As filed with the Securities and Exchange Commission on April 28, 2000
Securities Act File No. 333-11283
Investment Company Act File Act No. 811-07797
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 25 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 26
(Check appropriate box or boxes)
SUNAMERICA STYLE SELECT SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
The SunAmerica Center
733 Third Avenue
New York, NY 10017
(Address of Principal Executive Office)(Zip Code)
Registrant's telephone number, including area code: (800) 858-8850
Robert M. Zakem, Esq.
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017-3204
(Name and Address for Agent for Service)
Copy to:
Margery K. Neale, Esq.
Swidler Berlin Shereff Friedman, LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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MAY 1, 2000 PROSPECTUS
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SUNAMERICA STYLE SELECT SERIES(R)
o FOCUSED TECHNET PORTFOLIO
CLASS A SHARES
CLASS B SHARES
CLASS II SHARES
The Securities and Exchange Commission has not
approved or disapproved these securities or
passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
[Logo omitted]SunAmerica
Mutual Fund
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TABLE OF CONTENTS
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FUND HIGHLIGHTS ..........................................................2
SHAREHOLDER ACCOUNT INFORMATION ..........................................5
MORE INFORMATION ABOUT THE PORTFOLIO ....................................13
INVESTMENT STRATEGIES ..............................................13
GLOSSARY ...........................................................14
INVESTMENT TERMINOLOGY ........................................14
RISK TERMINOLOGY ..............................................15
FUND MANAGEMENT ....................................................16
INFORMATION ABOUT ADVISERS .........................................17
[Logo omitted]SunAmerica
Mutual Fund
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FUND HIGHLIGHTS
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Q&A
The following questions and answers are designed to give you an overview of
SunAmerica Style Select Series, Inc. (the "Fund"), and to provide you with
information about one of the Fund's separate Portfolios and its investment goal,
principal investment strategy, and principal investment technique. The
investment goal may be changed without shareholder approval, although you will
receive notice of any change. More complete investment information is provided
in chart form, under "More Information About the Portfolio," which is on page 13
and the glossary that follows on page 14.
Q: What is the Portfolio's investment goal, principal strategies and
techniques?
A:
PRINCIPAL
INVESTMENT INVESTMENT PRINCIPAL INVESTMENT
GOAL STRATEGIES TECHNIQUES
---- ---------- ----------
long-term growth and active trading of primaily
growth of capital focus domestic, but also foreign, equity
securities of companies that
demonstrate the potential for
long-term growth of capital and that
the Advisers believe will benefit
significantly from technological
advances or improvements, without
regard to market capitalization
SunAmerica Asset Management Corp. ("SunAmerica") is the Portfolio's investment
manager and will initially allocate the assets of the Portfolio equally among
the Portfolio's Advisers. Each Adviser manages a separate portion of the
Portfolio using growth and focus strategies.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIO'S PRINCIPAL INVESTMENT TECHNIQUES
The Portfolio will invest in up to thirty companies whose principal businesses
the Advisers believe will significantly benefit from advances or improvements in
technology ("technology companies"). Technology companies include companies in
many industries that rely extensively on technology in their product development
or operations, are expected to benefit from technological advances and
improvements, or may be experiencing growth in sales and earnings driven by
technology related research, products or services.
The broad industry categories in which technology companies may be found include
computer software and hardware, network and capital broadcasting, internet and
internet-related businesses, the development, production, sale, and distribution
of goods or services used in the broadcast and media industries, communications
services or equipment, the design, manufacture, or sale of electric components,
defense and data storage and retrieval, healthcare and biotechnology. The
relative size of the Portfolio's investment within these industries will vary
from time to time, and at times, one of these industries may not be represented
in the Portfolio's holdings.
The Portfolio will significantly invest, under normal market conditions, in
internet and internet-related businesses. These companies include e-commerce
enterprises as well as those that develop services and products for the
internet. The Advisers may rotate the Portfolio's holdings out of internet or
internet-related companies for temporary defensive purposes or, if market
conditions warrant.
Q: WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIO?
A: The following section describes the principal risks of the Portfolio, while
the chart on page 13 describes principal and additional risks.
RISKS OF INVESTING IN EQUITY SECURITIES
The Portfolio invests primarily in equity securities. As with any equity fund,
the value of your investment in the Portfolio may fluctuate in response to stock
market movements. You should be aware that the performance of different types of
equity stocks may decline under varying market conditions--for example, "growth"
stocks may perform poorly under circumstances in which "value" stocks in general
have continued to rise. In addition, individual stocks selected for the
Portfolio may underperform the market generally.
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A FOCUS strategy is one in which an Adviser actively invests in a small
number of holdings which constitute its favorite stock-picking ideas at
any given moment. A focus philosophy reflects the belief that, over time,
the performance of most investment managers' "highest confidence" stocks
exceeds that of their more diversified portfolios. Each Adviser may
invest in up to 10 securities for a total of up to 30 securities. Each
Adviser may invest in additional financial securities for the purpose of
cash management or to hedge a security in the Portfolio.
When deemed appropriate by an Adviser, the Portfolio may engage in ACTIVE
TRADING when it frequently trades its portfolio securities to achieve its
investment goal.
The "GROWTH" ORIENTED philosophy to which the Portfolio subscribes--that
of investing in securities believed to offer the potential for long-term
growth of capital--focuses on securities considered to have a historical
record of above-average earnings growth; to have significant growth
potential; to have above-average earnings growth or the ability to
sustain earnings growth; to offer proven or unusual products or services;
or to operate in industries experiencing increasing demand.
MARKET CAPITALIZATION represents the total market value of the
outstanding securities of a corporation.
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RISKS OF NON-DIVERSIFICATION
The Portfolio is non-diversified, which means that it can invest a larger
portion of its assets in the stock of a single company than can some other
mutual funds. By concentrating in a smaller number of stocks, the Portfolio's
risk is increased because the effect of each stock on the Portfolio's
performance is greater.
RISKS OF INVESTING IN SMALL COMPANIES
Stocks of smaller companies may be more volatile than, and not as readily
marketable as, those of larger companies. RISKS OF INVESTING IN TECHNOLOGY
COMPANIES Technology companies may react similarly to certain market pressures
and events. They may be significantly affected by short product cycles,
aggressive pricing of products and services, competition from new market
entrants, and obsolescence of existing technology. As a result, the Portfolio's
returns may be considerably more volatile than a fund that does not invest in
technology companies.
ADDITIONAL PRINCIPAL RISKS
Shares of the Portfolio are not bank deposits and are not guaranteed or insured
by any bank, SunAmerica or SunAmerica's affiliates, any government entity or the
Federal Deposit Insurance Corporation. As with any mutual fund, there is no
guarantee that the Portfolio will be able to achieve its investment goal or that
the net return on an investment in the Portfolio will exceed what could have
been obtained through other investment or savings vehicles. If the value of the
assets of the Portfolio goes down, you could lose money.
Q: HOW HAS THE PORTFOLIO PERFORMED HISTORICALLY?
A: Performance information for the Portfolio is not shown because it has been
in existence for less than one year.
Q: WHAT ARE THE PORTFOLIO'S EXPENSES?
A: The following table describes the fees and expenses that you may pay if you
buy and hold shares of the Portfolio.
CLASS CLASS CLASS
A B II
----- ----- -----
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)(1) ............. 5.75% None 1.00%
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed)(2) .................. None 4.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends ............................... None None None
Redemption Fee(3) .................................. None None None
Exchange Fee ....................................... None None None
Maximum Account Fee ................................ None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
Management Fees .................................... 1.25% 1.25% 1.25%
Distribution and Service (12b-1) Fees(4) ........... 0.35% 1.00% 1.00%
Other Expenses(5) .................................. 0.37% 0.37% 0.37%
---- ---- ----
Total Annual Portfolio Operating Expenses(5)(6) .... 1.97% 2.62% 2.62%
==== ==== ====
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
(2) Purchases of Class A shares over $1 million will be subject to a contingent
deferred sales charge (CDSC) on redemptions made within two years of
purchase. The CDSC on Class B shares applies only if shares are redeemed
within six years of their purchase. The CDSC on Class II shares applies
only if shares are redeemed within eighteen months of their purchase. See
page 5 for more information on the CDSCs.
(3) A $15.00 fee is imposed on wire and overnight mail redemptions.
(4) Because these fees are paid out of the Portfolio's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(5) Estimated.
(6) The Board of Directors, including a majority of the Independent Directors,
approved the Investment Advisory and Management Agreement subject to the
Total Annual Portfolio Operating Expenses ratios set forth above.
SunAmerica will waive fees and reimbursements should the Total Annual
Portfolio Operating Expenses be higher than estimated. SunAmerica may not
increase such ratios, which are contractually required by agreement with
the Board of Directors, without the approval of the Directors, including a
majority of the Independent Directors. The expense waivers and fee
reimbursements will continue indefinitely, subject to termination by the
Directors, including a majority of the Independent Directors.
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FUND HIGHLIGHTS
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EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolio with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Portfolio for the time
periods indicated and that your investment has a 5% return each year and that
the Portfolio's operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions and the net expenses shown in
the fee table your costs would be:
If you redeemed your investment at the end of the periods indicated:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FOCUSED TECHNET PORTFOLIO
(Class A shares) ................... $763 $1,158 $1,576 $2,739
(Class B shares)* .................. $665 $1,114 $1,590 $2,723
(Class II shares) .................. $462 $ 906 $1,476 $3,024
If you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FOCUSED TECHNET PORTFOLIO
(Class A shares) ................... $763 $1,158 $1,576 $2,739
(Class B shares)* .................. $265 $ 814 $1,390 $2,723
(Class II shares) .................. $362 $ 906 $1,476 $3,024
* Class B shares convert to Class A shares approximately seven years after
purchase as described in the section entitled "Shareholder Account
Information" on page 5. Therefore, expense information for years 8, 9 and 10
is the same for both Class A and Class B shares.
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SHAREHOLDER ACCOUNT INFORMATION
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SELECTING A SHARE CLASS
The Portfolio offers three classes of shares through this Prospectus: Class A,
Class B and Class II shares.
Each class of shares has its own cost structure, so you can choose the one best
suited to your investment needs. Your broker or financial advisor can help you
determine which class is right for you.
CLASS A
o Front-end sales charge, as described below. There are several ways to reduce
these charges, also described below.
o Lower annual expenses than Class B or Class II shares.
CLASS B
o No front-end sales charge; all your money goes to work for you right away.
o Higher annual expenses than Class A shares.
o Deferred sales charge on shares you sell within six years of purchase, as
described below.
o Automatic conversion to Class A shares approximately one year after such time
that no CDSC would be payable upon redemption, as described below, thus
reducing future annual expenses.
CLASS II
o Front-end sales charge, as described below.
o Higher annual expenses than Class A shares.
o Deferred sales charge on shares you sell within eighteen months of purchase,
as described below.
o No conversion to Class A.
CALCULATION OF SALES CHARGES
CLASS A. Sales Charges are as follows:
Concession
Sales Charge to Dealers
-----------------------------------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
YOUR INVESTMENT PRICE INVESTED PRICE
-----------------------------------
Less than $50,000 ........................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000 .............. 4.75% 4.99% 4.00%
$100,000 but less than $250,000 ............. 3.75% 3.90% 3.00%
$250,000 but less than $500,000 ............. 3.00% 3.09% 2.25%
$500,000 but less than $1,000,000 ........... 2.10% 2.15% 1.35%
$1,000,000 or more .......................... None None 1.00%
INVESTMENTS OF $1 MILLION OR MORE. Class A shares are available with no
front-end sales charge. However, a 1% CDSC is imposed on any shares you sell
within one year of purchase and a 0.50% CDSC is charged on any shares you sell
after the first year and within the second year after purchase.
CLASS B. Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC on shares you sell within six
years of buying them. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
Class B deferred charges:
Years after purchase CDSC on shares being sold
1st or 2nd year .............. 4.00%
3rd or 4th year .............. 3.00%
5th year ..................... 2.00%
6th year ..................... 1.00%
7th year and thereafter ...... None
CLASS II. Sales Charges are as follows:
Sales Charge Concession to Dealers
-------------------------------------------------------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
PRICE INVESTED PRICE
-------------------------------------------------------
1.00% 1.01% 1.00%
There is also a CDSC of 1% on shares you sell within 18 months after you buy
them.
DETERMINATION OF CDSC. Each CDSC is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. There is no
CDSC on shares you purchase through reinvestment of dividends. To keep your CDSC
as low as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC. If there are not
enough of these shares available, we will sell shares that have the lowest CDSC.
FOR PURPOSES OF THE CDSC, WE COUNT ALL PURCHASES YOU MAKE DURING A CALENDAR
MONTH AS HAVING BEEN MADE ON THE FIRST DAY OF THAT MONTH.
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SHAREHOLDER ACCOUNT INFORMATION
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SALES CHARGE REDUCTIONS AND WAIVERS
WAIVERS FOR CERTAIN INVESTORS. Various individuals and institutions may purchase
CLASS A shares without front-end sales charges, including:
o financial planners, institutions, broker-dealer representatives or
registered investment advisers utilizing Portfolio shares in fee-based
investment products under an agreement with the Distributor (this waiver
may also apply to front-end sales charges of Class II shares)
o participants in certain retirement plans that meet applicable conditions,
as described in the Statement of Additional Information
o Fund Directors and other individuals, and their families, who are
affiliated with the Portfolio or any fund distributed by SunAmerica
Capital Services, Inc.
o selling brokers and their employees and sales representatives and their
families
o participants in "Net Asset Value Transfer Program"
We will generally waive the CDSC for CLASS B or CLASS II shares in the following
cases:
o within one year of the shareholder's death or becoming disabled
o taxable distributions from or loans to participants made by qualified
retirement plans or retirement accounts (not including rollovers) for
which SunAmerica Fund Services, Inc. serves as a fiduciary
o Fund Directors and other individuals, and their families, who are
affiliated with any Portfolio or any fund distributed by SunAmerica
Capital Services, Inc.
o to make payments through the Systematic Withdrawal Plan (subject to
certain conditions)
o participants in "Net Asset Value Transfer Program"
REDUCING YOUR CLASS A SALES CHARGES. There are several special purchase plans
that allow you to combine multiple purchases of Class A shares of SunAmerica
Mutual Funds to take advantage of the breakpoints in the sales charge schedule.
For information about the "Rights of Accumulation," "Letter of Intent,"
"Combined Purchase Privilege," and "Reduced Sales Charge for Group Purchases,"
contact your broker or financial advisor, or consult the Statement of Additional
Information.
TO UTILIZE: IF YOU THINK YOU MAY BE ELIGIBLE FOR A SALES CHARGE REDUCTION OR
CDSC WAIVER, CONTACT YOUR BROKER OR FINANCIAL ADVISOR.
REINSTATEMENT PRIVILEGE. If you sell shares of the Portfolio, within one year
after the sale, you may invest some or all of the proceeds of the sale in the
same share class of the Portfolio without a sales charge. A shareholder may use
the reinstatement privilege only one time after selling such shares. If you paid
a CDSC when you sold your shares, we will credit your account with the dollar
amount of the CDSC at the time of sale. This may impact the amount of gain or
loss recognized on the previous sale, for tax purposes. All accounts involved
must be registered in the same name(s).
DISTRIBUTION AND SERVICE (12B-1) FEES
Each class of shares of each Portfolio has its own 12b-1 plan that provides for
distribution and account maintenance and service fees (payable to the
Distributor) based on a percentage of average daily net assets, as follows:
ACCOUNT MAINTENANCE AND
CLASS DISTRIBUTION FEE SERVICE FEE
A 0.10% 0.25%
B 0.75% 0.25%
II 0.75% 0.25%
Because 12b-1 fees are paid out of the Portfolio's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
INITIAL OFFERING OF SHARES
The Portfolio will accept orders for Class A, Class B and Class II shares of the
Portfolio during a pre-commencement period from May 1, 2000 through May 19,
2000. If you place your order for shares of the Portfolio during this time, the
shares will be issued at a net asset value of $12.50 per share at the
commencement of operations, which is expected to occur on May 22, 2000 (the
"Commencement Date"). An initial sales charge of up to 5.75% (6.10% of the net
amount invested) is imposed on each transaction in Class Ashares. This initial
sales charge may be reduced depending on the amount of the purchase as shown in
the table under "Calculation of Sales Charges" or the applicability of any
waiver or reduction of the sales charge. An initial sales charge of 1.00% (1.01%
of the net amount invested) is imposed on each transaction in Class II shares.
Payment for Portfolio shares is due when you place your order, however, your
money will not be transferred to the Portfolio until the Commencement Date. If
you purchase shares by electronic means, no funds will be transferred until the
Commencement Date. If you purchase shares by any other means, your payment will
be held by the Portfolio's Transfer Agent in a paid-in-waiting status until the
Commencement Date. Purchases held in a paid-in-waiting status may be rescinded
at any time prior to the Commencement Date and, if so, your payment will be
returned. During the period between receipt of your order and the commencement
date, your money will not be invested in any manner and no interest will be
earned. On the Commencement Date, all orders received will settle and be trans-
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ferred to the Portfolio.
Although you place an order for shares, you will not have any rights as a
shareholder of the Portfolio until your money is invested in the Portfolio and
the issuance of shares has been reflected in the Portfolio's books. We reserve
the right to withdraw, modify or terminate the initial offering without notice
and to refuse any order in whole or in part.
Beginning on or about May 22, 2000, the Portfolio will commence a continuous
offering of its shares
OPENING AN ACCOUNT
1. Read this prospectus carefully.
2. Determine how much you want to invest. The minimum initial investment for
each class of the Portfolio is as follows:
o non-retirement account: $500
o retirement account: $250
o dollar cost averaging: $500 to open; you must invest at least $25 a
month
The minimum subsequent investment for the Portfolio is as follows:
o non-retirement account: $100
o retirement account: $25
3. Complete the appropriate parts of the Account Application, carefully
following the instructions. If you have questions, please contact your
broker or financial advisor or call Shareholder/Dealer Services at
1-800-858-8850, extension 5125.
4. Complete the appropriate parts of the Supplemental Account Application. By
applying for additional investor services now, you can avoid the delay and
inconvenience of having to submit an additional application if you want to
add services later.
5. Make your initial investment using the chart on the next page. You can
initiate any purchase, exchange or sale of shares through your broker or
financial advisor.
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SHAREHOLDER ACCOUNT INFORMATION
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BUYING SHARES
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
................................................................................
o Make out a check for the o Make out a check for the
investment amount, payable to investment amount payable to the
the Focused TechNet Portfolio or Focused TechNet Portfolio or
SunAmerica Funds. SunAmerica Funds.
o Deliver the check and your o Include the stub from your Fund
completed Account Application statement or a note specifying the
(and Supplemental Account Focused TechNet Portfolio, your
Application, if applicable) to share class, your account number
your broker or financial and the name(s) in which the
advisor, or mail them to: account is registered.
SunAmerica Fund Services, Inc. o Indicate the Focused TechNet
Mutual Fund Operations, Portfolio and account number in
3rd Floor the memo section of your check.
The SunAmerica Center
733 Third Avenue o Deliver the check and your stub to
New York, New York 10017-3204 your broker or financial advisor,
or mail them to:
o All purchases must be in U.S.
dollars. Cash will not be NON-RETIREMENT ACCOUNTS:
accepted. A $25.00 fee will be SunAmerica Fund Services, Inc.
charged for all checks returned c/o NFDS
due to insufficient funds. P.O. Box 21-9373
Kansas City, Missouri 64121-9373
RETIREMENT ACCOUNTS:
SunAmerica Fund Services, Inc.
Mutual Fund Operations,
3rd Floor
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
BY WIRE
................................................................................
o Deliver your completed o Instruct your bank to wire the
application to your broker or amount of your investment to:
financial advisor or fax it to
SunAmerica Fund Services, Inc. State Street Bank
at 212-551-5585. & Trust Company
Boston, MA
o Obtain your account number by ABA #0110-00028
referring to your statement or DDA # 99029712
by calling your broker or
financial advisor or Specify the Focused TechNet
Shareholder/Dealer Services at Portfolio, your share class, your
1-800-858-8850, ext. 5125. Portfolio number, account number
and the name(s) in which the
o Instruct your bank to wire the account is registered. Your bank
amount of your investment to: may charge a fee to wire funds.
State Street Bank
& Trust Company
Boston, MA
ABA #0110-00028
DDA # 99029712
Specify the Focused TechNet Portfolio,
your choice of share class, your new
Portfolio number and account number
and the name(s) in which the account
is registered. Your bank may charge a
fee to wire funds.
TO OPEN OR ADD TO AN ACCOUNT USING DOLLAR COST AVERAGING, SEE "ADDITIONAL
INVESTOR SERVICES."
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SELLING SHARES
HOW REQUIREMENTS
THROUGH YOUR BROKER OR FINANCIAL ADVISOR
................................................................................
o Accounts of any type. o Call your broker or financial
advisor to place your order to
o Sales of any amount. sell shares.
BY MAIL
................................................................................
o Accounts of any type. o Write a letter of instruction
indicating the Focused TechNet
o Include all signatures and any Portfolio, your share class, your
additional documents that may be account number, the name(s) in
required (see next page). which the account is registered
and the dollar value or number of
o Mail the materials to: shares you wish to sell.
SunAmerica Fund Services, Inc. o Sales of $100,000 or more require
Mutual Fund Operations, the letter of instruction to have
3rd Floor a signature guarantee.
The SunAmerica Center
733 Third Avenue o A check will normally be mailed
New York, New York 10017-3204 on the next business day to the
name(s) and address in which the
account is registered, or
otherwise according to your
letter of instruction.
BY PHONE
................................................................................
o Most accounts. o Call Shareholder/Dealer Services
at 1-800-858-8850, extension 5125
o Sales of less than $100,000. between 8:30 a.m. and 7:00 p.m.
(Eastern time) on most business
days. Indicate the Focused
TechNet Portfolio, the name of
the person requesting the
redemption, your share class,
your account number, the name(s)
in which the account is
registered and the dollar value
or number of shares you wish to
sell.
o A check will be mailed to the
name(s) and address in which the
account is registered or to a
different address indicated in a
written authorization previously
provided to the Portfolio by the
Shareholder(s) on the account.
BY WIRE
................................................................................
o Request by mail to sell any o Proceeds will normally be wired
amount (accounts of any type). on the next business day. A $15
fee will be deducted from your
o Request by phone to sell less account.
than $100,000.
TO SELL SHARES THROUGH A SYSTEMATIC WITHDRAWAL PLAN, SEE "ADDITIONAL INVESTOR
SERVICES."
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SHAREHOLDER ACCOUNT INFORMATION
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SELLING SHARES IN WRITING. In certain circumstances, you will need to make your
request to sell shares in writing. Corporations, executors, administrators,
trustees or guardians may need to include additional items with a request to
sell shares. You may also need to include a signature guarantee, which protects
you against fraudulent orders. You will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling shares worth $100,000 or more
o you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution
o a credit union a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
TRANSACTION POLICIES
VALUATION OF SHARES. The net asset value per share (NAV) for the Portfolio and
each class is determined each business day at the close of regular trading on
the New York Stock Exchange (generally 4:00 p.m., Eastern time) by dividing the
net assets of each class by the number of such class's outstanding shares.
Investments for which market quotations are readily available are valued at
market at their price as of the close of regular trading on the New York Stock
Exchange for the day. All other securities and assets are valued at fair value
following procedures approved by the Directors.
BUY AND SELL PRICES. When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable CDSCs.
EXECUTION OF REQUESTS. The Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. We execute buy and sell requests at
the next NAV to be calculated after the Portfolio receives your request in good
order. If the Portfolio or the Distributor receives your order before the
Portfolio's close of business (generally 4:00 p.m., Eastern time), you will
receive that day's closing price. If the Portfolio or the Distributor receives
your order after that time, you will receive the next business day's closing
price. If you place your order through a broker or financial advisor, you should
make sure the order is transmitted to the Portfolio before the Portfolio's close
of business. The Portfolio and the Distributor reserve the right to reject any
order to buy shares.
During periods of extreme volatility or market crisis, the Portfolio may
temporarily suspend the processing of sell requests, or may postpone payment of
proceeds for up to three business days or longer, as allowed by federal
securities laws.
The Portfolio may invest in securities that are primarily listed on foreign
exchanges that trade on weekends or other days when the Portfolio does not price
its shares. As a result, the value of the Portfolio's shares may change on days
when you will not be able to purchase or redeem your shares.
If the Portfolio determines that it would be detrimental to the best interests
of the remaining shareholders of the Portfolio to make payment of redemption
proceeds wholly or partly in cash, the Portfolio may pay the redemption price by
a distribution in kind of securities from the Portfolio in lieu of cash.
At various times, the Portfolio may be requested to redeem shares for which it
has not yet received good payment. The Portfolio may delay or cause to be
delayed the mailing of a redemption check until such time as good payment (E.G.,
cash or certified check drawn on a United States bank) has been collected for
the purchase of such shares, which will not exceed 15 days.
TELEPHONE TRANSACTIONS. For your protection, telephone requests are recorded in
order to verify their accuracy. In addition, Shareholder/Dealer Services will
take measures to verify the identity of the caller, such as asking for name,
account number, social security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, the Portfolio is responsible
for any loss that may occur to any account due to an unauthorized telephone
call. Also for your protection, telephone transactions are not permitted on
accounts whose names or addresses have changed within the past 30 days. At times
of peak activity, it may be difficult to place requests by phone. During these
times, consider sending your request in writing.
EXCHANGES. You may exchange shares of the Portfolio for shares of the same class
of any other fund distributed by SunAmerica Capital Services, Inc. Before making
an exchange, you should review a copy of the prospectus of the fund into which
you would like to exchange. All exchanges are subject to applicable minimum
investment requirements. A Systematic Exchange Program is described under
"Additional Investor Services." An exchange is treated as a taxable sale of the
exchanged shares and a purchase of the new shares for federal income tax
purposes.
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If you exchange shares that were purchased subject to a CDSC, the CDSC will
continue to apply following the exchange. In determining the CDSC applicable to
shares being sold after an exchange, we will take into account the length of
time you held those shares prior to the exchange.
To protect the interests of other shareholders, we may cancel the exchange
privileges of any investors that, in the opinion of the Portfolio, are using
market timing strategies or making excessive exchanges. The Portfolio may change
or cancel its exchange privilege at any time, upon 60 days' written notice to
its shareholders. The Portfolio may also refuse any exchange order.
CERTIFICATED SHARES. Most shares are electronically recorded. If you wish to
have certificates for your shares, please call Shareholder/Dealer Services at
1-800-858-8850 extension 5125, for further information. You may sell or exchange
certificated shares only by returning the certificates to the Portfolio, along
with a letter of instruction and a signature guarantee. The Portfolio does not
issue certificates for fractional shares.
MULTI-PARTY CHECKS. The Fund may agree to accept a "multi-party check" in
payment for Portfolio shares. This is a check made payable to the investor by
another party and then endorsed over to the Portfolio by the investor. If you
use a multi-party check to purchase shares, you may experience processing
delays. In addition, the Fund is not responsible for verifying the authenticity
of any endorsement and assumes no liability for any losses resulting from a
fraudulent endorsement.
ADDITIONAL INVESTOR SERVICES
To select one or more of these additional services, complete the relevant
part(s) of the Supplemental Account Application. To add a service to an existing
account, contact your broker or financial advisor, or call Shareholder/Dealer
Services at 1-800-858-8850, extension 5125.
DOLLAR COST AVERAGING lets you make regular investments from your bank account
to the Portfolio or any other fund distributed by SunAmerica Capital Services of
your choice. You determine the frequency and amount of your investments, and you
can terminate your participation at any time.
SYSTEMATIC WITHDRAWAL PLAN may be used for routine bill payment or periodic
withdrawals from your account. To use:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s) and amount(s). The payee may be yourself or any other
party (which may require a signature guarantee), and there is no limit to
the number of payees you may have, as long as they are all on the same
payment schedule. Each withdrawal must be at least $50.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Make sure your dividends and capital gains are being reinvested.
You cannot elect the systematic withdrawal plan if you have requested
certificates for your shares.
SYSTEMATIC EXCHANGE PROGRAM may be used to exchange shares of the Portfolio
periodically for the same class of shares of one or more other funds distributed
by SunAmerica Capital Services, Inc. To use:
o Specify the SunAmerica Mutual Funds from which you would like money
withdrawn and into which you would like money invested.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Specify the amount(s). Each exchange must be worth at least $50.
o Accounts must be registered identically; otherwise a signature guarantee
will be required.
ASSET PROTECTION PLAN (OPTIONAL) Anchor National Life Insurance Company offers
an Asset Protection Plan to certain investors in the Portfolio. The benefits of
this optional coverage payable at death will be related to the amounts paid to
purchase Portfolio shares and to the value of the Portfolio shares held for the
benefit of the insured persons. However, to the extent the purchased shares are
redeemed prior to death, coverage with respect to these shares will terminate.
Purchasers of the Asset Protection Plan are required to authorize periodic
redemptions of Portfolio shares to pay the premiums for this coverage. These
redemptions will not be subject to CDSCs, but will have the same tax
consequences as any other Portfolio redemptions.
The Asset Protection Plan will be available to eligible persons who enroll for
the coverage within a limited time period after shares in the Portfolio are
initially purchased or transferred. In addition, coverage cannot be made
available unless Anchor National knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides Anchor National with information
regarding the beneficial owners of the shares. In addition, coverage is
available only to shares purchased on behalf of natural persons between 21 and
75 years of age; coverage is not available with respect to shares purchased for
a retirement account. Other restrictions on the coverage apply. This coverage
may not be available in all states and may be subject to additional restrictions
or limitations. Purchasers of shares should also make themselves familiar with
the impact on the Asset
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SHAREHOLDER ACCOUNT INFORMATION
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Protection Plan coverage of purchasing additional shares, reinvestment of
dividends and capital gains distributions and redemptions.
Anchor National is a SunAmerica company.
Please call 1-800-858-8850, extension 5660 for more information, including the
cost of the Asset Protection Plan option.
RETIREMENT PLANS. SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Simple IRAs, Roth IRAs, SEPs, SARSEPs, 401(k) plans,
403(b) plans and other pension, educational and profit-sharing plans. Using
these plans, you can invest in any fund distributed by SunAmerica Capital
Services, Inc. with a low minimum investment of $250 or, for some group plans,
no minimum investment at all. To find out more, call Retirement Plans at
1-800-858-8850, extension 5134.
DIVIDEND, DISTRIBUTION AND ACCOUNT POLICIES
ACCOUNT STATEMENTS. In general, you will receive account statements as follows:
o after every transaction that affects your account balance (except a
dividend reinvestment or automatic purchase from or automatic redemption
to your bank account)
o after any changes of name or address of the registered owner(s)
o in all other circumstances, annually
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS. The Portfolio generally distributes most or all of its net earnings
in the form of dividends. Income dividends and capital gains distributions, if
any, are paid at least annually by the Portfolio.
DIVIDEND REINVESTMENTS. Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same share class on which
they were paid. Alternatively, dividends and distributions may be reinvested in
any other fund distributed by SunAmerica Capital Services, Inc. or paid in cash
(if more than $10). You will need to complete the relevant part of the Account
Application to elect one of these other options. For existing accounts, contact
your broker or financial advisor or call Shareholder/Dealer Services at
1-800-858-8850, extension 5125 to change dividend and distribution payment
options.
TAXABILITY OF DIVIDENDS. The Portfolio intends to satisfy the requirements
necessary to qualify as a regulated investment company for federal income tax
purposes. For so long as the Portfolio so qualifies, it will pay no federal
income tax on the income and capital gains that it distributes to shareholders.
Dividends you receive from the Portfolio, whether reinvested or taken as cash,
are generally considered taxable. The Portfolio intends to make distributions
that may be taxed as ordinary income and capital gains (which may be taxable at
different rates depending on the length of time the Portfolio holds its assets).
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive. The Form 1099 that is
mailed to you every January details your dividends and their federal tax
category, although you should verify your tax liability with your tax
professional.
"BUYING INTO A DIVIDEND." You should note that if you purchase shares just
before a distribution, you will be taxed for that distribution like other
shareholders, even though that distribution represents simply a return of part
of your investment. You may wish to defer your purchase until after the record
date for the distribution, so as to avoid this tax impact.
TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions. If you hold Class B shares, you will not have a taxable event when
they convert into Class A shares.
OTHER TAX CONSIDERATIONS. If you are neither a lawful permanent resident nor a
citizen of the U.S. or if you are a foreign entity, ordinary income dividends
paid to you (which include distributions of net short-term capital gains) will
generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate
applies.
By law, the Portfolio must withhold 31% of your distributions and proceeds if
you have not provided a taxpayer identification number or social security
number.
This section summarizes some of the consequences under current federal income
tax law of an investment in the Portfolio. It is not a substitution for
professional tax advice. Consult your tax advisor about the potential tax
consequences of an investment in the Portfolio under all applicable laws.
SMALL ACCOUNTS. If you draw down an account so that its total value is less than
$500 ($250 for retirement plan accounts), you may be asked to purchase more
shares within 60 days. If you do not take action, the Fund may close out your
account and mail you the proceeds. Alternatively, you may be charged a $2.00
monthly charge to maintain your account. Your account will not be closed if its
drop in value is due to Portfolio performance or the effects of sales charges.
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MORE INFORMATION ABOUT THE PORTFOLIO
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INVESTMENT STRATEGIES
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The Portfolio has an investment goal and a strategy for pursuing it. The chart
summarizes information about the Portfolio's investment approach. Following this
chart is a glossary that further describes the investment and risk terminology
that we use. Please review the glossary in conjunction with this chart.
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FOCUSED TECHNET PORTFOLIO
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What is the Portfolio's investment Long-term growth of capital
goal?
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What principal investment strategies Growth and focus
does the Portfolio use to implement
its investment goal?
- --------------------------------------------------------------------------------
What are the Portfolio's principal o Active trading of up to thirty
investment techniques? equity securities of companies that
offer the potential for long-term
growth of capital and that the
Advisers believe will benefit
significantly from technological
advances or improvements, without
regard to market capitalization
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What are the Portfolio's other o Trading of foreign securities
significant investment techniques?
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What other types of securities may o Short-term investments
the Portfolio normally invest in as (up to 10%)
part of efficient portfolio o Defensive instruments
management or for return o Options and futures
enhancement purposes? o Special situations
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What principal risks normally may o Stock market volatility
affect the Portfolio? o Securities selection
o Non-diversification
o Small market capitalization
o Technology company
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What other risks o Foreign exposure
may affect the o Derivatives
Portfolio? o Hedging
o Emerging markets
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MORE INFORMATION ABOUT THE PORTFOLIO
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GLOSSARY
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Large-cap companies and Mid-cap companies generally have a substantial record of
operations (i.e., in business for at least five years) and are listed for
trading on the New York Stock Exchange or another national or international
stock exchange or, in some cases, are traded over the counter. Small-cap
companies generally will be companies that have been in business for a shorter
period of time.
- --------------------------------------------------------------------------------
INVESTMENT TERMINOLOGY
GROWTH OF CAPITAL is growth of the value of an investment.
ACTIVE TRADING means that the Portfolio may engage, when the Adviser deems
appropriate, in frequent trading of portfolio securities to achieve its
investment goal. In addition, because the Portfolio may sell a security without
regard to how long it has held the security, active trading may have tax
consequences for certain shareholders, involving a possible increase in
short-term capital gains or losses. Active trading may result in high portfolio
turnover and correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Portfolio. During periods of
increased market volatility, active trading may be more pronounced.
EQUITY SECURITIES include common and preferred stocks, convertible securities,
warrants and rights.
LARGE-CAP COMPANIES are those with market caps within the Morningstar, Inc.
Large-Cap category. Currently, this range is $9.5 billion or higher.
MID-CAP COMPANIES are those with market caps within the Morningstar, Inc.
Mid-Cap category. Currently, this range is between $1.5 billion and 9.5 billion.
SMALL-CAP COMPANIES are those with market caps within the Morningstar, Inc.
Small-Cap category. Currently, this range is $1.5 billion or less.
FOREIGN SECURITIES are issued by companies located outside of the United States
and include securities issued by companies located in emerging markets. Foreign
securities may include American Depositary Receipts (ADRs) or other similar
securities that convert into foreign securities.
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide the Portfolio
with sufficient liquidity to meet redemptions and cover expenses.
DEFENSIVE INVESTMENTS include high quality fixed income securities and money
market instruments. The Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When the
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, the Portfolio may not achieve its
investment goal.
OPTIONS AND FUTURES are contracts involving the right to receive or obligation
to deliver assets or money depending on the performance of one or more
underlying assets or financial instruments.
A SPECIAL SITUATION arises when, in the opinion of the Adviser, the securities
of a particular issuer will be recognized and appreciated in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investments in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
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RISK TERMINOLOGY
STOCK MARKET VOLATILITY: The stock market as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in the
Portfolio's portfolio.
SECURITIES SELECTION: A strategy used by the Portfolio, or securities selected
by an Adviser, may fail to produce the intended return.
SMALL MARKET CAPITALIZATION: Companies with smaller market capitalizations tend
to be at early stages of development with limited product lines, market access
for products, financial resources, access to new capital, or depth in
management. It may be difficult to obtain reliable information and financial
data about these companies. Consequently, the securities of smaller companies
may not be as readily marketable and may be subject to more abrupt or erratic
market movements.
TECHNOLOGY COMPANIES: The industries in which technology companies may be found
can be significantly affected by short product cycles, aggressive pricing of
products and services, competition from new market entrants, worldwide
scientific and technological developments and changes in governmental regulation
and policies.
NON-DIVERSIFICATION: The Portfolio will hold up to thirty securities. As a
result, its performance may be affected more by a decline in the market price of
one stock than would be the case if the Portfolio were more diversified.
FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as the U.S.
government. Foreign investments will also be affected by local political or
economic developments and governmental actions. Consequently, foreign securities
may be less liquid, more volatile and more difficult to price than U.S.
securities. These risks are heightened when the issuer is in an emerging market.
DERIVATIVES: Derivatives are subject to general risks relating to heightened
sensitivity to market volatility, interest rate fluctuations, illiquidity and
creditworthiness of the counterparty to the derivatives transactions.
HEDGING: Hedging is a strategy in which the Adviser uses a derivative security
to reduce certain risk characteristics of an underlying security or portfolio of
securities. While hedging strategies can be very useful and inexpensive ways of
reducing risk, they are sometimes ineffective due to unexpected changes in the
market. Moreover, while hedging can reduce or eliminate losses, it can also
reduce or eliminate gains.
EMERGING MARKETS: An emerging market country is one that the World Bank, the
International Finance Corporation or the United Nations or its authorities has
determined to have a low or middle income economy. Historical experience
indicates that the markets or emerging market countries have been more volatile
than more developed markets; however, such markets can provide higher rates of
return to investors.
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FUND MANAGEMENT
MANAGER: SunAmerica Asset Management Corp. selects the Advisers for the
Portfolio, may manage certain portions of the Portfolio directly, provides
various administrative services, and supervises the daily business affairs of
the Portfolio. The Advisers are responsible for decisions to buy and sell
securities for the Portfolio, selection of broker-dealers and negotiation of
commission rates for their respective portion of the Portfolio. SunAmerica may
terminate any agreement with another Adviser without shareholder approval.
Moreover, SunAmerica has received an exemptive order from the Securities and
Exchange Commission that permits SunAmerica, subject to certain conditions, to
enter into agreements relating to the Portfolio with Advisers approved by the
Board of Directors without obtaining shareholder approval. The exemptive order
also permits SunAmerica, subject to the approval of the Board but without
shareholder approval, to employ new Advisers for new or existing Portfolios,
change the terms of particular agreements with Advisers or continue the
employment of existing Advisers after events that would otherwise cause an
automatic termination of a subadvisory agreement. Shareholders of the Portfolio
have the right to terminate an agreement with an Adviser at any time by a vote
of the majority of the outstanding voting securities of the Portfolio.
Shareholders will be notified of any Adviser changes. The order also permits the
Fund to disclose to shareholders the Advisers' fees only in the aggregate for
the Portfolio. The annual rate of the investment advisory fee payable to
SunAmerica is 1.25% of average daily net assets. Payments to the Advisers for
their services is made by SunAmerica, not by the Portfolio.
SunAmerica, located in The SunAmerica Center, 733 Third Avenue, New York, New
York 10017, was organized in 1982 under the laws of Delaware, and manages,
advises and/or administers assets in excess of $30 billion as of March 31, 2000.
In addition to managing the Portfolio, SunAmerica serves as adviser, manager
and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Brazos Mutual
Funds, Seasons Series Trust, SunAmerica Equity Funds, Inc., SunAmerica Income
Funds, SunAmerica Money Market Funds, Inc., SunAmerica Series Trust and
SunAmerica Strategic Investment Series, Inc.
SunAmerica is the Portfolio's investment manager and will initially allocate the
assets of the Portfolio equally among the Advisers. SunAmerica will also
allocate new cash from share purchases and redemption requests equally among the
Advisers, unless SunAmerica determines, subject to the review of the Board, that
a different allocation of assets would be in the best interests of the Portfolio
and its shareholders.
SunAmerica intends, on a quarterly basis, to review the asset allocation in the
Portfolio to ensure that no portion of assets managed by an Adviser exceeds that
portion managed by any other Adviser to the Portfolio by more than 5%. If such a
condition exists, SunAmerica may at its discretion re-allocate cash flows among
the Advisers so as to effect a re-balancing of the Portfolio's asset allocation.
In addition, SunAmerica reserves the right, subject to the review of the Board,
to reallocate assets from one Adviser to another when it would be in the best
interests of the Portfolio and its shareholders to do so. In some instances, the
effect of the reallocation will be to shift assets from a better performing
Adviser to a portion of the Portfolio with a relatively lower total return.
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INFORMATION ABOUT ADVISERS
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THE ADVISERS AND PORTFOLIO MANAGERS FOR THE PORTFOLIO ARE DESCRIBED BELOW:
DESCRIPTION OF THE ADVISERS
SUNAMERICA ASSET MANAGEMENT CORP. See page 16.
DRESDNER RCM GLOBAL INVESTORS LLC. Dresdner is an indirect wholly owned
subsidiary of Dresdner Bank AG, an international banking organization, and is
located at Four Embarcadero Center, San Francisco, California 94111. As of
December 31, 1999, Dresdner had approximately $47 billion in total assets under
management and advice.
VAN WAGONER CAPITAL MANAGEMENT, INC. Van Wagoner is a privately owned company
located at 345 California Street, San Francisco, California 94104. As of March
31, 2000, Van Wagoner had approximately $47 billion in assets under management.
NAME, TITLE AND AFFILIATION OF
PORTFOLIO MANAGER EXPERIENCE
- ------------------------------ ----------
Walter C. Price, Jr. Mr. Price joined Dresdner in 1974 as a Senior
Portfolio Manager (Dresdner) Portfolio Securities Analyst and became a
principal in 1978. He has been a Managing
Director and Portfolio Manager with the firm
since 1985. Mr. Price has analytical
responsibility for much of Dresdner's
technology area.
Huachen Chen Mr. Chen joined Dresdner in 1985 as a
Portfolio Manager (Dresdner) Securities Analyst. He became a principal in
1994 and currently has research and money
management responsibilities for the
technology area.
Donna Calder Ms. Calder joined SunAmerica as a Portfolio
Portfolio Manager (SunAmerica) Manager in February 1998. Ms. Calder served
as a General Partner of Manhattan Capital
Partners, L.P. from November 1991 through
August 1995. She also has served as a
Portfolio Manager with Oppenheimer Management
and E.F. Hutton & Company.
Soohwan Kim, CFA Soohwhan Kim joined SunAmerica as a Senior
Senior Technology Analyst Research Analyst in July of 1999. Previously,
(SunAmerica) he was Vice President, Analyst at Citibank
Global Asset Management. From 1992 to 1993,
he served as an Economist with the Union Bank
of Switzerland.
Garrett R. Van Wagoner, CFA Mr. Van Wagoner is Portfolio Manager and
Portfolio Manager (Van Wagoner) President of the Van Wagoner Funds. Prior to
founding Van Wagoner Capital Management, Inc.
in 1995, Mr. Van Wagoner managed the Govett
Smaller Companies Fund for three years. He
also worked with Bessemer Trust, N.A. and has
over 20 years experience of equity portfolio
management.
Raiford Garrabrant, CFA Mr. Garrabrant is a Research Analyst and
Portfolio Manager and Portfolio Manager for Van Wagoner Capital
Research Analyst (Van Wagoner) Management, Inc. responsible for covering
companies with market capitalizations of $500
million and below. Prior to joining Van
Wagoner Capital Management, Inc., he was the
Assistant Portfolio Manager for the Govett
Smaller Companies Fund and assisted Mr. Van
Wagoner in managing this fund in 1994 and
1995. Mr.Garrabrant also worked with First
Citizen's Bank and Trust as a Financial
Analyst and has over eight years of research
and portfolio management experience.
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INFORMATION ABOUT ADVISERS
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DISTRIBUTOR. SunAmerica Capital Services, Inc. distributes the Portfolio's
shares. The Distributor, a SunAmerica company, receives the initial and deferred
sales charges, all or a portion of which may be re-allowed to other
broker-dealers. In addition, the Distributor receives fees under the Portfolio's
12b-1 plans.
The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances, affiliates of the
Distributor) in connection with sales of shares of the Portfolio. This
compensation may include (i) full re-allowance of the front-end sales charge on
Class A shares; (ii) additional compensation with respect to the sale of Class
A, Class B or Class II shares; or (iii) financial assistance to broker-dealers
in connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding the Portfolio, and/or
other broker-dealer sponsored special events. In some instances, this
compensation will be made available only to certain broker-dealers whose
representatives have sold a significant number of shares of the Portfolio.
Compensation may also include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
for meetings or seminars of a business nature. In addition, the following types
of non-cash compensation may be offered through sales contests: (i) travel
mileage on major air carriers; (ii) tickets for entertainment events (such as
concerts or sporting events); or (iii) merchandise (such as clothing, trophies,
clocks, pens or other electronic equipment). Broker-dealers may not use sales of
the Portfolio's shares to qualify for this compensation to the extent receipt of
such compensation may be prohibited by applicable law or the rules of any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. Dealers who receive bonuses or other incentives may be deemed to be
underwriters under the Securities Act of 1933.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Distributor based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to
investment companies of the type contemplated by the Portfolio's 12b-1 plans.
Banks and other financial services firms may be subject to various state laws
regarding these services, and may be required to register as dealers pursuant to
state law.
ADMINISTRATOR. SunAmerica Fund Services, Inc. assists the Portfolio's transfer
agent in providing shareholder services. The Administrator, a SunAmerica
company, is paid a monthly fee by the Portfolio for its services at the annual
rate of 0.22% of average daily net assets.
SunAmerica, the Distributor and Administrator are all located in The SunAmerica
Center, 733 Third Avenue, New York, New York 10017.
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FOR MORE INFORMATION
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The following documents contain more information about the Portfolio and are
available free of charge upon request:
ANNUAL AND SEMI-ANNUAL REPORTS. Contain financial statements, performance
data and information on portfolio holdings. The annual reports also contain a
written analysis of market conditions and investment strategies that
significantly affected the Portfolio's performance during the last applicable
period.
STATEMENT OF ADDITIONAL INFORMATION (SAI). Contains additional information
about the Portfolio's policies, investment restrictions and business
structure. This prospectus incorporates the SAI by reference.
You may obtain copies of these documents or ask questions about the Portfolio by
contacting:
SunAmerica Fund Services, Inc.
Mutual Fund Operations
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
1-800-858-8850, extension 5125
or
by calling your broker or financial advisor.
Information about the Portfolio (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call 1-202-942-8090 for information on the operation of the
Public Reference Room. Information about the Portfolio is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by electronic request at the
following E-mail address: [email protected], or by writing the Public Reference
Section of the Securities and Exchange Commission, Washington, D.C. 20549-0102.
You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.
DISTRIBUTOR: SunAmerica Capital Services
INVESTMENT COMPANY ACT
File No. 811-07797 [SUN AMERICA MUTUAL FUNDS LOGO]
TECPR
<PAGE>
- --------------------------------------------------------------------------------
May 22, 2000 PROSPECTUS
- --------------------------------------------------------------------------------
SUNAMERICA STYLE SELECT SERIES(R)
o FOCUS PORTFOLIO
o FOCUSED TECHNET PORTFOLIO
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
[Logo omitted]SunAmerica
Mutual Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
FUND HIGHLIGHTS .....................................................2
FINANCIAL HIGHLIGHTS ................................................8
SHAREHOLDER ACCOUNT INFORMATION .....................................9
MORE INFORMATION ABOUT THE PORTFOLIOS ..............................16
INVESTMENT STRATEGIES .........................................16
GLOSSARY ......................................................17
INVESTMENT TERMINOLOGY ....................................17
RISK TERMINOLOGY ..........................................18
FUND MANAGEMENT ...............................................19
INFORMATION ABOUT ADVISERS .........................................20
[Logo omitted]SunAmerica
Mutual Fund
<PAGE>
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FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
Q&A
- --------------------------------------------------------------------------------
A FOCUS strategy is one in which an Adviser actively invests in a small number
of holdings which constitute its favorite stock-picking ideas at any given
moment. A focus philosophy reflects the belief that, over time, the performance
of most investment managers' "highest confidence" stocks exceeds that of their
more diversified portfolios. Each adviser may invest in up to 10 securities for
a total, in each Portfolio, of up to 30 securities. Each Adviser may invest in
additional financial securities for the purposes of cash management or to hedge
a security in a Portfolio.
When deemed appropriate by an Adviser, a Portfolio may engage in ACTIVE TRADING
when it frequently trades its portfolio securities to achieve its investment
goal.
The "GROWTH" ORIENTED philosophy to which the Portfolios subscribe--that of
investing in securities believed to offer the potential for long-term growth of
capital--focuses on securities considered to have a historical record of
above-average earnings growth; to have significant growth potential; to have
above-average earnings growth or the ability to sustain earnings growth; to
offer proven or unusual products or services; or to operate in industries
experiencing increasing demand.
MARKET CAPITALIZATION represents the total market value of the outstanding
securities of a corporation.
- --------------------------------------------------------------------------------
The following questions and answers are designed to give you an overview of
SunAmerica Style Select Series, Inc. (the "Fund"), and to provide you with
information about two of the Fund's separate Portfolios and their investment
goals, principal investment strategies, and principal investment techniques.
Each Portfolio's investment goal may be changed without shareholder approval,
although you will receive notice of any change. More complete investment
information is provided in chart form, under "More Information About the
Portfolios," which is on page 16 and the glossary that follows on page 17.
Q: WHAT ARE THE PORTFOLIOS' INVESTMENT GOALS, PRINCIPAL STRATEGIES AND
TECHNIQUES?
A: PRINCIPAL
INVESTMENT INVESTMENT PRINCIPAL INVESTMENT
PORTFOLIO GOAL STRATEGIES TECHNIQUES
--------- ---- ---------- ----------
FOCUS long-term growth and active trading of equity
PORTFOLIO growth of capital focus securities that offer the
potential for long-term
growth of capital, without
regard to market
capitalization
FOCUSED long-term growth and active trading of primaily
TECHNET growth of capital focus domestic, but also foreign,
PORTFOLIO equity securities of
companies that demonstrate
the potential for long-term
growth of capital and that
the Advisers believe will
benefit significantly from
technological advances or
improvements, without
regard to market
capitalization
SunAmerica Asset Management Corp. ("SunAmerica") is the Portfolios'
investment manager and will initially allocate the assets of the Portfolios
equally among each Portfolio's Advisers. Each Adviser manages a separate
portion of a Portfolio using growth and focus strategies.
ADDITIONAL INFORMATION ABOUT THE FOCUSED TECHNET PORTFOLIO'S PRINCIPAL
INVESTMENT TECHNIQUES
The Focused TechNet Portfolio will invest in up to thirty companies whose
principal businesses the Advisers believe will significantly benefit from
advances or improvements in technology ("technology companies"). Technology
companies include companies in many industries that rely extensively on
technology in their product development or operations, are expected to
benefit from technological advances and improvements, or may be experiencing
growth in sales and earnings driven by technology related research, products
or service.
The broad industry categories in which technology companies may be found
include computer software and hardware, network and capital broadcasting,
internet and internet-related businesses, the development, production, sale,
and distribution of goods or services used in the broadcast and media
industries, communications services or equipment, the design, manufacture, or
sale of electric components, defense and data storage and retrieval,
healthcare and biotechnology. The relative size of the Portfolio's investment
in these industries will vary from time to time, and at times, one of these
industries may not be represented in the Portfolio's holdings.
The Portfolio will significantly invest, under normal market conditions, in
internet and internet-related businesses. These companies include e-commerce
enterprises as well as those that develop services and products for the
internet. The Advisers may rotate the Portfolio's holdings out of internet or
internet-related companies for temporary defensive purposes or, if market
conditions warrant.
Q: WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIOS?
A: The following section describes the principal risks of each Portfolio, while
the chart on page 16 describes principal and additional risks.
2
<PAGE>
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- --------------------------------------------------------------------------------
RISKS OF INVESTING IN EQUITY SECURITIES
Each Portfolio invests primarily in equity securities. As with any equity
fund, the value of your investment in either of these Portfolios may
fluctuate in response to stock market movements. You should be aware that the
performance of different types of equity stocks may decline under varying
market conditions--for example, "growth" stocks may perform poorly under
circumstances in which "value" stocks in general have continued to rise. In
addition, individual stocks selected for either of these Portfolios may
underperform the market generally.
RISKS OF NON-DIVERSIFICATION
Each Portfolio is non-diversified, which means that it can invest a larger
portion of its assets in the stock of a single company than can some other
mutual funds. By concentrating in a smaller number of stocks, a Portfolio's
risk is increased because the effect of each stock on the Portfolio's
performance is greater.
RISKS OF INVESTING IN SMALL COMPANIES
Stocks of smaller companies may be more volatile than, and not as readily
marketable as, those of larger companies.
RISKS OF INVESTING IN TECHNOLOGY COMPANIES (A PRINCIPAL RISK OF FOCUSED
TECHNET PORTFOLIO ONLY)
Technology companies may react similarly to certain market pressures and
events. They may be significantly affected by short product cycles,
aggressive pricing of products and services, competition from new market
entrants, and obsolescence of existing technology. As a result, the
Portfolio's returns may be considerably more volatile than a fund that does
not invest in technology companies.
ADDITIONAL PRINCIPAL RISKS
Shares of the Portfolios are not bank deposits and are not guaranteed or
insured by any bank, SunAmerica or SunAmerica's affiliates, any government
entity or the Federal Deposit Insurance Corporation. As with any mutual fund,
there is no guarantee that a Portfolio will be able to achieve its investment
goal or that the net return on an investment in a Portfolio will exceed what
could have been obtained through other investment or savings vehicles. If the
value of the assets of a Portfolio goes down, you could lose money.
Q: How have the Portfolios performed historically?
A: The following Risk/Return Bar Chart and Table illustrates the risks of
investing in the Focus Portfolio by showing the Portfolio's performance
during calendar year 1999, and comparing the Portfolio's average annual
returns to those of an appropriate market index. Sales charges are not
reflected in the bar chart. If these amounts were reflected, returns would be
less than those shown. Of course, past performance is not necessarily an
indication of how the Portfolio will perform in the future. Performance
information for the Focused TechNet Portfolio and for Class C shares of the
Focus Portfolio is not shown because they have been in existence for less
than one year.
3
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FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
FOCUS PORTFOLIO (CLASS B)
[BAR CHART OMITTED]
57.63%
--------
'99
During the period shown in the bar chart, the highest return for a quarter ended
was 31.61% (quarter ended 12/31/99) and the lowest return for a quarter was
1.06% (quarter ended 9/30/99). The Focus Portfolio's year-to-date return as of
March 31, 2000 was 9.03%.
Average Annual Total Returns
(as of the calendar year Past One Return Since
ended December 31, 1999) Year Inception****
Focus Portfolio* Class A 49.43% 46.79%
Class B 53.63% 49.41%
S&P 500 Index** 21.04% 22.22%
Morningstar Large-Cap Growth Category*** 38.63% 36.54%
* Includes sales charges.
** The S&P 500(R) is the Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices.
*** Developed by Morningstar, the Morningstar Large-Cap Growth category
curently reflects a group of 223 mutual funds that have portfolios with
median market capitalizations, price/earnings ratios, and price/book ratios
similar to those of the Portfolio.
**** Class A and B shares commenced offering on June 8, 1998.
4
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Q: WHAT ARE THE PORTFOLIOS' EXPENSES?
A: The following tables describe the fees and expenses that you may pay if you
buy and hold shares of a Portfolio.
Focused TechNet Portfolio
-------------------------
Class A Class B Class C
------- ------- -------
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)(1) .............. 5.75% None None
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed)(2) ................... None 4.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends ................................ None None None
Redemption Fee(3) ................................... None None None
Exchange Fee ........................................ None None None
Maximum Account Fee ................................. None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
Management Fees ..................................... 1.25% 1.25% 1.25%
Distribution and Service (12b-1) Fees(4) ............ 0.35% 1.00% 1.00%
Other Expenses(5) ................................... 0.37% 0.37% 0.37%
---- ---- ----
Total Annual Portfolio Operating Expenses(5)(6) ..... 1.97% 2.62% 2.62%
==== ==== ====
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
(2) Purchases of Class A shares over $1 million will be subject to a contingent
deferred sales charge (CDSC) on redemptions made within two years of
purchase. The CDSC on Class B shares applies only if shares are redeemed
within six years of their purchase. The CDSC on Class C shares applies only
if shares are redeemed within eighteen months of their purchase. See page 9
for more information on the CDSCs.
(3) A $15.00 fee is imposed on wire and overnight mail redemptions.
(4) Because these fees are paid out of the Portfolio's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(5) Estimated.
(6) The Board of Directors, including a majority of the Independent Directors,
approved the Investment Advisory and Management Agreement subject to the
Total Annual Portfolio Operating Expenses ratios set forth above.
SunAmerica will waive fees and reimbursements should the Total Annual
Portfolio Operating Expenses be higher than estimated. SunAmerica may not
increase such ratios, which are contractually required by agreement with
the Board of Directors, without the approval of the Directors, including a
majority of the Independent Directors. The expense waivers and fee
reimbursements will continue indefinitely, subject to termination by the
Directors, including a majority of the Independent Directors.
5
<PAGE>
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FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
Focus Portfolio
----------------------------
Class A Class B Class C
------- ------- -------
SHAREHOLDER FEES (FEES PAID
DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)(1) ........... 5.75% None None
Maximum Deferred Sales Charge (Load) (as a
percentage of amount redeemed)(2) ................ None 4.00% 1.00%
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends ............................. None None None
Redemption Fee(3) ................................ None None None
Exchange Fee ..................................... None None None
Maximum Account Fee .............................. None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
Management Fees .................................. 0.85% 0.85% 0.85%
Distribution and Service (12b-1) Fees(4) ......... 0.35% 1.00% 1.00%
Other Expenses(5) ................................ 0.43% 0.41% 0.43%
---- ---- ----
Total Annual Portfolio Operating Expenses(5) ..... 1.63% 2.26% 2.28%
==== ==== ====
Expense Reimbursement ............................ 0.18% 0.16% 0.18%
==== ==== ====
Net Expenses(6) .................................. 1.45% 2.10% 2.10%
==== ==== ====
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1 million or more.
(2) Purchases of Class A shares over $1 million will be subject to a contingent
deferred sales charge (CDSC) on redemptions made within two years of
purchase. The CDSC on Class B shares applies only if shares are redeemed
within six years of their purchase. The CDSC on Class II shares applies
only if shares are redeemed within eighteen months of their purchase. See
page 9 for more information on the CDSCs.
(3) A $15.00 fee is imposed on wire and overnight mail redemptions.
(4) Because these fees are paid out of the Portfolio's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
(5) As to Class C, estimated.
(6) The Board of Directors, including a majority of the Independent Directors,
approved the Investment Advisory and Management Agreement subject to the
Total Annual Portfolio Operating Expenses ratios set forth above.
SunAmerica will waive fees and reimbursements should the Total Annual
Portfolio Operating Expenses be higher than estimated. SunAmerica may not
increase such ratios, which are contractually required by agreement with
the Board of Directors, without the approval of the Directors, including a
majority of the Independent Directors. The expense waivers and fee
reimbursements will continue indefinitely, subject to termination by the
Directors, including a majority of the Independent Directors.
6
<PAGE>
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- --------------------------------------------------------------------------------
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Portfolio for the time periods
indicated and that your investment has a 5% return each year and that the
Portfolio's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions and the net expenses shown in the
fee table your costs would be:
If you redeemed your investment at the end of the periods indicated:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FOCUS PORTFOLIO
(Class A shares) ................... $714 $1,007 $1,322 $2,210
(Class B shares)* .................. $613 $ 958 $1,329 $2,188
(Class C shares) ................... $313 $ 658 $1,129 $2,188
FOCUSED TECHNET PORTFOLIO
(Class A shares) ................... $763 $1,158 $1,576 $2,739
(Class B shares)* .................. $665 $1,114 $1,590 $2,723
(Class C shares) ................... $365 $ 814 $1,390 $2,723
If you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
FOCUS PORTFOLIO
(Class A shares) ................... $714 $1,007 $1,322 $2,210
(Class B shares)* .................. $213 $ 658 $1,129 $2,188
(Class C shares) ................... $213 $ 658 $1,129 $2,188
FOCUSED TECHNET PORTFOLIO
(Class A shares) ................... $763 $1,158 $1,576 $2,739
(Class B shares)* .................. $265 $ 814 $1,390 $2,723
(Class C shares) ................... $265 $ 814 $1,390 $2,723
* Class B shares convert to Class A shares approximately seven years after
purchase as described in the section entitled "Shareholder Account
Information" on page 9. Therefore, expense information for years 8, 9 and 10
is the same for both Class A and B shares.
7
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Financial Highlights table for the Focus Portfolio is intended to help you
understand the Focus Portfolio's financial performance since inception. Certain
information reflects financial results for a single Portfolio share. The total
returns in each table represent the rate that an investor would have earned (or
lost) on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with Focus Portfolio's financial statements, are
incorporated by reference in the Fund's Statement of Additional Information
(SAI) which is available upon request. There are no financial highlights for
Focus Portfolio, Class C or Focused TechNet Portfolio, because they have been in
existence for less than one year.
FOCUS PORTFOLIO
<TABLE>
<CAPTION>
NET GAIN RATIO OF
NET (LOSS) ON NET
ASSET INVEST- TOTAL DIVI- RATIO OF INVESTMENT
VALUE, NET MENTS FROM DENDS DISTRI- NET NET EXPENSES INCOME
BEGIN- INVEST- (BOTH NET FROM NET BUTIONS ASSET ASSETS TO (LOSS) TO
NING MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF AVERAGE AVERAGE
PERIOD OF INCOME AND UN- MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD NET NET PORTFOLIO
ENDED PERIOD (LOSS)(1) REALIZED) INCOME INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S) ASSETS(4) ASSETS(4) TURNOVER
- ----------- ------ -------- -------- ------ -------- ------- ------- ------ --------- ----- - --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
------
06/08/98--
10/31/98 ... $12.50 $(0.01) $0.11 $0.10 $-- $-- $-- $12.60 0.80% $29,770 1.45%(3) (0.21)%(3) 106%
10/31/99 ... 12.60 (0.12) 6.75 6.63 -- -- -- 19.23 52.62 169,734 1.45 (0.70) 161
CLASS B
------
06/08/98--
10/31/98 ... 12.50 (0.04) 0.10 0.06 -- -- -- 12.56 0.48 45,817 2.10(3) (0.92)(3) 106
10/31/99 ... 12.56 (0.23) 6.72 6.49 -- -- -- 19.05 51.67 271,531 2.10 (1.34) 161
</TABLE>
- ----------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements (based on average net
assets):
10/31/98 10/31/99
-------- --------
Focus A ..................................... 0.32% 0.18%
Focus B ..................................... 0.32% 0.16%
8
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SHAREHOLDER ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
SELECTING A SHARE CLASS
Each Portfolio offers three classes of shares through this Prospectus: Class A,
Class B and Class C shares.
Each class of shares has its own cost structure, so you can choose the one best
suited to your investment needs. Your broker or financial advisor can help you
determine which class is right for you.
CLASS A
o Front-end sales charge, as described below. There are several ways to reduce
these charges, also described below.
o Lower annual expenses than Class B or Class C shares.
CLASS B
o No front-end sales charge; all your money goes to work for you right away.
o Higher annual expenses than Class A shares.
o Deferred sales charge on shares you sell within six years of purchase, as
described below.
o Automatic conversion to Class A shares approximately one year after such time
that no CDSC would be payable upon redemption, as described below, thus
reducing future annual expenses.
CLASS C
o No front-end sales charge; all your money goes to work for you right away.
o Higher annual expenses than Class A shares.
o Deferred sales charge on shares you sell within eighteen months of purchase,
as described below.
o No conversion to Class A.
CALCULATION OF SALES CHARGES
CLASS A. Sales Charges are as follows:
Concession
Sales Charge to Dealers
--------------------------------------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
YOUR INVESTMENT PRICE INVESTED PRICE
--------------------------------------
Less than $50,000 ....................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000 .......... 4.75% 4.99% 4.00%
$100,000 but less than $250,000 ......... 3.75% 3.90% 3.00%
$250,000 but less than $500,000 ......... 3.00% 3.09% 2.25%
$500,000 but less than $1,000,000 ....... 2.10% 2.15% 1.35%
$1,000,000 or more ...................... None None 1.00%
INVESTMENTS OF $1 MILLION OR MORE. Class A shares are available with no
front-end sales charge. However, a 1% CDSC is imposed on any shares you sell
within one year of purchase and a 0.50% CDSC is charged on any shares you sell
after the first year and within the second year after purchase.
CLASS B. Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC on shares you sell within six
years of buying them. The longer the time between the purchase and the sale of
shares, the lower the rate of the CDSC:
Class B deferred charges:
Years after purchase CDSC on shares being sold
1st or 2nd year 4.00%
3rd or 4th year 3.00%
5th year 2.00%
6th year 1.00%
7th year and thereafter None
CLASS C. Shares are offered at their net asset value per share, without any
initial sales charge. However, there is a CDSC of 1% on shares you sell within
18 months after you buy them.
DETERMINATION OF CDSC. Each CDSC is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. There is no
CDSC on shares you purchase through reinvestment of dividends. To keep your CDSC
as low as possible, each time you place a request to sell shares we will first
sell any shares in your account that are not subject to a CDSC. If there are not
enough of these shares available, we will sell shares that have the lowest CDSC.
FOR PURPOSES OF THE CDSC, WE COUNT ALL PURCHASES YOU MAKE DURING A CALENDAR
MONTH AS HAVING BEEN MADE ON THE FIRST DAY OF THAT MONTH.
9
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SHAREHOLDER ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVERS FOR CERTAIN INVESTORS. Various individuals and institutions may purchase
CLASS A shares without front-end sales charges, including:
o financial planners, institutions, broker-dealer representatives or registered
investment advisers utilizing Portfolio shares in fee-based investment
products under an agreement with the Distributor
o participants in certain retirement plans that meet applicable conditions, as
described in the Statement of Additional Information
o Fund Directors and other individuals, and their families, who are affiliated
with any Portfolio or any fund distributed by SunAmerica Capital Services,
Inc.
o selling brokers and their employees and sales representatives and their
families
o participants in "Net Asset Value Transfer Program"
We will generally waive the CDSC for CLASS B or CLASS C shares in the following
cases:
o within one year of the shareholder's death or becoming disabled
o taxable distributions from or loans to participants made by qualified
retirement plans or retirement accounts (not including rollovers) for which
SunAmerica Fund Services, Inc. serves as a fiduciary
o Fund Directors and other individuals, and their families, who are affiliated
with any Portfolio or any fund distributed by SunAmerica Capital Services,
Inc.
o to make payments through the Systematic Withdrawal Plan (subject to certain
conditions)
o participants in "Net Asset Value Transfer Program"
REDUCING YOUR CLASS A SALES CHARGES. There are several special purchase plans
that allow you to combine multiple purchases of Class A shares of SunAmerica
Mutual Funds to take advantage of the breakpoints in the sales charge schedule.
For information about the "Rights of Accumulation," "Letter of Intent,"
"Combined Purchase Privilege," and "Reduced Sales Charge for Group Purchases,"
contact your broker or financial advisor, or consult the Statement of Additional
Information.
TO UTILIZE: IF YOU THINK YOU MAY BE ELIGIBLE FOR A SALES CHARGE REDUCTION OR
CDSC WAIVER, CONTACT YOUR BROKER OR FINANCIAL ADVISOR.
REINSTATEMENT PRIVILEGE. If you sell shares of a Portfolio, within one year
after the sale, you may invest some or all of the proceeds of the sale in the
same share class of the Portfolio without a sales charge. A shareholder may use
the reinstatement privilege only one time after selling such shares. If you paid
a CDSC when you sold your shares, we will credit your account with the dollar
amount of the CDSC at the time of sale. This may impact the amount of gain or
loss recognized on the previous sale, for tax purposes. All accounts involved
must be registered in the same name(s).
DISTRIBUTION AND SERVICE (12B-1) FEES
Each class of shares of each Portfolio has its own 12b-1 plan that provides for
distribution and account maintenance and service fees (payable to the
Distributor) based on a percentage of average daily net assets, as follows:
ACCOUNT MAINTENANCE AND
CLASS DISTRIBUTION FEE SERVICE FEE
A 0.10% 0.25%
B 0.75% 0.25%
C 0.75% 0.25%
Because 12b-1 fees are paid out of a Portfolio's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
SELECTING A SHARE CLASS
Each Portfolio offers Class A, B and C shares through this prospectus. Class A
and Class B shares are available to all persons who meet eligibility
requirements. Class C shares are offered exclusively through certain financial
intermediaries who have executed an agreement with the Distributor to sell Class
C shares.
OPENING AN ACCOUNT*
1. Read this prospectus carefully.
2. Determine how much you want to invest. The minimum initial investment for
each class of the Portfolios are as follows:
o non-retirement account: $500
o retirement account: $250
o dollar cost averaging: $500 to open; you must invest at least $25 a
month
The minimum subsequent investment for the Portfolios are as follows:
o non-retirement account: $100
o retirement account: $25
3. Complete the appropriate parts of the Account Application, carefully
following the instructions. If you have questions, please contact your broker
or financial advisor or call Shareholder/Dealer Services at 1-800-858-8850,
extension 5125.
4. Complete the appropriate parts of the Supplemental Account Application. By
applying for additional investor services now, you can avoid the delay and
inconvenience of having to submit an additional application if you want to
add services later.
5. Make your initial investment using the chart on the next page. You can
initiate any purchase, exchange or sale of shares through your broker or
financial advisor.
* Class C shares are not available for sale through SunAmerica Fund Services,
Inc. or by telephone. Class C shares may be bought only through certain
financial intermediaries who have executed an agreement with the Distributor
to sell Class C shares.
10
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BUYING SHARES*
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
BY CHECK
................................................................................
o Make out a check for the o Make out a check for the
investment amount, payable to the investment amount payable to the
specific Portfolio or SunAmerica specific Portfolio or SunAmerica
Funds. Funds.
o Deliver the check and your o Include the stub from your Fund
completed Account Application statement or a note specifying
(and Supplemental Account the Portfolio name, your share
Application, if applicable) to class, your account number and
your broker or financial advisor, the name(s) in which the account
or mail them to: is registered.
SunAmerica Fund Services, Inc. o Indicate the Portfolio and
Mutual Fund Operations, account number in the memo
3rd Floor section of your check.
The SunAmerica Center
733 Third Avenue o Deliver the check and your stub
New York, New York 10017-3204 to your broker or financial
advisor, or mail them to:
o All purchases must be in U.S.
dollars. Cash will not be
accepted. A $25.00 fee will be NON-RETIREMENT ACCOUNTS:
charged for all checks returned SunAmerica Fund Services, Inc.
due to insufficient funds. c/o NFDS
P.O. Box 21-9373
Kansas City, Missouri 64121-9373
RETIREMENT ACCOUNTS:
SunAmerica Fund Services, Inc.
Mutual Fund Operations,
3rd Floor
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
BY WIRE
................................................................................
o Deliver your completed o Instruct your bank to wire the
application to your broker or amount of your investment to:
financial advisor or fax it to
SunAmerica Fund Services, Inc. at State Street Bank
212-551-5585. & Trust Company
Boston, MA
o Obtain your account number by ABA #0110-00028
referring to your statement or by DDA # 99029712
calling your broker or financial
advisor or Shareholder/Dealer Specify the Portfolio name, your share
Services at 1-800-858-8850, ext. class, your Portfolio number, account
5125. number and the name(s) in which the
account is registered. Your bank may
o Instruct your bank to wire the charge a fee to wire funds.
amount of your investment to:
State Street Bank
& Trust Company
Boston, MA
ABA #0110-00028
DDA # 99029712
Specify the Portfolio name, your choice
of share class, your new Portfolio
number and account number and the
name(s) in which the account is
registered. Your bank may charge a fee
to wire funds.
TO OPEN OR ADD TO AN ACCOUNT USING DOLLAR COST AVERAGING, SEE "ADDITIONAL
INVESTOR SERVICES."
* Class C shares are not available for sale through SunAmerica Fund Services,
Inc. or by telephone. Class C shares may be bought only through certain
financial intermediaries who have executed an agreement with the Distributor
to sell Class C shares.
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SHAREHOLDER ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
SELLING SHARES
HOW REQUIREMENTS
THROUGH YOUR BROKER OR FINANCIAL ADVISOR
................................................................................
o Accounts of any type. o Call your broker or financial
advisor to place your order to
o Sales of any amount. sell shares.
BY MAIL
................................................................................
o Accounts of any type. o Write a letter of instruction
indicating the Portfolio name,
o Include all signatures and any your share class, your account
additional documents that may be number, the name(s) in which the
required (see next page). account is registered and the
dollar value or number of shares
you wish to sell.
o Mail the materials to:
o Sales of $100,000 or more require
the letter of instruction to have
SunAmerica Fund Services, Inc. a signature guarantee.
Mutual Fund Operations,
3rd Floor o A check will normally be mailed
The SunAmerica Center on the next business day to the
733 Third Avenue name(s) and address in which the
New York, New York 10017-3204 account is registered, or
otherwise according to your
letter of instruction.
BY PHONE
................................................................................
o Most accounts. o Call Shareholder/Dealer Services
at 1-800-858-8850, extension 5125
o Sales of less than $100,000. between 8:30 a.m. and 7:00 p.m.
(Eastern time) on most business
days. Indicate the Portfolio
name, the name of the person
requesting the redemption, your
share class, your account number,
the name(s) in which the account
is registered and the dollar
value or number of shares you
wish to sell.
o A check will be mailed to the
name(s) and address in which the
account is registered or to a
different address indicated in a
written authorization previously
provided to the Portfolio by the
shareholder(s) on the account.
BY WIRE
................................................................................
o Request by mail to sell any o Proceeds will normally be wired
amount (accounts of any type). on the next business day. A $15
fee will be deducted from your
o Request by phone to sell less account.
than $100,000.
TO SELL SHARES THROUGH A SYSTEMATIC WITHDRAWAL PLAN, SEE "ADDITIONAL INVESTOR
SERVICES."
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SELLING SHARES IN WRITING. In certain circumstances, you will need to make your
request to sell shares in writing. Corporations, executors, administrators,
trustees or guardians may need to include additional items with a request to
sell shares. You may also need to include a signature guarantee, which protects
you against fraudulent orders. You will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling shares worth $100,000 or more
o you are requesting payment other than by a check mailed to the address of
record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
o a broker or securities dealer
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution
o a credit union
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
TRANSACTION POLICIES
VALUATION OF SHARES. The net asset value per share (NAV) for each Portfolio and
class is determined each business day at the close of regular trading on the New
York Stock Exchange (generally 4:00 p.m., Eastern time) by dividing the net
assets of each class by the number of such class's outstanding shares.
Investments for which market quotations are readily available are valued at
market at their price as of the close of regular trading on the New York Stock
Exchange for the day. All other securities and assets are valued at fair value
following procedures approved by the Directors.
BUY AND SELL PRICES. When you buy shares, you pay the NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive the NAV
minus any applicable CDSCs.
EXECUTION OF REQUESTS. Each Portfolio is open on those days when the New York
Stock Exchange is open for regular trading. We execute buy and sell requests at
the next NAV to be calculated after a Portfolio receives your request in good
order. If the Portfolio or the Distributor receives your order before the
Portfolio's close of business (generally 4:00 p.m., Eastern time), you will
receive that day's closing price. If the Portfolio or the Distributor receives
your order after that time, you will receive the next business day's closing
price. If you place your order through a broker or financial advisor, you should
make sure the order is transmitted to the Portfolio before the Portfolio's close
of business. Each Portfolio and the Distributor reserve the right to reject any
order to buy shares.
During periods of extreme volatility or market crisis, a Portfolio may
temporarily suspend the processing of sell requests, or may postpone payment of
proceeds for up to three business days or longer, as allowed by federal
securities laws.
Each Portfolio may invest in securities that are primarily listed on foreign
exchanges that trade on weekends or other days when a Portfolio does not price
its shares. As a result, the value of a Portfolio's shares may change on days
when you will not be able to purchase or redeem your shares.
If a Portfolio determines that it would be detrimental to the best interests of
the remaining shareholders of the Portfolio to make payment of redemption
proceeds wholly or partly in cash, the Portfolio may pay the redemption price by
a distribution in kind of securities from the Portfolio in lieu of cash.
At various times, a Portfolio may be requested to redeem shares for which it has
not yet received good payment. A Portfolio may delay or cause to be delayed the
mailing of a redemption check until such time as good payment (E.G., cash or
certified check drawn on a United States bank) has been collected for the
purchase of such shares, which will not exceed 15 days.
TELEPHONE TRANSACTIONS. For your protection, telephone requests are recorded in
order to verify their accuracy. In addition, Shareholder/Dealer Services will
take measures to verify the identity of the caller, such as asking for name,
account number, social security or other taxpayer ID number and other relevant
information. If appropriate measures are not taken, the Portfolio is responsible
for any loss that may occur to any account due to an unauthorized telephone
call. Also for your protection, telephone transactions are not permitted on
accounts whose names or addresses have changed within the past 30 days. At times
of peak activity, it may be difficult to place requests by phone. During these
times, consider sending your request in writing.
EXCHANGES. You may exchange shares of a Portfolio for shares of the same class
of any other fund distributed by SunAmerica Capital Services, Inc. Additionally,
you may exchange Class C shares of a Portfolio for Class IIshares of any other
fund distributed by SunAmerica Capital Services, Inc. Before making an exchange,
you should review a copy of the prospectus of the fund into which you would like
to exchange. All exchanges are subject to applicable minimum investment
requirements. A Systematic Exchange Program is described under "Additional
Investor Services." An exchange is treated as a taxable sale of the exchanged
shares and a purchase of the new shares for federal income tax purposes.
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SHAREHOLDER ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
If you exchange shares that were purchased subject to a CDSC, the CDSC will
continue to apply following the exchange. In determining the CDSC applicable to
shares being sold after an exchange, we will take into account the length of
time you held those shares prior to the exchange.
To protect the interests of other shareholders, we may cancel the exchange
privileges of any investors that, in the opinion of the Portfolio, are using
market timing strategies or making excessive exchanges. A Portfolio may change
or cancel its exchange privilege at any time, upon 60 days' written notice to
its shareholders. A Portfolio may also refuse any exchange order.
CERTIFICATED SHARES. Most shares are electronically recorded. If you wish to
have certificates for your shares, please call Shareholder/Dealer Services at
1-800-858-8850 extension 5125, for further information. You may sell or exchange
certificated shares only by returning the certificates to the Portfolio, along
with a letter of instruction and a signature guarantee. The Portfolios do not
issue certificates for fractional shares.
MULTI-PARTY CHECKS. A Portfolio may agree to accept a "multi-party check" in
payment for Portfolio shares. This is a check made payable to the investor by
another party and then endorsed over to a Portfolio by the investor. If you use
a multi-party check to purchase shares, you may experience processing delays. In
addition, the Portfolio is not responsible for verifying the authenticity of any
endorsement and assumes no liability for any losses resulting from a fraudulent
endorsement.
ADDITIONAL INVESTOR SERVICES
To select one or more of these additional services, complete the relevant
part(s) of the Supplemental Account Application. To add a service to an existing
account, contact your broker or financial advisor, or call Shareholder/Dealer
Services at 1-800-858-8850, extension 5125.
DOLLAR COST AVERAGING lets you make regular investments from your bank account
to a Portfolio or any other fund distributed by SunAmerica Capital Services of
your choice. You determine the frequency and amount of your investments, and you
can terminate your participation at any time.
SYSTEMATIC WITHDRAWAL PLAN may be used for routine bill payment or periodic
withdrawals from your account. To use:
o Make sure you have at least $5,000 worth of shares in your account.
o Make sure you are not planning to invest more money in this account
(buying shares during a period when you are also selling shares of the
same fund is not advantageous to you, because of sales charges).
o Specify the payee(s) and amount(s). The payee may be yourself or any other
party (which may require a signature guarantee), and there is no limit to
the number of payees you may have, as long as they are all on the same
payment schedule. Each withdrawal must be at least $50.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Make sure your dividends and capital gains are being reinvested.
You cannot elect the systematic withdrawal plan if you have requested
certificates for your shares.
SYSTEMATIC EXCHANGE PROGRAM may be used to exchange shares of a Portfolio
periodically for the same class of shares of one or more other funds distributed
by SunAmerica Capital Services, Inc. To use:
o Specify the SunAmerica Mutual Fund(s) from which you would like money
withdrawn and into which you would like money invested.
o Determine the schedule: monthly, quarterly, semi-annually, annually or in
certain selected months.
o Specify the amount(s). Each exchange must be worth at least $50.
o Accounts must be registered identically; otherwise a signature guarantee
will be required.
ASSET PROTECTION PLAN (OPTIONAL) Anchor National Life Insurance Company offers
an Asset Protection Plan to certain investors in each Portfolio. The benefits of
this optional coverage payable at death will be related to the amounts paid to
purchase Portfolio shares and to the value of the Portfolio shares held for the
benefit of the insured persons. However, to the extent the purchased shares are
redeemed prior to death, coverage with respect to these shares will terminate.
Purchasers of the Asset Protection Plan are required to authorize periodic
redemptions of Portfolio shares to pay the premiums for this coverage. These
redemptions will not be subject to CDSCs, but will have the same tax
consequences as any other Portfolio redemptions.
The Asset Protection Plan will be available to eligible persons who enroll for
the coverage within a limited time period after shares in a Portfolio are
initially purchased or transferred. In addition, coverage cannot be made
available unless Anchor National knows for whose benefit shares are purchased.
For instance, coverage cannot be made available for shares registered in the
name of your broker unless the broker provides Anchor National with information
regarding the beneficial owners of the shares. In addition, coverage is
available only to shares purchased on behalf of natural persons between 21 and
75 years of age; coverage is not available with respect to shares purchased for
a retirement account. Other restrictions on the coverage apply. This coverage
may not be available in all states and may be subject to additional restrictions
or limitations. Purchasers of shares should also make themselves familiar with
the impact on the Asset
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- --------------------------------------------------------------------------------
Protection Plan coverage of purchasing additional shares, reinvestment of
dividends and capital gains distributions and redemptions.
Anchor National is a SunAmerica company.
Please call 1-800-858-8850, extension 5660 for more information, including the
cost of the Asset Protection Plan option.
RETIREMENT PLANS. SunAmerica Mutual Funds offer a range of qualified retirement
plans, including IRAs, Simple IRAs, Roth IRAs, SEPs, SARSEPs, 401(k) plans,
403(b) plans and other pension, educational and profit-sharing plans. Using
these plans, you can invest in any fund distributed by SunAmerica Capital
Services, Inc. with a low minimum investment of $250 or, for some group plans,
no minimum investment at all. To find out more, call Retirement Plans at
1-800-858-8850, extension 5134.
DIVIDEND, DISTRIBUTION AND ACCOUNT POLICIES
ACCOUNT STATEMENTS. In general, you will receive account statements as follows:
o after every transaction that affects your account balance (except a
dividend reinvestment or automatic purchase from or automatic redemption
to your bank account)
o after any changes of name or address of the registered owner(s)
o in all other circumstances, quarterly or annually, depending upon the
Portfolio
Every year you should also receive, if applicable, a Form 1099 tax information
statement, mailed by January 31.
DIVIDENDS. Each Portfolio generally distributes most or all of its net earnings
in the form of dividends. Income dividends and capital gains distributions, if
any, are paid at least annually by the Portfolios.
DIVIDEND REINVESTMENTS. Your dividends and distributions, if any, will be
automatically reinvested in additional shares of the same share class on which
they were paid. Alternatively, dividends and distributions may be reinvested in
any other fund distributed by SunAmerica Capital Services, Inc. or paid in cash
(if more than $10). You will need to complete the relevant part of the Account
Application to elect one of these other options. For existing accounts, contact
your broker or financial advisor or call Shareholder/Dealer Services at
1-800-858-8850, extension 5125 to change dividend and distribution payment
options.
TAXABILITY OF DIVIDENDS. The Portfolios intend to satisfy the requirements
necessary to qualify as a regulated investment company for federal income tax
purposes. For so long as each Portfolio so qualifies, it will pay no federal
income tax on the income and capital gains that it distributes to shareholders.
Dividends you receive from a Portfolio, whether reinvested or taken as cash, are
generally considered taxable. The Portfolios intend to make distributions that
may be taxed as ordinary income and capital gains (which may be taxable at
different rates depending on the length of time the Portfolio holds its assets).
Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
"BUYING INTO A DIVIDEND." You should note that if you purchase shares just
before a distribution, you will be taxed for that distribution like other
shareholders, even though that distribution represents simply a return of part
of your investment. You may wish to defer your purchase until after the record
date for the distribution, so as to avoid this tax impact.
TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the sale
price of the shares you sell or exchange, you may have a gain or a loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions. If you hold Class B shares, you will not have a taxable event when
they convert into Class A shares.
OTHER TAX CONSIDERATIONS. If you are neither a lawful permanent resident nor a
citizen of the U.S. or if you are a foreign entity, ordinary income dividends
paid to you (which include distributions of net short-term capital gains) will
generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate
applies.
By law, each Portfolio must withhold 31% of your distributions and proceeds if
you have not provided a taxpayer identification number or social security
number.
This section summarizes some of the consequences under current federal income
tax law of an investment in a Portfolio. It is not a substitution for
professional tax advice. Consult your tax advisor about the potential tax
consequences of an investment in a Portfolio under all applicable laws.
SMALL ACCOUNTS. If you draw down an account so that its total value is less than
$500 ($250 for retirement plan accounts), you may be asked to purchase more
shares within 60 days. If you do not take action, the Fund may close out your
account and mail you the proceeds. Alternatively, you may be charged a $2.00
monthly charge to maintain your account. Your account will not be closed if its
drop in value is due to Portfolio performance or the effects of sales charges.
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MORE INFORMATION ABOUT THE PORTFOLIOS
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INVESTMENT
STRATEGIES
- ------------------------------------------------------------------------------
Each Portfolio has its own investment goal and a strategy for pursuing it. The
chart summarizes information about each Portfolio's investment approach.
Following this chart is a glossary that further describes the investment and
risk terminology that we use. Please review the glossary in conjunction with
this chart.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOCUS FOCUSED
PORTFOLIO TECHNET PORTFOLIO
- --------------------------------------------------------------------------------
What is the Portfolio's Long-term growth of Long-term growth of
investment goal? capital capital
- --------------------------------------------------------------------------------
What principal investment Growth and focus Growth and focus
strategies does the
Portfolio use to
implement its
investment goal?
- --------------------------------------------------------------------------------
What are the Portfolio's o Active trading of up o Active trading of up
principal investment to thirty equity to thirty equity
techniques? securities that offer securities of
the potential for companies that offer
long-term growth of the potential for
capital, without regard long-term growth of
to market capitalization capital and that the
Advisers believe will
benefit significantly
from technological
advances or
improvements, without
regard to market
capitalization
- --------------------------------------------------------------------------------
What are the Portfolio's o Trading of foreign o Trading of foreign
other significant securities securities
investment techniques?
- --------------------------------------------------------------------------------
What other types of o Short-term investments o Short-term investments
securities may (up to 10%) (up to 10%)
investments the Portfolio o Defensive instruments o Defensive instruments
normally invest in as o Options and futures o Options and futures
part of efficient o Special situations o Special situations
portfolio management or
for return enhancement
purposes?
- --------------------------------------------------------------------------------
What principal risks o Stock market volatility o Stock market volatility
normally may affect the o Securities selection o Securities selection
Portfolio? o Non-diversification o Non-diversification
o Small market
capitalization
o Technology companies
- --------------------------------------------------------------------------------
What other risks may affect o Foreign exposure o Foreign exposure
the Portfolio? o Derivatives o Derivatives
o Hedging o Hedging
o Emerging markets
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MORE INFORMATION ABOUT THE PORTFOLIOS
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GLOSSARY
- --------------------------------------------------------------------------------
LARGE-CAP COMPANIES and MID-CAP COMPANIES generally have a substantial record of
operations (i.e., in business for at least five years) and are listed for
trading on the New York Stock Exchange or another national or international
stock exchange or, in some cases, are traded over the counter. SMALL-CAP
COMPANIES generally will be companies that have been in business for a shorter
period of time.
- --------------------------------------------------------------------------------
INVESTMENT TERMINOLOGY
GROWTH OF CAPITAL is growth of the value of an investment.
ACTIVE TRADING means that the Portfolio may engage, when the Adviser deems
appropriate, in frequent trading of portfolio securities to achieve its
investment goal. In addition, because a Portfolio may sell a security without
regard to how long it has held the security, active trading may have tax
consequences for certain shareholders, involving a possible increase in
short-term capital gains or losses. Active trading may result in high portfolio
turnover and correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by a Portfolio. During periods of increased
market volatility, active trading may be more pronounced.
EQUITY SECURITIES include common and preferred stocks, convertible securities,
warrants and rights.
LARGE-CAP COMPANIES are those with market caps within the Morningstar, Inc.
Large-Cap category. Currently, this range is $9.5 billion or higher.
MID-CAP COMPANIES are those with market caps within the Morningstar, Inc.
Mid-Cap category. Currently, this range is between $1.5 billion and $9.5
billion.
SMALL-CAP COMPANIES are those with market caps within the Morningstar, Inc.
Small-Cap category. Currently, this range is $1.5 billion or less.
FOREIGN SECURITIES are issued by companies located outside of the United States
and include securities issued by companies located in emerging markets. Foreign
securities may include American Depositary Receipts (ADRs) or other similar
securities that convert into foreign securities.
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Portfolio
with sufficient liquidity to meet redemptions and cover expenses.
DEFENSIVE INSTRUMENTS include high quality fixed income securities and money
market instruments. A Portfolio will make temporary defensive investments in
response to adverse market, economic, political or other conditions. When a
Portfolio takes a defensive position, it may miss out on investment
opportunities that could have resulted from investing in accordance with its
principal investment strategy. As a result, a Portfolio may not achieve its
investment goal.
OPTIONS AND FUTURES are contracts involving the right to receive or obligation
to deliver assets or money depending on the performance of one or more
underlying assets or financial instruments.
A SPECIAL SITUATION arises when, in the opinion of the Adviser, the securities
of a particular issuer will be recognized and appreciated in value due to a
specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
technological breakthrough, a management change or other extraordinary corporate
event, or differences in market supply of and demand for the security.
Investments in special situations may carry an additional risk of loss in the
event that the anticipated development does not occur or does not attract the
expected attention.
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MORE INFORMATION ABOUT THE PORTFOLIOS
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RISK TERMINOLOGY
STOCK MARKET VOLATILITY: The stock market as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Portfolio's portfolio.
SECURITIES SELECTION: A strategy used by a Portfolio, or securities selected by
an Adviser, may fail to produce the intended return.
NON-DIVERSIFICATION: Each Portfolio will hold up to thirty securities. As a
result, performance may be affected more by a decline in the market price of one
stock than would be the case if each Portfolio were more diversified.
SMALL MARKET CAPITALIZATION: Companies with smaller market capitalizations tend
to be at early stages of development with limited product lines, market access
for products, financial resources, access to new capital, or depth in
management. It may be difficult to obtain reliable information and financial
data about these companies. Consequently, the securities of smaller companies
may not be as readily marketable and may be subject to more abrupt or erratic
market movements.
TECHNOLOGY COMPANIES: The industries in which technology companies may be found
can be significantly affected by short product cycles, aggressive pricing of
products and services, competition from new market entrants, worldwide
scientific and technological developments and changes in governmental regulation
and policies.
FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as the U.S.
government. Foreign investments will also be affected by local political or
economic developments and governmental actions. Consequently, foreign securities
may be less liquid, more volatile and more difficult to price than U.S.
securities. These risks are heightened when the issuer is in an emerging market.
DERIVATIVES: Derivatives are subject to general risks relating to heightened
sensitivity to market volatility, interest rate fluctuations, illiquidity and
creditworthiness of the counterparty to the derivatives transactions.
HEDGING: Hedging is a strategy in which the Adviser uses a derivative security
to reduce certain risk characteristics of an underlying security or portfolio of
securities. While hedging strategies can be very useful and inexpensive ways of
reducing risk, they are sometimes ineffective due to unexpected changes in the
market or exchange. Moreover, while hedging can reduce or eliminate losses, it
can also reduce or eliminate gains.
EMERGING MARKETS: An emerging market country is one that the World Bank, the
International Finance Corporation or the United Nations or its authorities has
determined to have a low or middle income economy. Historical experience
indicates that the markets of emerging market countries have been more volatile
than more developed markets; however, such markets can provide higher rates of
return to investors.
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FUND MANAGEMENT
- --------------------------------------------------------------------------------
MANAGER: SunAmerica Asset Management Corp. selects the Advisers for each
Portfolio, may manage certain portions of each Portfolio directly, provides
various administrative services, and supervises the daily business affairs of
each Portfolio. The Advisers are responsible for decisions to buy and sell
securities for each Portfolio, selection of broker-dealers and negotiation of
commission rates for their respective portion of the relevant Portfolio.
SunAmerica may terminate any agreement with another Adviser without shareholder
approval. Moreover, SunAmerica has received an exemptive order from the
Securities and Exchange Commission that permits SunAmerica, subject to certain
conditions, to enter into agreements relating to a Portfolio with Advisers
approved by the Board of Directors without obtaining shareholder approval. The
exemptive order also permits SunAmerica, subject to the approval of the Board
but without shareholder approval, to employ new Advisers for new or existing
Portfolios, change the terms of particular agreements with Advisers or continue
the employment of existing Advisers after events that would otherwise cause an
automatic termination of a subadvisory agreement. Shareholders of a Portfolio
have the right to terminate an agreement with an Adviser at any time by a vote
of the majority of the outstanding voting securities of such Portfolio.
Shareholders will be notified of any Adviser changes. The order also permits the
Portfolio to disclose to shareholders the Advisers' fees only in the aggregate
for each Portfolio. The annual rate of the investment advisory fee payable to
SunAmerica is 1.25% of average daily net assets for the Focused TechNet
Portfolio and 0.85% of average daily net assets for the Focus Portfolio.
Payments to the Advisers for their services is made by SunAmerica, not by the
Portfolios.
SunAmerica, located in The SunAmerica Center, 733 Third Avenue, New York, New
York 10017, was organized in 1982 under the laws of Delaware, and manages,
advises and/or administers assets in excess of $30 billion as of March 31, 2000.
In addition to managing the Portfolios, SunAmerica serves as adviser, manager
and/or administrator for Anchor Pathway Fund, Anchor Series Trust, Brazos Mutual
Funds, Seasons Series Trust, SunAmerica Equity Funds, Inc., SunAmerica Income
Funds, SunAmerica Money Market Funds, Inc., SunAmerica Series Trust and
SunAmerica Strategic Investment Series, Inc.
SunAmerica is the Portfolios' investment manager and will initially allocate the
assets of each Portfolio equally among the Advisers. SunAmerica will also
allocate new cash from share purchases and redemption requests equally among the
Advisers, unless SunAmerica determines, subject to the review of the Board, that
a different allocation of assets would be in the best interests of the Portfolio
and its shareholders.
With respect to the Focus Portfolio, in general, SunAmerica will not rebalance
or reallocate assets of the Portfolio among Advisers. However, SunAmerica
reserves the right, subject to the review of the Board, to reallocate assets
from one Adviser to another when it would be in the best interests of the
Portfolio and its shareholders to do so. In some instances, the effect of the
reallocation will be to shift assets from a better performing Adviser to a
portion of the Portfolio with a relatively lower total return.
With respect to the Focused TechNet Portfolio, SunAmerica intends, on a
quarterly basis, to review the asset allocation in the Portfolio to ensure that
no portion of assets managed by an Adviser exceeds that portion managed by any
other Adviser to the Portfolio by more than 5%. If such a condition exists,
SunAmerica generally will then re-allocate cash flows among the Advisers so as
to effect a re-balancing of the Portfolio's asset allocation. In addition,
SunAmerica reserves the right, subject to the review of the Board, to reallocate
assets from one Adviser to another when it would be in the best interests of the
Portfolio and its shareholders to do so. In some instances, the effect of the
reallocation will be to shift assets from a better performing Adviser to a
portion of the Portfolio with a relatively lower total return.
19
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INFORMATION ABOUT ADVISERS
- --------------------------------------------------------------------------------
THE ADVISERS AND PORTFOLIO MANAGERS FOR THE PORTFOLIOS ARE DESCRIBED BELOW:
PORTFOLIO MANAGEMENT ALLOCATED
PORTFOLIO AMONG THE FOLLOWING ADVISERS
- --------- ------------------------------
Focus Portfolio Fred Alger Management, Inc. ("Alger")
Jennison Associates LLC ("Jennison")
Marsico Capital Management, LLC ("Marsico")
Focused TechNet Portfolio SunAmerica
Dresdner RCM Global Investors LLC
("Dresdner")
Van Wagoner Capital Management, Inc.
("Van Wagoner")
DESCRIPTION OF THE ADVISERS
FRED ALGER MANAGEMENT, INC. Alger is a New York corporation wholly owned by its
principals and located at 1 World Trade Center, New York, New York 10048. Since
1964, Alger has provided investment management services to large corporate
pension plans, state and local governments, insurance companies, mutual funds
and high net-worth individuals. As of December 31, 1999, Alger had approximately
$17.4 billion in assets under management.
JENNISON ASSOCIATES LLC. Jennison is a Delaware limited liability company
located at 466 Lexington Avenue, New York, NY 10017. As of December 31, 1999,
Jennison had approximately $59.1 billion in assets under management for
institutional and mutual fund clients.
MARSICO CAPITAL MANAGEMENT, LLC. Marsico is a Colorado limited liability company
located at 1200 17th Street, Suite 1300, Denver, CO 80202. As of December 31,
1999, Marsico had approximately $14 billion in assets under management.
SUNAMERICA ASSET MANAGEMENT CORP. See page 19.
DRESDNERRCM GLOBAL INVESTORS LLC. Dresdner is an indirect wholly owned
subsidiary of Dresdner Bank AG, an international banking organization, and is
located at Four Embarcadero Center, San Francisco, California 94111. As of
December 31, 1999, Dresdner had approximately $47 billion in total assets under
management and advice.
VAN WAGONER CAPITAL MANAGEMENT, INC. Van Wagoner is a privately owned company
located at 345 California Street, San Francisco, California 94104. As of March
31, 2000, Van Wagoner had approximately $4.5 billion in assets under management.
NAME, TITLE AND
AFFILIATION OF
PORTFOLIO PORTFOLIO MANAGER EXPERIENCE
- --------- ----------------- ----------
Focus Portfolio David D. Alger Mr. Alger joined Alger in 1971
President and and has been President and
Portfolio Manager (Alger) Director since 1995. Prior to
1995, Mr. Alger was Executive
Vice President and Director of
Research with the firm.
Spiros "Sig" Segalas Mr. Segalas is a founding
Portfolio Manager member of Jennison, which was
(Jennison) established in 1969, and he
has been a Director and Equity
Portfolio Manager ever since.
In addition, Mr. Segalas has
served as President and Chief
Investment Officer of Jennison
since 1993 and 1973,
respectively.
Thomas F. Marsico Mr. Marsico has been the
Portfolio Manager Chairman and Chief Executive
(Marsico) Officer of Marsico since he
formed Marsico in 1997. From
1988 through 1997, Mr. Marsico
served as the portfolio
manager of the Janus Twenty
Fund and from 1991 through
1997, Mr. Marsico served as
the portfolio manager of the
Janus Growth & Income Fund.
20
<PAGE>
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- --------------------------------------------------------------------------------
NAME, TITLE AND
AFFILIATION OF
PORTFOLIO PORTFOLIO MANAGER EXPERIENCE
- --------- ----------------- ----------
Focused TechNet Walter C. Price, Jr. Mr. Price joined Dresdner in
Portfolio Portfolio Manager (Dresdner) 1974 as a Senior Securities
Analyst and became a principal
in 1978. He has been a
Managing Director and
Portfolio Manager with the
firm since 1985. Mr. Price has
analytical responsibility for
much of Dresdner's technology
area.
Huachen Chen Mr. Chen joined Dresdner in
Portfolio Manager (Dresdner) 1985 as a Securities Analyst.
He became a principal in 1994
and currently has research and
money management
responsibilities for the
technology area.
Donna Calder Ms. Calder joined SunAmerica
Portfolio Manager (SunAmerica) as a Portfolio Manager in
February 1998. Ms. Calder
served as a General Partner of
Manhattan Capital Partners,
L.P. from November 1991
through August 1995. She also
has served as a Portfolio
Manager with Oppenheimer
Management and E.F. Hutton &
Company.
Soohwan Kim, CFA Soohwhan Kim joined SunAmerica
Senior Technology Analyst as a Senior Research Analyst
(SunAmerica) in July of 1999. Previously,
he was Vice President, Analyst
at Citibank Global Asset
Management. From 1992 to 1993,
he served as an Economist with
the Union Bank of Switzerland.
Garrett R. Van Wagoner, CFA Mr. Van Wagoner is Portfolio
Portfolio Manager Manager and President of the
(Van Wagoner) Van Wagoner Funds. Prior to
founding Van Wagoner Capital
Management, Inc. in 1995, Mr.
Van Wagoner managed the Govett
Smaller Companies Fund for
three years. He also worked
with Bessemer Trust, N.A. and
has over 20 years experience
of equity portfolio
management.
Raiford Garrabrant, CFA Mr. Garrabrant is a Research
Portfolio Manager and Analyst and Portfolio Manager
Research Analyst(Van Wagoner) for Van Wagoner Capital
Management, Inc. responsible
for covering companies with
market capitalizations of $500
million and below. Prior to
joining Van Wagoner Capital
Management, Inc., he was the
Assistant Portfolio Manager
for the Govett Smaller
Companies Fund and assisted
Mr. Van Wagoner in managing
this fund in 1994 and 1995.
Mr.Garrabrant also worked with
First Citizen's Bank and Trust
as a Financial Analyst and has
over eight years of research
and portfolio management
experience.
21
<PAGE>
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INFORMATION ABOUT ADVISERS
- --------------------------------------------------------------------------------
DISTRIBUTOR. SunAmerica Capital Services, Inc. distributes each Portfolio's
shares. The Distributor, a SunAmerica company, receives the initial and deferred
sales charges, all or a portion of which may be re-allowed to other
broker-dealers. In addition, the Distributor receives fees under each
Portfolio's 12b-1 plans.
The Distributor, at its expense, may from time to time provide additional
compensation to broker-dealers (including in some instances, affiliates of the
Distributor) in connection with sales of shares of a Portfolio. This
compensation may include (i) full re-allowance of the front-end sales charge on
Class A shares; (ii) additional compensation with respect to the sale of Class
A, Class B or Class C shares; or (iii) financial assistance to broker-dealers in
connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding one or more of the
Portfolios, and/or other broker-dealer sponsored special events. In some
instances, this compensation will be made available only to certain
broker-dealers whose representatives have sold a significant number of shares of
a Portfolio. Compensation may also include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited registered
representatives for meetings or seminars of a business nature. In addition, the
following types of non-cash compensation may be offered through sales contests:
(i) travel mileage on major air carriers; (ii) tickets for entertainment events
(such as concerts or sporting events); or (iii) merchandise (such as clothing,
trophies, clocks, pens or other electronic equipment). Broker-dealers may not
use sales of a Portfolio's shares to qualify for this compensation to the extent
receipt of such compensation may be prohibited by applicable law or the rules of
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. Dealers who receive bonuses or other incentives may be deemed to
be underwriters under the Securities Act of 1933.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion of
the Distributor based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to
investment companies of the type contemplated by each Portfolio's 12b-1 plans.
Banks and other financial services firms may be subject to various state laws
regarding these services, and may be required to register as dealers pursuant to
state law.
ADMINISTRATOR. SunAmerica Fund Services, Inc. assists the Portfolio's transfer
agent in providing shareholder services. The Administrator, a SunAmerica
company, is paid a monthly fee by each Portfolio for its services at the annual
rate of 0.22% of average daily net assets.
SunAmerica, the Distributor and Administrator are all located in The SunAmerica
Center, 733 Third Avenue, New York, New York 10017.
22
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<PAGE>
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FOR MORE INFORMATION
- --------------------------------------------------------------------------------
The following documents contain more information about each Portfolio and are
available free of charge upon request:
ANNUAL AND SEMI-ANNUAL REPORTS. Contain financial statements, performance
data and information on portfolio holdings. The annual reports also contain
a written analysis of market conditions and investment strategies that
significantly affected a Portfolio's performance during the last applicable
period.
STATEMENT OF ADDITIONAL INFORMATION (SAI). Contains additional information
about a Portfolio's policies, investment restrictions and business
structure. This prospectus incorporates the SAI by reference.
You may obtain copies of these documents or ask questions about the Portfolios
by contacting:
SunAmerica Fund Services, Inc.
Mutual Fund Operations
The SunAmerica Center
733 Third Avenue
New York, New York 10017-3204
1-800-858-8850, extension 5125
or
by calling your broker or financial advisor.
Information about the Portfolios (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call 1-202-942-8090 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by electronic request at the
following E-mail address: [email protected], or by writing the Public Reference
Section of the Securities and Exchange Commission, Washington, D.C. 20549-0102.
You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.
DISTRIBUTOR: SunAmerica Capital Services
INVESTMENT COMPANY ACT
File No. 811-07797 [Logo omitted]SunAmerica
Mutual Fund
<PAGE>
SUNAMERICA STYLE SELECT SERIES(R)
FOCUS PORTFOLIO
FOCUSED TECHNET PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2000
The SunAmerica Center General Marketing and
733 Third Avenue Shareholder Information
New York, NY 10017-3204 (800) 858-8850
The Focus Portfolio and the Focused TechNet Portfolio (each, a
"Portfolio" and collectively, the "Portfolios") are two of eleven separate
investment portfolios of SunAmerica Style Select Series, Inc. (the
"Corporation"). Each Portfolio is managed by SunAmerica Asset Management Corp.
("SunAmerica"). The assets of each Portfolio are normally allocated among at
least three advisers (each, an "Adviser"), each of which is independently
responsible for advising its respective portion of the Portfolio's assets. The
Advisers may include SunAmerica and otherwise will consist of professional
investment advisers selected by SunAmerica subject to the review and approval of
the Corporation's Board of Directors. In choosing Advisers, SunAmerica will seek
to obtain, within each Portfolio's overall objective, a distinct investment
style. This Statement of Additional Information relates only to the Focus and
Focused TechNet Portfolios.
This Statement of Additional Information is not a Prospectus, but should
be read in conjunction with the Corporation's Prospectuses dated May 1, 2000 and
May 22, 2000. To obtain a Prospectus free of charge, please call the Corporation
at (800) 858-8850. Each Prospectus is incorporated by reference into this
Statement of Additional Information and this Statement of Additional Information
is incorporated by reference into the Prospectus. The Corporation's audited
financial statements are incorporated into this Statement of Additional
Information by reference to its 1999 annual report to shareholders. You may
request a copy of the annual report at no charge by calling (800) 858-8850 or
writing the Corporation at SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204. Capitalized terms used herein but not defined have the meanings
assigned to them in the Prospectuses.
TABLE OF CONTENTS
PAGE
THE CORPORATION......................................................... B-3
INVESTMENT OBJECTIVES AND POLICIES...................................... B-3
INVESTMENT RESTRICTIONS................................................. B-25
DIRECTORS AND OFFICERS.................................................. B-27
ADVISERS, DISTRIBUTOR AND ADMINISTRATOR................................. B-30
PORTFOLIO TRANSACTIONS AND BROKERAGE.................................... B-35
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES..................... B-37
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES................... B-43
EXCHANGE PRIVILEGE...................................................... B-43
DETERMINATION OF NET ASSET VALUE........................................ B-44
PERFORMANCE DATA........................................................ B-45
DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... B-50
<PAGE>
RETIREMENT PLANS........................................................ B-53
DESCRIPTION OF SHARES................................................... B-54
ADDITIONAL INFORMATION.................................................. B-56
FINANCIAL STATEMENTS.................................................... B-57
APPENDIX .............................................................APPENDIX-1
No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained in this
Statement of Additional Information or in the Prospectuses, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Corporation, SunAmerica, any Adviser or SunAmerica
Capital Services (the "Distributor"). This Statement of Additional Information
and the Prospectuses do not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction in which
such an offer to sell or solicitation of an offer to buy may not lawfully be
made.
B-2
<PAGE>
THE CORPORATION
The Corporation, organized as a Maryland corporation on July 3, 1996,
is a non-diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Corporation
consists of eleven Portfolios.
Class A, B and II shares of the Focus Portfolio commenced offering, and
the Focus Portfolio commenced operations, on June 1, 1998. The Class Z shares of
Focus Portfolio commenced offering on April 1, 1999. The Class C shares of Focus
Portfolio commenced offering on May 22, 2000.
The Focused TechNet Portfolio commenced operations on May 22, 2000.
offering Class A, B, C and II shares.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of the each of Focus Portfolio
and Focused TechNet Portfolio are described in the respective Portfolio's
Prospectus. Certain types of securities in which the Portfolios may invest and
certain investment practices the Portfolios may employ, which are described
under "More Information about the Portfolio(s) - Investment Strategies" in each
Prospectus, are discussed more fully below. Unless otherwise specified, each
Portfolio may invest in the following securities. The stated percentage
limitations are applied to an investment at the time of purchase unless
indicated otherwise.
TECHNOLOGY COMPANIES. The Focused TechNet Portfolio will invest, under
normal market conditions, at least 65% of its total assets in companies whose
principal businesses the Advisers believe will significantly benefit from
advances or improvements in technology ("technology companies"). Many of the
industries in which technology companies are found have exhibited and continue
to exhibit rapid growth, both through increasing demand for existing products
and services and the broadening of the technology market. In general, the stocks
of large capitalized companies that are well established in the technology
market can be expected to grow with the market. The expansion of technology and
its related industries, however, also provides a favorable environment for
investment in small-cap to mid-cap companies. The Portfolio's investment policy
is not limited to any minimum capitalization requirement and the Portfolio may
hold securities without regard to the capitalization of the issuer.
Companies in the rapidly changing fields of technology face special
risks. For example, their products or services may not prove commercially
successful or may become obsolete quickly. The value of the Focused TechNet
Portfolio's shares may be susceptible to factors affecting technology companies
and to greater risk and market fluctuation than in investment in a corporation
that invests in a broader range of portfolio securities not focus on any
particular market segment. Technology companies may be subject to greater
governmental regulation than many other companies and changes in governmental
policies and the need for regulatory approvals may have a material adverse
effect on these companies. Additionally, these companies may be subject to risks
of developing technologies, competitive pressure and other factors and are
dependent upon consumer and business acceptance as new technologies evolve.
WARRANTS AND RIGHTS. Each Portfolio may invest in warrants, which give
the holder of the warrant a right to purchase a given number of shares of a
particular issue at a specified price until expiration. Such investments
generally can provide a greater potential for profit or loss than investments of
equivalent amounts in the underlying common stock. The prices of warrants do not
necessarily move with the prices of the underlying securities. If the holder
does not sell the warrant, he risks the loss of his entire investment if the
market price of the underlying stock
B-3
<PAGE>
does not, before the expiration date, exceed the exercise price of the warrant
plus the cost thereof. Investment in warrants is a speculative activity.
Warrants pay no dividends and confer no rights (other than the right to purchase
the underlying stock) with respect to the assets of the issuer. Rights represent
a preemptive right of stockholders to purchase additional shares of a stock at
the time of a new issuance before the stock is offered to the general public,
allowing the stockholder to retain the same ownership percentage after the new
stock offering.
CONVERTIBLE SECURITIES AND PREFERRED STOCKS. Convertible securities may
be debt securities or preferred stock with a conversion feature. Traditionally,
convertible securities have paid dividends or interest at rates higher than
common stocks but lower than non-convertible securities. They generally
participate in the appreciation or depreciation of the underlying stock into
which they are convertible, but to a lesser degree. In recent years,
convertibles have been developed that combine higher or lower current income
with options and other features. Generally, preferred stock has a specified
dividend and ranks after bonds and before common stocks in its claim on income
for dividend payments and on assets should the company be liquidated. While most
preferred stocks pay a dividend, a Portfolio may purchase preferred stock where
the issuer has omitted, or is in danger of omitting, payment of its dividend.
Such investments would be made primarily for their capital appreciation
potential.
INVESTMENT IN SMALL, UNSEASONED COMPANIES. As described in the
Prospectus, each Portfolio may invest in the securities of small companies.
While such companies may realize more substantial growth than larger, more
established companies, they may also be subject to some additional risks. It may
be difficult to obtain reliable information and financial data on such companies
and the securities of these small companies may not be readily marketable,
making it difficult to dispose of shares when desirable. A risk of investing in
smaller, emerging companies is that they often are at an earlier stage of
development and therefore have limited product lines, market access for such
products, financial resources and depth in management as compared to larger,
more established companies, and their securities may be subject to more abrupt
or erratic market movements than securities of larger, more established
companies or the market averages in general. In addition, certain smaller
issuers may face difficulties in obtaining the capital necessary to continue in
operation and may go into bankruptcy, which could result in a complete loss of
an investment. Smaller companies also may be less significant factors within
their industries and may have difficulty withstanding competition from larger
companies. If other investment companies and investors who invest in such
issuers trade the same securities when a Portfolio attempts to dispose of its
holdings, the Portfolio may receive lower prices than might otherwise be
obtained.
Mid-Cap companies may also suffer more significant losses as well as
realize more substantial growth than larger, more established issuers. Thus,
investments in such companies tend to be more volatile and somewhat speculative.
FOREIGN SECURITIES. Investments in foreign securities offer potential
benefits not available from investments solely in securities of domestic issuers
by offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets.
Each Portfolio may invest in securities of foreign issuers in the form
of American Depositary Receipts (ADRs). The Focus Portfolio may invest in U.S.
dollar denominated securities of foreign companies. ADRs are securities,
typically issued by a U.S. financial institution, that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer and
deposited with the depository. ADRs may be sponsored or unsponsored. A sponsored
ADR is issued by a depository that has an exclusive relationship with the issuer
of the underlying security. An unsponsored ADR may be issued by any number of
U.S. depositories. Holders of unsponsored ADRs
B-4
<PAGE>
generally bear all the costs associated with establishing the unsponsored ADR.
The depository of an unsponsored ADR is under no obligation to distribute
shareholder communications received from the underlying issuer or to pass
through to the holders of the unsponsored ADR voting rights with respect to the
deposited securities or pool of securities. The Portfolios may invest in either
type of ADR. Although the U.S. investor holds a substitute receipt of ownership
rather than direct stock certificates, the use of the depository receipts in the
United States can reduce costs and delays as well as potential currency exchange
and other difficulties. A Portfolio may purchase securities in local markets and
direct delivery of these ordinary shares to the local depository of an ADR agent
bank in the foreign country. Simultaneously, the ADR agents create a certificate
that settles at the Corporation's custodian in three days. A Portfolio may also
execute trades on the U.S. markets using existing ADRs. A foreign issuer of the
security underlying an ADR is generally not subject to the same reporting
requirements in the United States as a domestic issuer. Accordingly, the
information available to a U.S. investor will be limited to the information the
foreign issuer is required to disclose in its own country and the market value
of an ADR may not reflect undisclosed material information concerning the issuer
of the underlying security. For purposes of a Portfolio's investment policies,
the Portfolio's investments in these types of securities will be deemed to be
investments in the underlying securities. Generally ADRs, in registered form,
are dollar denominated securities designed for use in the U.S. securities
markets, which represent and may be converted into the underlying foreign
security.
Investments in foreign securities, including securities of emerging
market countries, present special additional investment risks and considerations
not typically associated with investments in domestic securities, including
reduction of income by foreign taxes; fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than the U.S.;
greater difficulties in commencing lawsuits; higher brokerage commission rates
and custodian fees than the U.S.; increased possibilities in some countries of
expropriation, confiscatory taxation, political, financial or social instability
or adverse diplomatic developments; the imposition of foreign taxes on
investment income derived from such countries; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign economies.
The performance of investments in securities denominated in a foreign
currency ("non-dollar securities") will depend on, among other things, the
strength of the foreign currency against the dollar and the interest rate
environment in the country issuing the foreign currency. Absent other events
that could otherwise affect the value of non-dollar securities (such as a change
in the political climate or an issuer's credit quality), appreciation in the
value of the foreign currency generally can be expected to increase the value of
a Portfolio's non-dollar securities in terms of U.S. dollars. A rise in foreign
interest rates or decline in the value of foreign currencies relative to the
U.S. dollar generally can be expected to depress the value of the Portfolio's
non-dollar securities. Currencies are evaluated on the basis of fundamental
economic criteria (e.g., relative inflation levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data.
Because the Portfolios may invest in securities that are listed
primarily on foreign exchanges that trade on weekends or other days when the
Corporation does not price its shares, the value of the Portfolios' shares may
change on days when a shareholder will not be able to purchase or redeem shares.
FIXED INCOME SECURITIES. Fixed income securities are broadly
characterized as those that provide for periodic payments to the holder of the
security at a stated rate. Most fixed income securities, such as bonds,
represent indebtedness of the issuer and provide for repayment of principal at a
stated time in the future. Others do
B-5
<PAGE>
not provide for repayment of a principal amount, although they may represent a
priority over common stockholders in the event of the issuer's liquidation. Many
fixed income securities are subject to scheduled retirement, or may be retired
or "called" by the issuer prior to their maturity dates. The interest rate on
certain fixed income securities, known as "variable rate obligations," is
determined by reference to or is a percentage of an objective standard, such as
a bank's prime rate, the 90-day Treasury bill rate, or the rate of return on
commercial paper or bank certificates of deposit, and is periodically adjusted.
Certain variable rate obligations may have a demand feature entitling the holder
to resell the securities at a predetermined amount. The interest rate on certain
fixed income securities, called "floating rate instruments," changes whenever
there is a change in a designated base rate.
The market values of fixed income securities tend to vary inversely
with the level of interest rates -- when interest rates rise, their values will
tend to decline; when interest rates decline, their values generally will tend
to rise. The potential for capital appreciation with respect to variable rate
obligations or floating rate instruments will be less than with respect to
fixed-rate obligations. Long-term instruments are generally more sensitive to
these changes than short-term instruments. The market value of fixed income
securities and therefore their yield are also affected by the perceived ability
of the issuer to make timely payments of principal and interest.
The Portfolios currently invests only in corporate bonds or notes of
issuers having outstanding short-term securities rated in the top two rating
categories by Standard & Poor's and Moody's or in instruments issued, guaranteed
or insured by the U.S. government, its agencies or instrumentalities.
CORPORATE DEBT INSTRUMENTS. These instruments, such as bonds, represent
the obligation of the issuer to repay a principal amount of indebtedness at a
stated time in the future and, in the usual case, to make periodic interim
payments of interest at a stated rate. Each Portfolio may purchase corporate
obligations that mature or that may be redeemed in one year or less. These
obligations originally may have been issued with maturities in excess of one
year.
INVESTMENT GRADE. A designation applied to intermediate and long-term
corporate debt securities rated within the highest four rating categories
assigned by Standard & Poor's (AAA, AA, A or BBB) or by Moody's (Aaa, Aa, A or
Baa), or, if unrated, considered by the Adviser to be of comparable quality. The
ability of the issuer of an investment grade debt security to pay interest and
to repay principal is considered to vary from extremely strong (for the highest
ratings) through adequate (for the lowest ratings given above), although the
lower-rated investment grade securities may be viewed as having speculative
elements as well.
U.S. GOVERNMENT SECURITIES. Each Portfolio may invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances. For these securities, the payment
of principal and interest is unconditionally guaranteed by the U.S. government.
They are of the highest possible credit quality. These securities are subject to
variations in market value due to fluctuations in interest rates, but if held to
maturity, are guaranteed by the U.S. government to be paid in full.
Each Portfolio may also invest in securities issued by agencies of the
U.S. government or instrumentalities of the U.S. government. These obligations,
including those guaranteed by federal agencies or instrumentalities, may or may
not be backed by the "full faith and credit" of the United States. Obligations
of the Government National Mortgage Association ("GNMA"), the Farmers Home
Administration ("FMHA") and the Export-Import Bank are backed by the full faith
and credit of the United States.
B-6
<PAGE>
Each Portfolio may also invest in securities issued by U.S. government
instrumentalities and certain federal agencies that are neither direct
obligations of, nor are they guaranteed by, the U.S. Treasury. However, they
involve federal sponsorship in one way or another. For example, some are backed
by specific types of collateral; some are supported by the issuer's right to
borrow from the Treasury; some are supported by the discretionary authority of
the Treasury to purchase certain obligations of the issuer; and others are
supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, the Federal National Mortgage Association ("FNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Land Banks, Central Bank for
Cooperatives, Federal Intermediate Credit Banks and Federal Home Loan Banks. In
the case of securities not backed by the full faith and credit of the United
States, the Portfolio must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States if the agency or instrumentality does not meet
its commitments.
Each Portfolio may, in addition to the U.S. government securities noted
above, invest in mortgage-backed securities (including private mortgage-backed
securities), such as GNMA, FNMA or FHLMC certificates (as further discussed
below), which represent an undivided ownership interest in a pool of mortgages.
The mortgages backing these securities include conventional thirty-year
fixed-rate mortgages, fifteen-year fixed-rate mortgages, graduated payment
mortgages and adjustable rate mortgages. The U.S. government or the issuing
agency guarantees the payment of interest and principal of these securities.
However, the guarantees do not extend to the securities' yield or value, which
are likely to vary inversely with fluctuations in interest rates. These
certificates are in most cases pass-through instruments, through which the
holder receives a share of all interest and principal payments, including
prepayments, on the mortgages underlying the certificate, net of certain fees.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life of a particular issue of pass-through certificates.
Mortgage-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying mortgage obligations. Thus, the
actual life of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally result from
the sale of the underlying property or the refinancing or foreclosure of
underlying mortgages. The occurrence of prepayments is affected by a wide range
of economic, demographic and social factors and, accordingly, it is not possible
to predict accurately the average life of a particular pool. Yield on such pools
is usually computed by using the historical record of prepayments for that pool,
or, in the case of newly-issued mortgages, the prepayment history of similar
pools. The actual prepayment experience of a pool of mortgage loans may cause
the yield realized by a Portfolio to differ from the yield calculated on the
basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as does the value of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise on a comparable basis with other debt securities because of the
prepayment feature of pass-through securities. The reinvestment of scheduled
principal payments and unscheduled prepayments that a Portfolio receives may
occur at higher or lower rates than the original investment, thus affecting the
yield of the Portfolio. Monthly interest payments received by the Portfolio have
a compounding effect, which may increase the yield to shareholders more than
debt obligations that pay interest semi-annually. Because of those factors,
mortgage-backed securities may be less effective than U.S. Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Accelerated prepayments adversely affect yields for pass-through
securities purchased at a premium (i.e., at a price in excess of principal
amount) and may involve additional risk of loss of principal because the premium
may not have been fully amortized at the time the obligation is repaid. The
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opposite is true for pass-through securities purchased at a discount. A
Portfolio may purchase mortgage-backed securities at a premium or at a discount.
The following is a description of GNMA, FNMA and FHLMC certificates,
the most widely available mortgage-backed securities:
GNMA CERTIFICATES. GNMA Certificates are mortgage-backed securities
that evidence an undivided interest in a pool or pools of mortgages. GNMA
Certificates that a Portfolio may purchase are the modified pass-through type,
which entitle the holder to receive timely payment of all interest and principal
payments due on the mortgage pool, net of fees paid to the issuer and GNMA,
regardless of whether or not the mortgagor actually makes the payment.
GNMA guarantees the timely payment of principal and interest on
securities backed by a pool of mortgages insured by the Federal Housing
Administration or the FMHA, or guaranteed by the Veterans Administration. The
GNMA guarantee is authorized by the National Housing Act and is backed by the
full faith and credit of the United States. The GNMA is also empowered to borrow
without limitation from the U.S. Treasury if necessary to make any payments
required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosure will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the
Portfolio has purchased the certificates at a premium in the secondary market.
FHLMC CERTIFICATES. FHLMC issues two types of mortgage pass-through
securities: mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs") (collectively, "FHLMC Certificates"). PCs resemble GNMA
Certificates in that each PC represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. The FHLMC guarantees
timely monthly payment of interest (and, under certain circumstances, principal)
of PCs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal once
a year in guaranteed minimum payments. The expected average life of these
securities is approximately ten years. The FHLMC guarantee is not backed by the
full faith and credit of the U.S. government.
FNMA CERTIFICATES. FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates represent a pro rata share
of all interest and principal payments made and owed on the underlying pool.
FNMA guarantees timely payment of interest and principal on FNMA Certificates.
The FNMA guarantee is not backed by the full faith and credit of the U.S.
government.
Conventional mortgage pass-through securities ("Conventional Mortgage
Pass-Throughs") represent participation interests in pools of mortgage loans
that are issued by trusts formed by originators of the institutional investors
in mortgage loans (or represent custodial arrangements administered by such
institutions). These originators and institutions include commercial banks,
savings and loans associations, credit unions, savings banks, insurance
companies, investment banks or special purpose subsidiaries of the foregoing.
For federal income tax purposes, such trusts are generally treated as grantor
trusts or real estate mortgage investment conduits ("REMICs") and, in either
case, are generally not subject to any significant amount of federal income tax
at the entity level.
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The mortgage pools underlying Conventional Mortgage Pass-Throughs
consist of conventional mortgage loans evidenced by promissory notes secured by
first mortgages or first deeds of trust or other similar security instruments
creating a first lien on residential or mixed residential and commercial
properties. Conventional Mortgage Pass-Throughs (whether fixed or adjustable
rate) provide for monthly payments that are a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans, net of any fees or other
amount paid to any guarantor, administrator and/or servicer of the underlying
mortgage loans. A trust fund with respect to which a REMIC election has been
made may include regular interests in other REMICs, which in turn will
ultimately evidence interests in mortgage loans.
Conventional mortgage pools generally offer a higher rate of interest
than government and government-related pools because of the absence of any
direct or indirect government or agency payment guarantees. However, timely
payment of interest and principal of mortgage loans in these pools may be
supported by various forms of insurance or guarantees, including individual
loans, title, pool and hazard insurance and letters of credit. The insurance and
guarantees may be issued by private insurers and mortgage poolers. Although the
market for such securities is becoming increasingly liquid, mortgage-related
securities issued by private organizations may not be readily marketable.
Another type of mortgage-backed security in which each Portfolio may
invest is a collateralized mortgage obligation ("CMO"). CMOs are fully
collateralized bonds that are the general obligations of the issuer thereof
(e.g., the U.S. government, a U.S. government instrumentality, or a private
issuer). Such bonds generally are secured by an assignment to a trustee (under
the indenture pursuant to which the bonds are issued) of collateral consisting
of a pool of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of principal and
interest on the underlying mortgages are not passed through to the holders of
the CMOs as such (i.e., the character of payments of principal and interest is
not passed through, and therefore payments to holders of CMOs attributable to
interest paid and principal repaid on the underlying mortgages do not
necessarily constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs.
Principal and interest on the underlying mortgage assets may be
allocated among the several classes of CMOs in various ways. In certain
structures (known as "sequential pay" CMOs), payments of principal, including
any principal prepayments, on the mortgage assets generally are applied to the
classes of CMOs in the order of their respective final distribution dates. Thus,
no payment of principal will be made on any class of sequential pay CMOs until
all other classes having an earlier final distribution date have been paid in
full.
Additional structures of CMOs include, among others, "parallel pay"
CMOs. Parallel pay CMOs are structured to apply principal payments and
prepayments of the mortgage assets to two or more classes concurrently
on a proportionate or disproportionate basis. These simultaneous payments are
taken into account in calculating the final distribution date of each class.
A wide variety of CMOs may be issued in the parallel pay or sequential
pay structures. These securities include accrual certificates (also known as
"Z-Bonds"), which accrue interest at a specified rate only until all other
certificates having an earlier final distribution date have been retired and are
converted thereafter to an interest-paying security, and planned amortization
class ("PAC") certificates, which are parallel pay CMOs that generally require
that specified amounts of principal be applied on each payment date to one or
more classes of CMOs (the "PAC Certificates"), even though all other principal
payments and prepayments of the mortgage assets are then required to be applied
to one or more other classes of the certificates. The scheduled principal
payments for the PAC Certificates generally have the highest priority on each
payment date after interest due has been paid to all
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classes entitled to receive interest currently. Shortfalls, if any, are added to
the amount payable on the next payment date. The PAC Certificate payment
schedule is taken into account in calculating the final distribution date of
each class of PAC. In order to create PAC tranches, one or more tranches
generally must be created to absorb most of the volatility in the underlying
mortgage assets. These tranches tend to have market prices and yields that are
much more volatile than the PAC classes.
Each Portfolio may also invest in stripped mortgage-backed securities.
Stripped mortgage-backed securities are often structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. Stripped mortgage-backed securities have greater market
volatility than other types of U.S. government securities in which a Portfolio
invests. A common type of stripped mortgage-backed security has one class
receiving some or none of the interest and all or most of the inter of the
principal (the "principal only" class) from the mortgage pool, while the other
class will receive all or most of the interest (the "interest only" class). The
yield to maturity on an interest only class is extremely sensitive not only to
changes in prevailing interest rates, but also to the rate of principal
payments, including principal prepayments, on the underlying pool of mortgage
assets, and a rapid rate of principal payment may have a material adverse effect
on a Portfolio's yield. While interest-only and principal-only securities are
generally regarded as being illiquid, such securities may be deemed to be liquid
if they can be disposed of promptly in the ordinary course of business at a
value reasonably close to that used in the calculation of a Portfolio's net
asset value per share. Only government interest only and principal only
securities backed by fixed-rate mortgages and determined to be liquid under
guidelines and standards established by the Directors may be considered liquid
securities not subject to a Portfolio's limitation on investments in illiquid
securities.
ASSET-BACKED SECURITIES. Each Portfolio may invest in asset-backed
securities. These securities, issued by trusts and special purpose corporations,
are backed by a pool of assets, such as credit card and automobile loan
receivables, representing the obligations of a number of different parties.
Asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicer to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. Therefore, there is the possibility that the issuer of the
asset-backed security may be unable to meet its payments, in whole or in part,
to the holders of the asset-backed securities, including a Portfolio. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors to make payments on underlying assets, the
securities may contain elements of credit support that fall into two categories:
(i) liquidity protection and (ii) protection against losses resulting from
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that the receipt of payments on the underlying pool
occurs in a timely fashion. Protection against losses resulting from ultimate
default ensures payment through insurance policies or letters of credit obtained
by the issuer or sponsor from third parties. A
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Portfolio will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in such
a security.
ZERO COUPON BONDS, STEP-COUPON BONDS, DEFERRED INTEREST BONDS AND PIK
BONDS. Fixed income securities in which a Portfolio may invest also include zero
coupon bonds, step-coupon bonds, deferred interest bonds and bonds on which the
interest is payable in kind ("PIK bonds"). Zero coupon and deferred interest
bonds are debt obligations issued or purchased at a significant discount from
face value. A step-coupon bond is one in which a change in interest rate is
fixed contractually in advance. PIK bonds are debt obligations that provide that
the issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments may experience greater
volatility in market value due to changes in interest rates and other factors
than debt obligations that make regular payments of interest. A Portfolio will
accrue income on such investments for tax and accounting purposes, as required,
that is distributable to shareholders and which, because no cash is received at
the time of accrual, may require the liquidation of other portfolio securities
under disadvantageous circumstances to satisfy the Portfolio's distribution
obligations.
LOAN PARTICIPATIONS. Each Portfolio may invest in loan participations.
Loan participations are loans sold by the lending bank to an investor. The loan
participant borrower may be a company with highly-rated commercial paper that
finds it can obtain cheaper funding through a loan participation than with
commercial paper and can also increase the company's name recognition in the
capital markets. Loan participations often generate greater yield than
commercial paper.
The borrower of the underlying loan will be deemed to be the issuer
except to the extent the Portfolio derives its rights from the intermediary bank
that sold the loan participations. Because loan participations are undivided
interests in a loan made by the issuing bank, the Portfolio may not have the
right to proceed against the loan participations borrower without the consent of
other holders of the loan participations. In addition, loan participations will
be treated as illiquid if, in the judgment of the Adviser, they can not be sold
within seven days.
SHORT-TERM DEBT SECURITIES. As described in the Prospectus, in addition
to its primary investments, the Focus Portfolio may also invest up to 10% of its
total assets, and the Focused TechNet Portfolio may also invest up to 25% of its
total assets, in U.S. dollar denominated money market instruments (a) for
liquidity purposes (to meet redemptions and expenses) or (b) to generate a
return on idle cash held in a Portfolio's portfolio during periods when an
Adviser is unable to locate favorable investment opportunities. For temporary
defensive purposes, each Portfolio may invest up to 100% of its total assets in
cash and short-term fixed income securities, including corporate debt
obligations and money market instruments rated in one of the two highest
categories by a nationally recognized statistical rating organization (or
determined by the Adviser to be of equivalent quality). The types of short-term
and temporary defensive investments in which a Portfolio may invest are
described below:
Money Market Securities - Money market securities may include
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, repurchase agreements,
commercial paper, bankers' acceptances, time deposits and
certificates of deposit.
Commercial Bank Obligations - Certificates of deposit
(interest-bearing time deposits), including Eurodollar
certificates of deposit (certificates of deposit issued by
domestic or foreign banks located outside the U.S.) and Yankee
certificates of deposit (certificates of deposit issued by
branches of foreign banks located in the U.S.), domestic and
foreign bankers' acceptances (time
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drafts drawn on a commercial bank where the bank accepts an
irrevocable obligation to pay at maturity) and documented
discount notes (corporate promissory discount notes
accompanied by a commercial bank guarantee to pay at maturity)
representing direct or contingent obligations of commercial
banks with total assets in excess of $1 billion, based on the
latest published reports. Each Portfolio may also invest in
obligations issued by U.S. commercial banks with total assets
of less than $1 billion if the principal amount of these
obligations owned by the Portfolio is fully insured by the
Federal Deposit Insurance Corporation ("FDIC"). Each Portfolio
may also invest in notes and obligations issued by foreign
branches of U.S. and foreign commercial banks.
Savings Association Obligations - Certificates of deposit
(interest-bearing time deposits) issued by mutual savings
banks or savings and loan associations with assets in excess
of $1 billion and whose deposits are insured by the FDIC. Each
Portfolio may also invest in obligations issued by mutual
savings banks or savings and loan associations with total
assets of less than $1 billion if the principal amount of
these obligations owned by the Portfolio is fully insured by
the FDIC.
Commercial Paper - Short-term notes (up to 12 months) issued
by domestic and foreign corporations or governmental bodies.
Each Portfolio may purchase commercial paper only if judged by
the Adviser to be of suitable investment quality. This
includes commercial paper that is (a) rated in the two highest
categories by Standard & Poor's and by Moody's, or (b) other
commercial paper deemed on the basis of the issuer's
creditworthiness to be of a quality appropriate for the
Portfolio. See the Appendix for a description of the ratings.
A Portfolio will not purchase commercial paper described in
(b) above if such paper would in the aggregate exceed 15% of
its total assets after such purchase. The commercial paper in
which the Portfolio may invest includes variable amount master
demand notes. Variable amount master demand notes permit a
Portfolio to invest varying amounts at fluctuating rates of
interest pursuant to the agreement in the master note. These
are direct lending obligations between the lender and
borrower, they are generally not traded, and there is no
secondary market. Such instruments are payable with accrued
interest in whole or in part on demand. The amounts of the
instruments are subject to daily fluctuations as the
participants increase or decrease the extent of their
participation. Investments in these instruments are limited to
those that have a demand feature enabling the Portfolio
unconditionally to receive the amount invested from the issuer
upon seven or fewer days' notice. In connection with master
demand note arrangements, the Adviser, subject
to the direction of the Directors, monitors on an ongoing
basis the earning power, cash flow and other liquidity ratios
of the borrower, and its ability to pay principal and interest
on demand. The Adviser also considers the extent to which the
variable amount master demand notes are backed by bank letters
of credit. These notes generally are not rated by Moody's or
Standard & Poor's and a Portfolio may invest in them only if
it is determined that at the time of investment the notes are
of comparable quality to the other commercial paper in which
the Portfolio may invest. Master demand notes are considered
to have a maturity equal to the repayment notice period unless
the Adviser has reason to believe that the borrower could not
make timely repayment upon demand.
Corporate Bonds and Notes - Each Portfolio may purchase
corporate obligations that mature or that may be redeemed in
one year or less. These obligations originally may have been
issued with maturities in excess of one year. A Portfolio may
invest only in corporate bonds or notes of issuers having
outstanding short-term securities rated in the top two rating
categories by
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Standard & Poor's and Moody's. See the Appendix for a
description of investment-grade ratings by Standard & Poor's
and Moody's.
Government Securities - Debt securities maturing within one
year of the date of purchase include adjustable-rate mortgage
securities backed by GNMA, FNMA, FHLMC and other non-agency
issuers. Although certain floating or variable rate
obligations (securities whose coupon rate changes at least
annually and generally more frequently) have maturities in
excess of one year, they are also considered short-term debt
securities. See "U.S. Government Securities" above. Each
Portfolio may also purchase securities issued or guaranteed by
a foreign government, its agencies or instrumentalities. See
"Foreign Securities" above.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase
agreements involving only securities in which it could otherwise invest and with
selected banks, brokers and securities dealers whose financial condition is
monitored by the Adviser, subject to the guidance of the Board of Directors. In
such agreements, the seller agrees to repurchase the security at a mutually
agreed-upon time and price. The period of maturity is usually quite short,
either overnight or a few days, although it may extend over a number of months.
The repurchase price is in excess of the purchase price by an amount that
reflects an agreed-upon rate of return effective for the period of time a
Portfolio's money is invested in the security. Whenever a Portfolio enters into
a repurchase agreement, it obtains collateral having a value equal to at least
102% (100% if such collateral is in the form of cash) of the repurchase price,
including accrued interest. The instruments held as collateral are valued daily
and if the value of the instruments declines, the Portfolio will require
additional collateral. If the seller under the repurchase agreement defaults,
the Portfolio may incur a loss if the value of the collateral securing the
repurchase agreements has declined and may incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Portfolio may be delayed or limited. The Directors have
established guidelines to be used by the Adviser in connection with transactions
in repurchase agreements and will regularly monitor each Portfolio's use of
repurchase agreements. A Portfolio will not invest in repurchase agreements
maturing in more than seven days if the aggregate of such investments along with
other illiquid securities exceeds 15% of the value of its net assets. However,
there is no limit on the amount of a Portfolio's net assets that may be subject
to repurchase agreements having a maturity of seven days or less for temporary
defensive purposes.
DIVERSIFICATION. Each Portfolio is classified as "non-diversified" for
purposes of the 1940 Act, which means that it is not limited by the 1940 Act
with regard to the portion of assets that may be invested in the securities of a
single issuer. To the extent a Portfolio makes investments in excess of 5% of
its assets in the securities of a particular issuer, its exposure to the risks
associated with that issuer is increased.
Because each Portfolio invests in a limited number of issuers, the
performance of particular securities may adversely affect the Portfolio's
performance or subject the Portfolio to greater price volatility than that
experienced by diversified investment companies. Each Portfolio intends to
maintain the required level of diversification and otherwise conduct its
operations in order to qualify as a "regulated investment company" for purposes
of the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
regulated investment company under the Code, each Portfolio must, among other
things, diversify its holdings so that, at the end of each quarter of the
taxable year, (i) at least 50% of the market value of the Portfolio's assets is
represented by cash, U.S. government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Portfolio's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total
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assets is invested in the securities of any one issuer (other than U.S.
government securities or the securities of other regulated investment
companies).
In the unlikely event application of a Portfolio's strategy would
result in a violation of these requirements of the Code, the Portfolio would be
required to deviate from its strategy to the extent necessary to avoid losing
its status as a regulated investment company.
DERIVATIVES STRATEGIES. Each Portfolio may write (i.e., sell) call
options ("calls") on securities that are traded on U.S. exchanges and
over-the-counter markets to enhance income through the receipt of premiums from
expired calls and any net profits from closing purchase transactions. After
writing such a covered call, up to 25% of a Portfolio's total assets may be
subject to calls. All such calls written by a Portfolio must be "covered" while
the call is outstanding (i.e., the Portfolio must own the securities subject to
the call or other securities acceptable for applicable escrow requirements). If
a call written by the Portfolio is exercised, the Portfolio forgoes any profit
from any increase in the market price above the call price of the underlying
investment on which the call was written.
In addition, the Portfolio could experience capital losses, which might
cause previously distributed short-term capital gains to be re-characterized as
a non-taxable return of capital to shareholders.
Each Portfolio may also write put options ("puts"), which give the
holder of the option the right to sell the underlying security to the Portfolio
at the stated exercise price. A Portfolio will receive a premium for writing a
put option that increases the Portfolio's return. A Portfolio writes only
covered put options, which means that so long as the Portfolio is obligated as
the writer of the option it will, through its custodian, have deposited and
maintained cash or liquid securities denominated in U.S. dollars or non-U.S.
currencies with a securities depository with a value equal to or greater than
the exercise price of the underlying securities.
Primarily for hedging purposes, and from time to time for income
enhancement, each Portfolio may use interest rate futures contracts and stock
and bond index futures contracts, including futures on U.S. government
securities (together, "Futures"); and call and put options on equity and debt
securities, Futures, stock and bond indices. All puts and calls on securities,
interest rate Futures or stock and bond index Futures or options on such Futures
purchased or sold by a Portfolio will normally be listed on either (1) a
national securities or commodities exchange or (2) over-the-counter markets.
Because the markets for these instruments are relatively new and still
developing, the ability of a Portfolio to engage in such transactions may be
limited. Derivatives may be used to attempt to: (i) protect against possible
declines in the market value of a Portfolio's portfolio resulting from downward
trends in the equity and debt securities markets (generally due to a rise in
interest rates); (ii) protect a Portfolio's unrealized gains in the value of its
equity and debt securities that have appreciated; (iii) facilitate selling
securities for investment reasons; or (iv) establish a position in the equity
and debt securities markets as a temporary substitute for purchasing particular
equity and debt securities.
A Portfolio's use of Futures and options on Futures will be incidental
to its activities in the underlying cash market. When hedging to attempt to
protect against declines in the market value of the portfolio, to permit a
Portfolio to retain unrealized gains in the value of portfolio securities that
have appreciated, or to facilitate selling securities for investment reasons,
the Portfolio could: (i) sell Futures; (ii) purchase puts on such Futures or
securities; or (iii) write calls on securities held by it or on Futures. When
hedging to attempt to protect against the possibility that portfolio securities
are not fully included in a rise in value of the debt securities market, the
Portfolio could: (i) purchase Futures, or (ii) purchase calls on such Futures or
on securities. Additional information about the derivatives a Portfolio may use
is provided below.
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OPTIONS
Options on Securities. As noted above, each Portfolio may write and
purchase call and put options on equity and debt securities.
When a Portfolio writes a call on a security, it receives a premium and
agrees to sell the underlying security to a purchaser of a corresponding call on
the same security during the call period (usually not more than 9 months) at a
fixed price (which may differ from the market price of the underlying security),
regardless of market price changes during the call period. The Portfolio has
retained the risk of loss should the price of the underlying security increase
during the call period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, a Portfolio may
purchase a corresponding call in a "closing purchase transaction." A profit or
loss will be realized, depending upon whether the net of the amount of the
option transaction costs and the premium received on the call written was more
or less than the price of the call subsequently purchased. A profit may also be
realized if the call expires unexercised, because a Portfolio retains the
underlying security and the premium received. If a Portfolio could not effect a
closing purchase transaction due to lack of a market, it would hold the callable
securities until the call expired or was exercised.
When a Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period at a fixed exercise price. A Portfolio benefits only if the call
is sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the transaction
costs and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and a Portfolio will lose its premium payment and the right to
purchase the underlying investment.
A put option on securities gives the purchaser the right to sell, and
the writer the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by segregated liquid
assets equal to the exercise price of the put has the same economic effect to a
Portfolio as writing a covered call. The premium a Portfolio receives from
writing a put option represents a profit as long as the price of the underlying
investment remains above the exercise price. However, a Portfolio has also
assumed the obligation during the option period to buy the underlying investment
from the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put expires unexercised, a
Portfolio (as the writer of the put) realizes a gain in the amount of the
premium. If the put is exercised, a Portfolio must fulfill its obligation to
purchase the underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that case, a
Portfolio may incur a loss, equal to the sum of the sale price of the underlying
investment and the premium received minus the sum of the exercise price and any
transaction costs incurred.
A Portfolio may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an underlying
security from being put. Furthermore, effecting such a closing purchase
transaction will permit a Portfolio to write another put option to the extent
that the exercise price thereof is secured by the deposited assets, or to
utilize the proceeds from the sale of such assets for other investments by the
Portfolio. A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the option.
When a Portfolio purchases a put, it pays a premium and has the right
to sell the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put
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on an investment a Portfolio owns enables the Portfolio to protect itself during
the put period against a decline in the value of the underlying investment below
the exercise price by selling such underlying investment at the exercise price
to a seller of a corresponding put. If the market price of the underlying
investment is equal to or above the exercise price and as a result the put is
not exercised or resold, the put will become worthless at its expiration date,
and the Portfolio will lose its premium payment and the right to sell the
underlying investment pursuant to the put. The put may, however, be sold prior
to expiration (whether or not at a profit).
Buying a put on an investment that a Portfolio does not own permits the
Portfolio either to resell the put or buy the underlying investment and sell it
at the exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not exercised,
the put will become worthless on its expiration date. In the event of a decline
in the stock market, a Portfolio could exercise or sell the put at a profit to
attempt to offset some or all of its loss on its portfolio securities.
When writing put options on securities, to secure its obligation to pay
for the underlying security, a Portfolio will deposit in escrow liquid assets
with a value equal to or greater than the exercise price of the underlying
securities. A Portfolio therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of a Portfolio as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring a Portfolio to take delivery of the underlying security against
payment of the exercise price. A Portfolio has no control over when it may be
required to purchase the underlying security, since it may be assigned an
exercise notice at any time prior to the termination of its obligation as the
writer of the put. This obligation terminates upon expiration of the put, or
such earlier time at which a Portfolio effects a closing purchase transaction by
purchasing a put of the same series as that previously sold. Once a Portfolio
has been assigned an exercise notice, it is thereafter not allowed to effect a
closing purchase transaction.
Each Portfolio may use spread transactions for any lawful purpose
consistent with the Portfolio's investment objective. A Portfolio may purchase
covered spread options from securities dealers. Such covered spread options are
not presently exchange-listed or exchange-traded. The purchase of a spread
option gives a Portfolio the right to put, or sell, a security that it owns at a
fixed dollar spread or fixed yield spread in relationship to another security
that the Portfolio does not own, but which is used as a benchmark. The risk to a
Portfolio in purchasing covered spread options is the cost of the premium paid
for the spread option and any transaction costs. In addition, there is no
assurance that closing transactions will be available. The purchase of spread
options will be used to protect the Portfolio against adverse changes in
prevailing credit quality spreads, i.e., the yield spread between high quality
and lower quality securities. Such protection is provided only during the life
of the spread option.
Options on Securities Indices. As noted above, each Portfolio may write
and purchase call and put options on securities indices. Puts and calls on
broadly-based securities indices are similar to puts and calls on securities
except that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the securities market
generally) rather than on price movements in individual securities or Futures.
When a Portfolio buys a call on a securities index, it pays a premium. During
the call period, upon exercise of a call by a Portfolio, a seller of a
corresponding call on the same investment will pay the Portfolio an amount of
cash to settle the call if the closing level of the securities index upon which
the call is based is greater than the exercise price of the call. That cash
payment is equal to the difference between the closing price of the index and
the exercise price of the call times a specified multiple (the "multiplier")
which determines the total dollar value for each point of difference. When a
Portfolio buys a put on a securities index, it pays a premium and has the right
during the put period to require a seller of a corresponding put, upon the
Portfolio's exercise of its put, to deliver to the Portfolio
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an amount of cash to settle the put if the closing level of the securities index
upon which the put is based is less than the exercise price of the put. That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.
FUTURES AND OPTIONS ON FUTURES
Futures. Upon entering into a Futures transaction, a Portfolio will be
required to deposit an initial margin payment with the futures commission
merchant (the "futures broker"). The initial margin will be deposited with the
Corporation's custodian in an account registered in the futures broker's name;
however the futures broker can gain access to that account only under specified
conditions. As the Future is marked-to-market to reflect changes in its market
value, subsequent margin payments, called variation margin, will be paid to or
by the futures broker on a daily basis. Prior to expiration of the Future, if a
Portfolio elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is required to
be paid by or released to the Portfolio, and any loss or gain is realized for
tax purposes. All Futures transactions are effected through a clearinghouse
associated with the exchange on which the Futures are traded.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Portfolio's current or intended investments in fixed-income securities. For
example, if a Portfolio owned long-term bonds and interest rates were expected
to increase, that Portfolio might sell interest rate futures contracts. Such a
sale would have much the same effect as selling some of the long-term bonds in
that Portfolio's portfolio. However, since the Futures market is more liquid
than the cash market, the use of interest rate futures contracts as a hedging
technique allows a Portfolio to hedge its interest rate risk without having to
sell its portfolio securities. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of that
Portfolio's interest rate futures contracts would be expected to increase at
approximately the same rate, thereby keeping the net asset value of that
Portfolio from declining as much as it otherwise would have. On the other hand,
if interest rates were expected to decline, interest rate futures contracts may
be purchased to hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Since the fluctuations in the value of the interest rate
futures contracts should be similar to that of long-term bonds, a Portfolio
could protect itself against the effects of the anticipated rise in the value of
long-term bonds without actually buying them until the necessary cash became
available or the market had stabilized. At that time, the interest rate futures
contracts could be liquidated and that Portfolio's cash reserves could then be
used to buy long-term bonds on the cash market.
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Portfolio's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Portfolio may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Portfolio's securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the Futures position. When a Portfolio is not fully invested
in the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Portfolio intends to purchase. As such purchases are made,
the corresponding positions in stock or bond index futures contracts will be
closed out.
Options on Futures. As noted above, each Portfolio may purchase and
write options on interest rate futures contracts, stock and bond index futures
contracts and forward contracts. (Unless otherwise specified, options on
interest rate futures contracts, options on stock and bond index futures
contracts are collectively referred to as "Options on Futures.")
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The writing of a call option on a Futures contract constitutes a
partial hedge against declining prices of the securities in the portfolio. If
the Futures price at expiration of the option is below the exercise price, the
Portfolio will retain the full amount of the option premium, which provides a
partial hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a Futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures contract. If the Futures
price at expiration of the put option is higher than the exercise price, a
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities the Portfolio
intends to purchase. If a put or call option a Portfolio has written is
exercised, the Portfolio will incur a loss that will be reduced by the amount of
the premium it receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value of its Options
on Futures positions, a Portfolio's losses from exercised Options on Futures may
to some extent be reduced or increased by changes in the value of portfolio
securities.
Each Portfolio may purchase Options on Futures for hedging purposes,
instead of purchasing or selling the underlying Futures contract. For example,
where a decrease in the value of portfolio securities is anticipated as a result
of a projected market-wide decline or changes in interest or exchange rates, a
Portfolio could, in lieu of selling a Futures contract, purchase put options
thereon. In the event that such decrease occurs, it may be offset, in whole or
part, by a profit on the option. If the market decline does not occur, the
Portfolio will suffer a loss equal to the price of the put. Where it is
projected that the value of securities to be acquired by a Portfolio will
increase prior to acquisition, due to a market advance or changes in interest or
exchange rates, a Portfolio could purchase call Options on Futures, rather than
purchasing the underlying Futures contract. If the market advances, the
increased cost of securities to be purchased may be offset by a profit on the
call. However, if the market declines, the Portfolio will suffer a loss equal to
the price of the call but the securities the Portfolio intends to purchase may
be less expensive.
ADDITIONAL INFORMATION ABOUT DERIVATIVES AND THEIR USE
The Corporation's custodian, or a securities depository acting for the
custodian, will act as the Portfolios' escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the securities on which the
Portfolio has written options or as to other acceptable escrow securities, so
that no margin will be required for such transaction. OCC will release the
securities on the expiration of the option or upon a Portfolio's entering into a
closing transaction.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. A Portfolio's
option activities may affect its turnover rate and brokerage commissions. The
exercise by a Portfolio of puts on securities will result in the sale of related
investments, increasing portfolio turnover. Although such exercise is within the
Portfolio's control, holding a put might cause the Portfolio to sell the related
investments for reasons that would not exist in the absence of the put. A
Portfolio will pay a brokerage commission each time it buys a put or call, sells
a call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those that would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put and call options offer large amounts of
leverage. The leverage offered by trading in options could result in a
Portfolio's net asset value being more sensitive to changes in the value of the
underlying investments.
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In the future, each Portfolio may employ strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods are consistent with a Portfolio's investment objectives, legally
permissible and adequately disclosed.
REGULATORY ASPECTS OF DERIVATIVES
Each Portfolio must operate within certain restrictions as to its long
and short positions in Futures and options thereon under a rule (the "CFTC
Rule") adopted by the Commodity Futures Trading Commission (the "CFTC") under
the Commodity Exchange Act (the "CEA"), which excludes the Portfolio from
registration with the CFTC as a "commodity pool operator" (as defined in the
CEA) if it complies with the CFTC Rule. In particular, the Portfolio may (i)
purchase and sell Futures and options thereon for bona fide hedging purposes, as
defined under CFTC regulations, without regard to the percentage of the
Portfolio's assets committed to margin and option premiums, and (ii) enter into
non-hedging transactions, provided that the Portfolio may not enter into such
non-hedging transactions if, immediately thereafter, the sum of the amount of
initial margin deposits on the Portfolio's existing Futures positions and option
premiums would exceed 5% of the fair value of its portfolio, after taking into
account unrealized profits and unrealized losses on any such transactions.
Margin deposits may consist of cash or securities acceptable to the broker and
the relevant contract market.
Transactions in options by a Portfolio are subject to limitations
established by each of the exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors acting in
concert, regardless of whether the options were written or purchased on the same
or different exchanges or are held in one or more accounts or through one or
more exchanges or brokers. Thus, the number of options a Portfolio may write or
hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain other
sanctions. Due to requirements under the 1940 Act, when a Portfolio purchases a
Future, the Portfolio will segregate cash or liquid securities in an amount
equal to the market value of the securities underlying such Future, less the
margin deposit applicable to it.
POSSIBLE RISK FACTORS IN HEDGING
Participation in the options or Futures markets involves investment
risks and transaction costs to which a Portfolio would not be subject absent the
use of these strategies. If the Adviser's predictions of movements in the
direction of the securities and interest rate markets are inaccurate, the
adverse consequences to a Portfolio may leave the Portfolio in a worse position
than if such strategies were not used. There is also a risk in using short
hedging by selling Futures to attempt to protect against decline in value of the
portfolio securities (due to an increase in interest rates) that the prices of
such Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Portfolio's securities. The ordinary spreads between
prices in the cash and Futures markets are subject to distortions due to
differences in the natures of those markets. First, all participants in the
Futures markets are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
Futures contracts through offsetting transactions that could distort the normal
relationship between the cash and Futures markets. Second, the liquidity of the
Futures markets depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the Futures markets could be reduced, thus
producing distortion. Third, from the point-of-view of speculators, the deposit
requirements in the Futures markets are less onerous than margin requirements in
the securities markets. Therefore, increased participation by speculators in the
Futures markets may cause temporary price distortions.
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If a Portfolio establishes a position in the debt securities markets as
a temporary substitute for the purchase of individual debt securities (long
hedging) by buying Futures and/or calls on such Futures or on debt securities,
it is possible that the market may decline; if the Adviser then determines not
to invest in such securities at that time because of concerns as to possible
further market decline or for other reasons, the Portfolio will realize a loss
on the derivatives that is not offset by a reduction in the price of the debt
securities purchased.
ILLIQUID AND RESTRICTED SECURITIES. No more than 15% of the value of a
Portfolio's net assets determined as of the date of purchase may be invested in
illiquid securities, including repurchase agreements that have a maturity of
longer than seven days, interest-rate swaps, currency swaps, caps, floors and
collars, or in other securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities that are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period. Securities that
have not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. There will generally be a lapse of time between a
mutual fund's decision to sell an unregistered security and the registration of
such security promoting sale. Adverse market conditions could impede a public
offering of such securities. When purchasing unregistered securities, the
Portfolios will seek to obtain the right of registration at the expense of the
issuer (except in the case of Rule 144A securities, as described below).
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
For example, restricted securities that the Board of Directors, or the
Adviser pursuant to guidelines established by the Board of Directors, has
determined to be marketable, such as securities eligible for sale under Rule
144A promulgated under the Securities Act, or certain private placements of
commercial paper issued in reliance on an exemption from such Act pursuant to
Section 4(2) thereof, may be deemed to be liquid for purposes of this
restriction. This investment practice could have the effect of increasing the
level of illiquidity in the portfolio to the extent that qualified institutional
buyers (as defined in Rule 144A) become for a time uninterested in purchasing
these restricted securities. In addition, a repurchase agreement that by its
terms can be liquidated before its nominal fixed-term on seven days or less
notice is regarded as a liquid instrument. The Adviser will monitor the
liquidity of such restricted securities subject to the supervision of the
Directors. In reaching liquidity decisions the Adviser will consider, inter
alia, pursuant to guidelines and procedures established by the Directors, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security; and (4) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer). Subject to the applicable
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limitation on illiquid securities investments, a Portfolio may acquire
securities issued by the U.S. government, its agencies or instrumentalities in a
private placement.
Commercial paper issues in which a Portfolio's net assets may be
invested include securities issued by major corporations without registration
under the Securities Act in reliance on the exemption from such registration
afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on
the so-called private placement exemption from registration afforded by Section
4(2) of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the federal securities laws in that any
resale must similarly be made in an exempt transaction. Section 4(2) paper is
normally resold to other institutional investors through or with the assistance
of investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described above. A Portfolio's 15%
limitation on investments in illiquid securities includes Section 4(2) paper
other than Section 4(2) paper that the Adviser has determined to be liquid
pursuant to guidelines established by the Directors. The Directors have
delegated to the Advisers the function of making day-to-day determinations of
liquidity with respect to Section 4(2) paper, pursuant to guidelines approved by
the Directors that require the Advisers to take into account the same factors
described above for other restricted securities and require the Advisers to
perform the same monitoring and reporting functions.
SHORT SALES. Each Portfolio may sell a security it does not own in
anticipation of a decline in the market value of that security (short sales). To
complete such a transaction, a Portfolio must borrow the security to make
delivery to the buyer. The Portfolio then is obligated to replace the security
borrowed by purchasing it at market price at the time of replacement. The price
at such time may be more or less than the price at which the security was sold
by the Portfolio. Until the security is replaced, the Portfolio is required to
pay to the lender any dividends or interest that accrue during the period of the
loan. To borrow the security, the Portfolio also may be required to pay a
premium, which would increase the cost of the security sold. The proceeds of the
short sale will be retained by the broker, to the extent necessary to meet
margin requirements, until the short position is closed out. Until the Portfolio
replaces a borrowed security, the Portfolio will maintain daily a segregated
account, containing cash or liquid securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security at
the time it was sold short. A Portfolio will incur a loss as a result of the
short sale if the price of the security increases between the date of the short
sale and the date on which the Portfolio replaces the borrowed security. A
Portfolio will realize a gain if the security declines in price between those
dates. This result is the opposite of what one would expect from a cash purchase
of a long position in a security. The amount of any gain will be decreased, and
the amount of any loss increased, by the amount of any premium, dividends or
interest the Portfolio may be required to pay in connection with a short sale.
Each Portfolio may make "short sales against the box." A short sale is
against the box to the extent that the Portfolio contemporaneously owns, or has
the right to obtain without payment, securities identical to those sold short. A
Portfolio may not enter into a short sale, including a short sale against the
box, if, as a result, more than 25% of its net assets would be subject to such
short sales.
BORROWING. As a matter of fundamental policy each Portfolio is
authorized to borrow up to 33 1/3% of its total assets for temporary or
emergency purposes. In seeking to enhance investment performance, each Portfolio
may borrow money for investment purposes and may pledge assets to secure such
borrowings. This is the speculative factor known as leverage. This practice may
help increase the net asset value of the assets of a Portfolio in an amount
greater than would otherwise be the case when the market values of the
securities purchased through
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borrowing increase. In the event the return on an investment of borrowed monies
does not fully recover the costs of such borrowing, the value of the Portfolio's
assets would be reduced by a greater amount than would otherwise be the case.
The effect of leverage will therefore tend to magnify the gains or losses to the
Portfolio as a result of investing the borrowed monies. During periods of
substantial borrowings, the value of the Portfolio's assets would be reduced due
to the added expense of interest on borrowed monies. Each Portfolio is
authorized to borrow, and to pledge assets to secure such borrowings, up to the
maximum extent permissible under the 1940 Act (i.e., presently 50% of net
assets). The time and extent to which a Portfolio may employ leverage will be
determined by the Adviser in light of changing facts and circumstances,
including general economic and market conditions, and will be subject to
applicable lending regulations of the Board of Governors of the Federal Reserve
Board.
In seeking to enhance investment performance, each Portfolio may
increase its ownership of securities by borrowing at fixed rates of interest up
to the maximum extent permitted under the 1940 Act (presently 50% of net assets)
and investing the borrowed funds, subject to the restrictions stated in the
respective Prospectus. Any such borrowing will be made only pursuant to the
requirements of the 1940 Act and will be made only to the extent that the value
of the Portfolio's assets less its liabilities, other than borrowings, is equal
to at least 300% of all borrowings including the proposed borrowing. If the
value of a Portfolio's assets, so computed, should fail to meet the 300% asset
coverage requirement, the Portfolio is required, within three business days, to
reduce its bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when independent investment
judgment would not dictate such sale. Interest on money borrowed is an expense
the Portfolio would not otherwise incur, so that it may have little or no net
investment income during periods of substantial borrowings. Since substantially
all of a Portfolio's assets fluctuate in value, but borrowing obligations are
fixed when the Portfolio has outstanding borrowings, the net asset value per
share of a Portfolio correspondingly will tend to increase and decrease more
when the Portfolio's assets increase or decrease in value than would otherwise
be the case. A Portfolio's policy regarding use of leverage is a fundamental
policy, which may not be changed without approval of the shareholders of the
Portfolio.
LOANS OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, each Portfolio may lend portfolio securities in amounts up to
33 1/3% of total assets to brokers, dealers and other financial institutions,
provided, that such loans are callable at any time by the Portfolio and are at
all times secured by cash or equivalent collateral. In lending its portfolio
securities, a Portfolio receives income while retaining the securities'
potential for capital appreciation. The advantage of such loans is that a
Portfolio continues to receive the interest and dividends on the loaned
securities while at the same time earning interest on the collateral, which will
be invested in high-quality short-term debt securities, including repurchase
agreements. A loan may be terminated by the borrower on one business day's
notice or by a Portfolio at any time. If the borrower fails to maintain the
requisite amount of collateral, the loan automatically terminates, and the
Portfolio could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will be made only to
firms deemed by the Adviser to be creditworthy. On termination of the loan, the
borrower is required to return the securities to a Portfolio; and any gain or
loss in the market price of the loaned security during the loan would inure to
the Portfolio. Each Portfolio will pay reasonable finders', administrative and
custodial fees in connection with a loan of its securities or may share the
interest earned on collateral with the borrower.
Since voting or consent rights that accompany loaned securities pass to
the borrower, each Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities that are the subject of the loan.
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REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements with brokers, dealers, domestic and foreign banks or other
financial institutions that have been determined by the Adviser to be
creditworthy. In a reverse repurchase agreement, a Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price, reflecting
the interest rate effective for the term of the agreement. It may also be viewed
as the borrowing of money by the Portfolio. The Portfolio's investment of the
proceeds of a reverse repurchase agreement is the speculative factor known as
leverage. A Portfolio will enter into a reverse repurchase agreement only if the
interest income from investment of the proceeds is expected to be greater than
the interest expense of the transaction and the proceeds are invested for a
period no longer than the term of the agreement. The Portfolio will segregate
cash or liquid securities in an amount at least equal to its purchase
obligations under these agreements (including accrued interest). In the event
that the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Portfolio's
repurchase obligation, and the Portfolio's use of proceeds of the agreement may
effectively be restricted pending such decision. Reverse repurchase agreements
are considered to be borrowings and are subject to the percentage limitations on
borrowings. See "Investment Restrictions."
DOLLAR ROLLS. Each Portfolio may enter into "dollar rolls" in which a
Portfolio sells mortgage or other asset-backed securities ("Roll Securities")
for delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Portfolio foregoes principal and
interest paid on the Roll Securities. The Portfolio is compensated by the
difference between the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. The Portfolio also could be
compensated through the receipt of fee income equivalent to a lower forward
price. A "covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or a cash equivalent security position that matures on
or before the forward settlement date of the dollar roll transaction. A
Portfolio will enter into only covered rolls. Because "roll" transactions
involve both the sale and purchase of a security, they may cause the reported
portfolio turnover rate to be higher than that reflecting typical portfolio
management activities.
Dollar rolls involve certain risks including the following: if the
broker-dealer to whom the Portfolio sells the security becomes insolvent, the
Portfolio's right to purchase or repurchase the security subject to the dollar
roll may be restricted and the instrument the Portfolio is required to
repurchase may be worth less than an instrument the Portfolio originally held.
Successful use of dollar rolls will depend upon the Adviser's ability to predict
correctly interest rates and in the case of mortgage dollar rolls, mortgage
prepayments. For these reasons, there is no assurance that dollar rolls can be
successfully employed.
STANDBY COMMITMENTS. Standby commitments are put options that entitle
holders to same day settlement at an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. A Portfolio may acquire standby commitments to enhance the liquidity
of portfolio securities, but only when the issuers of the commitments present
minimal risk of default. Ordinarily, the Portfolio may not transfer a standby
commitment to a third party, although it could sell the underlying municipal
security to a third party at any time. A Portfolio may purchase standby
commitments separate from or in conjunction with the purchase of securities
subject to such commitments. In the latter case, the Portfolio would pay a
higher price for the securities acquired, thus reducing their yield to maturity.
Standby commitments will not affect the dollar-weighted average maturity of the
Portfolio, or the valuation of the securities underlying the commitments.
Issuers or financial intermediaries may obtain letters of credit or other
guarantees to support their ability to buy securities on demand. The Adviser may
rely upon its evaluation of a bank's credit in determining whether to support an
instrument supported by a letter of credit. Standby commitments are subject to
certain risks, including the ability of issuers of standby commitments to pay
for securities at the time the commitments are exercised; the fact that standby
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<PAGE>
commitments are not marketable by the Portfolio; and the possibility that the
maturities of the underlying securities may be different from those of the
commitments.
INTEREST-RATE SWAPS, MORTGAGE SWAPS, CAPS, COLLARS AND FLOORS. In order
to protect the value of portfolios from interest rate fluctuations and to hedge
against fluctuations in the fixed income market in which certain of the
Portfolios' investments are traded, each Portfolio may enter into interest-rate
swaps and mortgage swaps or purchase or sell interest-rate caps, floors or
collars. A Portfolio will enter into these hedging transactions primarily to
preserve a return or spread on a particular investment or portion of the
portfolio and to protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date. A Portfolio may also enter
into interest-rate swaps for non-hedging purposes. Interest-rate swaps are
individually negotiated, and the Portfolio expects to achieve an acceptable
degree of correlation between its portfolio investments and interest-rate
positions. A Portfolio will enter into interest-rate swaps only on a net basis,
which means that the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest-rate swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest-rate swaps is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make. If the other party to an
interest-rate swap defaults, the Portfolio's risk of loss consists of the net
amount of interest payments that the Portfolio is contractually entitled to
receive. The use of interest-rate swaps is a highly specialized activity, which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. All of these investments may be
deemed to be illiquid for purposes of the Portfolio's limitation on investment
in such securities. Inasmuch as these investments are entered into for good
faith hedging purposes, and inasmuch as segregated accounts will be established
with respect to such transactions, SunAmerica believes such obligations do not
constitute senior securities and accordingly will not treat them as being
subject to its borrowing restrictions. The net amount of the excess, if any, of
the Portfolio's obligations over its entitlements with respect to each
interest-rate swap will be accrued on a daily basis and an amount of cash or
liquid securities having an aggregate net asset value at least equal to the
accrued excess will be segregated. The Portfolio will also establish and
maintain such segregated accounts with respect to its total obligations under
any interest-rate swaps that are not entered into on a net basis and with
respect to any interest-rate caps, collars and floors that are written by the
Portfolio.
A Portfolio will enter into these transactions only with banks and
recognized securities dealers believed by the Adviser to present minimal credit
risk in accordance with guidelines established by the Board of Directors. If
there is a default by the other party to such a transaction, the Portfolio will
have to rely on its contractual remedies (which may be limited by bankruptcy,
insolvency or similar laws) pursuant to the agreements related to the
transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. Caps, collars and floors are
more recent innovations for which documentation is less standardized, and
accordingly, they are less liquid than swaps.
Mortgage swaps are similar to interest-rate swaps in that they
represent commitments to pay and receive interest. The notional principal
amount, upon which the value of the interest payments is based, is tied to a
reference pool or pools of mortgages.
The purchase of an interest-rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest-rate cap. The purchase of an interest-rate floor entitles the
purchaser, to the extent that a specified
B-24
<PAGE>
index falls below a predetermined interest rate, to receive payments of interest
on a notional principal amount from the party selling such interest-rate floor.
FUTURE DEVELOPMENTS. Each Portfolio may invest in securities and other
instruments that do not presently exist but may be developed in the future,
provided that each such investment is consistent with the Portfolio's investment
objectives, policies and restrictions and is otherwise legally permissible under
federal and state laws. The Prospectus and Statement of Additional Information
will be amended or supplemented as appropriate to discuss any such new
investments.
INVESTMENT RESTRICTIONS
The Corporation has adopted for each Portfolio certain investment
restrictions that are fundamental policies and cannot be changed without the
approval of the holders of a majority of that Portfolio's outstanding shares.
Such majority is defined as the vote of the lesser of (i) 67% or more of the
outstanding shares present at a meeting, if the holders of more than 50% of the
outstanding shares are present in person or by proxy or (ii) more than 50% of
the outstanding shares. All percentage limitations expressed in the following
investment restrictions are measured immediately after the relevant transaction
is made. Each Portfolio may not:
1. Invest more than 25% of the Portfolio's total assets in the
securities of issuers in the same industry. Obligations of the U.S.
Government, its agencies and instrumentalities are not subject to
this 25% limitation on industry concentration.
2. Invest in real estate (including limited partnership interests but
excluding securities of companies, such as real estate investment
trusts, that deal in real estate or interests therein); provided
that the Portfolio may hold or sell real estate acquired as a
result of the ownership of securities.
3. Purchase or sell commodities or commodity contracts, except to the
extent that a Portfolio may do so in accordance with applicable law
and the Prospectus and Statement of Additional Information, as they
may be amended from time to time, and without registering as a
commodity pool operator under the Commodity Exchange Act. Each
Portfolio may engage in transactions in put and call options on
securities and indices, spread transactions, forward and futures
contracts on securities and indices, put and call options on such
futures contracts, forward commitment transactions, interest rate,
mortgage and currency swaps and interest rate floors and caps and
may purchase hybrid instruments.
4. Make loans to others except for (a) the purchase of debt
securities; (b) entering into repurchase agreements; (c) the
lending of its portfolio securities; and (d) as otherwise permitted
by exemptive order of the SEC.
5. Borrow money, except that (i) each Portfolio may borrow in amounts
up to 33 1/3% of its total assets for temporary or emergency
purposes, (ii) each Portfolio may borrow for investment purposes to
the maximum extent permissible under the 1940 Act (i.e., presently
50% of net assets), and (iii) each Portfolio may obtain such
short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities. This policy shall not
prohibit a Portfolio's engaging in reverse repurchase agreements,
dollar rolls and similar investment strategies described in the
Prospectus and Statement of Additional Information, as they may be
amended from time to time.
B-25
<PAGE>
6. Issue senior securities as defined in the 1940 Act, except that
each Portfolio may enter into repurchase agreements, reverse
repurchase agreements, dollar rolls, lend its portfolio securities
and borrow money, as described above, and engage in similar
investment strategies described in the Prospectus and Statement of
Additional Information, as they may be amended from time to time.
7. Engage in underwriting of securities issued by others, except to
the extent that a Portfolio may be deemed to be an underwriter in
connection with the disposition of portfolio securities of the
Portfolio.
The Focused TechNet Portfolio primarily invests in companies whose
principal businesses are believed to be in a position to significantly benefit
from advances or improvements in technology (previously defined as "technology
companies"). Technology companies may be found in many different industries, and
for purposes of investment restriction no. 1, "industry" is determined by
reference to the DIRECTORY OF COMPANIES FILING ANNUAL REPORTS WITH THE
SECURITIES AND EXCHANGE COMMISSION, published by the Securities and Exchange
Commission.
The following additional restrictions are not fundamental policies and
may be changed by the Directors without a vote of shareholders. Each Portfolio
may not:
8. Purchase securities on margin, provided that margin deposits in
connection with futures contracts, options on futures contracts and
other derivative instruments shall not constitute purchasing
securities on margin.
9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and, to the extent related
to the segregation of assets in connection with the writing of
covered put and call options and the purchase of securities or
currencies on a forward commitment or delayed-delivery basis and
collateral and initial or variation margin arrangements with
respect to forward contracts, options, futures contracts and
options on futures contracts. In addition, each Portfolio may
pledge assets in reverse repurchase agreements, dollar rolls and
similar investment strategies described in the Prospectus and
Statement of Additional Information, as they may be amended from
time to time.
10. Invest in securities of other registered investment companies,
except by purchases in the open market, involving only customary
brokerage commissions and as a result of which not more than 10% of
its total assets (determined at the time of investment) would be
invested in such securities, or except (i) to the extent permitted
by applicable law.
11. Enter into any repurchase agreement maturing in more than seven
days or investing in any other illiquid security if, as a result,
more than 15% of a Portfolio's net assets would be so invested.
Restricted securities eligible for resale pursuant to Rule 144A
under the Securities Act that have a readily available market, and
commercial paper exempted from registration under the Securities
Act pursuant to Section 4(2) of that Act that may be offered and
sold to "qualified institutional buyers" as defined in Rule 144A,
which the Adviser has determined to be liquid pursuant to
guidelines established by the Directors, will not be considered
illiquid for purposes of this 15% limitation on illiquid
securities.
B-26
<PAGE>
DIRECTORS AND OFFICERS
The following table lists the Directors and executive officers of the
Corporation, their ages, business addresses, and principal occupations during
the past five years. For the purposes of this Statement of Additional
Information, the SunAmerica Mutual Funds ("SAMF") consist of SunAmerica Equity
Funds, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc., SunAmerica
Strategic Investment Series, Inc. and the Corporation. An asterisk indicates
those Directors who are interested persons of the Corporation within the meaning
of the 1940 Act.
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Corporation during past 5 years
- --------------------- -------------------- -------------------
<S> <C> <C>
S. James Coppersmith, 66 Director Retired; formerly, President and General
7 Elmwood Road Manager, WCVB-TV, a division of the Hearst
Marblehead, MA 01945 Corporation, (1982 to 1994);
Director/Trustee of SAMF and Anchor Series
Trust ("AST").
Samuel M. Eisenstat, 59 Chairman of the Board Attorney, solo practitioner; Chairman of
430 East 86th Street the Boards of Directors/Trustees of SAMF
New York, NY and AST.
Stephen J. Gutman, 56 Director Partner and Managing Member of B.B.
515 East 79th Street Associates LLC (menswear specialty
New York, NY 10021 retailing and other activities) since June
1988; Director/Trustee of SAMF and AST.
Peter A. Harbeck, *45 Director and President Director and President, SunAmerica Asset
The SunAmerica Center Management Corp. ("SunAmerica");
733 Third Avenue Director, SunAmerica Capital Service,
New York, NY 10017-3204 Inc. ("SACS"), since August 1993;
Director and President, SunAmerica Fund
Services, Inc. ("SAFS"), since May 1988;
President, SAMF and AST; Executive Vice
President and Chief Operating Officer,
SunAmerica, from May 1988 to August 1995;
Executive Vice President, SACS, from
November 1991 to August 1995; Director,
Resources Trust Company.
Sebastiano Sterpa, 70 Director Founder and Chairman of the Board of the
73473 Mariposa Drive Sterpa Group (real estate) since 1962;
Palm Desert, CA 92260 Director, Real Estate Business Service and
Countrywide Financial; Director/ Trustee of
SAMF.
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Corporation during past 5 years
- --------------------- -------------------- -------------------
<S> <C> <C>
J. Steven Neamtz, 39 Vice President Executive Vice President, SunAmerica,
The SunAmerica Center since April 1996; Director and President,
733 Third Avenue SACS, since April 1996; formerly,
New York, NY 10017-3204 Executive Vice President, New England
Funds, L.P. from July 1990 to April 1996.
Peter C. Sutton, 35 Treasurer Senior Vice President, SunAmerica, since
The SunAmerica Center April 1997; Treasurer, SAMF and AST, since
733 Third Avenue February 1996; Vice President and
New York, NY 10017-3204 Assistant Treasurer of Sun America Series
Trust ("SAST") and Anchor Pathway Fund
("APF"), since 1994; Vice President, Seasons
Series Trust ("Seasons"), since April 1997;
formerly, Vice President, SunAmerica, from
1994 to 1997; Controller, SAMF and AST, from
March 1993 to February 1996; Assistant
Controller, SAMF and AST, from 1990 to 1993.
Robert M. Zakem, 42 Secretary Senior Vice President and General Counsel,
The SunAmerica Center SunAmerica, since April 1993; Executive
733 Third Avenue Vice President, General Counsel and
New York, NY 10017-3204 Director, SACS, since August 1993; Vice
President, General Counsel and Assistant
Secretary, SAFS, since January 1994; Vice
President, SAST, APF and Seasons; Assistant
Secretary, SAST and APF, since September
1993; Assistant Secretary, Seasons, since
April 1997; formerly, Vice President and
Associate General Counsel, SunAmerica, from
March 1992 to April 1993.
</TABLE>
* A Director who may be deemed to be an interested person as that term is
defined in the 1940 Act.
The Directors of the Corporation are responsible for the overall
supervision of the operation of the Corporation and each Portfolio and perform
various duties imposed on directors of investment companies by the 1940 Act and
under the Corporation's articles of incorporation. Directors and officers of the
Corporation are also Directors and officers of some or all of the other
investment companies managed, administered or advised by SunAmerica, and
distributed by SunAmerica Capital Services ("SACS" or the "Distributor") and
other affiliates.
The Corporation pays each Director who is not an interested person of
the Corporation, SunAmerica or any Adviser, nor a party to any Management
Agreement or Subadvisory Agreement (collectively, the "Disinterested Directors")
annual compensation in addition to reimbursement of out-of-pocket expenses in
connection with attendance at meetings of the Directors. Specifically, each
Disinterested Director receives an aggregate of up to
B-28
<PAGE>
$60,000 in annual compensation for acting as director or trustee to SAMF and/or
AST, a pro rata portion of which, based on relative net assets, is borne by the
Corporation.
In addition, each Disinterested Director also serves on the Audit
Committee of the Board of Directors. The Audit Committee is charged with
recommending to the full Board the engagement or discharge of the Corporation's
independent accountants; directing investigations into matters within the scope
of the independent accountants' duties; reviewing with the independent
accountants the audit plan and results of the audit; approving professional
services provided by the independent accountants and other accounting firms
prior to the performance of such services; reviewing the independence of the
independent accountants; considering the range of audit and non-audit fees; and
preparing and submitting Committee minutes to the full Board. Each member of the
Audit Committee receives an aggregate of up to $5,000 in annual compensation for
serving on the Audit Committees of SAMF and/or AST, a pro rata portion of which,
based on relative net assets, is borne by the Corporation. The Corporation also
has a Nominating Committee, comprised solely of Disinterested Directors, which
recommends to the Directors those persons to be nominated for election as
Directors by shareholders and selects and proposes nominees for election by
Directors between shareholders' meetings. Members of the Nominating Committee
serve without compensation.
The Directors (and Trustees) of SAMF and AST have adopted the
SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the
"Retirement Plan") effective January 1, 1993 for the Disinterested Directors.
The Retirement Plan provides generally that if a Disinterested Director who has
at least 10 years of consecutive service as a Disinterested Director of any of
SAMF or AST (an "Eligible Director") retires after reaching age 60 but before
age 70 or dies while a Director, such person will be eligible to receive a
retirement or death benefit from each SunAmerica Mutual Fund with respect to
which he or she is an Eligible Director. With respect to Sebastiano Sterpa, the
Disinterested Directors have determined to make an exception to existing policy
and allow Mr. Sterpa to remain on the Board past age 70, until he has served for
ten years. Mr. Sterpa will cease accruing retirement benefits upon reaching age
70, although such benefits will continue to accrue interest as provided for in
the Retirement Plan. As of each birthday, prior to the 70th birthday, each
Eligible Director will be credited with an amount equal to (i) 50% of his or her
regular fees (excluding committee fees) for services as a Disinterested Director
of each SunAmerica mutual fund for the calendar year in which such birthday
occurs, plus (ii) 8.5% of any amounts credited under clause (i) during prior
years. An Eligible Director may receive any benefits payable under the
Retirement Plan, at his or her election, either in one lump sum or in up to
fifteen annual installments.
The following table sets forth information summarizing the compensation
that the Corporation paid each Disinterested Director for his services as
Director for the fiscal year ended October 31, 1999. The Directors who are
interested persons of the Corporation receive no compensation.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from Registrant
Compensation Accrued as Part of Benefits Upon and Corporation Complex
Director from Corporation Corporation Expenses* Retirement*+ Paid to Directors*
- -------- ---------------- --------------------- ------------ ------------------
<S> <C> <C> <C> <C>
S. James Coppersmith $13,416 $44,520 $29,670 $65,000
Samuel M. Eisenstat** 14,307 39,203 46,083 69,000
Stephen J. Gutman 13,416 40,593 60,912 65,000
Sebastiano Sterpa*** 13,537 19,734 7,900 43,333
</TABLE>
B-29
<PAGE>
* Information is for the six investment companies in the complex that pay
fees to these directors/trustees. The complex consists of SAMF and AST.
** Mr. Eisenstat receives additional compensation for serving as Chairman of
each of the boards in the complex, $300 of which is payable by the
Corporation.
*** Mr. Sterpa is not a trustee of AST.
+ Assuming participant elects to receive benefits in 15 yearly installments.
As of April 15, 2000, the Directors and officers of the Corporation
owned in the aggregate less than 1% of each class of each Portfolio's total
outstanding shares.
The following shareholders owned of record or beneficially 5% or more
of the Focus Portfolio Class' shares outstanding as of April 15, 2000: Class B -
Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL 32246 - owned of
record 8%; Class Z - Fidelity Investments Institutional Operations Co. ("FIIOC")
as Agent for Certain Employee Benefit Plans, Covington, KY 41015 - owned of
record 15%; FIIOC as Agent for Certain Non-Qualified Employee Benefit Plans,
Covington, KY 41015 - owned of record 19%. A shareholder who owns beneficially,
directly or indirectly, 25% or more of a Portfolio's outstanding voting
securities may be deemed to "control" (as defined in the 1940 Act) that
Portfolio.
ADVISERS, PERSONAL SECURITIES TRADING, DISTRIBUTOR AND ADMINISTRATOR
SUNAMERICA ASSET MANAGEMENT CORP. SunAmerica, which was organized as a
Delaware corporation in 1982, is located at The SunAmerica Center, 733 Third
Avenue, New York, NY 10017-3204, and acts as the investment manager to each of
the Portfolios pursuant to the Investment Advisory and Management Agreement (the
"Management Agreement") with the Corporation, on behalf of each Portfolio.
SunAmerica is a wholly owned subsidiary of SunAmerica Inc., which in turn is a
wholly owned subsidiary of American International Group, Inc. ("AIG"), the
leading U.S.-based international insurance organization. AIG, a Delaware
corporation, is a holding company that through its subsidiaries is primarily
engaged in a broad range of insurance and insurance related activities and
financial services in the United States and abroad. AIG, through its
subsidiaries, is also engaged in a range of financial services activities. As of
March 31, 2000, SunAmerica managed, advised and/or administered more than $30
billion of assets.
Under the Management Agreement, and except as delegated to the Advisers
under the Subadvisory Agreements (as defined below), SunAmerica selects and
manages the investment of the Portfolio, provides various administrative
services and supervises the Corporation's daily business affairs, subject to
general review by the Directors.
Except to the extent otherwise specified in the Management Agreement,
each Portfolio pays, or causes to be paid, all other expenses of the Corporation
and each of the Portfolios, including, without limitation, charges and expenses
of any registrar, custodian, transfer and dividend disbursing agent; brokerage
commissions; taxes; engraving and printing of share certificates; registration
costs of the Portfolios and their shares under federal and state securities
laws; the cost and expense of printing, including typesetting, and distributing
Prospectuses and Statements of Additional Information regarding the Portfolios,
and supplements thereto, to the shareholders of the Portfolios; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; all expenses incident to any
dividend, withdrawal or redemption options; fees and expenses of legal counsel
and independent accountants; membership dues of industry associations; interest
B-30
<PAGE>
on borrowings of the Portfolios; postage; insurance premiums on property or
personnel (including Officers and Directors) of the Corporation that inure to
its benefit; extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification relating thereto);
and all other costs of the Corporation's operation.
The annual rate of the investment advisory fee payable to SunAmerica
for the Focus Portfolio is 0.85% of average daily net assets, and for the
Focused TechNet Portfolio is 1.25% of average daily net assets.
With respect to the Focus Portfolio, SunAmerica has agreed to waive
fees or reimburse expenses, if necessary, to keep operating expenses at or below
an annual rate of 1.45% of the assets of Class A shares and 2.10% of the assets
of Class B, Class C and Class II shares for the Portfolio. With respect to the
Focused TechNet Portfolio, SunAmerica has agreed to waive fees or reimburse
expenses, if necessary, to keep operating expenses at or below an annual rate of
1.97% of the assets of Class A shares and 2.62% of the assets of Class B, Class
C and Class II shares for the Portfolio. SunAmerica also may voluntarily waive
or reimburse additional amounts to increase the investment return to the
Portfolio's investors. Further, any waivers or reimbursements made by SunAmerica
with respect to a Portfolio are subject to recoupment from that Portfolio within
the following two years, provided that the Portfolio is able to effect such
payment to SunAmerica and remain in compliance with the foregoing expense
limitations. The potential reimbursements are accounted for as possible
contingent liabilities that are not recordable on the balance sheet of a
Portfolio until collection is probable, but appear as footnote disclosure to
each Portfolio's financial statements. At such time as it appears probable that
a Portfolio is able to effect such reimbursement and that SunAmerica intends to
seek such reimbursement, the amount of the reimbursement will be accrued as an
expense of the Portfolio for that current period.
The following table sets forth the total advisory fees incurred by the
Focus Portfolio pursuant to the Management Agreement, or waived by SunAmerica,
for the fiscal years ended October 31, 1999 and 1998.
ADVISORY FEES
-------------
ADVISORY FEES* ADVISORY FEES WAIVED
-------------- --------------------
1999 1998** 1999 1998**
------ ------ ------ ------
Focus Portfolio $3,073,664 $238,994 $569,111 $89,221
- ---------------------------------------------------
* Without giving effect to fee waivers.
** From date of inception of June 1, 1998.
The Management Agreement continues in effect with respect to the
Portfolio, for a period of two years from the date of execution unless
terminated sooner, and thereafter from year to year, if approved at least
annually by vote of a majority of the Directors or by the holders of a majority
of the respective Portfolio's outstanding voting securities. Any such
continuation also requires approval by a majority of the Disinterested Directors
by vote cast in person at a meeting called for such purpose. The Management
Agreement may be terminated with respect to a Portfolio at any time, without
penalty, on 60 days' written notice by the Directors, by the holders of
a majority of the respective Portfolio's outstanding voting securities or by
SunAmerica. The Management Agreement automatically terminates with respect to
each Portfolio in the event of its assignment (as defined in the 1940 Act and
the rules thereunder).
B-31
<PAGE>
Under the terms of the Management Agreement, SunAmerica is not liable
to a Portfolio, or its shareholders, for any act or omission by it or for any
losses sustained by the Portfolio or its shareholders, except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
THE ADVISERS. Fred Alger Management, Inc. ("Alger"), Jennison
Associates LLC ("Jennison") and Marsico Capital Management, LLC ("Marsico") act
as Advisers to the Focus Portfolio pursuant to subadvisory agreements with
SunAmerica. Dresdner RCM Global Investors ("Dresdner") and Van Wagoner Capital
Management, Inc. ("Van Wagoner") act as Advisers to the Focused TechNet
Portfolio pursuant to various subadvisory agreements with SunAmerica. SunAmerica
also advises a portion of the Focused TechNet Portfolio as an Adviser.
Each of the other Advisers is independent of SunAmerica and discharges
its responsibilities subject to the policies of the Directors and the
supervision of SunAmerica, which pays the Advisers' fees. Alger is wholly owned
by its principals. Jennison is wholly owned by The Prudential Insurance Company
of America. Thomas F. Marsico owns 50% of Marsico's voting stock and Bank of
America owns 50% of Marsico's voting stock. Dresdner is an indirect wholly owned
subsidiary of Dresdner Bank AG. Van Wagoner is privately owned.
As described in the Prospectus, SunAmerica will initially allocate the
assets of each Portfolio equally among the Advisers for that Portfolio, and
subsequently allocations of new cash flow and of redemption requests will be
made equally among the Advisers of each Portfolio unless SunAmerica determines,
subject to the review of the Directors, that a different allocation of assets
would be in the best interests of a Portfolio and its shareholders. The
Corporation expects that differences in investment returns among the portions of
a Portfolio managed by different Advisers will cause the actual percentage of a
Portfolio's assets managed by each Adviser to vary over time. In general, a
Portfolio's assets once allocated to one Adviser will not be reallocated (or
"rebalanced") to another Adviser for the Portfolio. However, SunAmerica reserves
the right, subject to the review of the Board, to reallocate assets from one
Adviser to another when deemed in the best interests of a Portfolio and its
shareholders. In addition, SunAmerica intends, on a quarterly basis, to review
the asset allocation in each Portfolio to ensure that no portion of assets
managed by an Adviser exceeds that portion managed by any other Adviser to a
Portfolio by more than 5%. If such a condition exists, SunAmerica will then
reallocate cash flows among the Advisers so as to effect a rebalancing of the
Portfolio's asset allocation. In some instances, where a reallocation results in
any rebalancing of the Portfolio from a previous allocation, the effect of the
reallocation will be to shift assets from a better performing Adviser to a
portion of the Portfolio with a relatively lower total return. Each Adviser is
paid monthly by SunAmerica a fee equal to a percentage of the average daily net
assets of the Portfolio allocated to the Adviser. In addition, SunAmerica has
agreed to pay an additional $50,000 to the Adviser with the highest total return
for its portion of each Portfolio for each calendar year. The aggregate annual
rates, as a percentage of daily net assets, of the fees payable by SunAmerica to
the Advisers for each Portfolio may vary according to the level of assets of
each Portfolio. For the fiscal year ended October 31, 1999, SunAmerica paid the
Advisers of the Focus Portfolio a fee of 0.40% of the assets of the
Portfolio. Because the Focused TechNet Portfolio has not commenced operations as
of the date of this Statement of Additional Information, no fees have yet been
paid to the Advisers.
The Subadvisory Agreements continue in effect for a period of two years
from the date of their execution, unless terminated sooner. Thereafter, they may
be renewed from year to year, so long as continuance is specifically approved at
least annually in accordance with the requirements of the 1940 Act. The
Subadvisory Agreements provide that they will terminate in the event of an
assignment (as defined in the 1940 Act) or upon termination of the Management
Agreement. Under the terms of the Subadvisory Agreements, no Adviser is liable
to the Portfolio, or its shareholders, for any act or omission by it or for any
losses sustained by the Portfolios or their shareholders, except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties. SunAmerica may terminate any agreement with an Adviser
without shareholder approval. Moreover, SunAmerica
B-32
<PAGE>
has received an exemptive order from the SEC that permits SunAmerica, subject to
certain conditions, to enter into agreements relating to the Corporation with
Advisers approved by the Board of Directors without obtaining shareholder
approval. The exemptive order also permits SunAmerica, subject to the approval
of the Board but without shareholder approval, to employ new Advisers for new or
existing Funds, change the terms of particular agreements with Advisers or
continue the employment of existing Advisers after events that would otherwise
cause an automatic termination of a subadvisory agreement. Shareholders will be
notified of any Adviser changes.
The following table sets forth the total subadvisory fees pursuant to
the Subadvisory Agreements, for the fiscal years ended October 31, 1999 and
1998.
SUBADVISORY FEES
----------------
1999 1998*
---- -----
Focus Portfolio $1,448,979 $112,346
- -----------------------
* From date of inception of June 1, 1998.
PERSONAL SECURITIES TRADING. The Corporation and SunAmerica have
adopted a written Code of Ethics (the "SunAmerica Code"), which prescribes
general rules of conduct and sets forth guidelines with respect to personal
securities trading by "Access Persons" thereof. An Access Person is defined in
the SunAmerica Code as an individual who is a trustee, director, officer,
general partner or advisory person of the Corporation or SunAmerica. The topics
covered in the guidelines on personal securities trading include: (i) securities
being considered for purchase or sale, or purchased or sold, by any investment
company advised by SunAmerica, (ii) initial public offerings, (iii) private
placements, (iv) blackout periods, (v) short-term trading profits, (vi) gifts,
and (vii) services as a director. Access Persons may invest in securities,
including securities in which the Corporation may invest, subject to the
limitations set forth in the SunAmerica Code. The guidelines and restrictions in
the Code of Ethics comply with Rule 17j-1 under the 1940 Act and are
substantially similar to those contained in the Report of the Advisory Group on
Personal Investing issued by the Investment Company Institute's Advisory Panel.
SunAmerica reports to the Board of Directors on a quarterly basis, as to whether
there were any violations of the SunAmerica Code by Access Persons of the
Corporation or SunAmerica during the quarter.
The Advisers have each adopted a written Code of Ethics, and have
represented that the provisions of such Code of Ethics are substantially similar
to those in the SunAmerica Code and comply with Rule 17j-1 under the 1940 Act.
Further, the Advisers report to SunAmerica on a quarterly basis, as to whether
there were any Code of Ethics violations by employees thereof who may be deemed
Access Persons of the Corporation insofar as such violations related to the
Corporation. In turn, SunAmerica reports to the Board of Directors as to whether
there were any violations of the SunAmerica Code by Access Persons of the
Corporation or SunAmerica.
THE DISTRIBUTOR. The Corporation, on behalf of each Portfolio, has
entered into a distribution agreement (the "Distribution Agreement") with the
Distributor, a registered broker-dealer and an indirect wholly owned subsidiary
of AIG, to act as the principal underwriter in connection with the continuous
offering of each class of shares of each Portfolio. The address of the
Distributor is The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204.
The Distribution Agreement provides that the Distributor has the exclusive right
to distribute shares of the Portfolios through its registered representatives
and authorized broker-dealers. The Distribution Agreement also provides that the
Distributor will pay the promotional expenses, including the incremental cost of
printing prospectuses, annual reports and other periodic reports respecting each
Portfolio, for distribution to persons
B-33
<PAGE>
who are not shareholders of such Portfolio and the costs of preparing and
distributing any other supplemental sales literature. However, certain
promotional expenses may be borne by the Portfolio (see "Distribution Plans"
below).
SACS serves as Distributor of Class Z shares, with respect to the Focus
Portfolio and incurs the expenses of distributing the Portfolio's Class Z shares
under the Distribution agreement, none of which are reimbursed or paid by the
Corporation.
The Distribution Agreement with respect to each Portfolio will remain
in effect for two years from the date of execution unless terminated sooner, and
thereafter from year to year if such continuance is approved at least annually
by the Directors, including a majority of the Disinterested Directors. The
Corporation and the Distributor each has the right to terminate the Distribution
Agreement with respect to a Portfolio on 60 days' written notice, without
penalty. The Distribution Agreement will terminate automatically in the event of
its assignment as defined in the 1940 Act and the rules thereunder.
The Distributor may, from time to time, pay additional commissions or
promotional incentives to brokers, dealers or other financial services firms
that sell shares of the Portfolios. In some instances, such additional
commissions, fees or other incentives may be offered only to certain firms,
including Royal Alliance Associates, SunAmerica Securities, Inc., Koegler Morgan
& Company, Financial Service Corporation and Advantage Capital Corporation,
affiliates of the Distributor, that sell or are expected to sell during
specified time periods certain minimum amounts of shares of the Portfolios, or
of other funds underwritten by the Distributor. In addition, the terms and
conditions of any given promotional incentive may differ from firm to firm. Such
differences will, nevertheless, be fair and equitable, and based on such factors
as size, geographic location, or other reasonable determinants, and will in no
way affect the amount paid to any investor.
DISTRIBUTION PLANS. As indicated in the Prospectus, the Directors of
the Corporation have adopted Distribution Plans (the "Class A Plan," the "Class
B Plan," the "Class C Plan" and the "Class II Plan" and collectively, the
"Distribution Plans") pursuant to Rule 12b-1 under the 1940 Act. There is no
Distribution Plan in effect for Class Z shares of the Focus Portfolio. Reference
is made to "Fund Management - Distributor" in the Prospectus for certain
information with respect to the Distribution Plans.
Under the Class A Plan, the Distributor may receive payments from a
Portfolio at an annual rate of up to 0.10% of average daily net assets of such
Portfolio's Class A shares to compensate the Distributor and certain securities
firms for providing sales and promotional activities for distributing that class
of shares. Under the Class B, Class C and Class II Plans, the Distributor may
receive payments from a Portfolio at the annual rate of up to 0.75% of the
average daily net assets of such Portfolio's Class B, Class C and Class II
shares to compensate the Distributor and certain securities firms for providing
sales and promotional activities for distributing each such class of shares. The
distribution costs for which the Distributor may be reimbursed out of such
distribution fees include fees paid to broker-dealers that have sold Portfolio
shares, commissions and other expenses such as sales literature, prospectus
printing and distribution and compensation to wholesalers. It is possible that
in any given year the amount paid to the Distributor under the Class A Plan, the
Class B Plan, the Class C Plan or the Class II Plan will exceed the
Distributor's distribution costs as described above. The Distribution Plans
provide that each class of shares of each Portfolio may also pay the Distributor
an account maintenance and service fee of up to 0.25% of the aggregate average
daily net assets of such class of shares for payments to broker-dealers for
providing continuing account maintenance.
B-34
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION AND ACCOUNT MAINTENANCE AND SERVICE FEES
1999 1998*
CLASS A CLASS B CLASS II CLASS A CLASS B CLASS II
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Focus Portfolio $334,465 $1,443,431 $1,214,056 $29,757 $107,744 $88,405
</TABLE>
- -----------------------
* From date of inception of June 1, 1998.
Continuance of the Distribution Plans with respect to each Portfolio is
subject to annual approval by vote of the Directors, including a majority of the
Disinterested Directors who have no direct or indirect financial interest in the
operation of the Plans or in any agreements related to the Plans (the
"Independent Directors"). A Distribution Plan may not be amended to increase
materially the amount authorized to be spent thereunder with respect to a class
of shares of a Portfolio, without approval of the shareholders of the affected
class of shares of the Portfolio. In addition, all material amendments to the
Distribution Plans must be approved by the Directors in the manner described
above. A Distribution Plan may be terminated at any time with respect to a
Portfolio without payment of any penalty by vote of a majority of the
Independent Directors or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the affected class of shares of the
Portfolio. So long as the Distribution Plans are in effect, the election and
nomination of the Independent Directors of the Corporation shall be committed to
the discretion of the Independent Directors. In the Directors' quarterly review
of the Distribution Plans, they will consider the continued appropriateness of,
and the level of, compensation provided in the Distribution Plans. In their
consideration of the Distribution Plans with respect to a Portfolio, the
Directors must consider all factors they deem relevant, including information as
to the benefits of the Portfolio and the shareholders of the relevant class of
the Portfolio.
THE ADMINISTRATOR. The Corporation has entered into a Service
Agreement, under the terms of which SunAmerica Fund Services ("SAFS"), an
indirect wholly owned subsidiary of AIG, acts as a servicing agent assisting
State Street Bank and Trust Company ("State Street") in connection with certain
services offered to the shareholders of each of the Portfolios. Under the terms
of the Service Agreement, SAFS may receive reimbursement of its costs in
providing such shareholder services. SAFS is located at The SunAmerica Center,
733 Third Avenue, New York, NY 10017-3204.
The Service Agreement will remain in effect for two years from the date
of approval with respect to each Portfolio and from year to year thereafter
provided its continuance is approved annually by vote of the Directors including
a majority of the Disinterested Directors.
Pursuant to the Service Agreement, as compensation for services
rendered, SAFS receives a fee from the Corporation, computed and payable monthly
based upon an annual rate of 0.22% of average daily net assets. From this fee,
SAFS pays a fee to State Street, and its affiliate, National Financial Data
Services ("NFDS" and with State Street, the "Transfer Agent") (other than
out-of-pocket charges that would be paid by the Corporation). With respect to
the Focus Portfolio, no portion of such fee is paid or reimbursed by Class Z
shares. Class Z shares, however, pay all direct transfer agency fees and
out-of-pocket expenses. For the fiscal year ended October 31, 1999, the total
amount paid to the Administrator by the Corporation was $2,618,850. For further
information regarding the Transfer Agent see the section entitled "Additional
Information" below.
B-35
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
As discussed in the Prospectus, the Advisers are responsible for
decisions to buy and sell securities for each respective Portfolio, selection of
broker-dealers and negotiation of commission rates. Purchases and sales of
securities on a securities exchange are effected through broker-dealers who
charge a negotiated commission for their services. Orders may be directed to any
broker-dealer including, to the extent and in the manner permitted by applicable
law, an affiliated brokerage subsidiary of SunAmerica or another Adviser.
In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission (although the price of the security usually includes a profit
to the dealer). In underwritten offerings, securities are purchased at a fixed
price, which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid.
An Adviser's primary consideration in effecting a security transaction
is to obtain the best net price and the most favorable execution of the order.
However, the Adviser may select broker-dealers that provide it with research
services-analyses and reports concerning issuers, industries, securities,
economic factors and trends-and may cause a Portfolio to pay such broker-dealers
commissions that exceed those that other broker-dealers may have charged, if in
its view the commissions are reasonable in relation to the value of the
brokerage and/or research services provided by the broker-dealer. The research
services consist of assessments and analysis of the business or prospects of a
company, industry or economic sector. Certain research services furnished by
brokers may be useful to the Adviser with respect to clients other than the
Corporation and not all of these services may be used by the Adviser in
connection with the Corporation. No specific value can be determined for
research services furnished without cost to the Adviser by a broker. The
Advisers are of the opinion that because the material must be analyzed and
reviewed by its staff, its receipt does not tend to reduce expenses, but may be
beneficial in supplementing the Adviser's research and analysis. Therefore, it
may tend to benefit the Portfolio by improving the quality of the Adviser's
investment advice. The investment advisory fees paid by the Portfolio are not
reduced because the Adviser receives such services. When making purchases of
underwritten issues with fixed underwriting fees, the Adviser may designate the
use of broker-dealers who have agreed to provide the Adviser with certain
statistical, research and other information.
Subject to applicable law and regulations, consideration may also be
given to the willingness of particular brokers to sell shares of a Portfolio as
a factor in the selection of brokers for transactions effected on behalf of a
Portfolio, subject to the requirement of best price and execution.
Although the objectives of other accounts or investment companies that
the Adviser manages may differ from those of a Portfolio, it is possible that,
at times, identical securities will be acceptable for purchase by the Portfolio
and one or more other accounts or investment companies that the Adviser manages.
However, the position of each account or company in the securities of the same
issue may vary with the length of the time that each account or company may
choose to hold its investment in those securities. The timing and amount of
purchase by each account and company will also be determined by its cash
position. If the purchase or sale of a security is consistent with the
investment policies of one or more of the Portfolios and one or more of these
other accounts or companies is considered at or about the same time,
transactions in such securities will be allocated in a manner deemed equitable
by the Adviser. The Adviser may combine such transactions, in accordance with
applicable laws and regulations. However, simultaneous transactions could
adversely affect the ability of a Portfolio to obtain or dispose of the full
amount of a security, which it seeks to purchase or sell, or the price at which
such security can be
B-36
<PAGE>
purchased or sold. Because each of the Advisers to each Portfolio manages its
portion of the Portfolio's assets independently, it is possible that the same
security may be purchased and sold on the same day by two or more Advisers to
the same Portfolio, resulting in higher brokerage commissions for the Portfolio.
The following table sets forth the brokerage commissions paid by the
Focus Portfolio and the amounts of the brokerage commissions paid to affiliated
broker-dealers by the Portfolio for the fiscal years ended October 31, 1999 and
1998.
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
FOCUS PORTFOLIO
PERCENTAGE OF
AMOUNT OF
TRANSACTIONS
INVOLVING
PERCENTAGE OF PAYMENT OF
AGGREGRATE AMOUNT PAID TO COMMISSIONS PAID COMMISSIONS TO
BROKERAGE AFFILIATED TO AFFILIATE AFFILIATED
COMMISSIONS BROKER-DEALERS BROKER-DEALERS BROKER-DEALERS
----------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
1999 $689,632 $ 2,019 0.29% 0.29%
1998* $175,114 $13,770 7.90% 2.10%
</TABLE>
- -----------------------
* From date of inception of June 1, 1998.
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES
Upon making an investment in shares of a Portfolio, an open account
will be established under which shares of such Portfolio and additional shares
acquired through reinvestment of dividends and distributions will be held for
each shareholder's account by the Transfer Agent. Shareholders will not be
issued certificates for their shares unless they specifically so request in
writing, but no certificate is issued for fractional shares. Shareholders
receive regular statements from the Transfer Agent that report each transaction
affecting their accounts. Further information may be obtained by calling
Shareholder/Dealer Services at (800) 858-8850, extension 5125.
Shareholders who have met a Portfolio's minimum initial investment may
elect to have periodic purchases made through a dollar cost averaging program.
At the shareholder's election, such purchases may be made from their bank
checking or savings account on a monthly, quarterly, semi-annual or annual
basis. Purchases can be made via electronic funds transfer through the Automated
Clearing House or by physical draft check. Purchases made via physical draft
check require an authorization card to be filed with the shareholder's bank.
Shares of the Portfolios are sold at the respective net asset value
next determined after receipt of a purchase order, plus a sales charge, which,
at the election of the investor (i) may be imposed at the time of purchase
(Class A shares), (ii) may be deferred (Class B shares, Class C shares and
purchases of Class A shares in excess of $1 million) or (iii) may contain
elements of a sales charge that is both imposed at the time of purchase and
deferred
B-37
<PAGE>
(Class II shares). Reference is made to "Shareholder Account Information" in the
Prospectus for certain information as to the purchase of Portfolio shares.
The following table sets forth the front-end sales concessions with
respect to Class A shares of the Focus Portfolio, the amount of the front-end
sales concession that was reallowed to affiliated broker-dealers, and the
contingent deferred sales charges with respect to Class B and Class II shares of
the Focus Portfolio, received by the Distributor for the fiscal years ended
October 31, 1999 and 1998.
<TABLE>
<CAPTION>
AMOUNT AMOUNT
AMOUNT AMOUNT REALLOWED REALLOWED TO
REALLOWED REALLOWED TO NON-
FRONT-END TO TO CONTINGENT FRONT-END AFFILIATED AFFILIATED
SALES AFFILIATED NON-AFFILIATED CONTINGENT DEFERRED SALES BROKER BROKER
CONCESSIONS- BROKER-DEALER BROKER-DEALERS DEFERRED SALES SALES CHARGE CONCESSIONS DEALERS DEALERS
CLASS A CLASS A CLASS A CHARGE CLASS II CLASS II CLASS II CLASS II
SHARES SHARES SHARES CLASS B SHARES SHARES SHARES SHARES SHARES
1999
<S> <C> <C> <C> <C> <C> <C> <C>
$4,320,016 $1,424,165 $2,317,951 $257,008 $83,161 $2,363,391 $413,746 $1,949,645
1998*
$1,250,948 $ 191,346 $ 884,979 $ 10,686 $ 7,401 $ 513,213 $ 48,486 $ 464,727
</TABLE>
---------------------------
* For the period from June 1, 1998 (commencement of offering of shares).
WAIVER OF CONTINGENT DEFERRED SALES CHARGES. As discussed under
"Shareholder Account Information" in the Prospectus, the CDSC may be waived on
redemptions of Class B, Class C and Class II shares under certain circumstances.
The conditions set forth below are applicable with respect to the following
situations with the proper documentation:
DEATH. CDSCs may be waived on redemptions within one year following the
death (i) of the sole shareholder on an individual account, (ii) of a joint
tenant where the surviving joint tenant is the deceased's spouse, or (iii) of
the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfers to Minors
Act or other custodial account. The CDSC waiver is also applicable in the case
where the shareholder account is registered as community property. If, upon the
occurrence of one of the foregoing, the account is transferred to an account
registered in the name of the deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
Class B shares, Class C shares or Class II shares are not redeemed within one
year of the death, they will remain Class B shares, Class C shares or Class II
shares, as applicable, and be subject to the applicable CDSC, when redeemed.
DISABILITY. A CDSC may be waived on redemptions occurring within one
year after the sole shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in Section 72(m)(7) of
the Code). To be eligible for such waiver, (i) the disability must arise after
the purchase of shares and (ii) the disabled shareholder must have been under
age 65 at the time of the initial determination of
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<PAGE>
disability. If the account is transferred to a new registration and then a
redemption is requested, the applicable CDSC will be charged.
PURCHASES THROUGH THE DISTRIBUTOR. An investor may purchase shares of a
Portfolio through dealers who have entered into selected dealer agreements with
the Distributor. An investor's dealer who has entered into a distribution
arrangement with the Distributor is expected to forward purchase orders and
payment promptly to the Portfolio. Orders received by the Distributor before the
close of business will be executed at the offering price determined at the close
of regular trading on the New York Stock Exchange (the "NYSE") that day. Orders
received by the Distributor after the close of business will be executed at the
offering price determined after the close of regular trading of the NYSE on the
next trading day. The Distributor reserves the right to cancel any purchase
order for which payment has not been received by the fifth business day
following the investment. A Portfolio will not be responsible for delays caused
by dealers.
PURCHASE BY CHECK. Checks should be made payable to the specific
Portfolio or to "SunAmerica Funds." If the payment is for a retirement plan
account for which SunAmerica serves as fiduciary, please note on the check that
payment is for such an account. In the case of a new account, purchase orders by
check must be submitted directly by mail to SunAmerica Fund Services, Inc.,
Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New
York 10017-3204, together with payment for the purchase price of such shares and
a completed New Account Application. Payment for subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas
City, Missouri 64141-6373 and the shareholder's Portfolio account number should
appear on the check. For fiduciary retirement plan accounts, both initial and
subsequent purchases should be mailed to SunAmerica Fund Services, Inc., Mutual
Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204. Certified checks are not necessary but checks are accepted subject
to collection at full face value in United States funds and must be drawn on a
bank located in the United States. Upon receipt of the completed New Account
Application and payment check, the Transfer Agent will purchase full and
fractional shares of the applicable Portfolio at the net asset value next
computed after the check is received, plus the applicable sales charge.
Subsequent purchases of shares of each Portfolio may be purchased directly
through the Transfer Agent. SAFS reserves the right to reject any check made
payable other than in the manner indicated above. Under certain circumstances,
the Corporation will accept a multi-party check (e.g., a check made payable to
the shareholder by another party and then endorsed by the shareholder to the
Corporation in payment for the purchase of shares); however, the processing of
such a check may be subject to a delay. The Corporation does not verify the
authenticity of the endorsement of such multi-party check, and acceptance of the
check by the Corporation should not be considered verification thereof. Neither
the Corporation nor its affiliates will be held liable for any losses incurred
as a result of a fraudulent endorsement. There are restrictions on the
redemption of shares purchased by check for which funds are being collected.
(See "Shareholder Account Information" in the Prospectus.)
PURCHASE THROUGH SAFS. SAFS will effect a purchase order on behalf of a
customer who has an investment account upon confirmation of a verified credit
balance at least equal to the amount of the purchase order (subject to the
minimum $500 investment requirement for wire orders). If such order is received
at or prior to the Corporation's close of business, the purchase of shares of a
Corporation will be effected on that day. If the order is received after the
Corporation's close of business, the order will be effected on the next business
day.
PURCHASE BY FEDERAL FUNDS WIRE. An investor may make purchases by
having his or her bank wire federal funds to the Corporation's Transfer Agent.
Federal funds purchase orders will be accepted only on a day on which the
Corporation and the Transfer Agent are open for business. In order to insure
prompt receipt of a federal funds wire, it is important that these steps be
followed:
B-39
<PAGE>
1. You must have an existing SunAmerica Fund Account before wiring
funds. To establish an account, complete the New Account
Application and send it via facsimile to SAFS at: (212) 551- 5585.
2. Call SunAmerica Fund Services' Shareholder/Dealer Services, toll
free at (800) 858-8850, extension 5125 to obtain your new account
number.
3. Instruct the bank to wire the specified amount to the Transfer
Agent: State Street Bank and Trust Company, Boston, MA, ABA#
0110-00028; DDA# 99029712, SunAmerica [name of Portfolio, Class __]
(include shareholder name and account number).
WAIVER OF SALES CHARGES WITH RESPECT TO CERTAIN PURCHASES OF CLASS A
SHARES. To the extent that sales are made for personal investment purposes, the
sales charge is waived as to Class A shares purchased by current or retired
officers, directors, and other full-time employees of SunAmerica and its
affiliates, as well as members of the selling group and family members of the
foregoing. In addition, the sales charge is waived with respect to shares
purchased by certain qualified retirement plans or employee benefit plans (other
than IRAs), sponsored or administered by SunAmerica or an affiliate thereof.
Such plans may include certain employee benefit plans qualified under Sections
401 or 457 of the Code, or employee benefit plans created pursuant to Section
403(b) of the Code and sponsored by nonprofit organizations defined under
Section 501(c)(3) of the Code (collectively, "Plans"). A Plan will qualify for
purchases at net asset value provided that (a) the initial amount invested in a
Portfolio, the other portfolios of the Corporation (or in combination with the
shares of other SAMF) is at least $750,000, (b) the sponsor signs a $750,000
Letter of Intent, (c) such shares are purchased by an employer-sponsored plan
with at least 75 eligible employees, or (d) the purchases are by trustees or
other fiduciaries for certain employer-sponsored plans, the trustee, fiduciary
or administrator that has an agreement with the Distributor with respect to such
purchases and all such transactions for the plan are executed through a single
omnibus account. Further, the sales charge is waived with respect to shares
purchased by "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions, financial planners or registered investment advisers
adhering to the following standards established by the Distributor: (i) the
broker-dealer, financial institution or financial planner charges its client(s)
an advisory fee based on the assets under management on an annual basis, and
(ii) such broker-dealer, financial institution or financial planner does not
advertise that shares of a Portfolio may be purchased by clients at net asset
value. Shares purchased under this waiver may not be resold except to the
Portfolio. Shares are offered at net asset value to the foregoing persons
because of anticipated economies in sales effort and sales related expenses.
Reductions in sales charges apply to purchases or shares by a "single person"
including an individual; members of a family unit comprising husband, wife and
minor children; or a trustee or other fiduciary purchasing for a single
fiduciary account. Complete details concerning how an investor may purchase
shares at reduced sales charges may be obtained by contacting the Distributor.
REDUCED SALES CHARGES (CLASS A SHARES ONLY). As discussed under
"Shareholder Account Information" in the Prospectus, investors in Class A shares
of a Portfolio may be entitled to reduced sales charges pursuant to the
following special purchase plans made available by the Corporation.
COMBINED PURCHASE PRIVILEGE. The following persons may qualify for the
sales charge reductions or eliminations by combining purchases of Portfolio
shares into a single transaction:
1. an individual, or a "company" as defined in Section 2(a)(8) of the
1940 Act (which includes corporations that are corporate affiliates
of each other);
B-40
<PAGE>
2. an individual, his or her spouse and their minor children,
purchasing for his, her or their own account;
3. a trustee or other fiduciary purchasing for a single trust estate
or single fiduciary account (including a pension, profit-sharing,
or other employee benefit trust created pursuant to a plan
qualified under Section 401 of the Code);
4. tax-exempt organizations qualifying under Section 501(c)(3) of the
Code (not including 403(b) plans);
5. employee benefit plans of a single employer or of affiliated
employers, other than 403(b) plans; and
6. group purchases as described below.
A combined purchase currently may also include shares of other of the
Corporation's portfolios and other funds in SAMF (other than money market funds)
purchased at the same time through a single investment dealer, if the dealer
places the order for such shares directly with the Distributor.
RIGHTS OF ACCUMULATION. A purchaser of Portfolio shares may qualify for
a reduced sales charge by combining a current purchase (or combined purchases as
described above) with shares previously purchased and still owned; provided the
cumulative value of such shares (valued at cost or current net asset value,
whichever is higher), amounts to $50,000 or more. In determining the shares
previously purchased, the calculation will include, in addition to other Class A
shares of the particular Portfolio that were previously purchased, shares of the
other classes of the same Portfolio, as well as shares of any class of any other
of the Corporation's portfolios or of any of the other funds advised by
SunAmerica, as long as such shares were sold with a sales charge or acquired in
exchange for shares purchased with such a sales charge.
The shareholder's dealer, if any, or the shareholder, must notify the
Distributor at the time an order is placed of the applicability of the reduced
charge under the Right of Accumulation. Such notification must be in writing by
the dealer or shareholder when such an order is placed by mail. The reduced
sales charge will not be granted if: (a) such information is not furnished at
the time of the order; or (b) a review of the Distributor's or the Transfer
Agent's records fails to confirm the investor's represented holdings.
LETTER OF INTENT. A reduction of sales charges is also available to an
investor who, pursuant to a written "Letter of Intent" establishes a total
investment goal in Class A shares of one or more Portfolios and other of the
Corporation's portfolios to be achieved through any number of investments over a
thirteen-month period, of $50,000 or more. Each investment in such Portfolio and
other portfolios made during the period will be subject to a reduced sales
charge applicable to the goal amount. The initial purchase must be at least 5%
of the stated investment goal and shares totaling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Transfer Agent, in the name of
the investor. Shares of any class of shares of any Portfolio, other portfolio of
the Corporation or of other funds advised by SunAmerica that impose a sales
charge at the time of purchase, which the investor intends to purchase or has
previously purchased during a 30-day period prior to the date of execution of
the Letter of Intent and still owns, may also be included in determining the
applicable reduction; provided, the dealer or shareholder notifies the
Distributor of such prior purchase(s).
The Letter of Intent does not obligate the investor to purchase, nor
the Corporation to sell, the indicated amounts of the investment goal. In the
event the investment goal is not achieved within the thirteen-month period,
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<PAGE>
the investor is required to pay the difference between the sales charge
otherwise applicable to the purchases made during this period and sales charges
actually paid. Such payment may be made directly to the Distributor or, if not
paid, the Distributor is authorized by the Letter of Intent to liquidate a
sufficient number of escrowed shares to obtain such difference. If the goal is
exceeded and purchases pass the next sales charge break-point, the sales charge
on the entire amount of the purchase that results in passing that break-point,
and on subsequent purchases, will be subject to a further reduced sales charge
in the same manner as set forth above under "Rights of Accumulation," but there
will be no retroactive reduction of sales charges on previous purchases. At any
time while a Letter of Intent is in effect, a shareholder may, by written notice
to the Distributor, increase the amount of the stated goal. In that event,
shares of the applicable Portfolio purchased during the previous 90-day period
and still owned by the shareholder will be included in determining the
applicable sales charge. The 5% escrow and the minimum purchase requirement will
be applicable to the new stated goal. Investors electing to purchase shares of a
Portfolio pursuant to this purchase plan should carefully read such Letter of
Intent.
REDUCED SALES CHARGE FOR GROUP PURCHASES. Members of qualified groups
may purchase Class A shares of the Portfolios under the combined purchase
privilege as described above.
To receive a rate based on combined purchases, group members must
purchase Class A shares of a Portfolio through a single investment dealer
designated by the group. The designated dealer must transmit each member's
initial purchase to the Distributor, together with payment and completed New
Account Application. After the initial purchase, a member may send funds for the
purchase of Class A shares directly to the Transfer Agent. Purchases of a
Portfolio's shares are made at the public offering price based on the net asset
value next determined after the Distributor or the Transfer Agent receives
payment for the Class A shares. The minimum investment requirements described
above apply to purchases by any group member.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or other
organized groups of persons (the members of which may include other qualified
groups) provided that: (i) the group has at least 25 members of which at least
ten members participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some purpose in addition
to the purchase of investment company shares at a reduced sales charge; (iv) the
group's sole organizational nexus or connection is not that the members are
credit card customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) the group agrees to provide its
designated investment dealer at least annually access to the group's membership
by means of written communication or direct presentation to the membership at a
meeting; (vi) the group or its investment dealer will provide annual
certification, in form satisfactory to the Transfer Agent, that the group then
has at least 25 members and that at least ten members participated in group
purchases during the immediately preceding 12 calendar months; and (vii) the
group or its investment dealer will provide periodic certification, in form
satisfactory to the Transfer Agent, as to the eligibility of the purchasing
members of the group.
Members of a qualified group include: (i) any group that meets the
requirements stated above and is a constituent member of a qualified group; (ii)
any individual purchasing for his or her own account who is carried on the
records of the group or on the records of any constituent member of the group as
being a good standing employee, partner, member or person of like status of the
group or constituent member; or (iii) any fiduciary purchasing shares for the
account of a member of a qualified group or a member's beneficiary. For example,
a qualified group could consist of a trade association that would have as its
members individuals, sole proprietors, partnerships and corporations. The
members of the group would then consist of the individuals, the sole proprietors
and their employees, the members of the partnership and their employees, and the
corporations and their employees,
B-42
<PAGE>
as well as the trustees of employee benefit trusts acquiring a Portfolio's
shares for the benefit of any of the foregoing.
Interested groups should contact their investment dealer or the
Distributor. The Corporation reserves the right to revise the terms of or to
suspend or discontinue group sales with respect to shares of a Portfolio at any
time.
NET ASSET VALUE TRANSFER PROGRAM. Investors may purchase shares of a
Portfolio at net asset value to the extent that the investment represents the
proceeds from a redemption of a non-SunAmerica mutual fund in which the investor
either (a) paid a front-end sales load or (b) was subject to, or paid a CDSC on
the redemption proceeds. Shareholders may purchase either Class A, Class B,
Class C or Class II shares through the program to the extent that they
previously held shares of a non-SunAmerica Mutual Fund with a similar load
structure to the respective SunAmerica Mutual Fund share class. With respect to
sales of Class A shares through the program, the Distributor will pay a 0.50%
commission and 0.25% service fee to any dealer who initiates or is responsible
for such an investment. With respect to sales of Class B and Class C shares
through the program, they will receive 0.50% of the amount invested as
commission and 0.25% as a service fee, payable beginning the 13th month
following the purchase of such shares. (Class B shares will convert to Class A
shares as provided in the prospectus.). These payments are subject, however, to
forfeiture in the event of a redemption during the first year from the date of
purchase. No commission shall be paid on sales of Class II shares, but dealers
will receive a 1% service fee, commencing immediately and paid quarterly. In
addition, it is essential that a Net Asset Value Transfer Program Form accompany
the New Account Application to indicate that the investment is intended to
participate in the Net Asset Value Transfer Program. This program may be revised
or terminated without notice by the Distributor. For current information,
contact Shareholder/Dealer Services at (800) 858-8850, extension 5125.
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES
Reference is made to "Shareholder Account Information" in the
Prospectus for certain information as to the redemption of Portfolio shares.
Focus Portfolio, having filed with the SEC a notification of election pursuant
to Rule 18f-1, is committed to pay in cash all requests for redemption, by any
shareholder of record, limited in amount with respect to each shareholder during
any 90-day period to the lesser of (i) $250,000, or (ii) 1% of the net asset
value of Focus Portfolio at the beginning of such period.
If the Directors determine that it would be detrimental to the best
interests of the remaining shareholders of a Portfolio to make payment wholly or
partly in cash, the Corporation, may pay the redemption price in whole, or in
part, by a distribution in kind of securities from a Portfolio in lieu of cash.
If shares are redeemed in kind, the redeeming shareholder would incur brokerage
costs in converting the assets into cash. The method of valuing portfolio
securities is described below in the section entitled "Determination of Net
Asset Value," and such valuation will be made as of the same time the redemption
price is determined.
The Distributor is authorized, as agent for the Portfolios, to offer to
repurchase shares that are presented by telephone to the Distributor by
investment dealers. Orders received by dealers must be at least $500. The
repurchase price is the net asset value per share of the applicable class of
shares of a Portfolio next-determined after the repurchase order is received,
less any applicable CDSC. Repurchase orders received by the Distributor after
the Portfolio's close of business will be priced based on the next business
day's close. Dealers may charge for their services in connection with the
repurchase, but neither the Portfolios nor the Distributor imposes any such
charge. The offer to repurchase may be suspended at any time.
B-43
<PAGE>
EXCHANGE PRIVILEGE
Shareholders of a Portfolio may exchange their shares for the same
class of shares of the other Portfolio, other portfolios of the Corporation or
other SunAmerica Mutual Funds that offer such class at the respective net
asset value per share. Additionally, shareholders may exchange their Class C
shares of a Portfolio for Class II shares of the other Portfolio, other
portfolios of the Corporation or other SunAmerica Mutual Funds.
Before making an exchange, a shareholder should obtain and review the
prospectus of the fund whose shares are being acquired. All exchanges are
subject to applicable minimum initial or subsequent investment requirements.
Notwithstanding the foregoing, shareholders may elect to make periodic exchanges
on a monthly, quarterly, semi-annual and annual basis through the Systematic
Exchange Program. Through this program, the minimum exchange amount is $50 and
there is no fee for exchanges made. All exchanges can be effected only if the
shares to be acquired are qualified for sale in the state in which the
shareholder resides. Exchanges of shares generally will constitute a taxable
transaction except for IRAs, Keogh Plans and other qualified or tax-exempt
accounts. The exchange privilege may be terminated or modified upon 60 days'
written notice. Further information about the exchange privilege may be obtained
by calling Shareholder/Dealer Services at (800) 858-8850, extension 5125.
If a shareholder acquires Class A shares through an exchange from
another SunAmerica Mutual Fund where the original purchase of such fund's Class
A shares was not subject to an initial sales charge because the purchase was in
excess of $1 million, such shareholder will remain subject to the CDSC, if any,
as described in the Prospectus applicable to such redemptions. In such event,
the period for which the original shares were held prior to the exchange will be
"tacked" with the holding period of the shares acquired in the exchange for
purposes of determining whether the CDSC is applicable upon a redemption of any
of such shares.
A shareholder who acquires Class B, Class C or Class II shares through
an exchange from another SunAmerica Mutual Fund will retain liability for any
deferred sales charge outstanding on the date of the exchange. In such event,
the period for which the original shares were held prior to the exchange will be
"tacked" with the holding period of the shares acquired in the exchange for
purposes of determining what, if any, CDSC is applicable upon a redemption of
any of such shares and the timing of conversion of Class B shares to Class A. A
shareholder's CDSC schedule will not change if such shareholder exchanges Class
C or Class II shares purchased prior to December 1, 1998 for Class II shares
(which currently have a longer CDSC schedule).
Because excessive trading (including short-term "market timing"
trading) can hurt a Portfolio's performance, each Portfolio may refuse any
exchange sell order (1) if it appears to be a market timing transaction
involving a significant portion of a Portfolio's assets or (2) from any
shareholder account if previous use of the exchange privilege is considered
excessive. Accounts under common ownership or control, including, but not
limited to, those with the same taxpayer identification number and those
administered so as to redeem or purchase shares based upon certain predetermined
market indications, will be considered one account for this purpose.
In addition, a Portfolio reserves the right to refuse any exchange
purchase order if, in the judgment of the Adviser, the Portfolio would be unable
to invest effectively in accordance with its investment objective and policies
or would otherwise potentially be adversely affected. A shareholder's purchase
exchange may be restricted or refused if the Portfolio receives or anticipates
simultaneous orders affecting significant portions of the Portfolio's assets. In
particular, a pattern of exchanges that coincide with a "market timing" strategy
may be disruptive to the Portfolio and may therefore be refused.
B-44
<PAGE>
DETERMINATION OF NET ASSET VALUE
The Corporation is open for business on any day the NYSE is open for
regular trading. Shares are valued each day as of the close of regular trading
on the NYSE (generally, 4:00 p.m., Eastern time). Each Portfolio calculates the
net asset value of each class of its shares separately by dividing the total
value of each class's net assets by the shares outstanding of such class.
Investments for which market quotations are readily available are valued at
their price as of the close of regular trading on the New York Stock Exchange
for the day. All other securities and assets are valued at fair value following
procedures approved by the Directors.
Stocks are valued based upon closing sales prices reported on
recognized securities exchanges or, for listed securities having no sales
reported and for unlisted securities, upon last reported bid prices.
Non-convertible bonds, debentures, other long-term debt securities and
short-term securities with original or remaining maturities in excess of 60
days, are normally valued at prices obtained for the day of valuation from a
bond pricing service of a major dealer in bonds, when such prices are available;
however, in circumstances in which the Adviser deems it appropriate to do so, an
over-the-counter or exchange quotation at the mean of representative bid or
asked prices may be used. Securities traded primarily on securities exchanges
outside the United States are valued at the last sale price on such exchanges on
the day of valuation, or if there is no sale on the day of valuation, at the
last-reported bid price. If a security's price is available from more than one
foreign exchange, the Portfolio uses the exchange that is the primary market for
the security. Short-term securities with 60 days or less to maturity are
amortized to maturity based on their cost to the Corporation if acquired within
60 days of maturity or, if already held by the Corporation on the 60th day, are
amortized to maturity based on the value determined on the 61st day. Options
traded on national securities exchanges are valued as of the close of the
exchange on which they are traded. Futures and options traded on commodities
exchanges are valued at their last sale price as of the close of such exchange.
Other securities are valued on the basis of last sale or bid price (if a last
sale price is not available) in what is, in the opinion of the Adviser, the
broadest and most representative market, that may be either a securities
exchange or the over-the-counter market. Where quotations are not readily
available, securities are valued at fair value as determined in good faith in
accordance with procedures adopted by the Board of Directors. The fair value of
all other assets is added to the value of securities to arrive at the respective
Portfolio's total assets.
A Portfolio's liabilities, including proper accruals of expense items,
are deducted from total assets.
PERFORMANCE DATA
Each Portfolio may advertise performance data that reflects various
measures of total return and each Portfolio may advertise data that reflects
yield. An explanation of the data presented and the methods of computation that
will be used are as follows.
A Portfolio's performance may be compared to the historical returns of
various investments, performance indices of those investments or economic
indicators, including, but not limited to, stocks, bonds, certificates of
deposit, money market funds and U.S. Treasury Bills. Certain of these
alternative investments may offer fixed rates of return and guaranteed principal
and may be insured.
Average annual total return is determined separately for Class A, Class
B, Class C and Class II shares in accordance with a formula specified by the
SEC. Average annual total return is computed by finding the average annual
compounded rates of return for the 1-, 5-, and 10-year periods or for the lesser
included periods of effectiveness. The formula used is as follows:
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<PAGE>
P(1 + T)N = ERV
P = a hypothetical initial purchase payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10- year periods at the
end of the 1-, 5-, or 10-year periods (or fractional portion
thereof).
The above formula assumes that:
(a) The maximum sales load (i.e., either the front-end sales
load in the case of the Class A or Class II shares or the
deferred sales load that would be applicable to a complete
redemption of the investment at the end of the
specified period in the case of the Class B, Class C or
Class II shares) is deducted from the initial $1,000
purchase payment;
(b) All dividends and distributions are reinvested at net asset
value; and
(c) Complete redemption occurs at the end of the 1-, 5-, or 10-
year periods or fractional portion thereof with all
nonrecurring charges deducted accordingly.
The Focus Portfolio's average annual total return since inception and
for the 1 year period ended October 31, 1999 is as follows:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS II SHARES
<S> <C> <C> <C>
Since Inception1 30.46% 32.65% 33.59%
One year 43.84% 47.67% 49.16%
</TABLE>
- -------------------
1 From date of inception of June 1, 1998.
Each Portfolio may advertise cumulative, rather than average return,
for each class of its shares for periods of time other than the 1-, 5-, and
10-year periods or fractions thereof, as discussed above. Such return data will
be computed in the same manner as that of average annual total return, except
that the actual cumulative return will be computed.
COMPARISONS
Each Portfolio may compare its total return or yield to similar
measures as calculated by various publications, services, indices, or averages.
Such comparisons are made to assist in evaluating an investment in a Portfolio.
The following references may be used:
a) Dow Jones Composite Average or its component
averages--an unmanaged index composed of 30
blue-chipindustrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks (Dow
Jones Utilities Average), and 20
B-46
<PAGE>
transportation company stocks (Dow Jones
Transportation Average). Comparisons of
performance assume reinvestment of dividends.
b) Standard & Poor's 500 Composite Stock Price Index or
its component indices -- an unmanaged index composed of
400 industrial stocks, 40 financial stocks, 40
utilities stocks, and 20 transportation stocks.
Comparisons of performance assume reinvestment of
dividends.
c) Standard & Poor's 100 Stock Index -- an unmanaged index
based on the prices of 100 blue chip stocks, including
92 industrials, one utility, two transportation
companies, and five financial institutions. The
Standard & Poor's 100 Stock Index is a smaller, more
flexible index for options trading.
d) The NYSE composite or component indices -- unmanaged
indices of all industrial, utilities, transportation,
and finance stocks listed on the NYSE.
e) Wilshire 5000 Equity Index or its component
indices--represents the return on the market value of
all common equity securities for which daily pricing is
available. Comparisons of performance assume
reinvestment of dividends.
f) Lipper: Mutual Fund Performance Analysis, Fixed Income
Analysis, and Mutual Fund Indices -- measures total
return and average current yield for the mutual fund
industry. Ranks individual mutual fund performance over
specified time periods assuming reinvestment of all
distributions, exclusive of sales charges.
g) CDA Mutual Fund Report, published by CDA Investment
Technologies, analyzes price, current yield, risk,
total return, and average rate of return (average
annual compounded growth rate) over specified time
periods for the mutual fund industry.
h) Mutual Fund Source Book, Principia and other
publications and information services provided by
Morningstar, Inc. -- analyzes price, risk and total
return for the mutual fund industry.
i) Financial publications: Wall Street Journal,
BusinessWeek, Changing Times, Financial World, Forbes,
Fortune, Money, Pension and Investment Age, United
Mutual Fund Selector, and Wiesenberger Investment
Companies Service, and other publications containing
financial analyses that rate mutual fund performance
over specified time periods.
j) Consumer Price Index (or Cost of Living
Index),published by the U.S. Bureau of Labor Statistics
-- a statistical measure of periodic change in the
price of goods and services in major expenditure
groups.
k) Stocks, Bonds, Bills, and Inflation, published by
Ibbotson Associates -- historical measure of yield,
price, and total return for common and small company
stock, long-term government bonds, treasury bills, and
inflation.
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<PAGE>
l) Savings and Loan Historical Interest Rates as published
in the U.S. Savings & Loan League Fact Book.
m) Shearson-Lehman Municipal Bond Index and
Government/Corporate Bond Index -- unmanaged indices
that track a basket of intermediate and long-term
bonds. Reflect total return and yield and assume
dividend reinvestment.
n) Salomon GNMA Index published by Salomon Brothers Inc.
--Market value of all outstanding 30-year GNMA Mortgage
Pass-Through Securities that includes single family and
graduated payment mortgages.
o) Salomon Mortgage Pass-Through Index published by
Salomon Brothers Inc. --Market value of all outstanding
agency mortgage pass-through securities that includes
15- and 30-year FNMA, FHLMC and GNMA Securities.
p) Value Line Geometric Index -- broad based index made up
of approximately 1700 stocks each of which have an
equal weighting.
q) Morgan Stanley Capital International EAFE Index -- an
arithmetic, market value-weighted average of the
performance of over 900 securities on the stock
exchanges of countries in Europe, Australia and the Far
East.
r) Goldman Sachs 100 Convertible Bond Index -- currently
includes 67 bonds and 33 preferred stocks. The original
list of names was generated by screening for
convertible issues of $100 million or more in market
capitalization. The index is priced monthly.
s) Salomon Brothers High Grade Corporate Bond Index --
consists of publicly issued, non-convertible corporate
bonds rated "AA" or "AAA." It is a value-weighted,
total return index, including approximately 800 issues.
t) Salomon Brothers Broad Investment Grade Bond Index --
is a market-weighted index that contains approximately
4700 individually priced investment grade corporate
bonds rated "BBB" or better, U.S. Treasury/agency
issues and mortgage pass-through securities.
u) Salomon Brothers World Bond Index -- measures the total
return performance of high-quality securities in major
sectors of the international bond market. The index
covers approximately 600 bonds from 10 currencies:
Australian Dollars Netherlands Guilders
Canadian Dollars Swiss Francs
European Currency Units UK Pound Sterling
French Francs U.S. Dollars
Japanese Yen German Deutsche Marks
B-48
<PAGE>
v) J.P. Morgan Global Government Bond Index--a total
return, market capitalization-weighted index,
rebalanced monthly, consisting of the following
countries: Australia, Belgium, Canada, Denmark, France,
Germany, Italy, Japan, The Netherlands, Spain, Sweden,
the United Kingdom, and the United States.
w) Shearson Lehman Long-Term Treasury Bond Index -- is
comprised of all bonds covered by the Shearson Lehman
Hutton Treasury Bond Index with maturities of 10 years
or greater.
x) NASDAQ Industrial Index -- is comprised of more than
3,000 industrial issues. It is a value-weighted index
calculated on pure change only and does not include
income.
y) The MSCI Combined Far East Free ex Japan Index -- a
market capitalization weighted index comprised of
stocks in Hong Kong, Indonesia, Korea, Malaysia,
Philippines, Singapore and Thailand. Korea is included
in this index at 20% of its market capitalization.
z) First Boston High Yield Index -- generally includes
over 180 issues with an average maturity range of seven
to ten years with a minimum capitalization of $100
million. All issues are individually trader-priced
monthly.
aa) Morgan Stanley Capital International World Index -- An
arithmetic, market value-weighted average of the
performance of over 1,470 securities listed on the
stock exchanges of countries in Europe, Australia, the
Far East, Canada and the United States.
bb) Russell 2000 and 3000 Indices -- represents the top
2,000 and the top 3,000 stocks, respectively, traded on
the NYSE, American Stock Exchange and National
Association of Securities Dealers Automated Quotations,
by market capitalizations.
cc) Russell Midcap Growth Index -- contains those Russell
Midcap securities with a greater-than-average growth
orientation. The stocks are also members of the Russell
1000 Growth Index, the securities in which tend to
exhibit higher price-to-book and price earnings ratios,
lower dividend yields and higher forecasted growth
values than the Value universe.
In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to a Portfolio's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by a Portfolio to calculate
its figures. Specifically, a Portfolio may compare its performance to that of
certain indices that include securities with government guarantees. However, a
Portfolio's shares do not contain any such guarantees. In addition, there can be
no assurance that a Portfolio will continue its performance as compared to such
other standards.
B-49
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. Each Portfolio intends to distribute to the
registered holders of its shares substantially all of its net investment income,
which includes dividends, interest and net short-term capital gains, if any, in
excess of any net long-term capital losses. Each Portfolio intends to distribute
any net capital gains from the sale of assets held for more than 12 months in
excess of any net short-term capital losses. The current policy of each
Portfolio is to pay investment income dividends, if any, at least annually.
Each Portfolio intends to distribute net capital gains, if any, annually. In
determining amounts of capital gains to be distributed, any capital loss
carry-forwards from prior years will be offset against capital gains.
Distributions will be paid in additional Portfolio shares based on the
net asset value at the close of business on the ex-dividend or reinvestment
date, unless the dividends total in excess of $10.00 per distribution period and
the shareholder notifies the Portfolio at least five business days prior to the
payment date to receive such distributions in cash.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, no interest will accrue
on amounts represented by uncashed dividend or distribution checks.
TAXES. Each Portfolio intends to qualify and elect to be taxed as a regulated
investment company under Subchapter M of the Code for each taxable year. In
order to be qualified as a regulated investment company, each Portfolio
generally must, among other things, (a) derive at least 90% of its gross income
from the sales or other disposition of securities, dividends, interest, proceeds
from loans of stock or securities and certain other related income; and (b)
diversify its holdings so that, at the end of each fiscal quarter, (i) 50% of
the market value of each Portfolio's assets is represented by cash, government
securities, securities of other regulated investment companies and other
securities limited, in respect of any one issuer, to an amount no greater than
5% of each Portfolio's assets and not greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than government
securities or the securities of other regulated investment companies).
As a regulated investment company, each Portfolio will not be subject to
U.S. Federal income tax on its income and capital gains which it distributes as
dividends or capital gains distributions to shareholders provided that it
distributes to shareholders at least 90% of its investment company taxable
income for the taxable year. Each Portfolio intends to distribute sufficient
income to meet this qualification requirement.
Under the Code, amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To avoid the tax, each Portfolio must distribute during each
calendar year (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses for the 12-month period ending on
October 31 of the calendar year, and (3) all ordinary income and net capital
gains for the previous years that were not distributed during such years. To
avoid application of the excise tax, each Portfolio intends to make
distributions in accordance with the calendar year distribution requirement. A
distribution will be treated as paid during the calendar year if actually paid
during such year. Additionally, a distribution will be treated as paid on
December 31 of a calender year if it is declared by a Portfolio in October,
November or December of such year, payable to shareholders of record on a date
in such month and paid by such Portfolio during January of the following year.
Any such distributions paid during January of the following year will be taxable
to shareholders as of such December 31, rather than the date on which the
distributions are received.
B-50
<PAGE>
Distributions of net investment income and short-term capital gains are
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. The
portion of such dividends received from each Portfolio that will be eligible for
the dividends received deduction for corporations will be determined on the
basis of the amount of each Portfolio's gross income, exclusive of capital gains
from sales of stock or securities, which is derived as dividends from domestic
corporations, other than certain tax-exempt corporations and certain real estate
investment trusts, and will be designated as such in a written notice to
shareholders mailed not later than 60 days after the end of each fiscal year.
Distributions of net capital gains (i.e., the excess of net capital gains from
the sale of assets held for more than 12 months over net short-term capital
losses, and including such gains from certain transactions in futures and
options), if any, are taxable as capital gains to the shareholders, whether or
not reinvested and regardless of the length of time a shareholder has owned his
or her shares. The maximum capital gains rate for individuals is 20% with
respect to assets held for more than 12 months. The maximum capital gains rate
for corporate shareholders currently is the same as the maximum tax rate for
ordinary income.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands. In the case of an individual, any such capital gain will be
treated as short-term capital gain, taxable at the same rates as ordinary income
if the shares were held for not more than 12 months and long-term capital gain
taxable at the maximum rate of 20% if such shares were held for more than 12
months. In the case of a corporation, any such capital gain will be treated as
long-term capital gain, taxable at the same rates as ordinary income, if such
shares were held for more than 12 months. Any such loss will be treated as
long-term capital loss if such shares were held for more than 12 months. A loss
recognized on the sale or exchange of shares held for six months or less,
however, will be treated as long-term capital loss to the extent of any
long-term capital gains distribution with respect to such shares.
Generally, any loss realized on a sale or exchange of shares of a
Portfolio will be disallowed if other shares of the Portfolio are acquired
(whether through the automatic reinvestment of dividends or otherwise) within a
61-day period beginning 30 days before and ending 30 days after the date that
the shares are disposed of. In such a case, the basis of the shares acquired
will be adjusted to reflect the disallowed loss.
Under certain circumstances (such as the exercise of an exchange
privilege), the tax effect of sales load charges imposed on the purchase of
shares in a regulated investment company is deferred if the shareholder does not
hold the shares for at least 90 days.
Income received by a Portfolio from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which a Portfolio will be subject, since the amount of that
Portfolio's assets to be invested in various countries is not known. If more
than 50% in value of a Portfolio's total assets at the close of its taxable year
consists of securities of foreign corporations, the Portfolio will be eligible,
and intends, to file an election with the Internal Revenue Service pursuant to
which shareholders of the Portfolio will be required to include their
proportionate share of such foreign taxes in their U.S. income tax returns as
gross income, treat such proportionate share as taxes paid by them, and deduct
such proportionate share in computing their taxable incomes or, alternatively,
subject to certain limitations and the Portfolio and the shareholders satisfying
certain holding period requirements, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by non-corporate shareholders who do not itemize deductions. Of course,
certain retirement accounts which are not subject to tax cannot claim foreign
tax credits on investments in foreign securities held in the Portfolio. A
shareholder that
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is a nonresident alien individual or a foreign corporation may be subject to
U.S. withholding tax on the income resulting from the Portfolio's election
described in this paragraph but may not be able to claim a credit or deduction
against such U.S. tax for the foreign taxes treated as having been paid by such
shareholder. The Portfolios do not currently anticipate investing in such a
manner so as to qualify for this election.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Portfolio accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time such Portfolio actually collects such receivables or pays
such liabilities are treated as ordinary income or ordinary loss. Similarly,
gains or losses on forward foreign currency exchange contracts, foreign currency
gains or losses from futures contracts that are not "regulated futures
contracts" and from unlisted non-equity options, gains or losses from sale of
currencies or dispositions of debt securities denominated in a foreign currency
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition generally also
are treated as ordinary gain or loss. These gains, referred to under the Code as
"Section 988" gains or losses, increase or decrease the amount of each
Portfolio's investment company taxable income available to be distributed to its
shareholders as ordinary income. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, a Portfolio would
not be able to make any ordinary dividend distributions, and any distributions
made in the same taxable year may be recharacterized as a return of capital to
shareholders, thereby reducing the basis of each shareholder's Portfolio shares.
In certain cases, a Portfolio may be entitled to elect to treat foreign currency
gains on forward or futures contracts, or options thereon, as capital gains.
The Code includes special rules applicable to the listed non-equity
options, regulated futures contracts, and options on futures contracts which a
Portfolio may write, purchase or sell. Such options and contracts are classified
as Section 1256 contracts under the Code. The character of gain or loss
resulting from the sale, disposition, closing out, expiration or other
termination of Section 1256 contracts, except forward foreign currency exchange
contracts, is generally treated as long-term capital gain or loss to the extent
of 60% thereof and short-term capital gain or loss to the extent of 40% thereof
("60/40 gain or loss"). Such contracts, when held by a Portfolio at the end of a
fiscal year, generally are required to be treated as sold at market value on the
last day of such fiscal year for Federal income tax purposes
("marked-to-market"). Over-the-counter options are not classified as Section
1256 contracts and are not subject to the marked-to-market rule or to 60/40 gain
or loss treatment. Any gains or losses recognized by a Portfolio from
transactions in over-the-counter options generally constitute short-term capital
gains or losses. When call options written, or put options purchased, by a
Portfolio are exercised, the gain or loss realized on the sale of the underlying
securities may be either short-term or long-term, depending on the holding
period of the securities. In determining the amount of gain or loss, the sales
proceeds are reduced by the premium paid for the puts or increased by the
premium received for calls.
A substantial portion of each Portfolio's transactions in options,
futures contracts and options on futures contracts, particularly its hedging
transactions, may constitute "straddles" which are defined in the Code as
offsetting positions with respect to personal property. A straddle consisting of
a listed option, futures contract, or option on a futures contract and of U.S.
Government securities would constitute a "mixed straddle" under the Code. The
Code generally provides with respect to straddles (i) "loss deferral" rules
which may postpone recognition for tax purposes of losses from certain closing
purchase transactions or other dispositions of a position in the straddle to the
extent of unrealized gains in the offsetting position, (ii) "wash sale" rules
which may postpone recognition for tax purposes of losses where a position is
sold and a new offsetting position is acquired within a prescribed period, (iii)
"short sale" rules which may terminate the holding period of securities owned by
a Portfolio when offsetting positions are established and which may convert
certain losses from short-term to long-term, and (iv) "conversion transaction"
rules which recharacterize capital gains as ordinary income. The Code provides
that certain elections may be made
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<PAGE>
for mixed straddles that can alter the character of the capital gain or loss
recognized upon disposition of positions which form part of a straddle. Certain
other elections also are provided in the Code; no determination has been reached
to make any of these elections.
Code Section 1259 requires the recognition of gain (but not loss) if a
Portfolio makes a "constructive sale" of an appreciated financial position
(e.g., stock). A Portfolio generally will be considered to make a constructive
sale of an appreciated financial position if it sells the same or substantially
identical property short, enters into a futures or forward contract to deliver
the same or substantially identical property, or enters into certain other
similar transactions.
Each Portfolio may purchase debt securities (such as zero-coupon or
pay-in-kind securities) that contain original issue discount. Original issue
discount that accrues in a taxable year is treated as earned by a Portfolio and
therefore is subject to the distribution requirements of the Code. Because the
original issue discount earned by the Portfolio in a taxable year may not be
represented by cash income, the Portfolio may have to dispose of other
securities and use the proceeds to make distributions to shareholders.
A Portfolio may be required to backup withhold U.S. Federal income tax
at the rate of 31% of all taxable distributions payable to shareholders who fail
to provide their correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's U.S. Federal
income tax liability. Any distributions of net investment income or short-term
capital gains made to a foreign shareholder will be subject to U.S. withholding
tax of 30% (or a lower treaty rate if applicable to such shareholder).
The foregoing is a general and abbreviated summary of the applicable
income tax provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisors regarding the particular tax
consequences to them of an investment in each Portfolio. Qualification as a
regulated investment company under the Code for tax purposes does not entail
government supervision of management and investment policies.
RETIREMENT PLANS
Shares of each Portfolio are eligible to be purchased in conjunction
with various types of qualified retirement plans. The summary below is only a
brief description of the federal income tax laws for each plan and does not
purport to be complete. Further information or an application to invest in
shares of a Portfolio by establishing any of the retirement plans described
below may be obtained by calling Retirement Plans at (800) 858-8850. However, it
is recommended that a shareholder considering any retirement plan consult a tax
adviser before participating.
PENSION AND PROFIT-SHARING PLANS. Sections 401(a) and 401(k) of the Code permit
business employers and certain associations to establish pension and profit
sharing plans for employees. Shares of a Portfolio may be purchased by those who
would have been covered under the rules governing old H.R. 10 (Keogh) Plans, as
well as by corporate plans. Each business retirement plan provides tax
advantages for owners and participants. Contributions made by the employer are
tax-deductible, and participants do not pay taxes on contributions or earnings
until withdrawn.
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<PAGE>
TAX-SHELTERED CUSTODIAL ACCOUNTS. Section 403(b)(7) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code, to purchase
shares of a Portfolio and, subject to certain limitations, exclude the amount of
purchase payments from gross income for tax purposes.
INDIVIDUAL RETIREMENT ACCOUNTS (IRA). Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program, including
Simplified Employee Pension Plans, commonly referred to as SEP-IRA. Section 408A
of the Code treats Roth IRAs as IRAs subject to certain special rules applicable
thereto. IRAs are subject to limitations with respect to the amount that may be
contributed, the eligibility of individuals to make contributions, the amount if
any, entitled to be contributed on a deductible basis, and the time in which
distributions would be allowed to commence. In addition, certain distributions
from some other types of retirement plans may be placed on a tax-deferred basis
in an IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION (SARSEP). This plan was introduced
by a provision of the Tax Reform Act of 1986 as a unique way for small employers
to provide the benefit of retirement planning for their employees. Contributions
are deducted from the employee's paycheck before tax deductions and are
deposited into an IRA by the employer. These contributions are not included in
the employee's income and therefore are not reported or deducted on his or her
tax return.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES ("SIMPLE IRA"). This plan was
introduced by a provision of the Small Business Job Protection Act of 1996 to
provide small employers with a simplified tax-favored retirement plan.
Contributions are deducted from the employee's paycheck before taxes and are
deposited into a SIMPLE IRA by the employer, who must make either matching
contributions or non-elective contributions. Contributions are tax-deductible
for the employer and participants do not pay taxes on contributions on earnings
until they are withdrawn.
ROTH IRA. This plan, introduced by Section 302 of the Taxpayer Relief Act of
1997, generally permits individuals with adjusted gross income of up to $95,000,
and married couples with joint adjusted gross income of up to $150,000, to
contribute to a "Roth IRA." Contributions are not tax-deductible, but
distribution of assets (contributions and earnings) held in the account for at
least five years may be distributed tax-free under certain qualifying
conditions.
EDUCATION IRA. Established by the Taxpayer Relief Act of 1997, under Section 530
of the Code, this plan permits individuals to contribute to an IRA on behalf of
any child under the age of 18. Contributions are not tax-deductible but
distributions are tax-free if used for qualified educational expenses.
DESCRIPTION OF SHARES
Ownership of the Corporation is represented by shares of common stock.
The total number of shares that the Corporation has authority to issue is one
billion (1,000,000,000) shares of common stock (par value $0.0001 per share),
amounting in aggregate par value to one hundred thousand dollars ($100,000.00).
Currently, shares of eleven Portfolios of the Corporation have been
authorized pursuant to the Corporation's Articles of Incorporation ("Articles"):
the Large-Cap Growth Portfolio, the Mid-Cap Growth Portfolio, the Aggressive
Growth Portfolio, the Large-Cap Value Portfolio, the Value Portfolio, the
Small-Cap Value Portfolio, the Focus Portfolio, the Focus Growth and Income
Portfolio, the Focused TechNet Portfolio, the Focus Value Portfolio and the
International Equity Portfolio. The Large-Cap Growth Portfolio, the Mid-Cap
Growth Portfolio,
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<PAGE>
the Focus Growth and Income Portfolio and the Focus Value PORTFOLIO are divided
into three classes of shares, designated as Class A, Class B and Class II. The
Aggressive Growth Portfolio, Large-Cap Value Portfolio, Value Portfolio,
Small-Cap Value Portfolio, and International Equity Portfolio are divided into
four classes of shares, designated as Class A, Class B, Class II and Class Z.
The Focused TechNet Portfolio is divided into four classes of shares, designated
as Class A, Class B, Class C and Class II. The Focus Portfolio is divided into
five classes of shares, designated as Class A, Class B, Class C, Class II and
Class Z. The Directors may authorize the creation of additional Portfolios of
shares so as to be able to offer to investors additional investment portfolios
within the Corporation that would operate independently from the Corporation's
present Portfolios, or to distinguish among shareholders, as may be necessary,
to comply with future regulations or other unforeseen circumstances. Each
Portfolio of the Corporation's shares represents the interests of the
shareholders of that Portfolio in a particular portfolio of Corporation assets.
In addition, the Directors may authorize the creation of additional classes of
shares in the future, which may have fee structures different from those of
existing classes and/or may be offered only to certain qualified investors.
Shareholders are entitled to a full vote for each full share held. The
Directors have terms of unlimited duration (subject to certain removal
procedures) and have the power to alter the number of Directors, and appoint
their own successors, provided that at all times at least a majority of the
Directors have been elected by shareholders. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Directors being elected, while the holders of the
remaining shares would be unable to elect any Directors. Although the
Corporation need not hold annual meetings of shareholders, the Directors may
call special meetings of shareholders for action by shareholder vote as may be
required by the 1940 Act. Also, a shareholders meeting must be called, if so
requested in writing by the holders of record of 10% or more of the outstanding
shares of the Corporation. In addition, the Directors may be removed by the
action of the holders of record of two-thirds or more of the outstanding shares.
All Portfolios of shares will vote with respect to certain matters, such as
election of Directors. When all Portfolios are not affected by a matter to be
voted upon, such as approval of investment advisory agreements or changes in the
Portfolio's policies, only shareholders of the Portfolios affected by the matter
may be entitled to vote.
The classes of shares of a given Portfolio are identical in all
respects, except that (i) each class may bear differing amounts of certain
class-specific expenses, (ii) Class A shares are subject to an initial sales
charge, a distribution fee and an ongoing account maintenance and service fee,
(iii) Class B and Class C shares are subject to a CDSC, a distribution fee and
an ongoing account maintenance and service fee, (iv) Class B shares convert
automatically to Class A shares on the first business day of the month seven
years after the purchase of such Class B shares, (v) Class II shares are subject
to an initial sales charge, a distribution fee, an ongoing account maintenance
and service fee and a CDSC, (vi) each class has voting rights on matters that
pertain to the Rule 12b-1 plan adopted with respect to such class, except that
under certain circumstances, the holders of Class B shares may be entitled to
vote on material changes to the Class A Rule 12b-1 plan, (vii) Class Z shares
are not subject to any sales charge or any distribution, account maintenance or
service fee, (viii) each class of shares will be exchangeable into the same
class of shares of another Portfolio, Corporate Portfolio or other SunAmerica
Funds that offer that class, and (ix) Class C shares will be also exchangeable
into Class II shares of another Portfolio, Corporate Portfolio or other
SunAmerica Funds that offer Class II. All shares of the Corporation issued and
outstanding and all shares offered by the Prospectus when issued, are fully paid
and non-assessable. Shares have no preemptive or other subscription rights and
are freely transferable on the books of the Corporation. In addition, shares
have no conversion rights, except as described above.
The Articles provide, to the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted (as limited by the 1940
Act) that no Director or officer of the Corporation shall be personally liable
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<PAGE>
to the Corporation or to stockholders for money damages. The Articles provide
that the Corporation shall indemnify (i) the Directors and officers, whether
serving the Corporation or its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force (as limited by the 1940 Act), including the advance of
expenses under the procedures and to the full extent permitted by law, and (ii)
other employees and agents to such extent as shall be authorized by the Board of
Directors or the Corporation's By-laws and be permitted by law. The duration of
the Corporation shall be perpetual.
ADDITIONAL INFORMATION
COMPUTATION OF OFFERING PRICE PER SHARE.
The following is the offering price calculation for each Class of shares
of the Portfolios. With respect to the Focus Portfolio, the Class A, Class B,
Class C, Class II and Class Z calculations are based on the value of the Focus
Portfolio's net assets and number of shares outstanding on October 31, 1999.
With respect to the Focused TechNet Portfolio, the Class A, Class B, Class C and
Class II calculations are based on the estimated value of the Focused TechNet
Portfolio's net assets and number of shares outstanding on the date such shares
are first offered for sale to public investors.
<TABLE>
<CAPTION>
FOCUS PORTFOLIO
CLASS A CLASS B** CLASS C CLASS II+ CLASS Z++
------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Assets $169,733,685 $271,531,337 $12,500 $261,536,364 $2,521,789
Number of Shares
Outstanding 8,825,047 14,251,366 1,000 13,727,738 130,882
Net Asset Value Per
Share (net assets divided by number
of shares) $19.23 $19.05 $12.50 $19.05 $19.27
Sales charge for Class A Shares:
5.75% of offering price (6.10% of
net asset value per share)* $1.17 - - - -
Sales charge for Class II Shares:
1.00% of offering price (1.01% of
net asset value per share)* - - - $0.19 -
Offering Price $20.40 - $12.50 $19.24 $19.27
FOCUSED TECHNET PORTFOLIO
CLASS A CLASS B** CLASS C CLASS II+
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Net Assets $12,500 $12,500 $12,500 $12,500
Number of Shares
Outstanding 1,000 1,000 1,000 1,000
Net Asset Value Per
Share (net assets divided by number of shares) $12.50 $12.50 $12.50 $12.50
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B** CLASS C CLASS II+
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Sales charge for Class A Shares: 5.75% of offering
price (6.10% of net asset value per share)* $0.76 - - -
Sales charge for Class II Shares: 1.00% of offering
price (1.01% of net asset value per share)* - - - $0.13
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Offering Price $13.26 $12.50 $12.50 $12.63
</TABLE>
- -----------------------
* Rounded to nearest one-hundredth percent; assumes maximum sales charge
is applicable.
** Class B shares are not subject to an initial charge but may be subject
to a contingent deferred sales charge on redemption of shares within
six years of purchase.
+ Class II shares may be subject to a contingent deferred sales charge on
redemption of shares within eighteen months of purchase.
++ Class Z shares of Focus Portfolio commenced offering on April 1, 1999.
REPORTS TO SHAREHOLDERS. The Corporation sends audited annual and unaudited
semi-annual reports to shareholders of each of the Portfolios. In addition, the
Transfer Agent sends a statement to each shareholder having an account directly
with the Corporation to confirm transactions in the account.
CUSTODIAN AND TRANSFER AGENCY. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Portfolios and in those capacities maintains certain financial and
accounting books and records pursuant to agreements with the Corporation.
Transfer agent functions are performed for State Street by National Financial
Data Services, P.O. Box 419572, Kansas City, MO 64141-6572, an affiliate of
State Street.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL. PricewaterhouseCoopers LLP, 1177
Avenue of the Americas, New York, NY 10036, has been selected to serve as the
Corporation's independent accountants and in that capacity examines the annual
financial statements of the Corporation. The firm of Swidler Berlin Shereff
Friedman, LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York
10174, has been selected as legal counsel to the Corporation.
FINANCIAL STATEMENTS
The Corporation's audited financial statements are incorporated into this
Statement of Additional Information by reference to its 1999 annual report to
shareholders. You may request a copy of the annual report at no charge by
calling (800) 858-8850 or writing the Corporation at SunAmerica Fund Services,
Inc., Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue, New York,
New York 10017-3204.
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APPENDIX
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
DESCRIPTION OF MOODY'S CORPORATE RATINGS
Aaa Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective
elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there
may be other elements present that make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds rated A possess many favorable investment
attributes and are considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment
sometime in the future.
Baa Bonds rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate
for the present but certain protective elements may be
lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative
characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often
the protection of interest and principal payments may be
very moderate, and therefore not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any
long period of time may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with
respect to principal or interest.
Ca Bonds rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have
other marked shortcomings.
C Bonds rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Appendix-1
<PAGE>
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of the generic
rating category.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representations as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act, nor does it
represent that any specific note is a valid obligation of a rated issuer or
issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries
-- High rates of return on funds employed
-- Conservative capitalization structures with moderate
reliance on debt and ample asset protection
-- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation
-- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
level of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal
Appendix-2
<PAGE>
validity or enforceability of any support arrangement. You are cautioned to
review with your counsel any questions regarding particular support
arrangements.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks that may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships that exist with the issuer; and (8) recognition by management of
obligations that may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
DESCRIPTION OF STANDARD & POOR'S CORPORATE DEBT RATINGS
A Standard & Poor's corporate or municipal rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other reasons.
The ratings are based, in varying degrees, on the following
considerations: (1) likelihood of default capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions of the
obligation; and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
AAA Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the highest-rated
issues only in small degree.
A Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories.
Appendix-3
<PAGE>
BBB Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal for debt in this category than for debt in
higher-rated categories.
Debt rated BB, B, CCC, CC and C are regarded as having
predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates
the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposure to adverse
conditions.
BB Debt rated BB has less near-term vulnerability to default
than other speculative grade debt. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial or economic conditions that could lead to
inadequate capacity to meet timely interest and principal
payment. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B Debt rated B has a greater vulnerability to default but
presently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or BB-
rating.
CCC Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business,
financial and economic conditions to meet timely payments
of interest and repayments of principal. In the event of
adverse business, financial or economic conditions, it is
not likely to have the capacity to pay interest and repay
principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC
rating.
C The rating C is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC-debt
rating. The C rating may be used to cover a situation where
a bankruptcy petition has been filed but debt service
payments are continued.
CI The rating CI is reserved for income bonds on which no
interest is being paid.
D Debt rated D is in default. The D rating is assigned on the
day an interest or principal payment is missed. The D
rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
Plus (+) or minus (-): The ratings of AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within these ratings categories.
Appendix-4
<PAGE>
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood or risk of default upon failure of such completion. The investor
should exercise judgment with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the
principal amount of those bonds to the extent that the
underlying deposit collateral is insured by the Federal
Savings & Loan Insurance Corp. or the Federal Deposit
Insurance Corp. and interest is adequately collateralized.
* Continuance of the rating is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement
or closing documentation confirming investments and cash
flows.
NO Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that
Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Debt Obligations of Issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the credit-worthiness of the obligor but do not take
into account currency exchange and related uncertainties.
BOND INVESTMENT QUALITY STANDARDS: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA," "AA," "A," "BBB," commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS.
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of not more
than 365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest.
A Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this
category are delineated with the numbers 1, 2 and 3 to
indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very
strong. Those issues designated "A-1" that are determined
to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as
high as for issues designated "A-1."
Appendix-5
<PAGE>
A-3 Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat
more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher
designations.
B Issues rated "B" are regarded as having only adequate
capacity for timely payment. However, such capacity may be
damaged by changing conditions or short-term adversities.
C This rating is assigned to short-term debt obligations with
a doubtful capacity for payment.
D This rating indicates that the issue is either in default
or is expected to be in default upon maturity.
The commercial paper rating is not a recommendation to purchase or sell
a security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
Appendix-6
<PAGE>
PART C
OTHER INFORMATION
Item 23:Exhibits.
(a) (i) Articles of Incorporation, as Amended. Incorporated herein
by reference to Exhibit 1(A) of the Registrant's
Registration Statement on Form N-1A (File No. 333-11283)
filed on August 30, 1996.
(ii) Articles Supplementary dated August 1, 1996. Incorporated
herein by reference to Exhibit 1(B) of the Registrant's
Registration Statement on Form N-1A (File No. 333-11283)
filed on August 30, 1996.
(iii) Articles of Amendment dated August 19, 1996. Incorporated
herein by reference to Exhibit 1(C) of the Registrant's
Registration Statement on Form N-1A (File No. 333-11283)
filed on August 30, 1996.
(iv) Articles of Amendment dated November 13, 1996. Incorporated
herein by reference to Exhibit 1(D) of Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A (File No. 333-11283) filed on November 14,
1996.
(b) By-Laws. Incorporated herein by reference to Exhibit 2 of the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on August 30, 1996.
(c) Instruments Defining Rights of Shareholders. Incorporated herein
by reference to Exhibits (a) and (b) above.
(d) (i) Investment Advisory Agreement dated as of January 1, 1999 by
and between Registrant and SunAmerica Asset Management Corp.
("SAAMCo"). Filed herewith.
(ii) Subadvisory Agreement between SunAmerica Asset Management
Corp. ("SunAmerica") and American Century Investment
Management, Inc. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment
No. 18 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on October 29, 1999.
(iii) Subadvisory Agreement between SunAmerica and Bankers Trust
Company. Incorporated herein by reference to the identically
numbered Exhibit of Post-Effective Amendment No.13 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on February 26, 1999.
(iv) Subadvisory Agreement between SunAmerica and Berger
Associates, Inc. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on February 26, 1999.
(v) Subadvisory Agreement between SunAmerica and Credit Suisse
Asset Management, LLC (formerly known as Warburg Pincus
Asset Management, Inc.) Incorporated herein by reference to
the identically numbered Exhibit of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on February 26, 1999.
(vi) Subadvisory Agreement between SunAmerica and Davis Selected
Advisers, L.P. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment No.
13 to the Registrant's Registration Statement on Form N-1A
(File No. 333-11283) filed on February 26, 1999.
(vii) Subadvisory Agreement between SunAmerica and EQSF Advisers,
Inc. Incorporated herein by reference to the identically
numbered Exhibit of Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on October 29, 1999.
(viii) Subadvisory Agreement between SunAmerica and Fred Alger
Management, Inc. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment No.
21 to the Registrants-Registration Statement on Form N-1A
(File No. 333-11283) filed on February 28, 2000.
(ix) Subadvisory Agreement between SunAmerica and Janus Capital
Corporation. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment No.
13 to the Registrant's Registration Statement on Form N-1A
(File No. 333-11283) filed on February 26, 1999.
(x) Subadvisory Agreement between SunAmerica and Jennison
Associates LLC. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment No.
13 to the Registrant's Registration Statement on Form N-1A
(File No. 333-11283) filed on February 26, 1999.
(xi) Subadvisory Agreement between SunAmerica and Lazard Asset
Management. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment No.
13 to the Registrant's Registration Statement on Form N-1A
(File No. 333-11283) filed on February 26, 1999.
(xii) Subadvisory Agreement between SunAmerica and Marsico Capital
Management, LLC. Incorporated herein by reference to Exhibit
(d)(xiii) of Post- Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on February 26, 1999.
(xiii) Subadvisory Agreement between SunAmerica and Miller Anderson
& Sherrerd, LLP. Incorporated herein by reference to Exhibit
(d)(iv) of Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on February 26, 1999.
(xiv) Subadvisory Agreement between SunAmerica and Montag &
Caldwell, Inc. Incorporated herein by reference to Exhibit
(d)(xv) of Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on February 26, 1999.
(xv) Subadvisory Agreement between SunAmerica and Neuberger
Berman, LLC. Incorporated herein by reference to Exhibit
(d)(xvii) of Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on February 26, 1999.
(xvi) Subadvisory Agreement between SunAmerica and Rowe
Price-Fleming International, Inc. Incorporated herein by
reference to Exhibit (d)(xviii) of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on February 26, 1999.
(xvii) Subadvisory Agreement between SunAmerica and T. Rowe Price
Associates, Inc. Incorporated herein by reference to Exhibit
(d)(xix) of Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on February 26, 1999.
(xviii) Subadvisory Agreement between SunAmerica and Thornburg
Investment Management, Inc. Incorporated herein by reference
to the identically numbered Exhibit of Post-Effective
Amendment No. 18 to the Registrant's Registration Statement
on Form N-1A (File No. 333-11283) filed on October 29, 1999.
(xix) Subadvisory Agreement between SunAmerica and Wellington
Management Company, LLP. Incorporated herein by reference to
the identically numbered Exhibit of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on February 26, 1999.
(xx) Subadvisory Agreement dated as of April 1, 2000 by and
between SAAMCo and Van Wagoner Capital Management, Inc.
Filed herewith.
(xxi) Subadvisory Agreement dated as of April 1, 2000 by and
between SAAMCo and Dresdner RCM Global Investors LLC. Filed
herewith.
(e) (i) Distribution Agreement. Incorporated herein by reference to
the identically numbered Exhibit of Post-Effective Amendment
No. 13 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on February 26, 1999.
(ii) Form of Selling Agreement. Incorporated herein by reference
to Exhibit (e)(ii) of Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on December 30, 1998.
(f) Disinterested Trustees and Directors' Retirement Plan.
Incorporated herein by reference to Exhibit 7 of Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on Form
N-1A (File No. 333-11283) filed on November 14, 1996.
(g) Custodian Agreement. Incorporated herein by reference to Exhibit 8
of Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A (File No. 333-11283) filed on November 14,
1996.
(h) (i) Service Agreement. Incorporated herein by reference to
Exhibit 9(a) of Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File No.
<PAGE>
333-11283) filed on November 14, 1996.
(ii) Transfer Agency Agreement. Incorporated herein by reference
to Exhibit 9(b) of Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on November 14, 1996.
(i) Opinion of Counsel to the Registrant. Filed herewith.
(j) Consent of Independent Accountants. Filed herewith.
(k) Not applicable.
(l) Not applicable.
(m) (i) Distribution Plans. Incorporated herein by reference to the
identically numbered Exhibit of Post-Effective Amendment
No. 18 to the Registrant's Registration Statement on Form N-1A
(File No. 333-11283) filed on October 29, 1999.
(ii) Form of 12b-1 Distribution Plan for Class C shares of Focus
Portfolio. Filed herewith.
(iii) Form of 12b-1 Distribution Plan for Class C shares of Focused
TechNet Portfolio. Filed herewith.
(n) Not applicable.
(o) (i) 18f-3 Plan. Incorporated herein by reference to Exhibit
5(b)(15) of Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on June 15, 1998.
(ii) Powers of Attorney. Incorporated herein by reference to
Exhibit 17(a) of Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File No.
333-11283) filed on November 14, 1996.
(p) Code of Ethics. Incorporated herein by reference to Exhibit (p) of
Post-Effective Amendment No. 24 to the Registrant's Registration
Statement on Form N-1A (File No. 333-11283) filed on
April 19, 2000.
Item 24. Persons Controlled by or Under Common Control with Registrant.
There are no persons controlled by or under common control with
Registrant.
Item 25. Indemnification
5.01 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than a proceeding by or
in the right of the Corporation in which such person shall have been adjudged to
be liable to the Corporation), by reason of being or having been a director or
officer of the Corporation, or serving or having served at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another entity in which the Corporation has an interest as a shareholder,
creditor or otherwise (a "Covered Person"), against all liabilities, including
but not limited to amounts paid in satisfaction of judgments, in compromise or
as fines and penalties, and reasonable expenses (including attorney's fees)
actually incurred by the Covered Person in connection with any such action, suit
or proceeding, except (i) liability in connection with any proceeding in which
it is determined that (A) the act or omission of the Covered Person was material
to the matter giving rise to the proceeding, and was committed in bad faith or
was the result of active and deliberate dishonesty, or (B) the Covered Person
actually received an improper personal benefit in money, property or services,
or (C) in the case of any criminal proceeding, the Covered Person had reasonable
cause to believe that the act or omission was unlawful, and (ii) liability to
the Corporation or its security holders to which the Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office (any or all of the conduct referred to in clauses (i) and (ii) being
hereinafter referred to as "Disabling Conduct").
C-2
<PAGE>
5.02 PROCEDURE FOR INDEMNIFICATION. Any indemnification under Section
5.01 shall (unless ordered by a court) be made by the Corporation only as
authorized for a specific proceeding by (i) a final decision on the merits by a
court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of the proceeding against the Covered Person for insufficiency of
evidence of any Disabling Conduct, or (iii) a reasonable determination, based
upon a review of the facts, by a majority of a quorum of the directors who are
neither "interested persons" of the Corporation as defined in the Investment
Company Act of 1940 nor parties to the proceeding ("Disinterested Non-Party
Directors"), or an independent legal counsel in a written opinion, that the
Covered Person was not liable by reason of Disabling Conduct. The termination of
any proceeding by judgment, order or settlement shall not create a presumption
that the Covered Person did not meet the required standard of conduct; the
termination of any proceeding by conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, shall create
a rebuttable presumption that the Covered Person did not meet the required
standard of conduct. Any determination pursuant to this Section 5.02 shall not
prevent recovery from any Covered Person of any amount paid to him in accordance
with this By-Law as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to be liable by reason of
Disabling Conduct.
5.03 ADVANCE PAYMENT OF EXPENSES. Reasonable expenses (including
attorneys' fees) incurred by a Covered Person may be paid or reimbursed by the
Corporation in advance of the final disposition of an action, suit or proceeding
upon receipt by the Corporation of (i) a written affirmation by the Covered
Person of his good faith belief that the standard of conduct necessary for
indemnification under this By-Law has been met and (ii) a written undertaking by
or on behalf of the Covered Person to repay the amount if it is ultimately
determined that such standard of conduct has not been met, so long as either (A)
the Covered Person has provided a security for his undertaking, (B) the
Corporation is insured against losses arising by reason of any lawful advances,
or (C) a majority of a quorum of the Disinterested Non-Party Directors, or an
independent legal counsel in a written opinion, has determined, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
5.04 EXCLUSIVITY, ETC. The indemnification and advance of expenses
provided by this By-Law shall not be deemed exclusive of any other rights to
which a Covered Person seeking indemnification or advance or expenses may be
entitled under any law (common or statutory), or any agreement, vote of
stockholders or disinterested directors, or other provision that is consistent
with law, both as to action in an official capacity and as to action in another
capacity while holding office or while employed by or acting as agent for the
Corporation, shall continue in respect of all events occurring while the Covered
Person was a director or officer after such Covered Person has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such Covered Person. The Corporation shall not
be liable for any payment under this By-Law in connection with a claim made by a
director or officer to the extent such director or officer has otherwise
actually received payment, under an insurance policy, agreement, vote or
otherwise, of the amounts otherwise indemnifiable hereunder. All rights to
indemnification and advance of expenses under the Charter and hereunder shall be
deemed to be a contract between the Corporation and each director or officer of
the Corporation who serves or served in such capacity at any time while this
By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law,
provided that no such amendment shall diminish the rights of any Covered Person
hereunder with respect to events occurring or claims made before its adoption or
as to claims made after its adoption in respect of events occurring before its
adoption. Any repeal or modification of this By-Law shall not in any way
diminish any rights to indemnification or advance of expenses of a Covered
Person or the obligations of the Corporation arising hereunder with respect to
events occurring, or claims made, while this By-Law or any provision hereof is
in force.
5.05 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any Covered Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such;
provided, however, that the Corporation shall not purchase insurance to
indemnify any Covered Person against liability for Disabling Conduct.
C-3
<PAGE>
5.06 SEVERABILITY: DEFINITIONS. The invalidity or unenforceability of
any provision of this Article V shall not affect the validity or enforceability
of any other provision hereof. The phrase "this By-Law" in this Article V means
this Article V in its entirety.
Section 8 of the Article of Incorporation provides as follows:
(5) The Corporation shall indemnify (i) its directors and
officers, whether serving the Corporation or at its request any other entity, to
the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (ii) other employees and
agents to such extent as shall be authorized by the Board of Directors or the
By-Laws of the Corporation and as permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such By-Laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. The right of
indemnification provided hereunder shall not be construed to protect any
director or officer of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that this provision shall not be construed
to protect any director or officer against any liability to the Corporation or
its security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. No amendment, modification or repeal of
this provision shall adversely affect any right or protection provided hereunder
that exists at the time of such amendment, modification or repeal.
Item 26. Business and other Connections of Investment Adviser
SunAmerica is primarily in the business of providing investment
management, advisory and administrative services. Reference is made to
the most recent Form ADV and schedules thereto of SunAmerica on file
with the Commission (File No. 801-19813) for a description of the names
and employment of the directors and officers of SunAmerica and other
required information.
American Century Investment Management, Inc.; Bankers Trust Company;
Berger LLC.; Credit Suisse Asset Management, Inc.; Davis Selected
Advisers, L.P.; Dresdner RCM Global Investors LLC; EQSF Advisers, Inc.;
Fred Alger Management, Inc.; Janus Capital Corporation; Jennison
Associates LLC; Lazard Asset Management; Marsico Capital Management,
LLC; Miller Anderson & Sherrerd, LLP; Montag & Caldwell, Inc.;
Neuberger Berman, LLC; Perkins, Wolf, McDonnell & Company; Rowe-Price
Fleming International, Inc.; Thornburg Investment Management, Inc.; T.
Rowe Price Associates, Inc.; and Van Wagoner Capital Management, Inc.
the Advisers of certain of the Portfolios of the Registrant, are
primarily engaged in the business of rendering investment advisory
services. Reference is made to the recent Form ADV and schedules
thereto on file with the Commission for a description of the names and
employment of the directors and officers of the following Advisers, and
other required information:
File No.
--------
American Century Investment Management, Inc. 801-08174
Berger LLC 801-09451
Credit Suisse Asset Management, Inc. 801-07321
Davis Selected Advisers, L.P. 801-31648
Dresdner RCM Global Investors LLC 801-06709
EQSF Advisers, Inc. 801-27792
C-4
<PAGE>
Fred Alger Management, Inc. 801-56308
Janus Capital Corporation 801-13991
Jennison Associates LLC 801-05608
Lazard Asset Management 801-6568
Marsico Capital Management, LLC 801-54914
Miller Anderson & Sherrerd, LLP 801-10437
Montag & Caldwell, Inc. 801-15398
Neuberger Berman, LLC 801-03908
Perkins, Wolf, McDonnell & Company 801-19974
Rowe-Price Fleming International, Inc 801-14713
Thornburg Investment Management, Inc. 801-00241
T. Rowe Price Associates, Inc. 801-00856
Van Wagoner Capital Management, Inc. 801-50676
Reference is made to Post-Effective Amendment No. 26 to BT Investment
Funds' Registration Statement on Form N-1A (File No. 33-07404) filed on
October 26, 1998 for a description of the names and employment of the
directors and officers of Bankers Trust Company.
Item 27. Principal Underwriters
(a) The principal underwriter of the Registrant also acts as principal
underwriter for:
SunAmerica Income Funds
SunAmerica Money Market Funds, Inc.
SunAmerica Equity Funds
SunAmerica Strategic Investment Series, Inc.
(b) The following persons are the officers and directors of SunAmerica
Capital Services, Inc., the principal underwriter of Registrant's
Shares:
- --------------------------------------------------------------------------------
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION WITH UNDERWRITER POSITION WITH THE REGISTRANT
- --------------------------------------------------------------------------------
Peter A. Harbeck Director Director and President
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
- --------------------------------------------------------------------------------
J. Steven Neamtz Chief Executive Officer, Vice President
The SunAmerica Center President and Director
733 Third Avenue
New York, NY 10017-3204
- --------------------------------------------------------------------------------
Robert M. Zakem Executive Vice President, Secretary and Chief
The SunAmerica Center General Counsel and Director Compliance Officer
733 Third Avenue
New York, NY 10017-3204
- --------------------------------------------------------------------------------
Susan L. Harris Secretary None
SunAmerica, Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022
- --------------------------------------------------------------------------------
C-5
<PAGE>
- --------------------------------------------------------------------------------
Debbie Potash-Turner Chief Financial Officer and None
The SunAmerica Center Controller
733 Third Avenue
New York, NY 10017-3204
- --------------------------------------------------------------------------------
(c) Not applicable.
Item 28. Location of Accounts and Records
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, and its affiliate, National Financial Data
Services, collectively, act as custodian, transfer agent and dividend
paying agent. They maintain books, records and accounts pursuant to the
instructions of the Fund.
SunAmerica Asset Management Corp., ("SunAmerica") is located at The
SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204.
SunAmerica has contracted with Callan Associates, Inc. ("Callan") to
compile historical performance data relating to the Advisers, both
individually and on a composite basis. Registrant's records relating
thereto are maintained by Callan. Callan is located at 71 Stevenson
Street, Suite 1300, San Francisco, California 94105.
American Century Investment Management, Inc. is located at the American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Bankers Trust Company is located at 130 Liberty Street (One Bankers
Trust Plaza), New York, New York 10006.
Berger LLC is located at 210 University Boulevard, Suite 900, Denver,
Colorado 80206.
Credit Suisse Asset Management, Inc. is located at 466 Lexington
Avenue, New York, New York, 10017-3147.
Davis Selected Advisers, L.P. is located at 2949 East Elvira Road,
Suite 101, Tucson, Arizona 85706.
Dresdner RCM Global Investors LLC is located at Four Embarcadero
Center, San Francisco, California 94111.
EQSF Advisers, Inc. is located at 767 Third Avenue, New York, New York
10017.
Fred Alger Management, Inc. is located at 1 World Trade Center, New
York, New York 10048.
Janus Capital Corporation is located at 100 Fillmore Street, Denver,
Colorado 80206-4923.
Jennison Associates LLC is located at 466 Lexington Avenue, New York,
New York 10017.
Lazard Asset Management is located at 30 Rockefeller Plaza, New York,
New York 10112.
Marsico Capital Management, LLC is located at 1200 17th Street, Suite
1300, Denver, Colorado 80202.
Miller Anderson & Sherrerd, LLP is located at One Tower Bridge, West
Conshohocken, Pennsylvania 19428.
Montag & Caldwell, Inc. is located at 3455 Peachtree Road, Suite 1200,
Atlanta, Georgia 30326-1022.
Neuberger Berman, LLC is located at 605 Third Avenue, New York, New
York 10158-0180.
C-6
<PAGE>
Perkins, Wolf, McDonnell & Company is located at 53 West Jackson
Boulevard, Suite 722, Chicago, Illinois 60604.
Rowe Price-Fleming International, Inc. is located at 100 East Pratt
Street, Baltimore, Maryland 21202.
Thornburg Investment Management, Inc. is located at 119 East Marcy
Street, Santa Fe, New Mexico, 87501.
T. Rowe Price Associates, Inc. is located at 100 East Pratt Street,
Baltimore, Maryland 21202.
Van Wagoner Capital Management, Inc. is located at 345 California
Street, San Francisco, California 94104
Each of the Advisers maintains the books, accounts and records required to be
maintained pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder.
Item 29.Management Services
Not applicable.
Item 30.Undertakings
Not applicable.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
(the "1933 Act") and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Post-Effective Amendment No. 25 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 28th day
of April, 2000.
SunAmerica Style Select Series, Inc.
By: /s/ Peter C. Sutton
-------------------------
Peter C. Sutton
Treasurer
Pursuant to the requirements of the 1933 Act, this Post-Effective
Amendment No. 25 to the Registrant's Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated:
* President and Director
------------------------------ (Principal Executive Officer)
Peter A. Harbeck
/s/ Peter C. Sutton Treasurer
------------------------------ (Principal Financial and
Peter C. Sutton Accounting Officer) April 28, 2000
* Director
------------------------------
S. James Coppersmith
* Director
------------------------------
Samuel M. Eisenstat
* Director
------------------------------
Stephen J. Gutman
* Director
------------------------------
Sebastiano Sterpa
*By: /s/ Robert M. Zakem April 28, 2000
------------------------------
Attorney-in-Fact
Robert M. Zakem
C-8
<PAGE>
Exhibit Index
(d) (i) Investment Advisory Agreement dated as of January 1, 1999 by
and between Registrant and SunAmerica Asset Management Corp.
("SAAMCo").
(xx) Subadvisory Agreement dated as of April 1, 2000 by and
between SAAMCo and Van Wagoner Capital Management, Inc.
(xxi) Subadvisory Agreement dated as of April 1, 2000 by and
between SAAMCo and Dresdner RCM Global Investors LLC.
(i) Opinion of Counsel to the Registrant.
(j) Consent of Independent Accountants.
(m) (ii) Form of 12b-1 Distribution Plan for Class C shares of Focus
Portfolio.
(iii) Form of 12b-1 Distribution Plan for Class C shares of
Focused TechNet Portfolio.
C-9
SUNAMERICA STYLE SELECT SERIES, INC.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is dated as of
January 1, 1999, as amended from time to time, by and between SunAmerica Style
Select Series, Inc., a Maryland corporation (the "Corporation"), and SUNAMERICA
ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Corporation is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company and may issue shares of common stock, par value $.0001 per share, in
separately designated Portfolios representing separate funds with their own
investment objectives, policies and purposes (each, a "Fund" and collectively,
the "Funds"); and
WHEREAS, the Adviser is engaged in the business of rendering
investment management, advisory and administrative services and is registered as
an investment adviser under the Investment Advisers Act of 1940; and
WHEREAS, the Corporation desires to retain the Adviser to furnish
investment management, advisory and administrative services to the Corporation
and the Funds and the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE ADVISER. The Adviser shall manage the affairs of
the Funds including, but not limited to, continuously providing the Funds with
investment management, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Funds, making
purchases and sales of securities on behalf of the Funds and determining how
voting and other rights with respect to securities owned by the Funds shall be
exercised, subject in each case to the control of the Board of Directors of the
Corporation (the "Directors") and in accordance with the objectives, policies
and principles set forth in Corporation's Registration Statement and the Funds'
current Prospectus and Statement of Additional Information, as amended from
time to time, the requirements of the Act and other applicable law. In
performing such duties, the Adviser (i) shall provide such office space, such
bookkeeping, accounting, clerical, secretarial and administrative services
(exclusive of, and in addition to, any such service provided by any others
retained by the Funds or Corporation on behalf of the Funds) and such executive
and other personnel as shall be necessary for the operations of the Funds, (ii)
shall be responsible for the financial and accounting records required to be
maintained by the Funds (including those maintained by Corporation's custodian)
and (iii) shall oversee the performance of services provided to the Funds by
others, including the custodian, transfer and shareholder servicing agent. The
Corporation understands that the Adviser also acts as the manager of other
investment companies.
Subject to Section 36 of the Act, the Adviser shall not be liable to
the Funds or Corporation for any error of judgment or mistake of law or for any
loss arising out of any investment or for any
- 1 -
<PAGE>
act or omission in the management of the Funds and the performance of its duties
under this Agreement except for willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement.
2. RETENTION BY ADVISER OF SUB-ADVISERS, ETC. In carrying out its
responsibilities hereunder, the Adviser may employ, retain or otherwise avail
itself of the services of other persons or entities including, without
limitation, affiliates of the Adviser, on such terms as the Adviser shall
determine to be necessary, desirable or appropriate. Without limiting the
generality of the foregoing, and subject to the requirements of Section 15 of
the Act, the Adviser may retain one or more sub-advisers to manage all or a
portion of the investment portfolio of a Fund, at the Adviser's own cost and
expense. Retention of one or more sub-advisers, or the employment or retention
of other persons or entities to perform services, shall in no way reduce the
responsibilities or obligations of the Adviser under this Agreement and the
Adviser shall be responsible for all acts and omissions of such sub-advisers,
or other persons or entities, in connection with the performance of the
Adviser's duties hereunder.
3. EXPENSES. The Adviser shall pay all of its expenses arising from
the performance of its obligations under Section 1 and shall pay any salaries,
fees and expenses of the Corporation's Directors and Officers who are employees
of the Adviser. The Adviser shall not be required to pay any other expenses of
the Funds, including, but not limited to, direct charges relating to the
purchase and sale of portfolio securities, interest charges, fees and expenses
of independent attorneys and auditors, taxes and governmental fees, cost of
share certificates and any other expenses (including clerical expenses) of
issue, sale, repurchase or redemption of shares, expenses of registering and
qualifying shares for sale, expenses of printing and distributing reports,
notices and proxy materials to shareholders, expenses of data processing and
related services, shareholder recordkeeping and shareholder account service,
expenses of printing and filing reports and other documents filed with
governmental agencies, expenses of printing and distributing prospectuses,
expenses of annual and special shareholders meetings, fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Directors who are not employees of the
Adviser or its affiliates, membership dues in the Investment Company Institute,
insurance premiums and extraordinary expenses such as litigation expenses.
4. COMPENSATION OF THE ADVISER. (a) As full compensation for the
services rendered, facilities furnished and expenses paid by the Adviser under
this Agreement, the Corporation agrees to pay to the Adviser a fee at the
annual rates set forth in Schedule A hereto with respect to each Fund indicated
thereon. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month (i.e., the applicable annual fee rate
divided by 365 is applied to each prior days' net assets in order to calculate
the daily accrual). For purposes of calculating the Adviser's fee with respect
to any Fund, the average daily net asset value of a Fund shall be determined by
taking an average of all determinations of such net asset value during the
month. If the Adviser shall serve for less than the whole of any month the
foregoing compensation shall be prorated.
(b) Upon any termination of this Agreement on a day other than the
last day of the month, the fee for the period from the beginning of the month in
which termination occurs to the date of termination shall be prorated according
to the proportion which such period bears to the full month.
- 2 -
<PAGE>
5. PORTFOLIO TRANSACTIONS. The Adviser is responsible for decisions
to buy or sell securities and other investments for a portion of the assets of
each Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing Portfolio transactions, the Adviser may employ
or deal with such broker-dealers or futures commission merchants as may, in the
Adviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Adviser shall consider
all relevant factors including price (including the applicable brokerage
commission, dealer spread or futures commission merchant rate), the size of the
order, the nature of the market for the security or other investment, the
timing of the transaction, the reputation, experience and financial stability
of the broker-dealer or futures commission merchant involved, the quality of
the service, the difficulty of execution, the execution capabilities and
operational facilities of the firm involved, and, in the case of securities,
the firm's risk in positioning a block of securities. Subject to such policies
as the Directors may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of the Adviser's having caused a
Portfolio to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, if the Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member of an exchange, broker
or dealer viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to such Portfolio and to other
clients as to which the Adviser exercises investment discretion. In accordance
with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject
to any other applicable laws and regulations including Section 17(e) of the Act
and Rule 17e-1 thereunder, the Adviser may engage its affiliates or any other
subadviser to the Corporation and its respective affiliates, as broker-dealers
or futures commission merchants to effect Portfolio transactions in securities
and other investments for a Portfolio. The Adviser will promptly communicate to
the officers and the Directors of the Corporation such information relating to
Portfolio transactions as they may reasonably request. To the extent consistent
with applicable law, the Adviser may aggregate purchase or sell orders for the
Portfolio with contemporaneous purchase or sell orders of other clients of the
Adviser or its affiliated persons. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner the Adviser determines to be equitable and
consistent with its and its affiliates' fiduciary obligations to the Portfolio
and to such other clients. The Adviser hereby acknowledges that such
aggregation of orders may not result in more favorable pricing or lower
brokerage commissions in all instances.
6. TERM OF AGREEMENT. This agreement shall continue in full force
and effect for two years from the date hereof, and shall continue in full force
and effect from year to year thereafter if such continuance is approved in the
manner required by the Act and the Adviser has not notified the Corporation in
writing at least 60 days prior to the anniversary date of the previous
continuance that it does not desire such continuance. With respect to each
Fund, this Agreement may be terminated at any time, without payment of penalty
by the Fund or the Corporation, on 60 days written notice to the Adviser, by
vote of the Directors, or by vote of a majority of the outstanding voting
securities (as defined by the Act) of the Fund, voting separately from any
other Portfolio of the Corporation. The termination of this Agreement with
respect to any Fund or the addition of any Fund to Schedule A hereto (in the
manner required by the Act) shall not affect the continued
- 3 -
<PAGE>
effectiveness of this Agreement with respect to each other Fund subject hereto.
This Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
The Corporation hereby agrees that if (i) the Adviser ceases to
act as investment manager and adviser to the Corporation and (ii) the continued
use of the Corporation's present name would create confusion in the context of
the Adviser's business, then the Corporation will use its best efforts to change
its name in order to delete the word "SunAmerica" from its name.
7. LIABILITY OF THE ADVISER. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Adviser) the Adviser shall not be subject
to liability to the Corporation or to any shareholder of the Corporation for
any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of
law or for any loss suffered by any of them in connection with the matters to
which this Agreement relates, except to the extent specified in Section 36(b)
of the Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services. Except for such disabling
conduct, the Corporation shall indemnify the Adviser (and its officers,
directors, partners, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Adviser) (collectively, the
"Indemnified Parties") from any liability arising from the Adviser's conduct
under this Agreement.
Indemnification to the Adviser or any of its personnel or
affiliates shall be made when (i) a final decision on the merits rendered, by a
court or other body before whom the proceeding was brought, that the person to
be indemnified was not liable by reason of disabling conduct or, (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum of the Directors
who are neither "interested persons" of the Corporation as defined in section
2(a)(19) of the Act nor parties to the proceeding ("disinterested, non-party
Directors") or (b) an independent legal counsel in a written opinion. The
Corporation may, by vote of a majority of the disinterested, non-party Directors
advance attorneys' fees or other expenses incurred by an Indemnified Party in
defending a proceeding upon the undertaking by or on behalf of the Indemnified
Party to repay the advance unless it is ultimately determined that he is
entitled to indemnification. Such advance shall be subject to at least one of
the following: (1) the person to be indemnified shall provide a security for his
undertaking, (2) the Corporation shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a quorum of the
disinterested, non-party Directors or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts, that
there is reason to believe that the person to be indemnified ultimately will be
found entitled to indemnification.
8. NON-EXCLUSIVITY. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser who may
also be a Director, officer or employee of the Corporation to engage in any
other business or devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or dissimilar
nature, nor limit or restrict the right of the Adviser to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
9. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
- 4 -
<PAGE>
10. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the Act.
To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall apply.
11. SEPARATE PORTFOLIO. Pursuant to the provisions of the
Declaration, each Fund is a separate Portfolio of the Corporation, and all
debts, liabilities, obligations and expenses of a particular Fund shall be
enforceable only against the assets of that Fund and not against the assets of
any other Fund or of the Corporation as a whole.
IN WITNESS WHEREOF, the Corporation and the Adviser have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
SUNAMERICA STYLE SELECT SERIES, INC.
By:
-------------------------
Name: Peter A. Harbeck
Title: President
SUNAMERICA ASSET MANAGEMENT CORP.
By:
-------------------------
Name: Robert M. Zakem
Title: Senior Vice President
- 5 -
<PAGE>
SCHEDULE A
FEE RATE
(as a % of average
PORTFOLIO daily net asset value)
Large-Cap Growth Portfolio 1.00% net assets
Mid-Cap Growth Portfolio 1.00% first $750 million
.95% next $750 million
.90% thereafter
Aggressive Growth Portfolio 1.00% first $750 million
.95% next $750 million
.90% thereafter
Large-Cap Value Portfolio 1.00% net assets
Value Portfolio 1.00% first $750 million
.95% next $750 million
.90% thereafter
Small-Cap Value Portfolio 1.00% net assets
International Equity Portfolio 1.10% first $750 million
1.05% next $750 million
1.00% thereafter
Focus Portfolio .85% net assets
Focused Growth and Income Portfolio 1.00% net assets
Focused Value Portfolio 1.00% net assets
Focused TechNet Portfolio 1.25% net assets
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of April 1, 2000, by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and VAN WAGONER CAPITAL MANAGEMENT, INC., a Delaware corporation
(the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Style Select Series, Inc., a
Maryland corporation (the "Corporation"), have entered into an Investment
Advisory and Management Agreement dated as of January 1, 1999, (the "Advisory
Agreement") pursuant to which the Adviser has agreed to provide investment
management, advisory and administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company and may issue shares of common stock, par value $.0001 per share, in
separately designated series representing separate funds with their own
investment objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages the services
of the Subadviser in furtherance of its Investment Advisory and Management
Agreement with the Corporation. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of a portion of the assets of each Portfolio
listed on Schedule A attached hereto. The Subadviser will determine in its
discretion and subject to the oversight and review of the Adviser, the
securities to be purchased or sold, will provide the Adviser with records
concerning its activities which the Adviser or the Corporation is required to
maintain, and will render regular reports to the Adviser and to officers and
Directors of the Corporation concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Directors of the Corporation and
in compliance with such policies as the Directors of the Corporation may from
time to time establish and communicate to the Subadviser, and in compliance with
(a) the objectives,
<PAGE>
policies, and limitations for the Portfolio set forth in the Corporation's
current prospectus and statement of additional information as provided to the
Subadviser, and (b) applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that the
portion of each Portfolio set forth in Schedule A managed by it will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing and subject to Section 9(c) hereof, the Subadviser represents and
warrants that the management of the assets of the Portfolio managed by it will
be designed to comply with (a) the provisions of the Act and rules adopted
thereunder that relate to the investment of Portfolio assets, including
depositing those assets in custody with institutions designated by the
Corporation; and (b) applicable federal and state securities and commodities
laws (other than state securities laws relating to the amount of Portfolio
shares that may be sold in a particular state); provided that for purposes of
Section 17(a), (d) and (e), Subadviser shall effect compliance only in relation
to affiliated persons identified to it by the Adviser and its own affiliates.
The Adviser agrees that it, and not the Subadviser, shall be solely responsible
for insuring that each Portfolio set forth in Schedule A managed by the
Subadviser (i) qualifies as a "regulated investment company" under Subchapter
M, chapter I of the Internal Revenue Code of 1986, as amended (the "Code"); and
(ii) complies with any limits in its current prospectus or statement of
additional information concerning concentration of investments or the amount of
assets that may be invested by the Portfolio in any one or more securities.
Should the Adviser determine that the Portfolio is not in compliance with
Subchapter M, chapter I of the Code, the Subadviser agrees to follow
instructions of the Adviser to remedy such non-compliance. The Subadviser
further represents and warrants that only with respect to any statements or
omissions made in any Registration Statement for shares of the Corporation, or
any amendment or supplements thereto, made in reliance upon and in conformity
with information furnished by the Subadviser expressly for use therein, such
Registration Statement and any amendments or supplements thereto will, when
they become effective, conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
2. PORTFOLIO TRANSACTIONS. The Subadviser is responsible for
decisions to buy or sell securities and other investments for each Portfolio,
broker-dealers and futures commission merchants' selection, and negotiation of
brokerage commission and futures commission merchants' rates. As a general
matter, in executing Portfolio transactions, the Subadviser may employ or deal
with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the
-2-
<PAGE>
Subadviser shall consider all relevant factors including price (including the
applicable brokerage commission, dealer spread or futures commission merchant
rate), the size of the order, the nature of the market for the security or
other investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the
execution capabilities and operational facilities of the firm involved, and, in
the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
the Subadviser's having caused a Portfolio to pay a member of an exchange,
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, if the Subadviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
member of an exchange, broker or dealer viewed in terms of either that
particular transaction or the Subadviser's overall responsibilities with
respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of
the Corporation such information relating to Portfolio transactions as they may
reasonably request. To the extent consistent with applicable law, the
Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by the Subadviser in the manner the Subadviser determines to be equitable
and consistent with its and its affiliates' fiduciary obligations to the
Portfolio and to such other clients. The Adviser hereby acknowledges that such
aggregation of orders may not result in more favorable pricing or lower
brokerage commissions in all instances.
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be
entitled to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay to the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to the portion of the assets managed by the Subadviser for each
Portfolio listed thereon. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month (i.e., the applicable annual
fee rate divided by 365 applied to each prior days' net assets in order to
calculate the daily accrual). If the Subadviser shall provide its services
under this Agreement for less than the whole of any month, the foregoing
compensation shall be prorated.
-3-
<PAGE>
4. OTHER SERVICES. At the request of the Corporation or the
Adviser, the Subadviser in its discretion may make available to the
Corporation, office facilities, equipment, personnel and other services. Such
office facilities, equipment, personnel and services shall be provided for or
rendered by the Subadviser and billed to the Corporation or the Adviser at the
Subadviser's cost.
5. REPORTS. The Corporation, the Adviser and the Subadviser agree
to furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. STATUS OF THE SUBADVISER. The services of the Subadviser to the
Adviser and the Corporation are not to be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any
way or otherwise be deemed an agent of the Corporation.
7. CERTAIN RECORDS. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to be
maintained by the Corporation pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the
Adviser, or any governmental agency or other instrumentality having regulatory
authority over the Corporation.
8. REFERENCE TO THE SUBADVISER. The Corporation or the Adviser or
any affiliate or agent thereof shall have the right to make reference to or use
the name of the Subadviser or any of its affiliates in any advertising or
promotional materials unless the Subadviser, by written notice withholds such
right, however the right shall not be unreasonably withheld.
9. LIABILITY OF THE SUBADVISER. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties ("disabling conduct") hereunder on the part of the Subadviser (and
its officers, directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Subadviser) the Subadviser
shall not be subject to liability to the Adviser, its officers, directors,
agents, employees, controlling persons or shareholders or to the Corporation or
to any shareholder of the Corporation for any act or omission
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<PAGE>
in the course of, or connected with, rendering services hereunder, including
without limitation, any error of judgment or mistake of law or for any loss
suffered by any of them in connection with the matters to which this Agreement
relates, except to the extent specified in Section 36(b) of the Act concerning
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services. Except for such disabling conduct, the Adviser shall
indemnify the Subadviser (and its officers, directors, partners, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Subadviser) (collectively, the "Indemnified Parties") from
any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) arising from the Subadviser's providing
services under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of
the 1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or its affiliates or such directors, officers or controlling person may
become subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon breach of this Agreement by the Subadviser;
provided, however, that in no case is the Subadviser's indemnity in favor of
any person deemed to protect such other persons against any liability to which
such person would otherwise be subject by reasons of willful misfeasance, bad
faith, or gross negligence in the performance of his, her or its duties or by
reason of his, her or its reckless disregard of obligation and duties under
this Agreement.
(c) The Subadviser shall not be liable to the Adviser its
officers, directors, agents, employees, controlling persons or shareholders or
to the Corporation or its shareholders for (i) any acts of the Adviser or any
other subadviser to the Portfolio with respect to the portion of the assets of
a Portfolio not managed by Subadviser and (ii) acts of the Subadviser which
result from or are based upon acts of the Adviser, including, but not limited
to, a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by the Subadviser or, to the
extent such records relate to the portion of the assets managed by the
Subadviser, otherwise available to the Subadviser upon reasonable request. The
Adviser shall indemnify the Indemnified Parties from any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and
other expenses) arising from the conduct of the Adviser, the Corporation and
any other subadviser with respect to the portion of a Portfolio's assets not
allocated to Subadviser and with respect to any other portfolio of the
Corporation.
10. PERMISSIBLE INTERESTS. Directors and agents of the Corporation
are or may be interested in the Subadviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Subadviser are or may be
interested in the Corporation as Directors, or otherwise; and the Subadviser
(or any successor) is or may be interested in the Corporation in some manner.
11. TERM OF THE AGREEMENT. This Agreement shall continue in full
force and effect with respect to each Portfolio until two years from the date
hereof, and from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
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<PAGE>
Directors of the Corporation who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Directors of the
Corporation or by vote of a majority of the outstanding voting securities of
the Portfolio voting separately from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of a penalty by the Portfolio or the Corporation,
by vote of a majority of the Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, voting
separately from any other series of the Corporation, or by the Adviser, on not
less than 30 nor more than 60 days' written notice to the Subadviser. With
respect to each Portfolio, this Agreement may be terminated by the Subadviser
at any time, without the payment of any penalty, on 90 days' written notice to
the Adviser and the Corporation. The termination of this Agreement with respect
to any Portfolio or the addition of any Portfolio to Schedule A hereto (in the
manner required by the Act) shall not affect the continued effectiveness of
this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Corporation and the Adviser is
terminated.
12. SEVERABILITY. This Agreement constitutes the entire Agreement
between the parties hereto. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. SURVIVAL. Section 9 and the right to receive amounts due under
Section 3 shall survive termination of this Agreement.
14. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
15. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the
Act. To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
16. SEPARATE SERIES. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is
a separate series of the Corporation, and all debts, liabilities, obligations
and expenses of a particular Portfolio shall be enforceable only against the
assets of that Portfolio and not against the assets of any other Portfolio or
of the Corporation as a whole.
17. NOTICES. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
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<PAGE>
Subadviser: Van Wagoner Capital Management, Inc.
345 California Street
San Francisco, CA 94104-2606
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
------------------------------------
Name: Peter A. Harbeck
Title: President
VAN WAGONER CAPITAL MANAGEMENT, INC.
By:
------------------------------------
Name:
Title:
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<PAGE>
SCHEDULE A
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SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of April 1, 2000, by and
between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and DRESDNER RCM GLOBAL INVESTORS LLC, a Delaware limited liability
company (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Style Select Series, Inc., a
Maryland corporation (the "Corporation"), have entered into an Investment
Advisory and Management Agreement dated as of January 1, 1999, (the "Advisory
Agreement") pursuant to which the Adviser has agreed to provide investment
management, advisory and administrative services to the Corporation; and
WHEREAS, the Corporation is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company and may issue shares of common stock, par value $.0001 per share, in
separately designated series representing separate funds with their own
investment objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment series of the Corporation listed
on Schedule A attached hereto (the "Portfolio"), and the Subadviser is willing
to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Corporation. Pursuant to this Subadvisory
Agreement and subject to the oversight and review of the Adviser, the
Subadviser will manage the investment and reinvestment of a portion of the
assets of each Portfolio listed on Schedule A attached hereto. The Subadviser
will determine in its discretion and subject to the oversight and review of the
Adviser, the securities to be purchased or sold, will provide the Adviser with
records concerning its activities which the Adviser or the Corporation is
required to maintain, and will render regular reports to the Adviser and to
officers and Directors of the Corporation concerning its discharge of the
foregoing responsibilities. The Subadviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Directors of
the Corporation and in compliance with such policies as the Directors of the
Corporation may from time to time establish and communicate to the Subadviser,
and in compliance with (a) the objectives,
<PAGE>
policies, and limitations for the Portfolio set forth in the Corporation's
current prospectus and statement of additional information as provided to the
Subadviser, and (b) applicable laws and regulations.
The Subadviser represents and warrants to the Adviser that the
portion of each Portfolio set forth in Schedule A managed by it will at all
times be operated and managed in compliance with all applicable federal and
state laws governing its operations and investments. Without limiting the
foregoing and subject to Section 9(c) hereof, the Subadviser represents and
warrants (1) that the management of the assets of a Portfolio managed by it
will be designed to achieve qualification by each Portfolio to be treated as a
"regulated investment company" under subchapter M, chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (2) compliance with (a) the
provisions of the Act and rules adopted thereunder that relate to the
investment of Portfolio assets, including depositing those assets in custody
with institutions designated by the Corporation; and (b) applicable federal and
state securities and commodities laws (other than state securities laws
relating to the amount of Portfolio shares that may be sold in a particular
state); provided that for purposes of Section 17(a), (d) and (e), Subadviser
shall effect compliance only in relation to affiliated persons identified to it
by the Adviser and its own affiliates. The Subadviser further represents and
warrants that only with respect to any statements or omissions made in any
Registration Statement for shares of the Corporation, or any amendment or
supplements thereto, made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such Registration
Statement and any amendments or supplements thereto will, when they become
effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
2. PORTFOLIO TRANSACTIONS. The Subadviser is responsible for
decisions to buy or sell securities and other investments for each Portfolio,
broker-dealers and futures commission merchants' selection, and negotiation of
brokerage commission and futures commission merchants' rates. As a general
matter, in executing Portfolio transactions, the Subadviser may employ or deal
with such broker-dealers or futures commission merchants as may, in the
Subadviser's best judgement, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Subadviser shall
consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, the
execution capabilities and operational facilities of the firm involved, and, in
the case of securities, the firm's risk in positioning a block of securities.
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<PAGE>
Subject to such policies as the Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
the Subadviser's having caused a Portfolio to pay a member of an exchange,
broker or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange, broker or
dealer would have charged for effecting that transaction, if the Subadviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
member of an exchange, broker or dealer viewed in terms of either that
particular transaction or the Subadviser's overall responsibilities with
respect to such Portfolio and to other clients as to which the Subadviser
exercises investment discretion. In accordance with Section 11(a) of the 1934
Act and Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the Act and Rule 17e-1 thereunder, the
Subadviser may engage its affiliates, the Adviser and its affiliates or any
other subadviser to the Corporation and its respective affiliates, as
broker-dealers or futures commission merchants to effect Portfolio transactions
in securities and other investments for a Portfolio. The Subadviser will
promptly communicate to the Adviser and to the officers and the Directors of
the Corporation such information relating to Portfolio transactions as they may
reasonably request. To the extent consistent with applicable law, the
Subadviser may aggregate purchase or sell orders for the Portfolio with
contemporaneous purchase or sell orders of other clients of the Subadviser or
its affiliated persons. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by the Subadviser in the manner the Subadviser determines to be equitable
and consistent with its and its affiliates' fiduciary obligations to the
Portfolio and to such other clients. The Adviser hereby acknowledges that such
aggregation of orders may not result in more favorable pricing or lower
brokerage commissions in all instances.
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be
entitled to receive any payment from the Corporation and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay to the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to the portion of the assets managed by the Subadviser for each
Portfolio listed thereon. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month (i.e., the applicable annual
fee rate divided by 365 applied to each prior days' net assets in order to
calculate the daily accrual). If the Subadviser shall provide its services
under this Agreement for less than the whole of any month, the foregoing
compensation shall be prorated.
4. OTHER SERVICES. At the request of the Corporation or the
Adviser, the Subadviser in its discretion may make available to the
Corporation, office facilities, equipment, personnel and other services. Such
office facilities, equipment, personnel and services shall be provided for or
rendered by the Subadviser and billed to the Corporation or the Adviser at the
Subadviser's cost.
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<PAGE>
5. REPORTS. The Corporation, the Adviser and the Subadviser agree
to furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Corporation as each may reasonably request.
6. STATUS OF THE SUBADVISER. The services of the Subadviser to the
Adviser and the Corporation are not to be deemed exclusive, and the Subadviser
shall be free to render similar services to others so long as its services to
the Corporation are not impaired thereby. The Subadviser shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Corporation in any
way or otherwise be deemed an agent of the Corporation.
7. CERTAIN RECORDS. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio that are required to
be maintained by the Corporation pursuant to the requirements of Rule 31a-1 of
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Corporation are the
property of the Corporation and will be surrendered promptly to the Corporation
or the Adviser on request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Corporation's
auditors, the Corporation or any representative of the Corporation, the
Adviser, or any governmental agency or other instrumentality having regulatory
authority over the Corporation.
8. REFERENCE TO THE SUBADVISER. (a) The Corporation or the Adviser
or any affiliate or agent thereof shall have the right to make reference to or
use the name of the Subadviser in any advertising or promotional materials
unless the Subadviser by written notice withholds such right, however the right
shall not be unreasonably withheld.
(b) All such references to or use of the name of the Subadviser
shall state that the Subadviser is a manager of the Portfolios listed in
Schedule A. The Adviser agrees to indemnify, defend and hold harmless the
Subadviser from and against any and all claims, demands, liabilities and
expenses (including the reasonable cost of investigating and defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection thereof) arising out of or on the basis of any untrue statement, or
alleged untrue statement, of a material fact stated in any prospectus,
statement of additional information, or other advertising or promotional
material, or arising out of or based upon omission, or alleged omission, to
state a material fact required to be stated in any prospectus, statement of
additional information, or other advertising or promotional material, except
that the Adviser's agreement to indemnify Subadviser will not be deemed to
cover any such claim, demand, liability or expense to the extent that it solely
arises out of or is solely based upon any such
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<PAGE>
untrue statement, alleged untrue statement, omission or alleged omission or
alleged omission made in any prospectus, statement of additional information,
or advertising or promotional material in reliance upon information furnished
by Subadviser.
9. LIABILITY OF THE SUBADVISER. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties ("disabling conduct") hereunder on the part of the Subadviser (and
its officers, directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Subadviser) the Subadviser
shall not be subject to liability to the Adviser, its officers, directors,
agents, employees, controlling persons or shareholders or to the Corporation or
to any shareholder of the Corporation for any act or omission in the course of,
or connected with, rendering services hereunder, including without limitation,
any error of judgment or mistake of law or for any loss suffered by any of them
in connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct, the Adviser shall indemnify the
Subadviser (and its officers, directors, partners, agents, employees,
controlling persons, shareholders and any other person or entity affiliated
with the Subadviser) (collectively, the "Indemnified Parties") from any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) arising from the Subadviser's providing services under this
Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of
the 1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or its affiliates or such directors, officers or controlling person may
become subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon breach of this Agreement by the Subadviser;
provided, however, that in no case is the Subadviser's indemnity in favor of
any person deemed to protect such other persons against any liability to which
such person would otherwise be subject by reasons of willful misfeasance, bad
faith, or gross negligence in the performance of his, her or its duties or by
reason of his, her or its reckless disregard of obligation and duties under
this Agreement.
(c) The Subadviser shall not be liable to the Adviser its
officers, directors, agents, employees, controlling persons or shareholders or
to the Corporation or its shareholders for (i) any acts of the Adviser or any
other subadviser to the Portfolio with respect to the portion of the assets of
a Portfolio not managed by Subadviser and (ii) acts of the Subadviser which
result from or are based upon acts of the Adviser, including, but not limited
to, a failure of the Adviser to provide accurate and current information with
respect to any records maintained by Adviser or any other subadviser to a
Portfolio, which records are not also maintained by the Subadviser or, to the
extent such records relate to the portion of the assets managed by the
Subadviser, otherwise available to the Subadviser upon reasonable request. The
Adviser agrees that Subadviser shall manage the portion of the assets of a
Portfolio allocated to it as if it was a separate operating portfolio and shall
comply with subsections (a) and (b) of Section I of this Subadvisory Agreement
(including, but not limited to, the investment objectives, policies and
restrictions applicable to a Portfolio and qualifications of
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<PAGE>
a Portfolio as a regulated investment company under the Code) only with respect
to the portion of assets of a Portfolio allocated to Subadviser. The Adviser
shall indemnify the Indemnified Parties from any and all losses, claims,
damages, liabilities or litigation (including reasonable legal and other
expenses) arising from the conduct of the Adviser, the Corporation and any
other subadviser with respect to the portion of a Portfolio's assets not
allocated to Subadviser and with respect to any other portfolio of the
Corporation.
10. REPRESENTATION OF ADVISER. The Adviser represents and warrants
that it has full power and authority to enter into this Agreement and to engage
Subadviser to perform the duties required under this Agreement, and that its
engagement of Subadviser hereunder does not violate any applicable laws or
regulations, including the Investment Company Act of 1940.
11. PERMISSIBLE INTERESTS. Directors and agents of the Corporation
are or may be interested in the Subadviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Subadviser are or may be
interested in the Corporation as Directors, or otherwise; and the Subadviser
(or any successor) is or may be interested in the Corporation in some manner.
12. TERM OF THE AGREEMENT. This Agreement shall continue in full
force and effect with respect to each Portfolio until two years from the date
hereof, and from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Directors of the Corporation who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Directors of the
Corporation or by vote of a majority of the outstanding voting securities of
the Portfolio voting separately from any other series of the Corporation.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of a penalty by the Portfolio or the Corporation,
by vote of a majority of the Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, voting
separately from any other series of the Corporation, or by the Adviser, on not
less than 30 nor more than 60 days' written notice to the Subadviser. With
respect to each Portfolio, this Agreement may be terminated by the Subadviser
at any time, without the payment of any penalty, on 90 days' written notice to
the Adviser and the Corporation. The termination of this Agreement with respect
to any Portfolio or the addition of any Portfolio to Schedule A hereto (in the
manner required by the Act) shall not affect the continued effectiveness of
this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Corporation and the Adviser is
terminated.
13. SEVERABILITY. This Agreement constitutes the entire Agreement
between the parties hereto. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
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<PAGE>
14. SURVIVAL. Section 9 and the right to receive amounts due under
Section 3 shall survive termination of this Agreement.
15. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Corporation must be obtained in conformity with
the requirements of the Act.
16. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the
Act. To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
17. SEPARATE SERIES. Pursuant to the provisions of the Articles of
Incorporation and the General Laws of the State of Maryland, each Portfolio is
a separate series of the Corporation, and all debts, liabilities, obligations
and expenses of a particular Portfolio shall be enforceable only against the
assets of that Portfolio and not against the assets of any other Portfolio or
of the Corporation as a whole.
18. NOTICES. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
Subadviser: Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Fransisco, California 94111
Attention:
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017-3204
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
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<PAGE>
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By:
---------------------------------
Name: Peter A. Harbeck
Title: President
DRESDNER RCM GLOBAL INVESTORS LLC
By:
---------------------------------
Name:
Title:
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<PAGE>
SCHEDULE A
-9-
April 28, 2000
SunAmerica Style Select Series, Inc.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Ladies and Gentlemen:
This opinion is being furnished in connection with the filing by SunAmerica
Style Select Series, Inc. (the "Corporation"), a Maryland corporation, of
Post-Effective Amendment No. 25 to the Registration Statement on Form N-1A
(the "Amendment") which definitely registers 100,000,000 shares of beneficial
interest, $.0001 par value (the "Shares").
I am familiar with the proceedings taken by the Corporation in connection
with the authorization, issuance and sale of the Shares. In addition, I have
examined the Corporation's Articles of Incorporation, its By-Laws and such other
documents that have been deemed relevant to the matters referred to in this
opinion.
Based upon the foregoing, I am of the opinion that the Shares registered by
the Amendment are legally issued, fully paid and non-assessable shares of
beneficial interest of the Corporation.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Amendment of the Corporation, and to
the filing of this opinion under the securities laws of any state
Very truly yours,
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Robert M. Zakem
-------------------
Robert M. Zakem
Senior Vice President and
General Counsel
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment number 25 to the Registration Statement on Form N-1A ("Registration
Statement") of our report dated December 15, 1999, relating to the financial
statements and financial highlights of the Focus Portfolio which appears in the
October 31, 1999 Annual Report to Shareholders of the Style Select Series, Inc.,
which is also incorporated by reference into the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights" and
"Independent Accountants and Legal Counsel" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
April 25, 2000
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12B-1
(CLASS C SHARES)
PLAN OF DISTRIBUTION adopted as of the day of , 2000, by
SunAmerica Style Select Series, Inc., a Maryland corporation (the
"Corporation"), on behalf of the Class C shares of its separately designated
series, Focus Portfolio (the "Portfolio").
W I T N E S S E T H:
WHEREAS, the Corporation is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company; and
WHEREAS, the Portfolio is a separately designated investment
series of the Corporation with its own investment objective, policies and
purposes offering four separate classes of shares of beneficial interest, par
value $.01 per share, of the Corporation (the "Shares"); and
WHEREAS, the Corporation has entered into a Distribution
Agreement with SunAmerica Capital Services, Inc. (the "Distributor"), pursuant
to which the Distributor acts as the exclusive distributor and representative
of the Corporation in the offer and sale of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act, pursuant to which the
Portfolio will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class C shares of the Portfolio; and
WHEREAS, the Board of Directors of the Corporation (the
"Directors") as a whole, and the Directors who are not interested persons of
the Corporation and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating hereto (the "12b- 1
Directors"), having determined, in the exercise of reasonable business judgment
and in light of their fiduciary duties under state law and under Sections 36(a)
and (b) of the Act, that there is a reasonable likelihood that this Plan will
benefit the Portfolio and its Class C shareholders, have approved this Plan by
votes cast in person at a meeting called for the purpose of voting hereon and
on any agreements related hereto;
NOW THEREFORE, the Corporation on behalf of the Portfolio hereby
adopts this Plan on the following terms:
1. DISTRIBUTION ACTIVITIES. The Portfolio shall pay the Distributor
a distribution fee under the Plan at the end of each month at
the annual rate of up to 0.75% of average daily net assets
attributable to Class C shares of the Portfolio to compensate
the Distributor and certain securities firms ("Securities
Firms") for providing sales and promotional activities and
services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares. Such expenditures
may consist of sales commissions to financial consultants for
selling Class C shares, compensation, sales incentives and
payments to sales and marketing personnel, and the payment of
expenses incurred in its sales and promotional activities,
including advertising expenditures related to the Class C shares
of the Portfolio and
<PAGE>
the costs of preparing and distributing promotional materials
with respect to such Class C shares. Payment of the distribution
fee described in this Section 1 shall be subject to any
limitations set forth in applicable regulations of the National
Association of Securities Dealers, Inc. Nothing herein shall
prohibit the Distributor from collecting distribution fees in
any given year, as provided hereunder, in excess of expenditures
made in such year for sales and promotional activities with
respect to the Portfolio.
2. ACCOUNT MAINTENANCE ACTIVITIES. The Portfolio shall pay the
Distributor an account maintenance fee under the Plan at the end
of each month at the annual rate of up to 0.25% of average daily
net assets attributable to Class C shares of the Portfolio to
compensate the Distributor and Securities Firms for account
maintenance activities.
3. PAYMENTS TO OTHER PARTIES. The Portfolio hereby authorizes the
Distributor to enter into agreements with Securities Firms to
provide compensation to such Securities Firms for activities and
services of the type referred to in Sections 1 and 2 hereof. The
Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as
compensation for the above-mentioned activities and services.
Such agreements shall provide that the Securities Firms shall
deliver to the Distributor such information as is reasonably
necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. RELATED AGREEMENTS. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the 12b-1
Directors or, by vote of a majority of the outstanding
voting securities (as defined in the Act) of Class C shares
of the Fund, on not more than 60 days' written notice to
any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
5. QUARTERLY REPORTS. The Treasurer of the Corporation shall
provide to the Directors and the Directors shall review, at
least quarterly, a written report of the amounts expended
pursuant to this Plan with respect to Class C shares of the
Portfolio and any related agreement and the purposes for which
such expenditures were made.
6. TERM AND TERMINATION. (a) This Plan shall become effective as of
the date hereof, and, unless terminated as herein provided,
shall continue from year to year thereafter, so long as such
continuance is specifically approved at least annually by votes,
cast in person at a meeting called for the purpose of voting on
such approval, of a majority of both the (i) the Directors of
the Trust, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Directors or by vote of a majority of
the outstanding voting securities (as defined in the Act)
of Class C shares of the Portfolio.
<PAGE>
7. AMENDMENTS. This Plan may not be amended to increase materially
the maximum expenditures permitted by Sections 1 and 2 hereof
unless such amendment is approved by a vote of a majority of the
outstanding voting securities (as defined in the Act) of Class C
shares of the Portfolio, and no material amendment to this Plan
shall be made unless approved in the manner provided for the
annual renewal of this Plan in Section 6(a) hereof.
8. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in
effect, the selection and nomination of those Directors of the
Corporation who are not interested persons of the Corporation
shall be committed to the discretion of such disinterested
Directors.
9. RECORDKEEPING. The Corporation shall preserve copies of this
Plan and any related agreement and all reports made pursuant to
Section 5 hereof for a period of not less than six years from
the date of this Plan, any such related agreement or such
reports, as the case may be, the first two years in an easily
accessible place.
10. DEFINITION OF CERTAIN TERMS. For purposes of this Plan, the
terms "assignment," "interested person," "majority of the
outstanding voting securities," and "principal underwriter"
shall have their respective meanings defined in the Act and the
rules and regulations thereunder, subject, however, to such
exemptions as may be granted to either the Corporation or the
principal underwriter of the Shares by the Securities and
Exchange Commission, or its staff under the Act.
11. SEPARATE SERIES. Pursuant to the provisions of the Articles of
Incorporation, the Portfolio is a separate series of the
Corporation, and all debts, liabilities and expenses of Class C
shares of the Portfolio shall be enforceable only against the
assets of Class C shares of the Portfolio and not against the
assets of any other series or class of shares or of the
Corporation as a whole.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be
executed as of the day and year first written above.
SUNAMERICA STYLE SELECT SERIES, INC.
By:
---------------------------------
Name: Peter A. Harbeck
Title: President
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS C SHARES)
PLAN OF DISTRIBUTION adopted as of the day of , 2000, by
SunAmerica Style Select Series, Inc., a Maryland corporation (the
"Corporation"), on behalf of the Class C shares of its separately designated
series, Focused TechNet Portfolio (the "Portfolio").
W I T N E S S E T H:
WHEREAS, the Corporation is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company; and
WHEREAS, the Portfolio is a separately designated investment
series of the Corporation with its own investment objective, policies and
purposes offering four separate classes of shares of beneficial interest, par
value $.01 per share, of the Corporation (the "Shares"); and
WHEREAS, the Corporation has entered into a Distribution
Agreement with SunAmerica Capital Services, Inc. (the "Distributor"), pursuant
to which the Distributor acts as the exclusive distributor and representative
of the Corporation in the offer and sale of the Shares to the public; and
WHEREAS, the Corporation desires to adopt this Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act, pursuant to which the
Portfolio will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class C shares of the Portfolio; and
WHEREAS, the Board of Directors of the Corporation (the
"Directors") as a whole, and the Directors who are not interested persons of
the Corporation and who have no direct or indirect financial interest in the
operation of this Plan or in any agreement relating hereto (the "12b- 1
Directors"), having determined, in the exercise of reasonable business judgment
and in light of their fiduciary duties under state law and under Sections 36(a)
and (b) of the Act, that there is a reasonable likelihood that this Plan will
benefit the Portfolio and its Class C shareholders, have approved this Plan by
votes cast in person at a meeting called for the purpose of voting hereon and
on any agreements related hereto;
NOW THEREFORE, the Corporation on behalf of the Portfolio hereby
adopts this Plan on the following terms:
1. DISTRIBUTION ACTIVITIES. The Portfolio shall pay the Distributor
a distribution fee under the Plan at the end of each month at
the annual rate of up to 0.75% of average daily net assets
attributable to Class C shares of the Portfolio to compensate
the Distributor and certain securities firms ("Securities
Firms") for providing sales and promotional activities and
services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares. Such expenditures
may consist of sales commissions to financial consultants for
selling Class C shares, compensation, sales incentives and
payments to sales and marketing personnel, and the payment of
expenses incurred in its sales and promotional activities,
including advertising expenditures related to the Class C shares
of the Portfolio and
<PAGE>
the costs of preparing and distributing promotional materials
with respect to such Class C shares. Payment of the distribution
fee described in this Section 1 shall be subject to any
limitations set forth in applicable regulations of the National
Association of Securities Dealers, Inc. Nothing herein shall
prohibit the Distributor from collecting distribution fees in
any given year, as provided hereunder, in excess of expenditures
made in such year for sales and promotional activities with
respect to the Portfolio.
2. ACCOUNT MAINTENANCE ACTIVITIES. The Portfolio shall pay the
Distributor an account maintenance fee under the Plan at the end
of each month at the annual rate of up to 0.25% of average daily
net assets attributable to Class C shares of the Portfolio to
compensate the Distributor and Securities Firms for account
maintenance activities.
3. PAYMENTS TO OTHER PARTIES. The Portfolio hereby authorizes the
Distributor to enter into agreements with Securities Firms to
provide compensation to such Securities Firms for activities and
services of the type referred to in Sections 1 and 2 hereof. The
Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as
compensation for the above-mentioned activities and services.
Such agreements shall provide that the Securities Firms shall
deliver to the Distributor such information as is reasonably
necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. RELATED AGREEMENTS. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the 12b-1
Directors or, by vote of a majority of the outstanding
voting securities (as defined in the Act) of Class C shares
of the Fund, on not more than 60 days' written notice to
any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
5. QUARTERLY REPORTS. The Treasurer of the Corporation shall
provide to the Directors and the Directors shall review, at
least quarterly, a written report of the amounts expended
pursuant to this Plan with respect to Class C shares of the
Portfolio and any related agreement and the purposes for which
such expenditures were made.
6. TERM AND TERMINATION. (a) This Plan shall become effective as of
the date hereof, and, unless terminated as herein provided,
shall continue from year to year thereafter, so long as such
continuance is specifically approved at least annually by votes,
cast in person at a meeting called for the purpose of voting on
such approval, of a majority of both the (i) the Directors of
the Trust, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Directors or by vote of a majority of
the outstanding voting securities (as defined in the Act)
of Class C shares of the Portfolio.
<PAGE>
7. AMENDMENTS. This Plan may not be amended to increase materially
the maximum expenditures permitted by Sections 1 and 2 hereof
unless such amendment is approved by a vote of a majority of the
outstanding voting securities (as defined in the Act) of Class C
shares of the Portfolio, and no material amendment to this Plan
shall be made unless approved in the manner provided for the
annual renewal of this Plan in Section 6(a) hereof.
8. SELECTION AND NOMINATION OF DIRECTORS. While this Plan is in
effect, the selection and nomination of those Directors of the
Corporation who are not interested persons of the Corporation
shall be committed to the discretion of such disinterested
Directors.
9. RECORDKEEPING. The Corporation shall preserve copies of this
Plan and any related agreement and all reports made pursuant to
Section 5 hereof for a period of not less than six years from
the date of this Plan, any such related agreement or such
reports, as the case may be, the first two years in an easily
accessible place.
10. DEFINITION OF CERTAIN TERMS. For purposes of this Plan, the
terms "assignment," "interested person," "majority of the
outstanding voting securities," and "principal underwriter"
shall have their respective meanings defined in the Act and the
rules and regulations thereunder, subject, however, to such
exemptions as may be granted to either the Corporation or the
principal underwriter of the Shares by the Securities and
Exchange Commission, or its staff under the Act.
11. SEPARATE SERIES. Pursuant to the provisions of the Articles of
Incorporation, the Portfolio is a separate series of the
Corporation, and all debts, liabilities and expenses of Class C
shares of the Portfolio shall be enforceable only against the
assets of Class C shares of the Portfolio and not against the
assets of any other series or class of shares or of the
Corporation as a whole.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be
executed as of the day and year first written above.
SUNAMERICA STYLE SELECT SERIES, INC.
By:
---------------------------------
Name: Peter A. Harbeck
Title: President
