<PAGE> 1
As filed with the Securities and Exchange Commission on November 13, 1998
File Nos. 33-52742; 811-7238
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 _
Pre-Effective Amendment No. _
Post-Effective Amendment No. 17 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 _
Amendment No. 19 X
(Check appropriate box or boxes)
SUNAMERICA SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
1 SunAmerica Center
Los Angeles, CA 90067-6022
(Address of Principal Executive Office)(Zip Code)
Registrant's telephone number, including area code: (800) 858-8850
Robert M. Zakem
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 of Agent for Service)
Copy to:
Susan L. Harris, Esq.
SunAmerica Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- ---
X on December 1, 1998 pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)
- ---
on (date) pursuant to paragraph (a) of Rule 485
- ---
75 days after filing pursuant to paragraph (a)(2)
- ---
--------------------
================================================================================
<PAGE> 2
SUNAMERICA SERIES TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(b)
Under the Securities Act of 1933
<TABLE>
<CAPTION>
PART A
Item No. Registration Statement Caption Caption in Prospectus
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Trust, Its Investment
Objectives and Policies;
Description of Securities
and Investment Techniques
5. Management of the Fund Management
6. Capital Stock and Other Securities Dividends, Distributions and
Federal Taxes; Shareholder
Voting Rights; Shareholder
Inquiries
7. Purchase of Securities Being Offered Purchases and Redemptions
8. Redemption or Repurchase Purchases and Redemptions
9. Pending Legal Proceedings *
PART B Caption in Statement
Item No. Registration Statement Caption of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust
13. Investment Objectives and Policies Investment Objectives and
Policies; Investment
Restrictions
14. Management of the Fund Trust Officers and Trustees
15. Contact Persons and Principal Holders The Trust
of Securities
16. Investment Advisory and Other Services Investment Advisory and
Management Agreement;
Subadvisory Agreements;
General Information
17. Brokerage Allocation and Other Practices Execution of Portfolio
Transactions
18. Capital Stock and Other Securities *
19. Purchase, Redemption and Pricing of Price of Shares
Securities Being Offered
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
20. Tax Status Dividends, Distributions and
Federal Taxes
21. Underwriters *
22. Calculation of Performance Data *
23. Financial Statements Financial Statements
</TABLE>
* Omitted from the Prospectus or Statement of Additional Information because
the item is not applicable.
PART C
The information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C of this Registration Statement.
<PAGE> 4
PROSPECTUS -- DECEMBER 1, 1998
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- --------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
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- --------------------------------------------------------------------------------
P.O. BOX 54299
LOS ANGELES, CALIFORNIA 90054-0299
SunAmerica Series Trust ("Trust") is an open-end management investment company.
The Trust consists of 25 Portfolios, each of which has its own investment
objectives and policies.
The CASH MANAGEMENT PORTFOLIO seeks high current yield while preserving capital
by investing in a diversified selection of money market instruments.
The CORPORATE BOND PORTFOLIO seeks high total return with only moderate price
risk by investing primarily in investment grade fixed income securities.
The GLOBAL BOND PORTFOLIO seeks high total return, emphasizing current income
and, to a lesser extent, providing opportunities for capital appreciation,
through investment in high quality fixed income securities of U.S. and foreign
issuers and through transactions in foreign currencies.
The HIGH-YIELD BOND PORTFOLIO seeks high current income and secondarily seeks
capital appreciation by investing primarily in intermediate and long-term
corporate obligations, with emphasis on higher-yielding, higher-risk,
lower-rated or unrated securities.
The WORLDWIDE HIGH INCOME PORTFOLIO seeks high current income and, secondarily,
capital appreciation, by investing primarily in a portfolio of high-yielding
fixed income securities of issuers located throughout the world.
The SUNAMERICA BALANCED PORTFOLIO seeks to conserve principal by maintaining, at
all times, a balanced portfolio of stocks and bonds.
The BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO seeks reasonable current
income, long-term capital growth and conservation of capital by investing
primarily in common stocks and fixed income securities, with an emphasis on
income-producing securities which appear to have some potential for capital
enhancement.
The ASSET ALLOCATION PORTFOLIO seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term
through a diversified portfolio that may include common stocks and other
securities having common stock characteristics, bonds and other intermediate and
long-term fixed income securities and money market instruments (debt securities
maturing in 397 days or less) in any combination.
The EQUITY INCOME PORTFOLIO seeks long-term capital appreciation and income by
primarily investing in equity securities that are expected to pay above-average
dividends.
The UTILITY PORTFOLIO seeks high current income and moderate capital
appreciation by investing primarily in the equity and debt securities of utility
companies.
THE HIGH-YIELD BOND AND WORLDWIDE HIGH INCOME PORTFOLIOS INVEST PREDOMINANTLY
IN, AND THE CORPORATE BOND, BALANCED/PHOENIX INVESTMENT COUNSEL, ASSET
ALLOCATION, EQUITY INCOME, REAL ESTATE, INTERNATIONAL GROWTH AND INCOME, SMALL
COMPANY VALUE AND EMERGING MARKETS PORTFOLIOS MAY INVEST IN, LOWER-RATED AND
UNRATED BONDS (ALSO KNOWN AS "JUNK BONDS"). BONDS OF THIS TYPE ARE TYPICALLY
SUBJECT TO GREATER MARKET FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL
DUE TO DEFAULT BY THE ISSUER THAN ARE INVESTMENTS IN LOWER-YIELDING,
HIGHER-RATED BONDS. SEE "DESCRIPTION OF SECURITIES AND INVESTMENT
TECHNIQUES -- RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS" FOR A
DISCUSSION OF THE RISKS ASSOCIATED WITH HIGH-YIELD, HIGH-RISK SECURITIES.
The EQUITY INDEX PORTFOLIO seeks to provide investment results that correspond
with the performance of the Standard & Poor's 500 Corporate Stock Price Index
("S&P 500").
The GROWTH-INCOME PORTFOLIO seeks growth of capital and income by investing
primarily in common stocks or securities which demonstrate the potential for
appreciation and/or dividends.
The FEDERATED VALUE PORTFOLIO seeks growth of capital and income by investing
primarily in the securities of high quality companies.
The VENTURE VALUE PORTFOLIO seeks growth of capital by investing primarily in
common stocks.
(Cover continued on next page)
------------------------
This prospectus contains information you should know before investing. Please
read it carefully before you invest and keep it for future reference.
Shares of the Portfolios are not bank deposits and are not guaranteed or insured
by any bank, government entity or the FDIC.
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> 5
(Cover continued from previous page)
The "DOGS" OF WALL STREET PORTFOLIO seeks total return (including capital
appreciation and current income) primarily through the annual selection of
thirty high dividend yielding common stocks from the Dow Jones Industrial
Average and the broader market.
The ALLIANCE GROWTH, GROWTH/PHOENIX INVESTMENT COUNSEL and PUTNAM GROWTH
PORTFOLIOS each seeks long-term growth of capital by investing primarily in
common stocks or securities with common stock characteristics which its
subadviser believes have the potential for appreciation.
The REAL ESTATE PORTFOLIO seeks total return through a combination of growth and
income by investing primarily in securities of companies principally engaged in
or related to the real estate industry or which own significant real estate
assets or which primarily invest in real estate financial instruments.
The SMALL COMPANY VALUE PORTFOLIO seeks capital appreciation by investing in a
broadly diversified portfolio of equity securities of small capitalization
companies.
The AGGRESSIVE GROWTH PORTFOLIO seeks capital appreciation by investing
primarily in equity securities of small capitalization growth companies.
The INTERNATIONAL GROWTH AND INCOME PORTFOLIO seeks growth of capital with
current income as a secondary objective by investing primarily in common stocks
traded on markets outside the U.S.
The GLOBAL EQUITIES PORTFOLIO seeks long-term growth of capital through
investment primarily in common stocks or securities of U.S. and foreign issuers
with common stock characteristics which demonstrate the potential for
appreciation and through transactions in foreign currencies.
The INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO seeks long-term capital
appreciation by investing in accordance with country weightings determined by
its subadviser in common stocks of foreign issuers which, in the aggregate,
replicate broad country indices.
The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation by investing
mainly in the common stocks and other equity securities of companies that its
subadviser believes have above-average growth prospects primarily in emerging
markets outside the United States.
Shares of the Trust are issued and redeemed only in connection with investments
in and payments under variable annuity contracts and may be sold to fund
variable life contracts issued in the future. The contracts involve fees and
expenses not described in this Prospectus. Certain Portfolios may not be
available in connection with a particular contract. See the applicable contract
prospectus for information regarding contract fees and expenses and any
restrictions or limitations.
<PAGE> 6
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- --------------------------------------------------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
TOPIC PAGE
----- ----
<S> <C>
FINANCIAL HIGHLIGHTS...................... 4
THE TRUST, ITS INVESTMENT OBJECTIVES AND
POLICIES................................ 7
Cash Management Portfolio.......... 8
Corporate Bond Portfolio........... 8
Global Bond Portfolio.............. 9
High-Yield Bond Portfolio.......... 10
Worldwide High Income Portfolio.... 11
SunAmerica Balanced Portfolio...... 12
Balanced/Phoenix Investment Counsel
Portfolio.......................... 13
Asset Allocation Portfolio......... 14
Equity Income Portfolio............ 15
Utility Portfolio.................. 14
Equity Index Portfolio............. 22
Growth-Income Portfolio............ 16
Federated Value Portfolio.......... 16
Venture Value Portfolio............ 17
"Dogs" of Wall Street Portfolio.... 18
Alliance Growth Portfolio.......... 20
Growth/Phoenix Investment Counsel
Portfolio.......................... 20
Putnam Growth Portfolio............ 20
Real Estate Portfolio.............. 20
Small Company Value Portfolio...... 18
Aggressive Growth Portfolio........ 21
International Growth and Income
Portfolio.......................... 22
Global Equities Portfolio.......... 23
International Diversified Equities
Portfolio.......................... 24
Emerging Markets Portfolio......... 24
DESCRIPTION OF SECURITIES AND INVESTMENT
TECHNIQUES.............................. 25
MANAGEMENT................................ 36
PORTFOLIO TURNOVER AND BROKERAGE.......... 44
DIVIDENDS, DISTRIBUTIONS AND FEDERAL
TAXES................................... 45
PRICE OF SHARES........................... 46
PURCHASES AND REDEMPTIONS................. 46
SHAREHOLDER VOTING RIGHTS................. 46
INDEPENDENT ACCOUNTANTS................... 47
GENERAL INFORMATION....................... 47
SHAREHOLDER INQUIRIES..................... 47
FINANCIAL INFORMATION..................... 47
</TABLE>
3
<PAGE> 7
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- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
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- --------------------------------------------------------------------------------
The following Financial Highlights for the Portfolios and periods set forth
below, except for the six months ended May 31, 1998 which is unaudited, have
been audited by PricewaterhouseCoopers LLP, the Trust's independent accountants,
whose report on the financial statements containing such information is included
in the Trust's Annual Report to Shareholders. These Financial Highlights* should
be read in conjunction with the financial statements and notes thereto, which
are included in the Statement of Additional Information.
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
NET NET TOTAL DECLARED FROM NET NET NET
ASSET NET REALIZED FROM FROM NET REALIZED ASSET ASSETS
VALUE INVEST- & UNREALIZED INVEST- INVEST- GAIN ON VALUE END OF
BEGINNING MENT GAIN (LOSS) ON MENT MENT INVEST- END OF TOTAL PERIOD
PERIOD ENDED OF PERIOD INCOME** INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN*** (000'S)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Management Portfolio
2/9/93-11/30/93 $10.00 $0.19 $ 0.01 $ 0.20 $ -- $ -- $10.20 2.00% $ 24,603
11/30/94 10.20 0.38 (0.02) 0.36 (0.09) -- 10.47 3.51 89,098
11/30/95 10.47 0.56 0.01 0.57 (0.34) -- 10.70 5.59 90,731
11/30/96 10.70 0.53 (0.02) 0.51 (0.45) -- 10.76 4.92 91,247
11/30/97 10.76 0.53 0.01 0.54 (0.56) -- 10.74 5.22 156,119
5/31/98# 10.74 0.25 0.01 0.26 (0.68) -- 10.32 2.47 256,449
- -----------------------------------------------------------------------------------------------------------------------------
Corporate Bond Portfolio
7/1/93-11/30/93 10.00 0.14 0.05 0.19 -- -- 10.19 1.90 11,667
11/30/94 10.19 0.52 (0.87) (0.35) (0.05) (0.04) 9.75 (3.41) 15,869
11/30/95 9.75 0.60 1.00 1.60 (0.53) -- 10.82 17.01 29,475
11/30/96 10.82 0.65 0.03 0.68 (0.41) -- 11.09 6.51 37,207
11/30/97 11.09 0.77 0.21 0.98 (0.53) -- 11.54 9.26 62,272
5/31/98# 11.54 0.39 0.09 0.48 (0.46) -- 11.56 4.18 99,855
- -----------------------------------------------------------------------------------------------------------------------------
Global Bond Portfolio
7/1/93-11/30/93 10.00 0.13 0.17 0.30 -- -- 10.30 3.00 25,010
11/30/94 10.30 0.53 (0.86) (0.33) (0.09) (0.05) 9.83 (3.18) 44,543
11/30/95 9.83 0.60 0.97 1.57 (0.38) -- 11.02 16.40 59,759
11/30/96 11.02 0.59 0.54 1.13 (0.75) -- 11.40 10.94 68,221
11/30/97 11.40 0.52 0.38 0.90 (0.75) (0.04) 11.51 8.43 89,043
5/31/98# 11.51 0.23 0.37 0.60 (0.79) (0.22) 11.10 5.39 99,194
- -----------------------------------------------------------------------------------------------------------------------------
High-Yield Bond Portfolio
2/9/93-11/30/93 10.00 0.76 0.36 1.12 -- -- 11.12 11.20 41,851
11/30/94 11.12 1.20 (1.65) (0.45) (0.29) (0.06) 10.32 (4.26) 55,803
11/30/95 10.32 1.11 0.12 1.23 (1.02) -- 10.53 12.64 82,174
11/30/96 10.53 0.98 0.48 1.46 (0.95) -- 11.04 14.86 113,229
11/30/97 11.04 1.04 0.48 1.52 (0.74) -- 11.82 14.53 195,639
05/31/98# 11.82 0.58 0.27 0.85 (0.66) (0.08) 11.93 7.28 289,830
- -----------------------------------------------------------------------------------------------------------------------------
Worldwide High Income Portfolio
10/28/94-11/30/94 10.00 0.04 (0.09) (0.05) -- -- 9.95 (0.50) 10,478
11/30/95 9.95 1.10 0.47 1.57 (0.10) -- 11.42 16.02 21,515
11/30/96 11.42 1.25 1.60 2.85 (0.87) (0.05) 13.35 26.87 49,204
11/30/97 13.35 0.98 0.68 1.66 (0.90) (0.91) 13.20 14.17 125,224
05/31/98# 13.20 0.53 0.33 0.86 (0.61) (0.74) 12.71 6.33 147,739
- -----------------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced Portfolio
6/3/96-11/30/96 10.00 0.10 1.03 1.13 -- -- 11.13 11.30 10,224
11/30/97 11.13 0.23 2.15 2.38 (0.04) (0.02) 13.45 21.48 44,621
05/31/98# 13.45 0.14 1.50 1.64 (0.11) (0.36) 14.62 12.21 79,469
- -----------------------------------------------------------------------------------------------------------------------------
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<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
PERIOD ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Management Portfolio
2/9/93-11/30/93 0.71%+++ 2.53%+++ --% N/A
11/30/94 0.70++ 3.73++ -- N/A
11/30/95 0.67 5.32 -- N/A
11/30/96 0.62 4.90 -- N/A
11/30/97 0.63 5.06 -- N/A
5/31/98# 0.62+ 5.25+ -- N/A
- ----------------------------------------------------------------------
Corporate Bond Portfolio
7/1/93-11/30/93 0.94+++ 3.92+++ 208 N/A
11/30/94 0.94++ 5.21++ 419 N/A
11/30/95 0.96++ 5.93++ 412 N/A
11/30/96 0.97 6.11 338 N/A
11/30/97 0.91 6.99 49 N/A
5/31/98# 0.78+ 6.75+ 12 N/A
- ----------------------------------------------------------------------
Global Bond Portfolio
7/1/93-11/30/93 1.35+++ 3.56+++ 84 N/A
11/30/94 1.06 5.29 347 N/A
11/30/95 0.95 5.89 339 N/A
11/30/96 0.89 5.44 223 N/A
11/30/97 0.90 4.70 360 N/A
5/31/98# 0.84+ 4.02+ 118 N/A
- ----------------------------------------------------------------------
High-Yield Bond Portfolio
2/9/93-11/30/93 0.94+++ 9.43+++ 229 N/A
11/30/94 0.92++ 11.07++ 225 N/A
11/30/95 0.80 10.80 174 N/A
11/30/96 0.77 9.41 107 N/A
11/30/97 0.75 9.26 243 N/A
05/31/98# 0.69+ 9.72+ 92 N/A
- ----------------------------------------------------------------------
Worldwide High Income Portfolio
10/28/94-11/30/94 1.60+++ 4.48+++ 2 N/A
11/30/95 1.30 10.46 176 N/A
11/30/96 1.18 10.45 177 N/A
11/30/97 1.10 7.58 146 N/A
05/31/98# 1.07+ 8.09+ 76 N/A
- ----------------------------------------------------------------------
SunAmerica Balanced Portfolio
6/3/96-11/30/96 1.00+++ 1.92+++ 40 0.0600
11/30/97 1.00 1.82 143 0.0600
05/31/98# 0.82+ 1.97+ 64 N/A
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
* Calculated based upon average shares outstanding
** After fee waivers and expense reimbursements by the investment adviser
*** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company and First SunAmerica Life Insurance Company.
If such expenses had been included, total return would have been lower for
each period presented.
+ Annualized
++ During the periods indicated, the investment adviser waived a portion of or
all fees and assumed a portion of or all expenses for the Portfolios. If
all fees and expenses had been incurred by the Portfolios, the ratio of
expenses to average net assets and the ratio of net investment income to
average net assets would have been as follows:
# Unaudited
<TABLE>
<CAPTION>
EXPENSES NET INVESTMENT INCOME
--------------------------------------- ------------------------------------------
1993 1994 1995 1996 1997 1998 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Management Portfolio............ 1.10% 0.78% 0.67% 0.62% 0.63% 0.62% 2.14% 3.65% 5.32% 4.90% 5.06% 5.25%
Corporate Bond Portfolio............. 1.81 1.09 0.97 0.97 0.91 0.78 3.05 5.06 5.92 6.11 6.99 6.75
Global Bond Portfolio................ 1.81 1.06 0.95 0.89 0.90 0.84 3.10 5.29 5.89 5.44 4.70 4.02
High-Yield Bond Portfolio............ 1.29 0.93 0.80 0.77 0.75 0.69 9.08 11.06 10.80 9.41 9.26 9.72
Worldwide High Income Portfolio...... -- 2.26 1.30 1.18 1.10 1.07 -- 3.82 10.46 10.45 7.58 8.07
SunAmerica Balanced Portfolio........ -- -- -- 1.43 1.00 0.82 -- -- -- 1.49 1.82 1.95
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 8
The following Financial Highlights for the Portfolios and periods set forth
below, except for the six months ended May 31, 1998 which is unaudited, have
been audited by PricewaterhouseCoopers LLP, the Trust's independent accountants,
whose report on the financial statements containing such information is included
in the Trust's Annual Report to Shareholders. These Financial Highlights* should
be read in conjunction with the financial statements and notes thereto, which
are included in the Statement of Additional Information.
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
NET NET NET TOTAL DECLARED FROM NET NET NET
ASSET INVEST- REALIZED FROM FROM NET REALIZED ASSET ASSETS
VALUE MENT & UNREALIZED INVEST- INVEST- GAIN ON VALUE END OF
BEGINNING INCOME GAIN (LOSS) ON MENT MENT INVEST- END OF TOTAL PERIOD
PERIOD ENDED OF PERIOD (LOSS)** INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN*** (000'S)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced/Phoenix Investment Counsel Portfolio
10/28/94-11/30/94 $10.00 $0.04 $(0.08) $(0.04) $ -- $ -- $ 9.96 (0.40)% $ 1,516
11/30/95 9.96 0.34 2.23 2.57 (0.05) -- 12.48 25.89 32,429
11/30/96 12.48 0.34 1.31 1.65 (0.19) (0.31) 13.63 13.75 70,021
11/30/97 13.63 0.37 1.39 1.76 (0.23) (0.41) 14.75 13.52 95,721
05/31/98# 14.75 0.18 1.15 1.33 (0.31) (1.40) 14.37 9.06 115,048
- --------------------------------------------------------------------------------------------------------------------------------
Asset Allocation Portfolio
7/1/93-11/30/93 10.00 0.08 0.28 0.36 -- -- 10.36 3.60 35,590
11/30/94 10.36 0.29 (0.25) 0.04 (0.05) (0.03) 10.32 0.30 106,856
11/30/95 10.32 0.42 2.24 2.66 (0.20) (0.04) 12.74 26.10 199,836
11/30/96 12.74 0.48 2.00 2.48 (0.31) (0.39) 14.52 20.27 316,388
11/30/97 14.52 0.44 2.55 2.99 (0.40) (0.90) 16.21 21.97 526,585
05/31/98# 16.21 0.24 0.93 1.17 (0.35) (1.61) 15.42 7.09 671,222
- --------------------------------------------------------------------------------------------------------------------------------
Utility Portfolio
6/3/96-11/30/96 10.00 0.24 0.51 0.75 -- -- 10.75 7.50 6,299
11/30/97 10.75 0.36 1.91 2.27 (0.09) (0.02) 12.91 21.26 24,366
05/31/98# 12.91 0.20 0.92 1.12 (0.16) (0.33) 13.54 8.60 42,601
- --------------------------------------------------------------------------------------------------------------------------------
Growth-Income Portfolio
2/9/93-11/30/93 10.00 0.12 0.49 0.61 -- -- 10.61 6.10 45,080
11/30/94 10.61 0.13 (0.36) (0.23) (0.04) (0.01) 10.33 (2.20) 84,899
11/30/95 10.33 0.17 3.31 3.48 (0.10) -- 13.71 33.89 171,281
11/30/96 13.71 0.18 3.48 3.66 (0.12) (0.43) 16.82 27.41 325,463
11/30/97 16.82 0.17 4.69 4.86 (0.13) (0.73) 20.82 30.11 622,062
05/31/98# 20.82 0.09 3.20 3.29 (0.13) (0.96) 23.02 15.82 832,054
- --------------------------------------------------------------------------------------------------------------------------------
Federated Value Portfolio
6/3/96-11/30/96 10.00 0.07 1.01 1.08 -- -- 11.08 10.80 12,460
11/30/97 11.08 0.13 2.72 2.85 (0.03) -- 13.90 25.75 59,024
05/31/98# 13.90 0.09 2.13 2.22 (0.06) (0.30) 15.76 16.02 107,670
- --------------------------------------------------------------------------------------------------------------------------------
Venture Value Portfolio
10/28/94-11/30/94 10.00 0.03 (0.25) (0.22) -- -- 9.78 (2.20) 4,449
11/30/95 9.78 0.17 3.55 3.72 (0.03) -- 13.47 38.17 154,908
11/30/96 13.47 0.18 3.46 3.64 (0.09) (0.12) 16.90 27.44 516,413
11/30/97 16.90 0.19 4.73 4.92 (0.09) (0.26) 21.47 29.62 1,140,053
05/31/98# 21.47 0.11 2.06 2.17 (0.12) (0.68) 22.84 10.10 1,519,053
- --------------------------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street Portfolio
4/01/98-5/31/98# 10.00 0.03 (0.29) (0.26) -- -- 9.74 (2.60) 14,025
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
PERIOD ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced/Phoenix Investment Counsel Portfolio
10/28/94-11/30/94 1.00%++ 4.25%++ 10% N/A
11/30/95 0.98++ 3.08++ 153 N/A
11/30/96 0.84 2.74 194 0.0589
11/30/97 0.82 2.63 271 0.0526
05/31/98# 0.78+ 2.51+ 68 N/A
- -----------------------------------------------------------------------
Asset Allocation Portfolio
7/1/93-11/30/93 0.99+++ 2.33+++ 71 N/A
11/30/94 0.94++ 2.71++ 152 N/A
11/30/95 0.81 3.62 207 N/A
11/30/96 0.74 3.66 200 0.0587
11/30/97 0.68 2.88 176 0.0591
05/31/98# 0.64+ 2.96+ 78 N/A
- -----------------------------------------------------------------------
Utility Portfolio
6/3/96-11/30/96 1.05+++ 4.41+++ 24 0.0439
11/30/97 1.05++ 3.15++ 77 0.0365
05/31/98# 1.05+ 2.94+ 40 N/A
- -----------------------------------------------------------------------
Growth-Income Portfolio
2/9/93-11/30/93 0.82+++ 1.59+++ 27 N/A
11/30/94 0.81++ 1.26++ 59 N/A
11/30/95 0.77 1.42 59 N/A
11/30/96 0.72 1.21 82 0.0597
11/30/97 0.65 0.89 44 0.0555
05/31/98# 0.60+ 0.81+ 31 N/A
- -----------------------------------------------------------------------
Federated Value Portfolio
6/3/96-11/30/96 1.05+++ 1.26+++ 30 0.0520
11/30/97 1.03 1.03 46 0.0494
05/31/98# 0.84+ 1.14+ 24 N/A
- -----------------------------------------------------------------------
Venture Value Portfolio
10/28/94-11/30/94 1.10+++ 3.93+++ -- N/A
11/30/95 1.00++ 1.43++ 18 N/A
11/30/96 0.85 1.21 22 0.0598
11/30/97 0.79 0.98 22 0.0599
05/31/98# 0.75+ 0.96+ 7 N/A
- -----------------------------------------------------------------------
"Dogs" of Wall Street Portfolio
4/01/98-5/31/98# 0.85+++ 2.23+++ -- N/A
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
* Calculated based upon average shares outstanding
** After fee waivers and expense reimbursements by the investment adviser
*** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company and First Sun America Life Insurance
Company. If such expenses had been included, total return would have been
lower for each period presented.
+ Annualized
++ During the periods indicated, the investment adviser waived a portion of or
all fees and assumed a portion of or all expenses for the Portfolios. If
all fees and expenses had been incurred by the Portfolios, the ratio of
expenses to average net assets and the ratio of net investment income to
average net assets would have been as follows:
# Unaudited
<TABLE>
<CAPTION>
EXPENSES NET INVESTMENT INCOME (LOSS)
--------------------------------------- ------------------------------------------
1993 1994 1995 1996 1997 1998 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced/Phoenix Investment Counsel
Portfolio........................... --% 6.82% 1.11% 0.84% 0.82% 0.78% --% (1.57)% 2.95% 2.74% 2.63% 2.51%
Asset Allocation Portfolio........... 1.67 0.94 0.81 0.74 0.68 0.64 1.65 2.71 3.62 3.66 2.88 2.96
Utility Portfolio.................... -- -- -- 1.93 1.24 1.05 -- -- -- 3.53 2.96 2.94
Growth-Income Portfolio.............. 1.40 0.89 0.77 0.72 0.65 0.60 1.01 1.18 1.42 1.21 0.89 0.81
Federated Value Portfolio............ -- -- -- 1.57 1.03 0.84 -- -- -- 0.74 1.03 1.14
Venture Value Portfolio.............. -- 3.89 1.02 0.85 0.79 0.75 -- 1.14 1.41 1.21 0.98 0.96
"Dogs" of Wall Street Portfolio...... -- -- -- -- -- 1.13 -- -- -- -- -- 1.95
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 9
The following Financial Highlights for the Portfolios and periods set forth
below, except for the six months ended May 31, 1998 which is unaudited, have
been audited by PricewaterhouseCoopers LLP, the Trust's independent accountants,
whose report on the financial statements containing such information is included
in the Trust's Annual Report to Shareholders. These Financial Highlights* should
be read in conjunction with the financial statements and notes thereto, which
are included in the Statement of Additional Information.
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
NET NET NET TOTAL DECLARED FROM NET NET NET
ASSET INVEST- REALIZED FROM FROM NET REALIZED ASSET ASSETS
VALUE MENT & UNREALIZED INVEST- INVEST- GAIN ON VALUE END OF
BEGINNING INCOME GAIN (LOSS) ON MENT MENT INVEST- END OF TOTAL PERIOD
PERIOD ENDED OF PERIOD (LOSS)** INVESTMENTS OPERATIONS INCOME MENTS PERIOD RETURN*** (000'S)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Growth Portfolio
2/9/93-11/30/93 $10.00 $0.05 $ 0.87 $ 0.92 $ -- $ -- $10.92 9.20% $ 23,256
11/30/94 10.92 0.04 (0.14) (0.10) (0.01) (0.17) 10.64 (0.93) 52,213
11/30/95 10.64 0.07 5.08 5.15 (0.03) (0.13) 15.63 48.91 167,870
11/30/96 15.63 0.08 4.07 4.15 (0.04) (1.01) 18.73 28.05 381,367
11/30/97 18.73 0.16 4.76 4.92 (0.05) (1.04) 22.56 27.80 704,533
05/31/98# 22.56 0.04 5.31 5.35 (0.06) (2.30) 25.55 23.85 1,029,515
- --------------------------------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment Counsel Portfolio
2/9/93-11/30/93 10.00 0.17 0.61 0.78 -- -- 10.78 7.80 65,032
11/30/94 10.78 0.16 (0.87) (0.71) (0.06) -- 10.01 (6.64) 104,194
11/30/95 10.01 0.12 3.14 3.26 (0.13) -- 13.14 32.92 149,910
11/30/96 13.14 0.11 2.16 2.27 (0.11) (0.91) 14.39 18.40 186,368
11/30/97 14.39 0.11 2.48 2.59 (0.10) (1.26) 15.62 19.78 218,496
05/31/98# 15.62 0.02 1.94 1.96 (0.12) (2.76) 14.70 12.68 233,269
- --------------------------------------------------------------------------------------------------------------------------------
Putnam Growth Portfolio
2/9/93-11/30/93 10.00 0.02 0.02 0.04 -- -- 10.04 0.40 42,911
11/30/94 10.04 0.03 (0.01) 0.02 (0.01) -- 10.05 0.19 75,342
11/30/95 10.05 (0.01) 3.09 3.08 (0.03) -- 13.10 30.66 115,276
11/30/96 13.10 -- 2.61 2.61 -- -- 15.71 19.92 160,073
11/30/97 15.71 0.03 3.93 3.96 -- (0.52) 19.15 26.01 234,726
05/31/98# 19.15 0.01 3.01 3.02 (0.02) (3.08) 19.07 15.65 320,428
- --------------------------------------------------------------------------------------------------------------------------------
Real Estate Portfolio
6/2/97-11/30/97 10.00 0.16 1.37 1.53 -- -- 11.53 15.30 29,565
05/31/98# 11.53 0.20 (0.41) (0.21) (0.16) (0.01) 11.15 (1.86) 53,271
- --------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio
6/3/96-11/30/96 10.00 0.02 0.34 0.36 -- -- 10.36 3.60 35,124
11/30/97 10.36 0.01 1.40 1.41 (0.01) -- 11.76 13.62 103,603
05/31/98# 11.76 0.02 0.29 0.31 -- -- 12.07 2.64 112,531
- --------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Portfolio
6/2/97-11/30/97 10.00 0.03 0.38 0.41 -- -- 10.41 4.10 42,844
05/31/98# 10.41 0.10 1.91 2.01 (0.03) (0.06) 12.33 19.46 94,656
- --------------------------------------------------------------------------------------------------------------------------------
Global Equities Portfolio
2/9/93-11/30/93 10.00 0.03 0.96 0.99 -- -- 10.99 9.90 43,737
11/30/94 10.99 0.05 0.71 0.76 (0.01) (0.07) 11.67 6.87 136,758
11/30/95 11.67 0.12 1.64 1.76 (0.08) (0.29) 13.06 15.58 165,752
11/30/96 13.06 0.14 2.19 2.33 (0.14) (0.33) 14.92 18.21 246,482
11/30/97 14.92 0.09 1.79 1.88 (0.13) (0.69) 15.98 13.30 341,639
05/31/98# 15.98 0.04 2.85 2.89 (0.19) (1.36) 17.32 18.21 417,005
- --------------------------------------------------------------------------------------------------------------------------------
International Diversified Equities Portfolio
10/28/94-11/30/94 10.00 0.01 (0.23) (0.22) -- -- 9.78 (2.20) 12,438
11/30/95 9.78 0.07 0.38 0.45 (0.08) -- 10.15 4.63 48,961
11/30/96 10.15 0.05 1.43 1.48 (0.26) -- 11.37 14.85 157,008
11/30/97 11.37 0.09 0.28 0.37 (0.31) (0.10) 11.33 3.52 248,927
05/31/98# 11.33 0.08 2.16 2.24 (0.40) (0.15) 13.02 19.80 320,893
- --------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio
6/2/97-11/30/97 10.00 0.06 (2.03) (1.97) -- -- 8.03 (19.70) 19,979
05/31/98# 8.03 0.03 (0.41) (0.38) (0.07) -- 7.58 (4.77) 29,046
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
PERIOD ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio
2/9/93-11/30/93 0.82%+++ 0.61%+++ 73% N/A
11/30/94 0.82++ 0.37++ 146 N/A
11/30/95 0.79 0.51 138 N/A
11/30/96 0.71 0.51 121 0.0649
11/30/97 0.65 0.37 110 0.0617
05/31/98# 0.59+ 0.34+ 44 N/A
- ----------------------------------------------------------------------
Growth/Phoenix Investment Counsel Portfolio
2/9/93-11/30/93 0.82+++ 2.20+++ 165 N/A
11/30/94 0.81++ 1.52++ 211 N/A
11/30/95 0.76 1.01 229 N/A
11/30/96 0.74 0.82 164 0.0534
11/30/97 0.73 0.77 217 0.0530
05/31/98# 0.70+ 0.28+ 53 N/A
- ----------------------------------------------------------------------
Putnam Growth Portfolio
2/9/93-11/30/93 0.97+++ 0.32+++ 40 N/A
11/30/94 0.96++ 0.31++ 54 N/A
11/30/95 0.93 (0.05) 52 N/A
11/30/96 0.90 (0.02) 63 0.0443
11/30/97 0.91 0.18 125 0.0324
05/31/98# 0.87+ 0.13+ 30 N/A
- ----------------------------------------------------------------------
Real Estate Portfolio
6/2/97-11/30/97 1.25+++ 3.25+++ 7 0.0600
05/31/98# 1.01+ 3.49+ 8 N/A
- ----------------------------------------------------------------------
Aggressive Growth Portfolio
6/3/96-11/30/96 1.05+++ 0.46+++ 47 0.0600
11/30/97 0.90 (0.13) 221 0.0600
05/31/98# 0.84+ 0.31+ 155 N/A
- ----------------------------------------------------------------------
International Growth and Income Portfolio
6/2/97-11/30/97 1.60+++ 0.61+++ 19 0.0030
05/31/98# 1.54+ 1.80+ 22 N/A
- ----------------------------------------------------------------------
Global Equities Portfolio
2/9/93-11/30/93 1.50+++ 0.38+++ 58 N/A
11/30/94 1.28 0.42 67 N/A
11/30/95 1.14 1.02 106 N/A
11/30/96 1.03 1.04 70 0.0256
11/30/97 0.95 0.58 115 0.0284
05/31/98# 0.89+ 0.51+ 40 N/A
- ----------------------------------------------------------------------
International Diversified Equities Portfolio
10/28/94-11/30/94 1.70+++ 1.60+++ -- N/A
11/30/95 1.70++ 0.76++ 52 N/A
11/30/96 1.59 0.47 53 0.0023
11/30/97 1.35 0.82 56 0.0008
05/31/98# 1.27+ 1.36+ 29 N/A
- ----------------------------------------------------------------------
Emerging Markets Portfolio
6/2/97-11/30/97 1.90+++ 1.33+++ 49 0.0011
05/31/98# 1.90+ 0.67+ 33 N/A
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
* Calculated based upon average shares outstanding
** After fee waivers and expense reimbursements by the investment adviser
*** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company and First SunAmerica Life Insurance Company.
If such expenses had been included, total return would have been lower for
each period presented.
+ Annualized
++ During the periods indicated, the investment adviser waived a portion of or
all fees and assumed a portion of or all expenses for the Portfolios. If
all fees and expenses had been incurred by the Portfolios, the ratio of
expenses to average net assets and the ratio of net investment income
(loss) to average net assets would have been as follows:
# Unaudited
<TABLE>
<CAPTION>
EXPENSES NET INVESTMENT INCOME (LOSS)
--------------------------------------- --------------------------------------------
1993 1994 1995 1996 1997 1998 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Growth Portfolio.......... 1.56% 0.96% 0.79% 0.71% 0.65% 0.59% (0.13)% 0.23% 0.51% 0.51% 0.37% 0.34%
Growth/Phoenix Investment Counsel
Portfolio......................... 1.28 0.87 0.76 0.74 0.73 0.70 1.74 1.46 1.01 0.82 0.77 0.28
Putnam Growth Portfolio............ 1.46 1.05 0.93 0.90 0.91 0.87 (0.17) 0.22 (0.05) (0.02) 0.18 0.13
Real Estate Portfolio.............. -- -- -- -- 1.36 1.01 -- -- -- -- 3.14 3.49
Aggressive Growth Portfolio........ -- -- -- 1.09 0.90 0.84 -- -- -- 0.42 (0.13) 0.31
International Growth and Income
Portfolio......................... -- -- -- -- 2.02 1.54 -- -- -- -- 0.19 1.80
Global Equities Portfolio.......... 2.52 1.28 1.14 1.03 0.95 0.89 (0.64) 0.42 1.02 1.04 0.58 0.51
International Diversified Equities
Portfolio......................... -- 3.50 2.09 1.59 1.35 1.27 -- (0.20) 0.37 0.47 0.82 1.36
Emerging Markets Portfolio......... -- -- -- -- 2.60 1.90 -- -- -- -- 0.63 0.67
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE TRUST, ITS INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Trust, organized as a Massachusetts business trust on September 11, 1992, is
an open-end management investment company. It was established to provide a
funding medium for certain annuity contracts issued by various separate accounts
(the "Accounts") of Anchor National Life Insurance Company and First SunAmerica
Life Insurance Company (collectively referred to as the "Life Companies").
The Trust issues 25 separate series of shares ("Portfolios"), each of which
represents a separately managed portfolio of securities with its own investment
objectives. The Board of Trustees may establish additional series in the future.
The current Portfolios are the Cash Management Portfolio, Corporate Bond
Portfolio, Global Bond Portfolio, High-Yield Bond Portfolio, Worldwide High
Income Portfolio, SunAmerica Balanced Portfolio, Balanced/ Phoenix Investment
Counsel Portfolio, Asset Allocation Portfolio, Equity Income Portfolio, Utility
Portfolio, Equity Index Portfolio, Growth-Income Portfolio, Federated Value
Portfolio, Venture Value Portfolio, "Dogs" of Wall Street Portfolio, Alliance
Growth Portfolio, Growth/Phoenix Investment Counsel Portfolio, Putnam Growth
Portfolio, Real Estate Portfolio, Small Company Value Portfolio, Aggressive
Growth Portfolio, Equity Index Portfolio, International Growth and Income
Portfolio, Global Equities Portfolio, International Diversified Equities
Portfolio and Emerging Markets Portfolio. All shares may be purchased or
redeemed by the Accounts at net asset value without any sales or redemption
charge.
SunAmerica Asset Management Corp. ("SAAMCo" or the "Adviser"), an indirect,
wholly owned subsidiary of Anchor National Life Insurance Company, serves as
investment adviser for all the Portfolios of the Trust. See "Management." Some
Portfolios benefit from discretionary advisory services provided by separate
registered investment advisers (each a "Subadviser"). Alliance Capital
Management L.P. ("Alliance") serves as subadviser for the Global Equities,
Alliance Growth and Growth-Income Portfolios; Davis Selected Advisers, L.P.
("Davis Selected") serves as subadviser for the Venture Value and Real Estate
Portfolios; Federated Investment Counseling ("Federated") serves as subadviser
for the Corporate Bond, Federated Value and Utility Portfolios; Goldman Sachs
Asset Management ("GSAM") serves as subadviser for the Asset Allocation
Portfolio; Goldman Sachs Asset Management International ("GSAM-International")
serves as subadviser for the Global Bond Portfolio; First American Asset
Management ("First American") serves as subadviser for the Equity Income, Small
Company Value and Equity Index Portfolios; Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management") serves as subadviser for the
International Diversified Equities and Worldwide High Income Portfolios; Phoenix
Investment Counsel, Inc. ("Phoenix") serves as subadviser for the Growth/
Phoenix Investment Counsel and Balanced/Phoenix Investment Counsel Portfolios;
and Putnam Investment Management, Inc. ("Putnam") serves as subadviser for the
Putnam Growth, International Growth and Income and Emerging Markets Portfolios.
There is no subadviser for the Cash Management, High-Yield Bond, SunAmerica
Balanced, "Dogs" of Wall Street or Aggressive Growth Portfolios. SAAMCo performs
all investment advisory services for these Portfolios.
Each Portfolio has investment objectives and certain policies as described in
this Prospectus. There can be no guarantee that any Portfolio's investment
objectives will be met or that the net return on an investment in a Portfolio
will exceed that which could have been obtained through other investment or
savings vehicles. Investors should carefully review the investment objectives
and policies of a Portfolio and consider their ability to assume the risks
involved before making an investment in a Portfolio. Each Portfolio also has
certain fundamental investment restrictions, which are described in the
Statement of Additional Information. A Portfolio's fundamental investment
restrictions may not be changed without a majority of the outstanding voting
securities of that Portfolio. All other investment practices may be changed
without a vote of the shareholders. See "Shareholder Voting Rights."
The Global Bond, Worldwide High Income, International Diversified Equities and
"Dogs" of Wall Street Portfolios are organized as separate "non-diversified"
portfolios of the Trust (as such term is defined under the Investment Company
Act of 1940, as amended, (the "1940 Act")); subject, however, to certain tax
diversification requirements. See "Dividends, Distributions and Federal Taxes."
Each of the Utility and Real Estate Portfolios intends to concentrate its
investments in the industry stated in its name, which means that each Portfolio
intends to invest at least 25% of its total assets in the securities of such
industry. See "Investment Objectives and Policies -- Non-Diversified Status" in
the Statement of Additional Information.
7
<PAGE> 11
The Portfolios' investment objectives are discussed below. Reference to
limitations and restrictions on Portfolio investment used herein apply at the
time of purchase unless otherwise indicated. Please also see the section
captioned "Description of Securities and Investment Techniques" for a more
detailed description of the characteristics and risks associated with the types
of securities in which the various Portfolios may invest. Reference is also made
in the following sections to ratings assigned to certain types of securities by
Standard & Poor's Rating Services, a Division of the McGraw-Hill Companies, Inc.
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service,
Inc. ("Fitch"), Duff & Phelps Credit Rating Co. ("Duff & Phelps") and Thomson
BankWatch, Inc. ("Thomson BankWatch"), recognized independent securities ratings
institutions. References to the particular ratings categories of the securities
in which a Portfolio may invest should be read to include unrated securities
deemed by the Adviser or Subadviser to be of comparable quality to the rated
securities in such categories. A description of the ratings categories assigned
by S&P, Moody's, Fitch, Thomson BankWatch and Duff & Phelps is contained in the
Statement of Additional Information.
CASH MANAGEMENT PORTFOLIO
The Cash Management Portfolio seeks high current yield while preserving capital
by investing in a diversified selection of money market instruments including
corporate bonds and notes; commercial bank obligations; securities of the U.S.
government, its agencies and instrumentalities; commercial paper and savings
association obligations. These securities mature in 397 days or less. The Cash
Management Portfolio also may enter into repurchase agreements and firm
commitment agreements and purchase when-issued securities. See "Description of
Securities and Investment Techniques."
The Cash Management Portfolio invests only in securities determined, in
accordance with procedures established by the Trust's Board of Trustees, to
present minimal credit risks. It is the current policy to invest only in
instruments rated in the highest rating category by Moody's and S&P (for
example, commercial paper rated P-1 and A-1 by Moody's and S&P, respectively) or
in instruments that are issued, guaranteed or insured by the U.S. government,
its agencies or instrumentalities, as to the payment of principal and interest,
or in other instruments rated in the highest two categories by either Moody's or
S&P, provided the issuer has commercial paper rated in the highest rating
category by Moody's and S&P.
Although investments in the Cash Management Portfolio should present minimal
market risk because the investments of the Portfolio consist of only short-term
debt obligations, an investment in this Portfolio is subject to the risks of
declining interest rates and the economy as a whole. Also, the return on an
investment in the Cash Management Portfolio would not be the same as the return
on an investment in a money market fund available directly to the public even
where yields are equivalent, due to fees imposed at the variable annuity
contract level.
CORPORATE BOND PORTFOLIO
The Corporate Bond Portfolio seeks high total return with only moderate price
risk by investing primarily in investment grade fixed income securities. Under
normal market conditions, at least 65% of the Portfolio's total assets will be
invested in investment grade debt securities (i.e., those rated at the time of
purchase within the four highest grades assigned by Moody's (Aaa, Aa, A or Baa)
or by S&P (AAA, AA, A or BBB)), securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities (including mortgage-backed
securities) or repurchase agreements collateralized by such investment grade or
U.S. government securities. In addition, under normal circumstances, the
Portfolio will invest at least 65% of the value of its total assets in corporate
debt securities, including asset-backed securities and privately placed debt
securities, of domestic and foreign issuers. Certain fixed rate obligations in
which the Portfolio invests may involve equity characteristics. The Portfolio
may, for example, invest in unit offerings that combine fixed rate securities
and common stock or common stock equivalents such as warrants, rights and
options. These may be purchased by the Portfolio only when the debt security
meets the Portfolio's investment criteria and the value of the equity security
or equity equivalent is relatively small. If the equity security or equity
equivalent becomes valuable it will ordinarily be sold rather than exercised in
the case of warrants, rights or options. It is anticipated that no more than 10%
of the assets of the Portfolio will constitute equity securities or equity
equivalents regardless of how such securities were acquired. To the extent that
such securities are acquired, there may be some additional investment risk and
countervailing opportunity, depending upon the extent to which the common stock
price fluctuates.
Up to 35% of the Portfolio's total assets may be invested in the following:
other types of debt securities, including those rated below investment grade,
zero-coupon bonds, pay-in-kind securities, and
8
<PAGE> 12
units consisting of bonds and equity equivalents; commercial paper rated P-1 by
Moody's or A-1 by S&P; obligations of banks having total assets in excess of $1
billion; and preferred stocks (including those rated below investment grade,
convertible into, or carrying warrants to purchase, common stocks or other
equity interests).
The Portfolio will generally invest in debt securities and preferred stocks
rated below investment grade only to the extent that the Subadviser believes
that lower credit quality of such securities is offset by more attractive
yields. There is no limit with respect to the rating categories for securities
in which the Portfolio may invest. The weighted average ratings by S&P as a
percentage of all bonds held by the Portfolio during the fiscal year ended
November 30, 1997 were: "AAA" 10.39%; "AA" 3.47%; "A" 21.23%; "BBB" 35.24%; "BB"
11.72%; and "B" 15.85%, and 2.10% in cash. See "Description of Securities and
Investment Techniques -- Corporate Debt Instruments -- Lower Grade" for a
description of lower-rated securities.
The Portfolio may invest in high quality short-term money market instruments
denominated in U.S. dollars, including repurchase agreements, which are also
authorized for purchase by the Cash Management Portfolio. The Portfolio may
enter into "dollar rolls" in which the Portfolio sells mortgage or other
asset-backed securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same types, coupons and maturity)
securities on a specified future date. The Portfolio may also invest in
synthetic or derivative instruments based on permitted investments, including
futures contracts, options, interest-rate swaps, mortgage swaps and interest-
rate caps, floors and collars.
GLOBAL BOND PORTFOLIO
The investment objective of the Global Bond Portfolio is to provide investors
with high total return, emphasizing current income and, to a lesser extent,
providing opportunities for capital appreciation. Under normal circumstances,
the Portfolio will seek to meet its investment objective by pursuing investment
opportunities in foreign and domestic fixed income securities markets and by
engaging in currency transactions to enhance returns and for the purpose of
hedging its investments.
The fixed income securities in which the Portfolio may invest include: (i)
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and custodial receipts thereof; (ii) securities issued or
guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies or instrumentalities or by multiple governmental entities
(i.e., international organizations designated or supported by governmental
entities to promote economic reconstruction or development, such as the World
Bank); (iii) corporate debt securities; (iv) certificates of deposit and
bankers' acceptances issued or guaranteed by, or time deposits maintained at,
banks (including U.S. or foreign branches of U.S. banks or U.S. or foreign
branches of foreign banks) having total assets of more than $1 billion; (v)
commercial paper; and (vi) mortgage-related and asset-backed securities.
All securities purchased by the Portfolio will be rated at least BBB by S&P or
Baa by Moody's. However, the Portfolio generally intends to invest at least 50%
of its total assets in securities having the highest applicable credit quality
rating. The debt securities in which the Portfolio will invest may have fixed,
variable or floating interest rates.
In selecting securities for the Portfolio, the Subadviser will consider such
factors as the security's duration, sector and credit quality rating as well as
the security's yield and prospects for capital appreciation. It is expected that
the Portfolio will use currency transactions both to enhance returns for a given
level of risk and to hedge its exposure to foreign currencies. While the
Portfolio will have both long and short currency positions, neither its net long
foreign currency exposure nor its net short foreign currency exposure will
exceed the value of the Portfolio's total assets.
Under normal circumstances, the Portfolio's duration is expected to be equal to
that of its benchmark, the J.P. Morgan Global Government Bond Index, plus or
minus 2-5 years. In addition, the Portfolio will normally maintain a
dollar-weighted average duration of not more than 7.5 years. However, the
Portfolio is not subject to any limitation with respect to the average maturity
of its Portfolio or the individual securities in which the Portfolio may invest.
Duration represents the weighted average maturity of expected cash flows on a
debt obligation, discounted to present value. Maturity measures only the time
until final payment is due on a bond or other debt security; it takes no account
of the pattern of a security's cash flows over time. In computing the duration
of its portfolio, the Subadviser will have to estimate the duration of debt
obligations that are subject to prepayment or redemption by the issuer. The
Portfolio may use various techniques to shorten or lengthen its dollar-weighted
average duration,
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including the acquisition of debt obligations at a premium or discount,
transactions in options, futures contracts, options on futures and mortgage and
interest-rate swaps, caps, collars and floors. The Portfolio may also enter into
dollar rolls.
It is expected that the Portfolio will employ certain active currency and
interest-rate management techniques involving risks different from those
associated with investing solely in dollar-denominated fixed income securities
of U.S. issuers. Such active management techniques include transactions in
options (including yield curve options), futures and options on futures, forward
foreign currency exchange contracts, currency options and futures, currency,
mortgage and interest-rate swaps, floors, caps and collars. The aggregate amount
of the Portfolio's net currency exposure will not exceed its total asset value.
However, to the extent that the Portfolio is fully invested in fixed income
securities while also maintaining currency positions, it may be exposed to
greater combined risk. The Portfolio's net currency positions may expose it to
risks independent of its securities positions.
The Portfolio will, under normal market conditions, have at least 30% of its
total assets, adjusted to reflect the Portfolio's net exposure after giving
effect to currency transactions and positions, denominated in U.S. dollars. The
Portfolio may, for temporary defensive purposes (such as when instability or
unfavorable conditions exist in foreign countries), invest 100% of its total
assets in U.S. dollar-denominated securities or securities of U.S. issuers.
The Portfolio may invest more than 25% of its total assets in the securities of
corporate and governmental issuers located in each of Canada, Germany, Japan,
and the United Kingdom as well as in the securities of U.S. issuers.
Concentration of the Portfolio's investments in such issuers will subject the
Portfolio, to a greater extent than if investment was more limited, to the risks
of adverse securities markets, exchange rates and social, political or economic
events which may occur in those countries. Not more than 25% of the Portfolio's
total assets will be invested in securities of issuers in any other single
foreign country. Concentration of the Portfolio's investments in such issuers
will subject the Portfolio to the risks of adverse social, political or economic
events which may occur in those countries.
Investment in foreign securities involves special risks. See "Description of
Securities and Investment Techniques -- Risks and Considerations Applicable to
Investment in Securities of Foreign Issuers."
HIGH-YIELD BOND PORTFOLIO
The primary investment objective of the High-Yield Bond Portfolio is high
current income; its secondary investment objective is capital appreciation.
Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in high-yield bonds. Subject to this requirement the Portfolio may
maintain assets in cash or cash equivalents, including commercial bank
obligations (certificates of deposit; bankers' acceptances, which are time
drafts on a commercial bank for which the bank accepts an irrevocable obligation
to pay at maturity; and demand or time deposits), commercial paper (short-term
notes issued by corporations or governmental bodies) and obligations issued or
guaranteed by the U.S. government. These "high-yield" bonds, commonly referred
to as "junk bonds," typically are subject to greater market fluctuations and
risk of loss of income and principal due to default by the issuer than are
investments in lower-yielding, higher-rated bonds. Further, a substantial
portion of the Portfolio's assets will generally be invested in long-term (over
10 years to maturity) and intermediate-term (3 to 10 years to maturity) fixed
income securities, with emphasis on higher-yielding, higher-risk, lower-rated or
unrated corporate bonds.
High-yield, high-risk bonds generally include any bonds that are rated Ba or
below by Moody's or BB or below by S&P. Bonds rated Ba or BB or below are
considered speculative. The Portfolio may invest without limitation in bonds
rated as low as Ca by Moody's or C by S&P. In addition, the Portfolio may invest
up to 10% of its total assets in bonds rated C by Moody's or D by S&P. The
weighted average ratings by Moody's as a percentage of all bonds held by the
Portfolio during the fiscal year ended November 30, 1997 were: "Aaa" -- 5.17%;
"Ba" 14.04%; "B" 62.04%; and "Caa" 11.45%; and the balance 7.3% in unrated bonds
which the adviser deemed comparable to "Caa" rating. See "Description of
Securities and Investment Techniques -- Corporate Debt Instruments -- Lower
Grade" and "Description of Securities and Investment Techniques -- Risk Factors
Relating to High-Yield, High-Risk Bonds" for a more detailed description of
these securities.
In pursuing its secondary investment objective of capital appreciation, the
Portfolio may purchase high-yield bonds that are expected by the Adviser to
increase in value due to improvements in their credit quality or ratings or
anticipated declines in interest rates. In addition, the Portfolio may invest
for this purpose up to 25% of its assets in equity securities, such as common
stocks, or other securities having
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common stock characteristics. Securities designated as having "common stock"
characteristics include, but are not limited to, securities convertible into or
exchangeable for common stock. Such securities normally will be purchased as
part of a unit with fixed income securities or when an unusual opportunity for
capital appreciation is perceived due to anticipated improvement in the issuer's
credit quality or ratings. The Portfolio also may purchase or hold warrants or
rights.
Up to 25% of the Portfolio's assets may be invested in securities of foreign
issuers, which are generally denominated in currencies other than the U.S.
dollar. The Portfolio also has the ability to hold a portion of its assets in
foreign currencies and to enter into forward foreign currency exchange
contracts, currency options, currency and financial futures contracts, and
options on such futures contracts. The Portfolio may enter into repurchase
agreements and firm commitment agreements and may purchase securities on a
when-issued basis. Investment in foreign securities also involves special risks.
See "Description of Securities and Investment Techniques -- Risks and
Considerations Applicable to Investment in Securities of Foreign Issuers."
WORLDWIDE HIGH INCOME PORTFOLIO
The investment objective of the Worldwide High Income Portfolio is high current
income and, secondarily, capital appreciation, by investing primarily in a
portfolio of high-yielding, fixed income securities of issuers located
throughout the world. The Portfolio seeks to achieve its investment objective by
allocating its assets among any or all of three investment sectors: U.S.
corporate lower-rated and unrated debt securities, emerging country debt
securities and global fixed income securities offering high real yields. The
types of securities in each of these investment sectors are described in detail
in the Statement of Additional Information. In selecting U.S. corporate
lower-rated and unrated debt securities for the Portfolio, the Subadviser will
consider, among other things, the price of the security, and the financial
history, condition, prospects and management of the issuer. The Subadviser
intends to invest a portion of the Portfolio's assets in emerging country debt
securities that provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived creditworthiness
of the issuers improves due to improving economic, financial, political, social
or other conditions in the country in which the issuer is located. In addition,
the Subadviser will attempt to invest a portion of the Portfolio's assets in
fixed income securities of issuers in global fixed income markets displaying
high real (inflation adjusted) yields. Under normal conditions, the Portfolio
intends to invest between 80% and 100% of its total assets in some or all of
three categories of higher-yielding securities, some of which may entail
increased credit and market risk.
The Subadviser's approach to multi-currency fixed income management is strategic
and value-based and designed to produce an attractive real rate of return. The
Subadviser's assessment of the bond markets and currencies is based on an
analysis of real interest rates. Current nominal yields of securities are
adjusted for inflation prevailing in each currency sector using an analysis of
past and projected inflation rates. The Portfolio's aim is to invest in bond
markets which offer the most attractive real returns relative to inflation.
From time to time, a portion of the Portfolio's investments, which may be up to
100% of its investments, may be considered to have credit quality below
investment grade as determined by internationally recognized credit rating
agency organizations, such as Moody's and S&P. Such lower-rated bonds are
commonly referred to as "junk bonds." Securities in such lower rating categories
may have predominantly speculative characteristics or may be in default. See
"Description of Securities and Investment Techniques -- Corporate Debt
Instruments -- Lower Grade" for a description of Moody's and S&P's corporate
bond ratings. Ratings represent the opinion of rating agencies as to the quality
of bonds and other debt securities they undertake to rate at the time of
issuance. However, ratings are not absolute standards of quality and may not
reflect changes in an issuer's creditworthiness. Accordingly, while the
Subadviser will consider ratings, it will perform its own analysis and will not
rely principally on ratings. Emerging country debt securities in which the
Portfolio may invest will be subject to high risk and will not be required to
meet a minimum rating standard and may not be rated for creditworthiness by any
internationally recognized credit rating organization. The Portfolio's
investments in U.S. corporate lower-rated and unrated debt securities and
emerging country debt securities are expected to be rated in the lower and
lowest rating categories of internationally recognized credit rating
organizations. Ratings of a foreign debt instrument, to the extent that those
ratings are undertaken, are related to evaluations of the country in which the
issuer of the instrument is located. Ratings generally take into account the
currency in which a foreign debt instrument is denominated; instruments issued
by a foreign government in other than the local
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<PAGE> 15
currency, for example, typically have a lower rating than local currency
instruments due to the existence of an additional risk that the government will
be unable to obtain the required foreign currency to service its foreign
currency-denominated debt. In general, the ratings of debt securities or
obligations issued by a foreign public or private entity will not be higher than
the rating of the currency or the foreign currency debt of the central
government of the country in which the issuer is located, regardless of the
intrinsic creditworthiness of the issuer. To mitigate the risks associated with
investment in such lower-rated securities, the Portfolio will diversify its
holdings by market, issuer, industry and credit quality. The weighted average
ratings by Moody's as a percentage of all bonds held by the Portfolio during the
fiscal year ended November 30, 1997 were: "Aaa" 0.11%; "Baa" 1.11%; "Ba" 41.32%;
"B" 44.20%; "Caa" 12.56%; and the balance 0.70% in unrated bonds. See "Risk
Factors Relating to High-Yield, High-Risk Bonds" and "Risks and Considerations
Applicable to Investment in Securities of Foreign Issuers" under "Description of
Securities and Investment Techniques."
The Portfolio may invest in or own securities of companies in various stages of
financial restructuring, bankruptcy or reorganization which are not currently
paying interest or dividends, provided that the total value of all such
securities will not exceed 10% of the value of the Portfolio's total assets. The
Portfolio may have limited recourse in the event of default on such debt
instruments. The Portfolio may invest in loans, assignments of loans and
participation in loans. See the Statement of Additional Information for a
description of these investments. The Portfolio may also invest in depositary
receipts issued by U.S. or foreign financial institutions. See the Statement of
Additional Information for further information.
The Portfolio is not restricted in the portion of its assets which may be
invested in securities denominated in a particular currency and a substantial
portion of its assets may be invested in non-U.S. dollar-denominated securities.
The portion of the Portfolio's assets invested in securities denominated in
currencies other than the U.S. dollar will vary depending on market conditions.
The analysis of currencies is made independent of the analysis of markets. Value
in foreign exchange is determined by relative purchasing power parity of a given
currency. The Portfolio seeks to invest in currencies currently undervalued
based on purchasing power parity. The Subadviser analyzes current account and
capital account performance and real interest rates to adjust for short-term
currency flows. Although the Portfolio is permitted to engage in a wide variety
of investment practices designed to hedge against currency exchange rate risks
with respect to its holdings of non-U.S. dollar-denominated debt securities, the
Portfolio may be limited in its ability to hedge against these risks. See
"Foreign Currency Transactions" under "Description of Securities and Investment
Techniques." The Portfolio may also write (i.e., sell), covered call options and
may enter into futures contracts and options on futures and sell indexed
financial futures contracts. See "Options on Securities and Securities Indices"
and "Futures Contracts and Options Thereon" under "Description of Securities and
Investment Techniques."
The average time to maturity of the Portfolio's securities will vary depending
upon the Subadviser's perception of market conditions. The Subadviser invests in
medium-term securities (i.e., those with a remaining maturity of approximately 5
years) in a market neutral environment. When the Subadviser believes that real
yields are high, the Subadviser lengthens the remaining maturities of securities
held by the Portfolio and, conversely, when the Subadviser believes real yields
are low, it shortens the remaining maturities. Thus, the Portfolio is not
subject to any restrictions on the maturities of the debt securities it holds,
and the Subadviser may vary the average maturity of the securities held in the
Portfolio without limit.
The Portfolio may also invest in other types of securities and/or engage in a
variety of investment strategies including, but not limited to, zero-coupon,
pay-in-kind, illiquid and restricted securities; repurchase agreements; and
borrowing for investment and temporary purposes. See "Description of Securities
and Investment Techniques." For temporary defensive purposes, the Portfolio may
invest part or all of its total assets in cash or in short-term securities,
including certificates of deposit, commercial paper, notes, obligations issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities.
SUNAMERICA BALANCED PORTFOLIO
The investment objective of the SunAmerica Balanced Portfolio is to conserve
principal by maintaining at all times a balanced portfolio of stocks and bonds.
In seeking to achieve the investment objective of the Portfolio, the Adviser has
the flexibility to select among different types of investments for capital
growth and income and may alter the composition of the Portfolio as economic and
market trends change. The Adviser considers both the opportunity for gain and
the risk of loss in making investments. The
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<PAGE> 16
Adviser anticipates that, over the long-term, the Portfolio will consist of
equity investments, in the form of common and preferred stocks, warrants and
other rights, as well as long-term bonds and other debt securities such as
convertible securities, short-term investments and U.S. government securities.
The Portfolio will, under normal circumstances, invest at least 25% of its
assets in fixed income senior securities; however, the fixed income component
will exceed 25% when the Adviser believes such an adjustment in portfolio mix to
be necessary in order to conserve principal, such as in anticipation of decline
in the equities market. The Adviser shifts its emphasis among these different
types of investments, as well as among various industry sectors, as financial
trends and economic conditions change.
In selecting equity investments, the Adviser typically seeks companies of medium
to large capitalizations (generally $1 billion or more) that, based on their
future prospects or opportunities, it believes are undervalued in the
marketplace. Investments in companies with market capitalizations of less than
$1 billion may be more volatile than investments in companies with larger market
capitalizations, and thus the Portfolio intends to limit its investments in such
companies to no more than 20% of its total assets. See "Description of
Securities and Investment Techniques -- Investment in Small Cap Companies."
In selecting debt investments, the Adviser seeks debt securities with longer
maturities during periods of anticipated lower interest rates and shorter-term
debt securities when interest rates are expected to rise. The Adviser generally
selects long-term debt securities from high quality bonds (rated AA or higher by
S&P, Aa or higher by Moody's) to achieve income and capital gains. The Adviser
may also invest the Portfolio's assets in high quality, short-term debt
securities (such as commercial paper rated A-1 by S&P or P-1 by Moody's, or
determined by the Adviser to be of equivalent quality if unrated). However, the
Adviser may invest up to 10% of the value of the Portfolio's total assets in
securities rated as low as BBB by S&P or Baa by Moody's. See "Fixed Income
Securities" in "Description of Securities and Investment Techniques" below for a
discussion of the risks associated with investing in such securities. See also
the Statement of Additional Information for a description of securities ratings.
The Adviser may select equity and debt securities for the Portfolio issued by
either domestic or foreign issuers. See "Description of Securities and
Investment Techniques" for a description of the risks associated with foreign
securities.
BALANCED/PHOENIX INVESTMENT
COUNSEL PORTFOLIO
The Balanced/Phoenix Investment Counsel Portfolio, seeks as its investment
objectives reasonable income, long-term capital growth and conservation of
capital. The Portfolio intends to make investments based on combined
considerations of risk, income, capital enhancement and protection of capital
value.
The Portfolio may invest in any type or class of security. Under normal
circumstances, the Portfolio will invest in common stocks and fixed income
securities; however, it may also invest in securities convertible into common
stock. At least 25% of the value of the Portfolio's assets will normally be
invested in fixed income senior securities. The Portfolio may also engage in
certain options transactions and enter into financial futures contracts and
related options for hedging purposes, and may invest in zero coupon debt
obligations. Notwithstanding the foregoing, for temporary defensive purposes,
the Portfolio may actively pursue a policy of retaining cash or investing part
or all of its assets in cash equivalents, such as government securities and high
quality commercial paper. See "Description of Securities and Investment
Techniques" for a full discussion of the types of securities in which the
Portfolio may invest.
The Portfolio may invest up to 25% of the value of the Portfolio's total assets
in securities of foreign issuers, including emerging market securities and those
issued by foreign branches of U.S. banks. Such foreign investments may involve a
higher degree of risk than investments in domestic issuers. Foreign securities
are often denominated in foreign currencies, which means that their value will
be affected by changes in exchange rates, as well as other factors that affect
securities prices. Investment in foreign securities involves special risks. See
"Description of Securities and Investment Techniques -- Risks and Considerations
Applicable to Investment in Securities of Foreign Issuers."
With respect to investment in fixed income securities, the Portfolio intends to
emphasize investments in investment grade fixed income securities which are
rated within the four highest categories by recognized rating agencies such as
Moody's, S&P, Duff & Phelps or Fitch. However, the Portfolio may invest in
lower- or non-rated fixed income securities, but will not invest more than 35%
of its net assets in high-yield, high-risk fixed income securities. A fixed-
income securities issue may have its ratings reduced below the minimum permitted
for purchase by the Portfolio. In that event, the Subadviser will determine
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<PAGE> 17
whether the Portfolio should continue to hold such security. If, in the
Subadviser's opinion, market conditions warrant, the Portfolio may, from time to
time, increase its position in lower and non-rated securities. Investment in
lower-rated and unrated fixed income securities involves certain risks not
attendant to higher-rated securities. For the fiscal year ended November 30,
1997, 5.3% of the Portfolio's bond holdings were below investment grade. See
"Description of Securities and Investment Techniques -- Corporate Debt
Instruments" and "Description of Securities and Investment Techniques -- Risk
Factors Relating to High-Yield, High-Risk Bonds" for a full discussion of below
investment grade fixed income securities and the risks associated therewith.
ASSET ALLOCATION PORTFOLIO
The investment objective of the Asset Allocation Portfolio is high total return
(including income and capital gains) consistent with preservation of capital
over the long-term. The Portfolio seeks to achieve its objectives by investing
in a diversified portfolio that can include common stocks and other securities
having common stock characteristics, bonds and other intermediate and long-term
fixed income securities, including mortgage-related and asset-backed securities,
and money market instruments (debt securities maturing in 397 days or less).
Securities designated as having "common stock" characteristics include, but are
not limited to, securities convertible into, or exchangeable for, common stock.
The Subadviser will determine the relative mix of equities, fixed income
securities and money market instruments for the Portfolio based on its view of
long-term economic and market trends under the relative risks and opportunities
for long-term total return of the different classes of assets. Under normal
conditions, the Subadviser expects (but is not required) to maintain an
investment mix falling within the following ranges: 40% to 80% in equities; 20%
to 50% in fixed income securities; and 0% to 40% in money market instruments.
The Subadviser may make frequent shifts within these broad ranges whenever, in
the Subadviser's judgment, market or economic changes warrant a reallocation.
The Subadviser intends, in normal situations, to make any shifts in the
Portfolio's asset allocation gradually over time based on its views of long-term
trends and conditions.
The Portfolio may invest in securities of foreign issuers, including issuers in
emerging countries (which are generally denominated in currencies other than the
U.S. dollar), although there is no requirement that the Portfolio maintain
investments in foreign issuers. See "Description of Securities and Investment
Techniques -- Risks and Considerations Applicable to Investment in Securities of
Foreign Issuers." The Portfolio also has the ability to hold a portion of its
assets in foreign currencies and to enter into forward foreign currency exchange
contracts, currency options, currency swaps, currency and financial futures
contracts, and options on such futures contracts.
The Portfolio's fixed income investments will consist primarily of "investment
grade" bonds; that is, bonds that are rated BBB or better by S&P or Baa or
better by Moody's. Up to 25% of the Portfolio's fixed income assets may be
invested in securities that are below investment grade as defined above,
including securities rated as low as CC by S&P or Ca by Moody's. Securities
rated BBB or below by S&P or Baa or below by Moody's are considered to have
speculative characteristics. The weighted average ratings by S&P as a percentage
of all bonds held by the Portfolio during the fiscal year ended November 30,
1997 were: "AAA" 60.04%; "AA" 0.36%; "A" 6.46%; "BBB" 14.48%; "BB" 15.10%; "B"
2.04%; and CCC/NR 1.52%. For a more detailed description of the risks involved
with these securities, see "Description of Securities and Investment
Techniques -- Corporate Debt Instruments -- Lower Grade" and "-- Risk Factors
Relating to High-Yield, High-Risk Bonds." The Portfolio's investments in foreign
fixed income securities will be concentrated in securities issued or guaranteed
as to principal and interest by foreign governments or their agencies and
instrumentalities or by multinational agencies.
The Portfolio may enter into repurchase agreements and firm commitment
agreements, and may purchase when-issued securities. The Portfolio may also
engage in interest-rate swaps, mortgage swaps, transactions involving
interest-rate caps, floors and collars, dollar rolls and securities lending.
EQUITY INCOME PORTFOLIO
The Equity Income Portfolio seeks long-term growth of capital and income. Under
normal market conditions, the Portfolio invests at least 65% of its total assets
in equity securities of issuers believed by the Subadviser to be characterized
by sound management, the ability to finance expected growth and the ability to
pay above average dividends.
The Portfolio invests in equity securities that have relatively high dividend
yields and which, in the Subadviser's opinion, will result in a relatively
stable Portfolio dividend with a growth rate sufficient to
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<PAGE> 18
maintain the purchasing power of the income stream. Although the Subadviser
anticipates that higher yielding equity securities will generally represent the
core holdings of the Portfolio, the Portfolio may invest in lower yielding but
higher growth equity securities to the extent that the Subadviser believes such
investments are appropriate to achieve fund balance. All securities held by the
Portfolio will normally provide current income consistent with the Portfolio's
investment objective.
The "equity securities" in which the Portfolio may invest include corporate debt
obligations that are convertible into common stock. These convertible debt
obligations may include obligations rated as low as CCC by S&P or Caa by Moody's
or which have been assigned an equivalent rating by another nationally
recognized statistical rating organization. Debt obligations rated less than BBB
by S&P or Baa by Moody's are considered to be less than "investment grade" and
are sometimes referred to as "junk bonds." Obligations rated CCC by S&P or Caa
by Moody's are considered to be of poor standing and are predominantly
speculative. For a more detailed description of the risks involved with these
securities, see "Description of Securities and Investment
Techniques --
Corporate Debt Instruments" and "-- Risk Factors Relating to High-Yield,
High-Risk Bonds." If the rating of an obligation is reduced below the
categories set forth above after purchase or is discontinued, the Portfolio is
not required to sell the obligation but may consider doing so.
Purchases of less than investment grade convertible debt obligations are
intended to advance the Portfolio's objective of long-term growth of capital
through the "upside" potential of the obligations' conversion features and to
advance the Portfolio's objective of income through receipt of interest payable
on the obligations. The Portfolio will not invest more than 25% of its total
assets in convertible debt obligations that are rated less than investment
grade.
The Portfolio also may invest up to 35% of its total assets in fixed income
securities including securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities, nonconvertible preferred stocks,
nonconvertible corporate debt securities, and short-term obligations including
"cash items" such as rated commercial paper and variable amount master demand
notes; U.S. dollar-denominated time and savings deposits (including certificates
of deposit); bankers' acceptances; repurchase agreements collateralized by
eligible investments of the Portfolio securities of other mutual funds which
invest primarily in debt obligations with remaining maturities of 397 days or
less (which investments also are subject to the advisory fee); and other similar
high-quality short-term U.S. dollar-denominated obligations.
Subject to the limitations stated above, the Portfolio may invest up to 25% of
its total assets in securities of foreign issuers which are either listed on a
U.S. stock exchange or represented by American Depositary Receipts ("ADRs").
Investment in foreign securities involves special risks. See "Description of
Securities and Investment Techniques -- Risks and Considerations Applicable to
Investment in Securities of Foreign Issuers."
In addition, the Portfolio may (i) enter into repurchase agreements; (ii) in
order to attempt to reduce risk, purchase put and call options on equity
securities and on stock indices; (iii) write covered call options covering up to
25% of the equity securities owned by the Portfolio and write call options on
stock indices related to such equity securities; (iv) purchase securities on a
when-issued or delayed delivery basis; and (v) engage in the lending of fund
securities. See "Description of Securities and Investment Techniques" for more
information on these securities and strategies.
For temporary defensive purposes, the Portfolio may, without limitation, hold
cash or invest in cash items of the kinds described above. The Portfolio also
may invest not more than 35% of its total assets in cash and cash items in order
to utilize assets awaiting normal investment.
UTILITY PORTFOLIO
The Utility Portfolio seeks high current income and moderate capital
appreciation. The Portfolio's investment approach is based on the Subadviser's
conviction that over the long-term, the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of utility companies. The Portfolio intends to achieve its
investment objective by investing in equity and debt securities of utility
companies that produce, transmit, or distribute gas and electric energy as well
as those companies that provide communications facilities, such as telephone and
telegraph companies.
The Portfolio will, under normal circumstances, invest at least 65% of its total
assets in securities of utility companies. Such investments will be primarily in
common stocks selected by the Subadviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects and
of the risk and volatility of an issuer's
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<PAGE> 19
industry. However, other factors, such as product position, market share, or
profitability will also be considered by the Subadviser. The Portfolio may also
invest in preferred stocks, corporate bonds, notes, and warrants of utility
companies. Fixed income securities purchased by the Portfolio will be rated at
least BBB by S&P or Baa by Moody's.
The Portfolio may also invest in other types of securities and/or engage in a
variety of investment strategies, including: U.S. government securities; money
market instruments; foreign securities; illiquid securities; repurchase and
reverse repurchase agreements; securities lending; when-issued and
delayed-delivery transactions; and options, financial futures and options on
such futures. See "Description of Securities and Investment Techniques" for more
information on these securities and strategies. For temporary defensive
purposes, the Portfolio may invest up to 100% of its assets in cash, cash
equivalents and short-term debt instruments.
Risk Factors Applicable to Utility Securities -- There exist certain risks
associated with the utility industry of which investors in the Portfolio should
be aware. These include (i) utility companies' difficulty in earning adequate
returns on investment despite frequent rate increases; (ii) restrictions on
operations and increased costs and delays due to governmental regulations; (iii)
building or construction delays; (iv) environmental regulations; (v) difficulty
of the capital markets in absorbing utility debt and equity securities; and (vi)
difficulties in obtaining fuel at reasonable prices. Further information
concerning the risks associated with the utility industry generally, and
particular segments within the utility industry is contained in the Statement of
Additional Information.
Reducing Risks of Utility Securities -- The Subadviser believes that the risks
of investing in utility securities can be reduced. The professional portfolio
management techniques used by the Subadviser to attempt to reduce these risks
include credit research and diversification techniques. The Subadviser will
perform its own credit analysis in addition to using recognized rating agencies,
and will obtain information from other sources, including the issuer's
management and other investment analysts. The Subadviser's credit analysis will
consider the issuer's financial soundness, its responsiveness to changes in
interest rates and business conditions, and its anticipated cash flow, interest
or dividend coverage, and earnings. In evaluating an issuer, the Subadviser
places special emphasis on the estimated current value of the issuer's assets
rather than historical cost.
EQUITY INDEX PORTFOLIO
The Equity Index Portfolio seeks investment results that correspond to the
performance of the S&P 500. The Equity Index Portfolio invests primarily (at
least 65% of total assets) in common stocks included in the S&P 500. The
Subadviser believes that the Portfolio's objective can best be achieved by
investing in the common stocks of approximately 50% to 100% of the issues
included in the S&P 500, depending on the size of the Portfolio.
The Portfolio is managed by utilizing a computer program that identifies which
stocks should be purchased or sold in order to replicate, as closely as
possible, the composition of the S&P 500. The Portfolio includes a stock in its
investment portfolio in the order of the stock's weighting in the S&P 500,
starting with the most heavily weighted stock. Thus, the proportion of Portfolio
assets invested in a stock or industry closely approximates the percentage of
the S&P 500 represented by that stock or industry. Portfolio turnover is
expected to be well below that of actively managed mutual funds. Inasmuch as the
common stock of the Adviser's parent company (SunAmerica, Inc.) and the
Subadviser's parent company (U.S. Bancorp) are included in the S&P 500, such
stocks may be purchased by the Portfolio consistent with its indexing-based
policies.
Because the Portfolio may not always hold all of the stocks included in the S&P
500, the Portfolio will not duplicate the S&P 500's performance precisely.
However, there will be a close correlation between the Portfolio's performance
and that of the S&P 500 in both rising and falling markets. The Portfolio will
attempt to achieve a correlation between the performance of its portfolio and
that of the S&P 500 of at least 95%, without taking into account expenses of the
Portfolio. A perfect correlation would be indicated by a figure of 100%, which
would be achieved if the Portfolio's net asset value, including the value of its
dividends and capital gains distributions, increased or decreased in exact
proportion to changes in the S&P 500. The Portfolio's ability to replicate the
performance of the S&P 500 may be affected by, among other things, changes in
securities markets, the manner in which S&P calculates the S&P 500, the amount
and timing of cash flows into and out of the Portfolio, commissions, sales
charges (if any) and other expenses. Although cash flows into and out of the
Portfolio will affect portfolio turnover rate and its ability to replicate the
S&P 500's performance, investment adjustments will be made, as practicably as
possible, to account for these circumstances. In the event the Portfolio is
unable to achieve this correlation over time, the
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<PAGE> 20
Board of Trustees of the Trust will consider alternative strategies for the
Portfolio.
The Portfolio also may invest up to 20% of its total assets, in the aggregate,
in stock index futures contracts, options on stock indices, options on stock
index futures, and index participation contracts based on the S&P 500. The
Portfolio will not invest in these types of contracts and options for
speculative purposes, but rather to maintain sufficient liquidity to meet
redemption requests; to increase the level of portfolio assets devoted to
replicating the composition of the S&P 500; and to reduce transaction costs. See
"Description of Securities and Investment Techniques" for more information on
these securities and strategies. In addition, the Portfolio may engage in
securities lending described under "Description of Securities and Investment
Techniques -- Securities Lending."
For temporary defensive purposes, the Portfolio may, without limitation, hold
cash or invest in cash items including rated commercial paper and variable
amount master demand notes; U.S. dollar-denominated time and savings deposits
(including certificates of deposit); bankers' acceptances; repurchase agreements
collateralized by eligible investments of a Portfolio; and other similar high-
quality short-term U.S. dollar-denominated obligations. The Portfolio may also
invest not more than 35% of its total assets in the above items in order to
utilize assets awaiting normal investment.
GROWTH-INCOME PORTFOLIO
The Growth-Income Portfolio seeks growth of capital and income. In the selection
of securities for investment, the possibilities of appreciation and potential
dividends are given more weight than current yield. Ordinarily, the assets of
the Portfolio consist principally of a diversified group of common stocks, but
other types of securities, including preferred stocks, corporate bonds and
convertible bonds, may be held when deemed advisable. The Subadviser determines
the relative amounts to be invested in common stocks, preferred stocks, bonds
(including corporate and convertible), securities of the U.S. government, its
agencies and instrumentalities, cash and cash equivalents (such as commercial
bank and savings association obligations, commercial paper and short-term
corporate bonds and notes) and repurchase agreements. See "Description of
Securities and Investment Techniques."
FEDERATED VALUE PORTFOLIO
The Federated Value Portfolio seeks growth of capital and income. The Portfolio
pursues its investment objective by investing, under normal circumstances, at
least 65% of its assets in a portfolio of securities issued by the one hundred
companies contained in "The Leaders List" described below. The Portfolio's
investment approach is based upon the Subadviser's conviction that over the
longer term, the economy will continue to expand and develop and that this
economic growth will be reflected importantly in the growth of major
corporations. Generally, the Subadviser makes portfolio selections utilizing
fundamental analysis, with emphasis on the issuer's earning power, financial
condition and valuation.
The securities in which the Portfolio invests include, but are not limited to:
common stocks; preferred stocks; domestic issues of corporate debt obligations;
and warrants. The fixed income securities in which the Portfolio may invest must
be rated at least BBB by S&P, Baa by Moody's, or BBB by Fitch. If a security
loses its rating or has its rating reduced after the Portfolio has purchased it,
the Portfolio is not required to sell the security, but will consider doing so.
The Portfolio may also invest in other securities and/or engage in various
investment strategies, including: foreign securities; repurchase agreements;
illiquid securities; and securities lending. See "Description of Securities and
Investment Techniques" for more information on these securities and strategies.
For temporary or defensive purposes, the Portfolio may also hold cash and invest
in U.S. government securities in such proportions as the Subadviser may deem
necessary for such purposes.
"The Leaders List" is a trade name which represents a list of 100 blue chip
companies selected by the Subadviser. In the opinion of the Subadviser,
securities of these companies represent diversified and highly marketable
investments. The Subadviser uses its proprietary securities selection process to
evaluate the relative value of securities suitable for "The Leaders List." The
Subadviser also uses a number of standards and fundamental research factors in
selecting "The Leaders List." "The Leaders List" generally includes leading
companies in their industries determined in terms of sales, earnings, and/or
market capitalization. Companies on "The Leaders List" typically have a market
capitalization in excess of $1 billion. The list is subject to continuous review
and modification.
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<PAGE> 21
VENTURE VALUE PORTFOLIO
The Venture Value Portfolio seeks growth of capital. Under normal circumstances,
the assets of the Portfolio will be invested in securities which the Subadviser
believes have above-average appreciation potential. Usually these securities are
common stocks. Income is not a significant factor in selecting investments for
the Portfolio.
Generally, the Portfolio will invest predominantly in equity securities of
companies with market capitalizations of at least $250 million. Investments will
consist of issues which the Subadviser believes have capital growth potential
due to factors such as undervalued assets or earnings potential, product
development and demand, favorable operating ratios, resources for expansion,
management abilities, reasonableness of market price, and favorable overall
business prospects. These companies may offer greater potential for capital
appreciation but may also involve certain risks. See "Description of Securities
and Investment Techniques -- Investment in Small Cap Companies."
The Portfolio may invest in securities of foreign issuers. Such foreign
investments may involve a higher degree of risk than investments in domestic
issuers. Foreign securities are often denominated in foreign currencies, which
means that their value will be affected by changes in exchange rates, as well as
other factors that affect securities prices. To help reduce exposure to currency
fluctuations, the Portfolio may trade in forward foreign currency exchange
contracts (forward contracts), currency futures contracts and options thereon,
and securities indexed to foreign securities. The Subadviser will use these
techniques to lock in an exchange rate in connection with transactions in
securities denominated or traded in foreign currencies, to hedge the currency
risk in foreign securities held by the Portfolio and to hedge a currency risk
involved in an anticipated purchase of foreign securities.
The Portfolio will generally invest in securities of foreign companies through
trades of individual securities on recognized exchanges and developed
over-the-counter markets, through ADRs covering such securities, and through
U.S. registered investment companies primarily investing in foreign securities.
With respect to other registered investment companies, no such investment may
cause more than 10% of the Portfolio's total assets to be invested in such
companies. Such other investment companies usually have their own management
costs or fees and the Portfolio's Subadviser earns its regular fee on such
assets.
Investment in foreign securities and engaging in foreign currency transactions
involves special risks. See "Description of Securities and Investment
Techniques -- Risks and Considerations Applicable to Investment in Securities of
Foreign Issuers" and " -- Foreign Currency Transactions."
Sometimes a more defensive position may be desirable under certain economic or
financial circumstances. At these times, the Portfolio may, without limitation,
hold assets in cash and cash equivalents, including repurchase agreements, or in
fixed income or other defensive securities rather than in securities selected
for appreciation potential. The Portfolio may also have such holdings
temporarily for the purpose of managing exceptional in-flows and out-flows of
cash.
The Portfolio may also engage in other types of investment practices, including,
but not limited to, investment in illiquid securities and lending of portfolio
securities. See "Description of Securities and Investment Techniques" for a
description of these investment techniques and a discussion of the other
techniques in which the Portfolio may engage.
"DOGS" OF WALL STREET PORTFOLIO
The investment objective of the "Dogs" of Wall Street Portfolio is to seek total
return (including capital appreciation and current income) through a passively
managed strategy involving the annual selection of thirty high dividend yielding
common stocks from the Dow Jones Industrial Average ("DJIA")(1) and the broader
market. The thirty stocks will consist of (1) the ten highest yielding stocks in
the DJIA and (2) the twenty other highest yielding stocks of the largest
industrial companies in the market (with market capitalizations of at least $1
billion) that have been assessed as being of high quality from the perspective
of historical earnings and dividend performance. The Adviser will rely on
independently published reports for purposes of selecting these twenty stocks.
The Adviser will employ the same methodology, using the same analytical
parameters and benchmarks, in selecting the thirty stocks each year.
- ---------------
(1) "Dow Jones Industrial Average" is a trademark of Dow Jones & Company, Inc.
("Dow Jones"). None of the Trust, the Portfolio or SAAMCo is affiliated
with, nor is the Trust or the Portfolio sponsored by, Dow Jones. Dow Jones
has not participated in any way in the creation of the Trust or the
Portfolio or in the selection of the stocks included in the Portfolio, nor
has Dow Jones viewed or approved any information included in this
Prospectus.
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<PAGE> 22
The Portfolio's stock selection criteria is designed to implement a "value"
oriented philosophy of investing principally in securities believed to be
undervalued in the market. This philosophy reflects a contrarian approach, in
that the potential for superior relative performance is believed to be the
highest when stocks of fundamentally solid companies are out of favor. The
selection criteria is calculated to identify stocks of large, well-known
companies with solid financial strength and generous dividend yields that have
low price-earnings ratios ("P/E ratios") and have been generally overlooked by
the market.
The Portfolio invests in the thirty common stocks selected according to the
methodology described above. The Adviser will annually rebalance the Portfolio's
holdings within the first several weeks of each year according to the same
selection criteria, based on information as of the preceding December 31. The
Adviser will rebalance the Portfolio's holdings to create equal weightings among
the thirty stocks by purchasing new stocks that meet the selection criteria,
selling stocks that no longer meet the selection criteria, and adjusting its
ownership of stocks that continue to meet the criteria in order to achieve the
proper weightings of each of the thirty stocks.
The Portfolio employs a buy and hold strategy over the course of each year,
which ignores market timing and rejects active management. The Adviser
anticipates that the thirty stocks held by the Portfolio will remain the same
throughout the course of a year, despite any adverse developments concerning a
particular stock, an industry, the economy or the stock market generally.
However, due to purchases and redemptions of Portfolio shares during the year
and changes in the market value of the stock positions held by the Portfolio, it
is likely that the weightings of the stock positions in the Portfolio will
fluctuate throughout the year.
As the Portfolio's shares are sold during the year, new cash received by the
Portfolio is first used to the extent necessary to meet redemption requests. The
balance of any such cash invested weekly (or more frequently as the Adviser
deems necessary) in the thirty stocks selected for the Portfolio as of its most
recent rebalancing in proportion to the current weightings of such stocks in the
Portfolio and without any intention to rebalance the Portfolio's holdings on an
interim basis. To the extent redemptions exceed available cash, the Portfolio
generally meets redemption requests by selling stocks on a pro rata basis
(subject to rounding and avoidance of odd lots), based on the current weightings
of such stocks in the Portfolio and without any intention to rebalance the
Portfolio's holdings on an interim basis.
The Adviser intends that the Portfolio be at all times fully invested in the
stocks that are selected using the criteria described above, but reserves the
right to deviate from the investment strategy to the extent necessary to comply
with federal tax laws applicable to the Portfolio. In order to enhance its
income, the Portfolio may lend its securities and enter into repurchase
agreements. It may also seek to equitize uninvested cash through the use of
options and futures strategies. See "Description of Securities and Investment
Techniques."
HISTORICAL PERFORMANCE INFORMATION
The following tables compare the actual performance of the S&P 500 and the
hypothetical performance of a model portfolio employing the same stock selection
criteria as the "Dogs" of Wall Street Portfolio, rebalanced annually, for the
historical periods indicated. The S&P 500 is used as the performance comparison
because (1) it is the performance benchmark against which the Portfolio will be
measured; and (2) it is the index most widely recognized as representative of
the performance of the U.S. stock market. The S&P 500 is a composite index
consisting of 500 common stocks that are traded on the New York Stock Exchange
("NYSE"), American Stock Exchange and NASDAQ National Market System. The
companies that are included in the S&P 500 are leading companies of important
industry segments within the U.S. economy.
The Portfolio's actual performance may differ from that of the hypothetical
model for the following reasons: the Portfolio may not be fully invested at all
times; appreciation or depreciation in an individual stock's value may cause
stocks held by the Portfolio to be weighted unequally at any particular time;
cash surpluses and deficits from purchases and redemptions of Portfolio shares
may cause the Adviser to buy and sell stocks for the Portfolio between annual
rebalancings; the Adviser may modify slightly the Portfolio's investment
strategy as federal tax laws require; and the returns indicated in the
hypothetical model exclude commission costs, advisory fees, expenses and taxes
that would be borne by the Portfolio.
Because the returns for the model portfolio are hypothetical, they do not
represent actual trading or the impact that material economic and market factors
might have had on the Adviser's decision-making under actual circumstances.
However, except as described above, the Adviser can presently foresee no
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<PAGE> 23
circumstances that would cause deviation from the stock selection criteria used
in managing the Portfolio. All returns contained in the tables below reflect
reinvestment of dividends and other earnings. The results of the Portfolio's
strategy are based on statistical data gathered by the Adviser.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON OF S&P 500 AND HYPOTHETICAL RESULTS
OF THE STRATEGY FOR
"DOGS" OF WALL STREET PORTFOLIO
DECEMBER 31, 1988-DECEMBER 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following tables represent the hypothetical performance of "Dogs" of Wall
Street Portfolio obtained by applying its stock selection criteria retroactively
to December 31, 1987. The performance of the Portfolio's stock selection
criteria does not represent the performance of the Portfolio, nor does it
reflect the advisory fees, commissions, expenses or taxes which would be borne
by the Portfolio. The Portfolio's performance, as well as that of the S&P 500,
would be lower if such fees and expenses were deducted. Past performance of the
Portfolio's stock selection criteria is not predictive of future performance of
such criteria or of the Portfolio.
<TABLE>
<CAPTION>
- -----------------------------------------------
ANNUAL RESULTS
- -----------------------------------------------
"DOGS" OF
WALL STREET
YEAR ENDED S&P 500 STRATEGY
<S> <C> <C>
12/31/88............. 16.56% 34.4%
12/31/89............. 31.62% 32.3%
12/31/90............. -3.10% -1.1%
12/31/91............. 30.40% 39.3%
12/31/92............. 7.61% 11.9%
12/31/93............. 10.06% 12.7%
12/31/94............. 1.82% 10.2%
12/31/95............. 37.55% 36.8%
12/31/96............. 22.95% 20.8%
12/31/97............. 33.35% 31.2%
- -----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------
SUMMARY RESULTS
- -----------------------------------------------
"DOGS" OF
WALL STREET
YEAR ENDED S&P 500 STRATEGY
<S> <C> <C>
Arithmetic average... 18.83% 22.85%
Standard deviation of
return............. 14.42% 13.82%
1-yr................. 33.35% 31.20%
3-yr compounded*..... 31.14% 29.43%
5-yr compounded*..... 20.25% 21.91%
7-yr compounded*..... 19.74% 22.74%
10-yr compounded*.... 18.03% 22.13%
- -----------------------------------------------
</TABLE>
* Quoted return is for the most recent period ended December 31, 1997
ALLIANCE GROWTH PORTFOLIO
GROWTH/PHOENIX INVESTMENT COUNSEL PORTFOLIO
PUTNAM GROWTH PORTFOLIO
The three Growth Portfolios have the same investment objectives, policies and
restrictions, but have different Subadvisers. The investment objective of each
Portfolio is to seek long-term growth of capital. Whatever current income is
generated by the Portfolio is incidental to the objective of capital growth.
Each Portfolio's objective of capital growth is sought by investing primarily in
common stocks or securities with common stock characteristics. Securities
designated as having "common stock" characteristics include, but are not limited
to, securities convertible into or exchangeable for common stock. Such
convertible securities may be rated below BBB by S&P or Baa by Moody's (i.e.,
junk bonds). See "Description of Securities and Investment Techniques -- Risk
Factors Relating to High-Yield, High-Risk Securities". In addition, each
Portfolio may from time to time purchase preferred stocks and debt securities.
Each Portfolio's Subadviser considers the factors that it believes affect
potential for capital appreciation, including an issuer's current and projected
revenue, earnings, cash flow and assets, as well as general market conditions.
When the outlook for common stocks is not considered promising, for temporary
defensive purposes, a substantial portion of the assets may be invested in
securities of the U.S. government, its agencies and instrumentalities, cash and
cash equivalents (such as commercial bank and savings association obligations,
commercial paper and short-term corporate bonds and notes) and repurchase
agreements. Because the securities purchased by the Portfolios, in pursuing
their investment objective, are selected for growth potential rather than
production of income, the market values of such securities (and therefore, to a
large extent, the net asset values per share of the Portfolios) will tend to be
more volatile
20
<PAGE> 24
in response to market changes than they would be if income-producing securities
were sought for investment by the Portfolios. Up to 25% of each Portfolio's
total assets may be invested in foreign securities. See "Description of
Securities and Investment Techniques -- Risks and Considerations Applicable to
Investment in Securities of Foreign Issuers" and the Statement of Additional
Information.
REAL ESTATE PORTFOLIO
The investment objective of the Real Estate Portfolio is total return through a
combination of growth and income. It invests primarily in securities of
companies principally engaged in or related to the real estate industry or which
own significant real estate assets or which primarily invest in real estate
financial instruments. Normally, at least 65% of its total assets will be
invested in securities of companies which have at least 50% of the value of
their assets, gross income or net profits attributable to ownership, financing,
construction, management or sale of real estate, or to products or services that
are related to real estate or the real estate industry. The Portfolio does not
invest directly in real estate. Real estate companies include real estate
investment trusts ("REITs"), or other securitized real estate investments,
brokers, developers, lenders and companies with substantial real estate holdings
such as paper, lumber, hotel and entertainment companies. The Portfolio invests
in common stocks and other equity securities and debt securities. In keeping
with its primary growth objective, it will normally invest primarily in equity
securities (including securities convertible into equity securities). It may
also invest in fixed income securities for income or as a defensive strategy
when the Subadviser believes that adverse economic or market conditions require
such strategy.
The remaining 35% of the Portfolio's assets may be invested in securities of
companies in any other industries. These may include companies which are not
primarily involved in real estate operations or ownership but which have
products or services relating to the real estate industry, such as manufacturers
and distributors of building supplies, financial institutions which make or
service real estate loans or companies which have substantial real estate assets
such as some companies in the energy, retailing or railroad industries. There is
no limitation on such investments except that the Portfolio intends to invest
less than 25% of its total assets in the securities of any industry other than
the real estate industry.
The Portfolio will invest in shares of REITs. REITs pool investors' funds for
investment primarily in income producing real estate or real estate related
loans or interests. A REIT is not taxed on income distributed to shareholders if
it complies with various requirements relating to its organization, ownership,
assets and income and with the requirement that it distribute to its
shareholders at least 95% of its taxable income (other than net capital gains)
for each taxable year. REITs can generally be classified as Equity REITs,
Mortgage REITs and Hybrid REITs. Equity REITs invest the majority of their
assets directly in real property and derive their income primarily from rents.
Equity REITs can also realize capital gains by selling property that has
appreciated in value. Mortgage REITs invest the majority of their assets in real
estate mortgages and derive their income primarily from interest payments.
Hybrid REITs combine the characteristics of both Equity REITs and Mortgage
REITs.
Risk Factors Applicable to The Real Estate Portfolio -- The Real Estate
Portfolio will generally not purchase securities rated BB by S&P or Ba by
Moody's or lower if such purchase would then cause more than 30% of the
Portfolio's net assets to be invested in such securities. The Real Estate
Portfolio does not presently intend to have more than 5% of its assets invested
in fixed income securities rated below BBB by S&P or Baa by Moody's in the near
future.
Because the Portfolio invests primarily in the real estate industry, it is
subject to risks associated with the direct ownership of real estate. The
Portfolio could also be subject to such risks by reason of direct ownership as a
result of a default on a debt security it may own. These risks include declines
in the value of real estate, risks related to general and local economic
conditions, overbuilding and increased competition, increases in property taxes
and operating expenses, changes in zoning laws, casualty or condemnation losses,
fluctuations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increases in interest rates. If the Portfolio has
rental income or income from the disposition of real property, the receipt of
such income may adversely affect its ability to retain its tax status as a
regulated investment company.
Equity REITs may be affected by changes in the value of the underlying property
owned by the trusts, while Mortgage REITs may be affected by the quality of
credit extended. Equity and Mortgage REITs are dependent upon management skill,
may not be diversified and are subject to project financing risks. Such trusts
are also subject to heavy cash flow
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<PAGE> 25
dependency, defaults by borrowers, self-liquidation and the possibility of
failing to qualify for tax-free pass-through of income under the Internal
Revenue Code of 1986, as amended (the "Code") and to maintain exemption from
registration under the 1940 Act. Changes in interest rates may also affect the
value of the debt securities in the Portfolio's portfolio. By investing in REITs
indirectly through the Portfolio, a shareholder will bear not only his
proportionate share of the expense of the Portfolio, but also, indirectly,
similar expenses of the REITs, including compensation of management.
SMALL COMPANY VALUE PORTFOLIO
The Small Company Value Portfolio seeks capital appreciation. Under normal
market conditions, Small Company Value Portfolio invests at least 65% of its
total assets in equity securities of small capitalization companies. For these
purposes, small capitalization companies are deemed those with market
capitalizations of less than $1 billion at the time of purchase. In selecting
equity securities, the Subadviser utilizes a value-based selection discipline,
investing in equity securities it believes are undervalued relative to other
securities in the same industry or market at the time of purchase. In assessing
relative value, the Subadviser will consider such factors as ratios of market
price to earnings, market price to book value, market price to assets, estimated
earnings growth rate, cash flow and liquidation value.
The Portfolio also may invest up to 35% of its total assets in the aggregate in
equity securities of issuers with a market capitalization of $1 billion or more
and in fixed income securities including securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities, nonconvertible preferred
stocks, nonconvertible corporate debt securities, and short-term obligations
including "cash items" such as rated commercial paper and variable amount master
demand notes; U.S. dollar-denominated time and savings deposits (including
certificates of deposit); bankers' acceptances; repurchase agreements
collateralized by eligible investments of the Portfolio; securities of other
mutual funds which invest primarily in debt obligations with remaining
maturities of 397 days or less (which investments also are subject to the
advisory fee); and other similar high-quality short-term U.S. dollar-
denominated obligations.
Subject to the limitations states above, the Portfolio may invest up to 25% of
its total assets in securities of foreign issuers which are either listed on a
U.S. stock exchange or represented by ADRs. Investment in foreign securities
involves special risks. See "Description of Securities and Investment
Techniques -- Risks and Considerations Applicable to Investment in Securities of
Foreign Issuers."
In addition, the Portfolio may (i) enter into repurchase agreements; (ii) in
order to attempt to reduce risk, purchase put and call options on equity
securities and on stock indices; (iii) write covered call options covering up to
25% of the equity securities owned by the Portfolio; (iv) purchase securities on
a when-issued or delayed delivery basis; and (v) engage in the lending of fund
securities. See "Description of Securities and Investment Techniques" for more
information on these securities and strategies.
For temporary defensive purposes, the Portfolio may without limitation hold cash
or invest in cash items of the kinds described above. The Portfolio also may
invest not more than 35% of its total assets in cash and cash items in order to
utilize assets awaiting normal investment.
AGGRESSIVE GROWTH PORTFOLIO
The Aggressive Growth Portfolio seeks capital appreciation as its investment
objective. The Portfolio pursues this investment objective by investing, under
normal circumstances, at least 65% of its total assets in the equity securities
of small, lesser known or new growth companies or industries, such as
telecommunications, media and biotechnology. Such "Small Cap" companies will
typically have, at the time of purchase, market capitalizations of under $1
billion and have achieved, or are expected to achieve, growth or earnings over
various major business cycles. These companies may offer greater potential for
capital appreciation but may also involve certain risks. See "Description of
Securities and Investment Techniques -- Investment in Small Cap Companies." The
Portfolio may invest in securities issued by well known and established domestic
or foreign companies, as well as in newer and less-seasoned companies. Such
securities may be listed on an exchange or traded over-the-counter. In addition,
the Portfolio may invest up to 35% of its total assets in debt securities that
have the potential for capital appreciation due to anticipated market
conditions. The Portfolio may invest in securities rated as low as BBB by S&P or
Baa by Moody's.
INTERNATIONAL GROWTH AND INCOME PORTFOLIO
The investment objective of the International Growth and Income Portfolio is
growth of capital with current income as a secondary objective. The
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<PAGE> 26
Portfolio will seek its objectives by investing primarily in common stocks that
offer potential for capital growth. The Portfolio may also invest, consistent
with its objectives, in stocks that offer potential for current income. Under
normal market conditions, the Portfolio expects to invest substantially all of
its assets in securities principally traded on markets outside the U.S.
Moreover, the Portfolio will normally diversify its investments among a number
of different countries and, except when investing for defensive purposes, will
invest at least 65% of its total assets in at least three countries other than
the U.S.
The Portfolio may also purchase corporate bonds, notes and debentures (including
those rated below BBB by S&P or Baa by Moody's, i.e., junk bonds), preferred
stocks, securities convertible into common stocks or other equity securities, or
U.S. or foreign government securities if the Subadviser determines that their
purchase would help further the Portfolio's investment objectives or for
temporary defensive purposes. In addition, when circumstances warrant, the
Portfolio may hold some or all of its assets in cash or high-quality money
market instruments. See "Description of Securities and Investment
Techniques -- Corporate Debt Instruments" and "-- Risk Factors Relating to
High-Yield, High-Risk Bonds."
The types of securities selected for the Portfolio may vary from time to time in
light of the Portfolio's investment objective, changes in interest rates, and
economic and other factors. The Subadviser will seek to identify securities that
offer the potential for capital growth, and that are undervalued in relation to
underlying asset values or earnings potential. In selecting securities for the
Portfolio, the Subadviser may invest in the securities of issuers in developed
countries, as well as emerging markets. Investing in emerging markets, however,
may involve risks not generally associated with more developed markets. See
"Description of Securities and Investment Techniques -- Risks and Considerations
Applicable to Investment in Securities of Foreign Issuers" for more details. In
addition, the Subadviser may invest in the securities of companies with equity
market capitalizations of less than $1 billion. These companies may offer
greater potential for capital appreciation, but may also involve certain risks.
See "Description of Securities and Investment Techniques -- Investment in Small
Cap Companies."
GLOBAL EQUITIES PORTFOLIO
The investment objective of the Global Equities Portfolio is long-term growth of
capital through investment primarily in common stocks or securities of U.S. and
foreign issuers with common stock characteristics and through transactions in
foreign currencies. Securities designated as having "common stock"
characteristics include, but are not limited to, securities convertible into or
exchangeable for common stock. A major premise of the Portfolio's investment
approach is the Subadviser's belief that economic and political developments
have helped to create new opportunities worldwide.
The assets of the Portfolio will be invested with geographic flexibility. Under
normal market conditions, the Portfolio will invest at least 50% of its assets
in equity securities of issuers domiciled outside the U.S. or dollar-denominated
securities or securities of U.S. issuers. The Subadviser seeks to identify those
companies, both domestic and foreign, likely to benefit from long-term trends
and shifting trade patterns as they develop in the global economy. The
Subadviser currently does not intend to invest more than 20% of the Portfolio's
total assets in issuers domiciled in, or governments of, developing countries
(i.e., those identified as such by the international financial community).
When prevailing market, economic, political or currency conditions warrant, the
Portfolio may purchase fixed income securities (including securities of
governments other than the U.S., which may be securities of either national,
regional or local governments). For temporary defensive purposes, the Portfolio
may at times maintain all or any part of its assets in U.S. or
dollar-denominated or foreign currency-denominated cash or cash equivalents
(including U.S. government securities, foreign government securities,
certificates of deposit, time deposits, commercial paper, bankers' acceptances
and other high quality short-term debt securities).
The Portfolio may, from time to time, use currency transactions and financial
index futures both to enhance returns for a given level of risk and to hedge its
exposure to foreign currencies and local market conditions. While the Portfolio
will have both long and short currency positions, neither its net long foreign
currency exposure nor its net short foreign currency exposure will exceed the
value of the Portfolio's total assets. See "Description of Securities and
Investment Techniques -- Risks and Considerations Applicable to Investment in
Securities of Foreign Issuers" and the Statement of Additional Information.
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INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO
The investment objective of the International Diversified Equities Portfolio is
to provide long-term capital appreciation by investing in accordance with
country weightings determined by the Subadviser in common stocks of foreign
issuers which, in the aggregate, replicate broad country indices. The Subadviser
utilizes a top-down approach in selecting investments for the Portfolio that
emphasizes country selection and weighting rather than individual stock
selection. This approach reflects the Subadviser's philosophy that a diversified
selection of securities representing exposure to world markets, based upon the
economic outlook and current valuation levels for each country, is an effective
way to maximize the return and minimize the risk associated with international
investment.
The Subadviser determines country allocations for the Portfolio on an ongoing
basis within policy ranges dictated by each country's market capitalization and
liquidity. The Portfolio will invest in the industrialized countries throughout
the world that comprise the Morgan Stanley Capital International EAFE (Europe,
Australia and the Far East) Index. The Portfolio will also invest in emerging
country equity securities. Further information concerning emerging country
equity securities is contained in the Statement of Additional Information. See
"Description of Securities and Investment Techniques -- Risks and Considerations
Applicable to Investment in Securities of Foreign Issuers."
By analyzing a variety of macroeconomic and political factors, the Subadviser
develops fundamental projections on interest rates, currencies, corporate
profits and economic growth for each country. These country projections are then
used to determine what the Subadviser believes to be a fair value for the stock
market of each country. Discrepancies between actual value and fair value, as
determined by the Subadviser, provide an expected return for each stock market.
The expected return is adjusted by currency return expectations derived from the
Subadviser's purchasing-power parity exchange rate model to arrive at an
expected total return in U.S. dollars. The final country allocation decision is
then arrived at by considering the expected total return in light of various
country specific considerations such as market size, volatility, liquidity and
country risk.
Within a particular country, investments are made through the purchase of common
stocks which, in aggregate, replicate a broad market index, which in most cases
will be the Morgan Stanley Capital International EAFE Index for the given
country. The Subadviser may overweight or underweight an industry segment of a
particular index if it concludes this would be advantageous to the Portfolio.
Common stocks purchased for the Portfolio include common stocks and equivalents,
such as securities convertible into common stocks and securities having common
stock characteristics, such as rights and warrants to purchase common stocks.
Indexation of the Portfolio's stock selection reduces stock-specific risk
through diversification and minimizes transaction costs, which can be
substantial in foreign markets.
Common stocks purchased for the Portfolio normally will be listed on a major
stock exchange in the subject country. The Portfolio will not invest in the
stocks of U.S. issuers. For a description of special considerations and certain
risks associated with investments in foreign issuers, see "Description of
Securities and Investment Techniques -- Risks and Considerations Applicable to
Investment in Securities of Foreign Issuers." The Portfolio may temporarily
reduce its equity holdings in response to adverse market conditions and invest
in domestic, Eurodollar and foreign short-term money market instruments for
defensive purposes. Notwithstanding the foregoing, the Portfolios may seek to
gain exposure to certain foreign markets where direct investment may be
difficult or impracticable through investment in domestic closed-end mutual
funds which invest predominately in such markets.
The Portfolio may also engage in certain options transactions and enter into
financial futures contracts and related options for hedging purposes.
EMERGING MARKETS PORTFOLIO
The investment objective of the Emerging Markets Portfolio is long-term capital
appreciation. The Portfolio will invest in companies that the Subadviser
believes have above-average growth prospects primarily in emerging markets
outside the U.S. The Subadviser currently expects that, under normal market
conditions, the Portfolio will invest substantially all of its assets, other
than short-term investments held pending investment, and, except when investing
for defensive purposes as described below, at least 65% of its total assets, in
common stocks and other equity securities of "emerging market" companies. The
Portfolio will consider an issuer of securities to be an "emerging market"
company if it is organized under the laws of an emerging market country and has
a principal office in such country, or if it derives 50% or more of its revenues
from business in emerging market countries. For these purposes, a country is
considered to be an "emerging market country" based on the
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Subadviser's evaluation of its level of economic development or the size and
experience of its securities markets. While emerging market countries may change
over time depending on market and economic conditions, at present the Subadviser
believes that these countries include every country in the world except
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland,
the United Kingdom and the United States. Investing in emerging market countries
generally involves special risks. See "Description of Securities and Investment
Techniques -- Risks and Considerations Applicable to Investment in Securities of
Foreign Issuers." The Portfolio will normally diversify its investments among a
number of different countries.
Common stocks and other equity securities are normally the Portfolio's main
investments. However, the Portfolio may purchase preferred stock, debt
securities and securities convertible into common stock or other equity
securities if the Subadviser believes they would help achieve the Portfolio's
objective. The Portfolio may also hold a portion of its assets in cash or
high-quality money market instruments.
Because the Subadviser evaluates securities for the Portfolio based on their
long-term potential for capital appreciation, the Portfolio's investments may
not appreciate or yield significant income over the shorter term, and, as a
result, the Portfolio's total return over certain periods may be less than that
of other equity mutual funds.
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DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
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FIXED INCOME SECURITIES -- Fixed income securities are broadly characterized as
those that provide for periodic payments to the holder of the security at a
stated rate. Most fixed income securities, such as bonds, represent indebtedness
of the issuer and provide for repayment of principal at a stated time in the
future. Others do not provide for repayment of a principal amount, although they
may represent a priority over common stockholders in the event of the issuer's
liquidation. Many fixed income securities are subject to scheduled retirement,
or may be retired or "called" by the issuer prior to their maturity dates.
The 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.
Long-term instruments are generally more sensitive to these changes than are
short-term instruments. The market value of fixed income securities and
therefore their yield is also affected by the perceived ability of the issuer to
make timely payments of principal and interest.
CORPORATE DEBT INSTRUMENTS -- These instruments, such as bonds, represent the
obligation of the issuer to repay a principal amount of indebtedness at a stated
time in the future and, in the usual case, to make periodic interim payments of
interest at a stated rate.
Investment Grade -- A designation applied to intermediate and long-term
corporate debt securities rated within the highest four rating categories
assigned by S&P (AAA, AA, A or BBB) or by Moody's (Aaa, Aa, A or Baa). 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.
Lower Grade -- A designation applied to intermediate and long-term corporate
debt securities that are not investment grade; commonly referred to as "junk
bonds." These include bonds rated BB or below by S&P, or Ba or below by
Moody's. These securities are considered speculative.
The Corporate Bond and Worldwide High Income Portfolios may invest in bonds
rated as low as C by Moody's or D by S&P without limitation. The High-Yield Bond
Portfolio may invest in bonds rated as low as Ca by Moody's or CC by S&P and may
invest no more than 10% of its total net assets in bonds rated as low as C by
Moody's or D by S&P. The Asset Allocation and Balanced/Phoenix Investment
Counsel Portfolios may invest in bonds rated as low as Ca by Moody's or CC by
S&P. The International Growth and Income Portfolio may invest up to 20% of its
assets in bonds rated as low as C by Moody's or S&P. The Emerging Markets
Portfolio may invest in both higher-rated and lower-rated fixed income
securities and is not subject to any restrictions based on credit rating. The
Equity Index and Small Company Value Portfolios may invest up to 5% of their net
assets in less than investment grade convertible debt obligations. The Equity
Income Portfolio may invest up to 25% of its net assets in less than investment
grade convertible debt obligations. Bonds rated Ca by Moody's are described as
"speculative in a high degree; often in default or
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having other marked shortcomings." Bonds rated D by Moody's -- the lowest rated
class -- can be "regarded as having extremely poor prospects of ever attaining
any real investment standing." Not all fixed income securities are rated, and
each of the foregoing Portfolios may invest in securities that are not rated but
that are determined by the Adviser or Subadviser to be of comparable quality to
the rated securities in which the Portfolio may invest. Bonds rated C by S&P are
of the "highest degree of speculation;" those rated D by that organization are
in default and in arrears.
RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS -- High-yield, high-risk
bonds are subject to greater fluctuations in value than are higher-rated bonds
because the values of high-yield bonds tend to reflect short-term corporate,
economic and market developments and investor perceptions of the issuer's credit
quality to a greater extent. Although under normal market conditions longer-term
securities yield more than shorter-term securities, they are subject to greater
price fluctuations. Fluctuations in the value of a Portfolio's investments will
be reflected in its net asset value per share. The growth of the high-yield bond
market paralleled a long economic expansion, followed by an economic downturn
which severely disrupted the market for high-yield bonds and adversely affected
the value of outstanding bonds and the ability of the issuers to repay principal
and interest. The economy may affect the market for high-yield bonds in a
similar fashion in the future including an increased incidence of defaults on
such bonds. From time to time, legislation may be enacted which could have a
negative effect on the market for high-yield bonds.
In the case of corporate debt obligations which are convertible into common
stock, these risks may be present in a greater degree where the principal amount
of the obligation is greater than the current market value of the common stock
into which it is convertible.
High-yield bonds present the following risks:
Sensitivity to Interest Rate and Economic Changes -- High-yield, high-risk
bonds are very sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
that would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing. If the issuer of a bond defaulted on its obligations
to pay interest or principal or entered into bankruptcy proceedings, a
Portfolio may incur losses or expenses in seeking recovery of amounts owed
to it. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices (and therefore
yields) of high-yield bonds and the Portfolio's net asset value.
Payment Expectations -- High-yield, high-risk bonds may contain redemption
or call provisions. If an issuer exercised these provisions in a declining
interest-rate market, a Portfolio would have to replace the security with a
lower-yielding security, resulting in a decreased return for investors.
Conversely, a high-yield bond's value will decrease in a rising interest
rate market, as will the value of the Portfolio's assets. If the Portfolio
experiences unexpected net redemptions, this may force it to sell high-yield
bonds without regard to their investment merits, thereby decreasing the
asset base upon which expenses can be spread and possibly reducing the
Portfolio's rate of return.
Liquidity and Valuation -- There may be little trading in the secondary
market for particular bonds, which may affect adversely a Portfolio's
ability to value accurately or dispose of such bonds. Under such
circumstances, the task of accurate valuation becomes more difficult and
judgment would play a greater role due to the relative lack of reliable and
objective data. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of
high-yield bonds, especially in a thin market.
The Adviser or Subadviser attempts to reduce these risks through diversification
of the applicable Portfolio and by credit analysis of each issuer, as well as by
monitoring broad economic trends and corporate and legislative developments. If
a high-yield bond previously acquired by a Portfolio is downgraded, the Adviser
or Subadviser, as appropriate, will evaluate the security and determine whether
to retain or dispose of it.
U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury (such as Government National Mortgage
Association ("GNMA") certificates and Federal Housing Administration
debentures). For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government. They are of the highest
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possible credit quality. These securities are subject to variations in market
value due to fluctuations in interest rates, but if held to maturity, are
guaranteed by the U.S. government to be paid in full.
Securities issued by the U.S. government instrumentalities and certain federal
agencies are neither direct obligations of, nor are they guaranteed by, the U.S.
Treasury. However, they involve federal sponsorship in one way or another. For
example, some are 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, Federal Land Banks, Farmers Home Administration, Central Bank
for Cooperatives, Federal Intermediate Credit Banks and Federal Home Loan Banks.
GNMA CERTIFICATES -- GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
government. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Because both interest and principal payments (including prepayments)
on the underlying mortgage loans are passed through to the holder of the
certificate, GNMA certificates are called "pass-through" securities.
Although the mortgage loans in the pool have maturities of up to 30 years, the
actual average life of the GNMA certificates typically will be substantially
less because the mortgages are subject to normal principal amortization and may
be prepaid prior to maturity. Prepayment rates vary widely and may be affected
by changes in market interest rates. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of the GNMA certificates. Conversely, when interest rates are rising, the rate
of prepayment tends to decrease, thereby lengthening the actual average life of
the GNMA certificates. Accordingly, it is not possible to predict accurately the
average life of a particular pool. Reinvestment of prepayments may occur at
higher or lower rates than the original yield on the certificates. Due to the
prepayment feature and the need to reinvest prepayments of principal at current
rates, GNMA certificates can be less effective than typical bonds of similar
maturities at "locking-in" yields during periods of declining interest rates,
although they may have comparable risks of decline in value during periods of
rising interest rates.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS -- The Federal National Mortgage
Association ("FNMA"), a federally chartered and privately owned corporation,
issues pass-through securities representing an interest in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal and
interest but this guarantee is not backed by the full faith and credit of the
U.S. government. The Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the United States, issues participation
certificates that represent an interest in a pool of conventional mortgage
loans. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal and maintains reserves to protect holders against losses
due to default, but the certificates are not backed by the full faith and credit
of the U.S. government. As is the case with GNMA certificates, the actual
maturity of and realized yield on particular FNMA and FHLMC pass-through
securities will vary based on the prepayment experience of the underlying pool
of mortgages.
OTHER MORTGAGE-RELATED SECURITIES -- The Global Bond, Corporate Bond, High-Yield
Bond, SunAmerica Balanced, Balanced/Phoenix Investment Counsel and Asset
Allocation Portfolios may invest in collateralized mortgage obligations ("CMOs")
or mortgage-backed bonds issued by financial institutions such as commercial
banks, savings and loan associations, mortgage banks and securities
broker-dealers (or affiliates of such institutions established to issue these
securities). CMOs are obligations fully collateralized directly or indirectly by
a pool of mortgages on which payments of principal and interest are dedicated to
payment of principal and interest on the CMOs. Payments on the underlying
mortgages (both interest and principal) are passed through to the holders,
although not necessarily on a pro rata basis, on the same schedule as they are
received. Mortgage-backed bonds are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMOs). Accordingly, a change in the rate of
prepayments on the pool of mortgages could change the effective maturity of a
CMO but not that of a mortgage-backed bond
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(although, like many bonds, mortgage-backed bonds may be callable by the issuer
prior to maturity).
The Corporate Bond, Global Bond, High-Yield Bond, Asset Allocation and Emerging
Markets Portfolios may also invest in stripped mortgage-backed securities
("SMBS"), which are derivative multiclass mortgage securities, provided they are
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions from a pool of mortgage assets. A
common type of SMBS will have one class receiving all of the interest from the
mortgage assets, while the other class will receive all of the principal.
However, in some instances, one class will receive some of the interest and most
of the principal while the other class will receive most of the interest and the
remainder of the principal. If the underlying mortgage assets experience
greater-than-anticipated prepayments of principal, the Portfolio may fail to
fully recoup its initial investment in these securities. Although the market for
such securities is increasingly liquid, certain SMBS may not be readily
marketable and will be considered illiquid for purposes of the Portfolios'
limitation on investments in illiquid securities. The market value of the class
consisting entirely of principal payments generally is unusually volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest from mortgage assets are generally higher
than prevailing market yields on other mortgage-backed securities because their
cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped.
ASSET-BACKED SECURITIES -- These securities represent an interest in a pool of
consumer or other types of loans ("asset-backed securities"). Payments of
principal and interest on the underlying loans are passed through to the holders
of asset-backed securities over the life of the securities. Some asset-backed
securities may be subject to early prepayment of principal, which can be
expected to accelerate during periods of declining interest rates. Such
prepayments can usually be reinvested only at the lower yields then prevailing
in the market. Therefore, during periods of declining interest rates, asset-
backed securities are less likely than other fixed income obligations to
appreciate in value and less effective at locking in a particular yield. On the
other hand, asset-backed securities are subject to substantially the same risk
of depreciation during periods of rising interest rates as other fixed income
securities.
DOLLAR ROLLS -- The Corporate Bond, Global Bond, High-Yield Bond, SunAmerica
Balanced, Asset Allocation and Emerging Markets Portfolios may enter into
"dollar rolls" in which the 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. A
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. A Portfolio also could be compensated through the receipt of fee income
equivalent to a lower forward price. A "covered roll" is a specific type of
dollar roll for which there is an offsetting cash position or a cash equivalent
security position which matures on or before the forward settlement date of the
dollar roll transaction. The Portfolio will hold and maintain in a segregated
account until the settlement date cash or liquid securities in an amount equal
to the forward purchase price. The Portfolios will only enter into covered
rolls. Covered rolls are not treated as a borrowing or other senior security and
will be excluded from the calculation of each Portfolio's borrowings and other
senior securities. 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 that if the broker-dealer to whom
the Portfolio sells the security becomes insolvent, the Portfolio's right to
purchase or repurchase the security subject to the dollar roll may be restricted
and the instrument which the Portfolio is required to repurchase may be worth
less than an instrument which the Portfolio originally held. Successful use of
dollar rolls will depend upon the Adviser's or Subadviser'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.
SHORT-TERM DEBT SECURITIES -- Debt securities maturing within 397 days of the
date of purchase include (1) commercial bank obligations (certificates of
deposit, bankers' acceptances (time drafts 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)), (2) savings
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association obligations (certificates of deposit issued by mutual savings banks
or savings and loan associations), (3) commercial paper (short-term notes with
maturities of up to 9 months issued by corporations or governmental bodies), (4)
corporate bonds and notes (corporate obligations that mature, or that may be
redeemed, in 397 days or less), and (5) 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 397
days, they are also considered short-term debt securities.
ZERO-COUPON, PAY-IN-KIND AND DEFERRED INTEREST BONDS -- The Corporate Bond,
Global Bond, High-Yield Bond, Worldwide High Income, SunAmerica Balanced,
Balanced/Phoenix Investment Counsel, Asset Allocation, and Venture Value
Portfolios may invest in zero-coupon bonds as well as deferred interest bonds,
or other obligations that contain "original issue discount" for federal income
tax purposes. In addition, the Corporate Bond, High-Yield Bond and Worldwide
High Income Portfolios may invest in pay-in-kind securities. Zero-coupon,
deferred interest and capital appreciation bonds are debt obligations which are
issued or purchased at a significant discount from face value. Pay-in-kind bonds
are debt obligations which provide that the issuer thereof may, at its option,
pay interest on such bonds in cash or in the form of additional debt
obligations. Such investments may experience greater volatility in market value
due to changes in interest rates than do debt obligations, which make regular
payments of interest. A Portfolio will accrue income on such investments for tax
and accounting purposes, as required, which is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of other portfolio securities under disadvantageous circumstances to
satisfy the Portfolio's distribution obligations.
REPURCHASE AGREEMENTS -- Each Portfolio may enter into repurchase agreements,
under which the Portfolio buys a security and obtains a simultaneous commitment
from the seller to repurchase the security at a specified time and price. The
seller must maintain appropriate collateral in a segregated account. Each
Portfolio will only enter into repurchase agreements involving securities in
which it could otherwise invest and with selected banks and securities dealers
whose financial condition is monitored by the Adviser or applicable Subadviser,
subject to the oversight of the Board of Trustees. If the seller under the
repurchase agreement defaults, the Portfolio may incur a loss if the value of
the collateral securing the repurchase agreement has declined, and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the
collateral by the Portfolio may be delayed or limited.
REVERSE REPURCHASE AGREEMENTS -- The Cash Management, Corporate Bond, High-Yield
Bond, Worldwide High Income, SunAmerica Balanced, Utility, Federated Value and
Aggressive Growth Portfolios may enter into reverse repurchase agreements. In a
reverse repurchase agreement, the Portfolio sells a security subject to the
right and obligation to repurchase such security. The Portfolio then invests the
proceeds from the transaction in another obligation in which the Portfolio is
authorized to invest. In order to minimize any risk involved, the Portfolio
maintains in a segregated account cash or liquid securities equal in value to
the repurchase price.
ILLIQUID SECURITIES -- Each of the Portfolios may invest no more than 15% (10%
in the case of the Cash Management Portfolio) of the value of its net assets in
securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, certain interest-rate and
currency swaps, caps, floors and collars. For this purpose, not all securities
which are restricted are deemed to be illiquid. For example, restricted
securities which the Board of Trustees, or the Adviser (or Subadviser, as the
case may be) pursuant to guidelines established by the Board of Trustees, has
determined to be marketable, such as securities eligible for sale under Rule
144A promulgated under the Securities Act of 1933, as amended, or certain
private placements of commercial paper issued in reliance on an exemption from
such Act pursuant to Section 4(2) thereof, may be deemed to be liquid for
purposes of this restriction. This investment practice could have the effect of
increasing the level of illiquidity in the Portfolio to the extent that
qualified institutional buyers (as defined in Rule 144A) become for a time
uninterested in purchasing these restricted securities. In addition, a
repurchase agreement which by its terms can be liquidated before its nominal
fixed-term on seven days or less notice is regarded as a liquid instrument.
Subject to the applicable limitation on illiquid securities investments, a
Portfolio may acquire securities issued by the U.S. government, its agencies or
instrumentalities in a private placement. See "Investment Objectives and
Policies -- Illiquid Securities" in the Statement of Additional Information for
a further discussion of investments in such securities.
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FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED AND DELAYED-DELIVERY
TRANSACTIONS -- Each Portfolio (except Equity Index Portfolio) may purchase
securities on a firm commitment, when-issued or delayed-delivery basis. Firm
commitment agreements and when-issued or delayed-delivery transactions call for
the purchase or sale of securities at an agreed-upon price on a specified future
date. While a Portfolio will only purchase securities on a when-issued or
delayed-delivery basis with the intention of acquiring the securities, the
Portfolio may sell the securities before the settlement date, if it is deemed
advisable to do so. At the time a Portfolio makes the commitment to purchase
securities on a when-issued or delayed-delivery basis, the Portfolio will record
the transaction and thereafter reflect the value, each day, of such security in
determining the net asset value of the Portfolio. At the time of delivery of the
securities, the value may be more or less than the purchase price. A Portfolio
will maintain in a segregated account liquid assets having a value equal to or
greater than the Portfolio's purchase commitments. The Portfolio will likewise
segregate liquid assets with respect to securities sold on a delayed-delivery
basis.
INTEREST-RATE SWAPS, MORTGAGE SWAPS, CAPS, FLOORS AND COLLARS -- In order to
protect the value of the Corporate Bond, Global Bond, Asset Allocation and
Emerging Markets Portfolios from interest rate fluctuations and to hedge against
fluctuations in the fixed income market in which the Portfolio's investments are
traded, the Portfolios 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. The Global Bond Portfolio may also enter into interest-rate swaps
for non-hedging purposes. Interest-rate swaps involve the exchange by the
Portfolio with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating-rate payments for fixed-rate payments.
Since interest-rate swaps are individually negotiated, the Portfolios expect to
achieve an acceptable degree of correlation between their respective portfolio
investments and their interest-rate positions. The Portfolios will only enter
into interest-rate swaps on a net basis, which means that the two payment
streams are netted out, with the Portfolios 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, if any. 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.
Mortgage swaps are similar to interest-rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, upon
which the value of the interest payments is based, is tied to a reference pool
or pools of mortgages.
The purchase of an interest-rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such
interest-rate cap. The purchase of an interest-rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate floor. An interest-rate collar is the
combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates.
The Portfolios will not enter into any mortgage swap, interest-rate swap, cap or
floor transaction unless the unsecured commercial paper, senior debt, or the
claims paying ability of the other party thereto is rated either AA or A-1 or
better by S&P or Aa or P-1 or better by Moody's, or is determined to be of
equivalent quality by the applicable Subadviser.
STRUCTURED SECURITIES -- The Global Bond, Worldwide High Income, Asset
Allocation, International Growth and Income and Emerging Markets Portfolios may
invest in structured notes, bonds or debentures, the value of the principal of
and/or interest on which is determined by reference to changes in the value of
specific currencies, interest rates, commodities, indices or other financial
indicators (the "Reference") or the relative change in two or more References.
The interest rate or the principal amount payable upon maturity or redemption
may be increased or decreased depending upon changes in the applicable
Reference. The terms of the structured securities may provide that in certain
circumstances no principal is due at maturity and, therefore, may result in the
loss of the Portfolio's investment. Structured securities may be positively or
negatively indexed, so that appreciation
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of the Reference may produce an increase or decrease in the interest rate or
value of the security at maturity. In addition, the change in interest rate or
the value of the security at maturity may be a multiple of the change in the
value of the Reference. Consequently, structured securities entail a greater
degree of market risk than other types of debt obligations. Structured
securities may also be more volatile, less liquid and more difficult to price
accurately than less complex securities.
LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS -- The Worldwide High Income
Portfolio may invest a portion of its assets in "loan participations." By
purchasing a loan participation, the Portfolio acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. Many such loans are secured, and most impose restrictive covenants
which must be met by the borrower. These loans are made generally to finance
internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs
and other corporate activities. Such loans may be in default at the time of
purchase. The Portfolio may also purchase trade or other claims against
companies, which generally represent money owed by the company to a supplier of
goods or services. These claims may also be purchased at a time when the company
is in default. Certain of the loan participations acquired by the Portfolio may
involve credit facilities or other standby financing commitments which obligate
the Portfolio to pay additional cash on a certain date or on demand.
The highly leveraged nature of many such loans may make such loans especially
vulnerable to adverse changes in economic or market conditions. Loan
participations and other direct investments may not be in the form of securities
or may be subject to restrictions on transfer, and only limited opportunities
may exist to resell such instruments. As a result, the Portfolio may be unable
to sell such investments at an opportune time or may have to resell them at less
than fair market value.
SECURITIES LENDING -- Each Portfolio (except the Cash Management Portfolio) may
lend portfolio securities in amounts up to 33 1/3% of its respective total
assets to brokers, dealers and other financial institutions, provided such loans
are callable at any time by the Portfolio and are at all times secured by cash
or equivalent collateral. By lending its portfolio securities, a Portfolio will
receive income while retaining the securities' potential for capital
appreciation. As with any extensions of credit, there are risks of delay in
recovery and, in some cases, even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will be made only to firms deemed by the Adviser or Subadviser to be
creditworthy. The proceeds of such loans will be invested in high-quality
short-term debt securities, including repurchase agreements.
BORROWING AND OTHER FORMS OF LEVERAGE -- All of the Portfolios (except the Cash
Management) are authorized to borrow money to the extent permitted by applicable
law. The 1940 Act permits each Portfolio to borrow up to 33 1/3% of its total
assets from banks for temporary or emergency purposes. In seeking to enhance
performance, a Portfolio may borrow for investment purposes and may pledge
assets to secure such borrowings. The Cash Management Portfolio may not borrow
money, except from banks for temporary emergency purposes, and then in an amount
not in excess of 5% of the value of the Portfolio's total assets. In the event
that asset coverage for a Portfolio's borrowings falls below 300%, the Portfolio
will reduce within three days the amount of its borrowings in order to provide
for 300% asset coverage.
To the extent a Portfolio borrows for investment purposes, borrowing creates
leverage which is a speculative characteristic. Although a Portfolio is
authorized to borrow, it will do so only when the Adviser or Subadviser believes
that borrowing will benefit the Portfolio after taking into account
considerations such as the costs of borrowing and the likely investment returns
on securities purchased with borrowed monies. Borrowing by a Portfolio will
create the opportunity for increased net income but, at the same time, will
involve special risk considerations. Leveraging results from borrowing and will
magnify declines as well as increases in a Portfolio's net asset value per share
and net yield. The Portfolios expect that all of their borrowing will be made on
a secured basis. The Portfolios will maintain a segregated account of cash or
other liquid assets securing the borrowing for the benefit of the lenders. If
assets used to secure a borrowing decrease in value, a Portfolio may be required
to pledge additional collateral to the lender in the form of cash or securities
to avoid liquidation of those assets.
INVESTMENT IN SMALL CAP COMPANIES -- The SunAmerica Balanced, Venture Value,
Small Company Value and Aggressive Growth Portfolios and certain other
Portfolios may invest in small companies having market capitalizations of under
$1 billion. While such companies may realize more substantial growth than
larger, more established companies, they may also be subject to some
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additional risks. 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 then 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.
RISKS AND CONSIDERATIONS APPLICABLE TO INVESTMENT IN SECURITIES OF FOREIGN
ISSUERS -- There are elements of risk and opportunity involved, when investments
in foreign issuers are made, which include: trade imbalances and related
economic policies; currency fluctuations; foreign exchange control policies;
taxation on income from sources in such countries; expropriation or confiscatory
taxation; limitation on the removal of funds or other assets; political or
social instability; the diverse structure and liquidity of securities markets in
various countries and regions; policies of governments with respect to possible
nationalization of their industries; and other specific local political and
economic considerations. There may be less information publicly available about
foreign companies, and foreign companies may not be subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those of U.S. companies. Investment decisions made in the context
of the Portfolios' objectives and policies involve the evaluation of
opportunities and risks presented by probable future currency relationships,
especially during periods of broad adjustments in such relationships.
The Emerging Markets Portfolio will invest, and the other Portfolios (except the
Cash Management and Equity Index Portfolios) may invest, in issuers domiciled
in, or governments of, developing countries or emerging markets as well as
developed countries. Although there is no universally accepted definition, a
developing or emerging market country is generally considered to be a country
which is in the initial stages of its industrialization cycle with a low per
capita gross national product. Historical experience indicates that the markets
of developing countries have been more volatile than the markets of developed
countries; however, such markets can provide higher rates of return to
investors. The risks described above with respect to investment in foreign
securities generally may be exacerbated with respect to investments in
developing or emerging countries; however, such markets can provide higher rates
of return to investors. Investment in an emerging market country may involve
certain risks, including a less diverse and mature economic structure, a less
stable political system, an economy based on only a few industries or dependent
on international aid or development assistance, the vulnerability to local or
global trade conditions, extreme debt burdens, or volatile inflation rates.
The performance of investments in securities denominated in a foreign currency
("non-dollar securities") will depend, among other things, on the strength of
the foreign currency against the dollar and the interest rate environment in the
country issuing the foreign currency. Absent other events which 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
nondollar 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.
Additional costs could be incurred in connection with a Portfolio's foreign
investment activities. Foreign brokerage commissions are generally higher than
in the U.S. and a Portfolio will bear certain expenses in connection with its
foreign currency transactions. Increased custodian costs as well as
administrative difficulties (such as the applicability of foreign laws to
foreign custodians in various circumstances including bankruptcy, ability to
recover lost assets, expropriation, nationalization, record access, etc.) may be
associated with the maintenance of assets in foreign jurisdictions.
AMERICAN DEPOSITARY RECEIPTS -- Certain of the Portfolios may invest in American
Depositary Receipts ("ADRs") which are certificates issued by a U.S. depository
(usually a bank) and represent a specified quantity of shares of an underlying
non-U.S. stock on deposit with a custodian bank as collateral. Because ADRs
trade on U.S. securities exchanges,
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the Portfolios' Subadvisers do not treat them as foreign securities.
Nonetheless, they are subject to many of the risks of foreign securities such as
changes in exchange rates and more limited information about foreign issuers.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rate fluctuations are a major
area of risk and opportunity for the Global Bond, Worldwide High Income,
International Growth and Income, Global Equities, International Diversified
Equities and Emerging Markets Portfolios, and is of some risk to the other
Portfolios. Each Portfolio (other than the Cash Management and Equity Index
Portfolios), has the ability to hold a portion of its assets in foreign
currencies and to enter into forward foreign currency exchange contracts. Each
may also purchase and sell exchange-traded futures contracts relating to foreign
currency and purchase and sell put and call options on currencies and futures
contracts. A significant portion of the Portfolios' currency transactions will
be over-the-counter transactions.
Each Portfolio may enter into forward foreign currency exchange contracts to
reduce the risks of fluctuations in exchange rates; however, these contracts
cannot eliminate all such risks and do not eliminate fluctuations in the prices
of the Portfolio's portfolio securities.
Each Portfolio (other than the Cash Management and Equity Index Portfolios and
except as described below), may purchase and write put and call options on
currencies for the purpose of protecting against declines in the U.S. dollar
value of foreign portfolio securities and against increases in the U.S. dollar
cost of foreign securities to be acquired. The purchase of an option on currency
may constitute an effective hedge against exchange rate fluctuations; however,
in the event of exchange rate movements adverse to the Portfolio's position, the
Portfolio may forfeit the entire amount of the premium plus related transaction
costs. As with other kinds of option transactions, the writing of an option on
currency will constitute only a partial hedge, up to an amount of the premium
received, and a Portfolio could be required to purchase or sell currencies at
disadvantageous exchange rates, thereby incurring losses.
Each Portfolio that invests in foreign securities may utilize certain techniques
to attempt to enhance return, including forward foreign currency exchange
contracts, currency options and currency swaps. These techniques may be used
when the Subadviser anticipates that a foreign currency will appreciate or
depreciate in value, but securities denominated in that currency do not present
attractive investment opportunities or are not included in the Portfolio. Each
Portfolio may also use currency contracts and options to cross-hedge, which
involves selling or purchasing instruments on one currency to hedge against
changes in exchange rates for a different currency with a pattern of
correlation. To limit any leverage in connection with currency contract
transactions for hedging or non-hedging purposes, each Portfolio will segregate
cash or liquid securities in an amount sufficient to meet its payment
obligations in these transactions or otherwise "cover" the obligation. See the
Statement of Additional Information for more information regarding foreign
currency transactions.
The Global Bond, Worldwide High Income, Asset Allocation, Real Estate,
International Growth and Income, Global Equities, International Diversified
Equities and Emerging Markets Portfolios may enter into currency swaps. Currency
swaps involve the exchange by the Portfolio with another party of their
respective rights to make or receive payments in specified currencies. Currency
swaps usually involve the delivery of the entire principal value of one
designated currency in exchange for the other designated currency. Therefore,
the entire principal value of a currency swap is subject to the risk that the
other party to the swap will default on its contractual delivery obligations.
The use of currency swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Adviser or a Subadviser is incorrect
in its forecasts of market values and currency exchange rates, the investment
performance of the respective Portfolio would be less favorable than it would
have been if this investment technique were not used.
EURO CONVERSION -- Effective January 1, 1999, several European countries will
irrevocably fix their existing national currencies to a new single European
currency unit, the "euro." Certain European investments may be subject to
additional risks as a result of this conversion. These risks include adverse tax
and accounting consequences, as well as difficulty in processing transactions.
The Adviser is aware of such potential problems and is coordinating efforts to
prevent or alleviate their adverse impact on the Portfolios. There can be no
assurance that a Portfolio will not suffer any adverse consequences as a result
of the euro conversion.
OPTIONS ON SECURITIES AND SECURITIES INDICES -- Each Portfolio (other than the
Cash Management Portfolio) may write (sell) covered call and put options on any
securities in which it may invest. The
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Small Company Value and Equity Income Portfolio may each write covered call
options covering up to 25% of the equity securities it owns. Each Portfolio may
also write call and put options on any securities index composed of securities
in which it may invest. The Small Company Value Portfolio does not intend to
write call and put options on securities indices. A Portfolio may purchase put
and call options on any securities in which it may invest or options on any
securities index composed of securities in which it may invest. None of the
Equity Income, Small Company Value and Equity Index Portfolios will invest more
than 5% of the value of their total assets in purchased options, provided that
options which are "in the money" at the time of purchase may be excluded from
this 5% limitation. A call option is "in the money" if the exercise price is
lower than the current market price of the underlying security or index, and a
put option is "in the money" if the exercise price is higher than the current
market price.
All call options written by each Portfolio are covered, which means that the
Portfolio will own the securities subject to the option so long as the option is
outstanding or will have an absolute and immediate right to acquire such
security without additional cash consideration (or for additional cash
consideration held in a segregated account) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Portfolio
holds a call on the same security and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Portfolio in liquid
assets. A put option written by a Portfolio is covered if the Portfolio
maintains liquid assets with a value equal to the exercise price in a segregated
account, or else holds a put on the same security and in the same principal
amount as the put written where the exercise price of the put held (i) is equal
to or greater than the exercise price of the put written or (ii) is less than
the exercise price of the put written if the difference is maintained by the
Portfolio in liquid assets. Put and call options written by a Portfolio may also
be covered in such other manner as may be in accordance with the requirements of
the exchange on which, or the counterparty with which, the option is traded, and
applicable laws and regulations.
Each Portfolio (other than the Cash Management, Equity Income, Small Company
Value and Equity Index Portfolios) may purchase and write options on the yield
"spread," or yield differential between two securities. Such transactions are
referred to as "yield curve" options. In contrast to other types of options, a
yield curve option is based on the difference between the yields of designated
securities, rather than the prices of the individual securities, and is settled
through cash payments. Accordingly, a yield curve option is profitable to the
holder if this differential widens (in the case of a call) or narrows (in the
case of a put), regardless of whether the yields of the underlying securities
increase or decrease. All yield curve options written by a Portfolio will be
covered in the manner described above.
There is no assurance that a liquid secondary market on a domestic or foreign
options exchange will exist for any particular exchange-traded option or at any
particular time. If a Portfolio is unable to effect a closing purchase
transaction with respect to covered options it has written, the Portfolio will
not be able to sell the underlying securities or dispose of assets held in a
segregated account until the options expire or are exercised. Similarly, if a
Portfolio is unable to effect a closing sale transaction with respect to options
it has purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of the
underlying securities. In a closing purchase or sale transaction, a Portfolio
acquires a position that offsets and cancels an option position then held by the
Portfolio.
A Portfolio may purchase and sell both options that are traded: (i) on U.S.
exchanges; (ii) on foreign exchanges; and (iii) over-the-counter with broker-
dealers who make markets in these options. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that broker-dealers participating in such transactions will
not fulfill their obligations. Until such time as the staff of the SEC changes
its position, each Portfolio will treat purchased over-the-counter options and
all assets used to cover written over-the-counter options as illiquid
securities. However, for options written with primary dealers in U.S. government
securities pursuant to an agreement requiring a closing purchase transaction at
a formula price, the amount of illiquid securities may be calculated with
reference to a formula approved by the SEC staff.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The use of options to increase total
return involves the risk of loss if the Adviser or Subadviser is incorrect
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in its expectations of fluctuations in securities prices or interest rates. The
successful use of puts for hedging purposes depends in part on the ability of
the Adviser or Subadviser to predict future price fluctuations and the degree of
correlation between the options and securities markets. A Portfolio pays
brokerage commissions or spreads in connection with its options transactions.
The writing of options could significantly increase portfolio turnover rate of a
Portfolio and, therefore, associated brokerage commissions or spreads.
FUTURES CONTRACTS AND OPTIONS THEREON -- Futures contracts may be based on
various securities (including U.S. government securities), securities indices,
foreign currencies and other financial instruments and indices. The purchases of
futures contracts or call options thereon can serve as a long hedge, and the
sale of futures or the purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures contracts can serve as a limited
short hedge, using a strategy similar to that used for writing covered call
options on securities and indices. The Equity Index Portfolio will use futures
contracts and related options as a means of gaining exposure to securities in
the S&P 500.
In addition, subject to regulations promulgated by the Commodity Futures Trading
Commission, a Portfolio may engage in futures transactions for non-hedging
purposes. For example, futures strategies can be used to manage the average
duration of a Portfolio. To shorten the average duration of a Portfolio, the
Portfolio may sell a futures contract or a call option thereon, or purchase a
put option on that futures contract; to lengthen the average duration of a
Portfolio, the Portfolio may buy a futures contract or a call option thereon.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Portfolio is required to deposit in a
segregated account with the Trust's custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of cash
or liquid securities, in an amount generally equal to 10% or less of the
contract value. Margin must also be deposited when writing a call option on a
futures contract, in accordance with applicable exchange rules. Unlike margin in
securities transactions, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Portfolio at the termination of the transaction
if all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, the Portfolio may be required by an exchange
to increase the level of its initial margin payment, and initial margin
requirements might be increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures broker
daily as the value of the futures position varies, a process known as "marking
to market." Variation margin does not involve borrowing, but rather represents a
daily settlement of the Portfolio's obligations to or from a futures broker.
When a Portfolio purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when a Portfolio
purchases or sells a futures contract or writes a call option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Portfolio has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while a Portfolio may benefit from the use of futures and options on futures,
unanticipated changes in interest rates, securities prices or currency exchange
rates may result in a poorer overall performance for the Portfolio than if it
had not entered into any futures contracts or options transactions. The loss
incurred by a Portfolio in writing options on futures is potentially unlimited
and may exceed the amount of the premium received.
In the event of an imperfect correlation between a futures position and a
portfolio position which is intended to be protected, the desired protection may
not be obtained and a Portfolio may be exposed to risk of loss. In addition, it
is not possible to hedge fully or perfectly against currency fluctuations
affecting the value of securities denominated in foreign currencies because the
value of such securities is also likely to fluctuate as a result of independent
factors not related to currency fluctuations. Therefore, perfect correlation
between a Portfolio's futures positions and portfolio positions will be
impossible to achieve.
Investment in futures contracts or options thereon may also involve liquidity
risks due, for example, to exchange-imposed daily trading limits that would
prevent the Portfolio from liquidating an unfavorable position. See the
Statement of Additional Information concerning futures and options contracts.
WARRANTS -- Certain Portfolios may invest in warrants which give the holder of
the warrant a
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right to purchase a given number of shares of a particular issue at a specified
price until expiration.
INVERSE FLOATERS -- The Corporate Bond, Asset Allocation and Emerging Markets
Portfolios may invest in leveraged inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floater may be considered to be leveraged to the extent
that its interest rate varies by a magnitude that exceeds the magnitude of the
change in the index rate of interest. The higher degree of leverage inherent in
inverse floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity. Certain inverse floaters may be deemed to be illiquid securities for
purposes of a Portfolio's 15% limitation on investments in such securities.
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MANAGEMENT
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The Trust's Board of Trustees is responsible for the overall supervision of the
operations of the Trust and performs various duties imposed on trustees of
investment companies by the 1940 Act. The Board has retained others to provide
certain services to the Trust.
INVESTMENT ADVISER -- SAAMCo, located at The SunAmerica Center, 733 Third
Avenue, New York, New York 10017-3204, is a corporation organized in 1982 under
the laws of the State of Delaware. SAAMCo is an indirect, wholly-owned
subsidiary of Anchor National Life Insurance Company, which is an indirect
subsidiary of SunAmerica Inc., an investment grade financial services company
with assets held at December 31, 1997, of approximately $52 billion. SAAMCo is
engaged in providing investment advice and management services to the Trust,
other mutual funds and private accounts. As of February 28, 1998, SAAMCo
managed, advised and/or administered assets of approximately $13.7 billion.
The Trust, on behalf of each Portfolio, entered into an Investment Advisory and
Management Agreement (the "Agreement") with SAAMCo to handle the Trust's
day-to-day affairs, to provide investment advisory services, office space, and
other facilities for the management of the affairs of the Trust, and to pay the
compensation of certain officers of the Trust who are affiliated persons of
SAAMCo. The Agreement authorizes SAAMCo to retain one or more Subadvisers to
make the investment decisions for the Portfolios, and to place the purchase and
sale orders for the Portfolio transactions. SAAMCo has hired Subadvisers for
certain Portfolios, and manages the investments of other Portfolios itself
without the assistance of a Subadviser. SAAMCo, in consultation with one or more
SunAmerica affiliates, monitors the activities of the Subadvisers, and from time
to time will recommend the replacement of a Subadviser on the basis of
investment performance or other considerations.
SAAMCo may terminate any Subadvisory Agreement without shareholder approval.
Moreover, SAAMCo has obtained an exemptive order from the SEC which would permit
SAAMCo, subject to certain conditions, to enter into Subadvisory Agreements
relating to the Trust with Subadvisers approved by the Board without obtaining
shareholder approval. The exemptive order would also permit SAAMCo, subject to
the approval of the Board but without shareholder approval, to employ new
Subadvisers for new or existing Portfolios, change the terms of particular
Subadvisory Agreements or continue the employment of existing Subadvisers after
events that would otherwise cause an automatic termination of a Subadvisory
Agreement. Shareholders of a Portfolio have the right to terminate such
agreements for such Portfolio at any time by a vote of the majority of the
outstanding voting securities of such Portfolio. Shareholders will be notified
when SAAMCo intends to commence relying on the exemptive order, and would be
notified of any Subadviser changes effected thereafter.
Purchase and sale orders may be directed to any broker including, in the manner
and to the extent permitted by applicable law, affiliates of the Adviser or a
Subadviser. The individual Portfolio Managers for both the Adviser and
Subadvisers are identified in this section.
The annual rates of the investment advisory fees which apply to the CASH
MANAGEMENT PORTFOLIO are 0.55% on the first $100 million of assets, 0.50% on the
next $200 million and 0.45% on assets over $300 million.
The annual rates of the investment advisory fees which apply to the CORPORATE
BOND PORTFOLIO are 0.70% on the first $50 million of assets, 0.60% on the next
$100 million, 0.55% on the next $100 million and 0.50% on assets over $250
million.
The annual rates of the investment advisory fees which apply to both the GLOBAL
BOND AND ASSET ALLOCATION PORTFOLIOS are 0.75% on the first $50 million of
assets, 0.65% on the next
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$100 million, 0.60% on the next $100 million and 0.55% on assets over $250
million.
The annual rates of the investment advisory fees which apply to the HIGH-YIELD
BOND PORTFOLIO are 0.70% on the first $50 million of assets, 0.65% on the next
$100 million, 0.60% on the next $100 million and 0.55% on assets over $250
million.
The annual rate of the investment advisory fees which apply to each of the
WORLDWIDE HIGH INCOME AND INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIOS are
1.00% of assets.
The annual rates of the investment advisory fees which apply to each of the
SUNAMERICA BALANCED, BALANCED/PHOENIX INVESTMENT COUNSEL, GROWTH-INCOME,
ALLIANCE GROWTH AND GROWTH/PHOENIX INVESTMENT COUNSEL PORTFOLIOS are 0.70% on
the first $50 million of assets, 0.65% on the next $100 million, 0.60% on the
next $150 million, 0.55% on the next $200 million, and 0.50% on assets over $500
million.
The annual rates of the investment advisory fees which apply to the UTILITY AND
FEDERATED VALUE PORTFOLIOS are 0.75% on the first $150 million of assets, 0.60%
on the next $350 million and 0.50% on assets over $500 million.
The annual rate of the investment advisory fees which apply to the EQUITY INCOME
PORTFOLIO is 0.65% of assets.
The annual rate of the investment advisory fees which apply to the SMALL COMPANY
VALUE PORTFOLIO is 1.00% of assets.
The annual rate of the investment advisory fees which applies to the "DOGS" OF
WALL STREET PORTFOLIO is 0.60% of assets.
The annual rates of the investment advisory fees which apply to the VENTURE
VALUE AND REAL ESTATE PORTFOLIOS are 0.80% on the first $100 million of assets,
0.75% on the next $400 million and 0.70% on assets over $500 million.
The annual rates of the investment advisory fees which apply to the PUTNAM
GROWTH PORTFOLIO are 0.85% on the first $150 million of assets, 0.80% on the
next $150 million and 0.70% on assets over $300 million.
The annual rates of the investment advisory fees which apply to the AGGRESSIVE
GROWTH PORTFOLIO are 0.75% on the first $100 million of assets, 0.675% on the
next $150 million, 0.625% on the next $250 million and 0.60% on assets over $500
million.
The annual rate of the investment advisory fees which apply to the EQUITY INDEX
PORTFOLIO is 0.40% of assets.
The annual rates of the investment advisory fees which apply to the
INTERNATIONAL GROWTH AND INCOME PORTFOLIO are 1.00% on the first $150 million of
assets, 0.90% on the next $150 million and 0.80% on assets over $300 million.
The annual rate of the advisory fee which applies to the EMERGING MARKETS
PORTFOLIO is 1.25% of assets.
The annual rates of the investment advisory fees which apply to the GLOBAL
EQUITIES PORTFOLIO are 0.90% on the first $50 million of assets, 0.80% on the
next $100 million, 0.70% on the next $150 million and 0.65% on Assets over $300
million.
For the fiscal year ended November 30, 1997, the following Portfolios paid to
SAAMCo a fee equal to the following percentage of average daily net assets: Cash
Management Portfolio -- 0.54%, Corporate Bond Portfolio -- 0.70%, Global Bond
Portfolio -- 0.72%, High-Yield Bond Portfolio -- 0.66%, Worldwide High Income
Portfolio -- 1.00%, SunAmerica Balanced Portfolio -- 0.70%, Balanced/ Phoenix
Investment Counsel Portfolio -- 0.68%, Asset Allocation Portfolio -- 0.61%,
Utility Portfolio -- 0.75%, Growth-Income Portfolio -- 0.60%, Venture Value
Portfolio -- 0.74%, Alliance Growth Portfolio -- 0.59%, Growth/Phoenix
Investment Counsel Portfolio -- 0.65%, Putnam Growth Portfolio -- 0.83%,
Aggressive Growth Portfolio -- 0.75%, Global Equities Portfolio -- 0.76%,
Federated Value Portfolio -- 0.75% and International Diversified Equities
Portfolio -- 1.00%. For the period June 2, 1997 (commencement of operations)
through November 30, 1997, the following Portfolios paid to SAAMCo a fee equal
to the following percentage of average daily net assets: Real Estate
Portfolio -- 0.69%, International Growth and Income Portfolio -- 0.58% and
Emerging Markets Portfolio -- 0.55%.
The advisory fees for the Putnam Growth Portfolio for the fiscal year ended
November 30, 1997 was calculated at the annual rate set forth in the Statement
of Additional Information under "Investment Advisory and Management
Agreement -- Advisory Fees."
For certain Portfolios, the Adviser has voluntarily agreed to waive fees or
reimburse expenses, if necessary, to keep annual operating expenses at or below
the lesser of the following percentages of each of the following Portfolio's
average net assets: SunAmerica Balanced Portfolio -- 1.00%, "Dogs" of Wall
Street Portfolio -- 0.85%, Utility Portfolio --
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1.05%, Federated Value Portfolio -- 1.05%, Real Estate Portfolio -- 1.25%,
International Growth and Income Portfolio -- 1.60%, Emerging Markets
Portfolio -- 1.90%, Equity Index Portfolio -- 0.55%, Equity Income
Portfolio -- 0.95% and Small Company Value Portfolio -- 1.40%. The Adviser also
may voluntarily waive or reimburse additional amounts to increase the investment
return to a Portfolio's investors. The Adviser may terminate all such waivers
and/or reimbursements at any time. Further, any waivers or reimbursements made
by the Adviser (after June 3, 1996) 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 the Adviser and remain in compliance
with the foregoing expense limitations. For the fiscal year ended November 30,
1997, such recoupments were as follows: SunAmerica Balanced Portfolio -- 0.02%;
Federated Value Portfolio -- 0.05%; and Aggressive Growth Portfolio -- 0.01%.
The term "Assets" means the average daily net assets of the Portfolio. The
investment advisory fees are accrued daily and paid monthly.
SAAMCo's Fixed Income Investment Team headed by P. Christopher Leary has been
responsible for managing the CASH MANAGEMENT PORTFOLIO, HIGH-YIELD BOND
PORTFOLIO and the fixed income component of the SUNAMERICA BALANCED PORTFOLIO
since October 1996. Mr. Leary is an Executive Vice President of SAAMCo and has
been a portfolio manager with the firm since 1990. John W. Risner has
supervisory responsibility for the High-Yield Bond Portfolio. He is a Vice
President of SAAMCo and joined the firm in February 1997. Prior to joining
SAAMCo, Mr. Risner served as Senior Portfolio Manager of the Value Line
Aggressive Income Trust and the Value Line Convertible Fund.
The Domestic Equity Investment Team is responsible for managing the AGGRESSIVE
GROWTH PORTFOLIO, the equity component of the SUNAMERICA BALANCED PORTFOLIO and
the "DOGS" OF WALL STREET PORTFOLIO. The Team is composed of eight investment
professionals and traders, some of whom may focus more heavily on particular
Portfolios or particular aspects of the domestic equity markets. Donna Calder
has supervisory responsibility for the Aggressive Growth Portfolio. Ms. Calder
is a Vice President of SAAMCo and has been a portfolio manager with the firm
since March 1998. Prior to joining SAAMCo, Ms. Calder was the Founder and
General Partner of Manhattan Capital Partners, L.P. Francis D. Gannon has
supervisory responsibility for the equity component of the SunAmerica Balanced
Portfolio and the "Dogs" of Wall Street Portfolio. Mr. Gannon joined SAAMCo as
an equity analyst in 1993.
SUBADVISERS AND PORTFOLIO MANAGEMENT -- The organizations described below act as
Subadvisers to the Trust and certain of its Portfolios pursuant to Subadvisory
Agreements with SAAMCo. Under the Subadvisory Agreements, the Subadvisers manage
the investment and reinvestment of the assets of the respective Portfolios for
which they are responsible. Each of the Subadvisers is independent of SAAMCo and
discharges its responsibilities subject to the policies of the Trustees and the
oversight and supervision of SAAMCo, which pays the Subadvisers' fees.
Alliance Capital Management L.P. The Subadviser for the Growth-Income, Alliance
Growth and Global Equities Portfolios is Alliance. Alliance is a Delaware
limited partnership with principal offices at 1345 Avenue of the Americas, New
York, New York 10105. Alliance is a major international investment manager,
supervising client accounts with assets totaling over $218.7 billion as of
December 31, 1997. Alliance serves its clients, who primarily are major
corporate employee benefit funds, investment companies, foundations, endowment
funds and public employee retirement systems. As of December 31, 1997, Alliance
was retained as an investment manager of employee benefit fund assets for 28 of
the Fortune 100 companies.
The portion of the annual investment advisory fees received by SAAMCo which is
paid to Alliance with respect to the Growth-Income and Alliance Growth
Portfolios is 0.35% on the first $50 million of Assets, 0.30% on the next $100
million, 0.25% on the next $150 million, 0.20% on the next $200 million and
0.15% on Assets over $500 million; and with respect to the Global Equities
Portfolio is 0.50% on the first $50 million of Assets, 0.40% on the next $100
million, 0.30% on the next $150 million and 0.25% on Assets over $300 million.
For the fiscal year ended November 30, 1997, SAAMCo paid to Alliance, with
respect to each Portfolio subadvised by Alliance, a fee equal to the following
percentage of average daily net assets: Growth-Income Portfolio -- 0.25%,
Alliance Growth Portfolio -- 0.24%, and Global Equities Portfolio -- 0.36%.
James G. Reilly has served as the portfolio manager for the ALLIANCE GROWTH
PORTFOLIO since the inception date of February 9, 1993. Mr. Reilly is a Senior
Vice President of Alliance and joined the company in 1984.
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Michael R. Baldwin and Bruce W. Calvert have served as co-portfolio managers of
the GROWTH-INCOME PORTFOLIO since the inception date of February 9, 1993 and
Stephen W. Pelensky has served as a co-portfolio manager for the Portfolio since
June 30, 1995. Mr. Baldwin is a Vice President of Alliance and joined the
company in 1989. Mr. Calvert is Vice Chairman and Chief Investment Officer, and
joined Alliance in 1973. Mr. Pelensky is a Vice President of Alliance and joined
the company in 1994. Prior to joining Alliance, Mr. Pelensky was a portfolio
manager and analyst with Affinity Investment Advisors and BEA Associates.
Mr. Pelensky has also served as co-portfolio manager of the domestic equity
component of the GLOBAL EQUITIES PORTFOLIO since June 30, 1995 and Stephen
Beinhacker has served as co-portfolio manager of the foreign equity component of
the Global Equities Portfolio since February 1997. Mr. Beinhacker is a Director
and Vice President of Alliance and joined the company in 1992.
Davis Selected Advisers, L.P. The Subadviser of the Venture Value and Real
Estate Portfolios is Davis Selected, 124 East Marcy Street, Santa Fe, New Mexico
87501. Venture Advisers, Inc. is the sole General Partner of the limited
partnership, which, in turn, is controlled by Shelby M.C. Davis. Davis Selected
provides advisory services to other investment companies. As of February 28,
1998, Davis Selected had over $16.58 billion of assets under management. The
Subadvisory Agreement with Davis Selected provides that Davis Selected may
delegate any of its responsibilities under the agreement to one of its
affiliates, including Davis Selected Advisers -- NY, Inc., a wholly-owned
subsidiary; however Davis Selected remains ultimately responsible (subject to
supervision by SAAMCo) for the assets of the Portfolios allocated to it.
The portion of the annual investment advisory fee received by SAAMCo which is
paid to Davis Selected with respect to the Venture Value and Real Estate
Portfolios is 0.45% on the first $100 million of Assets, 0.40% on the next $400
million and 0.35% on Assets over $500 million. For the fiscal year ended
November 30, 1997, SAAMCo paid to Davis Selected, with respect to the Venture
Value and Real Estate Portfolios, a fee equal to 0.39% and 0.22%, respectively,
of each Portfolio's average daily net assets.
Christopher C. Davis has served as portfolio manager of the VENTURE VALUE
PORTFOLIO since October 1994. He has been employed by Davis Selected since
September, 1989 as a research analyst, assistant portfolio manager, co-portfolio
manager, and portfolio manager, working side by side with Shelby M.C. Davis.
Andrew A. Davis has served as the primary portfolio manager of the REAL ESTATE
PORTFOLIO since October 1994. He is a Vice President of Davis Series, Inc. and a
Co-President of Davis Selected's General Partner. Until February 1993, he was
the Vice President and head of convertible research at PaineWebber Incorporated.
Shelby M.C. Davis previously served as co-portfolio manager of the Venture Value
Portfolio. He will continue to consult with Christopher and Andrew Davis in his
capacity as Chief Investment Officer of Davis Selected.
Federated Investment Counseling. The Subadviser for the Corporate Bond, Utility
and Federated Value Portfolios is Federated, Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779. Federated is a subsidiary
of Federated Investors, Inc., a Pennsylvania corporation. All of the Class A
(voting) stock of Federated Investors, Inc. is owned by a trust, the trustees of
which are John F. Donahue, Chairman and Director of Federated Investors, Inc.,
Mr. Donahue's wife and Mr. Donahue's son, J. Christopher Donahue, President and
Director of Federated Investors, Inc. Federated together with other subsidiaries
of Federated Investors, Inc. serves as investment adviser to a number of
investment companies and private accounts. With over $139.5 billion invested
across more than 300 funds under management and/or administration as of December
31, 1997 Federated Investors, Inc. is one of the largest mutual fund investment
managers in the U.S.
The portion of the annual investment advisory fees received by SAAMCo which is
paid to Federated with respect to the Corporate Bond Portfolio is 0.30% on the
first $25 million of Assets, 0.25% on the next $25 million, 0.20% on the next
$100 million and 0.15% on Assets over $150 million; and with respect to each of
the Utility and Federated Value Portfolios is 0.55% on the first $20 million of
Assets, 0.35% on the next $30 million, 0.25% on the next $100 million, 0.20% on
the next $350 million and 0.15% on Assets over $500 million. For the fiscal year
ended November 30, 1997, SAAMCo paid to Federated, with respect to each
Portfolio subadvised by Federated, a fee equal to the following percentage of
average daily net assets: Utility -- 0.55%, Federated Value -- 0.46%, and
Corporate Bond Portfolio -- 0.27%.
Joseph M. Balestrino and Mark E. Durbiano have served as co-portfolio managers
of the CORPORATE BOND PORTFOLIO since May 1996. Mr. Balestrino
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joined Federated Investors, Inc. in 1986 and has been a Vice President of
Federated Advisers since 1995. Mr. Balestrino served as an Assistant Vice
President of Federated Advisers from 1991 to 1995. Mr. Balestrino is a Chartered
Financial Analyst. Mr. Durbiano joined Federated Investors, Inc. in 1982 and has
been a Senior Vice President of Federated Advisers since January 1996. From 1988
through 1995, Mr. Durbiano was a Vice President of Federated Advisers. Mr.
Durbiano is a Chartered Financial Analyst.
Linda A. Duessel has served as portfolio manager of the UTILITY PORTFOLIO since
June 1996. Ms. Duessel joined Federated Investors, Inc. in 1991, and has been a
Vice President of Federated Advisers since 1995. She was an Assistant Vice
President of Federated Advisers from 1991 until 1995. Ms. Duessel is a Certified
Public Accountant and a Chartered Financial Analyst.
Michael P. Donnelly and Arthur J. Barry have served as co-portfolio managers of
the FEDERATED VALUE PORTFOLIO since October 1997 and October 1998, respectively.
Mr. Donnelly joined Federated Investors, Inc. in 1989 as an Investment Analyst
and has been a Vice President of Federated Investors, Inc. since 1994. He served
as an Assistant Vice President of an affiliate of Federated Investors, Inc. from
1992 to 1994. Mr. Donnelly is a Chartered Financial Analyst. Mr. Barry, who has
been a Vice President of Federated since July 1998 and was an Assistant Vice
President from April 1997 to July 1998, joined an affiliate of Federated in 1994
as an Investment Analyst. Mr. Barry is a Chartered Financial Analyst and
received his M.S.I.A. from Carnegie Mellon University, where he concentrated in
finance and accounting.
First American Asset Management. The Subadviser for the Equity Income, Small
Company Value and Equity Index Portfolios is First American, a division of U.S.
Bank National Association. First American is located at 601 Second Avenue South,
Minneapolis, Minnesota 55402. First American has acted as an investment adviser
to First American Investment Funds, Inc. since its inception in 1987 and has
acted as investment adviser to First American Funds, Inc. since 1982 and to
First American Strategy Funds, Inc. since 1996. As of July 31, 1998, First
American was managing accounts with an aggregate value of approximately $77
billion, including mutual fund assets of approximately $31 billion. U.S.
Bancorp, 601 Second Avenue South, Minneapolis, Minnesota 55402, is the holding
company for First American.
The portion of the annual investment advisory fees received by SAAMCo which is
paid to First American with respect to the Equity Income Portfolio is 0.30% of
all assets; with respect to the Equity Index Portfolio is 0.125% of all assets;
and with respect to the Small Company Value Portfolio is 0.80% of all assets.
The EQUITY INCOME PORTFOLIO is managed by a committee comprised of Gerald C.
Bren, James Doak, Albin S. Dubiak, Cori B. Johnson, John M. Murphy, Roland P.
Whitcomb and Glenn E. Johnson, whose backgrounds are set forth below. The SMALL
COMPANY VALUE FUND PORTFOLIO is managed by a committee comprised of Albin S.
Dubiak, John D. Grangaard, Michael K. Sabbann, Douglas K. Rose, Robert L. Buss,
Anthony W. Hipple and Frank G. Magdalen, whose backgrounds also are set forth
below.
James Doak joined First American in 1982 after serving for two years as vice
president of INA Capital Advisors and ten years as Vice President of
Loomis-Sayles & Co. He has managed assets for individual and institutional
clients, specializing in equity investments. Mr. Doak received his bachelor's
degree from Brown University and his master's degree in business administration
from Wharton School of Business. He is a Chartered Financial Analyst.
John M. Murphy, Jr. is Chief Investment Officer of First American, having joined
the Subadviser in 1984. He has more than 30 years in the investment management
field and served with Investment Advisers, Inc. and Blyth, Eastman, Dillon & Co.
before joining First American. Mr. Murphy received his bachelor's degree from
Regis College.
Gerald C. Bren joined First American in 1972 as an investment analyst. Mr. Bren
received his master's degree in business administration from the University of
Chicago. He is a Chartered Financial Analyst.
Albin S. Dubiak began his investment career as a security trader with The First
National Bank of Chicago in 1963 before joining First American as an investment
analyst in 1969. Mr. Dubiak received his bachelor's degree from Indiana
University and his master's degree in business administration from the
University of Arizona.
Cori B. Johnson joined First American in 1991 as a securities analyst. Ms.
Johnson received her bachelor's degree from Concordia College and her master's
degree in business administration from the University of Minnesota. She is a
Chartered Financial Analyst.
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Roland P. Whitcomb, Jr. joined First American in 1986 after serving as an
account executive with Smith Barney & Co. since 1979. Mr. Whitcomb received his
bachelor's degree from the University of Chicago. He is a Chartered Financial
Analyst.
Douglas K. Rose joined First American in 1996 and has 10 years of investment
industry experience. Mr. Rose has analytic responsibilities for the business
services, environmental services, leisure and restaurant/lodging industries. Mr.
Rose holds a bachelor's degree from the University of Nebraska, and a master's
degree in business administration from the University of Minnesota. He is a
Chartered Financial Analyst.
Robert L. Buss joined First American in 1989 and has nine years of investment
industry experience. In 1996, Mr. Buss began analytical work in the equity
research area covering electric equipment, machinery and diversified
manufacturing. Mr. Buss holds a bachelor's degree in economics from the
University of Minnesota.
Anthony W. Hipple is primarily responsible for portfolio analytics and
screening. Mr. Hipple joined First American in 1996 and has four years of
investment industry experience. Mr. Hipple holds a bachelor's degree from the
University of Northern Iowa and a master's degree in business administration
from the University of Iowa.
Frank G. Magdalen joined First American in 1979 and has 24 years of investment
industry experience. Prior to joining First American, he was with the First
Interstate and Farmers Group. Mr. Magdalen received his bachelor's degree from
the University of Portland and his master's degree in business administration
from the University of Southern California. He is a Chartered Financial Analyst
and past president of the Portland Society of Financial Analysts.
Glenn E. Johnson joined First American in 1989 and has 13 years of investment
industry experience. Prior to joining First American, he was an analyst with
Piper Jaffray Inc. Mr. Johnson received his bachelor's degree and his master's
degree in business administration from the University of Minnesota. He is a
Chartered Financial Analyst.
Michael K. Sabbann joined First American in 1998 and has 11 years of investment
industry experience. Mr. Sabbann is responsible for analyzing and recommending
equity investments in small market capitalization companies for the Small
Company Value Portfolio. Mr. Sabbann received an MBA from the University of
Minnesota's Carlson School of Business in 1986 and a BA in chemistry from the
University of Minnesota in 1979. He is a Certified Financial Analyst.
John D. Grangaard joined First American in 1998 and has a diverse background
with 18 years of experience in the financial industry. Mr. Grangaard's
responsibilities include analysis for the financial industry in managing the
Small Company Value Portfolio. His professional responsibilities have included
work in securities analysis, corporate finance and banking, venture capital,
asset liability management and strategic planning. Mr. Grangaard holds a B.A. in
English from Yale University, an MBA in finance from the University of Minnesota
and a JD from the University of North Dakota.
The EQUITY INDEX PORTFOLIO is managed by James S. Rovner and Evan C. Lundquist.
James S. Rovner joined First American in 1986 and has managed assets for
institutional and individual clients for over 15 years, specializing in equity
and balanced investment strategies. Mr. Rovner received his bachelor's degree
and his master's degree in business administration from the University of
Wisconsin. He is a Chartered Financial Analyst.
Evan C. Lundquist joined First American in 1993 and has four years of investment
industry experience. Mr. Lundquist has analytic responsibilities for
paper/forest products, metals and mining, steel, engineering and construction,
and building and appliances industries. Mr. Lundquist received his bachelor's
degree from St. Mary's College.
Goldman Sachs Asset Management. The Subadviser for the Asset Allocation
Portfolio is GSAM, a separate operating division of Goldman, Sachs & Co.
Goldman Sachs Asset Management-International. The Subadviser for the Global Bond
Portfolio is GSAM-International, an affiliate of Goldman, Sachs & Co. Goldman,
Sachs & Co. is a New York limited partnership with its principal offices at 85
Broad Street, New York, New York 10004.
GSAM serves a wide range of clients including private and public pension funds,
endowments, foundations, banks, thrifts, insurance companies, corporations, and
private investors and family groups. The asset management services are divided
into the following areas: institutional fixed income investment management;
global currency management; institutional equity investment management; fund
management; money market mutual fund management and administration; and private
asset management. As of February 23, 1998, GSAM, together with its affiliates,
acted as investment
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adviser, administrator or distributor for approximately $148 billion in assets.
GSAM-International was organized in 1990 as a company with limited liability
under the laws of England. It is authorized to conduct investment advisory
business in the United Kingdom as a member of the Investment Management
Regulatory Organization Limited, a United Kingdom self-regulatory organization.
GSAM and GSAM-International are able to draw on the research and market
expertise of Goldman, Sachs & Co. in making investment decisions for the
Portfolios for which they act as Subadviser. In performing their subadvisory
services, GSAM and GSAM-International, while remaining ultimately responsible
for the management of the Portfolio, are able to draw upon the research and
expertise of their affiliate offices, for portfolio decisions and management
with respect to certain portfolio securities.
The portion of the annual investment advisory fees received by SAAMCo which is
paid to GSAM with respect to the Asset Allocation Portfolio is 0.40% on the
first $50 million of Assets, 0.30% on the next $100 million, 0.25% on the next
$100 million and 0.20% on Assets over $250 million. For the fiscal year ended
November 30, 1997, SAAMCo paid to GSAM, with respect to the Asset Allocation
Portfolio, a fee equal to 0.26% of average daily net assets. The portion of the
annual investment advisory fees received by SAAMCo which is paid to GSAM-
International with respect to the Global Bond Portfolio is 0.40% on the first
$50 million of Assets, 0.30% on the next $100 million, 0.25% on the next $100
million and 0.20% on Assets over $250 million. For the fiscal year ended
November 30, 1997, SAAMCo paid to GSAM-International, with respect to the Global
Bond Portfolio, a fee equal to 0.36% of the Portfolio's average daily net
assets.
Greg Gigliotti, Vice President of GSAM, Thomas S. Price, Vice President of GSAM,
Lawrence S. Sibley, Vice President of GSAM and Karma Wilson, Vice President of
GSAM serve as co-portfolio managers of the equity portion of the ASSET
ALLOCATION PORTFOLIO. Mr. Gigliotti joined GSAM in 1997. From 1996 to 1997 he
was a Vice President and senior analyst at Franklin Mutual Advisors, Inc., the
asset management division of Franklin Resources, Inc. From 1989 to 1996 he was a
Vice President and senior analyst at Heine Securities Corporation which was
purchased by Franklin Resources, Inc. Mr. Price joined GSAM in 1997. From 1996
to 1997 he was a Vice President and senior analyst at Franklin Mutual Advisors,
Inc., the asset management division of Franklin Resources, Inc. From 1993 to
1996 he was a Vice President and senior analyst at Heine Securities Corporation
which was purchased by Franklin Resources, Inc. Mr. Sibley joined GSAM in 1997.
From 1994 to 1997 he headed Institutional Equity Sales at J.P. Morgan Securities
and from 1987 to 1994, he was a principal of Sanford C. Bernstein & Co. in its
Institutional Sales Department. Ms. Wilson joined GSAM in 1994. Prior to 1994,
she was an investment analyst with Bankers Trust Australia Ltd. Before 1992 she
was employed at Arthur Andersen LLP.
Jonathan A. Beinner and Richard C. Lucy have served as co-portfolio managers of
the fixed income portion of the Asset Allocation Portfolio since its inception
date of July 1, 1993. Mr. Beinner is a Managing Director of Goldman, Sachs and
Co. -- Head of GSAM's U.S. Fixed Income Department, where he joined the Funds
Group in 1990. Mr. Lucy is a Vice President of Goldman, Sachs and Co.'s Fixed
Income Department, where he joined the Funds Group in 1992.
Stephen C. Fitzgerald and Andrew F. Wilson serve as co-portfolio managers of the
GLOBAL BOND PORTFOLIO. Mr. Fitzgerald has served as co-portfolio manager since
the inception date of July 1, 1993 and Mr. Wilson has served as co-portfolio
manager since December 1, 1995. Mr. Fitzgerald, an Executive Director and Chief
Investment Officer for international fixed income in the London office, joined
GSAM-International in 1992. Mr. Wilson, an Executive Director and Portfolio
Manager for international fixed income in the London office, joined
GSAM-International in December 1995. Prior to joining GSAM-International, Mr.
Wilson spent three years as an Assistant Director of Rothschild Asset
Management, where he was responsible for managing global and international bond
portfolios, with specific focus on the U.S., Canadian, Australian and Japanese
economies.
Morgan Stanley Dean Witter Investment Management Inc. The Subadviser of the
Worldwide High Income and International Diversified Equities Portfolios is MSDW
Investment Management, 1221 Avenue of the Americas, New York, New York 10020.
MSDW Investment Management is a wholly owned subsidiary of Morgan Stanley Dean
Witter & Co., and provides a broad range of portfolio management services to
customers in the United States and abroad. As of February 28, 1998, MSDW
Investment Management, together with its affiliated institutional investment
management companies, had approximately $154.6 billion of assets under
management (inclusive of assets under fiduciary advisory control).
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Morgan Stanley Dean Witter & Co. is a preeminent global financial services firm
that maintains leading market positions in each of its three primary businesses:
securities, asset management and credit services.
The portion of the annual investment advisory fee received by SAAMCo which is
paid to MSDW Investment Management with respect to each of the Worldwide High
Income and International Diversified Equities Portfolios is 0.65% on Assets up
to $350 million and 0.60% on Assets thereafter. For the fiscal year ended
November 30, 1997, SAAMCo paid to MSDW Investment Management, with respect to
the International Diversified Equities Portfolio and Worldwide High Income
Portfolio, a fee equal to 0.65% of each Portfolio's average daily net assets.
Robert Angevine, Thomas L. Bennett, Stephen F. Esser and Abigail L. McKenna
serve as co-portfolio managers for the Worldwide High Income Portfolio.
Mr. Angevine has served as a co-portfolio manager since the inception date of
October 28, 1994, and Mr. Bennett, Mr. Esser and Ms. McKenna have served as
co-portfolio managers since October, 1998. Mr. Angevine is a principal of Morgan
Stanley & Co. Incorporated ("Morgan Stanley") and a portfolio manager of MSDW
Investment Management's high yield investments. He has been with the firm since
1988. Mr. Bennett, a Managing Director of Morgan Stanley, joined MSDW Investment
Management in 1996 and has been a portfolio manager with Miller, Anderson and
Sherrerd, LLP ("MAS"), an affiliate of MSDW Investment Management, since 1984.
Mr. Esser, also a Managing Director of Morgan Stanley, joined MSDW Investment
Management in 1996 and has been a portfolio manager with MAS since 1988. Ms.
McKenna, a Vice President of MSDW Investment Management and Morgan Stanley,
joined the firm in 1996. She focuses primarily on the trading and management of
the emerging markets debt portfolios. Prior to joining MSDW Investment
Management, she was a Senior Portfolio manager at MIMCO from 1995 to 1996 and a
Limited Partner at Weiss Peck & Greer from 1991 to 1995 where she was
responsible for the trading and management of Corporate Bond Portfolios.
Barton Biggs has served as a co-portfolio manager for the INTERNATIONAL
DIVERSIFIED EQUITIES PORTFOLIO since the inception date of October 28, 1994 and
Francine Bovich and Ann Thivierge have served as co-portfolio managers of the
Portfolio since July 1, 1995. Mr. Biggs is Chairman and Chief Investment Officer
of MSDW Investment Management and a Director of Morgan Stanley Dean Witter & Co.
He joined Morgan Stanley in 1973 as a General Partner and Managing Director and
is a member of Morgan Stanley Dean Witter & Co.'s Board of Directors and of the
Management Committee. Ms. Bovich is a Managing Director of MSDW Investment
Management and is responsible for product development, portfolio management and
communication of asset allocation strategy. She joined MSDW Investment
Management, as a Principal in 1993. Prior to joining MSDW Investment Management,
Ms. Bovich was a Principal and Executive Vice President of Westwood Management
Corp. and was with the firm from 1986 to 1993. Ms. Thivierge is a Principal of
MSDW Investment Management and joined the company in 1986 as an Analyst. From
1992 through 1996 she served as a Vice President of MSDW Investment Management.
Phoenix Investment Counsel, Inc. The Subadviser of the Growth/Phoenix
Investment Counsel and Balanced/Phoenix Investment Counsel Portfolios is
Phoenix, an indirect wholly-owned subsidiary of Phoenix Investment Partners,
Ltd. Phoenix is located at 56 Prospect Street, Hartford, CT 06115. Phoenix was
originally organized in 1932 as John P. Chase, Inc. and has been engaged in the
management of mutual funds since 1958. As of December 31, 1997, Phoenix
Investment Partners, Ltd. through its affiliated companies, had over $46.4
billion in total assets under management for all its clients. Phoenix, the
subadviser, had in excess of $22.2 billion under management as of December 31,
1997.
The portion of the annual investment advisory fees received by SAAMCo which is
paid to Phoenix with respect to each of the Balanced/Phoenix Investment Counsel
and Growth/Phoenix Investment Counsel Portfolios is 0.35% on the first $50
million of Assets, 0.30% on the next $100 million; 0.25% on the next $150
million; 0.20% on the next $200 million and 0.15% on Assets over $500 million.
For the fiscal year ended November 30, 1997, SAAMCo paid to Phoenix, with
respect to the Balanced/Phoenix Investment Counsel and Growth/Phoenix Investment
Counsel Portfolios, a fee equal to 0.33% and 0.30%, respectively, of each
Portfolio's average daily net assets.
The Large Cap Growth Equity Investment Team is responsible for managing the
GROWTH/PHOENIX INVESTMENT COUNSEL PORTFOLIO. The Team is composed of 20
investment professionals and traders, some of whom may focus more heavily on
particular Portfolios or particular aspects of the domestic equity markets.
Pierre Trinque has supervisory responsibilities for the GROWTH/PHOENIX
INVESTMENT COUNSEL PORTFOLIO. Mr. Trinque has been with Phoenix since 1985.
The Large Cap Growth Equity Investment Team is responsible for managing the
equity component of the BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO. The Team
is composed of 20 investment professionals and traders, some of whom may focus
more heavily on particular Portfolios or particular aspects of the domestic
equity markets. Pierre Trinque has supervisory responsibilities for the equity
component of the BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO. Mr. Trinque has
been with Phoenix since 1985. The Fixed Income Team is responsible for managing
the fixed component of the BALANCED/ PHOENIX INVESTMENT COUNSEL PORTFOLIO. The
Team is composed of 16 investment professionals and traders, some of whom may
focus more heavily on particular Portfolios or particular sectors of the fixed
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<PAGE> 47
income markets. Christopher J. Kelleher has supervisory responsibilities for the
fixed component of the BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO. Mr.
Kelleher has been with Phoenix since 1980.
Putnam Investment Management, Inc. The Subadviser of the Putnam Growth,
International Growth and Income and Emerging Markets Portfolios is Putnam, a
Massachusetts corporation with principal offices at One Post Office Square,
Boston, Massachusetts. Putnam has been managing mutual funds since 1937 and
serves as investment adviser to the funds in the Putnam Family. Putnam and its
affiliates managed approximately $256 billion as of February 28, 1998. Putnam is
a subsidiary of Putnam Investments, Inc., which, other than a minority interest
owned by employees, is wholly owned by Marsh & McLennan Companies, Inc., a
publicly owned holding company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit consulting and investment
management.
The portion of the annual investment advisory fees received by SAAMCo which is
paid to Putnam with respect to the Putnam Growth Portfolio is 0.50% on the first
$150 million of Assets, 0.45% on the next $150 million of Assets and 0.35% on
Assets over $300 million. Putnam became the Subadviser to the Putnam Growth
Portfolio on April 15, 1997. For the fiscal year ended November 30, 1997, with
respect to the International Growth and Income and Emerging Markets Portfolios,
and for the period April 15, 1997 through November 30, 1997, with respect to the
Putnam Growth Portfolio, SAAMCo paid to Putnam, a fee equal to 0.32%, 0.50% and
0.33%, respectively. For the period December 1, 1996 through April 14, 1997,
SAAMCo paid to the Portfolio's predecessor subadviser, Provident Investment
Counsel, Inc., with respect to the Provident Growth Portfolio a fee equal to
0.15% of the Portfolio's average daily net assets. See "Investment Advisory and
Management Agreement -- Advisory Fees" in the Statement of Additional
Information for the annual rates applicable with respect to the predecessor
subadvisers. The portion of the annual investment advisory fees received by
SAAMCo which is paid to Putnam with respect to the International Growth and
Income Portfolio is 0.65% on the first $150 million of Assets, 0.55% on the next
$150 million of Assets and 0.45% on Assets over $300 million. The portion of the
annual investment advisory fees received by SAAMCo which is paid to Putnam with
respect to the Emerging Markets Portfolio is 1.00% on the first $150 million of
Assets, 0.95% on the next $150 million of Assets and 0.85% on Assets over $300
million.
C. Beth Cotner, Richard England, Manuel H. Weiss and David Santos have served as
co-portfolio managers of the PUTNAM GROWTH PORTFOLIO since April 1997. Ms.
Cotner, a Senior Vice President of Putnam has been an investment professional
with Putnam since 1995. Prior to that time, she was an Executive Vice President
of Kemper Financial Services. Mr. England, a Senior Vice President of Putnam has
been an investment professional with Putnam since 1992. Mr. Weiss, a Senior Vice
President of Putnam has been an investment professional with Putnam since 1987.
Mr. Santos, a Vice President of Putnam has been an investment professional with
Putnam since 1986.
Deborah F. Kuenstner and George W. Stairs have served as co-portfolio managers
of the INTERNATIONAL GROWTH AND INCOME PORTFOLIO since March 1998. Ms. Kuenstner
is a Senior Vice President of Putnam. Prior to March 1997, she was Senior
Portfolio Manager at Dupont Pension Fund Management. Mr. Stairs is a Senior Vice
President of Putnam. Prior to July 1994, he was an Associate at Value Quest Ltd.
Thomas R. Haslett, Managing Director of Putnam and J. Peter Grant, Senior Vice
President of Putnam, serve as co-portfolio managers of the EMERGING MARKETS
PORTFOLIO. Mr. Haslett has been an investment professional with Putnam since
1996. Prior to December 1996, he was a Managing Director of Montgomery Asset
Management, Ltd. Mr. Grant has been an investment professional with Putnam since
1973.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT -- State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, is the Trust's custodian, transfer agent and dividend paying agent. State
Street maintains custody of the Trust's securities and cash and the records of
each shareholder's account. State Street also performs other related shareholder
service functions.
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PORTFOLIO TURNOVER AND BROKERAGE
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All Portfolios effect portfolio transactions without regard to the length of
time particular investments have been held. Under certain market conditions, the
investment policies of the Portfolios may result in high portfolio turnover. The
portfolio turnover rates for the Portfolios (other than the Equity Income, Small
Company Value, "Dogs" of Wall Street, and
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<PAGE> 48
Equity Index Portfolios) are contained in the section entitled "Financial
Highlights." The portfolio turnover rates for the following Portfolios are not
expected to exceed the stated percentages: "Dogs" of Wall Street
Portfolio -- 25%; Equity Income Portfolio -- 30%; Equity Index Portfolio -- 10%;
and Small Company Value Portfolio -- 40%. High portfolio turnover involves
correspondingly greater brokerage commissions, to the extent such commissions
are payable, and other transaction costs that are borne directly by the
Portfolio involved. Higher turnover rates reflect an increased rate of
realization of gains and losses by the Portfolio, which would normally affect
the taxable income of the Portfolio's shareholders. Where the shareholder is an
insurance company separate account funding variable annuity contracts, qualified
as such under the Code, however, the contract owners are not currently charged
with such income or losses except to the extent provided under the Code
(normally when distributions under the contracts are made). Corporate bonds and
U.S. government securities are generally traded on a net basis and usually
neither brokerage commissions nor transfer taxes are involved.
Broker-dealers involved in the execution of portfolio transactions on behalf of
the Trust are selected on the basis of their professional capability and the
value and quality of their services. In selecting such broker-dealers, the
Adviser and Subadvisers will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and character
of the markets in which the security can be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the broker-dealer;
the broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions. The Adviser or a Subadviser also may select
broker-dealers which provide it with research services and may cause a Portfolio
to pay such broker-dealers commissions which exceed those which other broker-
dealers may have charged, if in the Adviser's or Subadviser's view the
commissions are reasonable in relation to the value of the brokerage and/or
research services provided by the broker-dealer. Further, the Adviser or a
Subadviser may effect portfolio transactions through broker-dealer affiliates of
the Trust, Adviser or Subadvisers.
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DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
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Under the Code, each Portfolio is treated as a separate regulated investment
company providing qualification requirements are met. To qualify as a regulated
investment company, a Portfolio must, among other things, (a) derive at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stocks, securities
or foreign currencies, or other income (including, but not limited to, gains
from options, futures or forward contracts) derived with respect to its business
of investing in such stocks, securities or currencies; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the Portfolio's assets is represented by cash, U.S. government
securities and other securities limited in respect of any one issuer to 5% of
the Portfolio's assets and to not more than 10% of the 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 U.S. government securities). Each
Portfolio intends to meet these qualification requirements.
So long as a Portfolio qualifies as a regulated investment company, such
Portfolio will not be subject to federal income tax on the net investment
company taxable income or net capital gains distributed to shareholders as
ordinary income dividend or capital gains dividends. It is the policy of each
Portfolio to distribute to its shareholders substantially all of its ordinary
income and net capital gains realized during each fiscal year. All distributions
are reinvested in shares of the Portfolio at net asset value unless the transfer
agent is instructed otherwise.
Each Portfolio of the Trust is also subject to variable contract asset
diversification regulations prescribed by the U.S. Treasury Department under the
Code. These regulations generally provide that, as of the end of each calendar
quarter or within 30 days thereafter, no more than 55% of the total assets of
the Portfolio may be represented by any one investment, no more than 70% by any
two investments, no more than 80% by any three investments, and no more than 90%
by any four investments. For this purpose, all securities of the same issuer are
considered a single investment, but each U.S. agency or instrumentality is
treated as a separate issuer. If a Portfolio fails to comply with these
regulations, the contracts invested in that Portfolio will not be treated as
annuity, endowment or life insurance contracts for tax purposes. The Real Estate
Portfolio may invest in REITs that hold residual interests in real estate
mortgage investment conduits ("REMICs"). Under Treasury regulations that have
not yet been issued, but may apply retroactively, a portion of the Portfolio's
income from a REIT that is attributable to the REIT's residual interest in a
REMIC (referred to in the Code as an "excess inclusion") will be subject to
federal income tax. These regulations are also expected to provide that excess
inclusion income of a
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<PAGE> 49
regulated investment company, such as the Portfolio, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly.
A "passive foreign investment company" ("PFIC") is a foreign corporation that,
in general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If a Portfolio acquires and
holds stock in a PFIC beyond the end of the year of its acquisition, the
Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the stock
(collectively, "PFIC income"), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. Recently enacted legislation
provides that the Portfolio may make a "mark-to-market" election with respect to
any stock it holds of a PFIC, if such stock is marketable (as defined for
purposes of such legislation). If the election is in effect at the end of the
Portfolio's taxable year, the Portfolio will recognize the amount of gains, if
any, with respect to PFIC stock. Such mark-to-market gain will be treated as
ordinary income. Alternatively, the Portfolio may elect to treat any PFIC in
which it invests as a "qualified electing fund," in which case, in lieu of the
foregoing tax and interest obligation, the Portfolio will be required to include
in its income each year, its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain, even if they are not distributed
to the Portfolio; those amounts would be subject to the distribution
requirements applicable to the Portfolio described above. It may be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
See the applicable contract prospectus for information regarding the federal
income tax treatment of the contracts and distributions to the separate
accounts.
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PRICE OF SHARES
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The Portfolios are open for business on any day the NYSE is open for regular
trading. Shares of each Portfolio of the Trust are sold at the net asset value
per share calculated daily at the close of regular trading on the NYSE
(generally, 4:00 p.m., Eastern time). Each Portfolio calculates its net asset
value per share by dividing the total value of its net assets by the number of
shares outstanding. Assets are generally valued at their market value, where
available, except that short-term securities with 60 days or less to maturity
are valued on an amortized cost basis. For a complete description of the
procedures involved in valuing various Trust assets, see the Statement of
Additional Information.
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PURCHASES AND REDEMPTIONS
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Shares of the Trust currently are offered only to separate accounts of Anchor
National Life Insurance Company and First SunAmerica Life Insurance Company. At
present, Trust shares are used as the investment vehicle for annuity contracts
only. The Life Companies may issue variable life contracts that also will use
the Trust as the underlying investment. The offering of Trust shares to variable
annuity and variable life separate accounts is referred to as "mixed funding."
It may be disadvantageous for variable annuity separate accounts and variable
life separate accounts to invest in the Trust simultaneously. Although neither
the Life Companies nor the Trust currently foresees such disadvantages either to
variable annuity or variable life contract owners, the Board of Trustees of the
Trust, based upon information provided by the Life Companies, will monitor
events in order to determine, should a material conflict arise, what action, if
any, need be taken in response thereto. Shares of the Trust may be offered to
separate accounts of other life insurance companies which are affiliates of the
Life Companies.
All shares may be purchased or redeemed by the separate accounts without any
sales or redemption charge at the next computed net asset value. Purchases and
redemptions are made subsequent to corresponding purchases and redemptions of
units of the separate accounts without delay.
Except in extraordinary circumstances and as permissible under the 1940 Act, the
redemption proceeds are paid on or before the seventh day following the request
for redemption.
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SHAREHOLDER VOTING RIGHTS
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All shares of the Trust have equal voting rights and may be voted in the
election of trustees and on other matters submitted to the vote of the
shareholders. Shareholders' meetings ordinarily will not be held unless required
by the 1940 Act. As permitted by Massachusetts law, there normally will be no
shareholders' meetings for the purpose of electing trustees unless and until
such time as fewer than a majority of the trustees holding office have been
elected by shareholders. At that time, the trustees then in office will call a
shareholders' meeting for the
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<PAGE> 50
election of trustees. The trustees must call a meeting of shareholders for the
purpose of voting upon the removal of any trustee when requested to do so by the
record holders of 10% or more of the outstanding shares of the Trust. A trustee
may be removed after the holders of record of not less than two-thirds of the
outstanding shares have declared that the trustee be removed either by
declaration in writing or by votes cast in person or by proxy. Except as set
forth above, the trustees shall continue to hold office and may appoint
successor trustees, provided that immediately after the appointment of any
successor trustee, at least two-thirds of the trustees have been elected by the
shareholders. Shares do not have cumulative voting rights. Thus, holders of a
majority of the shares voting for the election of trustees can elect all the
trustees. No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
that amendments to conform the Declaration to the requirements of applicable
federal laws or regulations or the regulated investment company provisions of
the Code may be made by the trustees without the vote or consent of
shareholders. If not terminated by the vote or written consent of a majority of
its outstanding shares, the Trust will continue indefinitely.
A change in the fundamental investment restrictions of a Portfolio requires the
vote of a "majority of the outstanding voting securities" of that Portfolio.
This term is defined in the 1940 Act and explained in the Statement of
Additional Information.
In matters affecting only a particular Portfolio, the matter shall have been
effectively acted upon by a vote of that Portfolio even though: (1) the matter
has not been approved by a vote of any other Portfolio; or (2) the matter has
not been approved by a vote of the Trust as a whole.
The Life Companies' separate accounts, as shareholders of the Portfolios, have
the right to vote each Portfolio's shares at any meeting of shareholders.
However, the separate account will vote each Portfolio's shares in accordance
with instructions received from contract owners. See the applicable contract
prospectus for information regarding contract owners' voting rights.
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INDEPENDENT ACCOUNTANTS
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PricewaterhouseCoopers LLP has been selected as independent accountants for the
Trust.
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GENERAL INFORMATION
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YEAR 2000 READINESS
Many services provided to the Trust and its shareholders by the Adviser rely on
both the smooth functioning of the Adviser's computer and computer-based systems
as well as those of its outside service providers. Many computer and
computer-based systems cannot distinguish the year 2000 from the year 1900
because of the way systems encode and calculate dates. This Year 2000 Issue
potentially could have an adverse impact on the handling of security trades, the
payment of interest and dividends, pricing and account services. The Adviser
recognizes the importance of the Year 2000 Issue and is taking appropriate steps
necessary in preparation of the year 2000. The Adviser fully anticipates that
its systems and those of its outside service providers will be adapted in time
for the year 2000, and to further this goal it has coordinated a plan to repair,
adapt or replace systems that are not Year 2000 compliant, and has obtained
similar assurances from its outside service providers. The Adviser expects to
complete its plan significantly by the end of the 1998 calendar year and then
perform appropriate systems testing during the 1999 calendar year.
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SHAREHOLDER INQUIRIES
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Shareholder inquiries should be directed to Anchor National Life Insurance
Company or First SunAmerica Life Insurance Company, Service Center, P.O. Box
54299, Los Angeles, California 90054-0299, telephone number (800) 445-SUN2. In
New York, shareholders should call (800) 99-NYSUN.
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FINANCIAL INFORMATION
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Further financial information can be found in the Statement of Additional
Information, which is available upon written request to the Trust.
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FOR MORE INFORMATION
The following documents contain more information about the Portfolios and are
available free of charge upon request:
ANNUAL/SEMI-ANNUAL REPORTS. Contain financial statements, performance data
and information on portfolio holdings. The annual report also contains a
written analysis of market conditions and Portfolio performance for the
Portfolios' most recently completed fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). Contains additional
information about the Portfolios' policies, investment restrictions and
business structure. This prospectus incorporates the SAI by reference.
You may obtain copies of these documents or ask questions about the Portfolios
by contacting:
SunAmerica Series Trust
P.O. Box 54299
Los Angeles, CA 90054-0299
1-800-445-SUN2
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 ("SEC"),
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
SEC's web-site at http://www.sec.gov and copies may be obtained upon payment of
a duplicating fee by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.
<PAGE> 52
Statement of Additional Information
SUNAMERICA SERIES TRUST
This Statement of Additional Information is not a prospectus, but should
be read in conjunction with the current Prospectus of SunAmerica Series Trust
("Trust") Capitalized terms used herein but not defined have the meanings
assigned to them in the Prospectus. The Prospectus may be obtained by
writing to the Trust at the following address:
P.O. Box 54299
Los Angeles, California 90054-0299
December 1, 1998
<PAGE> 53
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
- ----- ----
<S> <C>
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT PORTFOLIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
TRUST OFFICERS AND TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
SUBADVISORY AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
PRICE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
EXECUTION OF PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-43
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-48
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-49
</TABLE>
B-2
<PAGE> 54
THE TRUST
The Trust, organized as a Massachusetts business trust on September
11, 1992, is an open-end management investment company. Shares of the Trust
are issued and redeemed only in connection with investments in and payments
under variable annuity contracts, and may be sold to fund variable life
contracts in the future.
Shares of the Trust are held by separate accounts of Anchor National
Life Insurance Company, an Arizona corporation, and First SunAmerica Life
Insurance Company, a New York corporation. Anchor National Life Insurance
Company and First SunAmerica Life Insurance Company are wholly owned
subsidiaries of SunAmerica Life Insurance Company, an Arizona corporation
wholly owned by SunAmerica Inc., a Maryland corporation.
INVESTMENT OBJECTIVES AND POLICIES
The discussion below is intended to supplement the information
contained in the Prospectus.
CASH MANAGEMENT PORTFOLIO. The Cash Management Portfolio seeks to
achieve its investment objective by investing in a diversified selection of
money market instruments. Certain of the other Portfolios may also invest their
assets to varying degrees in money market instruments. The money market
instruments that such Portfolios may invest in include the following:
Commercial Bank Obligations. Certificates of deposit (interest-bearing
time deposits), bankers' acceptances (time drafts drawn on a
commercial bank where the bank accepts an irrevocable obligation to
pay at maturity) and documented discount notes (corporate promissory
discount notes accompanied by a commercial bank guarantee to pay at
maturity) representing direct or contingent obligations of commercial
banks with total assets in excess of $1 billion, based on the latest
published reports. The Cash Management Portfolio may also invest in
obligations issued by commercial banks with total assets of less than
$1 billion if the principal amount of these obligations owned by the
Cash Management Portfolio is fully insured by the Federal Deposit
Insurance Corporation ("FDIC").
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. The Cash Management 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
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<PAGE> 55
principal amount of these obligations owned by the Cash Management
Portfolio is fully insured by the FDIC.
Commercial Paper. Short-term notes (up to 9 months) issued by
corporations or governmental bodies. The Cash Management Portfolio
may only purchase commercial paper judged by SunAmerica Asset
Management Corp. ("SAAMCo" or 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 Ratings Services, a
Division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") and
by Moody's Investors Service, Inc. ("Moody's"), or (b) other
commercial paper deemed on the basis of the issuer's creditworthiness
to be of a quality appropriate for the Cash Management Portfolio. (No
more than 5% of the Cash Management Portfolio's assets may be invested
in commercial paper in the second highest rating category; no more
than the greater of 1% of the Cash Management Portfolio's assets or
$1 million may be invested in such securities of any one issuer.) See
"Description of Commercial Paper and Bond Ratings" for a description
of the ratings. The Cash Management 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 Cash Management Portfolio may invest
includes variable amount master demand notes. Variable amount master
demand notes permit the Cash Management 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 Cash
Management Portfolio unconditionally to receive the amount invested
from the issuer upon seven or fewer days' notice. Generally, the Cash
Management Portfolio attempts to invest in instruments having a
one-day notice provision. In connection with master demand note
arrangements, the Adviser, subject to the direction of the Trustees,
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 the Cash Management 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 a
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.
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Bankers' Acceptances. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank
and of the drawer to pay the full amount of the instrument upon
maturity.
Variable Amount Master Demand Notes. Variable amount master demand
notes are unsecured demand notes that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. Because
master demand notes are direct lending arrangements between a
Portfolio and the issuer, they are not normally traded. Although there
is no secondary market in the notes, a Portfolio may demand payment of
principal and accrued interest at any time. While the notes are not
typically rated by credit rating agencies, issuers of variable amount
master demand notes (which are normally manufacturing, retail,
financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. The Adviser or Subadviser
will consider the earning power, cash flow, and other liquidity ratios
of the issuers of such notes and will continuously monitor their
financial status and ability to meet payment on demand.
Corporate Bonds and Notes. The Cash Management Portfolio may purchase
corporate obligations that mature or that may be redeemed in 397 days
or less. These obligations originally may have been issued with
maturities in excess of 397 days. The Cash Management Portfolio may
invest only in corporate bonds or notes of issuers having outstanding
short-term securities rated in the top two rating categories by
Standard & Poor's and Moody's. See "Description of Commercial Paper
and Bond Ratings" for description of investment-grade ratings by
Standard & Poor's and Moody's.
U.S. TREASURY INFLATION-PROTECTION SECURITIES
The Equity Income, Small Company Value and Equity Index Portfolios may
invest in U.S. Treasury inflation-protection securities, which are issued by
the United States Department of Treasury ("Treasury") with a nominal return
linked to the inflation rate in prices. The index used to measure inflation
is the non-seasonally adjusted U.S. City Average All Items Consumer Price
Index for All Urban Consumers ("CPI-U").
The value of the principal is adjusted for inflation, and pays
interest every six months. The interest payment is equal to a fixed percentage
of the inflation-adjusted value of the principal. The final payment of
principal of the security will not be less than the original par amount of the
security at issuance.
The principal of the inflation-protection security is indexed to the
non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal
value for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index
ratio for any date is the ratio of the reference CPI applicable to such date
to the reference CPI applicable to the original issue date. Semiannual coupon
interest is determined by multiplying the inflation-adjusted principal amount
by one-half of the stated rate of interest on each interest payment date.
Inflation-adjusted principal or the original par amount, whichever is
larger, is paid on the maturity date as specified in the applicable offering
announcement. If at maturity the inflation-adjusted principal is less than the
original principal value of the security, an additional amount is paid at
maturity so that the additional amount plus the inflation-adjusted principal
equals the original principal amount. Some inflation-protection securities may
be stripped into principal and interest components. In the case of a stripped
security, the holder of the stripped principal component would receive this
additional amount. The final interest payment, however, will be based on the
final inflation-adjusted principal value, not the original par amount.
The reference CPI for the first day of any calendar month is the CPI-U
for the third preceding calendar month. (For example, the reference CPI for
December 1 is the CPI-U reported for September of the same year, which is
released in October.) The reference CPI for any other day of the month is
calculated by a linear interpolation between the reference CPI applicable to
the first day of the month and the reference CPI applicable to the first day of
the following month.
Any revisions the Bureau of Labor Statistics (or successor agency)
makes to any CPI-U number that has been previously released will not be used in
calculations of the value of outstanding inflation-protection securities. In
the case that the CPI-U for a particular month is not reported by the last day
of the following month, the Treasury will announce an index number based on the
last year-over-year CPI-U inflation rate available. Any calculations of the
Treasury's payment obligations on the inflation-protection security that need
that month's CPI-U number will be based on the index number that the Treasury
has announced. If the CPI-U is rebased to a different year, the Treasury will
continue to use the CPI-U series based on the base reference period in effect
when the security was first issued as long as that series continues to be
published. If the CPI-U is discontinued during the period the
inflation-protection security is outstanding, the Treasury will, in consultation
with the Bureau of Labor Statistics (or successor agency), determine an
appropriate substitute index and methodology for linking the discontinued
series with the new price index series. Determinations of the Secretary of the
Treasury in this regard are final.
Inflation-protection securities will be held and transferred in either
of two book-entry systems: the commercial book-entry system (TRADES) and
TREASURY DIRECT. The securities will be maintained and transferred at their
original par amount, i.e., not at their inflation-adjusted value. STRIPS
components will be maintained and transferred in TRADES at their value based on
the original par amount of the fully constituted security.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Worldwide High Income
Portfolio may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between an issuer of sovereign or corporate debt
obligations and one or more financial institutions ("Lenders"). The
Portfolio's investments in Loans are expected in most instances to be in the
form of participations in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. In the case of
Participations, the Portfolio will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In the event of the insolvency of the Lender selling a
Participation, the Portfolio may be treated as a general creditor of the Lender
and may not benefit from any set-off between the Lender and the borrower. The
Portfolio will acquire Participations only if the Lender interpositioned
between the Portfolio and the borrower is determined by the Subadviser to be
creditworthy. When the Portfolio purchases Assignments from Lenders it will
acquire direct rights against the borrower on the Loan. Because
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Assignments are arranged through private negotiations between potential
assignees and potential assignors, however, the rights and obligations acquired
by the Portfolio as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender. Because there is no liquid
market for such securities, the Portfolio anticipates that such securities
could be sold only to a limited number of institutional investors. The lack of
a liquid secondary market may have an adverse impact on the value of such
securities and the Portfolio's ability to dispose of particular Assignments or
Participations when necessary to meet the Portfolio's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
Assignments and Participations also may make it more difficult for the
Portfolio to assign a value to these securities for purposes of valuing the
Portfolio and calculating its net asset value.
STRUCTURED INVESTMENTS. The Global Bond Portfolio, Asset Allocation
Portfolio, Emerging Markets Portfolio, Worldwide High Income Portfolio and the
International Growth and Income Portfolio may invest a portion of its assets
in entities organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans)
and the issuance by that entity of one or more classes of securities
("Structured Securities") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Securities to create securities
with different investment characteristics, such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Securities is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Securities of the type
in which the Portfolio anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments. The Portfolio is permitted to invest in a class of
Structured Securities that is either subordinated or unsubordinated to the
right of payment of another class. Subordinated Structured Securities
typically have higher yields and present greater risks than unsubordinated
Structured Securities. Structured Securities are typically sold in private
placement transactions, and there currently is no active trading market for
Structured Securities.
A Portfolio's investments in government and government-related and
restructured debt instruments are subject to special risks, including the
inability or unwillingness to repay principal and interest, requests to
reschedule or restructure outstanding debt and requests to extend additional
loan amounts.
U.S. CORPORATE HIGH-YIELD FIXED-INCOME SECURITIES. A portion of
certain Portfolios' assets will be invested in U.S. corporate high-yield
fixed-income securities, which offer a yield above that generally available on
U.S. corporate debt securities in the four highest rating categories of the
recognized rating services. The Portfolios may acquire fixed-income securities
of U.S. issuers, including debt obligations (E.G., bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sales
contracts, commercial paper and obligations issued or guaranteed by the U.S.
government or any of its political subdivisions, agencies or instrumentalities)
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and preferred stock. These fixed-income securities may have equity features,
such as conversion rights or warrants, and the Portfolios may invest up to 10%
of their total assets in equity features, such as conversion rights or
warrants, and the Portfolios may invest up to 10% of their total assets in
equity securities other than preferred stock (e.g., common stock, warrants and
rights and limited partnership interests). The Portfolios may not invest more
than 5% of their total assets at the time of acquisition in either of (1)
equipment lease certificates, equipment trust certificates, equipment trust
certificates and conditional sales contracts or (2) limited partnership
interests.
EMERGING COUNTRY FIXED-INCOME SECURITIES. Certain of the Portfolios
may invest their assets, to varying degrees, in emerging country fixed-income
securities, which are debt securities of government and government-related
issuers located in emerging countries (including participations in loans
between governments and financial institutions), and of entities organized to
restructure outstanding debt of such issuers and debt securities of corporate
issuers located in or organized under the laws of emerging countries. As used
with respect to these Portfolios, an emerging country is any country that the
International Bank for Reconstruction and Development (more commonly known as
the World Bank) has determined to have a low or middle income economy. There
are currently over 150 countries which are considered to be emerging countries.
The countries generally include every nation in the world except the United
States, Canada, Japan, Australia, Singapore, New Zealand and most nations
located in Western Europe. Not withstanding the foregoing, with respect to
Emerging Markets Portfolio, in addition to the exclusions listed above, the
following countries should also be excluded from the countries considered
emerging markets: Austria, Belgium, Denmark, Finland, France, Germany, Ireland,
Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the United
Kingdom.
In selecting emerging country debt securities for investment by a
Portfolio, the Subadviser will apply a market risk analysis contemplating
assessment of factors such as liquidity, volatility, tax implications, interest
rate sensitivity, counterparty risks and technical market considerations.
Currently, investing in many emerging country securities is not feasible or may
involve unacceptable political risks. The Portfolios expect that their
investments in emerging country debt securities will be made primarily in some
or all of the following emerging countries:
<TABLE>
<S> <C> <C>
Argentina Indonesia Poland
Brazil Malaysia Portugal
Chile Mexico South Africa
Czech Republic Morocco Thailand
Egypt Pakistan Turkey
Greece Peru Uruguay
Hungary Philippines Venezuela
</TABLE>
As opportunities to invest in debt securities in other emerging
countries develop, the Portfolios expect to expand and further diversify the
emerging countries in which they invest. While the Portfolios generally are
not restricted in the portion of their assets which may be invested in a single
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country or region, it is anticipated that, under normal circumstances, each
Portfolio's assets will be invested in at least three countries.
A Portfolio's investments in government and government-related and
restructured debt securities will consist of (i) debt securities or obligations
issued or guaranteed by governments, governmental agencies or instrumentalities
and political subdivisions located in emerging countries (including
participation in loans between governments and financial institutions), (ii)
debt securities or obligations issued by government owned, controlled or
sponsored entities located in emerging countries, and (iii) interests in
issuers organized and operated for the purpose of restructuring the investment
characteristics of instruments issued by any of the entities described above.
Such type of restructuring involves the deposit with or purchase by an entity
of specific instruments and the issuance by that entity of one or more classes
of securities backed by, or representing an interest in, the underlying
instruments. Certain issuers of such structured securities may be deemed to be
"investment companies" as defined in the Investment Company Act of 1940, as
amended, (the "1940 Act"). As a result, a Portfolio's investment in such
securities may be limited by certain investment restrictions contained in the
1940 Act.
A Portfolio's investments in debt securities of corporate issuers in
emerging countries may include debt securities or obligations issued (i) by
banks located in emerging countries or by branches of emerging country banks
located outside the country or (ii) by companies organized under the laws of an
emerging country. Determinations as to eligibility will be made by the
Subadviser based on publicly available information and inquiries made to the
issuer. A Portfolio may also invest in certain debt obligations customarily
referred to as "Brady Bonds," which are created through the exchange of
existing commercial bank loans to foreign entities for new obligations in
connection with debt restructuring under a plan introduced by former U.S.
Secretary of the Treasury Nicholas F. Brady (the "Brady Plan").
Brady Plan debt restructurings have been implemented to date in
Argentina, Brazil, Bulgaria, Costa Rica, Croatia, the Dominican Republic,
Ecuador, Jordan, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines,
Poland, Slovenia, Uruguay and Venezuela. Brady Bonds have been issued only
relatively recently, and for that reason do not have a long payment history.
Brady Bonds may be collateralized or uncollateralized, are issued in various
currencies (but primarily the U.S. dollar) and are actively traded in
over-the-counter secondary markets. U.S. dollar-denominated, collateralized
Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are
generally collateralized in full as to principal by U.S. Treasury zero coupon
bonds having the same maturity as the bonds. Brady Bonds are often viewed as
having three or four valuation components: the collateralized repayment of
principal at final maturity; the collateralized interest payments; the
uncollateralized interest payments; and any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constituting the
"residual risk"). In light of the residual risk of Brady Bonds and the history
of defaults of countries issuing Brady Bonds with respect to commercial bank
loans by public and private entities, investments in Brady Bonds may be viewed
as speculative.
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Emerging country debt securities held by a Portfolio will take the
form of bonds, notes, bills, debentures, convertible securities, warrants, bank
debt obligations, short-term paper, mortgage-backed and other asset-backed
securities, loan participations, loan assignments and interests issued by
entities organized and operated for the purpose of restructuring the investment
characteristics of instruments issued by emerging country issuers. U.S.
dollar-denominated emerging country debt securities held by a Portfolio will
generally be listed but not traded on a securities exchange, and non-U.S.
dollar-denominated securities held by the Portfolios may or may not be listed or
traded on a securities exchange. A Portfolio may invest in mortgage-backed
securities and in other asset-backed securities issued by non-governmental
entities such as banks and other financial institutions. Mortgage-backed
securities include mortgage pass-through securities and collateralized mortgage
obligations. Asset-backed securities are collateralized by such assets as
automobile or credit card receivables and are securitized either in a
pass-through structure or in a pay-through structure similar to a collaterized
mortgage obligation.
Investments in emerging country debt securities entail special
investment risks. Many of the emerging countries listed above may have less
stable political environments than more developed countries. Also, it may be
more difficult to obtain a judgment in a court outside the United States.
GLOBAL FIXED-INCOME SECURITIES. Certain of the Portfolios may invest
their assets, to varying degrees, in global fixed-income securities. These are
debt securities denominated in currencies of countries displaying high real
yields. Such securities include government obligations issued or guaranteed by
U.S. or foreign governments and their political subdivisions, authorities,
agencies or instrumentalities, and by supranational entities (such as the World
Bank, The European Economic Community, The Asian Development Bank and the
European Coal and Steel Community), Eurobonds, and corporate bonds with varying
maturities denominated in various currencies. In this portion of the
portfolio, the Subadviser seeks to minimize investment risk by investing in a
high quality portfolio of debt securities, the majority of which will be rated
in one of the two highest rating categories by a nationally recognized
statistical rating organization. U.S. government securities in which a
Portfolio may invest include obligations issued or guaranteed by the U.S.
government, such as U.S. Treasury securities, as well as those backed by the
full faith and credit of the United States, such as obligations of the
Government National Mortgage Association and The Export-Import Bank. A
Portfolio may also invest in obligations issued or guaranteed by U.S.
government agencies or instrumentalities where a Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment.
Investment in foreign government securities for this portion of the portfolio
will be limited to those of developed nations which the Subadviser believes to
pose limited credit risk. These countries currently include Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain,
Sweden, Switzerland and the United Kingdom. Corporate and supranational
obligations selected for this portion of the portfolio will be limited to those
rated A or better by Moody's, Standard & Poor's or IBCA Ltd.
In selecting securities for this portion of a portfolio, the
Subadviser of the Portfolio evaluates the currency, market and individual
features of the securities being considered for investment. The Subadviser
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believes that countries displaying the highest real yields will over time
generate a high total return, and accordingly, the Subadviser's focus for this
portion of a portfolio will be to analyze the relative rates of real yield of
twenty global fixed-income markets. In selecting securities, the Subadviser
will first identify the global markets in which each Portfolio's assets will be
invested by ranking such countries in order of highest real yield. In this
portion of its portfolio, each Portfolio will invest its assets primarily in
fixed-income securities denominated in the currencies of countries within the
top quartile of the Subadviser's ranking.
The Subadviser's assessment of the global fixed-income markets is
based on an analysis of real interest rates. The Subadviser calculates real
yield for each global market by adjusting current nominal yields of securities
in each such market for inflation prevailing in each country using an analysis
of past and projected (one-year) inflation rates for that country. The
Subadviser expects to review and update on a regular basis its real yield
ranking of countries and market sectors and to alter the allocation of this
portion of each Portfolio's investments among markets as necessary when changes
to real yields and inflation estimates significantly alter the relative
rankings of the countries and market sectors.
In addition, the Global Bond Portfolio may invest in trust preferred
securities. A trust preferred or capital security is a long dated bond (for
example, 30 years) with preferred features. The preferred features are that
payment of interest can be deferred for a specified period without initiating a
default event. From a bondholder's viewpoint, the securities are senior in claim
to standard preferred but are junior to other bondholders. From the issuer's
viewpoint, the securities are attractive because their interest is deductible
for tax purposes like other types of debt instruments.
CORPORATE 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.
Corporate 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 servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that
of the holders of the related automobile receivables. In addition, because of
the large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of the automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on these securities.
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Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors to make payments on underlying assets, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A
Portfolio will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or
failure of the credit support could adversely affect the return on an
investment in such a security.
SHORT SALES. Each Portfolio (other than the Cash Management and
"Dogs" of Wall Street Portfolios) may make short sales, including "short sales
against the box." A short sale is effected by selling a security which a
Portfolio does not own. A short sale is against the box to the extent that a
Portfolio contemporaneously owns, or has the right to obtain without payment,
securities identical to those sold short. A short sale against the box of an
"appreciated financial position" (E.G., appreciated stock) generally is treated
as a sale by the Portfolio for federal income tax purposes. A Portfolio
generally will recognize any gain (but not loss) for federal income tax
purposes at the time that it makes a short sale against the box. A Portfolio
may not enter into a short sale against the box, if, as a result, more than 25%
of its total assets would be subject to such short sales.
When a Portfolio makes a short sale, the proceeds it receives from the
sale will be held on behalf of a broker until the Portfolio replaces the
borrowed securities. To deliver the securities to the buyer, a Portfolio
will need to arrange through a broker to borrow the securities and, in so
doing, a Portfolio will become obligated to replace the securities borrowed
at their market price at the time of replacement, whatever that price may be.
A Portfolio may have to pay a premium to borrow the securities and must pay
any dividends or interest payable on the securities until they are replaced.
A Portfolio's obligation to replace the securities borrowed in
connection with a short sale will be secured by collateral in the form of cash
or liquid securities held in a segregated account in the name of the broker.
In addition, such Portfolio will place in a segregated account an amount of cash
or liquid securities equal to the difference, if any, between (1) the market
value of the securities sold at the time they were sold short and (2) any cash
or liquid securities deposited as collateral with the broker in connection with
the short sale (not including the proceeds of the short sale). In the event
that the value of the collateral deposited with the broker plus the value of
the assets in the segregated account should fall below the value of the
securities sold short, additional amounts to cover the difference will be
placed in the segregated accounts. Short sales by a Portfolio involve
certain risks and special considerations. Possible losses from short sales
differ from losses that could be incurred from a purchase of a security,
because losses from short sales may be unlimited, whereas losses from purchases
can equal only the total amount invested.
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ILLIQUID SECURITIES. Each of the Portfolios may invest no more than
15% (10% in the case of the Cash Management Portfolio) of its net assets,
determined as of the date of purchase, in illiquid securities including
repurchase agreements which have a maturity of longer than seven days or in
other securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Historically,
illiquid securities have included securities subject to contractual or legal
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having a maturity of
longer than seven days. Repurchase agreements subject to demand are deemed to
have a maturity equal to the notice period. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have
an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. There generally will 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.
In recent years, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.
Restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act for which there is a readily available market will not be
deemed to be illiquid. The Adviser or Subadviser, as the case may be, will
monitor the liquidity of such restricted securities subject to the supervision
of the Board of Trustees of the Trust. In reaching liquidity decisions, the
Adviser, or Subadviser, as the case may be, will consider, inter alia, pursuant
to guidelines and procedures established by the Trustees, 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).
The Cash Management Portfolio may invest in commercial paper issues
which include securities issued by major corporations without registration
under the Securities Act in reliance on
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the exemption from such registration afforded by Section 3(a)(3) thereof, and
commercial paper issued in reliance on the so-called private placement
exemption from registration which is afforded by Section 4(2) of the Securities
Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to disposition
under the federal securities laws in that any resale must similarly be made in
an exempt transaction. Section 4(2) paper is normally resold to other
institutional investors through or with the assistance of investment dealers
who make a market in Section 4(2) paper, thus providing liquidity. Section
4(2) paper that is issued by a company that files reports under the Securities
Exchange Act of 1934 is generally eligible to be sold in reliance on the safe
harbor of Rule 144A described above. The Cash Management Portfolio's 10%
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 Trustees. The Portfolio's Board of
Trustees delegated to the Adviser the function of making day-to-day
determinations of liquidity with respect to Section 4(2) paper, pursuant to
guidelines approved by the Trustees that require the Adviser to take into
account the same factors described above for other restricted securities and
require the Adviser to perform the same monitoring and reporting functions.
REVERSE REPURCHASE AGREEMENTS. The Cash Management, Corporate Bond,
High-Yield Bond, Worldwide High Income, SunAmerica Balanced, Utility, Federated
Value and Aggressive Growth Portfolios may enter into reverse repurchase
agreements with brokers, dealers, domestic and foreign banks or other financial
institutions that have been determined by the Adviser or Subadviser to be
creditworthy. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio. The Portfolio's
investment of the proceeds of a reverse repurchase agreement is the speculative
factor known as leverage. A Portfolio will enter into a reverse repurchase
agreement only if the interest income from investment of the proceeds is
expected to be greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement.
The Portfolio will maintain a separate account with a segregated portfolio of
cash or liquid securities in an amount at least equal to its purchase
obligations under these agreements (including accrued interest). In the event
that the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Portfolio's
repurchase obligation, and the Portfolio's use of proceeds of the agreement may
effectively be restricted pending such decision. Reverse repurchase agreements
are considered to be borrowings and are subject to the percentage limitations
on borrowings. See "Investment Restrictions."
FLOATING RATE OBLIGATIONS. These securities have a coupon rate that
changes at least annually and generally more frequently. The coupon rate is
set in relation to money market rates. The obligations, issued primarily by
banks, other corporations, governments and semi-governmental bodies, may have a
maturity in excess of one year. In some cases, the coupon rate may vary with
changes in the yield on Treasury bills or notes or with changes in LIBOR
(London Interbank Offering Rate). The Adviser considers floating rate
obligations to be liquid investments because a number of U.S. and foreign
securities dealers make active markets in these securities.
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COVERED OPTIONS. Each Portfolio may write (sell) covered call and
put options on any securities in which it may invest. A Portfolio may purchase
and write such options on securities that are listed on national domestic
securities exchanges (and, for certain Portfolios, foreign securities
exchanges) or traded in the over-the-counter market. A call option written by
a Portfolio obligates a Portfolio to sell specified securities to the holder of
the option at a specified price if the option is exercised at any time before
the expiration date. All call options written by a Portfolio are covered,
which means that a Portfolio will own the securities subject to the option so
long as the option is outstanding. The purpose of writing covered call options
is to realize greater income than would be realized on portfolio securities
transactions alone. However, in writing covered call options for additional
income, a Portfolio may forego the opportunity to profit from an increase in
the market price of the underlying security.
A Portfolio will receive a premium from writing a put or call option,
which increases the Portfolio's gross income in the event the option expires
unexercised or is closed out at a profit. If the value of an index on which
the Portfolio has written a call option falls or remains the same, the
Portfolio will realize a profit in the form of the premium received (less
transaction costs) that could offset all or a portion of any decline in the
value of the securities it owns. If the value of the index rises, however, the
Portfolio will realize a loss in its call option position, which will reduce
the benefit of any unrealized appreciation in the Portfolio's stock
investments. By writing a put option, the Portfolio assumes the risk of a
decline in the index. To the extent that the price changes of securities owned
by a Portfolio correlate with changes in the value of the index, writing
covered put options on indices will increase the Portfolio's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the option.
A put option written by a Portfolio would obligate a Portfolio to
purchase specified securities from the option holder at a specified price if
the option is exercised at any time before the expiration date. All put
options written by a Portfolio would be covered, which means that the Portfolio
would have deposited cash, U.S. government securities or other high-grade debt
securities (I.E., securities rated in one of the top three categories by
Moody's or Standard & Poor's, or, if unrated, deemed by the Adviser or
Subadviser to be of comparable credit quality) with a value at least equal to
the exercise price of the put option in a segregated account. The purpose of
writing such options is to generate additional income for a Portfolio.
However, in return for the option premium, a Portfolio accepts the risk that it
may be required to purchase the underlying securities at a price in excess of
the securities' market value at the time of purchase.
The purchase of call options on stock indices may be used by a
Portfolio to attempt to reduce the risk of missing a broad market advance, or
an advance in an industry or market segment, at a time when the Portfolio holds
uninvested cash or short-term debt securities awaiting investment. When
purchasing call options for this purpose, the Portfolio will also bear the risk
of losing all or a portion of the premium paid, and related transaction costs,
if the value of the index does not rise. The purchase of call options on stock
indices when the Portfolio is substantially fully invested is a form of
leverage, up to the amount of the premium and related transaction costs, and
involves risks
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of loss and of increased volatility similar to those involved in purchasing
calls on securities the Portfolio owns.
A Portfolio also may purchase put options on stock indices to hedge
its investments against a decline in value. By purchasing a put option on a
stock index, the Portfolio will seek to offset a decline in the value of
securities it owns through appreciation of the put option. If the value of the
Portfolio's investments does not decline as anticipated, or if the value of the
option does not increase, the Portfolio's loss will be limited to the premium
paid for the option, plus related transaction costs. The success of this
strategy will largely depend on the accuracy of the correlation between the
changes in value of the index and the changes in value of the Portfolio's
security holdings.
YIELD CURVE OPTIONS. Certain Portfolios may purchase or write yield
curve options for other than hedging purposes (I.E., in an effort to increase
their current income) if, in the judgment of the Subadviser, the particular
Portfolio will be able to profit from movements in the spread between the yields
of the underlying securities. The trading of yield curve options is subject to
all of the risks associated with the trading of other types of options. In
addition, however, such options present risk of loss even if the yield of one of
the underlying securities remains constant, if the spread moves in a direction
or to an extent which was not anticipated. Yield curve options are traded
over-the-counter and because they have been only recently introduced,
established trading markets for these securities have not yet developed. Because
these securities are traded over-the-counter, the Securities and Exchange
Commission ("SEC") has taken the position that yield curve options are illiquid
and, therefore, cannot exceed the SEC illiquidity ceiling. Each Portfolio that
may enter into yield curve options transactions will cover such transactions as
described in the Prospectus.
PORTFOLIO STRATEGIES RELATED TO FOREIGN SECURITIES. Each Portfolio may
engage in various portfolio strategies to reduce certain risks of their
respective investments and/or to attempt to enhance return. Each Portfolio may
engage in strategies including the purchase and sale of forward foreign currency
exchange contracts, currency and financial index futures contracts (including,
in the case of the International Growth and Income, Emerging Markets and Global
Equities Portfolios, stock index futures) and options thereon, put and call
options on currencies and financial indices, and combinations thereof. The
Adviser or Subadviser will use such techniques as market conditions warrant.
Each Portfolio's ability to use these strategies may be limited by market
conditions, regulatory limits and tax considerations and there can be no
assurance that any of these strategies will succeed. New financial products and
risk management techniques continue to be developed and these Portfolios may use
these new investments and techniques to the extent consistent with their
investment objective and policies.
In addition to direct investment, the Portfolios which may invest in
foreign securities may also invest in American Depositary Receipts ("ADRs") and
in other Depositary Receipts, including Global Depositary Receipts ("GDRs"),
European Depositary Receipts ("EDRs") and others (which, together with ADRs,
GDRs and EDRs, are hereinafter collectively referred to as "Depositary
Receipts"), to the extent that such Depositary Receipts become available. ADRs
are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in
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a security or a pool of securities issued by a foreign issuer (the "underlying
issuer") and deposited with the depositary. ADRs include American Depositary
Shares and New York Shares and may be "sponsored" or "unsponsored." Sponsored
ADRs are established jointly by a depositary and the underlying issuer, whereas
unsponsored ADRs may be established by a depositary without participation by
the underlying issuer. GDRs, EDRs and other types of Depositary Receipts are
typically issued by foreign depositaries, although they may also be issued by
U.S. depositaries, and evidence ownership interests in a security or pool of
securities issued by either a foreign or a U.S. corporation. Holders of
unsponsored Depositary Receipts generally bear all the costs associated with
establishing the unsponsored Depositary Receipt. The depositary of unsponsored
Depositary Receipts is under no obligation to distribute shareholder
communications received from the underlying issuer or to pass through to the
holders of the unsponsored Depositary Receipt voting rights with respect to the
deposited securities or pool of securities. Depositary Receipts are not
necessarily denominated in the same currency as the underlying securities to
which they may be connected. Generally, Depositary Receipts in registered form
are designed for use in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets outside the United
States. A Portfolio may invest in sponsored and unsponsored Depositary
Receipts. For purposes of a Portfolio's investment policies, the Portfolio's
investments in Depositary Receipts will be deemed to be investments in the
underlying securities. The Portfolios also may invest in securities
denominated in European Currency Units ("ECUs"). Generally ADRs, in registered
form, are dollar denominated securities designed for use in the U.S. securities
markets, which represent and may be converted into the underlying foreign
security. EDRs, in bearer form, are designed for use in the European
securities markets. An "ECU" is a "basket" consisting of specified amounts of
currencies of certain of the twelve member states of the European Community.
The specific amount of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community from time to time to reflect
changes in relative values of the underlying currencies. In addition, the
Portfolios may invest in securities denominated in other currency "baskets."
See "Description of Securities and Investment Techniques - Risks and
Considerations Applicable to Investment in Securities of Foreign Issuers" in
the Prospectus.
The Portfolios may also invest in emerging country securities. As used
with respect to this Portfolio and as described above under "Emerging Country
Fixed-Income Securities," the term "emerging country" applies to any country
which, in the opinion of the Subadviser, is generally considered to be an
emerging or developing country by the international financial community,
including the International Bank for Reconstruction and Development (more
commonly known as the World Bank) and the International Finance Corporation.
There are currently over 150 countries which, in the opinion of the Subadviser,
are generally considered to be emerging or developing countries by the
international financial community. These countries generally include every
nation in the world except the United States, Canada, Japan, Australia, New
Zealand, Singapore (with the exception of the Emerging Markets Portfolio) and
most nations located in Western Europe. Not withstanding the foregoing with
respect to the Emerging Markets Portfolio, the Subadviser believes that in
addition to the exclusions listed above, the following countries should also be
excluded from the countries considered emerging markets: Austria, Belgium,
Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway,
Spain, Sweden and Switzerland.
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Currently, investing in many emerging countries is not feasible or may invoke
unacceptable political risks.
The International Diversified Equities Portfolio will focus its
investments on those emerging market countries in which it believes the
economies are developing strongly and in which the markets are becoming more
sophisticated. With respect to the portions of such Portfolio that is invested
in emerging country equity securities, the Portfolio initially intends to
invest primarily in some or all of the following countries:
<TABLE>
<S> <C> <C> <C>
Argentina Indonesia Portugal Thailand
Brazil Mexico South Africa Turkey
India Philippines South Korea
</TABLE>
As markets in other countries develop, the International Diversified
Equities Portfolio expects to expand and further diversify the emerging
countries in which it invests. The Portfolio does not intend to invest in any
security in a country where the currency is not freely convertible to U.S.
dollars, unless the Portfolio has obtained the necessary governmental licensing
to convert such currency or other appropriately licensed or sanctioned
contractual guarantee to protect such investment against loss of that
currency's external value, or the Portfolio has a reasonable expectation at the
time the investment is made that such governmental licensing or other
appropriately licensed or sanctioned guarantee would be obtained or that the
currency in which the security is quoted would be freely convertible at the
time of any proposed sale of the security by the Portfolio.
An emerging country security is one issued by a company that, in the
opinion of the Subadviser, has one or more of the following characteristics:(i)
it is organized under the laws of, or has its principal office in, an emerging
country, or (ii) alone or on a consolidated basis it derives 50% or more of its
annual revenue from business in emerging countries. An emerging market
security may also include a company which has its principal securities trading
market in an emerging country. The Subadviser will base determinations as to
eligibility on publicly available information and inquiries made to the
companies.
FOREIGN CURRENCY AND FINANCIAL INDEX TRANSACTIONS - FORWARD EXCHANGE
AND FUTURES CONTRACTS, OPTIONS AND OPTIONS ON FUTURES CONTRACTS. Each
Portfolio (other than the Cash Management Portfolio) may enter into contracts
for the purchase or sale for future delivery of foreign currencies ("forward
currency exchange contracts"), financial and foreign currency futures contracts
or contracts based on financial indices ("futures contracts") and may purchase
and write put and call options to buy or sell currencies and to buy or sell
futures contracts ("options on futures contracts").
A forward foreign currency contract is an obligation to purchase or
sell a currency against another currency at a future date and price as agreed
upon by the parties. A "sale" of a foreign currency futures contract means
entering into a contract to deliver the foreign currencies called for
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by the contract at a specified price on a specified date. A "purchase" of a
foreign currency futures contract means entering into a contract to acquire the
foreign currencies called for by the contract at a specified price on a
specified date.
An exchange-traded futures contract relating to foreign currency, or a
financial index, is similar to a forward foreign currency exchange contract but
has a standardized size and exchange date. A Portfolio may either accept or
make delivery of the currency at the maturity of such a contract or, prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract and the price at which the contract was originally struck. No
physical delivery of the securities underlying the index is made.
Over-the-counter currency instruments are subject to the risk that the
counterparty to such instruments will default on its obligations. Since
over-the-counter currency instruments are not guaranteed by an exchange or
clearinghouse, a default on the instrument would deprive the Portfolio of
unrealized profits, transaction costs or the benefits of a currency hedge or
force the Portfolio to cover its purchase or sale commitments, if any, at the
current market price. A Portfolio will not enter into such transactions unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is considered to be investment grade by the Adviser or
Subadviser.
Each Portfolio (other than Cash Management Portfolio) may enter into
futures contracts in anticipation of, or to protect against, fluctuations in
currency exchange rates. A Portfolio might, for example, enter into a futures
contract when it wanted to hold securities denominated in a particular currency
but anticipated, and wished to be protected against, a decline in that currency
against the U.S. dollar. Similarly, it might enter into futures contracts to
"lock in" the U.S. dollar price of non-U.S. dollar denominated securities that
it anticipated purchasing. Although futures contracts typically will involve
the purchase and sale of a foreign currency against the U.S. dollar, a
Portfolio also may enter into currency contracts not involving the U.S. dollar.
In connection with these futures transactions, the Trust has filed a
notice of eligibility with the Commodity Futures Trading Commission ("CFTC")
that exempts the Trust from CFTC registration as a "commodity pool operator" as
defined under the Commodity Exchange Act. Pursuant to this notice, each
Portfolio will observe certain CFTC guidelines with respect to its futures
transactions that, among other things, require the Portfolio to use futures for
bona fide "hedging" purposes only (as defined by CFTC rules), and, in the case
of futures transactions for non-bona fide hedging purposes, to limit initial
margin deposits to no more than 5% of its net assets after taking into account
unrealized profits and unrealized losses on any such contracts entered into.
In addition, subject to the limitation on margin deposits described above, a
Portfolio may engage in futures transactions for non-bona fide hedging
purposes, provided that the total value of such long futures positions will not
exceed the sum of (a) cash or cash equivalents set aside in an identifiable
manner for this purpose, (b) cash proceeds on existing investments due within
30 days, and (c) accrued profits on such futures or options positions.
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Parties to futures contracts and holders and writers of options on
futures can enter into offsetting closing transactions, similar to closing
transactions on options, by selling or purchasing, respectively, an instrument
identical to the instrument held or written. Positions in futures and options
on futures may be closed only on an exchange or board of trade where there
appears to be a liquid secondary market. However, there can be no assurance
that such a market will exist for a particular contract at a particular time.
Secondary markets for options on futures are currently in the development
stage, and no Portfolio will trade options on futures on any exchange or board
of trade unless, in the judgment of the Adviser or applicable Subadviser, the
markets for such options have developed sufficiently that the liquidity risks
for such options are not greater than the corresponding risks for futures.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or related option can vary from
the previous day's settlement price; once that limit is reached, no trades may
be made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If a Portfolio were unable to liquidate a futures or related options
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Portfolio would continue
to be subject to market risk with respect to its position. In addition, except
in the case of purchased options, the Portfolio would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the future or option or to maintain cash or securities
in a segregated account.
Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or related options might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the futures and related options
markets are subject to daily variation margin calls and might be compelled to
liquidate futures or related option positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the futures markets are
less onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.
In connection with the purchase of futures contracts, a Portfolio will
deposit and maintain in a segregated account an amount of cash or liquid
securities equal to its obligations under the futures contracts less any
amounts maintained in a margin account with the Trust's futures broker.
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OPTIONS. Each Portfolio may attempt to accomplish objectives similar
to those involved in their use of futures contracts by purchasing or selling
put or call options on currencies, currency futures contracts, and financial
index futures (including, in the case of the Global Equities Portfolio, stock
index futures). A foreign currency put option gives the Portfolio as purchaser
the right (but not the obligation) to sell a specified amount of currency at
the exercise price until the expiration of the option. A call option gives the
Portfolio as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price until its expiration. A
Portfolio might purchase a currency put option, for example, to protect itself
during the contract period against a decline in the U.S. dollar value of a
currency in which it holds or anticipates holding securities. If the
currency's value should decline against the U.S. dollar, the loss in currency
value should be offset, in whole or in part, by an increase in the value of the
put. If the value of the currency instead should rise against the U.S. dollar,
any gain to the Portfolio would be reduced by the premium it had paid for the
put option. A currency call option might be purchased, for example, in
anticipation of, or to protect against, a rise in the value against the U.S.
dollar of a currency in which a Portfolio anticipates purchasing securities.
Currency options may be either listed on an exchange or traded
over-the-counter ("OTC options"). Listed options are third-party contracts
(I.E., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation), and have standardized strike prices
and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. OTC options differ from exchange-traded
options in that OTC options are transacted with dealers directly and not
through a clearing corporation (which guarantees performance). Consequently,
there is a risk of non-performance by the dealer. Since no exchange is
involved, OTC options are valued on the basis of a quote provided by the
dealer. A Portfolio will not purchase an OTC option unless it is believed that
daily valuations for such options are readily obtainable. In the case of OTC
options, there can be no assurance that a liquid secondary market will exist
for any particular option at any specific time.
An option on a securities index is similar to an option on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
chosen index is greater than (in the case of a call) or less than (in the case
of a put) the exercise price of the option.
Options on futures contracts to be written or purchased by a Portfolio
will be traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions or exchange rates which otherwise might either
adversely affect the value of a Portfolio's securities or adversely affect the
prices of securities which a Portfolio intends to purchase at a later date.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD BONDS. The Corporate
Bond, High-Yield Bond, Worldwide High Income, Balanced/Phoenix Investment
Counsel, Asset Allocation, Small
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<PAGE> 72
Company Value, Real Estate, Equity Income and Emerging Markets Portfolios may
invest in high-yield bonds. These bonds present certain risks which are
discussed below:
Sensitivity to Interest Rate and Economic Changes -
High-yield bonds are very sensitive to adverse
economic changes and corporate developments. During
an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may
experience financial stress that would adversely
affect their ability to service their principal and
interest payment obligations, to meet projected
business goals, and to obtain additional financing.
If the issuer of a bond defaulted on its obligations
to pay interest or principal or entered into
bankruptcy proceedings, a Portfolio may incur losses
or expenses in seeking recovery of amounts owed to
it. In addition, periods of economic uncertainty and
changes can be expected to result in increased
volatility of market prices of high-yield bonds and
the Portfolio's net asset value.
Payment Expectations - High-yield bonds may contain
redemption or call provisions. If an issuer
exercised these provisions in a declining interest
rate market, a Portfolio would have to replace the
security with a lower yielding security, resulting in
a decreased return for investors. Conversely, a
high-yield bond's value will decrease in a rising
interest rate market, as will the value of the
Portfolio's assets. If the Portfolio experiences
unexpected net redemptions, this may force it to sell
high-yield bonds without regard to their investment
merits, thereby decreasing the asset base upon which
expenses can be spread and possibly reducing the
Portfolio's rate of return.
Liquidity and Valuation - There may be little trading
in the secondary market for particular bonds, which
may affect adversely a Portfolio's ability to value
accurately or dispose of such bonds. Adverse
publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the
values and liquidity of high-yield bonds, especially
in a thin market.
CERTAIN RISK FACTORS AFFECTING UTILITY COMPANIES. The Utility and Real
Estate Portfolios may invest in equity and debt securities of utility
companies. There are certain risks and considerations affecting utility
companies, and the holders of utility company securities, which an investor
should take into account when investing in those securities. Factors which may
adversely affect utility companies include: difficulty in financing large
construction programs during inflationary periods; technological innovations
which may cause existing plants, equipment, or products to become less
competitive or obsolete; the impact of natural or man-made disaster (especially
on regional utilities); increased costs or reductions in production due to the
unavailability of appropriate types of fuels; seasonally or occasionally
reduced availability or higher cost of natural
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gas; and reduced demand due to energy conservation among consumers. These
revenues of domestic and foreign utility companies generally reflect the
economic growth and developments in the geographic areas in which they do
business. Furthermore, utility securities tend to be interest rate sensitive.
In addition, most utility companies in the United States and in
foreign countries are subject to government regulation. Generally, the purpose
of such regulation is to ensure desirable levels of service and adequate
capacity to meet public demand. To this end, prices are often regulated to
enable consumers to obtain service at what is perceived to be a fair price,
while attempting to provide utility companies with a rate of return sufficient
to attract capital investment necessary for continued operation and necessary
growth. Recently, utility regulators have permitted utilities to diversify
outside of their original geographic regions and their traditional lines of
business. While the Subadvisers believe that these opportunities will permit
certain utility companies to earn more than their traditional regulated rates
of return, other companies may be forced to defend their core business and may
be less profitable. Of course, there can be no assurance that all of the
regulatory policies described in this paragraph will continue in the future.
In addition to the effects of regulation described in the previous
paragraph, utility companies may also be adversely affected by the following
regulatory considerations: (i) the development and implementation of a national
energy policy; (ii) the differences between regulatory policies of different
jurisdictions (or different regulators which have concurrent jurisdiction);
(iii) shifts in regulatory policies; (iv) adequacy of rate increases; and (v)
future regulatory legislation.
Foreign utility companies may encounter different risks and
opportunities than those located in the United States. Foreign utility
companies may be more heavily regulated than their United States counterparts.
Many foreign utility companies currently use fuels which cause more pollution
than fuels used by United States utilities. In the future, it may be necessary
for such foreign utility companies to invest heavily in pollution control
equipment or otherwise meet pollution restrictions. Rapid growth in certain
foreign economies may encourage the growth of utility industries in those
countries.
In addition to the foregoing considerations which affect most utility
companies, there are specific considerations which affect specific utility
industries:
Electric. The electric utility industry is composed of companies that
are engaged in the generation, transmission, and sale of electric energy.
Electric utility companies may be affected either favorably or unfavorably,
depending upon the circumstances, by the following: fuel costs; financing
costs; size of the region in which sales are made; operating costs;
environmental and safety regulations; changes in the regulatory environment;
and the length of time needed to complete major construction projects.
In the United States, the construction and operation of nuclear power
facilities is subject to a high degree of regulatory oversight by the Nuclear
Regulatory Commission and state agencies with
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concurrent jurisdiction. In addition, the design, construction, licensing, and
operation of nuclear power facilities are often subject to lengthy delays and
unanticipated costs due to changes in regulatory policy, regional political
actions, and lawsuits. Furthermore, during rate authorizations, utility
regulators may disallow the inclusion in electric rates of the higher operating
costs and expenditures resulting from these delays and unanticipated costs,
including the costs of a nuclear facility which a utility company may never be
able to use.
Telecommunications. The telephone industry is large and highly
concentrated. The greatest portion of this segment is comprised of companies
which distribute telephone services and provide access to the telephone
networks. While many telephone companies have diversified into other
businesses in recent years, the profitability of telephone utility companies
could be adversely affected by increasing competition, technological
innovations, and other structural changes in the industry.
Cable television companies are typically local monopolies, subject to
scrutiny by both utility regulators and municipal governments. Emerging
technologies and legislation encouraging local competition are combining to
threaten these monopolies and may slow future growth rates of these companies.
The radio telecommunications segment of this industry, including cellular
telephone, is in its early developmental phase and is characterized by
emerging, rapidly growing companies.
Gas. Gas transmission and distribution companies are undergoing
significant changes. In the United States, the Federal Energy Regulatory
Commission is reducing its regulation of interstate transmission of gas. While
gas utility companies have in the recent past been adversely affected by
disruptions in the oil industry, increased concentration, and increased
competition, the Subadviser believes that environmental considerations should
benefit the gas industry in the future.
Water. Water utility companies purify, distribute, and sell water.
This industry is highly fragmented because most of the water supplies are owned
by local authorities. Water utility companies are generally mature and are
experiencing little or no per capita volume growth. The Subadviser believes
that favorable investment opportunities may result if anticipated consolidation
and foreign participation in this industry occurs.
CONVENTIONAL MORTGAGE PASS-THROUGH SECURITIES. 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 loan
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 conduits ("REMIC") 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.
CERTAIN COLLATERALIZED MORTGAGE OBLIGATIONS. Principal and interest on
the underlying mortgage assets may be allocated among the several classes of
Collateralized Mortgage Obligations ("CMOs") in various ways. In certain
structures (known as "sequential pay" CMOs), payments of principal, including
any principal prepayments, on the mortgage assets generally are applied to the
classes of CMOs in the order of their respective final distribution dates.
Thus, no payment of principal will be made on any class of sequential pay CMOs
until all other classes having an earlier final distribution date have been
paid in full.
Additional structures of CMOs include, among others, "parallel pay"
CMOs. Parallel pay CMOs are those which are structured to apply principal
payments and prepayments of the mortgage assets to two or more classes
concurrently on a proportionate or disproportionate basis. These simultaneous
payments are taken into account in calculating the final distribution date of
each class.
A wide variety of CMOs may be issued in the parallel pay or sequential
pay structures. These securities include accrual certificates (also known as
"Z-Bonds"), which only accrue interest at a specified rate until all other
certificates having an earlier final distribution date have been retired and
are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay CMOs which
generally require that specified amounts of principal be applied on each
payment date to one or more classes of CMOs (the "PAC Certificates"), even
though all other principal payments and prepayments of the mortgage assets are
then required to be applied to one or more other classes of the certificates.
The scheduled principal payments for the PAC Certificates generally have the
highest priority on each payment date after interest due has been paid to all
classes entitled to receive interest currently. Shortfalls, if any, are added
to the amount
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<PAGE> 76
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 that 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.
WARRANTS. The Corporate Bond, High-Yield Bond, SunAmerica Balanced,
Utility, Federated Value, Aggressive Growth, Real Estate, International Growth
and Income, and Emerging Markets Portfolios 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 can
generally 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, it risks the loss of its entire investment if
the market price of the underlying stock does not, before the expiration date,
exceed the exercise price of the warrant plus the cost thereof. Investment in
warrants is a speculative activity. Warrants pay no dividends and confer no
rights (other than the right to purchase the underlying stock) with respect to
the assets of the issuer. Although certain of the Portfolios may not invest
directly in warrants, such Portfolios may invest in securities that are
acquired as part of a unit consisting of a combination of fixed-income and
equity securities or securities to which warrants are attached.
NON-DIVERSIFIED STATUS. The Global Bond, Worldwide High Income,
International Diversified Equities and "Dogs" of Wall Street Portfolios have
registered as "non-diversified" investment companies. As a result, under the
1940 Act, the Portfolios are limited only by their own investment restrictions
as to the percentage of their assets which may be invested in the securities of
any one issuer. However, in spite of the flexibility under the 1940 Act, the
Portfolios would still have to meet quarterly diversification requirements
under the Internal Revenue Code of 1986, as amended (the "Code") in order for
the Portfolios to qualify as a regulated investment company. As a result of
the Code's diversification requirements, the Portfolios may not have the
latitude to take full advantage of the relative absence of 1940 Act
diversification requirements.
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
COMMERCIAL PAPER RATINGS. Moody's employs the designations "P-1,"
"P-2" and "P-3" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated P-1 have a superior capacity for repayment of
short-term promissory obligations. P-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; and well-established access to a range of
financial markets and assured sources of alternate liquidity. Issues rated P-2
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of
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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 alternative liquidity is maintained.
Standard & Poor's ratings of commercial paper are graded into four
categories ranging from A for the highest quality obligations to D for the
lowest. A - Issues assigned its highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 - This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation. A-2 - Capacity for timely payments on issues with this
designation is strong. However, the relative degree of safety is not as high
as for issues designated A-1.
Duff & Phelps Rating Co. ("Duff & Phelps") commercial paper ratings
are consistent with the short-term rating criteria utilized by money market
participants. Duff & Phelps commercial paper ratings refine the traditional 1
category. The majority of commercial issuers carry the higher short-term
rating yet significant quality differences within that tier do exist. As a
consequence, Duff & Phelps has incorporated gradations of 1+ and 1-to assist
investors in recognizing those differences.
Duff 1+ - Highest certainty of time repayment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations. Duff 1 - Very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor. Duff 1- - High certainty of timely
payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. Duff 2 - Good certainty of
timely payment. Liquidity factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small. Duff 3 - Satisfactory
liquidity and other protection factors, qualify issue as investment grade. Risk
factors are larger and subject to more variation. Nevertheless, timely payment
is expected. Duff 4 - Speculative investment characteristics. Liquidity is
not sufficient to insure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation. Duff 5 -
Default.
The short-term ratings of Fitch Investor Services, Inc. ("Fitch")
apply to debt obligations that are payable on demand or have original
maturities of generally up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner. Fitch short-term ratings are as follows: F-1+ Exceptionally Strong
Credit Quality - Issues assigned this rating are regarded as having the
strongest degree of assurance for timely payment. F-1 Very Strong Credit
Quality -Issues assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+. F-2 Good Credit Quality -
Issues assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues assigned F-1+
and F-1 ratings.
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F-3 Fair Credit Quality -Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be rated
below investment grade. F-5 Weak Credit Quality -Issues assigned this rating
have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions. D Default -Issues assigned this rating are in actual or
imminent payment default. LOC - The symbol LOC indicates that the rating is
based on a letter of credit issued by a commercial bank.
Thomson BankWatch, Inc. ("BankWatch") short-term ratings apply only to
unsecured instruments that have a maturity of one year or less. These
short-term ratings specifically assess the likelihood of an untimely payment of
principal and interest. TBW-1 is the highest category, which indicates a very
high degree of likelihood that principal and interest will be paid on a timely
basis. TBW-2 is the second highest category and, while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated TBW-1.
CORPORATE DEBT SECURITIES. Moody's rates the long-term debt
securities issued by various entities from "Aaa" to "C." Aaa - Best quality.
These securities carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a larger, 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
more unlikely to impair the fundamentally strong position of these issues. Aa
- - High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present that make the long-term risks appear somewhat greater. A
- - Upper medium grade obligations. These bonds possess many favorable
investment attributes. 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 - Medium grade obligations. 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 -
Have speculative elements; future cannot be considered as well assured. The
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Bonds in
this class are characterized by uncertainty of position. B - Generally lack
characteristics of the desirable investment 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 - Of poor standing. Issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Speculative in a high degree; often in default or have other marked
shortcomings. C - Lowest rated class of bonds; can be regarded as having
extremely poor prospects of ever attaining any real investment standings.
Standard & Poor's rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality. AAA -
Highest rating. Capacity to pay interest and repay
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principal is extremely strong. AA - High grade. Very strong capacity to pay
interest and repay principal. Generally, these bonds differ from AAA issues
only in a small degree. A - Have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of change in circumstances and economic conditions than debt in higher rated
categories. BBB - Regarded as having adequate capacity to pay interest and
repay principal. These bonds normally exhibit adequate protection parameters,
but adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for debt
in higher rated categories. BB, B, CCC, CC, C - Regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicated the
lowest degree of speculation and C the highest degree of speculative. While
this debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. C1 - Reserved for income bonds on which no interest is being
paid. D - In default and payment of interest and/or repayment of principal
is in arrears.
Fitch rates the long-term debt securities issued by various entities
in categories "AAA" to "D" according to quality. AAA is considered to be
investment grade and of the highest credit quality. The ability to pay
interest and repay principal is exceptionally strong. AA is considered to be
investment grade and of very high credit quality. The ability to pay interest
and repay principal is very strong, although not quite as strong as AAA issues.
A is considered to be investment grade and of high credit quality. The ability
to pay interest and repay principal is strong, but these issues may be more
vulnerable to adverse changes in economic conditions and circumstances than
higher rated issues. BBB is considered to be investment grade and of
satisfactory credit quality. The ability to pay interest and repay principal
is adequate. These issues are more likely to be affected by adverse changes in
economic conditions and circumstances and, therefore, impair timely payment.
The likelihood that the ratings of these issues will fall below investment
grade is higher than for issues with higher ratings. BB is considered
speculative. The ability to pay interest and repay principal may be affected
over time by adverse economic changes. B is considered highly speculative. The
probability of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue. CCC issues are considered
to have certain identifiable characteristics which may lead to default. The
ability to meet obligations requires an advantageous business and economic
environment. CC issues are minimally protected and default in payment of
interest and/or principal seems probable over time. Issues rated C are in
imminent default in payment of interest or principal. DDD, DD, and D issues are
in default on interest and/or principal payments and are extremely speculative.
Plus(+) and minus(-) signs are used with a rating symbol to indicate the
relative position within the rating category.
Duff & Phelps rates long-term debt specifically to credit quality,
I.E., the likelihood of timely payment for principal and interest. AAA is
considered the highest quality. AA is considered high quality. A is regarded
as good quality. BBB is considered to be investment grade and of satisfactory
credit quality. BB and B are considered to be non-investment grade and CCC is
regarded as
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<PAGE> 80
speculative. Ratings in the long-term debt categories may include a plus(+) or
minus(-) designation which indicates where within the respective category the
issue is placed.
BankWatch rates the long-term debt securities issued by various
entities either AAA or AA. AAA is the highest category, which indicates the
ability to repay principal and interest on a timely basis is very high. AA is
the second highest category, which indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category. Ratings in the long-term debt categories
may include a plus (+) or minus (-) designation which indicates where within
the respective category the issue is placed.
INVESTMENT RESTRICTIONS
The Trust has adopted certain investment restrictions for each
Portfolio that cannot be changed without approval by a majority of its
outstanding voting securities. Such majority is defined as the vote of the
lesser of (i) 67% or more of the outstanding shares of the Portfolios 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
of the Portfolios.
INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT PORTFOLIO
The Cash Management Portfolio has adopted the following restrictions
that are fundamental policies. These fundamental policies, as well as the Cash
Management Portfolio's investment objective, cannot be changed without approval
by a majority of its outstanding voting securities. All percentage limitations
expressed in the following investment restrictions are measured immediately
after the relevant transaction is made. The Cash Management Portfolio may not:
1. Invest more than 5% of the value of its total assets in the
securities of any one issuer, provided that this limitation shall apply only to
75% of the value of the Portfolio's total assets, and, provided further, that
the limitation shall not apply to obligations of the government of the U.S. or
of any corporation organized as an instrumentality of the U.S. under a general
act of Congress.
2. As to 75% of its total assets, purchase more than 10% of the
outstanding voting class of securities of an issuer.
3. 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. In addition, the Portfolio may, if
deemed advisable, invest more than 25% of its assets in the obligations of
domestic commercial banks.
4. Make loans to others except for the purchase of the debt
securities listed above under its Investment Policies. The Portfolio may,
however, enter into repurchase agreements.
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5. Borrow money, except from banks for temporary purposes, and then
in an amount not in excess of 5% of the value of the Portfolio's total assets.
Moreover, in the event that the asset coverage for such borrowings falls below
300%, the Portfolio will reduce within three days the amount of its borrowings
in order to provide for 300% asset coverage.
6. Sell securities short except to the extent that the Portfolio
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short.
7. Act as underwriter of securities issued by others, engage in
distribution of securities for others, or make investments in other companies
for the purpose of exercising control or management.
In addition to the foregoing, the Cash Management Portfolio has
adopted the following non-fundamental policies (which may be changed by the
Trustees without shareholder approval). Under these restrictions, the Cash
Management Portfolio may not:
a. Enter into any repurchase agreement maturing in more than seven
days or invest in any other illiquid security if, as a result, more than 10% of
the Portfolio's total assets would be so invested.
b. Pledge or hypothecate its assets.
c. Invest in puts, calls, straddles, spreads or any combination
thereof, except as permitted by the Prospectus and Statement of Additional
Information, as amended from time to time.
d. Invest in securities of other investment companies except to
the extent permitted by applicable law and the Prospectus and Statement of
Additional Information, as amended from time to time.
e. Invest more than 5% of its assets (measured at the time of
purchase) in the securities of any one issuer (other than the U.S. Government);
provided however, that the Cash Management Portfolio may invest, as to 25% of
its assets, more than 5% of its assets in certain high quality securities (as
defined in the Rule) of a single issuer for a period of up to three business
days. Notwithstanding fundamental investment restriction Number 1 above, in
order to comply with Rule 2a-7 under the 1940 Act, the Cash Management
Portfolio has adopted this more restrictive policy The purchase by the Cash
Management Portfolio of securities that have "put" or "stand-by" commitment
features are not considered "puts" for purposes of non-fundamental investment
restriction C above.
INVESTMENT RESTRICTIONS OF THE CORPORATE BOND PORTFOLIO, GLOBAL BOND
PORTFOLIO, HIGH-YIELD BOND PORTFOLIO, WORLDWIDE HIGH INCOME PORTFOLIO,
SUNAMERICA BALANCED PORTFOLIO, BALANCED/PHOENIX INVESTMENT COUNSEL
PORTFOLIO, ASSET
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ALLOCATION PORTFOLIO, EQUITY INCOME PORTFOLIO, UTILITY PORTFOLIO,
GROWTH-INCOME PORTFOLIO, SMALL COMPANY VALUE, FEDERATED VALUE PORTFOLIO,
VENTURE VALUE PORTFOLIO, "DOGS" OF WALL STREET PORTFOLIO, ALLIANCE
GROWTH PORTFOLIO, PUTNAM GROWTH PORTFOLIO, GROWTH/PHOENIX INVESTMENT
COUNSEL PORTFOLIO, EQUITY INDEX PORTFOLIO, REAL ESTATE PORTFOLIO,
AGGRESSIVE GROWTH PORTFOLIO, INTERNATIONAL GROWTH AND INCOME
PORTFOLIO, GLOBAL EQUITIES PORTFOLIO, INTERNATIONAL DIVERSIFIED
EQUITIES PORTFOLIO AND EMERGING MARKETS PORTFOLIO
The Corporate Bond Portfolio, Global Bond Portfolio, High-Yield Bond
Portfolio, Worldwide High Income Portfolio, SunAmerica Balanced Portfolio,
Balanced/Phoenix Investment Counsel Portfolio, Asset Allocation Portfolio,
Equity Income Portfolio, Utility Portfolio, Growth-Income Portfolio, Small
Company Value Portfolio, Federated Value Portfolio, Venture Value Portfolio,
"Dogs" of Wall Street Portfolio, Alliance Growth Portfolio, Putnam Growth
Portfolio, Growth/Phoenix Investment Counsel Portfolio, Equity Index Portfolio,
Real Estate Portfolio, Aggressive Growth Portfolio, International Growth and
Income Portfolio, Global Equities Portfolio, International Diversified
Equities Portfolio and Emerging Markets Portfolio have each adopted the
following investment restrictions that are fundamental policies. These
fundamental policies cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of the respective Portfolio. All
percentage limitations expressed in the following investment restrictions are
measured immediately after the relevant transaction is made. These Portfolios
may not:
1. Other than the Global Bond, Worldwide High Income, "Dogs" of
Wall Street and International Diversified Equities Portfolios, invest more than
5% of the value of the total assets of a Portfolio in the securities of any one
issuer, provided that this limitation shall apply only to 75% of the value of
the Portfolio's total assets and, provided further, that the limitation shall
not apply to obligations issued or guaranteed by the government of the United
States or of any of its agencies or instrumentalities.
2. As to 75% of its total assets, purchase more than 10% of any
class of the outstanding voting securities of an issuer. This restriction does
not apply to the Global Bond, International Diversified Equities, "Dogs" of
Wall Street and Worldwide High Income Portfolios.
3. Invest more than 25% of the Portfolio's total assets in the
securities of issuers in the same industry, except that the Utility Portfolio
will invest at least 25% of its total assets in the securities of utility
companies, the Real Estate Portfolio will invest at least 25% of its total
assets in the securities of real estate companies and the "Dogs" of Wall Street
Portfolio may invest more than 25% of its assets in the securities of issuers
in the same industry to the extent such investments would be selected according
to stock selection criteria. Obligations of the U.S. Government, its agencies
and instrumentalities are not subject to this 25% limitation on industry
concentration. The Portfolio may, if deemed advisable, invest more than 25% of
its assets in the obligations of domestic
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commercial banks. With respect to all Portfolios other than the Utility
Portfolio, as to utility companies, the gas, electric, water and telephone
businesses will be considered separate industries.
4. Invest in real estate (including in the case of all Portfolios
except the Real Estate, Equity Income, Small Company Value and Equity Index
Portfolios limited partnership interests, but excluding in the case of all
Portfolios securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein); provided that a Portfolio may
hold or sell real estate acquired as a result of the ownership of securities.
This limitation shall not prevent a Portfolio from investing in securities
secured by real estate or interests therein.
5. Purchase commodities or commodity contracts; except that any
Portfolio may engage in transactions in put and call options on securities,
indices and currencies, forward and futures contracts on securities, indices
and currencies, put and call options on such futures contracts, forward
commitment transactions, forward foreign currency exchange contracts,
interest-rate, mortgage and currency swaps and interest-rate floors and caps.
6. Borrow money, except to the extent permitted by applicable law.
7. Purchase securities or evidences of interest therein on margin,
except that the Portfolios may obtain such short-term credit as may be
necessary for the clearance of any transaction.
8. Make loans to others except for (a) the purchase of debt
securities; (b) entering into repurchase agreements; and (c) the lending of its
portfolio securities.
In addition to the foregoing, the Global Bond, Corporate Bond,
High-Yield Bond, Worldwide High Income, SunAmerica Balanced, Balanced/Phoenix
Investment Counsel, Asset Allocation, Utility, Equity Income, Growth-Income,
Small Company Value, Federated Value, Venture Value, "Dogs" of Wall Street,
Alliance Growth, Growth/Phoenix Investment Counsel, Putnam Growth, Global
Equities, International Diversified Equities, Aggressive Growth, International
Growth and Income, Real Estate, Equity Index and Emerging Markets Portfolios
have each adopted the following non-fundamental policies (which may be changed
by the Trustees without shareholder approval). Under these restrictions, such
Portfolios may not:
a. 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 total assets would be so invested.
b. Invest in securities of other investment companies, except to
the extent permitted by applicable law and the Prospectus and Statement of
Additional Information, as amended from time to time.
c. Other than the Emerging Markets Portfolio, pledge, mortgage or
hypothecate its assets, except to the extent necessary to secure permitted
borrowings and, to the extent related to the
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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, the Corporate Bond, High-Yield
Bond, Worldwide High Income, SunAmerica Balanced, Aggressive Growth, Federated
Value and Utility Portfolios may pledge assets in reverse repurchase
agreements.
d. Invest in companies for the purpose of exercising control or
management.
e. Engage in underwriting of securities issued by others, except to
the extent it may be deemed to be acting as an underwriter in the purchase and
resale of portfolio securities.
f. Sell securities short except to the extent permitted by
applicable law.
g. Invest in puts, calls, straddles, spreads or any combination
thereof, except as permitted by the Prospectus and Statement of Additional
Information, as amended from time to time.
h. Issue any senior securities except as permitted by the 1940 Act,
other than, with respect to Equity Income, Small Company Value and Equity Index
Portfolios, as set forth in investment restriction number 6 and except to the
extent that issuing options or purchasing securities on a when-issued basis may
be deemed to constitute issuing a senior security.
TRUST OFFICERS AND TRUSTEES
The Trustees and executive officers of the Trust, their ages and
principal occupations for the past five years are set forth below. Each
Trustee also serves as a trustee of the Anchor Pathway Fund and Seasons Series
Trust. Unless otherwise noted, the address of each executive officer and
trustee is 1 SunAmerica Center, Los Angeles, California 90067-6022.
<TABLE>
<CAPTION>
Name, Age and Position(s) Principal Occupation(s) During Past Five Years
- ------------------------- -----------------------------------------------
Held with the Trust
- -------------------
<S> <C>
RICHARDS D. BARGER,* 70, Trustee Senior Partner, Law Firm of Barger & Wolen; Trustee,
Anchor Pathway ("APF") and Seasons Series Trust
("Seasons").
JAMES K. HUNT, * 47, Executive Vice President, SunAmerica Investments, Inc.
Trustee, Chairman and President (1993 to present); President, SunAmerica Corporate
Finance (since January 1994); Senior Vice President,
SunAmerica Investments, Inc. (1990-1993); Trustee, APF
and Seasons.
</TABLE>
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<PAGE> 85
<TABLE>
<CAPTION>
Name, Age and Position(s) Principal Occupation(s) During Past Five Years
- ------------------------- -----------------------------------------------
Held with the Trust
- -------------------
<S> <C>
NORMAN J. METCALFE, * 55, Trustee Vice Chairman and Chief Financial Officer, The Irvine
Company (March 1993 to Present); Director, SunAmerica
Inc. (1984-1993); Trustee, APF and Seasons
ALLAN L. SHER, 67, Trustee, APF and Seasons
Trustee
WILLIAM M. WARDLAW, 51, Partner, Freeman Spogli & Co., Incorporated (privately
Trustee owned merchant banking firm) (1988-Present); Trustee,
APF and Seasons.
SCOTT L. ROBINSON, 52, Senior Vice President and Controller, SunAmerica Inc.
Senior Vice President, Treasurer and (since 1991); Senior Vice President of Anchor National
Controller (since 1988); Senior Vice President, Treasurer and
Controller, APF and Seasons; Joined SunAmerica Inc. in
1978.
SUSAN L. HARRIS, 41, Senior Vice President (since November 1995), Secretary
Vice President, Counsel and Secretary (since 1989) and General Counsel-Corporate Affairs (since
December 1994), SunAmerica Inc.; Senior Vice President
and Secretary, Anchor National (since 1990); Vice President,
Counsel and Secretary, APF and Seasons; Joined SunAmerica Inc.
in 1985.
PETER C. SUTTON, 34 Senior Vice President, SAAMCo (since April 1997); Treasurer
The SunAmerica Center (since February 1996), SunAmerica Mutual Funds ("SAMF"),
733 Third Avenue Anchor Series Trust ("AST") and Style Select Series, Inc.;
New York, NY 10017-3204 Vice President and Assistant Treasurer, APF (since October
Vice President and Assistant Treasurer 1994) and Seasons (since April 1997); Formerly, Vice President,
SAAMCo (1994-1997); Controller, SAMF and AST (1993-1996);
Assistant Controller, SAMF and AST (1990-1993); Joined SAAMCo
in 1990.
ROBERT M. ZAKEM, 40 Senior Vice President and General Counsel, SAAMCo (since April
The SunAmerica Center 1993); Executive Vice President, General Counsel and Director,
733 Third Avenue Sun America Capital Services, Inc. ("SACS") (since February
New York, NY 10017-3204 1993); Vice President, General Counsel and Assistant Secretary,
Vice President and Assistant Secretary SunAmerica Fund Services, Inc. ("SAFS") (since January 1994);
Vice President, and Assistant Secretary, APF (since September
1993) and Seasons (since April 1997).
</TABLE>
* A trustee who may be deemed to be an "interested person" of the Trust as that
term is defined in the 1940 Act.
B-34
<PAGE> 86
The Trust pays no salaries or compensation to any of its officers, all
of whom are officers or employees of Anchor National Life Insurance Company or
its affiliates. An annual fee of $7,000, plus $500 for each meeting attended,
and expenses are paid to each Trustee who is not an officer or employee of
Anchor National Life Insurance Company or its affiliates for attendance at
meetings of the Board of Trustees. All other Trustees receive no remuneration
from the Trust.
The following table sets forth information summarizing the
compensation of each of the Trustees for his services as Trustee for the fiscal
year ended November 30, 1997.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM REGISTRANT AND
AGGREGATE BENEFITS ACCRUED FUND COMPLEX PAID
COMPENSATION AS PART OF FUND TO TRUSTEES*
FROM REGISTRANT EXPENSES
TRUSTEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richards D. Barger $9,000 - $23,000
- --------------------------------------------------------------------------------------------------
Frank L. Ellsworth $2,250 - $5,500
- --------------------------------------------------------------------------------------------------
William M. Wardlaw $6,250 - $15,250
- --------------------------------------------------------------------------------------------------
Norman J. Metcalfe $9,000 $23,000
- --------------------------------------------------------------------------------------------------
Allan L. Sher $6,750 - $17,500
- --------------------------------------------------------------------------------------------------
</TABLE>
* Information is as of November 30, 1997 for the two funds in the
complex which pay fees to these Trustees (the Trust, APF and Seasons).
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
The Trust, on behalf of each Portfolio, entered into an Investment
Advisory and Management Agreement with SunAmerica Asset Management Corp. to
handle the management of the Trust and its day to day affairs.
The Investment Advisory and Management Agreement provides that the
Adviser shall act as investment adviser to the Trust, manage the Trust's
investments, administer its business affairs, furnish offices, necessary
facilities and equipment, provide clerical, bookkeeping and administrative
services, and permit any of the Adviser's officers or employees to serve
without compensation as Trustees or officers of the Trust if duly elected to
such positions. Under the Agreement, the Trust agrees to assume and pay
certain charges and expenses of its operations, including: direct charges
B-35
<PAGE> 87
relating to the purchase and sale of portfolio securities, interest charges,
fees and expenses of independent legal counsel and independent accountants,
cost of stock 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 distributing prospectuses and statements of additional
information, 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 Trustees who are not
employees of the Adviser or its affiliates, membership dues in the Investment
Company Institute or any similar organization, all taxes and fees to Federal,
state or other governmental agencies, insurance premiums and extraordinary
expenses such as litigation expenses.
Each Portfolio pays its actual expenses for custodian services and a
portion of the Custodian's costs determined by the ratio of portfolio assets to
the total assets of the Trust, brokerage commissions or transaction costs, and
registration fees. Subject to supervision of the Board of Trustees, fees for
independent accountants, legal counsel, costs of reports of notices to
shareholders will be allocated based on the relative net assets of each
Portfolio. With respect to audit or legal fees clearly attributable to one
Portfolio, they will be assessed, subject to review by the Board of Trustees,
against that Portfolio.
The Investment Advisory and Management Agreement, after initial
approval with respect to each Portfolio, continues in effect for a period of
two years, in accordance with its terms, unless terminated, and thereafter may
be renewed from year to year as to each Portfolio for so long as such renewal
is specifically approved at least annually by (i) the Board of Trustees, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of each relevant Portfolio, and (ii) the vote of a majority of
Trustees who are not parties to the Agreement or interested persons (as defined
in the 1940 Act) of any such party, cast in person, at a meeting called for the
purpose of voting on such approval. The Agreement provides that it may be
terminated by either party without penalty upon the specified written notice
contained in the Agreement. The Agreement also provides for automatic
termination upon assignment.
Under the terms of the Advisory Agreement, the Adviser is not liable
to the Trust, or to any other person, for any act or omission by it or for any
losses sustained by the Trust or its shareholders, except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
As compensation for its services, the Adviser receives from the Trust
a fee, accrued daily and payable monthly, based on the net assets of each
Portfolio. The following table sets forth the total advisory fees received by
the Adviser from each Portfolio pursuant to the Investment Advisory and
Management Agreement for the fiscal years ended November 30, 1997, 1996 and
1995.
B-36
<PAGE> 88
ADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
PORTFOLIO 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Management $718,297 $694,655 $438,400
- --------------------------------------------------------------------------------------------------------
Corporate Bond (formerly, Fixed
Income)
$325,988 $230,031 $144,546
- --------------------------------------------------------------------------------------------------------
Global Bond $550,533 $458,390 $365,313
- --------------------------------------------------------------------------------------------------------
High-Yield Bond $1,000,566 $638,948 $478,203
- --------------------------------------------------------------------------------------------------------
Worldwide High Income
$915,682 $368,821 $143,765
- --------------------------------------------------------------------------------------------------------
SunAmerica Balanced
$178,845 $20,449* --
- --------------------------------------------------------------------------------------------------------
Balanced/Phoenix Investment
Counsel $558,675 $354,683 $92,499
- --------------------------------------------------------------------------------------------------------
Asset Allocation $2,556,963 $1,616,647 $1,000,248
- --------------------------------------------------------------------------------------------------------
Utility $100,647 $13,890* --
- --------------------------------------------------------------------------------------------------------
Growth-Income $2,784,063 $1,476,902 $794,078
- --------------------------------------------------------------------------------------------------------
Federated Value $237,339 $23,973* --
- --------------------------------------------------------------------------------------------------------
Venture Value $5,952,702 $2,305,064 $504,014
- --------------------------------------------------------------------------------------------------------
Alliance Growth $3,145,937 $1,522,222 $635,979
- --------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment
Counsel $1,299,894 $1,072,976 $835,634
- --------------------------------------------------------------------------------------------------------
Putnam Growth**
(formerly Provident Growth) $1,565,910 $1,073,769 $785,809
- --------------------------------------------------------------------------------------------------------
Global Equities $2,337,577 $1,627,510 $1,185,831
- --------------------------------------------------------------------------------------------------------
International Diversified Equities
$2,127,386 $1,025,593 $283,908
- --------------------------------------------------------------------------------------------------------
Aggressive Growth $506,503 $65,277* --
- --------------------------------------------------------------------------------------------------------
Real Estate* $58,800 -- --
- --------------------------------------------------------------------------------------------------------
International Growth and
Income* $125,310 -- --
- --------------------------------------------------------------------------------------------------------
Emerging Markets* $99,436 -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>
|
For the fiscal year ended November 30, 1997, the Adviser voluntarily waived
fees or reimbursed expenses as follows: Utility Portfolio - $25,537. For the
period June 2, 1997 (commencement of operations) through November 30, 1997, the
Adviser voluntarily waived fees or reimbursed expenses of each of the following
Portfolios: Real Estate Portfolio - $7,874; International Growth and Income
Portfolio - $52,507; and Emerging Markets Portfolio - $55,614. Certain
Portfolios had recoupments for the fiscal year ended November 30, 1997, and
such recoupments, which are not included as part of the advisory fee in the
above advisory fee table, were as follows: SunAmerica Balanced Portfolio -
$9,879; Federated Value Portfolio - $16,677; and Aggressive Growth Portfolio -
$3,186.
B-37
<PAGE> 89
* For the period 6/2/97 (commencement of operations) through
11/30/97
** Until April 15, 1997, the Advisory Agreement with respect to the
Putnam Growth Portfolio provided for an advisory fee payable to the Adviser at
the following annual rates: .85% on the first $50 million of average daily net
assets; .80% on the next $100 million; .70% on the next $100 million; .65% on
the next $100 million; and .60% over $350 million. The Advisory Agreement
relating to the Putnam Growth Portfolio was amended as of April 15, 1997 to
provide for the following annual fee rates: .85% on the first $150 million of
average daily net assets; .80% on the next $150 million; and .70% over $300
million.
Personal Trading. The Trust and the Adviser have adopted a written
Code of Ethics (the "Code") which prescribes general rules of conduct and sets
forth guidelines with respect to personal securities trading by "Access
Persons" thereof. An Access Person as defined in the Code is an individual who
is a trustee, director, officer, general partner or advisory person of the
Trust or the Adviser. 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 the Adviser, (ii) Initial Public Offerings,
(iii) private placements, (iv) blackout periods, (v) short-term trading
profits, (vi) gifts, and (vii) services as a director. These guidelines are
substantially similar to those contained in the Report of the Advisory Group on
Personal Investing issued by the Investment Company Institute's Advisory Panel.
The Adviser reports to the Board of Trustees on a quarterly basis, as to
whether there were any violations of the Code by Access Persons of the Trust or
any Subadviser during the quarter.
The Subadvisers have adopted a written Code of Ethics, the provisions
of which are materially similar to those in the Code, and have, with exception
to Putnam, undertaken to comply with the provisions of the Code to the extent
such provisions are more restrictive. Further, the Subadvisers report to the
Adviser 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 Trust.
In turn, the Adviser reports to the Board of Trustees as to whether there were
any violations of the Code by Access Persons of the Trust or any Subadviser.
SUBADVISORY AGREEMENTS
Alliance Capital Management L.P. ("Alliance"), Davis Selected Advisers,
L.P., Goldman Sachs Asset Management ("GSAM"), a separate division of Goldman,
Sachs & Co., Goldman Sachs Asset Management International,
("GSAM-International"), an affiliate of Goldman, Sachs & Co., Morgan Stanley
Dean Witter Investment Management Inc. ("MSDW Investment Management"), Phoenix
Investment Counsel, Inc., First American Asset Management ("First American"), a
division of U.S. Bank National Association, Putnam Investment Management, Inc.
and Federated Investment Counseling act as Subadvisers to certain of the Trust's
Portfolios pursuant to various Subadvisory Agreements with SAAMCo.
B-38
<PAGE> 90
Under the Subadvisory Agreements, the Subadvisers manage the investment and
reinvestment of the assets of the respective Portfolios for which they are
responsible. Each of the Subadvisers is independent of SAAMCo and discharges
its responsibilities subject to the policies of the Trustees and the oversight
and supervision of SAAMCo, which pays the Subadvisers' fees.
The Adviser pays each Subadviser a monthly fee with respect to each
Portfolio for which the Subadviser performs services, computed on average daily
net assets, at the following annual rates:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Growth-Income and Alliance .35% on the first $50 million
Growth Portfolios .30% on the next $100 million
.25% on the next $150 million
.20% on the next $200 million
.15% thereafter
-----------------------------------------------------------------------
Global Equities Portfolio .50% on the first $50 million
.40% on the next $100 million
.30% on the next $150 million
.25% thereafter
- -----------------------------------------------------------------------------------------------
Davis Selected Venture Value and Real Estate .45% on the first $100 million
Advisers, L.P. Portfolios .40% on the next $400 million
.35% thereafter
- -----------------------------------------------------------------------------------------------
Federated Investment Corporate Bond .30% on the first $25 million
Counseling Portfolio .25% on the next $25 million
.20% on the next $100 million
.15% thereafter
-----------------------------------------------------------------------
Federated Value and Utility .55% on the first $20 million
Portfolios .35% on the next $30 million
.25% on the next $100 million
.20% on the next $350 million
.15% thereafter
- -----------------------------------------------------------------------------------------------
GSAM Asset Allocation Portfolio .40% on the first $50 million
.30% on the next $100 million
.25% on the next $100 million
.20% thereafter
- -----------------------------------------------------------------------------------------------
GSAM- Global Bond Portfolio .40% on the first $50 million
International .30% on the next $100 million
.25% on the next $100 million
.20% thereafter
- -----------------------------------------------------------------------------------------------
First American Equity Income Portfolio .30%
Small Company Value Portfolio .80%
Equity Index Portfolio .125%
- -----------------------------------------------------------------------------------------------
</TABLE>
B-39
<PAGE> 91
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Morgan Stanley Asset International Diversified Equities .65% on the first $350 million
Management Inc. and Worldwide High Income .60% thereafter
Portfolios
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Phoenix Investment Growth/Phoenix Investment Counsel .35% on the first $50 million
Counsel and Balanced/ Phoenix Investment .30% on the next $100 million
Counsel Portfolios .25% on the next $150 million
.20% on the next $200 million
.15% thereafter.
- -----------------------------------------------------------------------------------------------
Putnam Investment Putnam Growth Portfolio .50% on the first $150 million
Management, Inc. .45% on the next $150 million
.35% thereafter
-----------------------------------------------------------------------
Emerging Markets Portfolio 1.00% on the first $150 million
.95% on the next $150 million
.85% thereafter
-----------------------------------------------------------------------
International Growth and Income .65% on the first $150 million
Portfolio .55% on the next $150 million
.45% thereafter
- -----------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the fees paid to the Subadvisers for the
fiscal years ended November 30, 1997, 1996 and 1995.
SUBADVISORY FEES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Growth
$1,280,957 $691,140 $306,832
----------------------------------------------------------------------------------
Alliance Growth-Income
$1,161,812 $673,445 $379,671
----------------------------------------------------------------------------------
Global Equities
$1,109,352 $811,790 $616,892
- -----------------------------------------------------------------------------------------------------------
Davis Selected Venture Value
Advisers, L.P. $3,126,351 $1,252,661 $281,866
----------------------------------------------------------------------------------
Real Estate $33,075++ -- --
- -----------------------------------------------------------------------------------------------------------
Asset Allocation
GSAM $1,088,896 $743,084 $485,722
- -----------------------------------------------------------------------------------------------------------
</TABLE>
B-40
<PAGE> 92
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GSAM Global Bond
International $281,015 $238,488 $194,306
- --------------------------------------------------------------------------------------------------------
Growth/Phoenix $599,956 $505,458 $399,134
Phoenix Investment Investment Counsel
Counsel, Inc. -------------------------------------------------------------------------------
Balanced/Phoenix
Investment Counsel
$271,312 $176,158 $46,249
- --------------------------------------------------------------------------------------------------------
Provident Investment
Counsel, Inc.+ Provident Growth
$284,164++ $614,720 $452,955
- --------------------------------------------------------------------------------------------------------
Worldwide High
MSDW Income $595,193 $239,733 $93,447
Investment -------------------------------------------------------------------------------
Management International
Diversified Equities
$1,382,736 $666,635 $184,540
- --------------------------------------------------------------------------------------------------------
Federated Corporate Bond $128,651 $48,744** --
Investment -------------------------------------------------------------------------------
Counseling Federated Value
$146,523 $17,580* --
-------------------------------------------------------------------------------
Utility $73,542 $10,186* --
- --------------------------------------------------------------------------------------------------------
Putnam Investment International Growth and
Management, Inc. Income $81,451+++ -- --
-------------------------------------------------------------------------------
Emerging Markets
$79,549+++ -- --
-------------------------------------------------------------------------------
Putnam Growth $618,584 -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>
* For the period 6/3/96 (commencement of operations) through 11/30/96
+ Until April 15, 1997, Provident Investment Counsel, Inc. served as
Subadviser to the Putnam Growth Portfolio (formerly named the
Provident Growth Portfolio). The Subadvisory fee was calculated at
the following annual rates: .50% on the first $50 million of average
daily net assets; .45% on the next $100 million; .35% on the next $100
million; .30% on the next $100 million; .25% over $350 million.
++ For the period 12/1/96 through 4/14/97 (termination of operations)
+++ For the period 6/2/97 (commencement of operations) through 11/30/97
The Subadvisory Agreements, after initial approval with respect to a
Portfolio, continue in effect for a period of two years, in accordance with
their terms, unless terminated, and may thereafter be renewed from year to year
as to a Portfolio for so long as such 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
B-41
<PAGE> 93
termination of the Advisory Agreement. The Subadvisory Agreements may be
terminated by the Trust, the Adviser or the respective Subadviser upon the
specified written notice contained in the Agreement.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The Cash Management, Corporate Bond, Aggressive Growth and Emerging
Markets Portfolios had capital loss carry-forwards of $684, $273,407,
$2,868,661 and $927,325, respectively, at November 30, 1997. To the extent not
yet utilized, such losses will be available to each of the Portfolios to offset
future gains through 2004 and 2005. The utilization of such losses will be
subject to annual limitations under the Code.
PRICE OF SHARES
Shares of the Trust are currently offered only to the Variable
Separate Account. The Trust is open for business on any day the New York Stock
Exchange ("NYSE") is open for business. 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 its shares separately by dividing
the total value of it's net assets by the shares outstanding. The net asset
value of a Portfolio's shares will also be computed on each other day in which
there is a sufficient degree of trading in such portfolio's securities that the
net asset value of its shares might be materially affected by changes in the
values of the portfolio securities; provided, however, that on such day the
Trust receives a request to purchase or redeem such Portfolio's shares. The
days and times of such computation may, in the future, be changed by the
Trustees in the event that the portfolio securities are traded in significant
amounts in markets other than the NYSE, or on days or at times other than those
during which the NYSE is open for trading.
Stocks and convertible bonds and debentures traded on the NYSE are
valued at the last sale price on such exchange on the day of valuation, or if
there is no sale on the day of valuation, at the last-reported bid price.
Non-convertible bonds and debentures and other long-term debt securities
normally are valued at prices obtained for the day of valuation from a bond
pricing service, when such prices are available. In circumstances where the
Adviser or Subadviser deems it appropriate to do so, an over-the-counter or
exchange quotation (at the mean of representative quoted bid or asked prices
for such securities or, if such prices are not available, at prices for
securities of comparable maturity, quality and type) 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. U.S.
Treasury bills, and other obligations issued by the U.S. Government, its
agencies or instrumentalities, certificates of deposit issued by banks,
corporate short-term notes and other short-term investments with original or
remaining maturities in excess of 60 days are valued at the mean of
representative quoted bid and asked prices for such securities or, if such
prices are not available, for securities of comparable maturity, quality and
type. Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Trust if acquired within 60 days of
maturity or, if already held by
B-42
<PAGE> 94
the Trust on the 60th day, are amortized to maturity based on the value
determined on the 61st day. Options on currencies purchased by a Portfolio are
valued at their last bid price in the case of listed options or at the average
of the last bid prices obtained from dealers in the case of OTC options.
Futures contracts involving foreign currencies traded on exchanges are valued
at their last sale or settlement price as of the close of such exchanges or if
no sales are reported, at the mean between the last reported bid and asked
prices. 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
or Subadviser, 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 by the Board of Trustees. 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. The net asset value of the respective
Portfolio is divided by the total number of shares outstanding to arrive at the
net asset value per share.
EXECUTION OF PORTFOLIO TRANSACTIONS
It is the policy of the Trust, in effecting transactions in portfolio
securities, to seek the best execution at the most favorable prices. The
determination of what may constitute best execution involves a number of
considerations, including the economic result to the Trust (involving both
price paid or received and any commissions and other costs), the efficiency
with which the transaction is effected where a large block is involved, the
availability of the broker to stand ready to execute potentially difficult
transactions and the financial strength and stability of the broker. Such
considerations are judgmental and are considered in determining the overall
reasonableness of brokerage commissions paid.
A factor in the selection of brokers is the receipt of research
services -- analyses and reports concerning issuers, industries, securities,
economic factors and trends -- and other statistical and factual information.
Research and other statistical and factual information provided by brokers is
considered to be in addition to and not in lieu of services required to be
performed by the Adviser or Subadviser.
The extent to which commissions may reflect the value of research
services cannot be presently determined. To the extent that research services
of value are provided by broker-dealers with or through whom the Adviser or
Subadviser places the Trust's portfolio transactions, the Adviser or Subadviser
may be relieved of expenses it might otherwise bear. Research services
furnished by broker-dealers could be useful and of value to the Adviser or
Subadviser in serving other clients as well as the Trust and research services
obtained by the Adviser or Subadviser as a result of the placement of portfolio
brokerage of other clients could be useful and of value in serving the Trust.
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 a security
B-43
<PAGE> 95
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. The Trust has
obtained exemptive orders from the SEC, permitting the Trust in certain
circumstances to deal with securities dealers (that may be deemed to be
affiliated persons of affiliated persons of the Trust solely because of a
subadvisory relationship with one or more Portfolios) as a principal in
purchases and sales of certain securities, and to pay commissions, fees or other
remuneration to such securities dealers in connection with the sale of
securities to or by any of the Portfolios on a securities exchange without
complying with certain of the requirements of Rule 17e-1 under the 1940 Act.
Subject to the above considerations, the Adviser or a Subadviser may
use broker-dealer affiliates of the Adviser or a Subadviser, as a broker for
any Portfolio. In order for such broker-dealer to effect any portfolio
transactions for a Portfolio, the commissions, fees or other remuneration
received by the broker-dealer must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. This standard
would allow such broker-dealer to receive no more than the remuneration which
would be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction. Furthermore, the Trustees of the Trust, including a
majority of the non-interested Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to such broker-dealers are consistent with the foregoing standard. These
types of brokerage transactions are also subject to such fiduciary standards as
may be imposed upon the broker-dealers by applicable law.
The following tables set forth the brokerage commissions paid by the
Portfolios and the amounts of the brokerage commissions which were paid to
affiliated broker-dealers of such Portfolios for the fiscal years ended
November 30, 1997, 1996 and 1995.
1997 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID TO
PORTFOLIO BROKERAGE AFFILIATED AFFILIATED
COMMISSIONS BROKER-DEALERS BROKER-DEALERS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Management -- -- --
- -------------------------------------------------------------------------------------------------------
Global Bond -- -- --
- -------------------------------------------------------------------------------------------------------
Corporate Bond -- -- --
- -------------------------------------------------------------------------------------------------------
High-Yield Bond $90 -- --
- -------------------------------------------------------------------------------------------------------
Worldwide High Income
-- -- --
- -------------------------------------------------------------------------------------------------------
</TABLE>
B-44
<PAGE> 96
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SunAmerica Balanced $73,801 -- --
- ------------------------------------------------------------------------------------------------------
Balanced/Phoenix Investment $153,408 -- --
Counsel
- ------------------------------------------------------------------------------------------------------
Asset Allocation $618,233 $77,151 12.48%
- ------------------------------------------------------------------------------------------------------
Utility $40,772 -- --
- ------------------------------------------------------------------------------------------------------
Growth-Income $547,081 -- --
- ------------------------------------------------------------------------------------------------------
Federated Value $77,121 -- --
- ------------------------------------------------------------------------------------------------------
Venture Value $634,966 $87,696 [13.81%]
- ------------------------------------------------------------------------------------------------------
Alliance Growth $1,020,216 -- --
- ------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment $731,747 $1,220 .17%
Counsel
- ------------------------------------------------------------------------------------------------------
Putnam Growth
(formerly Provident Growth) $241,968 $920 .38%
- ------------------------------------------------------------------------------------------------------
Real Estate* $53,466 -- --
- ------------------------------------------------------------------------------------------------------
Global Equities $1,376,002 -- --
- ------------------------------------------------------------------------------------------------------
International Diversified $269,652 -- --
Equities
- ------------------------------------------------------------------------------------------------------
Aggressive Growth $251,919 -- --
- ------------------------------------------------------------------------------------------------------
International Growth and Income * $120,957 -- --
- ------------------------------------------------------------------------------------------------------
Emerging Markets* $80,600 -- --
- ------------------------------------------------------------------------------------------------------
</TABLE>
* For the period June 2, 1997 (commencement of operations) through
November 30, 1997.
1996 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID
PORTFOLIO BROKERAGE AFFILIATED TO AFFILIATED
COMMISSIONS BROKER-DEALERS BROKER-DEALERS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Management -- -- --
- --------------------------------------------------------------------------------------------------------
Global Bond -- -- --
- --------------------------------------------------------------------------------------------------------
Corporate Bond -- -- --
- --------------------------------------------------------------------------------------------------------
High-Yield Bond $753 -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>
B-45
<PAGE> 97
<TABLE>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Worldwide High Income
-- -- --
- ----------------------------------------------------------------------------------------------------
SunAmerica Balanced* $10,184 -- --
- ----------------------------------------------------------------------------------------------------
Balanced/Phoenix Investment
Counsel $99,713 -- --
- ----------------------------------------------------------------------------------------------------
Asset Allocation $256,864 $23,078 8.98%
- ----------------------------------------------------------------------------------------------------
Utility* $9,359 -- --
- ----------------------------------------------------------------------------------------------------
Growth-Income $469,309 -- --
- ----------------------------------------------------------------------------------------------------
Federated Value* $14,785 -- --
- ----------------------------------------------------------------------------------------------------
Venture Value $413,771 $3,792 0.92%
- ----------------------------------------------------------------------------------------------------
Alliance Growth $672,137 -- --
- ----------------------------------------------------------------------------------------------------
Growth/Phoenix Investment
Counsel $483,274 -- --
- ----------------------------------------------------------------------------------------------------
Putnam Growth $144,932 -- --
(formerly Provident
Growth)
- ----------------------------------------------------------------------------------------------------
Global Equities $1,022,821 -- --
- ----------------------------------------------------------------------------------------------------
International Diversified
Equities $256,477 -- --
- ----------------------------------------------------------------------------------------------------
Aggressive Growth* $34,130 -- --
- ----------------------------------------------------------------------------------------------------
</TABLE>
* For the period 6/3/96 (commencement of operations) through November
30, 1996.
1995 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID
BROKERAGE AFFILIATED TO AFFILIATED
PORTFOLIO COMMISSIONS BROKER-DEALERS BROKER-DEALERS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Management -- -- --
- ----------------------------------------------------------------------------------------------------------
Corporate Bond* $562 $562 100%
- ----------------------------------------------------------------------------------------------------------
Global Bond -- -- --
- ----------------------------------------------------------------------------------------------------------
High-Yield Bond $9,100 -- --
- ----------------------------------------------------------------------------------------------------------
Worldwide High Income
-- -- --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
B-46
<PAGE> 98
<TABLE>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced/Phoenix
Investment Counsel $49,029 -- --
- ----------------------------------------------------------------------------------------------------------
Asset Allocation* $331,914 $35,946 10.83%
- ----------------------------------------------------------------------------------------------------------
Growth-Income $262,353 -- --
- ----------------------------------------------------------------------------------------------------------
Alliance Growth $353,849 -- --
- ----------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment
Counsel $548,063 -- --
- ----------------------------------------------------------------------------------------------------------
Putnam Growth $118,520 -- --
(formerly Provident Growth)
- ----------------------------------------------------------------------------------------------------------
Venture Value $184,729 -- --
- ----------------------------------------------------------------------------------------------------------
Global Equities $630,010 -- --
- ----------------------------------------------------------------------------------------------------------
International Diversified
Equities
$117,482 -- --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- - For the fiscal year ended November 30, 1995, the percentage of the
aggregate dollar amount of the transactions involving the payment of
commissions effected through affiliated brokers with respect to the
Corporate Bond Portfolio and Asset Allocation Portfolio were 10.34%
and 100%, respectively.
The policy of the Trust with respect to brokerage is reviewed by the
Board of Trustees from time to time. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, the foregoing practices may be modified.
The Adviser and the Subadvisers and their respective affiliates may
manage, or have proprietary interests in, accounts with similar or dissimilar
or the same investment objectives as one or more Portfolios of the Trust. Such
account may or may not be in competition with a Portfolio for investments.
Investment decisions for such accounts are based on criteria relevant to such
accounts; portfolio decisions and results of the Portfolio's investments may
differ from those of such other accounts. There is no obligation to make
available for use in managing the Portfolio any information or strategies used
or developed in managing such accounts. In addition, when two or more accounts
seek to purchase or sell the same assets, the assets actually purchased or sold
may be allocated among accounts on a good faith equitable basis at the
discretion of the account's adviser. In some cases, this system may adversely
affect the price or size of the position obtainable for a Portfolio.
If determined by the Adviser or Subadviser to be beneficial to the
interests of the Trust, partners and/or employees of the Adviser or Subadvisers
may serve on investment advisory committees, which will consult with the
Adviser regarding investment objectives and strategies for the Trust. In
connection with serving on such a committee, such persons may receive
B-47
<PAGE> 99
information regarding a Portfolio's proposed investment activities which is not
generally available to unaffiliated market participants, and there will be no
obligation on the part of such persons to make available for use in managing
the Portfolio any information or strategies known to them or developed in
connection with their other activities.
It is possible that a Portfolio's holdings may include securities of
entities for which a subadviser or its affiliate performs investment banking
services as well as securities of entities in which a subadviser or its
affiliate makes a market. From time to time, such activities may limit a
Portfolio's flexibility in purchases and sales of securities. When a
subadviser or its affiliate is engaged in an underwriting or other distribution
of securities of an entity, the subadviser may be prohibited from purchasing or
recommending the purchase of certain securities of that entity for the
Portfolio.
GENERAL INFORMATION
Custodian - State Street Bank and Trust Company ("State Street"), 225
Franklin Street, Boston, Massachusetts 02110, serves as the Trust's custodian.
In this capacity, State Street maintains the portfolio securities held by the
Trust, administers the purchase and sale of portfolio securities and performs
certain other duties. State Street also serves as transfer agent and dividend
disbursing agent for the Trust.
Independent Accountants and Legal Counsel - PricewaterhouseCoopers,
LLP 1177 Avenue of the Americas, New York, New York 10036, is the Trust's
independent accountants. PricewaterhouseCoopers, LLP performs an annual audit
of the Trust's financial statements and provides tax consulting, tax return
preparation and accounting services relating to filings with the SEC. The
firms of Swidler Berlin Shereff Friedman, LLP, 919 Third Avenue, New York, NY
10022 and Blazzard, Grodd & Hasenauer, P.C., Suite 213, Oceanwalk Mall, 101
North Ocean Drive, Hollywood, Florida 33019, have been selected as legal
counsel to the Trust.
Reports to Shareholders - Persons having a beneficial interest in the
Trust are provided at least semi-annually with reports showing the investments
of the Portfolios, financial statements and other information.
Shareholder and Trustee Responsibility - Shareholders of a
Massachusetts business trust may, under certain circumstances, be held
personally liable as partners for the obligations of the Trust. The risk of a
shareholder incurring any financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides that
notice of the disclaimer must be given in each agreement, obligation or
instrument entered into or executed by the Trust or Trustees. The Declaration
of Trust provides for indemnification of any shareholder held personally liable
for the obligations of the Trust and also provides for the Trust to reimburse
the shareholder for all legal and other expenses reasonably incurred in
connection with any such claim or liability.
B-48
<PAGE> 100
Under the Declaration of Trust, the trustees or officers are not
liable for actions or failure to act; however, they are not protected from
liability by reason of their willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of their office.
The Trust provides indemnification to its trustees and officers as authorized
by its By-Laws and by the 1940 Act and the rules and regulations thereunder.
Registration Statement - A registration statement has been filed with
the SEC under the Securities Act of 1933, as amended and the 1940 Act. The
Prospectus and this Statement of Additional Information do not contain all
information set forth in the registration statement, its amendments and
exhibits thereto, that the Trust has filed with the SEC, Washington, D.C., to
all of which reference is hereby made.
FINANCIAL STATEMENTS
Set forth following this Statement of Additional Information are the
unaudited financial statements of the Trust with respect to the six months ended
May 31, 1998.
B-49
<PAGE> 101
- ---------------------
SUNAMERICA SERIES TRUST
CASH MANAGEMENT PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 97.6% AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF DEPOSIT -- 3.9%
ABN Amro Bank 5.65% due 3/22/99............................. $ 5,000,000 $ 4,993,847
Societe Generale 5.76% due 4/16/99.......................... 5,000,000 4,998,314
-------------
TOTAL CERTIFICATES OF DEPOSIT (cost $9,997,639)............. 9,992,161
-------------
COMMERCIAL PAPER -- 72.8%
Alleheny University Hospitals 5.51% due 8/10/98............. 3,000,000 2,968,091
Atlantis One Funding Corp. 5.50% due 7/14/98................ 4,000,000 3,973,722
Atlantis One Funding Corp. 5.52% due 8/05/98................ 4,000,000 3,960,350
Avnet, Inc. 5.49% due 7/21/98............................... 5,000,000 4,961,875
Banco Bradesco SA 5.43% due 6/16/98......................... 2,000,000 1,995,475
Banner Receivables Corp. 5.58% due 7/16/98.................. 2,000,000 1,986,050
Bavaria Global Corp. 5.55% due 7/27/98...................... 5,000,000 4,956,833
BBL North America, Inc. 5.67% due 6/01/98................... 30,000,000 30,000,000
Certain Funding Corp. 5.55% due 7/15/98..................... 5,000,000 4,966,083
Corporate Asset Funding Co. 5.52% due 8/28/98............... 5,000,000 4,933,389
Cosco Cayman Fund Co. Ltd 5.52% due 8/04/98................. 5,000,000 4,951,467
Du Pont (E.I.) De Nemours & Co. 5.48% due 8/04/98........... 5,000,000 4,951,467
Edison Asset Securitization 5.54% due 7/13/98............... 6,500,000 6,457,988
Four Winds Funding Corp. 5.52% due 8/14/98.................. 5,000,000 4,942,547
Garanti Funding Corp. 5.53% due 7/29/98..................... 5,000,000 4,955,453
Greenwich Asset Funding, Inc. 5.48% due 7/13/98............. 5,000,000 4,968,033
Greenwich Asset Funding, Inc. 5.53% due 9/02/98............. 5,000,000 4,929,604
Island Finance Puerto Rico, Inc. 5.53% due 7/02/98.......... 6,000,000 5,971,428
Kittyhawk Funding Corp. 5.50% due 7/16/98................... 2,000,000 1,986,250
KZH Holding Corp. 5.45% due 10/05/98........................ 4,352,000 4,268,681
KZH IV Corp. 5.56% due 8/26/98.............................. 5,035,000 4,969,086
Merrill Lynch & Co., Inc. 5.52% due 8/19/98................. 5,000,000 4,940,201
Merrill Lynch & Co., Inc. 5.53% due 7/28/98................. 4,000,000 3,964,977
Mitsubishi International Corp. 5.56% due 9/02/98............ 5,000,000 4,929,604
Mitsui & Co. USA, Inc. 5.55% due 7/07/98.................... 4,000,000 3,977,800
Morgan Stanley, Dean Witter, Discover and Co. 5.61% due
6/22/98(1)................................................ 5,000,000 5,000,919
Pegasus Three Ltd. 5.55% due 6/09/98........................ 4,000,000 3,995,067
Pegasus Two Ltd. 5.57% due 7/29/98.......................... 4,085,000 4,048,342
Pemex Capital, Inc. 5.52% due 8/12/98....................... 3,000,000 2,967,180
Petroleo Brasileiro SA 5.51% due 8/26/98.................... 5,000,000 4,934,783
Plantation Pipe Line 5.52% due 9/04/98...................... 5,000,000 4,928,050
Sigma Finance Corp. 5.52% due 8/07/98....................... 5,000,000 4,949,192
Silver Tower US Funding, LLC 5.52% due 8/17/98.............. 5,000,000 4,940,325
Southland Corp. 5.50% due 7/15/98........................... 4,000,000 3,973,111
Sumitomo Corporation Of America 5.58% due 6/02/98........... 2,000,000 1,999,690
Westways Funding III Ltd. 5.54% due 7/06/98................. 2,092,000 2,080,732
Westways Funding III Ltd. 5.55% due 6/19/98................. 2,000,000 1,994,450
Westways Funding III Ltd. 5.55% due 8/19/98................. 5,000,000 4,937,361
-------------
TOTAL COMMERCIAL PAPER (cost $186,609,608).................. 186,615,656
-------------
CORPORATE SHORT-TERM NOTES -- 15.5%
Abbey National Treasury Services PLC 5.54% due 1/20/99...... 4,000,000 3,993,095
Bankers Trust Co. 5.57% due 6/01/98(1)...................... 5,000,000 4,989,691
Bankers Trust Co. 5.58% due 8/20/98(1)...................... 3,000,000 2,999,520
Banque National De Paris New York 5.71% due 3/30/99......... 2,000,000 1,998,633
</TABLE>
---------------------
11
<PAGE> 102
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES (CONTINUED) AMOUNT VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES (continued)
Barnett Banks, Inc. 5.81% due 6/28/98(1).................... $ 3,000,000 $ 3,006,299
Bear Stearns Co., Inc. 5.64% due 8/10/98(1)................. 3,000,000 2,999,970
Chase Manhattan Corp. 5.66% due 7/15/98(1).................. 2,000,000 2,000,920
General Motors Acceptance Corp. 5.82% due 8/06/98(1)........ 4,000,000 4,004,760
Goldman Sachs Group LP 5.69% due 7/15/98(1)................. 2,000,000 2,000,000
Kansallis Bank 9.75% due 12/15/98........................... 3,000,000 3,056,250
Sanwa Business Credit Corp. 5.64% due 8/20/98(1)............ 5,000,000 4,999,498
Virginia Electric & Power Co. 9.30% due 6/09/99............. 3,500,000 3,609,375
-------------
TOTAL CORPORATE SHORT-TERM NOTES (cost $39,673,714)......... 39,658,011
-------------
MUNICIPAL BONDS -- 5.4%
Illinois Student Assistance Corp. 5.61% due 6/03/98(1)...... 4,000,000 4,000,000
Illinois Student Assistance Corp. 5.61% due 6/03/98(1)...... 3,000,000 3,000,000
New Hampshire State Industrial Development Authority,
Revenue 5.64% due 8/21/98................................. 5,000,000 5,001,464
Texas St. General Obligation 5.59% due 6/03/98(1)........... 1,875,000 1,875,000
-------------
TOTAL MUNICIPAL BONDS (cost $13,875,000).................... 13,876,464
-------------
TOTAL SHORT-TERM SECURITIES (cost $250,155,961)............. 250,142,292
-------------
<CAPTION>
REPURCHASE AGREEMENT -- 2.5%
-----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.5%
Joint Repurchase Agreement Account (Note 3) (cost
$6,481,000)............................................... 6,481,000 6,481,000
-------------
TOTAL INVESTMENTS --
(cost $256,636,961) 100.1% 256,623,292
Liabilities in excess of other assets -- (0.1) (173,880)
------ -------------
NET ASSETS -- 100.0% $256,449,412
====== =============
</TABLE>
-----------------------------
(1) Variable rate security; maturity date reflects next reset
date; rate as of May 31, 1998.
See Notes to Financial Statements.
- ---------------------
12
<PAGE> 103
- ---------------------
SUNAMERICA SERIES TRUST
GLOBAL BOND PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(DENOMINATED IN
FOREIGN BONDS & NOTES -- 70.0% LOCAL CURRENCY) VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIAN DOLLAR -- 0.5%
Commonwealth of Australia 8.75% 2008........................ 700,000 $ 553,260
------------
CANADIAN DOLLAR -- 2.0%
Government of Canada 6.00% 2008............................. 2,800,000 2,022,980
------------
DANISH KRONER -- 6.9%
Kingdom of Denmark 8.00% 2003............................... 33,000,000 5,536,489
Kingdom of Denmark 8.00% 2006............................... 7,500,000 1,312,354
------------
6,848,843
------------
FRENCH FRANC -- 6.6%
Government of France 4.75% 2002............................. 16,000,000 2,703,794
Government of France 5.50% 2007............................. 22,000,000 3,842,554
------------
6,546,348
------------
GERMAN MARK -- 7.9%
Baden-Wuerttemberg 5.38% 2010............................... 3,800,000 2,171,641
Halifax PLC 5.63% 2007...................................... 800,000 465,361
Kreditanst Fur Wie 5.00% 2009............................... 2,900,000 1,628,791
Republic of Germany 6.00% 2007.............................. 3,400,000 2,054,577
Republic of Germany 6.25% 2024.............................. 2,400,000 1,497,638
------------
7,818,008
------------
ITALIAN LIRA -- 6.1%
Republic of Italy 6.75% 2007................................ 1,000,000,000 637,315
Republic of Italy 8.50% 2004................................ 8,000,000,000 5,396,123
------------
6,033,438
------------
JAPANESE YEN -- 12.3%
Asian Development Bank 5.00% 2003........................... 221,000,000 1,890,692
Asian Development Bank 5.63% 2002........................... 320,000,000 2,717,886
European Investment Bank 2.13% 2007......................... 182,000,000 1,394,190
Federal National Mortgage Association 2.13% 2007............ 490,000,000 3,728,943
International Bank of Reconstruction & Development 2.00%
2008...................................................... 130,000,000 980,351
Republic of Italy 5.13% 2003................................ 170,000,000 1,482,575
------------
12,194,637
------------
NETHERLANDS GUILDER -- 3.1%
Government of Netherlands 8.25% 2007........................ 5,000,000 3,074,265
------------
POUND STERLING -- 13.6%
Abbey National Treasury Services 8.00% 2003................. 1,200,000 2,077,559
Bank Nederlandse Gemeenten 6.38% 2005....................... 700,000 1,153,315
United Kingdom Treasury 6.75% 2004.......................... 3,600,000 6,190,415
United Kingdom Treasury 7.75% 2006.......................... 2,200,000 4,045,789
------------
13,467,078
------------
SPANISH PESETA -- 4.0%
Government of Spain 10.30% 2002............................. 500,000,000 3,984,493
------------
</TABLE>
---------------------
13
<PAGE> 104
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(DENOMINATED IN
FOREIGN BONDS & NOTES (CONTINUED) LOCAL CURRENCY) VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES DOLLAR -- 7.0%
Bayerische Landesbank Girozentrale 6.63% 2007............... $ 3,000,000 $ 3,126,231
Neder Waterschaps Bank 6.13% 2008........................... 2,000,000 2,006,250
Ontario Hydro 6.10% 2008.................................... 1,800,000 1,799,176
------------
6,931,657
------------
TOTAL FOREIGN BONDS & NOTES (cost $69,459,854).............. 69,475,007
------------
DOMESTIC BONDS & NOTES -- 19.4%
--------------------------------------------------------------------------------------------
CORPORATE BONDS -- 6.4%
Ameritech Capital Fund 5.88% 2003........................... 2,200,000 2,181,423
Ford Motor Credit Co. zero coupon 2005...................... 2,900,000 2,885,616
Ford Motor Credit Co. 6.13% 2003............................ 1,300,000 1,299,012
------------
6,366,051
------------
U.S. GOVERNMENT -- 13.0%
United States Treasury Bonds 6.50% 2026..................... 1,800,000 1,951,308
United States Treasury Notes 6.50% 2006..................... 1,800,000 1,896,192
United States Treasury Notes 7.00% 2006..................... 8,300,000 9,002,927
------------
12,850,427
------------
TOTAL DOMESTIC BONDS & NOTES (cost $19,256,402)............. 19,216,478
------------
TOTAL INVESTMENT SECURITIES (cost $88,716,256).............. 88,691,485
------------
SHORT-TERM SECURITIES -- 8.1%
--------------------------------------------------------------------------------------------
TIME DEPOSIT -- 8.1%
Cayman Island Time Deposit with State Street Bank & Trust
Co. 5.63% due 6/01/98..................................... 8,061,000 8,061,000
------------
TOTAL SHORT-TERM SECURITIES (cost $8,061,000)............... 8,061,000
------------
TOTAL INVESTMENTS --
(cost $96,777,256) 97.5% 96,752,485
Other assets less liabilities -- 2.5 2,441,921
------ ------------
NET ASSETS -- 100.0% $99,194,406
====== ============
</TABLE>
- ---------------------
14
<PAGE> 105
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
-------------------------------------------------------------------
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*AUD 5,585,590 USD 3,749,215 08/28/98 $ 250,049
CHF 6,949,000 USD 4,821,007 06/24/98 84,142
*DEM 22,098,745 USD 12,424,972 07/23/98 42
*DEM 9,975,184 USD 5,610,103 07/23/98 1,596
*DEM 856,180 USD 482,627 07/23/98 1,243
DKK 8,899,167 USD 1,320,580 07/16/98 8,923
DKK 37,130,867 USD 5,513,284 07/16/98 40,530
ESP 182,383,370 USD 1,221,590 06/10/98 17,660
FRF 39,707,160 USD 6,661,381 07/30/98 800
GBP 5,142,477 USD 8,536,512 06/29/98 149,422
ITL 9,481,138,574 USD 5,414,143 08/13/98 15,876
ITL 1,328,691,000 USD 768,029 08/13/98 11,514
*JPY 155,480,230 DEM 2,185,000 07/23/98 96,876
JPY 1,720,306,429 USD 13,174,954 07/24/98 652,135
JPY 90,086,834 USD 696,727 07/24/98 40,948
*USD 1,226,000 DEM 2,189,330 07/23/98 4,942
-----------
1,376,698
-----------
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ESP 465,916,000 USD 3,013,687 06/10/98 $ (61,869)
GBP 706,100 USD 1,148,118 06/29/98 (3,491)
GBP 2,479,934 USD 4,040,978 06/29/98 (3,654)
NLG 6,160,466 USD 3,062,737 07/17/98 (9,309)
*NZD 2,003,000 USD 1,052,977 10/21/98 (10,066)
*USD 3,211,373 AUD 4,843,736 06/18/98 (176,951)
USD 3,010,853 SEK 23,304,002 07/16/98 (32,895)
USD 1,391,968 SEK 10,587,167 07/16/98 (39,061)
*USD 5,139,653 DEM 9,086,289 07/23/98 (30,923)
*USD 3,467,859 DEM 6,118,933 07/23/98 (27,513)
*USD 2,145,696 DEM 3,763,100 07/23/98 (29,908)
USD 2,740,738 CAD 3,970,192 08/24/98 (11,262)
*USD 2,395,248 NZD 4,357,000 10/21/98 (82,876)
-----------
(519,778)
-----------
Net Unrealized Appreciation............. $ 856,920
===========
</TABLE>
-----------------------------
* Represents open forward foreign currency contracts and
offsetting or partially offsetting open forward foreign currency
contracts that do not have additional market risk but have
continued counterparty settlement risk.
<TABLE>
<S> <C> <C>
AUD -- Australian Dollar
CAD -- Canadian Dollar
CHF -- Swiss Franc
DEM -- Deutsche Mark
DKK -- Danish Krone
ESP -- Spanish Peseta
FRF -- French Franc
GBP -- Pound Sterling
ITL -- Italian Lira
JPY -- Japanese Yen
NLG -- Netherlands Guilder
NZD -- New Zealand Dollar
SEK -- Swedish Krona
USD -- United States Dollar
</TABLE>
See Notes to Financial Statements.
---------------------
15
<PAGE> 106
- ---------------------
SUNAMERICA SERIES TRUST
CORPORATE BOND PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 77.5% AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 8.2%
Apparel & Textiles -- 1.1%
Collins & Aikman Corp. 10.00% 2007.......................... $ 50,000 $ 52,375
Collins & Aikman Corp. 11.50% 2006.......................... 250,000 278,750
GFSI, Inc. 9.63% 2007....................................... 100,000 105,625
Pillowtex Corp. 9.00% 2007.................................. 75,000 78,375
Pillowtex Corp. 10.00% 2006................................. 125,000 135,000
Reliance Industries Ltd. 8.25% 2027*........................ 500,000 479,685
Automotive -- 1.4%
Aftermarket Technology Corp. 12.00% 2004.................... 75,000 82,313
Arvin Industries, Inc. 6.75% 2008........................... 375,000 373,485
Dana Corp. 7.00% 2028....................................... 800,000 817,160
Lear Corp. 9.50% 2006....................................... 50,000 55,125
Oshkosh Truck Corp. 8.75% 2008*............................. 50,000 50,500
Housing -- 0.6%
American Architecture Products Corp. 11.75% 2007*........... 100,000 104,750
American Builders & Contractors Supply Co., Inc. 10.63%
2007...................................................... 75,000 77,625
Building Materials Corp. of America 8.63% 2006.............. 100,000 103,000
Falcon Building Products, Inc. zero coupon 2007(1).......... 100,000 67,250
Sealy Mattress Co. zero coupon 2007*........................ 250,000 167,500
Syratech Corp. 11.00% 2007.................................. 50,000 45,000
Retail -- 5.1%
Boyds Collection Ltd. 9.00% 2008*........................... 150,000 150,375
Brylane Capital Corp. 10.00% 2003........................... 850,000 895,687
Chattem, Inc. 8.88% 2008*................................... 125,000 124,688
Harcourt General, Inc. 7.20% 2027........................... 870,000 874,628
Icon Health & Fitness, Inc. 13.00% 2002..................... 100,000 107,250
Jitney Jungle Stores of America, Inc. 10.38% 2007........... 125,000 130,938
K Mart Corp. Pass Through Trust 8.54% 2015.................. 884,778 909,649
Leslies Poolmart, Inc. 10.38% 2004.......................... 50,000 52,875
Penney (J.C.) Co., Inc. 7.65% 2016.......................... 500,000 544,730
ShopKo Stores, Inc. 9.25% 2022.............................. 1,000,000 1,213,260
Stater Brothers Holdings, Inc. 9.00% 2004................... 100,000 102,000
------------
8,179,598
------------
CONSUMER STAPLES -- 2.8%
Food, Beverage & Tobacco -- 1.9%
Ameriserve Food Distribution, Inc. 10.13% 2007.............. 200,000 212,000
Aurora Foods, Inc. 9.88% 2007............................... 50,000 53,500
Carr Gottstein Foods Co. 12.00% 2005........................ 100,000 111,500
Di Giorgio Corp. 10.00% 2007................................ 100,000 100,750
Dimon, Inc. 8.88% 2006...................................... 75,000 77,960
Eagle Family Foods, Inc. 8.75% 2008*........................ 150,000 146,250
International Home Foods, Inc. 10.38% 2006.................. 100,000 110,000
Nebco Evans Holding Co. zero coupon 2007(1)................. 125,000 84,688
Philip Morris Cos., Inc. 7.75% 2027......................... 1,000,000 1,062,980
Household Products -- 0.9%
Diamond Brands Operating Corp. 10.13% 2008*................. 50,000 50,500
NBTY, Inc. 8.63% 2007....................................... 100,000 102,750
</TABLE>
- ---------------------
16
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES (continued)
Household Products (continued)
Playtex Family Products Corp. 9.00% 2003.................... $ 200,000 $ 204,000
Polymer Group, Inc. 9.00% 2007.............................. 200,000 206,000
Revlon Consumer Products Corp. 8.63% 2008................... 200,000 198,500
Simmons Co. 10.75% 2006..................................... 100,000 105,500
------------
2,826,878
------------
EDUCATION -- 0.6%
University -- 0.6%
Boston University 7.63% 2097................................ 500,000 559,700
------------
ENERGY -- 4.3%
Energy Services -- 1.8%
Coastal Corp. 9.75% 2003.................................... 250,000 290,562
Enersis SA 7.40% 2016....................................... 600,000 584,982
Occidental Petroleum Corp. 8.50% 2004....................... 450,000 460,989
Pride Petroleum Services, Inc. 9.38% 2007................... 175,000 187,688
Tosco Corp. 7.00% 2000...................................... 250,000 254,323
Energy Sources -- 2.5%
Abraxas Petroleum Corp. 11.50% 2004......................... 50,000 52,375
Anker Coal Group, Inc. 9.75% 2007........................... 100,000 97,000
Di Industries, Inc. 8.88% 2007.............................. 100,000 100,750
Forcenergy, Inc. 8.50% 2007................................. 100,000 97,000
Forcenergy, Inc. 9.50% 2006................................. 50,000 51,750
Husky Oil Ltd. 7.13% 2006................................... 1,000,000 1,026,480
KCS Energy, Inc. 8.88% 2008................................. 50,000 48,500
National Equipment Services, Inc. 10.00% 2004*.............. 50,000 53,125
Ocean Energy, Inc. 10.38% 2005.............................. 75,000 83,250
Sun Co., Inc. 9.00% 2024.................................... 750,000 912,652
------------
4,301,426
------------
FINANCE -- 22.9%
Banks -- 6.1%
ABN Amro Holdings NV 7.30% 2026............................. 500,000 505,700
Continental Bank NA 12.50% 2001(2).......................... 300,000 349,029
Den Danske Bank 7.40% 2007*................................. 500,000 529,645
First Nationwide Holdings, Inc. 10.63% 2003................. 300,000 334,500
Firstbank Puerto Rico 7.63% 2005............................ 750,000 780,960
National Australia Bank Ltd. 6.60% 2007..................... 500,000 509,355
National Bank of Canada 8.13% 2004.......................... 750,000 814,275
Republic New York Corp. 7.75% 2009.......................... 1,000,000 1,112,500
Security Pacific Corp. 11.50% 2000.......................... 275,000 308,712
Signet Banking Corp. 9.63% 1999............................. 300,000 309,978
Swedbank 7.50% 2006......................................... 500,000 514,215
Financial Services -- 12.6%
Allmerica Financial Corp. 7.63% 2025........................ 500,000 540,605
Amvescap PLC 6.60% 2005*.................................... 1,000,000 1,009,090
Arvin Capital I 9.50% 2027.................................. 500,000 562,700
Case Equipment Loan Trust 7.30% 2002........................ 40,647 40,794
Chevy Chase Auto Receivables 5.80% 2002..................... 46,580 46,550
CNA Financial Corp. 6.95% 2018.............................. 500,000 499,140
CNA Financial Corp. 7.25% 2023.............................. 500,000 510,815
Continental Global Group, Inc. 11.00% 2007.................. 150,000 158,625
Delphi Funding LLC 9.31% 2027............................... 800,000 911,152
Ford Capital BV 9.38% 2001.................................. 600,000 651,768
Ford Capital BV 9.50% 2001.................................. 200,000 218,622
</TABLE>
---------------------
17
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services (continued)
Ford Motor Credit Co. 6.88% 2001............................ $ 550,000 $ 560,656
General Motors Acceptance Corp. 5.63% 2001.................. 300,000 297,240
Green Tree Financial Corp. 10.25% 2002...................... 970,000 1,078,087
Hutchinson Whampoa Finance Ltd. 7.50% 2027*................. 500,000 441,150
Lehman Brothers, Inc. 7.38% 2007............................ 575,000 609,351
Navistar Financial Corp. 6.55% 2001......................... 44,797 44,950
Reinsurance Group America, Inc. 7.25% 2006*................. 500,000 525,160
Resolution Funding Corp. zero coupon 2021................... 640,000 163,834
Salomon, Inc. 7.20% 2004.................................... 525,000 548,294
Santander Finance Issuances 7.25% 2015...................... 1,000,000 1,039,580
Sun Communities Operating LP 6.77% 2005..................... 900,000 917,172
Susa Partnership LP 7.50% 2027.............................. 750,000 767,587
Susa Partnership LP 8.20% 2017.............................. 250,000 277,813
Tanger Properties Ltd. 8.75% 2001........................... 85,000 87,898
Trizec Finance Corp., Ltd. 10.88% 2005...................... 67,000 73,700
Insurance -- 4.2%
Conseco, Inc. 6.40% 2003.................................... 500,000 497,120
Conseco, Inc. 10.50% 2004................................... 750,000 901,342
Equitable Life Assurance Society of the US 7.70% 2015*...... 1,000,000 1,090,700
Life Re Capital Trust I 8.72% 2027*......................... 500,000 550,680
Provident Cos., Inc. 7.41% 2038............................. 350,000 356,573
USF & G Capital II 8.47% 2027............................... 500,000 556,400
USF & G Capital III 8.31% 2046*............................. 250,000 279,963
------------
22,883,980
------------
HEALTHCARE -- 1.3%
Health Services -- 1.2%
Everest Healthcare Services, Inc. 9.75% 2008*............... 75,000 75,563
Genesis Health Ventures, Inc. 9.25% 2006.................... 50,000 50,250
Hudson Respiratory Care, Inc. 9.13% 2008*................... 125,000 125,937
Tenet Healthcare Corp. 8.00% 2005........................... 450,000 463,500
Tenet Healthcare Corp. 8.13% 2008*.......................... 500,000 502,070
Medical Products & Services -- 0.1%
Dade International, Inc. 11.13% 2006*....................... 100,000 113,250
------------
1,330,570
------------
INDUSTRIAL & COMMERCIAL -- 7.2%
Aerospace & Military Technology -- 0.1%
Tracor, Inc. 8.50% 2007..................................... 150,000 161,250
Business Services -- 4.8%
Allied Waste Industries, Inc. zero coupon 2007*(1).......... 150,000 110,250
Allied Waste North America, Inc. 10.25% 2006................ 100,000 110,250
Anchor Lamina, Inc. 9.88% 2008.............................. 100,000 99,750
Aviation Sales Co. 8.13% 2008............................... 100,000 97,750
Coinmach Corp. 11.75% 2005.................................. 50,000 56,000
Cummings Engine, Inc. 7.13% 2028............................ 500,000 503,310
Dailey Petroleum Services Corp. 9.50% 2008.................. 100,000 100,250
Dialog Corp. PLC 11.00% 2007................................ 75,000 82,688
Diva Systems Corp. zero coupon 2008*(1)(2).................. 100,000 54,000
Eagle Picher Industries, Inc. 9.38% 2008*................... 75,000 76,406
Fisher Scientific International, Inc. 9.00% 2008............ 50,000 50,000
Glenoit Corp. 11.00% 2007................................... 50,000 53,750
Grove Worldwide LLC 9.25% 2008*............................. 150,000 150,000
Holt Group, Inc. 9.75% 2006*................................ 100,000 101,250
Purina Mills, Inc. 9.00% 2010*.............................. 50,000 51,375
</TABLE>
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18
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (continued)
Business Services (continued)
Service Corp. International 6.50% 2008...................... $ 550,000 $ 550,522
Sitel Corp. 9.25% 2006*..................................... 200,000 204,000
SMFC Trust 7.76% 2035(3).................................... 248,331 226,136
Statia Terminals International 11.75% 2003.................. 50,000 52,875
Tekni Plex, Inc. 9.25% 2008*................................ 125,000 125,313
Tokheim Corp. 11.50% 2006................................... 31,000 34,410
United Stationers Supply Co. 12.75% 2005.................... 33,000 37,414
Universal Compression, Inc. zero coupon 2008................ 100,000 63,250
USA Waste Service, Inc. 7.13% 2007.......................... 750,000 779,205
Viasystems, Inc. 9.75% 2007*................................ 100,000 102,750
Waste Management, Inc. 8.75% 2018........................... 850,000 958,264
Electrical Equipment -- 0.1%
Amphenol Corp. 9.88% 2007................................... 50,000 53,000
Machinery -- 0.3%
Alvey Systems, Inc. 11.38% 2003............................. 100,000 107,000
CLARK Material Handling Co. 10.75% 2006..................... 100,000 107,000
Neenah Corp. 11.13% 2007.................................... 50,000 55,313
Werner Holdings Co., Inc. 10.00% 2007*...................... 50,000 52,250
Multi-Industry -- 0.1%
Four M Corp. 12.00% 2006.................................... 50,000 52,000
Transportation -- 1.8%
Allied Holdings, Inc. 8.63% 2007............................ 100,000 102,500
Ameritruck Distribution Corp. 12.25% 2005................... 100,000 70,000
Chemical Leaman Corp. 10.38% 2005........................... 100,000 105,750
Gearbulk Holdings Ltd. 11.25% 2004.......................... 100,000 109,000
Johnstown America Industries, Inc. 11.75% 2005.............. 50,000 55,625
Stena AB 8.75% 2007......................................... 100,000 103,125
Stena AB 10.50% 2005........................................ 100,000 109,000
Stena Line AB 10.63% 2008................................... 100,000 101,250
Transport Ocean Container Corp. 12.25% 2004................. 850,000 994,500
------------
7,169,731
------------
INFORMATION & ENTERTAINMENT -- 12.0%
Broadcasting & Media -- 9.9%
Acme Televison LLC zero coupon 2004......................... 75,000 61,313
Affiliated Newspapers Investments, Inc. zero coupon
2006(1)(2)................................................ 100,000 97,000
Big City Radio, Inc. zero coupon 2005*...................... 150,000 111,000
Chancellor Media Corp. 8.13% 2007........................... 175,000 175,875
Chancellor Media Corp. 8.75% 2007........................... 50,000 51,750
Chancellor Media Corp. 9.38% 2004........................... 100,000 104,750
Chancellor Media Corp. 10.50% 2007.......................... 100,000 112,250
Comcast Cable Communications 8.50% 2027*.................... 500,000 587,525
Comcast Cellular Holdings, Inc. 9.50% 2007.................. 50,000 51,500
Comcast Corp. 9.38% 2005.................................... 200,000 213,434
Comcast UK Cable Partners Ltd. zero coupon 2007(1).......... 175,000 143,937
Continental Cablevision, Inc. 9.50% 2013.................... 750,000 882,585
CSC Holdings, Inc. 9.25% 2005............................... 225,000 237,937
Diamond Cable PLC zero coupon 2007*(1)...................... 150,000 106,688
Diamond Holdings PLC 9.13% 2008*............................ 100,000 103,250
Echostar Satellite Broadcasting Corp. zero coupon 2004(1)... 150,000 137,625
Fox/Liberty Networks LLC zero coupon 2007*(1)............... 250,000 168,125
Garden State Newspapers, Inc. 8.75% 2009.................... 50,000 51,188
Hollinger International Publishing, Inc. 9.25% 2007......... 75,000 78,375
International CableTel, Inc. zero coupon 2006(1)............ 250,000 205,000
</TABLE>
---------------------
19
<PAGE> 110
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (continued)
Broadcasting & Media (continued)
Lamar Advertising Co. 8.63% 2007............................ $ 150,000 $ 153,000
Millicom International Cellular SA zero coupon 2006(1)...... 200,000 157,500
News America Holdings, Inc. 8.00% 2016...................... 300,000 326,616
News America Holdings, Inc. 10.13% 2012..................... 500,000 582,675
Outdoor Systems, Inc. 8.88% 2007............................ 200,000 207,500
Paging Network, Inc. 10.00% 2008............................ 175,000 181,125
Paramount Communications, Inc. 8.25% 2022................... 500,000 519,760
Regal Cinemas, Inc. 9.50% 2008*............................. 125,000 125,625
Rogers Cablesystems Ltd. 10.00% 2007........................ 100,000 110,250
Rogers Cablesystems Ltd. Class B 10.00% 2005................ 125,000 138,125
SCI Television, Inc. 11.00% 2005............................ 475,000 481,469
SFX Broadcasting, Inc. 10.75% 2006.......................... 50,000 55,250
Silver Cinemas International, Inc. 10.50% 2005*............. 100,000 102,250
Sinclair Broadcast Group, Inc. 8.75% 2007................... 150,000 152,250
Sinclair Broadcast Group, Inc. 9.00% 2007*.................. 175,000 179,812
Sinclair Broadcast Group, Inc. 10.00% 2005.................. 50,000 53,500
Sullivan Broadcasting 10.25% 2005........................... 100,000 114,375
Telewest Communications PLC zero coupon 2007(1)............. 300,000 240,750
Teligent, Inc. 11.50% 2007.................................. 150,000 153,375
TKR Cable, Inc. 10.50% 2007................................. 1,200,000 1,318,740
UIH Australia Pacific, Inc. zero coupon 2006(1)............. 100,000 69,000
United International Holdings, Inc. 10.75% 2008............. 250,000 157,500
Viacom, Inc. 8.00% 2006..................................... 450,000 463,500
Ziff Davis, Inc. 8.50% 2008................................. 200,000 201,500
Entertainment Products -- 0.1%
Cobblestone Golf Group, Inc. 11.50% 2003.................... 50,000 56,188
Leisure & Tourism -- 2.0%
AMF Group, Inc., Series B zero coupon 2006(1)............... 197,000 160,062
Continental Airlines 6.90% 2018............................. 750,000 769,732
Courtyard Marriott Ltd. 10.75% 2008......................... 50,000 55,188
Premier Parks, Inc. zero coupon 2008(1)..................... 250,000 159,375
Premier Parks, Inc. 12.00% 2003............................. 100,000 110,750
Six Flags Theme Parks, Inc. zero coupon 2005(1)............. 125,000 141,094
Southwest Airlines Co. 7.38% 2027........................... 590,000 637,607
------------
12,016,550
------------
INFORMATION TECHNOLOGY -- 5.0%
Computers & Business Equipment -- 0.5%
Harris Corp. 10.38% 2018.................................... 500,000 535,410
Electronics -- 0.8%
Figgie International, Inc. 9.88% 1999....................... 750,000 765,000
Telecommunications -- 3.7%
Anixter, Inc. 8.00% 2003.................................... 500,000 526,320
Call-Net Enterprises, Inc. zero coupon 2007(1).............. 250,000 175,313
Charter Communications South East LP 11.25% 2006............ 50,000 55,000
E Spire Communications, Inc. 13.75% 2007.................... 50,000 57,500
Hermes Europe Railtel BV 11.50% 2007........................ 100,000 113,000
Highwaymaster Communications 13.75% 2005*(2)................ 50,000 50,875
ICG Holdings, Inc. zero coupon 2006......................... 100,000 79,000
Intermedia Communications, Inc. zero coupon 2006(1)......... 175,000 143,062
Intermedia Communications, Inc. zero coupon 2007(1)......... 125,000 91,875
Intermedia Communications, Inc. 8.60% 2008*................. 100,000 101,000
IXC Communications, Inc. 9.00% 2008*........................ 100,000 98,875
JTM Industries, Inc. 10.00% 2008*........................... 50,000 50,375
</TABLE>
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20
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Telecommunications (continued)
Lenfest Communications, Inc. 8.38% 2005..................... $ 150,000 $ 157,125
Level 3 Commerce, Inc. 9.13% 2008........................... 400,000 388,000
Mcleod USA, Inc. zero coupon 2007(1)........................ 275,000 204,187
Mcleod USA, Inc. 8.38% 2008*................................ 50,000 50,000
Metronet Communications Corp. 12.00% 2007(2)................ 50,000 57,500
Nextel Communications, Inc. zero coupon 2007(1)............. 225,000 149,625
Nextel Communications, Inc. zero coupon 2008*(1)............ 250,000 159,375
Nextel International, Inc. zero coupon 2008*(1)............. 75,000 44,063
Nextlink Communications, Inc. 9.00% 2008*................... 100,000 99,750
Nextlink Communications, Inc. 9.45% 2008*................... 150,000 91,500
Pegasus Communications Corp. 9.63% 2005..................... 50,000 51,750
Qwest Communications International, Inc. zero coupon
2008*(1).................................................. 50,000 35,437
Qwest Communications International, Inc. 10.88% 2007........ 150,000 172,125
Telecommunications Techniques LLC 9.75% 2008*............... 125,000 125,313
Telesystem International Wireless, Inc. zero coupon
2007(1)................................................... 250,000 170,000
Triton PCS, Inc. zero coupon 2008*(1)....................... 200,000 117,750
Vanguard Cellular Systems, Inc. 9.38% 2006.................. 100,000 104,500
------------
5,020,605
------------
MATERIALS -- 6.7%
Chemicals -- 0.0%
ISP Holdings, Inc. 9.75% 2002............................... 50,000 52,750
Forest Products -- 1.7%
Buckeye Cellulose Corp. 9.25% 2008.......................... 125,000 131,875
Donohue Forest Products, Inc. 7.63% 2007.................... 750,000 798,375
Pope & Talbot, Inc. 8.38% 2013.............................. 250,000 248,632
Quno Corp. 9.13% 2005....................................... 400,000 428,000
Stone Container Corp. 11.50% 2004........................... 50,000 54,500
Metals & Minerals -- 5.0%
Barrick Gold Finance, Inc. 7.50% 2007....................... 750,000 792,877
Chiles Offshore LLC Corp. 10.00% 2008*...................... 125,000 122,500
Euramax International PLC 11.25% 2006....................... 100,000 108,000
GS Technologies, Inc. 12.25% 2005........................... 100,000 114,250
Inco Ltd. 9.60% 2022........................................ 1,325,000 1,482,052
MMI Products, Inc. 11.25% 2007*............................. 150,000 165,375
Placer Dome, Inc. 8.50% 2045................................ 750,000 717,443
Ryderson Tull, Inc. 9.13% 2006.............................. 100,000 107,750
Santa Fe Pacific Gold Corp. 8.38% 2005...................... 225,000 234,844
Southdown, Inc. 10.00% 2006................................. 1,000,000 1,115,000
------------
6,674,223
------------
MUNICIPAL BONDS -- 0.8%
Municipal Bonds -- 0.8%
Atlanta & Fulton County Georgia Recreation 7.00% 2028....... 500,000 504,320
McKeesport Pennsylvania 7.30% 2020.......................... 250,000 256,620
------------
760,940
------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 1.8%
Foreign Government -- 1.8%
Province of Quebec 13.25% 2014.............................. 890,000 1,005,335
Republic of Colombia 7.25% 2003............................. 250,000 246,432
Republic of South Africa 9.63% 1999......................... 500,000 519,525
------------
1,771,292
------------
</TABLE>
---------------------
21
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 1.0%
Real Estate Companies -- 0.1%
AEI Holdings, Inc. 10.00% 2007*............................. $ 50,000 $ 50,375
Real Estate Investment Trusts -- 0.9%
Chelsea GCA Realty, Inc. 7.75% 2001......................... 150,000 153,755
Price REIT, Inc. 7.50% 2006................................. 750,000 790,132
------------
994,262
------------
UTILITIES -- 2.9%
Electric Utilities -- 2.5%
California Energy, Inc. 10.25% 2004(4)...................... 600,000 642,300
El Paso Electric Co. 9.40% 2011............................. 75,000 84,919
International Utility Structures, Inc. 10.75% 2008*......... 50,000 51,375
Israel Electric Corp Ltd. 7.88% 2026*....................... 850,000 883,541
Puget Sound Energy 7.02% 2027............................... 350,000 360,832
Tenaga Nasional Berhad 7.50% 2096*.......................... 500,000 384,340
Wesco Distribution, Inc. 9.13% 2008......................... 100,000 99,675
Wesco International, Inc. 11.13% 2008....................... 50,000 29,011
Telephone -- 0.4%
American Cellular Corp. 10.50% 2008......................... 125,000 123,437
Paging Network, Inc. 10.13% 2007............................ 50,000 52,000
Pathnet, Inc. 12.25% 2008*(2)............................... 100,000 109,000
Viatel, Inc. 11.25%, 4/15/08(2)............................. 75,000 78,750
Viatel, Inc. zero coupon 2008*(2)........................... 50,000 29,125
------------
2,928,305
------------
TOTAL BONDS & NOTES (cost $75,586,180)...................... 77,418,060
------------
<CAPTION>
PREFERRED STOCK -- 4.2% SHARES
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES -- 0.0%
Food, Beverage & Tobacco -- 0.0%
Nebco Evans Holding Co. 11.25%*(5).......................... 350 36,225
------------
INFORMATION & ENTERTAINMENT -- 0.8%
Broadcasting & Media -- 0.8%
American Radio Systems Corp. Series B, 11.375%(5)........... 1,052 125,188
Benedek Communications Corp. 11.50%*(5)..................... 75 75,750
Capstar Broadcasting Partners 12.00%*....................... 532 62,909
Pegasus Communications Corp. 12.75%*........................ 111 130,425
Primedia, Inc. Series F, 9.20%.............................. 3,000 297,000
SFX Broadcasting, Inc. Series E, 12.625%*................... 531 62,791
Sinclair Capital 11.625%.................................... 500 55,545
------------
809,608
------------
INFORMATION TECHNOLOGY -- 1.1%
Software -- 1.0%
Microsoft Corp. convertible $2.196.......................... 10,520 982,305
Telecommunications -- 0.1%
Nextel Communications, Inc. 11.125%(5)...................... 51 54,282
------------
1,036,587
------------
</TABLE>
- ---------------------
22
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<TABLE>
<CAPTION>
PREFERRED STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 2.3%
Real Estate Investment Trusts -- 2.3%
Crown American Realty Trust Series A, 11.00%................ 1,000 $ 53,625
Highwood Properties, Inc. 8.625%............................ 1,000 1,100,625
Security Capital Industrial Trust Series C, 8.54%........... 20,000 1,096,250
------------
2,250,500
------------
TOTAL PREFERRED STOCK (cost $3,915,582)..................... 4,132,920
------------
<CAPTION>
WARRANTS -- 0.0%+ WARRANTS
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 0.0%
Broadcasting & Media -- 0.0%
Australis Holdings Property Ltd. 10/30/01* ................. 50 0
Pegasus Communications Corp. 1/01/2007...................... 100 3,250
UIH Australia Pacific, Inc. 5/15/06......................... 100 500
------------
3,750
------------
INFORMATION TECHNOLOGY -- 0.0%
Telecommunications -- 0.0%
Highwaymaster Communications, Inc. 1/01/49*................. 50 50
Metronet Communications Corp. 8/15/07*...................... 50 2,000
------------
2,050
------------
TOTAL WARRANTS (cost $2,772)................................ 5,800
------------
<CAPTION>
PRINCIPAL
U.S. GOVERNMENT AND AGENCIES -- 10.7% AMOUNT
---------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES -- 10.7%
U.S. Government & Agencies -- 10.7%
Federal National Mortgage Association 6.50% 2011............ $1,252,369 1,259,407
Federal National Mortgage Association 8.50% 2005............ 750,000 780,465
Government National Mortgage Association 8.00% 2026......... 1,141,014 1,186,289
United States Treasury Bonds 6.00% 2026..................... 1,750,000 1,776,250
United States Treasury Bonds 6.13% 2027..................... 1,000,000 1,044,840
United States Treasury Bonds 6.38% 2027..................... 1,432,000 1,534,703
United States Treasury Bonds 11.63% 2004.................... 1,000,000 1,319,220
United States Treasury Notes 5.63% 2002..................... 500,000 500,390
United States Treasury Notes 6.25% 2003..................... 250,000 256,563
United States Treasury Notes 7.75% 1999..................... 1,000,000 1,030,940
------------
TOTAL U.S. GOVERNMENT AND AGENCIES (cost $10,528,192)....... 10,689,067
------------
TOTAL INVESTMENT SECURITIES (cost $90,032,726).............. 92,245,847
------------
</TABLE>
[/R]
---------------------
23
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<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 7.4% AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.9%
Continental Corp. 8.25% due 4/15/99......................... $ 100,000 $ 101,549
Valassis Inserts, Inc. 9.38% due 3/15/99.................... 750,000 763,815
------------
865,364
------------
TIME DEPOSIT -- 6.5%
Cayman Island Time Deposit 5.25% due 6/01/98................ 6,515,000 6,515,000
------------
TOTAL SHORT-TERM SECURITIES (cost $7,373,242)............... 7,380,364
------------
TOTAL INVESTMENTS --
(cost $97,405,968) 99.8% 99,626,211
Other assets less liabilities -- 0.2 228,994
------ ------------
NET ASSETS -- 100.0% $99,855,205
====== ============
</TABLE>
-----------------------------
* Resale restricted to qualified institutional buyers
+ Non-income producing securities
(1) Represents a zero coupon bond which will convert to an
interest bearing security at a later date
(2) Consists of more than one class of securities traded together
as a unit, generally bonds with attached stocks or warrants
(3) Fair valued security; see Note 2
(4) Variable rate security; rate as of May 31, 1998
(5) PIK ("Payment-in-Kind") payment made with additional
securities in lieu of cash
See Notes to Financial Statements.
- ---------------------
24
<PAGE> 115
- ---------------------
SUNAMERICA SERIES TRUST
HIGH-YIELD BOND PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 89.5% AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 7.0%
Apparel & Textiles -- 1.8%
Phillips Van Heusen Corp. 7.75% 2023........................ $2,500,000 $ 2,299,475
Phillips Van Heusen Corp. 9.50% 2008*....................... 3,000,000 2,992,500
Automotive -- 0.6%
Trident Automotive PLC 10.00% 2005*......................... 1,500,000 1,616,250
Housing -- 0.8%
Lifestyle Furnishings International Ltd. 10.88% 2006........ 2,000,000 2,230,000
Retail -- 3.8%
Commemorative Brands, Inc. 11.00% 2007...................... 1,500,000 1,530,000
Electronic Retailing Systems International zero coupon
2004(1)................................................... 1,500,000 757,500
Eye Care Centers of America, Inc. 12.00% 2003............... 2,000,000 2,167,500
Finlay Fine Jewelry Corp. 8.38% 2008........................ 1,500,000 1,507,500
Jitney Jungle Stores of America, Inc. 12.00% 2006........... 2,500,000 2,815,625
Jumbo Sports, Inc. convertible 4.25% 2000................... 900,000 324,000
Shop At Home, Inc. 11.00% 2005.............................. 2,000,000 2,075,000
-------------
20,315,350
-------------
CONSUMER STAPLES -- 7.2%
Food, Beverage & Tobacco -- 1.2%
Specialty Foods Acquisition Corp. zero coupon 2005(1)....... 1,500,000 605,625
Specialty Foods Corp. 11.13% 2002........................... 2,850,000 2,878,500
Household Products -- 6.0%
Carson, Inc. 10.38% 2007.................................... 2,000,000 2,000,000
Drypers Corp. 10.25% 2007................................... 1,000,000 1,032,500
Drypers Corp. 10.25% 2007*.................................. 2,000,000 2,065,000
French Fragrances, Inc. 10.38% 2007......................... 2,750,000 2,942,500
Polymer Group Inc. 9.00% 2007............................... 3,500,000 3,605,000
Polymer Group, Inc. 8.75% 2008*............................. 3,500,000 3,535,000
Revlon Consumer Products Corp. 9.50% 1999................... 2,000,000 2,057,500
-------------
20,721,625
-------------
ENERGY -- 4.6%
Energy Services -- 1.6%
Pride International, Inc. 9.38% 2007........................ 4,400,000 4,719,000
Energy Sources -- 3.0%
Houston Exploration Co. 8.63% 2008*......................... 1,000,000 1,000,000
ICO, Inc. 10.38% 2007....................................... 1,250,000 1,300,000
P&L Coal Holdings Corp. 8.88% 2008*......................... 2,000,000 2,042,500
Southwest Royalties, Inc. 10.50% 2004....................... 2,500,000 2,262,500
Statia Terms International 11.75% 2003...................... 2,000,000 2,115,000
-------------
13,439,000
-------------
FINANCE -- 4.3%
Banks -- 1.2%
Bankunited Financial Corp. 10.25% 2026...................... 2,000,000 2,180,000
Western Financial Savings Bank 8.88% 2007................... 1,500,000 1,421,250
</TABLE>
---------------------
25
<PAGE> 116
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services -- 3.1%
Dollar Financial Group, Inc. 10.88% 2006.................... $2,000,000 $ 2,170,000
DTI Holdings, Inc. zero coupon 2008(1)(2)................... 3,750,000 2,137,500
Nationwide Credit, Inc. 10.25% 2008*........................ 2,000,000 2,035,000
Richmont Marketing Specialist 10.13% 2007*.................. 2,500,000 2,537,500
-------------
12,481,250
-------------
HEALTHCARE -- 4.1%
Drugs -- 1.5%
Schein Pharmaceutical, Inc. 8.73% 2004(3)................... 4,500,000 4,365,000
Health Services -- 2.6%
Abbey Healthcare Group, Inc. 9.50% 2002..................... 1,500,000 1,500,000
Fresenius Medical Care Capital Trust III 7.88% 2008......... 1,000,000 985,000
Integrated Health Services, Inc. 9.25% 2008................. 1,000,000 1,025,000
Tenet Healthcare Corp. 8.00% 2005........................... 4,000,000 4,120,000
-------------
11,995,000
-------------
INDUSTRIAL & COMMERCIAL -- 7.8%
Aerospace & Military Technology -- 1.5%
Interlake Corp. 12.13% 2002................................. 2,000,000 2,060,000
L-3 Communications Corp. 10.38% 2007........................ 2,000,000 2,210,000
Business Services -- 1.0%
Huntsman Corp. 9.09% 2008*(3)............................... 3,000,000 3,030,000
Transportation -- 5.3%
Alpha Shipping PLC 9.50% 2008*.............................. 1,250,000 1,206,250
Ermis Maritime Holdings Ltd. 12.50% 2006*(2)................ 1,364,000 1,470,392
First Wave Marine, Inc. 11.00% 2008......................... 2,000,000 2,135,000
Golden Ocean Group Ltd. 10.00% 2001*(2)..................... 3,350,000 2,876,813
Panoceanic Bulk Carriers Ltd. 12.00% 2007................... 1,000,000 952,500
Pegasus Shipping Hellas Ltd. 11.88% 2004.................... 1,500,000 1,522,500
Stena AB 10.50% 2005........................................ 2,000,000 2,160,000
TBS Shipping International Ltd. 10.00% 2005*................ 1,500,000 1,406,250
Travelcenters America, Inc. 10.25% 2007..................... 1,500,000 1,590,000
-------------
22,619,705
-------------
INFORMATION & ENTERTAINMENT -- 12.9%
Broadcasting & Media -- 11.5%
Australis Holdings Property Ltd. zero coupon 2002(1)(4)..... 1,000,000 200,000
Big City Radio, Inc. zero coupon 2005*(1)................... 2,500,000 1,850,000
Busse Broadcasting Corp. 11.63% 2000........................ 1,820,000 1,963,325
Cellnet Data Systems, Inc. zero coupon 2007(1).............. 3,200,000 1,832,000
Central European Media Enterprises Ltd. 9.38% 2004.......... 3,525,000 3,413,434
Comcast UK Cable Partners Ltd. zero coupon 2007(1).......... 1,000,000 822,500
Diamond Holdings PLC 9.13% 2008*............................ 2,500,000 2,581,250
Echostar DBS Corp. 12.50% 2002.............................. 1,250,000 1,403,125
Echostar Satellite Broadcasting Corp. zero coupon 2004(1)... 1,000,000 917,500
Fox Family Worldwide, Inc. 9.25% 2007....................... 1,500,000 1,462,500
ICG Services, Inc. zero coupon 2008*(1)..................... 3,500,000 2,095,625
International CableTel, Inc. zero coupon 2006(1)............ 5,000,000 4,100,000
Knology Holdings, Inc. zero coupon 2007(1).................. 2,500,000 1,459,375
Radio One, Inc. 7.00% 2004(3)............................... 1,000,000 1,020,000
Spanish Broadcasting Systems, Inc. 12.50% 2002.............. 2,250,000 2,573,437
UIH Australia Pacific, Inc. zero coupon 2006(1)............. 1,000,000 690,000
United International Holdings, Inc. zero coupon 2008(1)..... 4,500,000 2,801,250
Wavetek Corp. 10.13% 2007................................... 2,000,000 2,080,000
</TABLE>
- ---------------------
26
<PAGE> 117
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (continued)
Entertainment Products -- 0.3%
Outboard Marine Corp. 10.75% 2008*.......................... $1,000,000 $ 1,008,750
Leisure & Tourism -- 1.1%
Station Casinos, Inc. 9.63% 2003............................ 3,000,000 3,101,250
-------------
37,375,321
-------------
INFORMATION TECHNOLOGY -- 24.4%
Computers & Business Equipment -- 0.6%
Diva Systems Corp. zero coupon 2008*(1)(2).................. 3,250,000 1,722,500
Electronics -- 1.5%
Hawk Corp. 10.25% 2003...................................... 2,000,000 2,147,500
Park 'N View, Inc. 13.00% 2008*(2).......................... 2,250,000 2,261,250
Software -- 0.4%
Verio, Inc. 13.50% 2004*(2)................................. 1,000,000 1,160,000
Telecommunications -- 21.9%
American Mobile Satellite Corp. 12.25% 2008*(2)............. 1,500,000 1,515,000
Centennial Cellular Corp. 8.88% 2001........................ 3,500,000 3,648,750
Comcast Cellular Holdings, Inc. 9.50% 2007.................. 5,000,000 5,150,000
E Spire Communications, Inc. zero coupon 2005(1)............ 1,500,000 1,237,500
Flag Ltd. 8.25% 2008*....................................... 1,250,000 1,268,750
Global Crossing Holdings Ltd. 9.63% 2008*................... 750,000 772,500
GST Network Funding Inc. zero coupon 2008*(1)............... 2,250,000 1,341,562
Hermes Europe Railtel BV 11.50% 2007........................ 1,500,000 1,695,000
ICG Holdings, Inc. zero coupon 2007(1)...................... 3,500,000 2,520,000
IDT Corp. 8.75% 2006*....................................... 1,000,000 972,500
Intermedia Communications Inc. 8.60% 2008*.................. 4,000,000 4,040,000
International Wireless Communication zero coupon 2001....... 3,750,000 1,312,500
Ionica PLC zero coupon 2007(1).............................. 4,250,000 1,147,500
Ionica PLC 13.50% 2006...................................... 500,000 320,000
Lenfest Communications, Inc. 7.63% 2008*.................... 1,000,000 995,000
Level 3 Communications, Inc. 9.13% 2008*.................... 3,500,000 3,395,000
Microcell Telecommunications zero coupon 2006(1)............ 3,000,000 2,220,000
Midcom Communications, Inc. 8.25% 2003 convertible(5)....... 550,000 121,000
Millicom International Cellular SA zero coupon 2006(1)...... 1,000,000 787,500
Nextel Communications, Inc. zero coupon 2004(1)............. 1,000,000 977,500
Nextel Communications, Inc. zero coupon 2004(1)............. 3,500,000 3,386,250
Occidente Y Caribe Celular SA zero coupon 2004(1)........... 2,000,000 1,534,980
Omnipoint Communications, Inc. 8.88% 2006*(3)............... 3,000,000 2,992,500
Orbcomm Global LP 14.00% 2004............................... 2,750,000 3,183,125
Orion Network Systems, Inc. 12.50% 2007(1)(2)............... 3,500,000 2,725,625
Paging Network Do Brasil SA 13.50% 2005..................... 1,594,000 1,507,669
Poland Telecom Finance BV 14.00% 2007*(2)................... 1,000,000 1,100,000
Primus Telecommunications Group 9.88% 2008*................. 4,000,000 3,980,000
Rhythms Netconnections, Inc. 13.50% 2008*(1)(2)............. 2,000,000 1,040,000
RSL Communications Ltd. 12.25% 2006......................... 2,750,000 3,121,250
Transtel Pass Through Trust 12.50% 2007*.................... 1,500,000 1,434,375
Vialog Corp. 12.75% 2001.................................... 2,000,000 2,062,500
-------------
77,797,086
-------------
MATERIALS -- 11.8%
Chemicals -- 2.7%
American Pacific Corp. 9.25% 2005*.......................... 2,000,000 2,070,000
NL Industries, Inc. 11.75% 2003............................. 2,595,000 2,854,500
Sterling Chemicals Holdings, Inc. zero coupon 2008(1)....... 3,250,000 1,933,750
Sterling Chemicals, Inc. 11.75% 2006........................ 1,000,000 1,010,000
</TABLE>
---------------------
27
<PAGE> 118
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS (continued)
Forest Products -- 3.1%
Ainsworth Lumber Ltd. 12.50% 2007*.......................... $1,750,000 $ 1,881,250
American Pad & Paper Co. 13.00% 2005........................ 650,000 654,875
Doman Industries Ltd. 8.75% 2004............................ 3,000,000 2,955,000
Florida Coast Paper Co. 12.75% 2003......................... 3,000,000 3,315,000
Metals & Minerals -- 6.0%
Acme Metals, Inc. 10.88% 2007*.............................. 1,500,000 1,473,750
Acme Metals, Inc. 12.50% 2002............................... 1,727,000 1,839,255
Ameristeel Corp. 8.75% 2008*................................ 1,775,000 1,775,000
Great Central Mines Ltd. 8.88% 2008*........................ 3,000,000 2,981,250
GS Technologies Operating, Inc. 12.00% 2004................. 1,500,000 1,665,000
Kaiser Aluminum & Chemical Corp. 12.75% 2003................ 3,000,000 3,206,250
Metal Management, Inc. 10.00% 2008*......................... 3,000,000 2,958,750
Renco Metals, Inc. 11.50% 2003.............................. 1,500,000 1,575,000
-------------
34,148,630
-------------
UTILITIES -- 5.4%
Electric Utilities -- 0.6%
International Utility Structures, Inc. 10.75% 2008*......... 1,750,000 1,798,125
Telephone -- 4.8%
Bell Technology Group Ltd. 13.00% 2005*(2).................. 4,000,000 4,130,000
Celcaribe SA 13.50% 2004.................................... 1,250,000 1,292,188
Covad Communications Group, Inc. zero coupon 2008*(1)(2).... 1,750,000 918,750
Econophone, Inc. 13.50% 2007................................ 2,000,000 2,255,000
KMC Telecom Holdings, Inc. zero coupon 2008*(1)(2).......... 4,500,000 2,677,500
USN Communications, Inc. zero coupon 2004(1)................ 2,750,000 2,193,125
Viatel, Inc. zero coupon 2008*(1)(2)........................ 500,000 291,250
-------------
15,555,938
-------------
TOTAL BONDS & NOTES (cost $261,038,714)..................... 259,448,905
-------------
<CAPTION>
COMMON STOCK -- 0.1% SHARES
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 0.0%
Leisure & Tourism -- 0.0%
Capital Gaming International, Inc.+(4)...................... 103 1
-------------
INFORMATION TECHNOLOGY -- 0.1%
Telecommunications -- 0.1%
Hyperion Telecommunications................................. 18,180 278,381
Microcell Telecommunications................................ 17,149 137,192
Paging Brazil Holdings Co. LLC(4)........................... 1,594 16
-------------
415,589
-------------
TOTAL COMMON STOCK (cost $359,913).......................... 415,590
-------------
</TABLE>
- ---------------------
28
<PAGE> 119
<TABLE>
<CAPTION>
PREFERRED STOCK -- 4.3% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 0.8%
Health Services -- 0.8%
Fresenius Medical Care Capital Trust 8.22%.................. 2,250 $ 2,351,250
-------------
INFORMATION & ENTERTAINMENT -- 2.6%
Broadcasting & Media -- 2.6%
CSC Holdings, Inc. Series M 11.13%.......................... 23,769 2,739,371
Echostar Communications Corp. Series C 3.85%................ 35,000 2,135,000
Time Warner, Inc. Series M 10.25%(6)........................ 2,250 2,553,750
-------------
7,428,121
-------------
INFORMATION TECHNOLOGY -- 0.9%
Telecommunications -- 0.9%
Intermedia Communications, Inc. convertible, 7.00%*......... 5,000 171,875
IXC Communications, Inc. 6.75%*............................. 15,000 693,750
Nextlink Communications, Inc. 6.50%*........................ 10,000 477,500
Omnipoint Corp. 7.00%*...................................... 29,000 1,334,000
-------------
2,677,125
-------------
TOTAL PREFERRED STOCK (cost $12,019,188).................... 12,456,496
-------------
<CAPTION>
WARRANTS -- 0.2%+ WARRANTS
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.0%
Retail -- 0.0%
Electronic Retailing Systems International 2/01/04*......... 1,500 15,000
-------------
INDUSTRIAL & COMMERCIAL -- 0.0%
Multi-Industry -- 0.0%
Golden Ocean Group Ltd. 8/30/01............................. 2,500 10,000
-------------
INFORMATION & ENTERTAINMENT -- 0.1%
Broadcasting & Media -- 0.1%
Australis Holdings Property Ltd. 10/30/01*.................. 1,000 0
Benedek Communications Corp. 7/01/07(4)..................... 12,500 31,250
Cellnet Data Systems, Inc. 9/15/07.......................... 1,700 80,750
Knology Holdings, Inc. 10/15/07*............................ 6,000 12,000
UIH Australia Pacific, Inc. 5/15/06(4)...................... 1,000 5,000
United International Holdings, Inc. 11/15/99................ 1,750 17,500
Leisure & Tourism -- 0.0%
Fitzgerald Gaming Corp. 3/15/99*(4)......................... 2,000 20
-------------
146,520
-------------
INFORMATION TECHNOLOGY -- 0.1%
Telecommunications -- 0.1%
Clearnet Communications, Inc. 9/15/05....................... 3,300 19,800
International Wireless Communication Holdings, Inc.
8/15/07*(4)............................................... 3,750 0
Ionica PLC 8/15/06.......................................... 1,000 25,000
Occidente Y Caribe Celular SA 3/15/04*(4)................... 8,000 64,000
Primus Telecommunications Group 8/01/04..................... 1,000 38,000
Vialog Corp. 11/15/01....................................... 2,000 120,000
-------------
266,800
-------------
TOTAL WARRANTS (cost $423,359).............................. 438,320
-------------
TOTAL INVESTMENT SECURITIES (cost $273,841,174)............. 272,759,311
-------------
</TABLE>
---------------------
29
<PAGE> 120
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 0.7% AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.7%
Stone Container Corp. 11.88% due 12/01/98 (cost
$2,020,405)............................................... $2,000,000 $ 2,045,000
-------------
<CAPTION>
REPURCHASE AGREEMENT -- 2.8%
----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.8%
Joint Repurchase Agreement Account (Note 3) (cost
$8,093,000)............................................... 8,093,000 8,093,000
-------------
TOTAL INVESTMENTS --
(cost $283,954,579) 97.6% 282,897,311
Other assets less liabilities -- 2.4 6,932,230
------ -------------
NET ASSETS -- 100.0% $289,829,541
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Represents a zero coupon bond which will convert to an
interest bearing security at a later date
(2) Consists of more than one class of securities traded together
as a unit, generally bonds with attached stocks or warrants
(3) Variable rate security; rate as of May 31, 1998
(4) Fair valued security, see Note 2
(5) Bond in default
(6) PIK ("Payment-in-Kind") payment made with additional
securities in lieu of cash
See Notes to Financial Statements.
- ---------------------
30
<PAGE> 121
- ---------------------
SUNAMERICA SERIES TRUST
WORLDWIDE HIGH INCOME
PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 85.6% AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 2.7%
Housing -- 1.0%
American Standard Co. 7.38% 2008............................ $1,525,000 $ 1,502,125
Retail -- 1.7%
K-Mart Funding Corp. 8.80% 2010............................. 660,000 700,715
Musicland Group, Inc. 9.88% 2008*........................... 600,000 595,500
Southland Corp. 5.00% 2003.................................. 1,445,000 1,249,925
-------------
4,048,265
-------------
CONSUMER STAPLES -- 0.5%
Food, Beverage & Tobacco -- 0.3%
Fleming Cos., Inc. 10.50% 2004*............................. 144,000 149,400
Smithfield Foods, Inc. 7.63% 2008*.......................... 250,000 246,875
Household Products -- 0.2%
Revlon Consumer Products Corp. 8.13% 2006................... 375,000 373,125
-------------
769,400
-------------
ENERGY -- 0.8%
Energy Services -- 0.1%
EES Coke Battery, Inc. 9.38% 2007*.......................... 175,000 184,123
Energy Sources -- 0.7%
Chesapeake Energy Corp. 9.63% 2005*......................... 535,000 536,337
Synder Oil Corp. 8.75% 2007................................. 490,000 497,350
-------------
1,217,810
-------------
FINANCE -- 11.4%
Banks -- 3.9%
Export Credit Bank of Turkey 9.00% 2000..................... 1,750,000 1,723,750
Export Import Bank Korea 6.50% 1999......................... 1,800,000 1,699,920
SBS Agro Finance Bank 10.25% 2000........................... 2,500,000 2,081,250
Western Financial Savings Bank 8.88% 2007................... 315,000 298,463
Financial Services -- 7.3%
Alps Series 96-1, Class D 12.72% 2006*...................... 349,038 349,155
California FM Lease Trust 8.50% 2017*....................... 481,825 505,917
Dillon Read Structured Finance Corp. Series 1993 Class A
6.66% 2010................................................ 88,664 80,415
Dillon Read Structured Finance Corp. Series 1994 Class A
7.60% 2007................................................ 264,096 258,798
Dillon Read Structured Finance Corp. Series 1994 Class A
8.38% 2015................................................ 625,000 615,862
Dillon Read Structured Finance Corp. 9.35% 2019............. 200,000 209,000
FMAC Loan Receivables Trust Class C 7.93% 2018*............. 145,832 130,842
Fugi JGB Investment LLC 9.87% 2049.......................... 400,000 343,000
Long Beach Acceptance Auto Grantor Trust Series 1997-1 Class
B 14.22% 2003............................................. 363,958 363,446
Navistar Financial Corp. 9.00% 2002......................... 105,000 110,381
OHA Auto Grantor Trust 11.00% 2004*......................... 793,111 781,708
Pera Financial Services Co. 9.38% 2002...................... 1,600,000 1,464,000
SB Treasury Co. 9.40% 2049*(1).............................. 355,000 339,469
Securitized Multiple Asset Series 1997-5 Class A1 7.72%
2005*..................................................... 521,998 525,163
</TABLE>
---------------------
31
<PAGE> 122
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services (continued)
Unexim International Finance BV 9.88% 2000*................. $2,500,000 $ 2,087,500
Unexim International Finance BV 8.63% 2000(1)............... 750,000 626,250
Yapi Kredit Bankasi 10.00% 2002............................. 1,950,000 1,901,250
Insurance -- 0.2%
Oxford Health Plans, Inc. 11.00% 2005*...................... 265,000 270,300
-------------
16,765,839
-------------
HEALTHCARE -- 3.0%
Health Services -- 3.0%
Columbia/HCA Healthcare Corp. 6.91% 2005.................... 350,000 337,740
Columbia/HCA Healthcare Corp. 7.00% 2007.................... 415,000 400,176
Columbia/HCA Healthcare Corp. 7.69% 2025.................... 1,200,000 1,139,112
Fresenius Medical Care Capital Trust III 7.88% 2008......... 435,000 428,475
Tenet Healthcare Corp. 8.13% 2008*.......................... 475,000 473,812
Tenet Healthcare Corp. 8.63% 2007........................... 1,045,000 1,083,655
Vencor, Inc. 9.88% 2005*.................................... 630,000 635,512
-------------
4,498,482
-------------
INDUSTRIAL & COMMERCIAL -- 0.8%
Aerospace & Military Technology -- 0.3%
Jet Equipment Trust 11.79% 2013*............................ 300,000 408,006
Business Services -- 0.5%
Norcal Waste Systems, Inc. 13.50% 2005...................... 615,000 721,856
-------------
1,129,862
-------------
INFORMATION & ENTERTAINMENT -- 7.3%
Broadcasting & Media -- 6.1%
CSC Holdings, Inc. 7.88% 2007............................... 535,000 553,388
CSC Holdings, Inc. 9.88% 2006............................... 1,630,000 1,776,700
Fox/Liberty Networks LLC zero coupon 2007(2)................ 430,000 290,250
Fox/Liberty Networks LLC 8.88% 2007......................... 65,000 65,813
Globalstar LP 11.38% 2004*.................................. 365,000 361,350
Outdoor Systems, Inc. 8.88% 2007............................ 1,190,000 1,234,625
Paramount Communications, Inc. 8.25% 2022................... 725,000 748,642
RCN Corp. zero coupon 2007(2)............................... 1,960,000 1,296,050
Rogers Cablesystems Ltd. 10.13% 2012........................ 425,000 463,250
Rogers Cablesystems Ltd. Series B 10.00% 2005............... 295,000 325,975
Sinclair Broadcast Group, Inc. 9.00% 2007................... 840,000 863,100
TV Azteca SA de CV 10.13% 2004.............................. 1,050,000 1,065,750
Leisure & Tourism -- 1.2%
Grand Casino, Inc. 10.13% 2003.............................. 680,000 734,400
Host Marriot Corp. Acquisition Properties, Inc. Class B
9.00% 2007................................................ 555,000 604,256
Station Casinos, Inc. 9.75% 2007*........................... 400,000 448,000
-------------
10,831,549
-------------
INFORMATION TECHNOLOGY -- 14.5%
Computers & Business Equipment -- 0.3%
Corporate Express, Inc. 9.63% 2008*......................... 450,000 452,250
Electronics -- 1.0%
Advanced Micro Devices, Inc. 11.00% 2003.................... 495,000 535,838
Samsung Electronics America, Inc. 9.75% 2003*............... 1,000,000 951,360
</TABLE>
- ---------------------
32
<PAGE> 123
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Software -- 0.5%
Concentric Network Corp. 12.75% 2007........................ $ 175,000 $ 190,531
PSINet, Inc. 10.00% 2005*................................... 275,000 279,125
Wam Net, Inc zero coupon 2005(3)............................ 400,000 256,000
Telecommunications -- 12.7%
American Mobile Satellite Corp. 12.25% 2008*(3)............. 415,000 415,000
CIA International de Telecommunicaciones 10.38% 2004........ 4,300,000 3,784,000
Comcast Cellular Holdings, Inc. 9.50% 2007*................. 1,570,000 1,621,025
Consorcio Ecuatoriano De Telecommunicaciones SA 14.00%
2002...................................................... 1,600,000 1,632,000
Dolphin Telecom PLC zero coupon 2008*(2).................... 600,000 347,250
Hermes Europe Railtel BV 11.50% 2007........................ 340,000 384,200
Intermedia Communications, Inc. zero coupon 2007(2)......... 1,420,000 1,043,700
IXC Communications, Inc. 9.00% 2008*........................ 515,000 512,425
Lenfest Communications, Inc. 7.63% 2008..................... 60,000 59,700
Lenfest Communications, Inc. 8.38% 2005*.................... 740,000 773,300
Level 3 Communications, Inc. 9.13% 2008*.................... 530,000 514,100
Nextel Communications, Inc. zero coupon 2007(2)............. 2,070,000 1,376,550
Nextel Communications, Inc. zero coupon 2004(2)............. 555,000 536,962
Nextlink Communications, Inc. zero coupon 2008*(2).......... 940,000 576,925
Onepoint Communications Corp. 14.50% 2008*(3)............... 370,000 370,925
Primus Telecommunications Group 9.88% 2008*................. 415,000 411,888
Qwest Communications International, Inc. zero coupon
2008*(2).................................................. 225,000 159,469
Qwest Communications International, Inc. 10.88% 2007........ 200,000 230,250
Qwest Communications International, Inc. zero coupon
2007*(2).................................................. 1,210,000 892,375
Rhythms Netconnections, Inc. zero coupon 2008(2)(3)......... 1,100,000 551,375
Rogers Cantel, Inc. 8.30% 2007.............................. 750,000 733,125
Rogers Communications, Inc. 9.13% 2006...................... 90,000 91,350
RSL Communications Ltd. PLC 9.13% 2008*..................... 710,000 702,900
RSL Communications Ltd. PLC 12.25% 2006..................... 18,000 20,430
TCI Satellite Entertainment, Inc. zero coupon 2007(2)....... 620,000 390,600
Teleport Communications Group zero coupon 2007(2)........... 510,000 444,337
Versatel Telecom BV 13.25% 2008*(3)......................... 200,000 206,500
-------------
21,447,765
-------------
MATERIALS -- 3.3%
Chemicals -- 0.8%
ISP Holdings, Inc. Class B 9.00% 2003....................... 1,090,000 1,141,775
Forest Products -- 1.8%
S.D. Warren Co. 12.00% 2004................................. 265,000 293,488
Tjiwi Kimia International BV 13.25% 2001.................... 2,900,000 2,365,000
Metals & Minerals -- 0.7%
Murrin Murrin Holdings Property Ltd. 9.38% 2007............. 800,000 792,000
NSM Steel, Inc. 12.25% 2008*(3)............................. 270,000 252,450
-------------
4,844,713
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 35.6%
Foreign Government -- 35.6%
Colombia Hercules 1991 Integrated Loan 7.13% 2003(1)........ 1,234,921 1,160,826
Ivory Coast PDI 1.90% 2018(1)............................... 2,260,000 144,957
Ivory Coast 2.00% 2018(1)................................... 3,425,000 190,341
Jamaica Government Bonds 12.00% 1999........................ 2,000,000 2,050,000
Ministry of Finance Russia 10.00% 2007*..................... 10,150,000 9,033,500
Republic of Argentina 6.63% 2005............................ 6,127,500 5,499,431
Republic of Argentina 11.75% 2007*.......................... 1,850,000 1,794,500
Republic of Brazil 5.00% 2000(4)............................ 6,323,145 4,880,677
Republic of Brazil 6.63% 2006(1)............................ 7,032,500 5,968,835
</TABLE>
---------------------
33
<PAGE> 124
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
NON-U.S. GOVERNMENT OBLIGATIONS (continued)
Foreign Government (continued)
Republic of Brazil 9.38% 2008............................... $5,550,000 $ 5,203,125
Republic of Bulgaria 2.25% 2012............................. 2,600,000 1,704,625
Republic of Peru 3.25% 2017(1).............................. 2,300,000 1,380,000
Republic of Venezuela 6.81% 2007............................ 4,761,905 4,142,857
United Mexican States 8.63% 2008............................ 5,400,000 5,308,200
United Mexican States 11.38% 2016........................... 3,550,000 4,057,650
-------------
52,519,524
-------------
REAL ESTATE -- 0.4%
Real Estate Companies -- 0.4%
CB Richards Ellis Services, Inc. 8.88% 2006................. 550,000 544,500
-------------
UTILITIES -- 5.3%
Electric Utilities -- 4.5%
AES Corp. 8.50% 2007*....................................... 490,000 492,450
Compania De Transporte Energia 9.25% 2008*.................. 1,600,000 1,544,000
Korea Electric Power Corp. 6.38% 2003....................... 3,200,000 2,611,648
Mosenergo Finance BV 8.38% 2002*............................ 2,300,000 1,972,250
Telephone -- 0.8%
American Cellular Corp. 10.50% 2008*........................ 410,000 407,950
Iridium Capital Corp., Series A 13.00% 2005................. 115,000 124,200
PTC International Finance BV zero coupon 2007*(2)........... 800,000 548,000
Viatel, Inc. zero coupon 2008*(3)........................... 265,000 157,675
-------------
7,858,173
-------------
TOTAL BONDS & NOTES (cost $128,833,881)..................... 126,475,882
-------------
<CAPTION>
LOAN AGREEMENT -- 1.4%
----------------------------------------------------------------------------------------
<S> <C> <C>
LOAN AGREEMENT -- 1.4%
Foreign Government -- 1.4%
Gabon Loans 6.69% 2004 (cost $1,992,857).................... 2,571,429 2,134,286
-------------
<CAPTION>
PREFERRED STOCK -- 1.0% SHARES
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 1.0%
Broadcasting & Media -- 1.0%
Time Warner, Inc. Series M 10.25%(5)........................ 1,247 1,415,345
-------------
INFORMATION TECHNOLOGY -- 0.0%
Telecommunications -- 0.0%
IXC Communications, Inc. Series B 12.50%(5) ................ 6 7,434
-------------
TOTAL PREFERRED STOCK (cost $1,426,904)..................... 1,422,779
-------------
<CAPTION>
WARRANTS -- 0.0%+ WARRANTS
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 0.0%
Software -- 0.0%
Concentric Network Corp. 12/15/07 (cost $0)................. 175 16,625
-------------
TOTAL INVESTMENT SECURITIES (cost $132,253,642)............. 130,049,572
-------------
</TABLE>
- ---------------------
34
<PAGE> 125
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 5.5% AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN SHORT-TERM NOTES -- 5.5%
Acindar Industria Argentina de Aceros SA 11.55% due
11/12/98(1)............................................... $1,500,000 $ 1,511,250
Brazil Credit Linked Note zero coupon due 5/4/99............ 4,000,000 3,613,320
Russia Federation Ministry Finance 14.00% due 5/19/99....... 3,000,000 2,940,000
-------------
TOTAL SHORT-TERM SECURITIES (cost $8,213,840)............... 8,064,570
-------------
<CAPTION>
REPURCHASE AGREEMENT -- 4.8%
----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 4.8%
Agreement with State Street Bank & Trust Co., bearing
interest at 5.00% dated 5/29/98, to be repurchased 6/01/98
in the amount of $7,114,963 and collateralized by
$6,705,000 of U.S. Treasury Notes, bearing interest at
6.50%, due 11/15/26 and having an approximate aggregate
value of $7,288,162 (cost $7,112,000)..................... 7,112,000 7,112,000
-------------
TOTAL INVESTMENTS --
(cost $147,579,482) 98.3% 145,226,142
Other assets less liabilities -- 1.7 2,513,174
------ -------------
NET ASSETS -- 100.0% $147,739,316
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
(1) Variable rate security; rate as of May 31, 1998
(2) Represents a zero coupon bond which will convert to an
interest-bearing security at a later date
(3) Consists of more than one class of securities traded together
as a unit, generally bonds with attached stocks or warrants
(4) A portion of the coupon interest is received in cash and a
portion is capitalized in the principal of the security
(5) PIK ("Payment-in-Kind") payment made with additional
securities in lieu of cash
Allocation of investments as a percentage of net assets by country
as of May 31, 1998
<TABLE>
<S> <C>
United States............................................... 35.1%
Brazil...................................................... 13.3%
Russia...................................................... 12.3%
Argentina................................................... 9.6%
Mexico...................................................... 7.1%
Turkey...................................................... 3.4%
South Korea................................................. 2.9%
Venezuela................................................... 2.8%
Indonesia................................................... 1.6%
Gabon....................................................... 1.4%
Jamaica..................................................... 1.4%
Bulgaria.................................................... 1.2%
Netherlands................................................. 1.2%
Ecuador..................................................... 1.1%
Peru........................................................ 0.9%
Canada...................................................... 0.8%
Colombia.................................................... 0.8%
Australia................................................... 0.5%
Bermuda..................................................... 0.5%
Ivory Coast................................................. 0.2%
United Kingdom.............................................. 0.2%
-----
98.3%
=====
</TABLE>
See Notes to Financial Statements.
---------------------
35
<PAGE> 126
- ---------------------
SUNAMERICA SERIES TRUST
SUNAMERICA BALANCED
PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 64.0% SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 7.0%
Apparel & Textiles -- 1.2%
Gap, Inc.................................................... 17,000 $ 918,000
Automotive -- 1.6%
Ford Motor Co............................................... 13,000 674,375
General Motors Corp......................................... 8,000 575,500
Housing -- 1.8%
Home Depot, Inc............................................. 10,000 785,625
Whirlpool Corp.............................................. 10,000 683,125
Retail -- 2.4%
CVS Corp.................................................... 6,000 421,125
Dayton Hudson Corp.......................................... 15,000 695,625
Wal-Mart Stores, Inc........................................ 15,000 827,813
------------
5,581,188
------------
CONSUMER STAPLES -- 1.8%
Food, Beverage & Tobacco -- 1.4%
Heinz (H.J.) Co............................................. 10,000 530,625
Philip Morris Cos., Inc..................................... 15,000 560,625
Household Products -- 0.4%
Procter & Gamble Co......................................... 4,000 335,750
------------
1,427,000
------------
ENERGY -- 6.6%
Energy Services -- 3.0%
ENSCO International, Inc.................................... 15,000 379,688
EVI Weatherford, Inc.+...................................... 10,000 505,625
Halliburton Co.............................................. 15,000 710,625
Schlumberger Ltd............................................ 10,000 780,625
Energy Sources -- 3.6%
Baker Hughes, Inc........................................... 15,000 540,000
Chevron Corp................................................ 7,000 559,125
Mobil Corp.................................................. 4,000 312,000
Royal Dutch Petroleum Co. ADR............................... 18,000 1,009,125
Texaco, Inc................................................. 8,000 462,000
------------
5,258,813
------------
FINANCE -- 21.1%
Banks -- 8.6%
BankBoston Corp............................................. 5,000 526,875
Chase Manhattan Corp........................................ 5,000 679,688
Citicorp.................................................... 5,000 745,625
First Union Corp............................................ 8,000 442,500
Fleet Financial Group, Inc.................................. 8,000 656,000
Mellon Bank Corp............................................ 10,000 674,375
NationsBank Corp............................................ 10,000 757,500
</TABLE>
- ---------------------
36
<PAGE> 127
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Banks (continued)
Summit Bancorp.............................................. 25,000 $ 1,253,125
Wells Fargo & Co............................................ 3,000 1,084,500
Financial Services -- 10.0%
American Express Co......................................... 10,000 1,026,250
American General Corp....................................... 12,000 805,500
Associates First Capital Corp., Class A..................... 10,000 748,125
Capital One Financial Corp.................................. 7,000 698,687
Donaldson, Lufkin & Jenrette, Inc........................... 10,000 440,625
Equitable Cos., Inc......................................... 7,000 482,125
Hartford Financial Services Group, Inc...................... 7,000 770,437
Morgan Stanley, Dean Witter, Discover & Co.................. 10,000 780,625
Paine Webber Group, Inc..................................... 5,000 214,688
Providian Financial Corp.................................... 12,000 763,500
ReliaStar Financial Corp.................................... 9,300 402,225
Travelers Group, Inc........................................ 14,000 854,000
Insurance -- 2.5%
Allstate Corp............................................... 7,000 658,875
Conseco, Inc................................................ 15,000 699,375
St. Paul Cos., Inc.......................................... 14,000 621,250
------------
16,786,475
------------
HEALTHCARE -- 7.8%
Drugs -- 6.9%
Amgen, Inc.+................................................ 4,000 242,000
Biogen, Inc.+............................................... 13,000 572,000
IDEC Pharmaceuticals Corp.+................................. 19,500 614,250
Lilly (Eli) & Co............................................ 8,000 491,500
Merck & Co., Inc............................................ 5,000 585,313
Pfizer, Inc................................................. 6,000 628,875
Schering-Plough Corp........................................ 9,000 753,187
Warner-Lambert Co........................................... 25,000 1,595,312
Medical Products -- 0.9%
Beckman Coulter, Inc........................................ 6,000 334,500
Johnson & Johnson Co........................................ 5,000 345,313
------------
6,162,250
------------
INDUSTRIAL & COMMERCIAL -- 3.1%
Electrical Equipment -- 1.6%
General Electric Co......................................... 15,000 1,250,625
Multi-Industry -- 0.9%
United Technologies Corp.................................... 7,400 695,600
Transportation -- 0.6%
Burlington Northern Santa Fe Corp........................... 5,000 497,500
------------
2,443,725
------------
INFORMATION & ENTERTAINMENT -- 1.5%
Entertainment Products -- 0.8%
Oakley, Inc.+............................................... 25,000 326,562
Sunglass Hut International, Inc.+........................... 25,000 304,688
Leisure & Tourism -- 0.7%
Carnival Corp., Class A..................................... 8,000 542,000
------------
1,173,250
------------
</TABLE>
---------------------
37
<PAGE> 128
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY -- 9.6%
Communication Equipment -- 0.9%
Tellabs, Inc.+.............................................. 10,000 $ 687,188
Computers & Business Equipment -- 3.6%
Cisco Systems, Inc.+........................................ 11,000 831,875
Dell Computer Corp.+........................................ 10,000 824,062
Hewlett-Packard Co.......................................... 10,000 621,250
International Business Machines Corp........................ 5,000 586,875
Electronics -- 2.3%
Intel Corp.................................................. 10,000 714,375
Motorola, Inc............................................... 10,000 529,375
Texas Instruments, Inc...................................... 12,000 616,500
Software -- 0.9%
Microsoft Corp.+............................................ 8,000 678,500
Telecommunications -- 1.9%
AirTouch Communications, Inc.+.............................. 10,000 476,250
Lucent Technologies, Inc.................................... 15,000 1,064,062
------------
7,630,312
------------
MATERIALS -- 1.8%
Chemicals -- 1.2%
du Pont (E.I.) de Nemours & Co.............................. 12,000 924,000
Forest Products -- 0.6%
Fort James Corp............................................. 10,000 478,125
------------
1,402,125
------------
UTILITIES -- 3.7%
Gas & Pipeline Utilities -- 0.9%
Enron Corp.................................................. 14,000 701,750
Telephone -- 2.8%
AT&T Corp................................................... 15,000 913,125
Bell Atlantic Corp.......................................... 5,000 458,125
WorldCom, Inc.+............................................. 20,000 910,000
------------
2,983,000
------------
TOTAL COMMON STOCK (cost $44,080,145)....................... 50,848,138
------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 29.6% AMOUNT
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 1.0%
Automotive -- 1.0%
Chrysler Corp. 7.45% 2027................................... $ 750,000 823,755
------------
FINANCE -- 1.3%
Financial Services -- 1.3%
Morgan Stanley Group, Inc. 6.88% 2007....................... 1,000,000 1,034,110
------------
INFORMATION TECHNOLOGY -- 1.3%
Electronics -- 1.3%
Texas Instruments, Inc. 6.13% 2006.......................... 1,000,000 994,270
------------
</TABLE>
- ---------------------
38
<PAGE> 129
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES -- 26.0%
U.S. Government & Agencies -- 26.0%
Federal National Mortgage Association 5.75% 2008............ $ 750,000 $ 741,683
United States Treasury Bond Strip zero coupon 2005.......... 2,988,000 2,054,937
United States Treasury Bonds 6.13% 2027..................... 2,500,000 2,612,100
United States Treasury Notes 5.50% 2003 - 2008.............. 9,400,000 9,344,636
United States Treasury Notes 5.63% 2008..................... 2,000,000 2,009,680
United States Treasury Notes 5.88% 2005..................... 1,500,000 1,519,215
United States Treasury Notes 6.00% 2000..................... 750,000 756,682
United States Treasury Notes 6.13% 2007..................... 600,000 619,122
United States Treasury Notes 6.38% 2000..................... 1,000,000 1,014,840
------------
20,672,895
------------
TOTAL BONDS & NOTES (cost $23,369,802)...................... 23,525,030
------------
TOTAL INVESTMENT SECURITIES (cost $67,449,947).............. 74,373,168
------------
<CAPTION>
REPURCHASE AGREEMENT -- 7.3%
---------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 7.3%
Joint Repurchase Agreement Account (Note 3) (cost
$5,799,000)............................................... 5,799,000 5,799,000
------------
TOTAL INVESTMENTS --
(cost $73,248,947) 100.9% 80,172,168
Liabilities in excess of other
assets -- (0.9) (703,647)
------- ------------
NET ASSETS -- 100.0% $79,468,521
======= ============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
See Notes to Financial Statements.
---------------------
39
<PAGE> 130
- ---------------------
SUNAMERICA SERIES TRUST
BALANCED/PHOENIX INVESTMENT
COUNSEL PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 56.4% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 6.4%
Housing -- 0.9%
Home Depot, Inc. ........................................... 13,800 $ 1,084,163
Retail -- 5.5%
Borders Group, Inc.+........................................ 16,300 505,300
Consolidated Stores Corp.+.................................. 24,600 939,413
CVS Corp. .................................................. 15,200 1,066,850
Fred Meyer, Inc.+........................................... 11,990 515,570
Rite Aid Corp. ............................................. 40,100 1,436,081
Safeway, Inc.+.............................................. 38,600 1,406,487
TJX Cos., Inc. ............................................. 8,700 406,725
-------------
7,360,589
-------------
CONSUMER STAPLES -- 2.0%
Household Products -- 2.0%
Colgate-Palmolive Co........................................ 10,700 930,900
Gillette Co................................................. 11,300 1,323,512
-------------
2,254,412
-------------
ENERGY -- 3.3%
Energy Services -- 3.3%
Cooper Cameron Corp.+....................................... 5,400 321,300
Diamond Offshore Drilling, Inc.............................. 11,500 549,844
Global Industries Ltd.+..................................... 3,700 78,856
Halliburton Co.............................................. 13,000 615,875
Schlumberger Ltd............................................ 10,500 819,656
Tosco Corp.................................................. 29,400 933,450
Transocean Offshore, Inc.................................... 10,300 507,919
-------------
3,826,900
-------------
FINANCE -- 8.6%
Banks -- 4.2%
Banc One Corp............................................... 11,220 618,503
BankAmerica Corp............................................ 10,200 843,412
BankBoston Corp............................................. 4,600 484,725
Citicorp.................................................... 3,200 477,200
First Chicago NBD Corp...................................... 7,500 655,781
Mellon Bank Corp............................................ 4,500 303,469
NationsBank Corp............................................ 9,200 696,900
U.S. Bancorp................................................ 20,400 798,150
Financial Services -- 2.8%
Federal Home Loan Mortgage Corp............................. 22,000 1,001,000
Household International, Inc................................ 3,900 527,719
MBNA Corp................................................... 20,900 662,268
ReliaStar Financial Corp.................................... 7,000 302,750
Travelers Group, Inc........................................ 11,250 686,250
</TABLE>
- ---------------------
40
<PAGE> 131
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Insurance -- 1.6%
Allstate Corp............................................... 8,900 $ 837,713
American International Group, Inc........................... 5,300 656,206
UNUM Corp................................................... 6,000 333,375
-------------
9,885,421
-------------
HEALTHCARE -- 9.0%
Drugs -- 6.4%
Bristol-Myers Squibb Co..................................... 14,700 1,580,250
Cardinal Health, Inc........................................ 9,900 882,338
Elan Corp. PLC ADR+......................................... 7,200 440,550
Pfizer, Inc................................................. 12,700 1,331,119
Schering-Plough Corp........................................ 8,500 711,344
Warner-Lambert Co........................................... 23,400 1,493,212
Watson Pharmaceuticals, Inc.+............................... 20,600 901,250
Health Services -- 1.2%
HEALTHSOUTH Corp.+.......................................... 33,600 953,400
Tenet Healthcare Corp.+..................................... 13,900 486,500
Medical Products -- 1.4%
Guidant Corp................................................ 10,300 663,706
Medtronic, Inc.............................................. 17,400 967,875
-------------
10,411,544
-------------
INDUSTRIAL & COMMERCIAL -- 4.6%
Aerospace & Military Technology -- 1.0%
Boeing Co................................................... 24,500 1,166,812
Business Services -- 1.4%
Comdisco, Inc............................................... 4,800 174,600
Owens-Illinois, Inc.+....................................... 4,600 206,712
USA Waste Services, Inc.+................................... 26,400 1,245,750
Electrical Equipment -- 0.9%
General Electric Co......................................... 12,300 1,025,513
Machinery -- 0.4%
Deere & Co.................................................. 3,600 186,750
Thermo Electron Corp........................................ 9,800 344,225
Multi-Industry -- 0.9%
Tyco International Ltd...................................... 18,100 1,002,288
-------------
5,352,650
-------------
INFORMATION & ENTERTAINMENT -- 2.3%
Broadcasting & Media -- 2.3%
Capstar Broadcasting Corp., Class A+........................ 6,200 117,800
CBS Corp.................................................... 35,800 1,136,650
Chancellor Media Corp.+..................................... 15,200 635,550
Clear Channel Communications, Inc.+......................... 7,800 747,825
-------------
2,637,825
-------------
INFORMATION TECHNOLOGY -- 16.2%
Communication Equipment -- 0.6%
CIENA Corp.+................................................ 7,400 384,800
Ericsson (L.M.) Telecommunications Co., Class B ADR......... 12,600 351,225
</TABLE>
---------------------
41
<PAGE> 132
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Computers & Business Equipment -- 4.9%
Cisco Systems, Inc.+........................................ 7,500 $ 567,188
Compaq Computer Corp........................................ 21,800 595,412
EMC Corp.+.................................................. 11,100 459,956
International Business Machines Corp........................ 28,400 3,333,450
Staples, Inc.+.............................................. 27,400 688,425
Electronics -- 3.0%
Intel Corp.................................................. 16,300 1,164,431
Linear Technology Corp...................................... 4,200 293,738
Philips Electronics NV...................................... 20,400 1,940,550
Software -- 4.8%
America Online, Inc.+....................................... 3,800 316,588
BMC Software, Inc.+......................................... 23,000 1,059,437
Computer Associates International, Inc...................... 17,400 913,500
Compuware Corp.+............................................ 27,900 1,281,656
HBO & Co.................................................... 21,700 1,252,497
J.D. Edwards & Co.+......................................... 10,600 389,881
Sterling Commerce, Inc.+.................................... 7,800 309,563
Telecommunications -- 2.9%
AirTouch Communications, Inc.+.............................. 34,700 1,652,587
Liberty Media Group, Inc., Series A+........................ 29,750 981,750
Telecomunicacoes de Brasileiras SA ADR...................... 6,500 693,063
-------------
18,629,697
-------------
MATERIALS -- 1.3%
Chemicals -- 1.2%
Monsanto Co................................................. 18,500 1,024,437
Solutia, Inc................................................ 10,600 290,838
Forest Products -- 0.1%
International Paper Co...................................... 3,500 161,000
-------------
1,476,275
-------------
UTILITIES -- 2.7%
Telephone -- 2.7%
AT&T Corp................................................... 33,500 2,039,312
MCI Communications Corp..................................... 19,600 1,047,988
-------------
3,087,300
-------------
TOTAL COMMON STOCK (cost $56,560,447)....................... 64,922,613
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 37.2% AMOUNT
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.7%
Retail -- 0.7%
Fred Meyer, Inc. 7.45% 2008................................. $ 325,000 325,244
McKesson Corp. 6.40% 2008*(1)............................... 425,000 422,535
-------------
747,779
-------------
FINANCE -- 9.4%
Banks -- 0.7%
SB Treasury Co. LLC 9.40% 2008*(2).......................... 390,000 372,938
Vnesheconombank USSR 6.72% 2015*(2)......................... 595,000 389,725
</TABLE>
- ---------------------
42
<PAGE> 133
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services -- 7.8%
Aesop Funding II LLC 6.40% 2003*............................ $ 600,000 $ 604,278
Capital Equipment Receivables Trust 6.45% 2002.............. 360,000 369,562
Chase Credit Card Master Trust 6.30% 2003................... 500,000 504,060
Credit Suisse First Boston Corp. 6.72% 2007................. 1,000,000 1,015,469
CS First Boston Mortgage Securities Corp. 7.18%
2027(1)(2)................................................ 300,000 302,344
DLJ Mortgage Acceptance Corp. 7.58% 2028*................... 600,000 640,406
First Union-Lehman Brothers Commercial Mortgage Trust 7.43%
2029...................................................... 140,000 148,006
Fleetwood Credit Grantor Trust 6.90% 2012................... 63,980 64,846
Ford Motor Credit Co. 6.00% 2003............................ 400,000 397,564
GE Capital Mortgage Services, Inc. 7.25% 2026............... 293,877 298,422
Green Tree Financial Corp. 7.40% 2027....................... 125,000 128,320
Green Tree Financial Corp. 7.60% 2027....................... 125,000 131,018
IBJ Preferred Capital Co. LLC, 8.79% 2008*(2)............... 390,000 343,200
Merrill Lynch & Co, Inc. 6.00% 2003......................... 425,000 423,045
Mortgage Capital Funding, Inc. 7.01% 2006(1)................ 850,000 882,406
Nationslink Funding Corp. 7.69% 2005........................ 250,000 266,445
Premier Auto Trust 5.70% 2002............................... 250,000 248,670
Residential Asset Securitization Trust 8.00% 2026........... 127,341 128,356
Residential Funding Mortgage Securities 6.75% 2011.......... 273,368 276,956
Residential Funding Mortgage Securities 7.10% 2026.......... 200,000 202,406
Residential Funding Mortgage Securities 7.25% 2026.......... 293,401 297,448
Structured Asset Securities Corp. 6.95% 2007................ 140,000 144,725
Structured Asset Securities Corp. 7.00% 2026(2)............. 300,000 299,672
Triangle Funding Ltd. 5.85% 2005*(2)........................ 500,000 501,719
Wings Commercial Loan Master Trust I 5.92% 2008(2).......... 400,000 400,375
Insurance -- 0.9%
Norwest Asset Securities Corp. 7.75% 2027................... 1,000,000 1,031,562
-------------
10,813,943
-------------
HEALTHCARE -- 0.9%
Health Services -- 0.5%
Tenet Healthcare Corp. 8.13% 2008*.......................... 625,000 623,438
Medical Products -- 0.4%
Boston Scientific Corp. 6.63% 2005.......................... 425,000 428,655
-------------
1,052,093
-------------
INDUSTRIAL & COMMERCIAL -- 0.1%
Machinery -- 0.1%
Cummins Engine, Inc. 6.45% 2005............................. 155,000 155,011
-------------
INFORMATION TECHNOLOGY -- 0.5%
Software -- 0.4%
Computer Associates International, Inc. 6.38% 2005*......... 460,000 457,429
Telecommunications -- 0.1%
Compania de Radiocommunicaiones Moviles SA 9.25% 2008*(1)... 150,000 145,125
-------------
602,554
-------------
MATERIALS -- 0.4%
Forest Products -- 0.4%
Buckeye Cellulose Corp. 8.50% 2005.......................... 300,000 304,500
Buckeye Cellulose Corp. 9.25% 2008.......................... 100,000 105,500
-------------
410,000
-------------
</TABLE>
---------------------
43
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 5.9%
Municipal Bonds -- 5.9%
California State Department Water Resources 5.00% 2029...... $ 190,000 $ 184,427
Dallas Fort Worth Texas International 6.50% 2009............ 400,000 405,260
Florida State Department of Transportation 5.00% 2027....... 230,000 224,478
Fresno County California Pension Obligation 6.21% 2006...... 400,000 400,216
Houston Texas Water & Sewer Systems Revenue 5.00% 2025...... 290,000 282,805
Illinois Educational Facilities Authority Revenue 7.84%
2024...................................................... 615,000 668,929
Kern County California Pension Obligation 7.26% 2014........ 220,000 234,476
Long Beach California Pension Obligation 6.87% 2006......... 30,000 31,103
Los Angeles County Public Works Financing Authority 5.13%
2029...................................................... 290,000 286,726
Massachusetts State Port Authority Revenue 6.05% 2002....... 195,000 194,013
Massachusetts State Water Resources Authority 5.00% 2024.... 230,000 224,409
Miami Beach Florida Special Obligation 8.60% 2021........... 430,000 487,534
New York State Dormitory Authority Revenues 6.90% 2003...... 400,000 410,144
New York State General Obligation 6.40% 2008................ 610,000 616,649
Newport News 7.05% 2025..................................... 250,000 258,400
Orange County California Pension Obligation 7.62% 2008...... 160,000 174,496
Pittsburgh Pennsylvania General Obligation 6.50% 2017....... 500,000 489,555
San Bernardino County California Financing Authority 6.87%
2008...................................................... 15,000 15,566
San Bernardino County California Financing Authority 6.94%
2009...................................................... 35,000 36,543
Sonoma County California Pension Obligation 6.63% 2013...... 215,000 218,251
Texas State General Obligation 6.10% 2003................... 500,000 498,220
University Miami Florida Exchange Revenue 7.65% 2020........ 80,000 82,837
Ventura County California Pension 6.54% 2005................ 30,000 30,437
Washington State General Obligation 5.00% 2022.............. 290,000 284,415
-------------
6,739,889
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 5.9%
Foreign Government -- 5.9%
Brazil NMB 6.69% 2009(1).................................... 215,000 170,925
Compania Sud Americana de Vapores SA 7.38% 2003............. 50,000 48,625
Republic of Argentina 6.63% 2005(2)......................... 631,750 566,996
Republic of Argentina 9.75% 2027(1)......................... 600,000 556,800
Republic of Brazil 6.69% 2009(2)............................ 755,000 602,112
Republic of Colombia 7.25% 2004............................. 325,000 309,536
Republic of Colombia 7.63% 2007............................. 300,000 277,500
Republic of Ecuador 3.25% 2015(1)(2)........................ 467,321 283,898
Republic of Peru 4.00% 1999(2).............................. 455,000 301,722
Republic of Poland 4.00% 2014(2)............................ 1,800,000 1,623,375
Republic of Venezuela 9.25% 2027(1)......................... 340,000 285,260
Republic of Korea 8.88% 2008................................ 645,000 601,591
Russia Principal Loans 3.36% 2020(2)........................ 325,000 183,219
United Mexican States 11.50% 2026(1)........................ 860,000 1,001,040
-------------
6,812,599
-------------
U.S. GOVERNMENT & AGENCIES -- 13.0%
U.S. Government & Agencies -- 13.0%
Government National Mortgage Association 6.50% 2023......... 4,597,178 4,579,819
United States Treasury Notes 5.38% 2000..................... 2,825,000 2,816,158
United States Treasury Notes 5.50% 2000..................... 3,350,000 3,343,453
United States Treasury Notes 6.00% 2000..................... 2,500,000 2,522,275
United States Treasury Notes 6.75% 2000..................... 1,200,000 1,225,308
United States Treasury Notes 6.88% 2000..................... 450,000 460,125
-------------
14,947,138
-------------
</TABLE>
- ---------------------
44
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 0.4%
Telephone -- 0.4%
Century Telephone Enterprises, Inc. 6.30% 2008.............. $ 400,000 $ 397,256
Telefonica de Argentina SA 9.13% 2008*...................... 110,000 107,250
-------------
504,506
-------------
TOTAL BONDS & NOTES (cost $35,850,651)...................... 42,785,512
-------------
<CAPTION>
RIGHTS -- 0.0%+ RIGHTS
----------------------------------------------------------------------------------------
<S> <C> <C>
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.0%
Foreign Government -- 0.0%
United Mexican States 6/30/03............................... 461,000 0
-------------
<CAPTION>
WARRANTS -- 0.0%+ WARRANTS
----------------------------------------------------------------------------------------
<S> <C> <C>
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.0%
Foreign Government -- 0.0%
Republic of Venezuela 4/15/20............................... 535 0
-------------
TOTAL INVESTMENT SECURITIES (cost $99,013,780).............. 107,708,125
-------------
PRINCIPAL
SHORT-TERM SECURITIES -- 6.3% AMOUNT
----------------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES -- 6.3%
Colgate-Palmolive Co. 5.47% due 6/4/98...................... $2,375,000 2,373,917
Greenwich Funding Corp. 5.54% due 6/10/98................... 1,705,000 1,702,639
Heinz (H.J.) Co. 5.50% due 6/15/98.......................... 195,000 194,583
Koch Industries 5.62% due 6/1/98............................ 1,255,000 1,255,000
Navistar Financial Owner Trust 5.94% due 11/15/98........... 500,000 500,000
Sara Lee Corp. 5.48% due 6/2/98............................. 1,230,000 1,229,813
-------------
TOTAL SHORT-TERM SECURITIES (cost $7,255,946)............... 7,255,952
-------------
TOTAL INVESTMENTS --
(cost $106,269,726) 99.9% 114,964,077
Other assets less liabilities -- 0.1 83,510
------ -------------
NET ASSETS -- 100.0% $115,047,587
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
(1) Fair valued security; see Note 2
(2) Variable rate security; rate as of May 31, 1998
See Notes to Financial Statements
---------------------
45
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- ---------------------
SUNAMERICA SERIES TRUST
ASSET ALLOCATION PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 62.2% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 4.9%
Apparel & Textiles -- 1.8%
Fruit of The Loom, Inc.+.................................... 327,600 $ 11,773,125
Automotive -- 1.7%
Goodyear Tire & Rubber Co. ................................. 157,300 11,305,937
Retail -- 1.4%
Sears, Roebuck & Co. ....................................... 154,600 9,556,213
-------------
32,635,275
-------------
CONSUMER STAPLES -- 6.6%
Food, Beverage & Tobacco -- 6.6%
Philip Morris Cos., Inc. ................................... 342,800 12,812,150
RJR Nabisco Holdings Corp. ................................. 628,900 17,727,119
SUPERVALU, Inc. ............................................ 114,400 4,790,500
UST, Inc. .................................................. 330,400 8,796,900
-------------
44,126,669
-------------
ENERGY -- 3.0%
Energy Services -- 1.9%
Tosco Corp. ................................................ 407,200 12,928,600
Energy Sources -- 1.1%
Texaco, Inc. ............................................... 131,900 7,617,225
-------------
20,545,825
-------------
FINANCE -- 14.3%
Banks -- 5.8%
Chase Manhattan Corp. ...................................... 79,900 10,861,406
NationsBank Corp. .......................................... 192,000 14,544,000
Republic New York Corp. .................................... 59,200 7,603,500
Wells Fargo & Co. .......................................... 16,100 5,820,150
Financial Services -- 1.4%
American General Corp. ..................................... 134,800 9,048,450
Insurance -- 7.1%
Aetna, Inc. ................................................ 225,200 17,607,825
CIGNA Corp. ................................................ 234,000 16,029,000
Loews Corp. ................................................ 158,000 14,338,500
-------------
95,852,831
-------------
HEALTHCARE -- 2.8%
Health Services -- 2.8%
Foundation Health Systems, Inc.+............................ 308,700 9,396,056
Tenet Healthcare Corp.+..................................... 268,900 9,411,500
-------------
18,807,556
-------------
</TABLE>
- ---------------------
46
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL -- 12.5%
Aerospace & Military Technology -- 7.8%
Boeing Co. ................................................. 149,750 $ 7,131,844
Lear Corp.+................................................. 244,700 13,060,862
Lockheed Martin Corp. ...................................... 163,700 18,375,325
Raytheon Co., Class A....................................... 256,400 13,669,325
Business Services -- 2.1%
Fluor Corp. ................................................ 299,100 14,263,331
Transportation -- 2.6%
Canadian Pacific Ltd. ...................................... 428,200 12,444,563
CNF Transportation, Inc. ................................... 126,500 5,194,406
-------------
84,139,656
-------------
INFORMATION & ENTERTAINMENT -- 0.5%
Leisure & Tourism -- 0.5%
Circus Circus Enterprises, Inc.+............................ 178,000 3,159,500
Continental Airlines, Inc., Class B+........................ 9,800 554,313
-------------
3,713,813
-------------
INFORMATION TECHNOLOGY -- 5.1%
Computers & Business Equipment -- 3.7%
Quantum Corp.+.............................................. 741,200 16,213,750
Seagate Technology, Inc.+................................... 355,600 8,223,250
Electronics -- 1.4%
Avnet, Inc. ................................................ 163,100 9,622,900
-------------
34,059,900
-------------
MATERIALS -- 6.8%
Chemicals -- 3.4%
IMC Global, Inc. ........................................... 278,800 9,061,000
Union Carbide Corp. ........................................ 274,800 13,722,825
Forest Products -- 2.1%
Georgia-Pacific Corp.+...................................... 181,400 11,643,613
Georgia-Pacific Timber Group+............................... 102,900 2,424,581
Stone Container Corp.+...................................... 12,800 227,200
Metals & Minerals -- 1.3%
AK Steel Holding Corp. ..................................... 23,800 443,275
Ispat International NV+..................................... 328,500 7,904,531
-------------
45,427,025
-------------
REAL ESTATE -- 0.5%
Real Estate Companies -- 0.5%
LNR Property Corp. ......................................... 128,200 3,317,175
-------------
UTILITIES -- 5.2%
Electric Utilities -- 3.8%
Entergy Corp. .............................................. 360,600 9,488,287
Northeast Utilities+........................................ 291,400 4,644,188
Unicom Corp. ............................................... 329,300 11,319,687
Gas & Pipeline Utilities -- 1.4%
Enron Corp. ................................................ 194,400 9,744,300
-------------
35,196,462
-------------
TOTAL COMMON STOCK (cost $385,940,792)...................... 417,822,187
-------------
</TABLE>
---------------------
47
<PAGE> 138
<TABLE>
<CAPTION>
PREFERRED STOCK SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 0.1%
Broadcasting & Media -- 0.1%
Time Warner, Inc. Series M 10.25%(1) (cost $287,873)........ 284 $ 322,340
-------------
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 32.9% AMOUNT
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 0.8%
Automotive -- 0.0%
Chrysler Corp. 7.45% 2097................................... $ 190,000 208,533
Housing -- 0.4%
Owens Corning 7.50% 2005.................................... 1,555,000 1,565,092
United States Home Corp. 7.95% 2001......................... 605,000 592,900
USI American Holdings, Inc. 7.25% 2006...................... 240,000 243,497
Retail -- 0.4%
K-Mart Corp. 7.96% 1999..................................... 500,000 505,020
Kroger Co. 12.95% 2009(2)................................... 1,950,000 2,092,642
-------------
5,207,684
-------------
CONSUMER STAPLES -- 0.2%
Food, Beverage & Tobacco -- 0.2%
Fleming Cos., Inc. 10.63% 2001.............................. 270,000 286,200
Instituto Fomento Industrial 8.38% 2001(2).................. 10,000 10,050
Instituto Fomento Industrial 8.38% 2001*.................... 80,000 81,365
RJR Nabisco, Inc. 8.00% 2001................................ 860,000 871,610
-------------
1,249,225
-------------
ENERGY -- 0.5%
Energy Services -- 0.2%
Edison Mission Energy Funding Corp. 6.77% 2003*............. 224,560 227,499
National Power 7.63% 2000................................... 620,000 606,825
Oryx Energy Co. 9.50% 1999.................................. 495,000 514,528
Oryx Energy Co. 10.00% 2001................................. 100,000 109,078
YPF Sociedad Anonima 7.50% 2002............................. 75,927 77,503
Energy Sources -- 0.3%
Gulf Canada Resources Ltd. 9.25% 2004....................... 600,000 628,530
Triton Energy Ltd. 8.75% 2002............................... 1,110,000 1,151,625
-------------
3,315,588
-------------
FINANCE -- 9.5%
Banks -- 1.8%
Auburn Hills Trust 12.00% 2020.............................. 170,000 276,757
Banco De Colombia 8.63% 2000................................ 675,000 678,225
Banco Nacional De Comercio Exterior SNC 7.50% 2000.......... 1,030,000 1,024,850
Banco Nacional De Comercio Exterior SNC 8.00% 2002.......... 570,000 561,165
Banco Nacional de Obras y Servicios Publicos SNC 9.63%
2003...................................................... 110,000 112,300
Banco National Common 7.25% 2004............................ 550,000 514,938
BankAmerica Corp. 9.75% 2000................................ 400,000 428,860
Capital One Bank 6.15% 2001................................. 500,000 499,365
Capital One Bank 6.39% 2001................................. 1,000,000 1,003,540
Capital One Bank 6.40% 2003................................. 300,000 300,246
Capital One Bank 6.66% 2000................................. 150,000 150,707
Capital One Bank 6.88% 2000................................. 850,000 862,367
Capital One Bank 7.15% 2006................................. 1,225,000 1,241,684
Continental Bank NA 11.25% 2001............................. 300,000 301,254
Continental Bank NA 12.50% 2001............................. 450,000 523,543
Korea Development Bank 7.13% 2001........................... 80,000 71,918
</TABLE>
- ---------------------
48
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Banks (continued)
Long Island Savings Bank 6.20% 2001......................... $1,500,000 $ 1,500,510
Riggs National Corp. 9.65% 2009............................. 860,000 1,036,360
Security Pacific Corp. 11.50% 2000.......................... 600,000 673,554
Signet Banking Corp. 9.63% 1999............................. 775,000 800,777
Financial Services -- 7.6%
Americredit Automobile Recreation Trust 6.24% 2003(2)....... 2,600,000 2,615,438
Asset Securitization Corp. 7.49% 2027....................... 1,450,000 1,545,599
Autoflow 1996 A Grantor Trust 7.48% 2002*(2)................ 855,992 851,980
Case Equipment Loan Trust 7.30% 2002........................ 116,858 117,282
Chase Commercial Mortgage Securities Corp. 6.56% 2030....... 2,500,000 2,531,641
Chase Commercial Mortgage Securities Corp. 7.37% 2007....... 2,500,000 2,645,500
Chemical Master Credit Card Trust 1 5.98% 2008.............. 1,610,000 1,595,913
Chevy Chase Auto Receivables 5.80% 2002..................... 106,098 106,031
Citibank Credit Card Master Trust I 5.80% 2005.............. 4,500,000 4,459,185
Conseco Financing Trust I 8.70% 2026........................ 690,000 777,402
Countrywide Capital I 8.05% 2027............................ 820,000 914,521
Countrywide Funding Corp. 6.45% 2003........................ 300,000 301,761
Countrywide Funding Corp. 6.97% 2003........................ 1,000,000 1,026,600
Countrywide Funding Corp. 8.43% 1999........................ 450,000 465,498
Credit Suisse First Boston 6.55% 2035....................... 2,000,000 1,990,620
Discover Card Master Trust I 6.01% 2004(3).................. 300,000 302,436
Discover Card Master Trust I 6.21% 2013(3).................. 2,000,000 2,006,860
EQCC Home Equity Loan Trust 5.80% 2028(2)(3)................ 2,892,062 2,890,703
Fasco Grantor Trust 6.65% 2001.............................. 803,961 808,993
Felcor Suites Hotels, Inc. 7.38% 2004....................... 705,000 692,937
Financiera Energetica Nacional SA 9.00% 1999................ 200,000 207,250
Financiera Energetica Nacional SA 9.38% 2006................ 750,000 768,281
Fingerhut Financial Services 6.45% 2002..................... 920,000 925,170
First Union-Lehman Brothers Commercial Mortgage Trust 6.60%
2029...................................................... 2,250,000 2,304,832
First Union-Lehman Brothers Commercial Mortgage Trust 7.30%
2006...................................................... 1,050,000 1,112,570
Ford Capital BV 9.50% 2001.................................. 800,000 874,488
Ford Credit Auto Loan Master Trust 6.50% 2002............... 550,000 555,841
GE Capital Mortgage Services, Inc. 6.50% 2024............... 637,890 616,361
General Motors Acceptance Corp. 5.88% 2003.................. 500,000 495,245
Guangdong Enterprises Ltd. 8.88% 2007....................... 660,000 591,215
H & T Master Trust 8.00% 2002*(2)........................... 900,000 901,406
MBNA Master Credit Card Trust II 5.94% 2009(3).............. 3,200,000 3,197,984
Merrill Lynch Mortgage Investments, Inc. 6.39% 2030(2)...... 3,000,000 3,015,938
Morgan Stanley Capital I 7.46% 2006(2)...................... 1,400,000 1,473,500
National Financiera SNC 8.00% 2000.......................... 500,000 501,520
NWA Trust 8.26% 2006........................................ 237,120 255,340
PXRE Capital Trust I 8.85% 2027............................. 265,000 284,128
Sears Credit Account Master Trust 6.20% 2006................ 700,000 704,151
Sears Credit Account Master Trust 8.10% 2004................ 700,000 720,776
Standard Credit Card Master Trust 8.25% 2003................ 1,010,000 1,078,801
Tanger Properties Ltd. 8.75% 2001........................... 1,160,000 1,199,544
Voto Votorantim Overseas Trading Operations NV 8.50% 2005... 160,000 146,000
Voto Votorantim Overseas Trading Operations NV 8.50%
2005*..................................................... 350,000 319,813
Insurance -- 0.1%
Conseco, Inc. 6.40% 2003.................................... 780,000 775,507
-------------
64,235,481
-------------
HEALTHCARE -- 0.1%
Health Services -- 0.1%
Tenet Healthcare Corp. 8.00% 2005........................... 430,000 442,900
-------------
</TABLE>
---------------------
49
<PAGE> 140
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL -- 0.8%
Aerospace & Military Technology -- 0.0%
Newport News Shipbuilding, Inc. 9.25% 2006.................. $ 250,000 $ 262,500
Business Services -- 0.6%
Comdisco Inc. 6.13% 2003.................................... 2,000,000 1,978,620
Hertz Corp. 7.00% 2003...................................... 750,000 768,750
Loewen Group International, Inc. 8.25% 2003................. 1,365,000 1,414,454
Electrical Equipment -- 0.1%
Westinghouse Electric Corp. 8.88% 2001...................... 740,000 776,275
Transportation -- 0.1%
MRS Logistica SA 10.63% 2005................................ 300,000 270,000
MRS Logistica SA 10.63% 2005*............................... 230,000 212,998
-------------
5,683,597
-------------
INFORMATION & ENTERTAINMENT -- 2.4%
Broadcasting & Media -- 1.8%
Globo Participacioes SA 11.50% 2003(3)...................... 450,000 461,250
Grupo Televisa SA 11.38% 2003(2)............................ 640,000 687,200
News America Holdings, Inc. 9.25% 2013...................... 935,000 1,131,088
NWCG Holding Corp. zero coupon 1999......................... 1,380,000 1,295,875
Paramount Communications, Inc. 7.50% 2002................... 200,000 205,272
Poland Communications, Inc. 9.88% 2003...................... 160,000 157,722
Rogers Cablesystems Ltd. 9.63% 2002......................... 440,000 470,800
SCI Television, Inc. 11.00% 2005............................ 200,000 202,724
Time Warner Pass Through Asset Trust 4.90% 1999*............ 1,600,000 1,573,776
Time Warner, Inc 7.25% 2017................................. 850,000 876,341
Time Warner, Inc. 7.95% 2000................................ 4,345,000 4,460,360
Viacom, Inc. 6.75% 2003..................................... 630,000 637,314
Viacom, Inc. 10.25% 2001.................................... 175,000 194,933
Leisure & Tourism -- 0.6%
America West Airlines 8.16% 2002............................ 1,157,139 1,162,438
Continental Airlines 6.54% 2009............................. 415,000 413,303
ITT Corp. 6.25% 2000........................................ 1,215,000 1,185,099
Northwest Airlines Corp. 8.97% 2015......................... 859,806 939,725
Northwest Airlines Corp. 12.09% 2000........................ 245,688 271,837
-------------
16,327,057
-------------
INFORMATION TECHNOLOGY -- 1.4%
Communication Equipment -- 0.1%
TCI Communications, Inc. 6.82% 2010(3)...................... 95,000 95,185
TCI Communications, Inc. 8.75% 2015......................... 120,000 140,819
Computers & Business Equipment -- 0.0%
Viasystems, Inc. 9.75% 2007................................. 125,000 130,312
Telecommunications -- 1.3%
360 Communications Co. 7.13% 2003........................... 1,330,000 1,376,271
Adelphia Communications Corp. 10.25% 2000................... 250,000 257,500
Intermedia Communications, Inc. 8.60% 2008*................. 500,000 505,000
Nextel Communications, Inc. zero coupon 2004(4)............. 485,000 474,088
PanAmSat Corp. 6.13% 2005*.................................. 2,270,000 2,230,865
Tele-Communications, Inc. 7.38% 2000........................ 1,000,000 1,019,890
Tele-Communications, Inc. 8.25% 2003........................ 2,500,000 2,688,850
Tele-Communications, Inc. 9.65% 2003........................ 375,000 408,637
-------------
9,327,417
-------------
</TABLE>
- ---------------------
50
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<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
MATERIALS -- 0.3%
Forest Products -- 0.0%
Grupo Industrial Durango SA de CV 12.00% 2001............... $ 140,000 $ 150,608
Metals & Minerals -- 0.3%
Cemex SA de CV 10.00% 1999.................................. 410,000 424,350
Cemex SA de CV 10.75% 2000.................................. 390,000 411,450
Industrias Metalurgicas Pescarmona SA 9.50% 2002............ 210,000 199,168
LTV Corp. 8.20% 2007........................................ 600,000 598,500
-------------
1,784,076
-------------
MULTI-INDUSTRY -- 0.1%
Multi-Industry -- 0.1%
Corning Consumer Products Co. 9.63% 2008*................... 250,000 250,625
Wharf International Capital Ltd. 8.88% 2004................. 270,000 262,726
-------------
513,351
-------------
MUNICIPAL BONDS -- 0.8%
Municipal Bonds -- 0.8%
Anaheim California Public Financing Authority Lease Revenue
5.00% 2037................................................ 805,000 782,130
Chicago Illinois Midway Airport Revenue 5.50% 2029.......... 570,000 586,097
Chicago Illinois Skyway Toll Bridge Revenue 5.50% 2023...... 585,000 601,520
District Columbia Water Sewer Authority Revenue 5.50%
2023...................................................... 330,000 350,582
Indiana Health Facility Financing Authority Hospital Revenue
5.13% 2017................................................ 435,000 433,108
Marion County Indiana Convention and Recreational Facilities
5.00% 2027................................................ 570,000 551,367
Nevada State Bank Project Nos. 65 & R6 General Obligation
5.00% 2014................................................ 560,000 561,730
New York City Municipal Water Finance Authority Water and
Sewer System Revenue 5.13% 2021........................... 450,000 442,521
New York City Municipal Water Finance Authority Water and
Sewer System Revenue 5.75% 2026........................... 445,000 466,436
New York City Transit Finance Authority 5.00% 2013.......... 445,000 446,482
North Central Texas Health Facility Development Corporation
Revenue 5.13% 2022........................................ 395,000 386,740
-------------
5,608,713
-------------
NON-U.S. GOVERNMENT OBLIGATIONS -- 2.6%
Foreign Government -- 2.6%
Korea Republic 8.75% 2003................................... 2,030,000 1,928,561
Province of Quebec 13.25% 2014.............................. 625,000 705,994
Republic of Argentina zero coupon 2001(2)(3)................ 2,700,000 2,440,800
Republic of Argentina 5.50% 2000............................ JPY60,000,000 452,914
Republic of Argentina 8.75% 2002............................ 360,000 350,490
Republic of Brazil 6.88% 2001(3)............................ 875,000 846,562
Republic of Colombia 7.63% 2007............................. 190,000 175,643
Republic of Germany 6.00% 2007.............................. 11,100,000 6,707,591
Republic of Panama 6.84% 2002(3)............................ 2,480,022 2,433,645
Republic of Panama 7.88% 2002............................... 420,000 417,900
State of Israel 6.38% 2005.................................. 635,000 637,229
Province of Tacuman 9.45% 2004*............................. 151,761 146,796
-------------
17,244,125
-------------
</TABLE>
---------------------
51
<PAGE> 142
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 0.3%
Real Estate Investment Trusts -- 0.3%
Chelsea GCA Realty, Inc. 7.75% 2001......................... $ 570,000 $ 584,267
Liberty Property Trust 7.10% 2004........................... 640,000 648,704
Meditrust Corp. 7.38% 2000.................................. 1,150,000 1,162,443
-------------
2,395,414
-------------
U.S. GOVERNMENT & AGENCIES -- 12.3%
U.S. Government & Agencies -- 12.3%
Federal Home Loan Mortgage Corp. 5.50% 2008................. 1,971,071 1,912,392
Federal Home Loan Mortgage Corp. 6.00% 2012................. 569,354 563,302
Federal Home Loan Mortgage Corp. 6.00% 2013................. 582,397 576,206
Federal Home Loan Mortgage Corp. 6.00% 2013................. 491,336 486,113
Federal Home Loan Mortgage Corp. 6.00% 2013................. 507,646 502,250
Federal Home Loan Mortgage Corp. 6.00% 2013................. 341,490 337,860
Federal Home Loan Mortgage Corp. 6.00% 2013................. 497,172 491,887
Federal Home Loan Mortgage Corp. 6.00% 2013................. 2,990,191 2,958,406
Federal Home Loan Mortgage Corp. 6.35% 2018................. 3,000,000 3,022,500
Federal Home Loan Mortgage Corp. 7.50% 2025................. 1,609,959 1,654,732
Federal Home Loan Mortgage Corp. 7.50% 2027................. 1,323,651 1,360,051
Federal Home Loan Mortgage Corp. 7.50% 2027................. 680,414 699,125
Federal Home Loan Mortgage Corp. 7.50% 2027................. 895,375 919,998
Federal Home Loan Mortgage Corp. 7.50% 2027................. 884,619 908,946
Federal Home Loan Mortgage Corp. 7.50% 2028................. 913,520 938,642
Federal Home Loan Mortgage Corp. 7.50% 2028................. 1,329,859 1,366,842
Federal Home Loan Mortgage Corp. 7.50% 2028................. 917,766 943,005
Federal Home Loan Mortgage Corp. 8.00% 2099................. 2,000,000 2,075,620
Federal National Mortgage Association 6.00% 2013............ 304,962 301,339
Federal National Mortgage Association 6.00% 2013............ 1,214,239 1,199,813
Federal National Mortgage Association 6.00% 2013............ 1,215,582 1,201,141
Federal National Mortgage Association 6.00% 2013............ 1,266,481 1,251,436
Federal National Mortgage Association 6.50% 2025............ 518,485 516,540
Federal National Mortgage Association 6.50% 2025............ 594,672 592,442
Federal National Mortgage Association 6.50% 2025............ 714,685 712,448
Federal National Mortgage Association 6.50% 2026............ 911,529 908,111
Federal National Mortgage Association 6.50% 2026............ 773,683 770,782
Federal National Mortgage Association 6.50% 2027............ 947,497 941,869
Federal National Mortgage Association 6.50% 2027............ 894,812 889,497
Federal National Mortgage Association 6.50% 2027............ 53,245 52,929
Federal National Mortgage Association 6.50% 2027............ 63,559 63,181
Federal National Mortgage Association 6.50% 2027............ 54,445 54,122
Federal National Mortgage Association 6.50% 2027............ 189,198 188,074
Federal National Mortgage Association 6.50% 2027............ 57,612 57,270
Federal National Mortgage Association 6.50% 2027............ 915,495 910,057
Federal National Mortgage Association 6.50% 2099............ 7,000,000 7,039,340
Federal National Mortgage Association 6.50% 2099............ 1,000,000 994,060
Federal National Mortgage Association 7.00% 2024............ 1,276,712 1,251,102
Federal National Mortgage Association 7.00% 2099............ 7,000,000 7,098,420
Government National Mortgage Association 6.50% 2099......... 5,000,000 4,976,550
Government National Mortgage Association 7.00% 2023......... 364,611 370,116
Government National Mortgage Association 7.00% 2023......... 205,107 208,202
Government National Mortgage Association 7.00% 2023......... 510,763 518,603
Government National Mortgage Association 7.00% 2023......... 869,596 884,814
Government National Mortgage Association 7.00% 2023......... 220,148 223,508
Government National Mortgage Association 7.00% 2023......... 437,866 445,528
Government National Mortgage Association 7.00% 2023......... 461,563 469,640
Government National Mortgage Association 7.00% 2023......... 521,240 529,184
Government National Mortgage Association 7.00% 2023......... 169,491 172,045
Government National Mortgage Association 7.00% 2023......... 237,745 241,905
</TABLE>
- ---------------------
52
<PAGE> 143
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCIES (continued)
U.S. Government & Agencies (continued)
Government National Mortgage Association 7.00% 2023......... $ 52,647 $ 53,568
Government National Mortgage Association 7.00% 2023......... 462,227 470,460
Government National Mortgage Association 7.50% 2023......... 753,813 778,305
Government National Mortgage Association 7.50% 2027......... 221,066 227,835
Government National Mortgage Association 7.50% 2027......... 48,638 50,127
Government National Mortgage Association 7.50% 2027......... 125,820 129,673
Government National Mortgage Association 7.50% 2027......... 521,556 537,526
Government National Mortgage Association 7.50% 2027......... 463,677 477,874
Government National Mortgage Association 7.50% 2027......... 474,775 489,313
Government National Mortgage Association 7.50% 2099......... 1,000,000 1,030,620
Government National Mortgage Association 8.00% 2024......... 30,582 31,805
Government National Mortgage Association 8.00% 2026......... 30,298 31,500
Government National Mortgage Association 8.00% 2026......... 315,617 328,141
Government National Mortgage Association 8.00% 2026......... 187,539 194,980
Government National Mortgage Association 8.00% 2026......... 473,843 492,646
Government National Mortgage Association 8.00% 2026......... 599,696 623,492
Government National Mortgage Association 8.00% 2026......... 471,154 489,849
Government National Mortgage Association 8.00% 2026......... 462,111 480,448
Government National Mortgage Association 8.00% 2026......... 352,546 366,535
Government National Mortgage Association 8.00% 2026......... 360,042 374,328
Government National Mortgage Association 8.00% 2026......... 26,047 27,081
Government National Mortgage Association 8.00% 2026......... 877,029 911,830
Government National Mortgage Association 8.00% 2027......... 26,021 27,053
Government National Mortgage Association 8.00% 2027......... 31,894 33,159
United States Treasury Bonds 7.88% 2021..................... 710,000 882,615
United States Treasury Bonds 8.13% 2021..................... 200,000 255,406
United States Treasury Bonds 8.75% 2020..................... 8,010,000 10,787,228
United States Treasury Bonds Strip zero coupon 2014......... 2,280,000 882,223
United States Treasury Bonds Strip zero coupon 2017......... 50,000 16,109
United States Treasury Bonds Strip zero coupon 2019......... 40,000 11,299
United States Treasury Bonds Strip zero coupon 2020......... 3,610,000 987,010
United States Treasury Bonds Strip zero coupon 2021......... 8,100,000 2,054,241
-------------
82,286,224
-------------
UTILITIES -- 0.8%
Electric Utilities -- 0.3%
Central Maine Power Co. 7.45% 1999.......................... 885,000 892,956
Niagara Mohawk Power Corp. 6.88% 2003....................... 870,000 880,980
Niagara Mohawk Power Corp. 7.38% 2003....................... 210,000 218,322
Wesco Distribution, Inc. 9.13% 2008*........................ 250,000 249,188
Gas & Pipeline Utilities -- 0.2%
Bridas Corp. 12.50% 1999.................................... 60,000 63,094
CMS Energy Corp. 7.38% 2000................................. 1,150,000 1,159,648
Telephone -- 0.3%
Worldcom, Inc. 9.38% 2004................................... 1,600,000 1,693,696
-------------
5,157,884
-------------
TOTAL BONDS & NOTES (cost $218,213,085)..................... 220,778,736
-------------
TOTAL INVESTMENT SECURITIES (cost $604,441,750)............. 638,923,263
-------------
<CAPTION>
SHORT-TERM SECURITIES -- 0.9%
----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.3%
Advanta Corp. 7.00% due 9/16/98............................. 1,350,000 1,348,515
Bridas Corp. 10.25% due 12/7/98............................. 610,000 617,759
-------------
1,966,274
-------------
</TABLE>
---------------------
53
<PAGE> 144
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES (CONTINUED) AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN SHORT-TERM NOTES -- 0.6%
Acindar Industries 11.75% due 11/12/98(3)................... $ 440,000 $ 443,982
Empresa Col de Petroleos 7.25% due 7/8/98................... 640,000 640,800
Nacional Financiera SNC 8.56% due 6/19/98................... 600,000 600,000
Nacional Financiera SNC 9.00% due 1/25/99................... 50,000 50,656
Polysindo Eka Perkasa zero coupon due 11/19/98(2)........... 1,000,000 345,000
Polysindo Eka Perkasa zero coupon due 7/14/98............... 1,000,000 247,500
Republic of Argentina zero coupon due 8/14/98............... 1,300,000 1,282,450
Republic of Argentina zero coupon due 3/19/99............... 340,000 320,280
-------------
3,930,668
-------------
TOTAL SHORT-TERM SECURITIES (cost $7,247,302)............... 5,896,942
-------------
<CAPTION>
REPURCHASE AGREEMENT -- 5.3%
----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 5.3%
Agreement with The Nikko Securities Co., bearing interest at
5.55%, dated 5/29/98, to be repurchased 6/1/98 in the
amount of $35,520,421 and collateralized by $38,255,000 of
U.S. Treasury Bills, due 5/27/99 with an approximate
aggregate value of $36,276,164 (cost $35,504,000)@........ 35,504,000 35,504,000
-------------
TOTAL INVESTMENTS --
(cost $647,193,052) 101.4% 680,324,205
Total currency swap agreement, at value(5) 0.0% 32,844
Liabilities in excess of other
assets -- (1.4) (9,135,348)
------ -------------
NET ASSETS -- 100.0% $671,221,701
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
JPY -- Japanese Yen
(1) PIK ("Payment-in-Kind") payment made with additional
securities in lieu of cash
(2) Fair valued security; see Note 2.
(3) Variable rate security; rate as of May 31, 1998.
(4) Represents a zero coupon bond which will convert to an
interest-bearing security at a later date
(5) The Portfolio entered into a currency swap agreement with
Swiss Bank Corporation ("Swiss Bank"). Under the agreement the
Portfolio will pay Swiss Bank 3,300,000 Yen each year
commencing September 6, 1997 until September 6, 2000, with an
additional payment of 60,000,000 Yen due September 6, 2000. In
return, Swiss Bank will pay the Portfolio $21,570 on March 6
and September 6 each year commencing March 6, 1997 until
September 6, 2000 with an additional payment of $488,003 due
September 6, 2000.
- ---------------------
54
<PAGE> 145
@ The security or a portion thereof represent collateral for the
currency swap agreement and the following open futures
contracts:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS
----------------------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF EXPIRATION VALUE AT VALUE AS OF APPRECIATION/
CONTRACTS DESCRIPTION DATE TRADE DATE MAY 31, 1998 DEPRECIATION
----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
7 Long 90 Day Euro Dollar.............. December 1998 $ 1,646,007 $ 1,649,113 $ 3,106
5 Long 90 Day Euro Dollar.............. September 1998 1,172,657 1,178,750 6,093
4 Long 90 Day Euro Dollar.............. June 1998 935,725 943,100 7,375
7 Long 90 Day Euro Dollar.............. March 1999 1,646,094 1,649,550 3,456
118 Long U.S. 10 Year Note............... September 1998 13,316,312 13,348,750 32,438
10 Long U.S. 2 Year Note................ June 1998 2,078,501 2,081,250 2,749
15 Long U.S. 5 Year Note................ June 1998 10,361,089 10,375,783 14,694
5 Short U.S. Treasury Bond.............. September 1998 604,695 607,500 (2,805)
--------
Net Unrealized Appreciation..... $ 67,106
========
</TABLE>
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
-----------------------------------------------------------
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
-----------------------------------------------------------
<S> <C> <C> <C>
*AUD 9,763,335 USD 6,611,438 06/18/98 $ 495,068
DEM 12,107,510 USD 6,848,604 07/23/98 41,205
---------
$ 536,273
---------
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
-----------------------------------------------------------
<S> <C> <C> <C>
*USD 6,500,819 AUD 9,763,335 06/18/98 $ (384,449)
----------
Net Unrealized Appreciation... $ 151,824
==========
</TABLE>
-----------------------------
* Represents open forward foreign currency contracts and
offsetting or partially offsetting open forward foreign currency
contracts that do not have additional market risk but have
continued counterparty settlement risk.
AUD -- Australian Dollar
DEM -- Deutsche Mark
USD -- United States Dollar
See Notes to Financial Statements.
---------------------
55
<PAGE> 146
- ---------------------
SUNAMERICA SERIES TRUST
UTILITY PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 95.1% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES -- 0.9%
Food, Beverage & Tobacco -- 0.9%
UST, Inc. .................................................. 14,100 $ 375,413
-------------
ENERGY -- 1.1%
Energy Sources -- 1.1%
Burlington Resources, Inc................................... 6,800 286,450
Sonat, Inc. ................................................ 4,700 184,181
-------------
470,631
-------------
INDUSTRIAL & COMMERCIAL -- 2.0%
Multi-Industry -- 2.0%
Viag AG..................................................... 1,500 840,689
-------------
INFORMATION TECHNOLOGY -- 1.9%
Telecommunications -- 1.9%
Compania de Telecomunicaciones de Chile SA ADR.............. 9,000 199,687
U.S. West Communications Group.............................. 11,700 593,775
-------------
793,462
-------------
MATERIALS -- 1.1%
Metals & Minerals -- 1.1%
Barrick Gold Corp. ......................................... 25,700 494,725
-------------
REAL ESTATE -- 6.3%
Real Estate Investment Trusts -- 6.3%
Apartment Investment & Management Co., Class A.............. 3,000 117,000
Avalon Properties, Inc. .................................... 12,300 345,937
Boston Properties, Inc. .................................... 12,400 421,600
Brandywine Reality Trust.................................... 3,500 81,156
Camden Property Trust....................................... 4,200 128,363
Duke Realty Investments, Inc. .............................. 8,500 192,313
Equity Office Properties Trust.............................. 15,000 412,500
Equity Residential Properties Trust......................... 7,000 342,562
Liberty Property Trust...................................... 11,300 298,744
Security Capital Pacific Trust.............................. 14,670 330,992
-------------
2,671,167
-------------
UTILITIES -- 81.8%
Electric Utilities -- 42.1%
BEC Energy.................................................. 13,300 539,481
Cinergy Corp. .............................................. 13,100 423,294
Dominion Resources, Inc. ................................... 26,500 1,051,719
DQE, Inc. .................................................. 20,300 667,362
Duke Energy Corp. .......................................... 11,900 685,737
Edison International........................................ 19,000 560,500
Entergy Corp. .............................................. 24,700 649,919
Florida Progress Corp. ..................................... 11,100 457,875
FPL Group, Inc. ............................................ 15,400 946,137
Houston Industries, Inc. ................................... 24,100 689,862
</TABLE>
- ---------------------
56
<PAGE> 147
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (continued)
Electric Utilities (continued)
Illinova Corp. ............................................. 25,100 $ 729,469
LG&E Energy Corp. .......................................... 6,800 180,625
Montana Power Co. .......................................... 24,800 899,000
New Century Energies, Inc. ................................. 8,200 377,200
New England Electric System................................. 19,500 814,125
Niagara Mohawk Power Corp.+................................. 48,900 605,137
NIPSCO Industries, Inc. .................................... 32,400 870,750
PacifiCorp.................................................. 29,900 689,569
PECO Energy Co. ............................................ 37,600 1,062,200
Pinnacle West Capital Corp. ................................ 10,100 453,869
Potomac Electric Power Co. ................................. 33,700 823,544
Public Service Enterprise Group, Inc. ...................... 23,700 783,581
Puget Sound Energy, Inc. ................................... 19,900 519,888
Southern Co. ............................................... 22,300 592,344
TECO Energy, Inc. .......................................... 22,500 589,219
Texas Utilities Co. ........................................ 28,100 1,109,950
UtiliCorp United, Inc. ..................................... 4,800 170,700
Gas & Pipeline Utilities -- 20.5%
AGL Resources, Inc. ........................................ 11,300 226,000
CMS Energy Corp. ........................................... 15,700 683,931
Columbia Gas Systems, Inc. ................................. 1,800 151,875
Consolidated Natural Gas Co. ............................... 20,000 1,131,250
El Paso Natural Gas Co. .................................... 31,400 1,212,825
Enron Corp. ................................................ 19,900 997,487
Keyspan Energy Corp. ....................................... 24,700 832,081
KN Energy, Inc. ............................................ 8,000 433,000
MCN Energy Group Inc. ...................................... 26,800 964,800
National Fuel Gas Co. New Jersey............................ 9,000 381,375
NGC Corp. .................................................. 12,500 189,844
Pacific Enterprises......................................... 19,900 757,444
SCANA Corp. ................................................ 14,600 420,663
UGI Corp. .................................................. 13,600 344,250
Telephone -- 19.2%
Ameritech Corp. ............................................ 21,300 903,919
AT&T Corp. ................................................. 18,600 1,132,275
Bell Atlantic Corp. ........................................ 11,900 1,090,338
BellSouth Corp. ............................................ 6,800 438,600
GTE Corp. .................................................. 8,800 513,150
MCI Communications Corp. ................................... 25,400 1,358,106
SBC Communications, Inc. ................................... 17,000 660,875
Sprint Corp. ............................................... 20,000 1,435,000
Telefonica de Argentina SA ADR.............................. 8,000 260,500
Telefonica del Peru SA ADR.................................. 11,000 237,875
Telefonos de Mexico SA ADR.................................. 3,500 166,031
-------------
34,866,550
-------------
TOTAL COMMON STOCK (cost $37,962,173)....................... 40,512,637
-------------
PREFERRED STOCK -- 1.0%
----------------------------------------------------------------------------------------
UTILITIES -- 1.0%
Gas & Pipeline Utilities -- 1.0%
Williams Cos., Inc. 3.50% (cost $394,281)................... 2,900 434,420
-------------
</TABLE>
---------------------
57
<PAGE> 148
<TABLE>
<CAPTION>
PRINCIPAL
CONVERTIBLE BONDS -- 1.5% AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 1.5%
Financial Services -- 1.5%
Bell Atlantic Financial Services 5.75% 2003 convertible*
(cost $626,846)........................................... $ 610,000 $ 629,825
-------------
TOTAL INVESTMENT SECURITIES (cost $38,983,300).............. 41,576,882
-------------
SHORT-TERM SECURITIES -- 2.4%
----------------------------------------------------------------------------------------
TIME DEPOSIT -- 2.4%
Cayman Island Time Deposit with State Street Bank & Trust
Co.
4.50% due 6/01/98 (cost $1,005,000)....................... 1,005,000 1,005,000
------------
TOTAL INVESTMENTS --
(cost $39,988,300) 100.0% 42,581,882
Other assets less liabilities -- 0.0 19,086
------ ------------
NET ASSETS -- 100.0% $ 42,600,968
====== ============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR--American Depository Receipt
* Resale restricted to qualified institutional buyers
See Notes to Financial Statements.
- ---------------------
58
<PAGE> 149
- ---------------------
SUNAMERICA SERIES TRUST
GROWTH-INCOME PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 91.2% SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 9.6%
Apparel & Textiles -- 2.0%
Avon Products, Inc.......................................... 80,000 $ 6,545,000
Nautica Enterprises, Inc.+.................................. 155,000 4,533,750
Tommy Hilfiger Corp.+....................................... 80,000 5,380,000
Automotive -- 0.7%
Harley-Davidson, Inc........................................ 157,100 5,616,325
Housing -- 1.6%
Home Depot, Inc............................................. 170,000 13,355,625
Retail -- 5.3%
Dayton Hudson Corp.......................................... 154,000 7,141,750
Kohl's Corp.+............................................... 120,000 5,707,500
Kroger Co.+................................................. 125,000 5,367,188
Proffitt's, Inc.+........................................... 130,000 5,102,500
Wal-Mart Stores, Inc........................................ 385,000 21,247,187
-------------
79,996,825
-------------
CONSUMER STAPLES -- 12.5%
Food, Beverage & Tobacco -- 6.8%
Campbell Soup Co............................................ 127,000 6,921,500
Coca-Cola Co................................................ 370,000 28,998,750
Philip Morris Cos., Inc..................................... 400,000 14,950,000
Tyson Foods, Inc., Class A.................................. 270,000 5,703,750
Vlasic Foods International, Inc............................. 12,700 275,431
Household Products -- 5.7%
Colgate-Palmolive Co........................................ 93,000 8,091,000
Estee Lauder Cos., Inc., Class A............................ 59,900 3,826,113
Gillette Co................................................. 110,000 12,883,750
Procter & Gamble Co......................................... 216,000 18,130,500
United States Industries, Inc.+............................. 165,000 4,351,875
-------------
104,132,669
-------------
ENERGY -- 3.3%
Energy Services -- 2.0%
BJ Services Co.+............................................ 160,000 5,230,000
Halliburton Co.............................................. 130,000 6,158,750
Noble Drilling Corp.+....................................... 170,000 5,015,000
Energy Sources -- 1.3%
USX-Marathon Group, Inc..................................... 315,000 11,025,000
-------------
27,428,750
-------------
FINANCE -- 18.4%
Banks -- 6.3%
Banc One Corp............................................... 155,000 8,544,375
Chase Manhattan Corp........................................ 85,000 11,554,687
Citicorp.................................................... 90,000 13,421,250
Fleet Financial Group, Inc.................................. 87,000 7,134,000
NationsBank Corp............................................ 155,000 11,741,250
</TABLE>
---------------------
59
<PAGE> 150
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services -- 8.4%
Associates First Capital Corp., Class A..................... 50,000 $ 3,740,625
First Data Corp............................................. 178,000 5,918,500
Hartford Financial Services Group, Inc...................... 55,000 6,053,437
Household International, Inc................................ 60,000 8,118,750
Legg Mason, Inc............................................. 77,000 4,644,063
MBNA Corp................................................... 180,000 5,703,750
Merrill Lynch & Co., Inc.................................... 106,000 9,487,000
Morgan Stanley, Dean Witter, Discover & Co.................. 136,265 10,637,187
Penncorp Financial Group, Inc............................... 95,000 2,101,875
Travelers Group, Inc........................................ 217,600 13,273,600
Insurance -- 3.7%
American International Group, Inc........................... 120,000 14,857,500
Hartford Life, Inc.......................................... 100,000 5,150,000
PMI Group, Inc.............................................. 70,000 5,263,125
Travelers Property Casualty Corp., Class A.................. 140,000 5,818,750
-------------
153,163,724
-------------
HEALTHCARE -- 12.5%
Drugs -- 9.5%
Bristol-Myers Squibb Co..................................... 175,000 18,812,500
GelTex Pharmaceuticals, Inc.+............................... 180,000 4,151,250
IDEC Pharmaceuticals Corp.+................................. 85,000 2,677,500
Merck & Co., Inc............................................ 170,000 19,900,625
Pfizer, Inc................................................. 195,000 20,438,437
Schering-Plough Corp........................................ 160,000 13,390,000
Health Services -- 0.7%
United Healthcare Corp...................................... 90,000 5,760,000
Medical Products -- 2.3%
Boston Scientific Corp.++................................... 60,000 3,825,000
Centocor, Inc.+............................................. 125,200 4,882,800
Genzyme Corp.+.............................................. 150,000 4,106,250
Medtronic, Inc.............................................. 112,700 6,268,938
-------------
104,213,300
-------------
INDUSTRIAL & COMMERCIAL -- 10.2%
Aerospace & Military Technology -- 2.1%
AlliedSignal, Inc........................................... 180,000 7,695,000
Boeing Co................................................... 100,000 4,762,500
Sundstrand Corp............................................. 80,000 4,960,000
Business Services -- 1.2%
Donnelley(RR) & Sons Co..................................... 135,000 6,075,000
USA Waste Services, Inc.+................................... 45,000 2,123,438
Waste Management, Inc....................................... 65,000 2,112,500
Electrical Equipment -- 4.5%
Dresser Industries, Inc..................................... 145,000 6,751,562
General Electric Co......................................... 365,000 30,431,875
Multi-Industry -- 2.0%
Tyco International Ltd...................................... 131,800 7,298,425
United Technologies Corp.................................... 95,000 8,930,000
</TABLE>
- ---------------------
60
<PAGE> 151
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (continued)
Transportation -- 0.4%
CNF Transportation, Inc..................................... 80,000 $ 3,285,000
Union Pacific Corp.......................................... 1 48
-------------
84,425,348
-------------
INFORMATION & ENTERTAINMENT -- 6.9%
Broadcasting & Media -- 1.6%
Gannett, Inc................................................ 105,000 6,923,438
Scripps (E.W) Co., Class A.................................. 115,000 6,080,625
Leisure & Tourism -- 5.3%
Carnival Corp., Class A..................................... 95,200 6,449,800
Disney (Walt) Co............................................ 145,000 16,403,125
Mirage Resorts, Inc.+....................................... 183,700 3,823,256
Northwest Airlines Corp., Class A+.......................... 70,000 3,154,375
Royal Caribbean Cruises Ltd................................. 70,000 4,878,125
US Airways Group, Inc.+..................................... 75,000 5,250,000
Viad Corp................................................... 160,000 4,320,000
-------------
57,282,744
-------------
INFORMATION TECHNOLOGY -- 13.5%
Communication Equipment -- 1.7%
Ascend Communications, Inc.+................................ 140,000 6,046,250
FORE Systems, Inc.+......................................... 90,000 1,980,000
Tellabs, Inc.+.............................................. 87,000 5,978,531
Computers & Business Equipment -- 6.9%
Cisco Systems, Inc.+........................................ 210,000 15,881,250
Compaq Computer Corp........................................ 320,000 8,740,000
Dell Computer Corp.+........................................ 160,000 13,185,000
International Business Machines Corp........................ 125,000 14,671,875
Staples, Inc.+.............................................. 195,400 4,909,425
Electronics -- 3.0%
Altera Corp.+............................................... 140,000 4,707,500
Intel Corp.................................................. 180,000 12,858,750
Solectron Corp.+............................................ 100,000 4,137,500
Xilinx, Inc.+............................................... 100,000 3,803,125
Software -- 0.6%
Intuit, Inc.+............................................... 105,000 4,974,375
Telecommunications -- 1.3%
Liberty Media Group, Inc., Series A+........................ 193,462 6,384,246
Teleport Communications Group Inc., Class A+................ 75,000 4,195,313
-------------
112,453,140
-------------
MATERIALS -- 1.8%
Chemicals -- 0.6%
Praxair, Inc................................................ 100,000 4,931,250
Forest Products -- 1.2%
Champion International Corp................................. 100,000 4,800,000
Sealed Air Corp............................................. 105,000 5,617,500
-------------
15,348,750
-------------
</TABLE>
---------------------
61
<PAGE> 152
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 2.5%
Electric Utilities -- 2.5%
AES Corp.+.................................................. 150,000 $ 7,134,375
Consolidated Edison, Inc.................................... 130,000 5,565,625
FPL Group, Inc.............................................. 125,000 7,679,687
-------------
20,379,687
-------------
TOTAL INVESTMENT SECURITIES (cost $553,085,792)............. 758,824,937
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 8.7% AMOUNT
-----------------------------------------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT -- 8.5%
Cayman Island Time Deposit with State Street Bank & Trust
Co. 5.25% due 6/01/98@.................................... $70,511,000 70,511,000
------------
U.S. GOVERNMENT -- 0.2%
United States Treasury Bills 5.02% due 6/25/98.............. 1,800,000 1,793,976
------------
TOTAL SHORT-TERM SECURITIES (cost $72,304,976).............. 72,304,976
------------
TOTAL INVESTMENTS --
(cost $625,390,768) 99.9% 831,129,913
Other assets less liabilities -- 0.1 923,849
----- -------------
NET ASSETS -- 100.0% $832,053,762
===== =============
</TABLE>
-----------------------------
+ Non-income producing securities.
@ The security or a portion thereof represents collateral for the
following open futures contracts:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS
--------------------------------------------------------------------------------------------------------
NUMBER OF EXPIRATION VALUE AT VALUE AS OF UNREALIZED
CONTRACTS DESCRIPTION DATE TRADE DATE MAY 31, 1998 DEPRECIATION
--------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
135 Long Standard & Poor's 500 Index............. June 1998 $36,881,750 $36,814,500 $(67,250)
=========
</TABLE>
See Notes to Financial Statements
- ---------------------
62
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- ---------------------
SUNAMERICA SERIES TRUST
FEDERATED VALUE PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 96.5% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 11.7%
Automotive -- 1.3%
Borg-Warner Automotive, Inc. ............................... 12,700 $ 723,900
General Motors Corp. ....................................... 9,500 683,406
Housing -- 0.5%
Centex Corp. ............................................... 14,800 529,100
Retail -- 9.9%
American Stores Co. ........................................ 49,200 1,226,925
Dillards, Inc., Class A..................................... 26,400 1,110,450
K-Mart Corp.+............................................... 57,700 1,117,938
Liz Claiborne, Inc. ........................................ 26,000 1,317,875
Reebok International Ltd.+.................................. 38,000 1,092,500
Sherwin-Williams Co. ....................................... 29,200 970,900
Toys 'R' Us, Inc.+.......................................... 65,900 1,746,350
Wal-Mart Stores, Inc. ...................................... 38,000 2,097,125
-------------
12,616,469
-------------
CONSUMER STAPLES -- 11.8%
Food, Beverage & Tobacco -- 10.8%
Anheuser-Busch Cos., Inc. .................................. 29,300 1,345,969
Archer-Daniels-Midland Co. ................................. 92,500 1,745,937
Bestfoods................................................... 19,000 1,072,312
Corn Products International, Inc.+.......................... 41,950 1,436,787
Philip Morris Cos., Inc. ................................... 31,000 1,158,625
RJR Nabisco Holdings Corp. ................................. 13,000 366,438
Sara Lee Corp. ............................................. 15,700 924,338
Seagram Co., Ltd. .......................................... 33,500 1,471,906
UST, Inc. .................................................. 77,400 2,060,775
Household Products -- 1.0%
Unilever NV................................................. 14,000 1,105,125
-------------
12,688,212
-------------
ENERGY -- 10.4%
Energy Services -- 1.2%
Occidental Petroleum Corp. ................................. 47,200 1,303,900
Energy Sources -- 9.2%
Amerada Hess Corp. ......................................... 13,500 729,844
Ashland, Inc. .............................................. 42,000 2,094,750
Exxon Corp. ................................................ 14,000 987,000
Houston Industries, Inc. ................................... 34,700 993,287
Mobil Corp. ................................................ 13,800 1,076,400
Royal Dutch Petroleum Co. .................................. 11,500 644,719
Sun Co., Inc. .............................................. 42,600 1,810,500
Texaco, Inc. ............................................... 11,000 635,250
USX-Marathon Group, Inc. ................................... 26,300 920,500
-------------
11,196,150
-------------
FINANCE -- 13.4%
Banks -- 1.0%
Republic New York Corp. .................................... 8,700 1,117,406
</TABLE>
---------------------
63
<PAGE> 154
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services -- 5.9%
Bear Stearns Cos., Inc. .................................... 17,000 $ 922,250
First Data Corp. ........................................... 70,900 2,357,425
Green Tree Financial Corp. ................................. 50,200 2,017,412
Morgan Stanley, Dean Witter, Discover and Co. .............. 13,500 1,053,844
Insurance -- 6.5%
Allstate Corp. ............................................. 8,000 753,000
CIGNA Corp. ................................................ 27,100 1,856,350
General Reinsurance Corp. .................................. 4,500 989,438
Marsh & McLennan Cos., Inc. ................................ 16,000 1,401,000
MBIA, Inc. ................................................. 11,500 857,469
Oxford Health Plans, Inc.+.................................. 63,500 1,095,375
-------------
14,420,969
-------------
HEALTHCARE -- 8.1%
Drugs -- 4.6%
Bristol-Myers Squibb Co. ................................... 15,000 1,612,500
Merck & Co., Inc. .......................................... 8,000 936,500
Perrigo Co.+................................................ 37,800 415,800
Pharmacia & Upjohn, Inc. ................................... 44,600 1,970,763
Health Services -- 1.0%
United Healthcare Corp. .................................... 17,500 1,120,000
Medical Products -- 2.5%
Abbott Laboratories, Inc. .................................. 12,500 927,344
Biomet, Inc. ............................................... 20,900 603,487
US Surgical Corp. .......................................... 27,800 1,105,050
-------------
8,691,444
-------------
INDUSTRIAL & COMMERCIAL -- 12.7%
Aerospace & Military Technology -- 0.8%
Raytheon Co.+............................................... 15,500 826,344
Business Services -- 4.4%
Browning-Ferris Industries, Inc. ........................... 21,000 746,813
General Signal Corp. ....................................... 25,900 1,065,137
Johnson Controls, Inc. ..................................... 20,500 1,219,750
Waste Management, Inc. ..................................... 54,000 1,755,000
Electrical Equipment -- 1.0%
AMP, Inc. .................................................. 28,100 1,067,800
Machinery -- 1.3%
Cincinnati Milacron, Inc. .................................. 12,700 380,206
Ingersoll-Rand Co. ......................................... 21,700 977,856
Multi-Industry -- 1.0%
ITT Industries, Inc. ....................................... 30,400 1,121,000
Transportation -- 4.2%
ABB Ab ADR.................................................. 12,500 2,018,750
Canadian National Railway Co. .............................. 13,400 792,275
CNF Transportation, Inc. ................................... 26,000 1,067,625
Ryder System, Inc. ......................................... 20,500 698,281
-------------
13,736,837
-------------
INFORMATION & ENTERTAINMENT -- 5.3%
Broadcasting & Media -- 2.9%
News Corp., Ltd. ADR........................................ 4,000 98,500
Readers Digest Association, Inc., Class A................... 44,300 1,262,550
Viacom, Inc., Class A+...................................... 21,800 1,200,362
Viacom, Inc., Class B+...................................... 10,500 577,500
</TABLE>
- ---------------------
64
<PAGE> 155
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (continued)
Entertainment Products -- 0.9%
Eastman Kodak Co. .......................................... 13,500 $ 963,562
Leisure & Tourism -- 1.5%
AMR Corp.+.................................................. 900 138,544
Tricon Global Restaurants, Inc.+............................ 48,500 1,506,531
-------------
5,747,549
-------------
INFORMATION TECHNOLOGY -- 8.6%
Computers & Business Equipment -- 6.7%
Electronic Data Systems Corp. .............................. 50,900 1,851,487
International Business Machines Corp. ...................... 7,300 856,838
Lexmark International Group, Inc., Class A+................. 18,500 1,026,750
Seagate Technology, Inc.+................................... 42,000 971,250
Sequent Computer Systems, Inc.+............................. 55,600 920,875
Storage Technology Corp.+................................... 18,400 1,543,300
Software -- 1.0%
Novell, Inc.+............................................... 105,000 1,102,500
Telecommunications -- 0.9%
U.S. West Communications Group.............................. 20,000 1,015,000
-------------
9,288,000
-------------
MATERIALS -- 3.5%
Chemicals -- 0.9%
Dow Chemical Co. ........................................... 9,500 920,313
Forest Products -- 0.7%
Consolidated Papers, Inc. .................................. 26,800 775,525
Metals & Minerals -- 1.9%
Barrick Gold Corp. ......................................... 55,500 1,068,375
Nucor Corp. ................................................ 19,800 1,019,700
-------------
3,783,913
-------------
REAL ESTATE -- 1.2%
Real Estate Companies -- 0.5%
Security Capital Group, Inc., Class B+...................... 17,500 490,000
Real Estate Investment Trusts -- 0.7%
Boston Properties, Inc. .................................... 22,500 765,000
-------------
1,255,000
-------------
UTILITIES -- 9.8%
Electric Utilities -- 3.9%
Entergy Corp. .............................................. 43,500 1,144,594
PECO Energy Co. ............................................ 74,700 2,110,275
Public Service Enterprise Group, Inc. ...................... 28,000 925,750
Gas & Pipeline Utilities -- 4.0%
Coastal Corp. .............................................. 11,500 810,750
Columbia Gas Systems, Inc. ................................. 8,500 717,187
Consolidated Natural Gas Co. ............................... 27,500 1,555,469
Pacific Gas & Electric Co. ................................. 39,500 1,244,250
</TABLE>
---------------------
65
<PAGE> 156
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES (continued)
Telephone -- 1.9%
GTE Corp. .................................................. 15,500 $ 903,844
SBC Communications, Inc. ................................... 28,200 1,096,275
-------------
10,508,394
-------------
TOTAL COMMON STOCK (cost $90,207,579)....................... 103,932,937
-------------
PREFERRED STOCK -- 1.6%
----------------------------------------------------------------------------------------
INFORMATION & ENTERTAINMENT -- 1.6%
Broadcasting & Media -- 1.6%
News Corp., Ltd. ADR (cost $1,408,618)...................... 80,500 1,725,719
-------------
TOTAL INVESTMENT SECURITIES (cost $91,616,197).............. 105,658,656
-------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 1.5% AMOUNT
----------------------------------------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT -- 1.5%
Cayman Island Time Deposit with State Street Bank & Trust
Co.
4.50% due 6/01/98 (cost $1,614,000)..................... $1,614,000 1,614,000
-------------
TOTAL INVESTMENTS --
(cost $93,230,197) 99.6% 107,272,656
Other assets less liabilities -- 0.4 397,450
------ -------------
NET ASSETS -- 100.0% $107,670,106
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
See Notes to Financial Statements
- ---------------------
66
<PAGE> 157
- ---------------------
SUNAMERICA SERIES TRUST
VENTURE VALUE PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 91.2% SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 3.6%
Apparel & Textiles -- 0.7%
Nike, Inc., Class B......................................... 244,300 $ 11,237,800
Housing -- 2.1%
J.Ray McDermott SA+......................................... 77,600 3,133,100
Masco Corp.................................................. 498,400 28,035,000
Maytag Corp................................................. 4,200 211,837
Retail -- 0.8%
Harcourt General, Inc....................................... 143,400 7,815,300
Hasbro, Inc................................................. 100,700 3,851,775
---------------
54,284,812
---------------
CONSUMER STAPLES -- 5.0%
Food, Beverage & Tobacco -- 5.0%
Archer-Daniels-Midland Co................................... 569,020 10,740,252
Coca-Cola Co................................................ 12,400 971,850
Corn Products International, Inc.+.......................... 42,900 1,469,325
Gallaher Group PLC ADR...................................... 4,200 85,050
Nestle SA ADR............................................... 315,000 33,798,051
Philip Morris Cos., Inc..................................... 610,600 22,821,175
Tyson Foods, Inc., Class A.................................. 257,400 5,437,575
Household Products -- 0.0%
Fortune Brands, Inc......................................... 4,200 161,438
---------------
75,484,716
---------------
ENERGY -- 8.2%
Energy Services -- 7.1%
British Petroleum Co. PLC ADR............................... 78,154 6,926,442
Burlington Resources, Inc................................... 392,900 16,550,913
Cooper Cameron Corp.+....................................... 202,400 12,042,800
EVI Weatherford, Inc.+...................................... 191,500 9,682,719
Halliburton Co.............................................. 560,100 26,534,737
Nabors Industries, Inc.+.................................... 44,900 1,057,956
Schlumberger Ltd............................................ 453,300 35,385,731
Energy Sources -- 1.1%
Amerada Hess Corp........................................... 1,800 97,312
Amoco Corp.................................................. 2,800 117,075
Atlantic Richfield Co....................................... 4,800 378,600
Chevron Corp................................................ 8,100 646,987
Exxon Corp.................................................. 24,800 1,748,400
Mobil Corp.................................................. 2,200 171,600
Noble Affiliates, Inc....................................... 235,757 9,209,258
Pioneer Natural Resources Co................................ 167,100 3,926,850
Sonat, Inc.................................................. 2,200 86,213
---------------
124,563,593
---------------
</TABLE>
---------------------
67
<PAGE> 158
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 36.7%
Banks -- 13.0%
Banc One Corp............................................... 295,332 $ 16,280,182
BankAmerica Corp............................................ 479,900 39,681,731
Citicorp.................................................... 368,875 55,008,484
First Union Corp............................................ 4,500 248,906
Golden West Financial Corp.................................. 69,000 7,452,000
NationsBank Corp............................................ 3,325 251,869
U.S. Bancorp................................................ 361,100 14,128,038
Wells Fargo & Co............................................ 178,400 64,491,600
Financial Services -- 12.1%
American Express Co......................................... 615,000 63,114,375
Donaldson, Lufkin & Jenrette, Inc........................... 203,600 8,971,125
Federal Home Loan Mortgage Corp............................. 311,000 14,150,500
Household International, Inc................................ 14,100 1,907,906
Morgan (J.P.) & Co., Inc.................................... 74,900 9,301,644
Morgan Stanley, Dean Witter, Discover & Co.................. 469,825 36,675,714
State Street Corp........................................... 145,900 10,057,981
TCF Financial Corp.......................................... 88,200 2,872,013
Travelers Group, Inc........................................ 603,494 36,813,134
Insurance -- 11.4%
20th Century Industries..................................... 132,700 3,740,481
Allstate Corp............................................... 181,795 17,111,454
American International Group, Inc........................... 55,400 6,859,213
Berkley (W.R.) Corp......................................... 181,400 8,480,450
Chubb Corp.................................................. 333,100 26,502,269
General Reinsurance Corp.................................... 339,900 74,735,512
Progressive Corp., Ohio..................................... 100,000 13,787,500
Transatlantic Holdings, Inc................................. 252,600 18,897,638
UNUM Corp................................................... 56,000 3,111,500
Investment Companies -- 0.2%
Morgan Stanley Asia-Pacific Fund............................ 570,067 3,847,952
---------------
558,481,171
---------------
HEALTHCARE -- 5.0%
Drugs -- 4.1%
American Home Products Corp................................. 204,600 9,884,737
Bristol-Myers Squibb Co..................................... 47,800 5,138,500
Lilly (Eli) & Co............................................ 60,200 3,698,538
Merck & Co., Inc............................................ 25,100 2,938,269
Pfizer, Inc................................................. 169,600 17,776,200
SmithKline Beecham PLC ADR.................................. 416,100 22,391,381
Medical Products -- 0.9%
Johnson & Johnson Co........................................ 55,700 3,846,781
Novartis AG ADR............................................. 115,700 9,812,321
---------------
75,486,727
---------------
INDUSTRIAL & COMMERCIAL -- 5.3%
Aerospace & Military Technology -- 1.4%
Boeing Co................................................... 455,300 21,683,663
Business Services -- 0.0%
AC Nielsen Corp.+........................................... 133 3,433
Cognizant Corp.+............................................ 400 21,300
Dun & Bradstreet Corp....................................... 400 13,500
Waste Management, Inc....................................... 1,400 45,500
</TABLE>
- ---------------------
68
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL (continued)
Electrical Equipment -- 0.0%
General Electric Co......................................... 12,200 $ 1,017,175
Machinery -- 0.8%
McDermott International, Inc................................ 51,100 1,951,381
Smith International, Inc.+.................................. 200,800 9,851,750
Transportation -- 3.1%
Burlington Northern Santa Fe Corp........................... 278,800 27,740,600
Illinois Central Corp....................................... 200,350 7,437,994
Union Pacific Corp.......................................... 236,800 11,455,200
---------------
81,221,496
---------------
INFORMATION & ENTERTAINMENT -- 5.6%
Broadcasting & Media -- 1.4%
Gannett, Inc................................................ 174,700 11,519,281
News Corp., Ltd. ADR........................................ 149,700 3,686,363
Tribune Co.................................................. 84,600 5,657,625
Washington Post Co., Class B................................ 100 54,025
Leisure & Tourism -- 4.2%
McDonald's Corp............................................. 970,800 63,708,750
---------------
84,626,044
---------------
INFORMATION TECHNOLOGY -- 17.2%
Communication Equipment -- 0.3%
Molex, Inc.................................................. 145,181 4,046,920
Computers & Business Equipment -- 7.1%
Hewlett-Packard Co.......................................... 939,700 58,378,862
International Business Machines Corp........................ 425,000 49,884,375
Electronics -- 7.5%
Applied Materials, Inc.+.................................... 633,900 20,284,800
Intel Corp.................................................. 310,400 22,174,200
Motorola, Inc............................................... 392,500 20,777,969
Novellus Systems, Inc.+..................................... 333,000 12,591,563
Texas Instruments, Inc...................................... 748,700 38,464,462
Telecommunications -- 2.3%
360 Communications Co.+..................................... 285,300 8,148,882
AirTouch Communications, Inc.+.............................. 411,800 19,611,975
Globalstar Telecommunications Ltd.+......................... 21,148 1,253,019
Loral Space & Communications Corp.+......................... 83,200 2,111,200
Qwest Communications International, Inc.+................... 104,900 3,468,256
---------------
261,196,483
---------------
MATERIALS -- 1.2%
Chemicals -- 0.0%
Dow Chemical Co............................................. 600 58,125
Forest Products -- 0.0%
International Paper Co...................................... 1,300 59,800
Union Camp Corp............................................. 2,000 109,375
Metals & Minerals -- 1.2%
Martin Marietta Materials, Inc.............................. 393,400 18,096,400
---------------
18,323,700
---------------
</TABLE>
---------------------
69
<PAGE> 160
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 3.2%
Real Estate Companies -- 0.0%
Crescent Operating, Inc.+................................... 45,330 $ 934,931
Real Estate Investment Trusts -- 3.2%
Crescent Real Estate Equities Co............................ 413,900 14,176,075
Federal Realty Investment Trust............................. 47,800 1,183,050
General Growth Properties, Inc.............................. 277,300 10,260,100
Kimco Realty Corp........................................... 10,550 410,790
The Rouse Co................................................ 496,600 14,929,038
United Dominion Realty Trust, Inc........................... 52,200 737,325
Vornado Realty Trust........................................ 149,600 5,740,900
Weingarten Realty Investors................................. 15,200 649,800
---------------
49,022,009
---------------
UTILITIES -- 0.2%
Electric Utilities -- 0.0%
Carolina Power & Light Co................................... 900 36,900
Duke Energy Corp............................................ 1,400 80,675
Edison International........................................ 700 20,650
Enova Corp.................................................. 500 12,781
New England Electric System................................. 500 20,875
Southern Co................................................. 1,600 42,500
Wisconsin Energy Corp....................................... 800 23,600
Gas & Pipeline Utilities -- 0.2%
KN Energy, Inc.............................................. 51,500 2,787,438
Telephone -- 0.0%
SBC Communications, Inc..................................... 2,400 93,300
---------------
3,118,719
---------------
TOTAL COMMON STOCK (cost $1,058,278,086) ................... 1,385,809,470
---------------
<CAPTION>
PREFERRED STOCK -- 0.4%
----------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE -- 0.1%
Financial Services -- 0.1%
Devon Financing Trust, convertible $3.25.................... 30,700 2,007,013
---------------
INDUSTRIAL & COMMERCIAL -- 0.1%
Transportation -- 0.1%
Union Pacific Capital Trust, convertible 6.25%.............. 18,200 905,450
---------------
REAL ESTATE -- 0.1%
Real Estate Investment Trusts -- 0.1%
The Rouse Co., Series B convertible $3.00 .................. 10,000 485,000
Vornado Realty Trust, Series A convertible 6.50% ........... 9,100 509,600
---------------
994,600
---------------
INFORMATION TECHNOLOGY -- 0.1%
Telecommunications -- 0.1%
AirTouch Communications, Inc., Series C convertible 4.25%... 24,597 1,712,566
---------------
TOTAL PREFERRED STOCK (cost $5,286,106)..................... 5,619,629
---------------
TOTAL INVESTMENT SECURITIES (cost $1,063,564,192)........... 1,391,429,099
---------------
</TABLE>
- ---------------------
70
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<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 6.8% AMOUNT VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS -- 6.8%
Federal Home Loan Mortgage Discount Notes 5.40% due
6/03/98................................................... $ 25,415,000 $ 25,407,376
Federal Home Loan Mortgage Discount Notes 5.41% due
6/08/98................................................... 7,965,000 7,956,621
Federal Home Loan Mortgage Discount Notes 5.42% due
6/02/98................................................... 21,930,000 21,926,698
Federal Home Loan Mortgage Discount Notes 5.44% due
6/19/98................................................... 16,410,000 16,365,365
Federal National Mortgage Association Discount Notes 5.39%
due 6/04/98............................................... 20,210,000 20,200,922
Federal National Mortgage Association Discount Notes 5.42%
due 6/10/98............................................... 10,505,000 10,490,766
---------------
TOTAL SHORT-TERM SECURITIES (cost $102,347,748)............. 102,347,748
---------------
REPURCHASE AGREEMENT -- 1.7%
----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.7%
Agreement with State Street Bank and Trust Co., bearing
interest at 5.47%, dated 5/29/98, to be repurchased
6/01/98 in the amount of $26,161,720 and collateralized by
$26,765,000 of Federal National Mortgage Association
Discount Notes, due 6/10/98 with an approximate aggregate
value of $26,711,470 (cost $26,150,000)................... 26,150,000 26,150,000
---------------
TOTAL INVESTMENTS --
(cost $1,192,061,940) 100.1% 1,519,926,847
Liabilities in excess of other assets -- (0.1) (874,282)
------ ---------------
NET ASSETS -- 100.0% $1,519,052,565
====== ===============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
See Notes to Financial Statements
---------------------
71
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- ---------------------
SUNAMERICA SERIES TRUST
"DOGS" OF WALL STREET
PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 95.2% SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 29.6%
Automotive -- 6.6%
General Motors Corp. ....................................... 6,996 $ 503,275
Genuine Parts Co. .......................................... 12,526 425,101
Housing -- 2.9%
Foster Wheeler Corp. ....................................... 15,707 398,565
Retail -- 20.1%
International Flavors & Fragrances, Inc. ................... 7,659 367,632
Kimberly-Clark Corp. ....................................... 8,618 427,130
Limited, Inc. .............................................. 16,673 554,377
May Department Stores Co.+.................................. 8,066 518,745
Rubbermaid, Inc. ........................................... 17,005 554,788
Winn-Dixie Stores, Inc. .................................... 9,728 395,808
------------
4,145,421
------------
CONSUMER STAPLES -- 10.4%
Food, Beverage & Tobacco -- 10.4%
Anheuser-Busch Cos., Inc. .................................. 9,660 443,756
Kellogg Co. ................................................ 8,566 353,883
Philip Morris Cos., Inc. ................................... 9,391 350,989
UST, Inc. .................................................. 11,509 306,427
------------
1,455,055
------------
ENERGY -- 9.8%
Energy Services -- 3.5%
Exxon Corp. ................................................ 6,946 489,693
Energy Sources -- 6.3%
Chevron Corp. .............................................. 5,517 440,670
Royal Dutch Petroleum Co. GDR............................... 7,843 439,698
------------
1,370,061
------------
FINANCE -- 3.3%
Financial Services -- 3.3%
Morgan (J.P.) & Co., Inc. .................................. 3,764 467,442
------------
HEALTHCARE -- 3.8%
Drugs -- 3.8%
American Home Products Corp. ............................... 11,112 536,848
------------
</TABLE>
- ---------------------
72
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL & COMMERCIAL -- 12.3%
Business Services -- 12.3%
Bemis Co., Inc. ............................................ 9,645 $ 406,899
Minnesota Mining & Manufacturing Co. ....................... 5,176 479,427
National Service Industries, Inc. .......................... 8,576 437,376
Pall Corp. ................................................. 20,553 407,206
------------
1,730,908
------------
INFORMATION & ENTERTAINMENT -- 3.6%
Entertainment Products -- 3.6%
Eastman Kodak Co. .......................................... 7,018 500,910
------------
MATERIALS -- 10.0%
Chemicals -- 6.8%
Du Pont (E.I.) De Nemours & Co. ............................ 7,075 544,775
Nalco Chemical Co. ......................................... 10,744 402,900
Forest Products -- 3.2%
International Paper Co. .................................... 9,857 453,422
------------
1,401,097
------------
UTILITIES -- 12.4%
Electric Utilities -- 3.3%
Emerson Electric Co. ....................................... 7,529 457,387
Telephone -- 9.1%
Alltel Corp. ............................................... 10,353 408,296
AT&T Corp. ................................................. 6,932 421,986
SBC Communications, Inc. ................................... 11,607 451,222
------------
1,738,891
------------
TOTAL INVESTMENT SECURITIES (cost $13,698,573).............. 13,346,633
------------
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 10.0% AMOUNT
---------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 10.0%
Joint Repurchase Agreement Account (Note 3) (cost
$1,409,000)............................................... $1,409,000 1,409,000
------------
TOTAL INVESTMENTS -- (cost $15,107,573) 105.2% 14,755,633
Liabilities in excess of other
assets -- (5.2) (731,060)
------ ------------
NET ASSETS -- 100.0% $14,024,573
====== ============
</TABLE>
-----------------------------
+ Non-income producing securities
GDR -- Global Depository Receipt
See Notes to Financial Statements
---------------------
73
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- ---------------------
SUNAMERICA SERIES TRUST
PUTNAM GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 96.5% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 14.8%
Apparel & Textiles -- 0.5%
Jones Apparel Group, Inc.+.................................. 27,400 $ 1,736,475
Housing -- 2.1%
Home Depot, Inc............................................. 47,400 3,723,863
Masco Corp.................................................. 51,300 2,885,625
Retail -- 12.2%
Costco Cos., Inc.+.......................................... 108,600 6,285,225
CVS Corp.................................................... 91,900 6,450,231
Dayton Hudson Corp.......................................... 99,000 4,591,125
Fred Meyer, Inc.+........................................... 33,100 1,423,300
McKesson Corp............................................... 11,800 921,875
Office Depot, Inc.+......................................... 47,400 1,398,300
Safeway, Inc.+.............................................. 87,800 3,199,213
TJX Cos., Inc............................................... 81,300 3,800,775
Wal-Mart Stores, Inc........................................ 139,500 7,698,656
Walgreen Co................................................. 97,000 3,413,187
-------------
47,527,850
-------------
CONSUMER STAPLES -- 5.3%
Food, Beverage & Tobacco -- 2.0%
Coca-Cola Enterprises, Inc.................................. 102,900 3,865,181
Sara Lee Corp............................................... 40,400 2,378,550
Household Products -- 3.3%
Clorox Co................................................... 19,700 1,644,950
Colgate-Palmolive Co........................................ 37,300 3,245,100
Estee Lauder Cos., Inc., Class A............................ 25,500 1,628,813
Procter & Gamble Co......................................... 50,000 4,196,875
-------------
16,959,469
-------------
ENERGY -- 2.4%
Energy Services -- 1.5%
Cooper Cameron Corp.+....................................... 23,500 1,398,250
Halliburton Co.............................................. 35,800 1,696,025
Western Atlas, Inc.+........................................ 18,100 1,566,781
Energy Sources -- 0.9%
Exxon Corp.................................................. 42,200 2,975,100
-------------
7,636,156
-------------
FINANCE -- 20.1%
Banks -- 5.8%
BankAmerica Corp............................................ 91,800 7,590,712
Chase Manhattan Corp........................................ 18,500 2,514,844
Comerica, Inc............................................... 49,500 3,254,625
Fifth Third Bancorp......................................... 41,250 2,031,562
Norwest Corp................................................ 39,000 1,516,125
Southtrust Corp............................................. 23,850 967,416
SunTrust Banks, Inc......................................... 6,200 489,800
</TABLE>
- ---------------------
74
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services -- 11.9%
American Express Co......................................... 63,700 $ 6,537,212
Associates First Capital Corp., Class A..................... 39,500 2,955,094
Equitable Cos., Inc......................................... 33,900 2,334,863
Federal Home Loan Mortgage Corp............................. 87,800 3,994,900
Franklin Resources, Inc..................................... 7,000 342,125
MBNA Corp................................................... 139,525 4,421,198
Morgan (J.P.) & Co., Inc.................................... 11,700 1,452,994
Morgan Stanley, Dean Witter, Discover & Co.................. 53,500 4,176,344
Travelers Group, Inc........................................ 159,300 9,717,300
Washington Mutual, Inc...................................... 31,800 2,245,875
Insurance -- 2.4%
American International Group, Inc........................... 37,950 4,698,684
Conseco, Inc................................................ 64,900 3,025,963
-------------
64,267,636
-------------
HEALTHCARE -- 12.1%
Drugs -- 11.1%
Bristol-Myers Squibb Co..................................... 61,200 6,579,000
Cardinal Health, Inc........................................ 29,800 2,655,925
Lilly (Eli) & Co............................................ 64,300 3,950,431
Merck & Co., Inc............................................ 27,300 3,195,806
Pfizer, Inc................................................. 54,900 5,754,206
Schering-Plough Corp........................................ 65,800 5,506,638
Warner-Lambert Co........................................... 121,500 7,753,219
Health Services -- 1.0%
HEALTHSOUTH Corp.+.......................................... 114,500 3,248,937
-------------
38,644,162
-------------
INDUSTRIAL & COMMERCIAL -- 10.7%
Business Services -- 3.5%
Cendant Corp.+.............................................. 215,700 4,677,994
Owens-Illinois, Inc.+....................................... 38,600 1,734,587
Quintiles Transnational Corp.+.............................. 33,000 1,604,625
ServiceMaster Co............................................ 14,100 466,181
USA Waste Services, Inc.+................................... 56,900 2,684,969
Electrical Equipment -- 2.8%
General Electric Co......................................... 107,700 8,979,487
Machinery -- 1.3%
Ingersoll-Rand Co........................................... 93,800 4,226,863
Multi-Industry -- 3.1%
Tyco International Ltd...................................... 181,000 10,022,875
-------------
34,397,581
-------------
INFORMATION & ENTERTAINMENT -- 7.9%
Broadcasting & Media -- 5.3%
CBS Corp.+.................................................. 159,300 5,057,775
Gannett, Inc................................................ 91,800 6,053,062
Interpublic Group of Cos., Inc.............................. 48,300 2,864,794
Time Warner, Inc............................................ 40,000 3,112,500
</TABLE>
---------------------
75
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (continued)
Leisure & Tourism -- 2.6%
AMR Corp. +................................................. 18,000 $ 2,770,875
Carnival Corp., Class A..................................... 52,100 3,529,775
Marriott International, Inc., Class A....................... 53,400 1,855,650
-------------
25,244,431
-------------
INFORMATION TECHNOLOGY -- 19.8%
Communication Equipment -- 1.0%
Tellabs, Inc.+.............................................. 47,900 3,291,628
Computers & Business Equipment -- 3.7%
Cisco Systems, Inc.+........................................ 42,400 3,206,500
Dell Computer Corp.+........................................ 22,200 1,829,419
EMC Corp.+.................................................. 93,300 3,866,119
Hewlett-Packard Co.......................................... 5,400 335,475
Pitney Bowes, Inc........................................... 57,200 2,688,400
Software -- 9.8%
America Online, Inc.+....................................... 25,500 2,124,469
BMC Software, Inc.+......................................... 106,000 4,882,625
Computer Associates International, Inc...................... 83,200 4,368,000
Compuware Corp.+............................................ 53,800 2,471,437
HBO & Co.................................................... 77,100 4,450,115
Microsoft Corp.+............................................ 94,300 7,997,819
Parametric Technology Corp.+................................ 87,700 2,688,553
PeopleSoft, Inc.+........................................... 52,100 2,276,119
Telecommunications -- 5.3%
AirTouch Communications, Inc.+.............................. 50,000 2,381,250
Lucent Technologies, Inc.................................... 90,500 6,419,844
Northern Telecom Ltd........................................ 31,700 2,028,800
Tele-Communications TCI Ventures Group, Series A+........... 158,000 2,750,188
Tele-Communications, Inc., Series A+........................ 102,600 3,520,462
-------------
63,577,222
-------------
UTILITIES -- 3.4%
Telephone -- 3.4%
AT&T Corp................................................... 79,900 4,863,913
Sprint Corp................................................. 85,800 6,156,150
-------------
11,020,063
-------------
TOTAL INVESTMENT SECURITIES (cost $237,383,204)............. 309,274,570
-------------
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 2.8% AMOUNT
----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.8%
Agreement with JP Morgan Securities, Inc., bearing interest
at 5.54%, dated 5/29/98, to be repurchased 6/01/98 in the
amount of $8,790,056 and collateralized by $8,722,000 of
U.S. Treasury Notes, bearing interest at 6.00%, due
2/15/26 and having an approximate aggregate value of
$8,978,618 (cost $8,786,000).............................. $8,786,000 8,786,000
-------------
TOTAL INVESTMENTS --
(cost $246,169,204) 99.3% 318,060,570
Other assets less liabilities -- 0.7 2,367,249
------ -------------
NET ASSETS -- 100.0% $320,427,819
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
See Notes to Financial Statements
- ---------------------
76
<PAGE> 167
- ---------------------
SUNAMERICA SERIES TRUST
GROWTH/PHOENIX INVESTMENT
COUNSEL PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 97.6% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 11.4%
Housing -- 1.7%
Home Depot, Inc............................................. 49,000 $ 3,849,563
Retail -- 9.7%
Borders Group, Inc.+........................................ 50,000 1,550,000
Consolidated Stores Corp.+.................................. 87,700 3,349,044
CVS Corp.................................................... 57,300 4,021,744
Fred Meyer, Inc.+........................................... 42,250 1,816,750
Rite Aid Corp............................................... 142,500 5,103,281
Safeway, Inc.+.............................................. 146,700 5,345,381
TJX Cos., Inc............................................... 30,700 1,435,225
-------------
26,470,988
-------------
CONSUMER STAPLES -- 3.3%
Household Products -- 3.3%
Colgate-Palmolive Co........................................ 34,000 2,958,000
Gillette Co................................................. 39,800 4,661,575
-------------
7,619,575
-------------
ENERGY -- 5.8%
Energy Services -- 5.8%
Cooper Cameron Corp.+....................................... 19,200 1,142,400
Diamond Offshore Drilling, Inc.............................. 40,800 1,950,750
Global Industries Ltd.+..................................... 12,800 272,800
Halliburton Co.............................................. 46,000 2,179,250
Schlumberger Ltd............................................ 37,100 2,896,119
Tosco Corp.................................................. 105,000 3,333,750
Transocean Offshore, Inc.................................... 36,300 1,790,044
-------------
13,565,113
-------------
FINANCE -- 14.8%
Banks -- 7.3%
Banc One Corp............................................... 39,440 2,174,130
BankAmerica Corp............................................ 35,100 2,902,331
BankBoston Corp............................................. 16,300 1,717,612
Citicorp.................................................... 11,400 1,700,025
First Chicago NBD Corp...................................... 25,900 2,264,631
Mellon Bank Corp............................................ 15,700 1,058,769
NationsBank Corp............................................ 32,300 2,446,725
U.S. Bancorp................................................ 71,400 2,793,525
Financial Services -- 4.7%
Federal Home Loan Mortgage Corp............................. 77,500 3,526,250
Household International, Inc................................ 13,600 1,840,250
MBNA Corp................................................... 72,100 2,284,669
ReliaStar Financial Corp.................................... 25,000 1,081,250
Travelers Group, Inc........................................ 38,800 2,366,800
</TABLE>
---------------------
77
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Insurance -- 2.8%
Allstate Corp............................................... 31,600 $ 2,974,350
American International Group, Inc........................... 18,900 2,340,056
UNUM Corp................................................... 20,600 1,144,588
-------------
34,615,961
-------------
HEALTHCARE -- 15.4%
Drugs -- 10.8%
Bristol-Myers Squibb Co..................................... 51,800 5,568,500
Cardinal Health, Inc........................................ 33,900 3,021,338
Elan Corp. PLC ADR+......................................... 22,300 1,364,481
Pfizer, Inc................................................. 45,000 4,716,562
Schering-Plough Corp........................................ 29,900 2,502,256
Warner-Lambert Co........................................... 81,900 5,226,244
Watson Pharmaceuticals, Inc.+............................... 66,300 2,900,625
Health Services -- 2.1%
HEALTHSOUTH Corp.+.......................................... 118,500 3,362,437
Tenet Healthcare Corp.+..................................... 44,800 1,568,000
Medical Products -- 2.5%
Guidant Corp................................................ 36,100 2,326,194
Medtronic, Inc.............................................. 62,400 3,471,000
-------------
36,027,637
-------------
INDUSTRIAL & COMMERCIAL -- 8.2%
Aerospace & Military Technology -- 1.8%
Boeing Co................................................... 86,800 4,133,850
Business Services -- 2.5%
Comdisco, Inc............................................... 16,700 607,463
Owens-Illinois, Inc.+....................................... 15,900 714,506
USA Waste Services, Inc.+................................... 93,600 4,416,750
Electrical Equipment -- 1.6%
General Electric Co......................................... 43,600 3,635,150
Machinery -- 0.8%
Deere & Co.................................................. 14,200 736,625
Thermo Electron Corp........................................ 34,700 1,218,837
Multi-Industry -- 1.5%
Tyco International Ltd...................................... 64,000 3,544,000
-------------
19,007,181
-------------
INFORMATION & ENTERTAINMENT -- 3.9%
Broadcasting & Media -- 3.9%
Capstar Broadcasting Corp., Class A+........................ 21,100 400,900
CBS Corp.................................................... 123,600 3,924,300
Chancellor Media Corp.+..................................... 54,100 2,262,056
Clear Channel Communications, Inc.+......................... 27,000 2,588,625
-------------
9,175,881
-------------
INFORMATION TECHNOLOGY -- 27.9%
Communication Equipment -- 1.1%
CIENA Corp.+................................................ 25,900 1,346,800
Ericsson (L.M.) Telecommunications Co., Class B ADR......... 44,200 1,232,075
</TABLE>
- ---------------------
78
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION TECHNOLOGY (continued)
Computers & Business Equipment -- 8.4%
Cisco Systems, Inc.+........................................ 28,050 $ 2,121,281
Compaq Computer Corp........................................ 75,400 2,059,363
EMC Corp.+.................................................. 40,100 1,661,644
International Business Machines Corp........................ 96,400 11,314,950
Staples, Inc.+.............................................. 96,250 2,418,281
Electronics -- 5.1%
Intel Corp.................................................. 56,400 4,029,075
Linear Technology Corp...................................... 16,400 1,146,975
Philips Electronics NV...................................... 70,800 6,734,850
Software -- 8.3%
America Online, Inc.+....................................... 13,200 1,099,725
BMC Software, Inc.+......................................... 80,000 3,685,000
Computer Associates International, Inc...................... 60,300 3,165,750
Compuware Corp.+............................................ 98,800 4,538,625
HBO & Co.................................................... 76,300 4,403,941
J.D. Edwards & Co.+......................................... 38,400 1,412,400
Sterling Commerce, Inc.+.................................... 27,400 1,087,437
Telecommunications -- 5.0%
AirTouch Communications, Inc.+.............................. 121,200 5,772,150
Liberty Media Group, Inc., Series A+........................ 105,350 3,476,550
Telecomunicacoes de Brasileiras SA ADR...................... 22,900 2,441,712
-------------
65,148,584
-------------
MATERIALS -- 2.3%
Chemicals -- 2.0%
Monsanto Co................................................. 65,400 3,621,525
Solutia, Inc................................................ 39,600 1,086,525
Forest Products -- 0.3%
International Paper Co...................................... 12,200 561,200
-------------
5,269,250
-------------
UTILITIES -- 4.6%
Telephone -- 4.6%
AT&T Corp................................................... 117,700 7,164,988
MCI Communications Corp..................................... 67,100 3,587,753
-------------
10,752,741
-------------
TOTAL INVESTMENT SECURITIES (cost $192,540,040)............. 227,652,911
-------------
</TABLE>
---------------------
79
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<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 0.9% AMOUNT VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 0.9%
Koch Industries 5.62% due 6/01/98........................... $ 335,000 $ 335,000
Sara Lee Corp. 5.48% due 6/02/98............................ 670,000 669,898
Sara Lee Corp. 5.53% due 6/02/98............................ 1,180,000 1,179,819
-------------
TOTAL SHORT-TERM SECURITIES (cost $2,184,717)............... 2,184,717
-------------
TOTAL INVESTMENTS --
(cost $194,724,757) 98.5% 229,837,628
Other assets less liabilities -- 1.5 3,431,775
------ -------------
NET ASSETS -- 100.0% $233,269,403
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
See Notes to Financial Statements.
- ---------------------
80
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- ---------------------
SUNAMERICA SERIES TRUST
ALLIANCE GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 99.6% SHARES VALUE
------------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 9.3%
Housing -- 4.5%
Home Depot, Inc............................................. 596,500 $ 46,862,531
Retail -- 4.8%
Dayton Hudson Corp.......................................... 580,200 26,906,775
Kohl's Corp.+............................................... 190,600 9,065,413
Wal-Mart Stores, Inc........................................ 242,100 13,360,894
---------------
96,195,613
---------------
CONSUMER STAPLES -- 7.1%
Food, Beverage & Tobacco -- 5.5%
Campbell Soup Co............................................ 176,200 9,602,900
Coca-Cola Co................................................ 110,500 8,660,438
Philip Morris Cos., Inc..................................... 1,044,500 39,038,187
Household Products -- 1.6%
Colgate-Palmolive Co........................................ 132,200 11,501,400
Gillette Co................................................. 40,700 4,766,988
---------------
73,569,913
---------------
ENERGY -- 3.1%
Energy Services -- 3.1%
Halliburton Co.............................................. 420,800 19,935,400
Schlumberger Ltd............................................ 155,700 12,154,331
---------------
32,089,731
---------------
FINANCE -- 24.9%
Banks -- 7.9%
Banc One Corp............................................... 148,380 8,179,448
Chase Manhattan Corp........................................ 72,494 9,854,653
Citicorp.................................................... 228,500 34,075,063
First Chicago NBD Corp...................................... 18,700 1,635,081
NationsBank Corp............................................ 359,900 27,262,425
Financial Services -- 14.5%
Ahmanson (H.F.) & Co........................................ 279,800 21,334,750
Associates First Capital Corp., Class A..................... 241,131 18,039,613
Federal National Mortgage Association....................... 231,200 13,843,100
Household International, Inc................................ 111,200 15,046,750
MBNA Corp................................................... 1,172,600 37,156,762
Merrill Lynch & Co., Inc.................................... 204,900 18,338,550
Morgan Stanley, Dean Witter, Discover & Co.................. 322,700 25,190,769
Insurance -- 2.5%
American International Group, Inc........................... 65,300 8,084,956
MGIC Investment Corp........................................ 57,400 3,440,413
Progressive Corp............................................ 105,700 14,573,387
---------------
256,055,720
---------------
</TABLE>
---------------------
81
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE -- 12.6%
Drugs -- 9.9%
Bristol-Myers Squibb Co..................................... 323,200 $ 34,744,000
Merck & Co., Inc............................................ 173,200 20,275,225
Pfizer, Inc................................................. 218,700 22,922,494
Schering-Plough Corp........................................ 290,700 24,327,956
Health Services -- 2.7%
Humana, Inc................................................. 72,200 2,242,712
United Healthcare Corp...................................... 390,200 24,972,800
---------------
129,485,187
---------------
INDUSTRIAL & COMMERCIAL -- 7.3%
Electrical Equipment -- 0.8%
General Electric Co......................................... 104,300 8,696,013
Multi-Industry -- 6.5%
Tyco International Ltd...................................... 859,500 47,594,812
United Technologies Corp.................................... 201,800 18,969,200
---------------
75,260,025
---------------
INFORMATION & ENTERTAINMENT -- 8.2%
Broadcasting & Media -- 0.9%
Gannett, Inc................................................ 144,500 9,527,969
Leisure & Tourism -- 7.3%
Carnival Corp., Class A..................................... 87,000 5,894,250
Disney (Walt) Co............................................ 282,300 31,935,187
Northwest Airlines Corp., Class A+.......................... 496,800 22,387,050
UAL Corp.+.................................................. 185,300 14,719,769
---------------
84,464,225
---------------
INFORMATION TECHNOLOGY -- 26.0%
Communication Equipment -- 6.8%
Ericsson (L.M.) Telecommunications Co., Class B ADR......... 600,400 16,736,150
Nokia Corp., Class A ADR.................................... 723,800 47,001,763
Tellabs, Inc.+.............................................. 95,900 6,590,128
Computers & Business Equipment -- 10.1%
Cisco Systems, Inc.+........................................ 589,600 44,588,500
Compaq Computer Corp........................................ 408,700 11,162,619
Dell Computer Corp.+........................................ 530,900 43,749,478
International Business Machines Corp........................ 36,100 4,237,237
Electronics -- 1.7%
Intel Corp.................................................. 239,100 17,080,706
Software -- 1.7%
Microsoft Corp.+............................................ 206,600 17,522,263
Telecommunications -- 5.7%
AirTouch Communications, Inc.+.............................. 820,400 39,071,550
Liberty Media Group, Inc., Series A+........................ 506,300 16,707,900
Lucent Technologies, Inc.@.................................. 43,500 3,085,781
Tele-Communications, Inc., Series A+........................ 308 10,568
---------------
267,544,643
---------------
</TABLE>
- ---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 1.1%
Telephone -- 1.1%
MCI Communications Corp..................................... 211,000 $ 11,281,906
---------------
TOTAL INVESTMENT SECURITIES (cost $833,633,896)............. 1,025,946,963
---------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 0.5% AMOUNT
------------------------------------------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT -- 0.4%
Cayman Island Time Deposit with State Street Bank & Trust
Co. 4.50% due 6/01/98 @................................... $4,416,000 4,416,000
---------------
U.S. GOVERNMENT -- 0.1%
United States Treasury Bills 4.98% due 6/18/98.............. 300,000 299,295
---------------
TOTAL SHORT-TERM SECURITIES (cost $4,715,295)............... 4,715,295
---------------
TOTAL INVESTMENTS --
(cost $838,349,191) 100.1% 1,030,662,258
Liabilities in excess of other assets -- (0.1) (1,147,405)
------ ---------------
NET ASSETS -- 100.0% $1,029,514,853
====== ===============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
@ The security or a portion thereof represents collateral for the
following open futures contracts:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS
------------------------------------------------------------------------------------------------------------
NUMBER OF EXPIRATION VALUE AT VALUE AS OF UNREALIZED
CONTRACTS DESCRIPTION DATE TRADE DATE MARCH 31, 1998 DEPRECIATION
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
24 Long Standard & Poor's 500 Index............ June 1998 $6,556,800 $6,544,800 $(12,000)
=========
</TABLE>
See Notes to Financial Statements
---------------------
83
<PAGE> 174
- ---------------------
SUNAMERICA SERIES TRUST
GLOBAL EQUITIES PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 96.7% SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 0.4%
Goodman Fielder Wattie Ltd. (Consumer Staples).............. 1,080,637 $ 1,624,198
-------------
AUSTRIA -- 0.7%
Bank Austria AG (Finance)................................... 34,000 3,062,965
-------------
BELGIUM -- 0.8%
Barco NV (Industrial & Commercial).......................... 4,399 1,125,159
Bekaert SA (Industrial & Commercial)........................ 2,480 1,956,564
-------------
3,081,723
-------------
BRAZIL -- 0.4%
Telecomunicacoes de Brasileiras SA ADR (Information
Technology)............................................... 17,000 1,812,625
-------------
DENMARK -- 0.5%
Ratin A/S, Class B (Multi-industry)......................... 10,400 2,050,045
-------------
FINLAND -- 2.4%
Enso Oyj, Series R (Materials).............................. 203,000 2,227,150
Nokia Oyj, Series A (Information Technology)................ 102,138 6,723,446
Orion-yhtyma OY, Class B (Healthcare)....................... 29,398 880,861
-------------
9,831,457
-------------
FRANCE -- 6.8%
Alcatel Alsthom Compagnie General d'Electricite (Information
Technology)............................................... 11,400 2,438,910
Compagnie de St. Gobain (Materials)......................... 16,786 3,310,627
Compagnie Francaise d'Etudes et de Construction Technip
(Industrial & Commercial)................................. 26,000 3,728,564
L'Air Liquide SA (Materials)................................ 11,600 2,285,877
Pinault Printemps Redoute (Consumer Discretionary).......... 3,680 3,029,250
Schneider SA (Industrial & Commercial)+..................... 43,000 3,636,637
Societe Generale d'Enterprises SA (Finance)+................ 15,954 3,159,868
Total SA, Class B (Energy).................................. 26,030 3,232,540
Valeo SA (Consumer Discretionary)........................... 36,000 3,393,615
-------------
28,215,888
-------------
GERMANY -- 2.0%
Adidas AG (Consumer Discretionary).......................... 21,000 3,707,440
Merck KGAA (Healthcare)..................................... 39,500 1,529,747
Schmalbach-Lubeca AG (Materials)............................ 12,180 3,249,365
-------------
8,486,552
-------------
HONG KONG -- 1.1%
Cheung Kong (Holdings) Ltd. (Real Estate)................... 247,000 1,335,566
Dickson Concept Industries Ltd. (Industrial & Commercial)... 223,000 289,218
Hutchison Whampoa Ltd. (Multi-industry)+.................... 350,000 1,829,268
Sun Hung Kai Properties Ltd. (Real Estate)+................. 269,000 1,298,310
-------------
4,752,362
-------------
INDIA -- 0.4%
Mahanagar Telephone Nigam Ltd. GDR (Information
Technology)+.............................................. 57,000 751,830
Videsh Sanchar Nigam Ltd GDR (Information Technology)+...... 88,000 1,045,000
-------------
1,796,830
-------------
</TABLE>
- ---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
ITALY -- 2.0%
Credito Italiano SpA (Finance).............................. 480,000 $ 2,677,133
Telecom Italia Mobile SpA (Information Technology).......... 430,000 2,542,577
Telecom Italia SpA (Information Technology)................. 429,111 3,242,741
-------------
8,462,451
-------------
JAPAN -- 9.9%
Advantest Corp. (Information Technology).................... 90 5,563
Canon, Inc. (Information Technology)........................ 70,000 1,667,991
Daito Trust Construction Co. (Industrial & Commercial)...... 125,130 893,592
Daiwa Securities Co., Ltd. (Finance)........................ 300,000 1,141,599
Familymart Co (Consumer Discretionary)...................... 17,400 653,333
Fuji Photo Film Co. Ltd. (Information & Entertainment)...... 90,000 3,047,874
Honda Motor Co., Ltd. (Consumer Discretionary).............. 69,000 2,351,650
Hoya Corp. (Healthcare)..................................... 24,000 759,044
Japan Tobacco, Inc. (Consumer Staples)...................... 308 2,135,028
KAO Corp. (Consumer Staples)................................ 178,000 2,660,553
Mabuchi Motor Co., Ltd. (Consumer Discretionary)............ 50,000 3,249,332
Nichiei Co., Ltd. (Materials)............................... 11,440 768,229
Nintendo Co., Ltd. (Information & Entertainment)............ 19,900 1,860,820
Orix Corp. (Finance)........................................ 41,600 2,706,448
Promise Co (Finance)........................................ 39,000 1,641,779
Rohm Co., Ltd. (Information Technology)..................... 24,000 2,495,487
Sankyo Co. Ltd. (Healthcare)................................ 135,000 3,255,831
Sony Corp. (Information Technology)......................... 37,000 3,125,858
TDK Corp. (Information Technology).......................... 40,000 3,142,465
Tokai Bank Ltd. (Finance)................................... 219,000 1,212,889
Yamanouchi Pharmaceutical Co., Ltd. (Healthcare)............ 112,000 2,490,866
-------------
41,266,231
-------------
MEXICO -- 0.6%
Fomento Economico Mexicano SA de CV , Class B ADR (Consumer
Staples).................................................. 31,000 1,023,000
Panamerican Beverages, Inc., Class A ADR (Consumer
Staples).................................................. 48,000 1,623,000
-------------
2,646,000
-------------
NETHERLANDS -- 5.0%
Akzo Nobel NV (Materials)+.................................. 24,110 5,037,678
ASM Lithography Holding NV (Industrial & Commercial)........ 108,000 4,425,151
ING Groep NV (Finance)...................................... 71,025 4,877,329
Philips Electronics NV (Information Technology)............. 42,200 4,010,054
Stork NV (Industrial & Commercial).......................... 18,077 656,185
Wolters Kluwer NV (Information & Entertainment)+............ 12,500 1,755,924
-------------
20,762,321
-------------
SPAIN -- 2.3%
Banco Bilbao Vizcaya SA (Finance)........................... 40,500 2,033,685
Banco de Santander SA (Finance)............................. 42,000 2,114,550
Repsol SA (Energy).......................................... 50,000 2,777,961
Tabacalera SA, Class A (Consumer Staples)................... 124,390 2,679,864
-------------
9,606,060
-------------
SWEDEN -- 0.6%
Volvo AB, Class A (Consumer Discretionary).................. 36,000 1,136,871
Volvo AB, Class B (Consumer Discretionary).................. 39,400 1,259,324
-------------
2,396,195
-------------
SWITZERLAND -- 3.7%
Ciba Specialty Chemicals AG (Materials)+.................... 10,800 1,538,171
Nestle SA (Consumer Staples)+............................... 2,030 4,347,749
Novartis AG (Healthcare).................................... 1,800 3,047,182
Schindler Holding AG (Industrial & Commercial).............. 400 701,991
</TABLE>
---------------------
85
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND (continued)
Schindler Holding registered AG (Industrial & Commercial)... 960 $ 1,649,139
Zuerich Versicherungs-Gesellschaft (Finance)+............... 6,780 4,233,210
-------------
15,517,442
-------------
UNITED KINGDOM -- 9.7%
Bank of Scotland (Finance).................................. 218,100 2,523,839
Bass PLC (Consumer Staples)+................................ 122,757 2,255,615
Beazer Group PLC (Consumer Discretionary)................... 432,000 1,629,904
British Aerospace PLC (Industrial & Commercial)............. 270,000 2,394,583
British Airways PLC (Information & Entertainment)........... 400,000 4,236,783
Compass Group PLC (Information & Entertainment)............. 64,400 1,335,844
Diageo PLC (Consumer Staples)............................... 300,592 3,399,879
Granada Group PLC (Information & Entertainment)............. 122,000 2,289,529
HSBC Holdings PLC (Finance)................................. 32,673 792,686
HSBC Holdings PLC (75P)(Finance)............................ 25,000 653,320
Kingfisher PLC (Consumer Discretionary)..................... 97,993 1,736,565
Ladbroke Group PLC (Information & Entertainment)............ 516,052 2,916,324
Lloyds TSB Group Ltd. PLC (Finance)......................... 189,447 2,752,326
Railtrack Group PLC (Industrial & Commercial)+.............. 137,000 2,662,771
Rugby Group PLC (Industrial & Commercial)................... 444,760 1,016,998
Tomkins PLC (Multi-industry)................................ 655,395 3,784,067
Unilever NV PLC (Consumer Staples).......................... 140,000 1,537,753
Whitbread PLC (Consumer Staples)............................ 141,416 2,288,961
-------------
40,207,747
-------------
UNITED STATES -- 47.4%
ADC Telecommunications, Inc. (Information Technology)+...... 59,000 1,659,375
AES Corp. (Utilities)+...................................... 90,000 4,280,625
American International Group, Inc. (Finance)................ 29,300 3,627,706
Applied Materials, Inc. (Industrial & Commercial)+.......... 30,200 966,400
Avon Products, Inc. (Consumer Discretionary)................ 42,000 3,436,125
Banc One Corp. (Finance).................................... 42,000 2,315,250
Bristol-Myers Squibb Co. (Healthcare)....................... 52,000 5,590,000
Brunswick Corp. (Information & Entertainment)............... 65,000 2,043,438
Campbell Soup Co. (Consumer Staples)........................ 34,100 1,858,450
Carnival Corp., Class A (Information & Entertainment)....... 60,000 4,065,000
Cendant Corp. (Industrial & Commercial)+.................... 110,000 2,385,625
Chase Manhattan Corp. (Finance)............................. 42,700 5,804,531
Cisco Systems, Inc. (Information Technology)+............... 61,500 4,650,937
COMPAQ Computer, Corp. (Information Technology)+............ 77,100 2,105,794
Computer Associates International, Inc. (Information
Technology)............................................... 80,000 4,200,000
Dayton Hudson Corp. (Consumer Discretionary)................ 102,400 4,748,800
Dell Computer Corp. (Information Technology)+............... 46,700 3,848,372
Disney (Walt) Co. (Information & Entertainment)............. 16,000 1,810,000
Gannett Co, Inc. (Information & Entertainment).............. 80,000 5,275,000
Halliburton Co. (Energy).................................... 38,400 1,819,200
Harley-Davidson, Inc. (Consumer Discretionary).............. 64,000 2,288,000
Hartford Financial Services Group, Inc. (Finance)........... 15,900 1,749,994
Hartford Life, Inc. Class A (Finance)....................... 84,400 4,346,600
Home Depot, Inc. (Consumer Discretionary)................... 66,000 5,185,125
Household International, Inc. (Finance)..................... 37,800 5,114,812
Humana, Inc. (Healthcare)................................... 160,600 4,988,637
Kroger Co. (Consumer Discretionary)+........................ 89,200 3,830,025
Liberty Media Group, Class A (Information Technology)+...... 124,825 4,119,225
Liz Claiborne, Inc. (Consumer Discretionary)................ 75,000 3,801,563
Lucent Technologies, Inc. (Information Technology).......... 53,752 3,813,033
MBIA, Inc. (Finance)........................................ 68,000 5,070,250
MBNA Corp. (Finance)........................................ 121,325 3,844,486
Merck & Co., Inc. (Healthcare).............................. 48,100 5,630,706
Morgan Stanley, Dean Witter, Discover & Co. (Finance)....... 45,600 3,559,650
</TABLE>
- ---------------------
86
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
----------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (continued)
NationsBank Corp. (Finance)................................. 56,300 $ 4,264,725
Nautica Enterprises, Inc. (Consumer Discretionary)+......... 153,000 4,475,250
Philip Morris Cos., Inc. (Consumer Staples)................. 110,200 4,118,725
Proffitt's, Inc. (Consumer Discretionary)+.................. 89,000 3,493,250
Republic Industries, Inc. (Consumer Discretionary)+......... 145,000 3,570,625
Schering-Plough Corp. (Healthcare).......................... 36,500 3,054,594
Solectron Corp. (Information Technology)+................... 73,500 3,041,063
Staples, Inc. (Consumer Discretionary)+..................... 153,000 3,844,125
TJX Cos., Inc. (Consumer Discretionary)..................... 110,000 5,142,500
Travelers Group, Inc. (Finance)............................. 111,599 6,807,539
Tyco International Ltd. (Industrial & Commercial)........... 127,700 7,071,387
United Healthcare Corp. (Healthcare)........................ 74,000 4,736,000
United States Industries, Inc. (Consumer Staples)+.......... 150,400 3,966,800
United Technologies Corp. (Industrial & Commercial)......... 46,000 4,324,000
USA Waste Services, Inc. (Industrial & Commercial)+......... 91,200 4,303,500
USX-Marathon Group, Inc. (Energy)........................... 79,000 2,765,000
WorldCom, Inc. (Utilities)+................................. 109,300 4,973,150
-------------
197,784,967
-------------
TOTAL COMMON STOCK (cost $326,461,009)...................... 403,364,059
-------------
<CAPTION>
PREFERRED STOCK -- 0.5%
----------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY -- 0.5%
Henkel KGaA (Consumer Staples).............................. 25,160 2,256,186
-------------
TOTAL INVESTMENT SECURITIES (cost $327,760,869)............. 405,620,245
-------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 2.1% AMOUNT
----------------------------------------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT -- 2.1%
Cayman Island Time Deposit with State Street Bank & Trust
Co.
5.25% due 6/01/98 (cost $8,623,000)....................... $8,623,000 8,623,000
-------------
TOTAL INVESTMENTS --
(cost $336,383,869) 99.3% 414,243,245
Other assets less liabilities -- 0.7 2,761,787
------ -------------
NET ASSETS -- 100.0% $417,005,032
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See Notes to Financial Statements
---------------------
87
<PAGE> 178
- ---------------------
SUNAMERICA SERIES TRUST
INTERNATIONAL GROWTH AND
INCOME PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 95.4% SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 1.1%
YPF Sociedad Anonima ADR (Energy)........................... 32,900 $ 1,021,956
------------
AUSTRALIA -- 2.1%
Pioneer International Ltd. (Industrial & Commercial)+....... 230,100 613,146
St. George Bank Ltd. (Finance)*(1).......................... 9,600 470,400
Westpac Banking Corp. Ltd. (Finance)........................ 135,000 891,937
------------
1,975,483
------------
BELGIUM -- 0.8%
Electrabel SA (Utilities)................................... 3,148 787,214
------------
CANADA -- 3.7%
Abitibi-Consolidated, Inc. (Materials)...................... 54,000 735,750
Abitibi-Consolidated, Inc. (Materials)...................... 21,287 291,493
Bank of Nova Scotia (Finance)............................... 56,385 1,509,383
National Bank of Canada (Finance)........................... 47,588 970,117
------------
3,506,743
------------
FRANCE -- 11.0%
Assurance General de France (Finance)+...................... 8,250 508,817
Compagnie Generale des Etablissements Michelin, Class B
(Consumer Discretionary).................................. 20,914 1,294,060
Lafarge SA (Materials)...................................... 3,872 392,830
Lafarge SA new shares (Materials)+.......................... 887 90,435
Scor (Finance).............................................. 10,215 643,666
Societe Generale d'Enterprises SA (Finance)+................ 7,340 1,453,769
Societe Nationale Elf Aquitaine SA (Energy)................. 14,389 1,998,539
Television Francais (Information & Entertainment)........... 4,013 566,099
Total SA, Class B (Energy).................................. 12,176 1,512,079
Vivendi (Multi-industry).................................... 9,749 1,958,599
------------
10,418,893
------------
GERMANY -- 7.5%
Bayer AG (Multi-industry)................................... 33,242 1,589,207
Deutsche Bank AG (Finance).................................. 11,777 1,013,842
Deutsche Lufthansa AG (Information & Entertainment)......... 42,163 1,053,927
Deutsche Telekom AG (Information Technology)................ 45,993 1,233,440
Thyssen AG (Industrial & Commercial)+....................... 4,152 1,082,068
VEBA AG (Utilities)......................................... 17,697 1,162,443
------------
7,134,927
------------
GREECE -- 1.1%
OTE Greek Telecommunications (Information Technology)....... 36,874 1,082,928
------------
</TABLE>
- ---------------------
88
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
HONG KONG -- 4.3%
Dao Heng Bank Group Ltd. (Finance).......................... 327,000 $ 700,503
Henderson Land Development Co., Ltd. (Real Estate).......... 324,000 1,145,645
Hong Kong Electric Holdings Ltd. (Utilities)................ 350,500 1,029,020
HSBC Holdings PLC (Finance)+................................ 49,915 1,210,997
------------
4,086,165
------------
INDIA -- 1.1%
Mahanagar Telephone Nigam Ltd. GDR (Information
Technology)+.............................................. 77,500 1,017,187
------------
IRELAND -- 2.3%
Allied Irish Banks (Finance)................................ 53,990 715,452
CRH PLC (Industrial & Commercial)........................... 99,171 1,428,415
------------
2,143,867
------------
ITALY -- 3.0%
ENI SpA (Energy)............................................ 268,551 1,898,799
Telecom Italia SpA (Information Technology)................. 122,600 926,474
------------
2,825,273
------------
JAPAN -- 11.7%
Canon, Inc. (Information Technology)........................ 35,000 833,995
Fuji Photo Film Co., Ltd. (Materials)....................... 30,000 1,015,958
Honda Motor Co., Ltd. (Consumer Discretionary).............. 30,000 1,022,456
KAO Corp. (Consumer Staples)................................ 93,000 1,390,064
Nikko Securities Co., Ltd. (Finance)........................ 376,000 1,183,739
Promise Co. (Finance)....................................... 28,360 1,193,868
Ricoh Co., Ltd. (Information Technology).................... 95,000 1,026,211
Sankyo Co., Ltd. (Healthcare)............................... 40,000 964,691
Sony Corp. (Information Technology)......................... 20,400 1,723,446
Tokyo Electron Ltd. (Information Technology)................ 23,000 730,739
------------
11,085,167
------------
MEXICO -- 1.6%
Cemex SA de CV (Materials).................................. 198,774 824,844
Fomento Economico Mexicano SA de CV (Consumer Staples)...... 12,380 414,070
Fomento Economico Mexicano SA de CV (Consumer Staples)+..... 9,200 307,710
------------
1,546,624
------------
NETHERLANDS -- 8.8%
ABN Amro Holdings NV (Finance).............................. 41,032 993,639
Akzo Nobel NV (Materials)+.................................. 9,169 1,915,822
ING Groep NV (Finance)...................................... 22,341 1,534,170
Philips Electronics NV (Information Technology)............. 23,060 2,191,276
SGS Thomson Microelectronics NV (Information Technology).... 20,721 1,670,010
------------
8,304,917
------------
NEW ZEALAND -- 1.2%
Telecom Corp. of New Zealand Ltd. IR (Information
Technology)............................................... 213,400 561,303
Telecom Corp. of New Zealand Ltd. (Information
Technology)............................................... 121,200 558,371
------------
1,119,674
------------
NORWAY -- 1.6%
Den Norske Bank ASA (Finance)............................... 273,338 1,469,188
------------
PORTUGAL -- 0.5%
Portugal Telecom SA (Information Technology)................ 8,674 455,901
------------
</TABLE>
---------------------
89
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
SINGAPORE -- 1.1%
Development Bank of Singapore Ltd. alien shares (Finance)... 141,000 $ 850,463
Development Bank of Singapore Ltd., Class A alien shares
(Finance)................................................. 29,100 175,521
------------
1,025,984
------------
SPAIN -- 1.1%
Iberdrola SA (Utilities).................................... 64,761 1,068,311
------------
SWEDEN -- 5.1%
Pharmacia & Upjohn, Inc. ADR (Healthcare)................... 45,068 1,969,529
SKF AB, Series B (Materials)+............................... 47,077 1,003,134
Sparbanken Sverige AB, Class A (Finance)+................... 16,993 510,616
Svenska Cellulosa AB, Class B (Materials)................... 34,828 959,878
Volvo AB, Class B (Consumer Discretionary).................. 11,310 361,496
------------
4,804,653
------------
SWITZERLAND -- 4.9%
Julius Baer Holdings AG (Finance)........................... 197 567,796
Nestle SA (Consumer Staples)+............................... 983 2,105,339
Schweizerische Bankgesellschaft (Finance)+.................. 585 983,226
Schweiz Bankverein (Finance)+............................... 2,732 986,581
------------
4,642,942
------------
UNITED KINGDOM -- 19.8%
B.A.T. Industries PLC (Multi-industry)...................... 170,632 1,536,994
Bass PLC (Consumer Staples)+................................ 68,629 1,261,033
British Airways PLC (Information & Entertainment)........... 90,000 953,276
British Petroleum Co. PLC (Energy).......................... 94,868 1,392,983
BTR Ltd. PLC (Multi-industry)............................... 655,843 2,161,123
Cookson Group PLC (Materials)............................... 294,122 1,222,688
Glaxo Wellcome PLC (Healthcare)............................. 28,720 773,051
National Westminster Bank PLC (Finance)..................... 78,494 1,434,606
P & O PLC (Industrial & Commercial)......................... 69,234 953,830
Rio Tinto PLC (Materials)+.................................. 114,410 1,430,459
Rolls Royce PLC (Consumer Discretionary).................... 309,195 1,473,362
Scottish Power PLC (Utilities).............................. 107,508 971,029
Shell Transport & Trading Co. PLC (Energy).................. 98,645 729,054
Siebe PLC (Industrial & Commercial)......................... 10,800 270,769
Tomkins PLC (Multi-industry)................................ 251,618 1,452,772
Unilever NV PLC (Consumer Staples).......................... 69,355 761,792
------------
18,778,821
------------
TOTAL COMMON STOCK (cost $81,560,044)....................... 90,302,818
------------
<CAPTION>
WARRANTS -- 0.0%+ WARRANTS
---------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE -- 0.0%
Allianz (Finance)........................................... 1 5
------------
TOTAL INVESTMENT SECURITIES (cost $81,560,044).............. 90,302,823
------------
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 1.7% AMOUNT
---------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE SHORT-TERM NOTES -- 1.7%
Sheffield Receivables Corp. 5.50% due 7/10/98 (cost
$1,575,556)............................................... $1,585,000 1,575,556
------------
</TABLE>
- ---------------------
90
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<TABLE>
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 5.7% AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 5.7%
Agreement with JP Morgan Securities, Inc., bearing interest
at 5.54%, dated 5/29/98, to be repurchased 6/01/98 in the
amount of $5,409,496 and collateralized by $5,368,000 of
U.S. Treasury Notes, bearing interest at 6.00%, due
2/15/26 and having an approximate aggregate value of
$5,525,937 (cost $5,407,000).............................. $5,407,000 $ 5,407,000
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS --
(cost $88,542,600) 102.8% 97,285,379
Liabilities in excess of other assets -- (2.8) (2,629,057)
------ ------------
NET ASSETS -- 100.0% $94,656,322
====== ============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
IR -- Installment Receipt
(1) Fair valued security; see Note 2
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
--------------------------------------------------------------
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GBP 2,090,000 USD 3,452,032 10/28/98 $ 61,916
JPY 159,837,400 USD 1,263,522 06/12/98 107,153
JPY 142,162,600 USD 1,130,841 06/12/98 102,343
---------
Net Unrealized Appreciation............ $271,412
=========
</TABLE>
-----------------------------
<TABLE>
<S> <C> <C>
GBP -- Pound Sterling
JPY -- Japanese Yen
USD -- United States Dollar
</TABLE>
See Notes to Financial Statements
---------------------
91
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- ---------------------
SUNAMERICA SERIES TRUST
INTERNATIONAL DIVERSIFIED
EQUITIES PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 84.4% SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 1.0%
Amcor Holdings Ltd. (Materials)............................. 15,900 $ 73,685
Australian Gas Light Co., Ltd. (Utilities).................. 7,522 52,806
Australian National Industries Ltd. (Materials)............. 21,500 13,007
Boral Ltd. (Industrial & Commercial)........................ 29,685 59,117
Brambles Industries Ltd. (Industrial & Commercial).......... 5,400 109,569
Broken Hill Proprietary Co., Ltd. (Energy).................. 46,739 400,418
Burns, Philp & Co, Ltd. (Consumer Staples)+................. 11,879 1,153
Coca-Cola Amatil Ltd. (Consumer Staples).................... 19,019 139,950
Coles Myer Ltd. (Consumer Discretionary).................... 26,347 118,799
Crown Ltd. (Information & Entertainment).................... 13,534 5,424
CSR Ltd. (Industrial & Commercial).......................... 26,900 79,008
Fosters Brewing Group Ltd. (Consumer Staples)............... 45,700 99,310
General Property Trust (Real Estate)........................ 30,817 55,446
Gio Australia Holdings Ltd. (Finance)....................... 23,650 66,649
Goodman Fielder Wattie Ltd. (Consumer Staples).............. 29,911 44,956
Homestake Mining Co, (Energy)............................... 1,870 19,908
Leighton Holdings Ltd. (Industrial & Commercial)............ 6,000 20,291
Lend Lease Corp., Ltd. (Real Estate)........................ 5,937 126,785
M.I.M. Holdings Ltd. (Materials)............................ 34,943 18,163
National Australia Bank Ltd. (Finance)...................... 29,705 411,940
Newcrest Mining Ltd. (Materials)............................ 6,331 7,930
News Corp., Ltd. (Information & Entertainment).............. 43,729 269,745
Normandy Mining Ltd. (Materials)............................ 38,811 35,729
North Ltd. (Materials)...................................... 16,540 38,532
Orica Ltd. (Materials)...................................... 7,000 47,125
Pacific Dunlop Ltd. (Multi-industry)........................ 21,700 39,274
Pioneer International Ltd. (Industrial & Commercial)+....... 22,200 59,156
Renison Goldfields Consolidated Ltd. (Materials)............ 4,771 5,438
Rio Tintro, Ltd. (Materials)................................ 7,800 94,002
Santos Ltd. (Energy)........................................ 14,613 48,045
Smith (Howard) Ltd. (Multi-industry)........................ 4,900 31,914
Sons of Gwalia Ltd. (Materials)............................. 3,090 8,515
Southcorp Holdings Ltd. (Multi-industry).................... 15,389 55,347
TABCORP Holdings Ltd. (Information & Entertainment)......... 7,900 44,032
Telstra Corp., Ltd. (Information Technology)+............... 60,300 141,988
Western Mining Corp., Ltd. (Materials)+..................... 24,066 75,357
Westfield Trust new shares (Real Estate).................... 1,026 2,126
Westfield Trust (Real Estate)............................... 31,731 65,755
Westpac Banking Corp., Ltd. (Finance)....................... 41,300 272,867
-------------
3,259,261
-------------
AUSTRIA -- 0.5%
Austria Mikro Systeme International AG (Industrial &
Commercial)............................................... 200 14,495
Austrian Airlines Osterreische Luftverkehrs AG (Information
& Entertainment)+......................................... 800 27,974
Bank Austria AG (Finance)................................... 2,600 234,227
Bank Austria AG (Finance)+.................................. 2,264 203,416
Bau Holdings AG (Consumer Discretionary).................... 200 12,267
Boehler-Uddeholm AG (Materials)............................. 600 46,305
BWT AG (Industrial & Commercial)............................ 100 19,674
EA-Generali AG (Finance).................................... 300 102,752
</TABLE>
- ---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRIA (continued)
Flughafen Wien AG (Industrial & Commercial)................. 1,500 $ 80,529
Lenzing AG (Materials)+..................................... 200 14,975
Mayr-Melnhof Karton AG (Materials).......................... 700 51,241
Oesterreichische Elektrizitaetswirtschafts AG, Class A
(Utilities)............................................... 1,800 211,335
Oesterrichische Brau-Beteiligungs AG (Consumer Staples)..... 300 19,330
OMV AG (Energy)............................................. 1,300 188,148
Radex Heraklith Industriebeteiligungs AG (Materials)........ 800 42,311
Steyr-Daimler-Puch AG (Industrial & Commercial)............. 600 17,444
VA Technologies AG (Industrial & Commercial)................ 700 94,789
Wienerberger Baustoffindustrie AG (Materials)............... 500 123,661
-------------
1,504,873
-------------
BELGIUM -- 0.2%
Generale de Banque SA (Finance)............................. 400 292,743
Kredietbank NV (Finance)+................................... 400 280,511
-------------
573,254
-------------
DENMARK -- 0.2%
BG Bank (Finance)........................................... 1,100 64,726
Den Danske Bank (Finance)+.................................. 2,000 248,606
Jyske Bank A/S (Finance).................................... 400 47,662
Unidanmark AS (Finance)..................................... 2,000 161,520
-------------
522,514
-------------
FRANCE -- 9.0%
Accor SA (Information & Entertainment)...................... 1,879 515,367
Alcatel Alsthom Compagnie General d'Electricite (Information
Technology)............................................... 7,133 1,526,030
AXA (Finance)............................................... 15,084 1,716,899
Banque Nationale de Paris (Finance)......................... 10,959 935,994
Bouygues SA (Consumer Discretionary)........................ 1,282 231,844
Canal Plus (Information & Entertainment).................... 1,592 288,971
Cap Gemini SA (Industrial & Commercial)..................... 3,116 465,082
Carrefour SA (Consumer Discretionary)....................... 1,868 1,141,469
Compagnie de St. Gobain (Materials)......................... 4,088 806,258
Compagnie Financiere de Paribas (Finance)................... 8,607 877,531
Compagnie Generale des Etablissements Michelin, Class B
(Consumer Discretionary).................................. 5,791 358,320
Credit Commerce France (Finance)............................ 400 30,500
Credit Local de France (Finance)+........................... 204 27,721
Eridania Beghin-Say SA (Consumer Staples)................... 1,447 316,826
Essilor International (Healthcare).......................... 533 227,169
Etablissements Economiques du Casino Guichard-Perrachon
(Consumer Discretionary).................................. 4,225 300,827
France Telecom SA (Information Technology)+................. 31,097 1,741,702
Groupe Danone (Consumer Staples)............................ 3,715 1,000,312
Havas SA (Industrial & Commercial).......................... 3,495 275,254
Imetal SA (Materials)....................................... 772 108,387
L'Air Liquide SA (Materials)................................ 3,558 701,134
L'Oreal (Consumer Staples).................................. 2,890 1,435,098
Lafarge SA (Materials)...................................... 4,619 468,617
Lafarge SA new shares (Materials)+.......................... 384 39,151
Lagardere Group S.C.A. (Industrial & Commercial)............ 5,260 231,218
Legrand SA (Information Technology)......................... 1,478 407,605
Moet Henessy Louis Vuitton (Consumer Staples)............... 4,160 872,606
Natexis (Finance)........................................... 83 6,090
Pathe SA (Information & Entertainment)...................... 406 76,816
Pernod-Ricard (Consumer Staples)............................ 3,266 242,043
Peugeot SA (Consumer Discretionary)......................... 2,481 484,755
Pinault Printemps Redoute (Consumer Discretionary).......... 1,014 834,690
Promodes (Consumer Discretionary)........................... 903 439,803
</TABLE>
---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE (continued)
Rhone-Poulenc Rorer SA, Class A (Materials)................. 15,756 $ 874,309
Sagem SA (Industrial & Commercial).......................... 237 182,177
Sanofi SA (Healthcare)...................................... 5,157 604,221
Schneider SA (Industrial & Commercial)+..................... 6,311 533,740
Simco SA registered (Real Estate)........................... 1,172 101,666
Societe BIC SA (Information Technology)..................... 2,508 192,910
Societe Eurafrance SA (Finance)............................. 191 112,691
Societe Generale d'Enterprises SA (Finance)+................ 5,068 1,003,774
Societe Nationale Elf Aquitaine SA (Energy)................. 11,936 1,657,833
Sodexho SA (Industrial & Commercial)........................ 1,524 280,194
Suez Lyonnaise des Eaux (Multi-industry).................... 5,892 1,005,471
Thomson CSF (Industrial & Commercial)....................... 5,801 234,638
Total SA, Class B (Energy).................................. 11,410 1,416,953
Usinor Sacilor (Materials).................................. 12,014 201,003
Valeo SA (Consumer Discretionary)........................... 3,149 296,847
Vivendi (Multi-industry).................................... 5,887 1,182,713
-------------
29,013,229
-------------
GERMANY -- 8.9%
Adidas AG (Consumer Discretionary).......................... 1,921 339,142
Agiv AG (Multi-industry).................................... 1,336 37,439
Allianz AG (Finance)........................................ 8,919 2,819,289
Allianz AG new shares (Finance)+............................ 262 82,084
AMB Aachener Und Muenchner (Finance)........................ 20 2,298
Bankgesellschaft Berlin AG (Finance)........................ 1,050 25,658
BASF AG (Materials)......................................... 23,217 1,076,108
Bayer AG (Multi-industry)................................... 28,378 1,356,673
Bayerische Hypotheken Und Wechselbank AG (Finance).......... 10,447 657,530
Bayerische Vereinsbank AG (Finance)......................... 16,174 1,355,199
Beiersdorf AG (Healthcare).................................. 1,750 106,908
BHF-Bank AG (Finance)....................................... 400 16,410
Bilfinger & Berger Bau AG (Consumer Discretionary).......... 2,255 85,941
Brau Und Brunnen AG (Consumer Staples)...................... 334 39,685
CKAG Colonia Konzern AG (Finance)........................... 1,069 141,395
Commerzbank AG (Finance).................................... 2,100 85,095
Continental AG (Consumer Discretionary)..................... 3,190 96,902
Daimler-Benz AG (Consumer Discretionary).................... 20,912 2,107,315
Degussa AG (Materials)...................................... 3,808 243,089
Deutsche Bank AG (Finance).................................. 22,309 1,920,506
Deutsche Lufthansa AG (Information & Entertainment)......... 14,147 353,625
Deutsche Telekom AG (Information Technology)................ 85,969 2,305,516
Dresdner Bank AG (Finance).................................. 20,155 1,132,995
Heidelberg Zement AG (Materials)............................ 2,128 213,486
Hochtief AG (Industrial & Commercial)....................... 4,092 188,059
IKB Deutsche Industriebank AG (Finance)..................... 400 8,474
Karstadt AG (Consumer Discretionary)........................ 418 218,459
Klockner Humboldt Deutz AG (Industrial & Commercial)........ 1,971 22,093
Linde AG (Industrial & Commercial).......................... 434 321,076
Manitoba AG (Industrial & Commercial)....................... 551 219,257
Mannesmann AG (Industrial & Commercial)..................... 1,470 1,437,663
Merck KGAA (Healthcare)..................................... 7,295 282,519
Metro AG (Consumer Discretionary)........................... 8,960 570,969
Munchener Ruckversicherungs AG (Finance).................... 3,149 1,430,441
Preussag AG (Multi-industry)................................ 735 268,172
RWE AG (Utilities).......................................... 13,830 734,034
SAP AG (Information Technology)............................. 2,513 1,298,577
Schering AG (Healthcare).................................... 3,140 367,103
Siemens AG (Industrial & Commercial)........................ 21,536 1,390,471
STRABAG AG (Industrial & Commercial)+....................... 167 14,601
</TABLE>
- ---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY (continued)
Thyssen AG (Industrial & Commercial)+....................... 1,353 $ 352,610
VEBA AG (Utilities)......................................... 20,277 1,331,912
Viag AG (Multi-industry).................................... 1,040 582,878
Volkswagen AG (Consumer Discretionary)...................... 1,235 1,001,567
-------------
28,641,223
-------------
HONG KONG -- 0.0%
Bank of East Asia Ltd. (Finance)............................ 73 97
Cathay Pacific Airways Ltd. (Industrial & Commercial)....... 600 410
Hang Lung Development Co., Ltd. (Real Estate)............... 300 310
Hong Kong & China Gas Co. Ltd. (Utilities)+................. 400 524
Hong Kong & Shanghai Hotels Ltd. (Information &
Entertainment)............................................ 100 54
Hopewell Holdings Ltd. (Real Estate)........................ 700 95
Hutchison Whampoa Ltd. (Multi-industry)+.................... 400 2,091
New World Development Co., Ltd. (Real Estate)............... 800 1,889
Regal Hotels International Ltd. (Information &
Entertainment)............................................ 300 39
Shangri-La Asia Ltd. (Information & Entertainment).......... 100 66
Sino Land Co., Ltd. (Real Estate)........................... 7,824 2,676
South China Morning Post Ltd. (Information &
Entertainment)............................................ 1,400 795
Sun Hung Kai Properties Ltd. (Real Estate)+................. 1,738 8,388
Swire Pacific Ltd., Class A (Multi-industry)................ 400 1,479
Television Broadcasting Ltd. (Information &
Entertainment)............................................ 300 708
Varitronix International Ltd. (Industrial & Commercial)..... 620 1,300
-------------
20,921
-------------
IRELAND -- 0.1%
Allied Irish Banks PLC (Finance)............................ 24,800 325,465
-------------
ITALY -- 8.9%
Acciaierie & Ferriere Lombarde (Materials).................. 12,000 81,229
Assicurazione Generali SpA (Finance)........................ 92,230 2,964,161
Banca Commerciale Italiana SpA (Finance)+................... 139,200 821,898
Banca Fideuram SpA (Finance)................................ 10,000 62,600
Banca Intesa SpA (Finance).................................. 4,000 13,458
Banca Popolar di Milano (Finance)........................... 2,000 17,998
Banca Popolare di Bergamo Credito Varesino SpA (Finance).... 1,000 23,521
Banco Ambrosiano Veneto SpA (Finance)....................... 144,900 903,358
Banco Di Napoli (Finance)................................... 20,000 31,229
Banco di Roma SpA (Finance)................................. 40,000 82,480
Benetton Group SpA (Consumer Discretionary)................. 16,178 352,916
Burgo (Cartiere) SpA (Materials)............................ 14,700 129,942
Credito Italiano SpA (Finance).............................. 236,000 1,316,257
Edison SpA (Utilities)...................................... 58,000 553,606
ENI SpA (Energy)............................................ 687,000 4,857,457
Fiat SpA (Consumer Discretionary)........................... 289,720 1,296,983
Fiat SpA nonconvertible (Consumer Discretionary)............ 64,870 171,584
Impreglio SpA (Industrial & Commercial)..................... 25,000 26,308
Istituto Bancario San Paolotorino di Torino (Finance)+...... 81,800 1,281,906
Istituto Mobiliare Italiano (Finance)....................... 59,450 1,017,887
Istituto Nazionale Delle Asazioni SpA (Finance)............. 365,700 1,138,912
Italcementi Fabbriche Riunicemento SpA (Materials).......... 20,550 213,390
Italcementi Fabbriche Riunicemento SpA nonconvertible
(Materials)............................................... 14,150 72,521
Italgas-Societa Italiana Per il Gas SpA (Utilities)+........ 58,900 271,382
La Rinascente Per L'Eserciz Grandi Magazzini SpA (Consumer
Discretionary)............................................ 20,000 196,360
Magneti Marelli SpA (Industrial & Commercial)............... 42,500 108,184
Mediaset SpA (Information & Entertainment).................. 103,500 663,801
Mediobanca SpA (Finance).................................... 56,440 759,275
Montedison SpA (Multi-industry)............................. 249,650 345,079
Montedison SpA nonconvertible (Multi-industry).............. 82,100 77,150
</TABLE>
---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
ITALY (continued)
Olivetti SpA (Information Technology)+...................... 310,720 $ 456,889
Parmalat Finanziaria SpA (Consumer Staples)+................ 137,920 287,922
Pirelli SpA (Consumer Discretionary)........................ 144,000 475,085
Reno De Medici SpA (Materials).............................. 1,300 4,696
Riunione Adriatica de Sicur Ras SpA (Finance)............... 25,750 407,928
Riunione Adriatica de Sicur Ras SpA nonconvertible
(Finance)................................................. 165 1,714
S.A.I Societa Assicuratrice Industriale SpA (Finance)....... 11,950 154,983
Sirti SpA (Consumer Discretionary).......................... 26,600 165,304
SNIA BPD SpA (Multi-industry)............................... 63,000 86,007
Telecom Italia Mobile SpA (Information Technology).......... 567,900 3,357,975
Telecom Italia Mobile SpA RNC (Information Technology)...... 135,000 489,932
Telecom Italia SpA (Information Technology)................. 313,055 2,365,720
Telecom Italia SpA nonconvertible (Information
Technology)............................................... 74,709 402,868
-------------
28,509,855
-------------
JAPAN -- 8.7%
Ajinomoto Co., Inc. (Consumer Staples)...................... 28,000 235,541
Aoki Corp. (Industrial & Commercial)........................ 29,400 16,346
Asahi Bank Ltd. (Finance)................................... 21,000 79,002
Asahi Breweries Ltd. (Consumer Staples)..................... 17,400 218,615
Asahi Chemical Industry Co., Inc. (Materials)............... 52,000 179,854
Asahi Glass Co., Ltd. (Materials)........................... 48,200 260,334
Bank of Tokyo-Mitsubishi Ltd. (Finance)+.................... 88,400 909,596
Bank of Yokohama Ltd. (Finance)............................. 15,000 36,609
Bridgestone Corp. (Industrial & Commercial)................. 17,400 397,025
Canon, Inc. (Information Technology)........................ 21,200 505,163
Casio Computer Co., Ltd. (Information Technology)........... 11,600 108,051
Chiba Bank Ltd. (Finance)................................... 16,000 56,957
Chugai Pharmaceutical Co., Ltd. (Healthcare)................ 17,400 100,513
Dai Nippon Printing Co., Ltd. (Industrial & Commercial)..... 21,400 352,314
Daiei, Inc. (Consumer Discretionary)........................ 19,200 54,069
Daikin Industries Ltd. (Industrial & Commercial)............ 17,400 103,905
Daiwa House Industry Co., Ltd. (Consumer Discretionary)..... 17,400 135,567
Daiwa Securities Co., Ltd. (Finance)........................ 17,000 64,691
East Japan Railway Co. (Industrial & Commercial)............ 102 484,627
Ebara Corp. (Industrial & Commercial)....................... 11,600 103,947
Fanuc Ltd. (Information Technology)......................... 7,600 279,876
Fuji Bank Ltd. (Finance).................................... 25,000 122,753
Fuji Photo Film Co., Ltd. (Information & Entertainment)..... 11,600 392,837
Fujitsu Ltd. (Information Technology)....................... 43,400 498,274
Furukawa Electric Co., Ltd. (Industrial & Commercial)....... 13,600 43,209
Hankyu Corp. (Industrial & Commercial)...................... 22,000 91,501
Hazama-Gumi Ltd. (Consumer Discretionary)................... 17,300 10,118
Hitachi Ltd. (Information Technology)+...................... 85,800 565,639
Honda Motor Co., Ltd. (Consumer Discretionary).............. 21,000 715,720
Ito-Yokado Co., Ltd. (Consumer Discretionary)............... 11,600 577,948
Japan Airlines Co., Ltd. (Information & Entertainment)...... 53,100 136,115
Japan Energy Corp. (Energy)................................. 41,400 42,150
Joyo Bank Ltd. (Finance).................................... 9,000 31,973
Jusco Co., Ltd. (Consumer Discretionary).................... 8,800 153,137
Kajima Corp. (Industrial & Commercial)...................... 33,800 90,791
Kansai Electric Power Co., Inc. (Utilities)................. 23,000 366,200
KAO Corp. (Consumer Staples)................................ 23,800 355,737
Kawasaki Steel Corp. (Materials)............................ 28,000 44,884
Kinki Nippon Railway Co., Ltd. (Industrial & Commercial).... 39,500 189,956
Kirin Brewery Co., Ltd. (Consumer Staples).................. 34,800 323,902
Komatsu Ltd. (Industrial & Commercial)...................... 33,800 141,555
Kubota Ltd. (Industrial & Commercial)....................... 49,000 118,528
Kumagai Gumi Co., Ltd. (Industrial & Commercial)............ 52,800 34,313
</TABLE>
- ---------------------
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (continued)
Kyocera Corp. (Information Technology)...................... 5,100 $ 248,942
Kyowa Hakko Kogyo Co., Ltd. (Materials)..................... 17,400 68,726
Long-Term Credit Bank of Japan Ltd. (Finance)............... 28,000 40,638
Marubeni Corp. (Consumer Discretionary)..................... 46,200 93,407
Marui Co., Ltd. (Consumer Discretionary).................... 4,800 73,652
Matsushita Electric Industrial Co., Ltd. (Information
Technology)+.............................................. 49,000 767,781
Mitsubishi Chemical Corp. (Materials)....................... 52,000 93,119
Mitsubishi Corp. (Consumer Discretionary)................... 46,000 277,681
Mitsubishi Electric Corp. (Information Technology).......... 61,800 146,367
Mitsubishi Estate Co., Ltd. (Real Estate)................... 16,000 140,602
Mitsubishi Heavy Industries Ltd. (Industrial &
Commercial)............................................... 94,400 328,549
Mitsubishi Materials Corp. (Materials)...................... 34,600 67,456
Mitsubishi Trust & Banking Corp. (Finance).................. 25,800 229,143
Mitsui & Co., Ltd. (Multi-industry)......................... 47,600 244,032
Mitsui Engineering & Shipbuilding Co., Ltd. (Industrial &
Commercial)............................................... 33,800 26,359
Mitsui Fudosan Co., Ltd. (Real Estate)...................... 11,000 89,039
Mitsukoshi Ltd. (Consumer Discretionary).................... 17,200 43,841
Murata Manufacturing Co., Ltd. (Information Technology)..... 6,800 196,895
Mycal Corp. (Consumer Discretionary)........................ 11,600 70,191
NEC Corp. (Information Technology).......................... 30,800 313,582
NGK Insulators Ltd. (Industrial & Commercial)............... 17,400 156,800
Nippon Denso Co., Ltd. (Industrial & Commercial)............ 21,200 359,737
Nippon Express Co., Ltd. (Industrial & Commercial).......... 14,400 79,128
Nippon Fire & Marine Insurance Co., Ltd. (Finance).......... 17,400 66,590
Nippon Light Metal Co., Ltd. (Materials).................... 16,400 18,829
Nippon Meat Packers, Inc. (Consumer Staples)................ 17,400 224,269
Nippon Oil Co., Ltd. (Energy)............................... 49,200 152,762
Nippon Steel Corp. (Materials).............................. 191,000 324,103
Nippon Telegraph & Telephone Corp. (Utilities).............. 259 2,131,995
Nippon Yusen Kabushiki Kaish (Industrial & Commercial)...... 49,000 169,478
Nissan Motor Co., Ltd. (Consumer Discretionary)............. 61,600 186,815
NKK Corp. (Materials)....................................... 102,200 87,079
Nomura Securities Co., Ltd. (Finance)....................... 17,000 185,356
Odakyu Electric Railway Co., Ltd. (Industrial &
Commercial)............................................... 20,000 65,131
Oji Paper Co., Ltd. (Materials)+............................ 34,800 147,000
Osaka Gas Co., Ltd. (Utilities)............................. 75,200 162,357
Penta-Ocean Construction Co., Ltd. (Industrial &
Commercial)............................................... 17,400 36,436
Pioneer Electronic Corp. (Industrial & Commercial).......... 5,600 109,178
Rohm Co., Ltd. (Information Technology)..................... 2,800 291,140
Sakura Bank Ltd. (Finance).................................. 63,400 188,154
Sankyo Co., Ltd. (Healthcare)............................... 14,600 352,112
Sanwa Bank Ltd. (Finance)................................... 37,000 324,341
Sanyo Electric Co., Ltd. (Information Technology)........... 49,000 140,465
Secom Co., Ltd. (Industrial & Commercial)................... 5,000 284,136
Sega Enterprises Ltd. (Information & Entertainment)......... 3,400 64,077
Sekisui House Ltd. (Consumer Discretionary)................. 17,400 128,782
Sharp Corp. (Information Technology)........................ 31,800 239,493
Shimano, Inc. (Information & Entertainment)................. 5,800 135,273
Shimizu Corp. (Consumer Discretionary)...................... 25,000 68,597
Shin-Etsu Chemical Co. Ltd. (Materials)..................... 8,000 148,747
Shiseido Co., Ltd. (Healthcare)............................. 7,600 88,353
Shizuoka Bank Ltd. (Finance)................................ 10,000 108,167
Showa Denko KK (Materials).................................. 33,800 34,657
Sony Corp. (Information Technology)......................... 8,100 684,309
Sumitomo Chemical Co., Ltd. (Materials)..................... 65,400 176,144
Sumitomo Corp. (Consumer Discretionary)..................... 34,400 182,072
Sumitomo Electric Industries Ltd. (Industrial &
Commercial)............................................... 25,200 263,300
Sumitomo Forestry Co., Ltd. (Materials)..................... 10,800 60,516
Sumitomo Metal Industries Ltd. (Materials).................. 62,800 97,494
</TABLE>
---------------------
97
<PAGE> 188
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (continued)
Sumitomo Metal Mining Co., Ltd. (Materials)................. 17,400 $ 73,877
Sumitomo Osaka Cement Co., Ltd. (Materials)................. 17,200 22,480
Sumitomo Trust & Banking Co., Ltd. (Finance)................ 26,000 243,122
Taisei Corp. (Consumer Discretionary)....................... 34,800 67,846
Taisho Pharmaceutical Co., Ltd. (Healthcare)................ 11,600 223,222
Taiyo Yuden Co., Ltd. (Information Technology).............. 21,000 247,166
Takeda Chemical Industries Ltd. (Healthcare)................ 21,200 548,025
Teijin Ltd. (Consumer Discretionary)........................ 34,800 105,036
Tobu Railway Co., Ltd. (Industrial & Commercial)............ 23,200 65,836
Tohoku Electric Power Co., Inc. (Utilities)................. 12,000 162,467
Tokyo Corp. (Industrial & Commercial)....................... 28,000 91,992
Tokyo Electric Power Co., Inc. (Utilities).................. 30,300 579,789
Tokyo Electron Ltd. (Information Technology)................ 3,100 98,491
Tokyo Gas Co., Ltd. (Utilities)............................. 69,400 143,821
Tokyo Marine & Fire Insurance Co., Ltd. (Finance)........... 52,000 492,628
Toppan Printing Co., Ltd. (Information & Entertainment)..... 23,200 253,292
Toray Industries, Inc. (Materials).......................... 51,100 254,596
Toto Ltd. (Materials)....................................... 17,200 113,764
Toyobo Co., Ltd. (Consumer Discretionary)................... 34,800 47,241
Toyota Motor Corp. (Consumer Discretionary)................. 71,200 1,763,420
Ube Industries Ltd. (Materials)............................. 33,800 42,955
Yokogawa Electric Corp. (Information Technology)............ 19,000 98,231
-------------
27,752,513
-------------
NETHERLANDS -- 4.7%
ABN Amro Holdings NV (Finance).............................. 56,272 1,362,694
Akzo Nobel NV (Materials)+.................................. 2,875 600,719
Elsevier NV (Information & Entertainment)................... 21,000 326,844
Getronics NV (Information Technology)+...................... 3,110 154,646
Heineken NV (Consumer Staples).............................. 11,875 456,447
ING Groep NV (Finance)...................................... 39,358 2,702,737
KLM Royal Dutch Air Lines NV (Information &
Entertainment)............................................ 2,724 107,819
Koninklijke Ahold NV (Consumer Discretionary)............... 18,301 577,864
Koninklijke KNP BT NV (Materials)........................... 3,775 109,812
Koninklijke Nedlloyd Groep NV (Industrial & Commercial)..... 850 18,809
Koninklijke PTT Nederland NV (Information Technology)....... 16,799 938,916
Oce-Van Der Grinten NV (Information Technology)+............ 3,312 139,163
Philips Electronics NV (Information Technology)............. 12,350 1,173,559
Royal Dutch Petroleum Co. (Energy).......................... 75,600 4,308,078
Stork NV (Industrial & Commercial).......................... 1,588 57,643
Unilever NV PLC (Consumer Staples).......................... 22,600 1,795,818
Wolters Kluwer NV (Information & Entertainment)+............ 2,468 346,690
-------------
15,178,258
-------------
NORWAY -- 0.1%
Christiania Bank Og Kreditkasse (Finance)+.................. 33,900 145,320
Den Norske Bank ASA (Finance)............................... 39,500 212,312
NCL Holdings ASA, Class A (Information & Entertainment)+.... 22 105
-------------
357,737
-------------
PORTUGAL -- 1.6%
Banco Commercial Portugues SA (Finance)..................... 20,700 685,429
Banco Commercial Portugues SA new shares (Finance)+......... 3,223 106,721
Banco Espirito Santo e Comercial de Lisboa (Finance)+....... 10,600 373,104
Banco Totta & Acores SA (Finance)........................... 7,600 281,281
BPI-SGPS SA (Finance)+...................................... 10,000 405,146
Cimpor-Cimentos de Portugal SGPS SA (Industrial &
Commercial)............................................... 8,600 329,357
CIN-Corparacao Industrial de Norte SA (Materials)........... 400 30,441
Companhia de Seguros Tranquilidade (Finance)................ 800 26,718
Corticeira Amorim SA (Materials)............................ 1,900 41,193
</TABLE>
- ---------------------
98
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
PORTUGAL (continued)
Electricidad de Portugal SA (Utilities)..................... 38,000 $ 998,631
Engil SGPS (Industrial & Commercial)........................ 700 8,083
INAPA-Investimentos Participacoes e Gestao SA (Materials)... 1,400 17,928
Jeronimo Martins SGPS SA (Consumer Staples)................. 10,900 492,037
Portucel Industrial-Empresa Produtora de Celulose SA
(Materials)............................................... 9,300 80,551
Portugal Telecom SA (Information Technology)................ 19,500 1,024,911
Soares Da Costa (Consumer Discretionary).................... 1,200 11,136
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais SA
(Industrial & Commercial)................................. 4,300 247,194
UNICER Uniao Cervejeira SA (Consumer Staples)............... 1,200 27,456
-------------
5,187,317
-------------
SINGAPORE -- 0.0%
Asia Foods & Properties Ltd. (Consumer Staples)+............ 22,666 4,307
Fraser & Neave Ltd. (Consumer Staples)...................... 800 2,723
Inchcape Marketing Services Ltd. (Multi-industry)+.......... 8,000 1,983
Overseas Chinese Banking Corp. Ltd. (Finance)............... 534 2,121
Robinson & Co., Ltd. (Consumer Discretionary)............... 400 1,218
Shangri-La Hotel Ltd. (Information & Entertainment)......... 400 480
Singapore Press Holdings Ltd. (Information &
Entertainment)............................................ 1,020 8,345
-------------
21,177
-------------
SPAIN -- 6.4%
Acerinox SA (Materials)..................................... 1,387 206,380
Autopistas Concesionaria Espana SA (Industrial &
Commercial)............................................... 21,486 346,640
Banco Bilbao Vizcaya SA (Finance)........................... 63,250 3,176,064
Banco Central Hispanoamericano SA (Finance)................. 34,500 1,130,270
Banco de Santander SA (Finance)............................. 44,550 2,242,933
Banco Espanol de Credito SA (Finance)....................... 3,800 47,766
Banco Popular Espanol SA (Finance).......................... 600 47,588
Bankinter SA (Finance)...................................... 200 13,131
Corporacion Bancaria de Espana SA (Finance)................. 11,550 983,903
Corporacion Financiera Alba SA (Multi-industry)............. 1,325 159,997
Corporacion Mapfre SA (Finance)............................. 5,336 205,975
Dragados & Construcciones SA (Consumer Discretionary)....... 5,350 166,625
Ebro Agricolas, Compania de Alimentacion SA (Consumer
Staples).................................................. 4,050 104,223
Empresa Nacional Celulos SA (Materials)..................... 1,375 29,215
Endesa SA (Utilities)....................................... 89,900 2,153,329
Ercros SA (Materials)....................................... 14,800 20,313
Fomento de Construcciones y Contratas SA (Consumer
Discretionary)............................................ 5,400 273,296
Gas Natural SDG, SA (Utilities)............................. 13,400 916,028
General de Aguas de Barcelona SA (Utilities)................ 4,043 224,092
Iberdrola SA (Utilities).................................... 77,800 1,283,405
Inmobiliaria Metropolitana Vasco Central SA (Real Estate)... 2,712 161,235
Mapfre Vida de Seguro SA(Finance)........................... 26 1,269
Portland Valderrivas SA (Materials)......................... 75 9,477
Repsol SA (Energy).......................................... 25,500 1,416,760
Sociedad General de Aguas de Barcelona SA (Industrial &
Commercial)............................................... 39 2,136
Tabacalera SA, Class A (Consumer Staples)................... 13,500 290,845
Telefonica de Espana SA (Utilities)......................... 89,345 3,991,195
Union Electrica Fenosa SA (Utilities)....................... 26,800 332,458
Uralita SA (Materials)...................................... 5,400 74,114
Vallehermoso SA (Real Estate)............................... 3,983 152,960
Viscofan Industria Navarra De Envolturas Celulsicas SA
(Materials)............................................... 1,400 64,665
Zardoya Otis SA (Industrial & Commercial)................... 6,625 236,061
-------------
20,464,348
-------------
SWEDEN -- 3.8%
ABB AB, Class A (Industrial & Commercial)................... 34,700 560,085
ABB AB, Class B (Industrial & Commercial)................... 14,400 230,590
</TABLE>
---------------------
99
<PAGE> 190
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
SWEDEN (continued)
AGA, Series A (Materials)................................... 8,500 $ 138,281
AGA, Series B (Materials)................................... 50 801
Astra AB, Class A (Healthcare).............................. 69,266 1,391,984
Astra AB, Class B (Healthcare).............................. 16,700 324,952
Atlas Copco AB, Class A (Industrial & Commercial)........... 6,850 198,404
Atlas Copco AB, Class B (Industrial & Commercial)........... 3,600 106,338
Electrolux AB, Series B (Consumer Discretionary)............ 4,000 398,096
Ericsson L.M. Telecommunications Co., Class B (Information
Technology)............................................... 98,400 2,806,119
Esselte AB, Class B (Information Technology)................ 1,500 35,216
Fastighetspartner NF AB (Real Estate)+...................... 15,400 14,835
Granges AB (Materials)+..................................... 50 925
Hennes & Mauritz AB, Class B (Consumer Discretionary)....... 10,700 600,717
NetCom Systems AB, Class B (Information Technology)+........ 5,900 225,843
Nordbanken Holdings AB (Finance)+........................... 19,700 139,506
Sandvik AB, Class A (Materials)............................. 10,200 309,099
Sandvik AB, Class B (Materials)............................. 4,200 127,008
Scanem AB, Class A (Industrial & Commercial)................ 50 2,137
Securitas AB, Series B (Industrial & Commercial)............ 3,736 142,770
Skandia Forsakrings AB (Finance)............................ 28,000 409,069
Skandinaviska Enskilda Banken, Series A (Finance)........... 40,400 672,706
Skanska AB, Series B (Industrial & Commercial).............. 6,600 311,587
SKF AB, Series B (Materials)+............................... 5,000 106,542
Sparbanken Sverige AB, Series A (Finance)+.................. 23,100 694,123
Stora Kopparbergs Bergslags Aktiebolag, Class A
(Materials)............................................... 17,050 276,288
Svenska Cellulosa AB, Class B (Materials)................... 13,000 358,287
Svenska Handelsbanken, Series A (Finance)+.................. 15,000 631,595
Svenska Handelsbanken, Series B (Finance)................... 400 15,898
Svenskt Stal AB (SSAB), Series A (Materials)................ 5,700 110,912
Trelleborg AB, Class B (Multi-industry)..................... 7,200 101,974
Volvo AB, Class A (Consumer Discretionary).................. 1,000 31,580
Volvo AB, Class B (Consumer Discretionary).................. 21,300 680,802
WM-Data AB, Class B (Information Technology)................ 4,000 140,099
-------------
12,295,168
-------------
SWITZERLAND -- 7.7%
ABB AG (Industrial & Commercial)............................ 440 745,461
Adecco SA (Industrial & Commercial)......................... 835 343,807
Alusuisse-Lonza Holdings AG (Multi-industry)................ 260 349,241
Banque Cantonale Vaudoise (Finance)......................... 20 8,545
CS Holding AG (Finance)+.................................... 12,450 2,739,588
Gebrueder Sulzer AG (Industrial & Commercial)+.............. 180 153,939
Georg Fisher AG, Series B (Consumer Staples)................ 175 76,780
Gotthard Bank (Finance)..................................... 40 30,294
Holderbank Financiere Glarus AG (Materials)................. 315 402,707
Nestle SA (Consumer Staples)+............................... 1,775 3,801,603
Novartis AG (Healthcare).................................... 2,885 4,883,955
Roche Holdings AG (Healthcare).............................. 73 1,207,222
Roche Holdings AG Gerusscheine NPV (Healthcare)............. 312 3,208,451
Sairgroup (Information & Entertainment)..................... 750 229,328
Schweizerische BankGesellschaft (Finance)................... 1,100 369,760
Schweizerische BankGesellschaft (Finance)+.................. 940 1,579,885
Schweizerische Rueckversicherungs-Gesellschaft (Consumer
Discretionary)+........................................... 655 1,508,954
SGS Societe Generale de Surveillance Holding SA, Series B
(Industrial & Commercial)................................. 80 155,248
SMH AG (Consumer Discretionary)+............................ 235 202,562
</TABLE>
- ---------------------
100
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
SWITZERLAND (continued)
Swiss Bank Corp. (Finance)+................................. 3,580 $ 1,292,811
Valora Holdings AG (Industrial & Commercial)................ 295 80,147
Vontobel Holdings AG (Finance).............................. 20 28,350
Zuerich Versicherungs-Gesellschaft (Finance)+............... 2,135 1,333,024
-------------
24,731,662
-------------
THAILAND -- 0.0%
Advance Agro PCL (Materials)+............................... 660 564
CMIC Finance & Security PCL (Finance)(1).................... 6,700 0
Finance One PCL (Finance)(1)................................ 37,700 0
General Finance & Securities PCL (Finance)(1)............... 7,650 0
Land & House PCL alien shares (Real Estate)+................ 34,119 12,037
TPI Polene PCL (Materials).................................. 51,400 4,454
Univest Land PCL (Real Estate)(1)........................... 22,500 0
-------------
17,055
-------------
UNITED KINGDOM -- 22.6%
Abbey National PLC (Finance)................................ 77,650 1,386,206
Arjo Wiggins Appleton PLC (Materials)....................... 38,825 156,078
Associated British Foods PLC (Consumer Staples)............. 27,750 253,815
B.A.T. Industries PLC (Multi-industry)...................... 172,061 1,549,866
Bank of Scotland (Finance).................................. 2,600 30,087
Barclays PLC (Finance)...................................... 97,445 2,600,626
Bass PLC (Consumer Staples)+................................ 54,463 1,000,738
Bass PLC, Class B (Finance)................................. 2,300 3,268
BG PLC (Utilities).......................................... 215,535 1,111,546
BICC Group PLC (Industrial & Commercial).................... 38,843 104,680
Blue Circle Industries PLC (Materials)...................... 72,100 462,801
BOC Group PLC (Materials)................................... 38,795 614,630
Boots Co. PLC (Consumer Discretionary)...................... 61,000 915,612
BPB Industries PLC (Materials).............................. 38,825 276,639
British Aerospace PLC (Industrial & Commercial)............. 110,952 984,014
British Airways PLC (Information & Entertainment)........... 66,604 705,467
British Petroleum Co. PLC (Energy).......................... 320,654 4,708,283
British Sky Broadcasting Group PLC (Information &
Entertainment)............................................ 88,725 624,582
British Steel PLC (Materials)............................... 110,975 274,602
British Telecommunications PLC (Information Technology)..... 321,750 3,358,038
BTR Ltd. PLC (Multi-industry)............................... 189,293 623,755
Burmah Castrol PLC (Energy)................................. 16,629 331,626
Cable & Wireless PLC (Information Technology)............... 138,715 1,571,217
Cadbury Schweppes PLC (Consumer Staples).................... 60,996 932,987
Caradon PLC (Materials)..................................... 44,420 145,828
Centrica PLC (Utilities)+................................... 244,100 396,695
Coats Viyella PLC (Consumer Discretionary).................. 49,895 74,974
Commercial Union PLC (Finance)+............................. 38,848 706,204
Courtaulds PLC (Materials).................................. 27,750 211,664
De La Rue PLC (Information & Entertainment)................. 5,569 26,560
Diageo PLC (Consumer Staples)............................... 175,209 1,981,721
Diageo PLC, Class B (Consumer Staples)...................... 20,732 169,308
Elementis PLC (Multi-industry).............................. 43,290 123,735
Emi Group PLC (Information & Entertainment)................. 28,048 237,300
General Electric Co. PLC (Multi-industry)................... 160,975 1,319,862
GKN PLC (Consumer Discretionary)............................ 66,550 991,309
Glaxo Wellcome PLC (Healthcare)@............................ 170,650 4,593,352
Granada Group PLC (Information & Entertainment)............. 38,831 728,727
Great Universal Stores PLC (Consumer Discretionary)......... 66,575 946,556
Guardian Royal Exchange PLC (Finance)....................... 42,296 266,312
Hanson PLC (Multi-industry)................................. 33,272 195,771
HSBC Holdings PLC (Finance)................................. 125,818 3,109,195
HSBC Holdings PLC (75 P) (Finance).......................... 1,800 47,039
</TABLE>
---------------------
101
<PAGE> 192
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (continued)
Imperial Chemical Industries PLC (Materials)................ 49,900 $ 946,235
Ladbroke Group PLC (Information & Entertainment)............ 66,546 376,066
Land Securities PLC (Real Estate)........................... 44,400 696,903
LASMO PLC (Energy).......................................... 44,400 210,304
Legal & General Group Ltd. PLC (Finance).................... 66,575 736,150
Lloyds TSB Group Ltd. PLC (Finance)......................... 316,524 4,598,528
Lonrho Arfica PLC (Multi-industry)+......................... 11,101 13,417
Lonrho PLC (Multi-industry)................................. 11,101 54,394
Marks & Spencer PLC (Consumer Discretionary)................ 194,200 1,731,841
MEPC PLC (Real Estate)...................................... 33,325 299,364
National Power PLC (Utilities).............................. 77,650 722,907
National Westminster Bank PLC (Finance)..................... 3,600 65,796
Peninsular & Oriental Steam PLC (Industrial & Commercial)... 45,141 621,903
Pilkington PLC (Materials).................................. 83,214 198,434
Prudential Corp. PLC (Finance).............................. 110,910 1,474,556
Rank Group PLC (Information & Entertainment)................ 51,690 301,398
Reed International PLC (Information & Entertainment)........ 77,650 719,737
Reuters Group PLC (Information & Entertainment)............. 81,726 937,719
Rexam PLC (Materials)....................................... 33,325 169,004
Rio Tinto PLC (Materials)+.................................. 66,598 832,669
RMC Group PLC (Materials)................................... 16,650 314,096
Royal & Sun Alliance Insurance Group PLC (Finance).......... 77,631 823,532
Royal Bank of Scotland Group PLC (Finance).................. 29,551 499,067
Safeway PLC (Consumer Discretionary)+....................... 49,952 303,706
Sainsbury (J.) PLC (Consumer Discretionary)+................ 88,772 702,483
Schroder PLC (Finance)...................................... 16,612 487,840
Scottish Power PLC (Utilities).............................. 55,503 501,312
Sears PLC (Consumer Discretionary).......................... 110,975 116,910
Sedgwick Group PLC (Finance)................................ 33,271 80,426
Slough Estates PLC (Real Estate)............................ 27,750 172,232
SmithKline Beecham PLC (Healthcare)......................... 282,683 3,063,422
Southern Electric PLC (Utilities)........................... 27,771 240,173
Standard Chartered PLC (Finance)............................ 2,000 24,924
Tarmac PLC (Consumer Discretionary)......................... 77,637 158,823
Taylor Woodrow PLC (Industrial & Commercial)................ 44,379 165,264
Tesco PLC (Consumer Staples)................................ 105,405 926,211
Thames Water PLC (Industrial & Commercial).................. 38,861 631,226
Thorn PLC (Consumer Discretionary).......................... 27,750 92,461
TI Group PLC (Multi-industry)............................... 27,771 268,068
Unilever NV PLC (Consumer Staples).......................... 161,125 1,769,789
United Utilities PLC (Utilities)............................ 38,847 526,625
Vodafone Group PLC (Information Technology)................. 183,157 2,013,283
Zeneca Group PLC (Healthcare)............................... 49,900 2,028,578
-------------
72,471,051
-------------
TOTAL COMMON STOCK (cost $208,834,202)...................... 270,846,881
-------------
<CAPTION>
PREFERRED STOCK -- 0.7%
-----------------------------------------------------------------------------------------
<S> <C> <C>
AUSTRALIA -- 0.0%
News Corp., Ltd. 5.00% (Information & Entertainment)........ 32,116 173,975
-------------
AUSTRIA -- 0.1%
Bank Austria AG (Finance)................................... 1,200 106,957
Bank Austria AG 1.29% (Finance)............................. 900 80,792
Bau Holdings AG (Consumer Discretionary).................... 100 4,819
-------------
192,568
-------------
</TABLE>
- ---------------------
102
<PAGE> 193
<TABLE>
<CAPTION>
PREFERRED STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY -- 0.4%
RWE AG 3.19% non-voting (Utilities)......................... 9,220 $ 372,056
SAP AG 0.37% non-voting (Information Technology)............ 1,744 967,667
Volkswagen AG (Consumer Discretionary)...................... 400 240,549
-------------
1,580,272
-------------
ITALY -- 0.1%
Fiat SpA 2.49% (Consumer Discretionary)..................... 98,850 265,118
-------------
TOTAL PREFERRED STOCK (cost $1,078,366)..................... 2,211,933
-------------
<CAPTION>
PRINCIPAL
AMOUNT
(DENOMINATED
IN LOCAL
BONDS & NOTES -- 0.0% CURRENCY)
-----------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE -- 0.0%
Establissements Economiques du Casino Guichard-Perrachon SA
4.50% 2001 (Consumer Discretionary)....................... 43,400 15,753
Simco SA 3.25% 2006 (Real Estate)........................... 479 47,956
Sodexho SA 6.00% 2004 (Industrial & Commercial)............. 30,000 5,205
-------------
68,914
-------------
ITALY -- 0.0%
La Rinascente Per L'Esercizio Grandi Magazzini SpA 4.50%
2000 (Consumer Discretionary)............................. 16,000,000 9,037
-------------
PORTUGAL -- 0.0%
Jeronimo Martins SGPS SA zero coupon 2004 (Consumer
Staples).................................................. 1,746,000 9,970
-------------
TOTAL BONDS & NOTES (cost $81,041).......................... 87,921
-------------
RIGHTS -- 0.1%+ RIGHTS
-----------------------------------------------------------------------------------------
ITALY -- 0.0%
Magneti Marelli SpA 6/02/98 (Industrial & Commercial)....... 42,500 14,795
-------------
NETHERLANDS -- 0.0%
Koninlijke Ahold NV 5/13/98 (Consumer Discretionary)........ 18,301 11,557
-------------
PORTUGAL -- 0.1%
Banco Espirito Santo e Commercial de Lisboa SA 6/23/98
(Finance)................................................. 10,600 74,621
Banco Espirito Santo e Commercial de Lisboa SA 6/08/98
(Finance)................................................. 10,600 13,994
-------------
88,615
-------------
TOTAL RIGHTS (cost $7,179).................................. 114,967
-------------
</TABLE>
---------------------
103
<PAGE> 194
<TABLE>
<CAPTION>
WARRANTS WARRANTS VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
FRANCE -- 0.0%
Sodexho SA 6/07/04 (Industrial & Commercial)................ 6 $ 2,126
Vivendi 5/02/01 (Multi-industry)............................ 4,504 7,829
-------------
9,955
-------------
HONG KONG -- 0.0%
Hong Kong & China Gas 9/30/99 (Utilities)................... 11,700 876
Hong Kong & Shanghai Hotels Ltd. 12/10/98 (Information &
Entertainment)............................................ 5,666 7
Hysan Development Co., Ltd. 4/30/99 (Real Estate)(1)........ 6,500 0
Oriental Press Group 10/02/98 (Information &
Entertainment)............................................ 5,600 7
-------------
890
-------------
ITALY -- 0.0%
La Rinascente 11/30/99 (Finance)............................ 2,650 5,668
Mediobanca SpA 12/31/99 (Finance)........................... 2,000 2,389
Mediobanca SpA 12/20/00 (Finance)(1)........................ 8,740 0
-------------
8,057
-------------
SINGAPORE -- 0.0%
Asia Food & Properties Ltd. 12/07/02 (Consumer Staples)..... 1,700 136
Straits Steamship Land Ltd. 12/12/00 (Multi-industry)....... 4,750 695
-------------
831
-------------
TOTAL WARRANTS (cost $2,675)................................ 19,733
-------------
TOTAL INVESTMENT SECURITIES (cost $210,003,462)............. 273,281,435
-------------
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 14.4% AMOUNT
-----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 14.4%
Agreement with State Street Bank & Trust Co., bearing
interest at 5.00%, dated 5/29/98, to be repurchased
6/01/98 in the amount of $46,269,270 and collateralized by
$39,930,000 of U.S. Treasury Notes, bearing interest at
7.50%, due 11/15/16 and having an approximate aggregate
value of $47,175,178 (cost $46,250,000)@.................. $46,250,000 46,250,000
-------------
TOTAL INVESTMENTS --
(cost $256,253,462) 99.6% 319,531,435
Other assets less liabilities -- 0.4 1,361,253
------ -------------
NET ASSETS -- 100.0% $320,892,688
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
(1) Fair valued security; see Note 2
@ The security or a portion thereof represents collateral for the
following open futures contracts:
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS
--------------------------------------------------------------------------------------------------------
VALUE AS OF
NUMBER OF EXPIRATION VALUE AT MAY 31, UNREALIZED
CONTRACTS DESCRIPTION DATE TRADE DATE 1998 APPRECIATION
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
16 Long DTB DAX Index..................... June 1998 $4,839,736 $4,990,797 $151,061
37 Long CAC 40 Index...................... June 1998 4,692,472 4,981,840 289,368
---------
$440,429
=========
</TABLE>
-----------------------------
FRF -- French Franc
ITL -- Italian Lira
- ---------------------
104
<PAGE> 195
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACT
--------------------------------------------------------------------
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEM 3,213,000 USD 1,819,881 08/14/98 $ 11,166
*HKD 23,796,447 USD 3,063,000 08/12/98 12,571
*USD 2,952,856 ITL 5,228,475,200 07/15/98 22,411
JPY 499,971,150 USD 4,011,000 06/03/98 398,357
JPY 116,334,000 USD 889,404 06/09/98 48,115
JPY 788,232,600 USD 6,201,673 06/30/98 484,827
*JPY 638,133,000 USD 4,882,986 08/19/98 220,408
JPY 582,844,675 USD 4,360,521 08/26/98 97,700
USD 3,610,943 JPY 499,971,150 06/03/98 1,700
*USD 330,000 SGD 607,365 07/07/98 31,426
*USD 1,360,000 SGD 2,351,780 07/07/98 39,480
*USD 205,610 SGD 348,715 07/07/98 1,901
USD 4,759,275 DEM 8,531,000 07/09/98 33,279
*USD 151,000 MYR 688,560 08/04/98 22,729
*USD 1,138,627 MYR 4,611,400 08/04/98 24,871
-----------
1,450,941
-----------
</TABLE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
DEPRECIATION
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEM 4,090,000 USD 2,251,831 06/16/98 (42,799)
DEM 1,032,500 USD 566,467 06/16/98 (12,800)
DEM 1,678,471 USD 918,000 07/09/98 (24,933)
*FRF 14,179,000 USD 2,327,975 06/16/98 (44,313)
FRF 10,751,395 USD 1,796,991 08/04/98 (6,981)
*ITL 5,228,475,200 USD 2,906,000 07/15/98 (69,268)
JPY 499,971,000 USD 3,662,791 09/10/98 (1,739)
*MYR 688,560 USD 150,835 08/04/98 (22,894)
*MYR 4,611,440 USD 1,010,173 08/04/98 (153,325)
*SGD 607,365 USD 345,192 07/07/98 (16,235)
*SGD 2,351,780 USD 1,336,618 07/07/98 (62,862)
*SGD 348,715 USD 198,190 07/07/98 (9,321)
*USD 3,059,456 HKD 23,796,447 05/08/98 (9,027)
*USD 1,937,517 FRF 11,427,475 06/16/98 (25,586)
USD 5,510,634 DEM 9,692,103 07/09/98 (65,794)
*USD 3,170,942 JPY 416,202,000 08/19/98 (129,924)
-----------
(697,801)
-----------
Net Unrealized Appreciation.................. $ 753,140
===========
</TABLE>
-----------------------------
* Represents open foreign forward currency contracts and
offsetting or partially offsetting open forward foreign currency
contracts that do not have additional market risk but have
continued counterparty settlement risk.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEM -- Deutsche Mark FRF -- French Franc SGD -- Singapore Dollar
HKD -- Hong Kong Dollar JPY -- Japanese Yen USD -- United States Dollar
ITL -- Italian Lira MYR -- Malaysian Ringgit
</TABLE>
See Notes to Financial Statements
---------------------
105
<PAGE> 196
- ---------------------
SUNAMERICA SERIES TRUST
REAL ESTATE PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 93.2% SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT -- 6.8%
Leisure & Tourism -- 6.8%
Bristol Hotel Co.+.......................................... 7,300 $ 193,450
CapStar Hotel Co.+.......................................... 35,400 1,035,450
Host Marriott Corp.+........................................ 7,300 140,525
Premier Parks, Inc.+........................................ 14,200 754,375
Servico, Inc.+.............................................. 46,500 790,500
Vail Resorts, Inc.+......................................... 25,000 725,000
------------
3,639,300
------------
MULTI-INDUSTRY -- 1.4%
Multi-Industry -- 1.4%
St. Joe Corp................................................ 25,100 751,431
------------
REAL ESTATE -- 85.0%
Real Estate Companies -- 8.6%
Boardwalk Equities, Inc.+................................... 114,700 1,732,034
Catellus Development Corp.+................................. 54,000 1,002,375
Crescent Operating, Inc.+................................... 1,780 36,713
Security Capital Group, Inc., Class B+...................... 46,000 1,288,000
TrizecHahn Corp............................................. 23,400 501,637
Real Estate Investment Trusts -- 76.4%
Alexandria Real Estate Equities, Inc........................ 50,000 1,584,375
AMB Property Corp. ......................................... 37,500 892,969
Apartment Investment & Management Co., Class A.............. 35,475 1,383,525
Arden Realty, Inc........................................... 4,800 131,700
Avalon Properties, Inc...................................... 35,100 987,188
Bay Apartment Communities, Inc.............................. 11,400 418,950
Boston Properties, Inc...................................... 36,100 1,227,400
Boykin Lodging Co........................................... 7,000 148,313
Brandywine Realty Trust..................................... 30,800 714,175
Camden Property Trust....................................... 28,059 857,553
CarrAmerica Realty Corp..................................... 3,600 100,800
CCA Prison Realty Trust..................................... 6,400 200,400
CenterPoint Properties Corp................................. 60,500 2,049,437
Chelsea GCA Realty, Inc..................................... 2,500 100,156
Cornerstone Properties, Inc. ............................... 47,300 827,750
Crescent Real Estate Equities Co............................ 35,500 1,215,875
Duke Realty Investments, Inc................................ 6,200 140,275
Equity Office Properties Trust.............................. 28,497 783,668
Equity Residential Properties Trust......................... 4,400 215,325
Essex Property Trust, Inc................................... 27,500 893,750
FelCor Suite Hotels, Inc.................................... 25,100 864,381
First Industrial Realty Trust, Inc.......................... 19,300 598,300
First Union Real Estate Investments......................... 9,900 108,281
Gables Residential Trust.................................... 41,700 1,162,387
Glenborough Realty Trust, Inc............................... 23,600 663,750
Golf Trust of America, Inc.................................. 16,000 524,000
Home Properties of New York, Inc............................ 65,900 1,762,825
IRT Property Co............................................. 10,800 122,850
</TABLE>
- ---------------------
106
<PAGE> 197
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE (continued)
Real Estate Investment Trusts (continued)
Irvine Apartment Communities, Inc........................... 10,800 $ 322,650
JDN Realty Corp............................................. 36,000 1,170,000
Kilroy Realty Corp.......................................... 6,400 167,600
Kimco Realty Corp........................................... 5,500 214,156
Liberty Property Trust...................................... 36,700 970,256
Mack-Cali Realty Corp. ..................................... 37,100 1,335,600
National Golf Properties, Inc............................... 4,400 132,275
Pacific Gulf Properties, Inc................................ 14,000 304,500
Parkway Properties, Inc..................................... 37,800 1,169,437
Patriot American Hospitality, Inc........................... 32,016 766,383
Pennsylvania Real Estate Investment Trust................... 9,600 226,200
Post Properties, Inc........................................ 12,200 501,725
Prentiss Properties Trust................................... 12,300 314,419
PS Business Parks, Inc...................................... 21,200 506,150
Public Storage, Inc......................................... 34,600 1,038,000
Reckson Associates Realty Corp.............................. 49,600 1,233,800
Security Capital Pacific Trust.............................. 36,042 813,198
Simon DeBartolo Group, Inc.................................. 19,600 654,150
SL Green Realty Corp........................................ 35,000 794,063
Starwood Hotels and Resorts Trust........................... 44,300 2,090,406
Storage USA, Inc............................................ 31,700 1,178,844
Sunstone Hotel Investors, Inc............................... 32,200 462,875
The Macerich Co............................................. 6,600 178,200
The Rouse Co................................................ 30,800 925,925
Tower Realty Trust, Inc. ................................... 6,100 139,919
United States Restaurant Properties, Inc.................... 20,050 593,981
Urban Shopping Centers, Inc................................. 3,200 105,600
Vornado Realty Trust........................................ 42,200 1,619,425
Weingarten Realty Investors................................. 1,800 76,950
------------
45,247,804
------------
TOTAL COMMON STOCK (cost $50,713,515)....................... 49,638,535
------------
<CAPTION>
PREFERRED STOCK -- 3.0%
---------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE -- 3.0%
Real Estate Investment Trusts -- 3.0%
Camden Property Trust convertible, Series A $2.25........... 700 18,856
Equity Residential Properties Trust convertible, Series E
7.00%..................................................... 26,200 710,675
Security Capital Pacific Trust convertible, Series A
1.75%..................................................... 400 12,050
SL Green Realty Corp. convertible, 8.00%.................... 19,300 488,483
The Rouse Co. convertible, Series B 3.00%................... 5,400 261,900
Vornado Realty Trust convertible, Series A 6.50%............ 1,700 95,200
------------
TOTAL PREFERRED STOCK (cost $1,634,401)..................... 1,587,164
------------
TOTAL INVESTMENT SECURITIES (cost $52,347,916).............. 51,225,699
------------
</TABLE>
---------------------
107
<PAGE> 198
<TABLE>
<CAPTION>
PRINCIPAL
SHORT-TERM SECURITIES -- 5.3% AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL AGENCY OBLIGATIONS -- 5.3%
Federal Home Loan Mortgage Discount Notes 5.38% due 6/01/98
(cost $2,820,000)......................................... $2,820,000 $ 2,820,000
------------
TOTAL INVESTMENTS --
(cost $55,167,916) 101.5% 54,045,699
Liabilities in excess of other assets -- (1.5) (774,806)
------ ------------
NET ASSETS -- 100.0% $53,270,893
====== ============
</TABLE>
-----------------------------
+ Non-income producing securities
See Notes to Financial Statements
- ---------------------
108
<PAGE> 199
- ---------------------
SUNAMERICA SERIES TRUST
AGGRESSIVE GROWTH PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 86.4% SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER DISCRETIONARY -- 6.1%
Apparel & Textiles -- 1.9%
Gap, Inc.................................................... 15,000 $ 810,000
Mohawk Industries, Inc.+.................................... 44,200 1,342,575
Housing -- 1.5%
D.R. Horton, Inc............................................ 50,000 900,000
Toll Brothers, Inc.+........................................ 30,000 772,500
Retail -- 2.7%
Abercrombie & Fitch Co.+.................................... 30,000 1,267,500
Krause's Furniture, Inc.+................................... 79,000 281,438
Movado Group, Inc........................................... 36,500 1,058,500
Office Depot, Inc.+......................................... 15,500 457,250
-------------
6,889,763
-------------
CONSUMER STAPLES -- 2.0%
Food, Beverage & Tobacco -- 0.4%
Keebler Foods Co.+.......................................... 14,000 406,875
Household Products -- 1.6%
Furniture Brands International, Inc.+....................... 5,000 147,500
Scotts Co., Class A+........................................ 22,000 767,250
Steiner Leisure Ltd.+....................................... 30,000 892,500
-------------
2,214,125
-------------
ENERGY -- 3.7%
Energy Services -- 3.7%
EVI Weatherford, Inc.+...................................... 26,000 1,314,625
Friede Goldman International, Inc.+......................... 14,500 482,578
Global Marine, Inc.+........................................ 18,500 412,781
Nabors Industries, Inc. +................................... 18,500 435,906
R & B Falcon Corp.+......................................... 14,800 424,575
Transocean Offshore, Inc.................................... 13,000 641,063
Varco International, Inc.+.................................. 18,500 482,156
-------------
4,193,684
-------------
FINANCE -- 14.3%
Banks -- 7.2%
First American Corp......................................... 28,800 1,335,600
Fleet Financial Group, Inc.................................. 13,500 1,107,000
Hamilton Bancorp, Inc.+..................................... 29,400 944,475
Hibernia Corp. Class A...................................... 30,000 630,000
PNC Bank Corp............................................... 32,000 1,848,000
Summit Bancorp.............................................. 23,000 1,152,875
U.S. Bancorp................................................ 26,850 1,050,506
Financial Services -- 5.3%
Crestar Financial Corp...................................... 21,000 1,206,187
Donaldson, Lufkin & Jenrette, Inc........................... 20,000 881,250
Healthcare Financial Partners, Inc.+........................ 25,000 1,228,125
</TABLE>
---------------------
109
<PAGE> 200
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE (continued)
Financial Services (continued)
Legg Mason, Inc............................................. 14,900 $ 898,656
Lehman Brothers Holdings, Inc............................... 13,000 922,188
Merrill Lynch & Co., Inc.................................... 5,000 447,500
The Kroll O'Gara Co.+....................................... 19,700 428,475
Insurance -- 1.8%
Annuity And Life Re, Ltd.+.................................. 36,000 821,250
Reliance Group Holdings, Inc................................ 67,000 1,210,188
-------------
16,112,275
-------------
HEALTHCARE -- 5.4%
Drugs -- 0.4%
Sepracor, Inc.+............................................. 10,000 430,000
Health Services -- 2.8%
Advance Paradigm, Inc.+..................................... 14,300 506,756
Arterial Vascular Engineering, Inc.+........................ 19,500 602,672
Medaphis Corp.+............................................. 170,000 1,275,000
U.S. Vision, Inc.+.......................................... 30,000 382,500
Vision Twenty One, Inc.+.................................... 50,000 365,625
Medical Products -- 2.2%
Guidant Corp................................................ 9,000 579,938
Medimmune, Inc.+............................................ 20,000 997,500
Nanogen, Inc.+.............................................. 27,000 216,000
Novoste Corp.+.............................................. 21,000 530,250
Symphonix Devices, Inc.+.................................... 20,000 210,000
-------------
6,096,241
-------------
INDUSTRIAL & COMMERCIAL -- 7.3%
Aerospace & Military Technology -- 0.6%
Aeroflex Inc.+.............................................. 66,800 751,500
Business Services -- 6.7%
American Disposal Services, Inc.+........................... 30,000 1,174,687
Answerthink Consulting Group, Inc.+......................... 16,000 247,000
Caliber Learning Network Inc.+.............................. 11,200 184,800
North American Scientific, Inc.+............................ 73,950 2,144,550
Pre-Paid Legal Services, Inc.+.............................. 20,000 710,000
Preview Travel, Inc.+....................................... 40,400 1,146,350
Stirling Cooke Brown Holdings Ltd........................... 24,000 669,000
Sylvan Learning Systems, Inc.+.............................. 40,500 1,235,250
-------------
8,263,137
-------------
INFORMATION & ENTERTAINMENT -- 22.0%
Broadcasting & Media -- 15.1%
CCC Information Services Group, Inc.+....................... 15,500 351,656
Chancellor Media Corp.+..................................... 34,900 1,459,256
Cinar Films, Inc., Class B+................................. 43,000 822,375
Clear Channel Communications, Inc.+......................... 9,400 901,225
Clearnet Communications, Inc.+.............................. 86,900 993,919
CMG Information Services, Inc.+............................. 10,000 443,750
DoubleClick, Inc.+.......................................... 38,000 1,315,750
HA-LO Industries, Inc.+..................................... 49,400 1,528,312
Jacor Communications, Inc.+................................. 24,000 1,269,000
RCM Technologies, Inc.+..................................... 72,500 1,504,375
Snyder Communications, Inc.+................................ 74,000 2,983,125
Source Media, Inc.+......................................... 45,000 660,938
</TABLE>
- ---------------------
110
<PAGE> 201
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
INFORMATION & ENTERTAINMENT (continued)
Broadcasting & Media (continued)
SportsLine USA, Inc.+....................................... 32,000 $ 870,000
Univision Communications, Inc., Class A+.................... 28,500 990,375
Young & Rubicam, Inc.+...................................... 30,000 840,000
Entertainment Products -- 2.9%
Oakley, Inc.+............................................... 98,400 1,285,350
Sunglass Hut International, Inc.+........................... 162,000 1,974,375
Leisure & Tourism -- 4.0%
Carnival Corp., Class A+.................................... 21,500 1,456,625
Outback Steakhouse, Inc.+................................... 43,300 1,596,688
Royal Caribbean Cruises Ltd................................. 13,500 940,781
Travel Services International, Inc.+........................ 15,400 537,075
-------------
24,724,950
-------------
INFORMATION TECHNOLOGY -- 23.2%
Communication Equipment -- 2.4%
Ascend Communications, Inc.+................................ 52,000 2,245,750
IWL Communications, Inc.+................................... 20,000 310,000
Tellabs, Inc.+.............................................. 2,100 144,309
Computers & Business Equipment -- 1.0%
DA Consulting Group, Inc.+.................................. 1,000 14,375
Network Appliance, Inc.+.................................... 30,000 1,043,438
Electronics -- 1.2%
Lumen Technologies, Inc.+................................... 135,000 1,113,750
Uniphase Corp.+............................................. 5,000 255,000
Software -- 10.2%
Applied Voice Technology, Inc.+............................. 33,000 616,687
Cambridge Technology Partners, Inc.+........................ 10,000 501,563
Compuware Corp.+............................................ 36,000 1,653,750
DSET Corp.+................................................. 77,800 1,179,156
Excite, Inc.+............................................... 5,500 299,063
HBO & Co.................................................... 29,000 1,673,844
J.D. Edwards & Co.+......................................... 19,700 724,591
Keane, Inc.+................................................ 18,000 807,750
Legato Systems, Inc.+....................................... 33,200 950,350
Lycos, Inc.+................................................ 10,500 556,828
Mobius Management Systems, Inc.+............................ 30,000 423,750
Saville Systems PLC ADR+.................................... 23,000 918,562
Segue Software, Inc. +...................................... 7,500 97,500
Verio, Inc.+................................................ 30,500 697,687
Yahoo!, Inc.+............................................... 3,500 383,250
Telecommunications -- 8.4%
America Online, Inc.+....................................... 10,000 833,125
Frontier Corp............................................... 38,000 1,156,625
Glenayre Technologies, Inc.+................................ 81,000 1,240,312
GST Telecommunications, Inc+................................ 70,900 886,250
Intermedia Communications, Inc.+............................ 16,400 1,215,650
Lucent Technologies, Inc.................................... 20,000 1,418,750
Metro One Telecomm, Inc.+................................... 38,300 454,813
Pacific Gateway Exchange, Inc.+............................. 9,800 417,725
Primus Telecommunications Group, Inc.+...................... 8,600 159,100
Qwest Communications International, Inc.+................... 20,000 661,250
STAR Telecommunications, Inc.+.............................. 20,500 484,313
STARTEC Global Communications Corp.+........................ 32,600 533,825
-------------
26,072,691
-------------
</TABLE>
---------------------
111
<PAGE> 202
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
-----------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- 2.4%
Electric Utilities -- 1.0%
Niagara Mohawk Power Corp.+................................. 90,000 $ 1,113,750
Telephone -- 1.4%
Century Telephone Enterprises, Inc.......................... 25,000 1,107,812
Cincinnati Bell, Inc........................................ 15,000 477,188
-------------
2,698,750
-------------
TOTAL COMMON STOCK (cost $91,256,863)....................... 97,265,616
-------------
<CAPTION>
PUT OPTIONS -- 0.5%
-----------------------------------------------------------------------------------------
<S> <C> <C>
Nasdaq 100 Index Put, exp 7/98.............................. 2,800 135,450
S & P 500 Index Put, exp 7/98............................... 5,600 176,400
S & P 500 Index Put, exp 6/98............................... 2,800 65,450
Semiconductor Index Put, exp 6/98........................... 7,500 230,625
-------------
TOTAL PUT OPTIONS (cost $477,399)........................... 607,925
-------------
TOTAL INVESTMENT SECURITIES (cost $91,734,262).............. 97,873,541
-------------
<CAPTION>
PRINCIPAL
REPURCHASE AGREEMENT -- 16.9% AMOUNT
-----------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 16.9%
Joint Repurchase Agreement Account (Note 3)
(cost $18,983,000)........................................ $18,983,000 18,983,000
-------------
TOTAL INVESTMENTS --
(cost $110,717,262) 103.8% 116,856,541
Total written call options (0.1) (65,000)
Liabilities in excess of other assets -- (3.7) (4,260,650)
------ -------------
NET ASSETS -- 100.0% $112,530,891
====== =============
</TABLE>
-----------------------------
+ Non-income producing securities
ADR -- American Depository Receipt
<TABLE>
<CAPTION>
OPEN COVERED WRITTEN CALL OPTIONS
--------------------------------------------------------------------------------------------------------
SHARES SUBJECT EXPIRATION EXERCISE
CALL OPTIONS TO CALL DATE PRICE VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
America Online, Inc................................. 8,000 July 1998 $80.00 $(65,000)
=========
</TABLE>
See Notes to Financial Statements
- ---------------------
112
<PAGE> 203
- ---------------------
SUNAMERICA SERIES TRUST
EMERGING MARKETS PORTFOLIO INVESTMENT PORTFOLIO -- MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK -- 88.4% SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 4.6%
Banco Frances del Rio de la Plata SA ADR (Finance).......... 31,466 $ 241,144
Irsa Inversiones y Represenaciones SA GDR (Real Estate)..... 4,200 148,575
Perez Cos. SA (Multi-industry).............................. 34,100 187,980
Telefonica de Argentina SA ADR (Utilities).................. 10,200 332,138
YPF Sociedad Anonima ADR (Energy)........................... 13,700 425,556
------------
1,335,393
------------
BRAZIL -- 12.2%
Brazil Realty SA Empreendimentos & Participacoes GDR (Real
Estate)*(1)............................................... 7,100 157,088
Centrais Electricas de Santa Brasileiras SA GDR
(Utilities)............................................... 1,900 170,147
Compania Brasileira de Distribuidora GDR (Industrial &
Commercial)............................................... 27,700 662,285
Compania de Saneamento Basico do Estado de Sao Paulo
(Materials)............................................... 700,000 118,685
Compania Energetica de Minas ADR (Materials)................ 16,888 552,811
Compania Siderurgica Nacional (Materials)................... 7,700,000 197,505
Compania Siderurgica Nacional ADR (Materials)............... 2,500 60,860
Compania Vale do Rio Doce ADR (Materials)................... 25,000 510,787
Petroleo Brasileiro SA ADR (Energy)......................... 20,800 406,892
Souza Cruz SA (Consumer Staples)............................ 18,000 123,641
Telecomunicacoes de Brasileiras SA ADR (Information
Technology)............................................... 5,450 581,106
------------
3,541,807
------------
CANADA -- 1.4%
Hurricane Hydrocarbons Ltd. (Energy)........................ 37,320 178,031
Super Sol Ltd. ADR (Materials).............................. 12,500 217,969
------------
396,000
------------
CHILE -- 1.4%
Distribucion y Servicio D&S SA ADR (Consumer
Discretionary)............................................ 13,600 215,050
Madeco SA ADR (Materials)................................... 16,300 207,825
------------
422,875
------------
CHINA -- 1.0%
Beijing Datang Power Generation Co. Ltd. (Utilities)........ 160,000 56,266
Guangdong Kelon Electric Holdings (Industrial &
Commercial)............................................... 126,000 120,325
Qingling Motors Co., Ltd. (Consumer Discretionary).......... 180,000 70,848
Yanzhou Coal Mining Co., Ltd. (Materials)................... 218,000 45,012
------------
292,451
------------
GREECE -- 4.7%
Alpha Credit Bank (Finance)................................. 2,600 271,262
Commercial Bank of Greece (Finance)......................... 2,700 184,282
Hellenic Telecommunications Organization SA GDR
(Information Technology).................................. 17,500 251,562
National Bank Of Greece (Finance)........................... 2,160 310,764
OTE Greek Telecommunications (Utilities).................... 12,200 358,294
------------
1,376,164
------------
HONG KONG -- 3.1%
Asia Satellite Telecom Holdings Ltd. (Information
Technology)+.............................................. 55,000 85,527
Cheung Kong Holdings Ltd. (Real Estate)..................... 39,000 86,566
China Pharmaceutical Enterprise and Investment Corp., Ltd.
(Healthcare).............................................. 300,000 28,262
China Telecom, Ltd. (Information Technology)+............... 66,000 117,964
Dao Heng Bank Group Ltd. (Finance).......................... 35,000 74,977
Johnson Electric Holdings Ltd. (Industrial & Commercial).... 21,000 81,301
</TABLE>
---------------------
113
<PAGE> 204
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
HONG KONG (continued)
New World Development Co. Ltd. (Real Estate)+............... 50,900 $ 89,990
Ng Fung Hong Ltd. (Consumer Staples)........................ 110,000 93,690
Shanghai Industrial Holdings Ltd. (Finance)................. 35,000 98,238
Smartone Telecommunications (Information & Entertainment)... 30,000 71,041
VTech Holdings Ltd. (Information Technology)................ 22,000 71,403
------------
898,959
------------
HUNGARY -- 1.4%
Magyar Olaj Rt GDR (Utilities)*............................. 8,100 185,221
Pick Szeged Rt GDR (Consumer Staples)*(1)................... 23,900 230,635
------------
415,856
------------
INDIA -- 5.0%
BSES Ltd. GDR (Industrial & Commercial)..................... 11,300 152,550
Gujarat Ambuja Cements Ltd. GDR (Industrial &
Commercial)*.............................................. 21,800 144,425
Hindalco Industries Ltd. GDR (Materials)*................... 6,900 96,600
Indian Hotels Co., Ltd. GDR (Information & Entertainment)... 7,000 77,000
Larsen & Torbo GDR (Industrial & Commercial)................ 14,100 179,422
Mahanagar Telephone Nigam Ltd. GDR (Information
Technology)*.............................................. 23,800 312,375
Ranbaxy Laboratories Ltd. GDR (Healthcare)*................. 7,100 116,085
State Bank of India GDR (Finance)........................... 11,000 154,000
Tata Engineering & Locomotive Co., Ltd. GDR (Consumer
Discretionary)............................................ 21,200 113,950
Videsh Sanchar Nigam Ltd. GDR (Information Technology)...... 8,600 101,050
------------
1,447,457
------------
ISRAEL -- 3.8%
Bank Leumi Le Israel (Finance).............................. 163,000 329,194
Formula Systems Ltd. (Information Technology)............... 3,000 126,430
Koors Industries Ltd. ADR (Information Technology).......... 6,250 155,859
Koors Industries Ltd. (Information Technology).............. 1,550 193,846
Tadiran Ltd. (Information Technology)....................... 7,600 304,690
------------
1,110,019
------------
MALAYSIA -- 4.3%
Berjaya Sports Toto Berhad (Information & Entertainment).... 117,000 244,942
IJM Corp Berhad (Industrial & Commercial)................... 418,000 184,802
Jaya Tiasa Holdings Berhad (Consumer Discretionary)......... 58,000 76,173
KFC Holdings Berhad (Information & Entertainment)........... 63,000 73,728
Malakoff Berhad (Industrial & Commercial)................... 78,000 182,565
MNI Holdings Berhad (Information Technology)................ 95,000 148,237
PPB Oil Palms Berhad (Consumer Staples)..................... 210,000 159,471
Public Bank Berhad (Finance)................................ 141,000 50,237
Telecom Malaysia Berhad (Information Technology)............ 56,000 128,160
------------
1,248,315
------------
MEXICO -- 14.2%
Alfa SA de CV, Class A (Multi-industry)+.................... 91,000 433,333
Cemex SA de CV, Class B ADR (Materials)..................... 83,600 410,417
Cifra SA de CV (Consumer Discretionary)..................... 155,187 225,567
Corporacion Moctezuma SA de CV (Materials).................. 135,700 190,780
Fomento Economico Mexicanos SA de CV, Class B (Consumer
Staples).................................................. 8,600 287,642
G Accion SA De CV ADR (Real Estate)*(1)..................... 14,400 126,000
Grupo Financiero Banamex-Accival SA de CV, Class B
(Finance)................................................. 123,000 306,803
Grupo Imsa SA De CV ADR (Multi-industry).................... 16,300 277,100
Grupo Televisa SA ADR (Information & Entertainment)......... 13,600 531,250
Kimberly-Clark de Mexico SA de CV ADR (Materials)........... 72,600 302,911
Panamerican Beverages, Inc., Class A ADR (Consumer
Staples).................................................. 14,300 483,519
Telefonos de Mexico SA ADR (Utilities)...................... 11,800 559,762
------------
4,135,084
------------
</TABLE>
- ---------------------
114
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<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
PHILIPPINES -- 3.2%
Ayala Land, Inc. (Real Estate).............................. 498,000 $ 168,760
Benpres Holdings Corp. GDR (Multi-industry)*(1)............. 3,600 13,309
Benpres Holdings Corp. GDR (Multi-industry)(1).............. 9,000 29,250
Cosmos Bottling Co. (Consumer Staples)*..................... 1,132,200 153,470
International Container Systems, Inc. (Materials)........... 1,175,900 168,415
Philippine Long Distance Telephone Co. (Utilities).......... 6,200 158,568
Philippine Long Distance Telephone Co. ADR (Utilities)...... 3,700 93,887
SM Prime Holdings, Inc. (Real Estate)....................... 828,300 146,171
------------
931,830
------------
POLAND -- 1.3%
At Entertainment, Inc. (Information & Entertainment)........ 10,500 178,500
Kredyt Bank PBI SA GDR (Finance)*........................... 11,700 198,900
------------
377,400
------------
PORTUGAL -- 2.2%
Colep Companhia Portuguesa de Embalagens (Materials)........ 800 10,341
Investec Consultadoria International SA (Information &
Entertainment)............................................ 8,100 379,168
Portugal Telecom SA (Information Technology)................ 1,600 84,095
Portugal Telecom SA ADR (Information Technology)............ 3,000 158,250
------------
631,854
------------
RUSSIA -- 2.8%
Ao Mosenergo ADR (Energy)*(1)............................... 13,200 87,450
Ao Tatneft ADR (Energy)..................................... 22,300 261,909
Lukoil Holdings ADR (Utilities)............................. 5,300 218,236
Unified Energy Systems GDR (Utilities)(1)................... 13,600 234,600
------------
802,195
------------
SINGAPORE -- 0.7%
Development Bank of Singapore Ltd. (Finance)................ 32,000 193,013
------------
SOUTH AFRICA -- 5.4%
ABSA Group Ltd (Finance).................................... 34,400 270,424
Energy Africa Ltd GDR (Energy)*............................. 7,700 146,300
Engen Botswana Ltd. (Energy)................................ 69,600 260,735
Liberty Life Association of Africa Ltd. (Finance)........... 13,390 369,584
Momentum Life Assurers, Ltd. (Finance)...................... 83,700 163,277
Sasol Ltd. (Multi-industry)................................. 43,400 345,387
------------
1,555,707
------------
SOUTH KOREA -- 3.2%
Daewoo Heavy Industries (Industrial & Commercial)........... 20,000 68,632
Kookmin Bank (Finance)...................................... 24,254 119,762
Korea Electric Power Corp. (Utilities)...................... 22,000 220,391
Korea Mobile Telecommunications Corp. (Information &
Entertainment)............................................ 186 87,053
Mirae Co. (Information Technology).......................... 15,000 33,144
Pohang Iron & Steel Co., Ltd. (Materials)................... 2,650 106,618
Samsung Display Devices Co.(Information Technology)......... 2,446 86,718
Samsung Electronics, Co. (Information Technology)........... 4,600 174,849
Samsung Fire & Marine Insurance (Finance)+.................. 200 46,039
------------
943,206
------------
TAIWAN, PROVINCE OF CHINA -- 4.7%
Acer, Inc. GDR (Information Technology)..................... 17,450 125,204
ASE Test Ltd. (Information Technology)...................... 4,600 202,400
Asustek Computer, Inc. GDR (Information Technology)......... 11,300 210,200
Bank Sinopac (Finance)...................................... 270,000 165,298
Hon Hai Precision Industry (Information Technology)......... 32,000 182,723
Pacific Electrical Wire & Cables Co. (Industrial &
Commercial)............................................... 85,000 69,301
</TABLE>
---------------------
115
<PAGE> 206
<TABLE>
<CAPTION>
COMMON STOCK (CONTINUED) SHARES VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TAIWAN, PROVINCE OF CHINA (continued)
Siliconware Precision Industries Co. GDR (Information
Technology)............................................... 20,022 $ 170,187
Taiwan Semiconductor Manufacturing Co., Ltd. ADR
(Information Technology).................................. 12,100 228,387
------------
1,353,700
------------
THAILAND -- 1.6%
Advanced Information Services PCL alien shares (Information
& Entertainment).......................................... 20,000 108,938
Bangkok Bank PCL alien shares (Finance)*.................... 74,500 152,173
Electricity Generating PCL (Utilities)...................... 40,000 64,372
PTT Exploration & Production PCL alien shares (Energy)...... 7,700 66,724
Thai Farmers Bank alien shares (Finance)*................... 55,000 83,746
------------
475,953
------------
TURKEY -- 3.4%
Dogan Sirketler Grubu Holdings AS (Multi-industry).......... 2,675,000 157,932
Haci Omer Sabanci Holdings AS ADR (Finance)*................ 20,600 306,425
Turkiye Halk Bankasi AS (Finance)........................... 569,000 23,130
Turkiye Halk Bankasi AS (Finance)(1)........................ 853,500 34,695
Vestel Elektronik Sanayi ve Ticaret AS (Information
Technology)............................................... 1,160,800 157,290
Yapi Ve Kredi Bankasi AS (Finance)*......................... 6,623 130,142
Yapi Ve Kredi Bankasi AS GDR (Finance)...................... 8,771 172,350
------------
981,964
------------
UNITED KINGDOM -- 1.9%
Billiton PLC (Materials).................................... 60,000 149,071
Lonrho Africa PLC (Multi-industry).......................... 23,950 30,217
Lonrho PLC (Materials)...................................... 23,950 116,452
Ramco Energy PLC ADR (Utilities)............................ 22,700 246,862
------------
542,602
------------
VENEZUELA -- 0.9%
Compania Anon Nacional Tele de Venezuela ADR (Information &
Entertainment)............................................ 7,600 234,175
Siderurgica Venezolana Sivensa SA ADR (Industrial &
Commercial)............................................... 3,000 30,469
------------
264,644
------------
TOTAL COMMON STOCK (cost $29,299,633)....................... 25,674,448
------------
<CAPTION>
PREFERRED STOCK -- 6.4%
---------------------------------------------------------------------------------------
<S> <C> <C>
BRAZIL -- 6.4%
Banco Bradesco SA (Finance)................................. 51,112,190 417,750
Banco Itau SA (Finance)..................................... 650,000 387,146
Compania Cimento Portland Itau SA (Information &
Entertainment)............................................ 400,000 73,037
Empresa Brasileira de Aeronautica SA (Industrial &
Commercial)............................................... 5,000,000 80,428
Gerdau SA (Materials)....................................... 11,000,000 162,595
Lojas Americanas SA (Consumer Discretionary)................ 21,500,000 140,205
Telecomunicacoes de Sao Paulo SA (Utilities)................ 2,000,000 427,789
Telesp Celular SA (Information Technology).................. 2,000,000 179,115
------------
1,868,065
------------
TOTAL PREFERRED STOCK (cost $1,908,476)..................... 1,868,065
------------
</TABLE>
- ---------------------
116
<PAGE> 207
<TABLE>
<CAPTION>
PRINCIPAL
BONDS & NOTES -- 1.2% AMOUNT VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
INDIA -- 0.2%
Mahindra & Mahindra Ltd. 5.00% 2001......................... $ 65,000 $ 55,575
------------
SOUTH KOREA -- 0.4%
Medison Co. zero coupon 2002(1)............................. 200,000 128,923
------------
TAIWAN, PROVINCE OF CHINA -- 0.6%
Delta Electronic, Inc. zero coupon 2004..................... 135,000 159,975
------------
TOTAL BONDS & NOTES (cost $431,468)......................... 344,473
------------
RIGHTS -- 0.0%+ RIGHTS
---------------------------------------------------------------------------------------
SOUTH KOREA -- 0.0%
Samsung Electronics, Co.(1)................................. 294 0
------------
TAIWAN, PROVINCE OF CHINA -- 0.0%
Pacific Electrical Wire & Cable Co. ........................ 85,000 0
------------
TOTAL RIGHTS (cost $0)...................................... 0
------------
WARRANTS -- 0.0%+ WARRANTS
---------------------------------------------------------------------------------------
PHILIPPINES -- 0.0%
Belle Corp. (Real Estate) 12/31/00(1)....................... 129,200 0
------------
TOTAL INVESTMENT SECURITIES (cost $31,639,577).............. 27,886,986
------------
PRINCIPAL
REPURCHASE AGREEMENT -- 3.0% AMOUNT
---------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.0%
Agreement with JP Morgan Securities, Inc., bearing interest
at 5.54%, dated 05/29/98, to be repurchased 06/01/98 in
the amount of $874,404 and collateralized by $868,000 of
U.S. Treasury Notes, bearing interest at 6.00%, due
02/15/26 and having an approximate aggregate value of
$893,538 (cost $874,000).................................. $ 874,000 874,000
------------
TOTAL INVESTMENTS --
(cost $32,513,577) 99.0% 28,760,986
Other assets less liabilities -- 1.0 285,198
------ ------------
NET ASSETS -- 100.0% $29,046,184
====== ============
</TABLE>
-----------------------------
+ Non-income producing securities
* Resale restricted to qualified institutional buyers
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(1) Fair valued security; see Note 2
---------------------
117
<PAGE> 208
<TABLE>
<CAPTION>
OPEN FORWARD FOREIGN CURRENCY CONTRACTS
-------------------------------------------------------------
CONTRACT IN DELIVERY GROSS UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*TWD 11,747,800 USD 334,219 07/14/98 $ (9,234)
*TWD 10,812,200 USD 307,802 07/14/98 (8,498)
*USD 354,223 TWD 11,747,800 07/14/98 (10,770)
*USD 326,012 TWD 10,812,200 07/14/98 (9,912)
---------
Net Unrealized Depreciation.......... $(38,414)
=========
</TABLE>
-----------------------------
* Represents open forward foreign currency contracts and
offsetting or partially offsetting open forward foreign currency
contracts that do not have additional market risk but have
continued counterparty settlement risk.
<TABLE>
<S> <C> <C>
TWD -- New Taiwan Dollar
USD -- United States Dollar
</TABLE>
See Notes to Financial Statements.
- ---------------------
118
<PAGE> 209
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
WORLDWIDE
CASH GLOBAL CORPORATE HIGH-YIELD HIGH
MANAGEMENT BOND BOND BOND INCOME
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*........... $ -- $88,691,485 $ 92,245,847 $272,759,311 $130,049,572
Short-term securities*..................... 250,142,292 8,061,000 7,380,364 2,045,000 8,064,570
Repurchase agreements (cost equals
market)................................... 6,481,000 -- -- 8,093,000 7,112,000
Cash....................................... -- 765 206,707 61,383 --
Foreign currency........................... -- 198,446 -- -- 58
Receivables for --
Fund shares sold.......................... 843,118 37,073 445,347 538,251 346,103
Dividends and accrued interest............ 597,637 1,563,756 1,839,578 5,039,869 3,293,595
Sales of investments...................... -- -- 156,674 7,002,992 1,010,608
Prepaid expenses........................... 4,028 1,887 1,109 3,555 1,971
Deferred organizational expenses........... -- 15 15 -- --
Unrealized appreciation on forward foreign
currency contracts........................ -- 1,376,698 -- -- --
Currency swap agreement, at value.......... -- -- -- -- --
-----------------------------------------------------------------------
258,068,075 99,931,125 102,275,641 295,543,361 149,878,477
-----------------------------------------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed...................... 1,478,461 97,163 21,305 16,431 227,291
Management fees........................... 92,863 58,355 53,090 149,931 128,412
Purchases of investments.................. -- -- 2,301,250 5,492,298 1,704,710
Variation margin on futures contracts..... -- -- -- -- --
Unrealized depreciation on forward foreign
currency contracts........................ -- 519,778 -- -- --
Other accrued expenses..................... 45,547 61,423 44,791 55,160 78,748
Due to Custodian........................... 1,792 -- -- -- --
-----------------------------------------------------------------------
1,618,663 736,719 2,420,436 5,713,820 2,139,161
-----------------------------------------------------------------------
NET ASSETS................................. $256,449,412 $99,194,406 $ 99,855,205 $289,829,541 $147,739,316
=======================================================================
Shares of beneficial interest outstanding
(unlimited shares authorized)............. 24,841,190 8,933,684 8,636,611 24,293,839 11,627,677
Net asset value per share.................. $10.32 $11.10 $11.56 $11.93 $12.71
=======================================================================
COMPOSITION OF NET ASSETS:
Capital paid in............................ $252,891,896 $93,959,242 $ 95,027,854 $271,529,119 $141,967,009
Accumulated undistributed net investment
income.................................... 3,578,846 650,592 2,686,339 12,049,632 5,616,485
Accumulated undistributed net realized gain
(loss) on investments, future contracts
and options contracts..................... (7,661) 3,761,831 (79,231) 7,308,058 2,509,160
Unrealized appreciation (depreciation) on
investments............................... (13,669) (24,771) 2,220,243 (1,057,268) (2,353,340)
Unrealized foreign exchange gain (loss) on
other assets and liabilities.............. -- 847,512 -- -- 2
Unrealized appreciation (depreciation) on
futures contracts and currency swap
agreement................................. -- -- -- -- --
-----------------------------------------------------------------------
$256,449,412 $99,194,406 $ 99,855,205 $289,829,541 $147,739,316
=======================================================================
---------------
* Cost
Investment securities.................... $ -- $88,716,256 $ 90,032,726 $273,841,174 $132,253,642
=======================================================================
Short-term securities.................... $250,155,961 $ 8,061,000 $ 7,373,242 $ 2,020,405 $ 8,213,840
=======================================================================
<CAPTION>
BALANCED/
PHOENIX
SUNAMERICA INVESTMENT ASSET
BALANCED COUNSEL ALLOCATION
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value*........... $74,373,168 $107,708,125 $638,923,263
Short-term securities*..................... -- 7,255,952 5,896,942
Repurchase agreements (cost equals
market)................................... 5,799,000 -- 35,504,000
Cash....................................... 868 1,787 --
Foreign currency........................... -- -- --
Receivables for --
Fund shares sold.......................... 644,515 195,404 758,166
Dividends and accrued interest............ 315,246 571,161 3,451,240
Sales of investments...................... 815,626 1,606,251 15,960,864
Prepaid expenses........................... 525 1,864 9,441
Deferred organizational expenses........... -- -- 15
Unrealized appreciation on forward foreign
currency contracts........................ -- -- 536,273
Currency swap agreement, at value.......... -- -- 32,844
----------------------------------------
81,948,948 117,340,544 701,073,048
----------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed...................... 43,334 23,396 218,851
Management fees........................... 44,641 65,715 334,257
Purchases of investments.................. 2,363,537 2,163,515 28,779,375
Variation margin on futures contracts..... -- -- 4,027
Unrealized depreciation on forward foreign
currency contracts........................ -- -- 384,449
Other accrued expenses..................... 28,915 40,331 130,388
Due to Custodian........................... -- -- --
-----------------------------------------
2,480,427 2,292,957 29,851,347
-----------------------------------------
NET ASSETS................................. $79,468,521 $115,047,587 $671,221,701
=========================================
Shares of beneficial interest outstanding
(unlimited shares authorized)............. 5,436,745 8,004,780 43,535,195
Net asset value per share.................. $14.62 $14.37 $15.42
=========================================
COMPOSITION OF NET ASSETS:
Capital paid in............................ $69,499,651 $101,481,925 $589,746,477
Accumulated undistributed net investment
income.................................... 586,133 1,314,294 7,537,720
Accumulated undistributed net realized gain
(loss) on investments, future contracts
and options contracts..................... 2,459,516 3,557,017 40,524,659
Unrealized appreciation (depreciation) on
investments............................... 6,923,221 8,694,351 33,131,153
Unrealized foreign exchange gain (loss) on
other assets and liabilities.............. -- -- 150,120
Unrealized appreciation (depreciation) on
futures contracts and currency swap
agreement................................. -- -- 131,572
-----------------------------------------
$79,468,521 $115,047,587 $671,221,701
--------------- =========================================
*Cost
Investment securities..................... $67,449,947 $ 99,013,780 $604,441,750
=========================================
Short-term securities..................... $ -- $ 7,255,946 $ 7,247,302
=========================================
</TABLE>
See Notes to Financial Statements.
---------------------
119
<PAGE> 210
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH- FEDERATED VENTURE
UTILITY INCOME VALUE VALUE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*....................... $41,576,882 $758,824,937 $105,658,656 $1,391,429,099
Short-term securities*................................. 1,005,000 72,304,976 1,614,000 102,347,748
Repurchase agreements (cost equals market)............. -- -- -- 26,150,000
Cash................................................... 129 756 179 2,644
Foreign currency....................................... 1,028 -- -- --
Receivables for --
Fund shares sold...................................... 127,618 1,248,446 354,105 2,571,897
Dividends and accrued interest........................ 119,025 606,188 193,736 1,400,707
Sales of investments.................................. 278,260 -- 1,091,267 --
Prepaid expenses....................................... 156 10,025 670 17,007
Deferred organizational expenses....................... 105 -- -- --
Due from Adviser....................................... -- -- -- --
----------------------------------------------------------
43,108,203 832,995,328 108,912,613 1,523,919,102
----------------------------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed.................................. 80,714 130,284 -- 665,850
Management fees....................................... 31,271 397,232 68,087 946,828
Purchases of investments.............................. 369,816 -- 1,141,061 3,047,224
Variation margin on futures contracts................. -- 334,125 -- --
Other accrued expenses................................. 25,434 79,925 33,359 206,635
----------------------------------------------------------
507,235 941,566 1,242,507 4,866,537
----------------------------------------------------------
NET ASSETS............................................. $42,600,968 $832,053,762 $107,670,106 $1,519,052,565
==========================================================
Shares of beneficial interest outstanding (unlimited
shares authorized).................................... 3,147,298 36,151,489 6,831,023 66,494,150
Net asset value per share.............................. $13.54 $23.02 $15.76 $22.84
==========================================================
COMPOSITION OF NET ASSETS:
Capital paid in........................................ $38,093,286 $580,688,386 $ 89,638,876 $1,152,244,380
Accumulated undistributed net investment income........ 508,693 2,959,360 465,504 6,737,033
Accumulated undistributed net realized gain on
investments, future contracts and options contracts... 1,405,420 42,734,121 3,523,267 32,206,054
Unrealized appreciation (depreciation) on
investments........................................... 2,593,582 205,739,145 14,042,459 327,864,907
Unrealized foreign exchange gain (loss) on other assets
and liabilities....................................... (13) -- -- 191
Unrealized appreciation (depreciation) on futures
contracts............................................. -- (67,250) -- --
----------------------------------------------------------
$42,600,968 $832,053,762 $107,670,106 $1,519,052,565
==========================================================
* Cost
Investment securities................................. $38,983,300 $553,085,792 $ 91,616,197 $1,063,564,192
==========================================================
Short-term securities................................. $ 1,005,000 $ 72,304,976 $ 1,614,000 $ 102,347,748
==========================================================
<CAPTION>
GROWTH/
PHOENIX
"DOGS" OF PUTNAM INVESTMENT
WALL STREET GROWTH COUNSEL
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value*....................... $13,346,633 $309,274,570 $227,652,911
Short-term securities*................................. -- -- 2,184,717
Repurchase agreements (cost equals market)............. 1,409,000 8,786,000 --
Cash................................................... 635 971 3,448
Foreign currency....................................... -- -- --
Receivables for --
Fund shares sold...................................... 642,579 586,207 107,951
Dividends and accrued interest........................ 34,556 191,692 160,691
Sales of investments.................................. -- 3,553,149 4,526,628
Prepaid expenses....................................... -- 4,367 4,720
Deferred organizational expenses....................... 4,704 -- 599
Due from Adviser....................................... 4,893 -- --
-----------------------------------------
15,443,000 322,396,956 234,641,665
-----------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed.................................. 1,673 164,799 137,625
Management fees....................................... 5,437 224,156 129,918
Purchases of investments.............................. 1,402,150 1,524,884 1,050,137
Variation margin on futures contracts................. -- -- --
Other accrued expenses................................. 9,167 55,298 54,582
------------------------------------------
1,418,427 1,969,137 1,372,262
-------------------------------------------
NET ASSETS............................................. $14,024,573 $320,427,819 $233,269,403
===========================================
Shares of beneficial interest outstanding (unlimited
shares authorized).................................... 1,440,484 16,806,745 15,870,326
Net asset value per share.............................. $9.74 $19.07 $14.70
===========================================
COMPOSITION OF NET ASSETS:
Capital paid in........................................ $14,338,029 $235,070,881 $181,839,133
Accumulated undistributed net investment income........ 38,484 183,947 308,430
Accumulated undistributed net realized gain on
investments, future contracts and options contracts... -- 13,281,625 16,008,969
Unrealized appreciation (depreciation) on
investments........................................... (351,940) 71,891,366 35,112,871
Unrealized foreign exchange gain (loss) on other assets
and liabilities....................................... -- -- --
Unrealized appreciation (depreciation) on futures
contracts............................................. -- -- --
------------------------------------------
$14,024,573 $320,427,819 $233,269,403
==========================================
*Cost
Investment securities................................. $13,698,573 $237,383,204 $192,540,040
==========================================
Short-term securities................................. $ -- $ -- $ 2,184,717
==========================================
</TABLE>
See Notes to Financial Statements.
- ---------------------
120
<PAGE> 211
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
ALLIANCE GLOBAL GROWTH & DIVERSIFIED
GROWTH EQUITIES INCOME EQUITIES
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment securities, at value*...................... $1,025,946,963 $405,620,245 $ 90,302,823 $273,281,435
Short-term securities*................................ 4,715,295 8,623,000 1,575,556 --
Repurchase agreements (cost equals market)............ -- -- 5,407,000 46,250,000
Cash.................................................. 557 490 293 550,791
Foreign currency...................................... -- 361,208 18 813,736
Receivables for --
Fund shares sold..................................... 2,545,388 310,347 1,012,624 340,011
Dividends and accrued interest....................... 322,615 918,982 297,746 1,356,539
Foreign currency contracts........................... -- -- 3,036,227 3,004,230
Sales of investments................................. 6,319,324 9,435,112 -- 247,829
Variation margin on futures contracts................ -- -- -- 458,346
Prepaid expenses...................................... 11,213 6,959 357 6,546
Deferred organizational expenses...................... -- -- 5,213 --
Unrealized appreciation on forward foreign currency
contracts............................................ -- -- 271,412 1,450,941
-------------------------------------------------------------
1,039,861,355 425,276,343 101,909,269 327,760,404
-------------------------------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed................................. 1,051,321 57,027 58,928 109,536
Management fees...................................... 485,475 261,584 95,033 271,191
Foreign currency contracts........................... -- -- 3,035,463 3,034,303
Purchases of investments............................. 8,652,486 7,708,805 3,979,215 2,455,075
Variation margin on futures contracts................ 59,400 -- -- --
Unrealized depreciation on forward foreign currency
contracts............................................ -- -- -- 697,801
Other accrued expenses................................ 97,820 243,895 84,308 299,810
Written call options at value (proceeds $42,758 on
Aggressive Growth)................................... -- -- -- --
-------------------------------------------------------------
10,346,502 8,271,311 7,252,947 6,867,716
-------------------------------------------------------------
NET ASSETS............................................ $1,029,514,853 $417,005,032 $ 94,656,322 $320,892,688
=============================================================
Shares of beneficial interest outstanding (unlimited
shares authorized)................................... 40,286,710 24,077,796 7,680,014 24,639,968
Net asset value per share............................. $25.55 $17.32 $12.33 $13.02
=============================================================
COMPOSITION OF NET ASSETS:
Capital paid in....................................... $ 746,344,601 $322,270,245 $ 83,828,268 $269,683,040
Accumulated undistributed net investment income
(loss)............................................... 1,521,035 (1,421,442) 556,774 256,560
Accumulated undistributed net realized gain (loss) on
investments, future contracts and options
contracts............................................ 89,348,150 18,318,062 1,263,106 (13,476,566)
Unrealized appreciation (depreciation) on
investments.......................................... 192,313,067 77,859,376 8,742,779 63,277,973
Unrealized foreign exchange gain (loss) on other
assets and liabilities............................... -- (21,209) 265,395 711,252
Unrealized appreciation (depreciation) on futures
contracts and options contracts...................... (12,000) -- -- 440,429
-------------------------------------------------------------
$1,029,514,853 $417,005,032 $ 94,656,322 $320,892,688
=============================================================
* Cost
Investment securities................................ $ 833,633,896 $327,760,869 $ 81,560,044 $210,003,462
=============================================================
Short-term securities................................ $ 4,715,295 $ 8,623,000 $ 1,575,556 $ --
=============================================================
<CAPTION>
REAL AGGRESSIVE EMERGING
ESTATE GROWTH MARKETS
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment securities, at value*...................... $51,225,699 $ 97,873,541 $27,886,986
Short-term securities*................................ 2,820,000 -- --
Repurchase agreements (cost equals market)............ -- 18,983,000 874,000
Cash.................................................. 4,292 19 91,919
Foreign currency...................................... -- -- 47,948
Receivables for --
Fund shares sold..................................... 113,643 269,278 201,525
Dividends and accrued interest....................... 14,583 20,288 123,081
Foreign currency contracts........................... -- -- 170,017
Sales of investments................................. -- 1,046,200 95,353
Variation margin on futures contracts................ -- -- --
Prepaid expenses...................................... 245 830 201
Deferred organizational expenses...................... 5,213 585 5,213
Unrealized appreciation on forward foreign currency
contracts............................................ -- -- --
---------------------------------------
54,183,675 118,193,741 29,496,243
----------------------------------------
LIABILITIES:
Payables for --
Fund shares redeemed................................. 40,924 55,462 4,392
Management fees...................................... 35,500 72,800 33,232
Foreign currency contracts........................... -- -- 171,100
Purchases of investments............................. 807,129 5,430,755 150,033
Variation margin on futures contracts................ -- -- --
Unrealized depreciation on forward foreign currency
contracts............................................ -- -- 38,414
Other accrued expenses................................ 29,229 38,833 52,888
Written call options at value (proceeds $42,758 on
Aggressive Growth)................................... -- 65,000 --
----------------------------------------
912,782 5,662,850 450,059
----------------------------------------
NET ASSETS............................................ $53,270,893 $112,530,891 $29,046,184
=======================================
Shares of beneficial interest outstanding (unlimited
shares authorized)................................... 4,779,602 9,321,370 3,833,561
Net asset value per share............................. $11.15 $12.07 $7.58
========================================
COMPOSITION OF NET ASSETS:
Capital paid in....................................... $53,356,993 $ 98,320,280 $35,450,426
Accumulated undistributed net investment income
(loss)............................................... 557,643 167,645 55,538
Accumulated undistributed net realized gain (loss) on
investments, future contracts and options
contracts............................................ 478,474 7,925,929 (2,670,333)
Unrealized appreciation (depreciation) on
investments.......................................... (1,122,217) 6,139,279 (3,752,591)
Unrealized foreign exchange gain (loss) on other
assets and liabilities............................... -- -- (36,856)
Unrealized appreciation (depreciation) on futures
contracts and options contracts...................... -- (22,242) --
----------------------------------------
$53,270,893 $112,530,891 $29,046,184
========================================
*Cost
Investment securities................................ $52,347,916 $ 91,734,262 $31,639,577
========================================
Short-term securities................................ $ 2,820,000 $ -- $ --
========================================
</TABLE>
See Notes to Financial Statements.
---------------------
121
<PAGE> 212
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
WORLDWIDE
CASH CORPORATE HIGH-YIELD HIGH SUNAMERICA
MANAGEMENT GLOBAL BOND BOND BOND INCOME BALANCED
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Interest............................... $4,012,302 $2,280,750 $2,955,454 $12,756,318 $6,265,847 $ 587,296
Dividends.............................. -- -- 53,662 158,541 99,889 254,838
-----------------------------------------------------------------------------
Total income*...................... 4,012,302 2,280,750 3,009,116 12,914,859 6,365,736 842,134
-----------------------------------------------------------------------------
Expenses:
Management fees........................ 377,252 329,759 264,682 791,856 695,282 208,095
Custodian fees......................... 22,210 45,215 29,755 27,590 24,755 20,085
Auditing fees.......................... 11,565 12,720 11,920 11,670 12,615 12,335
Reports to investors................... 4,880 4,535 2,755 8,280 5,650 2,295
Amortization of organizational
expenses............................. 1,220 671 671 672 -- --
Legal fees............................. 889 715 628 889 889 715
Trustees' fees......................... 681 269 276 802 541 182
Interest expense....................... -- -- -- 8,653 -- --
Other expenses......................... 2,830 1,602 1,196 2,591 1,900 3,700
-----------------------------------------------------------------------------
Total expenses....................... 421,527 395,486 311,883 853,003 741,632 247,407
-----------------------------------------------------------------------------
Net investment income.................... 3,590,775 1,885,264 2,697,233 12,061,856 5,624,104 594,727
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on
investments.......................... (6,977) 2,279,555 194,911 7,429,351 2,556,722 2,475,952
Net realized gain on futures
contracts............................ -- -- -- -- -- --
Net realized foreign exchange gain
(loss) on other assets and
liabilities.......................... -- 1,611,372 -- -- (28,781) --
Change in unrealized appreciation/
depreciation on investments.......... (9,913) (448,369) 342,559 (2,722,424) (233,195) 3,358,087
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities.......................... -- (433,753) -- -- 2 --
Change in unrealized appreciation/
depreciation on futures contracts and
currency swap agreement.............. -- -- -- -- -- --
-----------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign
currencies........................... (16,890) 3,008,805 537,470 4,706,927 2,294,748 5,834,039
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $3,573,885 $4,894,069 $3,234,703 $16,768,783 $7,918,852 $6,428,766
=============================================================================
- ---------------
* Net of foreign withholding taxes on
interest and dividends of:............. $ -- $ 7,409 $ 7,749 $ -- $ 29,581 $ 2,590
=============================================================================
<CAPTION>
BALANCED/
PHOENIX
INVESTMENT ASSET
COUNSEL ALLOCATION
- -------------------------------------------------------------------
<S> <C> <C>
Income:
Interest............................... $1,477,985 $ 8,258,271
Dividends.............................. 259,219 2,584,687
------------------------
Total income*...................... 1,737,204 10,842,958
------------------------
Expenses:
Management fees........................ 356,210 1,783,194
Custodian fees......................... 35,780 101,390
Auditing fees.......................... 12,195 10,935
Reports to investors................... 3,890 19,520
Amortization of organizational
expenses............................. -- 671
Legal fees............................. 889 1,510
Trustees' fees......................... 541 1,757
Interest expense....................... -- --
Other expenses......................... 1,617 6,285
------------------------
Total expenses....................... 411,122 1,925,262
------------------------
Net investment income.................... 1,326,082 8,917,696
------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on
investments.......................... 3,664,600 47,262,425
Net realized gain on futures
contracts............................ -- 367,802
Net realized foreign exchange gain
(loss) on other assets and
liabilities.......................... -- 129,688
Change in unrealized appreciation/
depreciation on investments.......... 4,116,919 (17,462,509)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities.......................... -- 149,493
Change in unrealized appreciation/
depreciation on futures contracts and
currency swap agreement.............. -- (115,511)
------------------------
Net realized and unrealized gain (loss)
on investments and foreign
currencies........................... 7,781,519 30,331,388
------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $9,107,601 $39,249,084
- --------------- ========================
* Net of foreign withholding taxes on
interest and dividends of:............. $ 5,682 $ 3,455
========================
</TABLE>
See Notes to Financial Statements.
- ---------------------
122
<PAGE> 213
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH/
PHOENIX
GROWTH- FEDERATED VENTURE "DOGS" OF PUTNAM INVESTMENT
UTILITY INCOME VALUE VALUE WALL STREET# GROWTH COUNSEL
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Interest.................... $ 63,761 $ 2,083,486 $ 71,775 $ 3,765,747 $ 10,515 $ 247,454 $ 169,437
Dividends................... 618,025 3,092,310 749,520 7,843,865 42,659 1,183,296 935,865
-------------------------------------------------------------------------------------------------
Total income*........... 681,786 5,175,796 821,295 11,609,612 53,174 1,430,750 1,105,302
-------------------------------------------------------------------------------------------------
Expenses:
Management fees............. 143,259 2,088,503 310,461 4,898,607 10,370 1,168,551 723,035
Custodian fees.............. 20,615 75,630 20,130 129,490 2,745 43,545 41,290
Auditing fees............... 12,455 10,935 12,370 5,345 3,040 12,090 11,950
Reports to investors........ 1,420 23,800 3,090 44,205 1,830 10,140 8,705
Amortization of
organizational expenses... 106 672 -- -- 13 672 649
Legal fees.................. 628 2,059 715 3,129 1,220 989 889
Trustees' fees.............. 182 1,931 182 4,331 61 889 875
Other expenses.............. 621 6,540 998 11,145 305 3,044 3,218
-------------------------------------------------------------------------------------------------
Total expenses before
reimbursement........... 179,286 2,210,070 347,946 5,096,252 19,584 1,239,920 790,611
Expenses reimbursed by the
investment adviser...... -- -- -- -- (4,893) -- --
-------------------------------------------------------------------------------------------------
Net investment income......... 502,500 2,965,726 473,349 6,513,360 38,483 190,830 314,691
-------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain on
investments............... 1,425,017 37,836,082 3,543,696 32,335,636 -- 13,337,232 16,103,956
Net realized gain on futures
contracts................. -- 5,263,095 -- -- -- -- --
Net realized foreign
exchange gain on other
assets and liabilities.... 2,108 -- 5 -- -- -- --
Change in unrealized
appreciation/depreciation
on investments............ 540,135 57,712,708 7,697,765 86,252,908 (351,940) 26,277,362 10,350,134
Change in unrealized foreign
exchange gain/loss on
other assets and
liabilities............... (4) -- -- (263) -- -- --
Change in unrealized
appreciation/depreciation
on futures contracts...... -- (256,050) -- -- -- -- --
-------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currencies.... 1,967,256 100,555,835 11,241,466 118,588,281 (351,940) 39,614,594 26,454,090
-------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................. $2,469,756 $103,521,561 $11,714,815 $125,101,641 $(313,457) $39,805,424 $26,768,781
=================================================================================================
- ---------------
* Net of foreign withholding
taxes on interest and
dividends of:............... $ 610 $ 909 $ 12,009 $ 106,117 $ 769 $ -- $ 18,855
=================================================================================================
</TABLE>
# Commenced operations April 1, 1998
See Notes to Financial Statements.
---------------------
123
<PAGE> 214
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
ALLIANCE GLOBAL GROWTH & DIVERSIFIED REAL AGGRESSIVE EMERGING
GROWTH EQUITIES INCOME EQUITIES ESTATE GROWTH MARKETS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income:
Interest.................. $ 183,512 $ 280,314 $ 157,765 $ 861,945 $ 183,016 $ 325,627 $ 58,782
Dividends................. 3,951,887 2,380,695 857,217 2,969,408 781,990 303,531 286,833
---------------------------------------------------------------------------------------------------
Total income*......... 4,135,399 2,661,009 1,014,982 3,831,353 965,006 629,158 345,615
---------------------------------------------------------------------------------------------------
Expenses:
Management fees........... 2,469,464 1,412,102 384,060 1,459,319 179,258 406,902 175,935
Custodian fees............ 78,210 238,765 109,425 358,330 21,750 34,400 63,050
Auditing fees............. 13,420 12,160 13,245 12,335 12,555 12,370 13,175
Reports to investors...... 29,745 15,265 2,185 12,175 1,310 4,830 696
Amortization of
organizational
expenses................ 672 672 646 -- 646 592 646
Legal fees................ 2,080 1,250 628 989 628 889 628
Trustees' fees............ 2,674 1,056 175 875 186 562 182
Interest expense.......... -- -- -- -- -- 83 --
Other expenses............ 7,290 4,660 986 2,692 746 885 870
---------------------------------------------------------------------------------------------------
Total expenses.......... 2,603,555 1,685,930 511,350 1,846,715 217,079 461,513 255,182
---------------------------------------------------------------------------------------------------
Net investment income....... 1,531,844 975,079 503,632 1,984,638 747,927 167,645 90,433
---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss)
on investments.......... 89,448,629 20,042,710 1,458,953 (5,424,076) 481,096 11,506,508 (1,537,113)
Net realized gain (loss)
on futures and options
contracts............... 682,680 -- -- 17,917 -- (44,893) --
Net realized foreign
exchange gain (loss) on
other assets and
liabilities............. -- 2,829,592 (125,550) 2,637,241 -- -- (122,546)
Change in unrealized
appreciation/depreciation
on investments.......... 90,634,721 40,385,224 9,006,270 52,994,470 (2,444,562) (8,770,591) (184,898)
Change in unrealized
foreign exchange
gain/loss on other
assets and
liabilities............. -- (1,105,092) 389,802 (497,440) -- -- (36,826)
Change in unrealized
appreciation/depreciation
on futures and options
contracts............... (4,500) -- -- 440,429 -- (22,242) --
---------------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss)
on investments and
foreign currencies...... 180,761,530 62,152,434 10,729,475 50,168,541 (1,963,466) 2,668,782 (1,881,383)
---------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS................ $182,293,374 $63,127,513 $11,233,107 $52,153,179 $(1,215,539) $2,836,427 $(1,790,950)
===================================================================================================
- ---------------
* Net of foreign
withholding taxes on
interest and dividends
of:...................... $ 88,239 $ 240,990 $ 106,618 $ 421,317 $ 527 $ 810 $ 22,264
===================================================================================================
# Net of foreign withholding
taxes on capital gains.... $ -- $ -- $ -- $ -- $ -- $ -- $ 3,223
===================================================================================================
</TABLE>
See Notes to Financial Statements.
- ---------------------
124
<PAGE> 215
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CASH GLOBAL CORPORATE HIGH-YIELD WORLDWIDE
MANAGEMENT BOND BOND BOND HIGH INCOME
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 3,590,775 $ 1,885,264 $ 2,697,233 $ 12,061,856 $ 5,624,104
Net realized gain (loss) on investments..... (6,977) 2,279,555 194,911 7,429,351 2,556,722
Net realized gain on futures contracts...... -- -- -- -- --
Net realized foreign exchange gain (loss) on
other assets and liabilities............... -- 1,611,372 -- -- (28,781)
Change in unrealized
appreciation/depreciation on investments... (9,913) (448,369) 342,559 (2,722,424) (233,195)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities................................ -- (433,753) -- -- 2
Change in unrealized
appreciation/depreciation on futures
contracts and currency swap agreement...... -- -- -- -- --
----------------------------------------------------------------------
Net increase in net assets resulting from
operations................................. 3,573,885 4,894,069 3,234,703 16,768,783 7,918,852
----------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income....... (6,780,000) (6,255,000) (3,280,000) (13,985,000) (6,395,000)
Distribution from net realized gain on
investments.............................. -- (1,735,000) -- (1,645,000) (7,650,000)
----------------------------------------------------------------------
Total dividends and distributions to
shareholders............................... (6,780,000) (7,990,000) (3,280,000) (15,630,000) (14,045,000)
----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................... 517,076,912 16,558,109 43,209,346 142,129,647 48,347,692
Proceeds from shares issued for reinvestment
of dividends and distributions............. 6,780,000 7,990,000 3,280,000 15,630,000 14,045,000
Cost of shares repurchased.................. (420,320,839) (11,300,295) (8,860,462) (64,707,895) (33,751,549)
----------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions................. 103,536,073 13,247,814 37,628,884 93,051,752 28,641,143
----------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS................ 100,329,958 10,151,883 37,583,587 94,190,535 22,514,995
NET ASSETS:
Beginning of period......................... 156,119,454 89,042,523 62,271,618 195,639,006 125,224,321
----------------------------------------------------------------------
End of period............................... $256,449,412 $99,194,406 $99,855,205 $289,829,541 $147,739,316
======================================================================
---------------
Undistributed net investment income......... $ 3,578,846 $ 650,592 $ 2,686,339 $ 12,049,632 $ 5,616,485
======================================================================
Shares issued and repurchased:
Sold........................................ 49,096,428 1,448,625 3,715,070 11,749,893 3,611,403
Issued in reinvestment of dividends and
distributions.............................. 662,109 731,015 288,225 1,323,455 1,086,233
Repurchased................................. (39,459,376) (979,560) (761,886) (5,331,747) (2,556,820)
----------------------------------------------------------------------
Net increase................................ 10,299,161 1,200,080 3,241,409 7,741,601 2,140,816
======================================================================
<CAPTION>
BALANCED/
PHOENIX
SUNAMERICA INVESTMENT ASSET
BALANCED COUNSEL ALLOCATION
-------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 594,727 $ 1,326,082 $ 8,917,696
Net realized gain (loss) on investments..... 2,475,952 3,664,600 47,262,425
Net realized gain on futures contracts...... -- -- 367,802
Net realized foreign exchange gain (loss) on
other assets and liabilities............... -- -- 129,688
Change in unrealized
appreciation/depreciation on investments... 3,358,087 4,116,919 (17,462,509)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities................................ -- -- 149,493
Change in unrealized
appreciation/depreciation on futures
contracts and currency swap agreement...... -- -- (115,511)
-----------------------------------------
Net increase in net assets resulting from
operations................................. 6,428,766 9,107,601 39,249,084
-----------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income....... (470,000) (2,165,000) (12,565,000)
Distribution from net realized gain on
investments.............................. (1,630,000) (9,655,000) (58,650,000)
-----------------------------------------
Total dividends and distributions to
shareholders............................... (2,100,000) (11,820,000) (71,215,000)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................... 33,726,120 18,133,866 146,800,871
Proceeds from shares issued for reinvestment
of dividends and distributions............. 2,100,000 11,820,000 71,215,000
Cost of shares repurchased.................. (5,307,521) (7,914,916) (41,413,649)
-----------------------------------------
Net increase in net assets resulting from
capital share transactions................. 30,518,599 22,038,950 176,602,222
-----------------------------------------
TOTAL INCREASE IN NET ASSETS................ 34,847,365 19,326,551 144,636,306
NET ASSETS:
Beginning of period......................... 44,621,156 95,721,036 526,585,395
-----------------------------------------
End of period............................... $79,468,521 $115,047,587 $671,221,701
--------------- =========================================
Undistributed net investment income......... $ 586,133 $ 1,314,294 $ 7,537,720
=========================================
Shares issued and repurchased:
Sold........................................ 2,344,998 1,219,744 9,020,279
Issued in reinvestment of dividends and
distributions.............................. 144,429 826,573 4,576,800
Repurchased................................. (370,259) (531,155) (2,549,425)
-----------------------------------------
Net increase................................ 2,119,168 1,515,162 11,047,654
=========================================
</TABLE>
See Notes to Financial Statements.
---------------------
125
<PAGE> 216
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH- FEDERATED VENTURE "DOGS" OF
UTILITY INCOME VALUE VALUE WALL STREET#
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................... $ 502,500 $ 2,965,726 $ 473,349 $ 6,513,360 $ 38,483
Net realized gain on investments................ 1,425,017 37,836,082 3,543,696 32,335,636 --
Net realized gain on futures contracts.......... -- 5,263,095 -- -- --
Net realized foreign exchange gain on other
assets and liabilities......................... 2,108 -- 5 -- --
Change in unrealized appreciation/depreciation
on investments................................. 540,135 57,712,708 7,697,765 86,252,908 (351,940)
Change in unrealized foreign exchange gain/loss
on other assets and liabilities................ (4) -- -- (263) --
Change in unrealized appreciation/depreciation
on futures contracts........................... -- (256,050) -- -- --
-------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations................................ 2,469,756 103,521,561 11,714,815 125,101,641 (313,457)
-------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........... (410,000) (4,145,000) (330,000) (7,660,000) --
Distribution from net realized gain on
investments.................................. (875,000) (32,070,000) (1,790,000) (41,665,000) --
-------------------------------------------------------------------------
Total dividends and distributions to
shareholders................................... (1,285,000) (36,215,000) (2,120,000) (49,325,000) --
-------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold....................... 25,845,878 193,899,921 49,252,951 399,019,770 24,593,993
Proceeds from shares issued for reinvestment of
dividends and distributions.................... 1,285,000 36,215,000 2,120,000 49,325,000 --
Cost of shares repurchased...................... (10,080,793) (87,430,216) (12,321,604) (145,122,133) (10,255,963)
-------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions..................... 17,050,085 142,684,705 39,051,347 303,222,637 14,338,030
-------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS.................... 18,234,841 209,991,266 48,646,162 378,999,278 14,024,573
NET ASSETS:
Beginning of period............................. 24,366,127 622,062,496 59,023,944 1,140,053,287 --
-------------------------------------------------------------------------
End of period................................... $42,600,968 $832,053,762 $107,670,106 $1,519,052,565 $ 14,024,573
=========================================================================
---------------
Undistributed net investment income............. $ 508,693 $ 2,959,360 $ 465,504 $ 6,737,033 $ 38,484
=========================================================================
Shares issued and repurchased:
Sold............................................ 1,910,703 8,637,309 3,248,571 17,637,788 2,473,873
Issued in reinvestment of dividends and
distributions.................................. 93,386 1,571,832 136,072 2,146,431 --
Repurchased..................................... (743,837) (3,940,208) (800,804) (6,399,317) (1,033,389)
-------------------------------------------------------------------------
Net increase.................................... 1,260,252 6,268,933 2,583,839 13,384,902 1,440,484
=========================================================================
<CAPTION>
GROWTH/
PHOENIX
PUTNAM INVESTMENT
GROWTH COUNSEL
-----------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income........................... $ 190,830 $ 314,691
Net realized gain on investments................ 13,337,232 16,103,956
Net realized gain on futures contracts.......... -- --
Net realized foreign exchange gain on other
assets and liabilities......................... -- --
Change in unrealized appreciation/depreciation
on investments................................. 26,277,362 10,350,134
Change in unrealized foreign exchange gain/loss
on other assets and liabilities................ -- --
Change in unrealized appreciation/depreciation
on futures contracts........................... -- --
---------------------------
Net increase (decrease) in net assets resulting
from operations................................ 39,805,424 26,768,781
---------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........... (340,000) (1,540,000)
Distribution from net realized gain on
investments.................................. (43,740,000) (37,090,000)
---------------------------
Total dividends and distributions to
shareholders................................... (44,080,000) (38,630,000)
---------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold....................... 92,733,253 14,449,049
Proceeds from shares issued for reinvestment of
dividends and distributions.................... 44,080,000 38,630,000
Cost of shares repurchased...................... (46,837,072) (26,444,245)
---------------------------
Net increase in net assets resulting from
capital share transactions..................... 89,976,181 26,634,804
---------------------------
TOTAL INCREASE IN NET ASSETS.................... 85,701,605 14,773,585
NET ASSETS:
Beginning of period............................. 234,726,214 218,495,818
---------------------------
End of period................................... $320,427,819 $233,269,403
===========================
---------------
Undistributed net investment income............. $ 183,947 $ 308,430
===========================
Shares issued and repurchased:
Sold............................................ 4,663,328 924,032
Issued in reinvestment of dividends and
distributions.................................. 2,288,681 2,642,271
Repurchased..................................... (2,403,473) (1,684,213)
---------------------------
Net increase.................................... 4,548,536 1,882,090
===========================
</TABLE>
# Commenced operations April 1, 1998
See Notes to Financial Statements.
- ---------------------
126
<PAGE> 217
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
ALLIANCE GLOBAL GROWTH & DIVERSIFIED REAL
GROWTH EQUITIES INCOME EQUITIES ESTATE
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................... $ 1,531,844 $ 975,079 $ 503,632 $ 1,984,638 $ 747,927
Net realized gain (loss) on
investments............................. 89,448,629 20,042,710 1,458,953 (5,424,076) 481,096
Net realized gain (loss) on futures and
options contracts....................... 682,680 -- -- 17,917 --
Net realized foreign exchange gain (loss)
on other assets and liabilities......... -- 2,829,592 (125,550) 2,637,241 --
Change in unrealized
appreciation/depreciation on
investments............................. 90,634,721 40,385,224 9,006,270 52,994,470 (2,444,562)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (1,105,092) 389,802 (497,440) --
Change in unrealized
appreciation/depreciation on futures and
options contracts....................... (4,500) -- -- 440,429 --
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations............... 182,293,374 63,127,513 11,233,107 52,153,179 (1,215,539)
----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment income.... (1,965,000) (4,270,000) (135,000) (9,350,000) (430,000)
Distribution from net realized gain on
investments........................... (81,965,000) (29,965,000) (290,000) (3,540,000) (25,000)
----------------------------------------------------------------------------
Total dividends and distributions to
shareholders............................ (83,930,000) (34,235,000) (425,000) (12,890,000) (455,000)
----------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................ 285,105,421 64,181,896 72,169,905 115,821,132 44,724,225
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... 83,930,000 34,235,000 425,000 12,890,000 455,000
Cost of shares repurchased............... (142,417,209) (51,943,571) (31,590,652) (96,008,335) (19,802,651)
----------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions.............. 226,618,212 46,473,325 41,004,253 32,702,797 25,376,574
----------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS............. 324,981,586 75,365,838 51,812,360 71,965,976 23,706,035
NET ASSETS:
Beginning of period...................... 704,533,267 341,639,194 42,843,962 248,926,712 29,564,858
----------------------------------------------------------------------------
End of period............................ $1,029,514,853 $417,005,032 $ 94,656,322 $320,892,688 $ 53,270,893
============================================================================
---------------
Undistributed net investment income
(loss).................................. $ 1,521,035 $ (1,421,442) $ 556,774 $ 256,560 $ 557,643
============================================================================
Shares issued and repurchased:
Sold..................................... 11,495,621 3,799,322 6,368,753 9,307,834 3,903,428
Issued in reinvestment of dividends and
distributions........................... 3,331,877 1,993,885 40,284 996,906 39,089
Repurchased.............................. (5,765,711) (3,096,839) (2,844,684) (7,632,574) (1,727,980)
============================================================================
Net increase............................. 9,061,787 2,696,368 3,564,353 2,672,166 2,214,537
============================================================================
<CAPTION>
AGGRESSIVE EMERGING
GROWTH MARKETS
----------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................... $ 167,645 $ 90,433
Net realized gain (loss) on
investments............................. 11,506,508 (1,537,113)
Net realized gain (loss) on futures and
options contracts....................... (44,893) --
Net realized foreign exchange gain (loss)
on other assets and liabilities......... -- (122,546)
Change in unrealized
appreciation/depreciation on
investments............................. (8,770,591) (184,898)
Change in unrealized foreign exchange
gain/loss on other assets and
liabilities............................. -- (36,826)
Change in unrealized
appreciation/depreciation on futures and
options contracts....................... (22,242) --
---------------------------
Net increase (decrease) in net assets
resulting from operations............... 2,836,427 (1,790,950)
---------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment income.... -- (205,000)
Distribution from net realized gain on
investments........................... -- --
---------------------------
Total dividends and distributions to
shareholders............................ -- (205,000)
---------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................ 33,331,670 24,049,393
Proceeds from shares issued for
reinvestment of dividends and
distributions........................... -- 205,000
Cost of shares repurchased............... (27,240,670) (13,191,352)
---------------------------
Net increase in net assets resulting from
capital share transactions.............. 6,091,000 11,063,041
---------------------------
TOTAL INCREASE IN NET ASSETS............. 8,927,427 9,067,091
NET ASSETS:
Beginning of period...................... 103,603,464 19,979,093
---------------------------
End of period............................ $112,530,891 $ 29,046,184
===========================
---------------
Undistributed net investment income
(loss).................................. $ 167,645 $ 55,538
===========================
Shares issued and repurchased:
Sold..................................... 2,757,207 2,963,920
Issued in reinvestment of dividends and
distributions........................... -- 24,849
Repurchased.............................. (2,245,864) (1,643,213)
===========================
Net increase............................. 511,343 1,345,556
===========================
</TABLE>
See Notes to Financial Statements.
---------------------
127
<PAGE> 218
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
CASH CORPORATE HIGH-YIELD WORLDWIDE
MANAGEMENT GLOBAL BOND BOND BOND HIGH INCOME
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................ $ 6,775,888 $ 3,618,389 $ 3,274,207 $ 13,979,814 $ 6,939,979
Net realized gain on investments............. 925 2,772,480 505,509 9,993,528 8,159,728
Net realized gain (loss) on futures contracts
and options contracts....................... -- (11,209) -- -- --
Net realized foreign exchange gain (loss) on
other assets and liabilities................ -- 758,012 -- -- (120,494)
Change in unrealized
appreciation/depreciation on investments.... 2,661 (1,617,087) 718,565 (3,228,125) (5,021,473)
Change in unrealized foreign exchange
gain/loss on other assets and liabilities... -- 956,961 -- -- 4,477
Change in unrealized
appreciation/depreciation on futures
contracts, written options contracts and
currency swap agreements.................... -- -- -- -- --
-------------------------------------------------------------------------
Net increase in net assets resulting from
operations.................................. 6,779,474 6,477,546 4,498,281 20,745,217 9,962,217
-------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........ (6,330,000) (4,705,000) (2,010,000) (8,890,000) (3,530,000)
Distributions from net realized gain on
investments............................... -- (275,000) -- -- (3,570,000)
-------------------------------------------------------------------------
Total dividends and distributions to
shareholders................................ (6,330,000) (4,980,000) (2,010,000) (8,890,000) (7,100,000)
-------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................... 811,621,512 33,606,421 33,721,704 154,271,836 122,351,745
Proceeds from shares issued for reinvestment
of dividends and distributions.............. 6,330,000 4,980,000 2,010,000 8,890,000 7,100,000
Cost of shares repurchased................... (753,528,328) (19,262,861) (13,155,774) (92,607,140) (56,294,138)
-------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions.................. 64,423,184 19,323,560 22,575,930 70,554,696 73,157,607
-------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS................. 64,872,658 20,821,106 25,064,211 82,409,913 76,019,824
NET ASSETS:
Beginning of period.......................... 91,246,796 68,221,417 37,207,407 113,229,093 49,204,497
-------------------------------------------------------------------------
End of period................................ $ 156,119,454 $ 89,042,523 $ 62,271,618 $195,639,006 $125,224,321
=========================================================================
---------------
Accumulated undistributed net investment
income...................................... $ 6,768,071 $ 5,020,328 $ 3,269,106 $ 13,972,776 $ 6,387,381
=========================================================================
Shares issued and repurchased:
Sold......................................... 76,477,014 3,008,825 3,044,110 13,781,218 9,588,842
Issued in reinvestment of dividends and
distributions............................... 611,004 466,729 190,883 837,889 606,319
Repurchased.................................. (71,025,735) (1,726,496) (1,194,160) (8,319,515) (4,394,496)
-------------------------------------------------------------------------
Net increase................................. 6,062,283 1,749,058 2,040,833 6,299,592 5,800,665
=========================================================================
<CAPTION>
BALANCED/
PHOENIX
SUNAMERICA INVESTMENT
BALANCED COUNSEL
--------------------------------------------- ---------------------------
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 465,338 $ 2,159,933
Net realized gain on investments............. 1,624,801 9,676,697
Net realized gain (loss) on futures contracts
and options contracts....................... -- 24,811
Net realized foreign exchange gain (loss) on
other assets and liabilities................ -- --
Change in unrealized
appreciation/depreciation on investments.... 2,742,326 (1,288,697)
Change in unrealized foreign exchange
gain/loss on other assets and liabilities... -- --
Change in unrealized
appreciation/depreciation on futures
contracts, written options contracts and
currency swap agreements.................... -- --
----------------------------
Net increase in net assets resulting from
operations.................................. 4,832,465 10,572,744
----------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........ (60,000) (1,265,000)
Distributions from net realized gain on
investments............................... (40,000) (2,245,000)
----------------------------
Total dividends and distributions to
shareholders................................ (100,000) (3,510,000)
----------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................... 35,534,375 34,361,684
Proceeds from shares issued for reinvestment
of dividends and distributions.............. 100,000 3,510,000
Cost of shares repurchased................... (5,969,478) (19,233,950)
----------------------------
Net increase in net assets resulting from
capital share transactions.................. 29,664,897 18,637,734
----------------------------
TOTAL INCREASE IN NET ASSETS................. 34,397,362 25,700,478
NET ASSETS:
Beginning of period.......................... 10,223,794 70,020,558
----------------------------
End of period................................ $44,621,156 $ 95,721,036
============================
---------------
Accumulated undistributed net investment
income...................................... $ 461,406 $ 2,153,212
============================
Shares issued and repurchased:
Sold......................................... 2,875,391 2,475,607
Issued in reinvestment of dividends and
distributions............................... 8,651 269,378
Repurchased.................................. (485,362) (1,391,401)
----------------------------
Net increase................................. 2,398,680 1,353,584
============================
</TABLE>
See Notes to Financial Statements
- ---------------------
128
<PAGE> 219
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
ASSET GROWTH- FEDERATED VENTURE
ALLOCATION UTILITY INCOME VALUE VALUE
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income........................ $ 12,074,380 $ 422,847 $ 4,141,826 $ 327,018 $ 7,890,592
Net realized gain on investments............. 52,482,439 861,442 26,372,396 1,792,042 41,598,668
Net realized gain on futures contracts and
options contracts........................... 1,244,312 -- 6,303,783 -- --
Net realized foreign exchange gain (loss) on
other assets and liabilities................ (21,372) (3,129) 65 (1) 1,065
Change in unrealized
appreciation/depreciation on investments.... 14,589,518 1,765,756 80,954,336 5,148,585 150,492,499
Change in unrealized foreign exchange
gain/loss on other assets and liabilities... 627 (148) -- -- 113
Change in unrealized
appreciation/depreciation on futures
contracts, written options contracts and
currency swap agreements.................... (1,014,448) -- (773,581) -- --
--------------------------------------------------------------------------
Net increase in net assets resulting from
operations.................................. 79,355,456 3,046,768 116,998,825 7,267,644 199,982,937
--------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........ (9,550,000) (85,000) (2,770,000) (45,000) (3,390,000)
Distributions from net realized gain on
investments............................... (21,740,000) (21,000) (15,835,000) -- (9,745,000)
--------------------------------------------------------------------------
Total dividends and distributions to
shareholders................................ (31,290,000) (106,000) (18,605,000) (45,000) (13,135,000)
--------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................... 198,007,930 19,909,225 281,329,957 53,713,595 607,026,485
Proceeds from shares issued for reinvestment
of dividends and distributions.............. 31,290,000 106,000 18,605,000 45,000 13,135,000
Cost of shares repurchased................... (67,166,417) (4,888,513) (101,729,611) (14,416,823) (183,369,506)
--------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions.................. 162,131,513 15,126,712 198,205,346 39,341,772 436,791,979
--------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS................. 210,196,969 18,067,480 296,599,171 46,564,416 623,639,916
NET ASSETS:
Beginning of period.......................... 316,388,426 6,298,647 325,463,325 12,459,528 516,413,371
--------------------------------------------------------------------------
End of period................................ $526,585,395 $24,366,127 $ 622,062,496 $ 59,023,944 $1,140,053,287
==========================================================================
---------------
Accumulated undistributed net investment
income...................................... $ 11,185,024 $ 416,193 $ 4,138,634 $ 322,155 $ 7,883,673
==========================================================================
Shares issued and repurchased:
Sold......................................... 12,863,082 1,709,480 14,863,689 4,266,674 31,474,224
Issued in reinvestment of dividends and
distributions............................... 2,220,724 9,628 1,105,466 3,896 755,319
Repurchased.................................. (4,387,167) (417,938) (5,441,625) (1,147,636) (9,684,502)
--------------------------------------------------------------------------
Net increase................................. 10,696,639 1,301,170 10,527,530 3,122,934 22,545,041
==========================================================================
<CAPTION>
GROWTH/
PHOENIX
PUTMAN INVESTMENT
GROWTH COUNSEL
----------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income........................ $ 333,117 $ 1,535,922
Net realized gain on investments............. 43,697,799 36,951,244
Net realized gain on futures contracts and
options contracts........................... -- 194,755
Net realized foreign exchange gain (loss) on
other assets and liabilities................ -- 22
Change in unrealized
appreciation/depreciation on investments.... 278,511 (2,566,236)
Change in unrealized foreign exchange
gain/loss on other assets and liabilities... -- --
Change in unrealized
appreciation/depreciation on futures
contracts, written options contracts and
currency swap agreements.................... -- --
---------------------------
Net increase in net assets resulting from
operations.................................. 44,309,427 36,115,707
---------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........ -- (1,325,000)
Distributions from net realized gain on
investments............................... (5,465,000) (16,255,000)
---------------------------
Total dividends and distributions to
shareholders................................ (5,465,000) (17,580,000)
---------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.................... 84,068,227 36,491,255
Proceeds from shares issued for reinvestment
of dividends and distributions.............. 5,465,000 17,580,000
Cost of shares repurchased................... (53,724,485) (40,478,722)
---------------------------
Net increase in net assets resulting from
capital share transactions.................. 35,808,742 13,592,533
---------------------------
TOTAL INCREASE IN NET ASSETS................. 74,653,169 32,128,240
NET ASSETS:
Beginning of period.......................... 160,073,045 186,367,578
---------------------------
End of period................................ $234,726,214 $218,495,818
===========================
---------------
Accumulated undistributed net investment
income...................................... $ 333,117 $ 1,533,739
===========================
Shares issued and repurchased:
Sold......................................... 4,939,017 2,470,784
Issued in reinvestment of dividends and
distributions............................... 357,190 1,337,900
Repurchased.................................. (3,227,119) (2,775,949)
---------------------------
Net increase................................. 2,069,088 1,032,735
===========================
</TABLE>
See Notes to Financial Statements
---------------------
129
<PAGE> 220
- ---------------------
SUNAMERICA SERIES TRUST
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
ALLIANCE GLOBAL GROWTH AND DIVERSIFIED REAL AGGRESSIVE
GROWTH EQUITIES INCOME+ EQUITIES ESTATE+ GROWTH
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)....... $ 1,960,357 $ 1,783,905 $ 76,139 $ 1,750,638 $ 239,201 $ (91,011)
Net realized gain (loss) on
investments....................... 81,524,855 26,101,178 219,703 (6,297,980) 22,378 (2,829,784)
Net realized gain on futures
contracts and options contracts... 1,379,640 -- -- -- -- --
Net realized foreign exchange gain
(loss) on other assets and
liabilities....................... -- 69,950 111,488 6,707,753 -- --
Change in unrealized
appreciation/depreciation on
investments....................... 34,851,529 7,084,155 (263,491) 3,910,822 1,322,345 11,818,657
Change in unrealized foreign
exchange gain/loss on other assets
and liabilities................... -- 1,082,247 (124,407) 211,844 -- --
Change in unrealized
appreciation/depreciation on
futures contracts, options
contracts and currency swap
agreements........................ (405,000) -- -- -- -- --
-----------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations........................ 119,311,381 36,121,435 19,432 6,283,077 1,583,924 8,897,862
-----------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income.......................... (1,200,000) (2,305,000) -- (5,175,000) -- (43,000)
Distributions from net realized
gain on investments............. (23,710,000) (12,550,000) -- (1,715,000) -- --
-----------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders................... (24,910,000) (14,855,000) -- (6,890,000) -- (43,000)
-----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.......... 393,697,806 147,050,332 47,363,333 148,423,226 32,073,915 93,642,244
Proceeds from shares issued for
reinvestment of dividends and
distributions..................... 24,910,000 14,855,000 -- 6,890,000 -- 43,000
Cost of shares repurchased......... (189,842,593) (88,014,579) (4,538,803) (62,787,984) (4,092,981) (34,060,944)
-----------------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions...................... 228,765,213 73,890,753 42,824,530 92,525,242 27,980,934 59,624,300
-----------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS....... 323,166,594 95,157,188 42,843,962 91,918,319 29,564,858 68,479,162
NET ASSETS:
Beginning of period................ 381,366,673 246,482,006 -- 157,008,393 -- 35,124,302
-----------------------------------------------------------------------------------------
End of period...................... $ 704,533,267 $341,639,194 $42,843,962 $248,926,712 $29,564,858 $103,603,464
=========================================================================================
---------------
Accumulated undistributed net
investment income................. $ 1,954,191 $ 1,870,601 $ 188,142 $ 7,621,922 $ 239,716 $ --
=========================================================================================
Shares issued and repurchased:
Sold............................... 18,866,011 9,425,673 4,546,734 12,963,775 2,929,568 8,405,394
Issued in reinvestment of dividends
and distributions................. 1,397,084 1,045,391 -- 646,315 -- 4,470
Repurchased........................ (9,403,821) (5,605,026) (431,073) (5,452,782) (364,503) (2,989,260)
-----------------------------------------------------------------------------------------
Net increase....................... 10,859,274 4,866,038 4,115,661 8,157,308 2,565,065 5,420,604
=========================================================================================
<CAPTION>
EMERGING
MARKETS+
------------------------------------ -----------
<S> <C>
OPERATIONS:
Net investment income (loss)....... $ 105,714
Net realized gain (loss) on
investments....................... (913,203)
Net realized gain on futures
contracts and options contracts... --
Net realized foreign exchange gain
(loss) on other assets and
liabilities....................... (33,595)
Change in unrealized
appreciation/depreciation on
investments....................... (3,567,693)
Change in unrealized foreign
exchange gain/loss on other assets
and liabilities................... (30)
Change in unrealized
appreciation/depreciation on
futures contracts, options
contracts and currency swap
agreements........................ --
----------------
Net increase (decrease) in net
assets resulting from
operations........................ (4,408,807)
----------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income.......................... --
Distributions from net realized
gain on investments............. --
----------------
Total dividends and distributions
to shareholders................... --
----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.......... 26,523,263
Proceeds from shares issued for
reinvestment of dividends and
distributions..................... --
Cost of shares repurchased......... (2,135,363)
----------------
Net increase in net assets
resulting from capital share
transactions...................... 24,387,900
----------------
TOTAL INCREASE IN NET ASSETS....... 19,979,093
NET ASSETS:
Beginning of period................ --
----------------
End of period...................... $19,979,093
================
---------------
Accumulated undistributed net
investment income................. $ 170,105
================
Shares issued and repurchased:
Sold............................... 2,715,811
Issued in reinvestment of dividends
and distributions................. --
Repurchased........................ (227,806)
----------------
Net increase....................... 2,488,005
================
</TABLE>
+ Commenced operations June 2, 1997
See Notes to Financial Statements
- -------------------
130
<PAGE> 221
- ---------------------
SUNAMERICA SERIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: SunAmerica Series Trust
(the "Trust"), organized as a Massachusetts business trust on September 11,
1992, is an open-end management investment company. It was established to
provide a funding medium for certain annuity contracts issued by Variable
Separate Account (the "Account"), a separate account of Anchor National Life
Insurance Company ("Life Company"), organized under the laws of the state of
Arizona; and by FS Variable Separate Account (the "FS Account"), a separate
account of First SunAmerica Life Insurance Company ("FS Life Company"),
organized under the laws of the state of New York.
The Trust issues 22 separate series of shares (the "Portfolios"), each of
which represents a separate managed portfolio of securities with its own
investment objectives. The Trustees may establish additional series in the
future. All shares may be purchased or redeemed by the Account at net asset
value without any sales or redemption charge.
The investment objectives for each portfolio are as follows:
The CASH MANAGEMENT PORTFOLIO seeks high current yield while preserving capital
by investing in a diversified selection of money market instruments.
The GLOBAL BOND PORTFOLIO seeks a high total return, emphasizing current income
and, to a lesser extent, providing opportunities for capital appreciation,
through investment in high quality fixed-income securities of U.S. and foreign
issuers and through transactions in foreign currencies.
The CORPORATE BOND PORTFOLIO seeks a high total return with only moderate price
risk by investing primarily in investment grade fixed-income securities.
The HIGH-YIELD BOND PORTFOLIO seeks a high level of current income and
secondarily seeks capital appreciation by investing primarily in intermediate
and long-term corporate obligations, with emphasis on higher-yielding,
higher-risk, lower-rated or unrated securities.
The WORLDWIDE HIGH INCOME PORTFOLIO seeks high current income and, secondarily,
capital appreciation, by investing primarily in a portfolio of high-yielding
fixed-income securities of issuers located throughout the world.
The SUNAMERICA BALANCED PORTFOLIO seeks to conserve principal by maintaining at
all times a balanced portfolio of stocks and bonds.
The BALANCED/PHOENIX INVESTMENT COUNSEL PORTFOLIO seeks reasonable income,
long-term capital growth and conservation of capital by investing primarily in
common stocks and fixed-income securities, with an emphasis on income-producing
securities which appear to have some potential for capital enhancement.
The ASSET ALLOCATION PORTFOLIO seeks high total return (including income and
capital gains) consistent with preservation of capital over the long-term
through a diversified portfolio that can include common stocks and other
securities having common stock characteristics, bonds and other intermediate and
long-term fixed-income securities and money market instruments (debt securities
maturing in one year or less) in any combination.
The UTILITY PORTFOLIO seeks high current income and moderate capital
appreciation by investing primarily in the equity and debt securities of utility
companies.
The GROWTH-INCOME PORTFOLIO seeks growth of capital and income by investing
primarily in common stocks or securities which demonstrate the potential for
appreciation and/or dividends.
The FEDERATED VALUE PORTFOLIO seeks growth of capital and income by investing
primarily in the securities of high quality companies.
The VENTURE VALUE PORTFOLIO seeks to achieve growth of capital by investing
primarily in common stocks.
The "DOGS" OF WALL STREET PORTFOLIO seeks total return (including capital
appreciation and current income) primarily through the annual selection of
thirty high dividend yielding common stocks from the Dow Jones Industrial
Average and the Standard & Poor's 400 Industrials.
The PUTNAM GROWTH, GROWTH/PHOENIX INVESTMENT COUNSEL and ALLIANCE GROWTH
PORTFOLIOS each seeks long-term growth of capital by investing primarily in
common stocks or securities with common stock characteristics which demonstrate
the potential for appreciation.
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<PAGE> 222
The GLOBAL EQUITIES PORTFOLIO seeks long-term growth of capital through
investment primarily in common stocks or securities of U.S. and foreign issuers
with common stock characteristics which demonstrate the potential for
appreciation and through transactions in foreign currencies.
The INTERNATIONAL GROWTH AND INCOME PORTFOLIO seeks growth of capital and
current income through investment primarily in common stocks and securities
principally traded on markets outside the United States that offer potential for
capital growth and current income.
THE INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO seeks long-term capital
appreciation by investing in accordance with country weightings determined by
the Subadviser in common stocks of foreign issuers which, in the aggregate,
replicate broad country indices.
The REAL ESTATE PORTFOLIO seeks total return through a combination of growth and
income by investment primarily in securities of companies principally engaged in
or related to the real estate industry or which own significant real estate
assets or which primarily invest in real estate instruments.
The AGGRESSIVE GROWTH PORTFOLIO seeks long-term growth of capital through
investment primarily in equity securities of small capitalization growth
companies.
The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation by investing
in common stocks that have above-average growth prospects primarily in emerging
markets outside the United States.
2. SIGNIFICANT ACCOUNTING POLICIES: The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from these estimates.
In the opinion of management of the Trust, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair presentation
of the financial position of the Trust, and the results of its operations, the
changes in its net assets and its financial highlights for the periods then
ended. The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements.
SECURITY VALUATIONS: Stocks are stated at value 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. Nonconvertible bonds, debentures, other long-term debt securities, and
short-term securities with original or remaining maturities in excess of 60 days
are 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 where the investment adviser deems it appropriate to do so, an
over-the-counter or exchange quotation at the mean of representative bid or
asked prices may be used. Securities traded primarily on securities exchanges
outside the United States are valued at the last sale price on such exchanges on
the day of valuation, or if there is no sale on the day of valuation, at the
last reported bid price. If a security's price is available from more than one
foreign exchange, a portfolio uses the exchange that is the primary market for
the security. Developing markets securities involve risks not typically
associated with investing in securities of issuers in more developed markets.
These investments are subject to various risk factors including market, credit
and sovereign risk. The markets in which these securities trade can be volatile
and at times illiquid. Futures contracts are valued at the last sale price
established each day by the board of trade or exchange on which they are traded.
Short-term securities with 60 days or less to maturity are amortized to maturity
based on their cost to the Trust if acquired within 60 days of maturity or, if
already held by the Trust on the 60th day, are amortized to maturity based on
the value determined on the 61st day. Securities for which quotations are not
readily available are valued at fair value as determined in good faith under the
direction of the Trust's Trustees.
FOREIGN CURRENCY TRANSLATION: The books and records of the Trust are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and asked prices of
such currencies against the U.S. dollar.
The Trust does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at fiscal year-end. Similarly, the Trust does
not isolate the effect of changes in foreign exchange rates from the changes in
the market prices of portfolio securities sold during the year.
Realized foreign exchange gain and losses on other assets and liabilities and
change in unrealized foreign exchange gain and losses on other assets and
liabilities include realized foreign exchange gains and losses from currency
gains or losses between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends and
foreign withholding taxes recorded on the Trust's books and the U.S. dollar
equivalent amounts actually received or paid and changes in the unrealized
foreign exchange gains and losses relating to the other assets and liabilities
arising as a result of changes in the exchange rate.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS: As is customary in the mutual fund industry, securities
transactions are recorded on a trade date basis. Interest income is accrued
daily except when collection is not expected. Dividend income and distributions
to shareholders are recorded on the ex-dividend date except for certain
dividends from foreign securities, which are recorded as soon as the Trust is
informed after the ex-dividend date. The Trust amortizes premiums and accretes
discounts on fixed income securities, as well as those original issue discounts
for which
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<PAGE> 223
amortization is required for federal income tax purposes; gains and losses
realized upon the sale of such securities are based on their identified cost.
Portfolios which earn foreign income and capital gains may be subject to foreign
withholding taxes at various rates.
Common expenses incurred by the Trust are allocated among the Portfolios based
upon relative net assets or other appropriate allocation methods. In all other
respects, expenses are charged to each Portfolio as incurred on a specific
identification basis.
The Portfolios record dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined and presented in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent
distributions exceed current and accumulated earnings and profits for federal
income tax purposes, they are reported as distributions of paid-in capital. Net
investment income/loss, net realized gain/loss, and net assets are not affected.
For the year ended November 30, 1997, the reclassification arising from
book/tax differences resulted in increases (decreases) to the components of net
assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET UNDISTRIBUTED NET PAID-IN
INVESTMENT INCOME/(LOSS) REALIZED GAIN/(LOSS) CAPITAL
----------------------------------------------------
<S> <C> <C> <C>
Global Bond*............................................ $1,729,850 $(1,729,850) $ --
Worldwide High Income*.................................. (120,494) 120,494 --
Utility*................................................ (3,129) 3,129 --
Growth-Income*.......................................... 65 (65) --
Venture Value........................................... 1,065 (1,065) --
Growth/Phoenix Investment Counsel*...................... 22 (22) --
Global Equities......................................... 182,695 (182,696) 1
International Growth and Income*........................ 112,003 (111,488) (515)
International Diversified Equities*..................... 6,968,831 (6,964,267) (4,564)
Real Estate............................................. 515 -- (515)
Aggressive Growth....................................... 94,281 -- (94,281)
Emerging Markets........................................ 64,391 (63,876) (515)
</TABLE>
* Reclassification is primarily due to differing book/tax treatments for
foreign currency transactions.
ORGANIZATIONAL EXPENSES: Costs incurred by the Adviser in connection with the
organization and registration of the Trust amounted to $223,826. During the year
ended November 30, 1997 and period ended May 31, 1998, an additional $19,122 and
$4,717, respectively, were incurred as part of the organization and registration
of additional Portfolios. Organizational expenses are amortized on a straight
line basis by each applicable Portfolio of the Trust over the period of benefit
not to exceed 60 months from the date the respective Portfolio commenced
operations.
3. OPERATING POLICIES:
REPURCHASE AGREEMENTS: The Trust's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to assure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Trust has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Trust may be delayed or limited.
At May 31, 1998, the Aggressive Growth, High Yield Bond, Cash Management,
SunAmerica Balanced and "Dogs" of Wall Street Portfolios had a 12.6%, 5.4%,
4.4%, 3.8% and 0.9%, respectively, undivided interest, representing $18,983,000,
$8,093,000, $6,481,000, $5,799,000 and $1,409,000, respectively, in principal
amount, in a joint repo with PaineWebber, Inc., which is dated May 29, 1998,
bears interest at the rate of 5.50% per annum, has a principal amount of
$151,156,000 and a repurchase price of $151,225,280, matures on June 1, 1998 and
is collateralized by $136,175,000 of U.S. Treasury Bonds, which bear interest at
a rate of 6.75% per annum, mature August 15, 2026 and have an approximate value
of $155,130,560.
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<PAGE> 224
FORWARD FOREIGN CURRENCY CONTRACTS: Certain portfolios may enter into forward
foreign currency contracts ("forward contracts") to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates or to enhance return. A forward contract is an agreement
between two parties to buy or sell currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency exchange
rates. The contract is marked-to-market daily using the forward rate and the
change in market value is recorded by the Portfolio as unrealized gain or loss.
On the settlement date, the Portfolio records either realized gains or losses
when the contract is closed equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Forward contracts involve elements of risk in excess of the amount reflected in
the Statement of Assets and Liabilities. The Trust bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward contract.
FUTURES CONTRACTS: A futures contract is an agreement between two parties to
buy and sell a financial instrument at a set price on a future date. Upon
entering into such a contract the Trust is required to pledge to the broker an
amount of cash or U.S. government securities equal to the minimum "initial
margin" requirements of the exchange on which the futures contract is traded.
The contract amount reflects the extent of a Portfolio's exposure in these
financial instruments. A Portfolio's participation in the futures markets
involves certain risks, including imperfect correlation between movements in the
price of futures contracts and movements in the price of the securities hedged
or used for cover. The Trust's activities in the futures contracts are conducted
through regulated exchanges which do not result in counterparty credit risks.
Pursuant to a contract, the Portfolios agree to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Portfolios as unrealized appreciation or depreciation. When a
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
OPTIONS: An option is a contract conveying a right to buy or sell a financial
instrument at a specified price during a stipulated period. The premium paid by
a Portfolio for the purchase of a call or a put option is included in the
Portfolio's Statement of Assets and Liabilities as an investment and
subsequently marked to market to reflect the current market value of the option.
When a Portfolio writes a call or a put option, an amount equal to the premium
received by the Portfolio is included in the Portfolio's Statement of Assets and
Liabilities as a liability and is subsequently marked to market to reflect the
current market value of the option written. If an option which the Portfolio has
written either expires on its stipulated expiration date, or if the Portfolio
enters into a closing purchase transaction, the Portfolio realizes a gain (or
loss if the cost of a closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such options is
extinguished. If a call option which the Portfolio has written is exercised, the
Portfolio realizes a capital gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium originally
received. If a put option which the Portfolio has written is exercised, the
amount of the premium originally received reduces the cost of the security which
the Portfolio purchased upon exercise of the option.
CURRENCY SWAPS: Currency swaps involve the exchange by a Portfolio with
another party of its respective rights to make or receive payments in specified
currencies. Currency swaps usually involve the delivery of the principal value
of one designated currency in exchange for the other designated currency.
Therefore, the entire principal value of a currency swap is subject to the risk
that the other party will default on its contractual delivery obligations.
Currency swaps involve elements of risk in excess of the amount reflected in the
Statement of Assets and Liabilities. Changes in the value of the swap are
reported as unrealized appreciation or depreciation in the Statement of Assets
and Liabilities. A realized gain or loss is recorded upon early termination of
such agreement.
4. FEDERAL INCOME TAXES: The Trust intends to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
distribute all of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal tax provision is
required.
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The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for book purposes, including short-term securities and repurchase
agreements at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE UNREALIZED CAPITAL
UNREALIZED UNREALIZED GAIN/(LOSS) COST OF LOSS
GAIN LOSS NET INVESTMENTS CARRYOVER*+
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Management................................. $ 17,560 $ 31,229 $ (13,669) $ 256,636,961 $ 644
Global Bond..................................... 1,156,752 1,181,523 (24,771) 96,777,256 --
Corporate Bond**................................ 2,693,910 473,667 2,220,243 97,405,968 273,407
High-Yield Bond................................. 5,009,378 6,066,646 (1,057,268) 283,954,579 --
Worldwide High Income........................... 1,765,418 4,118,758 (2,353,340) 147,579,482 --
SunAmerica Balanced............................. 7,739,776 816,555 6,923,221 73,248,947 --
Balanced/Phoenix Investment Counsel............. 10,110,952 1,416,601 8,694,351 106,269,726 --
Asset Allocation................................ 50,096,206 16,965,053 33,131,153 647,193,052 --
Utility***...................................... 3,020,928 427,346 2,593,582 39,988,300 --
Growth-Income**................................. 213,361,616 7,622,471 205,739,145 625,390,768 --
Federated Value................................. 15,910,594 1,868,135 14,042,459 93,230,197 --
Venture Value................................... 348,435,762 20,570,855 327,864,907 1,192,061,940 --
"Dogs" of Wall Street........................... 207,267 559,207 (351,940) 15,107,573 --
Putnam Growth................................... 76,120,803 4,229,437 71,891,366 246,169,204 --
Growth/Phoenix Investment Counsel............... 39,186,518 4,073,647 35,112,871 194,724,757 --
Alliance Growth................................. 201,358,599 9,045,532 192,313,067 838,349,191 --
Global Equities**............................... 87,078,805 9,219,429 77,859,376 336,383,869 --
International Growth and Income................. 11,242,333 2,499,554 8,742,779 88,542,600 --
International Diversified Equities**............ 69,304,081 6,026,108 63,277,973 256,253,462 --
Real Estate..................................... 903,656 2,025,873 (1,122,217) 55,167,916 --
Aggressive Growth**............................. 10,962,145 4,822,866 6,139,279 110,717,262 2,868,661
Emerging Markets................................ 1,553,269 5,305,860 (3,752,591) 32,513,577 927,325
</TABLE>
* Expire 2004-2005
** Post 10/31/97 Capital Loss Deferrals: Corporate Bond $735; Growth-Income
$159,504; Global Equities $4,392,999; International Diversified Equities
$7,883,251 and Aggressive Growth $542,896.
*** Post 10/31/97 Currency Loss Deferrals: Utility $379.
+ Net capital loss carryovers reported as of November 30, 1997, which are
available to the extent provided in regulations to offset future capital
gains. To the extent that these carryovers are used to offset future capital
gains, it is probable that these gains so offset will not be distributed.
5. MANAGEMENT OF THE TRUST: SunAmerica Asset Management Corp. ("SAAMCo" or the
"Adviser"), an indirect wholly owned subsidiary of the Life Company, serves as
investment adviser for all the portfolios of the Trust. The Trust, on behalf of
each Portfolio, entered into an Investment Advisory and Management Agreement
(the "Agreement") with SAAMCo to handle the Trust's day-to-day affairs. It is
the responsibility of the Adviser and, for certain Portfolios pursuant to
Subadvisory Agreements described below, the subadvisers, to make investment
decisions for the Portfolios and to place the purchase and sale orders for the
Portfolio transactions. Such orders may be directed to any broker including, in
the manner and to the extent permitted by applicable law, affiliates of the
Adviser or a subadviser. The Agreement provides that SAAMCo shall administer the
Trust's business affairs; furnish offices, necessary facilities and equipment;
provide clerical, bookkeeping and administrative services; and permit any of its
officers or employees to serve, without compensation, as trustees or officers of
the Trust, if duly elected to such positions. There is no subadviser for the
Cash Management, High-Yield Bond, SunAmerica Balanced, "Dogs" of Wall Street and
Aggressive Growth Portfolios, and SAAMCo, therefore, performs all investment
advisory services for these Portfolios. The term "Assets", as used in the
following table, means the average daily net assets of the Portfolios.
The Trust pays SAAMCo a monthly fee calculated at the following annual
percentages of each Portfolio's assets:
<TABLE>
<CAPTION>
MANAGEMENT
PORTFOLIO ASSETS FEES
- ---------------------------------------------------------
<S> <C> <C>
Cash Management $0--$100 million 0.55%
> $100 million 0.50%
> $300 million 0.45%
$0--$ 50 million 0.70%
Corporate Bond > $ 50 million 0.60%
> $150 million 0.55%
> $250 million 0.50%
$0--$ 50 million 0.75%
Global Bond- > $ 50 million 0.65%
Asset Allocation > $150 million 0.60%
> $250 million 0.55%
$0--$ 50 million 0.70%
High-Yield Bond > $ 50 million 0.65%
> $150 million 0.60%
> $250 million 0.55%
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT
PORTFOLIO ASSETS FEES
- ---------------------------------------------------------
<S> <C> <C>
Worldwide High > $ 0 1.00%
Income-International
Diversified Equities
SunAmerica Balanced- $0--$ 50 million 0.70%
Balanced/Phoenix > $ 50 million 0.65%
Investment Counsel- > $150 million 0.60%
Growth-Income- > $300 million 0.55%
Alliance Growth- > $500 million 0.50%
Growth/Phoenix
Investment Counsel
Utility-Federated Value $0--$150 million 0.75%
> $150 million 0.60%
> $500 million 0.50%
</TABLE>
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<PAGE> 226
<TABLE>
<CAPTION>
MANAGEMENT
PORTFOLIO ASSETS FEES
- ---------------------------------------------------------
<S> <C> <C>
Venture Value-Real Estate $0--$100 million 0.80%
> $100 million 0.75%
> $500 million 0.70%
"Dogs" of Wall Street > $ 0 0.60%
Putnam Growth $0--$150 million 0.85%
> $150 million 0.80%
> $300 million 0.70%
International Growth and $0--$150 million 1.00%
Income > $150 million 0.90%
> $300 million 0.80%
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT
PORTFOLIO ASSETS FEES
- ---------------------------------------------------------
<S> <C> <C>
Global Equities $0--$ 50 million 0.90%
> $ 50 million 0.80%
> $150 million 0.70%
> $300 million 0.65%
Aggressive Growth $0--$100 million 0.75%
> $100 million 0.675%
> $250 million 0.625%
> $500 million 0.60%
Emerging Markets > $ 0 1.25%
</TABLE>
The organizations described below act as subadvisers to the Trust and certain
of its Portfolios pursuant to Subadvisory Agreements with SAAMCo. Under the
Subadvisory Agreements, the subadvisers manage the investment and reinvestment
of the assets of the respective Portfolios for which they are responsible. Each
of the subadvisers is independent of SAAMCo and discharges its responsibilities
subject to the policies of the Trust's Trustees and the oversight and
supervision of SAAMCo, which pays the subadvisers' fees.
Goldman Sachs Asset Management International, an affiliate of Goldman Sachs &
Co., serves as subadviser for the Global Bond Portfolio; Goldman Sachs Asset
Management, a separate operating division of Goldman Sachs & Co., serves as
subadviser for the Asset Allocation Portfolio; Federated Investment Counseling
serves as a subadviser for the Corporate Bond, Utility and Federated Value
Portfolios; Morgan Stanley Asset Management Inc., a wholly owned subsidiary of
Morgan Stanley Dean Witter Discover & Co., serves as subadviser for the
Worldwide High Income and International Diversified Equities Portfolios; Phoenix
Investment Counsel, Inc. serves as subadviser for the Balanced/Phoenix
Investment Counsel and Growth/Phoenix Investment Counsel Portfolios; Alliance
Capital Management L.P. serves as a subadviser for the Growth-Income, Alliance
Growth and Global Equities Portfolios; Davis Selected Advisers, L.P. serves as
subadviser for the Venture Value and Real Estate Portfolios; and Putnam
Investment Management, Inc. serves as subadviser for the Putnam Growth,
International Growth and Income and Emerging Markets Portfolios.
The portion of the investment advisory fees received by SAAMCo which are paid
to subadvisers are as follows:
<TABLE>
<CAPTION>
MANAGEMENT
PORTFOLIO ASSETS FEES
- ---------------------------------------------------------
<S> <C> <C>
Corporate Bond $0--$ 25 million 0.30%
> $ 25 million 0.25%
> $ 50 million 0.20%
> $150 million 0.15%
Global Bond- $0--$ 50 million 0.40%
Asset Allocation > $ 50 million 0.30%
> $150 million 0.25%
> $250 million 0.20%
Worldwide High Income- $0--$350 million 0.65%
International Diversified > $350 million 0.60%
Equities
Balanced/Phoenix $0--$ 50 million 0.35%
Investment Counsel- > $ 50 million 0.30%
Growth-Income- > $150 million 0.25%
Alliance Growth- > $300 million 0.20%
Growth/Phoenix > $500 million 0.15%
Investment Counsel
Utility-Federated Value $0--$ 20 million 0.55%
> $ 20 million 0.35%
> $ 50 million 0.25%
> $150 million 0.20%
> $500 million 0.15%
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT
PORTFOLIO ASSETS FEES
- ---------------------------------------------------------
<S> <C> <C>
Venture Value-Real Estate $0--$100 million 0.45%
> $100 million 0.40%
> $500 million 0.35%
Putnam Growth $0--$150 million 0.50%
> $150 million 0.45%
> $300 million 0.35%
Global Equities $0--$ 50 million 0.50%
> $ 50 million 0.40%
> $150 million 0.30%
> $300 million 0.25%
International Growth $0--$150 million 0.65%
and Income > $150 million 0.55%
> $300 million 0.45%
Emerging Markets $0--$150 million 1.00%
> $150 million 0.95%
> $300 million 0.85%
</TABLE>
For certain Portfolios, the Adviser has voluntarily agreed to reimburse
expenses, if necessary, to keep annual operating expenses at or below the
following percentages of each of the following Portfolio's average net assets:
Utility Portfolio -- 1.05%, "Dogs" of Wall Street Portfolio -- 0.85%,
International Growth and Income Portfolio -- 1.60%, Real Estate
Portfolio -- 1.25% and Emerging Markets Portfolio -- 1.90%. The Adviser also may
voluntarily reimburse additional amounts to increase the investment return to a
Portfolio's investors. The Adviser may terminate all such waivers and/or
reimbursements at any time. Further, effective June 3, 1996, any waivers or
reimbursements made by the Adviser 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 the Adviser and remain in compliance
with the foregoing expense limitations.
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<PAGE> 227
At May 31, 1998, the amounts repaid to the Adviser which are included in the
management fee along with the remaining balance subject to recoupment are as
follows:
<TABLE>
<CAPTION>
BALANCE
AMOUNT SUBJECT TO
RECOUPED RECOUPMENT
-------- ----------
<S> <C> <C>
SunAmerica Balanced Portfolio............................... $ 2,613 $ --
Utility Portfolio........................................... 15,198 26,555
"Dogs" of Wall Street....................................... -- 4,893
International Growth and Income Portfolio................... 52,507 --
Real Estate Portfolio....................................... 7,874 --
Emerging Markets Portfolio.................................. 10,157 45,457
</TABLE>
6. PURCHASES AND SALES OF SECURITIES: Information with respect to purchases and
sales of long-term securities for the six months ended May 31, 1998, was as
follows:
<TABLE>
<CAPTION>
CASH GLOBAL CORPORATE HIGH-YIELD WORLDWIDE SUNAMERICA
MANAGEMENT BOND BOND BOND HIGH INCOME BALANCED
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
Purchases of portfolio
securities (excluding U.S.
government securities).... $ -- $88,687,078 $34,870,317 $303,703,640 $114,970,768 $35,464,805
Sales of portfolio
securities (excluding U.S.
government securities).... -- 71,031,754 8,581,378 219,001,341 97,953,448 20,519,552
Purchases of U.S. government
securities................ -- 19,597,832 6,168,108 -- -- 27,362,558
Sales of U.S. government
securities................ -- 28,576,684 498,984 -- -- 15,940,167
</TABLE>
<TABLE>
<CAPTION>
BALANCED/PHOENIX
INVESTMENT ASSET GROWTH- FEDERATED VENTURE
COUNSEL ALLOCATION UTILITY INCOME VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
Purchases of portfolio
securities (excluding
U.S. government
securities).............. $ 65,287,244 $295,352,902 $ 30,896,573 $301,787,200 $ 57,735,182 $340,685,904
Sales of portfolio
securities (excluding
U.S. government
securities).............. 43,111,686 180,119,626 12,930,898 195,985,759 19,484,359 79,899,347
Purchases of U.S.
government
securities............... 17,148,025 236,778,947 -- -- -- --
Sales of U.S. government
securities............... 24,160,581 234,445,798 -- 7,717,335 -- --
</TABLE>
<TABLE>
<CAPTION>
GROWTH/PHOENIX
"DOGS" OF PUTNAM INVESTMENT ALLIANCE GLOBAL
WALL STREET GROWTH COUNSEL GROWTH EQUITIES
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
Purchases of portfolio
securities (excluding
U.S. government
securities).............. $13,698,573.... $130,106,247 $112,642,507 $529,358,807 $166,415,665
Sales of portfolio
securities (excluding
U.S. government
securities).............. -- 82,987,847 130,489,479 380,081,594 147,916,019
Purchases of U.S.
government
securities............... -- -- 3,639,657 4,106,252 --
Sales of U.S. government
securities............... -- -- -- 5,815,297 --
</TABLE>
---------------------
137
<PAGE> 228
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
GROWTH AND DIVERSIFIED AGGRESSIVE EMERGING
INCOME EQUITIES REAL ESTATE GROWTH MARKETS
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases of portfolio
securities (excluding
U.S. government
securities).............. $ 53,496,446 $ 96,647,735 $ 30,185,296 $149,766,622 $ 20,494,125
Sales of portfolio
securities (excluding
U.S. government
securities).............. 13,925,584 75,966,843 2,928,116 153,301,644 8,290,074
Purchases of U.S.
government
securities............... -- -- -- 4,461,188 --
Sales of U.S. government
securities............... -- -- -- 6,883,188 --
</TABLE>
7. TRANSACTIONS WITH AFFILIATES: The following Portfolios incurred brokerage
commissions with an affiliated broker:
<TABLE>
<CAPTION>
SUNAMERICA GOLDMAN SHELBY DONALDSON, LUFKIN &
SECURITIES, INC. SACHS & CO. CULLOM DAVIS JENRETTE SECURITIES CORP.
---------------- ----------- ------------ -------------------------
<S> <C> <C> <C> <C>
Balanced/Phoenix Investment Counsel Portfolio...... $ 95 $ -- $ -- $ --
Asset Allocation Portfolio......................... -- 43,600 -- --
Venture Value Portfolio............................ -- -- 9,576 --
Putnam Growth Portfolio............................ 610 -- -- --
Growth/Phoenix Investment Counsel Portfolio........ 360 -- -- --
Global Equities Portfolio.......................... -- -- -- 480
</TABLE>
8. COMMITMENTS AND CONTINGENCIES: The High-Yield Bond, SunAmerica Balanced,
Growth-Income, Venture Value, "Dogs" of Wall Street, Alliance Growth, Global
Equities and Aggressive Growth Portfolios have established an uncommitted line
of credit with State Street Bank and Trust Company with interest payable at the
Federal Funds rate plus 125 basis points. Borrowings under the line of credit
will commence when the Fund's cash shortfall exceeds $100,000.
- ---------------------
138
<PAGE> 229
- ---------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS*
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET TOTAL DIVIDENDS
ASSET NET NET REALIZED FROM DECLARED FROM
VALUE INVEST- & UNREALIZED INVEST- NET
PERIOD BEGINNING MENT GAIN (LOSS) ON MENT INVESTMENT
ENDED OF PERIOD INCOME** INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Management Portfolio
2/9/93-
11/30/93 $10.00 $0.19 $ 0.01 $ 0.20 $ --
11/30/94 10.20 0.38 (0.02) 0.36 (0.09)
11/30/95 10.47 0.56 0.01 0.57 (0.34)
11/30/96 10.70 0.53 (0.02) 0.51 (0.45)
11/30/97 10.76 0.53 0.01 0.54 (0.56)
5/31/98# 10.74 0.25 0.01 0.26 (0.68)
Global Bond Portfolio
7/1/93-
11/30/93 10.00 0.13 0.17 0.30 --
11/30/94 10.30 0.53 (0.86) (0.33) (0.09)
11/30/95 9.83 0.60 0.97 1.57 (0.38)
11/30/96 11.02 0.59 0.54 1.13 (0.75)
11/30/97 11.40 0.52 0.38 0.90 (0.75)
5/31/98# 11.51 0.23 0.37 0.60 (0.79)
Corporate Bond Portfolio
7/1/93-
11/30/93 10.00 0.14 0.05 0.19 --
11/30/94 10.19 0.52 (0.87) (0.35) (0.05)
11/30/95 9.75 0.60 1.00 1.60 (0.53)
11/30/96 10.82 0.65 0.03 0.68 (0.41)
11/30/97 11.09 0.77 0.21 0.98 (0.53)
5/31/98# 11.54 0.39 0.09 0.48 (0.46)
High-Yield Bond Portfolio
2/9/93-
11/30/93 10.00 0.76 0.36 1.12 --
11/30/94 11.12 1.20 (1.65) (0.45) (0.29)
11/30/95 10.32 1.11 0.12 1.23 (1.02)
11/30/96 10.53 0.98 0.48 1.46 (0.95)
11/30/97 11.04 1.04 0.48 1.52 (0.74)
5/31/98# 11.82 0.58 0.27 0.85 (0.66)
Worldwide High Income Portfolio
10/28/94-11/30/94 10.00 0.04 (0.09) (0.05) --
11/30/95 9.95 1.10 0.47 1.57 (0.10)
11/30/96 11.42 1.25 1.60 2.85 (0.87)
11/30/97 13.35 0.98 0.68 1.66 (0.90)
5/31/98# 13.20 0.53 0.33 0.86 (0.61)
SunAmerica Balanced Portfolio
6/3/96-
11/30/96 10.00 0.10 1.03 1.13 --
11/30/97 11.13 0.23 2.15 2.38 (0.04)
5/31/98# 13.45 0.14 1.50 1.64 (0.11)
Balanced/Phoenix Investment Counsel Portfolio
10/28/94-11/30/94 10.00 0.04 (0.08) (0.04) --
11/30/95 9.96 0.34 2.23 2.57 (0.05)
11/30/96 12.48 0.34 1.31 1.65 (0.19)
11/30/97 13.63 0.37 1.39 1.76 (0.23)
5/31/98# 14.75 0.18 1.15 1.33 (0.31)
<CAPTION>
DIVIDENDS NET NET RATIO OF NET
FROM NET ASSET ASSETS RATIO OF INVESTMENT
REALIZED VALUE END OF EXPENSES TO INCOME TO
PERIOD GAIN ON END OF TOTAL PERIOD AVERAGE NET AVERAGE NET PORTFOLIO
ENDED INVESTMENTS PERIOD RETURN*** (000'S) ASSETS ASSETS TURNOVER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Management Portfolio
2/9/93-
11/30/93 $ -- $10.20 2.00% $ 24,603 0.71%+++ 2.53%+++ --%
11/30/94 -- 10.47 3.51 89,098 0.70++ 3.73++ --
11/30/95 -- 10.70 5.59 90,731 0.67 5.32 --
11/30/96 -- 10.76 4.92 91,247 0.62 4.90 --
11/30/97 -- 10.74 5.22 156,119 0.63 5.06 --
5/31/98# -- 10.32 2.47 256,449 0.62+ 5.25+ --
Global Bond Portfolio
7/1/93-
11/30/93 -- 10.30 3.00 25,010 1.35+++ 3.56+++ 84
11/30/94 (0.05) 9.83 (3.18) 44,543 1.06 5.29 347
11/30/95 -- 11.02 16.40 59,759 0.95 5.89 339
11/30/96 -- 11.40 10.94 68,221 0.89 5.44 223
11/30/97 (0.04) 11.51 8.43 89,043 0.90 4.70 360
5/31/98# (0.22) 11.10 5.39 99,194 0.84+ 4.02+ 118
Corporate Bond Portfolio
7/1/93-
11/30/93 -- 10.19 1.90 11,667 0.94+++ 3.92+++ 208
11/30/94 (0.04) 9.75 (3.41) 15,869 0.94++ 5.21++ 419
11/30/95 -- 10.82 17.01 29,475 0.96++ 5.93++ 412
11/30/96 -- 11.09 6.51 37,207 0.97 6.11 338
11/30/97 -- 11.54 9.26 62,272 0.91 6.99 49
5/31/98# -- 11.56 4.18 99,855 0.78+ 6.75+ 12
High-Yield Bond Portfolio
2/9/93-
11/30/93 -- 11.12 11.20 41,851 0.94+++ 9.43+++ 229
11/30/94 (0.06) 10.32 (4.26) 55,803 0.92++ 11.07++ 225
11/30/95 -- 10.53 12.64 82,174 0.80 10.80 174
11/30/96 -- 11.04 14.86 113,229 0.77 9.41 107
11/30/97 -- 11.82 14.53 195,639 0.75 9.26 243
5/31/98# (0.08) 11.93 7.28 289,830 0.69+ 9.72+ 92
Worldwide High Income Portfolio
10/28/94-11/30/94 -- 9.95 (0.50) 10,478 1.60+++ 4.48+++ 2
11/30/95 -- 11.42 16.02 21,515 1.30 10.46 176
11/30/96 (0.05) 13.35 26.87 49,204 1.18 10.45 177
11/30/97 (0.91) 13.20 14.17 125,224 1.10 7.58 146
5/31/98# (0.74) 12.71 6.33 147,739 1.07+ 8.09+ 76
SunAmerica Balanced Portfolio
6/3/96-
11/30/96 -- 11.13 11.30 10,224 1.00+++ 1.92+++ 40
11/30/97 (0.02) 13.45 21.48 44,621 1.00 1.82 143
5/31/98# (0.36) 14.62 12.21 79,469 0.82+ 1.97+ 64
Balanced/Phoenix Investment Counsel Portfolio
10/28/94-11/30/94 -- 9.96 (0.40) 1,516 1.00+++ 4.25+++ 10
11/30/95 -- 12.48 25.89 32,429 0.98++ 3.08++ 153
11/30/96 (0.31) 13.63 13.75 70,021 0.84 2.74 194
11/30/97 (0.41) 14.75 13.52 95,721 0.82 2.63 271
5/31/98# (1.40) 14.37 9.06 115,048 0.78+ 2.51+ 68
</TABLE>
* Calculated based upon average shares outstanding
** After fee waivers and expense reimbursements by the investment adviser
*** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company and First SunAmerica Life Insurance
Company. If such expenses had been included, total return would have
been lower for each period presented.
# Unaudited
+ Annualized
++ During the below stated periods, the investment adviser waived a
portion of or all fees and assumed a portion of or all expenses for the
portfolios. If all fees and expenses had been incurred by the
portfolios, the ratio of expenses to average net assets and the ratio
of net investment income to average net assets would have been as
follows:
<TABLE>
<CAPTION>
EXPENSES NET INVESTMENT INCOME
------------------------------------- ----------------------------------------
1993 1994 1995 1996 1997 1993 1994 1995 1996 1997
------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Management Portfolio................... 1.10% 0.78% 0.67% 0.62% 0.63% 2.14% 3.65% 5.32% 4.90% 5.06%
Global Bond Portfolio....................... 1.81 1.06 0.95 0.89 0.90 3.10 5.29 5.89 5.44 4.70
Corporate Bond Portfolio.................... 1.81 1.09 0.97 0.97 0.91 3.05 5.06 5.92 6.11 6.99
High-Yield Bond Portfolio................... 1.29 0.93 0.80 0.77 0.75 9.08 11.06 10.80 9.41 9.26
Worldwide High Income Portfolio............. -- 2.26 1.30 1.18 1.10 -- 3.82 10.46 10.45 7.58
SunAmerica Balanced Portfolio............... -- -- -- 1.43 1.00 -- -- -- 1.49 1.82
Balanced/Phoenix Investment Counsel
Portfolio................................. -- 6.82 1.11 0.84 0.82 -- (1.57) 2.95 2.74 2.63
</TABLE>
See Notes to Financial Statements.
---------------------
139
<PAGE> 230
- ---------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS* -- (CONTINUED)
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET TOTAL DIVIDENDS
ASSET NET NET REALIZED FROM DECLARED FROM
VALUE INVEST- & UNREALIZED INVEST- NET
PERIOD BEGINNING MENT GAIN (LOSS) ON MENT INVESTMENT
ENDED OF PERIOD INCOME** INVESTMENTS OPERATIONS INCOME
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
7/1/93-
11/30/93 $10.00 $0.08 $ 0.28 $ 0.36 $ --
11/30/94 10.36 0.29 (0.25) 0.04 (0.05)
11/30/95 10.32 0.42 2.24 2.66 (0.20)
11/30/96 12.74 0.48 2.00 2.48 (0.31)
11/30/97 14.52 0.44 2.55 2.99 (0.40)
5/31/98# 16.21 0.24 0.93 1.17 (0.35)
Utility Portfolio
6/3/96-
11/30/96 10.00 0.24 0.51 0.75 --
11/30/97 10.75 0.36 1.91 2.27 (0.09)
5/31/98# 12.91 0.20 0.92 1.12 (0.16)
Growth-Income Portfolio
2/9/93-
11/30/93 10.00 0.12 0.49 0.61 --
11/30/94 10.61 0.13 (0.36) (0.23) (0.04)
11/30/95 10.33 0.17 3.31 3.48 (0.10)
11/30/96 13.71 0.18 3.48 3.66 (0.12)
11/30/97 16.82 0.17 4.69 4.86 (0.13)
5/31/98# 20.82 0.09 3.20 3.29 (0.13)
Federated Value Portfolio
6/3/96-
11/30/96 10.00 0.07 1.01 1.08 --
11/30/97 11.08 0.13 2.72 2.85 (0.03)
5/31/98# 13.90 0.09 2.13 2.22 (0.06)
Venture Value Portfolio
10/28/94-11/30/94 10.00 0.03 (0.25) (0.22) --
11/30/95 9.78 0.17 3.55 3.72 (0.03)
11/30/96 13.47 0.18 3.46 3.64 (0.09)
11/30/97 16.90 0.19 4.73 4.92 (0.09)
5/31/98# 21.47 0.11 2.06 2.17 (0.12)
"Dogs" of Wall Street Portfolio
4/1/98-
5/31/98# 10.00 0.03 (0.29) (0.26) --
Putnam Growth Portfolio
2/9/93-
11/30/93 10.00 0.02 0.02 0.04 --
11/30/94 10.04 0.03 (0.01) 0.02 (0.01)
11/30/95 10.05 (0.01) 3.09 3.08 (0.03)
11/30/96 13.10 -- 2.61 2.61 --
11/30/97 15.71 0.03 3.93 3.96 --
5/31/98# 19.15 0.01 3.01 3.02 (0.02)
Growth/Phoenix Investment Counsel Portfolio
2/9/93-
11/30/93 10.00 0.17 0.61 0.78 --
11/30/94 10.78 0.16 (0.87) (0.71) (0.06)
11/30/95 10.01 0.12 3.14 3.26 (0.13)
11/30/96 13.14 0.11 2.16 2.27 (0.11)
11/30/97 14.39 0.11 2.48 2.59 (0.10)
5/31/98# 15.62 0.02 1.94 1.96 (0.12)
<CAPTION>
DIVIDENDS NET NET RATIO OF NET
FROM NET ASSET ASSETS RATIO OF INVESTMENT
REALIZED VALUE END OF EXPENSES TO INCOME TO
PERIOD GAIN ON END OF TOTAL PERIOD AVERAGE NET AVERAGE NET PORTFOLIO
ENDED INVESTMENTS PERIOD RETURN*** (000'S) ASSETS ASSETS TURNOVER
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
7/1/93-
11/30/93 $ -- $10.36 3.60% $ 35,590 0.99%+++ 2.33%+++ 71%
11/30/94 (0.03) 10.32 0.30 106,856 0.94++ 2.71++ 152
11/30/95 (0.04) 12.74 26.10 199,836 0.81 3.62 207
11/30/96 (0.39) 14.52 20.27 316,388 0.74 3.66 200
11/30/97 (0.90) 16.21 21.97 526,585 0.68 2.88 176
5/31/98# (1.61) 15.42 7.09 671,222 0.64+ 2.96+ 78
Utility Portfolio
6/3/96-
11/30/96 -- 10.75 7.50 6,299 1.05+++ 4.41+++ 24
11/30/97 (0.02) 12.91 21.26 24,366 1.05++ 3.15++ 77
5/31/98# (0.33) 13.54 8.60 42,601 1.05+ 2.94+ 40
Growth-Income Portfolio
2/9/93-
11/30/93 -- 10.61 6.10 45,080 0.82+++ 1.59+++ 27
11/30/94 (0.01) 10.33 (2.20) 84,899 0.81++ 1.26++ 59
11/30/95 -- 13.71 33.89 171,281 0.77 1.42 59
11/30/96 (0.43) 16.82 27.41 325,463 0.72 1.21 82
11/30/97 (0.73) 20.82 30.11 622,062 0.65 0.89 44
5/31/98# (0.96) 23.02 15.82 832,054 0.60+ 0.81+ 31
Federated Value Portfolio
6/3/96-
11/30/96 -- 11.08 10.80 12,460 1.05+++ 1.26+++ 30
11/30/97 -- 13.90 25.75 59,024 1.03 1.03 46
5/31/98# (0.30) 15.76 16.02 107,670 0.84+ 1.14+ 24
Venture Value Portfolio
10/28/94-11/30/94 -- 9.78 (2.20) 4,449 1.10+++ 3.93+++ --
11/30/95 -- 13.47 38.17 154,908 1.00++ 1.43++ 18
11/30/96 (0.12) 16.90 27.44 516,413 0.85 1.21 22
11/30/97 (0.26) 21.47 29.62 1,140,053 0.79 0.98 22
5/31/98# (0.68) 22.84 10.10 1,519,053 0.75+ 0.96+ 7
"Dogs" of Wall Street Portfolio
4/1/98-
5/31/98# -- 9.74 (2.60) 14,025 0.85+++ 2.23+++ --
Putnam Growth Portfolio
2/9/93-
11/30/93 -- 10.04 0.40 42,911 0.97+++ 0.32+++ 40
11/30/94 -- 10.05 0.19 75,342 0.96++ 0.31++ 54
11/30/95 -- 13.10 30.66 115,276 0.93 (0.05) 52
11/30/96 -- 15.71 19.92 160,073 0.90 (0.02) 63
11/30/97 (0.52) 19.15 26.01 234,726 0.91 0.18 125
5/31/98# (3.08) 19.07 15.65 320,428 0.87+ 0.13+ 30
Growth/Phoenix Investment Counsel Portfolio
2/9/93-
11/30/93 -- 10.78 7.80 65,032 0.82+++ 2.20+++ 165
11/30/94 -- 10.01 (6.64) 104,194 0.81++ 1.52++ 211
11/30/95 -- 13.14 32.92 149,910 0.76 1.01 229
11/30/96 (0.91) 14.39 18.40 186,368 0.74 0.82 164
11/30/97 (1.26) 15.62 19.78 218,496 0.73 0.77 217
5/31/98# (2.76) 14.70 12.68 233,269 0.70+ 0.28+ 53
</TABLE>
* Calculated based upon average shares outstanding
** After fee waivers and expense reimbursements by the investment adviser
*** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company and First SunAmerica Life Insurance
Company. If such expenses had been included, total return would have been
lower for each period presented.
# Unaudited
+ Annualized
++ During the below stated periods, the investment adviser waived a portion
of or all fees and assumed a portion of or all expenses for the
portfolios. If all fees and expenses had been incurred by the portfolios,
the ratio of expenses to average net assets and the ratio of net
investment income (loss) to average net assets would have been as
follows:
<TABLE>
<CAPTION>
EXPENSES
----------------------------------------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------
Asset Allocation Portfolio...... 1.67% 0.94% 0.81% 0.74% 0.68% 0.64%
Utility Portfolio............... -- -- -- 1.93 1.24 1.05
Growth-Income Portfolio......... 1.40 0.89 0.77 0.72 0.65 0.60
Federated Value Portfolio....... -- -- -- 1.57 1.03 0.84
Venture Value Portfolio......... -- 3.89 1.02 0.85 0.79 0.75
"Dogs" of Wall Street
Portfolio..................... -- -- -- -- -- 1.13
Putnam Growth Portfolio......... 1.46 1.05 0.93 0.90 0.91 0.87
Growth/Phoenix Investment
Counsel Portfolio............. 1.28 0.87 0.76 0.74 0.73 0.70
<CAPTION>
NET INVESTMENT INCOME (LOSS)
--------------------------------------------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------
Asset Allocation Portfolio...... 1.65% 2.71% 3.62% 3.66% 2.88% 2.96%
Utility Portfolio............... -- -- -- 3.53 2.96 2.94
Growth-Income Portfolio......... 1.01 1.18 1.42 1.21 0.89 0.81
Federated Value Portfolio....... -- -- -- 0.74 1.03 1.14
Venture Value Portfolio......... -- 1.14 1.41 1.21 0.98 0.96
"Dogs" of Wall Street
Portfolio..................... -- -- -- -- -- 1.95
Putnam Growth Portfolio......... (0.17) 0.22 (0.05) (0.02) 0.18 0.13
Growth/Phoenix Investment
Counsel Portfolio............. 1.74 1.46 1.01 0.82 0.77 0.28
</TABLE>
See Notes to Financial Statements.
- ---------------------
140
<PAGE> 231
- ---------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS* -- (CONTINUED)
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET NET TOTAL DIVIDENDS
ASSET INVEST- NET REALIZED FROM DECLARED FROM
VALUE MENT & UNREALIZED INVEST- NET
PERIOD BEGINNING INCOME GAIN (LOSS) ON MENT INVESTMENT
ENDED OF PERIOD (LOSS)** INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Growth Portfolio
2/9/93-
11/30/93 $10.00 $0.05 $ 0.87 $ 0.92 $ --
11/30/94 10.92 0.04 (0.14) (0.10) (0.01)
11/30/95 10.64 0.07 5.08 5.15 (0.03)
11/30/96 15.63 0.08 4.07 4.15 (0.04)
11/30/97 18.73 0.16 4.76 4.92 (0.05)
5/31/98# 22.56 0.04 5.31 5.35 (0.06)
Global Equities Portfolio
2/9/93-
11/30/93 10.00 0.03 0.96 0.99 --
11/30/94 10.99 0.05 0.71 0.76 (0.01)
11/30/95 11.67 0.12 1.64 1.76 (0.08)
11/30/96 13.06 0.14 2.19 2.33 (0.14)
11/30/97 14.92 0.09 1.79 1.88 (0.13)
5/31/98# 15.98 0.04 2.85 2.89 (0.19)
International Growth and Income Portfolio
6/2/97-
11/30/97 10.00 0.03 0.38 0.41 --
5/31/98# 10.41 0.10 1.91 2.01 (0.03)
International Diversified Equities Portfolio
10/28/94-11/30/94 10.00 0.01 (0.23) (0.22) --
11/30/95 9.78 0.07 0.38 0.45 (0.08)
11/30/96 10.15 0.05 1.43 1.48 (0.26)
11/30/97 11.37 0.09 0.28 0.37 (0.31)
5/31/98# 11.33 0.08 2.16 2.24 (0.40)
Real Estate Portfolio
6/2/97-
11/30/97 10.00 0.16 1.37 1.53 --
5/31/98# 11.53 0.20 (0.41) (0.21) (0.16)
Aggressive Growth Portfolio
6/3/96-
11/30/96 10.00 0.02 0.34 0.36 --
11/30/97 10.36 0.01 1.40 1.41 (0.01)
5/31/98# 11.76 0.02 0.29 0.31 --
Emerging Markets Portfolio
6/2/97-
11/30/97 10.00 0.06 (2.03) (1.97) --
5/31/98# 8.03 0.03 (0.41) (0.38) (0.07)
<CAPTION>
DIVIDENDS NET NET RATIO OF NET
FROM NET ASSET ASSETS RATIO OF INVESTMENT
REALIZED VALUE END OF EXPENSES TO INCOME TO
PERIOD GAIN ON END OF TOTAL PERIOD AVERAGE NET AVERAGE NET PORTFOLIO
ENDED INVESTMENTS PERIOD RETURN*** (000'S) ASSETS ASSETS TURNOVER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Growth Portfolio
2/9/93-
11/30/93 $ -- $10.92 9.20% $ 23,256 0.82%+++ 0.61%+++ 73%
11/30/94 (0.17) 10.64 (0.93) 53,213 0.82++ 0.37++ 146
11/30/95 (0.13) 15.63 48.91 167,870 0.79 0.51 138
11/30/96 (1.01) 18.73 28.05 381,367 0.71 0.51 121
11/30/97 (1.04) 22.56 27.80 704,533 0.65 0.37 110
5/31/98# (2.30) 25.55 23.85 1,029,515 0.59+ 0.34+ 44
Global Equities Portfolio
2/9/93-
11/30/93 -- 10.99 9.90 43,737 1.50+++ 0.38+++ 58
11/30/94 (0.07) 11.67 6.87 136,758 1.28 0.42 67
11/30/95 (0.29) 13.06 15.58 165,752 1.14 1.02 106
11/30/96 (0.33) 14.92 18.21 246,482 1.03 1.04 70
11/30/97 (0.69) 15.98 13.30 341,639 0.95 0.58 115
5/31/98# (1.36) 17.32 18.21 417,005 0.89+ 0.51+ 40
International Growth and Income Portfolio
6/2/97-
11/30/97 -- 10.41 4.10 42,844 1.60+++ 0.61+++ 19
5/31/98# (0.06) 12.33 19.46 94,656 1.54+ 1.80+ 22
International Diversified Equities Portfolio
10/28/94-11/30/94 -- 9.78 (2.20) 12,438 1.70+++ 1.60+++ --
11/30/95 -- 10.15 4.63 48,961 1.70++ 0.76++ 52
11/30/96 -- 11.37 14.85 157,008 1.59 0.47 53
11/30/97 (0.10) 11.33 3.52 248,927 1.35 0.82 56
5/31/98# (0.15) 13.02 19.80 320,893 1.27+ 1.36+ 29
Real Estate Portfolio
6/2/97-
11/30/97 -- 11.53 15.30 29,565 1.25+++ 3.25+++ 7
5/31/98# (0.01) 11.15 (1.86) 53,271 1.01+ 3.49+ 8
Aggressive Growth Portfolio
6/3/96-
11/30/96 -- 10.36 3.60 35,124 1.05+++ 0.46+++ 47
11/30/97 -- 11.76 13.62 103,603 0.90 (0.13) 221
5/31/98# -- 12.07 2.64 112,531 0.84+ 0.31+ 155
Emerging Markets Portfolio
6/2/97-
11/30/97 -- 8.03 (19.70) 19,979 1.90+++ 1.33+++ 49
5/31/98# -- 7.58 (4.77) 29,046 1.90+ 0.67+ 33
</TABLE>
* Calculated based upon average shares outstanding
** After fee waivers and expense reimbursements by the investment adviser
*** Does not reflect expenses that apply to the separate accounts of Anchor
National Life Insurance Company and First SunAmerica Life Insurance
Company. If such expenses had been included, total return would have
been lower for each period presented.
# Unaudited
+ Annualized
++ During the below stated periods, the investment adviser waived a
portion of or all fees and assumed a portion of or all expenses for the
portfolios. If all fees and expenses had been incurred by the
portfolios, the ratio of expenses to average net assets and the ratio
of net investment income (loss) to average net assets would have been
as follows:
<TABLE>
<CAPTION>
EXPENSES NET INVESTMENT INCOME (LOSS)
------------------------------------- -----------------------------------------
1993 1994 1995 1996 1997 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------- -----------------------------------------
Alliance Growth Portfolio.................. 1.56% 0.96% 0.79% 0.71% 0.65% (0.13)% 0.23% 0.51% 0.51% 0.37%
Global Equities Portfolio.................. 2.52 1.28 1.14 1.03 0.95 (0.64) 0.42 1.02 1.04 0.58
International Growth and Income
Portfolio+............................... -- -- -- -- 2.02 -- -- -- -- 0.19
International Diversified Equities
Portfolio................................ -- 3.50 2.09 1.59 1.35 -- (0.20) 0.37 0.47 0.82
Real Estate Portfolio+..................... -- -- -- -- 1.36 -- -- -- -- 3.14
Aggressive Growth Portfolio................ -- -- -- 1.09 0.90 -- -- -- 0.42 (0.13)
Emerging Markets Portfolio+................ -- -- -- -- 2.60 -- -- -- -- 0.63
</TABLE>
See Notes to Financial Statements.
---------------------
141
<PAGE> 232
PART C
OTHER INFORMATION
Item 23. Exhibits.
Exhibits.
(a) Declaration of Trust, as amended. Incorporated herein by
reference to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A (File No. 2-85370) filed on
February 29, 1996.
(b) By-Laws. Incorporated herein by reference to Post-Effective
Amendment No. 6 to the Registrant's Registration Statement on
Form N-1A (File No. 2-85370) filed on February 29, 1996.
(c) Instruments Defining Rights of Security Holders.
Inapplicable.
(d)(1) Investment Advisory and Management Agreement between
Registrant and SunAmerica Asset Management Corp.
Incorporated herein by reference to Post-Effective
Amendment No. 12 to the Registrant's Registration Statement
on Form N-1A filed on May 7, 1997.
(d)(2) Subadvisory Agreements. Incorporated herein by reference to
Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A (file No. 3-85370)
filed on February 29, 1996 and also incorporated herein by
reference to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A filed on
May 7, 1997.
(e) Underwriting Contracts. Inapplicable.
<PAGE> 233
(f) Bonus or Profit Sharing Contracts. Inapplicable.
(g) Custodian Agreements. Incorporated herein by reference to
Post-Effective Amendment No. 10 to the Registrant's
Registration Statement on Form N-1A (File No. 2-85370) filed on
February 28, 1997.
(h)(1) Other Material Contracts. Fund Participation Agreement
between Registrant and Anchor National Life Insurance Company,
on behalf of itself and Variable Separate Account.
Incorporated herein by reference to Post-Effective Amendment
No. 6 to the Registrant's Registration Statement on Form N-1A
(File No. 2-85370) filed on February 29, 1996.
(2) Transfer Agency and Service Agreement filed between the
Registrant and State Street Bank and Trust Company.
Incorporated herein by reference to Post-Effective Amendment
No. 12 to the Registrant's Registration Statement on Form N-1A
filed on May 7, 1997.
(i) Legal Opinion. Inapplicable.
(j) Other Opinions. Consent of Independent Accountants.
Incorporated herein by reference to Post-Effective Amendment
No. 15 to the Registrant's Registration Statement on
Form N-1A filed on March 27, 1998.
(k) Omitted Financial Statements. Inapplicable.
(l) Initial Capital Agreements. Inapplicable.
(m) Rule 12b-1 Plan. Inapplicable.
(n) Financial Data Schedules.
(o) Rule 18-3f Plan. Inapplicable.
- ---------------------
Item 24. Persons Controlled by or Under Common Control with the Fund.
Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A (File No. 2-85370) filed on November 3, 1992.
C-2
<PAGE> 234
Item 25. Indemnification.
Article VI of the Registrant's By-Laws relating to the indemnification
of officers and trustees is quoted below:
ARTICLE VI
INDEMNIFICATION
The Trust shall provide any indemnification required by
applicable law and shall indemnify trustees, officers, agents and
employees as follows:
(a) the Trust shall indemnify any director or officer of the Trust who
was or is a party or is threatened to be made a party of any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by
or in the right of the Trust) by reason of the fact that such Person
is or was such Trustee or officer or an employee or agent of the
Trust, or is or was serving at the request of the Trust as a director,
officer, employee or agent of another corporation, partnership, joint
venture, Trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such Person in connection with
such action, suit or proceeding, provided such Person acted in good
faith an in a manner such Person reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
Person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Person did not reasonably believe his or her
actions to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that such Person's conduct was unlawful.
C-3
<PAGE> 235
(b) The Trust shall indemnify any Trustee or officer of the Trust who
was or is a part or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Trust to
procure a judgment in its favor by reason of the fact that such Person
is or was such Trustee or officer or an employee or agent of the Trust,
or is or was serving at the request of the Trust as a director,
officer, employee or agent of another corporation, partnership, joint
venture, Trust or other enterprise, against expenses (including
attorneys' fees), actually and reasonably incurred by such Person in
connection with the defense or settlement of such action or suit if
such Person acted in good faith and in a manner such Person reasonably
believed to be in or not opposed to the best interests of the Trust,
except that no indemnification shall be made in respect of any claim,
issue or matter as to which such Person shall have been adjudged to be
liable for negligence or misconduct in the performance of such Person's
duty to the Trust unless and only to the extent that the court in which
such action or suit was brought, or any other court having jurisdiction
in the premises, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case,
such Person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been
successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subparagraphs (a) or (b) above or in
defense of any claim, issue or matter therein, such Person shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such Person in connection therewith, without
the necessity for the determination as to the standard of conduct as
provided in subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered
by a court) shall be made by the Trust only as authorized in the
specific case upon a determination that indemnification of the Trustee
or officer is proper in view of the standard of conduct set forth in
subparagraph (a) or (b). Such determination shall be made (i) by the
Board by a majority vote of a quorum consisting of Trustees who were
disinterested and not parties to such action, suit or proceedings, or
(ii) if such a quorum of disinterested Trustees so directs, by
independent legal counsel in a written opinion, and any determination
so made shall be conclusive and binding upon all parties.
(e) Expenses incurred in defending a civil or criminal action, writ
or proceeding may be paid by the Trust in advance
C-4
<PAGE> 236
of the final disposition of such action, suit or proceeding, as
authorized in the particular case, upon receipt of an undertaking by
or on behalf of the Trustee or officer to repay such amount unless it
shall ultimately be determined that such Person is entitled to be
indemnified by the Trust as authorized herein. Such determination
must be made by disinterested Trustees or independent legal counsel.
Prior to any payment being made pursuant to this paragraph, a majority
of quorum of disinterested, non-party Trustees of the Trust, 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 indemnitee ultimately will be found entitled to
indemnification.
(f) Agents and employees of the Trust who are not Trustees or
officers of the Trust may be indemnified under the same standards and
procedures set forth above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled and shall continue as to a Person who has ceased to be a
Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a Person.
(h) Nothing in the Declaration or in these By-Laws shall be deemed to
protect any Trustee or officer of the Trust against any liability to
the Trust or to its Shareholders to which such Person would otherwise
be subject by reason of willful malfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of such Person's office.
(i) The Trust shall have power to purchase and maintain insurance on
behalf of any Person against any liability asserted against or
incurred by such Person, whether or not the Trust would have the power
to indemnify such Person against such liability under the provisions
of this Article. Nevertheless, insurance will not be purchased or
maintained by the Trust if the purchase or maintenance of such
insurance would result in the indemnification of any Person in
contravention of any rule or regulation and/or interpretation of the
Securities and Exchange Commission.
* * * * * * * * * * * * * *
The Investment Advisory and Management Agreement provides that
in absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of office on
the part of the Investment Adviser (and
C-5
<PAGE> 237
its officers, directors, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the
Investment Adviser to perform or assist in the performance of its
obligations under each Agreement) the Investment Adviser shall not be
subject to liability to the Trust or to any shareholder of the Trust
for any act or omission in the course of, or connected with, rendering
services, including without limitation, any error of judgment or
mistake or law or for any loss suffered by any of them in connection
with the matters to which each Agreement relates, except to the extent
specified in Section 36(b) of the Investment Company Act of 1940
concerning loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services. Certain of the
Subadvisory Agreements provide for similar indemnification of the
Subadviser by the Investment Adviser.
SunAmerica Inc., the parent of Anchor National Life Insurance
Company, provides, without cost to the Fund, indemnification of
individual trustees. By individual letter agreement, SunAmerica Inc.
indemnifies each trustee to the fullest extent permitted by law
against expenses and liabilities (including damages, judgments,
settlements, costs, attorney's fees, charges and expenses) actually
and reasonably incurred in connection with any action which is the
subject of any threatened, asserted, pending or completed action, suit
or proceeding, whether civil, criminal, administrative, investigative
or otherwise and whether formal or informal to which any trustee was,
is or is threatened to be made a party by reason of facts which
include his being or having been a trustee, but only to the extent
such expenses and liabilities are not covered by insurance.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it
C-6
<PAGE> 238
is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
Item 26. Business and Other Connections of the Investment Adviser.
SunAmerica Asset Management Corp. ("SAAMCo"), the Investment Adviser
of the Trust, 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 SAAMCo on file
with the Commission (File No. 801-19813) for a description of the
names and employment of the directors and officers of SAAMCo and other
required information.
Alliance Capital Management L.P., Federated Investment Counseling,
First American Asset Management Group, Goldman Sachs Asset Management,
Goldman Sachs Asset Management International, Phoenix Investment
Counsel, Inc., Putnam Investment Management, Inc., Davis Selected
Advisers, L.P., Morgan Stanley Asset Management Inc. and Federated
Investment Counseling, the Subadvisers of certain of the Portfolios of
the Trust, are primarily engaged in the business of rendering
investment advisory services. Reference is made to the most 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 Alliance Capital Management L.P., Goldman Sachs Asset Management,
Goldman Sachs Asset Management International, Phoenix Investment
Counsel, Inc., Putnam Investment Management, Inc., Davis Selected
Advisers, L.P. Morgan Stanley Asset Management Inc. and Federated
Investment Counseling, and other required information:
File No.
Alliance Capital Management L.P. 801-32361
Federated Investment Counseling 801-34611
First American Asset Management, Inc. 801-24113
Goldman Sachs Asset Management 801-16048
Goldman Sachs Asset Management Int'l. 801-38157
Phoenix Investment Counsel, Inc. 801-5995
Putnam Investment Management, Inc. 801-7974
Davis Selected Advisers, L.P. 801-31648
Morgan Stanley Asset Management Inc. 801-15757
Item 27. Principal Underwriters.
There is no Principal Underwriter for the Registrant.
Item 28. Location of Accounts and Records.
C-7
<PAGE> 239
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, acts as custodian, transfer agent and dividend
paying agent. It maintains books, records and accounts pursuant to
the instructions of the Trust.
SunAmerica Asset Management Corp., is located at The SunAmerica Center,
733 Third Avenue, New York, New York 10017-3204. Alliance Capital
Management L.P. is located at 1345 Avenue of the Americas, New York,
New York 10105. First American Asset Management Group is located at
U.S. Bancorp, 601 Second Avenue South, Minneapolis, Minnesota 55402.
Goldman Sachs Asset Management and Goldman Sachs Asset Management
International are located at 85 Broad Street, 12th Floor, New York, New
York 10005. Morgan Stanley Asset Management Inc., is located at 1221
Avenue of the Americas, 22nd Floor, New York, New York 10020. Phoenix
Investment Counsel, Inc. is located at One American Row, Hartford,
Connecticut 06115. Putnam Investment Management, Inc., is located at
One Post Office Square, Boston, Massachusetts 02109. Davis Selected
Advisers, L.P. is located at 124 East Marcy Street, Sante Fe, New
Mexico 87501. Federated Investment Counseling is located at Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. Each of the Investment Adviser and Subadvisers maintain
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.
None.
Item 30. Undertakings.
None.
C-8
<PAGE> 240
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, Registrant
has duly caused the Post-Effective Amendment No. 17 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 13th
day of November, 1998.
SUNAMERICA SERIES TRUST
By: /s/ Peter C. Sutton
------------------------
Peter C. Sutton
Vice President
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Post-Effective Amendment No. 17 to Registrant's Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<S> <C> <C>
* Trustee, Chairman and
- ------------------------------ President
James K. Hunt (Principal Executive Officer) November 13, 1998
* Senior Vice President,
- ------------------------------ Treasurer and Controller
Scott L. Robinson (Principal Financial
and Accounting Officer) November 13, 1998
* Trustee November 13, 1998
- ------------------------------
Richards D. Barger
* Trustee November 13, 1998
- ------------------------------
Norman J. Metcalfe
* Trustee November 13, 1998
- ------------------------------
Allan L. Sher
* Trustee November 13, 1998
- ------------------------------
William M. Wardlaw
*By: /s/ Robert M. Zakem November 13, 1998
-------------------------
Robert M. Zakem
Attorney-in-Fact
</TABLE>
<PAGE> 241
SUNAMERICA SERIES TRUST
EXHIBIT INDEX
Exhibit
(n) Financial Data Schedules.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 001
<NAME> SUNAMERICA SERIES TRUST GLOBAL EQUITIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 336,383,869
<INVESTMENTS-AT-VALUE> 414,243,245
<RECEIVABLES> 10,664,441
<ASSETS-OTHER> 6,959
<OTHER-ITEMS-ASSETS> 361,698
<TOTAL-ASSETS> 425,276,343
<PAYABLE-FOR-SECURITIES> 7,708,805
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 562,506
<TOTAL-LIABILITIES> 8,271,311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 322,270,245
<SHARES-COMMON-STOCK> 24,077,796
<SHARES-COMMON-PRIOR> 21,381,428
<ACCUMULATED-NII-CURRENT> (1,421,442)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,318,062
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 77,838,167
<NET-ASSETS> 417,005,032
<DIVIDEND-INCOME> 2,380,695
<INTEREST-INCOME> 280,314
<OTHER-INCOME> 0
<EXPENSES-NET> 1,685,930
<NET-INVESTMENT-INCOME> 975,079
<REALIZED-GAINS-CURRENT> 22,872,302
<APPREC-INCREASE-CURRENT> 39,280,132
<NET-CHANGE-FROM-OPS> 63,127,513
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,270,000)
<DISTRIBUTIONS-OF-GAINS> (29,966,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,799,322
<NUMBER-OF-SHARES-REDEEMED> (3,096,839)
<SHARES-REINVESTED> 1,993,885
<NET-CHANGE-IN-ASSETS> 75,365,838
<ACCUMULATED-NII-PRIOR> 1,870,601
<ACCUMULATED-GAINS-PRIOR> 25,413,638
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,412,102
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,685,930
<AVERAGE-NET-ASSETS> 381,840,458
<PER-SHARE-NAV-BEGIN> 15.98
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 2.85
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> (1.36)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.32
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 002
<NAME> SUNAMERICA SERIES GROWTH ALLIANCE GROWTH
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 838,349,191
<INVESTMENTS-AT-VALUE> 1,030,662,258
<RECEIVABLES> 9,187,327
<ASSETS-OTHER> 11,213
<OTHER-ITEMS-ASSETS> 557
<TOTAL-ASSETS> 1,039,861,355
<PAYABLE-FOR-SECURITIES> 8,652,486
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,694,016
<TOTAL-LIABILITIES> 10,346,502
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 746,344,601
<SHARES-COMMON-STOCK> 40,286,710
<SHARES-COMMON-PRIOR> 31,224,923
<ACCUMULATED-NII-CURRENT> 1,521,035
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 89,348,150
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 192,301,067
<NET-ASSETS> 1,029,514,853
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> SUNAMERICA SERIES TRUST
[NUMBER] 004
[NAME] SUNAMERICA SERIES TRUST PUTNAM GROWTH
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<NAME> SUNAMERICA SERIES TRUST HIGH YIELD BOND
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<NAME> SUNAMERICA SERIES TRUST CASH MANAGEMENT
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
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<NAME> SUNAMERICA SERIES TRUST ASSET ALLOCATION
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<NAME> SUNAMERICA SERIES TRUST GLOBAL BOND
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<CIK> 0000892538
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<NAME> SUNAMERICA SERIES TRUST CORPORATE BOND
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<NAME> SUNAMERICA SERIES TRUST
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<NUMBER> 011
<NAME> SUNAMERICA SERIES TRUST BALANCED/PHOENIX INVESTMENT COUNSEL
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 012
<NAME> SUNAMERICA SERIES TRUST VENTURE VALUE
<S> <C>
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<FISCAL-YEAR-END> NOV-30-1998
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 013
<NAME> SUNAMERICA SERIES TRUST WORLDWIDE HIGH INCOME
<S> <C>
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 014
<NAME> SUNAMERICA SERIES TRUST INTERNATIONAL DIVERSIFIED EQUITIES
<S> <C>
<PERIOD-TYPE> 6-MOS
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<TABLE> <S> <C>
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 015
<NAME> SUNAMERICA SERIES TRUST UTILITY
<S> <C>
<PERIOD-TYPE> 6-MOS
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<TABLE> <S> <C>
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 016
<NAME> SUNAMERICA SERIES TRUST SUNAMERICA BALANCED
<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 017
<NAME> SUNAMERICA SERIES TRUST FEDERATED VALUE
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 018
<NAME> SUNAMERICA SERIES TRUST AGGRESSIVE GROWTH
<S> <C>
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 019
<NAME> SUNAMERICA SERIES TRUST REAL ESTATE
<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 020
<NAME> SUNAMERICA SERIES TRUST INTERNATIONAL GROWTH & INCOME
<S> <C>
<PERIOD-TYPE> 6-MOS
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 021
<NAME> SUNAMERICA SERIES TRUST EMERGING MARKETS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 022
<NAME> SUNAMERICA SERIES TRUST DOGS OF WALL STREET
<S> <C>
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<FISCAL-YEAR-END> NOV-30-1998
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</TABLE>
