<PAGE>
SEPTEMBER 30, 1997
SunAmerica
Equity Funds
[PHOTO]
ANNUAL REPORT
BALANCED ASSETS (Yen) BLUE CHIP GROWTH (Yen) MID-CAP GROWTH
SMALL COMPANY GROWTH (Yen) GROWTH AND INCOME
[LOGO] SUNAMERICA
ASSET MANAGEMENT
<PAGE>
SUNAMERICA EQUITY FUNDS
SHAREHOLDER LETTER
November 5, 1997
DEAR SHAREHOLDER:
The SunAmerica Equity Funds each produced solid returns for the twelve
months ended September 30, 1997. The prolonged correction in the small- and
mid-cap growth arenas resulted in more impressive returns of larger
capitalization, more value-oriented stocks, making this a challenging year for
the Funds' growth-oriented investment strategies. The Balanced Assets, Blue
Chip Growth and Growth and Income Funds had stronger returns because of the
larger cap stocks these portfolios held.
MARKET ACTIVITY
Strong economic growth combined with a lack of inflation proved positive for
the equity markets for the twelve months ended September 30, 1997. However,
the first half of the fiscal year was characterized by investors' concerns
regarding emerging inflation, corporate earnings, the direction of interest
rates, and market valuation levels. Investor sentiment finally reversed a few
weeks after the Federal Reserve Board raised the Federal Funds rate by 0.25%
on March 25th. In fact, the Fed's single rate hike set the stage for what
turned into a dramatic turnaround in growth-oriented stocks.
LARGE CAPITALIZATION STOCKS. Overall, the S&P 500 Index advanced by a huge
40.44% for the fiscal year, and the large-cap companies led the equity market.
The market reacted particularly positively to the enactment of the balanced
budget process by Congress, the faster-than-expected declining budget deficit,
and the Taxpayer Relief Act of 1997-all of which indicate a move toward
greater fiscal responsibility. The combination of sound fundamentals, higher
than anticipated corporate earnings despite the absence of pricing power, and
the lack of evident inflation further supported the market's rise to record
levels. Finally, falling interest rates helped certain key sectors, and
liquidity was strong throughout the year, although it pushed relative
valuations, already considered stretched, even higher.
The only real glitches were in December, when Federal Reserve Board Chairman
Alan Greenspan made public comments regarding "irrational exuberance" over
market valuations, and in early March to mid-April, when there was a
correction of approximately 10%. After these short-lived downturns, the S&P
500 Index rebounded, moving to a record level on August 4th. The Index fell
back once more and then recovered to almost a new peak at the end of
September. Financial services, technology, health care, and energy services
were the strongest performing sectors; utilities and basic industries were the
worst performers.
MID-CAPITALIZATION STOCKS. Psychology dominated the high growth mid-cap
sector throughout the fiscal year. During the first seven months, skittishness
over the possibility of rising interest rates, inflation, and need for
liquidity drew investors toward large-cap, value-oriented stocks and away from
what were perceived to be high multiple, high risk, low liquidity stocks.
This, of course, led to high volatility, an outflow of funds, and
disappointing performance for mid-cap growth stocks during these months. But
several factors came together after the March 25th interest rate hike, which
led to a strong rebound.
1
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SUNAMERICA EQUITY FUNDS
SHAREHOLDER LETTER
First, earnings reports from the first calendar quarter showed that growth
rates were still fairly robust and actually started to accelerate relative to
the large-caps after more than a year of underperformance-especially in the
technology sector. Second, relative valuations had reached their lowest levels
since 1991 as compared to large-caps, due to severe and somewhat
indiscriminate selling. Many very good growth companies were trading at
significant discounts to earlier levels while business fundamentals remained
strong. Clearly, the valuation gap between the capitalization sectors was
unsustainable. And third, there was a significant change in sentiment,
supported by more moderate economic growth in the second calendar quarter,
giving investors confidence that the Fed would not raise rates again.
Overall, for the period from May through September 1997, mid-cap stocks
outperformed large-cap stocks, though they lagged the small-cap sector
somewhat. It is important to note, however, that the growth stocks within the
mid-cap sector lagged the value-oriented stocks, making it difficult for
growth investors to outperform the benchmark during this period.
SMALL CAPITALIZATION STOCKS. Market activity for the small-cap sector and
the factors, both positive and negative, affecting these stocks were virtually
identical to that of the mid-cap sector for the fiscal year. Like mid-cap
stocks, small-cap stocks benefited from earnings growth that remained strong
throughout the period of underperformance. Also, valuations of small-cap
companies were compelling at their lowest levels in over four years. The
small-cap sector also experienced the same reversal in investor sentiment. For
the period from May through September, small-cap stocks outperformed both the
mid-cap and large-cap segments of the market and the Russell 2000 Index, which
often represents small stocks, broke records virtually every day in September.
The major difference was that growth outperformed value within the small-cap
sector during these months.
INVESTMENT REVIEW
THE BLUE CHIP GROWTH AND BALANCED ASSETS FUNDS, each of which invests in
high quality, large-cap, growth stocks using a top-down, thematic investment
approach, both benefited from overweightings in the strong performing
financial services, technology, and health care sectors. We emphasized
financial services stocks that fit our Consolidation Synergy and Asset
Gathering themes. For example, regional and money center banks are seeing
their returns on investment and earnings improve, as industry restructuring
creates greater efficiencies. Brokerage firms and others are benefiting both
from intra-industry consolidation and from the strong liquidity coming into
the equity markets.
Our focus within technology is on the Telecommunications Revolution and the
Demand for Personal Computers. In the former, our emphasis is on equipment
companies, such as Lucent Technology, Motorola, and Northern Telecom. In the
latter, our emphasis is on names like Compaq, which is entering the build-to-
order market. Our theme for health care is the Graying of America, and thus we
are focusing on the large drug companies, where we see strong earnings growth
coming from new pharmaceutical products and unit volume. We reduced the Funds'
holdings in HMOs and hospitals. We also, as anticipated, moved from an
underweighted to a neutral position in energy, and stayed underweighted in the
retail sector. We favor certain specialty vendors, however, such as Home Depot
and the Gap, as we believe their innovative
2
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SUNAMERICA EQUITY FUNDS
SHAREHOLDER LETTER
strategies are resulting in accelerating growth rates. The Funds maintained
neutral weightings in cyclicals and underweightings in paper and metals.
In both Funds, we also reduced the total number of names in the portfolio-
while staying broadly diversified and nearly fully invested-to enhance our
focus. Clearly, this strategy has worked, for while the Blue Chip Growth Fund
underperformed for the twelve month period due to its overdiversification and
too-high allocation to cash in the fourth calendar quarter, the Fund ranked in
the top third of its Lipper category average for 1997 year to date.
The Balanced Assets Fund outperformed for the entire fiscal year, although
it, too, benefited from our strategy, ranking in the top decile of its Lipper
category average for the nine months year to date. This Fund also benefited
from its 32.2% allocation to fixed income securities, most of which was in
U.S. Treasuries. As interest rates fell over the last half of the fiscal year,
the U.S. Treasury market rallied. This rally was prompted primarily by good
prospects for benign inflation; positive balanced budget and deficit numbers;
and an increase in foreign ownership of U.S. Treasuries, based, in turn, on
the strength and stability of the U.S. dollar, attractive real rates, and
their appeal as a safe haven, especially given the volatility of the Far East
during this time.
THE MID-CAP GROWTH AND SMALL COMPANY GROWTH FUNDS seek to invest in high
growth stocks, early in their growth cycle, using a top-down, long-term,
secular trend investment approach. Both Funds were hampered from a performance
perspective by their investment style during the first seven months of the
year, but were, likewise, helped significantly by that same style returning to
favor in the remaining months of the year. Effective stock picking and
relative sector positioning added value during the second half of the year as
well.
More specifically, both Funds benefited from increased weightings in the
technology sector, where we are focusing on wireless and wire-line
telecommunications equipment companies, personal computer specialty component
suppliers, software developers, and user training providers. We believe that
the trends of machines replacing manual labor, high demand for PCs, and
increased consumerism over the Internet will continue. The Funds also
benefited from an overweighting in oil and gas equipment and service
providers. Sophisticated technology makes it more economical and more reliable
to find and produce oil and gas; companies are leaner and more cost-conscious
than in the past; and there is still limited supply but now greater demand as
the Third World industrializes. We also overweighted financial stocks, as this
sector is undergoing vast deregulation, leading, in turn, to greater
consolidation and restructuring. As an aging population saves for retirement,
we particularly like the annuity companies within this sector. The Funds
stayed underweighted in health care and retail, though we maintain holdings in
each for stock specific reasons.
THE GROWTH AND INCOME FUND underperformed its Lipper category average for
the fiscal year. This was primarily because we tilted more toward value-
oriented stocks in the last quarter, believing that large-cap overvaluations
would soon lead to a significant correction and that a more conservative
position for the portfolio would be appropriate. However, growth-oriented
stocks continued to dominate the large-cap market. The Fund benefited from its
overweighted positions in financials and energy services, which
3
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SUNAMERICA EQUITY FUNDS
SHAREHOLDER LETTER
performed well. But, to a certain degree, performance was mitigated by cutting
back to neutral positions in the strong performing health care and technology
sectors and by an overweighted position in basic industries, which
underperformed. Still, the Fund did take gains in the drug and technology
stocks it sold.
MANAGER OUTLOOK
As we enter the eighth year of economic recovery, we remain bullish for the
equity markets. We believe the "new paradigm" of high growth and low inflation,
wherein corporate America has made cost-cutting an ongoing process, serves as a
positive backdrop for equities going forward. We believe that volatility will
increase, however we expect any corrections to be short-lived, and we intend to
use any pullbacks in the market as buying opportunities.
Within the large capitalization sector, those factors we most focus on-
earnings, liquidity, and interest rates-remain intact. Even with the newsworthy
activity of late October, we expect to see the Dow Jones Industrial Average
above 8000 in December 1997 and the S&P 500 to crest around 1050. Over the next
12-months, our major concern is how corporate expenditures on the Year 2000
software problems will affect their balance sheets.
In the Blue Chip Growth and Balanced Assets Funds, then, we will continue to
seek companies with solid double-digit growth, strong fundamentals, good cash
flow, and a positive outlook for new products, services, or management
strategies that fit our investment themes. In the Growth and Income Fund, we do
not foresee any near-term sector weighting shifts. We believe that certain
cable companies and medical equipment supply companies are attractive. We
intend to focus on individual stock selection, as we seek high quality growth
stocks in the mid- to large-cap range that are attractively valued and have a
strong dividend yield.
Within the mid- and small-cap sectors, fundamentals remain positive, relative
earnings growth continues to be strong, and valuations remain reasonable.
Investor sentiment also continues to be favorable. Should deflation rather than
inflation become evident, as we believe it may, then this, too, will favor
smaller stocks not subject to the same pricing pressures as large-cap stocks.
We thus anticipate strong performance for both the Mid-Cap Growth and Small
Company Growth Funds into 1998.
In all of the SunAmerica Equity Funds, what is perhaps most important is that
we as portfolio managers and you as shareholders maintain a long-term
perspective. For our part, we remain committed to our long-standing,
disciplined, growth-oriented investment strategies. The wisdom of this
philosophy has been proven in the performance of our Funds over time. We value
your ongoing support of the SunAmerica Equity Funds and look forward to serving
your investment needs in the years ahead with pro-active management and capital
appreciation consistent with each Fund's objective.
/s/ Francis D. Gannon /s/ Audrey Snell /s/ Gerard P. Sullivan
Francis D. Gannon Audrey Snell Gerard P. Sullivan
Portfolio Manager Portfolio Manager Portfolio Manager
4
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES--September 30, 1997
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND
ASSETS GROWTH GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments securities,
at value*.............. $333,413,856 $103,187,915 $60,498,775 $308,955,261 $101,961,399
Repurchase agreements
(cost equals market)... 9,623,000 4,864,000 1,704,000 8,729,000 1,946,000
Cash.................... 611 885 965 737,197 469
Interest and dividends
receivable............. 1,536,899 99,413 24,170 38,821 131,745
Receivable for
investments sold....... 71,274 -- -- 4,386,911 3,607,877
Receivable for shares of
beneficial interest
sold................... 349,841 99,175 92,470 944,378 673,316
Prepaid expenses........ 53,670 33,248 6,676 12,343 1,638
Receivable from
investment adviser..... 1,071 -- -- 1,313 5,615
Deferred organizational
expenses............... -- -- -- -- 481
------------ ------------ ----------- ------------ ------------
Total assets.......... 345,050,222 108,284,636 62,327,056 323,805,224 108,328,540
------------ ------------ ----------- ------------ ------------
LIABILITIES:
Payable for investments
purchased.............. 1,423,459 2,529,705 1,767,423 11,590,784 5,313,355
Payable for shares of
beneficial interest
redeemed............... 273,685 89,408 586,814 770,525 40,338
Accrued expenses........ 266,383 106,970 82,630 228,700 105,746
Investment advisory and
management fees
payable................ 208,754 63,699 36,143 184,907 62,326
Distribution and service
maintenance fees
payable................ 188,876 49,466 24,015 149,641 57,855
Interest payable........ -- -- -- 272,357 --
------------ ------------ ----------- ------------ ------------
Total liabilities..... 2,361,157 2,839,248 2,497,025 13,196,914 5,579,620
------------ ------------ ----------- ------------ ------------
Net assets.......... $342,689,065 $105,445,388 $59,830,031 $310,608,310 $102,748,920
============ ============ =========== ============ ============
*Identified cost........ $285,308,950 $ 84,617,938 $48,905,829 $228,366,138 $ 90,559,476
============ ============ =========== ============ ============
</TABLE>
See Notes to Financial Statements
5
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 1997 (continued)
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND
ASSETS GROWTH GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS WERE COMPOSED
OF:
Shares of beneficial
interest, $.01 par
value.................. $ 185,357 $ 52,727 $ 29,154 $ 111,233 $ 76,685
Paid-in capital......... 262,988,303 74,153,715 40,034,894 211,784,895 81,177,756
------------ ------------ ----------- ------------ ------------
263,173,660 74,206,442 40,064,048 211,896,128 81,254,441
Accumulated
undistributed net
investment income
(loss)................. 91,715 (8,538) (4,811) (18,299) (2,144)
Accumulated
undistributed net
realized gain on
investments, foreign
currency and other
assets and liabilities. 31,318,784 12,677,507 8,177,848 18,141,358 10,094,700
Net unrealized
appreciation of
investments............ 48,104,906 18,569,977 11,592,946 80,589,123 11,401,923
------------ ------------ ----------- ------------ ------------
Net assets.......... $342,689,065 $105,445,388 $59,830,031 $310,608,310 $102,748,920
============ ============ =========== ============ ============
CLASS A (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. $169,201,480 $ 67,812,674 $46,050,759 $185,222,183 $ 47,219,337
Shares of beneficial
interest issued and
outstanding............ 9,149,250 3,353,686 2,228,633 6,552,664 3,511,301
Net asset value and
redemption price per
share.................. $ 18.49 $ 20.22 $ 20.66 $ 28.27 $ 13.45
Maximum sales charge
(5.75% of offering
price)................. 1.13 1.23 1.26 1.72 0.82
------------ ------------ ----------- ------------ ------------
Maximum offering price
to public.............. $ 19.62 $ 21.45 $ 21.92 $ 29.99 $ 14.27
============ ============ =========== ============ ============
CLASS B (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. $173,434,497 $ 37,632,714 $13,779,272 $124,437,541 $ 55,529,583
Shares of beneficial
interest issued and
outstanding............ 9,383,565 1,919,060 686,796 4,537,277 4,157,247
Net asset value,
offering and redemption
price per share
(excluding any
applicable contingent
deferred sales charge). $ 18.48 $ 19.61 $ 20.06 $ 27.43 $ 13.36
============ ============ =========== ============ ============
CLASS Z (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. $ 53,088 $ 948,586
Shares of beneficial
interest issued and
outstanding............ 2,871 33,348
Net asset value,
offering and redemption
price per share........ $ 18.49 $ 28.45
============ ============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF OPERATIONS -- For the year ended September 30, 1997
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND
ASSETS GROWTH GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................. $ 8,086,537 $ 245,342 $ 68,199 $ 297,446 $ 204,043
Dividends (net of
withholding taxes of
$25,958, $10,720,
$3,115, $5,565 and
$7,012, respectively)... 2,825,430 1,099,782 369,830 877,951 1,075,659
----------- ----------- ----------- ----------- -----------
Total investment income.. 10,911,967 1,345,124 438,029 1,175,397 1,279,702
----------- ----------- ----------- ----------- -----------
Expenses:
Investment advisory and
management fees......... 2,430,522 701,489 416,078 1,955,511 531,071
Distribution and service
maintenance fees--Class
A....................... 545,512 202,327 148,384 545,065 127,978
Distribution and service
maintenance fees--Class
B....................... 1,681,853 357,241 130,813 1,045,469 342,443
Transfer agent fees and
expenses--Class A....... 466,811 166,989 118,291 456,633 99,791
Transfer agent fees and
expenses--Class B....... 440,844 102,784 39,939 283,557 96,543
Transfer agent fees and
expenses--Class Z....... 9,205 -- -- 9,205 --
Custodian fees and
expenses................ 139,755 61,965 69,000 150,315 78,555
Registration fees--Class
A....................... 26,500 15,665 15,248 51,096 17,718
Registration fees--Class
B....................... 27,682 19,320 9,742 34,780 18,188
Registration fees--Class
Z....................... 229 -- -- 766 --
Audit and tax consulting
fees.................... 40,740 22,415 20,690 45,055 22,555
Trustees' fees and
expenses................ 38,642 11,111 6,648 30,600 7,118
Printing expense......... 35,730 9,540 5,625 27,330 9,630
Legal fees and expenses.. 8,095 1,895 470 6,315 --
Insurance expense........ 4,044 1,096 670 3,169 385
Interest expense......... 3,084 3,840 15,767 489,385 403
Amortization of
organizational
expenses................ -- -- -- -- 277
Miscellaneous expenses... 7,036 3,438 3,265 4,567 5,331
----------- ----------- ----------- ----------- -----------
Total expenses........... 5,906,284 1,681,115 1,000,630 5,138,818 1,357,986
Less: expenses
reimbursed by
investment adviser...... (9,394) -- -- (9,971) (151,366)
----------- ----------- ----------- ----------- -----------
Net expenses............. 5,896,890 1,681,115 1,000,630 5,128,847 1,206,620
----------- ----------- ----------- ----------- -----------
Net investment income
(loss)................... 5,015,077 (335,991) (562,601) (3,953,450) 73,082
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on
investments.............. 34,784,767 13,956,312 10,239,030 32,482,170 10,454,215
Net realized loss on
option contracts......... -- -- -- (72,208) --
Net realized loss on
foreign currency and
other assets and
liabilities.............. -- -- -- -- (8)
Net change in unrealized
appreciation/depreciation
of investments........... 31,289,347 12,669,963 984,447 23,022,865 9,603,085
----------- ----------- ----------- ----------- -----------
Net realized and
unrealized gain on
investments, foreign
currency and other assets
and liabilities.......... 66,074,114 26,626,275 11,223,477 55,432,827 20,057,292
----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING
FROM OPERATIONS.......... $71,089,191 $26,290,284 $10,660,876 $51,479,377 $20,130,374
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
7
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED ASSETS FUND BLUE CHIP GROWTH FUND MID-CAP GROWTH FUND
---------------------------- ---------------------------- ---------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996 1997 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 5,015,077 $ 3,950,337 $ (335,991) $ (408,630) $ (562,601) $ (425,977)
Net realized gain on
investments........... 34,784,767 33,912,222 13,956,312 13,200,391 10,239,030 1,634,384
Net change in
unrealized
appreciation
(depreciation) of
investments........... 31,289,347 (8,691,595) 12,669,963 (2,296,867) 984,447 4,688,230
------------ ------------ ------------ ----------- ----------- -----------
Net increase in net
assets resulting from
operations............. 71,089,191 29,170,964 26,290,284 10,494,894 10,660,876 5,896,637
------------ ------------ ------------ ----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... (2,846,051) (2,345,435) -- -- -- --
From net investment
income (Class B)...... (2,063,991) (1,868,201) -- -- -- --
From net investment
income (Class Z)...... (641) -- -- -- -- --
From net realized gains
on investments
(Class A)............. (14,835,171) (7,282,221) (7,108,685) (4,646,750) (1,856,886) (4,337,142)
From net realized gains
on investments
(Class B)............. (17,300,021) (9,730,482) (5,010,638) (4,492,488) (619,105) (1,083,506)
From net realized gains
on investments
(Class Z)............. (994) -- -- -- -- --
------------ ------------ ------------ ----------- ----------- -----------
Total dividends and
distributions to
shareholders........... (37,046,869) (21,226,339) (12,119,323) (9,139,238) (2,475,991) (5,420,648)
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 6).. (9,585,219) 28,256,172 3,081,521 4,897,454 (4,043,040) 7,954,560
------------ ------------ ------------ ----------- ----------- -----------
TOTAL INCREASE IN NET
ASSETS................. 24,457,103 36,200,797 17,252,482 6,253,110 4,141,845 8,430,549
NET ASSETS:
Beginning of period..... 318,231,962 282,031,165 88,192,906 81,939,796 55,688,186 47,257,637
------------ ------------ ------------ ----------- ----------- -----------
End of period [including
undistributed net
investment income
(loss) for September
30, 1997 and September
30, 1996 of $91,715,
$(18,577); $(8,538),
$0; $(4,811), and $0,
respectively].......... $342,689,065 $318,231,962 $105,445,388 $88,192,906 $59,830,031 $55,688,186
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND GROWTH AND INCOME FUND
---------------------------- ----------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ (3,953,450) $ (1,857,708) $ 73,082 $ 154,585
Net realized gain on
investments........... 32,482,170 14,472 10,454,215 1,853,730
Net realized loss on
option contracts...... (72,208) -- -- --
Net realized gain
(loss) on foreign
currency, other assets
and liabilities....... -- 36 (8) 2
Net change in
unrealized
appreciation
(depreciation) of
investments........... 23,022,865 33,583,299 9,603,085 1,445,861
------------ ------------ ------------ -----------
Net increase in net
assets resulting from
operations............. 51,479,377 31,740,099 20,130,374 3,454,178
------------ ------------ ------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... -- -- (72,848) (123,623)
From net investment
income (Class B)...... -- -- (30,158) (58,296)
From net investment
income (Class Z)...... -- -- -- --
From net realized gains
on investments (Class
A).................... (5,628,252) (16,561,192) (1,193,264) (175,889)
From net realized gains
on investments (Class
B).................... (3,985,469) (12,782,675) (917,178) (127,334)
From net realized gains
on investments (Class
Z).................... (7,070) -- -- --
------------ ------------ ------------ -----------
Total dividends and
distributions to
shareholders........... (9,620,791) (29,343,867) (2,213,448) (485,142)
------------ ------------ ------------ -----------
NET INCREASE IN NET
ASSETS RESULTING FROM
CAPITAL SHARE
TRANSACTIONS (NOTE 6).. 2,343,256 106,187,132 49,829,973 25,962,674
------------ ------------ ------------ -----------
TOTAL INCREASE IN NET
ASSETS................. 44,201,842 108,583,364 67,746,899 28,931,710
NET ASSETS
Beginning of period..... 266,406,468 157,823,104 35,002,021 6,070,311
------------ ------------ ------------ -----------
End of period [including
undistributed net
investment income
(loss) for September
30, 1997 and September
30, 1996 $(18,299), $0;
$(2,144), and $(2,516),
respectively].......... $310,608,310 $266,406,468 $102,748,920 $35,002,021
============ ============ ============ ===========
</TABLE>
See Notes to Financial Statements
9
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF CASH FLOWS--For the year ended September 30, 1997
<TABLE>
<S> <C> <C>
SMALL COMPANY GROWTH FUND
CASH FLOWS FROM OPERATING ACTIVITIES:
Investment income............................. $ 1,175,397
Expenses from operations...................... (4,639,462)
Interest expense.............................. (489,385)
------------
Net investment loss........................... $ (3,953,450)
Purchase of portfolio securities.............. (891,367,006)
Net proceeds from sale of short-term
investments.................................. 1,037,000
Proceeds from the sale of portfolio
securities................................... 901,195,038
Increase in interest payable.................. 241,257
Net change in receivables/payables related to
operations................................... 177,118
-------------
Net cash provided/(used) by operating
activities................................. 7,329,957
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of capital shares....................... 158,130,369
Redemption of capital shares.................. (164,385,375)
------------
Cash utilized by capital share transactions... (6,255,006)
Dividends and distributions paid in cash...... (338,738)
-------------
Net cash provided/(used) by financing
activities................................. (6,593,744)
-------------
Net increase in cash........................... 736,213
Cash at beginning of year...................... 984
-------------
Cash at end of year............................ $ 737,197
=============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
BALANCED ASSETS FUND
<TABLE>
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/24/93-
9/30/93(3)..... $15.07 $ -- $ 0.06 $ 0.06 $ -- $ -- $ -- $15.13 0.40% $ 33,381
9/30/94......... 15.13 0.30 (0.23) 0.07 (0.28) (0.30) (0.58) 14.62 0.50 52,098
9/30/95......... 14.62 0.32 2.51 2.83 (0.45) (0.58) (1.03) 16.42 20.68 119,916
9/30/96......... 16.42 0.27 1.39 1.66 (0.28) (0.99) (1.27) 16.81 10.65 147,035
9/30/97......... 16.81 0.31 3.43 3.74 (0.31) (1.75) (2.06) 18.49 24.81 169,201
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- ----------- --------------- --------- ----------
CLASS A
<S> <C> <C> <C> <C>
9/24/93-
9/30/93(3)..... 1.54%(4) 0.46%(4) 25% $ NA
9/30/94......... 1.58 2.00 141 NA
9/30/95......... 1.50 2.13 130 NA
9/30/96......... 1.52 1.63 187 0.0611
9/30/97......... 1.50 1.86 149 0.0599
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/93(5)...... $15.63 $ 0.30 $ 2.63 $ 2.93 $(0.30) $(2.40) $(2.70) $15.86 20.29% $113,871
7/01/93-
9/30/93(5)..... 15.86 0.05 0.49 0.54 (0.06) (1.21) (1.27) 15.13 3.44 137,456
9/30/94......... 15.13 0.20 (0.23) (0.03) (0.18) (0.30) (0.48) 14.62 (0.14) 180,655
9/30/95......... 14.62 0.23 2.51 2.74 (0.36) (0.58) (0.94) 16.42 19.96 162,115
9/30/96......... 16.42 0.17 1.38 1.55 (0.18) (0.99) (1.17) 16.80 9.93 171,197
9/30/97......... 16.80 0.21 3.43 3.64 (0.21) (1.75) (1.96) 18.48 24.09 173,435
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- ----------- --------------- --------- ----------
CLASS B
<S> <C> <C> <C> <C>
6/30/93(5)...... 1.91%(6) 1.94%(6) 251% $ NA
7/01/93-
9/30/93(5)..... 2.10(4)(6) 1.36(4)(6) 25 NA
9/30/94......... 2.21 1.36 141 NA
9/30/95......... 2.12 1.59 130 NA
9/30/96......... 2.12 1.03 187 0.0611
9/30/97......... 2.11 1.26 149 0.0599
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS Z
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/07/96-
9/30/97(3)..... $17.07 $ 0.38 $ 3.19 $ 3.57 $(0.40) $(1.75) $(2.15) $18.49 23.56% $ 53
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- ----------- --------------- --------- ----------
CLASS Z
<S> <C> <C> <C> <C>
10/07/96-
9/30/97(3)..... 0.99%(4)(6) 2.30%(4)(6) 149% $0.0599
- --------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/08/93-
9/30/94(3)..... $16.24 $ 0.09 (1) $(0.26) $(0.17) $ -- $(0.65) $(0.65) $15.42 (1.05)% $ 3,207
9/30/95......... 15.42 0.02 (1) 2.99 3.01 -- (1.09) (1.09) 17.34 21.29 42,407
9/30/96......... 17.34 (0.03)(1) 2.22 2.19 -- (1.91) (1.91) 17.62 13.88 51,993
9/30/97......... 17.62 (0.02)(1) 5.05 5.03 -- (2.43) (2.43) 20.22 32.96 67,812
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- ----------- --------------- --------- ----------
CLASS A
<S> <C> <C> <C> <C>
10/08/93-
9/30/94(3)..... 1.64%(4)(6) 0.65%(4)(6) 170% $ NA
9/30/95......... 1.58(6) 0.11(6) 251 NA
9/30/96......... 1.57 (0.18) 269 0.0600
9/30/97......... 1.54 (0.11) 211 0.0600
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/92(5)..... $12.53 $(0.13) $ 1.19 $ 1.06 $ -- $ -- $ -- $13.59 8.46% $83,237
1/01/93-
9/30/93(5)..... 13.59 (0.02)(1) 2.71 2.69 -- -- -- 16.28 19.79 79,774
9/30/94......... 16.28 (0.01)(1) (0.28) (0.29) -- (0.65) (0.65) 15.34 (1.81) 71,749
9/30/95......... 15.34 (0.01)(1) 2.89 2.88 -- (1.09) (1.09) 17.13 20.51 39,533
9/30/96......... 17.13 (0.14)(1) 2.19 2.05 -- (1.91) (1.91) 17.27 13.17 36,199
9/30/97......... 17.27 (0.13)(1) 4.90 4.77 -- (2.43) (2.43) 19.61 32.02 37,633
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- ----------- --------------- --------- ----------
CLASS B
<S> <C> <C> <C> <C>
12/31/92(5)..... 2.53% (0.75)% 192% $ NA
1/01/93-
9/30/93(5)..... 2.46(4) (0.14)(4) 171 NA
9/30/94......... 2.28 (0.05) 170 NA
9/30/95......... 2.22 (0.09) 251 NA
9/30/96......... 2.23 (0.83) 269 0.0600
9/30/97......... 2.22 (0.77) 211 0.0600
</TABLE>
- ------------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Pursuant to a reorganization of the SunAmerica Mutual Funds, the Equity
Funds fiscal year ends were changed to September 30
(6) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
6/30/93 9/30/93 9/30/94 9/30/95 9/30/97
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balanced Assets Class B.............. .05% .04% -- -- --
Balanced Assets Class Z.............. -- -- -- -- 39.42%
Blue Chip Growth Class A............. -- -- 1.66% .11% --
</TABLE>
See Notes to Financial Statements
11
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/92(4)..... $13.30 $(0.07) $ 2.87 $ 2.80 $(0.02) $(0.44) $(0.46) $15.64 21.42% $30,024
12/01/92-
9/30/93(4)..... 15.64 (0.09)(2) 3.17 3.08 -- (0.69) (0.69) 18.03 20.42 34,918
9/30/94......... 18.03 0.04 (2) (1.64) (1.60) -- (2.65) (2.65) 13.78 (9.60) 32,906
9/30/95......... 13.78 (0.08)(2) 4.14 4.06 (0.04) -- (0.04) 17.80 29.51 37,714
9/30/96......... 17.80 (0.12)(2) 2.21 2.09 -- (2.11) (2.11) 17.78 12.92 41,904
9/30/97......... 17.78 (0.15)(2) 3.83 3.68 -- (0.80) (0.80) 20.66 21.54 46,051
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS) AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- -------------- ---------------- --------- ----------
CLASS A
<S> <C> <C> <C> <C>
11/30/92(4)..... 1.76% (0.46)% 98% $ NA
12/01/92-
9/30/93(4)..... 1.81(3) 1.18 (3) 231 NA
9/30/94......... 1.76 0.28 555 NA
9/30/95......... 1.66 (0.51) 392 NA
9/30/96......... 1.62 (0.69) 307 0.0603
9/30/97......... 1.64 (0.84) 332 0.0600
<CAPTION>
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
10/04/93-
9/30/94(5)..... $18.12 $ 0.03 (2) $(1.80) $(1.77) $ -- $(2.65) $(2.65) $13.70 (10.56)% $ 4,039
9/30/95......... 13.70 (0.18)(2) 4.08 3.90 (0.02) -- (0.02) 17.58 28.55 9,544
9/30/96......... 17.58 (0.24)(2) 2.18 1.94 -- (2.11) (2.11) 17.41 12.16 13,784
9/30/97......... 17.41 (0.28)(2) 3.73 3.45 -- (0.80) (0.80) 20.06 20.65 13,779
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS) AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- -------------- ---------------- --------- ----------
CLASS B
<S> <C> <C> <C> <C>
10/04/93-
9/30/94(5)..... 2.43%(3)(7) 0.20 %(3)(7) 555% $ NA
9/30/95......... 2.31(7) (0.17)(7) 392 NA
9/30/96......... 2.32 (1.43) 307 0.0603
9/30/97......... 2.35 (1.56) 332 0.0600
- --------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND*
<CAPTION>
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS)(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/92(4)(6).. $13.88 $(0.12) $ 3.39 $ 3.27 $ -- $(0.69) $(0.69) $16.46 24.31% $ 32,056
12/01/92-
9/30/93(4)(6).. 16.46 (0.02) 4.07 4.05 -- (0.73) (0.73) 19.78 25.68 39,238
9/30/94......... 19.78 (0.10) (1.40) (1.50) -- (1.46) (1.46) 16.82 (7.74) 38,570
9/30/95......... 16.82 (0.04) 8.28 8.24 -- (0.41) (0.41) 24.65 50.00 89,510
9/30/96......... 24.65 (0.16) 4.29 4.13 -- (4.53) (4.53) 24.25 19.35 158,567
9/30/97......... 24.25 (0.30) 5.18 4.88 -- (0.86) (0.86) 28.27 20.84 185,241
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS) AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- -------------- ---------------- --------- ----------
CLASS A
<S> <C> <C> <C> <C>
11/30/92(4)(6).. 1.90% (0.88)% 209% $ NA
12/01/92-
9/30/93(4)(6).. 1.83(3) (0.15)(3) 216 NA
9/30/94......... 1.67 (0.60) 411 NA
9/30/95......... 1.57 (0.22) 351 NA
9/30/96......... 1.53 (0.68) 240 0.0607
9/30/97......... 1.72 (1.27) 343 0.0598
<CAPTION>
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS)(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/24/93-
9/30/93(5)..... $19.66 $ -- $ 0.12 $ 0.12 $ -- $ -- $ -- $19.78 0.61% $ 38,898
9/30/94......... 19.78 (0.20) (1.42) (1.62) -- (1.46) (1.46) 16.70 (8.40) 52,208
9/30/95......... 16.70 (0.16) 8.19 8.03 -- (0.41) (0.41) 24.32 49.08 68,313
9/30/96......... 24.32 (0.29) 4.20 3.91 -- (4.53) (4.53) 23.70 18.60 107,839
9/30/97......... 23.70 (0.44) 5.03 4.59 -- (0.86) (0.86) 27.43 20.08 124,450
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS) AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- -------------- ---------------- --------- ----------
CLASS B
<S> <C> <C> <C> <C>
9/24/93-
9/30/93(5)..... 2.34%(3) (1.70)%(3) 216% $ NA
9/30/94......... 2.31 (1.23) 411 NA
9/30/95......... 2.22 (0.84) 351 NA
9/30/96......... 2.16 (1.30) 240 0.0607
9/30/97......... 2.34 (1.89) 343 0.0598
<CAPTION>
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS)(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS Z
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/07/96-
9/30/97(5)..... $24.61 $(0.15) $ 4.85 $ 4.70 $ -- $(0.86) $(0.86) $28.45 19.78% $948
<CAPTION>
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS) AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE
- ---------------- -------------- ---------------- --------- ----------
CLASS Z
<S> <C> <C> <C> <C>
10/07/96-
9/30/97(5)..... 1.07%(3)(7) (0.67)%(3)(7) 343% $0.0598
</TABLE>
- ------------
* During the year ended September 30, 1997 the Fund had: average debt
outstanding of $7,423,185; average shares outstanding of 11,152,428; and
average amount of debt per share of $0.67. The Fund had no borrowings
outstanding at September 30, 1997.
(1) Total return is not annualized and does not reflect sales load
(2) Calculated based upon average shares outstanding
(3) Annualized
(4) Pursuant to a reorganization of the SunAmerica Mutual Funds, the Equity
Funds fiscal year ends were changed to September 30
(5) Commencement of sale of respective class of shares
(6) Restated to reflect a 0.984460367 for 1.00 stock split effective September
24, 1993
(7) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95 9/30/97
------- ------- -------
<S> <C> <C> <C>
Mid-Cap Growth Class B.............................. .48% .17% --
Small Company Growth Class Z........................ -- -- 2.19%
</TABLE>
See Notes to Financial Statements
12
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/01/94-
9/30/94(3)..... $ 7.33 $0.07 $0.10 $0.17 $(0.06) $ -- $(0.06) $7.44 2.34% $ 3,098
9/30/95......... 7.44 0.32 1.08 1.40 (0.30) (0.15) (0.45) 8.39 19.53 3,532
9/30/96......... 8.39 0.14 2.50 2.64 (0.17) (0.39) (0.56) 10.47 32.59 21,099
9/30/97......... 10.47 0.05 3.40 3.45 (0.03) (0.44) (0.47) 13.45 34.18 47,219
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS(5) NET ASSETS(5) TURNOVER PER SHARE
- ---------------- ------------- ------------- --------- ----------
CLASS A
<S> <C> <C> <C> <C>
7/01/94-
9/30/94(3)..... 1.50%(4) 3.48%(4) 8% $ NA
9/30/95......... 0.46 4.16 230 NA
9/30/96......... 0.96 1.52 161 0.0600
9/30/97......... 1.38 0.45 200 0.0600
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/06/94-
9/30/94(3)..... $ 7.33 $0.05 $0.11 $0.16 $(0.05) $ -- $(0.05) $7.44 2.19% $ 229
9/30/95......... 7.44 0.35 1.03 1.38 (0.28) (0.15) (0.43) 8.39 19.19 2,538
9/30/96......... 8.39 0.08 2.50 2.58 (0.13) (0.39) (0.52) 10.45 31.75 13,903
9/30/97......... 10.45 (0.03) 3.39 3.36 (0.01) (0.44) (0.45) 13.36 33.30 55,530
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS(5) NET ASSETS(5) TURNOVER PER SHARE
- ---------------- ------------- ------------- --------- ----------
CLASS B
<S> <C> <C> <C> <C>
7/06/94-
9/30/94(3)..... 2.15%(4) 2.86%(4) 8% $ NA
9/30/95......... 0.30 4.48 230 NA
9/30/96......... 1.58 0.73 161 0.0600
9/30/97......... 2.05 (0.27) 200 0.0600
</TABLE>
- ------------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95 9/30/96 9/30/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Growth and Income Class A.................... 4.48% 2.96% 1.01% 0.22%
Growth and Income Class B.................... 20.35 5.07 1.14 0.21
</TABLE>
See Notes to Financial Statements
13
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK--65.1%
AEROSPACE & MILITARY TECHNOLOGY--
1.4%
AlliedSignal, Inc. ...... 70,000 $ 2,975,000
Boeing Co................ 33,780 1,838,899
------------
4,813,899
------------
APPAREL & TEXTILES--1.2%
Gap, Inc. ............... 60,000 3,003,750
Oakley, Inc.+............ 100,000 1,075,000
------------
4,078,750
------------
AUTOMOTIVE--1.0%
General Motors Corp. .... 50,000 3,346,875
------------
BANKS--9.0%
Ahmanson (H.F.) & Co..... 35,000 1,988,438
Banc One Corp. .......... 25,000 1,395,313
BankAmerica Corp......... 30,000 2,199,375
BankBoston Corp. ........ 20,000 1,768,750
Bankers Trust New York
Corp. .................. 10,000 1,225,000
Barnett Banks, Inc. ..... 40,000 2,830,000
Chase Manhattan Corp. ... 20,000 2,360,000
Citicorp. ............... 15,000 2,009,062
First Union Corp. ....... 60,000 3,003,750
Fleet Financial Group,
Inc. ................... 30,000 1,966,875
Hibernia Corp., Class A.. 100,000 1,700,000
Summit Bancorp. ......... 187,500 8,332,031
------------
30,778,594
------------
BUSINESS SERVICES--1.2%
American Express Co. .... 50,000 4,093,750
------------
CHEMICALS--0.7%
du Pont (E.I.) de Nemours
& Co. .................. 40,000 2,462,500
------------
COMMUNICATION EQUIPMENT--0.6%
Tellabs, Inc.+........... 40,000 2,060,000
------------
COMPUTERS & BUSINESS EQUIPMENT--
3.0%
Compaq Computer Corp.+... 30,000 2,242,500
Dell Computer Corp.+..... 30,000 2,906,250
Hewlett-Packard Co....... 35,000 2,434,688
International Business
Machines Corp........... 25,000 2,648,437
------------
10,231,875
------------
CONGLOMERATES--3.3%
General Electric Co. .... 40,000 2,722,500
Republic Industries,
Inc.+................... 50,000 1,646,875
Rockwell International
Corp. .................. 25,000 1,573,438
Schlumberger Ltd. ....... 25,000 2,104,687
United Technologies
Corp. .................. 40,000 3,240,000
------------
11,287,500
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C> <C> <C> <C>
DEPARTMENT STORES--1.4%
Wal-Mart Stores, Inc. .. 100,000 $ 3,662,500
Woolworth Corp.+........ 50,000 1,106,250
------------
4,768,750
------------
ELECTRICAL EQUIPMENT--0.5%
Westinghouse Electric
Corp. ................. 70,000 1,894,375
------------
ELECTRONICS--2.6%
Intel Corp. ............ 30,000 2,769,375
Motorola, Inc. ......... 40,000 2,875,000
Texas Instruments,
Inc. .................. 25,000 3,378,125
------------
9,022,500
------------
ENERGY SERVICES--1.3%
ENSCO International,
Inc. .................. 50,000 1,971,875
Halliburton Co.......... 50,000 2,600,000
------------
4,571,875
------------
ENERGY SOURCES--3.4%
Baker Hughes, Inc....... 55,000 2,406,250
Mobil Corp. ............ 35,000 2,590,000
Noble Affiliates, Inc. . 30,000 1,342,500
Royal Dutch Petroleum
Co..................... 50,000 2,775,000
Texaco, Inc............. 40,000 2,457,500
------------
11,571,250
------------
FINANCIAL SERVICES--7.1%
Beneficial Corp. ....... 25,000 1,904,688
Donaldson, Lufkin &
Jenrette, Inc. ........ 30,000 2,146,875
Household International,
Inc.................... 20,000 2,263,750
Lehman Brothers
Holdings, Inc. ........ 35,000 1,876,875
Morgan Stanley, Dean
Witter,
Discover & Co.......... 50,000 2,703,125
Paine Webber Group,
Inc.................... 45,000 2,095,312
ReliaStar Financial
Corp................... 80,000 3,185,000
Transamerica Corp. ..... 25,000 2,487,500
Travelers Group, Inc. .. 45,000 3,071,250
Wells Fargo & Co. ...... 10,000 2,750,000
------------
24,484,375
------------
FOOD, BEVERAGE & TOBACCO--1.5%
Coca-Cola Co............ 20,000 1,218,750
PepsiCo, Inc............ 35,000 1,419,687
Philip Morris Cos.,
Inc..................... 60,000 2,493,750
------------
5,132,187
------------
FOREST PRODUCTS--1.2%
Bowater, Inc............ 30,000 1,530,000
Champion International
Corp.................... 40,000 2,437,500
------------
3,967,500
------------
</TABLE>
14
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
HEALTH SERVICES--0.2%
Apria Healthcare Group, Inc.+............................. 60,000 $ 810,000
------------
HOUSEHOLD PRODUCTS--1.7%
Gillette Co............................................... 20,000 1,726,250
Procter & Gamble Co....................................... 20,000 1,381,250
Warner-Lambert Co......................................... 20,000 2,698,750
------------
5,806,250
------------
INSURANCE--1.5%
Allstate Corp............................................. 25,000 2,009,375
Conseco, Inc.............................................. 35,000 1,708,437
Equitable Cos., Inc. ..................................... 35,000 1,437,188
------------
5,155,000
------------
LEISURE & TOURISM--1.7%
Carnival Corp. Class A.................................... 40,000 1,850,000
HFS, Inc.+................................................ 40,000 2,977,500
MGM Grand, Inc.+.......................................... 23,000 999,062
------------
5,826,562
------------
MACHINERY--0.9%
Caterpillar, Inc.......................................... 25,000 1,348,438
Deere & Co................................................ 30,000 1,612,500
------------
2,960,938
------------
MEDICAL PRODUCTS--0.8%
Amgen, Inc.+.............................................. 25,000 1,198,438
US Surgical Corp. ........................................ 50,000 1,459,375
------------
2,657,813
------------
METALS & MINING--1.0%
Aluminum Co. of America................................... 40,000 3,280,000
------------
PHARMACEUTICALS--7.1%
Biogen, Inc.+............................................. 35,000 1,135,313
Bristol-Myers Squibb Co................................... 30,000 2,482,500
Cephalon, Inc.+........................................... 75,000 881,250
Chiron Corp.+............................................. 60,000 1,357,500
IDEC Pharmaceuticals Corp.+............................... 75,500 3,161,562
Lilly (Eli) & Co. ........................................ 25,000 3,010,937
Merck & Co., Inc. ........................................ 25,000 2,498,438
Neurex Corp.+............................................. 115,000 1,696,250
Novartis AG ADR(1)........................................ 35,000 2,687,163
Pfizer, Inc. ............................................. 35,000 2,102,188
Schering-Plough Corp. .................................... 30,000 1,545,000
SmithKline Beecham PLC ADR(1)............................. 40,000 1,955,000
------------
24,513,101
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SOFTWARE--0.8%
Microsoft Corp.+................................... 20,000 $ 2,646,250
------------
SPECIALTY RETAIL--1.7%
CVS Corp. ......................................... 40,000 2,275,000
Home Depot, Inc. .................................. 67,500 3,518,437
------------
5,793,437
------------
TELECOMMUNICATIONS--5.0%
AirTouch Communications, Inc.+ 60,000 2,126,250
AT&T Corp.......................................... 70,000 3,101,875
Bell Atlantic Corp. ............................... 35,000 2,815,313
Lucent Technologies, Inc. ......................... 50,000 4,068,750
Northern Telecom Ltd. ............................. 35,000 3,637,812
Teleport Communications Group, Class A+............ 30,000 1,346,250
------------
17,096,250
------------
TRANSPORTATION--1.9%
Burlington Northern Santa Fe Corp. ................ 20,000 1,932,500
Continental Airlines, Inc.,
Class B+.......................................... 45,000 1,771,875
Delta Air Lines, Inc. ............................. 30,000 2,825,625
------------
6,530,000
------------
UTILITIES--0.4%
Enron Corp. ....................................... 40,000 1,540,000
------------
TOTAL COMMON STOCK
(COST $177,441,773)................................. 223,182,156
------------
BONDS & NOTES--9.9%
AEROSPACE & MILITARY TECHNOLOGY--1.2%
Lockheed Martin Corp.
7.25% due 5/15/06................................. $ 4,000 4,141,000
------------
AUTOMOTIVE--1.5%
Chrysler Corp.
7.45% due 3/01/27................................. 5,000 5,135,650
------------
BANKS--0.6%
Chase Manhattan Corp.
7.88% due 8/01/04................................. 2,000 2,031,140
------------
FINANCIAL SERVICES--5.1%
Bear Stearns Cos., Inc.
6.63% due 1/15/04................................. 5,000 4,980,100
Donaldson, Lufkin & Jenrette, Inc.
6.88% due 11/01/05................................ 2,000 2,005,940
Ford Motor Credit Co.
8.00% due 6/15/02................................. 5,000 5,310,050
Goldman Sachs Group-L.P.
6.60% due 7/15/02................................. 5,000 5,013,200
------------
17,309,290
------------
</TABLE>
15
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- ----------------------------------------------------------------------------------
<S> <C> <C>
BONDS & NOTES (CONTINUED)
FOOD, BEVERAGE & TOBACCO--1.5%
Hershey Foods Corp.
7.20% due 8/15/27................................. $ 5,000 $ 5,102,250
------------
TOTAL BONDS & NOTES
(COST $32,773,230)................................ 33,719,330
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--0.9%
6.50% due 9/01/10
(cost $3,111,812)................................... 3,183 3,175,960
------------
U.S. TREASURY NOTES--16.4%
5.88% due 8/31/99.................................. 5,000 5,003,900
6.25% due 3/31/99.................................. 15,000 15,105,450
6.50% due 10/15/06................................. 10,000 10,214,100
6.63% due 5/15/07.................................. 5,000 5,164,050
6.88% due 7/31/99-3/31/00.......................... 10,000 10,204,650
7.25% due 8/15/04.................................. 10,000 10,631,200
------------
TOTAL U.S. TREASURY NOTES
(COST $55,646,197)................................ 56,323,350
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
U.S. TREASURY BONDS--5.0%
6.38% due 8/15/27............................... $ 5,000 $ 4,978,100
11.25% due 2/15/15.............................. 8,000 12,034,960
------------
TOTAL U.S. TREASURY BONDS
(COST $16,335,938)............................. 17,013,060
------------
TOTAL INVESTMENT SECURITIES--97.3%
(COST $285,308,950)............................ 333,413,856
------------
REPURCHASE AGREEMENT--2.8%
Joint Repurchase Agreement Account (Note 2)
(cost $9,623,000).............................. 9,623 9,623,000
------------
TOTAL INVESTMENTS--
(COST $294,931,950)............................ 100.1% 343,036,856
Liabilities in excess of other assets............ (0.1) (347,791)
------- ------------
NET ASSETS-- 100.0% $342,689,065
======= ============
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
See Notes to Financial Statements
16
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--97.9%
AEROSPACE & MILITARY TECHNOLOGY--1.6%
AlliedSignal, Inc. ..................................... 24,000 $ 1,020,000
Boeing Co. ............................................. 11,260 612,966
------------
1,632,966
------------
APPAREL & TEXTILES--2.4%
Gap, Inc. .............................................. 30,000 1,501,875
Oakley, Inc.+........................................... 100,000 1,075,000
------------
2,576,875
------------
AUTOMOTIVE--1.6%
General Motors Corp. ................................... 25,000 1,673,438
------------
BANKS--10.4%
Ahmanson (H.F.) & Co. .................................. 15,000 852,188
Banc One Corp. ......................................... 20,000 1,116,250
BankAmerica Corp. ...................................... 10,000 733,125
Bankers Trust New York Corp. ........................... 8,000 980,000
Barnett Banks, Inc. .................................... 10,000 707,500
Chase Manhattan Corp. .................................. 10,000 1,180,000
Citicorp. .............................................. 10,000 1,339,375
First Union Corp. ...................................... 20,000 1,001,250
Hibernia Corp., Class A................................. 60,000 1,020,000
Summit Bancorp.......................................... 45,000 1,999,687
------------
10,929,375
------------
BROADCASTING & MEDIA--0.6%
Nextel Communications, Inc., Class A+................... 20,000 577,500
------------
BUSINESS SERVICES--1.9%
American Express Co. ................................... 25,000 2,046,875
------------
CHEMICALS--0.6%
du Pont (E.I.) de Nemours & Co. ........................ 10,000 615,625
------------
COMMUNICATION EQUIPMENT--1.0%
Tellabs, Inc.+.......................................... 20,000 1,030,000
------------
COMPUTERS & BUSINESS EQUIPMENT--4.8%
Compaq Computer Corp.+.................................. 15,000 1,121,250
Dell Computer Corp.+.................................... 10,000 968,750
HBO & Co. .............................................. 20,000 755,000
Hewlett-Packard Co. .................................... 20,000 1,391,250
International Business Machines Corp. 8,000 847,500
------------
5,083,750
------------
CONGLOMERATES--3.9%
General Electric Co. ................................... 15,000 1,020,938
Republic Industries, Inc.+.............................. 20,000 658,750
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
CONGLOMERATES (CONTINUED)
Schlumberger Ltd. ......................................... 15,000 $ 1,262,812
United Technologies Corp. ................................. 15,000 1,215,000
------------
4,157,500
------------
DEPARTMENT STORES--1.9%
Wal-Mart Stores, Inc. ..................................... 30,000 1,098,750
Woolworth Corp.+........................................... 40,000 885,000
------------
1,983,750
------------
ELECTRICAL EQUIPMENT--1.0%
Westinghouse Electric Corp. ............................... 40,000 1,082,500
------------
ELECTRONICS--5.1%
Intel Corp. ............................................... 20,000 1,846,250
Motorola, Inc. ............................................ 30,000 2,156,250
Texas Instruments, Inc. ................................... 10,000 1,351,250
------------
5,353,750
------------
ENERGY SERVICES--2.6%
ENSCO International, Inc. ................................. 30,000 1,183,125
Halliburton Co. ........................................... 30,000 1,560,000
------------
2,743,125
------------
ENERGY SOURCES--4.4%
Baker Hughes, Inc. ........................................ 32,000 1,400,000
Mobil Corp. ............................................... 15,000 1,110,000
Noble Affiliates, Inc. .................................... 15,000 671,250
Royal Dutch Petroleum Co. ................................. 15,000 832,500
Texaco, Inc. .............................................. 10,000 614,375
------------
4,628,125
------------
FINANCIAL SERVICES--11.8%
Beneficial Corp. .......................................... 10,000 761,875
Donaldson, Lufkin & Jenrette, Inc. ........................ 15,000 1,073,438
Fleet Financial Group, Inc. ............................... 10,000 655,625
Household International, Inc. ............................. 10,000 1,131,875
Lehman Brothers Holdings, Inc. ............................ 15,000 804,375
Morgan Stanley, Dean Witter,
Discover & Co. ........................................... 20,000 1,081,250
PaineWebber Group, Inc. ................................... 25,000 1,164,062
ReliaStar Financial Corp. ................................. 50,000 1,990,625
Transamerica Corp. ........................................ 10,000 995,000
Travelers Group, Inc. ..................................... 20,000 1,365,000
Wells Fargo & Co. ......................................... 5,000 1,375,000
------------
12,398,125
------------
FOOD, BEVERAGE & TOBACCO--1.8%
Coca-Cola Co............................................... 8,000 487,500
PepsiCo, Inc............................................... 15,000 608,437
Philip Morris Cos., Inc.................................... 20,000 831,250
------------
1,927,187
------------
</TABLE>
17
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOREST PRODUCTS--1.6%
Bowater, Inc............................................... 10,000 $ 510,000
Champion International Corp. .............................. 20,000 1,218,750
------------
1,728,750
------------
HEALTH SERVICES--0.3%
Apria Healthcare Group, Inc.+.............................. 20,000 270,000
------------
HOUSEHOLD PRODUCTS--1.9%
Gillette Co................................................ 8,000 690,500
Warner-Lambert Co.......................................... 10,000 1,349,375
------------
2,039,875
------------
INSURANCE--1.8%
Allstate Corp.............................................. 10,000 803,750
Conseco, Inc............................................... 10,000 488,125
Equitable Cos., Inc. ...................................... 15,000 615,938
------------
1,907,813
------------
LEISURE & TOURISM--3.5%
Carnival Corp., Class A.................................... 20,000 925,000
Four Seasons Hotels, Inc................................... 20,000 820,000
HFS, Inc.+................................................. 20,000 1,488,750
MGM Grand, Inc.+........................................... 9,200 399,625
------------
3,633,375
------------
MACHINERY--2.8%
ASM Lithography Holdings NV+............................... 10,000 987,500
Caterpillar, Inc. ......................................... 10,000 539,375
Deere & Co. ............................................... 10,000 537,500
US Filter Corp.+........................................... 20,000 860,000
------------
2,924,375
------------
MEDICAL PRODUCTS--1.1%
Amgen, Inc.+............................................... 13,000 623,188
US Surgical Corp. ......................................... 20,000 583,750
------------
1,206,938
------------
METALS & MINING--1.2%
Aluminum Co. of America.................................... 15,000 1,230,000
------------
PHARMACEUTICALS--10.5%
Biogen, Inc.+.............................................. 12,000 389,250
Bristol-Myers Squibb Co.................................... 10,000 827,500
Cephalon, Inc.+............................................ 20,000 235,000
Chiron Corp.+.............................................. 30,000 678,750
IDEC Pharmaceuticals Corp.+................................ 55,000 2,303,125
Lilly (Eli) & Co........................................... 10,000 1,204,375
Merck & Co., Inc........................................... 10,000 999,375
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Neurex Corp.+..................................... 60,000 $ 885,000
Novartis AG ADR(1)................................ 10,000 767,761
Pfizer, Inc....................................... 22,000 1,321,375
Schering-Plough Corp.............................. 10,000 515,000
SmithKline Beecham PLC ADR(1)..................... 20,000 977,500
------------
11,104,011
------------
SOFTWARE--1.3%
Microsoft Corp.+.................................. 10,000 1,323,125
------------
SPECIALTY RETAIL--2.3%
CVS Corp.......................................... 20,000 1,137,500
Home Depot, Inc................................... 25,500 1,329,187
------------
2,466,687
------------
TELECOMMUNICATIONS--8.4%
AirTouch Communications, Inc.+.................... 30,000 1,063,125
AT&T Corp......................................... 30,000 1,329,375
Bell Atlantic Corp................................ 15,000 1,206,563
Loral Space & Communications Corp.+............... 50,000 1,031,250
Lucent Technologies, Inc.......................... 25,000 2,034,375
Northern Telecom Ltd.............................. 15,000 1,559,062
Teleport Communications
Group, Class A+ ................................. 15,000 673,125
------------
8,896,875
------------
TRANSPORTATION--3.1%
Burlington Northern Santa Fe Corp. ............... 10,000 966,250
Continental Airlines, Inc., Class B+.............. 15,000 590,625
Delta Air Lines, Inc.............................. 10,000 941,875
Laidlaw, Inc...................................... 50,000 746,875
------------
3,245,625
------------
UTILITIES--0.7%
Enron Corp........................................ 20,000 770,000
------------
TOTAL COMMON STOCK
(COST $84,617,938)................................. 103,187,915
------------
REPURCHASE AGREEMENT--4.6%
Joint Repurchase Agreement Account (Note 2)
(cost $4,864,000)................................ $ 4,864 4,864,000
------------
TOTAL INVESTMENTS--
(COST $89,481,938)............................... 102.5% 108,051,915
Liabilities in excess of other assets (2.5) (2,606,527)
------- ------------
NET ASSETS-- 100.0% $105,445,388
======= ============
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
See Notes to Financial Statements
18
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--101.1%
AEROSPACE & MILITARY TECHNOLOGY--1.4%
REMEC, Inc.+................................................ 22,300 $ 813,950
---------
APPAREL & TEXTILES--2.0%
Big Dog Holdings Inc.+...................................... 2,000 28,000
Jones Apparel Group, Inc.+.................................. 10,000 540,000
Tefron Ltd.+................................................ 10,000 200,000
TJX Cos., Inc............................................... 13,200 403,425
---------
1,171,425
---------
BANKS--5.9%
Bankers Trust New York Corp................................. 5,000 612,500
CBT Group PLC ADR(1)........................................ 10,000 802,500
FirstFed Financial Corp. Delaware........................... 15,000 511,875
Hibernia Corp., Class A..................................... 15,000 255,000
PNC Bank Corp. ............................................. 10,000 488,125
Summit Bancorp. ............................................ 19,500 866,531
---------
3,536,531
---------
BROADCASTING & MEDIA--5.2%
Cinar Films, Inc., Class B+................................. 25,000 953,125
Jacor Communications, Inc.+................................. 10,000 441,875
Telemundo Group Inc., Class A+.............................. 10,000 350,000
Univision Communications, Inc............................... 20,000 1,085,000
Yahoo!, Inc.+............................................... 5,000 250,625
---------
3,080,625
---------
BUSINESS SERVICES--7.4%
Amazon.com, Inc.+........................................... 10,000 520,625
American Express Co. ....................................... 10,000 818,750
Computer Horizons Corp.+.................................... 10,000 362,500
Federal Express Corp.+...................................... 8,000 640,000
Lason Holdings, Inc.+....................................... 55,000 1,519,375
Personal Group Of America, Inc.............................. 5,000 171,250
Vestcom International, Inc.+................................ 20,000 400,000
---------
4,432,500
---------
CHEMICALS--0.2%
Solutia, Inc.+.............................................. 7,000 140,000
---------
COMPUTERS & BUSINESS EQUIPMENT--2.6%
Bay Networks, Inc.+......................................... 10,000 386,250
Dell Computer Corp.+........................................ 5,000 484,375
FORE Systems, Inc.+......................................... 15,000 295,313
SMART Modular Technologies, Inc.+........................... 5,000 415,000
---------
1,580,938
---------
CONGLOMERATES--3.1%
Sunbeam Corp................................................ 25,000 1,109,375
Tyco International Ltd...................................... 9,000 738,563
---------
1,847,938
---------
CONTAINERS & STORAGE--0.6%
Owens-Illinois, Inc.+....................................... 10,000 339,375
---------
DEPARTMENT STORES--4.7%
Ames Department Stores, Inc.+............................... 70,000 1,050,000
Kohl's Corp.+............................................... 10,000 710,000
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
DEPARTMENT STORES (CONTINUED)
Neiman Marcus Group, Inc.+.................................. 15,000 $ 480,000
Penney (J.C.) Co, Inc. ..................................... 10,000 582,500
-----------
2,822,500
-----------
ELECTRICAL EQUIPMENT--1.3%
ASM Lithography Holdings NV+................................ 5,000 493,750
Helix Technology Corp. ..................................... 5,000 309,531
-----------
803,281
-----------
ELECTRONICS--14.4%
Analog Devices, Inc.+....................................... 20,000 670,000
Applied Materials, Inc.+.................................... 5,000 476,250
Credence Systems Corp.+..................................... 10,000 487,500
Digital Microwave Corp. .................................... 10,000 447,500
DII Group, Inc.+............................................ 20,000 655,625
FARO Technologies Inc.+..................................... 17,000 278,375
Jabil Circuit, Inc.+........................................ 9,000 589,500
Kulicke & Soffa Industries, Inc.+........................... 8,000 370,500
Level One Communications, Inc............................... 10,000 402,500
Linear Technology Corp. .................................... 10,000 687,500
Micrel, Inc.+............................................... 10,000 423,125
Novellus Systems, Inc.+..................................... 5,000 630,000
PRI Automation, Inc.+....................................... 10,000 585,000
Sanmina Corp.+.............................................. 7,000 605,937
Teradyne, Inc.+............................................. 10,000 538,125
Texas Instruments, Inc. .................................... 3,000 405,375
VLSI Technology, Inc.+...................................... 10,000 346,875
-----------
8,599,687
-----------
ENERGY SERVICES--2.2%
Cooper Cameron, Corp.+...................................... 5,000 359,062
Diamond Offshore Drilling, Inc. ............................ 5,000 275,938
KN Energy, Inc. ............................................ 10,000 457,500
Western Gas Resources, Inc. ................................ 10,000 216,875
-----------
1,309,375
-----------
ENERGY SOURCES--1.2%
Kerr-McGee Corp. ........................................... 10,000 688,125
-----------
FINANCIAL SERVICES--4.3%
Associates First Capital Corp. ............................. 10,000 622,500
Crestar Financial Corp. .................................... 7,000 328,125
Lehman Brothers Holdings, Inc. ............................. 7,000 375,375
Merrill Lynch & Co., Inc. .................................. 11,000 816,062
New Century Financial Corp.+................................ 25,000 426,563
-----------
2,568,625
-----------
FOREST PRODUCTS--1.1%
Georgia-Pacific Corp. ...................................... 2,000 208,750
Sealed Air Corp.+........................................... 8,500 466,969
-----------
675,719
-----------
</TABLE>
19
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
HEALTH SERVICES--3.0%
Access Health Inc.+........................................ 15,000 $ 517,500
Healthcare Financial Partners, Inc.+....................... 20,400 629,850
HEALTHSOUTH Corp.+......................................... 25,000 667,188
-----------
1,814,538
-----------
HOUSEHOLD PRODUCTS--1.1%
Furniture Brands International, Inc.+...................... 20,000 377,500
Scotts Co., Class A+....................................... 10,000 262,500
-----------
640,000
-----------
HOUSING--0.5%
Assisted Living Concepts, Inc.+............................ 20,000 320,000
-----------
INSURANCE--1.3%
Allmerica Financial Corp. ................................. 10,000 439,375
Chubb Corp. ............................................... 5,000 355,313
-----------
794,688
-----------
LEISURE & TOURISM--1.2%
Carnival Corp., Class A.................................... 15,000 693,750
-----------
MACHINERY -- 2.4%
Flanders Corp.+............................................ 100,000 775,000
Precision Castparts Corp. ................................. 10,000 650,000
-----------
1,425,000
-----------
MEDICAL PRODUCTS--0.6%
Twinlab Corp.+............................................. 17,000 348,500
-----------
METALS & MINING--1.7%
EASCO, Inc. ............................................... 45,000 551,250
Steel Dynamics, Inc.+...................................... 20,000 470,000
-----------
1,021,250
-----------
PHARMACEUTICALS--6.0%
Andrx Corp.+............................................... 15,500 705,250
IDEC Pharmaceuticals Corp.+................................ 10,000 418,750
Lilly (Eli) & Co. ......................................... 6,000 722,625
Mylan Laboratories, Inc. .................................. 18,000 403,875
Protein Design Labs, Inc.+................................. 10,000 387,500
Vivus, Inc.+............................................... 25,000 937,500
-----------
3,575,500
-----------
POLLUTION CONTROL--1.3%
American Disposal Services, Inc.+.......................... 25,000 781,250
-----------
REAL ESTATE INVESTMENT TRUSTS--2.5%
Boston Properties, Inc.+................................... 15,000 492,187
Starwood Lodging Trust..................................... 12,500 717,969
Westfield America, Inc. ................................... 17,000 282,625
-----------
1,492,781
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SOFTWARE--8.4%
Applied Voice Technology, Inc.+.................... 20,000 $ 572,500
Best Software, Inc. ............................... 17,000 248,625
BMC Software, Inc.+................................ 10,000 647,500
Crystal Systems Solutions Ltd.+ 10,400 278,200
HBO & Co. ......................................... 25,000 943,750
Lycos Inc.+........................................ 10,000 340,000
Microsoft Corp.+................................... 4,800 635,100
PeopleSoft, Inc.+.................................. 5,000 298,750
Veritas DGC, Inc.+ ................................ 10,000 425,625
Veritas Software Co.+ ............................. 15,000 659,062
-----------
5,049,112
-----------
SPECIALTY RETAIL--2.6%
CVS Corp. ......................................... 13,000 739,375
Intimate Brands, Inc., Class A..................... 10,000 233,125
Michaels Stores, Inc.+............................. 20,000 611,250
-----------
1,583,750
-----------
TELECOMMUNICATIONS--7.7%
AT&T Corp. ........................................ 10,000 443,125
Lucent Technologies, Inc. ......................... 6,000 488,250
Network Solutions, Inc+............................ 2,000 43,500
Newbridge Networks Corp. ADR(1).................... 15,000 898,125
Nextel Communications, Inc., Class A+.............. 10,000 288,750
Northern Telecom Ltd............................... 7,000 727,562
PairGain Technologies, Inc.+....................... 10,000 285,000
Tekelec, Inc.+..................................... 30,000 1,021,875
Vimpel-Communication-SP ADR+(1).................... 10,000 417,500
-----------
4,613,687
-----------
TRANSPORTATION--3.2%
Airborne Freight Corp. ............................ 5,000 302,813
Caliber System, Inc................................ 10,000 542,500
CNF Transportation, Inc. .......................... 25,000 1,089,062
-----------
1,934,375
-----------
TOTAL COMMON STOCK
(COST $48,905,829).................................. 60,498,775
-----------
REPURCHASE AGREEMENT--2.9%
Joint Repurchase Agreement Account (Note 2)
(cost $1,704,000)................................. $ 1,704 1,704,000
-----------
TOTAL INVESTMENTS--
(COST $50,609,829)................................ 104.0% 62,202,775
Liabilities in excess of other assets (4.0) (2,372,744)
------- -----------
NET ASSETS--........................................ 100.0% $59,830,031
======= ===========
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipts")
See Notes to Financial Statements.
20
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--98.9%
AEROSPACE & MILITARY TECHNOLOGY--2.9%
Aeroflex Inc.+.......................................... 240,000 $ 2,430,000
REMEC, Inc.+............................................ 178,050 6,498,825
------------
8,928,825
------------
APPAREL & TEXTILES--1.8%
Big Dog Holdings Inc.+.................................. 6,000 84,000
Brooks Automation, Inc.+................................ 50,000 1,918,750
Jones Apparel Group, Inc.+.............................. 25,000 1,350,000
Novel Denim Holdings Ltd.+.............................. 29,000 783,000
Stage Stores, Inc. ..................................... 32,500 1,401,562
------------
5,537,312
------------
AUTOMOTIVE--0.2%
Budget Group, Inc., Class A+............................ 15,000 495,000
------------
BANKS--6.2%
CBT Group PLC ADR....................................... 25,000 2,006,250
First American Corp.(Tennessee)......................... 111,000 5,425,125
First International Bancorp Inc.+....................... 35,500 636,781
First Tennessee National Corp........................... 10,000 570,000
Hamilton Bancorp, Inc.+................................. 50,000 1,375,000
Hibernia Corp., Class A................................. 58,000 986,000
PNC Bank Corp. ......................................... 33,000 1,610,813
Summit Bancorp. ........................................ 92,250 4,099,359
U.S. Bancorp............................................ 26,425 2,550,013
------------
19,259,341
------------
BROADCASTING & MEDIA--2.4%
Cinar Films, Inc., Class B+............................. 47,500 1,810,938
Jacor Communications, Inc.+............................. 40,000 1,767,500
Mecklermedia Corp.+..................................... 17,500 405,781
Yahoo!, Inc.+........................................... 67,500 3,383,437
------------
7,367,656
------------
BUSINESS SERVICES--7.2%
America Online, Inc.+................................... 15,000 1,131,562
Boron, LePore & Associates, Inc. ....................... 76,200 1,762,125
Computer Horizons Corp.+................................ 52,500 1,903,125
CorporateFamily Solutions Inc.+......................... 97,000 1,636,875
NCO Group, Inc.+........................................ 66,200 2,449,400
Object Design, Inc.+.................................... 70,000 577,500
Personal Group Of America, Inc.......................... 85,000 2,911,250
ProSoft Development, Inc.+.............................. 240,000 3,420,000
ProSoft Development, Inc.+(2)(3)........................ 100,000 1,260,000
Sterling Commerce, Inc.+................................ 65,000 2,335,937
Sunquest Information Systems, Inc.+..................... 37,500 567,188
Vestcom International, Inc.+............................ 115,000 2,300,000
------------
22,254,962
------------
COMMUNICATION EQUIPMENT--4.3%
ANADIGICS, Inc.+........................................ 35,000 1,725,937
Digital Microwave Corp.+................................ 100,000 4,475,000
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMUNICATION EQUIPMENT (CONTINUED)
Spectrian Corp.+.......................................... 35,000 $ 2,244,375
Tellabs, Inc.+............................................ 41,900 2,157,850
World Access, Inc.+....................................... 85,000 2,762,500
------------
13,365,662
------------
COMPUTERS & BUSINESS EQUIPMENT--4.2%
Apex PC Solutions Inc.+................................... 55,000 2,083,125
Bay Networks, Inc.+....................................... 35,000 1,351,875
Box Hill Systems Corp.+................................... 35,000 612,500
CHS Electronics, Inc.+.................................... 28,000 766,500
Computer Task Group, Inc.+................................ 75,000 3,145,312
FORE Systems, Inc.+....................................... 50,000 984,375
SMART Modular Technologies, Inc.+......................... 50,000 4,150,000
------------
13,093,687
------------
DEPARTMENT STORES--0.5%
Kohl's Corp.+............................................. 20,000 1,420,000
------------
ELECTRICAL EQUIPMENT--0.8%
Helix Technology Corp. ................................... 40,000 2,476,250
------------
ELECTRONICS--18.1%
Aehr Test Systems+........................................ 102,000 1,804,125
Align-Rite International, Inc.+........................... 43,500 1,038,563
Alpha Industries, Inc.+................................... 64,300 1,189,550
Credence Systems Corp.+................................... 65,000 3,168,750
Dallas Semiconductor Corp................................. 18,500 827,875
DII Group, Inc.+.......................................... 140,000 4,589,375
Electro Scientific Industries, Inc. ADR+(1)............... 17,500 1,067,500
Electroglas, Inc.+........................................ 75,000 2,550,000
FARO Technologies Inc.+................................... 86,200 1,411,525
GaSonics International Corp.+............................. 65,000 1,352,812
Intelect Communications Systems, Ltd.+.................... 25,000 284,375
inTEST Corp.+............................................. 125,000 2,125,000
Jabil Circuit, Inc.+...................................... 20,000 1,310,000
KLA Instruments, Corp.+................................... 20,000 1,351,250
Kulicke & Soffa Industries, Inc.+......................... 55,000 2,547,187
Linear Technology Corp. .................................. 20,000 1,375,000
Micrel, Inc.+............................................. 96,000 4,062,000
Novellus Systems, Inc.+................................... 10,000 1,260,000
Photronics, Inc.+......................................... 20,000 1,211,250
PRI Automation, Inc.+..................................... 55,000 3,217,500
QLogic Corp.+............................................. 35,000 1,465,625
Semtech Corp.+............................................ 20,000 1,382,500
SIPEX Corp.+.............................................. 68,000 2,159,000
Speedfam International, Inc.+............................. 20,000 1,207,500
Teradyne, Inc.+........................................... 23,000 1,237,688
Texas Instruments, Inc. .................................. 15,000 2,026,875
Uniphase Corp.+........................................... 20,000 1,590,000
Unitrode Corp.+........................................... 20,000 1,482,500
Veeco Instruments, Inc.+.................................. 20,000 1,263,750
Vitesse Semiconductor Corp.+.............................. 95,000 4,708,437
------------
56,267,512
------------
</TABLE>
21
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
ENERGY SERVICES--7.1%
Cliffs Drilling Co. ...................................... 22,400 $ 1,559,600
Cooper Cameron, Corp.+.................................... 30,000 2,154,375
Diamond Offshore Drilling, Inc. .......................... 27,000 1,490,062
ENSCO International, Inc.+................................ 56,000 2,208,500
Falcon Drilling, Inc.+.................................... 70,000 2,471,875
Friede Goldman International, Inc.+....................... 25,000 1,500,000
Noble Drilling Corp.+..................................... 107,500 3,466,875
Pride International, Inc.+................................ 30,000 1,020,000
Santa Fe International Corp.+............................. 60,000 2,790,000
Stolt Comex Seaway S.A.+.................................. 45,000 2,815,312
UTI Energy Corp.+......................................... 15,000 619,688
------------
22,096,287
------------
ENERGY SOURCES--0.3%
Precision Drilling Corp.+................................. 15,000 958,125
------------
FINANCIAL SERVICES--4.6%
American Capital Strategies Ltd.+......................... 57,000 1,140,000
Crestar Financial Corp. .................................. 17,000 796,875
E*TRADE Group, Inc.+...................................... 40,000 1,880,000
Hambrecht + Quist Group, Inc. ............................ 100,000 3,525,000
Jackson Hewitt, Inc.+..................................... 68,000 2,601,000
Legg Mason, Inc. ......................................... 26,933 1,420,734
Metris Cos., Inc. ........................................ 36,500 1,580,906
Raymond James Financial, Inc. ............................ 40,000 1,440,000
------------
14,384,515
------------
HEALTH SERVICES--1.8%
BioReliance Corp.+........................................ 40,000 1,050,000
Diagnostic Health Services, Inc.+......................... 50,000 756,250
Healthcare Financial Partners, Inc.+...................... 70,600 2,179,775
NovaCare, Inc.+........................................... 101,000 1,742,250
------------
5,728,275
------------
HOUSING--1.2%
D.R. Horton, Inc. ........................................ 75,000 1,181,250
Windmere-Durable Holdings, Inc. .......................... 107,000 2,547,938
------------
3,729,188
------------
LEISURE & TOURISM--1.4%
CapStar Hotel Co.+........................................ 12,000 402,750
Pegasus Systems, Inc.+.................................... 33,500 607,188
Ryanair Holdings PLC ADR+(1).............................. 31,200 937,462
Travel Services International, Inc.+...................... 32,500 674,375
Trendwest Resorts, Inc.+.................................. 75,000 1,762,500
------------
4,384,275
------------
MACHINERY--3.8%
Ade Corp.+................................................ 20,000 802,500
Advanced Technology Materials, Inc. ...................... 47,500 1,745,625
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
MACHINERY (CONTINUED)
Applied Science + Technology Inc.+........................ 45,000 $ 961,875
ASM Lithography Holdings NV+.............................. 33,000 3,258,750
Flanders Corp.+........................................... 500,000 3,875,000
Semitool, Inc+............................................ 50,000 1,256,250
------------
11,900,000
------------
MEDICAL PRODUCTS--2.6%
Closure Medical Corp.+.................................... 45,000 1,552,500
Guidant Corp. ............................................ 38,000 2,128,000
LifeCell Corp.+........................................... 157,400 1,239,525
Miravant Med Technologies+................................ 25,000 1,375,000
Novametrix Medical Systems, Inc. ......................... 60,000 603,750
Osteotech, Inc. .......................................... 54,000 1,086,750
------------
7,985,525
------------
METALS & MINING--0.7%
Maverick Tube Corp.+...................................... 52,000 2,145,000
------------
PHARMACEUTICALS--2.5%
ChiRex Inc.+.............................................. 60,000 1,530,000
IDEC Pharmaceuticals Corp.+............................... 23,000 963,125
Kos Pharmaceuticals, Inc.+................................ 45,000 1,608,750
Protein Design Labs, Inc.+................................ 40,000 1,550,000
Vivus, Inc.+.............................................. 60,000 2,250,000
------------
7,901,875
------------
POLLUTION CONTROL--1.1%
American Disposal Services, Inc.+......................... 110,000 3,437,500
------------
REAL ESTATE INVESTMENT TRUSTS--1.8%
Boston Properties, Inc.+.................................. 35,000 1,148,438
Equity Office Properties Trust............................ 59,000 2,002,312
FelCor Suite Hotels, Inc. ................................ 19,500 800,719
Starwood Lodging Trust.................................... 28,000 1,608,250
------------
5,559,719
------------
RESTAURANTS--0.4%
Logans Roadhouse, Inc.+................................... 27,500 715,000
Ryan's Family Steak Houses, Inc.+......................... 45,000 413,438
------------
1,128,438
------------
SOFTWARE--10.0%
Applied Voice Technology, Inc.+........................... 30,000 858,750
Aris Corp.+............................................... 61,000 1,296,250
Best Software, Inc........................................ 36,000 531,000
BMC Software, Inc.+....................................... 20,000 1,295,000
Compuware Corp.+.......................................... 40,000 2,420,000
Crystal Systems Solutions Ltd.+........................... 33,700 901,475
HBO & Co.................................................. 60,000 2,265,000
Innovus Corp.+(2)(3)...................................... 54,000 29,700
</TABLE>
22
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
SOFTWARE (CONTINUED)
J. D. Edwards & Co.+...................................... 55,500 $ 1,859,250
Keane, Inc.+.............................................. 54,000 1,714,500
LHS Group, Inc.+.......................................... 50,000 2,300,000
Lycos, Inc.+.............................................. 80,000 2,720,000
Omtool Ltd.+.............................................. 25,000 334,375
QuadraMed Corp.+.......................................... 158,000 2,725,500
Saville Systems PLC ADR+(1)............................... 56,500 3,969,125
Veritas DGC, Inc.+........................................ 65,000 2,766,563
Veritas Software Corp.+................................... 67,500 2,965,781
------------
30,952,269
------------
SPECIALTY RETAIL--0.4%
Amazon.com, Inc.+......................................... 20,000 1,041,250
Maxim Group, Inc.+........................................ 20,000 325,000
------------
1,366,250
------------
TELECOMMUNICATIONS--9.0%
Digital Lightwave, Inc.+ 30,000 487,500
Lucent Technologies, Inc.................................. 20,000 1,627,500
McLeod USA, Inc., Class A+................................ 60,000 2,366,250
Network Solutions, Inc.+.................................. 6,000 130,500
Newbridge Networks Corp. ADR+(1).......................... 53,000 3,173,375
NICE Systems Ltd. ADR+(1)................................. 50,000 2,812,500
Pacific Gateway Exchange, Inc............................. 35,600 1,392,850
PairGain Technologies, Inc.+.............................. 28,000 798,000
Qwest Communications International, Inc.+................. 80,000 3,690,000
RADCOM Ltd.+.............................................. 38,000 446,500
Stanford Telecommunications, Inc. ........................ 40,000 875,000
Tekelec, Inc.+............................................ 168,000 5,722,500
Teledata Communications, Inc.+............................ 40,000 1,805,000
Vimpel-Communications-SP ADR(1)........................... 65,000 2,713,750
------------
28,041,225
------------
TELEPHONE--0.3%
NEXTLINK Communications, Inc., Class A 40,500 972,000
------------
TRANSPORTATION--1.3%
Airborne Freight Corp..................................... 30,000 1,816,875
Caliber System, Inc....................................... 23,000 1,247,750
CNF Transportation, Inc................................... 22,200 967,088
------------
4,031,713
------------
TOTAL COMMON STOCK
(COST $227,296,296)...................................... 307,168,386
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
BONDS & NOTES--0.1%
SOFTWARE--0.1%
Wind River Systems, Inc.*
5.00% due 7/31/02
(cost $250,000)................................ $ 250 $ 255,000
------------
WARRANTS--0.5%+
PHARMACEUTICALS--0.5%
Ligand Pharmaceuticals, Inc.
(cost $819,842)................................ 142,500 1,531,875
------------
TOTAL INVESTMENT SECURITIES--99.5%
(COST $228,366,138)............................ 308,955,261
------------
REPURCHASE AGREEMENT--2.8%
Joint Repurchase Agreement Account (Note 2)
(cost $8,729,000).............................. $ 8,729 8,729,000
------------
TOTAL INVESTMENTS--
(COST $237,095,138)............................ 102.3% 317,684,261
------------
Liabilities in excess of other assets............ (2.3) (7,075,951)
------------
NET ASSETS-- 100.0% $310,608,310
======== ============
</TABLE>
- -------
+ Non-income producing security
* Resale restricted to qualified institutional buyers
(1) ADR ("American Depositary Receipt")
(2) At September 30, 1997 the Fund held restricted securities amounting to
0.4% of net assets. The Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in the
connection with the disposition of the securities.
<TABLE>
<CAPTION>
VALUATION
AS OF
DATE OF UNIT SEPTEMBER 30,
DESCRIPTION ACQUISITION COST 1997
----------- ----------- ------ -------------
<S> <C> <C> <C>
ProSoft Development, Inc. 3/12/97 $10.50 $12.60
Innovus Corp. 3/21/95 3.50 0.55
</TABLE>
(3) Fair valued security, see Note 2
See Notes to Financial Statements
23
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--99.2%
AEROSPACE & MILITARY TECHNOLOGY--1.2%
AlliedSignal, Inc. ...................................... 18,000 $ 765,000
Boeing Co. .............................................. 8,924 485,800
------------
1,250,800
------------
AUTOMOTIVE--1.2%
Cooper Tire & Rubber..................................... 19,000 504,688
General Motors Corp. .................................... 8,000 535,500
Ugly Duckling Corp.+..................................... 15,000 228,750
------------
1,268,938
------------
BANKS--6.4%
Bankers Trust New York Corp. ............................ 5,000 612,500
Chase Manhattan Corp. ................................... 10,000 1,180,000
Citicorp................................................. 5,000 669,687
First Union Corp. ....................................... 25,500 1,276,594
Mellon Bank Corp. ....................................... 18,000 985,500
NationsBank Corp. ....................................... 10,000 618,750
Summit Bancorp........................................... 28,500 1,266,469
------------
6,609,500
------------
BROADCASTING & MEDIA--2.9%
Dow Jones & Co., Inc. ................................... 15,000 701,250
New York Times Co., Class A.............................. 16,000 840,000
Tele-Communications TCI Group, Class A+.................. 15,905 326,052
Time Warner, Inc. ....................................... 20,000 1,083,750
------------
2,951,052
------------
BUSINESS SERVICES--1.9%
American Express Co. .................................... 9,000 736,875
Fortune Brands, Inc. .................................... 9,000 303,188
Gartner Group, Inc., Class A+............................ 30,000 900,000
------------
1,940,063
------------
CHEMICALS--4.1%
du Pont (E.I.) de Nemours & Co. ......................... 15,000 923,437
Fuller (H.B.) Co. ....................................... 15,000 812,813
IMC Global, Inc. ........................................ 15,000 528,750
Monsanto Co. ............................................ 10,000 390,000
Potash Corp. of Saskatchewan, Inc. ...................... 12,000 942,000
RPM, Inc. Ohio........................................... 30,000 615,000
------------
4,212,000
------------
COMPUTERS & BUSINESS EQUIPMENT--5.1%
3Com Corp.+.............................................. 10,000 512,500
American Pad & Paper Co.+................................ 21,000 261,188
Cisco Systems, Inc.+..................................... 7,000 511,438
Computer Sciences Corp.+................................. 12,000 849,000
Hewlett-Packard Co. ..................................... 13,000 904,312
Honeywell, Inc. ......................................... 16,000 1,075,000
International Business Machines Corp. ................... 11,000 1,165,312
------------
5,278,750
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
CONGLOMERATES--3.6%
Corning, Inc. ............................................. 15,000 $ 708,750
General Electric Co. ...................................... 23,000 1,565,437
Rockwell International Corp. .............................. 15,000 944,063
Tenneco, Inc. ............................................. 10,000 478,750
------------
3,697,000
------------
CONTAINERS & STORAGE--1.4%
Ivex Packaging Corp.+...................................... 19,000 304,000
Owens-Illinois, Inc.+...................................... 33,000 1,119,938
------------
1,423,938
------------
CONSTRUCTION MATERIALS--0.6%
Dal-Tile International, Inc.+.............................. 43,000 645,000
------------
CONSUMER SERVICES--1.0%
Service Corporation International.......................... 31,000 997,813
------------
DEPARTMENT STORES--1.7%
Penney (J.C.) Co, Inc. .................................... 12,000 699,000
Wal-Mart Stores, Inc....................................... 28,000 1,025,500
------------
1,724,500
------------
ELECTRONICS--6.2%
Emerson Electric Co. ...................................... 19,000 1,094,875
General Cable Corp.+....................................... 22,000 781,000
Hubbell, Inc., Class B..................................... 10,000 462,500
Intel Corp. ............................................... 20,000 1,846,250
Motorola, Inc. ............................................ 21,000 1,509,375
Texas Instruments, Inc. ................................... 5,000 675,625
------------
6,369,625
------------
ENERGY SERVICES--2.4%
Baker Hughes, Inc. ........................................ 25,000 1,093,750
ENSCO International, Inc. ................................. 14,000 552,125
Halliburton Co. ........................................... 16,000 832,000
------------
2,477,875
------------
ENERGY SOURCES--6.7%
Amoco Corp. ............................................... 9,000 867,375
Chevron Corp. ............................................. 7,000 582,312
Duke Energy Co. ........................................... 15,666 774,488
Exxon Corp. ............................................... 14,000 896,875
Mobil Corp. ............................................... 10,000 740,000
Noble Affiliates, Inc. .................................... 10,000 447,500
Nuevo Energy Co.+.......................................... 15,000 718,125
Royal Dutch Petroleum Co. ................................. 22,000 1,221,000
Texaco, Inc. .............................................. 10,000 614,375
------------
6,862,050
------------
ENTERTAINMENT PRODUCTS--1.0%
Mattel, Inc. .............................................. 30,000 993,750
------------
</TABLE>
24
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES--6.3%
Associates First Capital Corp. ............................ 9,800 $ 610,050
Beneficial Corp. .......................................... 10,000 761,875
ContiFinancial Corp.+...................................... 25,000 812,500
Federal National Mortgage Association...................... 12,000 564,000
Household International, Inc. ............................. 11,000 1,245,062
Transamerica Corp. ........................................ 7,000 696,500
Washington Mutual, Inc. ................................... 10,000 697,500
Wells Fargo & Co. ......................................... 4,000 1,100,000
------------
6,487,487
------------
FOOD, BEVERAGE & TOBACCO--6.2%
Coca-Cola Co. ............................................. 10,000 609,375
ConAgra, Inc. ............................................. 10,000 660,000
Flowers Industries, Inc. .................................. 15,000 305,625
Heinz (H.J.) Co. .......................................... 13,000 600,438
Kellogg Co. ............................................... 7,000 294,875
Philip Morris Cos., Inc. .................................. 54,000 2,244,375
RJR Nabisco Holdings Corp. ................................ 11,000 378,125
Sysco Corp. ............................................... 35,000 1,292,812
------------
6,385,625
------------
FOREST PRODUCTS--1.3%
Champion International Corp. .............................. 8,000 487,500
International Paper Co. ................................... 5,000 275,313
Willamette Industries, Inc. ............................... 16,000 612,000
------------
1,374,813
------------
HEALTH SERVICES--1.3%
Columbia/HCA Healthcare Corp. ............................. 17,000 488,750
Tenet Healthcare Corp.+.................................... 29,000 844,625
------------
1,333,375
------------
HOUSEHOLD PRODUCTS--2.8%
Avon Products, Inc. ....................................... 4,000 248,000
Gillette Co. .............................................. 6,000 517,875
International Flavors & Fragrances, Inc. .................. 5,000 245,000
Kimberly-Clark Corp. ...................................... 17,100 836,831
Procter & Gamble Co. ...................................... 7,000 483,437
Ralston Purina Co. ........................................ 3,000 265,500
Unilever NV................................................ 1,500 318,938
------------
2,915,581
------------
INSURANCE--2.0%
Aetna, Inc. ............................................... 6,000 488,625
Allstate Corp. ............................................ 10,000 803,750
Chubb Corp. ............................................... 10,000 710,625
------------
2,003,000
------------
LEISURE & TOURISM--0.8%
Carnival Corp., Class A.................................... 18,000 832,500
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
MACHINERY--1.5%
Case Corp. ................................................ 9,000 $ 599,625
Ingersoll-Rand Co. ........................................ 22,000 947,375
------------
1,547,000
------------
MEDICAL PRODUCTS--5.1%
Amgen, Inc.+............................................... 15,000 719,063
Baxter International, Inc. ................................ 27,000 1,410,750
Johnson & Johnson.......................................... 21,000 1,210,125
Sola International, Inc.+.................................. 43,400 1,489,162
St. Jude Medical, Inc.+.................................... 10,000 350,625
------------
5,179,725
------------
METALS & MINING--1.8%
Crown, Cork & Seal Co., Inc. .............................. 32,000 1,476,000
EASCO, Inc. ............................................... 32,500 398,125
------------
1,874,125
------------
PHARMACEUTICALS--4.4%
Abbott Laboratories, Inc. ................................. 10,000 639,375
American Home Products Corp. .............................. 4,000 292,000
Biogen, Inc.+.............................................. 10,000 324,375
Bristol-Myers Squibb Co. .................................. 14,000 1,158,500
IDEC Pharmaceuticals Corp.+................................ 30,000 1,256,250
Merck & Co., Inc. ......................................... 8,000 799,500
------------
4,470,000
------------
POLLUTION CONTROL--1.5%
United States Filter Corp.+................................ 20,000 861,250
USA Waste Services, Inc.+.................................. 18,000 717,750
------------
1,579,000
------------
REAL ESTATE COMPANIES--0.1%
Security Capital Group, Inc., Class B...................... 4,000 137,500
------------
REAL ESTATE INVESTMENT TRUSTS--2.0%
Crescent Real Estate Equities Co. ......................... 19,000 762,375
Equity Office Properties Trust............................. 17,000 576,937
Prime Retail, Inc. ........................................ 20,000 312,500
Westfield America, Inc. ................................... 25,000 415,625
------------
2,067,437
------------
RESTAURANTS--0.8%
McDonald's Corp. .......................................... 18,000 857,250
------------
SOFTWARE--2.8%
Fiserv, Inc.+.............................................. 10,000 438,750
Microsoft Corp.+........................................... 10,000 1,323,125
Novell, Inc.+.............................................. 44,000 394,625
Reynolds & Reynolds Co., Class A........................... 35,000 680,312
------------
2,836,812
------------
</TABLE>
25
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
SPECIALTY RETAIL--2.4%
CVS Corp. ................................................. 21,000 $ 1,194,375
Home Depot, Inc. .......................................... 24,000 1,251,000
------------
2,445,375
------------
TELECOMMUNICATIONS--5.4%
Ameritech Corp. ........................................... 8,000 532,000
AT&T Corp. ................................................ 22,500 997,031
Bell Atlantic Corp. ....................................... 9,216 741,312
GTE Corp. ................................................. 11,000 499,125
Lucent Technologies, Inc. ................................. 12,296 1,000,587
MCI Communications Corp. .................................. 10,000 293,750
SBC Communications, Inc. .................................. 10,000 613,750
Tele-Communications TCI Venture Group, Class A+............ 9,095 187,585
Teleport Communications Group, Class A+.................... 15,000 673,125
------------
5,538,265
------------
TRANSPORTATION--1.0%
Burlington Northern, Inc. ................................. 10,000 966,250
------------
UTILITIES--2.3%
Baltimore Gas & Electric Co. .............................. 7,000 194,250
Consolidated Natural Gas Co. .............................. 11,000 640,062
GPU, Inc. ................................................. 7,000 251,125
New York St. Electric & Gas Corp. ......................... 25,000 671,875
Southwest Gas Corp. ....................................... 10,000 196,250
Utilicorp United, Inc. .................................... 14,000 421,750
------------
2,375,312
------------
TOTAL COMMON STOCK
(COST $90,508,964)........................................ 101,909,086
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
BONDS & NOTES--0.0%
FOREST PRODUCTS--0.0%
Stone Container Corp.
11.88% due 12/01/98
(cost $50,512)................................... $ 50 $ 52,313
------------
TOTAL INVESTMENT SECURITIES--99.2%
(COST $90,559,476)............................... 101,961,399
------------
REPURCHASE AGREEMENT--1.9%
Joint Repurchase Agreement
Account (Note 2)
(cost $1,946,000)................................ 1,946 1,946,000
------------
TOTAL INVESTMENTS--
(COST $92,505,476)............................... 101.1% 103,907,399
Liabilities in excess of other assets.............. (1.1) (1,158,479)
------ ------------
NET ASSETS-- 100.0% $102,748,920
====== ============
</TABLE>
- --------
+ Non-income producing security
See Notes to Financial Statements
26
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997
Note 1. Organization
SunAmerica Equity Funds is an open-end diversified management investment
company organized as a Massachusetts business trust (the "Trust" or "Equity
Funds") on June 16, 1986. It currently consists of five different
investment funds (each, a "Fund" and collectively, the "Funds"). Each Fund
is a separate series of the Trust with a distinct investment objective
and/or strategy. Each Fund is advised and/or managed by SunAmerica Asset
Management Corp. (the "Adviser" or "SAAMCo"), an indirect wholly-owned
subsidiary of SunAmerica Inc. ("SunAmerica"). An investor may invest in one
or more of the following Funds: SunAmerica Balanced Assets Fund ("Balanced
Assets Fund"), SunAmerica Blue Chip Growth Fund ("Blue Chip Growth Fund"),
SunAmerica Mid-Cap Growth Fund ("Mid-Cap Growth Fund"), SunAmerica Small
Company Growth Fund ("Small Company Growth Fund"), and SunAmerica Growth
and Income Fund ("Growth and Income Fund"). The Funds are considered to be
separate entities for financial and tax reporting purposes. On September
29, 1997, pursuant to a Plan of Reorganization, and shareholder approval,
the Global Balanced Fund, formally incorporated within the SunAmerica
Equity Funds, transferred all its assets and liabilities to the Style
Select International Equity Portfolio in an exchange for shares with an
equivalent value. The investment objective for each of the Funds is as
follows:
Balanced Assets seeks to conserve principal by maintaining at all times a
balanced portfolio of stocks and bonds.
Blue Chip Growth seeks capital appreciation by investing primarily in
equity securities of companies with large market capitalizations.
Mid-Cap Growth seeks capital appreciation by investing primarily in equity
securities of medium-sized companies.
Small Company Growth seeks capital appreciation by investing primarily in
equity securities of small capitalization growth companies.
Growth and Income seeks capital appreciation and current income by
investing primarily in common stocks.
Each Fund currently offers two classes of shares. Balanced Assets Fund and
Small Company Growth Fund also offer Class Z shares, exclusively for sale
to employees participating in the SunAmerica profit sharing and retirement
plan. Class A shares are offered at net asset value per share plus an
initial sales charge. Class B shares are offered without an initial sales
charge, although a declining contingent sales charge may be imposed on
redemptions made within six years of purchase. Class Z shares are offered
at net asset value. Any purchases of Class A shares in excess of $1,000,000
will be subject to a contingent deferred sales charge on redemptions made
within one year of purchase. Class B shares of each Fund will convert
automatically to Class A shares on the first business day of the month
after seven years from the issuance of such Class B shares and at such time
will be subject to the lower distribution fee applicable to Class A shares.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions. Class A shares and Class B shares each make
distribution and account maintenance and service fee payments under the
distribution plans pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "1940 Act"), except that Class B shares are subject to higher
distribution fee rates. There are no distribution or service fee payments
applicable to Class Z.
27
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates. The
following is a summary of the significant accounting policies followed by
the Funds in the preparation of their financial statements:
SECURITY VALUATIONS: Securities that are actively traded in the over-the-
counter market, including listed securities for which the primary market is
believed by the Adviser to be over-the-counter, are valued at the quoted
bid price provided by principal market makers. Securities listed on the New
York Stock Exchange ("NYSE") or other national securities exchanges, are
valued on the basis of the last sale price on the exchange on which they
are primarily traded. If there is no sale on that day, then securities are
valued at the closing bid price on the NYSE or other primary exchange for
that day. However, if the last sale price on the NYSE is different than the
last sale price on any other exchange, the NYSE price is used. Securities
that are traded on foreign exchanges are ordinarily valued at the last
quoted sales price available before the time when the assets are valued. If
a security's price is available from more than one foreign exchange, a Fund
uses the exchange that is the primary market for the security. Values of
portfolio securities primarily traded on foreign exchanges are already
translated into U.S. dollars when received from a quotation service.
Options traded on national securities exchanges are valued as of the close
of the exchange on which they are traded. Futures and options traded on
commodities exchanges are valued at their last sale price as of the close
of such exchange. The Funds may make use of a pricing service in the
determination of their net asset values. Securities for which market
quotations are not readily available and other assets are valued at fair
value as determined pursuant to procedures adopted in good faith by the
Trustees. Short-term investments which mature in less than 60 days are
valued at amortized cost, if their original maturity was 60 days or less,
or by amortizing their value on the 61st day prior to maturity, if their
original term to maturity exceeded 60 days.
REPURCHASE AGREEMENTS: The Funds, along with other affiliated registered
investment companies, transfer uninvested cash balances into a single joint
account, the daily aggregate balance of which is invested in one or more
repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. The Funds' custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral
is valued daily on a mark to market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In
the event of default of the obligation to repurchase, a Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of
the security, realization of the collateral by the Fund may be delayed or
limited.
As of September 30, 1997, Balanced Assets Fund, Blue Chip Growth Fund, Mid-
Cap Growth Fund, Small Company Growth Fund and Growth and Income Fund had a
9.8%, 4.9%, 1.7%, 8.8%, and 2.0% undivided interest, respectively, which
represented $9,623,000, $4,864,000, $1,704,000, $8,729,000, and $1,946,000,
respectively, in principal amount in a joint repurchase agreement with
28
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
PaineWebber Group, Inc. As of such date, the repurchase agreement in the
joint account and the collateral therefor were as follows:
PaineWebber Group, Inc. Repurchase Agreement 5.9% dated 9/30/97, in the
principal amount of $98,661,000 repurchase price $98,677,169 due 10/01/97
collateralized by $50,000,000 U.S. Treasury Note 6.25% due 4/30/01,
$7,930,000 U.S. Treasury Note 7.375% due 11/15/97, and $26,830,000 U.S.
Treasury Note 11.25% due 2/15/15; approximate aggregate value $100,622,498.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: As customary in the mutual fund industry,
securities transactions are recorded on a trade date basis. Realized gains
and losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis; dividend income is
recorded on the ex-dividend date. Funds investing in foreign securities may
be subject to taxes imposed by countries in which they invest. Such taxes
are generally based on either income or gains earned or repatriated. The
Fund accrues such taxes when the related income is earned. The Equity
Funds, except for the Growth and Income Fund, do not amortize premiums or
accrete discounts except for original issue discounts and on interest only
securities for which amortization is required for federal income tax
purposes.
Net investment income, other than class specific expenses and realized and
unrealized gains and losses, is allocated daily to each class of shares
based upon the relative net asset value of outstanding shares (or the value
of the dividend-eligible shares, as appropriate) of each class of shares at
the beginning of the day (after adjusting for the current capital shares
activity of the respective class).
Expenses common to all Funds, not directly related to individual Funds, are
allocated among the Equity Funds based upon their relative net asset value
or other appropriate methods.
The Funds issue and redeem their shares, invest in securities and
distribute dividends from net investment income and net realized gains
which are paid in cash or are reinvested at the discretion of shareholders.
These activities are reported in the Statement of Changes in Net Assets.
Additional information on cash receipts and payments is presented in the
Statement of Cash Flows. Cash for purposes of cash flow presentation does
not include short-term investments.
Dividends from net investment income, if any, are paid semiannually, except
for Balanced Assets Fund and Growth and Income Fund, which pay quarterly.
Capital gain distributions, if any, are paid at least annually.
The Funds record dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined and
presented in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Net
investment income/loss, net realized gain/loss, and net assets were not
affected.
29
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
For the year ended September 30, 1997, the following reclassifications
arising from book/tax differences were primarily the result of
reclassifications due to net operating losses.
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
------------- -------------- -------
<S> <C> <C> <C>
Balanced Assets Fund.................... $ (5,898) $ 5,898 $ --
Blue Chip Growth Fund................... (327,453) 327,453 --
Mid-Cap Growth Fund..................... (586,288) 557,790 28,498
Small Company Growth Fund............... (3,941,943) 3,935,151 6,792
Growth and Income Fund.................. (39,291) 30,296 8,995
</TABLE>
FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are
maintained in U.S. dollars.
Assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the mean of the quoted bid and asked prices of such
currencies against the U.S. dollar.
The Funds do not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in
the market prices of securities held at fiscal year-end. Similarly, the
Funds do not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses between the trade and settlement dates of securities
transactions, the difference between the amounts of interest, dividends and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid and changes in the unrealized
foreign exchange gains and losses relating to other assets and liabilities
arising as a result of changes in the exchange rate.
ORGANIZATIONAL EXPENSES: Costs incurred by SAAMCo in connection with the
organization of Growth and Income Fund amounted to $1,383. These costs are
being amortized on a straight line basis by the Fund over a period not to
exceed 60 months from the date the Fund commenced operations.
Note 3. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and
Management Agreement (the "Agreement") with SAAMCo. Under the Agreement,
SAAMCo provides continuous supervision of a Fund's portfolio and
administers its corporate affairs, subject to general review by the
Trustees. In connection therewith, SAAMCo furnishes the Funds with office
facilities, maintains certain of the Funds' books and records, and pays the
salaries and expenses of all personnel, including officers of the Funds who
are employees of SAAMCo and its affiliates. The investment advisory and
management fee to SAAMCo with respect to each Fund is computed daily and
payable monthly, at an annual rate of .75% of a Fund's average daily net
assets up to $350 million, .70% of the next $350 million, and .65%
thereafter. For the year ended September 30, 1997, SAAMCo earned fees in
the amounts stated on the Statement of Operations, of which SAAMCo agreed
to voluntarily reimburse $147,159 on the Growth and Income Fund.
30
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
For the year ended September 30, 1997, SAAMCo has agreed to voluntarily
reimburse expenses, excluding management fee reimbursements which are
stated separately in the Notes, as follows:
<TABLE>
<S> <C>
Balanced Assets Class Z......................................... $9,394
Small Company Class Z........................................... $9,971
Growth and Income Class A....................................... $ 674
Growth and Income Class B....................................... $3,533
</TABLE>
The Trust, on behalf of each Fund, has a Distribution Agreement with
SunAmerica Capital Services, Inc. ("SACS"), an indirect wholly-owned
subsidiary of SunAmerica Inc. Each Fund has adopted a Distribution Plan
(the "Plan") in accordance with the provisions of Rule 12b-1 under the 1940
Act. Rule 12b-1 permits an investment company directly or indirectly to pay
expenses associated with the distribution of its shares ("distribution
expenses") in accordance with a plan adopted by the investment company's
board of trustees and approved by its shareholders. Pursuant to such rule,
the Trustees and the shareholders of each class of shares of each Fund have
adopted Distribution Plans hereinafter referred to as the "Class A Plan"
and the "Class B Plan." In adopting the Class A Plan and the Class B Plan,
the Trustees determined that there was a reasonable likelihood that each
such Plan would benefit the Trust and the shareholders of the respective
class. The sales charge and distribution fees of a particular class will
not be used to subsidize the sale of shares of any other class.
Under the Class A Plan and Class B Plan, the Distributor receives payments
from a Fund at an annual rate of up to 0.10% and 0.75%, respectively, of
average daily net assets of such Fund's Class A and Class B shares to
compensate the Distributor and certain securities firms for providing sales
and promotional activities for distributing that class of shares. The
distribution costs for which the Distributor may be reimbursed out of such
distribution fees include fees paid to broker-dealers that have sold Fund
shares, commissions and other expenses such as those incurred for sales
literature, prospectus printing and distribution and compensation to
wholesalers. It is possible that in any given year the amount paid to the
Distributor under the Class A Plan or Class B Plan may exceed the
Distributor's distribution costs as described above. The Distribution Plans
provide that each class of shares of each Fund may also pay the Distributor
an account maintenance and service fee up to an annual rate of 0.25% of the
aggregate average daily net assets of such class of shares for payments to
broker-dealers for providing continuing account maintenance. Accordingly,
for the year ended September 30, 1997, SACS received fees (see Statement of
Operations) based upon the aforementioned rates.
31
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
SACS receives sales charges on each Fund's Class A shares, portions of
which are reallowed to affiliated broker-dealers and non-affiliated broker-
dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of each
Fund's Class B shares. SACS has advised the Funds that for the year ended
September 30, 1997 the proceeds received from Class A sales (and paid out
to affiliated and non-affiliated broker-dealers) and Class B redemptions
are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------- -------------------
SALES AFFILIATED NON-AFFILIATED CONTINGENT DEFERRED
CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES
--------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
Balanced Assets Fund.... $ 666,236 $501,649 $74,438 $299,683
Blue Chip Growth Fund... 68,915 42,671 17,613 54,673
Mid-Cap Growth Fund..... 81,231 44,483 24,280 44,557
Small Company Growth
Fund................... 1,315,944 536,682 610,386 262,423
Growth and Income Fund.. 707,401 367,498 251,127 44,335
</TABLE>
The Trust has entered into a Service Agreement with SunAmerica Fund
Services, Inc. ("SAFS"), an indirect wholly-owned subsidiary of SunAmerica
Inc. Under the Service Agreement, SAFS performs certain shareholder account
functions by assisting the Funds' transfer agent in connection with the
services that it offers to the shareholders of the Funds. The Service
Agreement, which permits the Funds to compensate SAFS for services rendered
based upon an annual rate of 0.22% of average daily net assets, is approved
annually by the Trustees. For the year ended September 30, 1997, the Funds
incurred the following expenses which are included in transfer agent fees
in the Statement of Operations to compensate SAFS pursuant to the terms of
the Service Agreement.
<TABLE>
<CAPTION>
PAYABLE AT
EXPENSE SEPTEMBER 30, 1997
----------------- -------------------
CLASS A CLASS B CLASS A CLASS B
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Balanced Assets Fund.................. $342,893 $370,008 $ 30,266 $ 30,960
Blue Chip Growth Fund................. 127,177 78,591 12,004 6,681
Mid-Cap Growth Fund................... 93,270 28,779 8,182 2,419
Small Company Growth Fund............. 342,612 230,003 32,550 21,528
Growth and Income Fund................ 80,443 75,337 8,545 9,737
</TABLE>
Note 4. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
investments (excluding U.S. Government securities and short-term
investments) during the year ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND
ASSETS GROWTH GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Aggregate purchases..... $458,505,516 $185,836,829 $178,759,273 $897,438,689 $184,678,165
============ ============ ============ ============ ============
Aggregate sales......... $485,225,053 $190,147,906 $181,167,111 $893,902,367 $133,059,633
============ ============ ============ ============ ============
</TABLE>
32
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
Note 5. Portfolio Securities (Tax Basis)
Each Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute all of its
taxable income, including any net realized gain on investments, to its
shareholders. Therefore, no federal tax provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for federal tax purposes, including short-term securities, were
as follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND
ASSETS GROWTH GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Cost.................... $294,948,972 $89,624,171 $50,609,829 $237,859,919 $92,955,228
============ =========== =========== ============ ===========
Appreciation............ $ 52,049,861 $19,995,262 $11,832,514 $ 80,748,366 $12,440,698
Depreciation............ (3,961,977) (1,567,518) (239,568) (924,024) (1,488,527)
------------ ----------- ----------- ------------ -----------
Net unrealized
appreciation........... $ 48,087,884 $18,427,744 $11,592,946 $ 79,824,342 $10,952,171
============ =========== =========== ============ ===========
</TABLE>
Note 6. Capital Share Transactions
At September 30, 1997, the Adviser and SACS in the aggregate, owned 393,071
Class A shares of the Growth and Income Fund representing 5.15% of the
Fund's net assets.
Transactions in capital shares of each class of each series were as
follows:
<TABLE>
<CAPTION>
BALANCED ASSETS FUND
--------------------------------------------------------------------------------------------------------
CLASS A CLASS B
---------------------------------------------------- --------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
-------------------------- ------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------- ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 2,014,610 $ 33,670,422 3,119,474 $ 50,864,950 1,601,187 $ 26,977,385 3,055,442 $ 49,865,609
Reinvested
dividends...... 1,098,904 17,076,435 583,832 9,290,744 1,191,203 18,422,134 690,103 10,949,550
Shares redeemed. (2,712,729) (45,625,149) (2,257,335) (36,956,739) (3,596,433) (60,154,848) (3,430,716) (55,757,942)
----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 400,785 $ 5,121,708 1,445,971 $ 23,198,955 (804,043) $(14,755,329) 314,829 $ 5,057,217
=========== ============= ========== ============ ========== ============ ========== ============
<CAPTION>
BALANCED ASSETS FUND
--------------------------
CLASS Z
--------------------------
FOR THE PERIOD
OCTOBER 7, 1996* THROUGH
SEPTEMBER 30, 1997
--------------------------
SHARES AMOUNT
------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 3,052 $ 51,485
Reinvested
dividends...... 102 1,635
Shares redeemed. (283) (4,718)
----------- -------------
Net increase.... 2,871 $ 48,402
=========== =============
</TABLE>
* Inception of the class
33
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
BLUE CHIP GROWTH FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
-------------------------- ------------------------- ------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------- ---------- ------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 623,963 $ 10,925,394 753,893 $ 12,709,149 1,259,797 $ 21,456,617 3,214,655 $ 53,717,531
Reinvested
dividends...... 455,714 6,972,433 285,095 4,507,347 319,329 4,764,382 277,108 4,315,647
Shares redeemed. (676,748) (11,828,552) (533,503) (8,978,653) (1,756,723) (29,208,753) (3,702,537) (61,373,567)
----------- ------------- ---------- ------------- ---------- ------------ ---------- -------------
Net increase
(decrease)..... 402,929 $ 6,069,275 505,485 $ 8,237,843 (177,597) $ (2,987,754) (210,774) $ (3,340,389)
=========== ============= ========== ============= ========== ============ ========== =============
<CAPTION>
MID-CAP GROWTH FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
-------------------------- ------------------------- ------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------- ---------- ------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 1,195,858 $ 22,039,862 585,749 $ 10,047,757 361,032 $ 6,440,002 1,569,285 $ 26,612,848
Reinvested
dividends...... 105,242 1,820,690 262,450 4,236,039 35,395 598,248 66,071 1,049,943
Shares redeemed. (1,428,977) (26,234,993) (609,879) (10,404,579) (501,401) (8,706,849) (1,386,338) (23,587,448)
----------- ------------- ---------- ------------- ---------- ------------ ---------- -------------
Net increase
(decrease)..... (127,877) $ (2,374,441) 238,320 $ 3,879,217 (104,974) $ (1,668,599) 249,018 $ 4,075,343
=========== ============= ========== ============= ========== ============ ========== =============
<CAPTION>
SMALL COMPANY GROWTH FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------------- ---------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
-------------------------- ------------------------- ------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------ ------------- ---------- ------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 4,356,568 $ 104,158,132 6,607,402 $ 153,907,782 2,294,947 $ 52,824,439 6,285,098 $ 144,713,218
Reinvested
dividends...... 231,823 5,468,761 725,288 15,398,224 165,485 3,806,222 543,295 11,327,669
Shares redeemed. (4,573,784) (108,631,540) (4,425,505) (102,867,176) (2,474,107) (56,073,072) (5,086,621) (116,292,585)
----------- ------------- ---------- ------------- ---------- ------------ ---------- -------------
Net increase
(decrease)..... 14,607 $ 995,353 2,907,185 $ 66,438,830 (13,675) $ 557,589 1,741,772 $ 39,748,302
=========== ============= ========== ============= ========== ============ ========== =============
<CAPTION>
SMALL COMPANY
GROWTH FUND
--------------------------
CLASS Z
--------------------------
FOR THE PERIOD
OCTOBER 7, 1996* THROUGH
SEPTEMBER 30, 1997
--------------------------
SHARES AMOUNT
------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 36,250 $ 860,624
Reinvested
dividends...... 300 7,070
Shares redeemed. (3,202) (77,380)
----------- -------------
Net increase.... 33,348 $ 790,314
=========== =============
</TABLE>
* Inception of the class
34
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1997 -- (continued)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
-----------------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------- ----------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------- ---------------------- ---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 2,346,608 $ 27,325,734 1,608,366 $15,926,962 3,556,104 $41,322,565 1,180,720 $11,686,226
Reinvested dividends.... 118,133 1,248,669 32,680 297,897 86,070 908,039 19,593 176,116
Shares redeemed......... (969,421) (11,704,696) (46,202) (441,023) (815,041) (9,270,338) (172,820) (1,683,504)
--------- ------------ --------- ----------- --------- ----------- --------- -----------
Net increase............ 1,495,320 $ 16,869,707 1,594,844 $15,783,836 2,827,133 $32,960,266 1,027,493 $10,178,838
========= ============ ========= =========== ========= =========== ========= ===========
</TABLE>
Note 7. Commitments and Contingencies
The SunAmerica family of mutual funds may borrow up to $75,000,000 under an
uncommitted line of credit with State Street Bank and Trust Company, the
Funds' custodian, with interest payable at the Federal Funds rate plus 100
basis points. Borrowings under the line of credit will commence when the
respective Fund's cash shortfall exceeds $100,000.
Note 8. Trustees Retirement Plan
The Trustees (and Directors) of the SunAmerica Family of Mutual Funds have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement
Plan (the "Retirement Plan") effective January 1, 1993 for the unaffiliated
Trustees. The Retirement Plan provides generally that if an unaffiliated
Trustee who has at least 10 years of consecutive service as a Disinterested
Trustee of any of the SunAmerica mutual funds (an "Eligible Trustee")
retires after reaching age 60 but before age 70 or dies while a Trustee,
such person will be eligible to receive a retirement or death benefit from
each SunAmerica mutual fund with respect to which he or she is an Eligible
Trustee. As of each birthday, prior to the 70th birthday, but in no event
for a period greater than 10 years, each Eligible Trustee will be credited
with an amount equal to 50% of his or her regular fees (excluding committee
fees) for services as a Disinterested Trustee of each SunAmerica mutual
fund for the calendar year in which such birthday occurs. In addition, an
amount equal to 8.5% of any amounts credited under the preceding clause
during prior years, is added to each Eligible Trustee's account until such
Eligible Trustee reaches his or her 70th birthday. An Eligible Trustee may
receive any benefits payable under the Retirement Plan, at his or her
election, either in one lump sum or in up to fifteen annual installments.
As of September 30, 1997, Balanced Assets Fund, Blue Chip Growth Fund, Mid-
Cap Growth Fund, Small Company Growth Fund and Growth and Income Fund had
accrued $27,913, $8,538, $4,811, $18,299 and $2,144, respectively, for the
Retirement Plan, which is included in accrued expenses on the Statement of
Assets and Liabilities, and for the year ended September 30, 1997 expensed
$12,881, $3,666, $2,273, $10,325 and $1,920, respectively, for the
Retirement Plan, which is included in Trustees' fees and expenses on the
Statement of Operations.
35
<PAGE>
SUNAMERICA EQUITY FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of SunAmerica Equity Funds
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations, of cash flows (SunAmerica Small Company Growth Fund only), and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SunAmerica Balanced Assets Fund,
SunAmerica Blue Chip Growth Fund, SunAmerica Mid-Cap Growth Fund, SunAmerica
Small Company Growth Fund and SunAmerica Growth and Income Fund (constituting
SunAmerica Equity Funds, hereafter referred to as the "Fund") at September 30,
1997, the results of each of their operations for the year then ended,
SunAmerica Small Company Growth Fund's cash flows for the year then ended, the
changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 1997 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 7, 1997
36
<PAGE>
SUNAMERICA EQUITY FUNDS
SHAREHOLDER TAX INFORMATION--(UNAUDITED)
Certain tax information regarding the SunAmerica Equity Funds is required to
be provided to shareholders based upon each Fund's income and distributions
for the taxable year ended September 30, 1997. The information and
distributions reported herein may differ from the information and
distributions taxable to the shareholders for the calendar year ending
December 31, 1997. The information necessary to complete your income tax
returns will be included with your Form 1099-DIV which will be sent to you
under separate cover in January 1998.
During the year ended September 30, 1997 the Funds paid the following
dividends per share:
<TABLE>
<CAPTION>
NET NET
SHORT- LONG-
NET TERM TERM
TOTAL INVESTMENT CAPITAL CAPITAL
DIVIDENDS INCOME GAINS GAINS
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
Balanced Assets Class A.................... $2.06 $.31 $.89 $.86
Balanced Assets Class B.................... 1.96 .21 .89 .86
Balanced Assets Class Z.................... 2.15 .40 .89 .86
Blue Chip Growth Class A................... 2.43 -- 1.57 .86
Blue Chip Growth Class B................... 2.43 -- 1.57 .86
Mid-Cap Growth Class A..................... .80 -- .24 .56
Mid-Cap Growth Class B..................... .80 -- .24 .56
Small Company Growth Class A............... .86 -- .06 .80
Small Company Growth Class B............... .86 -- .06 .80
Small Company Class Z...................... .86 -- .06 .80
Growth and Income Class A.................. .47 .03 .40 .04
Growth and Income Class B.................. .45 .01 .40 .04
</TABLE>
For the year ended September 30, 1997, 16.95%, 17.33%, 6.54%, 14.40% and
13.82% of the dividends paid from ordinary income by Balanced Assets Fund,
Blue Chip Growth Fund, Mid-Cap Growth Fund, Small Company Growth Fund and
Growth and Income Fund respectively, qualified for the 70% dividends received
deductions for corporations.
37
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in the SunAmerica Equity Funds'
portfolios to a similar investment in an index. Please note that "inception" as
used herein reflects the date a Fund commenced operations without regard to
when a second class of shares was introduced. It is important to note that the
SunAmerica Equity Funds are professionally managed mutual funds while the
indices are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only. The graphs present the performance of the
class of that particular Fund which has been in existence the longest. The
performance of the other class will vary based upon the difference in sales
charges and fees assessed to shareholders of that class. The maximum sales
charge for Class A is 5.75% of the public offering price. The maximum
contingent deferred sales charge for Class B is 4% and is reduced to 0% after
six years. Both Class A and Class B bear ongoing 12b-1 distribution and service
fees. Each index has been chosen by the particular portfolio's manager as an
appropriate comparison and is accompanied by a brief discussion from the
portfolio manager about why the portfolio performed the way it did relative to
the index.
Balanced Assets Fund
[CHART]
S&P 500
Balanced Assets (dividends Lehman Bros. Int
Class B reinvested) Gov't Index
Sep-87 10,000 10,000 10,000
Jun-88 9,266 8,744 10,892
Jun-89 10,028 10,541 11,990
Jun-90 11,320 12,279 12,918
Jun-91 11,760 13,187 14,278
Jun-92 12,641 14,956 16,112
Jun-93 15,206 16,994 17,730
Sep-93 15,730 17,433 18,129
Sep-94 15,707 18,077 17,857
Sep-95 18,843 23,456 19,753
Sep-96 20,714 28,224 20,761
Sep-97 25,732 39,644 22,387
*Fund changed its fiscal year end from June 30 as of September 24, 1993.
The SunAmerica Balanced Assets Fund seeks to conserve principal by maintaining
at all times a balanced portfolio of stocks and bonds. This fiscal year was
characterized by strong economic growth and low inflation that together proved
positive for both the equity and bond markets as well as by high volatility in
both asset classes. In such an environment, this Fund's conservative approach
led to outperformance of its group average's performance (tracked by Lipper
Analytical Service for the twelve months ended September 30, 1997. Of course,
due to its fixed income component, it underperformed the S&P 500 index, which is
an unmanaged index and not available as an investment. Our strategy going
forward will be to continue to buy high quality, large cap growth stocks,
focusing on the financial services, technology, and health care sectors.
- --------------------------------------------------------------------------------
Class A Class B Class Z
-----------------------------------------------------------------
SEC SEC SEC
Balanced Average Cumulative Average Cumulative Average Cumulative
Assets Annual Traditional Annual Traditional Annual Traditional
Fund Return Return+ Return Return+ Return Return+
- --------------------------------------------------------------------------------
1 Year Return 17.64% 24.81% 20.09% 24.09% N/A N/A
- --------------------------------------------------------------------------------
5 Year Return N/A N/A 14.00% 94.51% N/A N/A
- --------------------------------------------------------------------------------
Since Inception 12.15% 68.18% 12.56% 347.67% N/A 23.56%
- --------------------------------------------------------------------------------
+Traditional returns do not include sales load.
38
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (continued)
Blue Chip Growth Fund
[CHART]
S&P 500
Blue Chip Growth (dividends
Class B reinvested)
Sep-87 10,000 10,000
Dec-87 7,187 7,757
Dec-88 9,287 9,045
Dec-89 10,472 11,911
Dec-90 7,842 11,541
Dec-91 10,183 15,058
Dec-92 11,044 16,204
Sep-93 13,230 17,433
Sep-94 12,991 18,077
Sep-95 15,656 23,456
Sep-96 17,718 28,224
Sep-97 23,392 39,644
*Fund changed its fiscal year end from December 31 to September 30 as of
September 24, 1993.
- --------------------------------------------------------------------------------
Class A Class B
-----------------------------------------------------------------
SEC SEC
Blue Chip Average Cumulative Average Cumulative
Growth Annual Traditional Annual Traditional
Fund Return Return+ Return Return+
- --------------------------------------------------------------------------------
1 Year Return 25.32% 32.96% 28.02% 32.02%
- --------------------------------------------------------------------------------
5 Year Return N/A N/A 17.44% 125.40%
- --------------------------------------------------------------------------------
Since Inception 14.48% 81.72% 12.11% 319.60%
- --------------------------------------------------------------------------------
+Traditional returns do not include sales load.
The SunAmerica Blue Chip Growth Fund seeks capital appreciation by Investing
primarily in equity securities of companies with large market capitalizations.
During the past year, the Fund underperformed the S&P 500 Index and its Lipper
category average, primarily because of an overweighted cash allocation and
over-diversification in the fourth calendar quarter. However, with a more
focused diversification strategy and overweightings in the strong performing
sectors of financial services, technology, and health care, the Fund
outperformed both the S&P 500 Index and its Lipper category average for the year
to date ended September 30, 1997. Our strategy going forward is to stay fully
invested and to continue to use extensive fundamental research and our thematic
approach to identify attractive investment opportunities.
Mid-Cap Growth Fund
[CHART]
S&P 500 (dividends Mid-Cap Growth
reinvested) Class A
Sep-87 10,000 10,000
Nov-87 7,209 6,537
Nov-88 8,890 8,300
Nov-89 11,632 11,320
Nov-90 11,228 9,325
Nov-91 13,512 12,227
Nov-92 16,008 14,847
Sep-93 17,433 17,878
Sep-94 18,077 16,163
Sep-95 23,456 20,932
Sep-96 28,224 23,638
Sep-97 39,644 28,730
*Fund changed its fiscal year end from November 30 to September 30 as of
September 24, 1993.
- --------------------------------------------------------------------------------
Class A Class B
-----------------------------------------------------------------
SEC SEC
Mid-Cap Average Cumulative Average Cumulative
Growth Annual Traditional Annual Traditional
Fund Return Return+ Return Return+
- --------------------------------------------------------------------------------
1 Year Return 14.55% 21.54% 16.65% 20.65%
- --------------------------------------------------------------------------------
5 Year Return 15.08% 114.19% N/A N/A
- --------------------------------------------------------------------------------
Since Inception 12.93% 288.51% 11.15% 55.58%
- --------------------------------------------------------------------------------
+Traditional returns do not include sales load.
The SunAmerica Mid-Cap Growth Fund seeks capital appreciation by Investing
primarily in the equity securities of medium-sized companies with market
capitalizations of $1 billion to approximately $5 billion. The first seven
months of the Fund's fiscal year were dominated by investors' concerns regarding
inflation, corporate earnings, the direction of interest rates, and market
valuation levels. Thus mid-cap growth stocks in general underperformed the S&P
500, and the Fund in particular underperformed its Lipper category average for
the twelve month period. However, mid-cap growth stocks and the Fund recovered
somewhat in the last five months, and we believe both are well positioned for
strong performance as we head into 1998. We will continue to make sector
weighting decisions on a long-term, secular trend basis.
39
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (continued)
Small Company Growth Fund
[CHART]
NASDAQ Small Company
Industrials Growth Class A
Sep-87 10,000 10,000
Nov-87 6,022 6,409
Nov-88 9,473 7,663
Nov-89 12,259 9,369
Nov-90 8,512 8,194
Nov-91 12,941 12,407
Nov-92 16,086 14,827
Sep-93 20,200 16,415
Sep-94 18,637 16,361
Sep-95 27,955 22,343
Sep-96 33,363 25,212
Sep-97 40,316 31,304
*Fund changed its fiscal year end from November 30 to September 30 as of
September 24, 1993.
- --------------------------------------------------------------------------------
Class A Class B Class Z
-----------------------------------------------------------------
Small SEC SEC SEC
Company Average Cumulative Average Cumulative Average Cumulative
Growth Annual Traditional Annual Traditional Annual Traditional
Fund Return Return+ Return Return+ Return Return+
- --------------------------------------------------------------------------------
1 Year Return 13.89% 20.84% 16.08% 20.08% N/A N/A
- --------------------------------------------------------------------------------
5 Year Return 22.20% 189.07% N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Since Inception 15.41% 389.70% 17.89% 95.67% N/A 19.78%
- --------------------------------------------------------------------------------
+Traditional returns do not include sales load.
The SunAmerica Small Company Growth Fund seeks to realize capital appreciation
by investing in equity securities of small capitalization growth companies. Like
the Mid-Cap Growth Fund, this Fund's relative performance was hampered by its
growth-oriented investment style during the first seven months of the fiscal
year, yet, likewise, helped significantly by that same style returning to favor
in the remaining months of the year. In fact, for the third calendar quarter,
Class A shares had a cumulative total return of 25.59%, as compared to 16.55%
for its Lipper category average, ranking it in the top 2%. The Fund particularly
benefited from its overweightings in technology, oil and gas equipment and
service providers, and financial stocks and intends to maintain strong positions
in these sectors into the next fiscal year.
40
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (continued)
Growth and Income Fund
[CHART]
S&P 500
Growth & Income Growth & Income (dividends
Class A Class B reinvested)
Jul-94 10,000 10,000 10,000
Sep-94 9,645 9,819 10,489
Sep-95 11,529 11,779 13,610
Sep-96 15,286 15,746 16,377
Sep-97 20,511 21,088 23,003
- --------------------------------------------------------------------------------
Class A Class B
-----------------------------------------------------------------
SEC SEC
Growth Average Cumulative Average Cumulative
and Income Annual Traditional Annual Traditional
Fund Return Return+ Return Return+
- --------------------------------------------------------------------------------
1 Year Return 26.46% 34.18% 29.30% 33.30%
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5 Year Return N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Since Inception 24.74% 117.63% 25.94% 113.89%
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+Traditional returns do not include sales load.
The SunAmerica Growth and Income Fund invests in common stocks, which offer
potential for capital appreciation, current income or both. The Fund
underperformed primarily because of its more conservative approach to stock
investing and because we were slightly late in adjusting the portfolio toward a
value-oriented weighting in the fourth fiscal quarter. Our strategy going
forward is to focus on a bottom-up, highly diversified, high quality stock
picking approach, to seek growth and dividend yield at a good price, to maintain
relatively neutral sectors weighting, and to use market corrections as buying
opportunities to re-balance the portfolio.
41
<PAGE>
TRUSTEES INVESTMENT ADVISER
S. James Coppersmith SunAmerica Asset Management Corp.
Samuel M. Eisenstat The SunAmerica Center
Stephen J. Gutman 733 Third Avenue
Peter A. Harbeck New York, NY 10017-3204
Peter McMillan III
Sebastiano Sterpa DISTRIBUTOR
SunAmerica Capital Services, Inc.
OFFICERS The SunAmerica Center
Peter A. Harbeck, President 733 Third Avenue
Nancy Kelly, Vice President New York, NY 10017-3204
Audrey L. Snell, Vice President SHAREHOLDER SERVICING AGENT
Gerard P. Sullivan, Vice President SunAmerica Fund Services, Inc.
Robert M. Zakem, Secretary The SunAmerica Center
Peter C. Sutton, Treasurer 733 Third Avenue
Donna M. Handel, Assistant Treasurer New York, NY 10017-3204
John T. Genoy, Assistant Treasurer
Abbe P. Stein, Assistant Secretary
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company
P.O. Box 419572
Kansas City, MO 64141-6572
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BULK RATE
SUNAMERICA EQUITY FUNDS U.S. POSTAGE
THE SUNAMERICA CENTER PAID
733 THIRD AVENUE Kansas City,
NEW YORK, NY 10017-3204 MO
1-800-858-8850 PERMIT NO.
3657
This report is submitted solely for
the general information of
shareholders of the Fund.
Distribution of this report to
persons other than shareholders of
the Fund is authorized only in
connection with a currently effective
prospectus, setting forth details of
the Fund, which must precede or
accompany this report.
SPONSORED BY:
LOGO SUNAMERICA
ASSET MANAGEMENT
EFANN
