<PAGE> 1
As filed with the Securities and Exchange Commission on March __, 1999
Securities Act File No. 33-52742
Investment Company Act File Act No. 811-7238
============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. 20 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 22
(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, Esq.
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017-3204
(Name and Address for Agent for Service)
Copy to:
Susan L. Harris, Esq.
Senior Vice President and General Counsel
SunAmerica Inc.
1 SunAmerica Center
Los Angeles, CA 90067-6022
Margery K. Neale, Esq.
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate
box)
|_| immediately upon filing pursuant to paragraph (b)
|X| on (March 31, 1999) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<PAGE> 2
----------------------------------------------
PROSPECTUS
MARCH 30, 1999
----------------------------------------------
SUNAMERICA SERIES TRUST
-- Cash Management Portfolio
-- Corporate Bond Portfolio
-- Global Bond Portfolio
-- High-Yield Bond Portfolio
-- Worldwide High Income Portfolio
-- SunAmerica Balanced Portfolio
-- MFS Total Return Portfolio
-- Asset Allocation Portfolio
-- Utility Portfolio
-- Equity Income Portfolio
-- Equity Index Portfolio
-- Growth-Income Portfolio
-- Federated Value Portfolio
-- Venture Value Portfolio
-- "Dogs" of Wall Street Portfolio
-- Alliance Growth Portfolio
-- MFS Growth and Income Portfolio
-- Putnam Growth Portfolio
-- Real Estate Portfolio
-- Small Company Value Portfolio
-- MFS Mid-Cap Growth Portfolio
-- Aggressive Growth Portfolio
-- International Growth and Income Portfolio
-- Global Equities Portfolio
-- International Diversified Equities Portfolio
-- Emerging Markets Portfolio
----------------------------------------------
[SUN AMERICA LOGO]
----------------------------------------------
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> 3
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TRUST HIGHLIGHTS............................................ 3
Q&A....................................................... 3
ACCOUNT INFORMATION......................................... 29
ADDITIONAL INFORMATION ABOUT THE "DOGS" OF WALL STREET
PORTFOLIO................................................. 30
Investment Strategy for the "Dogs" of Wall Street
Portfolio.............................................. 30
MORE INFORMATION ABOUT THE PORTFOLIOS....................... 30
Investment Strategies..................................... 30
GLOSSARY.................................................... 42
Investment Terminology.................................... 42
Risk Terminology.......................................... 44
OTHER INFORMATION........................................... 46
Year 2000................................................. 46
MANAGEMENT.................................................. 47
Investment Adviser and Manager............................ 47
Information about the Subadvisers......................... 49
Portfolio Management...................................... 51
Custodian, Transfer and Dividend Paying Agent............. 63
FINANCIAL HIGHLIGHTS........................................ 63
FOR MORE INFORMATION........................................ 68
</TABLE>
2
<PAGE> 4
--------------------------------------------------------------------
TRUST HIGHLIGHTS
--------------------------------------------------------------------
The following questions and answers are designed to give you an
overview of SunAmerica Series Trust (the "Trust") and to provide you
with information about the Trust's twenty-six separate investment
series ("Portfolios") and their investment goals and principal
strategies. More complete investment information is provided in the
chart, under "More Information About the Portfolios," which is on
page 30, and the glossary that follows on page 42.
Q: WHAT ARE THE PORTFOLIOS' INVESTMENT GOALS AND PRINCIPAL INVESTMENT
STRATEGIES?
A: Each Portfolio operates as a separate mutual fund, with its own investment
goal and a principal strategy for pursuing it. A Portfolio's investment
goal may be changed without shareholder approval, but you will be notified
of any change. There can be no assurance that any Portfolio will meet its
investment goal or that the net return on an investment will exceed what
could have been obtained through other investment or savings vehicles.
FIXED INCOME PORTFOLIOS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Management high current yield while invests in a diversified selection
Portfolio preserving capital of money market instruments
----------------------------------------------------------------------------------------------
Corporate Bond high total return with invests primarily in investment
Portfolio only moderate price risk grade fixed income securities
----------------------------------------------------------------------------------------------
Global Bond Portfolio high total return, invests in high quality fixed
emphasizing current income securities of U.S. and
income and, to a lesser foreign issuers and transactions in
extent, capital foreign currencies
appreciation
----------------------------------------------------------------------------------------------
High-Yield Bond high current income and, invests primarily in intermediate
Portfolio secondarily, capital and long-term corporate
appreciation obligations, emphasizing
higher-yielding, higher-risk,
lower-rated or unrated securities
(junk bonds) with a primary focus
on "B" rated high-yield bonds
----------------------------------------------------------------------------------------------
Worldwide High Income high current income and, invests primarily in high-yielding
Portfolio secondarily, capital fixed income securities (junk
appreciation bonds) of issuers located
throughout the world
----------------------------------------------------------------------------------------------
</TABLE>
Q&A
FIXED INCOME PORTFOLIOS typically seek to provide high current
income consistent with the preservation of capital by investing in
fixed income securities.
YIELD is the annual dollar income received on an investment
expressed as a percentage of the current or average price.
INCOME is interest payments from bonds or dividends from stocks.
TOTAL RETURN is a measure of performance which combines all elements
of return including income and capital gain or loss; it represents
the change in value of an investment over a given period expressed
as a percentage of the initial investment.
"HIGH QUALITY" INSTRUMENTS have a very strong capacity to pay
interest and repay principal; they reflect the issuers' high
creditworthiness and low risk of default.
3
<PAGE> 5
BALANCED OR ASSET ALLOCATION PORTFOLIOS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SunAmerica Balanced conservation of maintains at all times a balanced
Portfolio principal portfolio of stocks and bonds, with
at least 25% invested in fixed
income securities
----------------------------------------------------------------------------------------------
MFS Total Return reasonable current invests primarily in common stocks
Portfolio income, long-term and fixed income securities, with
capital growth and an emphasis on income-producing
conservation of capital securities that appear to have some
potential for capital enhancement
----------------------------------------------------------------------------------------------
Asset Allocation high total return invests in a diversified portfolio
Portfolio (including income and that may include common stocks and
capital gains) other securities with common stock
consistent with long- characteristics, bonds and other
term preservation of intermediate and long-term fixed
capital income securities and money market
instruments
----------------------------------------------------------------------------------------------
Utility Portfolio high current income and invests primarily in equity and
moderate capital debt securities of utility
appreciation companies
----------------------------------------------------------------------------------------------
</TABLE>
EQUITY PORTFOLIOS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income long-term capital invests primarily in equity
Portfolio appreciation and income securities that are expected to pay
above-average dividends
----------------------------------------------------------------------------------------------
Equity Index Portfolio investment results that invests primarily in common stocks
correspond with the included in the S&P 500(R)
performance of the
Standard & Poor's 500(R)
Composite Stock Price
Index ("S&P 500(R)")
----------------------------------------------------------------------------------------------
Growth-Income growth of capital and invests primarily in common stocks
Portfolio income or securities that demonstrate the
potential for appreciation and/or
dividends
----------------------------------------------------------------------------------------------
Federated Value growth of capital and invests primarily in the securities
Portfolio income of high quality companies
----------------------------------------------------------------------------------------------
Venture Value growth of capital invests primarily in common stocks
Portfolio of companies with market
capitalizations of at least $5
billion
----------------------------------------------------------------------------------------------
"Dogs" of Wall Street total return (including invests in thirty high dividend
Portfolio capital appreciation and yielding common stocks selected
current income) annually from the Dow Jones
Industrial Average and the broader
market (see "Additional information
about the "Dogs" of Wall Street
Portfolio" for a detailed
description of the Portfolio's
Investment Strategy)
----------------------------------------------------------------------------------------------
Alliance Growth long-term growth of invests primarily in equity
Portfolio capital securities of a limited number of
large, carefully selected, high
quality U.S. companies that are
judged likely to achieve superior
earnings
----------------------------------------------------------------------------------------------
</TABLE>
BALANCED PORTFOLIOS typically try to balance three different
investment goals: capital appreciation, income and capital
preservation by investing in a mixture of stocks, bonds and money
market instruments.
ASSET ALLOCATION is a varying combination, depending on market
conditions and risk level, of stocks, bonds, money market
instruments and other assets.
CAPITAL APPRECIATION/GROWTH is an increase in the market value of
securities held.
INDEX PORTFOLIOS typically are comprised of securities that make up or
represent a target index; the primary objective is to mirror the
investment results of the index.
4
<PAGE> 6
EQUITY PORTFOLIOS (CONT'D)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MFS Growth and Income reasonable current invests primarily in equity
Portfolio income and long-term securities
growth of capital and
income
----------------------------------------------------------------------------------------------
Putnam Growth long-term growth of invests primarily in common stocks
Portfolio capital or securities with common stock
characteristics that its Subadviser
believes have above-average growth
prospects
----------------------------------------------------------------------------------------------
Real Estate Portfolio total return through a invests primarily in securities of
combination of growth companies principally engaged in or
and income related to the real estate industry
or that own significant real estate
assets or that primarily invest in
real estate financial instruments
----------------------------------------------------------------------------------------------
Small Company Value capital appreciation invests in a broadly diversified
Portfolio portfolio of equity securities of
small companies generally with
market capitalizations of less than
$1 billion
----------------------------------------------------------------------------------------------
MFS Mid-Cap Growth long-term growth of invests primarily in equity
Portfolio capital securities of medium-sized
companies, generally with market
capitalizations between $1 billion
and $5 billion, that its Subadviser
believes have above-average growth
potential
----------------------------------------------------------------------------------------------
Aggressive Growth capital appreciation invests primarily in equity
Portfolio securities of high growth companies
including small growth companies
with market capitalizations under
$1 billion
----------------------------------------------------------------------------------------------
</TABLE>
INTERNATIONAL PORTFOLIOS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT GOAL PRINCIPAL INVESTMENT STRATEGY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Growth growth of capital and, invests primarily in common stocks
and Income Portfolio secondarily, current traded on markets outside the U.S.
income
----------------------------------------------------------------------------------------------
Global Equities long-term growth of invests primarily in common stocks
Portfolio capital or securities with common stock
characteristics of U.S. and foreign
issuers that demonstrate the
potential for appreciation and
engages in transactions in foreign
currencies
----------------------------------------------------------------------------------------------
International long-term capital invests (in accordance with country
Diversified Equities appreciation and sector weightings determined by
Portfolio its Subadviser) in common stocks of
foreign issuers that, in the
aggregate, replicate broad country
and sector indices
----------------------------------------------------------------------------------------------
Emerging Markets long-term capital invests primarily in common stocks
Portfolio appreciation and other equity securities of
companies that its Subadviser
believes have above-average growth
prospects primarily in emerging
markets outside the U.S.
----------------------------------------------------------------------------------------------
</TABLE>
A "GROWTH" PHILOSOPHY -- that of investing in securities believed to
offer the potential for capital appreciation -- focuses on
securities of companies that are considered to have an historical
record of above- average growth rate, significant growth potential,
above-average earnings growth or value, the ability to sustain
earnings growth, or that offer proven or unusual products or
services, or operate in industries experiencing increasing demand.
A "VALUE" PHILOSOPHY -- that of investing in securities that are
believed to be undervalued in the market -- often reflects a
contrarian approach in that the potential for superior relative
performance is believed to be highest when fundamentally solid
companies are out of favor. The selection criteria is usually
calculated to identify stocks of companies with solid financial
strength and generous dividend yields that have low price- earnings
ratios and have generally been overlooked by the market, or
companies undervalued within an industry or market capitalization
category.
MARKET CAPITALIZATION represents the total market value of the
outstanding securities of a corporation.
INTERNATIONAL PORTFOLIOS typically seek capital appreciation by
investing significantly in securities traded in markets outside
the U.S.
AN "EMERGING MARKET" COUNTRY is generally a country with a low or
middle income economy or that is in the early stages of its
industrialization cycle.
5
<PAGE> 7
Q: WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE PORTFOLIOS?
A: The following section describes the principal risks of each Portfolio, while
the chart on page 31 describes various additional risks.
Risks of Investing in Equity Securities
The EQUITY INCOME, EQUITY INDEX, GROWTH-INCOME, FEDERATED VALUE, VENTURE
VALUE, "DOGS" OF WALL STREET, ALLIANCE GROWTH, MFS GROWTH AND INCOME, PUTNAM
GROWTH, REAL ESTATE, SMALL COMPANY VALUE, MFS MID-CAP GROWTH, AGGRESSIVE
GROWTH, INTERNATIONAL GROWTH AND INCOME, GLOBAL EQUITIES, INTERNATIONAL
DIVERSIFIED EQUITIES and EMERGING MARKETS PORTFOLIOS invest primarily in
equity securities. In addition, the SUNAMERICA BALANCED, MFS TOTAL RETURN,
ASSET ALLOCATION and UTILITY PORTFOLIOS invest significantly in equities. As
with any equity fund, the value of your investment in any of these
Portfolios may fluctuate in response to stock market movements. Growth
stocks are historically volatile, which will particularly affect the
GROWTH-INCOME, ALLIANCE GROWTH, MFS GROWTH AND INCOME, PUTNAM GROWTH, MFS
MID-CAP GROWTH, AGGRESSIVE GROWTH and INTERNATIONAL GROWTH AND INCOME
PORTFOLIOS. You should be aware that the performance of different types of
equity stocks may rise or decline under varying market conditions -- for
example, "value" stocks may perform well under circumstances in which
"growth" stocks in general have fallen. In addition, individual stocks
selected for any of these Portfolios may underperform the market generally.
Risks of Investing in Bonds
The CORPORATE BOND, GLOBAL BOND, HIGH-YIELD BOND, and WORLDWIDE HIGH INCOME
PORTFOLIOS invest primarily in bonds. In addition, the SUNAMERICA BALANCED,
MFS TOTAL RETURN, ASSET ALLOCATION and UTILITY PORTFOLIOS invest
significantly in bonds. As with any bond fund, the value of your investment
in these Portfolios may go up or down in response to changes in interest
rates or defaults (or even the potential for future default) by bond
issuers. To the extent a Portfolio is invested in the bond market, movements
in the bond market generally may affect its performance.
Risks of Investing in Junk Bonds
The HIGH-YIELD BOND and WORLDWIDE HIGH INCOME PORTFOLIOS invest
predominantly in junk bonds, which are considered speculative. The CORPORATE
BOND, MFS TOTAL RETURN, ASSET ALLOCATION, EQUITY INCOME, EQUITY INDEX,
ALLIANCE GROWTH, PUTNAM GROWTH, REAL ESTATE, SMALL COMPANY VALUE, MFS
MID-CAP, INTERNATIONAL GROWTH AND INCOME and EMERGING MARKETS PORTFOLIOS may
also invest in junk bonds. While the Adviser and Subadvisers each tries to
diversify its portfolio and to engage in a credit analysis of each junk bond
issuer in which it invests, junk bonds carry a substantial risk of default
or changes in the issuer's creditworthiness, or they may already be in
default. A junk bond's market price may fluctuate more than higher-quality
securities and may decline significantly. In addition, it may be more
difficult for a Portfolio to dispose of junk bonds or to determine their
value. Junk bonds may contain redemption or call provisions that, if
exercised during a period of declining interest rates, may force a Portfolio
to replace the security with a lower yielding security. If this occurs, it
will result in a decreased return for you.
Risks of Investing in Money Market Securities
While an investment in the CASH MANAGEMENT PORTFOLIO should present the
least market risk of any of the Portfolios since it invests only in
high-quality short-term debt obligations (money market securities), you
should be aware that an investment in the CASH MANAGEMENT PORTFOLIO is
subject to the risk that the value of its investments may be subject to
changes in interest rates. The CASH MANAGEMENT PORTFOLIO does not seek to
maintain a stable net asset value of $1.00.
Risks of Investing Internationally
Except for the Cash Management Portfolio, all of the Portfolios may invest
internationally, including in "emerging market" countries. While investing
internationally may reduce your risk by increasing the diversification of
your investment, the value of your investment may be affected by fluctuating
currency values, changing local and regional economic, political and social
conditions, and greater market volatility, and, in addition, foreign
securities may not be as liquid as domestic securities. These risks affect
all the Portfolios except for the Cash Management Portfolio and are primary
risks of the
6
<PAGE> 8
GLOBAL BOND, WORLDWIDE HIGH INCOME, INTERNATIONAL GROWTH AND INCOME, GLOBAL
EQUITIES, INTERNATIONAL DIVERSIFIED EQUITIES and EMERGING MARKETS
PORTFOLIOS.
Risks of Investing in Smaller Companies
Stocks of smaller companies may be more volatile than, and not as liquid as,
those of larger companies. This will particularly affect the SMALL COMPANY
VALUE, GROWTH-INCOME, ALLIANCE GROWTH, PUTNAM GROWTH, AGGRESSIVE GROWTH,
INTERNATIONAL GROWTH AND INCOME and EMERGING MARKETS PORTFOLIOS.
Risks of a "Passively Managed" Strategy
Each of the EQUITY INDEX, "DOGS" OF WALL STREET and INTERNATIONAL
DIVERSIFIED EQUITIES PORTFOLIOS will not deviate from its strategy (except
to the extent necessary to comply with federal tax laws). If a Portfolio is
committed to a strategy that is unsuccessful, the Portfolio will not meet
its investment goal. Because the Portfolios will not use certain techniques
available to other mutual funds to reduce stock market exposure, the
Portfolios may be more susceptible to general market declines than other
Portfolios.
Risks of Investing in Utility Securities
The UTILITY PORTFOLIO invests primarily 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. Such utility securities entail
certain risks including: (i) utility companies' historic 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.
To attempt to reduce these risks, 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.
Risks of Investing in Real Estate Securities
The REAL ESTATE PORTFOLIO invests primarily in the real estate industry. A
Portfolio that invests primarily in the real estate industry is subject to
the risks associated with the direct ownership of real estate. The Portfolio
could also be subject to the risks 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. Most of the
Portfolio's investments are, and likely will continue to be, interests in
Real Estate Investment Trusts (REITs).
Risks of Investing in "Non-Diversified" Portfolios
The GLOBAL BOND, WORLDWIDE HIGH INCOME, "DOGS" OF WALL STREET, MFS MID-CAP
GROWTH and INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIOS are organized as
"non-diversified" Portfolios. A non-diversified Portfolio can invest a
larger portion of assets in the securities of a single company than can some
other mutual funds. By concentrating in a smaller number of securities, a
Portfolio's risk is increased because the effect of each security on the
Portfolio's performance is greater.
Additional Principal Risks
Shares of the Portfolios are not bank deposits and are not guaranteed or
insured by any bank, government entity or the Federal Deposit Insurance
Corporation. As with any mutual fund, there is no guarantee that a Portfolio
will be able to achieve its investment goals. If the value of the assets of
a Portfolio goes down, you could lose money.
7
<PAGE> 9
Q: HOW HAVE THE PORTFOLIOS PERFORMED HISTORICALLY?
A: The following Risk/Return Bar Charts and Tables illustrate the risks of
investing in the Portfolios by showing changes in the Portfolios'
performance from calendar year to calendar year, and comparing the
Portfolios' average annual returns to those of an appropriate market index.
Fees and expenses incurred at the contract level are not reflected in the
bar charts and tables. If these amounts were reflected, returns would be
less than those shown. Of course, past performance is not necessarily an
indication of how a Portfolio will perform in the future. The "DOGS" OF WALL
STREET, THE EQUITY INCOME, the EQUITY INDEX, the SMALL COMPANY VALUE, and
the MFS MID-CAP GROWTH PORTFOLIOS have not been in existence for a full
calendar year.
- --------------------------------------------------------------------------------
CASH MANAGEMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH MANAGEMENT PORTFOLIO
-------------------------
<S> <C>
1994 3.80%
1995 5.48%
1996 4.91%
1997 5.22%
1998 5.05%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
1.36% (quarter ended 06/30/95) and the lowest return for a quarter was 0.64%
(quarter ended 3/31/94).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Cash Management Portfolio 5.05% 4.89% 4.52%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993.
8
<PAGE> 10
- --------------------------------------------------------------------------------
CORPORATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C>
-3.19% 17.78% 4.49% 10.90% 6.05%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
5.94% (quarter ended 06/30/95) and the lowest return for a quarter was -2.89%
(quarter ended 03/31/94).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Corporate Bond Portfolio 6.05% 6.98% 6.78%
- ------------------------------------------------------------------------------------------------
Lipper Corporate BBB Rated Index(2) 6.41% 6.65% 6.82%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Corporate Bond Index(3) 8.59% 7.74% 7.65%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Index(4) 8.67% 7.28% 7.10%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is July 1, 1993. The since inception
returns for the comparative indices are as of the inception date month end.
(2) The Lipper Corporate BBB Rated Index is an average of variable annuity
accounts that include at least 65% of assets in corporate and government
debt issues in the top four grades.
(3) The Lehman Brothers Corporate Bond Index includes all publicly issued,
fixed rate, nonconvertible investment grade, dollar-denominated,
SEC-registered corporate debt.
(4) The Lehman Brothers Aggregate Index combines several Lehman Brothers
fixed-income indices to give a broad view of the bond market -- 70%
reflects the Government/Corporate Bond Index, 29% reflects the
Mortgage-Backed Securities Index and 1% reflects the Asset-Backed
Securities Index.
9
<PAGE> 11
- --------------------------------------------------------------------------------
GLOBAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C>
-4.65% 17.64% 9.36% 10.03% 10.87%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
5.66% (quarter ended 09/30/98) and the lowest return for a quarter was -3.97%
(quarter ended 03/31/94).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Global Bond Portfolio 10.87% 8.40% 8.52%
- ------------------------------------------------------------------------------------------------
J.P. Morgan Global Government Bond Index(2) 11.41% 10.29% 10.15%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is July 1, 1993. The since inception
return for the comparative index is as of the inception date month end.
(2) The J.P. Morgan Global Government Bond Index tracks the performance of bonds
throughout the world, including issues from Europe, Australia, the Far East
and the United States.
10
<PAGE> 12
- --------------------------------------------------------------------------------
HIGH-YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C>
-5.52% 14.24% 14.57% 14.42% -2.95%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
7.38% (quarter ended 09/30/97) and the lowest return for a quarter was -8.40%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
High-Yield Bond Portfolio -2.95% 6.55% 7.73%
- ------------------------------------------------------------------------------------------------
Merrill Lynch High-Yield Master Index(2) 3.67% 9.40% 10.40%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993. The since inception
return for the comparative index is as of the inception date month end.
(2) The Merrill Lynch High-Yield Master Index includes publicly placed,
nonconvertible, coupon-bearing U.S. domestic debt with a maturity of at
least one year. Par amounts of all issues at the beginning and ending of
each reporting period must be at least $10,000. Issues included in the index
must have a rating that is less than investment grade but not in default.
11
<PAGE> 13
- --------------------------------------------------------------------------------
WORLDWIDE HIGH INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C>
-20.97% 25.32% 15.54% -17.07%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
12.07% (quarter ended 06/30/95) and the lowest return for a quarter was -24.35%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Worldwide High Income Portfolio -17.07% 8.78%
- -----------------------------------------------------------------------------------------
First Boston High Yield Bond Index(2) 0.58% 10.07%
- -----------------------------------------------------------------------------------------
J.P. Morgan EMBI Plus(3) -11.05% 13.90%
- -----------------------------------------------------------------------------------------
Blended Index(4) -4.61% 12.33%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is October 28, 1994. The since inception
returns for the comparative indices are as of the inception date month end.
(2) The First Boston High Yield Bond Index is a trader-priced portfolio
constructed to mirror the public high-yield debt market. Securities in the
index are rated B or lower.
(3) The J.P. Morgan Emerging Markets Bond Index (EMBI) Plus is a market-weighted
index composed of all Brady Bonds outstanding; it includes Argentina,
Brazil, Mexico, Nigeria, the Philippines, and Venezuela.
(4) The Blended Index combines 50% of the First Boston High Yield Index and 50%
of the J.P. Morgan Emerging Markets Bond Index Plus.
12
<PAGE> 14
- --------------------------------------------------------------------------------
SUNAMERICA BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998
<S> <C>
24.48% 24.61%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
15.55% (quarter ended 12/31/98) and the lowest return for a quarter was -5.24%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- -----------------------------------------------------------------------------------------
SunAmerica Balanced Portfolio 24.61% 23.17%
- -----------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 28.83%
- -----------------------------------------------------------------------------------------
Lehman Brothers Aggregate Index(3) 8.67% 9.61%
- -----------------------------------------------------------------------------------------
Blended Index(4) 19.57% 19.77%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 3, 1996. The since inception
returns for the comparative indices are as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
(3) The Lehman Brothers Aggregate Index combines several Lehman Brothers
fixed-income indices to give a broad view of the bond market -- 70%
reflects the Government/Corporate Bond Index, 29% reflects the
Mortgage-Backed Securities Index and 1% reflects the Asset-Backed
Securities Index.
(4) The Blended Index consists of 55% S&P 500(R) Index, 35% Lehman Brothers
Aggregate Index, and 10% Treasury Bills. Treasury Bills are short-term
securities with maturities of one-year or less issued by the U.S.
Government.
13
<PAGE> 15
- --------------------------------------------------------------------------------
MFS TOTAL RETURN PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C>
27.64% 9.94% 16.90% 19.53%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
13.55% (quarter ended 12/31/98) and the lowest return for a quarter was -4.95%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- -----------------------------------------------------------------------------------------
MFS Total Return Portfolio(2) 19.53% 17.42%
- -----------------------------------------------------------------------------------------
S&P 500(R)(3) 28.58% 28.35%
- -----------------------------------------------------------------------------------------
Lehman Brothers Aggregate Index(4) 8.67% 9.66%
- -----------------------------------------------------------------------------------------
Blended Index(5) 19.57% 19.41%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is October 28, 1994. The since inception
returns for the comparative indices are as of the inception date month end.
(2) Prior to January 1, 1999, the MFS Total Return Portfolio was named the
Balanced Phoenix Investment Counsel Portfolio.
(3) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
(4) The Lehman Brothers Aggregate Index combines several Lehman Brothers
fixed-income indices to give a broad view of the bond market -- 70%
reflects the Government/Corporate Bond Index, 29% reflects the
Mortgage-Backed Securities Index and 1% reflects the Asset-Backed
Securities Index.
(5) The Blended Index consists of 35% Lehman Brothers Aggregate Index, 55% S&P
500 Index, and 10% Treasury Bills. Treasury Bills are short-term securities
with maturities of one-year or less issued by the U.S. Government.
14
<PAGE> 16
- --------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C>
-0.26% 26.29% 18.95% 21.81% 3.32%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
11.05% (quarter ended 06/30/97) and the lowest return for a quarter was -8.76%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Asset Allocation Portfolio 3.32% 13.53% 13.39%
- ------------------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 24.07% 21.89%
- ------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Index(3) 8.67% 7.28% 7.10%
- ------------------------------------------------------------------------------------------------
Blended Index(4) 21.01% 17.32% 15.99%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is July 1, 1993. The since inception
returns for the comparative indices are as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
(3) The Lehman Brothers Aggregate Index combines several Lehman Brothers
fixed-income indices to give a broad view of the bond market--70% reflects
the Government/Corporate Bond Index, 29% reflects the Mortgage-Backed
Securities Index and 1% reflects the Asset-Backed Securities Index.
(4) The Blended Index consists of 40% Lehman Brothers Aggregate Index and 60%
S&P 500 Index.
15
<PAGE> 17
- --------------------------------------------------------------------------------
UTILITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998
<S> <C>
25.73% 14.04%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
12.85% (quarter ended 12/31/97) and the lowest return for a quarter was -1.15%
(quarter ended 06/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Utility Portfolio 14.04% 19.02%
- -----------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 28.83%
- -----------------------------------------------------------------------------------------
Blended Index(3) 42.31% 35.55%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 3, 1996. The since inception
returns for the comparative indices are as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect changes
in larger companies more heavily than those in smaller companies.
(3) The Blended Index is comprised of 35% S&P Utility Index and 65% for the S&P
Communications Service Index, on a market capitalization weighted basis.
The S&P Utility Index is presently comprised of 40 stocks from the electric
and natural gas industries. The S&P Communications Service Index is
comprised of the companies listed in the telecommunications sectors of the
S&P 400, 500, and 600. Created in July of 1996, the S&P Communications
Service Index includes cellular and wireless service providers including
pagers, long distance providers and the telephone group companies (local
service providers).
16
<PAGE> 18
---------------------------------------------------------------------------
GROWTH-INCOME PORTFOLIO
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1994 1995 1996 1997 1998
- -2.61% 34.10% 24.06% 33.91% 30.74%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
28.51% (quarter ended 12/31/98) and the lowest return for a quarter was -14.39%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE PAST ONE PAST FIVE RETURN SINCE
CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Growth-Income Portfolio 30.74% 23.18% 20.94%
- ------------------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 24.07% 21.42%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993. The since inception
return for the comparative index is as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the Index will reflect
changes in larger companies more heavily than those in smaller companies.
17
<PAGE> 19
- --------------------------------------------------------------------------------
FEDERATED VALUE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1997 1998
31.43% 17.96%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
16.10% (quarter ended 12/31/98) and the lowest return for a quarter was -11.49%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR PAST ONE RETURN SINCE
ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- --------------------------------------------------------------------------------------
Federated Value Portfolio 17.96% 22.24%
- --------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 28.83%
- --------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 3, 1996. The since inception
return for the comparative index is as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
18
<PAGE> 20
- --------------------------------------------------------------------------------
VENTURE VALUE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1995 1996 1997 1998
37.45% 24.76% 34.32% 13.73%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
21.07% (quarter ended 12/31/98) and the lowest return for a quarter was -14.87%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAST ONE RETURN SINCE
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Venture Value Portfolio 13.73% 25.66%
- ----------------------------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 28.35%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is October 28, 1994. The since inception
return for the comparative index is as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
19
<PAGE> 21
- --------------------------------------------------------------------------------
ALLIANCE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1994 1995 1996 1997 1998
- -2.16% 43.79% 29.11% 31.43% 52.23%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
32.57% (quarter ended 12/31/98) and the lowest return for a quarter was -12.54%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER PAST ONE PAST FIVE RETURN SINCE
31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio 52.23% 29.44% 26.80%
- ------------------------------------------------------------------------------------------------------------
Russell 1000 Growth Index(2) 38.70% 25.70% 22.22%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993. The since inception
return for the comparative index is as of the inception date month end.
(2) The Russell 1000 Growth Index consists of stocks with a greater-than-average
growth orientation. Companies in this index tend to exhibit higher
price-to-book and price-earnings ratios, lower dividend yields and higher
forecasted growth values.
20
<PAGE> 22
- --------------------------------------------------------------------------------
MFS GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1994 1995 1996 1997 1998
- -8.01% 32.10% 15.99% 23.22% 29.28%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
22.03% (quarter ended 12/31/98) and the lowest return for a quarter was -8.93%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER PAST ONE PAST FIVE RETURN SINCE
31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
MFS Growth and Income Portfolio(2) 29.28% 17.56% 16.67%
- ------------------------------------------------------------------------------------------------------------
S&P 500(R)(3) 28.58% 24.07% 21.42%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993. The since inception
return for the comparative index is as of the inception date month end.
(2) Prior to January 1, 1999 the MFS Growth and Income Portfolio was named the
Growth Phoenix Investment Counsel Portfolio.
(3) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
21
<PAGE> 23
- --------------------------------------------------------------------------------
PUTNAM GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1994 1995 1996 1997 1998
- -1.57% 24.75% 20.37% 32.48% 34.76%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
25.28% (quarter ended 12/31/98) and the lowest return for a quarter was -12.26%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER PAST ONE PAST FIVE RETURN SINCE
31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Putnam Growth Portfolio 34.76% 21.42% 18.43%
- ------------------------------------------------------------------------------------------------------------
S&P 500(R)(2) 28.58% 24.07% 21.42%
- ------------------------------------------------------------------------------------------------------------
Russell 1000 Growth Index(3) 38.70% 25.70% 22.22%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993. The since inception
returns for the comparative indices are as of the inception date month end.
(2) The S&P 500(R) Index tracks the performance of 500 stocks representing a
sampling of the largest foreign and domestic stocks traded publicly in the
United States. Because it is market-weighted, the index will reflect
changes in larger companies more heavily than those in smaller companies.
(3) The Russell 1000 Growth Index consists of stocks with a
greater-than-average growth orientation. Companies in this index tend to
exhibit higher price-to-book and price-earnings ratios, lower dividend
yields and higher forecasted growth values.
22
<PAGE> 24
- --------------------------------------------------------------------------------
REAL ESTATE PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1998
- -14.11%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
1.44% (quarter ended 12/31/98) and the lowest return for a quarter was -11.07%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAST ONE RETURN SINCE
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Real Estate Portfolio -14.11% 0.04%
- ----------------------------------------------------------------------------------------------------------
Morgan Stanley REIT Index(2) -16.90% -0.85%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 2, 1997. The since inception
return for the comparative index is as of the inception date month end.
(2) The Morgan Stanley Real Estate Investment Trust (REIT) Index is a
capitalization-weighted index with dividends reinvested of mostly actively
traded real estate investment trusts and is designed to be a measure of
real estate equity performance. The index was developed with a base value
of 200 as of December 31, 1994.
23
<PAGE> 25
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1997 1998
12.35% 17.43%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
32.06% (quarter ended 12/31/98) and the lowest return for a quarter was -17.31%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAST ONE RETURN SINCE
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio 17.43% 13.59%
- ----------------------------------------------------------------------------------------------------------
Russell 2000 Index(2) -2.56% 7.47%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 3, 1996. The since inception
return for the comparative index is as of the inception date month end.
(2) The Russell 2000 Index is comprised of the smallest 2000 companies in the
Russell 3000 Index, representing approximately 11% of the Russell 3000
total market capitalization. The Index was developed with a base value of
$135,000 as of December 31, 1986.
24
<PAGE> 26
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1998
10.83%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
14.81% (quarter ended 12/31/98) and the lowest return for a quarter was -17.57%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAST ONE RETURN SINCE
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
International Growth and Income Portfolio 10.83% 10.91%
- ----------------------------------------------------------------------------------------------------------
MSCI EAFE Index(2) 20.34% 10.06%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 2, 1997. The since inception
return for the comparative index is as of the inception date month end.
(2) The Morgan Stanley Capital International (MSCI) Europe, Australia, and Far
East (EAFE) Index represents the foreign stocks of 19 countries in Europe,
Australia and the Far East.
25
<PAGE> 27
- --------------------------------------------------------------------------------
GLOBAL EQUITIES PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
-0.3% 19.16% 14.18% 15.06% 22.86%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
25.50% (quarter ended 12/31/98) and the lowest return for a quarter was -18.20%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER PAST ONE PAST FIVE RETURN SINCE
31, 1998) YEAR YEARS INCEPTION(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Global Equities Portfolio 22.86% 13.91% 14.78%
- ------------------------------------------------------------------------------------------------------------
MSCI World Index(2) 24.79% 16.19% 17.25%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is February 9, 1993. The since inception
return for the comparative index is as of the inception date month end.
(2) The Morgan Stanley Capital International (MSCI) World Index is one of the
Morgan Stanley Capital International indexes and measures stock market
performance in the U.S., Europe, Canada, Australia, New Zealand, the Far
East and emerging markets.
26
<PAGE> 28
- --------------------------------------------------------------------------------
INTERNATIONAL DIVERSIFIED EQUITIES PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1995 1996 1997 1998
10.34% 9.31% 6.37% 18.53%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
15.91% (quarter ended 03/31/98) and the lowest return for a quarter was -12.33%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAST ONE RETURN SINCE
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
International Diversified Equities Portfolio 18.53% 9.63%
- ----------------------------------------------------------------------------------------------------------
MSCI EAFE Index(2) 20.34% 10.13%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is October 28, 1994. The since inception
return for the comparative index is as of the inception date month end.
(2) The Morgan Stanley Capital International (MSCI) Europe, Australia, and Far
East (EAFE) Index represents the foreign stocks of 19 countries in Europe,
Australia and the Far East.
27
<PAGE> 29
- --------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1998
- -24.27%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter was
16.39% (quarter ended 12/31/98) and the lowest return for a quarter was -22.17%
(quarter ended 09/30/98).
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAST ONE RETURN SINCE
AVERAGE ANNUAL TOTAL RETURNS (AS OF THE CALENDAR YEAR ENDED DECEMBER 31, 1998) YEAR INCEPTION(1)
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio -24.27% -25.17%
- ----------------------------------------------------------------------------------------------------------
MSCI Emerging Markets Free Index(2) -25.33% -28.28%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date for the Portfolio is June 2, 1997. The since inception
return for the comparative index is as of the inception date month end.
(2) The Morgan Stanley Capital International (MSCI) Emerging Markets--Free
Index is a capitalization-weighted equity index composed of companies that
are representative of the market structure of the following countries:
Argentina, Brazil, Chile, China, Colombia, Czech Republic, Greece, Hungary,
India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Pakistan, Peru,
Philippines, Poland, Portugal, South Africa, Sri Lanka, Taiwan, Thailand,
Turkey, and Venezuela.
28
<PAGE> 30
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
Shares of the Portfolios are not offered directly to the public. Instead, shares
are currently offered only to certain Separate Accounts of Anchor National Life
Insurance Company and First SunAmerica Life Insurance Company. So if you would
like to invest in a Portfolio, you must purchase a variable annuity contract
from either Anchor National Life Insurance Company or First SunAmerica Life
Insurance Company. You should be aware that the contracts involve fees and
expenses that are not described in this Prospectus and that the contracts also
may involve certain restrictions and limitations. Certain Portfolios may not be
available in connection with a particular contract. You will find information
about purchasing a variable annuity contract and the Portfolios available to you
in the prospectus that offers the contracts, which accompanies this Prospectus.
TRANSACTION POLICIES
VALUATION OF SHARES The net asset value per share (NAV) for each Portfolio is
determined each business day at the close of regular trading on the New York
Stock Exchange (generally 4:00 p.m., Eastern time) by dividing its net assets by
the number of its shares outstanding. Investments for which market quotations
are readily available are valued at market. All other securities and assets are
valued at "fair value" following procedures approved by the Trustees.
Certain of the Portfolios may invest to a large extent in securities that are
primarily listed on foreign exchanges that trade on weekends or other days when
the Trust does not price its shares. As a result, the value of these Portfolios'
shares may change on days when the Trust is not open for purchases or
redemptions.
BUY AND SELL PRICES The Separate Accounts buy and sell shares of a Portfolio at
NAV, without any sales or other charges.
EXECUTION OF REQUESTS The Trust is open on those days when the New York Stock
Exchange is open for regular trading. Buy and sell requests are executed at the
next NAV to be calculated after the request is accepted by the Trust. If the
order is received by the Trust before the Trust's close of business (generally
4:00 p.m., Eastern time), the order will receive that day's closing price. If
the order is received after that time, it will receive the next business day's
closing price.
During periods of extreme volatility or market crisis, a Portfolio may
temporarily suspend the processing of sell requests, or may postpone payment of
proceeds for up to seven business days or longer, as allowed by federal
securities laws.
DIVIDEND POLICIES AND TAXES
DISTRIBUTIONS Each Portfolio annually declares and distributes substantially all
of its net investment income in the form of dividends and capital gains
distributions.
DISTRIBUTION REINVESTMENT The dividends and distributions will be reinvested
automatically in additional shares of the same Portfolio on which they were
paid.
TAXABILITY OF A PORTFOLIO Each Portfolio intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as
amended. As long as each Portfolio is qualified as a regulated investment
company, it will not be subject to federal income tax on the earnings that it
distributes to its shareholders.
29
<PAGE> 31
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT THE "DOGS" OF WALL STREET PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT STRATEGY FOR THE "DOGS" OF WALL STREET PORTFOLIO
The "DOGS" OF WALL STREET PORTFOLIO employs a passively managed "buy and hold"
strategy that annually selects the following 30 stocks: (1) the 10 highest
yielding common stocks in the Dow Jones Industrial Average and (2) the 20 other
highest yielding stocks of the 400 largest industrial companies in the U.S.
markets that have capitalizations of at least $1 billion and have received one
of the two highest rankings from an independently published common stock ranking
service on the basis of growth and stability of earnings and dividends. The
stocks in the Portfolio will not change over the course of the year, even if
there are adverse developments concerning a particular stock, an industry, the
economy or the stock market generally. The annual selection of the thirty stocks
that meet these criteria takes place no later than January 15th, on the basis of
information as of the preceding December 31st. Immediately after the Portfolio
buys and sells stocks, it will hold an equal value of each of the thirty stocks.
In other words, the Portfolio will invest 1/30 of its assets in each of the
stocks that make up its portfolio. Thereafter, when an investor purchases shares
of the Portfolio, the Adviser invests the additional funds in the selected
stocks based on each stock's respective percentage of the Portfolio's assets.
Due to purchases and redemptions of Portfolio shares during the year and changes
in the market value of the stocks held by the Portfolio, it is likely that the
weightings of the stocks in the Portfolio will fluctuate throughout the course
of the year. This may result in the Portfolio investing more than 25% of its
assets in the securities of issuers in the same industry, to the extent such
investments are selected according to the Portfolio's stock selection criteria.
- --------------------------------------------------------------------------------
MORE INFORMATION ABOUT THE PORTFOLIOS
- --------------------------------------------------------------------------------
INVESTMENT STRATEGIES
Each Portfolio has its own investment goal and strategy for pursuing it. The
charts below summarize information about each Portfolio's investment strategy.
We have included a glossary to define the investment terminology used in the
charts throughout this Prospectus.
30
<PAGE> 32
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIOS
- -----------------------------------------------------------------------------------------------------------------------------
CASH HIGH-YIELD WORLDWIDE HIGH
MANAGEMENT CORPORATE BOND GLOBAL BOND BOND INCOME
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
What is the high current yield high total return high total return, high current high current
Portfolio's while preserving with only moderate emphasizing income and, income and,
investment goal? capital price risk current income secondarily, secondarily,
and, to a lesser capital capital
extent, capital appreciation appreciation
appreciation
- -----------------------------------------------------------------------------------------------------------------------------
What are the a diversified investment grade high quality fixed intermediate and high-yielding
Portfolios' selection of money fixed income income securities long-term fixed income
principal market instruments securities of U.S. and corporate securities (junk
investments (under foreign issuers obligations, bonds) of issuers
normal market and transactions emphasizing located throughout
conditions)? in foreign higher- yielding, the world
currencies higher- risk,
lower-rated or
unrated securities
(junk bonds) with
a primary focus on
"B" rated high-
yield bonds
- -----------------------------------------------------------------------------------------------------------------------------
What are the - securities - bond market - bond market - bond market - bond market
Portfolio's selection volatility volatility volatility volatility
principal risks? - interest rate - securities - securities - securities - securities
fluctuations selection selection selection selection
- credit quality - interest rate - interest rate - interest rate - interest rate
fluctuations fluctuations fluctuations fluctuations
- credit quality - credit quality - credit quality - credit quality
- foreign exposure - junk bonds - junk bonds
- non- - foreign exposure
diversification - non-
- euro conversion diversification
- emerging markets - euro conversion
- emerging markets
- -----------------------------------------------------------------------------------------------------------------------------
What other
investment
strategies can the
Portfolio use?
-----------------------------------------------------------------------------------------------
- Active trading Yes Yes Yes Yes Yes
-----------------------------------------------------------------------------------------------
- Borrowing for Yes Yes Yes Yes Yes
temporary or (up to 5%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%)
emergency
purposes
-----------------------------------------------------------------------------------------------
- Types of fixed
income
securities:
-----------------------------------------------------------------------------------------------
U.S. government Yes Yes Yes Yes Yes
securities
-----------------------------------------------------------------------------------------------
Investment grade Yes See principal Yes Yes No
corporate bonds investments
section
above
-----------------------------------------------------------------------------------------------
Junk bonds No Yes No See principal See principal
(up to 35%) investments investments
section section
above above
-----------------------------------------------------------------------------------------------
Pass-through No Yes Yes Yes No
securities
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIOS (continued)
- -----------------------------------------------------------------------------------------------------------------------------
CASH HIGH-YIELD WORLDWIDE HIGH
MANAGEMENT CORPORATE BOND GLOBAL BOND BOND INCOME
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
----------------------------------------------------------------------------------------------
- Convertible No Yes No Yes Yes
securities
----------------------------------------------------------------------------------------------
- Preferred stocks No Yes No Yes No
(up to 35%)
----------------------------------------------------------------------------------------------
- Structured No No Yes No Yes
securities
----------------------------------------------------------------------------------------------
- Warrants No Yes No Yes No
(up to 10%)
----------------------------------------------------------------------------------------------
- Rights No Yes No Yes Yes
(up to 10%)
----------------------------------------------------------------------------------------------
- Short-term See principal Yes Yes Yes Yes
investments investments
section
above
----------------------------------------------------------------------------------------------
- Defensive No Yes Yes No Yes
investments
----------------------------------------------------------------------------------------------
- Foreign No Yes See principal Yes See principal
securities investments (up to 25%) investments
section section
above above
----------------------------------------------------------------------------------------------
- Currency No No Yes Yes Yes
transactions
----------------------------------------------------------------------------------------------
- Illiquid Yes Yes Yes Yes Yes
securities (up to 10%) (up to 15%) (up to 15%) (up to 15%) (up to 15%)
----------------------------------------------------------------------------------------------
- Options and No Yes Yes Yes Yes
futures (up to 10%)
----------------------------------------------------------------------------------------------
- Forward No No Yes Yes Yes
commitments
----------------------------------------------------------------------------------------------
- Dollar rolls No Yes Yes Yes No
----------------------------------------------------------------------------------------------
- Zero-coupon bonds No Yes Yes Yes Yes
(up to 35%)
----------------------------------------------------------------------------------------------
- Pay-in-kind bonds No Yes Yes Yes Yes
(up to 35%)
----------------------------------------------------------------------------------------------
- Deferred interest No Yes Yes Yes Yes
bonds
----------------------------------------------------------------------------------------------
- Firm commitment Yes Yes Yes Yes Yes
agreements
----------------------------------------------------------------------------------------------
- When-issued/ Yes Yes Yes Yes Yes
delayed delivery
transactions
----------------------------------------------------------------------------------------------
- Interest rate No No Yes No Yes
swaps, caps,
floors and
collars
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIOS (continued)
- -----------------------------------------------------------------------------------------------------------------------------
CASH HIGH-YIELD WORLDWIDE HIGH
MANAGEMENT CORPORATE BOND GLOBAL BOND BOND INCOME
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
----------------------------------------------------------------------------------------------
- Securities No Yes Yes Yes Yes
lending (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%)
----------------------------------------------------------------------------------------------
- Loan No No Yes No Yes
participations
- -----------------------------------------------------------------------------------------------------------------------------
What other - junk bonds - prepayment - prepayment - illiquidity
potential risks can - prepayment - illiquidity - foreign exposure - derivatives
affect the - foreign exposure - derivatives - euro conversion - hedging
Portfolio? - euro conversion - hedging - emerging markets
- emerging markets - illiquidity
- illiquidity - derivatives
- derivatives - hedging
- hedging
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCED OR ASSET ALLOCATION PORTFOLIOS
- ----------------------------------------------------------------------------------------------------------------------
SUNAMERICA
BALANCED MFS TOTAL RETURN ASSET ALLOCATION UTILITY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What is the conservation of reasonable current high total return high current income
Portfolio's principal income, long-term (including income and and moderate capital
investment goal? capital growth and capital gains) appreciation
conservation of consistent with
capital preservation of
capital over the
long-term
- ----------------------------------------------------------------------------------------------------------------------
What are the a balanced portfolio common stocks and a diversified equity and debt
Portfolio's of stocks and bonds, fixed-income portfolio that may securities of utility
principal with at least 25% securities, with an include common stocks companies
investments (under invested in fixed emphasis on and other securities
normal market income securities income-producing with common stock
conditions)? securities that appear characteristics, bonds
to have some potential and other intermediate
for capital and long-term fixed
enhancement income securities and
money market
instruments
- ----------------------------------------------------------------------------------------------------------------------
What are the - stock and bond - stock and bond - stock and bond - stock and bond
Portfolio's market volatility market volatility market volatility market volatility
principal risks? - securities selection - securities selection - securities selection - securities selection
- interest rate - interest rate - interest rate - utility industry
fluctuations fluctuations fluctuations
- credit quality - credit quality - credit quality
- junk bonds - junk bonds
- foreign exposure
- illiquidity
- derivatives
- hedging
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
BALANCED OR ASSET ALLOCATION PORTFOLIOS (continued)
- ----------------------------------------------------------------------------------------------------------------------
SUNAMERICA
BALANCED MFS TOTAL RETURN ASSET ALLOCATION UTILITY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
------------------------------------------------------------------------------------------
- Active trading Yes Yes Yes Yes
------------------------------------------------------------------------------------------
- Borrowing for Yes (up to 33 1/3%) Yes (up to 5%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
temporary or
emergency purposes
------------------------------------------------------------------------------------------
- Types of fixed
income securities:
------------------------------------------------------------------------------------------
U.S. government Yes Yes Yes Yes
securities
------------------------------------------------------------------------------------------
Investment grade Yes Yes Yes Yes
corporate bonds
------------------------------------------------------------------------------------------
Junk bonds Yes Yes (up to 20%) Yes (up to 25% of Yes
Portfolio's
fixed income
investments)
------------------------------------------------------------------------------------------
Senior securities Yes (at least 25%) Yes Yes No
------------------------------------------------------------------------------------------
Pass-through Yes Yes Yes No
securities
------------------------------------------------------------------------------------------
- Convertible Yes Yes Yes Yes
securities
------------------------------------------------------------------------------------------
- Preferred stocks Yes Yes Yes Yes
------------------------------------------------------------------------------------------
- Small company Yes (up to 20%) Yes Yes Yes
stocks
------------------------------------------------------------------------------------------
- Hybrid instruments No Yes Yes No
------------------------------------------------------------------------------------------
- Structured No Yes Yes No
securities
------------------------------------------------------------------------------------------
- Indexed securities No Yes Yes No
------------------------------------------------------------------------------------------
- Warrants Yes Yes Yes Yes
------------------------------------------------------------------------------------------
- Rights Yes Yes Yes No
------------------------------------------------------------------------------------------
- Short-term Yes Yes Yes Yes
investments
------------------------------------------------------------------------------------------
- Defensive Yes Yes Yes Yes
investments
------------------------------------------------------------------------------------------
- Equity swaps Yes Yes Yes No
------------------------------------------------------------------------------------------
- Foreign securities Yes Yes (up to 20%) Yes Yes
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
BALANCED OR ASSET ALLOCATION PORTFOLIOS (continued)
- ----------------------------------------------------------------------------------------------------------------------
SUNAMERICA
BALANCED MFS TOTAL RETURN ASSET ALLOCATION UTILITY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
------------------------------------------------------------------------------------------
- Currency Yes Yes Yes No
transactions
------------------------------------------------------------------------------------------
- Illiquid Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
securities
------------------------------------------------------------------------------------------
- Options and Yes Yes Yes Yes
futures
------------------------------------------------------------------------------------------
- Forward Yes Yes Yes No
commitments
------------------------------------------------------------------------------------------
- REITs Yes Yes Yes Yes
------------------------------------------------------------------------------------------
- Dollar rolls Yes Yes Yes No
------------------------------------------------------------------------------------------
- Zero-coupon bonds Yes Yes Yes No
------------------------------------------------------------------------------------------
- Pay-in-kind bonds No Yes No No
------------------------------------------------------------------------------------------
- Deferred interest Yes Yes Yes No
bonds
------------------------------------------------------------------------------------------
- Firm commitment Yes Yes Yes Yes
agreements
------------------------------------------------------------------------------------------
- When-issued/ Yes Yes Yes Yes
delayed-delivery
transactions
------------------------------------------------------------------------------------------
- Interest rate Yes Yes Yes No
swaps, caps,
floors and collars
------------------------------------------------------------------------------------------
- Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
------------------------------------------------------------------------------------------
- Loan No Yes Yes No
participations
- ----------------------------------------------------------------------------------------------------------------------
What other potential - prepayment - credit quality - prepayment - interest rate
risks can affect the - foreign exposure - junk bonds - euro conversion fluctuations
Portfolio? - euro conversion - prepayment - emerging markets - credit quality
- emerging markets - euro conversion - foreign exposure
- illiquidity - emerging markets - euro conversion
- derivatives - illiquidity - emerging markets
- hedging - derivatives - illiquidity
- hedging - real estate industry
- derivatives
- hedging
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIOS
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
FEDERATED "DOGS" OF
EQUITY INCOME EQUITY INDEX VALUE VENTURE VALUE WALL STREET
GROWTH-
INCOME
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
What is the long-term investment growth of growth of growth of total return
Portfolio's capital results that capital and capital and capital (including
investment goal? appreciation correspond with income income capital
and income the performance appreciation
of the S&P 500 and current
income)
- ---------------------------------------------------------------------------------------------------------------------------
What are the equity common stocks common stocks securities of common stocks 30 high
Portfolio's securities included in the or securities high quality generally dividend
principal expected to S&P 500 that companies issued by yielding stocks
investments (under pay demonstrate the companies with through a
normal market above-average potential for market passively
conditions)? dividends appreciation capitalizations managed
and/or of at least $5 strategy
dividends billion
- ---------------------------------------------------------------------------------------------------------------------------
What are the - stock market - stock market - stock market - stock market - stock market - stock market
Portfolio's volatility volatility volatility volatility volatility volatility
principal risks? - securities - passively - securities - securities - securities - passively
selection managed selection selection selection managed
strategy strategy
- non-
diversification
- ---------------------------------------------------------------------------------------------------------------------------
What other
investment
strategies can the
Portfolio use?
--------------------------------------------------------------------------------------------------
- Active trading Yes Yes Yes Yes Yes Yes
--------------------------------------------------------------------------------------------------
- Borrowing for Yes Yes Yes Yes Yes Yes
temporary or (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%)
emergency purposes
--------------------------------------------------------------------------------------------------
- Types of fixed
income securities:
--------------------------------------------------------------------------------------------------
U.S. government Yes No Yes Yes Yes Yes
securities
--------------------------------------------------------------------------------------------------
Investment grade Yes No Yes Yes Yes No
corporate bonds
--------------------------------------------------------------------------------------------------
Junk bonds Yes No No No No No
--------------------------------------------------------------------------------------------------
- Convertible Yes No Yes Yes Yes No
securities
--------------------------------------------------------------------------------------------------
- Preferred stocks Yes No Yes Yes Yes No
--------------------------------------------------------------------------------------------------
- Small company Yes Yes Yes Yes Yes Yes
stocks
--------------------------------------------------------------------------------------------------
- Warrants No No Yes Yes No No
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ALLIANCE GROWTH
<S> <C> <C>
What is the long-term
Portfolio's growth of
investment goal? capital
- -------------------------------------------------------------------------------------------------------
What are the equity
Portfolio's securities of a
principal limited number
investments (under of large,
normal market carefully
conditions)? selected, high
quality U.S.
companies that
are judged
likely to
achieve
superior
earnings
- ------------------------------------------------------------------------------------------------------------
What are the - stock market
Portfolio's volatility
principal risks? - securities
selection
- small market
capitalization
- -----------------------------------------------------------------------------------------------------------------
What other
investment
strategies can the
Portfolio use?
- Active trading Yes
- Borrowing for Yes
temporary or (up to 33 1/3%)
emergency purposes
- Types of fixed
income securities:
U.S. government Yes
securities
Investment grade Yes
corporate bonds
Junk bonds Yes
- Convertible Yes
securities
- Preferred stocks Yes
- Small company Yes
stocks
- Warrants Yes
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 38
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIOS (continued)
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
FEDERATED "DOGS" OF
EQUITY INCOME EQUITY INDEX VALUE VENTURE VALUE WALL STREET
GROWTH-
INCOME
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
--------------------------------------------------------------------------------------------------
- Short-term Yes Yes Yes Yes Yes Yes
investments
--------------------------------------------------------------------------------------------------
- Defensive Yes Yes Yes Yes Yes Yes
investments
--------------------------------------------------------------------------------------------------
- Foreign securities Yes Yes Yes Yes Yes Yes
(up to 25%)
--------------------------------------------------------------------------------------------------
- Currency No No Yes No Yes No
transactions
--------------------------------------------------------------------------------------------------
- Illiquid Yes Yes Yes Yes Yes Yes
securities (up to 15%) (up to 15%) (up to 15%) (up to 15%) (up to 15%) (up to 15%)
--------------------------------------------------------------------------------------------------
- Options and Yes Yes Yes Yes Yes Yes
futures (up to 20%)
--------------------------------------------------------------------------------------------------
- Forward Yes No Yes No Yes Yes
commitments
--------------------------------------------------------------------------------------------------
- Other registered Yes Yes No Yes Yes No
investment (up to 10%)
companies
--------------------------------------------------------------------------------------------------
- Zero-coupon bonds No No No No Yes No
--------------------------------------------------------------------------------------------------
- Deferred interest No No No No Yes No
bonds
--------------------------------------------------------------------------------------------------
- Firm commitment Yes Yes Yes Yes Yes Yes
agreements
--------------------------------------------------------------------------------------------------
- When-issued/ Yes Yes Yes Yes Yes Yes
delayed-delivery
transactions
--------------------------------------------------------------------------------------------------
- Securities lending Yes Yes Yes Yes Yes Yes
(up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------------------
What other potential - credit - credit - credit - credit - credit - foreign
risks can affect the quality quality quality quality quality exposure
Portfolio? - junk bonds - junk bonds - foreign - foreign - foreign - euro
- foreign - foreign exposure exposure exposure conversion
exposure exposure - euro - euro - euro - emerging
- euro - euro conversion conversion conversion markets
conversion conversion - emerging - emerging - emerging - illiquidity
- emerging - emerging markets markets markets - derivatives
markets markets - illiquidity - illiquidity - illiquidity - hedging
- derivatives - derivatives - derivatives - derivatives - derivatives
- hedging - hedging - hedging - hedging - hedging
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ALLIANCE GROWTH
<S> <C> <C>
What other
investment
strategies can the
Portfolio use?
- Short-term Yes
investments
- Defensive Yes
investments
- Foreign securities Yes
(up to 25%)
- Currency Yes
transactions
- Illiquid Yes
securities (up to 15%)
- Options and Yes
futures
- Forward Yes
commitments
- Other registered Yes
investment
companies
- Zero-coupon bonds Yes
- Deferred interest No
bonds
- Firm commitment Yes
agreements
- When-issued/ Yes
delayed-delivery
transactions
- Securities lending Yes
(up to 33 1/3%)
- ---------------------------------------------------------------------------------------------------------------------------
What other potential - credit
risks can affect the quality
Portfolio? - foreign
exposure
- euro
conversion
- emerging
markets
- illiquidity
- derivatives
- hedging
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIOS (continued)
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
MFS GROWTH PUTNAM MFS MID-CAP
AND INCOME GROWTH REAL ESTATE GROWTH
SMALL
COMPANY
VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
What is the reasonable long-term growth total return capital long-term growth
Portfolio's current income of capital through a appreciation of capital
investment goal? and long-term combination of
growth of growth and income
capital and
income
- --------------------------------------------------------------------------------------------------------------------
What are the equity securities common stocks or securities of equity securities equity securities
Portfolios' securities with companies of small of companies with
principal common stock principally capitalization medium market
investments (under characteristics engaged in or companies capitalization,
normal market that its related to the generally with
conditions)? Subadviser real estate market
believes have industry or that capitalizations
above-average own significant between $1
growth prospects real estate billion and $5
assets or that billion, that its
primarily invest Subadviser
in real estate believes to have
financial above-average
instruments growth potential
- --------------------------------------------------------------------------------------------------------------------
What are the - stock market - stock market - stock market - stock market - stock market
Portfolio's volatility volatility volatility volatility volatility
principal risks? - securities - securities - securities - securities - securities
selection selection selection selection selection
- small market - real estate - small market - non-
capitalization industry capitalization diversification
- --------------------------------------------------------------------------------------------------------------------
What other
investment
strategies can the
Portfolio use?
---------------------------------------------------------------------------------------------
- Active trading Yes Yes Yes Yes Yes
---------------------------------------------------------------------------------------------
- Borrowing for Yes Yes Yes Yes Yes
temporary or (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%)
emergency purposes
---------------------------------------------------------------------------------------------
- Types of fixed
income securities:
---------------------------------------------------------------------------------------------
U.S. government Yes Yes Yes Yes Yes
securities
---------------------------------------------------------------------------------------------
Investment grade Yes No Yes Yes Yes
corporate bonds
---------------------------------------------------------------------------------------------
Junk bonds No Yes Yes Yes Yes
(up to 5%) (up to 20%)
---------------------------------------------------------------------------------------------
- Convertible Yes Yes Yes Yes Yes
securities
---------------------------------------------------------------------------------------------
- Preferred stocks Yes Yes Yes Yes Yes
---------------------------------------------------------------------------------------------
- Small company Yes Yes Yes See principal Yes
stocks investments
section above
---------------------------------------------------------------------------------------------
- Warrants Yes Yes Yes Yes Yes
---------------------------------------------------------------------------------------------
- Rights Yes Yes Yes Yes Yes
---------------------------------------------------------------------------------------------
- Short-term Yes Yes Yes Yes Yes
investments
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
AGGRESSIVE
GROWTH
<S> <C> <C>
What is the capital
Portfolio's appreciation
investment goal?
- --------------------------------------------------------------------------------------------------------------------
What are the equity securities
Portfolios' of high growth
principal companies
investments (under including small
normal market growth companies
conditions)? with market
capitalizations
under $1 billion
- --------------------------------------------------------------------------------------------------------------------
What are the - stock market
Portfolio's volatility
principal risks? - securities
selection
- small market
capitalization
- --------------------------------------------------------------------------------------------------------------------
What other
investment
strategies can the
Portfolio use?
---------------------------------------------------------------------------------------------
- Active trading Yes
---------------------------------------------------------------------------------------------
- Borrowing for Yes
temporary or (up to 33 1/3%)
emergency purposes
---------------------------------------------------------------------------------------------
- Types of fixed
income securities:
---------------------------------------------------------------------------------------------
U.S. government Yes
securities
---------------------------------------------------------------------------------------------
Investment grade Yes
corporate bonds
---------------------------------------------------------------------------------------------
Junk bonds No
---------------------------------------------------------------------------------------------
- Convertible Yes
securities
---------------------------------------------------------------------------------------------
- Preferred stocks Yes
---------------------------------------------------------------------------------------------
- Small company Yes
stocks
---------------------------------------------------------------------------------------------
- Warrants Yes
---------------------------------------------------------------------------------------------
- Rights Yes
---------------------------------------------------------------------------------------------
- Short-term Yes
investments
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIOS (continued)
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
MFS GROWTH PUTNAM MFS MID-CAP
AND INCOME GROWTH REAL ESTATE GROWTH
SMALL
COMPANY
VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
---------------------------------------------------------------------------------------------
- Defensive Yes Yes Yes Yes Yes
investments
---------------------------------------------------------------------------------------------
- Foreign securities Yes Yes Yes Yes Yes
(up to 20%) (up to 25%) (up to 25%) (up to 20%)
---------------------------------------------------------------------------------------------
- Currency Yes Yes Yes No Yes
transactions
---------------------------------------------------------------------------------------------
- Illiquid Yes Yes Yes Yes Yes
securities (up to 15%) (up to 15%) (up to 15%) (up to 15%) (up to 15%)
---------------------------------------------------------------------------------------------
- Options and Yes Yes Yes No Yes
futures
---------------------------------------------------------------------------------------------
- Forward Yes Yes Yes Yes Yes
commitments
---------------------------------------------------------------------------------------------
- REITs No Yes Yes Yes No
---------------------------------------------------------------------------------------------
- Other registered Yes Yes Yes Yes Yes
investment
companies
---------------------------------------------------------------------------------------------
- Dollar rolls No No No No No
---------------------------------------------------------------------------------------------
- Zero-coupon bonds Yes No No No Yes
---------------------------------------------------------------------------------------------
- Pay-in-kind bonds No No No No Yes
---------------------------------------------------------------------------------------------
- Deferred interest No No No No Yes
bonds
---------------------------------------------------------------------------------------------
- Firm commitment Yes Yes Yes Yes Yes
agreements
---------------------------------------------------------------------------------------------
- When-issued/ Yes Yes Yes Yes Yes
delayed-delivery
transactions
---------------------------------------------------------------------------------------------
- Securities lending Yes Yes Yes Yes Yes
(up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%) (up to 33 1/3%)
- --------------------------------------------------------------------------------------------------------------------
- What other - credit quality - credit quality - credit quality - credit quality - credit quality
potential risks - junk bonds - junk bonds - junk bonds - junk bonds - junk bonds
can affect the - foreign - foreign - prepayment - foreign - foreign
Portfolio? exposure exposure - foreign exposure exposure
- euro conversion - euro conversion exposure - euro conversion - euro conversion
- emerging - emerging - euro conversion - emerging - emerging
markets markets - emerging markets markets
- illiquidity - illiquidity markets - derivatives - derivatives
- derivatives - derivatives - illiquidity - hedging - hedging
- hedging - hedging - derivatives
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
AGGRESSIVE
GROWTH
<S> <C> <C>
What other
investment
strategies can the
Portfolio use?
---------------------------------------------------------------------------------------------
- Defensive Yes
investments
---------------------------------------------------------------------------------------------
- Foreign securities Yes
---------------------------------------------------------------------------------------------
- Currency Yes
transactions
---------------------------------------------------------------------------------------------
- Illiquid Yes
securities (up to 15%)
---------------------------------------------------------------------------------------------
- Options and Yes
futures
---------------------------------------------------------------------------------------------
- Forward Yes
commitments
---------------------------------------------------------------------------------------------
- REITs Yes
---------------------------------------------------------------------------------------------
- Other registered Yes
investment
companies
---------------------------------------------------------------------------------------------
- Dollar rolls No
---------------------------------------------------------------------------------------------
- Zero-coupon bonds No
---------------------------------------------------------------------------------------------
- Pay-in-kind bonds No
---------------------------------------------------------------------------------------------
- Deferred interest Yes
bonds
---------------------------------------------------------------------------------------------
- Firm commitment Yes
agreements
---------------------------------------------------------------------------------------------
- When-issued/ Yes
delayed-delivery
transactions
---------------------------------------------------------------------------------------------
- Securities lending Yes
(up to 33 1/3%)
- --------------------------------------------------------------------------------------------------------------------
- What other - credit quality
potential risks - emerging
can affect the markets
Portfolio? - illiquidity
- derivatives
- hedging
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIOS
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
GROWTH AND INCOME GLOBAL EQUITIES EMERGING MARKETS
INTERNATIONAL
DIVERSIFIED
EQUITIES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What is the growth of capital and long-term growth of long-term capital long-term capital
Portfolio's (secondarily) current capital appreciation appreciation
investment goal? income
- ----------------------------------------------------------------------------------------------------------------------
What are the common stocks traded common stocks or common stocks of common stocks and
Portfolios' on markets outside securities of U.S. and foreign issuers that, other equity
principal the U.S. foreign issuers with in the aggregate, securities of
investments (under common stock replicate broad companies that its
normal market characteristics that country and sector Subadviser believes
conditions)? demonstrate the indices have above-average
potential for growth prospects
appreciation and primarily in emerging
transactions in markets outside the
foreign currencies United States.
- ----------------------------------------------------------------------------------------------------------------------
What are the - stock market - stock market - stock market - stock market
Portfolio's volatility volatility volatility volatility
principal risks? - securities selection - securities selection - foreign exposure - securities selection
- foreign exposure - foreign exposure - non-diversification - foreign exposure
- emerging markets - emerging markets - emerging markets - emerging markets
- small market - passively managed
capitalization strategy
- ----------------------------------------------------------------------------------------------------------------------
What other
investment
strategies can the
Portfolio use?
------------------------------------------------------------------------------------------
- Active trading Yes Yes Yes Yes
------------------------------------------------------------------------------------------
- Borrowing for Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
temporary or
emergency purposes
------------------------------------------------------------------------------------------
- Types of fixed
income securities:
------------------------------------------------------------------------------------------
U.S. government Yes Yes Yes Yes
securities
------------------------------------------------------------------------------------------
Investment grade Yes Yes No Yes
corporate bonds
------------------------------------------------------------------------------------------
Junk bonds Yes No No Yes
------------------------------------------------------------------------------------------
- Convertible Yes Yes Yes Yes
securities
------------------------------------------------------------------------------------------
- Preferred stocks Yes Yes Yes Yes
------------------------------------------------------------------------------------------
- Small company Yes Yes Yes Yes
stocks
------------------------------------------------------------------------------------------
- Structured Yes No No Yes
securities
------------------------------------------------------------------------------------------
- Warrants Yes No Yes No
------------------------------------------------------------------------------------------
- Rights Yes Yes Yes Yes
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIOS (continued)
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
GROWTH AND INCOME GLOBAL EQUITIES EMERGING MARKETS
INTERNATIONAL
DIVERSIFIED
EQUITIES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
What other
investment
strategies can the
Portfolio use?
------------------------------------------------------------------------------------------
- Short-term Yes Yes Yes Yes
investments
------------------------------------------------------------------------------------------
- Defensive Yes Yes Yes Yes
investments
------------------------------------------------------------------------------------------
- Foreign securities See principal See principal See principal See principal
investments investments investments investments
section above section above section above section above
------------------------------------------------------------------------------------------
- Currency Yes Yes Yes Yes
transactions
------------------------------------------------------------------------------------------
- Illiquid Yes (up to 15%) Yes (up to 15%) Yes (up to 15%) Yes (up to 15%)
securities
------------------------------------------------------------------------------------------
- Options and Yes Yes Yes Yes
futures
------------------------------------------------------------------------------------------
- Forward Yes Yes Yes Yes
commitments
------------------------------------------------------------------------------------------
- Other registered Yes No Yes Yes
investment
companies
------------------------------------------------------------------------------------------
- Firm commitment Yes Yes Yes Yes
agreements
------------------------------------------------------------------------------------------
- When-issued/ Yes Yes Yes Yes
delayed delivery
transactions
------------------------------------------------------------------------------------------
- Securities lending Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%) Yes (up to 33 1/3%)
- ----------------------------------------------------------------------------------------------------------------------
What other potential - credit quality - credit quality - credit quality - credit quality
risks can affect the - junk bonds - euro conversion - illiquidity - junk bonds
Portfolio? - euro conversion - illiquidity - derivatives - euro conversion
- illiquidity - derivatives - hedging - illiquidity
- derivatives - hedging - derivatives
- hedging - hedging
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 43
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
INVESTMENT TERMINOLOGY
LARGE COMPANIES generally have market capitalizations of over $5 billion,
although there may be some overlap among capitalization categories.
MEDIUM SIZED COMPANIES generally have market capitalizations ranging from $1
billion to $5 billion, although there may be some overlap among capitalization
categories. With respect to the MFS MID-CAP GROWTH PORTFOLIO, the Subadviser
will consider companies with market capitalizations equaling or exceeding $250
million but not exceeding the top range of the Russell MidCap(TM) Growth Index
to be medium sized companies.
SMALL COMPANIES generally have market capitalizations of $1 billion or less,
although there may be some overlap among capitalization categories.
ACTIVE TRADING means that a Portfolio may engage in frequent trading of
portfolio securities to achieve its investment goal. In addition, because a
Portfolio may sell a security without regard to how long it has held the
security, active trading may have tax consequences for certain shareholders,
involving a possible increase in short-term capital gains or losses. Active
trading may result in high portfolio turnover and correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by a Portfolio. During periods of increased market volatility, active trading
may be more pronounced. In the "Financial Highlights" section we provide each
Portfolio's portfolio turnover rate for each of the last five years.
The Fund may BORROW FOR TEMPORARY OR EMERGENCY PURPOSES including to meet
redemptions. Borrowing will cost the Fund interest expense and other fees.
FIXED INCOME SECURITIES provide consistent interest or dividend payments. They
include corporate bonds, notes, debentures, preferred stocks, convertible
securities, U.S. government securities and mortgage-backed and asset-backed
securities. The issuer of a SENIOR fixed income security is obligated to make
payments on this security ahead of other payments to security holders.
An INVESTMENT GRADE fixed income security is rated in one of the top four rating
categories by a debt rating agency (or is considered of comparable quality by
the Adviser or Subadviser). The two best-known debt rating agencies are Standard
& Poor's Rating Services, a Division of the McGraw-Hill Companies, Inc. and
Moody's Investors Service, Inc. INVESTMENT GRADE refers to any security rated
"BBB" or above by Standard & Poor's or "Baa" or above by Moody's.
A JUNK BOND is a high yield, high risk bond that does not meet the credit
quality standards of investment grade securities.
U.S. GOVERNMENT SECURITIES are issued or guaranteed by the U.S. government, its
agencies and instrumentalities. Some U.S. government securities are issued or
unconditionally guaranteed by the U.S. Treasury. They are of the highest
possible credit quality. While these securities are subject to variations in
market value due to fluctuations in interest rates, they will be paid in full if
held to maturity. Other U.S. government securities are neither direct
obligations of, nor 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.
PASS-THROUGH SECURITIES involve various debt obligations that are backed by a
pool of mortgages or other assets. Principal and interest payments made on the
underlying asset pools are typically passed through to investors. Types of
pass-through securities include "mortgage-backed securities," "collateralized
mortgage obligations," "commercial mortgage-backed securities," and
"asset-backed securities."
42
<PAGE> 44
CONVERTIBLE SECURITIES are securities (such as bonds or preferred stocks) that
may be converted into common stock of the same or a different company.
PREFERRED STOCK is a class of capital stock that pays dividends at a specified
rate and that has preference over common stock in the payment of dividends and
the liquidation of assets.
SMALL COMPANY STOCKS are stocks of companies that generally have a
capitalization of under $1 billion.
HYBRID INSTRUMENTS, such as INDEXED (i.e., Standard and Poor's Depositary
Receipts and World Equity Benchmark Shares) and STRUCTURED SECURITIES, can
combine the characteristics of securities, futures, and options. For example,
the principal amount, redemption, or conversion terms of a security could be
related to the market price of some commodity, currency, or securities index.
Such securities may bear interest or pay dividends at below market (or even
relatively nominal) rates. Under certain conditions, the redemption value of
such an investment could be zero.
WARRANTS are rights to buy common stock of a company at a specified price during
the life of the warrant. RIGHTS represent a preemptive right of stockholders to
purchase additional shares of a stock at the time of a new issuance before the
stock is offered to the general public.
SHORT-TERM INVESTMENTS include money market securities such as short-term U.S.
government obligations, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. These securities provide a Portfolio
with sufficient liquidity to meet redemptions and cover expenses.
DEFENSIVE INVESTMENTS include high quality fixed income securities, repurchase
agreements and other money market instruments. A Portfolio will make temporary
defensive investments in response to adverse market, economic, political or
other conditions. When a Portfolio takes a defensive position, it may miss out
on investment opportunities that could have resulted from investing in
accordance with its principal investment strategy. As a result, a Portfolio may
not achieve its investment goal.
EQUITY SWAPS are exchanges of the total return on a stock for the total return
on another asset, usually a diversified equity or fixed income index.
FOREIGN SECURITIES are issued by companies located outside of the United States,
including emerging markets. Foreign securities may include American Depositary
Receipts (ADRs) or other similar securities that convert into foreign
securities.
CURRENCY TRANSACTIONS include the purchase and sale of currencies to facilitate
securities transactions and forward currency contracts, which are used to hedge
against changes in currency exchange rates.
ILLIQUID SECURITIES are subject to legal or contractual restrictions that may
make them difficult to sell. A security that cannot easily be sold within seven
days will generally be considered illiquid. Certain restricted securities (such
as Rule 144A securities) are not generally considered illiquid because of their
established trading market.
OPTIONS AND FUTURES are contracts involving the right to receive or the
obligation to deliver assets or money depending on the performance of one or
more underlying assets or a market or economic index.
FORWARD COMMITMENTS are commitments to purchase or sell securities at a future
date. A Portfolio purchasing a forward commitment assumes the risk of any
decline in value of the securities beginning on the date of the agreement.
DOLLAR ROLLS are instruments in which a Portfolio sells mortgage or other
asset-backed securities ("Roll Securities") for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date.
REITS (real estate investment trusts) are trusts that invest primarily in
commercial real estate or real estate related loans. The value of an interest in
a REIT may be affected by the value and the cash flows of the properties owned
or the quality of the mortgages held by the trust.
A Portfolio may invest in OTHER REGISTERED INVESTMENT COMPANIES, which are
registered in accordance with the federal securities laws.
43
<PAGE> 45
ZERO-COUPON AND DEFERRED INTEREST BONDS are debt obligations that are issued or
purchased at a significant discount from face value. PAY-IN-KIND BONDS are debt
obligations that provide that the issuer thereof may, at its option, pay
interest on such bonds in cash or in the form of additional debt obligations.
Such investments may experience greater volatility in market value due to
changes in interest rates than do debt obligations.
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. At the time of delivery of the securities, the value may be more or
less than the purchase price.
INTEREST RATE SWAPS, CAPS, FLOORS AND COLLARS Interest rate swaps involve the
exchange by a Portfolio with another party of their respective commitments to
pay or receive interest, such as an exchange of fixed-rate payments for floating
rate payments. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payment 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 the 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.
SECURITIES LENDING involves a loan of securities by a Portfolio in exchange for
cash or collateral. A Portfolio earns interest on the loan while retaining
ownership of the security.
By purchasing a LOAN PARTICIPATION, a Portfolio acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. The highly leveraged nature of many such loans may make such loans
especially vulnerable to adverse changes in economic or market conditions. As a
result, a Portfolio may be unable to sell such investments at an opportune time
or may have to resell them at less than fair market value.
RISK TERMINOLOGY
MARKET VOLATILITY: The stock and/or bond markets as a whole could go up or down
(sometimes dramatically). This could affect the value of the securities in a
Portfolio's portfolio.
SECURITIES SELECTION: A strategy used by a Portfolio, or securities selected by
its portfolio manager, may fail to produce the intended return.
PASSIVELY MANAGED STRATEGY: A Portfolio following a passively managed strategy
will not deviate from its investment strategy. In the case of "DOGS" OF WALL
STREET PORTFOLIO, this entails buying and holding thirty stocks selected through
objective selection criteria (except to the extent necessary to comply with
applicable federal tax laws). In other cases, it may involve a passively managed
strategy utilized to achieve investment results that correspond to a particular
market index. Such a Portfolio will not sell stocks in its portfolio and buy
different stocks over the course of a year, even if there are adverse
developments concerning a particular stock, company or industry. There can be no
assurance that the strategy will be successful.
INTEREST RATE FLUCTUATIONS: Volatility of the bond market is due principally to
changes in interest rates. As interest rates rise, bond prices typically fall;
and as interest rates fall, bond prices typically rise. Longer-term and lower
coupon bonds tend to be more sensitive to changes in interest rates.
CREDIT QUALITY: The creditworthiness of the issuer is always a factor in
analyzing fixed income securities. An issuer with a lower credit rating will be
more likely than a higher rated issuer to default or otherwise become unable to
honor its financial obligations. This type of issuer will typically issue JUNK
BONDS. In addition to the risk of default, junk bonds may be more volatile, less
liquid, more difficult to value and more susceptible to adverse economic
conditions or investor perceptions than other bonds.
PREPAYMENT: Prepayment risk is the possibility that the principal of the loans
underlying mortgage-backed or other pass-through securities may be prepaid at
any time. As a general rule, prepayments increase during a period of falling
interest rates and decrease during a period of rising interest rates. As a
44
<PAGE> 46
result of prepayments, in periods of declining interest rates a Portfolio may be
required to reinvest its assets in securities with lower interest rates. In
periods of increasing interest rates, prepayments generally may decline, with
the effect that the securities subject to prepayment risk held by a Portfolio
may exhibit price characteristics of longer-term debt securities.
FOREIGN EXPOSURE: Investors in foreign countries are subject to a number of
risks. A principal risk is that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment. In
addition, there may be less publicly available information about a foreign
company and it may not be subject to the same uniform accounting, auditing and
financial reporting standards as U.S. companies. Foreign governments may not
regulate securities markets and companies to the same degree as in the U.S.
Foreign investments will also be affected by local political or economic
developments and governmental actions. Consequently, foreign securities may be
less liquid, more volatile and more difficult to price than U.S. securities.
These risks are heightened when an issuer is in an EMERGING MARKET.
NON-DIVERSIFICATION: By concentrating in a smaller number of securities, a
Portfolio's risk is increased because the effect of each stock on the
Portfolio's performance is greater.
EURO CONVERSION: Effective January 1, 1999, several European countries
irrevocably fixed their existing national currencies to a new single European
currency unit, the "euro." Certain European investments may be subject to
additional risks as a result of this conversion. These risks include adverse tax
and accounting consequences, as well as difficulty in processing transactions.
SAAMCo 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.
EMERGING MARKETS: An emerging market country is generally a country with a low
or middle income economy or that is in the early stages of its industrialization
cycle. Emerging market countries may change over time depending on market and
economic conditions and the list may vary by advisor. The risks attendant to
foreign exposure are heightened in an emerging market country. Historical
experience indicates that the markets of emerging countries have been more
volatile than more developed markets; however, such markets can provide higher
rates of return to investors.
SMALL MARKET CAPITALIZATION: Companies with smaller market capitalizations
(particularly under $1 billion) tend to be at early stages of development with
limited product lines, market access for products, financial resources, access
to new capital, or depth in management. Consequently, the securities of smaller
companies may not be as readily marketable and may be subject to more abrupt or
erratic market movements.
ILLIQUIDITY: Certain securities may be difficult or impossible to sell at the
time and the price that the seller would like.
REAL ESTATE INDUSTRY: 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.
In addition, 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 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, and to maintain exemption from
registration under the laws governing mutual funds.
UTILITY INDUSTRY: Risks 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.
45
<PAGE> 47
DERIVATIVES: A derivative is any financial instrument whose value is based on,
and determined by, another security, index or benchmark (i.e., stock options,
futures, caps, floors, etc.). In recent years, derivative securities have become
increasingly important in the field of finance. Futures and options are now
actively traded on many different exchanges. Forward contracts, swaps, and many
different types of options are regularly traded outside of exchanges by
financial institutions in what are termed "over the counter" markets. Other more
specialized derivative securities often form part of a bond or stock issue. To
the extent a contract is used to hedge another position in the portfolio, there
is a risk that changes in the value of the contract will not match those of the
hedged position. Moreover, while hedging can reduce or eliminate losses, it can
also reduce or eliminate gains. To the extent an option or futures contract is
used to enhance return, rather than as a hedge, a Portfolio will be directly
exposed to the risks of the contract. Gains or losses from non-hedging positions
may be substantially greater than the cost of the position.
HEDGING: Hedging is a strategy in which a Portfolio uses a derivative security
to reduce certain risk characteristics of an underlying security or portfolio of
securities. While hedging strategies can be very useful and inexpensive ways of
reducing risk, they are sometimes ineffective due to unexpected changes in the
market. Hedging also involves the risk that changes in the value of the
derivative will not match those of the instruments being hedged as expected, in
which case any losses on the instruments being hedged may not be reduced.
Examples of hedging strategies are:
- Long Hedge -- Strategy in which an investor locks in a future price on a
security/index by buying a futures contract.
- Neutral Hedge -- Strategy that is designed to provide the highest
expected return on a portfolio of securities assuming that the price of a
particular investment in the portfolio remains constant.
- Perfect Hedge -- a hedge whose change in value is equal to the change in
value of the underlying security, positive or negative.
- Short Hedge -- Strategy designed to reduce the risk of a decline in value
of a security/index without requiring ownership of that security.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
YEAR 2000
Many computer and computer-based systems cannot distinguish the year 2000 from
the year 1900 because of the way they encode and calculate dates (commonly known
as the "Year 2000 Issue"). The Year 2000 Issue could potentially have an adverse
impact on the handling of security trades, the payment of interest and
dividends, pricing and account services. We recognize the importance of the Year
2000 Issue and are taking appropriate steps necessary in preparation for the
year 2000. The Trust's management fully anticipates that their systems will be
adapted in time for the year 2000, and to further this goal they have
coordinated a plan to repair, adapt or replace their systems as necessary. They
have also obtained representations from their outside service providers that
they are doing the same. The Trust's management completed their plan
significantly by the end of the 1998 calendar year and expects to perform
appropriate systems testing during the 1999 calendar year. If the problem has
not been fully addressed, however, the Trust could be negatively impacted. The
Year 2000 Issue could also have a negative impact on the companies in which the
Trust invests, which could hurt the Trust's investment returns.
46
<PAGE> 48
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
SunAmerica Asset Management Corp. (SAAMCo) serves as investment adviser and
manager for all the Portfolios of the Trust. SAAMCo selects the Subadvisers for
Portfolios, manages the investments for certain Portfolios, provides various
administrative services and supervises the daily business affairs of each
Portfolio.
SAAMCo has received an exemptive order from the Securities and Exchange
Commission that permits SAAMCo, subject to certain conditions, to enter into
agreements relating to the Trust with Subadvisers approved by the Board of
Trustees without obtaining shareholder approval. The exemptive order also
permits 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 agreements with Subadvisers or continue the employment of
existing Subadvisers after events that would otherwise cause an automatic
termination of a subadvisory agreement. Shareholders will be notified of any
Subadviser changes. SAAMCo does not presently rely on this exemptive order.
Shareholders of a Portfolio have the right to terminate an agreement with a
Subadviser for that Portfolio at any time by a vote of the majority of the
outstanding voting securities of such Portfolio.
SAAMCo, located at The SunAmerica Center, 733 Third Avenue, New York, New York,
10017, is a corporation organized under the laws of the state of Delaware. In
addition to serving as investment adviser and manager of the Trust, SAAMCo
serves as adviser, manager and/or administrator for Anchor Pathway Fund, Anchor
Series Trust, Seasons Series Trust, Style Select Series, Inc. SunAmerica Equity
Funds, SunAmerica Income Funds, SunAmerica Money Market Funds, Inc. and
SunAmerica Strategic Investment Series, Inc.
For the fiscal year ended November 30, 1998, each Portfolio paid SAAMCo a fee
equal to the following percentage of average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO FEE
--------- ---
<S> <C>
Cash Management Portfolio.................... 0.52%
Corporate Bond Portfolio..................... 0.65%
Global Bond Portfolio........................ 0.70%
High-Yield Bond Portfolio.................... 0.63%
Worldwide High Income Portfolio.............. 1.00%
SunAmerica Balanced Portfolio................ 0.68%
MFS Total Return Portfolio................... 0.67%
Asset Allocation Portfolio................... 0.59%
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
PORTFOLIO FEE
--------- ---
<S> <C>
Utility Portfolio............................ 0.75%
Growth-Income Portfolio...................... 0.56%
Federated Value Portfolio.................... 0.75%
Venture Value Portfolio...................... 0.72%
"Dogs" of Wall Street Portfolio.............. 0.60%
Alliance Growth Portfolio.................... 0.55%
MFS Growth and Income Portfolio.............. 0.64%
Putnam Growth Portfolio...................... 0.81%
Real Estate Portfolio........................ 0.80%
Aggressive Growth Portfolio.................. 0.74%
International Growth and Income Portfolio.... 1.00%
Global Equities Portfolio.................... 0.74%
International Diversified Equities
Portfolio.................................. 1.00%
Emerging Markets Portfolio................... 1.25%
</TABLE>
The Trust's fee rates changed with respect to ALLIANCE GROWTH PORTFOLIO, MFS
TOTAL RETURN PORTFOLIO and MFS GROWTH AND INCOME PORTFOLIO, effective January 1,
1999. As of that date, SAAMCo's fee with respect to such Portfolios and the MFS
MID-CAP GROWTH PORTFOLIO as a percentage of average daily net assets, including
breakpoints, is as follows:
<TABLE>
<CAPTION>
FEE
PORTFOLIO (INCLUDING BREAKPOINTS)
--------- -----------------------
<S> <C>
MFS Total Return Portfolio................... 0.70% to $50 million
0.65% thereafter
Alliance Growth Portfolio.................... 0.70% to $50 million
0.65% next $100 million
0.60% over $150 million
MFS Growth and Income Portfolio.............. 0.70% to $600 million
0.65% next $900 million
0.60% over $1.5 billion
MFS Mid-Cap Growth Portfolio................. 0.75% to $600 million
0.70% next $900 million
0.65% over $1.5 billion
</TABLE>
Effective January 1999, the Trust's fiscal year end changed from November 30 to
January 31. For the period December 1, 1998 through January 31, 1999 (new fiscal
year end), each Portfolio paid SAAMCo a fee equal to the following percentage of
average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO FEE
--------- ---
<S> <C>
Cash Management Portfolio.................... 0.52%
Corporate Bond Portfolio..................... 0.63%
Global Bond Portfolio........................ 0.69%
High-Yield Bond Portfolio.................... 0.62%
Worldwide High Income Portfolio.............. 1.00%
SunAmerica Balanced Portfolio................ 0.66%
MFS Total Return Portfolio................... 0.67%
Asset Allocation Portfolio................... 0.58%
Equity Income................................ 0.65%
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
PORTFOLIO FEE
--------- ---
<S> <C>
Utility Portfolio............................ 0.75%
Equity Index................................. 0.40%
Growth-Income Portfolio...................... 0.55%
Federated Value Portfolio.................... 0.75%
Venture Value Portfolio...................... 0.72%
Alliance Growth Portfolio.................... 0.57%
MFS Growth and Income Portfolio.............. 0.67%
Putnam Growth Portfolio...................... 0.78%
Real Estate Portfolio........................ 0.80%
Small Company Value.......................... 1.00%
Aggressive Growth Portfolio.................. 0.72%
International Growth and Income Portfolio.... 1.00%
Global Equities Portfolio.................... 0.73%
International Diversified Equities
Portfolio.................................. 1.00%
Emerging Markets Portfolio................... 1.25%
"Dogs" of Wall Street Portfolio.............. 0.60%
</TABLE>
INFORMATION ABOUT THE SUBADVISERS
ALLIANCE CAPITAL MANAGEMENT L.P. (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 whose clients primarily are
major corporate employee benefit funds, investment companies, foundations,
endowment funds and public employee retirement systems. Alliance serves as
investment manager of employee benefit fund assets for 35 of the Fortune 100
companies.
DAVIS SELECTED ADVISERS, L.P. (Davis Selected) is located at 124 East Marcy
Street, Santa Fe, New Mexico 87501. Davis Selected provides advisory services to
other investment companies. 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.
FEDERATED INVESTMENT COUNSELING (Federated) is located at Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779. Federated and
its affiliate companies serves as investment adviser to a number of investment
companies and private accounts.
FIRST AMERICAN ASSET MANAGEMENT (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.
GOLDMAN SACHS ASSET MANAGEMENT (GSAM) is a separate operating division of
Goldman, Sachs & Co., which registered as an investment adviser in 1981.
Goldman, Sachs & Co. is located at 1 New York Plaza, 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.
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL (GSAM-International), a member of
the Investment Management Regulatory Organization Limited, a United Kingdom
self-regulatory organization, since 1990 and a registered investment adviser
since 1991, is an affiliate of Goldman, Sachs & Co. In performing their
49
<PAGE> 51
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. GSAM International is
located at Peterborough Court, 133 Fleet Street, London, EC4A 2BB, England.
MASSACHUSETTS FINANCIAL SERVICES COMPANY (MFS) is America's oldest mutual fund
organization and, with its predecessor organizations, has a history of money
management dating from 1924 and the founding of the first mutual fund in the
United States. MFS is located at 500 Boylston Street, Boston, Massachusetts,
02116.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, D/B/A MORGAN STANLEY ASSET
MANAGEMENT (MSAM) offers investment management and fiduciary services to taxable
and tax-exempt funds and institutions, international organizations and
individuals investing in U.S. and international equity and fixed income
securities. MSAM is located at 1221 Avenue of the Americas, New York, New York
10020.
PUTNAM INVESTMENT MANAGEMENT, INC. (Putnam), is 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.
SAAMCo compensated the various Subadvisers out of the advisory fees that it
received from the respective Portfolios. SAAMCo may terminate any agreement with
another Subadviser without shareholder approval.
50
<PAGE> 52
PORTFOLIO MANAGEMENT
The primary investment manager(s) and/or management team(s) for each portfolio
is set forth in the following table.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Management Portfolio SAAMCo - Fixed Income Investment The Fixed Income
Team Investment Team has
been responsible for
the management of this
portfolio since its
inception in 1993.
----------------------------------------------------------------------------------------------------------------
Corporate Bond Portfolio Federated - Joseph M. Balestrino Mr. Balestrino joined
Co-Portfolio Manager and Federated in 1986 as a
Senior Vice President Project Manager in the
Product Design
Department and became
an Assistant Vice
President and
Investment Analyst in
1991. He became a Vice
President and
portfolio manager in
1995 and a Senior Vice
President in 1998.
- Mark E. Durbiano Mr. Durbiano joined
Co-Portfolio Manager Federated in 1982 as
Senior Vice President an Investment Analyst
and became a Vice
President and
portfolio manager in
1988. He has been a
Senior Vice President
since 1996.
----------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Bond Portfolio GSAM-International - Stephen C. Fitzgerald Mr. Fitzgerald,
Co-Portfolio Manager Managing Director and
Chief Investment
Officer for
international fixed
income in the London
office since November
1998, joined GSAM
International in 1992
as an Executive
Director and Portfolio
Manager.
- Andrew F. Wilson Mr. Wilson, an
Co-Portfolio Manager Executive Director and
portfolio manager for
international fixed
income in the London
office, joined GSAM
International in
December 1995 as an
Executive Director and
portfolio manager.
From 1993 to 1995, he
was 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.
----------------------------------------------------------------------------------------------------------------
High-Yield Bond Portfolio SAAMCo - John W. Risner Mr. Risner joined
Vice President and SAAMCo in 1997 as a
Portfolio Manager Vice President and
portfolio manager.
Prior to joining
SAAMCo, he served as
Senior Portfolio
Manager of the Value
Line Aggressive Income
Trust and the Value
Line Convertible Fund
from 1992 to 1997.
----------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Worldwide High Income MSAM - Robert Angevine Mr. Angevine is a
Portfolio Co-Portfolio Manager principal of Morgan
Stanley & Co.
Incorporated and a
portfolio manager of
MSAM's high-yield
investments. He joined
the firm in 1988 as a
portfolio manager.
- Thomas L. Bennett Mr. Bennett is a
Managing Director and Managing Director of
Co-Portfolio MSAM and has been a
Manager portfolio manager with
MSAM's affiliate
Miller Anderson &
Sherrerd, LLP since
1984.
- Stephen F. Esser Mr. Esser is a
Managing Director and Managing Director of
Co-Portfolio MSAM and has been a
Manager portfolio manager with
MSAM's affiliate
Miller Anderson &
Sherrerd, LLP since
1988.
- Abigail McKenna Ms. McKenna is a Vice
Vice President and President and
Co-Portfolio Manager portfolio manager of
MSAM. She was a Senior
Portfolio Manager at
MetLife Investment
Management Corp. from
1995 to 1996 and a
Limited Partner at
Weiss Peck & Greer
from 1991 to 1995. Ms.
McKenna joined MSAM in
1996 as a Vice
President and
portfolio manager.
----------------------------------------------------------------------------------------------------------------
SunAmerica Balanced SAAMCo - Francis D. Gannon Mr. Gannon has been a
Portfolio Vice President and portfolio manager with
Portfolio Manager SAAMCo since 1996. He
joined SAAMCo in 1993
as an equity analyst.
----------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 55
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MFS Total Return Portfolio MFS - David M. Calabro Mr. Calabro joined MFS
Senior Vice President and in 1992 as a Vice
Portfolio Manager President and equity
analyst. He became a
portfolio manager in
1993 and was promoted
to Senior Vice
President in 1998.
- Geoffrey L. Kurinsky Mr. Kurinsky, the
Senior Vice President and manager of the
Portfolio Manager Portfolio's fixed
income securities,
joined MFS in 1987 as
a research analyst. He
became a Vice
President and
portfolio manager in
1989. In 1993, he was
promoted to Senior
Vice President.
- Constantinos G. Mokas Mr. Mokas, manager of
Vice President and the Portfolio's
Portfolio Manager convertible
securities, joined MFS
in 1990 as a research
analyst. He was
promoted to Assistant
Vice President in
1994, Vice President
in 1996 and portfolio
manager in 1998.
- Lisa B. Nurme Ms. Nurme, a manager
Senior Vice President and of the Portfolio's
Portfolio Manager common stock
investments, joined
MFS in 1987 as a
research analyst and
became an Investment
Officer in 1990. She
was then promoted to
Assistant Vice
President in 1991,
Vice President in
1992, portfolio
manager in 1995 and
Senior Vice President
in 1998.
----------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 56
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- Maura A. Shaughnessy Ms. Shaughnessy, a
Senior Vice President and manager of the
Portfolio Manager Portfolio's common
stock investments,
joined MFS in 1991 as
a research analyst and
became Vice President
and portfolio manager
in 1992. She was
promoted to Senior
Vice President in
1998.
- Kenneth J. Enright Mr. Enright, a manager
Vice President and of the Portfolio's
Portfolio Manager common stock portion,
joined MFS in 1986 as
a research analyst. He
became an Assistant
Vice President in
1987, Vice President
in 1988, and portfolio
manager in 1993.
----------------------------------------------------------------------------------------------------------------
Asset Allocation Portfolio GSAM - Paul D. Farrell Mr. Farrell joined
Vice President and Senior GSAM in 1991 as a Vice
Portfolio Manager President and has been
(equity portion) a Senior Portfolio
Manager since 1991.
- Karma Wilson Ms. Wilson joined GSAM
Co-Portfolio Manager and in 1994 as a Vice
Vice President President and
(equity portion) portfolio manager.
Prior to 1994, she was
an investment analyst
with Bankers Trust
Australia Ltd.
- George D. Adler Mr. Adler joined GSAM
Vice President and Senior in 1997 as a Vice
Portfolio Manager President and
(equity portion) portfolio manager.
From 1990 to 1997, he
was a portfolio
manager at Liberty
Investment Management,
Inc. ("Liberty").
- Robert G. Collins Mr. Collins joined
Vice President and Senior GSAM in 1997 as a Vice
Portfolio Manager President and
(equity portion) portfolio manager.
From 1991 to 1997, he
was a portfolio
manager at Liberty.
----------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE> 57
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- Herbert E. Ehlers Mr. Ehlers joined GSAM
Managing Director and in 1997 as a Managing
Senior Portfolio Manager Director and portfolio
(equity portion) manager. From 1994 to
1997, he was the Chief
Investment Officer and
Chairman at Liberty.
He was a portfolio
manager and president
at Liberty's
predecessor firm,
Eagle Asset
Management, from 1984
to 1994.
- Gregory H. Ekizian Mr. Ekizian joined
Vice President and Senior GSAM in 1997 as a Vice
Portfolio Manager President and
(equity portion) portfolio manager.
From 1990 to 1997, he
was a portfolio
manager at Liberty and
its predecessor firm,
Eagle Asset
Management.
- David G. Shell Mr. Shell joined GSAM
Vice President and Senior in 1997 as a Vice
Portfolio Manager President and
(equity portion) portfolio manager.
From 1987 to 1997, he
was a portfolio
manager at Liberty and
its predecessor firm,
Eagle Asset
Management.
- Ernest C. Segundo, Jr. Mr. Segundo joined
Vice President and Senior GSAM in 1997 as a Vice
Portfolio Manager President and
(equity portion) portfolio manager.
From 1992 to 1997, he
was a portfolio
manager at Liberty.
- Jonathan A. Beinner Mr. Beinner has been
Co-Portfolio Manager and Managing Director of
Managing Director (fixed GSAM's U.S. Fixed
income portion) Income Department
since 1997. He joined
the Fixed Income Group
in 1990 as an
associate portfolio
manager.
----------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 58
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- C. Richard Lucy Mr. Lucy has been Co-
Co-Portfolio Manager and Managing Director of
Managing Director (fixed GSAM's Fixed Income
income portion) Department since 1997.
He joined the Fixed
Income Group in 1992
as a Vice President
and portfolio manager.
----------------------------------------------------------------------------------------------------------------
Utility Portfolio Federated - Linda A. Duessel Ms. Duessel joined
Co-Portfolio Manager and Federated in 1991 as
Vice President an Investment Analyst
and Assistant Vice
President. She became
a Vice President and
portfolio manager in
1995.
- Steven J. Lehman Mr. Lehman joined
Co-Portfolio Manager and Federated in 1997 as a
Vice President Vice President and
portfolio manager.
From 1985 to 1997, he
served as a portfolio
manager and Vice
President at First
Chicago NBD.
----------------------------------------------------------------------------------------------------------------
Equity Income Portfolio First American - Gerald C. Bren Mr. Bren joined First
Co-Portfolio Manager American in 1972 as an
investment analyst. He
became a portfolio
manager in 1987. He is
a Chartered Financial
Analyst.
- Cori B. Johnson Ms. Johnson joined
Portfolio Manager First American in 1991
as a securities
analyst. She became a
portfolio manager in
1993. She is a
Chartered Financial
Analyst.
----------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Index Portfolio First American - James S. Rovner Mr. Rovner joined
Portfolio Manager First American in 1986
as a portfolio manager
and has managed assets
for institutional and
individual clients for
over 15 years,
specializing in equity
and balanced
investment strategies.
- Evan C. Lundquist Mr. Lundquist joined
Portfolio Manager First American in 1993
as an analyst and
portfolio manager. He
has analytic
responsibilities for
paper/forest products,
metals and mining,
steel, engineering and
construction, and
building and
appliances industries.
----------------------------------------------------------------------------------------------------------------
Growth-Income Portfolio Alliance - Michael R. Baldwin Mr. Baldwin joined the
Portfolio Manager and company in 1989 as a
Senior Vice President research analyst. He
became a portfolio
manager in 1991 and
was promoted to Senior
Vice President and
Associate Director of
Research in 1996.
----------------------------------------------------------------------------------------------------------------
Federated Value Portfolio Federated - Arthur J. Barry Mr. Barry joined
Co-Portfolio Manager and Federated in 1994 as
Vice President an Investment Analyst
and was promoted to an
Assistant Vice
President and
portfolio manager in
April 1997. He was
then promoted to Vice
President in 1998.
----------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- Michael P. Donnelly Mr. Donnelly joined
Co-Portfolio Manager and Federated in 1989 as
Vice President an Investment Analyst
and became an
Assistant Vice
President and
portfolio manager in
1992. He was then
promoted to Vice
President in 1994.
----------------------------------------------------------------------------------------------------------------
Venture Value Portfolio Davis Selected - Christopher C. Davis Mr. Davis has been
Co-Portfolio Manager employed by Davis
Selected since 1989 as
a research analyst,
assistant portfolio
manager, co-portfolio
manager, and portfolio
manager.
- Kenneth C. Feinberg Mr. Feinberg has been
Co-Portfolio Manager employed by Davis
Selected since 1994 as
a research analyst,
assistant portfolio
manager, and portfolio
manager.
----------------------------------------------------------------------------------------------------------------
"Dogs" of Wall Street SAAMCo - Francis D. Gannon See above.
Portfolio Vice President and
Portfolio Manager
----------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio Alliance - James G. Reilly Mr. Reilly joined the
Executive Vice President company in 1984 as a
and Portfolio Manager research analyst. He
became a portfolio
manager in 1993 and
was promoted to an
Executive Vice
President in 1999.
----------------------------------------------------------------------------------------------------------------
MFS Growth and Income MFS - John D. Laupheimer, Jr. Mr. Laupheimer joined
Portfolio Senior Vice President and MFS in 1981 as a
Portfolio Manager research analyst. He
became an Investment
Officer in 1983,
Assistant Vice
President in 1984,
Vice President in
1986, portfolio
manager in 1987,
Senior Vice President
in 1995 and Director
of Equity Research in
1999.
- Mitchell D. Dynan Mr. Dynan joined MFS
Senior Vice President and in 1986 as a research
Portfolio Manager analyst. He became an
Assistant Vice
President in 1987,
Vice President in
1988, portfolio
manager in 1995 and
Senior Vice President
in 1999.
----------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Putnam Growth Portfolio Putnam - C. Beth Cotner Ms. Cotner joined the
Managing Director and Chief company in 1995 as
Investment Officer Senior Vice President
and Senior Portfolio
Manager. Prior to that
time, she was an
Executive Vice
President of Kemper
Financial Services
from 1984 to 1995.
- Richard England Mr. England joined the
Senior Vice President and company in 1992 as a
Senior Portfolio Manager Global Equity Analyst.
In 1994, he was
promoted to Associate
Director of Research
and then joined the
Growth Equity Team in
1996 as a Senior
Portfolio Manager.
- Manuel H. Weiss Mr. Weiss joined the
Senior Vice President and company in 1987 as a
Senior Portfolio Manager portfolio manager to
head the quantitative
effort in the
development of the
Core Growth Equity
product.
- David J. Santos Mr. Santos joined the
Senior Vice President and company in 1986 as a
Portfolio Manager Pricing Operations
Manager and moved to
the investment
management side in
1991. He became a
portfolio manager in
1992.
----------------------------------------------------------------------------------------------------------------
Real Estate Portfolio Davis Selected - Andrew A. Davis Mr. Davis has been
Portfolio Manager employed by Davis
Selected since 1994 as
a research analyst,
assistant portfolio
manager, co-portfolio
manager and portfolio
manager.
----------------------------------------------------------------------------------------------------------------
</TABLE>
60
<PAGE> 62
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Small Company Value First American - Albin S. Dubiak Mr. Dubiak is the
Portfolio Portfolio Manager leader of the
investment team that
manages this
portfolio. He joined
First American in 1969
as an investment
analyst and became a
portfolio manager in
1985.
- Frank G. Magdalen Mr. Magdalen joined
Portfolio Manager First American in 1979
as an investment
analyst and became a
portfolio manager in
1991. He is a
Chartered Financial
Analyst.
----------------------------------------------------------------------------------------------------------------
MFS Mid-Cap Growth MFS - Mark Regan Mr. Regan joined MFS
Portfolio Vice President and as a research analyst
Portfolio Manager in 1989. He was named
investment officer in
1990, Assistant Vice
President in 1991,
Vice President in
1992, portfolio
manager in 1993 and
Senior Vice President
in 1999.
----------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio SAAMCo - Donna M. Calder Ms. Calder joined the
Vice President and firm in 1998 as a Vice
Portfolio Manager President and
portfolio manager.
Prior to joining
SAAMCo, she was the
founder and General
Partner of Manhattan
Capital Partners, L.P.
(1991-1995).
----------------------------------------------------------------------------------------------------------------
International Growth and Putnam - Deborah F. Kuenstner Ms. Kuenster joined
Income Portfolio Chief Investment Officer Putnam as a Senior
and Senior Portfolio Vice President and
Manager Senior Portfolio
Manager in March 1997.
Ms. Kuenstner was
Senior Portfolio
Manager at Dupont
Pension Fund
Management from 1989
to 1997.
----------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE> 63
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME AND TITLE OF EXPERIENCE
ADVISER/ PORTFOLIO MANAGER (AND/
SUBADVISER OR MANAGEMENT TEAM)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- George W. Stairs Mr. Stairs joined
Senior Vice President and Putnam as a Global
Portfolio Manager Equity research
analyst in 1994. In
1997, he became a
Senior Vice President
and Portfolio Manager.
Mr. Stairs was an
Associate at Value
Quest Ltd. from 1992
to 1994.
----------------------------------------------------------------------------------------------------------------
Global Equities Portfolio Alliance - Stephen Beinhacker Mr. Beinhacker joined
Portfolio Manager, the company in 1992 as
Director and Senior Vice Director of
President International
Quantitative Stock
Analysis and portfolio
manager. He was
promoted to Senior
Vice President in
1998.
----------------------------------------------------------------------------------------------------------------
International Diversified MSAM - Barton Biggs Mr. Biggs has been a
Equities Portfolio Chairman, Chief Chairman and a
Investment Officer and Director of MSAM since
Co-Portfolio Manager 1980 and a Managing
Director of Morgan
Stanley & Co.
Incorporated since
1975.
- Ann Thivierge Ms. Thivierge joined
Managing Director and MSAM in 1986 and is
Co-Portfolio Manager currently a Managing
Director.
----------------------------------------------------------------------------------------------------------------
Emerging Markets Portfolio Putnam - Thomas R. Haslett Mr. Haslett joined
Managing Director, Chief Putnam as Managing
Investment Officer and Co- Director, Chief
Portfolio Manager Investment Officer and
portfolio manager in
1996. He was a
Managing Director of
Montgomery Asset
Management, Ltd. from
1992 to 1996.
- J. Peter Grant Mr. Grant joined
Senior Vice President and Putnam in 1973 as a
Co-Portfolio Manager Vice President and
research analyst. He
became a portfolio
manager in 1974 and a
Senior Vice President
in 1997.
----------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE> 64
CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company, Boston, Massachusetts, acts as Custodian of
the Trust's assets as well as Transfer and Dividend Paying Agent and in so doing
performs certain bookkeeping, data processing and administrative services.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following Financial Highlights tables for each Portfolio is intended to help
you understand the Portfolios' financial performance for the past 5 years.
Certain information reflects financial results for a single Portfolio share. The
total returns in each table represent the rate that an investor would have
earned on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with each Portfolio's financial statements, are
included in the Trust's annual report to shareholders, which is available upon
request.
63
<PAGE> 65
- --------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS*
(SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
NET TOTAL
ASSET NET NET REALIZED FROM
VALUE INVEST- & UNREALIZED INVEST-
PERIOD BEGINNING MENT GAIN (LOSS) ON MENT
ENDED OF PERIOD INCOME** INVESTMENTS OPERATIONS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Management Portfolio
11/30/94 $10.20 $0.38 $(0.02) $ 0.36
11/30/95 10.47 0.56 0.01 0.57
11/30/96 10.70 0.53 (0.02) 0.51
11/30/97 10.76 0.53 0.01 0.54
11/30/98 10.74 0.54 (0.02) 0.52
1/31/99# 10.58 0.08 0.01 0.09
Global Bond Portfolio
11/30/94 10.30 0.53 (0.86) (0.33)
11/30/95 9.83 0.60 0.97 1.57
11/30/96 11.02 0.59 0.54 1.13
11/30/97 11.40 0.52 0.38 0.90
11/30/98 11.51 0.49 0.78 1.27
1/31/99# 11.77 0.07 0.11 0.18
Corporate Bond Portfolio
11/30/94 10.19 0.52 (0.87) (0.35)
11/30/95 9.75 0.60 1.00 1.60
11/30/96 10.82 0.65 0.03 0.68
11/30/97 11.09 0.77 0.21 0.98
11/30/98 11.54 0.77 (0.02) 0.75
1/31/99# 11.83 0.12 0.04 0.16
High-Yield Bond Portfolio
11/30/94 11.12 1.20 (1.65) (0.45)
11/30/95 10.32 1.11 0.12 1.23
11/30/96 10.53 0.98 0.48 1.46
11/30/97 11.04 1.04 0.48 1.52
11/30/98 11.82 1.14 (1.24) (0.10)
1/31/99# 10.98 0.18 (0.02) 0.16
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
11/30/96 11.42 1.25 1.60 2.85
11/30/97 13.35 0.98 0.68 1.66
11/30/98 13.20 1.07 (2.61) (1.54)
1/31/99# 10.31 0.16 (0.35) (0.19)
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
11/30/98 13.45 0.30 2.33 2.63
1/31/99# 15.61 0.05 1.58 1.63
MFS Total Return 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
11/30/96 12.48 0.34 1.31 1.65
11/30/97 13.63 0.37 1.39 1.76
11/30/98 14.75 0.36 1.56 1.92
1/31/99# 14.96 0.06 0.82 0.88
<CAPTION>
- -------------------------------------------------- -----------------------------------------------------------
DIVIDENDS DIVIDENDS NET NET
DECLARED FROM FROM NET ASSET ASSETS
NET REALIZED VALUE END OF
PERIOD INVESTMENT GAIN ON END OF TOTAL PERIOD
ENDED INCOME INVESTMENTS PERIOD RETURN*** (000'S)
- -------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash Management Portfolio
11/30/94 $ (0.09) $ - $10.47 3.51% $ 89,098
11/30/95 (0.34) - 10.70 5.59 90,731
11/30/96 (0.45) - 10.76 4.92 91,247
11/30/97 (0.56) - 10.74 5.22 156,119
11/30/98 (0.68) - 10.58 5.05 223,640
1/31/99# - - 10.67 0.85 277,370
Global Bond Portfolio
11/30/94 (0.09) (0.05) 9.83 (3.18) 44,543
11/30/95 (0.38) - 11.02 16.40 59,759
11/30/96 (0.75) - 11.40 10.94 68,221
11/30/97 (0.75) (0.04) 11.51 8.43 89,043
11/30/98 (0.79) (0.22) 11.77 11.75 115,428
1/31/99# - - 11.95 1.53 122,306
Corporate Bond Portfolio
11/30/94 (0.05) (0.04) 9.75 (3.41) 15,869
11/30/95 (0.53) - 10.82 17.01 29,475
11/30/96 (0.41) - 11.09 6.51 37,207
11/30/97 (0.53) - 11.54 9.26 62,272
11/30/98 (0.46) - 11.83 6.61 143,561
1/31/99# - - 11.99 1.35 158,804
High-Yield Bond Portfolio
11/30/94 (0.29) (0.06) 10.32 (4.26) 55,803
11/30/95 (1.02) - 10.53 12.64 82,174
11/30/96 (0.95) - 11.04 14.86 113,229
11/30/97 (0.74) - 11.82 14.53 195,639
11/30/98 (0.66) (0.08) 10.98 (1.26) 284,580
1/31/99# - - 11.14 1.46 293,037
Worldwide High Income Portfolio
10/28/94-
11/30/94 - - 9.95 (0.50) 10.478
11/30/95 (0.10) - 11.42 16.02 21,515
11/30/96 (0.87) (0.05) 13.35 26.87 49,204
11/30/97 (0.90) (0.91) 13.20 14.17 125,224
11/30/98 (0.61) (0.74) 10.31 (13.74) 121,290
1/31/99# - - 10.12 (1.84) 116,977
SunAmerica Balanced Portfolio
6/3/96-
11/30/96 - - 11.13 11.30 10,224
11/30/97 (0.04) (0.02) 13.45 21.48 44,621
11/30/98 (0.11) (0.36) 15.61 19.81 149,242
1/31/99# - - 17.24 10.44 194,878
MFS Total Return Portfolio
10/28/94-
11/30/94 - - 9.96 (0.40) 1,516
11/30/95 (0.05) - 12.48 25.89 32,429
11/30/96 (0.19) (0.31) 13.63 13.75 70,021
11/30/97 (0.23) (0.41) 14.75 13.52 95,721
11/30/98 (0.31) (1.40) 14.96 13.54 131,440
1/31/99# - - 15.84 5.88 145,332
<CAPTION>
- -------------------------------------------------- ------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- -------------------------------------------------- ------------------------------------------
<S> <C> <C> <C>
Cash Management Portfolio
11/30/94 0.70%++ 3.73%++ -%
11/30/95 0.67 5.32 -
11/30/96 0.62 4.90 -
11/30/97 0.63 5.06 -
11/30/98 0.58 4.97 -
1/31/99# 0.62+ 5.02+ -
Global Bond Portfolio
11/30/94 1.06 5.29 347
11/30/95 0.95 5.89 339
11/30/96 0.89 5.44 223
11/30/97 0.90 4.70 360
11/30/98 0.85 4.27 210
1/31/99# 0.97+ 3.65+ 30
Corporate Bond Portfolio
11/30/94 0.94++ 5.21++ 419
11/30/95 0.96++ 5.93++ 412
11/30/96 0.97 6.11 338
11/30/97 0.91 6.99 49
11/30/98 0.77 6.61 15
1/31/99# 0.80+ 6.16+ 4
High-Yield Bond Portfolio
11/30/94 0.92++ 11.07++ 225
11/30/95 0.80 10.80 174
11/30/96 0.77 9.41 107
11/30/97 0.75 9.26 243
11/30/98 0.69 9.75 128
1/31/99# 0.72+ 9.71+ 17
Worldwide High Income Portfolio
10/28/94-
11/30/94 1.60+++ 4.48+++ 2
11/30/95 1.30 10.46 176
11/30/96 1.18 10.45 177
11/30/97 1.10 7.58 146
11/30/98 1.08 8.90 158
1/31/99# 1.11+@ 9.57+@ 12
SunAmerica Balanced Portfolio
6/3/96-
11/30/96 1.00+++ 1.92+++ 40
11/30/97 1.00 1.82 143
11/30/98 0.78 2.10 111
1/31/99# 0.74+@ 1.73+@ 26
MFS Total Return Portfolio
10/28/94-
11/30/94 1.00+++ 4.25+++ 10
11/30/95 0.98++ 3.08++ 153
11/30/96 0.84 2.74 194
11/30/97 0.82 2.63 271
11/30/98 0.77 2.43 106
1/31/99# 0.81+ 2.40+ 86
</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.
# The Portfolio changed its fiscal year ended from November 30 to January
31.
+ Annualized
@ Net of custody credits of 0.01%
++ 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
---------------------------------------- -------------------------------------------
1994 1995 1996 1997 1998 1999 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------- -------------------------------------------
Cash Management Portfolio................ 0.78% 0.67% 0.62% 0.63% 0.58% 0.62% 3.65% 5.32% 4.90% 5.06% 4.97% 5.02%
Global Bond Portfolio.................... 1.06 0.95 0.89 0.90 0.85 0.97 5.29 5.89 5.44 4.70 4.27 3.65
Corporate Bond Portfolio................. 1.09 0.97 0.97 0.91 0.77 0.80 5.06 5.92 6.11 6.99 6.61 6.16
High-Yield Bond Portfolio................ 0.93 0.80 0.77 0.75 0.69 0.72 11.06 10.80 9.41 9.26 9.75 9.71
Worldwide High Income Portfolio.......... 2.26 1.30 1.18 1.10 1.08 1.11 3.82 10.46 10.45 7.58 8.90 9.57
SunAmerica Balanced Portfolio............ - - 1.43 1.00 0.78 0.74 - - 1.49 1.82 2.10 1.73
MFS Total Return Portfolio............... 6.82 1.11 0.84 0.82 0.77 0.81 (1.57) 2.95 2.74 2.63 2.43 2.40
</TABLE>
64
<PAGE> 66
- --------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS* -- (CONTINUED)
(SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NET TOTAL
ASSET NET NET REALIZED FROM
VALUE INVEST- & UNREALIZED INVEST-
PERIOD BEGINNING MENT GAIN (LOSS) ON MENT
ENDED OF PERIOD INCOME** INVESTMENTS OPERATIONS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Portfolio
11/30/94 $10.36 $0.29 $(0.25) $ 0.04
11/30/95 10.32 0.42 2.24 2.66
11/30/96 12.74 0.48 2.00 2.48
11/30/97 14.52 0.44 2.55 2.99
11/30/98 16.21 0.48 0.08 0.56
1/31/99# 14.81 0.07 0.15 0.22
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
11/30/98 12.91 0.42 1.62 2.04
1/31/99# 14.46 0.08 0.03 0.11
Growth-Income Portfolio
11/30/94 10.61 0.13 (0.36) (0.23)
11/30/95 10.33 0.17 3.31 3.48
11/30/96 13.71 0.18 3.48 3.66
11/30/97 16.82 0.17 4.69 4.86
11/30/98 20.82 0.17 4.33 4.50
1/31/99# 24.23 0.02 3.63 3.65
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
11/30/98 13.90 0.17 2.35 2.52
1/31/99# 16.06 0.02 0.54 0.56
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
11/30/96 13.47 0.18 3.46 3.64
11/30/97 16.90 0.19 4.73 4.92
11/30/98 21.47 0.20 2.23 2.43
1/31/99# 23.10 0.03 1.25 1.28
"Dogs" of Wall Street Portfolio
4/1/98-
11/30/98 10.00 0.11 (0.30) (0.19)
1/31/99# 9.81 0.02 (0.23) (0.21)
Putnam Growth Portfolio
11/30/94 10.04 0.03 (0.01) 0.02
11/30/95 10.05 (0.01) 3.09 3.08
11/30/96 13.10 - 2.61 2.61
11/30/97 15.71 0.03 3.93 3.96
11/30/98 19.15 0.01 4.15 4.16
1/31/99# 20.21 (0.01) 3.33 3.32
MFS Growth and Income Portfolio
11/30/94 10.78 0.16 (0.87) (0.71)
11/30/95 10.01 0.12 3.14 3.26
11/30/96 13.14 0.11 2.16 2.27
11/30/97 14.39 0.11 2.48 2.59
11/30/98 15.62 0.02 2.61 2.63
1/31/99# 15.37 0.01 1.60 1.61
<CAPTION>
- --------------------------------------------- --------------------------------------------------------------
DIVIDENDS DIVIDENDS NET NET
DECLARED FROM FROM NET ASSET ASSETS
NET REALIZED VALUE END OF
PERIOD INVESTMENT GAIN ON END OF TOTAL PERIOD
ENDED INCOME INVESTMENTS PERIOD RETURN*** (000'S)
- --------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Allocation Portfolio
11/30/94 $ (0.05) $(0.03) $10.32 0.30% $ 106,856
11/30/95 (0.20) (0.04) 12.74 26.10 199,836
11/30/96 (0.31) (0.39) 14.52 20.27 316,388
11/30/97 (0.40) (0.90) 16.21 21.97 526,585
11/30/98 (0.35) (1.61) 14.81 2.85 713,045
1/31/99# - - 15.03 1.49 724,516
Utility Portfolio
6/3/96-
11/30/96 - - 10.75 7.50 6,299
11/30/97 (0.09) (0.02) 12.91 21.26 24,366
11/30/98 (0.16) (0.33) 14.46 15.98 68,049
1/31/99# - - 14.57 0.76 77,323
Growth-Income Portfolio
11/30/94 (0.04) (0.01) 10.33 (2.20) 84,899
11/30/95 (0.10) - 13.71 33.89 171,281
11/30/96 (0.12) (0.43) 16.82 27.41 325,463
11/30/97 (0.13) (0.73) 20.82 30.11 622,062
11/30/98 (0.13) (0.96) 24.23 21.91 1,019,590
1/31/99# - - 27.88 15.06 1,206,113
Federated Value Portfolio
6/3/96-
11/30/96 - - 11.08 10.80 12,460
11/30/97 (0.03) - 13.90 25.75 59,024
11/30/98 (0.06) (0.30) 16.06 18.22 145,900
1/31/99# - - 16.62 3.49 159,176
Venture Value Portfolio
10/28/94-
11/30/94 - - 9.78 (2.20) 4,449
11/30/95 (0.03) - 13.47 38.17 154,908
11/30/96 (0.09) (0.12) 16.90 27.44 516,413
11/30/97 (0.09) (0.26) 21.47 29.62 1,140,053
11/30/98 (0.12) (0.68) 23.10 11.36 1,725,411
1/31/99# - - 24.38 5.54 1,840,354
"Dogs" of Wall Street Portfolio
4/1/98-
11/30/98 - - 9.81 (1.90) 65,283
1/31/99# - - 9.60 (2.14) 78,062
Putnam Growth Portfolio
11/30/94 (0.01) - 10.05 0.19 75,342
11/30/95 (0.03) - 13.10 30.66 115,276
11/30/96 - - 15.71 19.92 160,073
11/30/97 - (0.52) 19.15 26.01 234,726
11/30/98 (0.02) (3.08) 20.21 22.56 398,863
1/31/99# - - 23.53 16.43 494,813
MFS Growth and Income Portfolio
11/30/94 (0.06) - 10.01 (6.64) 104,194
11/30/95 (0.13) - 13.14 32.92 149,910
11/30/96 (0.11) (0.91) 14.39 18.40 186,368
11/30/97 (0.10) (1.26) 15.62 19.78 218,496
11/30/98 (0.12) (2.76) 15.37 17.82 238,298
1/31/99# - - 16.98 10.47 266,069
<CAPTION>
- --------------------------------------------- --------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- --------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Asset Allocation Portfolio
11/30/94 0.94%++ 2.71%++ 152%
11/30/95 0.81 3.62 207
11/30/96 0.74 3.66 200
11/30/97 0.68 2.88 176
11/30/98 0.64 3.15 156
1/31/99# 0.66+ 2.60+ 30
Utility Portfolio
6/3/96-
11/30/96 1.05+++ 4.41+++ 24
11/30/97 1.05++ 3.15++ 77
11/30/98 1.01 3.04 72
1/31/99# 0.93+ 3.02+ 12
Growth-Income Portfolio
11/30/94 0.81++ 1.26++ 59
11/30/95 0.77 1.42 59
11/30/96 0.72 1.21 82
11/30/97 0.65 0.89 44
11/30/98 0.60 0.78 53
1/31/99# 0.60+ 0.35+ 16
Federated Value Portfolio
6/3/96-
11/30/96 1.05+++ 1.26+++ 30
11/30/97 1.03 1.03 46
11/30/98 0.83 1.13 51
1/31/99# 0.86+ 0.75+ 4
Venture Value Portfolio
10/28/94-
11/30/94 1.10+++ 3.93+++ -
11/30/95 1.00++ 1.43++ 18
11/30/96 0.85 1.21 22
11/30/97 0.79 0.98 22
11/30/98 0.75 0.89 25
1/31/99# 0.77+ 0.86+ 5
"Dogs" of Wall Street Portfolio
4/1/98-
11/30/98 0.85+++ 2.04+++ 0
1/31/99# 0.85+ 0.93+ 58
Putnam Growth Portfolio
11/30/94 0.96++ 0.31++ 54
11/30/95 0.93 (0.05) 52
11/30/96 0.90 (0.02) 63
11/30/97 0.91 0.18 125
11/30/98 0.86 0.09 75
1/31/99# 0.86+ (0.19)+ 10
MFS Growth and Income Portfolio
11/30/94 0.81++ 1.52++ 211
11/30/95 0.76 1.01 229
11/30/96 0.74 0.82 164
11/30/97 0.73 0.77 217
11/30/98 0.70 0.17 105
1/31/99# 0.75+ 0.38+ 76
</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.
# The Portfolio changed its fiscal year ended from November 30 to January
31.
+ 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)
---------------------------------------- ---------------------------------------------
1994 1995 1996 1997 1998 1999 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------- ---------------------------------------------
Asset Allocation Portfolio............ 0.94% 0.81% 0.74% 0.68% 0.64% 0.66% 2.71% 3.62% 3.66% 2.88% 3.15% 2.60%
Utility Portfolio..................... - - 1.93 1.24 1.01 0.93 - - 3.53 2.96 3.04 3.02
Growth-Income Portfolio............... 0.89 0.77 0.72 0.65 0.60 0.60 1.18 1.42 1.21 0.89 0.78 0.55
Federated Value Portfolio............. - - 1.57 1.03 0.83 0.86 - - 0.74 1.03 1.13 0.75
Venture Value Portfolio............... 3.89 1.02 0.85 0.79 0.75 0.77 1.14 1.41 1.21 0.98 0.89 0.86
"Dogs" of Wall Street Portfolio....... - - - - 0.92 0.85 - - - - 1.97 0.93
Putnam Growth Portfolio............... 1.05 0.93 0.90 0.91 0.86 0.86 0.22 (0.05) (0.02) 0.18 0.09 (0.19)
MFS Growth and Income Portfolio....... 0.87 0.76 0.74 0.73 0.70 0.75 1.46 1.01 0.82 0.77 0.17 0.38
</TABLE>
65
<PAGE> 67
- --------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS* -- (CONTINUED)
(SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NET NET TOTAL DIVIDENDS DIVIDENDS
ASSET INVEST- NET REALIZED FROM DECLARED FROM FROM NET
VALUE MENT & UNREALIZED INVEST- NET REALIZED
PERIOD BEGINNING INCOME GAIN (LOSS) ON MENT INVESTMENT GAIN ON
ENDED OF PERIOD (LOSS)** INVESTMENTS OPERATIONS INCOME INVESTMENTS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Growth Portfolio
11/30/94 $10.92 $0.04 $(0.14) $(0.10) $ (0.01) $(0.17)
11/30/95 10.64 0.07 5.08 5.15 (0.03) (0.13)
11/30/96 15.63 0.08 4.07 4.15 (0.04) (1.01)
11/30/97 18.73 0.16 4.76 4.92 (0.05) (1.04)
11/30/98 22.56 0.07 7.77 7.84 (0.06) (2.30)
1/31/99# 28.04 0.00 7.22 7.22 - -
Global Equities Portfolio
11/30/94 10.99 0.05 0.71 0.76 (0.01) (0.07)
11/30/95 11.67 0.12 1.64 1.76 (0.08) (0.29)
11/30/96 13.06 0.14 2.19 2.33 (0.14) (0.33)
11/30/97 14.92 0.09 1.79 1.88 (0.13) (0.69)
11/30/98 15.98 0.07 2.40 2.47 (0.19) (1.36)
1/31/99# 16.90 0.00 1.71 1.71 - -
International Growth and Income Portfolio
6/2/97-
11/30/97 10.00 0.03 0.38 0.41 - -
11/30/98 10.41 0.13 0.86 0.99 (0.03) (0.06)
1/31/99# 11.31 - 0.40 0.40 (0.02) (0.19)
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) (0.10)
11/30/98 11.33 0.15 1.93 2.08 (0.40) (0.15)
1/31/99# 12.86 (0.01) 0.22 0.21 - -
Real Estate Portfolio
6/2/97-
11/30/97 10.00 0.16 1.37 1.53 - -
11/30/98 11.53 0.45 (1.93) (1.48) (0.16) (0.01)
1/31/99# 9.88 0.09 (0.36) (0.27) - -
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) -
11/30/98 11.76 0.04 0.52 0.56 - -
1/31/99# 12.32 - 3.20 3.20 - -
Emerging Markets Portfolio
6/2/97-
11/30/97 10.00 0.06 (2.03) (1.97) - -
11/30/98 8.03 0.04 (1.78) (1.74) (0.07) -
1/31/99# 6.22 0.01 - 0.01 (0.01) -
<CAPTION>
- ---------------------------------------------- --------------------------------------------------------------------------
NET NET RATIO OF NET
ASSET ASSETS RATIO OF INVESTMENT
VALUE END OF EXPENSES TO INCOME TO
PERIOD END OF TOTAL PERIOD AVERAGE NET AVERAGE PORTFOLIO
ENDED PERIOD RETURN*** (000'S) ASSETS NET ASSETS TURNOVER
- ---------------------------------------------- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Growth Portfolio
11/30/94 $10.64 (0.93)% $ 53,213 0.82%++ 0.37%++ 146%
11/30/95 15.63 48.91 167,870 0.79 0.51 138
11/30/96 18.73 28.05 381,367 0.71 0.51 121
11/30/97 22.56 27.80 704,533 0.65 0.37 110
11/30/98 28.04 35.92 1,396,140 0.58 0.27 90
1/31/99# 35.26 25.75 1,864,924 0.63+ (0.01)+ 11
Global Equities Portfolio
11/30/94 11.67 6.87 136,758 1.28 0.42 67
11/30/95 13.06 15.58 165,752 1.14 1.02 106
11/30/96 14.92 18.21 246,482 1.03 1.04 70
11/30/97 15.98 13.30 341,639 0.95 0.58 115
11/30/98 16.90 15.34 420,358 0.88 0.46 92
1/31/99# 18.61 10.12 463,138 0.86+ (0.04)+ 12
International Growth and Income Portfolio
6/2/97-
11/30/97 10.41 4.10 42,844 1.60+++ 0.61+++ 19
11/30/98 11.31 9.58 128,344 1.46 1.12 51
1/31/99# 11.50 3.56 142,497 1.46+ (0.10) 10
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 11.33 3.52 248,927 1.35 0.82 56
11/30/98 12.86 18.33 354,174 1.26 1.18 40
1/31/99# 13.07 1.63 373,785 1.26+ (0.43)+ 7
Real Estate Portfolio
6/2/97-
11/30/97 11.53 15.30 29,565 1.25+++ 3.25+++ 7
11/30/98 9.88 (13.04) 59,102 0.95 4.21 26
1/31/99# 9.61 (2.73) 58,504 1.01+ 5.63+ 6
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
11/30/98 12.32 4.76 133,183 0.83 0.32 268
1/31/99# 15.52 25.97 182,313 0.82+ 0.13+ 29
Emerging Markets Portfolio
6/2/97-
11/30/97 8.03 (19.70) 19,979 1.90+++ 1.33+++ 49
11/30/98 6.22 (21.86) 31,685 1.90++ 0.61++ 96
1/31/99# 6.22 0.20 32,708 1.90+++ 0.60+++ 22
</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.
# The Portfolio changed its fiscal year ended from November 30 to January 31.
+ 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)
---------------------------------------- ----------------------------------------------
1994 1995 1996 1997 1998 1999 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------- ----------------------------------------------
Alliance Growth Portfolio............ 0.96% 0.79% 0.71% 0.65% 0.58% 0.63% 0.23% 0.51% 0.51% 0.37% 0.27% (0.01)
Global Equities Portfolio............ 1.28 1.14 1.03 0.95 0.88 0.86 0.42 1.02 1.04 0.58 0.46 (0.04)
International Growth and Income
Portfolio........................... - - - 2.02 1.46 1.46 - - - 0.19 1.12 (0.10)
International Diversified Equities
Portfolio........................... 3.50 2.09 1.59 1.35 1.26 1.26 (0.20) 0.37 0.47 0.82 1.18 (0.43)
Real Estate Portfolio................ - - - 1.36 0.95 1.01 - - - 3.14 4.21 5.63
Aggressive Growth Portfolio.......... - - 1.09 0.90 0.83 0.82 - - 0.42 (0.13) 0.32 0.13
Emerging Markets Portfolio........... - - - 2.60 2.01 2.29 - - - 0.63 0.50 0.21
</TABLE>
66
<PAGE> 68
- --------------------------------------------------------------------------------
SUNAMERICA SERIES TRUST
FINANCIAL HIGHLIGHTS* -- (CONTINUED)
(SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
NET TOTAL
ASSET NET NET REALIZED FROM
VALUE INVEST- & UNREALIZED INVEST-
PERIOD BEGINNING MENT GAIN (LOSS) ON MENT
ENDED OF PERIOD INCOME** INVESTMENTS OPERATIONS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Index Portfolio
12/14/98-
1/31/99 $10.00 $0.01 $ 1.17 $ 1.18
Equity Income Portfolio
12/14/98-
1/31/99 10.00 0.03 0.54 0.57
Small Company Value Portfolio
12/14/98-
1/31/99 10.00 - 0.05 0.05
<CAPTION>
- --------------------------------------------- --------------------------------------------------------------
DIVIDENDS DIVIDENDS NET NET
DECLARED FROM FROM NET ASSET ASSETS
NET REALIZED VALUE END OF
PERIOD INVESTMENT GAIN ON END OF TOTAL PERIOD
ENDED INCOME INVESTMENTS PERIOD RETURN*** (000'S)
- --------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Index Portfolio
12/14/98-
1/31/99 $ (0.03) $ - $11.15 11.81% $ 11,168
Equity Income Portfolio
12/14/98-
1/31/99 (0.03) - 10.54 5.70 5.287
Small Company Value Portfolio
12/14/98-
1/31/99 (0.02) - 10.03 0.49 5.024
<CAPTION>
- --------------------------------------------- --------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- --------------------------------------------- --------------------------------------
<S> <C> <C> <C>
Equity Index Portfolio
12/14/98-
1/31/99 0.55+++ 0.75+++ 0%
Equity Income Portfolio
12/14/98-
1/31/99 0.95+++ 1.87+++ 14%
Small Company Value Portfolio
12/14/98-
1/31/99 1.40+++ 0.12+++ 6%
</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.
# The Portfolio changed its fiscal year ended from November 30 to January
31.
+ 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>
NET
INVESTMENT
EXPENSES INCOME (LOSS)
1999 1999
-------- -------------
<S> <C> <C>
Equity Index Portfolio...................................... 1.80% (0.50)%
Equity Income Portfolio..................................... 3.47 (0.65)
Small Company Value Portfolio............................... 3.87 (2.35)
</TABLE>
67
<PAGE> 69
- --------------------------------------------------------------------------------
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 investment
strategies that significantly affected a Portfolio's performance for the
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:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
1-800-445-7862
-- or --
First SunAmerica Life Insurance Company
Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
1-800-99-NYSUN (New York Shareholders)
1-800-445-SUN2 (all others)
Information about the Portfolios (including the SAI) can be reviewed and copied
at the Public Reference Room of the Securities and Exchange Commission,
Washington, D.C. Call (800) SEC-0330 for information on the operation of the
Public Reference Room. Information about the Portfolios is also available on the
Securities and Exchange Commission's web-site at http://www.sec.gov and copies
may be obtained upon payment of a duplicating fee by writing the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549-6009.
You should rely only on the information contained in this prospectus. No one is
authorized to provide you with any different information.
[SUN AMERICA LOGO]
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, California 90067-6022
First SunAmerica Life Insurance Company
733 Third Avenue
New York, New York 10017
INVESTMENT COMPANY ACT
- - File No. 811-7238
68
<PAGE> 70
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")
dated March 30, 1999. This Statement of Additional Information incorporates the
Prospectus by reference. The Trust's audited financial statements are
incorporated into this Statement of Additional Information by reference to its
1998 annual report to shareholders. You may request a copy of the Prospectus
and/or annual report at no charge by calling (800) 445-7862 or writing the Trust
at the address below.
P.O. Box 54299
Los Angeles, California 90054-0299
(800) 445-SUN2
March 30, 1999
<PAGE> 71
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TOPIC PAGE
- ----- ----
<S> <C>
THE TRUST.......................................................... B-4
INVESTMENT OBJECTIVES AND POLICIES................................. B-4
DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS................... B-44
INVESTMENT RESTRICTIONS............................................ B-47
INVESTMENT RESTRICTIONS OF THE CASH MANAGEMENT PORTFOLIO........... B-47
TRUST OFFICERS AND TRUSTEES........................................ B-52
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT....................... B-54
SUBADVISORY AGREEMENTS............................................. B-59
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES......................... B-62
SHARES OF THE TRUST................................................ B-63
PRICE OF SHARES.................................................... B-65
EXECUTION OF PORTFOLIO TRANSACTIONS................................ B-66
GENERAL INFORMATION................................................ B-74
FINANCIAL STATEMENTS............................................... B-75
</TABLE>
B-2
<PAGE> 72
THE TRUST
The Trust commenced operations on February 9, 1993 with the Cash
Management, High-Yield Bond, Growth-Income, Alliance Growth, Growth/Phoenix
Investment Counsel, Provident Growth and the Global Equities Portfolios. The
Fixed Income, Global Bond and Asset Allocation Portfolios commenced operations
on July 1, 1993. The Trustees subsequently approved the addition of the
following Portfolios: (a) Balanced/Phoenix Investment Counsel, International
Diversified Equities, Worldwide High Income, and Venture Value Portfolios
effective October 21, 1994; (b) SunAmerica Balanced, Aggressive Growth,
Federated Value, and Federated Utility Portfolios effective June 1, 1996; (c)
Emerging Markets, International Growth and Income, and Real Estate Portfolios
effective April 7, 1997; (d) "Dogs" of Wall Street Portfolio effective February
1, 1998; (e) Equity Income, Equity Index, and Small Company Value Portfolios
effective September 1, 1998; (f) and The MFS Mid-Cap Growth portfolio effective
January 1, 1999. effective January 12, 1999, The Trust's fiscal year end changed
from November 30 to January 31.
The Trustees approved the renaming of the following Portfolios: (a)
Fixed Income Portfolio to Corporate Bond Portfolio effective June 1, 1996; (b)
Federated Utility Portfolio to Utility Portfolio effective June 3, 1996; (c)
Provident Growth Portfolio to Putnam Growth Portfolio effective April 7, 1997;
and (d) The Growth/Phoenix Investment Counsel Portfolio and Balanced/Phoenix
Investment Counsel Portfolio to MFS Growth and Income Portfolio and MFS Total
Return Portfolio, respectively effective January 1, 1999.
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 Delaware corporation.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each of the Portfolios are
described in the Prospectus. Certain types of securities in which the Portfolios
may invest and certain investment practices that the Portfolios may employ are
described under "More Information About the Portfolios - Investment Strategies"
in the Prospectus and are discussed more fully below. Unless otherwise
B-3
<PAGE> 73
specified, each Portfolio may invest in the following securities. The stated
percentage limitations are applied to an investment at the time of purchase
unless indicated otherwise.
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, 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 Standard & Poor's Rating Services, a Division of
The McGraw-Hill Companies, Inc. ("Standard & Poor's") (AAA, AA, A or
BBB) or by Moody's Investors Service, Inc. ("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. The
Worldwide High Income, Equity Index, "Dogs" of Wall Street, Putnam
Growth and International Diversified Equities Portfolios will not
invest in investment grade corporate bonds.
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
Standard & Poor's, or Ba or below by Moody's. These securities are
considered speculative.
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 Standard &
Poor's (for example, commercial paper rated P-1 and A-1 by Moody's and Standard
& Poor's, 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
B-4
<PAGE> 74
rated in the highest two categories by either Moody's or Standard & Poor's,
provided the issuer has commercial paper rated in the highest rating category by
Moody's and Standard & Poor's.
The Corporate Bond 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, and only up to 35% of net assets. There is no limit with
respect to the rating categories for securities in which the Portfolio may
invest.
All securities purchased by the Global Bond Portfolio will be rated, at
the time of investment, at least BBB by Standard & Poor's 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.
Unrated securities will be determined by the Subadvisers to be of comparable
quality. The debt securities in which the Portfolio will invest may have fixed,
variable or floating interest rates.
The High-Yield Bond Portfolio may invest without limitation in bonds
rated as low as Ca by Moody's or C by Standard & Poor's (or unrated but
considered by the Subadviser of equivalent quality). In addition, the Portfolio
may invest up to 10% of its total assets in bonds rated C by Moody's or D by
Standard & Poor's.
From time to time, a portion of the Worldwide High Income 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 Standard &
Poor's ("junk bonds").
The SunAmerica Balanced Portfolio may invest up to 10% of the value of
its total assets (measured at the time of investment) in securities rated as low
as BBB by Standard & Poor's or Baa by Moody's.
The MFS Total Return Portfolio may invest in fixed income securities
rated Baa by Moody's or BBB by Standard & Poor's or Fitch Investors Services,
Inc. ("Fitch") and comparable unrated securities. The Portfolio may also invest
up to 20% in securities rated Baa or lower by Moody's or BB or lower by Standard
& Poor's or Fitch and comparable unrated securities ("junk bonds").
The Asset Allocation Portfolio's fixed income investments will consist
primarily of "investment grade" bonds; that is, bonds that are rated BBB or
better by Standard & Poor's 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
Standard & Poor's or Ca by Moody's. Securities rated BBB or below by Standard &
Poor's or Baa or below by Moody's are considered to have speculative
characteristics.
The Utility Portfolio may invest in junk bonds.
B-5
<PAGE> 75
The Equity Income Portfolio may invest up to 25% of its assets in
convertible debt obligations rated as low as CCC by Standard & Poor's or Caa by
Moody's or that have been assigned an equivalent rating by another nationally
recognized statistical rating organization.
The Equity Index Portfolio may not invest in junk bonds.
The Growth-Income Portfolio may not invest in junk bonds.
The Federated Value Portfolio may not invest in junk bonds. The fixed
income securities in which the Federated Value Portfolio may invest must be
rated, at the time of purchase, BBB or better by Standard & Poor's, 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 Venture Value Portfolio may not invest in junk bonds.
The "Dogs" of Wall Street Portfolio may not invest in junk bonds.
The Alliance Growth Portfolio and Putnam Growth Portfolio may invest in
convertible securities rated below BBB by Standard & Poor's or Baa by Moody's or
be determined by the Subadviser to be of comparable quality (i.e., junk bonds).
The MFS Growth and Income Portfolio may not invest in junk bonds.
The Real Estate Portfolio will not invest more than 5% of its assets
in junk bonds.
The Small Company Value Portfolio may invest up to 5% of its net assets
in less than investment grade debt obligations.
The MFS Mid-Cap Growth Portfolio may invest up to 20% of its net assets
in non-convertible fixed income securities rated Baa or lower by Moody's or BB
or lower by Standard & Poor's or Fitch and comparable unrated securities.
The Aggressive Growth Portfolio may not invest in junk bonds.
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 Standard & Poor's.
The Global Equities Portfolio may not invest in junk bonds.
The International Diversified Equities Portfolio may not invest in junk
bonds.
B-6
<PAGE> 76
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.
High-Yield Bonds in which the Corporate Bond, High-Yield Bond,
Worldwide High Income, MFS Total Return, Asset Allocation, Equity Income, Real
Estate, Small Company Value, MFS Mid-Cap Growth and Emerging Markets Portfolios
may invest present certain risks, which are discussed below:
Sensitivity to Interest Rate and Economic Changes - High-yield bonds
are very sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience
financial stress that would adversely affect their ability to service
their principal and interest payment obligations, to meet projected
business goals, and to obtain additional financing. If the issuer of a
bond defaults on its obligations to pay interest or principal or enters
into bankruptcy proceedings, a Portfolio may incur losses or expenses
in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices of high-yield bonds and the Portfolio's net
asset value.
Payment Expectations - High-yield bonds may contain redemption or call
provisions. If an issuer 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.
SunAmerica Asset Management Corp. ("SAAMCo" or 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.
B-7
<PAGE> 77
Subject to the limitations described above and below, the following
discussion is a description of the types of money market and fixed income
securities in which the Cash Management Portfolio and certain other Portfolios
(as described below) may invest.
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 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
purchase commercial paper only if judged by the Adviser to be of
suitable investment quality. This includes commercial paper that is (a)
rated in the two highest categories by Standard & Poor's, and by
Moody's, or (b) other commercial paper deemed on the basis of the
issuer's creditworthiness to be of a quality appropriate for the 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
B-8
<PAGE> 78
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 the
Portfolio may invest. Master demand notes are considered to have a
maturity equal to the repayment notice period unless the Adviser has
reason to believe that the borrower could not make timely repayment
upon demand.
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 (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'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.
B-9
<PAGE> 79
U.S. corporate high-yield fixed income securities. As described above,
a portion of the assets of the Corporate Bond, High-Yield Bond,
Worldwide High Income, MFS Total Return, Asset Allocation, Equity
Income, Real Estate, Small Company Value, MFS Mid-Cap Growth and
Emerging Markets Portfolios 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) 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), except that the Cash Management, Global Bond,
Worldwide High Income, Equity Income, Equity Index, Venture Value,
"Dogs" Of Wall Street, Global Equity, and Emerging Markets Portfolios
may not invest in warrants, and the Cash Management, Global Bond,
Utility, Equity Income, Equity Index, Growth-Income, Federates Value,
Venture Value, "Dogs" of Wall Street and Alliance Growth Portfolios
will not invest in rights. 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. Each of the Portfolios expect
the Cash Management Portfolio 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 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 the
Emerging Market 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.
B-10
<PAGE> 80
In selecting emerging country debt securities for investment by the
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:
Argentina Indonesia Poland
Brazil Malaysia Portugal
Chile Mexico South Africa
Czech Republic Morocco Thailand
Egypt Pakistan Turkey
Greece Peru Uruguay
Hungary Philippines Venezuela
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
that may be invested in a single 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. The Cash Management,
Corporate Bond, High-Yield Bond, SunAmerica Balanced, Utility, Equity
Income, Equity Index, Growth-Income, Federated Value, Venture Value,
"Dogs" of Wall Street, Alliance Growth, MFS Growth and Income, Putnam
Growth, Real Estate, Small Company Value, MFS Mid-Cap Growth,
Aggressive Growth, Global Equities and International Diversified
Equities Portfolios will not invest in structured securities.
B-11
<PAGE> 81
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.
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
B-12
<PAGE> 82
pass-through structure or in a pay-through structure similar to a
collateralized 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. Each of the Portfolios except the Cash
Management Portfolio 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 a 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 the Portfolio must look principally
to the issuing or guaranteeing agency for ultimate repayment.
Investment in foreign government securities for this portion of a
Portfolio will be limited to those of developed nations that 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
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
B-13
<PAGE> 83
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 a 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.
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 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. The Equity Index Portfolio will not invest in U.S. Government
Securities.
B-14
<PAGE> 84
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.
U.S. TREASURY INFLATION PROTECTION SECURITIES. The Equity Income and
Small Company Value 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").
B-15
<PAGE> 85
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.
B-16
<PAGE> 86
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 Global Bond, Worldwide High
Income, MFS Total Return and Asset Allocation Portfolios 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 Portfolios' 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 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.
The MFS Total Return Portfolio may invest a portion of its assets in
loan participations whereby the Portfolio may acquire some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. Many of these loans are secured, and most impose restrictive covenants
that must be met by the borrower. These loans are made generally to finance
internal growth, mergers, acquisitions, stock repurchases, leveraged buyouts 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 revolving credit facilities or other standby financing commitments that
obligate the Portfolio to pay additional cash on a certain date or on demand.
B-17
<PAGE> 87
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 there may be no liquid market
for such securities, as described above.
STRUCTURED INVESTMENTS. The Global Bond Portfolio, Asset Allocation
Portfolio, Worldwide High Income Portfolio, International Growth and Income
Portfolio, MFS Total Return Portfolio and the Emerging Markets Portfolio may
each 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.
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
B-18
<PAGE> 88
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.
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 that fall into two categories:
(i) liquidity protection and (ii) protection against losses resulting from
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that the receipt of payments on the underlying pool
occurs in a timely fashion. Protection against losses resulting from ultimate
default ensures payment through insurance policies or letters of credit obtained
by the issuer or sponsor from third parties. A Portfolio will not pay any
additional or separate fees for credit support. The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquency or
loss in excess of that anticipated or failure of the credit support could
adversely affect the return on an investment in such a security.
The Cash Management, Worldwide High Income, Utility, Equity Income,
Equity Index, MFS Growth and Income, Putnam Growth, Real Estate, Small Company
Value, MFS Mid-Cap Growth, Aggressive Growth, International Growth and Income,
Global Equities, International Diversified Equities, and Emerging Markets
Portfolios do not invest in such pass-through securities.
STRIPPED MORTGAGE-BACKED SECURITIES. The Corporate Bond, Global Bond,
High-Yield Bond, Asset Allocation, MFS Total Return 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.
BORROWING AND OTHER FORMS OF LEVERAGE. All of the Portfolios (except
the Cash Management Portfolio) 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
B-19
<PAGE> 89
borrow for investment purposes and may pledge assets to secure such borrowings.
The Cash Management Portfolio may not borrow money except 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 COMPANIES. Each of the Portfolios except the Cash
Management, Corporate Bond and Global Bond 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 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.
SHORT SALES. Each Portfolio (other than the Cash Management, MFS Total
Return 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
that 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
B-20
<PAGE> 90
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 the 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.
INVERSE FLOATERS. The Corporate Bond, MFS Total Return, 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.
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 that 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 that are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Repurchase agreements
B-21
<PAGE> 91
subject to demand are deemed to have a maturity equal to the notice period.
Securities that have not been registered under the Securities Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them,
resulting in additional expense and delay. There 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,
including securities issued by major corporations without registration under the
Securities Act in reliance on the exemption from such registration afforded by
Section 3(a)(3) thereof, and commercial paper issued in reliance on the
so-called private placement exemption from registration afforded by Section 4(2)
of the Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted
as to disposition under the federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity. Section 4(2) paper that is issued by a company that files reports
under the Securities Exchange Act of 1934 is generally eligible to be sold in
reliance on the safe harbor of Rule 144A described above. The
B-22
<PAGE> 92
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.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase
agreements with sellers who are member firms (or a subsidiary thereof) of the
New York Stock Exchange (the "NYSE") or members of the Federal Reserve System,
recognized primary U.S. government securities dealers or institutions that the
Adviser or Subadviser, as the case may be, has determined to be of comparable
creditworthiness. The securities that the Portfolio purchases and holds through
its agent are U.S. government securities, the values of which are equal to or
greater than the repurchase price agreed to be paid by the seller. The
repurchase price may be higher than the purchase price, the difference being
income to the Portfolio, or the purchase and repurchase prices may be the same,
with interest at a standard rate due to the Portfolio together with the
repurchase price on repurchase. In either case, the income to the Portfolio is
unrelated to the interest rate on the U.S. government securities.
The repurchase agreement provides that in the event the seller fails to
pay the price agreed upon on the agreed upon delivery date or upon demand, as
the case may be, the Portfolio will have the right to liquidate the securities.
If at the time the Portfolio is contractually entitled to exercise its right to
liquidate the securities, the seller is subject to a proceeding under the
bankruptcy laws or its assets are otherwise subject to a stay order, the
Portfolio's exercise of its right to liquidate the securities may be delayed and
result in certain losses and costs to the Portfolio. The Portfolio has adopted
and follows procedures intended to minimize the risks of repurchase agreements.
For example, the Portfolio enters into repurchase agreements only after the
Adviser or Subadviser, as the case may be, has determined that the seller is
creditworthy, and the Adviser or Subadviser, as the case may be, monitors that
seller's creditworthiness on an ongoing basis. Moreover, under such agreements,
the value of the securities (which are marked to market every business day) is
required to be greater than the repurchase price, and the Portfolio has the
right to make margin calls at any time if the value of the securities falls
below the agreed upon margin.
REVERSE REPURCHASE AGREEMENTS. The Cash Management, Corporate Bond,
High-Yield Bond, Worldwide High Income, SunAmerica Balanced, Asset Allocation,
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
B-23
<PAGE> 93
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."
REITS. REITs, in which the SunAmerica Balanced, MFS Total Return, Asset
Allocation, Utility, Putnam Growth, Real Estate, Small Company Value and
Aggressive Growth Portfolios may invest, 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. 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 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.
ZERO-COUPON, PAY-IN-KIND AND DEFERRED INTEREST BONDS. The Corporate
Bond, Global Bond, High-Yield Bond, Worldwide High Income, SunAmerica Balanced,
MFS Total Return, Asset Allocation, Venture Value, and MFS Mid-Cap Growth
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. The Alliance Growth and MFS Growth and Income Portfolios also may
invest in zero-coupon bonds, and the Aggressive Growth Portfolio also may invest
in deferred interest bonds. In addition, the Corporate Bond, Global Bond,
High-Yield Bond, Worldwide High Income, MFS Total Return and MFS Mid-Cap Growth
Portfolios may invest in pay-in-kind securities. Zero-coupon, deferred interest
and capital appreciation bonds are debt obligations that are issued or purchased
at a significant discount from face value. Pay-in-kind bonds are debt
obligations that provide that the issuer thereof may, at its option, pay
interest on such bonds in cash or in the form of additional debt obligations.
Such
B-24
<PAGE> 94
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.
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.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED AND DELAYED-DELIVERY
TRANSACTIONS. Each Portfolio may purchase securities on a when-issued , firm
commitment 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 purchase
securities on a when-issued or delayed-delivery basis only 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 Global Bond, Worldwide High Income, SunAmerica
Balanced, MFS Total Return, and Asset Allocation Portfolios from interest rate
fluctuations and to hedge against fluctuations in the fixed income market in
which each such 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. The Corporate Bond, Global Bond, MFS Total Return and
Asset Allocation Portfolios may enter mortgage swaps. 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 enter into
interest-rate swaps only on a net basis, which means that the two payment
B-25
<PAGE> 95
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 Standard & Poor's or Aa or P-1 or better by Moody's, or is
determined to be of equivalent quality by the applicable Subadviser.
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.
COVERED OPTIONS. Each Portfolio except the Cash Management and Small
Company Value Portfolios may write (sell) covered call and put options on any
securities in which it may invest. The Equity Income Portfolio may write covered
call options covering up to 25% of the equity securities it owns. 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
B-26
<PAGE> 96
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 as
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.
Each Portfolio may also write call and put options on any securities
index composed of securities in which it may invest. 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.
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.
B-27
<PAGE> 97
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 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. Each Portfolio (other than the Cash Management,
Equity Income, MFS Growth and Income, Small Company Value and Equity Index
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 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 other Portfolio that may enter into yield curve options
transactions will cover such transactions as described above.
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
(except the Cash Management, Corporate Bond, Utility, Equity Income, Equity
Index, Federated Value and Small Company Value Portfolios), 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, International Diversified Equities,
Global Equities, Emerging Markets Portfolios and 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.
B-28
<PAGE> 98
In addition to direct investment, the Portfolios that may invest in
foreign securities (which includes each Portfolio except the Cash Management
Portfolio) 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 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"). 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."
The Portfolios may also invest in emerging country securities. As used
with respect to these Portfolios and as described above under "Emerging Country
Fixed Income Securities," the term "emerging country" applies to any country
that, in the opinion of the relevant 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 that are generally considered to be
emerging 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
B-29
<PAGE> 99
markets: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy,
the Netherlands, Norway, Spain, Sweden and Switzerland. Currently, investing in
many emerging countries is not feasible or may involve 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 invests primarily in some
or all of the following countries:
Argentina Indonesia Portugal Thailand
Brazil Mexico South Africa Turkey
India Philippines South Korea
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 respective 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 that has its principal
securities trading market in an emerging country. The respective 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. 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 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"), except that the Small Company Value Portfolio will not invest in
options and futures.
B-30
<PAGE> 100
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. 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 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.
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.
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.
A significant portion of the Portfolios' currency transactions will be
over-the-counter transactions. 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 the Cash Management Portfolio) may enter
into futures contracts in anticipation of, or to protect against, fluctuations
in currency exchange rates. A Portfolio might,
B-31
<PAGE> 101
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. 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.
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
B-32
<PAGE> 102
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 with the Trust's custodian 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.
The Global Bond, High-Yield Bond, Worldwide High Income, SunAmerica
Balanced, MFS Total Return, Asset Allocation, Growth-Income, Venture Value,
Alliance Growth, MFS Growth and Income, Putnam Growth, Real Estate, MFS Mid-Cap
Growth, Aggressive Growth, International Growth and Income, Global Equities,
International Diversified Equities and Emerging Markets Portfolios may engage in
currency transactions, 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. 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
B-33
<PAGE> 103
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.
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 MFS Mid-Cap Growth, International
Diversified Equities and Global Equities Portfolios, 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 that otherwise might either
B-34
<PAGE> 104
adversely affect the value of a Portfolio's securities or adversely affect the
prices of securities a Portfolio intends to purchase at a later date.
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, that an investor should take into account
when investing in those securities. Factors that may adversely affect utility
companies include: difficulty in financing large construction programs during
inflationary periods; technological innovations that 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
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. Utility
regulators permit utilities to diversify outside of their original geographic
regions and their traditional lines of business. While the Subadviser of the
relevant Portfolio believes 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 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 that 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 that 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.
B-35
<PAGE> 105
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 that affect specific utility
industries:
Electric. The electric utility industry is composed of
companies 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 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 that 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 that 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
B-36
<PAGE> 106
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. Each Portfolio, as
consistent with its investment goal and strategies and investment restrictions
may invest in conventional mortgage pass-through securities. Conventional
mortgage pass-through securities 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.
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.
B-37
<PAGE> 107
The Cash Management, Worldwide High Income and Utility Portfolios will
not invest in pass-through securities.
DOLLAR ROLLS. These are instruments in which a Portfolio sells mortgage
or other asset-backed securities ("roll securities") for delivery in the current
month and simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on a specified future date. During the
roll period, the Portfolio foregoes principal and interest paid on the roll
securities. A Portfolio is compensated by the difference between the current
sales prices 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. 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. The Corporate Bond, Global Bond, High-Yield Bond,
SunAmerica Balanced, MFS Total Return, and Portfolios may invest in dollar
rolls.
WEBS. World Equity Benchmark Shares ("WEBS") are shares of an
investment company that invests substantially all of its assets in securities
included in the MSCI indices for specified countries. The market prices of WEBS
are expected to fluctuate in accordance with both changes in the net asset
values of their underlying indices and supply and demand of WEBS on the American
Stock Exchange. In the event substantial market or other disruptions affecting
WEBS should occur in the future, the liquidity and value of Portfolio's shares
could also be substantially and adversely affected, and the Fund's ability to
provide investment results approximating the performance of securities in the
EAFE Index could be impaired.
SPDRs. SPDRs are American Stock Exchange-traded securities that
represent ownership in the SPDR Trust, a trust established to accumulate and
hold a portfolio of common stocks intended to track the price performance and
dividend yield of the S&P 500. SPDRs may be used for several reasons, including
but not limited to facilitating the handling of cash flows or trading, or
reducing transaction costs. The use of SPDRs would introduce additional risk, as
the price movement of the instrument does not perfectly correlate with the price
action of the underlying index.
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.
B-38
<PAGE> 108
Additional structures of CMOs include, among others, "parallel pay"
CMOs. Parallel pay CMOs are structured to apply principal payments and
prepayments of the mortgage assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of CMOs may be issued in the parallel pay or sequential
pay structures. These securities include accrual certificates (also known as
"Z-Bonds"), which accrue interest at a specified rate only until all other
certificates having an earlier final distribution date have been retired and are
converted thereafter to an interest-paying security, and planned amortization
class ("PAC") certificates, which are parallel pay CMOs, 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 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, Asset
Allocation, MFS Total Return, Utility, Federated Value, MFS Growth and Income,
MFS Mid-Cap Growth, Putnam Growth, Real Estate, Aggressive Growth, International
Growth and Income, International Diversified Equities 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 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, "Dogs"
of Wall Street, MFS Mid-Cap Growth and International Diversified Equities
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 that 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 Code in order
B-39
<PAGE> 109
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.
EQUITY SWAPS. The SunAmerica Balances, MFS Total Return and Asset
Allocation Portfolios may enter into equity swap contracts to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment is restricted for legal reasons or is otherwise
impracticable. The counterparty to an equity swap contract will typically be a
bank, investment banking firm or broker/dealer. The counterparty will generally
agree to pay the Portfolio the amount, if any, by which the notional amount of
the equity swap contract would have increased in value had it been invested in
the particular stocks, plus the dividends that would have been received on those
stocks. The Portfolio will agree to pay to the counterparty a floating rate of
interest on the notional amount of the equity swap contract plus the amount, if
any, by which that notional amount would have decreased in value had it been
invested in such stocks. Therefore, the return to the Portfolio on any equity
swap contract should be the gain or loss on the notional amount plus dividends
on the stocks less the interest paid by the Portfolio on the notional amount.
A Portfolio will enter into equity swaps only on a net basis, which
means that the two payment streams are netted out, with the Portfolio receiving
or paying, as the case may be, only the net amount of the two payments. Payments
may be made at the conclusion of an equity swap contract or periodically during
its term. Equity swaps do not involve the delivery of securities or other
underlying assets. Accordingly, the risk of loss with respect to equity swaps is
limited to the net amount of payments that a Portfolio is contractually
obligated to make. If the other party to an equity swap defaults, the
Portfolio's risk of loss consists of the net amount of payment that the
Portfolio is contractually entitled to receive, if any. The net amount of the
excess, if any, of the Portfolio's obligations over its entitlements with
respect to each equity swap will be accrued on a daily basis and an amount of
cash or liquid assets, having an aggregate net asset value at least equal to
such accrued excess will be maintained in a segregated account by the
Portfolio's custodian. Inasmuch as these transactions are entered into for
hedging purposes or are offset by segregated cash or liquid assets, as permitted
by applicable law, the Portfolio and GSAM believe that transactions do not
constitute senior securities under the Act and, accordingly, will not treat them
as being subject to the Portfolio's borrowing restrictions.
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
B-40
<PAGE> 110
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
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 rated A-1 that are 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.
Fitch's short-term ratings 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
B-41
<PAGE> 111
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. 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
B-42
<PAGE> 112
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 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 indicates the lowest degree of speculation and C the highest
degree of speculation. 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.
B-43
<PAGE> 113
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 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.
B-44
<PAGE> 114
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: (a) for the purchase of the debt
securities listed above under its Investment Policies; or (b) as otherwise
permitted by exemptive order of the SEC.
5. Borrow money, except 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 (in accordance
with Rule 2a-7 under the 1940 Act) of a single issuer for a period of up to
B-45
<PAGE> 115
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, MFS TOTAL RETURN PORTFOLIO, ASSET
ALLOCATION PORTFOLIO, UTILITY PORTFOLIO, EQUITY INCOME PORTFOLIO,
EQUITY INDEX PORTFOLIO, GROWTH-INCOME PORTFOLIO, FEDERATED VALUE
PORTFOLIO, VENTURE VALUE PORTFOLIO, "DOGS" OF WALL STREET PORTFOLIO,
ALLIANCE GROWTH PORTFOLIO, MFS GROWTH AND INCOME PORTFOLIO, PUTNAM
GROWTH PORTFOLIO, REAL ESTATE PORTFOLIO, SMALL COMPANY VALUE PORTFOLIO,
MFS MID-CAP GROWTH 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, MFS
Total Return Portfolio, Asset Allocation Portfolio, Utility Portfolio, Equity
Income Portfolio, Equity Index Portfolio, Growth-Income Portfolio, Federated
Value Portfolio, Venture Value Portfolio, "Dogs" of Wall Street Portfolio,
Alliance Growth Portfolio, MFS Growth and Income Portfolio, Putnam Growth
Portfolio, Real Estate Portfolio, Small Company Value Portfolio, MFS Mid-Cap
Growth 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, MFS Mid-Cap Growth 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, Worldwide High
B-46
<PAGE> 116
Income, "Dogs" of Wall Street, MFS Mid-Cap Growth and International Diversified
Equities 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 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 Equity Income, Equity Index, Real Estate and Small Company Value
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 or
regulatory approval.
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; (c) the lending of its portfolio
securities; and (d) as otherwise permitted by exemptive order of the SEC.
In addition to the foregoing, the Corporate Bond, Global Bond,
High-Yield Bond, Worldwide High Income, SunAmerica Balanced, MFS Total Return,
Asset Allocation, Utility, Equity Income, Equity Index, Growth-Income, Federated
Value, Venture Value, "Dogs" of Wall Street, Alliance Growth, Small Company
Value, Real Estate, MFS Growth and Income, Putnam Growth, MFS Mid-Cap Growth,
Aggressive Growth, International Growth and Income, Global Equities,
B-47
<PAGE> 117
International Diversified Equities 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 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,
Utility, Federated Value and Aggressive Growth 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, Equity Index and Small Company Value
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.
B-48
<PAGE> 118
<TABLE>
<CAPTION>
NAME, AGE AND POSITION(S) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
HELD WITH THE TRUST -----------------------------------------------
- -------------------------
<S> <C>
JAMES K. HUNT, * 47, Executive Vice President, SunAmerica
Trustee, Chairman and President Investments, Inc. (1993 to present); President,
SunAmerica Corporate Finance (since January
1994); Trustee, Anchor Pathway Fund ("APF")
and Seasons Series Trust ("Seasons").
MONICA C. LOZANO, 42 Associate Publisher, La Opinion (newspaper
Trustee publishing concern) since 1995: Director, First
3257 Purdue Avenue Interstate Bank of California from 1994-1996;
Los Angeles, CA 90066 Editor, La Opinion, from 1991-1995.
ALLAN L. SHER, 67, Retired; Trustee, APF and Seasons.
Trustee
WILLIAM M. WARDLAW, 52, Principal, Freeman Spogli & Co. (investment
Trustee banking) (1988-present); Vice President and
Director, MCC International Holdings (cable)
(since April 1998); Trustee, APF and Seasons.
SCOTT L. ROBINSON, 53, Senior Vice President and Controller, SunAmerica
Senior Vice President, Treasurer and Inc. (since 1991); Senior Vice President of Anchor
Controller National (since 1988); Senior Vice President,
Treasurer and Controller, APF and Seasons; Joined
SAAMCo in 1978.
SUSAN L. HARRIS, 42, Senior Vice President (since November 1995),
Vice President, Counsel and Secretary Secretary (since 1995) and General
Counsel-Corporate Affairs (since December
1994), SAAMCo; Senior Vice President and
Secretary, Anchor National (since 1990); Vice
President, Counsel and Secretary, APF and
Seasons; joined SAAMCo in 1985.
</TABLE>
B-49
<PAGE> 119
<TABLE>
<CAPTION>
NAME, AGE AND POSITION(S) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
HELD WITH THE TRUST -----------------------------------------------
- -------------------------
<S> <C>
PETER C. SUTTON, 34 Senior Vice President, SAAMCo (since April
Vice President and Assistant Treasurer 1997); Treasurer (since February 1996),
SunAmerica Equity Funds, SunAmerica Income
The SunAmerica Center Funds and SunAmerica Money Market Funds, Inc.
733 Third Avenue ("SunAmerica Mutual Funds" or "SAMF"),
New York, NY 10017-3204 Anchor Series Trust ("AST") and Style Select
Series, Inc. ("Style Select"); Vice President and
Assistant Treasurer, APF (since October 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, 41 Senior Vice President, General Counsel and
Vice President and Assistant Secretary Assistant Secretary, SAAMCo (since April 1993);
Secretary and Chief Compliance Officer, SAMF
The SunAmerica Center and AST (since 1993), Style Select (since 1996);
733 Third Avenue Executive Vice President, General Counsel and
New York, NY 10017-3204 Director, SunAmerica Capital Services, Inc. (since
February 1993); Vice President, General Counsel
and Assistant Secretary, SunAmerica Fund Services,
Inc. (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.
The Trustees of the Trust are responsible for the overall supervision
of the operation of the Trust and each Portfolio and perform various duties
imposed on directors/trustees of investment companies by the 1940 Act and under
the Trust's Declaration of Trust. 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, 1998.
B-50
<PAGE> 120
COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENSION OR
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED FROM REGISTRANT AND
COMPENSATION AS PART OF FUND FUND COMPLEX PAID
TRUSTEE FROM REGISTRANT EXPENSES TO TRUSTEES*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
William M. Wardlaw $8,500 -- $20,250
- --------------------------------------------------------------------------------
Allan L. Sher $9,000 -- $22,000
- --------------------------------------------------------------------------------
Richards D. Barger $9,000 -- $22,000
- --------------------------------------------------------------------------------
Norman J. Metcalf $9,000 -- $22,000
- --------------------------------------------------------------------------------
</TABLE>
* Information is as of November 30, 1998 for the three funds in the
complex that pay fees to these Trustees (the Trust, Seasons Series
Trust and Anchor Pathway Fund).
The following table sets forth information summarizing the
compensation of each of the Trustees for his services as Trustee for the period
December 1, 1998 through January 31, 1999 (new fiscal year end).
Compensation Table
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued from Registrant and
Compensation as Part of Fund Fund Complex Paid
Trustee from Registrant Expenses to Trustees*
- -------- --------------- ---------------- -------------------
<S> <C> <C> <C>
William M. Wardlaw $2,250 - $6,000
Allan L. Sher $2,250 - $6,000
Monica Lozano $2,250 - $6,000
</TABLE>
* Information is as of January 31, 1999 for the three funds in the complex that
pay fees to these Trustees (the Trust, Seasons Series Trust and Anchor Pathway
Fund).
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
The Trust, on behalf of each Portfolio, entered into an Investment
Advisory and Management Agreement with SAAMCo to handle the management of the
Trust and its day to day affairs. The Adviser is a wholly-owned subsidiary of
American International Group, Inc. ("AIG"), the leading U.S.-based international
insurance organization.
AIG, a Delaware corporation, is a holding company which through
its subsidiaries is primarily engaged in a broad range of insurance and
insurance related activities and financial services in the United States and
abroad. AIG, through its subsidiaries, is also engaged in a range of financial
services activities. AIG's asset management operations are carried out primarily
by AIG Global Investment Group, Inc., a direct wholly owned subsidiary of AIG,
and its affiliates (collectively, "AIG Global"). AIG Global manages the
investment portfolios of various AIG subsidiaries, as well as third party
assets, and is responsible for product design and origination, marketing and
distribution of third party asset management products, including offshore and
private investment funds and direct investment. As of June 30, 1998, AIG Global
managed more than $86 billion of assets, of which approximately $10.8 billion
represented assets of unaffiliated third parties. AIG Capital Management Corp.,
an indirect wholly-owned subsidiary of AIG Global Investment Group, Inc., serves
as investment adviser to The AIG Money Market Fund, a separate series of The
Advisors' Inner Circle Fund, a registered investment company. In addition, AIG
Global Investment Corp., an AIG Global group company, serves as the
sub-investment adviser to an unaffiliated registered investment company. AIG
companies do not otherwise provide investment advice to any registered
investment companies.
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
B-51
<PAGE> 121
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 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 at the following annual rates:
B-52
<PAGE> 122
<TABLE>
<CAPTION>
PORTFOLIO FEE RATE
- --------- --------
<S> <C>
Alliance Growth Portfolio* .70% to $ 50MM
.65% next $100MM
.60% over $150MM
Growth-Income Portfolio .70% to $ 50MM
.65% next $100MM
.60% next $150MM
.55% next $200MM
.50% over $500MM
Putnam Growth Portfolio .85% to $150MM
.80% next $150MM
.70% over $300MM
Global Equities Portfolio .90% to $ 50MM
.80% next $100MM
.70% next $150MM
.65% over $300MM
Venture Value Portfolio .80% to $100MM
.75% next $400MM
.70% over $500MM
Asset Allocation Portfolio .75% to $ 50MM
.65% next $100MM
.60% next $100MM
.55% over $250MM
Global Bond Portfolio .75% to $ 50MM
.65% next $100MM
.60% next $100MM
.55% over $250MM
High-Yield Bond Portfolio .70% to $ 50MM
.65% next $100MM
.60% next $100MM
.55% over $250MM
Corporate Bond Portfolio .70% to $ 50MM
.60% next $100MM
.55% next $100MM
.50% over $250MM
International Diversified Equities Portfolio 1.00% of Net Assets
</TABLE>
B-53
<PAGE> 123
<TABLE>
<CAPTION>
PORTFOLIO FEE RATE
- --------- --------
<S> <C>
Worldwide High Income Portfolio 1.00% of Net Assets
Cash Management Portfolio .55% to $100MM
.50% next $200MM
.45% over $300MM
Federated Value Portfolio .75% to $150MM
.60% next $350MM
.50% over $500MM
Utility Portfolio .75% to $150MM
.60% next $350MM
.50% over $500MM
Aggressive Growth Portfolio .75% to $100MM
.675% next $150MM
.625% next $250MM
.600% over $500MM
SunAmerica Balanced Portfolio .70% to $ 50MM
.65% next $100MM
.60% next $150MM
.55% next $200MM
.50% over $500MM
International Growth and Income 1.00% to $150MM
Portfolio .90% next $150MM
.80% over $300MM
Emerging Markets Portfolio 1.25% of Net Assets
Real Estate Portfolio .80% to $100MM
.75% next $400MM
.70% over $500MM
"Dogs" of Wall Street Portfolio .60% of Net Assets
MFS Growth and Income Portfolio** .70% to $600MM
.65% next $900MM
.60% over $1.5B
MFS Total Return Portfolio** .70% to $ 50MM
.65% Thereafter
</TABLE>
B-54
<PAGE> 124
<TABLE>
<CAPTION>
PORTFOLIO FEE RATE
- --------- --------
<S> <C>
MFS Mid-Cap Growth .75% to $600MM
.70% next $900MM
.65% over $1.5B
Equity Income Portfolio .65%
Equity Index Portfolio .40%
Small Company Value Portfolio 1.00%
</TABLE>
- -----------------
* Prior to January 1, 1999, the Advisory Agreement with respect to the Alliance
Growth Portfolio provided for an advisory fee payable by the Portfolio to the
Adviser at the following annual rates: .70% on the first $50 million; .65% on
the next $100 million; .60% over $150 million; .55% on the next $200 million and
.50% thereafter.
** Prior to January 1, 1999, the Advisory Agreement with respect to the MFS
Total Return Portfolio (formerly the Balanced/Phoenix Investment Counsel
Portfolio) and the MFS Growth and Income Portfolio (formerly the Growth/Phoenix
Investment Counsel Portfolio) provided for an advisory fee payable by each
Portfolio to the Adviser at the following annual rates: .70% on the first $50
million; .65% on the next $100 million; .60% on the next $150 million; .55% on
the next $200 million; .50% over $500 million.
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, 1998, 1997 and 1996, and for
the period December 1, 1998 through January 31, 1999 (new fiscal year end).
ADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO 1999+ 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Management $224,945 $1,059,551 $718,297 $694,655
- --------------------------------------------------------------------------------
Corporate Bond
(formerly, Fixed Income) $161,457 $654,148 $325,988 $230,031
- --------------------------------------------------------------------------------
Global Bond $139,771 $728,940 $550,533 $458,390
- --------------------------------------------------------------------------------
High-Yield Bond $305,048 $1,667,268 $1,000,566 $638,948
- --------------------------------------------------------------------------------
Worldwide High Income $198,398 $1,333,369 $915,682 $368,821
- --------------------------------------------------------------------------------
SunAmerica Balanced $189,910 $570,440 $178,845 $20,449*
- --------------------------------------------------------------------------------
MFS Total Return
(formerly Balanced/Phoenix
Investment Counsel) ** $157,567 $762,995 $558,675 $354,683
- --------------------------------------------------------------------------------
Asset Allocation $716,334 $3,758,570 $2,556,963 $1,616,647
- --------------------------------------------------------------------------------
Equity Income $4,546 -- -- --
- --------------------------------------------------------------------------------
Utility $93,546 $372,897 $100,647 $13,890*
- --------------------------------------------------------------------------------
Equity Index $5,763 -- -- --
- --------------------------------------------------------------------------------
</TABLE>
B-55
<PAGE> 125
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PORTFOLIO 1999+ 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth-Income $1,024,303 $4,533,481 $2,784,063 $1,476,902
- -------------------------------------------------------------------------------------------
Federated Value $193,283 $764,690 $237,339 $23,973*
- -------------------------------------------------------------------------------------------
Venture Value $2,175,195 $10,509,956 $5,952,702 $2,305,064
- -------------------------------------------------------------------------------------------
Alliance Growth *** $1,551,967 $5,626,794 $3,145,937 $1,522,222
- -------------------------------------------------------------------------------------------
MFS Growth and Income
(formerly Growth/Phoenix
Investment Counsel)** $288,906 $1,467,118 $1,299,894 $1,072,976
- -------------------------------------------------------------------------------------------
Putnam Growth
(formerly Provident Growth) $593,614 $2,581,835 $1,565,910**** $1,073,769
- -------------------------------------------------------------------------------------------
Real Estate* $81,013 $398,357 $58,800 --
- -------------------------------------------------------------------------------------------
Small Company Value $6,831 -- -- --
- -------------------------------------------------------------------------------------------
Aggressive Growth $188,017 $826,035 $506,503 $65,277*
- -------------------------------------------------------------------------------------------
International Growth and
Income* $231,046 $922,124 $125,310 --
- -------------------------------------------------------------------------------------------
Global Equities $545,025 $2,893,944 $2,337,577 $1,627,510
- -------------------------------------------------------------------------------------------
International Diversified Equities $612,770 $3,095,975 $2,127,386 $1,025,593
- -------------------------------------------------------------------------------------------
Emerging Markets* $67,951 $341,627 $99,436 --
- -------------------------------------------------------------------------------------------
"Dogs" of Wall Street $87,628 $126,908 -- --
- -------------------------------------------------------------------------------------------
</TABLE>
+ For the period December 1, 1998 through January 31, 1999 (New Fiscal
Year End)
* For the period 6/2/97 (commencement of operations) through 11/30/97
** Prior to January 1, 1999, the Advisory Agreement with respect to the MFS
Total Return Portfolio (formerly the Balanced/Phoenix Investment Counsel
Portfolio) and the MFS Growth and Income Portfolio (formerly the Growth/Phoenix
Investment Counsel Portfolio) provided for an advisory fee payable by each
Portfolio to the Adviser at the following annual rates: .70% on the first $50
million; .65% on the next $100 million; .60% on the next $150 million; .55% on
the next $200 million; .50% over $500 million. The Advisory Agreement was
amended as of December 30, 1998 to provide for the following annual fee rates
with respect to the MFS Total Return Portfolio : .70% on the first $50 million
and .65% over $50 million. The Advisory Agreement was amended as of December 30,
1998 to provide for the following annual fee rate with respect to the MFS Growth
and Income Portfolio: .70% on the first $600 million; .65% on the next $900
million and .60% thereafter.
*** Prior to January 1, 1999, the Advisory Agreement with respect to the
Alliance Growth Portfolio provided for an advisory fee payable by the Portfolio
to the Adviser at the following annual rates: .70% on the first $50 million;
.65% on the next $100 million; .60% over $150 million; .55% on the next $200
million and .50% thereafter. The Advisory Agreement relating to the Alliance
Growth Portfolio was amended as of December 30, 1998 to provide for the
following annual fee rates: .70% on the first $50 million; .65% on the next $100
million and .60% over $150 million.
**** 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.
For the fiscal year ended November 30, 1998, the Adviser voluntarily
waived fees or reimbursed expenses, which are not included as part of the table
as follows: Emerging Markets Portfolio - $29,562; and "Dogs" of Wall Street -
$15,116. Certain Portfolios had recoupments for the fiscal year ended November
30, 1998, and such recoupments, which are not included as part of the advisory
fee table, were as follows: SunAmerica Balanced Portfolio - $2,612; Utility
Portfolio - $41,753; International Growth and Income Portfolio - $52,507; and
Real Estate Portfolio - $7,874.
Personal Trading. The Trust and the Adviser have adopted a written Code
of Ethics (the "SunAmerica Code"), which prescribes general rules of conduct and
sets forth guidelines with respect to personal securities trading by "Access
Persons" thereof. An Access Person as defined in the
B-56
<PAGE> 126
SunAmerica 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 SunAmerica
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 SunAmerica Code, and have, with
the exception of Putnam Investment Management, Inc. and Davis Selected Advisers,
LP, undertaken to comply with the provisions of the SunAmerica 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 SunAmerica Code by Access Persons of the Trust or any
Subadviser.
B-57
<PAGE> 127
SUBADVISORY AGREEMENTS
Alliance Capital Management L.P. ("Alliance"), Davis Selected Advisers
L.P. ("Davis Selected"), Federated Investment Counseling ("Federated"), First
American Asset Management ("First American"), Goldman Sachs Asset Management
("GSAM"), Goldman Sachs Asset Management International ("GSAM-International"),
Morgan Stanley Dean Witter Investment Management d/b/a Morgan Stanley Asset
Management ("MSAM"), Massachusetts Financial Services Company ("MFS") and Putnam
Investment Management, Inc. ("Putnam") act as Subadvisers to certain of the
Trust's Portfolios pursuant to various 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.
Federated is a wholly owned subsidiary of Federated Investors. First
American is a division of U.S. Bank National Association. GSAM is a separate
division of Goldman, Sachs & Co. GSAM International is an affiliate of Goldman,
Sachs & Co. MSAM is a subsidiary of Morgan Stanley Dean Witter and Co.
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 Alliance Growth Portfolio* .35% on the first $50 million
.30% on the next $100 million
.25% thereafter
--------------------------------------------------------------
Growth-Income Portfolio .35% on the first $50 million
.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
Portfolios .40% on the next $400 million
.35% thereafter
- ---------------------------------------------------------------------------------
Federated Corporate Bond .30% on the first $25 million
Portfolio .25% on the next $25 million
.20% on the next $100 million
.15% thereafter
- ---------------------------------------------------------------------------------
</TABLE>
B-58
<PAGE> 128
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
SUBADVISER PORTFOLIO FEE
- ---------------------------------------------------------------------------------
<S> <C> <C>
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
- ---------------------------------------------------------------------------------
First American Equity Income Portfolio .30%
--------------------------------------------------------------
Small Cap Value Portfolio .80%
--------------------------------------------------------------
Equity Index Portfolio .125%
- ---------------------------------------------------------------------------------
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-International Global Bond Portfolio .40% on the first $50 million
.30% on the next $100 million
.25% on the next $100 million
.20% thereafter
- ---------------------------------------------------------------------------------
MFS** MFS Growth and Income .40% on the first $300 million
Portfolio .375% on the next $300 million
.35% on the next $300 million
.325% on the next $600 million
.25% over $1.5 billion
--------------------------------------------------------------
MFS Total Return Portfolio .375%
--------------------------------------------------------------
MFS Mid-Cap Growth Portfolio .40% on the first $50 million
.30% on the next $100 million
.25% on the next $100 million
.20% thereafter
- ---------------------------------------------------------------------------------
MSAM International Diversified .65% on the first $350 million
Equities and Worldwide High .60% thereafter
Income Portfolios
- ---------------------------------------------------------------------------------
Putnam Putnam Growth Portfolio*** .50% on the first $150 million
.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 .65% on the first $150 million
Income Portfolio .55% on the next $150 million
.45% thereafter
- ---------------------------------------------------------------------------------
</TABLE>
* Prior to January 1, 1999, the Subadvisory fee for Alliance Growth
Portfolio was as calculated at the following annual rates: .35% on the
first $50 million; .30% on the next $100 million; .25% on the next $150
million; .20% on the next $200 million and .15% over $500 million.
** Prior to January 1, 1999, Phoenix Investment Counsel served as
Subadviser to the MFS Growth and Income and MFS Total Return Portfolios
(formerly Growth/Phoenix Investment Counsel and Balanced/Phoenix
Investment Counsel Portfolios). The Subadvisory fee was calculated at
the following rates for both Portfolios: .35% on the first $50 million;
.30% on the next $100 million; .25% on the next $150 million; .20% on
the next $200 million and .15% over $500 million.
*** 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.
B-59
<PAGE> 129
**** The following table sets forth the fees paid to the Subadvisers and to
Phoenix Investment Counsel, Inc., as former Subadviser to the MFS
Growth and Income and MFS Total Return Portfolios, for the fiscal years
ended January 31, 1999, November 30, 1998, 1997 and 1996.
B-60
<PAGE> 130
SUBADVISORY FEES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Alliance Growth# $603,017 $2,038,038 $1,280,957 $691,140
-----------------------------------------------------------------------
Growth-Income $366,743 $1,710,044 $1,161,812 $673,445
-----------------------------------------------------------------------
Global Equities $246,211 $1,328,440 $1,109,352 $811,790
- ----------------------------------------------------------------------------------------------
Davis Selected Venture Value $1,113,077 $5,404,978 $3,126,351 $1,252,661
-----------------------------------------------------------------------
Real Estate $45,570 $219,647 $33,075++ -
- ----------------------------------------------------------------------------------------------
Federated Corporate Bond $57,239 $238,882 $128,651 $48,744**
-----------------------------------------------------------------------
Federated Value $79,715 $344,897 $146,523 $17,580*
-----------------------------------------------------------------------
Utility $46,470 $192,017 $73,542 $10,186*
- ----------------------------------------------------------------------------------------------
Equity Income $2,098 -- -- --
-----------------------------------------------------------------------
Equity Index $1,801 -- -- --
-----------------------------------------------------------------------
First American Asset
Management Small Company $5,465 -- -- --
Value
- ----------------------------------------------------------------------------------------------
GSAM Asset Allocation $287,509 $1,525,843 $1,088,896 $743,084
- ----------------------------------------------------------------------------------------------
GSAM International Global Bond $69,083 $363,357 $281,015 $238,488
- ----------------------------------------------------------------------------------------------
MSAM Worldwide High $128,059 $866,690 $595,193 $239,733
Income
-----------------------------------------------------------------------
International $397,302 $2,012,245 $1,382,736 $666,635
Diversified
Equities
- ----------------------------------------------------------------------------------------------
Growth/Phoenix $60,957 $669,632 $599,956 $505,458
Investment
Counsel
-----------------------------------------------------------------------
Phoenix Investment
Counsel, Inc. Balanced/Phoenix $36,628 $365,613 $271,312 $176,158
Investment
Counsel)
- ----------------------------------------------------------------------------------------------
Provident Investment Provident Growth -- $284,164+++ $614,720
Counsel, Inc.+
- ----------------------------------------------------------------------------------------------
International $150,180 $565,251 $81,451++ --
Growth and
Income
-----------------------------------------------------------------------
</TABLE>
B-61
<PAGE> 131
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
SUBADVISER PORTFOLIO 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerging $54,361 $273,302 $79,549++ --
Markets
- ----------------------------------------------------------------------------------------------
Putnam Putnam Growth $328,656 $1,472,238 $618,584 --
- ----------------------------------------------------------------------------------------------
</TABLE>
* For the period 6/3/96 (commencement of operations) through 11/30/96
** For the period 6/3/96 through 11/30/96
# Prior to January 1, 1999, the Subadvisory fee for Alliance Growth
Portfolio was as calculated at the following annual rates: .35% on the
first $50 million; .30% on the next $100 million; .25% on the next $150
million; .20% on the next $200 million and .15% over $500 million.
## Prior to January 1, 1999, Phoenix Investment Counsel served as
Subadviser to the MFS Growth and Income and MFS Total Return Portfolios
(formerly Growth/Phoenix Investment Counsel and Balanced/Phoenix
Investment Counsel Portfolios). The Subadvisory fee was calculated at
the following rates for both Portfolios: .35% on the first $50 million;
.30% on the next $100 million; .25% on the next $150 million; .20% on
the next $200 million and .15% over $500 million.
+ 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 6/2/97 (commencement of operations) through 11/30/97
+++ For the period 12/1/96 through 4/14/97 (termination of operations)
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 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
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 or the securities of other regulated investment companies); and (c)
distribute at least 90% of its investment company taxable income (including
short-term capital gains).
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
B-62
<PAGE> 132
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 not be subject to federal income tax. These regulations are
also expected to provide that excess inclusion income of a 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, the "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. 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 by the Code for
purposes of such election). 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.
Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries. Income
tax treaties between certain countries and
B-63
<PAGE> 133
the United States may reduce or eliminate such taxes. It is impossible to
determine in advance the effective rate of foreign tax to which a Portfolio will
be subject, since the amount of that Portfolio' assets to be invested in various
countries is not known. Shareholders are urged to consult their tax advisors
regarding specific questions as to Federal, state and local taxes.
The Cash Management, Corporate Bond and Emerging Markets Portfolios
had capital loss carry-forwards of $2,503, $218,318, and $8,943,573,
respectively, at November 30, 1998. 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.
SHARES OF THE TRUST
The Trust consists of twenty-six separate Portfolios, each of which
offers a single class of shares. 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 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% 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 of Trust 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.
In matters affecting only a particular Portfolio, the matter shall have
been effectively acted upon by a majority vote of that Portfolio even though:
(1) the matter has not been approved by a majority vote of any other Portfolio;
or (2) the matter has not been approved by a majority vote of the Trust.
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
B-64
<PAGE> 134
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.
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 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 its 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 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
B-65
<PAGE> 135
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 Adviser or Subadviser may cause a Portfolio to pay such
broker-dealers commissions that exceed what other broker-dealers may have
charged, if in its view the commissions are reasonable in relation to the value
of the brokerage and/or research services provided by the broker-dealer. The
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
may not be used by the Adviser or Subadviser in connection with the Trust and
could be useful and of value to the Adviser or Subadviser in serving other
clients as well as the Trust. Research services obtained by the Adviser or
Subadviser as a result of the placement of portfolio brokerage of other clients
could also 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 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
B-66
<PAGE> 136
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 that 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.
For the fiscal year ended November 30, 1998, and for the period
December 1, 1998 through January 31, 1999 (new fiscal year end) the Portfolios
acquired no securities of brokers or dealers that executed its portfolio
transactions during the fiscal year.
The following tables set forth the brokerage commissions paid by the
Portfolios and the amounts of the brokerage commissions paid to affiliated
broker-dealers of such Portfolios for the fiscal years ended January 31, 1999,
November 30, 1998, 1997 and 1996.
1999 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT OF
AMOUNT PAID PERCENTAGE OF TRANSACTIONS
AGGREGATE TO AFFILIATED COMMISSIONS PAID INVOLVING
BROKERAGE BROKER-DEALERS* TO AFFILIATED PAYMENT OF
PORTFOLIO COMMISSIONS* BROKER-DEALERS* COMMISSIONS*
<S> <C> <C> <C> <C>
Cash Management -- -- --
Corporate Bond -- -- --
Global Bond -- -- --
High-Yield Bond -- -- --
Worldwide High -- -- --
Income
</TABLE>
B-67
<PAGE> 137
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT OF
AMOUNT PAID PERCENTAGE OF TRANSACTIONS
AGGREGATE TO AFFILIATED COMMISSIONS PAID INVOLVING
BROKERAGE BROKER-DEALERS TO AFFILIATED PAYMENT OF
PORTFOLIO COMMISSIONS* * BROKER-DEALERS* COMMISSIONS*
<S> <C> <C> <C> <C>
SunAmerica Balanced $20,508 -- --
MFS Total Return $104,590 -- --
Portfolio (formerly
Balanced/Phoenix
Investment Counsel)
Asset Allocation $308,929 $32,590 10.5% 7.77%
Equity Income $8,370 -- --
Utility $26,459 -- --
Equity Index $7,045 -- --
Growth-Income $411,348 -- --
Federated Value $23,384 -- --
Venture Value $246,044 $5,130 2.1% 4.17%
Alliance Growth $323,300 -- -
MFS Growth and $333,737 -- --
Income Portfolio
(formerly
Growth/Phoenix
Investment Counsel)
Putnam Growth $68,229 --
(formerly Provident
Growth)
Real Estate $37,343 -- --
Small Company $9,881 -- --
Value
Aggressive Growth $56,850 -- --
International Growth $78,648 -- --
and Income
Global Equities $155,404 -- --
</TABLE>
B-68
<PAGE> 138
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT OF
AMOUNT PAID PERCENTAGE OF TRANSACTIONS
AGGREGATE TO AFFILIATED COMMISSIONS PAID INVOLVING
BROKERAGE BROKER-DEALERS TO AFFILIATED PAYMENT OF
PORTFOLIO COMMISSIONS* * BROKER-DEALERS* COMMISSIONS*
<S> <C> <C> <C> <C>
International $39,214 -- --
Diversified Equities
Emerging Markets $47,618 -- --
"Dogs" of Wall $109,583 -- --
Street
</TABLE>
* For period December 1, 1998 through January 31, 1999 (new fiscal year end).
1998 Brokerage Commissions
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT OF
PERCENTAGE OF TRANSACTIONS
AGGREGATE AMOUNT PAID COMMISSIONS PAID INVOLVING
BROKERAGE TO AFFILIATED TO AFFILIATED PAYMENT OF
PORTFOLIO COMMISSIONS BROKER-DEALERS BROKER-DEALERS COMMISSIONS
<S> <C> <C> <C> <C>
Cash Management -- -- -- --
Corporate Bond $391 -- -
Global Bond -- -- --
High-Yield Bond -- -- --
Worldwide High -- -- --
Income
SunAmerica Balanced $141,473 -- -- --
MFS Total Return $125,555 $95 --
Portfolio (formerly
Balanced/Phoenix
Investment Counsel)
Asset Allocation $1,153,926 $100,571 9.16%
Utility $139,718 -- -- --
Growth-Income $984,054 $1,000 0.06%
</TABLE>
B-69
<PAGE> 139
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT OF
PERCENTAGE OF TRANSACTIONS
AGGREGATE AMOUNT PAID COMMISSIONS PAID INVOLVING
BROKERAGE TO AFFILIATED TO AFFILIATED PAYMENT OF
PORTFOLIO COMMISSIONS BROKER-DEALERS BROKER-DEALERS COMMISSIONS
<S> <C> <C> <C> <C>
Federated Value $214,317 -- -- --
Venture Value $1,124,621 $9,576 0.98%
Alliance Growth $1,701,859 -- -- --
MFS Growth and $423,830 $360 0.04%
Income Portfolio
(formerly
Growth/Phoenix
Investment Counsel)
Putnam Growth $433,115 $610 0.15%
(formerly Provident
Growth)
Real Estate $119,289 $222 0.24%
Aggressive Growth $424,154 -- -- --
International Growth $336,662 -- -- --
and Income
Global Equities $1,215,172 $2,030 0.23%
International $239,147 -- -- --
Diversified Equities
Emerging Markets $202,758 -- - --
"Dogs" of Wall $82,855 -- - --
Street
</TABLE>
B-70
<PAGE> 140
1997 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 -- -- --
Global Bond -- -- --
High-Yield Bond $90 -- --
Worldwide High Income -- -- --
SunAmerica Balanced $73,801 -- --
MFS Total Return Portfolio $153,408 -- --
(formerly
Balanced/Phoenix
Investment 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 -- --
MFS Growth and Income $731,747 $1,220 .17%
Portfolio (formerly
Growth/Phoenix
Investment Counsel)
Putnam Growth $241,968 $920 .38%
(Formerly Provident
Growth)
Real Estate* $53,466 -- --
Aggressive Growth $251,919 -- --
International Growth and $120,957 -- --
Income *
Global Equities $1,376,002 -- --
</TABLE>
B-71
<PAGE> 141
<TABLE>
<CAPTION>
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID
PORTFOLIO BROKERAGE AFFILIATED TO AFFILIATED
COMMISSIONS BROKER-DEALERS BROKER-DEALERS
<S> <C> <C> <C>
International Diversified $269,652 -- --
Equities
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 -- -- --
CORPORATE BOND -- -- --
GLOBAL BOND -- -- --
HIGH-YIELD BOND $753 -- --
WORLDWIDE HIGH INCOME -- -- --
SUNAMERICA BALANCED* $10,184 -- --
MFS TOTAL RETURN PORTFOLIO $99,713 -- --
(FORMERLY
BALANCED/PHOENIX
INVESTMENT COUNSEL)
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 -- --
MFS GROWTH AND INCOME $483,274 -- --
PORTFOLIO (FORMERLY
GROWTH/PHOENIX
INVESTMENT COUNSEL)
</TABLE>
B-72
<PAGE> 142
<TABLE>
<CAPTION>
AGGREGATE AMOUNT PAID TO PERCENTAGE PAID
PORTFOLIO BROKERAGE AFFILIATED TO AFFILIATED
COMMISSIONS BROKER-DEALERS BROKER-DEALERS
<S> <C> <C> <C>
PUTNAM GROWTH $144,932 -- --
(formerly Provident Growth)
AGGRESSIVE GROWTH* $34,130 -- --
GLOBAL EQUITIES $1,022,821 -- --
INTERNATIONAL DIVERSIFIED $256,477 -- --
EQUITIES
</TABLE>
For the period 6/3/96 (commencement of operations) through November 30,
1996.
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 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
B-73
<PAGE> 143
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 firm of Swidler Berlin Shereff Friedman, LLP, 919
Third Avenue, New York, NY 10022 has 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.
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
B-74
<PAGE> 144
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
The Trust's audited financial statements are incorporated into this
Statement of Additional Information by reference to its 1998 Annual Report
to Shareholders. You may request a copy of the Annual Report at no charge
by calling (800) 445-7862 or writing the Trust at P.O. Box 54299, Los
Angeles, California 90054-0299.
B-75
<PAGE> 145
PART C
OTHER INFORMATION
Item 23. Exhibits.
Exhibits.
(a) Declaration of Trust, as amended. Incorporated herein by reference to
Exhibit 1 of Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A (File No. 811-7238) filed on
February 29, 1996.
(b) By-Laws. Incorporated herein by reference to Exhibit 2 of
Post-Effective Amendment No. 6 to the Registrant's Registration
Statement on Form N-1A (File No. 811-7238) filed on February 29, 1996.
(c) Inapplicable.
(d) (i) Investment Advisory and Management Agreement between Registrant
and SunAmerica Asset Management Corp.
(ii) Form of Subadvisory Agreement between SunAmerica and Alliance
Capital Management L.P.
(iii) Form of Subadvisory Agreement between SunAmerica and Davis
Selected Advisers, L.P.
(iv) Form of Subadvisory Agreement between SunAmerica and Federated
Investment Counseling.
(v) Form of Subadvisory Agreement between SunAmerica and First
American Asset Management.
(vi) Form of Subadvisory Agreement between SunAmerica and Goldman
Sachs Asset Management.
(vii) Form of Subadvisory Agreement between SunAmerica and Goldman
Sachs Asset Management International.
(viii) Form of Subadvisory Agreement between SunAmerica and
Massachusetts Financial Services Company.
(ix) Form of Subadvisory Agreement between SunAmerica and Morgan
Stanley Dean Witter Investment Management d/b/a Morgan Stanley
Asset Management.
C-1
<PAGE> 146
(x) Form of Subadvisory Agreement between SunAmerica and Putnam
Investment Management, Inc.
(e) Inapplicable.
(f) Inapplicable.
(g) Custodian Agreement. Incorporated herein by reference to Exhibit 8 of
Post-Effective Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A (File No. 811-7238) filed on February 28, 1997.
(h) (i) Fund Participation Agreement between Registrant and Anchor
National Life Insurance Company, on behalf of itself and Variable
Separate Account. Incorporated herein by reference to Exhibit 9
of Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A (File No. 811-7238) filed on
February 29, 1996.
(ii) Transfer Agency and Service Agreement filed between the
Registrant and State Street Bank and Trust Company. Incorporated
herein by reference to Exhibit 9(a) of Post-Effective Amendment
No. 12 to the Registrant's Registration Statement on Form N-1A
(File No. 811-7238) filed on May 7, 1997.
(i) Opinion of Counsel.
(j) Consent of Independent Accountants.
(k) Inapplicable.
(l) Inapplicable.
(m) Inapplicable.
(n) Financial Data Schedule.
(o) (i) Inapplicable.
(ii) Power of Attorney.
Item 24. Persons Controlled by or Under Common Control with the Registrant.
There are no persons controlled by or under common control with the
Registrant.
C-2
<PAGE> 147
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 to 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.
(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
C-3
<PAGE> 148
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 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.
C-4
<PAGE> 149
(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 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
C-5
<PAGE> 150
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 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. ("SunAmerica"), 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 SunAmerica on file with the Commission (File
No. 801-19813) for a description of the names and employment of
the directors and officers of SunAmerica and other required
information.
Alliance Capital Management L.P., Davis Selected
Advisers, L.P., Federated Investment Counseling, First
American Asset Management, Goldman Sachs Asset Management,
Goldman Sachs Asset Management International, Massachusetts
Financial Services Company, Morgan Stanley Dean Witter
Investment Management d/b/a Morgan Stanley Asset Management,
and Putnam Investment Management, Inc., and 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., Davis Selected Advisers, L.P.,
Federated Investment Counseling, First American Asset
Management, Goldman Sachs Asset Management, Goldman Sachs
Asset Management International, Massachusetts Financial
Services
C-6
<PAGE> 151
Company, Morgan Stanley Dean Witter Investment Management
d/b/a Morgan Stanley Asset Management, and Putnam Investment
Management, Inc., and other required information:
<TABLE>
<CAPTION>
File No.
--------
<S> <C>
Alliance Capital Management L.P. 801-32361
Davis Selected Advisers, L.P. 801-31648
Federated Investment Counseling 801-34611
First American Asset Management 801-24113
Goldman Sachs & Co. 801-16048
Goldman Sachs Asset Management International 801-38157
Massachusetts Financial Services Company 801-17352
Morgan Stanley Dean Witter Investment
Management d/b/a Morgan Stanley
Asset Management 801-15757
Putnam Investment Management, Inc. 801-7974
</TABLE>
Item 27. Principal Underwriters.
There is no Principal Underwriter for the Registrant.
Item 28. Location of Accounts and Records.
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. 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. First American Asset
Management is located at U.S. Bancorp, 601 Second Avenue
South, Minneapolis, Minnesota 55402. Goldman Sachs Asset
Management is located at 85 Broad Street, 12th Floor, New
York, New York 10004. Goldman Sachs Asset Management
International is located at Peterborough Court, 133 Fleet
Street, London EC4A 2BB, England. Massachusetts Financial
Services Company is located at 500 Boylston Street, Boston,
Massachusetts 02116. Morgan Stanley Dean Witter Investment
Management d/b/a Morgan Stanley Asset Management is located at
1221 Avenue of the Americas, 22nd Floor, New York, New York
10020. Putnam Investment Management, Inc., is located at One
Post Office Square, Boston, Massachusetts 02109. Each of the
Investment Adviser and Subadvisers maintain the books,
accounts
C-7
<PAGE> 152
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.
Inapplicable.
Item 30. Undertakings.
Inapplicable.
C-8
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of the Post-Effective
Amendment No. 20 to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, as amended, and has duly caused the Post-Effective
Amendment No. 20 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 30th day of March, 1999.
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. 20 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 March 30, 1999
* (Principal Executive Officer)
- ------------------
James K. Hunt
Senior Vice President,
Treasurer and Controller
* (Principal Financial and Accounting
- ------------------ Officer)
Scott L. Robinson
*
- ----------------- Trustee
Monica Lozano
* Trustee
- ----------------
Allan L. Sher
* Trustee
- ------------------
William M. Wardlaw
*By: /s/Robert M. Zakem March 30, 1999
--------------------
Robert M. Zakem
Attorney-in-Fact
</TABLE>
C-9
<PAGE> 154
SUNAMERICA SERIES TRUST
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
(d) (i) Investment Advisory and Management Agreement between Registrant
and SunAmerica Asset Management Corp.
(ii) Subadvisory Agreement between SunAmerica and Alliance Capital
Management L.P.
(iii) Subadvisory Agreement between SunAmerica and Davis Selected
Advisers, L.P.
(iv) Subadvisory Agreement between SunAmerica and Federated Investment
Counseling.
(v) Subadvisory Agreement between SunAmerica and First American Asset
Management.
(vi) Subadvisory Agreement between SunAmerica and Goldman Sachs Asset
Management.
(vii) Subadvisory Agreement between SunAmerica and Goldman Sachs Asset
Management International.
(viii) Subadvisory Agreement between SunAmerica and Massachusetts
Financial Services Company.
(ix) Subadvisory Agreement between SunAmerica and Morgan Stanley Dean
Witter Investment Management d/b/a Morgan Stanley Asset
Management.
(x) Subadvisory Agreement between SunAmerica and Putnam Investment
Management, Inc.
(i) Opinion of Counsel.
(j) Consent of Independent Accountants.
(n) Financial Data Schedule.
(o) (ii) Power of Attorney.
<PAGE> 1
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is dated as of January
1, 1999, between SUNAMERICA SERIES TRUST, a Massachusetts business trust (the
"Trust") and SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser" or "SAAMCo").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1.
THE TRUST'S PORTFOLIOS. The Trust is authorized to issue shares in separate
series, with each series representing interests in a separate portfolio of
securities and other assets, and currently offers shares of the series set forth
in Schedule A attached hereto (the "Portfolios"). It is recognized that
additional Portfolios may be added and certain current Portfolios may be deleted
in the future.
2.
DUTIES OF THE ADVISER. The Adviser shall manage the affairs of the Trust as set
forth herein, either by taking such actions itself or by delegating its duties
to a subadviser pursuant to a written subadvisory agreement. Such duties shall
include, but not limited to, continuously providing the Trust with investment
management, including investment research, advice and supervision, determining
which securities shall be purchased or sold by each Portfolio of the Trust and
making purchases and sales of securities on behalf of each Portfolio. The
Adviser's management shall be subject to the control of the Trustees of the
Trust (the "Trustees") and in accordance with the objectives, policies and
restrictions for each such Portfolio set forth in the Trust's Registration
Statement and its current Prospectus and Statement of Additional Information, as
amended from time to time, the requirements of the Investment Company Act of
1940, as amended (the "Act") and other applicable law, as well as to the factors
affecting the Trust's status as a regulated investment company under the
Internal Revenue Code of 1986, as amended, (the "Code") and the regulations
thereunder and the status of variable contracts under the diversification
requirements set forth in Section 817(h) of the Code and the regulations
thereunder. In performing such duties, the Adviser shall (i) provide such office
space, bookkeeping, accounting, clerical, secretarial and administrative
services (exclusive of, and in addition to, any such service provided by any
others retained by the Trust or any of its Portfolios) and such executive and
other personnel as shall be necessary for the operations of each Portfolio, (ii)
be responsible for the financial and accounting records required to be
maintained by each Portfolio (including those maintained by the Trust's
custodian), and (iii) oversee the performance of services provided to each
Portfolio by others, including the custodian, transfer agent, shareholder
servicing agent and subadviser, if any. The Trust acknowledges that the Adviser
also acts as the manager of other investment companies.
<PAGE> 2
With respect to the Cash Management Portfolio, the Adviser hereby accepts
the responsibilities for making the determinations required by Rule 2a-7 under
the Act to be made by the Trustees of the Trust and which are delegable by the
Trustees pursuant to paragraph (e) of such Rule, to the extent that the Trustees
may hereinafter delegate such responsibilities to the Adviser.
The Adviser may delegate certain of its duties under this Agreement with
respect to a Portfolio to a subadviser pursuant to a written agreement, subject
to the approval of the Trustees and a Portfolio's shareholders, as required by
the Act. The Adviser is solely responsible for payment of any fees or other
charges to a subadviser arising from such delegation and the Trust shall have no
liability therefor.
3.
EXPENSES. The Adviser shall pay all of its expenses arising from the performance
of its obligations under this Agreement and shall pay any salaries, fees and
expenses of the Trustees and any officers of the Trust who are employees of the
Adviser. The Adviser shall not be required to pay any other expenses of the
Trust, including, but not limited to, direct charges relating to the purchase
and sale of portfolio securities, interest charges, fees and expenses of
independent attorneys and auditors, taxes and governmental fees, cost of 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 filing reports and other documents filed with governmental
agencies, expenses of printing and distributing prospectuses, expenses of annual
and special shareholders' meetings, fees and disbursements of transfer agents
and custodians, expenses of disbursing dividends and distributions, fees and
expenses of Trustees who are not employees of the Adviser or its affiliates,
membership dues in the Investment Company Institute, insurance premium dues in
the Investment Company Institute, insurance premiums and extraordinary expenses
such as litigation expenses.
4.
COMPENSATION. (a) As compensation for services performed and the facilities and
personnel provided by the Adviser under this Agreement, the Trust will pay to
the Adviser, promptly after the end of each month for the services rendered by
the Adviser during the preceding month, the sum of the amounts set forth in
Schedule A attached hereto calculated in accordance with the average daily net
assets of the indicated Portfolio.
To the extent required by the laws of any state in which the Trust
is subject to an expense guarantee limitation, if the aggregate expenses of any
Portfolio in any fiscal year exceed the specified expense limitation ratios for
that year (calculated on a daily basis), the Adviser agrees to waive such
portion of its advisory fee in excess of the limitation, but such waiver shall
not exceed the full amount of the advisory fee for such year except as may be
elected by Adviser in its
-2-
<PAGE> 3
discretion. For this purpose, aggregate expenses of a Portfolio shall include
the compensation of the Adviser and all normal expenses, fees and charges, but
shall exclude interest, taxes, brokerage fees on portfolio transactions, fees
and expenses incurred in connection with the distribution of Trust shares, and
extraordinary expenses including litigation expenses. In the event any amounts
are so contributed by the Adviser to the Trust, the Trust agrees to reimburse
the Adviser for any expenses waived, provided that such reimbursement does not
result in increasing the Trust's aggregate expenses above the aforementioned
expense limitation ratios.
The Adviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of the Portfolio shall be that determined in the manner and on the dates
set forth in the current prospectus of the Trust and, on days on which the net
assets are not so determined, the net asset computation to be used shall be as
determined on the next day on which the net assets shall have been determined.
(b) Upon any termination of this Agreement on a day other than the last
day of the month, the fee for the period from the beginning of the month in
which termination occurs to the date of termination shall be prorated according
to the proportion which such period bears to the full month.
5.
PURCHASE AND SALE OF SECURITIES. The Adviser shall purchase securities from or
though and sell securities to or through such persons, brokers or dealers as the
Adviser shall deem appropriate in order to carry out the policies with respect
to portfolio transactions as set forth in the Trust's Registration Statement and
its current Prospectus or Statement of Additional Information, as amended from
time to time, or as the Trustees may direct from time to time.
Nothing herein shall prohibit the Trustees from approving the payment by
the Trust of additional compensation to others for consulting services,
supplemental research and security and economic analysis.
6.
TERM OF AGREEMENT. This Agreement shall continue in full force and effect with
respect to each Portfolio until two years from the date approved by the Trustees
of the Trust in respect of such Portfolio, and from year to year thereafter so
long as such continuance is approved at least annually (i) by the Trustees by
vote cast in person at a meeting called for the purpose of voting on such
renewal, or by the vote of a majority of the outstanding voting securities (as
defined by the Act) of such Portfolio with respect to which renewal is to be
effected, and (ii) by a majority of the non- interested Trustees by vote cast in
person at a meeting called for the purpose of voting on such renewal. Any
approval of this Agreement or the renewal thereof with respect to a Portfolio by
the vote of a majority of the outstanding voting securities of that Portfolio,
or by the Trustees of the Trust which shall include a majority of the
non-interested Trustees, shall be effective to continue this Agreement with
respect to that Portfolio notwithstanding (a) that this Agreement or the renewal
thereof has not been so approved as to any other Portfolio, or (b) that this
Agreement or the renewal
-3-
<PAGE> 4
thereof has not been so approved by the vote of a majority of the outstanding
voting securities of the Trust as a whole.
7.
TERMINATION. This Agreement may be terminated at any time as to a Portfolio,
without payment of any penalty, by the Trustees or by the vote of a majority of
the outstanding voting securities (as defined in the Act) of such Portfolio on
sixty (60) days' written notice to the Adviser. Similarly, the Adviser may
terminate this Agreement without penalty on like notice to the Trust provided,
however, that this Agreement may not be terminated by the Adviser unless another
investment advisory agreement has been approved by the Trust in accordance with
the Act, or after six months' written notice, whichever is earlier. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the Act).
8.
REPORTS. The Adviser shall report to the Trustees, or to any committee or
officers of the Trust acting pursuant to the authority of the Trustees, at such
times and in such detail as shall be reasonable and as the Board may deem
appropriate in order to enable the Trust to determine that the investment
policies of each Portfolio are being observed and implemented and that the
obligations of the Adviser under this Agreement are being fulfilled. Any
investment program undertaken by the Adviser pursuant to this Agreement and any
other activities undertaken by the Adviser on behalf of the Trust shall at all
times be subject to any directives of the Trustees or any duly constituted
committee or officer of the Trust acting pursuant to the authority of the
Trustees.
9.
RECORDS. The Trust is responsible for maintaining and preserving for such period
or periods as the Securities and Exchange Commission may prescribe by rules and
regulations, such accounts, books and other documents as constitute the records
forming the basis for all reports, including financial statements required to be
filed pursuant to the Act and for the Trust's auditor's certification relating
thereto. The Adviser hereby undertakes and agrees to maintain in the form and
for the periods required by Rule 31a-2 under the Act, all records relating to
the Portfolio's investments that are required to be maintained pursuant to the
requirements of Rule 31a-1 of the Act.
The Adviser and the Trust agree that all accounts, books and other
records maintained and preserved by each as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, or any governmental agency or
other instrumentality having regulatory authority over the Trust. It is
expressly understood and agreed that
-4-
<PAGE> 5
the books and records maintained by the Adviser on behalf of each Portfolio
shall, at all times, remain the property of the Trust.
10.
LIABILITY OF ADVISER. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties ("disabling conduct")
hereunder on the part of the Adviser (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Adviser), the Adviser shall not be subject to liability to
the Trust or to any other person for any act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Act concerning loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services. Except for such disabling conduct or liability under Section 36(b) of
the Act, the Trust shall indemnify the Adviser (and its officers, directors,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Adviser) from any liability arising from the
Adviser's conduct under this Agreement.
Indemnification to the Adviser or any of its personnel or affiliates
shall be made when (A) a final decision on the merits rendered, by a court or
other body before whom the proceeding was brought, that the person to be
indemnified was not liable by reason of disabling conduct or, (B) in the absence
of such a decision, a reasonable determination, based upon a review of the
facts, that the person to be indemnified was not liable by reason of disabling
conduct, by (a) the vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19) of the Act nor
parties to the proceeding ("disinterested, non-party Trustees"), or (b) an
independent legal counsel in a written opinion. The Trust may, by vote of a
majority of the disinterested, non-party Trustees, advance attorneys' fees or
other expenses incurred by officers, Trustees, investment advisers, subadvisers
or principal underwriters, in defending a proceeding upon the undertaking by or
on behalf of the person to be indemnified to repay the advance unless it is
ultimately determined that such person is entitled to indemnification. Such
advance shall be subject to at least one of the following: (i) the person to be
indemnified shall provide adequate security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested, non-party Trustees, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts, that there is reason to believe that the
person to be indemnified ultimately will be found entitled to indemnification.
11.
-5-
<PAGE> 6
MISCELLANEOUS. Anything herein to the contrary notwithstanding, this Agreement
shall not be construed to require, or to impose any duty upon either of the
parties, to do anything in violation of any applicable laws or regulations.
The Declaration of Trust establishing the Trust, a copy of which is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name of the Trust refers to the Trustees collectively as
Trustees, not as individuals or personally; and that no Trustee, shareholder,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Trust or
any Portfolio; but that the Trust Estate shall be liable. Notice is hereby given
that nothing contained herein shall be construed to be binding upon any of the
Trustees, officers, or shareholders of the Trust individually.
IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement
to be executed by their duly authorized officers as of the date first above
written.
SUNAMERICA SERIES TRUST
/s/James K. Hunt
By:
--------------------------------
James K. Hunt
Chairman and President
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Peter A. Harbeck
-------------------------
Peter A. Harbeck
President
-6-
<PAGE> 7
SCHEDULE A
<TABLE>
<CAPTION>
FEE RATE
(as a % of average
FUND daily net asset value)
---- ----------------------
<S> <C> <C> <C>
Alliance Growth Portfolio .70% to $ 50MM
.65% next $100MM
.60% over $150MM
Growth-Income Portfolio .70% to $ 50MM
.65% next $100MM
.60% next $150MM
.55% next $200MM
.50% over $500MM
Putnam Growth Portfolio .85% to $150MM
.80% next $150MM
.70% over $300MM
Global Equities Portfolio .90% to $ 50MM
.80% next $100MM
.70% next $150MM
.65% over $300MM
Venture Value Portfolio .80% to $100MM
.75% next $400MM
.70% over $500MM
Asset Allocation Portfolio .75% to $ 50MM
.65% next $100MM
.60% next $100MM
.55% over $250MM
Global Bond Portfolio .75% to $ 50MM
.65% next $100MM
</TABLE>
-7-
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
.60% next $100MM
.55% over $250MM
High-Yield Bond Portfolio .70% to $ 50MM
.65% next $100MM
.60% next $100MM
.55% over $250MM
Corporate Bond Portfolio .70% to $ 50MM
.60% next $100MM
.55% next $100MM
.50% over $250MM
<CAPTION>
FEE RATE
(as a % of average
FUND daily net asset value)
---- -------------------------
<S> <C> <C> <C>
International Diversified Equities Portfolio 1.00% of Net Assets
Worldwide High Income Portfolio 1.00% of Net Assets
Cash Management Portfolio .55% to $100MM
.50% next $200MM
.45% over $300MM
Federated Value Portfolio .75% to $150MM
.60% next $350MM
.50% over $500MM
Utility Portfolio .75% to $150MM
.60% next $350MM
.50% over $500MM
Aggressive Growth Portfolio .75% to $100MM
.675% next $150MM
.625% next $250MM
.600% over $500MM
SunAmerica Balanced Portfolio .70% to $ 50MM
.65% next $100MM
.60% next $150MM
.55% next $200MM
.50% over $500MM
International Growth and Income Portfolio 1.00% to $150MM
.90% next $150MM
.80% over $300MM
Emerging Markets Portfolio 1.25% of Net Assets
</TABLE>
-8-
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Real Estate Portfolio .80% to $100MM
.75% next $400MM
.70% over $500MM
"Dogs" of Wall Street Portfolio .60% of Net Assets
<CAPTION>
FEE RATE
(as a % of average
FUND daily net asset value)
---- ----------------------
<S> <C> <C> <C>
MFS Growth and Income .70% to $600MM
Portfolio .65% next $900MM
.60% over $1.5B
MFS Total Return .70% to $ 50MM
Portfolio .65% Thereafter
MFS Mid-Cap Growth .75% to $600MM
.70% next $900MM
.65% over $1.5B
Equity Income Portfolio .65% of Net Assets
Equity Index Portfolio .40% of Net Assets
Small Company Value Portfolio 1.00% of Net Assets
</TABLE>
-9-
<PAGE> 1
Exhibit d(ii)
SUBADVISORY AGREEMENT
BETWEEN SUNAMERICA ASSET MANAGEMENT CORP.
AND
ALLIANCE CAPITAL MANAGEMENT L.P.
It is hereby agreed by and between SUNAMERICA ASSET MANAGEMENT CORP. (the
"Adviser") and ALLIANCE CAPITAL MANAGEMENT L.P. ("Subadviser") as follows:
1.
DUTIES OF SUBADVISER. Adviser hereby engages the services of Subadviser in
furtherance of its Investment Advisory and Management Agreement with SunAmerica
Series Trust (the "Trust") dated as of January 1, 1999, on behalf of the
Alliance Growth Portfolio, the Growth-Income Portfolio and the Global Equities
Portfolio (each, a "Portfolio," and collectively, the "Portfolios"). Pursuant to
this Sub-Advisory Agreement and subject to the oversight and review of Adviser,
Subadviser will manage the investment and reinvestment of the assets of the
Portfolio. In this regard, Subadviser will determine in its discretion the
securities to be purchased or sold, will provide Adviser with records concerning
its activities which Adviser or the Trust is required to maintain, and will
render regular reports to Adviser and to officers and Trustees of the Trust
concerning its discharge of the foregoing responsibilities. Subadviser shall
discharge the foregoing responsibilities subject to the control of the officers
and the Trustees of the Trust and in compliance with such policies as the
Trustees of the Trust may from time to time establish, and in compliance with
the objectives, policies, and limitations for the Portfolios set forth in the
Trust's current prospectus and statement of additional information, and
applicable laws and regulations. Subadviser accepts such employment and agrees,
at its own expense, to render the services set forth herein and to provide the
office space, furnishings, equipment and personnel required by it to perform
such services on the terms and for the compensation provided in this Agreement.
2.
PORTFOLIO TRANSACTIONS. Subadviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities and is
directed to use its best efforts to obtain the best price and execution. Subject
to policies established by the Trustees of the Trust, Subadviser may also be
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if Subadviser determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or Subadviser's overall
responsibilities with respect to a Portfolio, other portfolios of the Trust and
other clients of Subadviser. The execution of such transactions shall not be
deemed to represent an unlawful act or
<PAGE> 2
breach of any duty created by this Agreement or otherwise. Subadviser will
promptly communicate to Advisor and to the officers and the Trustees of the
Trust such information relating to portfolio transactions as they may
reasonably request.
3.
COMPENSATION OF SUBADVISER. As its compensation hereunder, the Adviser shall
pay to Subadviser promptly after the end of each month, a fee calculated in
accordance with the average daily net assets of the indicated Portfolio as
follows:
Alliance Growth Portfolio:
--------------------------
.35% per annum on the first $50 million;
.30% per annum on the next $100 million;
.25% per annum thereafter.
Growth Income Portfolio:
------------------------
.35% per annum on the first $50 million;
.30% per annum on the next $100 million;
.25% per annum on the next $150 million;
.20% per annum on the next $200 million;
.15% per annum thereafter.
Global Equities Portfolio:
--------------------------
.50% per annum on the first $50 million;
.40% per annum on the next $100 million;
.30% per annum on the next $150 million;
.25% per annum thereafter.
To the extent required by the laws of any state in which the Trust is
subject to an expense guarantee limitation, if the aggregate expenses of any
Portfolio in any fiscal year exceed the specified expense limitation ratios for
that year (calculated on a daily basis), as a result of which Adviser is
required to reduce or refund its advisory and management fee payable by a
Portfolio, Subadviser agrees to waive such portion of its subadvisory fee in the
same proportion as the fees waived by the Adviser bear to the total advisory and
management fee paid by such Portfolio. Such waiver, however, shall not exceed
the full amount of the subadvisory fee for such year except as may be elected by
Subadviser in its discretion. For this purpose, aggregate expenses of a
Portfolio shall include the compensation of Adviser and all normal expenses,
fees and charges, but shall exclude interest, taxes, brokerage fees on portfolio
transactions, fees and expenses incurred in connection with the distribution of
Trust shares, and extraordinary expenses including litigation expenses. In the
event any amounts are so contributed by Subadviser to Adviser, Adviser agrees to
reimburse Subadviser
-2-
<PAGE> 3
for any expenses waived, provided that Adviser has been reimbursed by the
Trust.
Subadviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of a Portfolio shall be that determined in the manner and on the dates
set forth in the current prospectus of the Trust and, on days on which the net
assets are not so determined, the net asset computation to be used shall be as
determined on the next day on which the net assets shall have been determined.
4.
REPORTS. Adviser and Subadviser agree to furnish to each other, if applicable,
current prospectuses, statements of additional information, proxy statements,
reports of shareholders, certified copies of their financial statements, and
such other information with regard to their affairs and that of the Trust as
each may reasonably request.
5.
STATUS OF SUBADVISER. The services of Subadviser to Adviser and the Trust are
not to be deemed exclusive, and Subadviser shall be free to render similar
services to others so long as its services to the Trust are not impaired
thereby. Subadviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust in any way or otherwise be deemed an agent of the Trust.
6.
CERTAIN RECORDS. Subadviser hereby undertakes and agrees to maintain, in the
form and for the period required by Rule 31a-2 under the Investment Company Act
of 1940, all records relating to the Portfolios' investments that are required
to be maintained by the Trust pursuant to the requirements of Rule 31a-1 of
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment
Company Act of 1940 which are prepared or maintained by Subadviser on behalf of
the Trust are the property of the Trust and will be surrendered promptly to the
Trust or Adviser on request.
Subadviser agrees that all accounts, books and other records maintained
and preserved by it as required hereby shall be subject at any time, and from
time to time, to such reasonable periodic, special and other examinations by
the Securities and Exchange Commission, the Trust's auditors, the Trust or any
representative of the Trust, the Adviser, or any governmental agency or other
instrumentality having regulatory authority over the Trust.
7.
REFERENCE TO SUBADVISER. Neither the Trust nor Adviser or any affiliate or
agent thereof shall make reference to or use the name of Subadviser or any of
its affiliates in any advertising or promotional
-3-
<PAGE> 4
materials without the prior approval of Subadviser, which approval shall not be
unreasonably withheld. Subadviser agrees to notify Adviser of any changes in the
membership of the general partners of Subadviser as soon as practicable prior to
such change.
8.
LIABILITY OF SUBADVISER. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties ("disabling conduct")
hereunder on the part of Subadviser (and its officers, directors, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with Subadviser), Subadviser shall not be subject to liability to the
Adviser or to any other person for any act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, any
error of judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates, except to the
extent specified in Section 36(b) of the Investment Company Act of 1940
concerning loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services.
9.
DURATION AND TERMINATION. This Agreement shall continue in full force and effect
with respect to a Portfolio until the earlier of (a) two years from the date
this Agreement is approved by the Trustees, or (b) the first meeting of the
shareholders of such Portfolio after the date hereof. If approved at such
meeting by the affirmative vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940), of the Portfolio
with respect to such Portfolio, voting separately from any other series of the
Trust, this Agreement shall continue in full force and effect with respect to
such Portfolio from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Trust, provided, however, that if the shareholders
fail to approve the Agreement as provided herein, Subadviser may continue to
serve hereunder in the manner and to the extent permitted by the Investment
Company Act of 1940 and rules thereunder. The foregoing requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the Investment Company Act of 1940 and
the rules and regulations thereunder.
This Agreement may be terminated at any time, without the payment of any
penalty by vote of a majority of the Trustees of the Trust or by a vote of a
majority of the outstanding voting securities of a Portfolio on not less than 30
days nor more than 60 days written notice to Subadviser or by Subadviser at any
time without the payment of any penalty, on 90 days written notice to Adviser
and the Trust; provided, however, that this Agreement may not be terminated by
Subadviser unless another subadvisory agreement has been approved by the Trust
in accordance with the Investment Company Act of 1940, or after six months'
written notice, whichever is earlier. This Agreement shall automatically
terminate in the event of its assignment (as defined in the Investment
-4-
<PAGE> 5
Company Act of 1940). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at any office of such party.
As used in this Section 11, the terms "assignment," "interested persons,"
and a "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the Investment Company Act of 1940 and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission under said Act.
This Agreement will also terminate in the event that the Investment
Advisory and Management Agreement by and between the Trust on behalf of the
Portfolio and Adviser referred to in Section 1 is terminated.
10.
SEVERABILITY. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
nothing contained herein shall be construed to be binding upon any of the
Trustees, officers, or shareholders of the Trust individually.
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement on this 1st day of January, 1999.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Authorized Signatory
---------------------------------
ALLIANCE CAPITAL MANAGEMENT L.P.
BY: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, ITS GENERAL PARTNER
By: /s/ Authorized Signatory
---------------------------------
-5-
<PAGE> 1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by and between
SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the "Adviser"), and
DAVIS SELECTED ADVISERS, L.P., a Colorado limited partnership (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a Massachusetts
business trust (the "Trust"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory Agreement")
pursuant to which the Adviser has agreed to provide investment management,
advisory and administrative services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of beneficial interest in separately designated portfolios
representing separate funds with their own investment objectives, policies and
purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment portfolio or portfolios of the
Trust listed in Schedule A hereto (the "Portfolio(s)"), and the Subadviser is
willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE SUBADVISER. (a) The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement. Pursuant to this Subadvisory Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of the assets of each Portfolio listed. The Subadviser will
determine in its discretion and subject to the oversight and review of the
Adviser, the securities to be purchased or sold, will provide the Adviser with
records concerning its activities which the Adviser or the Trust is required to
maintain, and will render regular reports to the Adviser and to officers and
Trustees of the Trust concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Trustees of the Trust and in
compliance with such policies as the Trustees of the Trust may from time to time
establish, and in compliance with the objectives, policies, and limitations for
the Portfolio(s) set forth in the Trust's current prospectus and statement of
additional information, and applicable laws and regulations. The Adviser shall
inform the Subadviser of any requirements of the California Insurance Code (or
other applicable insurance Code, if any) and any regulations
<PAGE> 2
thereunder that operate to limit or restrict the investments the Portfolio(s)
may otherwise make, and to inform the Subadviser promptly of any changes in such
requirements.
The Subadviser represents and warrants to the Adviser that each of the
Portfolios set forth in Schedule A will at all times be operated and managed (1)
in compliance with all applicable federal and state laws governing its
operations and investments; (2) so as not to jeopardize either the treatment of
the Polaris variable annuity contracts issued by Variable Separate Account (File
No. 33-47473; hereinafter "Contracts") as annuity contracts for purposes of the
Internal Revenue Code of 1986, as amended (the "Code"), or the eligibility of
the Contracts to qualify for sale to the public in any state where they may
otherwise be sold; and (3) to minimize any taxes and/or penalties payable by the
Trust or such Portfolio. Without limiting the foregoing, the Subadviser
represents and warrants (1) qualification, election and maintenance of such
election by each Portfolio to be treated as a "regulated investment company"
under subchapter M, chapter 1 of the Code, and (2) compliance with (a) the
provisions of the Act and rules adopted thereunder; (b) the diversification
requirements specified in the Internal Revenue Service's regulations under
Section 817(h) of the Code; (c) applicable state insurance laws; (d) applicable
federal and state securities, commodities and banking laws; and (e) the
distribution requirements necessary to avoid payment of any excise tax pursuant
to Section 4982 of the Code. The Subadviser further represents and warrants that
to the extent that any statements or omissions made in any Registration
Statement for the Contracts or shares of the Trust, or any amendment or
supplement thereto, are made in reliance upon and in conformity with information
furnished by the Subadviser expressly for use therein, such Registration
Statement and any amendments or supplements thereto will, when they become
effective, conform in all material respects to the requirements of the
Securities Act of 1933 and the rules and regulations of the Commission
thereunder (the "1933 Act") and the Act and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
(b) In performing its investment advisory services, Subadviser,
while remaining ultimately responsible for management of the portion of the
assets of the Portfolio allocated to it, may delegate any of its
responsibilities to one of its affiliates, including Davis Selected Advisers -
NY, Inc., its New York affiliate.
2. PORTFOLIO TRANSACTIONS. The Subadviser is authorized to select
the brokers or dealers that will execute the purchases and sales of portfolio
securities and is directed to use its best efforts to obtain the best price and
execution. In selecting such broker or dealers, the Subadviser shall consider
all relevant factors, including price (including the applicable brokerage
commission or dealer spread), the size of the order, the nature of the market
for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker or dealer involved,
the quality of the service, the difficulty of execution, the execution
capabilities and operations facilities of the firm involved, and the firm's risk
in positioning a block of securities.
-2-
<PAGE> 3
Subject to such policies as the Trustees may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended, the Subadviser
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Trustees of the Trust such information relating to portfolio transactions as
they may reasonably request.
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be
entitled to receive any payment from the Trust and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation for
the Subadviser under this Agreement, the Adviser agrees to pay the Subadviser a
fee at the annual rates set forth in Schedule A hereto with respect to each
Portfolio listed thereon. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month (i.e., the applicable annual fee
rate divided by 365 applied to each prior days' net assets in order to calculate
the daily accrual). For purposes of calculating the Subadviser's fee, the
average daily net asset value of a Portfolio shall be determined by taking an
average of all determinations of such net asset value during the month. If the
Subadviser shall provide its services under this Agreement for less than the
whole of any month, the foregoing compensation shall be prorated.
The Subadviser, not the Adviser or the Trust, will pay Davis
Selected Advisers - NY, Inc., or any other affiliate the services of which are
utilized hereunder, all of such affiliate's reasonable direct and indirect costs
associated with maintenance of an office and performance of such services.
To the extent required by the laws of any state in which the Trust
is subject to an expense guarantee limitation, if the aggregate expenses of any
Portfolio in any fiscal year exceed the specified expense limitation ratios for
that year (calculated on a daily basis), as a result of which the Adviser is
required to reduce or refund its advisory and management fee payable by the
Portfolio, the Subadviser agrees to waive such portion of its subadvisory fee in
the same proportion as the fees waived by the Adviser bear to the total advisory
and management fee paid by the Portfolio. Such waiver, however, shall not exceed
the full amount of the subadvisory fee for such year except as may be elected by
the Subadviser in its discretion. For this purpose, aggregate expenses of a
Portfolio shall include the compensation of the Adviser and all normal expenses,
fees and charges, but shall exclude interest, taxes, brokerage fees on portfolio
transactions, fees and expenses incurred in connection with the distribution of
Trust shares, and extraordinary expenses including litigation expenses. In the
event any amounts are so contributed by the Subadviser to the Adviser, the
Adviser agrees to reimburse the Subadviser for any expenses waived, provided
that the Adviser has been reimbursed by the Trust.
-3-
<PAGE> 4
4. REPORTS. The Adviser and the Subadviser agree to furnish to each
other, if applicable, current prospectuses, statements of additional
information, proxy statements, reports of shareholders, certified copies of
their financial statements, and such other information with regard to their
affairs and that of the Trust as each may reasonably request.
5. STATUS OF THE SUBADVISER. The services of the Subadviser to the
Adviser and the Trust are not to be deemed exclusive, and the Subadviser shall
be free to render similar services to others so long as its services to the
Trust are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
6. CERTAIN RECORDS. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio(s) that are required to
be maintained by the Trust pursuant to the requirements of Rule 31a-1 of that
Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Trust are the property
of the Trust and will be surrendered promptly to the Trust or the Adviser on
request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
7. REFERENCE TO THE SUBADVISER. Neither the Trust nor the Adviser or
any affiliate or agent thereof shall make reference to or use the name of the
Subadviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld.
8. INDEMNIFICATION. The Adviser agrees to indemnify and hold
harmless the Subadviser and its affiliates and each of its directors and
officers and each person, if any, who controls the Subadviser within the meaning
of Section 15 of the 1933 Act against any and all losses, claims, damages,
liabilities or litigation (including legal and other expenses), to which the
Subadviser or its affiliates or such directors, officers or controlling person
may become subject under the 1933 Act, under any other statute, at common law or
otherwise, which may be based upon any wrongful act or breach of this Agreement
by the Adviser; provided, however, that in no case is the Adviser's indemnity in
favor of any person deemed to protect such person against any liability to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of his, her or its duties or by
reasons of his, her or its reckless disregard of obligations and duties under
this Agreement.
-4-
<PAGE> 5
The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person, if
any, who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the 1933
Act, under other statutes, at common law or otherwise, which may be based upon
(i) any wrongful act or breach of this Agreement by the Subadviser, or (ii) any
failure by the Subadviser to comply with the representations and warranties set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
9. TERM OF THE AGREEMENT. This Agreement shall continue in full
force and effect with respect to each Portfolio until the earlier of (a) two
years from the date this Agreement is approved by the Trustees, or (b) the first
meeting of the shareholders of the Portfolio of the Trust after the date hereof.
If approved at such meeting by the affirmative vote of a majority of the
outstanding voting securities (as defined in the Act), of the Portfolio with
respect to such Portfolio, voting separately from any other series of the Trust,
this Agreement shall continue in full force and effect with respect to such
Portfolio from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Portfolio voting separately
from any other series of the Trust, provided, however, that if the shareholders
fail to approve the Agreement as provided herein, the Subadviser may continue to
serve hereunder in the manner and to the extent permitted by the Act and rules
thereunder. The foregoing requirement that continuance of this Agreement be
"specifically approved at least annually" shall be construed in a manner
consistent with the Act and the rules and regulations thereunder.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of penalty by the Portfolio or the Trust, by vote
of a majority of the Trustees, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Trust, or by the Adviser, on not less than 30 nor
more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Trust; provided, however, that this Agreement may not be terminated by
the Subadviser unless another subadvisory agreement has been approved by the
Trust in accordance with the Act, or after six months' written notice, whichever
is earlier. The termination of this Agreement with respect to any Portfolio or
the addition of any Portfolio to Schedule A hereto (in the manner required by
the Act) shall not affect the continued effectiveness of this Agreement with
respect to each other Portfolio subject hereto. This Agreement shall
automatically terminate in the event of its assignment (as defined by the Act).
-5-
<PAGE> 6
This Agreement will also terminate in the event that the Advisory
Agreement by and between the Trust and the Adviser is terminated.
10. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
11. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Trust must be obtained in conformity the
requirements of the Act.
12. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the Act.
To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
13. PERSONAL LIABILITY. The Declaration of the Trust establishing
the Trust (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and, in accordance with that Declaration, no
Trustee, shareholder, officer, employee or agent of the Trust shall be held to
any personal liability, nor shall resort be had to their private property for
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust, but the "Trust Property" only shall be liable.
14. SEPARATE SERIES. Pursuant to the provisions of the Declaration,
each portfolio is a separate series of the Trust, and all debts, liabilities,
obligations and expenses of a particular portfolio shall be enforceable only
against the assets of that portfolio and not against the assets of any other
portfolio or of the Trust as a whole.
15. NOTICES. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
Subadviser: Davis Selected Advisers, L.P.
124 E. Marcy Street
P.O. Box 1688
Santa Fe, NM 87504-1688
Attention: Kenneth C. Eich
Chief Operating Officer
Adviser: SunAmerica Asset Management Corp.
733 Third Avenue
New York, New York 10017
Attention: Robert M. Zakem
Senior Vice President
and General Counsel
-6-
<PAGE> 7
with a copy to: SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Susan L. Harris
Vice President, Associate
General Counsel and
Secretary
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
-----------------------------------
DAVIS SELECTED ADVISERS, L.P.
By: /s/Authorized Signatory
-----------------------------------
-7-
<PAGE> 1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999 by and
between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and FEDERATED INVESTMENT COUNSELING, a Delaware business trust (the
"Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a
Massachusetts business trust (the "Trust"), have entered into an Investment
Advisory and Management Agreement dated as of January 1, 1999, (the "Advisory
Agreement") pursuant to which the Adviser has agreed to provide investment
management, advisory and administrative services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company and may issue shares of beneficial interest, par value $.01 per share,
in separately designated portfolios representing separate funds with their own
investment objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment portfolio or portfolios of the
Trust listed on Schedule A attached hereto (the "Portfolio(s)"), and the
Subadviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto
as follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Trust. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of the assets of each Portfolio listed on
Schedule A attached hereto. Subject to the oversight and review of the Adviser,
the Subadviser will determine in its discretion the securities to be purchased
or sold, and through delegated authority from the Adviser, execute such
documents as may be necessary in connection therewith; will provide the Adviser
with records concerning its activities which the Adviser or the Trust is
required to maintain; and will render regular reports to the Adviser and to
officers and Trustees of the Trust concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Trustees of the Trust and in
compliance with such policies as the Trustees of the Trust may from time to
time establish, and in
<PAGE> 2
compliance with the objectives, policies, and limitations for the Portfolio(s)
set forth in the Trust's current prospectus and statement of additional
information.
The Subadviser represents and warrants that its management of
the Portfolios will at all times conform with: (1) the objectives, policies,
and limitations for the Portfolio(s) set forth in the Trust's current
prospectus and statement of additional information; (2) the provisions of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code")
applicable to regulated investment companies including those investment
companies underlying variable annuities; (3) the provisions of the Act and
rules adopted thereunder applicable to the Portfolios; (4) the diversification
requirements specified in the Internal Revenue Service's regulations under
Section 817(h) of the Code; (5) applicable state insurance laws provided to
Subadviser by Adviser in writing (which may be satisfied through delivery to
Subadviser of a copy of the Trust's current prospectus), or as acknowledged in
a written undertaking by Subadviser; (6) applicable federal and state
securities laws; and (7) the distribution requirements necessary to avoid
payment of any excise tax pursuant to Section 4982 of the Code. The Subadviser
further represents and warrants that to the extent that any statements or
omissions made in any Registration Statement for the Contracts or shares of the
Trust, or any amendment or supplement thereto, are made in reliance upon and in
conformity with information furnished by the Subadviser expressly for use
therein, such Registration Statement and any amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules and regulations of the
Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE ADVISER. The Adviser
represents and warrants to the Subadviser that: (1) it is a corporation duly
formed and validly existing under the laws of Delaware; (2) it is duly
authorized to execute and deliver this Agreement and to perform its obligations
thereunder; and (3) it is registered with the Securities and Exchange
Commission as an investment adviser under the Investment Advisers Act of 1940,
as amended.
3. PORTFOLIO TRANSACTIONS. The Subadviser is responsible for
decisions to buy or sell securities and other investments of the assets of each
Portfolio, broker-dealers and futures commission merchants selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing portfolio transactions, the Subadviser may
employ or deal with such broker-dealers or futures commission merchants as may,
in the Subadviser's best judgement, provide prompt and reliable execution of
the transactions at favorable prices and reasonable commission rates. In
selecting such broker-dealers or futures commission merchants, the Subadviser
shall consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the
<PAGE> 3
nature of the market for the security or other investment, the timing of the
transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and
operational facilities of the firm involved, and, in the case of securities,
the firm's risk in positioning a block of securities.
Subject to such policies as the Trustees may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Subadviser's having caused a Portfolio to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Subadviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular transaction
or the Subadviser's overall responsibilities with respect to such Portfolio and
to other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and
subject to any other applicable laws and regulations including Section 17(e) of
the Act and Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the
Adviser and its affiliates or any other subadviser to the Trust and its
respective affiliates, as broker-dealers or futures commission merchants to
effect portfolio transactions in securities and other investments for a
Portfolio. The Subadviser will promptly communicate to the Adviser and to the
officers and the Trustees of the Trust such information relating to portfolio
transactions as they may reasonably request. To the extent consistent with
applicable law, the Subadviser may aggregate purchase or sell orders for the
Portfolios with contemporaneous purchase or sell orders of other clients of the
Subadviser or its affiliated persons. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
determines to be equitable and consistent with its and its affiliates' fiduciary
obligations to the Portfolios and to such other clients. The Adviser hereby
acknowledges that such aggregation of orders may not result in more favorable
pricing or lower brokerage commissions in all instances.
4. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be
entitled to receive any payment from the Trust and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to each Portfolio listed thereon. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month (i.e., the
applicable annual fee rate divided by 365 applied to each prior days' net
assets in order to calculate the daily accrual). For purposes of calculating
the Subadviser's fee, the average daily net asset value of a Portfolio shall be
determined by taking an average of all determinations of such net asset value
during the month. If the Subadviser shall provide its services under this
Agreement for less than the whole of any month, the foregoing compensation
shall be prorated.
-3-
<PAGE> 4
5. REPORTS. The Trust, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, policies and procedures relating to the
management of the Trust as adopted by the Board of Trustees, and such other
information with regard to their affairs and that of the Trust as each may
reasonably request.
6. STATUS OF THE SUBADVISER. The services of the Subadviser to the
Adviser and the Trust are not to be deemed exclusive, and the Subadviser shall
be free to render similar services to others so long as its services to the
Trust are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. CERTAIN RECORDS. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio(s) that are required
to be maintained by the Trust pursuant to the requirements of Rule 31a-1 of
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the Trust or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
8. REFERENCE TO THE SUBADVISER. Neither the Trust nor the Adviser
or any affiliate or agent thereof shall make reference to or use the name of
the Subadviser or any of its affiliates in any advertising or promotional
materials without the prior written approval of the Subadviser, which approval
shall not be unreasonably withheld.
9. LIABILITY OF THE SUBADVISER. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties ("disabling conduct") hereunder on the part of the Subadviser (and
its officers, directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Subadviser) the Subadviser
shall not be subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with, rendering
services hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this Agreement relates, except to the extent specified in
Section 36(b) of the Act concerning
-4-
<PAGE> 5
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services. Except for such disabling conduct, the Adviser shall
indemnify the Subadviser (and its officers, directors, partners, agents,
employees, controlling persons, shareholders and any other person or entity
affiliated with the Subadviser) (collectively, the ("Indemnified Parties") from
any liability arising from the Subadviser's conduct under this Agreement.
Subadviser hereby indemnifies, defends and protects Adviser and holds Adviser
harmless, from and against any and all liability arising out of Subadviser's
disabling conduct.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of
the 1933 Act against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses), to which the Adviser or its
affiliates or such directors, officers or controlling person may become subject
under the 1933 Act, under other statutes, at common law or otherwise, which
arise out of or result from any breach of any representation or warranty set
forth in Section 1 of this Agreement; provided, however, that in no case is the
Subadviser's indemnity in favor of any person deemed to protect such other
persons against any liability to which such person would otherwise be subject
by reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
(c) The Adviser is hereby expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of the
Subadviser and agrees that the obligations assumed by the Subadviser pursuant
to this Agreement will be limited in any case to the Subadviser and its assets
and the Adviser shall not seek satisfaction of any such obligations from the
shareholders of the Subadviser, the trustees of the Subadviser, officers,
employees or agents of the Subadviser, or any of them.
10. PERMISSIBLE INTERESTS. Trustees and agents of the Trust are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested
in the Trust as trustees, or otherwise; and the Subadviser (or any successor)
is or may be interested in the Trust in some manner.
11. TERM OF THE AGREEMENT. This Agreement shall continue in full
force and effect with respect to each Portfolio until two years from the date
hereof, and from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Portfolio voting
separately from any other series of the Trust.
-5-
<PAGE> 6
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of a penalty by the Portfolio or the Trust, by
vote of a majority of the Trustees, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Trust, or by the Adviser, on not less than 30 nor
more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on not less than 30 nor more than 60 days'
written notice to the Adviser and the Trust; provided, however, that this
Agreement may not be terminated by the Subadviser unless another subadvisory
agreement has been approved by the Trust in accordance with the Act, or after
six months from the date written notice is given, whichever is earlier.
Notwithstanding the requirements set forth in the immediately preceding
sentence, Subadviser may terminate this Agreement on 30 days' written notice
upon the institution of formal proceedings against the Adviser or the Trust by
the NASD, the SEC, any state securities or insurance department or any other
regulatory body regarding the Adviser's obligations under this Agreement or
related to the sale of the Contracts, operation of the separate account, or
sale of shares of the Trust, provided that such formal proceedings are likely
to have a material adverse impact on the Subadviser. The termination of this
Agreement with respect to any Portfolio or the addition of any Portfolio to
Schedule A hereto (in the manner required by the Act) shall not affect the
continued effectiveness of this Agreement with respect to each other Portfolio
subject hereto. This Agreement shall automatically terminate in the event of
its assignment (as defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Trust and the Adviser is terminated.
12. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
13. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Trust must be obtained in conformity with the
requirements of the Act.
14. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the
Act. To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. PERSONAL LIABILITY. The Declaration of the Trust establishing
the Trust (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and, in accordance with that Declaration, no
Trustee, shareholder, officer, employee or agent of the Trust shall be held to
any personal liability, nor shall resort be had to their private property for
satisfaction
-6-
<PAGE> 7
of any obligation or claim or otherwise in connection with the affairs of the
Trust, but the "Trust Property" only shall be liable.
16. SEPARATE SERIES. Pursuant to the provisions of the Declaration,
each Portfolio is a separate series of the Trust, and all debts, liabilities,
obligations and expenses of a particular Portfolio shall be enforceable only
against the assets of that Portfolio and not against the assets of any other
Portfolio or of the Trust as a whole.
17. NOTICES. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
Subadviser: Federated Investment Counseling
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017
Attention: Robert M. Zakem
Senior Vice President
and General Counsel
with a copy to:SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067-6022
Attention: Susan L. Harris
Senior Vice President,
General Counsel - Corporate Affairs
and Secretary
IN WITNESS WHEREOF, the parties have caused their respective
duly authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
----------------------------------
-7-
<PAGE> 8
Name:
Title:
FEDERATED INVESTMENT COUNSELING
By: /s/Authorized Signatory
----------------------------------
Name:
Title:
-8-
<PAGE> 1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999 by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and FIRST AMERICAN ASSET MANAGEMENT, A DIVISION OF U.S. BANK
NATIONAL ASSOCIATION (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a Massachusetts
business trust (the "Trust"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory
Agreement"), pursuant to which the Adviser has agreed to provide investment
management, advisory and administrative services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of beneficial interest, no par value per share, in separately
designated portfolios representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is a national banking association with trust
and investment powers organized under the laws of the United States and exempt
from registration as an investment adviser under the Investment Advisers Act of
1940 (the "Advisers Act"), as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment portfolio or portfolios of the
Trust listed on Schedule A attached hereto (the "Portfolio(s)"), and the
Subadviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Trust. Pursuant to this Subadvisory Agreement
and subject to the oversight and review of the Adviser, the Subadviser will
manage the investment and reinvestment of the assets of each Portfolio listed
on Schedule A attached hereto. The Subadviser will determine in its discretion
and subject to the oversight and review of the Adviser, the securities to be
purchased or sold, will provide the Adviser with records concerning its
activities which the Adviser or the Trust is required to maintain, and will
render regular reports to the Adviser and to officers and Trustees of the Trust
concerning its discharge of the foregoing responsibilities. The Subadviser
shall discharge the foregoing responsibilities subject to the control of the
officers and the Trustees of the Trust and in compliance with such policies as
the Trustees of the Trust may from time to time establish and communicate in
writing to the Subadviser, and in compliance with (a) the objectives, policies,
and limitations for the Portfolio(s) set forth in the Trust's current
prospectus and statement of additional information as
<PAGE> 2
most recently provided by the Adviser to the Subadviser, and (b) applicable
laws and regulations.
The Subadviser represents and warrants to the Adviser that
each of the Portfolios set forth in Schedule A will at all times be operated
and managed (1) in compliance with all applicable federal and state laws
governing its investments; and (2) so as to comply with such information
provided by the Adviser to the Subadviser which is intended to protect the
treatment of the variable annuity contracts which invest in the Portfolios
(hereinafter "Contracts") as annuity contracts for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), and the eligibility of the
Contracts to qualify for sale to the public in any state where they may
otherwise be sold, and to minimize any taxes and/or penalties payable by the
Trust or such Portfolio(s). The Subadviser represents and warrants that,
unless directions given by the Trustees or the Adviser to the Subadviser
prevent the Subadviser from doing so, the Subadviser will cause the
Portfolio(s) to comply with (a) the provisions of the Act and rules adopted
thereunder which relate to the investment of the Portfolio(s)' assets; and (b)
the diversification requirements specified in the Internal Revenue Service's
regulations under Section 817(h) of the Code. The Subadviser further
represents and warrants that to the extent that any statements or omissions
made in any Registration Statement for the Contracts or shares of the Trust, or
any amendment or supplement thereto, are made in reliance upon and in
conformity with information furnished by the Subadviser expressly for use
therein ("Furnished Information"), such Registration Statement and any
amendments or supplements thereto will, with respect to the Furnished
Information, when they become effective, conform in all material respects to
the requirements of the Securities Act of 1933 and the rules and regulations of
the Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. Further, any statements or omissions in any Registration Statement
for the Contracts or shares of the Trust, or any amendment or supplement
thereto, which are made based upon Furnished Information and which have been
provided to Subadviser for its review, shall be deemed acknowledged and
approved by Subadviser, unless Subadviser provides Adviser with written
indication to the contrary within 5 business days of its receipt of the
Registration Statement, amendment or supplement for review.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
2. PORTFOLIO TRANSACTIONS. The Subadviser is responsible for
decisions to buy or sell securities and other investments of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates.
As a general matter, in executing portfolio transactions, the Subadviser may
employ or deal with such broker-dealers or futures commission merchants as may,
in the Subadviser's best judgement, provide prompt and reliable execution of
the transactions at favorable prices and reasonable commission rates. In
selecting such broker-dealers or futures commission merchants, the Subadviser
shall consider all relevant factors including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the
-2-
<PAGE> 3
nature of the market for the security or other investment, the timing of the
transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and
operational facilities of the firm involved, and, in the case of securities,
the firm's risk in positioning a block of securities. Subject to such policies
as the Trustees may determine and communicate in writing to the Subadviser and
consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Subadviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Subadviser's having caused a Portfolio to pay a member
of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that
transaction, if the Subadviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such member of an exchange, broker or dealer
viewed in terms of either that particular transaction or the Subadviser's
overall responsibilities with respect to such Portfolio and to other clients as
to which the Subadviser exercises investment discretion. In accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any
other applicable laws and regulations including Section 17(e) of the Act and
Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser
and its affiliates or any other subadviser to the Trust and its respective
affiliates, as broker-dealers or futures commission merchants to effect
portfolio transactions in securities and other investments for a Portfolio.
The Subadviser will promptly communicate to the Adviser and to the officers and
the Trustees of the Trust such information relating to portfolio transactions
as they may reasonably request.
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be
entitled to receive any payment from the Trust and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to each Portfolio listed thereon. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month (i.e., the
applicable annual fee rate divided by 365 applied to each prior day's net
assets in order to calculate the daily accrual). If the Subadviser shall
provide its services under this Agreement for less than the whole of any month,
the foregoing compensation shall be prorated.
4. OTHER SERVICES. At the request of the Trust or the Adviser,
the Subadviser in its discretion may make available to the Trust, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Trust or the Adviser at the Subadviser's cost.
5. REPORTS. The Trust, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Trust as each may reasonably request.
6. STATUS OF THE SUBADVISER. The services of the Subadviser to
the Adviser and the Trust are not to be deemed exclusive, and the Subadviser
shall be free to render similar services to
-3-
<PAGE> 4
others so long as its services to the Trust are not impaired thereby. The
Subadviser shall be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
7. CERTAIN RECORDS. The Subadviser hereby undertakes and agrees
to maintain, in the form and for the period required by Rule 31a-2 under the
Act, all records relating to the investments of the Portfolio(s) that are
required to be maintained by the Trust pursuant to the requirements of Rule
31a-1 of that Act. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the
Act which are prepared or maintained by the Subadviser on behalf of the Trust
are the property of the Trust and will be surrendered promptly to the Trust or
the Adviser on request.
The Subadviser agrees that all accounts, books and other
records maintained and preserved by it as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
8. REFERENCE TO THE SUBADVISER. Neither the Trust nor the
Adviser or any affiliate or agent thereof shall make reference to or use the
name of the Subadviser or any of its affiliates in any advertising or
promotional materials without the prior approval of the Subadviser, which
approval shall not be unreasonably withheld.
9. LIABILITY OF THE SUBADVISER. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties ("disabling conduct") hereunder on the part of the Subadviser (and
its officers, directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Subadviser) the Subadviser
shall not be subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with, rendering
services hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this Agreement relates, except to the extent specified in
Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services. Except for such
disabling conduct, the Adviser shall indemnify and hold harmless the Subadviser
(and its officers, directors, partners, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Subadviser)
from any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) arising from the Subadviser's conduct
under this Agreement. Subadviser hereby agrees to indemnify, defend and
protect Adviser (and its officers, directors, partners, agents, employees,
controlling persons, shareholders and any other person or entity affiliated
with the Adviser) and hold Adviser harmless, from and against any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses) arising out of Subadviser's disabling conduct. In no case
is any indemnity provided in
-4-
<PAGE> 5
this Agreement in favor of any person deemed to protect such other persons
against any liability to which such person would otherwise be subject by
reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of obligation and duties under this Agreement.
10. PERMISSIBLE INTERESTS. Trustees and agents of the Trust are
or may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested
in the Trust as trustees, or otherwise; and the Subadviser (or any successor)
is or may be interested in the Trust in some manner.
11. TERM OF THE AGREEMENT. This Agreement shall continue in full
force and effect with respect to each Portfolio until two years from the date
hereof, and from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Portfolio voting
separately from any other series of the Trust.
With respect to each Portfolio, this Agreement may be
terminated at any time, without payment of a penalty by the Portfolio or the
Trust, by vote of a majority of the Trustees, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, voting
separately from any other series of the Trust, or by the Adviser, on 90 days'
written notice to the Subadviser. With respect to each Portfolio, this
Agreement may be terminated by the Subadviser at any time, without the payment
of any penalty, on 90 days' written notice to the Adviser and the Trust;
provided, however, that this Agreement may not be terminated by the Subadviser
unless another subadvisory agreement has been approved by the Trust in
accordance with the Act, or after six months' written notice, whichever is
earlier. The termination of this Agreement with respect to any Portfolio or
the addition of any Portfolio to Schedule A hereto (in the manner required by
the Act) shall not affect the continued effectiveness of this Agreement with
respect to each other Portfolio subject hereto. This Agreement shall
automatically terminate in the event of its assignment (as defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement by
and between the Trust and the Adviser is terminated.
12. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
13. AMENDMENTS. This Agreement may be amended by mutual consent
in writing, but the consent of the Trust must be obtained in conformity with
the requirements of the Act.
-5-
<PAGE> 6
14. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York and the applicable provisions
of the Act. To the extent the applicable laws of the State of New York, or any
of the provisions herein, conflict with the applicable provisions of the Act,
the latter shall control.
15. PERSONAL LIABILITY. The Declaration of the Trust establishing
the Trust (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and, in accordance with that Declaration, no
Trustee, shareholder, officer, employee or agent of the Trust shall be held to
any personal liability, nor shall resort be had to their private property for
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust, but the "Trust Property" only shall be liable.
16. SEPARATE SERIES. Pursuant to the provisions of the
Declaration, each Portfolio is a separate series of the Trust, and all debts,
liabilities, obligations and expenses of a particular Portfolio shall be
enforceable only against the assets of that Portfolio and not against the
assets of any other Portfolio or of the Trust as a whole.
17. NOTICES. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
Subadviser: FIRST AMERICAN ASSET MANAGEMENT,
a division of U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attention: James S. Doak
Senior Managing Director
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
with a copy to: SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067-6022
Attention: Susan L. Harris
-6-
<PAGE> 7
Senior Vice President,
General Counsel - Corporate Affairs
and Secretary
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
----------------------------------------------
FIRST AMERICAN ASSET MANAGEMENT,
A DIVISION OF U.S. BANK NATIONAL ASSOCIATION
By: /s/Authorized Signatory
---------------------------------------------
-8-
<PAGE> 1
SUBADVISORY AGREEMENT
BETWEEN SUNAMERICA ASSET MANAGEMENT CORP.
AND
GOLDMAN SACHS ASSET MANAGEMENT,
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
It is hereby agreed by and between SUNAMERICA ASSET MANAGEMENT
CORP. (the "Adviser") and GOLDMAN SACHS ASSET MANAGEMENT, A SEPARATE OPERATING
DIVISION OF GOLDMAN, SACHS & CO. ("Subadviser") as follows:
1.
DUTIES OF SUBADVISER. Adviser hereby engages the services of Subadviser in
furtherance of its Investment Advisory and Management Agreement with SunAmerica
Series Trust (the "Trust") dated as of January 1, 1999, on behalf of the Asset
Allocation Portfolio (the "Portfolio"). Pursuant to this Sub-Advisory Agreement
and subject to the oversight and review of Adviser, Subadviser will manage the
investment and reinvestment of the assets of the Portfolio. In this regard,
Subadviser will determine in its discretion the securities to be purchased or
sold, will provide Adviser with records concerning its activities which Adviser
or the Trust is required to maintain, and will render regular reports to
Adviser and to officers and Trustees of the Trust concerning its discharge of
the foregoing responsibilities. Subadviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Trustees of the
Trust and in compliance with such policies as the Trustees of the Trust may
from time to time establish, and in compliance with the objectives, policies,
and limitations for the Portfolio set forth in the Trust's current prospectus
and statement of additional information, and applicable laws and regulations.
Adviser agrees to inform Subadviser of any and all requirements of the
California Insurance Code and regulations thereunder that operate to limit or
restrict the investments the Portfolio may otherwise make, and to inform
Subadviser promptly of any changes in such requirements. Subadviser accepts
such employment and agrees, at its own expense, to render the services set
forth herein and to provide the office space, furnishings, equipment and
personnel required by it to perform such services on the terms and for the
compensation provided in this Agreement.
2.
PORTFOLIO TRANSACTIONS. Subadviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities and
is directed to use its best efforts to obtain the best price and execution.
Subject to policies established by the Trustees of the Trust, Subadviser may
also be authorized to effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if Subadviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or
Subadviser's overall
<PAGE> 2
responsibilities with respect to a Portfolio, other portfolios of the Trust and
other clients of Subadviser. The execution of such transactions shall not be
deemed to represent an unlawful act or breach of any duty created by this
Agreement or otherwise. Subadviser will promptly communicate to Adviser and to
the officers and the Trustees of the Trust such information relating to
portfolio transactions as they may reasonably request.
3.
COMPENSATION OF SUBADVISER. As its compensation hereunder, the Adviser shall
pay to Subadviser promptly after the end of each month, a fee calculated in
accordance with the average daily net assets of the indicated Portfolio as
follows:
<TABLE>
<CAPTION>
Asset Allocation Portfolio:
--------------------------
<S> <C>
.40% per annum on the first $50 million;
.30% per annum on the next $100 million;
.25% per annum on the next $100 million;
.20% per annum thereafter.
</TABLE>
To the extent required by the laws of any state in which the Trust is
subject to an expense guarantee limitation, if the aggregate expenses of any
Portfolio in any fiscal year exceed the specified expense limitation ratios for
that year (calculated on a daily basis), as a result of which Adviser is
required to reduce or refund its advisory and management fee payable by a
Portfolio, Subadviser agrees to waive such portion of its subadvisory fee in
the same proportion as the fees waived by the Adviser bear to the total
advisory and management fee paid by such Portfolio. Such waiver, however,
shall not exceed the full amount of the subadvisory fee for such year except as
may be elected by Subadviser in its discretion. For this purpose, aggregate
expenses of a Portfolio shall include the compensation of Adviser and all
normal expenses, fees and charges, but shall exclude interest, taxes, brokerage
fees on portfolio transactions, fees and expenses incurred in connection with
the distribution of Trust shares, and extraordinary expenses including
litigation expenses. In the event any amounts are so contributed by Subadviser
to Adviser, Adviser agrees to reimburse Subadviser for any expenses waived,
provided that Adviser has been reimbursed by the Trust.
Subadviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of a Portfolio shall be that determined in the manner and on the dates
set forth in the current prospectus of the Trust and, on days on which the net
assets are not so determined, the net asset computation to be used shall be as
determined on the next day on which the net assets shall have been determined.
4.
REPORTS. Adviser and Subadviser agree to furnish to each other, if applicable,
current prospectuses, statements of additional information, proxy statements,
reports of shareholders, certified copies of their financial statements, and
such other information with regard to their affairs and that of the Trust
-2-
<PAGE> 3
as each may reasonably request.
5.
STATUS OF SUBADVISER. The services of Subadviser to Adviser and the Trust are
not to be deemed exclusive, and Subadviser shall be free to render similar
services to others so long as its services to the Trust are not impaired
thereby. Subadviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust in any way or otherwise be deemed an agent of the Trust.
6.
CERTAIN RECORDS. Subadviser hereby undertakes and agrees to maintain, in the
form and for the period required by Rule 31a-2 under the Investment Company Act
of 1940, all records relating to the Portfolio's investments that are required
to be maintained by the Trust pursuant to the requirements of Rule 31a-1 of
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment
Company Act of 1940 which are prepared or maintained by Subadviser on behalf of
the Trust are the property of the Trust and will be surrendered promptly to the
Trust or Adviser on request.
Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
7.
REFERENCE TO SUBADVISER. Neither the Trust nor Adviser or any affiliate or
agent thereof shall make reference to or use the name of Subadviser or any of
its affiliates in any advertising or promotional materials without the prior
approval of Subadviser, which approval shall not be unreasonably withheld.
Subadviser agrees to notify Adviser of any changes in the membership of the
general partners of Subadviser as soon as practicable prior to such change.
8.
LIABILITY OF SUBADVISER. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties ("disabling
conduct") hereunder on the part of Subadviser (and its officers, directors,
agents, partners, employees, controlling persons, shareholders and any other
person or entity affiliated with Subadviser ("associated persons")), Subadviser
and its associated persons shall not be subject to liability to the Adviser or
to any other person for any act or omission in the course of, or connected
with, rendering services hereunder (including, without limitation, as a result
of failure by Adviser, by any other affiliate of Anchor National Life Insurance
-3-
<PAGE> 4
Company ("ANLIC"), or by ANLIC, to comply with this Agreement or the
requirements of Section 10506 of the California Insurance Code and regulations
duly adopted pursuant to such Section or, as a result of any error of judgment
or mistake of law or for any loss suffered by Advisor or any other person in
connection with the matters to which this 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.
Adviser hereby indemnifies, defends and protects Subadviser and holds
Subadviser and its associated persons harmless from and against any and all
claims, demands, actions, losses, damages, liabilities, costs, charges, counsel
fees and expenses of any nature ("Losses") arising out of (i) any inaccuracy or
omission in any prospectus, registration statement, annual report or proxy
statement or advertising or promotional material pertaining to the Portfolio
("Documents") to the extent such Document contains information not supplied to
Adviser by Subadviser for inclusion in such Document, (ii) any breach of
Adviser of any representation or agreement contained in this Subadvisory
Agreement, (iii) any failure by Adviser, by any other affiliate of ANLIC, or by
ANLIC, to comply with the requirements of Section 10506 of the California
Insurance Code and regulations duly adopted pursuant to such Section, and (iv)
any action taken or omitted to be taken by Subadviser pursuant to this
Subadvisory Agreement, except to the extent such Losses result from
Subadviser's breach of this Subadvisory Agreement or Subadviser's disabling
conduct. Subadviser hereby indemnifies, defends and protects Adviser and holds
Adviser harmless from and against any and all Losses arising out of
Subadviser's disabling conduct.
9.
DURATION AND TERMINATION. This Agreement shall continue in full force and
effect with respect to a Portfolio until the earlier of (a) two years from the
date this Agreement is approved by the Trustees, or (b) the first meeting of
the shareholders of such Portfolio after the date hereof. If approved at such
meeting by the affirmative vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940), of the Portfolio
with respect to such Portfolio, voting separately from any other series of the
Trust, this Agreement shall continue in full force and effect with respect to
such Portfolio from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Portfolio voting
separately from any other series of the Trust, provided, however, that if the
shareholders fail to approve the Agreement as provided herein, Subadviser may
continue to serve hereunder in the manner and to the extent permitted by the
Investment Company Act of 1940 and rules thereunder. The foregoing requirement
that continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940 and the rules and regulations thereunder.
This Agreement may be terminated at any time, without the payment of any
penalty by vote of a majority of the Trustees of the Trust or by a vote of a
majority of the outstanding voting securities
-4-
<PAGE> 5
of a Portfolio on not less than 30 days nor more than 60 days written notice to
Subadviser or by Subadviser at any time without the payment of any penalty, on
90 days written notice to Adviser and the Trust; provided, however, that this
Agreement may not be terminated by Subadviser unless another subadvisory
agreement has been approved by the Trust in accordance with the Investment
Company Act of 1940, or after six months' written notice, whichever is earlier.
This Agreement shall automatically terminate in the event of its assignment (as
defined in the Investment Company Act of 1940). Any notice under this
Agreement shall be given in writing, addressed and delivered, or mailed postage
prepaid, to the other party at any office of such party.
As used in this Section 11, the terms "assignment," "interested
persons," and a "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the Investment Company Act of 1940
and the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission under said Act.
This Agreement will also terminate in the event that the Investment
Advisory and Management Agreement by and between the Trust on behalf of the
Portfolio and Adviser referred to in Section 1 is terminated.
10.
SEVERABILITY. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
nothing contained herein shall be construed to be binding upon any of the
Trustees, officers, or shareholders of the Trust individually.
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of January 1, 1999.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
-----------------------------------
GOLDMAN SACHS ASSET MANAGEMENT,
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
BY: GOLDMAN, SACHS & CO.
-5-
<PAGE> 6
By: /s/Authorized Signatory
---------------------------------
-6-
<PAGE> 1
SUBADVISORY AGREEMENT
BETWEEN SUNAMERICA ASSET MANAGEMENT CORP.
AND
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL,
AN AFFILIATE OF
GOLDMAN, SACHS & CO.
It is hereby agreed by and between SUNAMERICA ASSET MANAGEMENT
CORP. (the "Adviser") and GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL, AN
AFFILIATE OF GOLDMAN, SACHS & CO. ("Subadviser") as follows:
1.
DUTIES OF SUBADVISER. Adviser hereby engages the services of Subadviser in
furtherance of its Investment Advisory and Management Agreement with SunAmerica
Series Trust (the "Trust") dated as of January 1, 1999, on behalf of the Global
Bond Portfolio (the "Portfolio"). Pursuant to this Subadvisory Agreement and
subject to the oversight and review of Adviser, Subadviser will manage the
investment and reinvestment of the assets of the Portfolio. In this regard,
Subadviser will determine in its discretion the securities to be purchased or
sold, will provide Adviser with records concerning its activities which Adviser
or the Trust is required to maintain, and will render regular reports to
Adviser and to officers and Trustees of the Trust concerning its discharge of
the foregoing responsibilities. Subadviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Trustees of the
Trust and in compliance with such policies as the Trustees of the Trust may
from time to time establish, and in compliance with the objectives, policies,
and limitations for the Portfolio set forth in the Trust's current prospectus
and statement of additional information, and applicable laws and regulations.
Adviser agrees to inform Subadviser of any and all requirements of the
California Insurance Code and regulations thereunder that operate to limit or
restrict the investments the Portfolio may otherwise make, and to inform
Subadviser promptly of any changes in such requirements. Subadviser accepts
such employment and agrees, at its own expense, to render the services set
forth herein and to provide the office space, furnishings, equipment and
personnel required by it to perform such services on the terms and for the
compensation provided in this Agreement.
2.
<PAGE> 2
PORTFOLIO TRANSACTIONS. Subadviser is authorized to select the brokers or
dealers that will execute the purchases and sales of portfolio securities and
is directed to use its best efforts to obtain the best price and execution.
Subject to policies established by the Trustees of the Trust, Subadviser may
also be authorized to effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if Subadviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or
Subadviser's overall responsibilities with respect to the Portfolio, other
portfolios of the Trust and other clients of Subadviser. The execution of such
transactions shall not be deemed to represent an unlawful act or breach of any
duty created by this Agreement or otherwise. Subadviser will promptly
communicate to Adviser and to the officers and the Trustees of the Trust such
information relating to portfolio transactions as they may reasonably request.
3.
COMPENSATION OF SUBADVISER. As its compensation hereunder, the Adviser shall
pay to Subadviser promptly after the end of each month, a fee calculated in
accordance with the average daily net assets of the Portfolio as follows:
.40% per annum on the first $50 million;
.30% per annum on the next $100 million;
.25% per annum on the next $100 million;
.20% per annum thereafter.
To the extent required by the laws of any state in which the Trust is
subject to an expense guarantee limitation, if the aggregate expenses of the
Portfolio in any fiscal year exceed the specified expense limitation ratios for
that year (calculated on a daily basis), as a result of which Adviser is
required to reduce or refund its advisory and management fee payable by the
Portfolio, Subadviser agrees to waive such portion of its subadvisory fee in
the same proportion as the fees waived by the Adviser bear to the total
advisory and management fee paid by the Portfolio. Such waiver, however, shall
not exceed the full amount of the subadvisory fee for such year except as may
be elected by Subadviser in its discretion. For this purpose, aggregate
expenses of the Portfolio shall include the compensation of Adviser and all
normal expenses, fees and charges, but shall exclude interest, taxes, brokerage
fees on portfolio transactions, fees and expenses incurred in connection with
the distribution of Trust shares, and extraordinary expenses including
litigation expenses. In the event any amounts are so contributed by Subadviser
to Adviser, Adviser agrees to reimburse Subadviser for any expenses waived,
provided that Adviser has been reimbursed by the Trust.
Subadviser's fee shall be accrued daily at 1/365th of the applicable
annual rate set forth above. For the purpose of accruing compensation, the net
assets of the Portfolio shall be that determined in the manner and on the dates
set forth in the current prospectus of the Trust and, on days on which the net
assets are not so determined, the net asset computation to be used shall be as
-2-
<PAGE> 3
determined on the next day on which the net assets shall have been determined.
4.
REPORTS. Adviser and Subadviser agree to furnish to each other, if applicable,
current prospectuses, statements of additional information, proxy statements,
reports of shareholders, certified copies of their financial statements, and
such other information with regard to their affairs and that of the Trust as
each may reasonably request.
5.
STATUS OF SUBADVISER. The services of Subadviser to Adviser and the Trust are
not to be deemed exclusive, and Subadviser shall be free to render similar
services to others so long as its services to the Trust are not impaired
thereby. Subadviser shall be deemed to be an independent contractor and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust in any way or otherwise be deemed an agent of the Trust.
6.
CERTAIN RECORDS. Subadviser hereby undertakes and agrees to maintain, in the
form and for the period required by Rule 31a-2 under the Investment Company Act
of 1940, all records relating to the Portfolio's investments that are required
to be maintained by the Trust pursuant to the requirements of Rule 31a-1 of
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Investment
Company Act of 1940 which are prepared or maintained by Subadviser on behalf of
the Trust are the property of the Trust and will be surrendered promptly to the
Trust or Adviser on request.
Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
7.
REFERENCE TO SUBADVISER. Neither the Trust nor Adviser or any affiliate or
agent thereof shall make reference to or use the name of Subadviser or any of
its affiliates in any advertising or promotional materials without the prior
approval of Subadviser, which approval shall not be unreasonably withheld.
-3-
<PAGE> 4
8.
LIABILITY OF SUBADVISER. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties ("disabling
conduct") hereunder on the part of Subadviser (and its officers, directors,
agents, partners, employees, controlling persons, shareholders and any other
person or entity affiliated with Subadviser ("associated persons")), Subadviser
and its associated persons shall not be subject to liability to the Adviser or
to any other person for any act or omission in the course of, or connected
with, rendering services hereunder (including, without limitation, as a result
of failure by Adviser, by any other affiliate of Anchor National Life Insurance
Company ("ANLIC"), or by ANLIC, to comply with this Agreement or the
requirements of Section 10506 of the California Insurance Code and regulations
duly adopted pursuant to such Section or, as a result of any error of judgment
or mistake of law or for any loss suffered by Advisor or any other person in
connection with the matters to which this 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.
Adviser hereby indemnifies, defends and protects Subadviser and holds
Subadviser and its associated persons harmless from and against any and all
claims, demands, actions, losses, damages, liabilities, costs, charges, counsel
fees and expenses of any nature ("Losses") arising out of (i) any inaccuracy or
omission in any prospectus, registration statement, annual report or proxy
statement or advertising or promotional material pertaining to the Portfolio
("Documents") to the extent such Document contains information not supplied to
Adviser by Subadviser for inclusion in such Document, (ii) any breach of
Adviser of any representation or agreement contained in this Subadvisory
Agreement, (iii) any failure by Adviser, by any other affiliate of ANLIC, or by
ANLIC, to comply with the requirements of Section 10506 of the California
Insurance Code and regulations duly adopted pursuant to such Section, and (iv)
any action taken or omitted to be taken by Subadviser pursuant to this
Subadvisory Agreement, except to the extent such Losses result from
Subadviser's breach of this Subadvisory Agreement or Subadviser's disabling
conduct. Subadviser hereby indemnifies, defends and protects Adviser and holds
Adviser harmless from and against any and all Losses arising out of
Subadviser's disabling conduct.
9.
DURATION AND TERMINATION. This Agreement shall continue in full force and
effect with respect to the Portfolio until the earlier of (a) two years from
the date this Agreement is approved by the Trustees, or (b) the first meeting
of the shareholders of the Portfolio after the date hereof. If approved at
such meeting by the affirmative vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940), of the Portfolio
with respect to the Portfolio, voting separately from any other series of the
Trust, this Agreement shall continue in full force and effect with respect to
such Portfolio from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a
-4-
<PAGE> 5
meeting called for the purpose of voting on such approval, and (ii) by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Portfolio voting separately from any other series of the
Trust, provided, however, that if the shareholders fail to approve the
Agreement as provided herein, Subadviser may continue to serve hereunder in the
manner and to the extent permitted by the Investment Company Act of 1940 and
rules thereunder. The foregoing requirement that continuance of this Agreement
be "specifically approved at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement may be terminated at any time, without the payment of
any penalty by vote of a majority of the Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Portfolio on not less
than 30 days nor more than 60 days written notice to Subadviser or by
Subadviser at any time without the payment of any penalty, on 90 days written
notice to Adviser and the Trust; provided, however, that this Agreement may not
be terminated by Subadviser unless another subadvisory agreement has been
approved by the Trust in accordance with the Investment Company Act of 1940, or
after six months' written notice, whichever is earlier. This Agreement shall
automatically terminate in the event of its assignment (as defined in the
Investment Company Act of 1940). Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed postage prepaid, to the
other party at any office of such party.
As used in this Section 11, the terms "assignment," "interested
persons," and a "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the Investment Company Act of 1940
and the rules and regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission under said Act.
This Agreement will also terminate in the event that the Investment
Advisory and Management Agreement by and between the Trust on behalf of the
Portfolio and Adviser referred to in Section 1 is terminated.
10.
SEVERABILITY. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
nothing contained herein shall be construed to be binding upon any of the
Trustees, officers, or shareholders of the Trust individually.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of January 1, 1999.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Authorized Signatory
--------------------------------------
GOLDMAN SACHS ASSET MANAGEMENT
INTERNATIONAL, AN AFFILIATE OF
GOLDMAN, SACHS & CO.
By: /s/Authorized Signatory
--------------------------------------
-6-
<PAGE> 1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1,
1999, by and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation
(the "Adviser"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a
Massachusetts business trust (the "Trust"), have entered into an Investment
Advisory and Management Agreement dated as of January 1, 1999, (the "Advisory
Agreement"), pursuant to which the Adviser has agreed to provide investment
management, advisory and administrative services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company and may issue shares of beneficial interest, no par value per share,
in separately designated portfolios representing separate funds with their own
investment objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of
rendering investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to
furnish investment advisory services to the investment portfolio or portfolios
of the Trust listed on Schedule A attached hereto (the "Portfolio(s)"), and the
Subadviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto
as follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages
the services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Trust. Pursuant to this Subadvisory Agreement
and subject to the oversight and review of the Adviser, the Subadviser will
manage the investment and reinvestment of the assets of each Portfolio listed
on Schedule A attached hereto. The Subadviser will determine in its discretion
and subject to the oversight and review of the Adviser, the securities to be
purchased or sold, will provide the Adviser with records concerning its
activities which the Adviser or the Trust is required to maintain under
provisions of the Act, and will render regular quarterly reports to the Adviser
and to officers and Trustees of the Trust concerning its discharge of the
foregoing responsibilities. The Subadviser shall discharge the foregoing
responsibilities subject to the control of the officers and the Trustees of the
Trust and in compliance with such policies as the Trustees of the Trust may
from time to time establish, and subject to the last paragraph of this Section,
in compliance with (a) the objectives,
<PAGE> 2
policies, and limitations for the Portfolio(s) set forth in the Trust's current
prospectus and statement of additional information, and (b) applicable laws and
regulations.
Subject to the last paragraph of this Section, the
Subadviser represents and warrants to the Adviser that each of the Portfolios
set forth in Schedule A will be operated and managed (1) in compliance with all
applicable federal and state securities laws governing its operations and
investments; and (2) so as not to jeopardize either the treatment of the
variable annuity contracts which invest in the Portfolios (hereinafter
"Contracts") as annuity contracts for purposes of the Internal Revenue Code of
1986, as amended (the "Code"). Without limiting the foregoing, and subject to
the last paragraph of this Section the Subadviser represents and warrants (1)
to manage each Portfolio so as to be treated as a "regulated investment
company" under subchapter M, chapter 1 of the Code, and (2) compliance with (a)
the provisions of the Act and rules adopted thereunder; (b) the diversification
requirements specified in the Internal Revenue Service's regulations under
Section 817(h) of the Code; (c) applicable federal and state securities laws;
and (d) the distribution requirements necessary to avoid payment of any excise
tax pursuant to Section 4982 of the Code. The Subadviser further represents
and warrants that to the extent that any statements or omissions made in any
Registration Statement for the Contracts or shares of the Trust, or any
amendment or supplement thereto, are made in direct reliance upon and in direct
conformity with specific information furnished by the Subadviser expressly for
use therein ("Furnished Information"), such Registration Statement and any
amendments or supplements thereto will, with respect to the Furnished
Information, when they become effective, conform in all material respects to
the requirements of the Securities Act of 1933 and the rules and regulations of
the Commission thereunder (the "1933 Act") and the Act and will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. Further, any statements or omissions in any Registration Statement
for the Contracts or shares of the Trust, or any amendment or supplement
thereto, which are made based upon Furnished Information and which have been
provided to Subadviser for its review, shall be deemed acknowledged and
approved by Subadviser, unless Subadviser provides Adviser with written
indication to the contrary within 5 business days of its receipt of the
Registration Statement, amendment or supplement for review.
The Subadviser accepts such employment and agrees, at
its own expense, to render the services set forth herein and to provide the
office space, furnishings, equipment and personnel required by it to perform
such services on the terms and for the compensation provided in this Agreement.
The Adviser acknowledges that the Subadviser is not the
compliance agent for any Portfolio or for the Trust or the Adviser, and does
not have access to all of each Portfolio's books and records necessary to
perform certain compliance testing. To the extent that the Subadviser has
agreed to perform the services specified in this Section in accordance with the
Trust's registration statement, the Trust's Agreement and Declaration of Trust
and By-Laws, the Trust's Prospectus and any policies adopted by the Trust's
Board of Trustees applicable to the Portfolios (collectively, the "Charter
Requirements"), and in accordance with applicable law (including Sub-chapters M
and L
-2-
<PAGE> 3
of the Code, the Act and the Advisers Act ("Applicable Law")), the Subadviser
shall perform such services based upon its books and records with respect to
each Portfolio, which comprise a portion of each Portfolio's books and records,
and upon information and written instructions received from the Adviser or the
Trust's administrator, and shall not be held responsible under this Agreement
so long as it performs such services in accordance with this Agreement, the
Charter Requirements and Applicable Law based upon such books and records and
such information and instructions provided by the Adviser or the Trust's
administrator. The Adviser shall promptly provide the Subadviser with copies of
the Trust's registration statement, the Trust's Agreement and Declaration of
Trust and By-Laws, the Trust's currently effective Prospectus and any written
policies or procedures adopted by the Trust's Board of Trustees applicable to
the Portfolio and any amendments or revisions thereto.
2. PORTFOLIO TRANSACTIONS. The Subadviser is
responsible for decisions to buy or sell securities and other investments of
the assets of each Portfolio, broker-dealers and futures commission merchants'
selection, and negotiation of brokerage commission and futures commission
merchants' rates. As a general matter, in executing portfolio transactions,
the Subadviser may employ or deal with such broker-dealers or futures
commission merchants as may, in the Subadviser's best judgement, provide prompt
and reliable execution of the transactions at favorable prices and reasonable
commission rates. In selecting such broker-dealers or futures commission
merchants, the Subadviser shall consider all relevant factors including price
(including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a
block of securities. Subject to such policies as the Trustees may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Subadviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Subadviser's having caused a Portfolio to pay a member
of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that
transaction, if the Subadviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such member of an exchange, broker or dealer
viewed in terms of either that particular transaction or the Subadviser's
overall responsibilities with respect to such Portfolio and to other clients as
to which the Subadviser exercises investment discretion. In accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any
other applicable laws and regulations including Section 17(e) of the Act and
Rule 17e-1 thereunder, the Subadviser may engage its affiliates, the Adviser
and its affiliates or any other subadviser to the Trust and its respective
affiliates, as broker-dealers or futures commission merchants to effect
portfolio transactions in securities and other investments for a Portfolio.
The Subadviser will promptly communicate to the Adviser and to the officers and
the Trustees of the Trust such information relating to portfolio transactions
as they may reasonably request.
-3-
<PAGE> 4
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall
not be entitled to receive any payment from the Trust and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to each Portfolio listed thereon. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month (i.e., the
applicable annual fee rate divided by 365 applied to each prior days' net
assets in order to calculate the daily accrual). If the Subadviser shall
provide its services under this Agreement for less than the whole of any month,
the foregoing compensation shall be prorated.
4. OTHER SERVICES. At the request of the Trust or the
Adviser, the Subadviser in its discretion may make available to the Trust,
office facilities, equipment, personnel and other services. Such office
facilities, equipment, personnel and services shall be provided for or rendered
by the Subadviser and billed to the Trust or the Adviser at the Subadviser's
cost.
5. REPORTS. The Trust, the Adviser and the Subadviser
agree to furnish to each other, if applicable, current prospectuses, statements
of additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Trust as each may reasonably request.
6. STATUS OF THE SUBADVISER. The services of the
Subadviser to the Adviser and the Trust are not to be deemed exclusive, and the
Subadviser shall be free to render similar services to others so long as its
services to the Trust are not impaired thereby. The Subadviser shall be deemed
to be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Trust in any way
or otherwise be deemed an agent of the Trust.
7. CERTAIN RECORDS. The Subadviser hereby undertakes
and agrees to maintain, in the form and for the period required by Rule 31a-2
under the Act, all records relating to the investments of the Portfolio(s) in
connection with the provision of services hereunder that are required to be
maintained by the Trust pursuant to the requirements of Rule 31a-1 of that Act.
Any such records which are prepared or maintained by the Subadviser on behalf
of the Trust are the property of the Trust and will be surrendered promptly to
the Trust or the Adviser on request; provided that the Subadviser may retain
copies of these records.
The Subadviser agrees that all accounts, books and other
records maintained and preserved by it as required hereby shall be subject at
any time, and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
Each party to this Agreement agrees to cooperate with each other party and with
appropriate authorities having the requisite jurisdiction (including, but not
limited to, the SEC and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement
-4-
<PAGE> 5
or the Trust. This agreement to cooperate does not restrict either party's
right to assert that information requested is privileged or confidential.
8. REFERENCE TO THE SUBADVISER. Neither the Trust nor
the Adviser or any affiliate or agent thereof shall make reference to or use
the name of the Subadviser or any of its affiliates or any derivation thereof
or logo associated therewith in any advertising or promotional materials or
otherwise without the prior approval of the Subadviser. Any such witholding of
approval by the Subviser shall be made in writing to the Adviser and shall
indicate the specific reason(s) why such approval is being withheld.
9. STANDARD OF CARE AND INDEMNIFICATION.
(a) In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Subadviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Subadviser) the Subadviser shall
not be subject to liability to the Trust or to any shareholder of the Trust for
any act or omission in the course of, or connected with, rendering services
hereunder, including without limitation, any error of judgment or mistake of
law or for any loss suffered by any of them in connection with the matters to
which this Agreement relates, except to the extent specified in Section 36(b)
of the Act concerning loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services. Except for such disabling
conduct, the Adviser shall indemnify and hold harmless the Subadviser (and its
officers, directors, partners, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Subadviser)
from any and all losses, claims, damages, liabilities or litigation (including
reasonable legal and other expenses) arising from the Subadviser's conduct
under this Agreement. Subadviser hereby agrees to indemnify, defend and protect
Adviser (and its officers, directors, partners, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the
Adviser) and hold Adviser harmless, from and against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and
other expenses) arising out of Subadviser's disabling conduct.
(b) In no case is any indemnity provided in this
Agreement in favor of any person deemed to protect such other persons against
any liability to which such person would otherwise be subject by reasons of
willful misfeasance, bad faith, or gross negligence in the performance of his,
her or its duties or by reason of his, her or its reckless disregard of
obligations and duties under this Agreement.
(c) Any person seeking indemnification hereunder
shall furnish the indemnifying party with (i) prompt notice of any claim, suit
or action and (ii) full information and all reasonable assistance necessary to
defend such claim. The indemnifying party shall have full authority to control
the defense and settlement of any such action with counsel of its own
selection; and the indemnified party shall not have any right to
indemnification hereunder for any
-5-
<PAGE> 6
settlement entered into by the indemnified party without the indemnifying
party's prior written consent.
10. PERMISSIBLE INTERESTS. Trustees and agents of the
Trust are or may be interested in the Subadviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise; directors,
partners, officers, agents, and shareholders of the Subadviser are or may be
interested in the Trust as trustees, or otherwise; and the Subadviser (or any
successor) is or may be interested in the Trust in some manner.
11. TERM OF THE AGREEMENT. This Agreement shall continue
in full force and effect with respect to each Portfolio until two years from
the date hereof, and from year to year thereafter so long as such continuance
is specifically approved at least annually (i) by the vote of a majority of
those Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Portfolio(s) voting
separately from any other series of the Trust.
With respect to each Portfolio, this Agreement may be
terminated at any time, without payment of a penalty by the Portfolio or the
Trust, by vote of a majority of the Trustees, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Portfolio, voting
separately from any other series of the Trust, or by the Adviser, on not less
than 30 nor more than 60 days' written notice to the Subadviser. With respect
to each Portfolio, this Agreement may be terminated by the Subadviser at any
time, without the payment of any penalty, on 90 days' written notice to the
Adviser and the Trust; provided, however, that this Agreement may not be
terminated by the Subadviser unless another subadvisory agreement has been
approved by the Trust in accordance with the Act, or after six months' written
notice, whichever is earlier. In the event of such a termination, the Adviser
will use its best efforts, and cause the Trust to use its best efforts, to
engage another subadviser for the portfolio as soon as possible.
Notwithstanding the foregoing, the Subadviser may terminate the Agreement on 60
days' written notice to the Adviser and the Trust, in the event of a breach of
this Agreement by the Adviser. The termination of this Agreement with respect
to any Portfolio or the addition of any Portfolio to Schedule A hereto (in the
manner required by the Act) shall not affect the continued effectiveness of
this Agreement with respect to each other Portfolio subject hereto. This
Agreement shall automatically terminate in the event of its assignment (as
defined by the Act). This Agreement will also automatically terminate in the
event that the Advisory Agreement by and between the Trust and the Adviser is
terminated.
12. SEVERABILITY. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
13. AMENDMENTS. This Agreement may be amended by mutual
consent in writing, but the consent of the Trust must be obtained in conformity
with the requirements of the Act.
-6-
<PAGE> 7
14. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York and the applicable provisions
of the Act. To the extent the applicable laws of the State of New York or any
of the provisions herein, conflict with the applicable provisions of the Act,
the latter shall control.
15. PERSONAL LIABILITY. The Declaration of the Trust
establishing the Trust (the "Declaration"), is on file in the office of the
Secretary of The Commonwealth of Massachusetts, and, in accordance with that
Declaration, no Trustee, shareholder, officer, employee or agent of the Trust
shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall
be liable.
16. SEPARATE SERIES. Pursuant to the provisions of the
Declaration, each Portfolio is a separate series of the Trust, and all debts,
liabilities, obligations and expenses of a particular Portfolio shall be
enforceable only against the assets of that Portfolio and not against the
assets of any other Portfolio or of the Trust as a whole.
17. NOTICES. All notices shall be in writing and deemed
properly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed as
follows:
Subadviser: Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attention: General Counsel
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
-7-
<PAGE> 8
with a copy to: SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067-6022
Attention: Susan L. Harris
Senior Vice President,
General Counsel - Corporate
Affairs and Secretary
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
--------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By: /s/Authorized Signatory
--------------------------------
-8-
<PAGE> 9
SCHEDULE A
<TABLE>
<CAPTION>
ANNUAL FEE
(AS PERCENTAGE OF
AVERAGE DAILY NET ASSETS OF
PORTFOLIO(S) THE PORTFOLIO)
- ------------ ----------------------------
<S> <C>
MFS Growth and Income Portfolio 0.40% - first $300 million
0.375% - next $300 million
0.35% - next $300 million
0.325% - next $600 million
0.25% - over $1.5 billion
MFS Mid-Cap Growth Portfolio 0.40% - first $300 million
0.375% - next $300 million
0.35% - next $300 million
0.325% - next $600 million
0.25% - over $1.5 billion
MFS Total Return Portfolio 0.375%
</TABLE>
-9-
<PAGE> 1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, a Delaware
corporation (the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a Massachusetts
business trust (the "Trust"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory Agreement")
pursuant to which the Adviser has agreed to provide investment management,
advisory and administrative services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of beneficial interest in separately designated portfolios
representing separate funds with their own investment objectives, policies and
purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment portfolio or portfolios of the
Trust listed in Schedule A hereto (the "Portfolio(s)"), and the Subadviser is
willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Subadviser. The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement. Pursuant to this Subadvisory Agreement and subject to the
oversight and review of the Adviser, the Subadviser will manage the investment
and reinvestment of the assets of each Portfolio listed. The Subadviser will
determine in its discretion and subject to the oversight and review of the
Adviser, the securities to be purchased or sold, will provide the Adviser with
records concerning its activities which the Adviser or the Trust is required to
maintain, and will render regular reports to the Adviser and to officers and
Trustees of the Trust concerning its discharge of the foregoing
responsibilities. The Subadviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Trustees of the Trust and in
compliance with such policies as the Trustees of the Trust may from time to
time establish, and in compliance with the objectives, policies, and
limitations for the Portfolio(s) set forth in the Trust's current prospectus
and statement of additional information, and applicable laws and regulations.
<PAGE> 2
The Subadviser represents and warrants to the Adviser that each
of the Portfolios set forth in Schedule A will at all times be operated and
managed (1) in compliance with all applicable federal and state laws; (2) so as
not to jeopardize either the treatment of the Polaris variable annuity
contracts issued by Variable Separate Account (File No. 33-47473; hereinafter
"Contracts") as annuity contracts for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), or the eligibility of the Contracts to qualify
for sale to the public in any state where they may otherwise be sold; and (3)
to minimize any taxes and/or penalties payable by the Trust or such Portfolio.
Without limitation, the Subadviser represents and warrants the Portfolios= (1)
qualification, election and maintenance of such election by each Portfolio to
be treated as a "regulated investment company" under subchapter M, chapter 1 of
the Code, and (2) compliance with (a) the provisions of the Act and rules
adopted thereunder; (b) the diversification requirements specified in the
Internal Revenue Service's regulations under Section 817(h) of the Code; (c)
applicable state insurance laws; (d) applicable federal and state securities,
commodities and banking laws; and (e) the distribution requirements necessary
to avoid payment of any excise tax pursuant to Section 4982 of the Code. The
Subadviser further represents and warrants that to the extent that any
statements or omissions made in any Registration Statement for the Contracts or
shares of the Trust, or any amendment or supplement thereto, are made in
reliance upon and in conformity with information furnished by the Subadviser
expressly for use therein, such Registration Statement and any amendments or
supplements thereto will, when they become effective, conform in all material
respects to the requirements of the Securities Act of 1933 and the rules and
regulations of the Commission thereunder (the "1933 Act") and the Act and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement.
2. Portfolio Transactions. The Subadviser is authorized to select
the brokers or dealers that will execute the purchases and sales of portfolio
securities and is directed to use its best efforts to obtain the best price and
execution. In selecting such broker or dealers, the Subadviser shall consider
all relevant factors, including price (including the applicable brokerage
commission or dealer spread), the size of the order, the nature of the market
for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker or dealer
involved, the quality of the service, the difficulty of execution, the
execution capabilities and operations facilities of the firm involved, and the
firm's risk in positioning a block of securities. Subject to such policies as
the Trustees may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, the Subadviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of the Subadviser's having caused a Portfolio to pay
a member of an exchange, broker or dealer an
-2-
<PAGE> 3
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. The
Subadviser will promptly communicate to the Adviser and to the officers and the
Trustees of the Trust such information relating to portfolio transactions as
they may reasonably request.
3. Compensation of the Subadviser. The Subadviser shall not be
entitled to receive any payment from the Trust and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to each Portfolio listed thereon. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month (i.e., the
applicable annual fee rate divided by 365 applied to each prior days' net
assets in order to calculate the daily accrual). For purposes of calculating
the Subadviser's fee, the average daily net asset value of a Portfolio shall be
determined by taking an average of all determinations of such net asset value
during the month. If the Subadviser shall provide its services under this
Agreement for less than the whole of any month, the foregoing compensation
shall be prorated.
4. Reports. The Adviser and the Subadviser agree to furnish to each
other, if applicable, current prospectuses, statements of additional
information, proxy statements, reports of shareholders, certified copies of
their financial statements, and such other information with regard to their
affairs and that of the Trust as each may reasonably request.
5. Status of the Subadviser. The services of the Subadviser to the
Adviser and the Trust are not to be deemed exclusive, and the Subadviser shall
be free to render similar services to others so long as its services to the
Trust are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
6. Certain Records. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the Act,
all records relating to the investments of the Portfolio(s) that are required
to be maintained by the Trust pursuant to the requirements of Rule 31a-1 of
that Act. Any records required to be maintained and preserved pursuant to the
provisions of Rule 31a-1 and Rule 31a-2 promulgated under the Act which are
prepared or maintained by the Subadviser on behalf of the Trust are the
property of the Trust and will be surrendered promptly to the Trust or the
Adviser on request.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such
-3-
<PAGE> 4
reasonable periodic, special and other examinations by the Securities and
Exchange Commission, the Trust's auditors, the Trust or any representative of
the Trust, the Adviser, or any governmental agency or other instrumentality
having regulatory authority over the Trust.
7. Reference to the Subadviser. Neither the Trust nor the Adviser
or any affiliate or agent thereof shall make reference to or use the name of
the Subadviser or any of its affiliates in any advertising or promotional
materials without the prior approval of the Subadviser, which approval shall
not be unreasonably withheld.
8. Indemnification. The Adviser agrees to indemnify and hold
harmless the Subadviser and its affiliates and each of its directors and
officers and each person, if any, who controls the Subadviser within the
meaning of Section 15 of the 1933 Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses), to
which the Subadviser or its affiliates or such directors, officers or
controlling person may become subject under the 1933 Act, under any other
statute, at common law or otherwise, which may be based upon any wrongful act
or breach of this Agreement by the Adviser; provided, however, that in no case
is the Adviser's indemnity in favor of any person deemed to protect such person
against any liability to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the performance of
his, her or its duties or by reasons of his, her or its reckless disregard of
obligations and duties under this Agreement.
The Subadviser agrees to indemnify and hold harmless the Adviser
and its affiliates and each of its directors and officers and each person, if
any, who controls the Adviser within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or its affiliates or
such directors, officers or controlling person may become subject under the
1933 Act, under other statutes, at common law or otherwise, which may be based
upon (i) any wrongful act or breach of this Agreement by the Subadviser, or
(ii) any failure by the Subadviser to comply with the representations and
warranties set forth in Section 1 of this Agreement; provided, however, that in
no case is the Subadviser's indemnity in favor of any person deemed to protect
such other persons against any liability to which such person would otherwise
be subject by reasons of willful misfeasance, bad faith, or gross negligence in
the performance of his, her or its duties or by reason of his, her or its
reckless disregard of obligation and duties under this Agreement.
9. Term of the Agreement. This Agreement shall continue in full
force and effect with respect to each Portfolio until the earlier of (a) two
years from the date this Agreement is approved by the Trustees, or (b) the
first meeting of the shareholders of the Portfolio of the Trust after the date
hereof. If approved at such meeting by the affirmative vote of a majority of
the outstanding voting securities (as defined in the Act), of the Portfolio
with respect to such Portfolio, voting separately from any other series of the
Trust, this Agreement shall continue in full force and effect with respect to
such Portfolio from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
-4-
<PAGE> 5
of voting on such approval, and (ii) by the Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Portfolio voting
separately from any other series of the Trust, provided, however, that if the
shareholders fail to approve the Agreement as provided herein, the Subadviser
may continue to serve hereunder in the manner and to the extent permitted by
the Act and rules thereunder. The foregoing requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of penalty by the Portfolio or the Trust, by vote
of a majority of the Trustees, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Trust, or by the Adviser, on not less than 30 nor
more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser
and the Trust; provided, however, that this Agreement may not be terminated by
the Subadviser unless another subadvisory agreement has been approved by the
Trust in accordance with the Act, or after six months' written notice, whichever
is earlier. The termination of this Agreement with respect to any Portfolio or
the addition of any Portfolio to Schedule A hereto (in the manner required by
the Act) shall not affect the continued effectiveness of this Agreement with
respect to each other Portfolio subject hereto. This Agreement shall
automatically terminate in the event of its assignment (as defined by the Act).
This Agreement will also terminate in the event that the Advisory
Agreement by and between the Trust and the Adviser is terminated.
10. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
11. Amendments. This Agreement may be amended by mutual consent in
writing, but the consent of the Trust must be obtained in conformity the
requirements of the Act.
12. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the
Act. To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
13. Personal Liability. The Declaration of the Trust establishing
the Trust (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and, in accordance with that Declaration, no
Trustee, shareholder, officer, employee or agent of the Trust shall be held to
any personal liability, nor shall resort be had to their private property for
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust, but the "Trust Property" only shall be liable.
14. Separate Series. Pursuant to the provisions of the Declaration,
each portfolio is a
-5-
<PAGE> 6
separate series of the Trust, and all debts, liabilities, obligations and
expenses of a particular portfolio shall be enforceable only against the assets
of that portfolio and not against the assets of any other portfolio or of the
Trust as a whole.
15. Notices. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
Subadviser: Morgan Stanley Dean Witter Investment Management
1221 Avenue of the Americas
New York, New York 10020
Attention: General Counsel
Adviser: SunAmerica Asset Management Corp.
733 Third Avenue
New York, New York 10017
Attn: Robert M. Zakem
Senior Vice President
and General Counsel
with a copy to:SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Susan L. Harris
Vice President, Associate
General Counsel and
Secretary
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
-----------------------------------
-6-
<PAGE> 1
SUBADVISORY AGREEMENT
This SUBADVISORY AGREEMENT is dated as of January 1, 1999, by
and between SUNAMERICA ASSET MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation
(the "Subadviser").
WITNESSETH:
WHEREAS, the Adviser and SunAmerica Series Trust, a Massachusetts
business trust (the "Trust"), have entered into an Investment Advisory and
Management Agreement dated as of January 1, 1999, (the "Advisory Agreement"),
pursuant to which the Adviser has agreed to provide investment management,
advisory and administrative services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company and
may issue shares of beneficial interest, no par value per share, in separately
designated portfolios representing separate funds with their own investment
objectives, policies and purposes; and
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Subadviser to furnish
investment advisory services to the investment portfolio or portfolios of the
Trust listed on Schedule A attached hereto (the "Portfolio(s)"), and the
Subadviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. DUTIES OF THE SUBADVISER. The Adviser hereby engages the
services of the Subadviser in furtherance of its Investment Advisory and
Management Agreement with the Trust. Pursuant to this Subadvisory Agreement and
subject to the oversight and review of the Adviser, the Subadviser will manage
the investment and reinvestment of the assets of each Portfolio listed on
Schedule A attached hereto. The Subadviser will determine in its discretion and
subject to the oversight and review of the Adviser, the securities to be
purchased or sold, will provide the Adviser with records concerning its
activities which the Adviser or the Trust is required to maintain, and will
render regular reports to the Adviser and to officers and Trustees of the Trust
concerning its discharge of the foregoing responsibilities. The Subadviser
shall discharge the foregoing responsibilities subject to the control of the
officers and the Trustees of the Trust and in compliance with such policies as
the Trustees of the Trust may from time to time establish as delivered in
writing to the Subadviser, and in compliance with (a) the objectives, policies,
and limitations for the Portfolio(s) set forth in the Trust's current
prospectus and statement of additional information as delivered to the
Subadviser, and (b) applicable laws and regulations.
<PAGE> 2
The Subadviser agrees that it will operate and manage the
Portfolio set forth in Schedule A (1) in compliance with all applicable federal
and state laws governing the Subadviser's management of the Portfolio and
investments; and (2) so as not to jeopardize either the treatment of the
SunAmerica Series Trust variable annuity contracts issued by Variable Separate
Account and FS Variable Separate Account (File Nos. 33-47473 and 33-85014,
respectively; hereinafter "Contracts") as annuity contracts for purposes of the
Internal Revenue Code of 1986, as amended (the "Code"). Without limiting the
foregoing, the Subadviser agrees to manage the Portfolio in compliance with (a)
the provisions of the Act and rules adopted thereunder; (b) the diversification
requirements specified in the Internal Revenue Service's regulations under
Section 817(h) of the Code; (c) applicable state insurance laws; and (d)
applicable federal and state securities, commodities and banking laws; provided
that Adviser shall provide Subadviser with written direction as to the
requirements of applicable state insurance laws and applicable federal and
state banking laws. For purposes of the preceding sentence, disclosure in the
Trust's prospectus and/or statement of additional information of applicable
state insurance laws and regulations and applicable federal and state banking
laws and regulations shall constitute "written direction" thereof. The Adviser
acknowledges and agrees that the Subadviser's compliance with its obligations
under this Agreement will be based, in part, on information supplied by the
Adviser, or an agent thereof, as to each Portfolio, including but not limited
to, portfolio security lot level realized and unrealized gain/loss allocation.
The Adviser agrees that all such information will be supplied on a timely
basis. The Subadviser further represents and warrants that to the extent that
any statements or omissions made in any Registration Statement for the
Contracts or shares of the Trust, or any amendment or supplement thereto, are
made in reliance upon and in conformity with information furnished by the
Subadviser expressly for use therein, such Registration Statement and any
amendments or supplements thereto will, when they become effective, conform in
all material respects to the requirements of the Securities Act of 1933 and the
rules and regulations of the Commission thereunder (the "1933 Act") and the Act
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
The Subadviser accepts such employment and agrees, at its own
expense, to render the services set forth herein and to provide the office
space, furnishings, equipment and personnel required by it to perform such
services on the terms and for the compensation provided in this Agreement. The
Subadviser shall not have any responsibility for the administrative affairs of
the Portfolio, including any responsibility for the calculation of the net
asset value of the Portfolio's shares or shareholder accounting services;
provided, however, that the Subadviser shall, as requested from time to time by
the Adviser, assist the Adviser in obtaining pricing information relating to
the Portfolio's investment securities.
2. PORTFOLIO TRANSACTIONS. The Subadviser is responsible for
decisions to buy or sell securities and other investments of the assets of each
Portfolio, broker-dealers and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing portfolio transactions, the Subadviser may
employ or deal with such broker-dealers or futures commission merchants as may,
in the Subadviser's best judgement, provide prompt and reliable execution of
the transactions at favorable
-2-
<PAGE> 3
prices and reasonable commission rates. In selecting such broker-dealers or
futures commission merchants, the Subadviser shall consider all relevant
factors including price (including the applicable brokerage commission, dealer
spread or futures commission merchant rate), the size of the order, the nature
of the market for the security or other investment, the timing of the
transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, the execution capabilities and
operational facilities of the firm involved, and, in the case of securities,
the firm's risk in positioning a block of securities. Subject to such policies
as the Trustees may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Subadviser
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of the Subadviser's
having caused a Portfolio to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, if the Subadviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member of an exchange,
broker or dealer viewed in terms of either that particular transaction or the
Subadviser's overall responsibilities with respect to such Portfolio and to
other clients as to which the Subadviser exercises investment discretion. In
accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder,
and subject to any other applicable laws and regulations including Section
17(e) of the Act and Rule 17e-1 thereunder, the Subadviser may engage its
affiliates, the Adviser and its affiliates or any other subadviser to the Trust
and its respective affiliates, as broker-dealers or futures commission
merchants to effect portfolio transactions in securities and other investments
for a Portfolio. The Subadviser will promptly communicate to the Adviser and to
the officers and the Trustees of the Trust such information relating to
portfolio transactions as they may reasonably request. To the extent consistent
with applicable law, the Subadviser may aggregate purchase or sell orders for
the Portfolio with contemporaneous purchase or sell orders of other clients of
the Subadviser or its affiliated persons. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
determines to be equitable and consistent with its and its affiliates'
fiduciary obligations to the Portfolio and to such other clients. The Adviser
hereby acknowledges that such aggregation of orders may not result in more
favorable pricing or lower brokerage commissions in all instances.
3. COMPENSATION OF THE SUBADVISER. The Subadviser shall not be
entitled to receive any payment from the Trust and shall look solely and
exclusively to the Adviser for payment of all fees for the services rendered,
facilities furnished and expenses paid by it hereunder. As full compensation
for the Subadviser under this Agreement, the Adviser agrees to pay the
Subadviser a fee at the annual rates set forth in Schedule A hereto with
respect to each Portfolio listed thereon. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month (i.e., the
applicable annual fee rate divided by 365 applied to each prior days' net
assets in order to calculate the daily accrual). For purposes of calculating
the Subadviser's fee, the average daily net asset value of a Portfolio shall be
determined by taking an average of all determinations of such net
-3-
<PAGE> 4
asset value during the month. If the Subadviser shall provide its services
under this Agreement for less than the whole of any month, the foregoing
compensation shall be prorated.
4. OTHER SERVICES. At the request of the Trust or the Adviser, the
Subadviser in its discretion may make available to the Trust, office
facilities, equipment, personnel and other services. Such office facilities,
equipment, personnel and services shall be provided for or rendered by the
Subadviser and billed to the Trust or the Adviser at the Subadviser's cost.
5. REPORTS. The Trust, the Adviser and the Subadviser agree to
furnish to each other, if applicable, current prospectuses, statements of
additional information, proxy statements, reports of shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs and that of the Trust as each may reasonably request.
6. STATUS OF THE SUBADVISER. The services of the Subadviser to the
Adviser and the Trust are not to be deemed exclusive, and the Subadviser shall
be free to render similar services to others so long as its services to the
Trust are not impaired thereby. The Subadviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. CERTAIN RECORDS. While the Subadviser is not being engaged to
serve as the Trust's official record keeper, the Subadviser nevertheless hereby
undertakes and agrees to maintain, in the form and for the period required by
Section 204 of the Advisers Act and Rule 204-2 thereunder, all records relating
to the investments of the Portfolio(s) that are required to be maintained by
the Subadviser pursuant to the requirements of Rule 204-2 under the Advisers
Act. The Subadviser will also, in connection with the purchase and sale of
securities for each Portfolio, arrange for the transmission to the custodian
for the Trust on a daily basis, such confirmation, trade tickets, and other
documents and information, that identify securities to be purchased or sold on
behalf of the Portfolio, as may be reasonably necessary to enable the custodian
to perform its administrative and recordkeeping responsibilities with respect
to the Portfolio.
The Subadviser agrees that all accounts, books and other records
maintained and preserved by it as required hereby shall be subject at any time,
and from time to time, to such reasonable periodic, special and other
examinations by the Securities and Exchange Commission, the Trust's auditors,
the Trust or any representative of the Trust, the Adviser, or any governmental
agency or other instrumentality having regulatory authority over the Trust.
8. REFERENCE TO THE SUBADVISER. The Adviser covenants as follows:
(a) The Adviser will (and will cause its affiliates
(including the Trust) (each an "Affiliate") to) use the name "Putnam Investment
Management", "Putnam Investments", "Putnam" or any derivation thereof only for
so long as this Agreement remains in effect. At such times as this Agreement is
no longer in effect, the Adviser will, and will cause each Affiliate to, cease
using any
-4-
<PAGE> 5
such name or any other name indicating that any Portfolio is advised
by or otherwise connected to the Subadviser.
(b) It will not, and will cause its Affiliates to not, refer
to the Subadviser or any Affiliate in any sales literature or promotional
material except with the prior approval of the Subadviser. In the case of
materials, such as the portfolio's prospectus, required by law to be prepared,
such approval shall not be unreasonably withheld.
(c) It will permit the Portfolios to be used as a funding
vehicle only for insurance contracts issued by SunAmerica Inc. or any of its
affiliates.
(d) It will not (and will cause it Affiliates to not) engage
in marketing programs (written or otherwise) directed toward Putnam Capital
Manager Annuity Contract ("PCM") which directly solicit transfers from PCM to
the Adviser's products or those of its Affiliates. For purposes of the
foregoing, general marketing efforts by SunAmerica Inc. and its affiliates
shall not constitute a direct solicitation of PCM contract holders. The Adviser
will not (and will cause its Affiliates to not) create or use marketing
materials which provide direct comparisons between PCM and the Adviser's
products or those of any of its Affiliates. The Adviser, in connection with any
exchange program, will not (and will cause its Affiliates to not) reimburse
voluntarily, or enter into any contract or policy after the date hereof
providing for the reimbursement of, any deferred sales charges to encourage the
transfer of assets from PCM to the Adviser's products or those of any
Affiliate. For purposes hereof, the term "Affiliate" shall not be construed to
include agents of SunAmerica Inc. or affiliates thereof, who are not employees
of such entities.
9. LIABILITY OF THE SUBADVISER. (a) In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
or duties ("disabling conduct") hereunder on the part of the Subadviser (and
its officers, directors, agents, employees, controlling persons, shareholders
and any other person or entity affiliated with the Subadviser) the Subadviser
shall not be subject to liability to the Trust, any shareholder of the Trust or
the Adviser for any act or omission in the course of, or connected with,
rendering services hereunder, including without limitation, any error of
judgment or mistake of law or for any loss suffered by any of them in
connection with the matters to which this Agreement relates. Except for such
disabling conduct, the Adviser shall indemnify the Subadviser (and its
officers, directors, partners, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Subadviser)
(collectively, the "Indemnified Parties") from any liability arising from the
Subadviser's conduct under this Agreement.
(b) The Subadviser agrees to indemnify and hold harmless the
Adviser and its affiliates and each of its directors and officers and each
person, if any, who controls the Adviser within the meaning of Section 15 of
the 1933 Act against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses), to which the
Adviser or its affiliates or such directors, officers or controlling persons
may become subject under the 1933 Act, under other statutes, at common law or
otherwise, which may be based upon (i) any wrongful act
-5-
<PAGE> 6
or material breach of this Agreement by the Subadviser resulting from
Subadviser's disabling conduct, or (ii) any untrue statement of a material fact
in the Trust's registration statement or omission to state a material fact
required to be stated therein or necessary to make the statement therein not
misleading, if such statement or omission was made in reliance on information
furnished by the Subadviser to use in such registration statement, provided,
however, that in no case is the Subadviser's indemnity in favor of any person
deemed to protect such other persons against any liability to which such person
would otherwise be subject by reasons of willful misfeasance, bad faith, or
gross negligence in the performance of his, her or its duties or by reason of
his, her or its reckless disregard of obligation and duties under this
Agreement.
10. PERMISSIBLE INTERESTS. Trustees and agents of the Trust are or
may be interested in the Subadviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Subadviser are or may be interested
in the Trust as trustees, or otherwise; and the Subadviser (or any successor)
is or may be interested in the Trust in some manner.
11. TERM OF THE AGREEMENT. This Agreement shall continue in full
force and effect with respect to each Portfolio until the earlier of (a) two
years from the date this Agreement is approved by the Trustees, or (b) the
first meeting of the shareholders of the Portfolio of the Trust after the date
hereof. If approved at such meeting by the affirmative vote of a majority of
the outstanding voting securities (as defined in the Act), of the Portfolio
with respect to such Portfolio, voting separately from any other series of the
Trust, this Agreement shall continue in full force and effect with respect to
such Portfolio from year to year thereafter so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Portfolio voting
separately from any other series of the Trust, provided, however, that if the
shareholders fail to approve the Agreement as provided herein, the Subadviser
may continue to serve hereunder in the manner and to the extent permitted by
the Act and rules thereunder. The foregoing requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the Act and the rules and regulations thereunder.
With respect to each Portfolio, this Agreement may be terminated
at any time, without payment of a penalty by the Portfolio or the Trust, by
vote of a majority of the Trustees, or by vote of a majority of the outstanding
voting securities (as defined in the Act) of the Portfolio, voting separately
from any other series of the Trust, or by the Adviser, on not less than 30 nor
more than 60 days' written notice to the Subadviser. With respect to each
Portfolio, this Agreement may be terminated by the Subadviser at any time,
without the payment of any penalty, on 60 days' written notice to the Adviser
and the Trust. The termination of this Agreement with respect to any Portfolio
or the addition of any Portfolio to Schedule A hereto (in the manner required
by the Act) shall not affect the continued effectiveness of this Agreement with
respect to each other Portfolio subject
-6-
<PAGE> 7
hereto. This Agreement shall automatically terminate in the event of its
assignment (as defined by the Act).
This Agreement will also terminate in the event that the
Advisory Agreement by and between the Trust and the Adviser is terminated.
12. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
13. AMENDMENTS. This Agreement may be amended by mutual consent in
writing, but the consent of the Trust must be obtained in conformity with the
requirements of the Act.
14. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the
Act. To the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. PERSONAL LIABILITY. The Declaration of the Trust establishing
the Trust (the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, and, in accordance with that Declaration, no
Trustee, shareholder, officer, employee or agent of the Trust shall be held to
any personal liability, nor shall resort be had to their private property for
satisfaction of any obligation or claim or otherwise in connection with the
affairs of the Trust, but the "Trust Property" only shall be liable.
16. SEPARATE SERIES. Pursuant to the provisions of the Declaration,
each Portfolio is a separate series of the Trust, and all debts, liabilities,
obligations and expenses of a particular Portfolio shall be enforceable only
against the assets of that Portfolio and not against the assets of any other
Portfolio or of the Trust as a whole.
17. NOTICES. All notices shall be in writing and deemed properly
given when delivered or mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:
Subadviser: Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
Attn: General Counsel
Adviser: SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue, Third Floor
New York, NY 10017
Attention: Robert M. Zakem
Senior Vice President and
General Counsel
-7-
<PAGE> 8
with a copy to: SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067-6022
Attention: Susan L. Harris
Senior Vice President,
General Counsel - Corporate Affairs
and Secretary
IN WITNESS WHEREOF, the parties have caused their respective duly
authorized officers to execute this Agreement as of the date first above
written.
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/Authorized Signatory
---------------------------------
PUTNAM INVESTMENT MANAGEMENT, INC.
By: /s/Authorized Signatory
---------------------------------
-8-
<PAGE> 1
EXHIBIT I
March 29, 1999
Gentlemen:
This opinion is being furnished in connection with the filing by
SunAmerica Series Trust, a Massachusetts business trust (the "Trust"), of
Post-Effective Amendment No. 20 (the "Amendment") to the Registration Statement
on Form N-1A (the "Registration Statement") which registers an indefinite
number of shares of beneficial interest of each series of the Trust without par
value, (the "Shares") under the Securities Act of 1933, as amended (the "1933
Act"), pursuant to the Trust's Registration Statement.
As counsel for the Trust, I am familiar with the proceedings taken by the
Trust in connection with the authorization, issuance and sale of the Shares. In
addition, I have examined the Trust's Declaration of Trust, By-Laws and such
other documents that have been deemed relevant to the matters referred to
herein.
Based upon the foregoing, I am of the opinion that, upon issuance and sale
of the Shares in the manner referred to in the Amendment, the Shares will be
legally issued, fully paid and nonassessable shares of beneficial interest of
the Trust. However, I note that as set forth in the Registration Statement,
shareholders of Seasons Series Trust might, under certain circumstances, be
liable for transactions effected by the Trust.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Amendment, and to the filing of this
opinion under the securities laws of any state.
Very truly yours,
By: /s/ Robert M. Zakem
------------------------------------------
Robert M. Zakem
Senior Vice President and General Counsel
<PAGE> 1
EXHIBIT (J)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No.
20 to the registration statement on Form N-1A (the "Registration Statement") of
our report dated March 19, 1999, relating to the financial statements and
financial highlights appearing in the January 31, 1999 Annual Report to
Shareholders of SunAmerica Series Trust, which are also incorporated by
reference into the Registration Statement. We also consent to the reference to
us under the heading "General Information" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in the Prospectus, which constitutes part of this Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 19, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 011
<NAME> SUNAMERICA SERIES TRUST GLOBAL EQUITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 358,605,286
<INVESTMENTS-AT-VALUE> 413,974,527
<RECEIVABLES> 9,440,787
<ASSETS-OTHER> 7,981
<OTHER-ITEMS-ASSETS> 4,303,177
<TOTAL-ASSETS> 427,726,472
<PAYABLE-FOR-SECURITIES> 2,871,680
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,496,803
<TOTAL-LIABILITIES> 7,368,483
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 337,951,338
<SHARES-COMMON-STOCK> 24,867,476
<SHARES-COMMON-PRIOR> 21,381,428
<ACCUMULATED-NII-CURRENT> 4,369,876
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,489,013
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 54,547,762
<NET-ASSETS> 420,357,989
<DIVIDEND-INCOME> 4,580,487
<INTEREST-INCOME> 663,866
<OTHER-INCOME> 0
<EXPENSES-NET> 3,427,915
<NET-INVESTMENT-INCOME> 1,816,438
<REALIZED-GAINS-CURRENT> 32,951,996
<APPREC-INCREASE-CURRENT> 15,989,727
<NET-CHANGE-FROM-OPS> 50,758,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,270,000)
<DISTRIBUTIONS-OF-GAINS> (29,965,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,865,607
<NUMBER-OF-SHARES-REDEEMED> (7,373,444)
<SHARES-REINVESTED> 1,993,885
<NET-CHANGE-IN-ASSETS> 78,718,795
<ACCUMULATED-NII-PRIOR> 1,870,601
<ACCUMULATED-GAINS-PRIOR> 25,413,638
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,893,944
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,427,915
<AVERAGE-NET-ASSETS> 391,376,060
<PER-SHARE-NAV-BEGIN> 15.98
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 2.40
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> (1.36)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.90
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 021
<NAME> SUNAMERICA SERIES TRUST ALLIANCE GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 1,147,880,385
<INVESTMENTS-AT-VALUE> 1,411,183,191
<RECEIVABLES> 12,029,419
<ASSETS-OTHER> 18,944
<OTHER-ITEMS-ASSETS> 489
<TOTAL-ASSETS> 1,423,232,043
<PAYABLE-FOR-SECURITIES> 24,498,978
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,593,045
<TOTAL-LIABILITIES> 27,092,023
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 998,116,331
<SHARES-COMMON-STOCK> 49,783,374
<SHARES-COMMON-PRIOR> 31,224,923
<ACCUMULATED-NII-CURRENT> 2,757,752
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 131,205,631
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 264,060,306
<NET-ASSETS> 1,396,140,020
<DIVIDEND-INCOME> 8,002,163
<INTEREST-INCOME> 745,476
<OTHER-INCOME> 0
<EXPENSES-NET> 5,979,078
<NET-INVESTMENT-INCOME> 2,768,561
<REALIZED-GAINS-CURRENT> 131,988,790
<APPREC-INCREASE-CURRENT> 162,389,460
<NET-CHANGE-FROM-OPS> 297,146,811
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,965,000)
<DISTRIBUTIONS-OF-GAINS> (81,965,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,725,595
<NUMBER-OF-SHARES-REDEEMED> (15,499,022)
<SHARES-REINVESTED> 3,331,878
<NET-CHANGE-IN-ASSETS> 691,606,753
<ACCUMULATED-NII-PRIOR> 1,954,191
<ACCUMULATED-GAINS-PRIOR> 81,181,841
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,626,794
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,979,078
<AVERAGE-NET-ASSETS> 1,025,358,827
<PER-SHARE-NAV-BEGIN> 22.56
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 7.77
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> (2.30)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.04
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 031
<NAME> SUNAMERICA SERIES TRUST GROWTH/PHOENIX INVESTMENT COUNSEL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 189,996,176
<INVESTMENTS-AT-VALUE> 239,800,117
<RECEIVABLES> 333,609
<ASSETS-OTHER> 5,685
<OTHER-ITEMS-ASSETS> 4,191
<TOTAL-ASSETS> 240,143,602
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,845,130
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 176,423,275
<SHARES-COMMON-STOCK> 15,502,022
<SHARES-COMMON-PRIOR> 13,988,236
<ACCUMULATED-NII-CURRENT> 382,750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,688,506
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49,803,941
<NET-ASSETS> 238,298,472
<DIVIDEND-INCOME> 1,672,684
<INTEREST-INCOME> 319,029
<OTHER-INCOME> 0
<EXPENSES-NET> 1,593,885
<NET-INVESTMENT-INCOME> 397,828
<REALIZED-GAINS-CURRENT> 11,774,676
<APPREC-INCREASE-CURRENT> 25,041,204
<NET-CHANGE-FROM-OPS> 37,213,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,540,000)
<DISTRIBUTIONS-OF-GAINS> (37,090,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,358,623
<NUMBER-OF-SHARES-REDEEMED> (3,487,108)
<SHARES-REINVESTED> 2,642,271
<NET-CHANGE-IN-ASSETS> 19,802,654
<ACCUMULATED-NII-PRIOR> 1,533,739
<ACCUMULATED-GAINS-PRIOR> 36,995,013
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,467,118
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,593,885
<AVERAGE-NET-ASSETS> 227,852,960
<PER-SHARE-NAV-BEGIN> 15.62
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 2.61
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (2.76)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.37
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 041
<NAME> SUNAMERICA SERIES TRUST PUTNAM GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 303,420,952
<INVESTMENTS-AT-VALUE> 398,298,256
<RECEIVABLES> 2,357,216
<ASSETS-OTHER> 6,326
<OTHER-ITEMS-ASSETS> 705
<TOTAL-ASSETS> 400,662,503
<PAYABLE-FOR-SECURITIES> 1,043,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 756,128
<TOTAL-LIABILITIES> 1,799,288
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 293,277,062
<SHARES-COMMON-STOCK> 19,740,492
<SHARES-COMMON-PRIOR> 12,258,209
<ACCUMULATED-NII-CURRENT> 267,117
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,441,732
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 94,877,304
<NET-ASSETS> 398,863,215
<DIVIDEND-INCOME> 2,426,681
<INTEREST-INCOME> 593,826
<OTHER-INCOME> 0
<EXPENSES-NET> 2,737,604
<NET-INVESTMENT-INCOME> 282,903
<REALIZED-GAINS-CURRENT> 10,488,436
<APPREC-INCREASE-CURRENT> 49,263,300
<NET-CHANGE-FROM-OPS> 60,034,639
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (340,000)
<DISTRIBUTIONS-OF-GAINS> (43,740,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,626,946
<NUMBER-OF-SHARES-REDEEMED> (5,433,344)
<SHARES-REINVESTED> 2,288,681
<NET-CHANGE-IN-ASSETS> 164,137,001
<ACCUMULATED-NII-PRIOR> 333,117
<ACCUMULATED-GAINS-PRIOR> 43,684,393
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,581,835
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,737,604
<AVERAGE-NET-ASSETS> 317,027,744
<PER-SHARE-NAV-BEGIN> 19.15
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 4.15
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (3.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.21
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 051
<NAME> SUNAMERICA SERIES TRUST GROWTH-INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 772,208,087
<INVESTMENTS-AT-VALUE> 1,019,010,417
<RECEIVABLES> 4,869,122
<ASSETS-OTHER> 14,905
<OTHER-ITEMS-ASSETS> 541
<TOTAL-ASSETS> 1,023,894,985
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,304,858
<TOTAL-LIABILITIES> 4,304,858
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 717,788,150
<SHARES-COMMON-STOCK> 42,072,781
<SHARES-COMMON-PRIOR> 29,882,556
<ACCUMULATED-NII-CURRENT> 6,292,994
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 42,977,449
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 252,531,534
<NET-ASSETS> 1,019,590,127
<DIVIDEND-INCOME> 6,786,492
<INTEREST-INCOME> 4,338,253
<OTHER-INCOME> 0
<EXPENSES-NET> 4,817,836
<NET-INVESTMENT-INCOME> 6,306,909
<REALIZED-GAINS-CURRENT> 43,334,956
<APPREC-INCREASE-CURRENT> 104,316,297
<NET-CHANGE-FROM-OPS> 153,958,162
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,145,000)
<DISTRIBUTIONS-OF-GAINS> (32,070,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,956,198
<NUMBER-OF-SHARES-REDEEMED> (9,337,805)
<SHARES-REINVESTED> 1,571,832
<NET-CHANGE-IN-ASSETS> 397,527,631
<ACCUMULATED-NII-PRIOR> 4,138,634
<ACCUMULATED-GAINS-PRIOR> 31,704,944
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,533,481
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,817,836
<AVERAGE-NET-ASSETS> 806,696,135
<PER-SHARE-NAV-BEGIN> 20.82
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 4.33
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (0.96)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.23
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 061
<NAME> SUNAMERICA SERIES TRUST HIGH YIELD BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 307,885,190
<INVESTMENTS-AT-VALUE> 279,368,634
<RECEIVABLES> 8,268,737
<ASSETS-OTHER> 4,999
<OTHER-ITEMS-ASSETS> 660
<TOTAL-ASSETS> 287,643,030
<PAYABLE-FOR-SECURITIES> 2,404,490
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 658,042
<TOTAL-LIABILITIES> 3,062,532
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 288,468,092
<SHARES-COMMON-STOCK> 25,920,925
<SHARES-COMMON-PRIOR> 16,552,238
<ACCUMULATED-NII-CURRENT> 25,603,717
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (974,755)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (28,516,556)
<NET-ASSETS> 284,580,498
<DIVIDEND-INCOME> 456,053
<INTEREST-INCOME> 26,975,805
<OTHER-INCOME> 0
<EXPENSES-NET> 1,808,312
<NET-INVESTMENT-INCOME> 25,623,546
<REALIZED-GAINS-CURRENT> (861,067)
<APPREC-INCREASE-CURRENT> (30,181,712)
<NET-CHANGE-FROM-OPS> (5,419,233)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,985,000)
<DISTRIBUTIONS-OF-GAINS> (1,645,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,131,140
<NUMBER-OF-SHARES-REDEEMED> (15,085,908)
<SHARES-REINVESTED> 1,323,455
<NET-CHANGE-IN-ASSETS> 88,941,492
<ACCUMULATED-NII-PRIOR> 13,972,776
<ACCUMULATED-GAINS-PRIOR> 1,523,707
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,667,268
<INTEREST-EXPENSE> 14,905
<GROSS-EXPENSE> 1,808,312
<AVERAGE-NET-ASSETS> 262,752,523
<PER-SHARE-NAV-BEGIN> 11.82
<PER-SHARE-NII> 1.14
<PER-SHARE-GAIN-APPREC> (1.24)
<PER-SHARE-DIVIDEND> (0.66)
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.98
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 071
<NAME> SUNAMERICA SERIES TRUST CASH MANAGEMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 220,050,946
<INVESTMENTS-AT-VALUE> 220,072,621
<RECEIVABLES> 6,006,562
<ASSETS-OTHER> 5,597
<OTHER-ITEMS-ASSETS> 7,235,410
<TOTAL-ASSETS> 233,320,190
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,680,099
<TOTAL-LIABILITIES> 9,680,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 213,571,824
<SHARES-COMMON-STOCK> 21,137,846
<SHARES-COMMON-PRIOR> 14,542,029
<ACCUMULATED-NII-CURRENT> 10,054,177
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7,585)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,675
<NET-ASSETS> 223,640,091
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,230,912
<OTHER-INCOME> 0
<EXPENSES-NET> 1,164,806
<NET-INVESTMENT-INCOME> 10,066,106
<REALIZED-GAINS-CURRENT> (6,901)
<APPREC-INCREASE-CURRENT> 25,431
<NET-CHANGE-FROM-OPS> 10,084,636
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,780,000)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 122,958,824
<NUMBER-OF-SHARES-REDEEMED> (117,025,116)
<SHARES-REINVESTED> 662,109
<NET-CHANGE-IN-ASSETS> 67,520,637
<ACCUMULATED-NII-PRIOR> 6,768,071
<ACCUMULATED-GAINS-PRIOR> (684)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,059,551
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,164,806
<AVERAGE-NET-ASSETS> 202,391,146
<PER-SHARE-NAV-BEGIN> 10.74
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.68)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.58
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 081
<NAME> SUNAMERICA SERIES TRUST ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 720,843,055
<INVESTMENTS-AT-VALUE> 732,876,795
<RECEIVABLES> 33,563,771
<ASSETS-OTHER> 12,655
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 766,453,221
<PAYABLE-FOR-SECURITIES> 48,171,855
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,236,096
<TOTAL-LIABILITIES> 53,407,951
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 657,595,100
<SHARES-COMMON-STOCK> 48,147,133
<SHARES-COMMON-PRIOR> 32,487,541
<ACCUMULATED-NII-CURRENT> 18,708,081
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,296,960
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,445,129
<NET-ASSETS> 713,045,270
<DIVIDEND-INCOME> 6,446,320
<INTEREST-INCOME> 17,716,410
<OTHER-INCOME> 0
<EXPENSES-NET> 4,074,673
<NET-INVESTMENT-INCOME> 20,088,057
<REALIZED-GAINS-CURRENT> 22,532,216
<APPREC-INCREASE-CURRENT> (29,396,243)
<NET-CHANGE-FROM-OPS> 13,224,030
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,565,000)
<DISTRIBUTIONS-OF-GAINS> (58,650,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,818,398
<NUMBER-OF-SHARES-REDEEMED> (7,735,606)
<SHARES-REINVESTED> 4,576,800
<NET-CHANGE-IN-ASSETS> 186,459,875
<ACCUMULATED-NII-PRIOR> 11,185,024
<ACCUMULATED-GAINS-PRIOR> 51,414,744
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,758,570
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,074,673
<AVERAGE-NET-ASSETS> 637,921,781
<PER-SHARE-NAV-BEGIN> 16.21
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> (0.35)
<PER-SHARE-DISTRIBUTIONS> (1.61)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.81
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 091
<NAME> SUNAMERICA SERIES TRUST GLOBAL BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 107,695,823
<INVESTMENTS-AT-VALUE> 111,964,911
<RECEIVABLES> 2,660,667
<ASSETS-OTHER> 2,051,047
<OTHER-ITEMS-ASSETS> 10,467
<TOTAL-ASSETS> 116,687,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,258,877
<TOTAL-LIABILITIES> 1,258,877
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,424,448
<SHARES-COMMON-STOCK> 9,803,196
<SHARES-COMMON-PRIOR> 7,733,604
<ACCUMULATED-NII-CURRENT> 2,981,658
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,617,939
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,404,170
<NET-ASSETS> 114,428,215
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,355,321
<OTHER-INCOME> 0
<EXPENSES-NET> 892,160
<NET-INVESTMENT-INCOME> 4,463,161
<REALIZED-GAINS-CURRENT> 3,500,204
<APPREC-INCREASE-CURRENT> 3,699,307
<NET-CHANGE-FROM-OPS> 11,662,672
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,255,000)
<DISTRIBUTIONS-OF-GAINS> (1,735,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,681,272
<NUMBER-OF-SHARES-REDEEMED> (4,342,695)
<SHARES-REINVESTED> 731,015
<NET-CHANGE-IN-ASSETS> 26,385,692
<ACCUMULATED-NII-PRIOR> 5,020,328
<ACCUMULATED-GAINS-PRIOR> 1,605,904
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 728,940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 892,160
<AVERAGE-NET-ASSETS> 104,452,294
<PER-SHARE-NAV-BEGIN> 11.51
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.78
<PER-SHARE-DIVIDEND> (0.79)
<PER-SHARE-DISTRIBUTIONS> (0.22)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.77
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 101
<NAME> SUNAMERICA SERIES TRUST CORPORATE BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 139,721,082
<INVESTMENTS-AT-VALUE> 141,033,101
<RECEIVABLES> 3,206,738
<ASSETS-OTHER> 2,126
<OTHER-ITEMS-ASSETS> 4,403
<TOTAL-ASSETS> 144,246,368
<PAYABLE-FOR-SECURITIES> 478,951
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 206,131
<TOTAL-LIABILITIES> 685,082
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 135,935,380
<SHARES-COMMON-STOCK> 12,139,847
<SHARES-COMMON-PRIOR> 5,395,202
<ACCUMULATED-NII-CURRENT> 6,650,194
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (336,307)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,312,019
<NET-ASSETS> 143,561,286
<DIVIDEND-INCOME> 175,643
<INTEREST-INCOME> 7,260,944
<OTHER-INCOME> 0
<EXPENSES-NET> 777,221
<NET-INVESTMENT-INCOME> 6,659,366
<REALIZED-GAINS-CURRENT> (60,443)
<APPREC-INCREASE-CURRENT> (565,665)
<NET-CHANGE-FROM-OPS> 6,033,258
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,280,000)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,082,885
<NUMBER-OF-SHARES-REDEEMED> (2,626,465)
<SHARES-REINVESTED> 288,225
<NET-CHANGE-IN-ASSETS> 81,289,668
<ACCUMULATED-NII-PRIOR> 3,269,106
<ACCUMULATED-GAINS-PRIOR> (274,142)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 654,148
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 777,221
<AVERAGE-NET-ASSETS> 100,691,238
<PER-SHARE-NAV-BEGIN> 11.54
<PER-SHARE-NII> 0.77
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.83
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 111
<NAME> SUNAMERICA SERIES TRUST BALANCED/PHOENIX INVESTMENT COUNSEL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 115,869,876
<INVESTMENTS-AT-VALUE> 130,682,457
<RECEIVABLES> 902,104
<ASSETS-OTHER> 2,397
<OTHER-ITEMS-ASSETS> 2,601
<TOTAL-ASSETS> 131,589,559
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 149,819
<TOTAL-LIABILITIES> 149,819
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 112,888,557
<SHARES-COMMON-STOCK> 8,785,397
<SHARES-COMMON-PRIOR> 6,489,618
<ACCUMULATED-NII-CURRENT> 2,758,518
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 980,084
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,812,581
<NET-ASSETS> 131,439,740
<DIVIDEND-INCOME> 486,611
<INTEREST-INCOME> 3,152,118
<OTHER-INCOME> 0
<EXPENSES-NET> 875,860
<NET-INVESTMENT-INCOME> 2,762,869
<REALIZED-GAINS-CURRENT> 1,095,104
<APPREC-INCREASE-CURRENT> 10,235,149
<NET-CHANGE-FROM-OPS> 14,093,122
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,165,000)
<DISTRIBUTIONS-OF-GAINS> (9,655,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,754,398
<NUMBER-OF-SHARES-REDEEMED> (1,285,192)
<SHARES-REINVESTED> 826,573
<NET-CHANGE-IN-ASSETS> 35,718,704
<ACCUMULATED-NII-PRIOR> 2,153,212
<ACCUMULATED-GAINS-PRIOR> 9,547,417
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 762,995
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 875,860
<AVERAGE-NET-ASSETS> 113,537,612
<PER-SHARE-NAV-BEGIN> 14.75
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 1.56
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> (1.40)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.96
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 121
<NAME> SUNAMERICA SERIES TRUST VENTURE VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 1,407,596,503
<INVESTMENTS-AT-VALUE> 1,727,012,607
<RECEIVABLES> 5,112,414
<ASSETS-OTHER> 25,857
<OTHER-ITEMS-ASSETS> 657
<TOTAL-ASSETS> 1,732,151,535
<PAYABLE-FOR-SECURITIES> 1,729,730
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,010,969
<TOTAL-LIABILITIES> 6,740,699
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,336,913,820
<SHARES-COMMON-STOCK> 74,708,785
<SHARES-COMMON-PRIOR> 53,109,248
<ACCUMULATED-NII-CURRENT> 12,945,662
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,134,983
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 319,416,371
<NET-ASSETS> 1,725,410,836
<DIVIDEND-INCOME> 17,319,322
<INTEREST-INCOME> 6,630,872
<OTHER-INCOME> 0
<EXPENSES-NET> 10,987,042
<NET-INVESTMENT-INCOME> 12,963,152
<REALIZED-GAINS-CURRENT> 56,164,555
<APPREC-INCREASE-CURRENT> 77,803,918
<NET-CHANGE-FROM-OPS> 146,931,625
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,660,000)
<DISTRIBUTIONS-OF-GAINS> (41,665,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,411,379
<NUMBER-OF-SHARES-REDEEMED> (14,958,273)
<SHARES-REINVESTED> 2,146,431
<NET-CHANGE-IN-ASSETS> 585,357,549
<ACCUMULATED-NII-PRIOR> 7,883,673
<ACCUMULATED-GAINS-PRIOR> 41,535,418
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,509,956
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,987,042
<AVERAGE-NET-ASSETS> 1,458,565,234
<PER-SHARE-NAV-BEGIN> 21.47
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 2.23
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.68)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.10
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 131
<NAME> SUNAMERICA SERIES TRUST WORLDWIDE HIGH INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 124,199,946
<INVESTMENTS-AT-VALUE> 119,012,649
<RECEIVABLES> 4,256,732
<ASSETS-OTHER> 39,245
<OTHER-ITEMS-ASSETS> 214
<TOTAL-ASSETS> 123,308,840
<PAYABLE-FOR-SECURITIES> 1,687,876
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 331,414
<TOTAL-LIABILITIES> 2,019,290
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 144,716,391
<SHARES-COMMON-STOCK> 11,763,769
<SHARES-COMMON-PRIOR> 9,486,861
<ACCUMULATED-NII-CURRENT> 11,808,237
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (30,065,617)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5,169,461)
<NET-ASSETS> 121,289,550
<DIVIDEND-INCOME> 127,595
<INTEREST-INCOME> 13,183,219
<OTHER-INCOME> 0
<EXPENSES-NET> 1,445,762
<NET-INVESTMENT-INCOME> 11,865,052
<REALIZED-GAINS-CURRENT> (30,096,032)
<APPREC-INCREASE-CURRENT> (3,049,316)
<NET-CHANGE-FROM-OPS> (21,280,296)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,395,000)
<DISTRIBUTIONS-OF-GAINS> (7,650,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,284,965
<NUMBER-OF-SHARES-REDEEMED> (6,094,290)
<SHARES-REINVESTED> 1,086,233
<NET-CHANGE-IN-ASSETS> (3,934,771)
<ACCUMULATED-NII-PRIOR> 6,387,381
<ACCUMULATED-GAINS-PRIOR> 7,631,219
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,333,369
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,445,762
<AVERAGE-NET-ASSETS> 133,336,874
<PER-SHARE-NAV-BEGIN> 13.20
<PER-SHARE-NII> 1.07
<PER-SHARE-GAIN-APPREC> (2.61)
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> (0.74)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 141
<NAME> SUNAMERICA SERIES TRUST INTERNATIONAL DIVERSIFIED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 296,373,045
<INVESTMENTS-AT-VALUE> 348,306,318
<RECEIVABLES> 9,133,265
<ASSETS-OTHER> 1,385,195
<OTHER-ITEMS-ASSETS> 3,301,114
<TOTAL-ASSETS> 362,125,892
<PAYABLE-FOR-SECURITIES> 2,475
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,949,175
<TOTAL-LIABILITIES> 7,951,650
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 304,887,209
<SHARES-COMMON-STOCK> 27,543,557
<SHARES-COMMON-PRIOR> 21,967,802
<ACCUMULATED-NII-CURRENT> 5,133,814
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,731,689
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,884,908
<NET-ASSETS> 354,174,242
<DIVIDEND-INCOME> 5,318,868
<INTEREST-INCOME> 2,241,539
<OTHER-INCOME> 0
<EXPENSES-NET> 3,910,613
<NET-INVESTMENT-INCOME> 3,649,794
<REALIZED-GAINS-CURRENT> 6,356,957
<APPREC-INCREASE-CURRENT> 40,392,713
<NET-CHANGE-FROM-OPS> 50,399,464
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,350,000)
<DISTRIBUTIONS-OF-GAINS> (3,540,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,306,696
<NUMBER-OF-SHARES-REDEEMED> (24,727,847)
<SHARES-REINVESTED> 996,906
<NET-CHANGE-IN-ASSETS> 105,247,530
<ACCUMULATED-NII-PRIOR> 7,621,922
<ACCUMULATED-GAINS-PRIOR> (7,167,648)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,095,975
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,910,613
<AVERAGE-NET-ASSETS> 309,597,491
<PER-SHARE-NAV-BEGIN> 11.33
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> (0.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.86
<EXPENSE-RATIO> 1.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 151
<NAME> SUNAMERICA SERIES TRUST UTILITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 64,728,612
<INVESTMENTS-AT-VALUE> 68,780,055
<RECEIVABLES> 731,787
<ASSETS-OTHER> 808
<OTHER-ITEMS-ASSETS> 1,265
<TOTAL-ASSETS> 69,513,915
<PAYABLE-FOR-SECURITIES> 1,279,516
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 185,691
<TOTAL-LIABILITIES> 1,465,207
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,783,834
<SHARES-COMMON-STOCK> 4,705,418
<SHARES-COMMON-PRIOR> 1,887,046
<ACCUMULATED-NII-CURRENT> 1,327,226
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,886,214
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,051,434
<NET-ASSETS> 68,048,708
<DIVIDEND-INCOME> 1,615,024
<INTEREST-INCOME> 175,044
<OTHER-INCOME> 0
<EXPENSES-NET> 448,081
<NET-INVESTMENT-INCOME> 1,341,987
<REALIZED-GAINS-CURRENT> 2,886,965
<APPREC-INCREASE-CURRENT> 1,997,996
<NET-CHANGE-FROM-OPS> 6,226,948
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (410,000)
<DISTRIBUTIONS-OF-GAINS> (875,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,592,714
<NUMBER-OF-SHARES-REDEEMED> (1,867,728)
<SHARES-REINVESTED> 93,386
<NET-CHANGE-IN-ASSETS> 43,682,581
<ACCUMULATED-NII-PRIOR> 416,193
<ACCUMULATED-GAINS-PRIOR> 853,295
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 372,897
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 448,081
<AVERAGE-NET-ASSETS> 44,152,581
<PER-SHARE-NAV-BEGIN> 12.91
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> (0.16)
<PER-SHARE-DISTRIBUTIONS> (0.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.46
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 161
<NAME> SUNAMERICA SERIES TRUST SUNAMERICA BALANCED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 134,056,263
<INVESTMENTS-AT-VALUE> 147,701,643
<RECEIVABLES> 2,022,526
<ASSETS-OTHER> 1,579
<OTHER-ITEMS-ASSETS> 241
<TOTAL-ASSETS> 149,725,989
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484,382
<TOTAL-LIABILITIES> 484,382
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 130,743,616
<SHARES-COMMON-STOCK> 9,557,707
<SHARES-COMMON-PRIOR> 3,317,577
<ACCUMULATED-NII-CURRENT> 1,745,210
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,107,401
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,645,380
<NET-ASSETS> 149,241,607
<DIVIDEND-INCOME> 662,695
<INTEREST-INCOME> 1,741,460
<OTHER-INCOME> 0
<EXPENSES-NET> 648,719
<NET-INVESTMENT-INCOME> 1,755,436
<REALIZED-GAINS-CURRENT> 3,122,205
<APPREC-INCREASE-CURRENT> 10,080,246
<NET-CHANGE-FROM-OPS> 14,957,887
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (470,000)
<DISTRIBUTIONS-OF-GAINS> (1,630,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,767,253
<NUMBER-OF-SHARES-REDEEMED> (1,671,552)
<SHARES-REINVESTED> 144,429
<NET-CHANGE-IN-ASSETS> 104,620,451
<ACCUMULATED-NII-PRIOR> 461,406
<ACCUMULATED-GAINS-PRIOR> 1,613,564
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 570,440
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 648,719
<AVERAGE-NET-ASSETS> 83,540,840
<PER-SHARE-NAV-BEGIN> 13.45
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 2.33
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> (0.36)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.61
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 171
<NAME> SUNAMERICA SERIES TRUST FEDERATED VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 134,300,044
<INVESTMENTS-AT-VALUE> 147,678,891
<RECEIVABLES> 1,298,871
<ASSETS-OTHER> 1,755
<OTHER-ITEMS-ASSETS> 739,527
<TOTAL-ASSETS> 149,719,044
<PAYABLE-FOR-SECURITIES> 1,169,909
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,649,296
<TOTAL-LIABILITIES> 3,819,205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123,906,498
<SHARES-COMMON-STOCK> 9,084,848
<SHARES-COMMON-PRIOR> 4,247,184
<ACCUMULATED-NII-CURRENT> 1,141,295
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,473,199
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,378,847
<NET-ASSETS> 145,899,839
<DIVIDEND-INCOME> 1,847,018
<INTEREST-INCOME> 152,288
<OTHER-INCOME> 0
<EXPENSES-NET> 850,194
<NET-INVESTMENT-INCOME> 1,149,112
<REALIZED-GAINS-CURRENT> 7,493,661
<APPREC-INCREASE-CURRENT> 7,034,153
<NET-CHANGE-FROM-OPS> 15,676,926
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (330,000)
<DISTRIBUTIONS-OF-GAINS> (1,790,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,117,294
<NUMBER-OF-SHARES-REDEEMED> (2,415,702)
<SHARES-REINVESTED> 136,072
<NET-CHANGE-IN-ASSETS> 86,875,895
<ACCUMULATED-NII-PRIOR> 322,155
<ACCUMULATED-GAINS-PRIOR> 1,769,566
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 764,690
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 850,194
<AVERAGE-NET-ASSETS> 101,959,330
<PER-SHARE-NAV-BEGIN> 13.90
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 2.35
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> (0.30)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.06
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 181
<NAME> SUNAMERICA SERIES TRUST AGGRESSIVE GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 120,290,760
<INVESTMENTS-AT-VALUE> 132,421,981
<RECEIVABLES> 4,922,716
<ASSETS-OTHER> 1,912
<OTHER-ITEMS-ASSETS> 7
<TOTAL-ASSETS> 137,346,616
<PAYABLE-FOR-SECURITIES> 3,450,153
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 713,779
<TOTAL-LIABILITIES> 4,163,932
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,582,910
<SHARES-COMMON-STOCK> 10,814,111
<SHARES-COMMON-PRIOR> 8,810,027
<ACCUMULATED-NII-CURRENT> 352,153
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,116,400
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,131,221
<NET-ASSETS> 133,182,684
<DIVIDEND-INCOME> 430,032
<INTEREST-INCOME> 854,898
<OTHER-INCOME> 0
<EXPENSES-NET> 927,927
<NET-INVESTMENT-INCOME> 357,003
<REALIZED-GAINS-CURRENT> 8,637,913
<APPREC-INCREASE-CURRENT> (2,778,649)
<NET-CHANGE-FROM-OPS> 6,216,267
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,231,775
<NUMBER-OF-SHARES-REDEEMED> (4,227,691)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 29,579,220
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,535,686)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 826,035
<INTEREST-EXPENSE> 83
<GROSS-EXPENSE> 927,927
<AVERAGE-NET-ASSETS> 111,309,587
<PER-SHARE-NAV-BEGIN> 11.76
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.32
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 191
<NAME> SUNAMERICA SERIES TRUST REAL ESTATE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 66,690,041
<INVESTMENTS-AT-VALUE> 59,464,806
<RECEIVABLES> 230,068
<ASSETS-OTHER> 5,346
<OTHER-ITEMS-ASSETS> 3,975
<TOTAL-ASSETS> 59,704,195
<PAYABLE-FOR-SECURITIES> 507,575
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 94,979
<TOTAL-LIABILITIES> 602,554
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 65,875,343
<SHARES-COMMON-STOCK> 5,984,232
<SHARES-COMMON-PRIOR> 2,565,065
<ACCUMULATED-NII-CURRENT> 1,549,439
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,097,906)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (7,225,235)
<NET-ASSETS> 59,101,641
<DIVIDEND-INCOME> 2,219,597
<INTEREST-INCOME> 299,076
<OTHER-INCOME> 0
<EXPENSES-NET> 465,054
<NET-INVESTMENT-INCOME> 2,053,619
<REALIZED-GAINS-CURRENT> (1,186,055)
<APPREC-INCREASE-CURRENT> (8,547,580)
<NET-CHANGE-FROM-OPS> (7,680,016)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (430,000)
<DISTRIBUTIONS-OF-GAINS> (25,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,318,577
<NUMBER-OF-SHARES-REDEEMED> (2,938,499)
<SHARES-REINVESTED> 39,089
<NET-CHANGE-IN-ASSETS> 29,536,783
<ACCUMULATED-NII-PRIOR> 239,716
<ACCUMULATED-GAINS-PRIOR> 22,378
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 398,357
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 465,054
<AVERAGE-NET-ASSETS> 48,810,447
<PER-SHARE-NAV-BEGIN> 11.53
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> (1.93)
<PER-SHARE-DIVIDEND> (0.16)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.88
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 201
<NAME> SUNAMERICA SERIES TRUST INTERNATIONAL GROWTH AND INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 127,561,513
<INVESTMENTS-AT-VALUE> 129,661,609
<RECEIVABLES> 1,595,941
<ASSETS-OTHER> 65,853
<OTHER-ITEMS-ASSETS> 37,197
<TOTAL-ASSETS> 131,360,600
<PAYABLE-FOR-SECURITIES> 704,070
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,312,663
<TOTAL-LIABILITIES> 3,016,733
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,160,210
<SHARES-COMMON-STOCK> 11,343,208
<SHARES-COMMON-PRIOR> 4,115,661
<ACCUMULATED-NII-CURRENT> 846,246
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,318,384
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,019,027
<NET-ASSETS> 128,343,867
<DIVIDEND-INCOME> 1,853,069
<INTEREST-INCOME> 390,097
<OTHER-INCOME> 0
<EXPENSES-NET> 1,269,714
<NET-INVESTMENT-INCOME> 973,452
<REALIZED-GAINS-CURRENT> 1,207,037
<APPREC-INCREASE-CURRENT> 1,406,925
<NET-CHANGE-FROM-OPS> 3,587,414
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (135,000)
<DISTRIBUTIONS-OF-GAINS> (290,000)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,322,605
<NUMBER-OF-SHARES-REDEEMED> (6,135,342)
<SHARES-REINVESTED> 40,284
<NET-CHANGE-IN-ASSETS> 85,499,905
<ACCUMULATED-NII-PRIOR> 188,142
<ACCUMULATED-GAINS-PRIOR> 219,703
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 922,124
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,269,714
<AVERAGE-NET-ASSETS> 86,961,693
<PER-SHARE-NAV-BEGIN> 10.41
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 0.86
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.31
<EXPENSE-RATIO> 1.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 211
<NAME> SUNAMERICA SERIES TRUST EMERGING MARKETS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 34,090,050
<INVESTMENTS-AT-VALUE> 32,465,361
<RECEIVABLES> 1,408,185
<ASSETS-OTHER> 23,380
<OTHER-ITEMS-ASSETS> 417,630
<TOTAL-ASSETS> 34,314,556
<PAYABLE-FOR-SECURITIES> 1,075,215
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,554,063
<TOTAL-LIABILITIES> 2,629,278
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,328,507
<SHARES-COMMON-STOCK> 5,092,143
<SHARES-COMMON-PRIOR> 2,488,055
<ACCUMULATED-NII-CURRENT> (52,849)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,932,791)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,657,589)
<NET-ASSETS> 31,685,278
<DIVIDEND-INCOME> 551,407
<INTEREST-INCOME> 134,006
<OTHER-INCOME> 0
<EXPENSES-NET> 519,273
<NET-INVESTMENT-INCOME> 166,140
<REALIZED-GAINS-CURRENT> (9,125,800)
<APPREC-INCREASE-CURRENT> 1,910,134
<NET-CHANGE-FROM-OPS> (7,049,526)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (205,000)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,145,118
<NUMBER-OF-SHARES-REDEEMED> (2,565,829)
<SHARES-REINVESTED> 24,849
<NET-CHANGE-IN-ASSETS> 11,706,185
<ACCUMULATED-NII-PRIOR> 170,105
<ACCUMULATED-GAINS-PRIOR> (1,010,674)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341,627
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 548,835
<AVERAGE-NET-ASSETS> 27,330,204
<PER-SHARE-NAV-BEGIN> 8.03
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (1.78)
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.22
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000892538
<NAME> SUNAMERICA SERIES TRUST
<SERIES>
<NUMBER> 221
<NAME> SUNAMERICA SERIES TRUST DOGS OF WALL STREET
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 62,928,639
<INVESTMENTS-AT-VALUE> 64,456,364
<RECEIVABLES> 899,732
<ASSETS-OTHER> 4,639
<OTHER-ITEMS-ASSETS> 776
<TOTAL-ASSETS> 65,361,511
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78,330
<TOTAL-LIABILITIES> 78,330
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,322,868
<SHARES-COMMON-STOCK> 6,655,623
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 431,867
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 721
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,527,725
<NET-ASSETS> 65,283,181
<DIVIDEND-INCOME> 564,668
<INTEREST-INCOME> 46,382
<OTHER-INCOME> 0
<EXPENSES-NET> 179,787
<NET-INVESTMENT-INCOME> 431,263
<REALIZED-GAINS-CURRENT> 721
<APPREC-INCREASE-CURRENT> 1,527,725
<NET-CHANGE-FROM-OPS> 1,959,709
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,307,445
<NUMBER-OF-SHARES-REDEEMED> (1,651,822)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 65,283,181
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 126,908
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 194,903
<AVERAGE-NET-ASSETS> 31,640,404
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> (0.30)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.81
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and trustees
of Anchor Pathway Fund, Seasons Series Trust and SunAmerica Series Trust do
hereby severally constitute and appoint Susan L. Harris, Scott L. Robinson,
Peter C. Sutton and Robert M. Zakem or any of them, the true and lawful agents
and attorneys-in-fact of the undersigned with respect to all matters arising in
connection with any Registration Statement on Form N-1A and any and all
amendments (including post-effective amendments) thereto, with full power and
authority to execute said Registration Statement for and on behalf of the
undersigned, in our names and in the capacities indicated below, and to file the
same, together with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission. The undersigned hereby
give to said agents and attorneys-in-fact full power and authority to act in the
premises, including, but not limited to, the power to appoint a substitute or
substitutes to act hereunder with the same power and authority as said agents
and attorneys-in-fact would have if personally acting. The undersigned hereby
ratify and confirm all that said agents and attorneys-in-fact, or any substitute
or substitutes, may do by virtue hereof.
WITNESS the due execution hereof on the date and in the capacity set forth
below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES K. HUNT Trustee, Chairman and President January 12, 1999
- ------------------------------------ (Principal Executive Officer)
James K. Hunt
/s/ SCOTT L. ROBINSON Senior Vice President, January 12, 1999
- ------------------------------------ Treasurer and Controller
Scott L. Robinson (Principal Financial and
Accounting Officer)
/s/ MONICA C. LOZANO Trustee January 12, 1999
- ------------------------------------
Monica C. Lozano
/s/ ALLAN L. SHER Trustee January 12, 1999
- ------------------------------------
Allan L. Sher
/s/ WILLIAM M. WARDLAW Trustee January 12, 1999
- ------------------------------------
William M. Wardlaw
</TABLE>
