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ANCHOR ADVISOR VARIABLE ANNUITY
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SUNAMERICA SERIES TRUST
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SUPPLEMENT TO THE PROSPECTUS DATED APRIL 1, 1998
The date of the Prospectus is hereby changed to December 10, 1998.
The second and third sentences of the first paragraph on Page 1 of the
Prospectus are hereby deleted and replaced with the following:
The Trust consists of 25 Portfolios, each of which has its own investment
objectives and policies. This Prospectus includes 16 of the 25 Portfolios
of the Trust.
The paragraph under the heading "The Asset Allocation Portfolio" on Page 1 is
hereby deleted and replaced with the following:
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 last sentence of the third paragraph in the second column on Page 1 is
hereby deleted and replaced with the following:
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 last paragraph in the second column on the Page 1 is hereby deleted and
replaced with the following:
This prospectus contains information you should know before investing.
Please read it carefully before you invest and keep it for future
reference.
Investments in a Portfolio are not bank deposits and are not guaranteed or
insured by any bank, government entity or the FDIC.
The Financial Highlights on Pages 4, 5 and 6 are hereby supplemented as follows:
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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)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Management Portfolio
05/31/98# 10.74 0.25 0.01 0.26 (0.68) -- 10.32 2.47 256,449
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Corporate Bond Portfolio
05/31/98# 11.54 0.39 0.09 0.48 (0.46) -- 11.56 4.18 99,855
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Global Bond Portfolio
05/31/98# 11.51 0.23 0.37 0.60 (0.79) (0.22) 11.10 5.39 99,194
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High-Yield Bond Portfolio
05/31/98# 11.82 0.58 0.27 0.85 (0.66) (0.08) 11.93 7.28 289,830
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Worldwide High Income Portfolio
05/31/98# 13.20 0.53 0.33 0.86 (0.61) (0.74) 12.71 6.33 147,739
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SunAmerica Balanced Portfolio
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
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<S> <C> <C> <C> <C>
Cash Management Portfolio
05/31/98# 0.62+ 5.25+ -- N/A
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Corporate Bond Portfolio
05/31/98# 0.78+ 6.75+ 12 N/A
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Global Bond Portfolio
05/31/98# 0.84+ 4.02+ 118 N/A
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High-Yield Bond Portfolio
05/31/98# 0.69+ 9.72+ 92 N/A
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Worldwide High Income Portfolio
05/31/98# 1.07+ 8.09+ 76 N/A
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SunAmerica Balanced Portfolio
05/31/98# 0.82+ 1.97+ 64 N/A
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</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
# Unaudited
<TABLE>
<CAPTION>
NET
INVESTMENT
EXPENSES INCOME
-------- ----------
1998 1998
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<S> <C> <C>
Cash Management Portfolio................................... 0.62% 5.25%
Corporate Bond Portfolio.................................... 0.78 6.75
Global Bond Portfolio....................................... 0.84 3.10
High-Yield Bond Portfolio................................... 0.69 9.72
Worldwide High Income Portfolio............................. 1.07 8.07
SunAmerica Balanced Portfolio............................... 0.82 1.95
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</TABLE>
2
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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 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)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
05/31/98# 16.21 0.24 0.93 1.17 (0.35) (1.61) 15.42 7.09 671,222
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Utility Portfolio
05/31/98# 12.91 0.20 0.92 1.12 (0.16) (0.33) 13.54 8.60 42,601
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Growth-Income Portfolio
05/31/98# 20.82 0.09 3.20 3.29 (0.13) (0.96) 23.02 15.82 832,054
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Federated Value Portfolio
05/31/98# 13.90 0.09 2.13 2.22 (0.06) (0.30) 15.76 16.02 107,670
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Venture Value Portfolio
05/31/98# 21.47 0.11 2.06 2.17 (0.12) (0.68) 22.84 10.10 1,519,053
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"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
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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
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<S> <C> <C> <C> <C>
Asset Allocation Portfolio
05/31/98# 0.64+ 2.96+ 78 N/A
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Utility Portfolio
05/31/98# 1.05+ 2.94+ 40 N/A
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Growth-Income Portfolio
05/31/98# 0.60+ 0.81+ 31 N/A
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Federated Value Portfolio
05/31/98# 0.84+ 1.14+ 24 N/A
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Venture Value Portfolio
05/31/98# 0.75+ 0.96+ 7 N/A
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"Dogs" of Wall Street Portfolio
4/01/98-5/31/98# 0.85+++ 2.23+++ -- N/A
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</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>
NET
INVESTMENT
INCOME
EXPENSES (LOSS)
-------- ----------
1998 1998
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<S> <C> <C>
Asset Allocation Portfolio.................................. 0.64 2.96
Utility Portfolio........................................... 1.05 2.94
Growth-Income Portfolio..................................... 0.60 0.81
Federated Value Portfolio................................... 0.84 1.14
Venture Value Portfolio..................................... 0.75 0.96
"Dogs" of Wall Street Portfolio............................. 1.13 1.95
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</TABLE>
3
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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 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)
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Growth Portfolio
05/31/98# 22.56 0.04 5.31 5.35 (0.06) (2.30) 25.55 23.85 1,029,515
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Aggressive Growth Portfolio
05/31/98# 11.76 0.02 0.29 0.31 -- -- 12.07 2.64 112,531
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Global Equities Portfolio
05/31/98# 15.98 0.04 2.85 2.89 (0.19) (1.36) 17.32 18.21 417,005
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International Diversified Equities Portfolio
05/31/98# 11.33 0.08 2.16 2.24 (0.40) (0.15) 13.02 19.80 320,893
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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
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<S> <C> <C> <C> <C>
Alliance Growth Portfolio
05/31/98# 0.59+ 0.34+ 44 N/A
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Aggressive Growth Portfolio
05/31/98# 0.84+ 0.31+ 155 N/A
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Global Equities Portfolio
05/31/98# 0.89+ 0.51+ 40 N/A
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International Diversified Equities Portfolio
05/31/98# 1.27+ 1.36+ 29 N/A
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</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
# Unaudited
<TABLE>
<CAPTION>
NET
INVESTMENT
INCOME
EXPENSES (LOSS)
-------- ----------
1998 1998
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<S> <C> <C>
Alliance Growth Portfolio................................... 0.59% 0.34%
Aggressive Growth Portfolio................................. 0.84 0.31
Global Equities Portfolio................................... 0.89 0.51
International Diversified Equities Portfolio................ 1.27 1.36
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</TABLE>
4
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The second sentence of the first paragraph on Page 7 is hereby deleted and
replaced with the following:
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 first sentence of the second paragraph on Page 7 is hereby deleted and
replaced with the following:
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 third sentence of the second paragraph on Page 7 is hereby deleted and
replaced with the following:
This Prospectus describes 16 of the 25 Portfolios of the Trust which are
the Cash Management Portfolio, Corporate Bond Portfolio, Global Bond
Portfolio, High-Yield Bond Portfolio, Worldwide High Income Portfolio,
SunAmerica Balanced Portfolio, Asset Allocation Portfolio, Utility
Portfolio, Growth-Income Portfolio, Federated Value Portfolio, Venture
Value Portfolio, "Dogs" of Wall Street Portfolio, Alliance Growth
Portfolio, Aggressive Growth Portfolio, Global Equities Portfolio and
International Diversified Equities Portfolio.
The following is hereby inserted as the second sentence of the last paragraph on
Page 7:
Reference to limitations and restrictions on Portfolio investments used
herein apply at the time of purchase unless otherwise indicated.
The second sentence of the first paragraph under the heading "Cash Management
Portfolio" on Page 8 is hereby deleted and replaced with the following:
These securities mature in 397 days or less.
The second sentence of the first paragraph under the heading "Asset Allocation
Portfolio" on Page 13 is hereby deleted and replaced with the following:
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).
The second sentence of the second paragraph under the heading "Federated Value
Portfolio" on Page 15 is hereby deleted and replaced with the following:
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.
The last sentence of the second paragraph under the heading "Venture Value
Portfolio" on Page 15 is hereby deleted and replaced with the following:
See "Description of Securities and Investment Techniques -- Investment in
Small Cap Companies."
The first sentence of the third paragraph under the heading " 'Dogs' of Wall
Street Portfolio" on Page 16 is hereby deleted and replaced with the following:
The Portfolio invests in the thirty common stocks selected according to the
methodology described above.
The second sentence of the third paragraph under the heading " 'Dogs' of Wall
Street Portfolio" on Page 16 is hereby deleted.
The first sentence of the fourth paragraph under the heading " 'Dogs' of Wall
Street Portfolio" on Page 16 is hereby deleted and replaced with the following:
The Portfolio employs a buy and hold strategy over the course of each year,
which ignores market timing and rejects active management.
The fifth paragraph under the heading " 'Dogs' of Wall Street Portfolio" on Page
17 is hereby deleted and replaced with the following:
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 is invested weekly (or more
frequently as
5
<PAGE> 6
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 second sentence of the fourth paragraph under the heading "Corporate Debt
Instruments" on Page 21 is hereby deleted and replaced with the following:
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 following paragraph is hereby inserted after the paragraph with the heading
"Risk Factors Relating to High-Yield, High-Risk Bonds" on Page 21:
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.
The paragraph under the heading "Short-Term Debt Securities" on Page 23 is
hereby deleted and replaced with the following:
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 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.
The second sentence of the paragraph under the heading "Repurchase Agreements"
on Page 24 is hereby deleted and replaced with the following:
The seller must maintain appropriate collateral in a segregated account.
The following two paragraphs are hereby inserted before the paragraph with the
heading "Securities Lending" on Page 26:
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.
6
<PAGE> 7
The sixth sentence of the second paragraph under the heading "Borrowing and
Other Forms of Leverage" on Page 26 is hereby deleted and replaced with the
following:
The Portfolios will maintain a segregated account of cash or other liquid
assets securing the borrowing for the benefit of the lenders.
The paragraph under the heading "Risks Associated With Investing in Small
Companies" on Page 26 is hereby deleted and replaced with the following:
INVESTMENT IN SMALL CAP COMPANIES -- The SunAmerica Balanced, Venture
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
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 than 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.
The following paragraph is hereby inserted before the paragraph with the heading
"Foreign Currency Transactions" on Page 27:
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, 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.
The first sentence of the third paragraph under the heading "Foreign Currency
Transactions" on page 27 is hereby deleted and replaced with the following:
Each Portfolio (other than the Cash Management Portfolio 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 following paragraph is hereby inserted before the paragraph under the
heading "Options on Securities and Securities Indices" on Page 28:
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.
The following is hereby inserted as the second paragraph under the heading
"Options on Securities and Securities Indices" on Page 28:
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
7
<PAGE> 8
put written where the exercise price of the put held (i) is equal to or greater
than the exercise price of the put written (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 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.
The paragraph under the heading "Federated Investment Counseling" on Page 33 is
hereby deleted and replaced with the following:
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 fifth paragraph under the heading "Federated Investment Counseling" on Page
33 is hereby deleted and replaced with the following:
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.
The fifth paragraph under the heading "Goldman Sachs Asset
Management-International" on Page 34 is hereby deleted and replaced with the
following:
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.
The first paragraph under the heading "Morgan Stanley Asset Management, Inc." on
Page 34 is hereby deleted and replaced with the following:
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).
8
<PAGE> 9
The third, fourth and fifth paragraphs under the heading "Morgan Stanley Asset
Management Inc." on Pages 34 and 35 are hereby deleted and replaced with the
following:
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 MetLife Investment Management Corp. From 1995
to 1996 and 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 and Ann Thivierge serve as co-portfolio managers for the
International Diversified Equities Portfolio. Mr. Biggs has served as a
co-portfolio manager since the inception date of October 28, 1994 and Ann
Thivierge has served as a co-portfolio manager since July 1, 1995. Mr.
Biggs joined Morgan Stanley Dean Witter & Co in 1973 as a General Partner
and Managing Director. He has been Chairman and a Director of MSDW
Investment Management and a Managing Director of Morgan Stanley since 1975.
Ms. Thivierge joined the company in 1986 as an analyst and served as a Vice
President of MSDW Investment Management from 1992 to 1996. She is currently
a Principal of MSDW Investment Management.
The paragraph under the heading "Independent Accountants" on Page 37 is hereby
deleted and replaced with the following:
PricewaterhouseCoopers LLP has been selected as independent accountants for
the Trust.
9
<PAGE> 10
POLARIS/POLARIS(II) VARIABLE ANNUITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUPPLEMENT TO THE PROSPECTUS DATED APRIL 1, 1998
The date of the Prospectus is hereby changed to December 10, 1998.
The second sentence of the first paragraph on Page 1 of the Prospectus is hereby
deleted and replaced with the following:
The Trust consists of 25 Portfolios, each of which has its own investment
objectives and policies. This Prospectus includes 22 of the 25 Portfolios
of the Trust.
The paragraph under the heading "The Asset Allocation Portfolio" on Page 1 is
hereby deleted and replaced with the following:
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 last sentence of the third paragraph in the second column on Page 1 is
hereby deleted and replaced with the following:
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 last paragraph in the second column on the Page 1 is hereby deleted and
replaced with the following:
This prospectus contains information you should know before investing.
Please read it carefully before you invest and keep it for future
reference.
Investments in a Portfolio are not bank deposits and are not guaranteed or
insured by any bank, government entity or the FDIC.
The Financial Highlights on Pages 4, 5, 6 and 7 are hereby supplemented as
follows:
1
<PAGE> 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
05/31/98# 10.74 0.25 0.01 0.26 (0.68) -- 10.32 2.47 256,449
- -----------------------------------------------------------------------------------------------------------------------------
Corporate Bond Portfolio
05/31/98# 11.54 0.39 0.09 0.48 (0.46) -- 11.56 4.18 99,855
- -----------------------------------------------------------------------------------------------------------------------------
Global Bond Portfolio
05/31/98# 11.51 0.23 0.37 0.60 (0.79) (0.22) 11.10 5.39 99,194
- -----------------------------------------------------------------------------------------------------------------------------
High-Yield Bond Portfolio
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
05/31/98# 13.20 0.53 0.33 0.86 (0.61) (0.74) 12.71 6.33 147,739
- -----------------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced Portfolio
05/31/98# 13.45 0.14 1.50 1.64 (0.11) (0.36) 14.62 12.21 79,469
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<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
05/31/98# 0.62+ 5.25+ -- N/A
- ----------------------------------------------------------------------------------
Corporate Bond Portfolio
05/31/98# 0.78+ 6.75+ 12 N/A
- ----------------------------------------------------------------------------------------------
Global Bond Portfolio
05/31/98# 0.84+ 4.02+ 118 N/A
- ----------------------------------------------------------------------------------------------------------
High-Yield Bond Portfolio
05/31/98# 0.69+ 9.72+ 92 N/A
- ----------------------------------------------------------------------------------------------------------------------
Worldwide High Income Portfolio
05/31/98# 1.07+ 8.09+ 76 N/A
- -----------------------------------------------------------------------------------------------------------------------------
SunAmerica Balanced Portfolio
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
# Unaudited
<TABLE>
<CAPTION>
NET
INVESTMENT
EXPENSES INCOME
-------- ----------
1998 1998
--------------------------------------------------------------------------------------
<S> <C> <C>
Cash Management Portfolio................................... 0.62% 5.25%
Corporate Bond Portfolio.................................... 0.78 6.75
Global Bond Portfolio....................................... 0.84 3.10
High-Yield Bond Portfolio................................... 0.69 9.72
Worldwide High Income Portfolio............................. 1.07 8.07
SunAmerica Balanced Portfolio............................... 0.82 1.95
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 12
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
05/31/98# 14.75 0.18 1.15 1.33 (0.21) (1.40) 14.37 9.06 115,048
- --------------------------------------------------------------------------------------------------------------------------------
Asset Allocation Portfolio
05/31/98# 16.21 0.24 0.93 1.17 (0.35) (1.61) 15.42 7.09 671,222
- --------------------------------------------------------------------------------------------------------------------------------
Utility Portfolio
05/31/98# 12.91 0.20 0.92 1.12 (0.16) (0.33) 13.54 8.60 42,601
- --------------------------------------------------------------------------------------------------------------------------------
Growth-Income Portfolio
05/31/98# 20.82 0.09 3.20 3.29 (0.13) (0.96) 23.02 15.82 832,054
- --------------------------------------------------------------------------------------------------------------------------------
Federated Value Portfolio
05/31/98# 13.90 0.09 2.13 2.22 (0.06) (0.30) 15.76 16.02 107,670
- --------------------------------------------------------------------------------------------------------------------------------
Venture Value Portfolio
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
05/31/98# 0.78+ 2.51+ 68 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Asset Allocation Portfolio
05/31/98# 0.64+ 2.96+ 78 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Utility Portfolio
05/31/98# 1.05+ 2.94+ 40 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Growth-Income Portfolio
05/31/98# 0.60+ 0.81+ 31 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Federated Value Portfolio
05/31/98# 0.84+ 1.14+ 24 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Venture Value Portfolio
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>
NET
INVESTMENT
INCOME
EXPENSES (LOSS)
-------- ----------
1998 1998
--------------------------------------------------------------------------------------
<S> <C> <C>
Balanced/Phoenix Investment Counsel Portfolio............... 0.78% 2.51%
Asset Allocation Portfolio.................................. 0.64 2.96
Utility Portfolio........................................... 1.05 2.94
Growth-Income Portfolio..................................... 0.60 0.81
Federated Value Portfolio................................... 0.84 1.14
Venture Value Portfolio..................................... 0.75 0.96
"Dogs" of Wall Street Portfolio............................. 1.13 1.95
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 13
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
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
05/31/98# 15.62 0.02 1.94 1.96 (0.12) (2.76) 14.70 12.68 233,269
- --------------------------------------------------------------------------------------------------------------------------------
Putnam Growth Portfolio
05/31/98# 19.15 0.01 3.01 3.02 (0.02) (3.08) 19.07 15.65 320,428
- --------------------------------------------------------------------------------------------------------------------------------
Real Estate Portfolio
05/31/98# 11.53 0.20 (0.41) (0.21) (0.16) (0.01) 11.15 (1.86) 53,271
- --------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio
05/31/98# 11.76 0.02 0.29 0.31 -- -- 12.07 2.64 112,531
- --------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Portfolio
05/31/98# 10.41 0.10 1.91 2.01 (0.03) (0.06) 12.33 19.46 94,656
- --------------------------------------------------------------------------------------------------------------------------------
Global Equities Portfolio
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
05/31/98# 11.33 0.08 2.16 2.24 (0.40) (0.15) 13.02 19.80 320,893
- --------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio
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
05/31/98# 0.59+ 0.34+ 44 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Growth/Phoenix Investment Counsel Portfolio
05/31/98# 0.70+ 0.28+ 53 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Putnam Growth Portfolio
05/31/98# 0.87+ 0.13+ 30 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Real Estate Portfolio
05/31/98# 1.01+ 3.49+ 8 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio
05/31/98# 0.84+ 0.31+ 155 N/A
- --------------------------------------------------------------------------------------------------------------------------------
International Growth and Income Portfolio
05/31/98# 1.54+ 1.80+ 22 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Global Equities Portfolio
05/31/98# 0.89+ 0.51+ 40 N/A
- --------------------------------------------------------------------------------------------------------------------------------
International Diversified Equities Portfolio
05/31/98# 1.27+ 1.36+ 29 N/A
- --------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio
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
# Unaudited
<TABLE>
<CAPTION>
NET
INVESTMENT
INCOME
EXPENSES (LOSS)
-------- ----------
1998 1998
--------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Growth Portfolio................................... 0.59% 0.34%
Growth/Phoenix Investment Counsel Portfolio................. 0.70 0.28
Putnam Growth Portfolio..................................... 0.87 0.13
Real Estate Portfolio....................................... 1.01 3.49
Aggressive Growth Portfolio................................. 0.84 0.31
International Growth and Income Portfolio................... 1.54 1.80
Global Equities Portfolio................................... 0.89 0.51
International Diversified Equities Portfolio................ 1.27 1.36
Emerging Markets Portfolio.................................. 1.90 0.67
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 14
The second sentence of the first paragraph on Page 8 is hereby deleted and
replaced with the following:
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 first sentence of the second paragraph on Page 8 is hereby deleted and
replaced with the following:
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 third sentence of the second paragraph on Page 8 is hereby deleted and
replaced with the following:
This Prospectus describes 22 of the 25 Portfolios of the Trust which 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, Utility 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, Aggressive Growth Portfolio,
International Growth and Income Portfolio, Real Estate Portfolio, Global
Equities Portfolio, International Diversified Equities Portfolio and the
Emerging Markets Portfolio.
The following is hereby inserted as the second sentence of the last paragraph on
Page 8:
Reference to limitations and restrictions on Portfolio investments used
herein apply at the time of purchase unless otherwise indicated.
The second sentence of the first paragraph under the heading "Cash Management
Portfolio" on Page 9 is hereby deleted and replaced with the following:
These securities mature in 397 days or less.
The second sentence of the first paragraph under the heading "Asset Allocation
Portfolio" on Page 15 is hereby deleted and replaced with the following:
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).
The second sentence of the second paragraph under the heading "Federated Value
Portfolio" on Page 16 is hereby deleted and replaced with the following:
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.
The last sentence of the second paragraph under the heading "Venture Value
Portfolio" on Page 17 is hereby deleted and replaced with the following:
See "Description of Securities and Investment Techniques -- Investment in
Small Cap Companies."
The first sentence of the third paragraph under the heading " 'Dogs' of Wall
Street Portfolio" on Page 18 is hereby deleted and replaced with the following:
The Portfolio invests in the thirty common stocks selected according to the
methodology described above.
The second sentence of the third paragraph under the heading " 'Dogs' of Wall
Street Portfolio" on Page 18 is hereby deleted.
The first sentence of the fourth paragraph under the heading " 'Dogs' of Wall
Street Portfolio" on Page 18 is hereby deleted and replaced with the following:
The Portfolio employs a buy and hold strategy over the course of each year,
which ignores market timing and rejects active management.
5
<PAGE> 15
The fifth paragraph under the heading " 'Dogs' of Wall Street Portfolio" on Page
18 is hereby deleted and replaced with the following:
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 is 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 second sentence of the fourth paragraph under the heading "Corporate Debt
Instruments" on Page 24 is hereby deleted and replaced with the following:
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 following paragraph is hereby inserted after the paragraph with the heading
"Risk Factors Relating to High-Yield, High-Risk Bonds" on Page 25:
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.
The paragraph under the heading "Short-Term Debt Securities" on Page 27 is
hereby deleted and replaced with the following:
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 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.
The second sentence of the paragraph under the heading "Repurchase Agreements"
on Page 28 is hereby deleted and replaced with the following:
The seller must maintain appropriate collateral in a segregated account.
The following two paragraphs are hereby inserted before the paragraph with the
heading "Securities Lending" on Page 29:
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
6
<PAGE> 16
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.
The sixth sentence of the second paragraph under the heading "Borrowing and
Other Forms of Leverage" on Page 26 is hereby deleted and replaced with the
following:
The Portfolios will maintain a segregated account of cash or other liquid
assets securing the borrowing for the benefit of the lenders.
The paragraph under the heading "Risks Associated With Investing in Small
Companies" on Page 30 is hereby deleted and replaced with the following:
INVESTMENT IN SMALL CAP COMPANIES -- The SunAmerica Balanced, Venture
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
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 than 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.
The following paragraph is hereby inserted before the paragraph with the heading
"Foreign Currency Transactions" on Page 31:
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, 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.
The first sentence of the third paragraph under the heading "Foreign Currency
Transactions" on page 31 is hereby deleted and replaced with the following:
Each Portfolio (other than the Cash Management Portfolio 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 following paragraph is hereby inserted before the paragraph under the
heading "Options on Securities and Securities Indices" on Page 32:
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.
The following is hereby inserted as the second paragraph under the heading
"Options on Securities and Securities Indices" on Page 32:
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
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<PAGE> 17
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 (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 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.
The paragraph under the heading "Federated Investment Counseling" on Page 37 is
hereby deleted and replaced with the following:
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 fifth paragraph under the heading "Federated Investment Counseling" on Page
37 is hereby deleted and replaced with the following:
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.
The fifth paragraph under the heading "Goldman Sachs Asset
Management-International" on Page 38 is hereby deleted and replaced with the
following:
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.
The first paragraph under the heading "Morgan Stanley Asset Management, Inc." on
Page 38 is hereby deleted and replaced with the following:
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
8
<PAGE> 18
institutional investment management companies, had approximately $154.6 billion
of assets under management (inclusive of assets under fiduciary advisory
control).
The third, fourth and fifth paragraphs under the heading "Morgan Stanley Asset
Management Inc." on Pages 38 and 39 are hereby deleted and replaced with the
following:
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 MetLife Investment Management Corp. From 1995
to 1996 and 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 and Ann Thivierge serve as co-portfolio managers for the
International Diversified Equities Portfolio. Mr. Biggs has served as a
co-portfolio manager since the inception date of October 28, 1994 and Ann
Thivierge has served as a co-portfolio manager since July 1, 1995. Mr.
Biggs joined Morgan Stanley Dean Witter & Co in 1973 as a General Partner
and Managing Director. He has been Chairman and a Director of MSDW
Investment Management and a Managing Director of Morgan Stanley since 1975.
Ms. Thivierge joined the company in 1986 as an analyst and served as a Vice
President of MSDW Investment Management from 1992 to 1996. She is currently
a Principal of MSDW Investment Management.
The paragraph under the heading "Independent Accountants" on Page 43 is hereby
deleted and replaced with the following:
PricewaterhouseCoopers LLP has been selected as independent accountants for
the Trust.
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