase Manhattan Corp.................. 52,600 2,988,338
---------------
BROADCASTING & MEDIA--6.9%
Clear Channel Communications, Inc.+... 64,400 2,934,225
MediaOne Group, Inc.+................. 35,204 1,489,569
Time Warner, Inc...................... 35,339 3,279,901
---------------
7,703,695
---------------
BUSINESS SERVICES--6.2%
Hertz Corp., Class A.................. 90,000 3,223,125
Robert Half International, Inc.+...... 92,000 3,691,500
---------------
6,914,625
---------------
COMMUNICATION EQUIPMENT--7.1%
Cisco Systems, Inc.+.................. 125,209 7,895,993
---------------
COMPUTERS & BUSINESS EQUIPMENT--8.2%
EMC Corp.+............................ 141,218 9,090,909
---------------
DRUGS--14.6%
Cardinal Health, Inc.................. 62,000 5,862,875
Merck & Co., Inc...................... 21,900 2,961,975
Pfizer, Inc........................... 35,000 3,755,937
Schering-Plough Corp.................. 35,400 3,641,775
---------------
16,222,562
---------------
ELECTRONICS--3.1%
Texas Instruments, Inc................ 53,300 3,407,869
---------------
FINANCIAL SERVICES--8.4%
Citigroup, Inc........................ 52,315 2,462,075
MBNA Corp............................. 135,000 3,079,687
Washington Mutual, Inc................ 100,000 3,737,500
---------------
9,279,262
---------------
HOUSEHOLD PRODUCTS--4.2%
Warner-Lambert Co..................... 59,692 4,678,360
---------------
HOUSING--3.9%
Furniture Brands International,
Inc.+............................... 50,000 1,075,000
Home Depot, Inc....................... 75,000 3,262,500
---------------
4,337,500
---------------
LEISURE & TOURISM--3.1%
UAL Corp.+............................ 52,232 3,391,815
---------------
RETAIL--1.8%
CVS Corp.............................. 45,000 2,055,938
---------------
<CAPTION>
SHARES/
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 3)
- ---------------------------------------------------------------------------
<S> <C> <C>
SOFTWARE--12.2%
Automatic Data Processing, Inc........ 40,000 $ 3,112,500
Computer Sciences Corp.+.............. 95,000 5,011,250
Microsoft Corp.+...................... 28,800 3,049,200
Oracle Corp.+......................... 81,300 2,403,431
---------------
13,576,381
---------------
TELEPHONE--4.6%
MCI WorldCom, Inc.+................... 91,600 5,060,900
---------------
TOTAL INVESTMENT SECURITIES--91.6%
(cost $94,997,799).................... 101,633,384
---------------
SHORT-TERM SECURITIES--4.7%
Federal Home Loan Bank
Discount Note
5.30% due 11/02/98
(cost $5,199,234)................... $ 5,200 5,199,234
---------------
REPURCHASE AGREEMENTS--5.1%
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $2,613,925,
collateralized by $1,840,000 U.S.
Treasury Note 8.88% due 2/15/99
approximate aggregate value
$2,668,949 (cost $2,613,000)........ 2,613 2,613,000
---------------
Agreement with State Street Bank and
Trust Co., bearing 4.25%, dated
10/30/98 to be repurchased 11/02/98
in the amount of $3,033,074,
collateralized by $2,170,000 U.S.
Treasury Note 11.63%, due 11/15/04
approximate aggregate value
$3,093,828 (cost $3,032,000)........ 3,032 3,032,000
---------------
TOTAL REPURCHASE AGREEMENTS
(cost $5,645,000)..................... 5,645,000
---------------
TOTAL INVESTMENTS--
(cost $105,842,033)................... 101.4% 112,477,618
Liabilities in excess of other
assets.............................. (1.4) (1,503,689)
--------------- ---------------
NET ASSETS-- 100.0% $ 110,973,929
--------------- ---------------
--------------- ---------------
</TABLE>
- ------------------
+ Non-income producing security
See Notes to Financial Statements
<PAGE>
70
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998
NOTE 1. ORGANIZATION
Style Select Series, Inc. (the "Fund") is an open-end management investment
company organized as a Maryland corporation on July 3, 1996. The Fund is managed
by SunAmerica Asset Management Corp. ("SunAmerica"), an indirect wholly-owned
subsidiary of SunAmerica Inc. The Fund currently offers nine separate investment
portfolios (each, a "Portfolio"). The assets of each Portfolio are normally
allocated among at least three investment advisers (each, an "Adviser"), each of
which will be independently responsible for advising its respective portion of
the Portfolio's assets. The investment objectives for each of the Portfolios are
as follows:
LARGE-CAP GROWTH seeks long-term growth of capital by investing generally in
equity securities of large-sized companies.
MID-CAP GROWTH seeks long-term growth of capital by investing generally in
equity securities of medium-sized companies.
AGGRESSIVE GROWTH seeks long-term growth of capital by investing generally in
equity securities of small and medium-sized companies.
LARGE-CAP BLEND seeks long-term growth of capital and a reasonable level of
current income by investing generally in equity securities of large-sized
companies.
LARGE-CAP VALUE seeks long-term growth of capital by investing in equity
securities of large-sized companies using a "value" style of investing.
VALUE seeks long-term growth of capital by investing in equity securities using
a "value" style of investing.
SMALL-CAP VALUE seeks long-term growth of capital by investing in equity
securities of small-sized companies using a "value" style of investing.
INTERNATIONAL EQUITY seeks long-term growth of capital by investing in equity
securities of issuers in countries other than the United States.
FOCUS seeks long-term growth of capital by investing generally in equity
securities.
Each Fund offers multiple classes of shares. The classes within each Fund are
presented in the Statement of Assets and Liabilities. The cost structure for
each class is as follows:
<TABLE>
<S> <C>
Class A shares-- Offered at net asset value per share plus an initial sales charge. Any purchases of
Class A shares in excess of $1,000,000 will be subject to a contingent deferred sales
charge on redemptions made within one year of purchase.
Class B shares-- Offered at net asset value per share without an initial sales charge, although a
declining contingent deferred sales charge may be imposed on redemptions made within
six years of purchase. Class B shares will convert automatically to Class A shares on
the first business day of the month after seven years from the issuance of such
shares and at such time will be subject to the lower distribution fee applicable to
Class A shares.
</TABLE>
<PAGE>
71
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<S> <C>
Class C shares-- Offered at net asset value per share without an initial sales charge. Certain
redemptions made within the first year of the date of purchase are subject to a
contingent deferred sales charge.
Class II Offered at net asset value per share plus an initial sales charge. Certain
shares-- redemptions made within the first year of the date of purchase are subject to a
contingent deferred sales charge.
Class Z shares-- Offered at net asset value per share exclusively for sale to employees participating
in the SunAmerica profit sharing and retirement plan.
</TABLE>
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions. Class A, Class B, Class C, and Class II shares each make
distribution and account maintenance and service fee payments under the
distribution plans pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Act"), except that Class B, Class C and Class II shares are subject
to higher distribution fee rates. There are no distribution or service fee
payments applicable to Class Z.
NOTE 2. REORGANIZATION
On September 29, 1997, International Equity Portfolio acquired all of the assets
and liabilities of SunAmerica Global Balanced Fund ("Global Balanced Fund"), a
regulated investment company registered under the 1940 Act. The agreement was
adopted as a tax-free reorganization of Global Balanced Fund. In exchange for
all of the assets of Global Balanced Fund, International Equity Portfolio issued
495,830 Class A shares and 1,063,431 Class B shares at net asset values of
$13.50 and $13.42, respectively, to Class A shareholders and Class B
shareholders of Global Balanced Fund. As of the close of business on September
29, 1997, the total net assets of Global Balanced were $20,964,949 (including
$1,218,731 of unrealized appreciation on investments and $1,619 of unrealized
depreciation of foreign currency). The net assets of International Equity
Portfolio were $56,392,003 on September 29, 1997.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from these estimates. The following is a summary of the
significant accounting policies followed by the Portfolios in the preparation of
their financial statements:
SECURITY VALUATIONS: Securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed by
the Adviser to be over-the-counter, are valued at the quoted bid price provided
by principal market makers. Securities listed on the New York Stock Exchange
("NYSE") or other national securities exchanges, are valued on the basis of the
last sale price on the exchange on which they are primarily traded. If there is
no sale on that day, then securities are valued at the closing bid price on the
NYSE or other primary exchange for that day. However, if the last sale price on
the NYSE is different than the last sale price on any other exchange, the NYSE
price is used. Securities that are traded on foreign exchanges are ordinarily
valued at the last quoted sales price available before the time when the assets
are valued. If a security's price is available from more than one foreign
exchange, a Portfolio uses the exchange that is the primary market for the
security. Values of portfolio securities primarily traded on foreign exchanges
are already translated into U.S. dollars when received from a quotation service.
Options traded on national securities exchanges are valued as of the close of
the exchange on which they are traded. Futures and options traded on commodities
exchanges are valued at their last sale price as of the close of such exchange.
The Portfolios may make use of a pricing service in the determination of their
net asset values. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined pursuant to
procedures adopted in good faith by the Directors. Short-term investments which
mature in less than 60 days are valued at amortized cost, if their original
maturity was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original term to maturity exceeded 60 days.
<PAGE>
72
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NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
REPURCHASE AGREEMENTS: The Portfolios, along with other affiliated registered
investment companies, may transfer uninvested cash balances into a single joint
account, the daily aggregate balance of which is invested in one or more
repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. The Portfolios' custodian takes possession of the collateral
pledged for investments in such repurchase agreements. The underlying collateral
is valued daily on a mark to market basis to ensure that the value, at the time
the agreement is entered into, is equal to at least 102% of the repurchase
price, including accrued interest. In the event of default of the obligation to
repurchase, a Portfolio has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. If the seller defaults and the value
of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the
Portfolio may be delayed or limited.
Pursuant to exemptive relief granted by the Securities and Exchange Commission,
the Portfolios are permitted to participate in joint repurchase agreement
transactions with other affiliated mutual funds.
As of October 31, 1998, the Aggressive Growth Portfolio had a 3.3% undivided
interest, which represented $5,055,000 in principal amount in a joint repurchase
agreement with PaineWebber, Inc. As of such date, the repurchase agreement in
the joint account and the collateral therefore were as follows:
PaineWebber, Inc. Repurchase Agreement, 5.30% dated 10/30/98, in the principal
amount of $154,812,000 repurchase price $154,880,375 due 11/02/98,
collateralized by $41,860,000 U.S. Treasury Note 5.125% due 8/31/00, and
$100,000,000 U.S. Treasury Note 6.125% due 11/15/27, approximate aggregate value
$158,160,221.
As of October 31, 1998, the Mid-Cap Growth Portfolio and the Large-Cap Value
Portfolio had a 1.1% and 0.4% undivided interest, respectively, which
represented $1,510,000 and $585,000, respectively, in principal amount in a
joint repurchase agreement with PaineWebber, Inc. As of such date, the
repurchase agreement in the joint account and the collateral therefore were as
follows:
PaineWebber, Inc. Repurchase Agreement, 5.40% dated 10/30/98, in the principal
amount of $131,590,000 repurchase price $131,649,216 due 11/02/98,
collateralized by $76,805,000 U.S. Treasury Note 5.875% due 11/15/99, and
$50,000,000 U.S. Treasury Note 5.75% due 4/30/03, approximate aggregate value
$134,202,843.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: As customary in the mutual fund industry,
securities transactions are recorded on a trade date basis. Realized gains and
losses on sales of investments are calculated on the identified cost basis.
Interest income is recorded on the accrual basis; dividend income is recorded on
the ex-dividend date. Portfolios investing in foreign securities may be subject
to taxes imposed by countries in which they invest. Such taxes are generally
based on either income or gains earned or repatriated. The Portfolios accrue
such taxes when the related income is earned. The Portfolios amortize premiums
and accrue discounts including original issue discounts for federal income tax
purposes.
Net investment income, other than class specific expenses, and realized and
unrealized gains and losses, is allocated daily to each class of shares based
upon the relative net asset value of outstanding shares of each class of shares
at the beginning of the day (after adjusting for the current capital shares
activity of the respective class).
Expenses common to all Portfolios, not directly related to individual
Portfolios, are allocated among the Portfolios based upon their relative net
asset value or other appropriate methods.
The Portfolios issue and redeem their shares, invest in securities and
distribute dividends from net investment income and net realized gains which are
paid in cash or are reinvested at the discretion of the shareholders. These
activities are reported in the Statement of Changes in Net Assets.
<PAGE>
73
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
Dividends from net investment income and capital gain distributions, if any, are
paid annually. The Portfolios record dividends and distributions to their
shareholders on the ex-dividend date. The amount of dividends and distributions
from net investment income and net realized capital gains are determined and
presented in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Net investment income/loss, net
realized gain/loss, and net assets are not affected.
For the year ended October 31, 1998, the following reclassifications arising
from book/tax differences were primarily the result of reclassifications due to
net operating losses.
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
--------------- --------------- ---------------
<S> <C> <C> <C>
Large-Cap Growth Portfolio.............. $ 2 $ 410,993 $ (410,995)
Mid-Cap Growth Portfolio................ (1,362,464) 1,371,650 (9,186)
Aggressive Growth Portfolio............. 7,593 1,668,659 (1,676,252)
Large-Cap Blend Portfolio............... 536 31,361 (31,897)
Large-Cap Value Portfolio............... (5,880) 44,970 (39,090)
Value Portfolio......................... 22,478 799,787 (822,265)
Small-Cap Value Portfolio............... 112,852 51,544 (164,396)
International Equity Portfolio.......... (553,671) 566,735 (13,064)
Focus Portfolio......................... -- 199,494 (199,494)
</TABLE>
FOREIGN CURRENCY TRANSACTION: The books and records of the Fund are maintained
in U.S. dollars. Assets and liabilities denominated in foreign currencies and
commitments under forward foreign currency contracts are translated into U.S.
dollars at the mean of the quoted bid and asked prices of such currencies
against the U.S. dollar.
The Fund does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the changes in the market
prices of securities held at fiscal year-end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the changes in the
market prices of portfolio securities sold during the year.
Realized foreign exchange gains and losses on other assets and liabilities and
change in unrealized foreign exchange gains and losses on other assets and
liabilities include foreign exchange gains and losses from currency gains or
losses between the trade and settlement dates of securities transactions, the
difference between the amounts of interest, dividends and foreign withholding
taxes recorded on a Portfolio's books and the U.S. dollar equivalent amounts
actually received or paid and changes in the unrealized foreign exchange gains
and losses relating to other assets and liabilities arising as a result of
changes in the exchange rate.
FORWARD FOREIGN CURRENCY CONTRACTS: Certain portfolios may enter into forward
foreign currency contracts ("forward contracts") to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates or to enhance return. A forward contract is an agreement
between two parties to buy or sell currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency exchange
rates. The contract is marked to market daily using the forward rate and the
change in market value is recorded by the Portfolio as unrealized gain or loss.
On settlement date, the Portfolio records realized foreign exchange gains or
losses when the contract is closed equal to the difference between the value of
the contract at the time it was opened and the value at the time it was closed.
Risks may arise upon entering into these contracts from
<PAGE>
74
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Forward contracts involve elements of risk in excess of the
amounts reflected in the Statement of Assets and Liabilities. The Fund bears the
risk of an unfavorable change in the foreign exchange rate underlying the
forward contract.
FUTURES CONTRACTS: A futures contract is an agreement between two parties to buy
and sell a financial instrument at a set price on a future date. Upon entering
into such a contract the Portfolios are required to pledge to the broker an
amount of cash or U.S. government securities equal to the minimum "initial
margin" requirements of the exchange on which the futures contract is traded.
The Portfolios' activities in futures contracts are for hedging purposes and are
conducted through regulated exchanges which do not result in counterparty credit
risks. A Portfolio's participation in the futures markets involves certain
risks, including imperfect correlation between movements in the price of futures
contracts and movements in the price of the securities hedged or used for cover.
Pursuant to a contract the Portfolios agree to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
Portfolios as unrealized appreciation or depreciation. Futures contracts involve
elements of risk in excess of the amount reflected in the Statement of Assets
and Liabilities. When a contract is closed, the Portfolios record a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
OPTIONS: The premium paid by a Portfolio for the purchase of a call or a put
option is included in the Portfolio's Statement of Assets and Liabilities as an
investment and subsequently marked to market to reflect the current market value
of the option. When a Portfolio writes a call or a put option, an amount equal
to the premium received by the Portfolio is included in the Portfolio's
Statement of Assets and Liabilities as a liability and is subsequently marked to
market to reflect the current market value of the option written. If an option
which the Portfolio has written either expires on its stipulated expiration
date, or if the Portfolio enters into a closing purchase transaction, the
Portfolio realizes a gain (or loss if the cost of a closing purchase transaction
exceeds the premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a call option which the Portfolio has written is
exercised, the Portfolio realizes a capital gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. If a put option which the Portfolio has written is
exercised, the amount of the premium originally received reduces the cost basis
of the security which the Portfolio purchased upon exercise of the option.
During the fiscal year ended October 31, 1998, transactions in written option
contracts were as follows:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
---------------------------------
CONTRACTS AMOUNT
--------------- ---------------
<S> <C> <C>
Written option contracts as of
10/31/97.............................. 0 $ 0
Options written during the year......... (602) (426,801)
Written options assigned during the
year.................................. 21 8,016
Written options closed during the
year.................................. 502 257,906
Net realized gain on written options
closed................................ -- 121,617
--- ---------------
Written option contracts as of
10/31/98.............................. (79) $ (39,262)
--- ---------------
--- ---------------
</TABLE>
ORGANIZATIONAL EXPENSES: Costs incurred by SAAMCo in connection with the
organization of each Portfolio are being amortized on a straight line basis by
the Portfolios over a period not to exceed 60 months from the date the
Portfolios commenced operations.
<PAGE>
75
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
NOTE 4. INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, DISTRIBUTION AGREEMENT AND
SERVICES AGREEMENT
The Fund, on behalf of each Portfolio, has entered into an Investment Advisory
and Management Agreement (the "Agreement") with SunAmerica. Under the Agreement,
SunAmerica provides continuous supervision of the respective Portfolios and
administers their corporate affairs, subject to general review by the Board of
Directors (the "Directors"). In connection therewith, SunAmerica furnishes the
Fund with office facilities, maintains certain of the Fund's books and records,
and pays for the salaries and expenses of all personnel, including officers of
the Fund who are employees of SunAmerica and its affiliates. The annual rate of
the investment advisory and management fee payable by each Portfolio to
SunAmerica as full compensation for services and facilities furnished to the
Fund is as follows: 1.00% of the average daily net assets of the Large-Cap
Growth, Mid-Cap Growth, Aggressive Growth, Large-Cap Blend, Large-Cap Value,
Value and Small-Cap Value Portfolios, respectively, 1.10% of the average daily
net assets of the International Equity Portfolio, and .85% of the average daily
net assets of the Focus Portfolio.
The organizations described below act as Advisers to the Fund pursuant to
Subadvisory Agreements with SunAmerica. Under the Subadvisory Agreements, the
Advisers manage the investment and reinvestment of the assets of the respective
Portfolios for which they are responsible. Each of the following Advisers is
independent of SunAmerica (with the exception of the Aggressive Growth for which
SunAmerica acts as an Adviser) and discharges its responsibilities subject to
the policies of the Directors and the oversight and supervision of SunAmerica,
which pays the Advisers' fees. The Advisers for the Large-Cap Growth Portfolio
are Janus Capital Corporation; L. Roy Papp & Associates; and Montag & Caldwell,
Inc. The Advisers for the Mid-Cap Growth Portfolio are Miller Anderson &
Sherrerd, LLP; Pilgrim Baxter & Associates, Ltd.; and T. Rowe Price Associates,
Inc. Effective May 1, 1998 Wellington Management Co., LLP assumed the role as
subadvisor from Pilgrim Baxter & Associates, Ltd. The Advisers for the
Aggressive Growth Portfolio are Janus Capital Corporation; SunAmerica; and
Warburg, Pincus Asset Management, Inc. The Advisers for the Large-Cap Blend
Portfolio are Lazard Asset Management; SunAmerica; and T. Rowe Price Associates,
Inc. Effective April 1, 1998 Morgan Stanley Asset Management, Inc. assumed the
role as subadvisor from SunAmerica. The Advisers for the Large-Cap Value
Portfolio are David L. Babson & Co., Inc.; Davis Selected Advisers, L.P.; and
Wellington Management Co., LLP. The Advisers for the Value Portfolio are Davis
Selected Advisers, L.P.; Neuberger & Berman, LLC; and Strong Capital Management,
Inc. The Advisers for the Small-Cap Value are Berger Associates, Inc.; Lazard
Asset Management; and the Glenmede Trust Company. The Advisers for the
International Equity Portfolio are Rowe Price-Fleming International, Inc.;
Strong Capital Management, Inc.; and Warburg, Pincus Counsellors, Inc. Effective
March 1, 1998 Bankers Trust Company assumed the role as subadvisor from Strong
Capital Management, Inc. The Advisers for the Focus Portfolio are Bramwell
Capital Management, Inc.; Jennison Associates LLC; and Marsico Capital
Management, LLC. 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. For the year ended October 31, 1998 SunAmerica paid the Advisers for
each Portfolio the following, expressed as an annual percentage of the average
daily net assets of each Portfolio: Large-Cap Growth Portfolio, .48%; Mid-Cap
Growth Portfolio, .48%; Aggressive Growth Portfolio, .38%; Large-Cap Blend
Portfolio, .42%; Large-Cap Value Portfolio, .42%; Value Portfolio, .50%;
Small-Cap Value Portfolio, .55%; International Equity Portfolio, .66%; and Focus
Portfolio, .40%. SunAmerica has voluntarily agreed to waive fees or reimburse
expenses, if necessary, to keep annual operating expenses at or below the
following percentages of each Portfolio's average net assets: Large-Cap Growth
Portfolio, Mid-Cap Growth Portfolio, Aggressive Growth Portfolio, Large-Cap
Blend Portfolio, Large-Cap Value Portfolio, Value Portfolio and Small-Cap Value
Portfolio 1.78% for Class A shares and 2.43% for Class B shares and Class C
shares, respectively. International Equity Portfolio 2.03% for Class A shares
and 2.68% for Class B and Class C shares and 1.46% for Class Z shares.
Aggressive Growth Portfolio, Large-Cap Value Portfolio, Value Portfolio and
Small-Cap Value Portfolio 1.21% for Class Z shares. Focus Portfolio 1.45% for
Class A shares and 2.10% for Class B shares and Class II shares. Prior to June
17, 1997, SunAmerica voluntarily agreed to waive fees or reimburse expenses, if
necessary, to keep annual operating expenses at or below an annual rate of 1.90%
of the average daily net assets of Class A and 2.55% of the average daily net
assets of Class B and Class C shares for the Mid-Cap Growth Portfolio,
Aggressive Growth Portfolio and Value Portfolio, and 2.15%
<PAGE>
76
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
of the average daily net assets of Class A shares and 2.80% of the average daily
net assets of Class B and Class C shares for the International Equity Portfolio.
SunAmerica also may voluntarily waive or reimburse additional amounts to
increase the investment return to a Portfolio's investors. 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.
At October 31, 1998, expenses previously waived or reimbursed by SAAMCO that are
subject to recoupment are as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES
REIMBURSED REIMBURSED
--------------- ---------------
<S> <C> <C>
Large-Cap Growth A...................... $ 117,500 $ 4,037
Large-Cap Growth B...................... $ 105,509 $ 6,504
Large-Cap Growth C...................... $ 25,678 $ 22,169
Mid-Cap Growth A........................ $ 148,349 $ 4,830
Mid-Cap Growth B........................ $ 207,687 $ 27,372
Mid-Cap Growth C........................ $ 28,221 $ 14,792
Aggressive Growth A..................... $ 211,810 $ 1,390
Aggressive Growth B..................... $ 228,704 $ 19,214
Aggressive Growth C..................... $ 28,654 $ 23,328
Aggressive Growth Z..................... $ -- $ 9,617
Large-Cap Blend A....................... $ 107,702 $ 2,805
Large-Cap Blend B....................... $ 63,742 $ 8,452
Large-Cap Blend C....................... $ 8,393 $ 21,259
Large-Cap Value A....................... $ 90,454 $ 6,800
Large-Cap Value B....................... $ 108,307 $ 3,894
Large-Cap Value C....................... $ 20,135 $ 18,762
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES
REIMBURSED REIMBURSED
--------------- ---------------
<S> <C> <C>
Large-Cap Value Z....................... $ -- $ 9,130
Value A................................. $ 210,670 $ 3,354
Value B................................. $ 269,314 $ 36,502
Value C................................. $ 28,915 $ 19,117
Value Z................................. $ -- $ 9,630
Small-Cap Value A....................... $ 98,659 $ 5,912
Small-Cap Value B....................... $ 124,444 $ 2,153
Small-Cap Value C....................... $ 25,918 $ 18,565
Small-Cap Value Z....................... $ -- $ 11,469
International Equity A.................. $ 194,248 $ 1,996
International Equity B.................. $ 264,493 $ 38,499
International Equity C.................. $ 34,043 $ 16,207
International Equity Z.................. $ -- $ 9,640
Focus A................................. $ 27,330 $ --
Focus B................................. $ 33,996 $ --
Focus II................................ $ 27,895 $ --
</TABLE>
The Fund, on behalf of each Portfolio, has entered into a Distribution Agreement
with SunAmerica Capital Services, Inc. ("SACS" or the "Distributor"), an
indirect wholly-owned subsidiary of SunAmerica Inc. Each Portfolio has adopted a
Distribution Plan (the "Plan") in accordance with the provisions of Rule 12b-1
under the Act. Rule 12b-1 under the Act permits an investment company directly
or indirectly to pay expenses associated with the distribution of its shares
("distribution expenses") in accordance with a plan adopted by the investment
company's Board of Directors. Pursuant to such rule, the Directors and the
shareholders of each class of shares of each Portfolio have adopted Distribution
Plans hereinafter referred to as the "Class A Plan", "Class B Plan", "Class C
Plan"; and "Class II Plan". In adopting the Distribution Plans, the Directors
determined that there was a reasonable likelihood that each such Plan would
benefit the Fund and the shareholders of the respective class. The sales charge
and distribution fees of a particular class will not be used to subsidize the
sale of shares of any other class.
Under the Class A Plan, Class B Plan, Class C Plan and Class II Plan, the
Distributor receives payments from a Portfolio at an annual rate of up to 0.10%,
0.75%, 0.75% and 0.75%, respectively, of average daily net assets of such
Portfolio's Class to compensate the Distributor and certain securities firms for
providing sales and promotional activities for distributing that 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
Fund shares, commissions and other expenses such as those incurred for sales
literature, prospectus printing and distribution and compensation to
wholesalers. It is possible that in any given year the amount paid to the
distributor under each Class' Plan may exceed the Distributor's distribution
costs as described above. The Distribution Plans provide that each class of
<PAGE>
77
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
shares of each Portfolio may also pay the Distributor an account maintenance and
service fee up to an annual rate of 0.25% of the aggregate average daily net
assets of such class of shares for payments to broker-dealers for providing
continuing account maintenance. Accordingly, for the fiscal year ended October
31, 1998, SACS received fees (see Statement of Operations) based upon the
aforementioned rates.
SACS receives sales charges on each Portfolio's Class A and Class II shares,
portions of which are reallowed to affiliated broker-dealers and non-affiliated
broker-dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of each
Portfolio's Class B, Class C and Class II shares. SACS has advised the
Portfolios that for the fiscal year ended October 31, 1998 the proceeds received
from sales (and paid out to affiliated and non-affiliated broker-dealers) and
redemptions are as follows:
<TABLE>
<CAPTION>
CLASS B CLASS C
CLASS A --------------- ---------------
--------------------------------------------------- CONTINGENT CONTINGENT
AFFILIATED NON-AFFILIATED DEFERRED SALES DEFERRED SALES
SALES CHARGES BROKER- DEALERS BROKER-DEALERS CHARGES CHARGES
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Large-Cap Growth Portfolio.............. $ 490,037 $ 146,344 $ 277,561 $ 44,805 $ 3,460
Mid-Cap Growth Portfolio................ 642,963 192,696 358,628 117,430 5,824
Aggressive Growth Portfolio............. 781,470 327,106 350,450 175,664 6,360
Large-Cap Blend Portfolio............... 426,981 117,550 254,379 41,902 1,995
Large-Cap Value Portfolio............... 592,150 148,306 378,394 42,369 3,839
Value Portfolio......................... 2,704,806 641,893 1,340,011 236,910 11,291
Small-Cap Value Portfolio............... 834,323 192,150 534,751 68,098 6,021
International Equity Portfolio.......... 341,296 145,456 150,191 128,111 6,227
Focus Portfolio......................... 1,250,948 191,346 884,979 10,686 --
</TABLE>
<TABLE>
<CAPTION>
CLASS II
---------------------------------------------------------------------
CONTINGENT
AFFILIATED NON-AFFILIATED DEFERRED SALES
SALES CHARGES BROKER-DEALERS BROKER-DEALERS CHARGES
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
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.......... -- -- -- --
Focus Portfolio......................... 513,213 48,486 464,727 7,401
</TABLE>
<PAGE>
78
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NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
The Fund, on behalf of each Portfolio, has entered into a Service Agreement with
SunAmerica Fund Services, Inc. ("SAFS"), an indirect wholly-owned subsidiary of
SunAmerica Inc. Under the Service Agreement, SAFS performs certain shareholder
account functions by assisting the Portfolios' transfer agent in connection with
the services that it offers to the shareholders of the Portfolios. The Service
Agreement, which permits the Portfolios to compensate SAFS for services rendered
based upon an annual rate of 0.22% of average daily net assets, is approved
annually by the Directors. For the year ended October 31, 1998, the Portfolios
incurred the following expenses, which are included in transfer agent fees in
the Statement of Operations, to compensate SAFS pursuant to the terms of the
Service Agreement.
<TABLE>
<CAPTION>
PAYABLE
EXPENSE OCTOBER 31, 1998
------------------------------------------------- -------------------------------------------------
CLASS A CLASS B CLASS C CLASS II CLASS A CLASS B CLASS C CLASS II
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Large-Cap Growth
Portfolio.............. $ 35,152 $ 30,628 $ 7,376 $ -- $ 2,441 $ 4,425 $ 1,211 $ --
Mid-Cap Growth
Portfolio.............. 58,806 109,815 16,076 -- 5,157 9,674 1,470 --
Aggressive Growth
Portfolio.............. 110,625 145,324 19,021 -- 9,382 12,695 1,748 --
Large-Cap Blend
Portfolio.............. 36,643 23,461 3,065 -- 1,730 2,846 426 --
Large-Cap Value
Portfolio.............. 29,830 40,259 7,498 -- 2,227 4,866 987 --
Value Portfolio.......... 158,026 236,010 31,467 -- 12,461 19,101 2,656 --
Small-Cap Value
Portfolio.............. 32,603 44,644 9,252 -- 2,552 4,427 1,027 --
International Equity
Portfolio.............. 56,888 104,370 14,026 -- 4,732 8,438 1,416 --
Focus Portfolio.......... 18,704 23,704 -- 19,449 4,861 7,499 -- 5,833
</TABLE>
NOTE 5. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchase and proceeds from sales and maturities of long-term
investments during the fiscal year ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
LARGE-CAP AGGRESSIVE
GROWTH MID-CAP GROWTH GROWTH LARGE-CAP BLEND LARGE-CAP VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Purchases (excluding U.S. government
securities)............................ $ 27,690,162 $ 138,443,040 $ 206,131,947 $ 28,554,033 $ 32,925,804
Sales (excluding U.S. government
securities)............................ 9,475,589 105,226,143 159,907,858 26,565,315 11,826,509
Purchases of U.S. government
securities............................. -- -- 709,734 -- --
Sales of U.S. government securities..... -- -- 704,785 -- --
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
SMALL-CAP VALUE EQUITY
VALUE PORTFOLIO PORTFOLIO PORTFOLIO FOCUS PORTFOLIO
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Purchases (excluding U.S. government
securities)............................ $ 201,863,730 $ 50,152,462 $ 96,643,623 $ 161,331,271
Sales (excluding U.S. government
securities)............................ 123,619,062 17,620,777 82,700,308 58,138,493
Purchases of U.S. government
securities............................. -- -- -- --
Sales of U.S. government securities..... -- -- -- --
</TABLE>
<PAGE>
79
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
NOTE 6. TRANSACTIONS WITH AFFILIATES
The following Portfolios incurred brokerage commissions with affiliated brokers:
<TABLE>
<CAPTION>
INTERNATIONAL
MID-CAP GROWTH LARGE-CAP BLEND LARGE-CAP VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO VALUE PORTFOLIO PORTFOLIO
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Morgan Stanley & Co., Inc............... $ 3,390 $ 590 $ -- $ -- $ --
Royal Alliance Associates, Inc.......... 4,225 -- -- -- --
SunAmerica Securities, Inc.............. 1,882 -- -- -- --
Lazard Freres & Co. LLC................. -- 550 -- -- --
Shelby Cullom Davis & Co................ -- -- 54 5,124 --
Neuberger & Berman LLC.................. -- -- -- 160,871 --
Bankers Trust Co........................ -- -- -- -- 3,070
Jardine Fleming Securities Ltd.......... -- -- -- -- 17,220
Ord Mirnett Securities Ltd.............. -- -- -- -- 3,911
NationsBanc Montgomery Securities....... -- -- -- -- --
Prudential Securities, Inc.............. -- -- -- -- --
<CAPTION>
FOCUS PORTFOLIO
---------------
<S> <C>
Morgan Stanley & Co., Inc............... $ --
Royal Alliance Associates, Inc.......... --
SunAmerica Securities, Inc.............. --
Lazard Freres & Co. LLC................. --
Shelby Cullom Davis & Co................ --
Neuberger & Berman LLC.................. --
Bankers Trust Co........................ --
Jardine Fleming Securities Ltd.......... --
Ord Mirnett Securities Ltd.............. --
NationsBanc Montgomery Securities....... 11,374
Prudential Securities, Inc.............. 2,396
</TABLE>
NOTE 7. FEDERAL INCOME TAXES
The Portfolios intend to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute all of their
taxable income, including any net realized gain on investments, to their
shareholders. Therefore, no federal tax provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities, including short-term securities, for federal income tax purposes
were as follows:
<TABLE>
<CAPTION>
LARGE-CAP AGGRESSIVE
GROWTH MID-CAP GROWTH GROWTH LARGE-CAP BLEND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cost.................................... $ 43,725,912 $ 96,118,191 $ 123,627,971 $ 27,912,742
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Appreciation............................ $ 6,231,892 $ 10,740,947 $ 27,055,973 $ 2,266,225
Depreciation............................ (1,856,598) (6,350,203) (5,711,240) (1,535,991)
--------------- --------------- --------------- ---------------
Net unrealized appreciation............. $ 4,375,294 $ 4,390,744 $ 21,344,733 $ 730,234
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
LARGE-CAP VALUE SMALL-CAP VALUE EQUITY
PORTFOLIO VALUE PORTFOLIO PORTFOLIO PORTFOLIO FOCUS PORTFOLIO
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Cost.................................... $ 48,478,228 $ 192,012,948 $ 54,381,473 $ 83,438,000 $ 109,138,536
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
Appreciation............................ $ 2,581,197 $ 16,726,072 $ 2,263,408 $ 7,551,044 $ 4,750,626
Depreciation............................ (3,873,661) (11,906,526) (9,764,251) (6,510,944) (1,411,544)
--------------- --------------- --------------- --------------- ---------------
Net unrealized appreciation/
depreciation........................... $ (1,292,464) $ 4,819,546 $ (7,500,843) $ 1,040,100 $ 3,339,082
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
</TABLE>
At October 31, 1998, Large-Cap Growth Portfolio had capital loss carryforward of
$1,082,976 which will expire between 2005-2006, Aggressive Growth Portfolio,
Value Portfolio, Small-Cap Value Portfolio, International Equity Portfolio and
Focus Portfolio had capital loss carryforwards of $4,430,983, $6,407,836,
$1,185,064, $5,850,175 and $4,898,476, respectively, which were available to the
extent provided in regulations and which will expire 2006.
<PAGE>
80
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
Large-Cap Blend Portfolio utilized capital loss carryforwards of $13,688 to
offset the Portfolios' net taxable gains realized and recognized in the year
ended October 31, 1998.
NOTE 8. OPEN FORWARD CURRENCY CONTRACTS
At October 31, 1998, the International Equity Portfolio held forward foreign
currency exchange contracts ("forward contracts") in order to hedge against
changes in future foreign exchange rates and enhance return. Forward contracts
involve elements of market risk in excess of the amount reflected in the
Statement of Assets and Liabilities. The Portfolio bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward
contracts. International Equity Portfolio held the following forward currency
contracts at October 31, 1998.
<TABLE>
<CAPTION>
GROSS
CONTRACT IN UNREALIZED
TO DELIVER EXCHANGE FOR DELIVERY DATE APPRECIATION
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
*USD 182,136 JPY 24,000,000 2/26/99 $ 27,320
*USD 86,261 JPY 11,000,000 2/26/99 9,740
*USD 164,902 JPY 19,000,000 2/26/99 917
*USD 37,453 JPY 5,000,000 2/26/99 6,183
*JPY 15,500,000 USD 137,931 2/26/99 2,658
*USD 1,176,932 DEM 1,950,000 11/23/98 1,582
*DEM 3,890,000 USD 2,364,742 11/23/98 13,757
---------------
62,157
---------------
</TABLE>
<TABLE>
<CAPTION>
GROSS
CONTRACT IN UNREALIZED
TO DELIVER EXCHANGE FOR DELIVERY DATE DEPRECIATION
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
JPY 252,400,000 USD 1,889,646 2/26/99 $ (313,128)
*USD 135,324 JPY 15,500,000 2/26/99 (51)
JPY 21,000,000 USD 179,748 2/26/99 (3,525)
JPY 20,300,000 USD 151,946 2/26/99 (25,218)
*JPY 63,000,000 USD 471,557 2/26/99 (78,264)
JPY 8,000,000 USD 59,701 2/26/99 (10,117)
JPY 16,141,000 USD 140,564 2/26/99 (303)
USD 655,809 JPY 75,000,000 2/26/99 (1,261)
---------------
(431,867)
---------------
Net Unrealized Depreciation (369,710)
---------------
---------------
</TABLE>
- ----------------
* Represents open forward currency contracts and offsetting or partially
offsetting open forward foreign currency contracts that do not have
additional market risk but have continued counterparty settlement risk.
<TABLE>
<S> <C> <C>
DEM -- Deutsche Mark
JPY -- Japanese Yen
USD -- United States Dollar
</TABLE>
<PAGE>
81
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
NOTE 9. CAPITAL SHARE TRANSACTIONS
Transactions in shares of each class of each series were as follows:
<TABLE>
<CAPTION>
LARGE-CAP GROWTH PORTFOLIO
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997+ OCTOBER 15, 1997+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 1,126,670 $ 15,068,918 2,056,806 $ 25,693,489 2,091,339 $ 27,630,099 65,591 $ 793,598
Reinvested
dividends.......... 317 4,694 -- -- 252 3,708 -- --
Shares redeemed..... (2,081,206) (27,467,943) (53,919) (661,012) (239,375) (3,214,482) -- --
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)......... (954,219) $(12,394,331) 2,002,887 $ 25,032,477 1,852,216 $ 24,419,325 65,591 $ 793,598
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
CLASS C
-----------------------------------------------------
FOR THE PERIOD
OCTOBER 15, 1997+
FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 565,584 $ 7,501,837 14,084 $ 172,781
Reinvested
dividends.......... 54 792 -- --
Shares redeemed..... (42,395) (571,201) -- --
---------- ------------ ---------- ------------
Net increase........ 523,243 $ 6,931,428 14,084 $ 172,781
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
+ Commencement of Operations
<PAGE>
82
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
MID-CAP GROWTH PORTFOLIO
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996+ NOVEMBER 19, 1996+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 2,003,438 $ 30,029,197 3,264,892 $ 40,663,001 2,411,557 $ 35,655,215 2,969,116 $ 37,170,139
Reinvested
dividends.......... -- -- -- -- -- -- -- --
Shares redeemed..... (1,146,590) (16,877,753) (1,923,538) (25,255,844) (972,294) (14,050,897) (348,034) (4,559,436)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase........ 856,848 $ 13,151,444 1,341,354 $ 15,407,157 1,439,263 $ 21,604,318 2,621,082 $ 32,610,703
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
CLASS C
-----------------------------------------------------
FOR THE PERIOD
MARCH 6, 1997*
FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 1,037,718 $ 15,100,986 458,934 $ 5,975,048
Reinvested
dividends.......... -- -- -- --
Shares redeemed..... (724,281) (10,531,818) (115,441) (1,596,837)
---------- ------------ ---------- ------------
Net increase........ 313,437 $ 4,569,168 343,493 $ 4,378,211
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996+ NOVEMBER 19, 1996+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 1,887,998 $ 31,932,623 3,856,767 $ 52,508,769 2,426,954 $ 40,971,389 3,420,491 $ 48,609,878
Reinvested
dividends.......... 15,149 232,082 -- -- 21,234 323,184 -- --
Shares redeemed..... (939,066) (15,813,931) (1,433,429) (22,546,557) (921,116) (14,741,870) (345,988) (5,157,472)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase........ 964,081 $ 16,350,774 2,423,338 $ 29,962,212 1,527,072 $ 26,552,703 3,074,503 $ 43,452,406
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
CLASS Z
CLASS C -------------------------
-----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 6, 1997* APRIL 3, 1998*
FOR THE YEAR ENDED THROUGH THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 395,453 $ 6,677,908 411,297 $ 5,980,151 21,269 $ 378,269
Reinvested
dividends.......... 1,904 28,983 -- --
Shares redeemed..... (124,617) (2,098,913) (35,505) (512,718) (403) (7,760)
---------- ------------ ---------- ------------ ---------- ------------
Net increase........ 272,740 $ 4,607,978 375,792 $ 5,467,433 20,866 $ 370,509
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
+ Commencement of Operations
* Inception of the class
<PAGE>
83
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
LARGE-CAP BLEND PORTFOLIO
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997+ OCTOBER 15, 1997+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 710,580 $ 9,385,878 2,050,665 $ 25,623,294 1,318,539 $ 17,361,591 78,691 $ 969,619
Reinvested
dividends.......... 845 12,086 -- -- 685 9,757 -- --
Shares redeemed..... (1,930,218) (25,563,679) (80,670) (990,000) (151,506) (1,955,466) -- --
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)......... (1,218,793) $(16,165,715) 1,969,995 $ 24,633,294 1,167,718 $ 15,415,882 78,691 $ 969,619
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------
CLASS C
-----------------------------------------------------
FOR THE PERIOD
OCTOBER 15, 1997+
FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 210,319 $ 2,771,825 11,932 $ 148,672
Reinvested
dividends.......... 79 1,120 -- --
Shares redeemed..... (30,059) (392,116) -- --
---------- ------------ ---------- ------------
Net increase........ 180,339 $ 2,380,829 11,932 $ 148,672
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
LARGE-CAP VALUE PORTFOLIO
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997+ OCTOBER 15, 1997+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 1,166,196 $ 14,892,230 2,100,495 $ 26,218,938 2,558,635 $ 32,748,118 111,740 $ 1,361,527
Reinvested
dividends.......... 556 7,625 -- -- 657 8,980 -- --
Shares redeemed..... (2,099,990) (26,169,149) (141,051) (1,698,383) (420,860) (5,315,302) -- --
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)......... (933,238) $(11,269,294) 1,959,444 $ 24,520,555 2,138,432 $ 27,441,796 111,740 $ 1,361,527
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------
-----------------------------------------------------
CLASS Z
CLASS C -------------------------
-----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997+ APRIL 16, 1998*
FOR THE YEAR ENDED THROUGH THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 509,447 $ 6,443,368 14,544 $ 178,760 19,034 $ 247,966
Reinvested
dividends.......... 98 1,336 -- -- 14 197
Shares redeemed..... (58,595) (702,209) -- -- (2,671) (34,016)
---------- ------------ ---------- ------------ ---------- ------------
Net increase........ 450,950 $ 5,742,495 14,544 $ 178,760 16,377 $ 214,147
---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
+ Commencement of Operations
* Inception of the class
<PAGE>
84
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE PORTFOLIO
-------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- -----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996+ NOVEMBER 19, 1996+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold....... 3,024,790 $ 49,667,494 4,671,463 $ 65,290,119 3,700,591 $ 60,058,522 5,001,111 $ 73,400,374
Reinvested
dividends........ 113,683 1,775,725 -- -- 181,420 2,813,830 -- --
Shares redeemed... (1,402,287) (22,115,075) (1,665,401) (26,013,487) (1,230,770) (18,910,699) (155,252) (2,394,393)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase...... 1,736,186 $ 29,328,144 3,006,062 $ 39,276,632 2,651,241 $ 43,961,653 4,845,859 $ 71,005,981
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
CLASS Z
CLASS C -----------------------
----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 6, 1997* APRIL 3, 1998*
FOR THE YEAR ENDED THROUGH THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998
------------------------- ------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 649,398 $ 10,523,159 633,085 $ 9,591,079 8,051 $ 130,827
Reinvested
dividends.......... 16,911 262,283 -- -- -- --
Shares redeemed..... (222,292) (3,432,853) (46,506) (698,146) (1,371) (23,115)
---------- ------------ ---------- ----------- ---------- ----------
Net increase........ 444,017 $ 7,352,589 586,579 $ 8,892,933 6,680 $ 107,712
---------- ------------ ---------- ----------- ---------- ----------
---------- ------------ ---------- ----------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
SMALL-CAP VALUE PORTFOLIO
------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
------------------------------------------------------ ---------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997+ OCTOBER 15, 1997+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
-------------------------- ------------------------- ------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------ ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 1,603,110 $ 20,093,169 2,177,614 $ 27,190,002 2,609,019 $ 32,523,069 256,511 $3,168,460
Reinvested
dividends.......... 1,239 15,852 -- -- 1,337 17,010 -- --
Shares redeemed..... (1,970,872) (23,878,009) (419,530) (5,174,050) (449,305) (5,182,382) (28) (345)
---------- ------------- ---------- ------------ ---------- ------------ ---------- ----------
Net increase
(decrease)......... (366,523) $ (3,768,988) 1,758,084 $ 22,015,952 2,161,051 $ 27,357,697 256,483 $3,168,115
---------- ------------- ---------- ------------ ---------- ------------ ---------- ----------
---------- ------------- ---------- ------------ ---------- ------------ ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CLASS Z
CLASS C -----------------------
--------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
OCTOBER 15, 1997+ APRIL 3, 1998*
FOR THE YEAR ENDED THROUGH THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998
------------------------ ----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 610,407 $ 7,609,109 43,289 $ 536,921 13,605 $ 169,205
Reinvested
dividends.......... 244 3,104 -- -- 14 183
Shares redeemed..... (98,273) (1,113,740) -- -- (535) (6,219)
---------- ----------- ---------- ---------- ---------- ----------
Net increase........ 512,378 $ 6,498,473 43,289 $ 536,921 13,084 $ 163,169
---------- ----------- ---------- ---------- ---------- ----------
---------- ----------- ---------- ---------- ---------- ----------
</TABLE>
+ Commencement of Operations
* Inception of the class
<PAGE>
85
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
--------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
------------------------------------------------------- ----------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
NOVEMBER 19, 1996+ NOVEMBER 19, 1996+
FOR THE YEAR ENDED THROUGH FOR THE YEAR ENDED THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
-------------------------- -------------------------- -------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold....... 3,643,759 $ 46,757,853 3,085,642 $ 39,324,047 1,477,710 $ 19,056,486 2,566,019 $33,369,226
Shares issued in
acquisition of
the Global
Balanced Fund
(Note 2)......... -- -- 495,830 6,693,711 -- -- 1,063,431 14,271,238
Reinvested
dividends........ 34,215 406,818 -- -- 58,619 691,698 -- --
Shares redeemed... (3,309,178) (42,505,076) (1,626,511) (21,418,365) (1,020,515) (12,793,168) (183,548) (2,395,962)
---------- ------------- ---------- ------------- ---------- ------------- ---------- ----------
Net increase...... 368,796 $ 4,659,595 1,954,961 $ 24,599,393 515,814 $ 6,955,016 3,445,902 $45,244,502
---------- ------------- ---------- ------------- ---------- ------------- ---------- ----------
---------- ------------- ---------- ------------- ---------- ------------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CLASS Z
CLASS C --------------------------
-------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 6, 1997* APRIL 6, 1998*
FOR THE YEAR ENDED THROUGH THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998
-------------------------- -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold....... 446,371 $ 5,752,349 404,951 $ 5,319,147 11,801 $ 159,226
Reinvested
dividends........ 3,864 45,601 -- -- -- --
Shares redeemed... (148,954) (1,852,682) (44,682) (586,462) -- --
---------- ------------- ---------- ------------- ---------- -------------
Net increase...... 301,281 $ 3,945,268 360,269 $ 4,732,685 11,801 $ 159,226
---------- ------------- ---------- ------------- ---------- -------------
---------- ------------- ---------- ------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
FOCUS PORTFOLIO
----------------------------------------------------------------------------------
CLASS A CLASS B CLASS II
-------------------------- ------------------------- -------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JUNE 8, 1998+ JUNE 8, 1998+ JUNE 8, 1998+
THROUGH THROUGH THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1998 OCTOBER 31, 1998
-------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 4,937,120 $ 62,391,549 4,130,135 $ 52,830,672 2,883,328 $ 36,845,163
Reinvested
dividends.......... -- -- -- -- -- --
Shares redeemed..... (2,574,338) (32,571,137) (482,431) (5,983,085) (65,791) (780,345)
---------- ------------- ---------- ------------ ---------- ------------
Net increase........ 2,362,782 $ 29,820,412 3,647,704 $ 46,847,587 2,817,537 $ 36,064,818
---------- ------------- ---------- ------------ ---------- ------------
---------- ------------- ---------- ------------ ---------- ------------
</TABLE>
+ Commencement of Operations
* Inception of the class
<PAGE>
86
STYLE SELECT SERIES LOGO
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1998 -- (CONTINUED)
NOTE 10. DIRECTORS' RETIREMENT PLAN
The Directors (and Trustees) of the SunAmerica Family of Mutual Funds have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement Plan
(the "Retirement Plan") effective January 1, 1993 for the unaffiliated
Directors. The Retirement Plan provides generally that if a disinterested
Director who has at least 10 years of consecutive service as a Disinterested
Director of any of the SunAmerica mutual funds (an "Eligible Director") retires
after reaching age 60 but before age 70 or dies while a Director, such person
will be eligible to receive a retirement or death benefit from each SunAmerica
mutual fund with respect to which he or she is an Eligible Director. As of each
birthday, prior to the 70th birthday, but in no event for a period greater than
10 years, each Eligible Director will be credited with an amount equal to 50% of
his or her regular fees (excluding committee fees) for services as a
Disinterested Director of each SunAmerica mutual fund for the calendar year in
which such birthday occurs. In addition, an amount equal to 8.5% of any amounts
credited under the preceding clause during prior years, is added to each
Eligible Director's account until such Eligible Trustee reaches his or her 70th
birthday. An Eligible Director may receive any benefits payable under the
Retirement Plan, at his or her election, either in one lump sum or in up to
fifteen annual installments. As of October 31, 1998, Large-Cap Growth Portfolio,
Mid-Cap Growth Portfolio, Aggressive Growth Portfolio, Large-Cap Blend
Portfolio, Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value Portfolio
and International Equity Portfolio had accrued $807, $2,748, $3,914, $840, $798,
$5,561, $801 and $5,246, respectively, for the Retirement Plan, which is
included in accrued expenses on the Statement of Assets and Liabilities, and as
of October 31, 1998 expensed $807, $2,105, $3,153, $840, $798, $4,882, $801 and
$2,308, respectively, for the Retirement Plan, which is included in Directors'
fees and expenses on the Statement of Operations.
NOTE 11. SUBSEQUENT EVENTS
On August 19, 1998, SunAmerica Inc. entered into an agreement with American
International Group, Inc. ("AIG"). Under the terms of the agreement, SunAmerica
Inc. will merger with and into AIG, and consequently, SAAMCo, which acts as
investment adviser of the Fund, will become a subsidiary of AIG. SAAMCo will not
change its name and no organizational changes are currently planned which would
affect services provided to the Fund. As a result of the merger, Fund
shareholders of record as of October 30, 1998 will be asked to approve a new
investment advisory and management agreement with SAAMCo, to take effect upon
consummation of the merger. The new agreement will be identical to the current
agreement in all respects except for its effective date and termination date and
will have no effect on the fees or expenses payable by the Fund or its
shareholders. The merger transaction is expected to be consummated in late 1998
or early 1999.
Effective December 1, 1998, the Portfolios will offer Class II shares in place
of Class C shares, except for the Focus Portfolio which already offers Class II
shares. The cost structure for Class II shares is presented in Note 1.
Effective December 1, 1998, American Century Investment Management, Inc. assumed
the role as subadvisor from Strong Capital Management, Inc. for the Value
Portfolio.
<PAGE>
87
STYLE SELECT SERIES LOGO
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF STYLE SELECT SERIES, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Large-Cap Growth Portfolio, Mid-Cap
Growth Portfolio, Aggressive Growth Portfolio, Large-Cap Blend Portfolio,
Large-Cap Value Portfolio, Value Portfolio, Small-Cap Value Portfolio,
International Equity Portfolio, and Focus Portfolio (constituting the nine
portfolios of Style Select Series, Inc., hereafter referred to as the "Fund") at
October 31, 1998, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 15, 1998
<PAGE>
88
STYLE SELECT SERIES LOGO
SHAREHOLDER TAX INFORMATION -- (UNAUDITED)
Certain tax information regarding the Style Select Series, Inc. is required to
be provided to shareholders based upon each Portfolio's income and distributions
for the taxable year ended October 31, 1998. The information and distributions
reported herein may differ from the information and distributions taxable to the
shareholders for the calendar year ending December 31, 1998. The information
necessary to complete your income tax returns will be included with your Form
1099-DIV which will be sent to you under a separate cover in January 1999.
During the year ended October 31, 1998 the Portfolio's paid the following
dividends per share:
<TABLE>
<CAPTION>
NET SHORT-
NET TERM
TOTAL INVESTMENT CAPITAL
DIVIDENDS INCOME GAINS
----------- ------------- -----------
<S> <C> <C> <C>
Large-Cap Growth Class A........................................................... $ .01 $ .01 $ --
Large-Cap Growth Class B........................................................... -- -- --
Large-Cap Growth Class C........................................................... -- -- --
Mid-Cap Growth Class A............................................................. -- -- --
Mid-Cap Growth Class B............................................................. -- -- --
Mid-Cap Growth Class C............................................................. -- -- --
Aggressive Growth Class A.......................................................... .11 -- .11
Aggressive Growth Class B.......................................................... .11 -- .11
Aggressive Growth Class C.......................................................... .11 -- .11
Aggressive Growth Class Z.......................................................... -- -- --
Large-Cap Blend Class A............................................................ .01 .01 --
Large-Cap Blend Class B............................................................ .01 .01 --
Large-Cap Blend Class C............................................................ .01 .01 --
Large-Cap Value Class A............................................................ .01 .01 --
Large-Cap Value Class B............................................................ -- -- --
Large-Cap Value Class C............................................................ -- -- --
Large-Cap Value Class Z............................................................ .01 .01 --
Value Class A...................................................................... .59 -- .59
Value Class B...................................................................... .59 -- .59
Value Class C...................................................................... .59 -- .59
Value Class Z...................................................................... -- -- --
Small-Cap Value Class A............................................................ .01 .01 --
Small-Cap Value Class B............................................................ .01 .01 --
Small-Cap Value Class C............................................................ .01 .01 --
Small-Cap Value Class Z............................................................ .02 .02 --
International Equity Class A....................................................... .22 -- .16
International Equity Class B....................................................... .22 -- .16
International Equity Class C....................................................... .22 -- .16
International Equity Class Z....................................................... -- -- --
Focus Class A...................................................................... -- -- --
Focus Class B...................................................................... -- -- --
Focus Class II..................................................................... -- -- --
<CAPTION>
NET LONG-
TERM
CAPITAL
GAINS
-----------
<S> <C>
Large-Cap Growth Class A........................................................... $ --
Large-Cap Growth Class B........................................................... --
Large-Cap Growth Class C........................................................... --
Mid-Cap Growth Class A............................................................. --
Mid-Cap Growth Class B............................................................. --
Mid-Cap Growth Class C............................................................. --
Aggressive Growth Class A.......................................................... --
Aggressive Growth Class B.......................................................... --
Aggressive Growth Class C.......................................................... --
Aggressive Growth Class Z.......................................................... --
Large-Cap Blend Class A............................................................ --
Large-Cap Blend Class B............................................................ --
Large-Cap Blend Class C............................................................ --
Large-Cap Value Class A............................................................ --
Large-Cap Value Class B............................................................ --
Large-Cap Value Class C............................................................ --
Large-Cap Value Class Z............................................................ --
Value Class A...................................................................... --
Value Class B...................................................................... --
Value Class C...................................................................... --
Value Class Z...................................................................... --
Small-Cap Value Class A............................................................ --
Small-Cap Value Class B............................................................ --
Small-Cap Value Class C............................................................ --
Small-Cap Value Class Z............................................................ --
International Equity Class A....................................................... .06
International Equity Class B....................................................... .06
International Equity Class C....................................................... .06
International Equity Class Z....................................................... --
Focus Class A...................................................................... --
Focus Class B...................................................................... --
Focus Class II..................................................................... --
</TABLE>
For the year ended October 31, 1998, 52.40%, 22.77%, 69.03%, 75.49%, 13.13%, and
14.45% of the dividends paid from ordinary income by Large-Cap Growth Portfolio,
Aggressive Growth Portfolio, Large-Cap Blend Portfolio, Large-Cap Value
Portfolio, Value Portfolio, and Small-Cap Value Portfolio respectively,
qualified for the 70% dividends received deductions for corporations.
<PAGE>
89
STYLE SELECT SERIES LOGO
COMPARISONS: PORTFOLIOS VS. THE INDEXES
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in each Style Select Series,
Inc. portfolio to the growth of a similar investment in an appropriate benchmark
index. Please note, the graphs represent the performance of the largest class of
shares. It is important to also note that the portfolios are professionally
managed mutual funds, while the indices are unmanaged and, in any case, are not
available for investment. The maximum sales charge for Class A is 5.75% of the
public offering price. The maximum contingent deferred sales charges ("CDSC")
for Class B and Class C is 4% and 1%, respectively. Class B's CDSC is reduced to
0% after six years; Class C's CDSC is reduced to 0% after one year. All classes
bear ongoing 12b-1 distribution and service fees.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MORNINGSTAR LARGE-CAP
RUSSELL 1000 LARGE-CAP GROWTH
INDEX GROWTH INDEX CLASS B
<S> <C> <C> <C>
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
10/97 $9,630.40 $9,628.59 $9,432.00
11/97 $10,039.40 $9,826.68 $9,608.00
12/97 $10,151.84 $9,921.89 $9,672.00
1/98 $10,455.38 $10,074.87 $9,928.00
2/98 $11,241.84 $10,877.92 $10,680.00
3/98 $11,689.94 $11,374.18 $10,904.00
4/98 $11,851.73 $11,556.66 $11,184.00
5/98 $11,515.37 $11,250.13 $10,848.00
6/98 $12,220.69 $11,945.60 $11,328.00
7/98 $12,139.79 $11,843.79 $11,216.00
8/98 $10,317.85 $9,897.31 $9,530.00
9/98 $11,110.47 $10,613.86 $10,010.00
10/98 $12,003.42 $11,308.41 $10,498.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
LARGE-CAP GROWTH PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return 16.42% 9.73% 15.54% 11.54% 15.64% 14.64%
Since Inception* 9.81% 3.35% 8.98% 4.77% 8.98% 8.59%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A, Class B and Class C: 10/15/97
LARGE-CAP GROWTH PORTFOLIO
The Large-Cap Growth Portfolio seeks long-term growth of capital through equity
investments in large-sized companies that have an above average growth
potential. The Portfolio produced double-digit returns for the fiscal year -- a
fact worth noting in a highly volatile period in the equity markets. Strong
stockpicking was the primary factor that contributed to this Portfolio
performance. Our managers' continued to focus on companies with management teams
believed capable of building their business in any market or economic cycle.
Looking ahead, they will continue to try to identify those companies showing the
greatest promise for above-average growth.
<PAGE>
90
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL MID-CAP MORNINGSTAR MID-CAP MID-CAP GROWTH
GROWTH INDEX GROWTH INDEX CLASS B
<S> <C> <C> <C>
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
11/96 $10,168.00 $10,188.00 $10,072.00
1/97 $10,440.05 $10,452.18 $10,032.00
4/97 $9,869.51 $9,403.56 $8,792.00
7/97 $12,109.34 $11,653.32 $10,808.00
10/97 $11,966.27 $11,647.61 $10,904.00
1/98 $12,030.16 $11,587.62 $11,080.00
4/98 $13,899.18 $13,385.65 $13,000.00
7/98 $13,117.44 $12,737.43 $12,296.00
10/98 $12,257.29 $11,611.66 $11,136.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
MID-CAP GROWTH PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return 6.49% 0.37% 5.80% 1.80% 5.79% 4.79%
Since Inception* 16.80% 5.06% 15.36% 5.68% 20.96% 12.19%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A and Class B: 11/19/96; Class C: 3/06/97
MID-CAP GROWTH PORTFOLIO
The Mid-Cap Growth Portfolio seeks long-term growth of capital by investing
primarily in the equity securities of medium-sized companies with above average
growth potential. The fiscal year ending October 31, 1998 will no doubt go down
as a tumultuous period for U.S. equities in general and for mid-cap companies in
particular. A focus on investing in high quality companies with strong,
predictable earnings growth and maintaining a diversified portfolio, both by
stock and sector, served our managers well. Using careful stock selection and
prudent sector diversification, we intend to continue to seek strong performance
in the upcoming challenging environment.
<PAGE>
91
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL 2500 MORNINGSTAR AGGRESSIVE AGGRESSIVE GROWTH
GROWTH INDEX GROWTH INDEX CLASS B
<S> <C> <C> <C>
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
11/96 $10,183.00 $10,165.00 $10,104.00
1/97 $10,538.86 $10,535.63 $11,064.00
4/97 $9,456.54 $9,376.15 $9,984.00
7/97 $11,640.07 $11,719.54 $12,504.00
10/97 $11,969.44 $11,722.83 $12,640.00
1/98 $11,590.50 $11,531.55 $12,493.00
4/98 $13,171.37 $13,179.34 $14,564.00
7/98 $12,243.06 $12,345.22 $14,581.00
10/98 $10,985.44 $11,040.56 $12,730.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
AGGRESSIVE GROWTH PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return 4.55% -1.46% 3.87% -0.13% 3.94% 2.94%
Since Inception* 32.98% 12.29% 31.30% 13.19% 22.74% 13.18%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A and Class B: 11/19/96; Class C: 3/06/97
AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio seeks long-term growth of capital by investing
generally in equity securities of small and mid capitalization growth companies,
although managers can seek out growth companies of any size. The twelve months
ending October 31, 1998, the Portfolio outperformed both its benchmark index and
its Morningstar category average for the year and for the life of the Portfolio
since inception on November 19, 1996. Allocating a portion of assets to large
cap names helped relative performance as did management of risk through in-depth
fundamental analysis, extensive meetings with company managements, and close
monitoring of industry trends. While volatility will likely remain high in
months ahead, the fundamentals of small cap companies, where the majority of the
Portfolio's holdings are invested, remain strong and relative valuations
attractive.
<PAGE>
92
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MORNINGSTAR
S&P 500 LARGE-CAP LARGE-CAP BLEND
INDUSTRIAL INDEX BLEND INDEX CLASS B
<S> <C> <C> <C>
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
10/97 $9,666.00 $9,656.56 $9,568.00
11/97 $10,113.44 $9,951.25 $9,888.00
12/97 $10,287.09 $10,113.25 $10,104.00
1/98 $10,400.86 $10,190.24 $10,104.00
2/98 $11,150.97 $10,895.34 $10,744.00
3/98 $11,722.01 $11,382.24 $11,256.00
4/98 $11,839.94 $11,478.43 $11,160.00
5/98 $11,636.41 $11,234.84 $10,936.00
6/98 $12,109.08 $11,598.45 $11,112.00
7/98 $11,980.12 $11,405.91 $10,800.00
8/98 $10,248.03 $9,750.84 $9,166.00
9/98 $10,904.52 $10,275.37 $9,566.00
10/98 $11,791.49 $11,011.35 $9,975.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
LARGE-CAP BLEND PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return 8.95% 2.69% 8.43% 4.43% 8.26% 7.26%
Since Inception* 4.42% -1.53% 3.75% -0.24% 3.67% 3.51%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A, Class B and Class C: 10/15/97
LARGE-CAP BLEND PORTFOLIO
The Large-Cap Blend Portfolio seeks long-term growth of capital and a reasonable
level of current income through equity investments in large-sized companies.
While the Portfolio provided solid returns in the first half of the fiscal year
ending October 31, 1998, it underperformed its benchmark index and Morningstar
category average for the twelve months. However, a relatively conservative,
defensive strategy benefited performance overall, as did an emphasis on
yield-oriented stocks. In coming months, we believe today's increasingly
risk-averse equity investors will favor the kinds of stocks our managers'
typically emphasize in this Portfolio, which may, in turn, benefit relative
performance.
<PAGE>
93
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL 1000 MORNINGSTAR LARGE-CAP LARGE-CAP VALUE
INDEX VALUE INDEX CLASS B
<S> <C> <C> <C>
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
10/97 $9,720.60 $9,634.77 $9,488.00
11/97 $10,150.35 $9,905.38 $9,712.00
12/97 $10,446.64 $10,075.73 $9,784.00
1/98 $10,298.82 $10,055.17 $9,696.00
2/98 $10,992.13 $10,725.53 $10,336.00
3/98 $11,664.41 $11,197.75 $10,792.00
4/98 $11,742.45 $11,241.24 $10,968.00
5/98 $11,568.31 $11,034.38 $10,584.00
6/98 $11,716.61 $11,111.30 $10,680.00
7/98 $11,509.81 $10,779.78 $10,296.00
8/98 $9,796.92 $9,256.24 $8,699.00
9/98 $10,359.27 $9,736.84 $9,203.00
10/98 $11,161.70 $10,480.56 $9,611.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
LARGE-CAP VALUE PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return 6.22% 0.11% 5.52% 1.52% 5.52% 4.52%
Since Inception* 0.78% -4.81% 0.11% -3.73% 0.11% 0.11%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A, Class B and Class C: 10/15/97
LARGE-CAP VALUE PORTFOLIO
The Large-Cap Value Portfolio seeks long-term growth of capital through equity
investments in large-sized companies with strong growth potential, using a value
style of investing. The Portfolio underperformed its benchmark index and
Morningstar category average for the fiscal year, primarily because growth
stocks in general outperformed value stocks. Given that prior to this
extraordinary five year run favoring large cap growth, the longest period in
which one style of investing remained in favor without a significant reversal
was three years, a change may be near. It should also be noted that while this
past fiscal year was an exception, over the last 24 years, returns from value
stocks have been less volatile than those of growth stocks. Thus, our managers'
strategy going forward is to stay true to their value-oriented disciplines,
regardless of fluctuating market conditions.
<PAGE>
94
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL MID-CAP MORNINGSTAR MID-CAP
VALUE VALUE INDEX VALUE CLASS B
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
<S> <C> <C> <C>
11/96 $10,147.00 $10,305.00 $10,232.00
1/97 $10,421.66 $10,723.62 $10,656.00
4/97 $10,534.56 $10,674.08 $10,800.00
7/97 $12,429.64 $12,638.77 $12,872.00
10/97 $12,649.24 $12,656.12 $12,800.00
1/98 $12,929.86 $12,936.89 $12,863.00
4/98 $14,486.24 $14,494.12 $14,474.00
7/98 $13,257.23 $13,264.44 $13,261.00
10/98 $12,399.33 $12,406.07 $11,898.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE SEC AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
VALUE PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return -3.32% -8.88% -3.92% -7.77% -3.92% -4.88%
Since Inception* 24.44% 8.53% 22.98% 9.33% 13.37% 7.88%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A and Class B: 11/19/96; Class C: 3/06/97
VALUE PORTFOLIO
The Value Portfolio seeks long-term growth of capital through equity investments
in undervalued companies with strong growth potential, without regard to the
size of the issuer. The market in general was led by high multiple issues this
past fiscal year, and value stocks trailed their growth counterparts. Thus, the
Portfolio's returns trailed those of the benchmark index and Morningstar
category average for the period. Still, as you can see in the chart above,
experience has shown that our managers' processes are historically successful in
outperforming the benchmark over longer time horizons, and so they remain
steadfast to their investment philosophies and disciplines. The financial
services and technology sectors may be particularly attractive in the months
ahead, benefiting from long-term demographic and business trends.
<PAGE>
95
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUSSELL 2000 MORNINGSTAR SMALL-CAP SMALL-CAP
VALUE INDEX VALUE INDEX VALUE CLASS B
DOLLARS (THOUSANDS) 10,000.00 10,000.00 10,000.00
<S> <C> <C> <C>
10/97 9,728.10 9,697.59 9,712.00
11/97 9,834.72 9,643.55 9,728.00
12/97 10,168.12 9,742.11 9,960.00
1/98 9,984.18 9,588.90 9,736.00
2/98 10,587.72 10,236.16 10,392.00
3/98 11,017.16 10,700.21 10,736.00
4/98 11,071.58 10,810.19 10,784.00
5/98 10,679.65 10,359.35 10,328.00
6/98 10,619.31 10,203.69 10,104.00
7/98 9,787.50 9,500.10 9,448.00
8/98 8,254.68 7,832.41 7,781.00
9/98 8,720.82 8,104.22 8,085.00
10/98 8,979.74 8,448.55 8,254.08
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CUMULATIVE SEC AVERAGE CUMULATIVE SEC AVERAGE CUMULATIVE SEC AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
SMALL-CAP VALUE PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return -10.79% -15.92% -11.40% -14.95% -11.47% -12.36%
Since Inception* -13.36% -17.64% -14.02% -17.46% -14.02% -13.48%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A, Class B and Class C: 10/15/97
SMALL-CAP VALUE PORTFOLIO
The Small-Cap Value Portfolio seeks long-term growth of capital through equity
investments in small-sized, undervalued companies with strong growth potential.
The Portfolio closely tracked its Morningstar category average for the twelve
months ending October 31, 1998. This is particularly notable in what was clearly
a difficult fiscal period for small cap value investors. Our managers' sector
positioning and stock selection generally defended well against the summer
market decline.
Record low valuations, strong relative earnings growth, falling interest rates,
an easing credit crunch, and heightened insider buying and share repurchase
among small cap companies all seem to bode well for a long-awaited recovery for
small caps in the coming year.
<PAGE>
96
STYLE SELECT SERIES LOGO
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MORNINGSTAR FOREIGN
MSCI EAFE USD INDEX STOCK INDEX INTERNATIONAL EQUITY CLASS B
DOLLARS (THOUSANDS) $10,000.00 $10,000.00 $10,000.00
<S> <C> <C> <C>
11/96 $10,160.00 $10,205.00 $10,056.00
1/97 $9,682.87 $10,244.82 $9,968.00
4/97 $9,936.35 $10,417.28 $9,952.00
7/97 $11,354.83 $11,824.83 $11,200.00
10/97 $10,249.27 $10,784.52 $9,904.00
1/98 $10,708.65 $10,967.09 $9,911.00
4/98 $11,847.52 $12,521.96 $11,150.00
7/98 $12,007.65 $12,552.30 $11,183.00
10/98 $11,269.17 $11,113.17 $9,838.00
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SEC SEC SEC
CUMULATIVE AVERAGE CUMULATIVE AVERAGE CUMULATIVE AVERAGE
TRADITIONAL ANNUAL TRADITIONAL ANNUAL TRADITIONAL ANNUAL
INTERNATIONAL EQUITY PORTFOLIO RETURN+ RETURN RETURN+ RETURN RETURN+ RETURN
<S> <C> <C> <C> <C> <C> <C>
1 Year Return -0.09% -5.84% -0.67% -4.64% -0.67% -1.66%
Since Inception* -0.41% -3.20% -1.62% -5.55% -2.40% -1.46%
</TABLE>
+ Traditional returns do not reflect sales load.
* Inception date for Class A and Class B: 11/19/96; Class C: 3/06/97
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks long-term growth of capital by
investing in equity securities of issuers in countries other than the United
States. The Portfolio's returns trailed those of the MSCI EAFE Index and the
Morningstar category average for the twelve months ending October 31, 1998. Most
developed equity markets had enjoyed a record-setting pace through mid-July, but
then emerging market uncertainties spoiled it, as several events led to a
massive correction during the remainder of the summer. Still, the Portfolio
remained overweighted in the European markets, which gained for the year, and
was underweighted in the dismally-performing Asia-Pacific region and other
emerging markets. Given our current outlook, our managers intend to maintain
this overall allocation strategy in the near term.
