<PAGE>
As filed with the Securities and Exchange Commission on January 12, 1996
File Nos. 33-8021; 811-4801
______________________________________________________________________________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [_]
Amendment No. 16 [X]
(Check appropriate box or boxes)
SUNAMERICA EQUITY FUNDS
(Exact Name of Registrant as Specified in Charter)
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017-3204
(Address of Principal Executive Office)(Zip Code)
Registrant's telephone number, including area code: (800) 858-8850
Robert M. Zakem
Senior Vice President and General Counsel
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue - 3rd Floor
New York, NY 10017-3204
(Name and Address of Agent for Service)
Copy to:
Margery K. Neale, Esq.
Shereff, Friedman, Hoffman, & Goodman LLP
919 Third Avenue
New York, NY 10022
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate box)
<TABLE>
<CAPTION>
<S> <C>
[X] immediately upon filing pursuant to paragraph (b) of Rule 485 [_] on (date) pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a) of Rule 485 [_] on (date) pursuant to paragraph (a) of Rule 485
</TABLE>
____________________
Registrant has elected to register an indefinite number of shares
of beneficial interest, par value $.01 per share, under the Securities Act of
1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. The Rule
24f-2 Notice for Registrant's fiscal year ended September 30, 1995 was filed on
November 14, 1995.
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
SUNAMERICA EQUITY FUNDS
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Under the Securities Act of 1933
--------------------------------
<TABLE>
<CAPTION>
PART A
Item No. Registration Statement Caption Caption in Prospectus
- -------- ------------------------------ ---------------------
<S> <C> <C>
1 Cover Page Cover Page
2 Synopsis Summary of Fund Expenses
3 Condensed Financial Information Financial Highlights; Performance Data
4 General Description of Registrant Investment Objective and Policies;
Investment Techniques and Risk Factors;
Investment Restrictions; General Information
5 Management of the Fund Management of the Trust; Portfolio
Transactions and Brokerage
5A Management's Discussion of Fund Performance *
6 Capital Stock and Other Dividends, Distributions and Taxes;
Securities General Information
7 Purchase of Securities Being Purchase of Shares; Determination
Offered of Net Asset Value
8 Redemption or Repurchase Redemption of Shares; Exchange Privilege
9 Pending Legal Proceedings Inapplicable
PART B Caption in Statement
Item No. Registration Statement Caption of Additional Information
- ------- ------------------------------ -------------------------
10 Cover Page Cover Page
11 Table of Contents Cover Page
12 General Information and History History of the Funds
13 Investment Objectives and Investment Objective and Policies;
Policies Investment Restrictions; Portfolio
Turnover; Appendix
14 Management of the Fund Trustees and Officers
15 Contact Persons and Principal Holders Inapplicable
of Securities
16 Investment Advisory and Other Adviser, Distributor and Administrator;
Services Additional Information
17 Brokerage Allocation Portfolio Transactions and Brokerage
18 Capital Stock and Other Securities Dividends, Distributions and Taxes;
Description of Shares; Additional Information
19 Purchase, Redemption and Pricing Additional Information Regarding Purchase
of Securities Being Offered of Shares; Additional Information Regarding
Redemption of Shares; Determination of Net
Asset Value; Retirement Plans
20 Tax Status Dividends, Distributions and Taxes
21 Underwriters Adviser, Distributor and Administrator
22 Calculation of Performance Data Performance Data
23 Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Registration Statement.
- -------------------------
* Included in the Annual Shareholders Report with respect to
Registrant's fiscal period ended September 30, 1995.
<PAGE>
SUNAMERICA EQUITY FUNDS
THE SUNAMERICA CENTER, 733 THIRD AVENUE, NEW YORK, NY 10017-3204
GENERAL MARKETING AND SHAREHOLDER INFORMATION
(800) 858-8850
SunAmerica Equity Funds is an open-end management investment company
organized as a Massachusetts business trust (the "Trust") with six different
investment funds (each, a "Fund" and collectively, the "Funds"). Each Fund is
a separate series of the Trust with distinct investment objectives and/or
strategies. Each Fund is advised and/or managed by SunAmerica Asset Management
Corp. (the "Adviser"). AIG Global Investment Corp. ("AIG Global") serves as
sub-adviser for the foreign equity component and Goldman Sachs Asset
Management International ("GSAM") serves as sub-adviser for the global bond
component of the SunAmerica Global Balanced Fund. (AIG Global and GSAM are
collectively referred to hereinafter as the "Sub-Advisers"). An investor may
invest in one or more of the following Funds:
SunAmerica Balanced Assets Fund ("Balanced Assets Fund")--seeks to conserve
principal by maintaining at all times a balanced portfolio of stocks and
bonds.
SunAmerica Global Balanced Fund ("Global Balanced Fund")--seeks capital
appreciation while conserving principal by maintaining at all times a balanced
portfolio of domestic and foreign stocks and bonds.
SunAmerica Blue Chip Growth Fund ("Blue Chip Growth Fund")--seeks capital
appreciation by investing primarily in equity securities of companies with
large market capitalizations.
SunAmerica Mid-Cap Growth Fund ("Mid-Cap Growth Fund")--seeks capital
appreciation by investing primarily in equity securities of medium-sized
companies.
SunAmerica Small Company Growth Fund ("Small Company Growth Fund")--seeks
capital appreciation by investing primarily in equity securities of small
capitalization growth companies.
SunAmerica Growth and Income Fund ("Growth and Income Fund")--seeks capital
appreciation and current income by investing primarily in common stocks.
Each Fund currently offers Class A shares and Class B shares. The offering
price is the next-determined net asset value per share, plus for each class a
sales charge which, at the investor's option, may be (i) imposed at the time
of purchase (Class A shares) or (ii) deferred (Class B shares and purchases of
Class A shares in excess of $1 million). Class B shares are offered without an
initial sales charge, although a declining contingent deferred sales charge
may be imposed on redemptions made within six years of purchase. Class B
shares of each Fund will convert automatically to Class A shares on the first
business day of the month following the seventh anniversary of 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 makes distribution and account
maintenance and service fee payments under a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). See "Purchase of Shares."
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank through which such shares may be sold, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
This Prospectus explains concisely what you should know before investing in
any of the Funds. Please read it carefully before investing and retain it for
future reference. You can find more detailed information about the Funds in
the Statement of Additional Information dated January 12, 1996, which is
incorporated by reference into this Prospectus, and further information about
the performance of the Funds in the Trust's Annual Report to Shareholders. The
Statement of Additional Information and Annual Report to Shareholders may be
obtained without charge by contacting the Trust at the address or telephone
number listed above.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM- MISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
PROSPECTUS DATED JANUARY 12, 1996
<PAGE>
SUMMARY OF FUND EXPENSES
A general comparison of the sales arrangements and other non-recurring
expenses applicable to Class A shares and Class B shares follows:
<TABLE>
<CAPTION>
SMALL
BALANCED GLOBAL BLUE CHIP MID-CAP COMPANY GROWTH AND
ASSETS FUND BALANCED FUND GROWTH FUND GROWTH FUND GROWTH FUND INCOME FUND
----------- ------------- ----------- ----------- ----------- -----------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B A B A B A B A B A B
----- ----- ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales
Load(/1/)............. 5.75% None 5.75% None 5.75% None 5.75% None 5.75% None 5.75% None
Maximum Sales Load on
Reinvested Dividends.. None None None None None None None None None None None None
Maximum Deferred Sales
Load(/2/)............. None 4.00% None 4.00% None 4.00% None 4.00% None 4.00% None 4.00%
Redemption Fees(/3/)... None None None None None None None None None None None None
Exchange Fees.......... None None None None None None None None None None None None
Annual Fund Operating Expenses (net
of fee waivers/expense reimburse-
ments)(/4/)
(as a percentage of average net assets)
Management Fees........ 0.75% 0.75% 0.57% 0.57% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% None None
12b-1 Fees(/5/)........ 0.35% 1.00% 0.35% 1.00% 0.35% 1.00% 0.35% 1.00% 0.35% 1.00% 0.35% 1.00%
Other Expenses......... 0.40% 0.37% 1.23% 1.23% 0.48% 0.47% 0.57% 0.56% 0.47% 0.47% 0.65% 0.65%
----- ----- ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
Total Operating
Expenses(/6/).......... 1.50% 2.12% 2.15% 2.80% 1.58% 2.22% 1.66% 2.31% 1.57% 2.22% 1.00% 1.65%
===== ===== ====== ====== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- -------
(1) The front-end sales charge on Class A shares decreases with the size of the
purchase to 0% for purchases of $1,000,000 or more. See "Purchase of Shares."
(2) 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. The contingent deferred sales charge on Class B shares applies only
if a redemption occurs within six years from their purchase date.
(3) A $15.00 fee may be imposed for wire redemptions.
(4) The information provided is based on data for the fiscal year ended
September 30, 1995, with the exception of Growth and Income Fund Class A and
Class B, which represents estimated expenses for the current fiscal year. The
Growth and Income Fund's expenses for the year ended September 30, 1995 were
.46% for Class A and .30% for Class B, net of expenses waivers and
reimbursements.
(5) 0.25% of the 12b-1 fee comprises an Account Maintenance and Service Fee. A
portion of the Account Maintenance and Service Fee is allocated to member
firms of the National Association of Securities Dealers, Inc. for continuous
personal service by such members to investors in the Funds, such as
responding to shareholder inquiries, quoting net asset values, providing
current marketing material and attending to other shareholder matters. Class
B shareholders who own their shares for an extended period of time may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the
maximum front-end sales charge permitted under the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
(6) For the fiscal year ended September 30, 1995, the total operating expenses
(on a gross basis) for Global Balanced Fund Class A and Class B, Blue Chip
Growth Fund Class A, Mid-Cap Growth Fund Class B, and Growth and Income Fund
Class A and Class B were: 2.55%, 3.25%, 1.69%, 2.48%, 3.42% and 5.37%,
respectively.
2
<PAGE>
EXAMPLE:
You would pay the following expenses on a $1,000 investment over various time
periods assuming (1) a 5% annual rate of return and (2) redemption at the end
of each time period. The 5% return and the expenses used in this example should
not be considered indicative of actual or expected performance or expenses both
of which will vary:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BALANCED ASSETS FUND
(Class A shares).............................. $72 $102 $135 $226
(Class B shares)*............................. $62 $ 96 $134 $222
GLOBAL BALANCED FUND
(Class A shares).............................. $78 $121 $166 $291
(Class B shares)*............................. $68 $117 $168 $290
BLUE CHIP GROWTH FUND
(Class A shares).............................. $73 $105 $139 $235
(Class B shares)*............................. $63 $ 99 $139 $231
MID-CAP GROWTH FUND
(Class A shares).............................. $73 $107 $143 $243
(Class B shares)*............................. $63 $102 $144 $247
SMALL COMPANY GROWTH FUND
(Class A shares).............................. $73 $104 $138 $233
(Class B shares)*............................. $63 $ 99 $139 $231
GROWTH AND INCOME FUND
(Class A shares).............................. $67 $ 88 $110 $173
(Class B shares)*............................. $57 $ 82 $110 $170
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
BALANCED ASSETS FUND
(Class A shares).............................. $72 $102 $135 $226
(Class B shares)*............................. $22 $ 66 $114 $222
GLOBAL BALANCED FUND
(Class A shares).............................. $78 $121 $166 $291
(Class B shares)*............................. $28 $ 87 $148 $290
BLUE CHIP GROWTH FUND
(Class A shares).............................. $73 $105 $139 $235
(Class B shares)*............................. $23 $ 69 $119 $231
MID-CAP GROWTH FUND
(Class A shares).............................. $73 $107 $143 $243
(Class B shares)*............................. $23 $ 72 $124 $241
SMALL COMPANY GROWTH FUND
(Class A shares).............................. $73 $104 $138 $233
(Class B shares)*............................. $23 $ 69 $119 $231
GROWTH AND INCOME FUND
(Class A shares).............................. $67 $ 88 $110 $173
(Class B shares)*............................. $17 $ 52 $ 90 $170
</TABLE>
The foregoing examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
- -------
* Class B shares convert to Class A shares on the first business day of the
month following the seventh anniversary of the purchase of such Class B
shares. Therefore, with respect to the 10-year expense information, years 8,
9 and 10 reflect the expenses attributable to ownership of Class A shares.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights for each of the two years ended September
30, 1995 and for the period July 1, 1993 through September 30, 1993 and for the
three years in the period ended June 30, 1993 for the Balanced Assets Fund and
the periods through September 30, 1995 for the Blue Chip Growth Fund, has been
audited by Price Waterhouse LLP, each Fund's independent accountants, whose
report on the financial statements containing such information for the five
years in the period ended September 30, 1995 is included in the Annual Report
to Shareholders. These Financial Highlights should be read in conjunction with
each Fund's financial statements and notes thereto, which are included in the
Statement of Additional Information and are incorporated by reference herein.
<TABLE>
<CAPTION>
NET
GAIN (LOSS)
ON
INVESTMENTS TOTAL DIVIDENDS DISTRI- NET NET
NET ASSET NET (BOTH FROM FROM NET BUTIONS ASSET 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)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME
AVERAGE TO
PERIOD NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- ----------------------------------------------------------------------------------------------------------------------------
BALANCED ASSETS FUND
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/24/93-
09/30/93(/1//1/) $15.07 $ -- $ 0.06 $ 0.06 $ -- $ -- $ -- $15.13 0.40% $ 33,381
09/30/94 15.13 0.30(/1/) (0.23) 0.07 (0.28) (0.30) (0.58) 14.62 0.50 52,098
09/30/95 14.62 0.32(/1/) 2.51 2.83 (0.45) (0.58) (1.03) 16.42 20.68 119,916
<S> <C> <C> <C>
09/24/93-
09/30/93(/1//1/) 1.54%(3) 0.46%(3) 25%
09/30/94 1.58 2.00 141
09/30/95 1.50 2.13 130
CLASS B(8)
----
06/30/86 $10.63 $0.18(/1/) $ 3.48 $ 3.66 $(0.08) $(0.22) $(0.30) $13.99 34.64% $ 60,656
06/30/87 13.99 0.14(/1/) 1.32 1.46 (0.11) (0.62) (0.73) 14.72 9.87 141,055
06/30/88 14.72 0.23(/1/) (0.52) (0.29) (0.23) (0.72) (0.95) 13.48 (1.49) 151,924
06/30/89 13.48 0.37(/1/) 0.70 1.07 (0.38) -- (0.38) 14.17 8.22 131,317
06/30/90 14.17 0.53(/1/) 1.26 1.79 (0.53) -- (0.53) 15.43 12.89 123,611
06/30/91 15.43 0.39(/1/) 0.18 0.57 (0.25) -- (0.25) 15.75 4.41 90,239
06/30/92 15.75 0.33(/1/) 0.98 1.31 (0.42) (1.01) (1.43) 15.63 7.51 83,234
06/30/93 15.63 0.30(/1/) 2.63 2.93 (0.30) (2.40) (2.70) 15.86 20.29 113,871
07/01/93-
09/30/93 15.86 0.05(/1/) 0.49 0.54 (0.06) (1.21) (1.27) 15.13 3.44 137,456
09/30/94 15.13 0.20(/1/) (0.23) (0.03) (0.18) (0.30) (0.48) 14.62 (0.14) 180,655
09/30/95 14.62 0.23(/1/) 2.51 2.74 (0.36) (0.58) (0.94) 16.42 19.96 162,115
06/30/86 1.92% 1.32% 69%
06/30/87 2.13 0.95 76
06/30/88 2.01 1.65 58
06/30/89 2.02 2.74 59
06/30/90 1.92 3.55 33
06/30/91 1.94(/4/) 2.65(/4/) 56
06/30/92 1.93(/5/) 2.04(/5/) 151
06/30/93 1.91(/6/) 1.94(/6/) 251
07/01/93-
09/30/93 2.10(3)(7) 1.36(3)(7) 25
09/30/94 2.21 1.36 141
09/30/95 2.12 1.59 130
BLUE CHIP GROWTH FUND(9)
CLASS A
10/08/93-
09/30/94(/1//1/) $16.24 $0.09(/1/) $(0.26) $(0.17) $ -- $(0.65) $(0.65) $15.42 (1.05)% $ 3,207
09/30/95 15.42 0.02(/1/) 2.99 3.01 -- (1.09) (1.09) 17.34 21.29 42,407
10/08/93-
09/30/94(/1//1/) 1.64%(/3/)(/1//2/) 0.65%(/3/)(/1//2/) 170%
09/30/95 1.58(13) 0.11(13) 251
CLASS B
12/31/86 $11.81 $0.05 $ 1.92 $ 1.97 $(0.29) $(0.35) $(0.64) $13.14 16.75% $144,971
12/31/87 13.14 0.03 (1.05) (1.02) (0.03) (1.56) (1.59) 10.53 (7.48) 185,939
12/31/88 10.53 0.16 2.91 3.07 (0.17) (0.60) (0.77) 12.83 29.34 216,582
12/31/89 12.83 0.17 1.47 1.64 (0.17) (1.35) (1.52) 12.95 12.76 207,549
12/31/90 12.95 0.04 (3.29) (3.25) (0.05) -- (0.05) 9.65 (25.11) 123,379
12/31/91 9.65 (0.06) 2.94 2.88 -- -- -- 12.53 29.84 105,734
12/31/92 12.53 (0.13) 1.19 1.06 -- -- -- 13.59 8.46 83,237
01/01/93-
09/30/93 13.59 (0.02)(/1/) 2.71 2.69 -- -- -- 16.28 19.79 79,774
09/30/94 16.28 (0.01)(/1/) (0.28) (0.29) -- (0.65) (0.65) 15.34 (1.81) 71,749
09/30/95 15.34 (0.01)(/1/) 2.89 2.88 -- (1.09) (1.09) 17.13 20.51 39,533
12/31/86 2.40% 0.80% 60%
12/31/87 2.41(/1//0/) 3.32(/1//0/) 41
12/31/88 2.35 1.20 47
12/31/89 2.36 1.12 67
12/31/90 2.51 3.36 90
12/31/91 2.50 (0.42) 79
12/31/92 2.53 (0.75) 192
01/01/93-
09/30/93 2.46(/3/) (0.14)(/3/) 171
09/30/94 2.28 (0.05) 170
09/30/95 2.22 (0.09) 251
</TABLE>
- -------
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load.
(3) Annualized.
(4) Net of expense reimbursement equivalent to .29% of average net assets in
fiscal 1991.
(5) Net of expense reimbursement equivalent to .12% of average net assets in
fiscal 1992.
(6) Net of expense reimbursement equivalent to .05% of average net assets in
fiscal 1993.
(7) Net of expense reimbursement equivalent to .04% of average net assets for
the period ended September 30, 1993.
(8) Shares of the SunAmerica Balanced Assets Fund series of SunAmerica Fund
Group were redesignated as Class B shares of SunAmerica Balanced Assets
Fund. In addition, the Fund changed its fiscal year end to September 30,
effective September 24, 1993.
(9) Blue Chip Growth Fund changed its fiscal year end to September 30,
effective September 24, 1993.
(10) Net of fee waiver equivalent to .05% of average net assets in fiscal 1987.
(11) Commencement of sale of respective class of shares.
(12) Net of expense reimbursement equivalent to 1.66% of average net assets for
the period ended September 30, 1994.
(13) Net of fee waiver/expense reimbursement equivalent to .11% of average net
assets for the fiscal year ended September 30, 1995.
4
<PAGE>
The following financial highlights for the periods through September 30,
1995, has been audited by Price Waterhouse LLP, each Fund's independent
accountants, whose report on the financial statements containing such
information for the five years in the period ended September 30, 1995 is
included in the Annual Report to Shareholders. These Financial Highlights
should be read in conjunction with each Fund's financial statements and notes
thereto, which are included in the Statement of Additional Information and are
incorporated by reference herein.
<TABLE>
<CAPTION>
NET
GAIN (LOSS)
ON
INVESTMENTS TOTAL DIVIDENDS DISTRI- NET NET
NET ASSET NET (BOTH FROM FROM NET BUTIONS ASSET 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(/1/) (000'S)
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME
AVERAGE TO
PERIOD NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- ---------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH FUND(6)
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/87(/2/) $11.91 $ .07 $(1.44) $(1.37) $(0.04) -- $(0.04) $10.50 (11.61)% $18,429
11/30/88 10.50 .47 2.36 2.83 (.08) -- (.08) 13.25 26.97 28,082
11/30/89 13.25 .17 4.42 4.59 (.29) $ (.54) (.83) 17.01 36.39 48,188
11/30/90 17.01 .30 (3.08) (2.78) (.24) (1.09) (1.33) 12.90 (17.62) 27,460
11/30/91 12.90 .16 3.09 3.25 (.25) (2.60) (2.85) 13.30 31.13 29,142
11/30/92 13.30 (.07) 2.87 2.80 (.02) (.44) (.46) 15.64 21.42 30,024
12/01/92-
09/30/93 15.64 (0.09)(/5/) 3.17 3.08 -- (0.69) (0.69) 18.03 20.42 34,918
09/30/94 18.03 (0.04)(/5/) (1.64) (1.60) -- (2.65) (2.65) 13.78 (9.60) 32,906
09/30/95 13.78 (0.08)(/5/) 4.14 4.06 (0.04) -- (0.04) 17.80 29.51 37,714
<S> <C> <C> <C>
11/30/87(/2/) 1.30%(/3/)(/4/) 1.10%(/3/)(/4/) 202%
11/30/88 1.84 3.47 89
11/30/89 1.83 .85 54
11/30/90 1.84 1.72 65
11/30/91 1.76 1.20 225
11/30/92 1.76 (.46) 98
12/01/92-
09/30/93 1.81(3) 1.18(/3/) 231
09/30/94 1.76 0.28 555
09/30/95 1.66 (0.51) 392
CLASS B
10/04/93-
09/30/94(/8/) $18.12 $0.03(/5/) $(1.80) $(1.77) $ -- $(2.65) $(2.65) $13.70 (10.56)% $ 4,039
09/30/95 13.70 (0.18)(/5/) 4.08 3.90 (0.02) -- (0.02) 17.58 28.55 9,544
10/04/93-
09/30/94(/8/) 2.43%(3)(9) (0.20)%(/3/)(/9/) 555%
09/30/95 2.31(10) (0.17)(10) 392
SMALL COMPANY GROWTH FUND(6)
CLASS A
11/30/87(2)(7) $12.10 $(0.12)(/5/) $(3.13) $(3.25) $ -- $ -- $ -- $ 8.85 26.87% $ 8,326
11/30/88(7) 8.85 (0.11)(/5/) 5.18 5.07 -- -- -- 13.92 57.29 22,180
11/30/89(7) 13.92 (0.01)(/5/) 4.03 4.02 -- (0.29) (0.29) 17.65 29.41 48,956
11/30/90(7) 17.65 (0.04)(/5/) (5.19) (5.23) -- (0.54) (0.54) 11.88 (30.58) 23,548
11/30/91(7) 11.88 (0.01)(/5/) 4.92 4.91 -- (2.91) (2.91) 13.88 52.05 27,832
11/30/92(7) 13.88 (0.12)(/5/) 3.39 3.27 -- (0.69) (0.69) 16.46 24.31 32,056
12/01/92-
09/30/93(/7/) 16.46 (0.02)(/5/) 4.07 4.05 -- (0.73) (0.73) 19.78 25.68 39,238
09/30/94 19.78 (0.10)(/5/) (1.40) (1.50) -- (1.46) (1.46) 16.82 (7.74) 38,570
09/30/95 16.82 (0.04)(/5/) 8.28 8.24 -- (0.41) (0.41) 24.65 50.00 89,510
11/30/87(2)(7) 1.84%(/3/)(/4/) (1.06)%(/3/)(/4/) 98%
11/30/88(7) 2.16 (0.80) 54
11/30/89(7) 1.82 (0.04) 32
11/30/90(7) 2.05 (0.26) 27
11/30/91(7) 1.86 (0.06) 110
11/30/92(7) 1.90 (0.88) 209
12/01/92-
09/30/93(/7/) 1.83(3) (0.15)(3) 216
09/30/94 1.67 (0.60) 411
09/30/95 1.57 (0.22) 351
CLASS B
09/24/93-
09/30/93(/8/) $19.66 $ -- $0.12 $0.12 $ -- $ -- $ -- $19.78 0.61% $38,898
09/30/94 19.78 (0.20)(/5/) (1.42) (1.62) -- (1.46) (1.46) 16.70 (8.40) 52,208
09/30/95 16.70 (0.16)(/5/) 8.19 8.03 -- (0.41) (0.41) 24.32 49.08 68,313
09/24/93-
09/30/93(/8/) 2.34%(3) (1.70)%(3) 216%
09/30/94 2.31 (1.23) 411
09/30/95 2.22 (0.84) 351
</TABLE>
- -------
(1) Does not reflect sales load.
(2) For the period January 28, 1987 (commencement of operations) to November
30, 1987.
(3) Annualized.
(4) Net of fee waiver equivalent to .82% and .51% of average net assets of the
Mid-Cap Growth Fund and Small Company Growth Fund, respectively, in fiscal
1987.
(5) Calculated based upon average shares outstanding.
(6) Mid-Cap Growth Fund and Small Company Growth Fund both changed their
fiscal year ends to September 30, effective September 24, 1993.
(7) Restated to reflect a 0.984460367 for 1.00 stock split effective September
24, 1993.
(8) Commencement of sale of respective class of shares.
(9) Net of expense reimbursement equivalent to .48% of average net assets for
the period ended September 30, 1994.
(10) Net of fee waiver/expense reimbursement equivalent to .17% of average net
assets for the year ended September 30, 1995.
5
<PAGE>
The following financial highlights for each of the periods ended September
30, 1995 for the Global Balanced Fund and the Growth and Income Fund, has been
audited by Price Waterhouse LLP, each Fund's independent accountants, whose
report on the financial statements containing such information is included in
the Annual Report to Shareholders. These Financial Highlights should be read in
conjunction with each Fund's financial statements and notes thereto, which are
included in the Statement of Additional Information and are incorporated by
reference herein.
<TABLE>
<CAPTION>
NET
GAIN (LOSS)
ON
INVESTMENTS TOTAL DIVIDENDS DISTRI- NET NET
NET ASSET NET (BOTH FROM FROM NET BUTIONS ASSET 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)
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME
AVERAGE TO
PERIOD NET AVERAGE PORTFOLIO
ENDED ASSETS NET ASSETS TURNOVER
- -------------------------------------------------------------------------------------------------------------------
GLOBAL BALANCED FUND
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/15/94-
9/30/94(/3/) $6.94 $0.02 $(0.05) $(0.03) $ -- $ -- $ -- $6.91 (0.43)% $13,100
9/30/95......... 6.91 0.10 0.36 0.46 (0.01) -- (0.01) 7.36 6.72 9,615
<S> <C> <C> <C>
6/15/94-
9/30/94(/3/) 2.15%(/4/)(/5/) 0.93%(/4/)(/5/) 18%
9/30/95......... 2.15(/5/) 1.36(/5/) 169
CLASS B
6/16/94-
9/30/94(/3/) $6.94 $0.01 $(0.05) $(0.04) $ -- $ -- $ -- $6.90 (0.58)% $13,532
9/30/95......... 6.90 0.05 0.36 0.41 (0.01) -- (0.01) 7.30 5.91 13,976
6/16/94-
9/30/94(/3/) 2.80%(4)(5) 0.33%(/4/)(/5/) 18%
9/30/95......... 2.80(/5/) 0.75(/5/) 169
GROWTH AND INCOME FUND
CLASS A
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
7/01/94-
9/30/94(3) 1.50%(/4/)(/5/) 3.48%(/4/)(/5/) 8%
9/30/95......... 0.46(/5/) 4.16(/5/) 230
CLASS B
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
7/06/94-
9/30/94(/3/) 2.15%(4)(5) 2.86%(4)(5) 8%
9/30/95......... 0.30(/5/) 4.48(/5/) 230
</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 fee waivers/expense reimbursements (based on average
net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95
------- -------
<S> <C> <C>
Global Balanced Class A....................................... 1.14% .40%
Global Balanced Class B....................................... .93 .45
Growth and Income Class A..................................... 4.48 2.96
Growth and Income Class B..................................... 20.35 5.07
</TABLE>
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Balanced Assets Fund is to conserve princi-
pal by maintaining at all times a balanced portfolio of stocks and bonds. The
investment objective of the Global Balanced Fund is to seek capital apprecia-
tion while conserving principal by investing in a balanced portfolio of domes-
tic and foreign stocks and bonds. The investment objective of the Blue Chip
Growth Fund, the Mid-Cap Growth Fund and the Small Company Growth Fund is cap-
ital appreciation. Each seeks to achieve this objective through investment
primarily in equity securities (common stock and securities convertible into
common stock), as described below. Under normal market conditions, at least
65% of the total assets of the Blue Chip Growth Fund, the Mid-Cap Growth Fund
and the Small Company Growth Fund will be invested in such securities. The in-
vestment objectives of the Growth and Income Fund are capital appreciation and
current income. There can be no assurance that the investment objective of a
Fund will be achieved. See "Investment Techniques and Risk Factors" for a full
discussion of the types of securities in which the Funds may invest and the
risks attendant thereto.
Except as specifically indicated, the investment policies and strategies de-
scribed herein are not fundamental policies of the Funds and may be changed by
the Board of Trustees (the "Trustees") without the approval of shareholders.
Each Fund's respective investment objective and fundamental investment re-
strictions, however, may not be changed without approval of shareholders of
the affected Fund. See "Investment Restrictions."
BALANCED ASSETS FUND
In seeking to achieve the investment objective of the Balanced Assets Fund,
the Adviser has the flexibility to select among different types of investments
for capital growth and income and may alter the composition of the portfolio
as economic and market trends change. This investment approach, designated by
the Adviser as a "fully managed" investment policy, distinguishes the Balanced
Assets Fund from many other investment companies, which often seek either cap-
ital appreciation or current income.
The Adviser considers both the opportunity for gain and the risk of loss in
making investments. While the Adviser anticipates that, over the long term,
the portfolio will consist primarily of equity investments, in the form of
common and preferred stocks, it may also invest in long-term bonds and other
debt securities such as convertible securities, short-term investments, U.S.
government securities and warrants and other rights. The Balanced Assets Fund
will normally invest at least 25% of its assets in fixed-income senior securi-
ties; however, the fixed income component will exceed 25% when the Adviser be-
lieves such an adjustment in portfolio mix to be necessary in order to con-
serve principal, such as in anticipation of a decline in the equities market.
Flexibility to choose among various kinds of investments is a principal fea-
ture of the Adviser's fully managed investment approach. The Adviser shifts
its emphasis among these different types of investments, as well as among var-
ious industry sectors, as financial trends and economic conditions change. For
example, one strategy is to increase the investments in equity securities when
the Adviser anticipates a generally rising stock market. A corresponding
strategy is to reduce investments in equity securities when the Adviser fore-
sees a declining stock market or when it believes that the total return from
debt or convertible securities and short-term investments can be expected to
exceed returns from equity investments.
In selecting equity investments, the Adviser typically seeks companies of
medium to large capitalizations (generally $800 million or more) that, based
on their future prospects or opportunities, it believes are undervalued in the
marketplace; however, the Fund intends to limit its investments in companies
with market capitalizations of less than $800 million to 20% of its total as-
sets. Consistent with the Adviser's approach to equity selection, the Adviser
will direct the sale of equity investments that it judges to be overpriced or
when it believes other investments offer better values. Investments in compa-
nies with market capitalizations of less than $800 million may be more vola-
tile than investments in companies with larger market capitalizations.
In selecting debt investments, the Adviser is primarily concerned with de-
termining the most appropriate time to buy and sell debt securities. The Ad-
viser seeks debt securities with longer maturities during periods of antici-
pated lower interest rates and shorter-term debt securities when interest
rates are expected to rise. The Adviser generally selects long-term debt secu-
rities from high-quality bonds (rated "AA" or higher by Standard & Poor's Rat-
ings Servic
7
<PAGE>
es, a Division of The McGraw-Hill Companies Inc. ("S&P"), "Aa" or higher by
Moody's Investors Service, Inc. ("Moody's"), or determined by the Adviser to
be of equivalent quality if unrated) to achieve income and capital gains. The
Adviser may also invest the Fund's assets in high-quality, short-term debt se-
curities (such as commercial paper rated "A-1" by S&P or "P-1" by Moody's or
determined by the Adviser to be of equivalent quality if unrated). However,
the Adviser may invest up to 10% of the value of the Fund's total assets (mea-
sured at the time of investment) in securities rated as low as "BBB" by S&P or
"Baa" by Moody's (or determined by the Adviser to be of equivalent quality if
unrated). See "Fixed Income Securities" in "Investment Techniques and Risk
Factors" below for a discussion of the risks associated with investing in such
securities. See also the Appendix to the Statement of Additional Information
for a description of securities ratings.
GLOBAL BALANCED FUND
In seeking to achieve the investment objective of the Global Balanced Fund,
the Adviser and the Sub-Advisers have the flexibility to select among a combi-
nation of domestic and foreign equity and debt securities designed for capital
growth and/or income, which will be varied from time to time both with respect
to types of securities and markets in response to changing markets and eco-
nomic trends. This investment approach, designated by the Adviser as a "fully
managed" investment policy, distinguishes the Global Balanced Fund from many
other investment companies, which often seek either capital appreciation or
current income. In addition, the Fund may employ a variety of instruments and
techniques to enhance performance and to hedge against market and currency
risks as described further below. Investment in foreign securities involves
risks not generally associated with investment in domestic securities. See
"Investment Techniques and Risk Factors" below and the Statement of Additional
Information for a full discussion of the risks associated with investment in
foreign securities.
The Adviser and Sub-Advisers consider both the opportunity for gain and the
risk of loss in making investments. While it is anticipated that, over the
long term, the portfolio will consist primarily of foreign and domestic equity
securities, in the form of common and preferred stocks, the Fund may also in-
vest in global bonds and other global debt securities such as convertible se-
curities, short-term instruments, securities of U.S. and foreign governments
and warrants and other rights. Under normal circumstances, the Fund will in-
vest at least (i) 25% of its assets in global fixed-income senior securities;
(ii) 10% of its assets in domestic equity securities; and (iii) 45% of its as-
sets in foreign equity securities. Each component may exceed its designated
minimum when it is believed that such an adjustment in portfolio mix is neces-
sary in order to enhance performance or conserve principal. In addition, it is
anticipated that, under normal circumstances, the Fund will invest its assets
in at least 10 countries at any time, although it is only required, under such
circumstances, to maintain investments in at least three countries (one of
which may be the United States). Notwithstanding the foregoing, the number of
countries in which the Fund actually invests may vary from time to time when,
in the opinion of the Adviser and/or Sub-Advisers, economic or political con-
ditions warrant investment in a greater or lesser number of countries. Fur-
thermore, the Fund reserves the right to invest substantially all of its as-
sets in U.S. markets or U.S. dollar-denominated obligations when market condi-
tions warrant such an investment decision. The allocation among the components
will be reviewed by the Adviser and Sub-Advisers on at least a monthly basis.
In determining the allocation of assets among countries and/or capital mar-
kets, the Adviser and Sub-Advisers will consider, among other factors, the
relative valuation, condition and growth potential of the various economies,
including interest rates, monetary and fiscal policy, current and anticipated
changes in the rates of economic growth, rates of inflation, corporate prof-
its, capital reinvestment resources, self-sufficiency, balance of payments,
governmental deficits or surpluses and other pertinent financial, social and
political factors which may affect such markets. In allocating between equity
and debt securities within each market, consideration will also be given to
the relative opportunity for capital appreciation of equity and debt securi-
ties, dividend yields, and the level of interest rates paid on debt securities
of various maturities.
In selecting securities denominated in foreign currencies, each Sub-Adviser
will consider, among other factors, the effect of movement in currency ex-
change rates on the U.S. dollar value of such securities. An increase in the
value of a currency can be expected to increase the value of the Fund's secu-
rities denominated in such currency, while a decline in the
8
<PAGE>
value of the currency could produce the opposite effect. A Sub-Adviser may
seek to hedge all or a portion of the Fund's foreign securities through the
use of forward foreign currency contracts, currency options, futures contracts
and options thereon. The Fund will also engage in such transactions to enhance
returns. See "Investment Techniques and Risk Factors" below.
It is expected that the Fund will employ certain active currency and inter-
est-rate management techniques involving risks different from those associated
with investing solely in dollar-denominated securities of U.S. issuers. Such
active management techniques
include transactions in options (including yield curve options), futures, op-
tions on futures, forward foreign currency exchange contracts, currency op-
tions and futures, currency and interest rate swaps, mortgage swaps, caps,
collars and floors. The aggregate amount of the Fund's net currency exposure
will not exceed its total asset value. However, to the extent that the Fund is
fully invested in securities while also maintaining currency positions, it may
be exposed to greater combined risk. The Fund's net currency positions may ex-
pose it to risks independent of its securities positions. See "Risks and Con-
siderations Applicable to Investment in Securities of Foreign Issuers" and
"Foreign Currency Transactions" in "Investment Techniques and Risk Factors"
below.
While there are no prescribed limits on the geographical allocation of the
Fund's assets, the Adviser anticipates that investment of the Fund's assets
will be subject to the following guidelines, which may be revised from time to
time as market conditions warrant:
<TABLE>
<CAPTION>
MAXIMUM INVESTMENT
REGION (AS A % OF NET ASSETS)
- ------ ----------------------
<S> <C>
Europe................................................... 70%
Japan.................................................... 50%
Asia/Pacific (excluding Japan)........................... 60%
Latin America............................................ 20%
Canada................................................... 30%
United States............................................ 40%
Other.................................................... 10%
</TABLE>
In addition, no more than 20% of the Fund's total assets will be invested in
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with the
potential for rapid economic growth ("emerging markets"). Emerging markets
will include any country: (i) having an "emerging stock market" as defined by
the International Finance Corporation; (ii) with low-to middle-income econo-
mies according to the International Bank for Reconstruction and Development
(the "World Bank"); (iii) listed in World Bank publications as developing; or
(iv) determined by the Adviser or a Sub-Advisers to be an emerging market as
defined above. The Fund may invest in securities of: (i) companies the princi-
pal securities trading market for which is located in an emerging market coun-
try; (ii) companies organized under the laws of, and with a principal office
in, an emerging market country; (iii) companies whose principal activities are
located in emerging market countries; or (iv) companies traded in any market
that derive 50% or more of their total revenue from either goods or services
produced in an emerging market or sold in an emerging market. None of the
Fund's fixed income investments will be in emerging markets or countries. See
"Investment Techniques and Risk Factors" below for a discussion of the risks
associated with investments in emerging markets.
Within the portion of the Fund's portfolio allocated to equity securities,
the Adviser, with respect to the domestic equity component of the Fund, and
AIG Global, with respect to the foreign equity component of the Fund, will
each seek to identify the securities of companies and industry sectors which
are expected to provide high total return relative to alternative equity in-
vestments. The Fund generally will seek to invest in securities which are be-
lieved to be undervalued. Undervalued issues include securities selling at a
discount from the price-to-book value ratios and price/earnings ratios com-
puted with respect to the relevant stock market averages. The Fund may also
consider as undervalued, securities selling at a discount from their historic
price-to-book value or price/earnings ratios, even though these ratios may be
above the ratios for the stock market averages. Securities offering dividend
yields higher than the yields for the relevant stock market averages or higher
than such securities' historic yield may also be considered to be undervalued.
The Fund may also invest in the securities of small and emerging growth compa-
nies when such companies are expected to provide a higher total return than
other equity investments. Such companies are characterized by rapid historical
growth rates, above-average returns on equity or special investment value in
terms of their products or services, research capabilities or other unique at-
tributes. The Adviser and AIG Global will seek to identify small and emerging
growth companies that pos
9
<PAGE>
sess superior management, marketing ability, research and product development
skills and sound balance sheets. See "Investment Techniques and Risk Factors"
below for a discussion of the risks associated with investments in small com-
panies.
The debt securities in which the Fund may invest include securities issued
or guaranteed by the U.S. government and its agencies or instrumentalities, by
foreign governments (including foreign states, provinces and municipalities)
and agencies or instrumentalities thereof and debt obligations issued by U.S.
and foreign corporations. Such securities may include mortgage-backed securi-
ties issued or guaranteed by governmental entities or by private issuers. In
addition, the Fund may invest in debt securities issued or guaranteed by in-
ternational organizations designed or supported by multiple governmental enti-
ties (which are not obligations of the U.S. government or foreign governments)
to promote economic reconstruction or development ("supranational entities")
such as the World Bank. The Fund may also invest in certificates of deposit,
bankers' acceptances, time deposits of certain size banks, commercial paper
and asset-backed securities, and enter into dollar rolls. Under normal circum-
stances, GSAM expects that at least 30% of the fixed income component, ad-
justed to reflect such component's net exposure after giving effect to cur-
rency transactions and positions, will be denominated in U.S. dollars. Fur-
ther, because the securities markets in each of Canada, Germany, Japan and the
United Kingdom are highly developed, liquid and subject to extensive regula-
tions, GSAM may invest more than 25% of the fixed income component in the se-
curities of corporate and government issuers located in any of one of such
countries. Allocation of investments in such issuers could subject the Fund to
the risks of adverse social, political or economic events which may occur in
those countries.
The obligations of foreign governmental entities have various kinds of gov-
ernment support and include obligations issued or guaranteed by foreign gov-
ernmental entities with taxing power. These obligations may or may not be sup-
ported by the full faith and credit of a foreign government. The Fund will in-
vest in foreign government securities of issuers considered stable by GSAM.
GSAM does not believe that the credit risk inherent in the obligations of sta-
ble foreign governments is significantly greater than that of U.S. government
securities.
The Fund may invest the portion of its assets allocated to debt obligations
in the securities of governmental issuers and in corporate debt securities,
including convertible debt securities, rated "BBB" or better by S&P or "Baa"
or better by Moody's or which, in GSAM's judgement, possess similar credit
characteristics ("investment grade bonds"). Notwithstanding the foregoing, it
is expected that the Fund will generally invest a significant portion of such
component in securities having the highest applicable credit quality rating
or, if unrated, determined by GSAM at the time of investment to be of compara-
ble quality, with the remainder of such component invested in securities rated
of high quality by S&P or Moody's (i.e., "AA" or "Aa") or of comparable quali-
ty. However, with respect to obligations of a government issuer, the Fund may
invest in such obligations if rated "A" or better by S&P or Moody's, or if
unrated, determined by GSAM to be of comparable credit quality; provided that
the obligations are denominated in the issuer's own currency. See "Fixed In-
come Securities" in "Investment Techniques and Risk Factors" below for a dis-
cussion of the risks associated with investing in debt securities rated in the
fourth highest rating category. See also the Statement of Additional Informa-
tion for more information regarding ratings of debt securities. The ratings
assigned by S&P and Moody's are considered as one of several factors in GSAM's
independent credit analysis of issuers.
The average maturity of the Fund's portfolio of debt securities will vary
based on GSAM's assessment of pertinent economic market conditions. As with
all debt securities, changes in market yields will affect the value of such
securities. Prices generally increase when interest rates decline and decrease
when interest rates rise. Prices of longer term securities generally fluctuate
more in response to interest rate changes than do the prices of shorter-term
securities. The Fund may use various techniques to shorten or lengthen the
dollar-weighted average duration of its fixed income portfolio, including the
acquisition of debt obligations at a premium or discount, transactions in op-
tions, futures contracts and options on futures and interest rate swaps, mort-
gage swaps, caps and floors. Under normal circumstances, the Fund will main-
tain a dollar-weighted average duration of not more than 7.5 years. However,
the Fund is not subject to any limitation with respect to the average maturity
of its portfolio or the individual securities in which the Fund may invest.
See "Hedging and Income Enhancement Strategies" and "Special Risks of Hedging
and Income Enhancement Strategies" in
10
<PAGE>
"Investment Techniques and Risk Factors" below for more information concerning
the use of these investment techniques.
BLUE CHIP GROWTH FUND
The Blue Chip Growth Fund will invest, under normal circumstances, at least
65% of its total assets in equity securities of companies with large market
capitalizations, and which have conducted operations for at least five years.
A "blue chip" or "large-cap" stock is one which the Adviser considers compara-
ble to the stocks included in the Standard & Poor's 500 Index ("S&P 500") at
the time of purchase, and which has a minimum market capitalization of $5 bil-
lion, and that is traded on the New York Stock Exchange ("NYSE"), American
Stock Exchange ("AMEX") or on other national exchanges or on foreign ex-
changes. The Fund may also invest in equity securities that are (i) issued by
small companies which are believed by the Adviser to have significant growth
potential; (ii) issued by companies considered by the Adviser to be underval-
ued or overlooked and that have above-average earnings growth or value; or
(iii) unlisted, but these will generally be securities that have an estab-
lished over-the-counter market, although the depth and liquidity of that mar-
ket may vary from time to time and from security to security. In pursuing its
investment objective, the Fund may, under normal circumstances, invest up to
35% of its total assets in debt securities that have the potential for capital
appreciation due to anticipated market conditions. The Fund may invest in se-
curities rated as low as "BBB" or "Baa." See "Fixed Income Securities" in "In-
vestment Techniques and Risk Factors" below for a discussion of the risks as-
sociated with investing in such securities.
MID-CAP GROWTH FUND
The Mid-Cap Growth Fund will invest, under normal circumstances, at least
65% of its total assets in the equity securities of medium-sized companies
("Mid-Cap Companies") with market capitalizations of $1 billion to $5 billion,
which have conducted operations for at least five years. The Fund may also in-
vest in equity securities that are issued by (i) small companies which are be-
lieved by the Adviser to have significant growth potential, or (ii) companies
considered by the Adviser to have above-average earnings growth or value. A
significant portion of the Fund's equity investments are in securities listed
on the NYSE or other national securities exchanges or on foreign exchanges.
The Fund will also invest in unlisted securities, but these will generally be
securities that have an established over-the-counter market, although the
depth and liquidity of that market may vary from time to time and from secu-
rity to security. In pursuing its investment objective, the Fund may, under
normal circumstances, invest up to 35% of its total assets in debt securities
that have the potential for capital appreciation due to anticipated market
conditions. The Fund may invest in securities rated as low as "BBB" or "Baa."
See "Fixed Income Securities" in "Investment Techniques and Risk Factors" be-
low for a discussion of the risks associated with investing in such securi-
ties.
SMALL COMPANY GROWTH FUND
The Small Company Growth Fund pursues its investment objective by investing,
under normal circumstances, at least 65% of its total assets in the equity se-
curities of small, lesser known or new growth companies or industries, such as
telecommunications, media and biotechnology. Such "Small Cap" companies will
typically have market capitalizations of under $1 billion and have achieved,
or are expected to achieve, growth or earnings over various major business cy-
cles. The Fund may invest in securities issued by well known and established
domestic or foreign companies, as well as in newer and less-seasoned compa-
nies. Such securities may be listed on an exchange or traded over-the-counter.
See "Investment in Small Companies" in "Investment Techniques and Risk Fac-
tors" below for a discussion of the risks associated with investing in small
companies. In pursuing its investment objectives, the Fund may, under normal
circumstances, invest up to 35% of its total assets in debt securities that
have the potential for capital appreciation due to anticipated market condi-
tions. The Fund may invest in securities rated as low as "BBB" or "Baa." See
"Fixed Income Securities" in "Investment Techniques and Risk Factors" below
for a discussion of the risks associated with investing in such securities.
GROWTH AND INCOME FUND
The Growth and Income Fund will invest primarily in common stocks that offer
potential for cap-
11
<PAGE>
ital appreciation, current income, or both. The Fund may also purchase corpo-
rate bonds, notes, debentures, preferred stocks, convertible securities (both
debt securities and preferred stocks) or U.S. government securities, if the
Adviser determines that their purchase would help further the achievement of
the Fund's investment objectives. In addition, the Fund may invest in equity
securities that are (i) issued by small companies which are believed by the
Adviser to have significant growth potential; (ii) issued by companies consid-
ered by the Adviser to be undervalued or overlooked and that have above-aver-
age earnings growth or value; or (iii) unlisted, but these will generally be
securities that have an established over-the-counter market, although the
depth and liquidity of that market may vary from time to time and from secu-
rity to security. The types of securities held by the Fund may vary from time
to time in light of the Fund's investment objectives, changes in interest
rates, and economic and other factors. The Fund may also hold a portion of its
assets in cash or money market instruments. At times, when market conditions
warrant, the Fund may, as a temporary defensive measure, invest without limi-
tation in debt securities or preferred stocks, or invest in any other securi-
ties which the Adviser considers consistent with a defensive posture. See "In-
vestment in Small Companies" in "Investment Techniques and Risk Factors" below
for a discussion of the risks associated with investment in small companies.
The Fund is authorized to invest a portion of its debt portfolio in fixed
income securities rated below investment grade by a nationally recognized
statistical rating organization or in unrated securities which, in the
Adviser's judgment, possess similar credit characteristics ("high yield
bonds"). The Adviser has adopted a policy that the Fund will not invest more
than 15% of the Fund's total assets in obligations rated below "BBB" or "Baa."
Investment in high yield bonds (which are commonly referred to as "junk"
bonds) involves substantial risk. Investments in high yield bonds will be made
only when, in the judgment of the Adviser, such securities provide attractive
total return potential, relative to the risk of such securities, as compared
to higher quality debt securities. Securities rated "BB" or lower by S&P or
"Ba" or lower by Moody's are considered by those rating agencies to have
varying degrees of speculative characteristics. Consequently, although high
yield bonds can be expected to provide higher yields, such securities may be
subject to greater market price fluctuations and risk of loss of principal
than lower yielding, higher rated fixed income securities. The Fund generally
will not invest in debt securities in the lowest rating categories ("CC" or
lower for S&P or "Ca" or lower for Moody's) unless the Adviser believes that
the financial condition of the issuer or the protection afforded the
particular securities is stronger than would otherwise be indicated by such
low ratings. In the event the rating of a debt security is down-graded below
the lowest rating category deemed by the Adviser to be acceptable for the
Fund's investments, the Adviser will determine on a case-by-case basis the
appropriate action to best serve the interest of shareholders, including
disposition of the security. See the Statement of Additional Information for
additional information regarding high yield bonds.
High yield bonds may be issued by less creditworthy companies or by larger,
highly leveraged companies and are frequently issued in corporate
restructurings such as mergers and leveraged buyouts. Such securities are par-
ticularly vulnerable to adverse changes in the issuer's industry and in gen-
eral economic conditions. High yield bonds frequently are junior obligations
of their issuers, so that in the event of the issuer's bankruptcy, claims of
the holders of high yield bonds will be satisfied only after satisfaction of
the claims of senior security-holders. While the high yield bonds in which the
Fund may invest normally do not include securities which, at the time of in-
vestment, are in default or the issuers of which are in bankruptcy, there can
be no assurance that such events will not occur after the Fund purchases a
particular security, in which case the Fund may experience losses and incur
costs.
High yield bonds tend to be more volatile than higher rated fixed income se-
curities so that adverse economic events may have a greater impact on the
prices of high yield bonds than on higher rated fixed income securities. Like
higher rated fixed income securities, high yield bonds are generally purchased
and sold through dealers who make a market in such securities for their own
accounts. However, there are fewer dealers in the high yield bond market which
may be less liquid than the market for higher rated fixed income securities
even under normal economic conditions. Also, there may be significant dispari-
ties in the prices quoted for high yield bonds by various dealers. Adverse
economic conditions or investor perceptions (whether or not based on economic
fun-
12
<PAGE>
damentals) may impair the liquidity of this market and may cause the prices
the Fund receives for its high yield bonds to be reduced, or the Fund may ex-
perience difficulty in liquidating a portion of its portfolio. Under such con-
ditions, judgment may play a greater role in valuing certain of the Fund's
portfolio securities than in the case of securities trading in a more liquid
market.
INVESTMENT TECHNIQUES AND RISK FACTORS
ILLIQUID SECURITIES. Each Fund may invest up to 10% of its net assets,
determined as of the date of purchase, in illiquid securities including
repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities), and securities that are not readily marketable in securities
markets either within or without the United States. Restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or certain private placements of commercial paper issued in reliance
on an exemption from such Act pursuant to Section 4(2) thereof, that have a
readily available market are not considered illiquid for purposes of a Fund's
10% limitation on purchases of illiquid securities. Because it is not possible
to predict with assurance how the market for restricted securities will
develop, the Adviser (or Sub-Advisers) will monitor the liquidity of such
restricted securities under the supervision of the Trustees. To the extent
that, for a period of time, qualified institutional buyers cease purchasing
such restricted securities pursuant to Rule 144A, the Fund's investing in such
securities may have the effect of increasing the level of illiquidity in the
Fund's portfolio during such period. See "Illiquid Securities" in the
Statement of Additional Information for a discussion of the risks associated
with investments in such securities.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements in
order to generate income while providing liquidity. When a Fund acquires a
security from a bank or securities dealer, it may simultaneously enter into a
repurchase agreement, wherein the seller agrees to repurchase the security at
a mutually agreed-upon time (generally within seven days) and price. The
repurchase price is in excess of the purchase price by an amount which
reflects an agreed-upon market rate of return, which is not tied to the coupon
rate or maturity of the underlying security. Repurchase agreements will be
fully collateralized. If, however, the seller defaults on its obligation to
repurchase the underlying security, the Fund may experience delay or
difficulty in exercising its rights to realize upon the security and might
incur a loss if the value of the security has declined. The Fund might also
incur disposition costs in liquidating the security. There is no limit on the
amount of a Fund's net assets that may be subject to repurchase agreements
having a maturity of seven days or less for temporary defensive purposes.
SHORT-TERM AND TEMPORARY DEFENSIVE INVESTMENTS. In addition to their primary
investments, each Fund may also invest up to 10% of its total assets in money
market instruments for liquidity purposes (to meet redemptions and expenses).
For temporary defensive purposes, each Fund may invest up to 100% of its total
assets in fixed-income securities, including corporate debt obligations and
money market instruments rated in one of the two highest categories by a
nationally recognized statistical rating organization (or determined by the
Adviser or Sub-Advisers to be of equivalent quality). Money market instruments
include securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, repurchase agreements, commercial paper, bankers'
acceptances and certificates of deposit. See the Appendix to the Statement of
Additional Information for a description of securities ratings.
U.S. GOVERNMENT SECURITIES. Each Fund may invest in U.S. Treasury
securities, including bills, notes, bonds and other debt securities issued by
the U.S. Treasury. These instruments are direct obligations of the U.S.
government and, as such, are backed by the "full faith and credit" of the
United States. They differ primarily in their interest rates, the lengths of
their maturities and the dates of their issuances. Each Fund may also invest
in securities issued by agencies of the U.S. government or instrumentalities
of the U.S. government. These obligations, including those which are
guaranteed by Federal agencies or instrumentalities, may or may not be backed
by the full faith and credit of the United States. Obligations of the
Government National Mortgage Association ("GNMA"), the Farmers Home
Administration and the Export-Import Bank are backed by the full faith and
credit of the United States. In the case of securities not backed by the full
13
<PAGE>
faith and credit of the United States, a Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment and may
not be able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments.
Mortgage-backed Government Securities. The Balanced Assets Fund and the
Global Balanced Fund may, in addition to the securities noted above, invest in
mortgage-backed securities, including those representing an undivided
ownership interest in a pool of mortgages, e.g., GNMA, Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation Certificates.
The U.S. government or the issuing agency guarantees the payment of interest
and principal of these securities. However, the guarantees do not extend to
the securities' yield or value, which are likely to vary inversely with
fluctuations in interest rates. These certificates are in most cases "pass-
through" instruments, through which the holder receives a share of interest
and principal payments from the mortgages underlying the certificate, net of
certain fees. Because the prepayment characteristics of the underlying
mortgages vary, it is not possible to predict accurately the average life of a
particular issue of pass-through certificates. Mortgage-backed securities are
often subject to more rapid repayment than their stated maturity date would
indicate as a result of the pass-through of prepayments of principal on the
underlying mortgage obligations. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected
to accelerate. In addition, the Fund may invest in collaterized mortgage
obligations and stripped mortgage-backed securities, including interest-only
and principal-only securities. While interest-only and principal-only
securities are generally regarded as being illiquid, such securities may be
deemed to be liquid if they can be disposed of promptly in the ordinary course
of business at a value reasonably close to that used in the calculation of the
Fund's net asset value per share. Only government interest-only and principal-
only securities backed by fixed-rate mortgages and determined to be liquid
under guidelines and standards established by the Trustees may be considered
liquid not subject to a Fund's limitation on investment in illiquid
securities. See "U.S. Government Securities" in the Statement of Additional
Information for a further discussion of those types of securities.
FIXED INCOME SECURITIES. In addition to U.S. government securities, each
Fund may invest, subject to the percentage and credit quality limitations
stated in the prospectus, in debt securities, including corporate obligations
issued by domestic and foreign corporations and money market instruments,
without regard to the maturities of such securities. Those debt securities
which are rated "BBB" or "Baa", while considered to be "investment grade", may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. As a conse-
quence of the foregoing, the opportunities for income and gain may be limited.
While the Funds have no stated policy with respect to the disposition of secu-
rities whose ratings fall below investment grade, each occurrence is examined
by the Adviser or Sub-Advisers to determine the appropriate course of action.
ASSET-BACKED SECURITIES. The Global Balanced Fund may invest in asset-backed
securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card or
automobile loan receivables, representing the obligations of a number of
different parties. Corporate asset-backed securities present certain risks.
For instance, in the case of credit card receivables, these securities may not
have the benefit of any security interest in the related collateral. See the
Statement of Additional Information for further information on these
securities.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS. Fixed income
securities in which the Global Balanced Fund and Growth and Income Fund may
invest also include zero coupon bonds, deferred interest bonds and bonds on
which the interest is payable in kind ("PIK bonds"). Zero coupon and deferred
interest bonds are debt obligations which are issued or purchased at a
significant discount from face value. The discount approximates the total
amount of interest the bonds will accrue and compound over the period until
maturity or the first interest payment date at a rate of interest reflecting
the market rate of the security at the time of issuance. While zero coupon
bonds do not require the periodic payment of interest, deferred interest bonds
provide for a period of delay before the regular payment of interest begins.
PIK bonds are debt obligations which provide that the issuer thereof
14
<PAGE>
may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of
return to attract investors who are willing to defer receipt of such cash.
Such investments may experience greater volatility in market value due to
changes in interest rates and other factors than debt obligations which make
regular payments of interest. A Fund will accrue income on such investments
for tax and accounting purposes, as required, which is distributable to
shareholders and which, because no cash is received at the time of accrual,
may require the liquidation of other portfolio securities under
disadvantageous circumstances to satisfy the Fund's distribution obligations.
WARRANTS. Each Fund may invest in warrants which give the holder of the
warrant a right to purchase a given number of shares of a particular issue at
a specified price until expiration. A Fund may not invest more than 5% of its
total assets in such warrants, and, of such amount, no more than 2% of total
assets in warrants not listed on the NYSE or AMEX.
INVESTMENT IN SMALL COMPANIES. The Small Company Growth Fund will invest,
and the other Funds may each invest, in small companies having market
capitalizations of under $1 billion. It may be difficult to obtain reliable
information and financial data on such companies and the securities of these
small companies may not be readily marketable, making it difficult to dispose
of shares when desirable. Securities of small or emerging growth companies may
be subject to more abrupt or erratic market movements than larger, more
established companies or the market average in general. A risk of investing in
smaller, emerging companies is that they often have limited product lines,
markets or financial resources, and their securities may be subject to more
abrupt or erratic market movements than securities of larger, more established
companies or the market averages in general. In addition, certain issuers in
which these Funds may invest may face difficulties in obtaining the capital
necessary to continue in operation and may go into bankruptcy, which could
result in a complete loss of the Fund's investment.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Each Fund may purchase or
sell securities on a when-issued or delayed-delivery basis. When-issued or
delayed-delivery transactions arise when securities are purchased or sold by a
Fund with payment and delivery taking place a month or more in the future in
order to secure what is considered to be an advantageous price and yield to
the Fund at the time of entering into the transaction. While the Fund will
only purchase securities on a when-issued or delayed-delivery basis with the
intention of acquiring the securities, the Fund may sell the securities before
the settlement date, if it is deemed advisable. At the time the Fund makes the
commitment to purchase securities on a when-issued or delayed-delivery basis,
the Fund will record the transaction and thereafter reflect the value, each
day, of such security in determining the net asset value of the Fund. At the
time of delivery of the securities, the value may be more or less than the
purchase price. The Fund will maintain in a segregated account of the Fund
liquid assets having a value equal to or greater than the Fund's purchase
commitments. The Fund will likewise segregate liquid assets in respect of
securities sold on a delayed-delivery basis. Subject to this requirement, each
Fund may purchase securities on such basis without limitation.
FOREIGN SECURITIES. Although foreign securities are generally not expected
to constitute a significant portion of any Fund's investment portfolio (other
than the Global Balanced Fund), each Fund is authorized to invest, without
limitation, in foreign securities. A Fund may purchase securities issued by
issuers in any country; provided, that a Fund (other than the Global Balanced
Fund) may not invest more than 25% of its total assets in the securities is-
sued by entities domiciled in any one foreign country. Foreign investments may
be affected favorably or unfavorably by changes in currency rates and ex-
change-control regulations and costs will be incurred in connection with con-
versions between various currencies. The value of a security may fluctuate as
a result of currency exchange rates in a manner unrelated to the underlying
value of the security. There may be less publicly available information about
a foreign company than about a U.S. company, and foreign companies may not be
subject to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies. Securities of
some foreign companies may be less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees are gen-
erally higher than in the
15
<PAGE>
U.S. In addition, there is generally less governmental regulation of stock ex-
changes, brokers and listed companies abroad than in the U.S. Investments in
foreign securities may also be subject to other risks, different from those
affecting U.S. investments, including local political or economic develop-
ments, expropriation or nationalization of assets and imposition of withhold-
ing taxes on dividend or interest payments.
Each Fund may also invest in securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs),
Global Depositary Receipts (GDRs) or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are certificates issued by a U.S. depository (usually a bank)
and represent a specified quantity of shares of an underlying non-U.S. stock
on deposit with a custodian bank as collateral. EDRs, GDRs and other types of
depositary receipts are typically issued by foreign depositaries, although
they may also be issued by U.S. depositaries, and evidence ownership interests
in a security or pool of securities issued by either a foreign or a U.S.
corporation. Each Fund also may invest in securities denominated in European
Currency Units (ECUs). An ECU is a "basket" consisting of specified amounts of
currencies of certain of the twelve member states of the European Community.
The specific amount of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community from time to time to reflect
changes in relative values of the underlying currencies. In addition, the
Funds may invest in securities denominated in other currency "baskets." See
"Foreign Securities" in the Statement of Additional Information for a further
discussion of these types of securities.
Emerging Markets. Investment may be made from time to time in issuers domi-
ciled in, or governments of, developing countries or emerging markets as well
as developed countries. Although there is no universally accepted definition,
a developing country is generally considered to be a country which is in the
initial stages of its industrialization cycle with a low per capita gross na-
tional product. Historical experience indicates that the markets of developing
countries or emerging markets have been more volatile than the markets of de-
veloped countries; however, such markets can provide higher rates of return to
investors. Investment in an emerging market country may involve certain risks,
including a less diverse and mature economic structure, a less stable politi-
cal system, an economy based on only a few industries or dependent on interna-
tional aid or development assistance, the vulnerability to local or global
trade conditions, extreme debt burdens, or volatile inflation rates.
Risks and Considerations Applicable to Investment in Securities of Foreign
Issuers. Elements of risk and opportunity when investments in foreign issuers
are made include trade imbalances and related economic policies; currency
fluctuations; foreign exchange control policies; expropriation or confiscatory
taxation; limitation on the removal of funds or other assets; political or so-
cial instability; the diverse structure and liquidity of securities markets in
various countries and regions; policies of governments with respect to possi-
ble nationalization of their industries; and other specific local political
and economic considerations. Foreign companies and foreign investment prac-
tices are generally not subject to uniform accounting, auditing and financial
reporting standards and practices or regulatory requirements comparable to
those of U.S. companies. There may by less information publicly available
about foreign companies. Investment decisions made in the context of the
Funds' objectives and policies involve the evaluation of opportunities and
risks presented by probable future currency relationships, especially during
periods of broad adjustments in such relationships.
The performance of investments in securities denominated in a foreign cur-
rency ("non-dollar securities") will depend on, among other things, the
strength of the foreign currency against the dollar and the interest rate en-
vironment in the country issuing the foreign currency. Absent other events
which could otherwise affect the value of non-dollar securities (such as a
change in the political climate or an issuer's credit quality), appreciation
in the value of the foreign currency generally can be expected to increase the
value of a Fund's non-dollar securities in terms of U.S. dollars. A rise in
foreign interest rates or decline in the value of foreign currencies relative
to the U.S. dollar generally can be expected to depress the value of the
Fund's non-dollar securities. Currencies are evaluated on the basis of funda-
mental economic criteria (e.g., relative inflation levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data.
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<PAGE>
Foreign Currency Transactions. Currency exchange rate fluctuations are a ma-
jor area of risk and opportunity for the Global Balanced Fund. The Fund has
the ability to hold a portion of its assets in foreign currencies and to enter
into forward foreign currency exchange contracts. It may also purchase and
sell exchange-traded futures contracts relating to foreign currency and pur-
chase and sell put and call options on currencies and futures contracts. A
significant portion of the Fund's currency transactions will be over-the-
counter transactions.
The Global Balanced Fund may enter into forward foreign currency exchange
contracts to reduce the risks of fluctuations in exchange rates; however,
these contracts cannot eliminate all such risks and do not eliminate fluctua-
tions in the prices of the Fund's portfolio securities. For example, purchas-
ing (selling) a currency forward limits the Fund's exposure to risk of loss
from a rise (decline) in the U.S. dollar value of the currency, but also lim-
its its potential for gain from a decline (rise) in the currency's U.S. dollar
value.
The Global Balanced Fund may purchase and write put and call options on cur-
rencies for the purpose of protecting against declines in the U.S. dollar
value of foreign portfolio securities and against increases in the U.S. dollar
cost of foreign securities to be acquired. As with other kinds of option
transactions, however, the writing of an option on currency will constitute
only a partial hedge, up to an amount of the premium received. The Fund could
be required to purchase or sell currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on currency may constitute
an effective hedge against exchange rate fluctuations; however, in the event
of exchange rate movements adverse to the Fund's position, the Fund may for-
feit the entire amount of the premium plus related transaction costs.
The Global Balanced Fund may enter into forward foreign currency exchange
contracts, currency options and currency swaps for non-hedging purposes when a
Sub-Adviser anticipates that a foreign currency will appreciate or depreciate
in value, but securities denominated in that currency do not present attrac-
tive investment opportunities or are not included in the Fund. The Fund may
use currency contracts and options to cross-hedge, which involves selling or
purchasing instruments in one currency to hedge against changes in exchange
rates for a different currency with a pattern of correlation. To limit any
leverage in connection with currency contract transactions for non-hedging
purposes, the Fund will segregate liquid assets such as cash, U.S. government
securities or other appropriate high-grade obligations in an amount sufficient
to meet its payment obligations in these transactions. Initial margin deposits
made in connection with currency futures transactions or premiums paid for
currency options traded over-the-counter or on a commodities exchange may each
not exceed 5% of the Fund's total assets in the case of non-bona fide hedging
transactions.
The Global Balanced Fund may enter into currency swaps. Currency swaps in-
volve the exchange by the Fund with another party of their respective rights
to make or receive payments in specified currencies. Since currency swaps are
individually negotiated, the Fund expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swap positions.
Currency swaps usually involve the delivery of the entire principal value of
one designated currency in exchange for the other designated currency. There-
fore, the entire principal value of a currency swap is subject to the risk
that the other party to the swap will default on its contractual delivery ob-
ligations. The Fund will maintain in a segregated account with the Fund's cus-
todian cash and liquid high grade debt securities equal to the net amount, if
any, of the excess of the Fund's obligations over its entitlements with re-
spect to swap transactions. To the extent that the net amount of a swap is
held in a segregated account consisting of cash and liquid, high grade debt
securities, the Fund, the Adviser and Sub-Advisers believe that swaps do not
constitute senior securities under the 1940 Act and, accordingly, will not
treat them as being subject to the Fund's borrowing restriction. The use of
currency swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If a Sub-Adviser is incorrect in its forecasts of
market values and currency exchange rates, the investment performance of the
Fund would be less favorable that it would have been if this investment tech-
nique were not used.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend portfolio securities in
amounts up to 33% of its respective total assets to brokers, dealers and other
financial institutions, provided such loans are callable
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<PAGE>
at any time by the Fund and are at all times secured by cash or equivalent
collateral. By lending its portfolio securities, a Fund will receive income
while retaining the securities' potential for capital appreciation. As with
any extensions of credit, there are risks of delay in recovery and, in some
cases, even loss of rights in the collateral should the borrower of the secu-
rities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Adviser (or Sub-Advisers) to be credit-
worthy. The proceeds of such loans will be invested in high-quality short-term
debt securities, including repurchase agreements.
LEVERAGE. In seeking to enhance investment performance, the Global Balanced
Fund, Small Company Growth Fund and Growth and Income Fund may borrow money
for investment purposes and may each pledge assets to secure such borrowings.
This is the speculative factor known as leverage. This practice may help a
Fund increase the net asset value of its shares in an amount greater than
would otherwise be the case when the market values of the securities purchased
through borrowing increase. In the event the return on an investment of bor-
rowed monies does not fully recover the costs of such borrowing, the net asset
value of the Fund's shares would be reduced by a greater amount than would
otherwise be the case. The effect of leverage will therefore tend to magnify
the gains or losses to a Fund as a result of investing the borrowed monies.
During periods of substantial borrowings, the net asset value of a Fund's
shares would be reduced due to the added expense of interest on borrowed mon-
ies. Each Fund is authorized to borrow, and to pledge assets to secure such
borrowings, up to the maximum extent permissible under the 1940 Act (i.e.,
presently 50% of net assets). The time and extent to which a Fund may employ
leverage will be determined by the Adviser (or Sub-Advisers) in light of
changing facts and circumstances, including general economic and market condi-
tions, and will be subject to applicable lending regulations of the Board of
Governors of the Federal Reserve Board. The Funds' policies regarding the use
of leverage are fundamental policies which may not be changed without the ap-
proval of shareholders of the respective Fund.
Under the 1940 Act, the value of a Fund's assets less liabilities, other
than borrowings, must be at least three times all of the Fund's borrowings,
including the proposed borrowing. If for any reason the value of a Fund's as-
sets falls below the 1940 Act requirement, the Fund must within three business
days reduce its borrowings to satisfy such requirement. To do this, a Fund may
have to sell a portion of its investments at a time when it may be disadvanta-
geous to do so.
HEDGING AND INCOME ENHANCEMENT STRATEGIES. Each Fund may write covered calls
to enhance income. For hedging purposes as a temporary defensive maneuver,
each Fund may use interest rate futures and stock and bond index futures (to-
gether, "Futures"); forward contracts on foreign currencies; and call and put
options on equity and debt securities, Futures, stock and bond indices and
foreign currencies (all of the foregoing are referred to as "Hedging Instru-
ments"). A call or put may be purchased only if, after such purchase, the
value of all call and put options held by the Fund would not exceed 5% of the
Fund's total assets. A Fund will not use Futures and options on Futures for
speculation. All puts and calls on securities, interest rate futures or stock
and bond index futures or options on such Futures purchased or sold by the
Fund will be listed on a national securities or commodities exchange or on
U.S. over-the-counter markets. The Global Balanced Fund may invest up to 5% of
its total assets in yield curve options. See "Foreign Securities--Foreign Cur-
rency Transactions."
Special Risks of Hedging and Income Enhancement Strategies. Participation in
the options or Futures markets and in currency exchange transactions involves
investment risks and transaction costs to which a Fund would not be subject
absent the use of these strategies. If the Adviser's (or Sub-Adviser's) pre-
dictions of movements in the direction of the securities, foreign currency and
interest rate markets are inaccurate, the adverse consequences to the Fund may
leave the Fund in a worse position than if such strategies were not used.
Risks inherent in the use of options, foreign currency and Futures contracts
and options on Futures contracts include (1) dependence on the Adviser's (or
Sub-Adviser's) ability to predict correctly movements in the direction of in-
terest rates, securities prices and currency markets; (2) imperfect correla-
tion between the price of options and Futures contracts and options thereon
and movements in the prices of the securities or currencies being hedged; (3)
the fact that skills needed to use these strategies are different from those
needed to select portfolio securities; (4) the possible absence of a liquid
second-
18
<PAGE>
ary market for any particular instrument at any time; (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences;
and (6) the possible inability of the Fund to purchase or sell a portfolio se-
curity at a time that otherwise would be favorable for it to do so, or the
possible need for the Fund to sell a portfolio security at a disadvantageous
time, due to the need for the Fund to maintain "cover" or to segregate securi-
ties in connection with hedging transactions. A transaction is "covered" when
the Fund owns the security subject to the option on such security, or some
other security acceptable for applicable escrow requirements. See the State-
ment of Additional Information for further information concerning income en-
hancement and hedging strategies and the regulation requirements relating
thereto.
SHORT SALES. Each Fund may make "short sales against the box." A short sale
is effected by selling a security which the Fund does not own. A short sale is
against the box to the extent that the Fund contemporaneously owns, or has the
right to obtain without payment, securities identical to those sold short. A
Fund may not enter into a short sale against the box, if, as a result, more
than 25% of its total assets would be subject to such short sales.
OTHER INVESTMENTS. Each Fund may enter into reverse repurchase agreements.
In addition, the Global Balanced Fund may enter into dollar rolls, interest-
rate swaps and mortgage swaps or purchase or sell interest-rate caps, floors
or collars. The Global Balanced Fund may also invest in leveraged inverse
floating rate debt instruments. See the Statement of Additional Information
for further information concerning these investment techniques.
SPECIAL SITUATIONS. Each Fund may invest, subject to its particular invest-
ment limitations described above, up to 25% of its assets in "special situa-
tions" that the Adviser (or Sub-Advisers) believes present opportunities for
capital growth, or in the case of the Balanced Assets Fund, Global Balanced
Fund, and Growth and Income Fund, for total return. A "special situation" may
involve a merger, reorganization, or other unusual development that is ex-
pected to occur which, in the opinion of the Adviser (or Sub-Advisers), may
prompt an increase in the value of an issuer's securities regardless of gen-
eral business conditions or the movement of the market as a whole. A risk is
present that the price of the security may decline if the anticipated develop-
ment fails to occur.
FUTURE DEVELOPMENTS. Each Fund may invest in securities and other instru-
ments which do not presently exist but may be developed in the future, pro-
vided that each such investment is consistent with the Fund's investment ob-
jectives, policies and restrictions and is otherwise legally permissible under
federal and state laws. The Prospectus will be amended or supplemented as ap-
propriate to discuss any such new investments.
INVESTMENT RESTRICTIONS
Each Fund (other than the Global Balanced Fund) has adopted certain funda-
mental policies designed to maintain the diversity of its portfolio and reduce
investment risk. With respect to 75% of each such a Fund's total assets, the
Fund may not invest more than 5% of its assets in the securities of any one
issuer (other than obligations of the U.S. government, its agencies and in-
strumentalities) or purchase more than 10% of an issuer's voting securities or
more than 10% of any class of an issuer's outstanding securities. In addition,
none of the Funds may purchase securities (other than obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities) if as a
result of such purchase more than 25% of a Fund's total assets would be in-
vested in any one industry. See the Statement of Additional Information for
information concerning other fundamental policies.
The Global Balanced Fund is classified as non- diversified within the mean-
ing of the 1940 Act, which means that the Fund is not limited by such Act in
the proportion of its assets which may be invested in the securities of any
one issuer. However, the Fund's investments will be limited so as to qualify
as a "regulated investment company" for purposes of the Internal Revenue Code
of 1986, as amended (the "Code"). To qualify, among other requirements, the
Fund will limit its investments so that, at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of the market value of its total assets, not more than 5% of
the market value of its total assets will be invested in the securities of a
single issuer (other than obligations of the U.S. government,
19
<PAGE>
its agencies and instrumentalities), and the Fund will not own more than 10%
of the outstanding voting securities of a single issuer. To the extent that
the Fund assumes large positions in the securities of a small number of is-
suers, the Fund may be more susceptible to any single economic, political or
regulatory occurrence and to the financial conditions of the issuer in which
it invests.
MANAGEMENT OF THE TRUST
TRUSTEES. The Trustees of the Trust are responsible for the overall supervi-
sion of the operation of the Trust and each Fund and perform various duties
imposed on trustees of investment companies by the 1940 Act and by the Common-
wealth of Massachusetts.
THE ADVISER. The Adviser selects and/or manages the investments of each
Fund, provides various administrative services and supervises the Funds' daily
business affairs, subject to general review by the Trustees. The Adviser is an
indirect wholly owned subsidiary of SunAmerica Inc. ("SunAmerica"), an invest-
ment-grade financial services company which has total capital of approximately
$1.8 billion. SunAmerica's principal executive offices are located at 1
SunAmerica Center, Century City, Los Angeles, CA 90067-6022. In addition to
serving as adviser to the Funds, the Adviser and its affiliates serve as ad-
viser, manager and/or administrator for Anchor Pathway Fund, SunAmerica Income
Funds, SunAmerica Money Market Funds, Inc., Anchor Series Trust and SunAmerica
Series Trust. The Adviser and its affiliates managed, advised and/or adminis-
tered assets of approximately 7.6 billion as of December 31, 1996 for invest-
ment companies, individuals, pension accounts, and corporate and trust ac-
counts.
Pursuant to the Investment Advisory and Management Agreement entered into
between the Adviser and the Trust, on behalf of each Fund, each Fund (other
than the Global Balanced Fund) pays the Adviser a fee, payable monthly, com-
puted daily at the annual rate of .75% on the first $350 million of the Fund's
average daily net assets, .70% on the next $350 million of net assets and .65%
on net assets over $700 million for the services performed, on behalf of the
Fund and the facilities furnished by the Adviser. The Global Balanced Fund
pays the Adviser a fee, payable monthly, computed daily at the annual rate of
1.00% on the first $350 million of the Fund's average daily net assets, .90%
on the next $350 million of net assets and .85% on net assets over $700 mil-
lion. These advisory fee rates are higher than those paid by most other in-
vestment companies. For the fiscal year ended September 30, 1995, each Fund
paid the Adviser a fee equal to the following percentage of average daily net
assets: Balanced Assets Fund -- .75%; Blue Chip Growth Fund -- .75%; Global
Balanced Fund -- 1.00%; Growth and Income Fund -- .75%; Mid-Cap Growth
Fund -- .75% and Small Company Growth Fund -- .75%. For the fiscal year ended
September 30, 1995, the Adviser waived its fees with respect to the Global
Balanced Fund and Growth and Income Fund amounting to $115,214 and $32,455,
respectively.
THE SUB-ADVISERS. The Adviser has entered into sub-advisory agreements with
AIG Global and GSAM pursuant to which the Sub-Advisers provide the Global Bal-
anced Fund with investment advisory services, including the continuous review
and administration of the Fund's foreign equity (AIG Global) and global bond
(GSAM) investment programs. The Sub-Advisers discharge their responsibilities
subject to the direction and control of the Trustees and the oversight and re-
view of the Adviser.
AIG Global serves as sub-adviser for the foreign equity component of the
Global Balanced Fund. AIG Global's principal offices are located at 70 Pine
Street, New York, NY 10270. In providing sub-advisory services to the foreign
equity component of the Fund with respect to European, Japanese and Southeast
Asian securities and markets, AIG Global will utilize the services of certain
of its affiliates. Each of AIG Global and its affiliated companies providing
services on behalf of the foreign equity component of the Fund is an indirect
wholly owned subsidiary of American International Group, Inc. ("AIG"). AIG is
an international insurance organization whose member companies write insurance
in approximately 130 countries and jurisdictions and are engaged in a range of
financial services businesses. As of December 31, 1995, AIG Global Investment
Corp., and its foreign affiliates advised on approximately $60 billion of as-
sets, of which more than $10 billion represented assets of non-affiliated cli-
ents. The Adviser pays AIG Global a monthly fee with respect to those net as-
sets of the Global Balanced Fund actually managed by AIG Global and its affil-
iates (as described above), computed on average daily net assets at the fol-
lowing
20
<PAGE>
annual rates: .50% on the first $50 million of such assets, .40% of the next
$100 million of such assets, .30% on the next $150 million of such assets, and
.25% of such assets in excess of $300 million. For the fiscal year ended Sep-
tember 30, 1995, the Adviser paid to AIG Global a fee equal to .50% of the
Global Balanced Fund's average daily net assets. The foregoing fees are paid
from the management fee paid to the Adviser and do not increase Fund expenses.
GSAM serves as sub-adviser for the global bond component of the Global
Balanced Fund. GSAM, an affiliate of Goldman, Sachs & Co., a Delaware limited
partnership, is located at 140 Sleet Street, London EC 4A-B, England. GSAM
serves a wide range of clients including private and public pension funds,
endowments, foundations, banks, thrifts, insurance companies, corporations,
and private investors and family groups. GSAM was organized in 1990. As a
company with limited liability under the laws of England, it is authorized to
conduct investment advisory business in the United Kingdom as a member of
IMRO. The asset management services are divided into the following areas:
institutional fixed income investment management; global currency management;
institutional equity investment management; fund management; money market
mutual fund management and administration; and private asset management. In
performing its investment advisory services, GSAM, while remaining ultimately
responsible for management of the global bond component of the Global Balanced
Fund, is able to draw on the research and market expertise of its affiliate
offices, including Goldman Sachs (Asia) L.L.C., its Hong Kong affiliate, for
portfolio decisions and management. As of December 31, 1995, GSAM, together
with its affiliates, acted as investment adviser, administrator or distributor
for approximately $55.3 billion in assets. The Adviser pays GSAM a monthly fee
with respect to those net assets of the Global Balanced Fund actually managed
by GSAM, computed on average daily net assets, at the following annual rates:
.40% on the first $50 million of such assets, .30% on the next $100 million of
such assets, .25% on the next $100 million of such assets, and .20% of such
assets in excess of $250 million. For the fiscal year ended September 30,
1995, the Adviser paid to GSAM a fee equal to .40% of the Global Balanced
Fund's average daily net assets. The foregoing fees are paid from the
management fee paid to the Adviser and do not increase Fund expenses.
PORTFOLIO MANAGERS. There are eight portfolio managers of the Funds. The
following individuals are primarily responsible for the day-to-day management
of the particular Funds indicated:
Stanton J. Feeley has served as 1) portfolio manager of the Balanced Assets
Fund and Blue Chip Growth Fund since February 1992, 2) portfolio manager of
the domestic equity component of the Global Balanced Fund since the inception
date of June 15, 1994 and 3) portfolio manager of the Growth and Income Fund
since the inception date of July 1, 1994. Mr. Feeley is an Executive Vice
President of the Adviser and serves as the firm's Chief Investment Officer.
Mr. Feeley has 31 years experience in the investment industry, including expe-
rience in institutional sales management.
P. Christopher Leary has served as assistant portfolio manager of the
Balanced Assets Fund since June 1991. Mr. Leary is a Senior Vice President of
the Adviser and has been a portfolio manager with the firm since 1990.
Previously, Mr. Leary was an investment manager with Equitable Capital
Management.
Francis D. Gannon has served as assistant portfolio manager of the Balanced
Assets Fund since December 1995. Mr. Gannon is an Assistant Vice President of
the Adviser and has been an equity analyst with the firm since 1993.
Audrey L. Snell has served as portfolio manager of the Small Company Growth
Fund since November 1991 and portfolio manager of the Mid-Cap Growth Fund
since February 1993. Ms. Snell is a Vice President of the Adviser and has been
a portfolio manager with the firm since 1991.
Gerald P. Sullivan has served as assistant portfolio manager of the Growth
and Income Fund since December 1995. Mr. Sullivan has been an equity analyst
for the Adviser since February 1995. Prior to joining the Adviser, Mr.
Sullivan spent two years as a portfolio manager for Texas Commerce Investment
Management. Prior to his time at Texas Commerce, he spent four years as a
director for the Southmore Foundation, Inc. and as an adjunct professor at
Rice University in Houston, Texas.
Stephen Fitzgerald has served as the portfolio manager for the global bond
component of the Global Balanced Fund since the inception date of
21
<PAGE>
June 15, 1994. Mr. Fitzgerald is Vice President in GSAM's London office, and
joined GSAM in 1992. Prior to 1992, he spent two years managing multi-currency
fixed income and balanced portfolios at Invesco MIM Limited, where he was a
senior member of the derivative products group.
Andrew F. Wilson has served as co-portfolio manager for the global bond com-
ponent of the Global Balanced Fund since joining GSAM in December 1995. Mr.
Wilson is a Senior International Fixed Income Portfolio Manager in GSAM's Lon-
don office. Prior to joining GSAM, Mr. Wilson spent two years as an Assistant
Director of Rothschild Asset Management, where he was responsible for economic
and bond market forecasts for the U.S. and Canadian economies. Prior to his
time at Rothschild, he spent a year as a Trading Manager at the Reserve Bank
of New Zealand, where he oversaw the bank's four portfolio managers. Prior to
that, he spent two years as an Investment Manager in the Foreign Exchange Di-
vision at the Bank of England, on secondment from the Reserve Bank of New Zea-
land.
Peter G. Wignall has served as co-portfolio manager for the foreign equity
component of the Global Balanced Fund since the inception date of June 15,
1994. Mr. Wignall, Managing Director and Chief Executive of AIG Global Invest-
ment Corp. (Europe) Ltd., is responsible for asset allocation, strategy and
currency management. Previously, Mr. Wignall was a senior portfolio manager at
Citibank Investment Management in Australia and London.
THE DISTRIBUTOR. SunAmerica Capital Services, Inc. (the "Distributor"), an
indirect wholly owned subsidiary of SunAmerica, acts as distributor of the
shares of each Fund pursuant to the Distribution Agreement between the
Distributor and the Trust on behalf of each Fund. The Distributor receives all
initial and deferred sales charges in connection with the sale of Fund shares,
all or a portion of which it may reallow to other broker-dealers. The
Distributor and other broker-dealers pay commissions to salespersons, as well
as the cost of printing and mailing prospectuses to potential investors and of
any advertising expenses incurred by them in connection with their
distribution of Fund shares.
The Distributor, at its expense, may from time-to-time, provide additional
compensation to broker-dealers (including in some instances, exclusively to
Royal Alliance Associates, Inc., SunAmerica Securities, Inc. and/or Advantage
Capital Management Corporation, affiliates of the Distributor) in connection
with sales of shares of the Fund. Such compensation may include (i) full re-
allowance of the front-end sales charge on Class A shares; (ii) additional
compensation with respect to the sale of Class A or Class B shares; or (iii)
financial assistance to broker-dealers in connection with conferences, sales
or training programs for their employees, seminars for the public, advertising
campaigns regarding one or more of the Funds, and/or other broker-dealer spon-
sored special events. In some instances, this compensation will be made avail-
able only to certain broker-dealers whose representatives have sold a signifi-
cant amount of shares of the Fund. Compensation may also include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. In addition, the following types of non-cash compensation may be of-
fered through sales contests: (i) travel mileage on major air carriers; (ii)
tickets for entertainment events (such as concerts or sporting events); or
(iii) merchandise (such as clothing, trophies, clocks, pens or other elec-
tronic equipment). Broker-dealers may not use sales of the Funds' shares to
qualify for this compensation to the extent receipt of such compensation may
be prohibited by the laws of any state or any self-regulatory agency, such as,
for example, the National Association of Securities Dealers, Inc. Dealers who
receive bonuses or other incentives may be deemed to be underwriters under the
Securities Act of 1933.
Certain laws and regulations limit the ability of banks and other depository
institutions to underwrite and distribute securities. However, in the opinion
of the Adviser based upon the advice of counsel, these laws and regulations do
not prohibit such depository institutions from providing other services to in-
vestment companies of the type contemplated by the Distribution Plans (as de-
scribed below). The Trustees will consider appropriate modifications to the
operations of the Funds, including discontinuance of payments under the Dis-
tribution Plans to banks and other depository institutions, in the event such
institutions can no longer provide the services called for under their agree-
ments. Banks and other financial services firms may be subject to various
state laws regarding services described, and may be required to register as
dealers pursuant to state law.
22
<PAGE>
DISTRIBUTION PLANS. Rule 12b-1 under the 1940 Act 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 directors 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, the Distributor may receive payments from a Fund at
an annual rate of up to 0.10% of average daily net assets of such Fund's Class
A shares to compensate the Distributor and certain securities firms for pro-
viding sales and promotional activities for distributing that class of shares.
Under the Class B Plan, the Distributor may receive payments from a Fund at
the annual rate of up to 0.75% of the average daily net assets of such Fund's
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 wholesal-
ers. 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 distribu-
tion 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 of up to 0.25% of the aggregate average daily net assets of such
class of shares for payments to broker-dealers for providing continuing ac-
count maintenance. In this regard, some payments are used to compensate bro-
ker-dealers with account maintenance and service fees in an amount up to 0.25%
per year of the assets maintained in a Fund by their customers.
For the fiscal year ended September 30, 1995, under the Class A Plan, each
Fund paid the Distributor a fee equal to the following percentages of average
daily net assets: Balanced Assets Fund -- .35%; Blue Chip Growth Fund -- .35%;
Global Balanced Fund -- .35%; Mid-Cap Growth Fund -- .35% and Small Company
Growth Fund -- .35%. For the same period, under the Class B Plan, each Fund
paid the Distributor a fee equal to the following percentages of average daily
net assets: Balanced Assets Fund --1.00%; Blue Chip Growth Fund -- 1.00%;
Global Balanced Fund -- 1.00%; Mid-Cap Growth Fund --1.00% and Small Company
Growth Fund -- 1.00%. For the fiscal year ended September 30, 1995, the Growth
and Income Fund (Class A and Class B shares) paid the Distributor a fee equal
to .12% and .16%, respectively, of the Fund's average daily net assets, pursu-
ant to a voluntary fee waiver by the Distributor.
ADMINISTRATOR. The Trust has entered into a Service Agreement under the
terms of which SunAmerica Fund Services, Inc. ("SAFS"), an indirect wholly
owned subsidiary of SunAmerica, assists the Transfer Agent in providing
shareholder service and may receive reimbursement from the Trust of its costs
in providing such services through a fee approved annually by the Trustees.
PURCHASE OF SHARES
GENERAL. Shares of each of the Funds are sold at the respective net asset
value next calculated after receipt of a purchase order, plus a sales charge,
which, at the election of the investor, may be imposed either (i) at the time
of purchase (Class A shares), or (ii) on a deferred basis (Class B shares and
certain Class A shares).
The minimum initial investment in each Fund is $500 and the minimum subse-
quent investment is $100. However, for Individual Retirement Accounts
("IRAs"), Keogh Plan accounts and accounts for other qualified plans, the min-
imum initial investment is $250 and the minimum subsequent investment is $25.
The decision as to which class is most beneficial to an investor depends on
the amount and intended length of the investment. Investors making large in-
vestments, qualifying for a reduced initial sales charge, might consider Class
A shares because there is a lower distribution fee than Class B shares (prior
23
<PAGE>
to conversion). Investors making small investments might consider Class B
shares because 100% of the purchase price is invested immediately. Sharehold-
ers who purchase $1,000,000 or more of shares of the Funds should only pur-
chase Class A shares. Dealers may receive different levels of compensation de-
pending on which class of shares they sell.
Upon making an investment in shares of a Fund, an open account will be
established under which shares of the applicable Fund and additional shares
acquired through reinvestment of dividends and distributions will be held for
each shareholder's account by State Street Bank and Trust Company ("State
Street") and its affiliate, National Financial Data Services ("NFDS")
(collectively, the "Transfer Agent"). Shareholders will not be issued
certificates for their shares unless they specifically so request in writing.
Shareholders receive regular statements from the Transfer Agent that report
each transaction affecting their accounts. Further information may be obtained
by calling Shareholder/Dealer Services at (800) 858-8850.
CLASS A SHARES. Class A shares are offered at net asset value plus an
initial sales charge, which varies with the size of the purchase as follows:
<TABLE>
<CAPTION>
CONCESSION
SALES CHARGE TO DEALERS
----------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
SIZE OF PURCHASE PRICE INVESTED PRICE
---------------- -------- -------- ----------
<S> <C> <C> <C>
Less than $50,000.................................. 5.75% 6.10% 5.00%
$50,000 but less than $100,000..................... 4.75% 4.99% 4.00%
$100,000 but less than $250,000.................... 3.75% 3.90% 3.00%
$250,000 but less than $500,000.................... 3.00% 3.09% 2.25%
$500,000 but less than $1,000,000.................. 2.10% 2.15% 1.35%
$1,000,000 or more................................. None None see below
</TABLE>
No sales charge is payable at the time of purchase on investments of $1 mil-
lion or more. Nevertheless, the Distributor will pay a commission to any
dealer who initiates or is responsible for such an investment, in the amount
of 1.00% of the amount invested. Redemptions of such shares within the twelve
months following their purchase will be subject to a contingent deferred sales
charge at the rate of 1.00% of the lesser of the net asset value of the shares
being redeemed (exclusive of reinvested dividends and distributions) or the
total cost of such shares. This contingent deferred sales charge is paid to
the Distributor. Redemptions of such shares held longer than twelve months
would not be subject to a contingent deferred sales charge. However, one-half
of the commission paid with respect to such a purchase is subject to forfei-
ture by the dealer in the event the redemption occurs during the second year
from the date of purchase. In determining whether a deferred sales charge is
payable, it is assumed that shares purchased with reinvested dividends and
distributions and then other shares held the longest are redeemed first.
To the extent that sales are made for personal investment purposes, the
sales charge is waived as to Class A shares purchased by current or retired
officers, directors, and other full-time employees of SunAmerica and its
affiliates, as well as members of the selling group and family members of the
foregoing. In addition, the sales charge is waived with respect to shares
purchased by "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners adhering to certain standards
established by the Distributor. Shares purchased under this waiver are subject
to certain limitations described in the Statement of Additional Information.
Complete details concerning how an investor may purchase shares at reduced
sales charges may be obtained by contacting Shareholder/Dealer Services at
(800) 858-8850.
There are certain special purchase plans for Class A shares which can reduce
the amount of the initial sales charge to investors in the Funds. For more in-
formation about "Rights of Accumulation," the "Letter of Intent," "Combined
Purchase Privilege," "Reduced Sales Charges for Group Purchases" and the "Net
Asset Value Transfer Program," see the Statement of Additional Information.
CLASS B SHARES. Class B shares are offered at net asset value. Certain
redemptions of Class B shares within the first six years of the date of
purchase are subject to a CDSC. The charge is assessed on an amount equal to
the lesser of the then-current market value or the purchase price of the
shares being redeemed. No charge is assessed on shares derived from
reinvestment of dividends or capital gains distributions. In determining
whether the CDSC is applicable to a redemption, the calculation is determined
in the manner that results in the lowest possible rate being charged.
Therefore, it is assumed that the redemption is first of any Class A shares,
second of any shares in the shareholder's Fund
24
<PAGE>
account that are not subject to a CDSC (i.e., shares representing reinvested
dividends and distributions), third of shares held for more than six years and
fourth of shares held the longest during the six-year period. The CDSC will
not be applied to dollar amounts representing an increase in the net asset
value of the shares being redeemed since the time of purchase of such redeemed
shares. The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of Fund shares until the time
of redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month are aggregated and deemed to have been made on the first day of
the month. The following table sets forth the rates of the CDSC.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLARS INVESTED OR
PAYMENT WAS MADE REDEMPTION PROCEEDS
- ------------------- -------------------------
<S> <C>
First................................................. 4%
Second................................................ 4%
Third................................................. 3%
Fourth................................................ 3%
Fifth................................................. 2%
Sixth................................................. 1%
Seventh and thereafter................................ 0%
</TABLE>
The CDSC will be waived in connection with redemptions which are (a) re-
quested within one year of the death or the initial determination of disabil-
ity of a shareholder; (b) taxable distributions or loans to participants made
by qualified retirement plans or retirement accounts (not including rollovers)
for which the Adviser serves as fiduciary (e.g., prepares all necessary tax
reporting documents); provided that, in the case of a taxable distribution,
the plan participant or accountholder has attained the age of 59 1/2 at the
time the redemption is made; (c) made pursuant to a Systematic Withdrawal
Plan, up to a maximum amount of 12% per year from a shareholder account based
on the value of the account at the time the Plan is established, provided,
however, that all dividends and capital gains distributions are reinvested in
Fund shares; and (d) made of shares in accounts consisting of assets which
were originally individually managed by the Adviser and had paid an investment
advisory fee to the Adviser. See the Statement of Additional Information for
further information concerning conditions with respect to (a) above. For Fed-
eral income tax purposes, the amount of the CDSC will reduce the amount real-
ized on the redemption of shares, concomitantly reducing gain or increasing
loss. For information on the imposition and waiver of the CDSC contact
Shareholder/Dealer Services at (800) 858-8850.
Shareholders of a Fund that acquired their Class B shares pursuant to a
reorganization effected with another SunAmerica mutual fund will remain
subject to the terms of the CDSC in effect for the previous fund at the time
of such reorganization. For additional information, see "Additional
Information Regarding Purchase of Shares" in the Statement of Additional
Information.
Conversion Feature. Class B shares (including a pro-rata portion of the
Class B shares purchased through the reinvestment of dividends and distribu-
tions) will convert automatically to Class A shares on the first business day
of the month following the seventh anniversary of the issuance of such Class B
shares. Subsequent to the conversion of a Class B share to a Class A share,
such share will no longer be subject to the higher distribution fee of Class B
shares. Such conversion will be on the basis of the relative net asset values
of Class B shares and Class A shares, without the imposition of any sales
load, fee or charge.
ADDITIONAL PURCHASE INFORMATION. All purchases are confirmed to each share-
holder. The Trust reserves the right to reject any purchase order and may at
any time discontinue the sale of any class of shares of any Fund. Share cer-
tificates are issued upon written request, but no certificate is issued for
fractional shares.
Shares of the Funds may be purchased through the Distributor or SAFS, by
check or federal funds wire and through a dollar cost averaging program.
Shares will be priced at the net asset value next determined after the order
is placed with the Distributor or SAFS. See "Additional Information Regarding
Purchase of Shares" in the Statement of Additional Information for more
information regarding these services and the procedures involved and when
orders are deemed to be placed.
Investors may purchase Class A shares of a Fund at net asset value to the
extent that the investment represents the proceeds from a redemption of shares
of a non-SunAmerica mutual fund in which the investor either (a) paid a front-
end sales load or (b)
25
<PAGE>
was subject to or paid a CDSC on the redemption proceeds. See " Net Asset
Value Transfer Program" in the Statement of Additional Information for more
details regarding this privilege.
REDEMPTION OF SHARES
Shares of any Fund may be redeemed at any time at their net asset value next
determined, less any applicable contingent deferred sales charge, after
receipt by the Fund of a redemption request in proper form. Any capital gain
or loss realized by a shareholder upon any redemption of shares must be
recognized for federal income tax purposes. See "Dividends, Distributions and
Taxes."
REGULAR REDEMPTION. Shareholders may redeem their shares by sending a writ-
ten request to SAFS, Mutual Fund Operations, The SunAmerica Center, 733 Third
Avenue, New York, NY 10017-3204. All written requests for redemption must be
endorsed by the shareholder(s) with signature(s) guaranteed by an "eligible
guarantor institution" which includes: banks, brokers, dealers, credit unions,
securities and exchange associations, clearing agencies and savings associa-
tions. Guarantees must be signed by an authorized signatory of the eligible
guarantor and the words "Signature Guaranteed" must appear with the signature.
Signature guarantees by notaries will not be accepted. SAFS may request fur-
ther documentation from corporations, executors, administrators, trustees or
guardians.
REPURCHASE THROUGH DISTRIBUTOR. The Distributor is authorized, as agent for
the Funds, to offer to repurchase shares which are presented by telephone to
the Distributor by investment dealers. Orders received by dealers must be at
least $500. The repurchase price is the net asset value per share of the ap-
plicable class of shares of a Fund next determined after the repurchase order
is received, less any applicable contingent deferred sales charge. Repurchase
orders received by the Distributor after 4:00 P.M., Eastern time, will be
priced based on the next business day's close. Dealers may charge for their
services in connection with the repurchase, but neither the Funds nor the Dis-
tributor imposes any charge. The offer to repurchase may be suspended at any
time, as described below.
TELEPHONE REDEMPTION. The Trust accepts telephone requests for redemption of
shares with a value of less than $100,000. The proceeds of a telephone
redemption may be sent by wire to the shareholder's bank account as set forth
in the New Account Application Form or in a subsequent written authorization.
Shareholders utilizing the redemption through the electronic funds transfer
method will incur a $15.00 transaction fee. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Failure to do so may result in liability to the Trust for losses incurred due
to unauthorized or fraudulent telephone instructions. Such procedures include,
but are not limited to, requiring some form of personal identification prior
to acting upon instructions received by telephone and/or tape recording of
telephone instructions.
A shareholder making a telephone redemption should call Shareholder/Dealer
Services at (800) 858-8850, and state (i) the name of the shareholder(s)
appearing on the Fund's records, (ii) his or her account number with the Fund,
(iii) the amount to be redeemed and (iv) the name of the person(s) requesting
the redemption. The Trust reserves the right to terminate or modify the
telephone redemption service at any time.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who have invested at least $5,000
in any of the Funds may provide for the periodic payment from the account pur-
suant to the Systematic Withdrawal Plan. At the shareholder's election, such
payment may be made directly to the shareholder or to a third party on a
monthly, quarterly, semi-annual or annual basis. The minimum periodic payment
is $50. Maintenance of a withdrawal plan concurrently with purchases of addi-
tional shares may be disadvantageous to a shareholder because of the sales
charge applicable to such purchases. Shareholders who have been issued share
certificates will not be eligible to participate in the Systematic Withdrawal
Plan and will have to comply with certain additional procedures in order to
redeem shares. Further information may be obtained by calling
Shareholder/Dealer Services at (800) 858-8850.
GENERAL. Normally payment is made on the next business day for shares
redeemed, but in any event, payment is made by check within seven days after
receipt by the Transfer Agent of share certificates or of a redemption
request, or both, in proper form. Under unusual circumstances, the Funds may
suspend repurchases or postpone
26
<PAGE>
payment for up to seven days or longer, as permitted by the federal securities
laws.
At various times, a Fund may be requested to redeem shares for which it has
not yet received good payment. A Fund may delay or cause to be delayed the
mailing of a redemption check until such time as good payment (e.g., cash or
certified check drawn on a United States bank) has been collected for the pur-
chase of such shares, which will not exceed 15 days.
Because of the high cost of maintaining smaller shareholder accounts, the
Funds may redeem, on at least 60 days' written notice and without shareholder
consent, any account that, due to a shareholder redemption and not to market
fluctuation of the account's value, has a net asset value of less than $500
($250 for retirement plan accounts), as of the close of business on the day
preceding such notice, unless such shareholder increases the account balance
to at least $500 during such 60-day period. In the alternative, the applicable
Fund may impose a $2.00 monthly charge on accounts below the minimum account
size.
If a shareholder redeems shares of any class of a Fund and then within one
year from the date of redemption decides the shares should not have been re-
deemed, the shareholder may use all or any part of the redemption proceeds to
reinstate, free of sales charges (Class A shares) and with the crediting of
any CDSC paid with respect to such reinstated shares at the time of redemption
(Class B shares), all or any part of the redemption proceeds in shares of the
Fund at the then-current net asset value. Reinstatement may affect the tax
status of the prior redemption.
EXCHANGE PRIVILEGE
GENERAL. Shareholders in any of the Funds may exchange their shares for the
same class of shares of any other Fund or other funds in the SunAmerica Family
of Mutual Funds that offer such class at the respective net asset value per
share. Before making an exchange, a shareholder should obtain and review the
prospectus of the fund whose shares are being acquired. All exchanges are sub-
ject to applicable minimum initial investment requirements and can only be ef-
fected if the shares to be acquired are qualified for sale in the state in
which the shareholder resides. Exchanges of shares generally will constitute a
taxable transaction except for IRAs, Keogh Plans and other qualified or tax-
exempt accounts. The exchange privilege may be terminated or modified upon 60
days' written notice. Further information about the exchange privilege may be
obtained by calling Shareholder/Dealer Services at (800) 858-8850.
If a shareholder acquires Class A shares through an exchange from another
fund in the SunAmerica Family of Mutual Funds where the original purchase of
such fund's Class A shares was not subject to an initial sales charge because
the purchase was in excess of $1 million, such shareholder will remain subject
to the 1% CDSC, if any, applicable to such redemptions. In such event, the pe-
riod for which the original shares were held prior to the exchange will be
"tacked" with the holding period of the shares acquired in the exchange for
purposes of determining whether the 1% CDSC is applicable upon a redemption of
any of such shares.
A shareholder who acquires Class B shares through an exchange from another
fund in the SunAmerica Family of Mutual Funds will retain liability for any
deferred sales charge which is outstanding on the date of the exchange. In
such event, the period for which the original shares were held prior to the
exchange will be "tacked" with the holding period of the shares acquired in
the exchange for purposes of determining what, if any, CDSC is applicable upon
a redemption of any of such shares.
RESTRICTIONS ON EXCHANGES. Because excessive trading (including short-term
"market timing" trading) can hurt a Fund's performance, each Fund may refuse
any exchange sell order (1) if it appears to be a market timing transaction
involving a significant portion of a Fund's assets or (2) from any shareholder
account if previous use of the exchange privilege is considered excessive. Ac-
counts under common ownership or control, including, but not limited to, those
with the same taxpayer identification number and those administered so as to
redeem or purchase shares based upon certain predetermined market indications,
will be considered one account for this purpose.
In addition, a Fund reserves the right to refuse any exchange purchase order
if, in the judgment of the Adviser, the Fund would be unable to invest effec-
tively in accordance with its investment objective and policies, or would oth-
erwise potentially be adversely affected. A shareholder's purchase exchange
27
<PAGE>
may be restricted or refused if the Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In particular, a
pattern of exchanges that coincide with a "market timing" strategy may be dis-
ruptive to the Fund and may therefore be refused.
Finally, as indicated under "Purchase of Shares", the Fund and Distributor
reserve the right to refuse any order for the purchase of shares.
PORTFOLIO TRANSACTIONS, BROKERAGE AND TURNOVER
The Adviser is responsible for decisions to buy and sell securities for the
Funds, selection of broker-dealers and negotiations of commission rates. With
respect to the Global Balanced Fund, AIG Global and GSAM are responsible for
decisions to buy and sell foreign equity and global fixed income securities,
respectively, selection of broker-dealers and negotiation of commission rates
for their respective component of the portfolio. In the over-the-counter mar-
ket, securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission (although the
price of the security usually includes a profit to the dealer). In underwrit-
ten offerings, securities are purchased at a fixed price which includes an un-
derwriter's concession or discount. On occasion, certain money market securi-
ties may be purchased directly from an issuer, in which case no commissions or
discounts are paid.
As a general matter, the Adviser (or Sub-Advisers) selects broker-dealers
which, in its best judgment, provide prompt and reliable execution at favora-
ble security prices and reasonable commission rates. The Adviser (or Sub-Ad-
viser) may select broker-dealers which provide it with research services and
may cause a Fund to pay such broker-dealers commissions which exceed those
which other broker-dealers may have charged, if in the Adviser's (or Sub-Ad-
viser's) view the commissions are reasonable in relation to the value of the
brokerage and/or research services provided by the broker-dealer. Brokerage
arrangements may take into account the distribution of Fund shares by broker-
dealers, subject to best price and execution. The Adviser, AIG Global and GSAM
may effect portfolio transactions through an affiliated broker-dealer, acting
as agent and not as principal, in accordance with Rule 17e-1 under the 1940
Act and other applicable securities laws.
Each Fund has no limitation regarding its policy with respect to portfolio
turnover. The portfolio turnover rate is calculated by dividing the lesser of
sales or purchases of portfolio securities, excluding short-term securities,
by the average monthly value of the Fund's long-term portfolio securities.
High portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs which will be borne directly by the Fund. In addi-
tion, high portfolio turnover may result in increased short-term capital
gains, which, when distributed to shareholders, are treated as ordinary in-
come.
DETERMINATION OF NET ASSET VALUE
Each Fund calculates the net asset value of each class of its shares
separately by dividing the total value of each class's net assets by the
shares of each class outstanding. Shares are valued each day as of the close
of regular trading on the NYSE (currently, 4:00 P.M., Eastern time).
Investments for which market quotations are readily available are valued at
market. All other securities and assets are valued at fair value following
procedures approved by the Trustees.
PERFORMANCE DATA
Each Fund may advertise performance data that reflect its total investment
return. A brief summary of the computations is provided below and a detailed
discussion is in the Statement of Additional Information. Both total return
and yield figures are based on historical earnings and are not intended to in-
dicate future performance.
Total return performance data may be advertised by each Fund. The average
annual total return may be calculated for one-, five- and ten-year periods or
for the lesser period since inception. These performance data represent the
average annual percentage changes of a hypothetical $1,000 investment and as-
sumes the reinvestment of all dividends and distributions and includes sales
charges and recurring fees that are charged to shareholder accounts. A Fund's
advertisements may also reflect total return performance data calculated by
means of cumulative, aggregate, aver-
28
<PAGE>
age, year-to-date, or other total return figures. Further, the Fund may adver-
tise total return performance for periods of time in addition to those noted
above.
Yield will be calculated based on a 30-day (or one-month) period ended on
the date of the applicable Fund's most recent balance sheet and for other such
periods, as deemed appropriate. The net investment income per share earned
during the period will be divided by the maximum offering price per share on
the last day of the period and annualized to obtain the yield. For purposes of
calculating yields, net income is determined by a standard formula prescribed
by the Securities and Exchange Commission to facilitate comparison with yields
quoted by other mutual funds.
Although expenses for Class B shares may be higher than those for Class A
shares, the performance of Class B shares may be higher than the performance
of Class A shares after giving effect to the impact of the sales charges and
12b-1 fees applicable to each class of shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income are paid
annually for the Global Balanced Fund; semi-annually for the Blue Chip Growth
Fund, Mid-Cap Growth Fund and Small Company Growth Fund; and quarterly for the
Balanced Assets Fund and Growth and Income Fund. Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January which were declared in the previous calendar quarter will be
treated as paid in December of the previous year. Dividends and distributions
are paid in additional shares based on the next determined net asset value,
unless the shareholder elects in writing, not less than five business days
prior to the payment date, to receive such amounts in cash.
In addition to having the dividends and distributions of a Fund reinvested
in shares of such Fund, a shareholder may, if he or she so elects on the New
Account Application Form, have dividends and distributions invested in the
same class of shares of any other SunAmerica Mutual Fund at the then-current
net asset value of such Fund(s).
The excess of net realized long-term capital gains over net capital losses
("capital gain distributions"), if any, will be distributed to the
shareholders annually. Each Fund's policy is to offset any prior year capital
loss carry forward against any realized capital gains, and accordingly, no
distribution of capital gains will be made until gains have been realized in
excess of any such loss carry forward.
TAXES. Each Fund is qualified and intends to continue to qualify and elect
to be taxed as a regulated investment company under the Code. While so
qualified, the Trust and each of the Funds will not be subject to U.S. Federal
income tax on the portion of its investment company taxable income and net
capital gains distributed to its shareholders.
For Federal income tax purposes, dividends of net investment income and
distributions of any net realized short-term capital gain, whether paid in
cash or reinvested in shares of the Fund, are taxable to shareholders as
ordinary income. To the extent a Fund's income is derived from certain
dividends received from domestic corporations, a portion of the dividends paid
to corporate shareholders of such Fund will be eligible for the 70% dividends
received deduction.
Income and capital gains received by the Global Balanced Fund may give rise
to withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes.
Shareholders may be able to claim U.S. foreign tax credits with respect to
such taxes, subject to certain provisions and limitations contained in the
Code. If more than 50% in value of the Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible, and intends, to file an election with the Internal Revenue Service
when beneficial to shareholder pursuant to which shareholders of the Fund will
be required to include their proportionate share of such withholding taxes in
their U.S. income tax returns as gross income, treat such proportionate share
as taxes paid by them, and deduct such proportionate share in computing their
taxable incomes or, alternatively, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by non-corporate shareholders who do not itemize deductions. Of
course, certain retirement accounts which are not subject to tax cannot claim
foreign tax credits on in
29
<PAGE>
vestments in foreign securities held in the Fund. A shareholder that is a non-
resident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such sharehold-
er. The Fund will report annually to its shareholders the amount per share of
such withholding taxes.
Under Code Section 988, foreign currency gains or losses from certain for-
ward contracts, from futures contracts that are not "regulated futures con-
tracts" and from unlisted non-equity options will generally be treated as or-
dinary income or loss. Such Code Section 988 gains or losses will generally
increase or decrease the amount of a fund's investment company taxable income
available to be distributed to shareholders as ordinary income, rather than
increasing or decreasing the amount of the Fund's net capital gain. Addition-
ally, if Code Section 988 losses exceed other investment company taxable in-
come during a taxable year, a Fund would not be able to make any ordinary div-
idend distributions, and any distributions made in the same taxable year may
be recharacterized as a return of capital to shareholders, thereby reducing
the basis of each shareholder's fund shares. In certain cases, a Fund may be
entitled to elect to treat foreign currency gains on forward or futures con-
tracts, or options thereon, as capital gains.
The Global Balanced Fund and Growth and Income Fund may purchase debt
securities (such as zero-coupon or pay-in-kind securities) that contain
original issue discount. Original issue discount that accrues in a taxable
year is treated as earned by a Fund and therefore is subject to the
distribution requirements of the Code. Because the original issue discount
earned by the Fund in a taxable year may not be represented by cash income,
the Fund may have to dispose of other securities and use the proceeds to make
distributions to shareholders.
Statements as to the tax status of distributions to shareholders of the
Funds will be mailed annually. Shareholders are urged to consult their own tax
advisors regarding specific questions as to federal, state or local taxes.
Foreign shareholders are also urged to consult their own tax advisors
regarding the foreign tax consequences of ownership of interests in a Fund.
See "Dividends, Distributions and Taxes" in the Statement of Additional
Information.
GENERAL INFORMATION
REPORTS TO SHAREHOLDERS. The Trust sends to its shareholders audited annual
and unaudited semi-annual reports for the Fund. The financial statements ap-
pearing in annual reports are audited by independent accountants. In addition,
the Transfer Agent sends to each shareholder having an account directly with
the Trust a statement confirming transactions in the account.
ORGANIZATION. The Trust, a business trust organized under the laws of the
Commonwealth of Massachusetts on June 18, 1986, is an open-end diversified
management investment company, commonly referred to as a mutual fund. The
Trust consists of six investment series or funds: the Balanced Assets Fund,
the Global Balanced Fund, the Blue Chip Growth Fund, the Mid-Cap Growth Fund,
the Small Company Growth Fund, and the Growth and Income Fund. The Trustees
have the authority to issue an unlimited number of shares of beneficial inter-
est of separate series, par value $.01 per share, of the Trust, and to divide
each such series into one or more classes of shares.
The Trust does not hold annual shareholder meetings. The Trustees are re-
quired to call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee when so requested in writing by the share-
holders of record holding at least 10% of the Trust's outstanding shares. Each
share of each Fund has equal voting rights on each matter pertaining to that
Fund or matters to be voted upon by the Trust, except as noted above. Each
share of each Fund is entitled to participate equally with the other shares of
that Fund in dividends and other distributions and the proceeds of any liqui-
dation, except that, due to the differing expenses borne by the two classes,
such dividends and proceeds are likely to be lower for Class B shares than for
Class A shares. See the Statement of Additional Information for more informa-
tion with respect to the distinctions among classes.
Under Massachusetts law, shareholders of a trust, such as the Trust, in cer-
tain circumstances may be held personally liable as partners for the obliga-
tions of the trust. However the Declaration of Trust,
30
<PAGE>
pursuant to which the Trust was organized, contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. The Declaration of
Trust also provides for indemnification out of the Trust's property for any
shareholder held personally liable for any Trust obligation. Thus the risk of
a shareholder being personally liable, as a partner for obliga-
tions of the Trust, is limited to the unlikely circumstance in which the Trust
itself would be unable to meet its obligations.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL. Price Waterhouse LLP has been
selected as independent accountants for the Funds. The firm of Shereff,
Friedman, Hoffman & Goodman, LLP has been selected as legal counsel for the
Funds.
SHAREHOLDER INQUIRIES. All inquiries regarding the Trust should be directed
to the Trust at the telephone number or address on the cover page of this Pro-
spectus. For questions concerning share ownership, dividends, transfer of own-
ership or share redemption, contact SAFS, Mutual Fund Operations, The
SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204, or call
Shareholder/Dealer Services at (800) 858-8850.
31
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE STATEMENT OF ADDI-
TIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESEN-
TATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE AD-
VISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION OF AN OFFER TO
BUY MAY NOT LAWFULLY BE MADE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus................................................................ Cover
Summary of Fund Expenses.................................................. 2
Financial Highlights...................................................... 4
Investment Objectives and Policies........................................ 7
Balanced Assets Fund...................................................... 7
Global Balanced Fund...................................................... 8
Blue Chip Growth Fund..................................................... 11
Mid-Cap Growth Fund....................................................... 11
Small Company Growth Fund................................................. 11
Growth and Income Fund.................................................... 11
Investment Techniques..................................................... 13
Risk Factors.............................................................. 13
Investment Restrictions................................................... 19
Management of the Trust................................................... 20
Purchase of Shares........................................................ 23
Redemption of Shares...................................................... 26
Exchange Privilege........................................................ 27
Portfolio Transactions, Brokerage and Turnover............................ 28
Determination of Net Asset Value.......................................... 28
Performance Data.......................................................... 28
Dividends, Distributions and Taxes........................................ 29
General Information....................................................... 30
</TABLE>
Investment Adviser:
SUNAMERICA ASSET MANAGEMENT CORP.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Sub-Advisers:
(Global Balanced Fund)
AIG GLOBAL INVESTMENT CORP.
70 Pine Street
New York, NY 10270
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
140 Sleet Street
London EC4A-B, England
Distributor:
SUNAMERICA CAPITAL SERVICES, INC.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Custodian and Transfer Agent:
STATE STREET BANK AND TRUST COMPANY
1776 Heritage Drive
North Quincy, MA 02171
Servicing Agent:
SUNAMERICA FUND SERVICES, INC.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
EFPRO
SUNAMERICA EQUITY FUNDS
SUNAMERICA BALANCED ASSETS FUND
SUNAMERICA GLOBAL BALANCED FUND
SUNAMERICA BLUE CHIP GROWTH FUND
SUNAMERICA MID-CAP GROWTH FUND
SUNAMERICA SMALL COMPANY GROWTH FUND
SUNAMERICA GROWTH AND INCOME FUND
PROSPECTUS
JANUARY 12, 1996
LOGO
<PAGE>
SUNAMERICA EQUITY FUNDS
Statement of Additional Information
dated January 12, 1996
The SunAmerica Center General Marketing and
733 Third Avenue Shareholder Information
New York, NY 10017-3204 (800) 858-8850
SunAmerica Equity Funds is a mutual fund consisting of six different
investment funds: SunAmerica Balanced Assets Fund, SunAmerica Global Balanced
Fund, SunAmerica Blue Chip Growth Fund, SunAmerica Mid-Cap Growth Fund,
SunAmerica Small Company Growth Fund and SunAmerica Growth and Income Fund. Each
Fund has distinct investment objectives and strategies.
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Funds' Prospectus dated January 12, 1996. To obtain
a Prospectus, please call the Fund at (800) 858-8850. Capitalized terms used
herein but not defined have the meanings assigned to them in the Prospectus.
TABLE OF CONTENTS
Page
----
History of the Funds . . . . . . . . . . . . . . . . . . . . .B-2
Investment Objectives and Policies . . . . . . . . . . . . . .B-3
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . B-33
Investment Restrictions. . . . . . . . . . . . . . . . . . . B-34
Trustees and Officers. . . . . . . . . . . . . . . . . . . . B-37
Adviser, Sub-Advisers, Personal Trading, Distributor and
Administrator. . . . . . . . . . . . . . . . . . . . . . . B-40
Portfolio Transactions and Brokerage . . . . . . . . . . . . B-49
Additional Information Regarding Purchase of Shares. . . . . B-52
Additional Information Regarding Redemption of Shares. . . . B-60
Determination of Net Asset Value . . . . . . . . . . . . . . B-61
Performance Data . . . . . . . . . . . . . . . . . . . . . . B-62
Dividends, Distributions and Taxes . . . . . . . . . . . . . B-67
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . B-72
Description of Shares. . . . . . . . . . . . . . . . . . . . B-73
Additional Information . . . . . . . . . . . . . . . . . . . B-75
Financial Statements . . . . . . . . . . . . . . . . . . . . B-75
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . B-76
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Statement of Additional Information or in the Prospectus, and, if given or made,
such other information or representations must not be relied upon as having been
authorized by the Fund, the Adviser, Sub-Advisers or the Distributor. This
Statement of Additional Information and the Prospectus do not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction in which such an offer to sell or solicitation of an
offer to buy may not lawfully be made.
<PAGE>
This Statement of Additional Information relates to the six different
investment funds (each, a "Fund," and collectively, the "Funds") of SunAmerica
Equity Funds, a Massachusetts business trust (the "Trust"), which is registered
as an open-end investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The six Funds are: SunAmerica Balanced Assets Fund
("Balanced Assets Fund"), SunAmerica Global Balanced Fund ("Global Balanced
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").
HISTORY OF THE FUNDS
The Trust was organized under the name "Integrated Equity Portfolios" in
1986 and subsequently renamed "SunAmerica Equity Portfolios" in 1990. On
September 24, 1993, the Trust reorganized with certain funds in the SunAmerica
Family of Mutual Funds (the "Reorganization") and was renamed "SunAmerica Equity
Funds". In the Reorganization, all outstanding shares of the two then-existing
series of the Trust, the Growth Portfolio ("Growth Portfolio") and the
Aggressive Growth Portfolio ("Aggressive Growth Portfolio"), were redesignated
Class A shares and renamed the SunAmerica Growth Fund ("Growth Fund") and the
SunAmerica Emerging Growth Fund ("Emerging Growth Fund"), respectively. In
addition, the SunAmerica Emerging Growth Fund series of SunAmerica Fund Group
("Old Emerging Growth") reorganized with, and its shareholders received Class B
shares of, the Emerging Growth Fund. With regard to the Balanced Assets Fund
series of the Trust, the Total Return Fund series of SunAmerica Multi-Asset
Portfolios, Inc. ("Total Return") and the SunAmerica Balanced Assets Fund series
of SunAmerica Fund Group ("Old Balanced Assets") reorganized with, and their
shareholders received Class A and Class B shares of the Balanced Assets Fund,
respectively. The SunAmerica Capital Appreciation Fund, Inc. ("Capital
Appreciation") was reorganized with, and its shareholders received Class B
shares of, the SunAmerica Value Fund ("Value Fund"). The Reorganization was
approved by the shareholders of the Funds or their predecessors who were
entitled to vote with respect thereto on September 23, 1993. On March 16, 1994,
the Board of Trustees of the Trust (the "Trustees") approved changing the names
of the Value Fund, Growth Fund and Emerging Growth Fund to the Blue Chip Growth
Fund, Mid-Cap Growth Fund and Small Company Growth Fund, respectively, and such
name changes became effective on June 7, 1994.
On December 21, 1993, the Trustees approved the creation of the Global
Balanced Fund and on March 16, 1994, the Trustees approved the creation of the
Growth and Income Fund.
B-2
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each of the Funds are described
in the Funds' Prospectus. Certain types of securities in which the Funds may
invest and certain investment practices which the Funds may employ, which are
described under "Other Investment Practices and Restrictions" in the Prospectus
and in the Appendix to the Prospectus, are discussed more fully below.
Illiquid Securities. Each Fund may invest up to 10% of its net assets,
determined as of the date of purchase, in illiquid securities including
repurchase agreements and time deposits which have a maturity of longer than
seven days or in other securities that are illiquid by virtue of the absence of
a readily available market or legal or contractual restrictions on resale.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period. Securities
which have not been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them,
resulting in additional expense and delay. There will generally be a lapse of
time between a mutual fund's decision to sell an unregistered security and the
registration of such security promoting sale. Adverse market conditions could
impede a public offering of such securities. When purchasing unregistered
securities, each of the Funds will seek to obtain the right of registration at
the expense of the issuer.
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the
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general public or to certain institutions may not be indicative of the liquidity
of such investments.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act for which there is a readily available market will not be deemed
to be illiquid. The Adviser (or Sub-Adviser) will monitor the liquidity of such
restricted securities subject to the supervision of the Trustees. In reaching
liquidity decisions the Adviser (or Sub-Adviser) will consider, inter alia,
pursuant to guidelines and procedures established by the Trustees, the following
factors: (1) the frequency of trades and quotes for the security; (2) the number
of dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
Commercial paper issues in which the Funds may invest include securities
issued by major corporations without registration under the Securities Act in
reliance on the exemption from such registration afforded by Section 3(a)(3)
thereof, and commercial paper issued in reliance on the so-called private
placement exemption from registration which is afforded by Section 4(2) of the
Securities Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws in that any resale must similarly
be made in an exempt transaction. Section 4(2) paper is normally resold to other
institutional investors through or with the assistance of investment dealers who
make a market in Section 4(2) paper, thus providing liquidity. Section 4(2)
paper that is issued by a company that files reports under the Securities
Exchange Act of 1934 is generally eligible to be sold in reliance on the safe
harbor of Rule 144A described above. A Fund's 10% limitation on investments in
illiquid securities includes Section 4(2) paper other than Section 4(2) paper
that the Adviser (or Sub-Adviser) has determined to be liquid pursuant to
guidelines established by the Trustees. The Trustees delegated to the Adviser
(or Sub-Adviser) the function of making day-to-day determinations of liquidity
with respect to Section 4(2) paper, pursuant to guidelines approved by the
Trustees that require the Adviser (or Sub-Adviser) to take into account the same
factors described above for other restricted securities and require the Adviser
(or Sub-Adviser) to perform the same monitoring and reporting functions.
The staff of the Securities and Exchange Commission (the "SEC") has taken
the position that purchased over-the-counter ("OTC") options and the assets used
as "cover" for written OTC options are illiquid. The assets used as cover for
OTC options written by a Fund will be considered illiquid unless the OTC options
are sold to qualified dealers who agree that the Fund may
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repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure will be considered illiquid only to the extent that
the maximum repurchase price under the option formula exceeds the intrinsic
value of the option.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
banks, brokers or securities dealers. In such agreements, the seller agrees to
repurchase a security from a Fund at a mutually agreed-upon time and price. The
period of maturity is usually quite short, either overnight or a few days
although it may extend over a number of months. The resale price is in excess of
the purchase price, reflecting an agreed-upon rate of return effective for the
period of time a Fund's money is invested in the security. Whenever a Fund
enters into a repurchase agreement, it obtains collateral having a value at
least equal to the amount of the purchase price. The instruments held as
collateral are valued daily and if the value of the instruments declines, a Fund
will require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreements declines, a Fund may incur a loss.
In addition, 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. The Trustees have established guidelines to be used by the Adviser (or
Sub-Adviser) in connection with transactions in repurchase agreements and will
regularly monitor each Fund's use of repurchase agreements. A Fund will not
invest in repurchase agreements maturing in more than seven days if the
aggregate of such investments along with other illiquid securities exceeds 10%
of the value of its net assets. However, there is no limit on the amount of a
Fund's net assets that may be subject to repurchase agreements having a maturity
of seven days or less for temporary defensive purposes.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement, the Fund sells a security subject
to the rights and obligations to repurchase such security. The Fund then invests
the proceeds from the transaction in another obligation in which the Fund is
authorized to invest. In order to minimize any risk involved, the Fund
maintains, in a segregated account with the custodian, cash, cash equivalents or
liquid high grade debt securities equal in value to the repurchase price.
Reverse repurchase agreements are considered to be borrowings and are subject to
the percentage limitations on borrowings. See "Investment Restrictions."
Risks of Investing in Lower Rated Bonds. Debt securities in which the Growth and
Income Fund may invest may be in the lower rating categories of recognized
rating agencies (that is, ratings of Ba or lower by Moody's Investors Service,
Inc. ("Moody's") or BB or lower by Standard & Poor's Corporation ("S&P")) (and
comparable unrated securities) (commonly known as "junk bonds"). For a
description of
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these and other rating categories, see Appendix A. No minimum rating standard is
required for a purchase by the Fund.
It should be noted that lower-rated securities are subject to risk factors
such as (a) vulnerability to economic downturns and changes in interest rates;
(b) sensitivity to adverse economic changes and corporate developments; (c)
redemption or call provisions which may be exercised at inopportune times; (d)
difficulty in accurately valuing or disposing of such securities; (e) federal
legislation which could affect the market for such securities; and (f) special
adverse tax consequences associated with investments in certain high-yield,
high-risk bonds.
High yield bonds, like other bonds, may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, the Fund would have to replace the security with a lower yielding
security, resulting in lower return for investors. Conversely, a high yield
bond's value will decrease in a rising interest rate market.
There is a thinly traded market for high yield bonds, and recent market
quotations may not be available for some of these bonds. Market quotations are
generally available only from a limited number of dealers and may not represent
firm bids from such dealers or prices for actual sales. As a result, a Fund may
have difficulty valuing the high yield bonds in their portfolios accurately and
disposing of these bonds at the time or price desired.
Ratings assigned by Moody's and S&P to high yield bonds, like other bonds,
attempt to evaluate the safety of principal and interest payments on those
bonds. However, such ratings do not assess the risk of a decline in the market
value of those bonds. In addition, ratings may fail to reflect recent events in
a timely manner and are subject to change. If a rating with respect to a
portfolio security is changed, the Adviser will determine whether the security
will be retained based upon the factors the Adviser considers in acquiring or
holding other securities in the portfolio. Investment in high yield bonds may
make achievement of the Fund's objective more dependent on the Adviser's own
credit analysis than is the case for higher-rated bonds.
Market prices for high yield bonds tend to be more sensitive than those for
higher-rated securities due to many of the factors described above, including
the credit-worthiness of the issuer, redemption or call provisions, the
liquidity of the secondary trading market and changes in credit ratings, as well
as interest rate movements and general economic conditions. In addition, yields
on such bonds will fluctuate over time. An economic downturn could severely
disrupt the market for high yield bonds. In addition, legislation impacting high
yield bonds may have a materially adverse effect on the market for such bonds.
For
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example, federally insured savings and loan associations have been required to
divest their investments in high yield bonds.
The risk of default in payment of principal and interest on high yield
bonds is significantly greater than with higher-rated debt securities because
high yield bonds are generally unsecured and are often subordinated to other
obligations of the issuer, and because the issuers of high yield bonds usually
have high levels of indebtedness and are more sensitive to adverse economic
conditions, such as recession or increasing interest rates. Upon a default,
bondholders may incur additional expenses in seeking recovery.
As a result of all these factors, the net asset value of a Fund to the
extent it invests in high yield bonds, is expected to be more volatile than the
net asset value of funds which invest solely in higher-rated debt securities.
This volatility may result in an increased number of redemptions from time to
time. High levels of redemptions in turn may cause a fund to sell its portfolio
securities at inopportune times and decrease the asset base upon which expenses
can be spread.
Asset-Backed Securities. The Global Balanced Fund may invest in asset-
backed securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card and automobile
loan receivables, representing the obligations of a number of different parties.
The Fund may also invest in privately issued asset-backed securities.
Asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the services to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors to make payments on underlying assets, the securities may
contain elements of credit
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support which fall into two categories: (i) liquidity protection and (ii)
protection against losses resulting from ultimate default by a obligor on the
underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that the
receipt of payments on the underlying pool occurs in a timely fashion.
Protection against losses resulting from ultimate default ensures payment
through insurance policies or letters of credit obtained by the issuer or
sponsor from third parties. The Fund will not pay any additional or separate
fees for credit support. The degree of credit support provided for each issue is
generally based on historical information respecting the level of credit risk
associated with the underlying assets. Delinquency or loss in excess of that
anticipated or failure of the credit support could adversely affect the return
on an investment in such a security.
Dollar Rolls. The Global Balanced Fund may enter into "dollar rolls" in which
the Fund sells mortgage or other asset-backed securities ("Roll Securities") for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a specified
future date. During the roll period, the Fund foregoes principal and interest
paid on the Roll Securities. The Fund is compensated by the difference between
the current sales price and the lower forward price for the future purchase
(often referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. The Fund also could be compensated through the
receipt of fee income equivalent to a lower forward price. A "covered roll" is a
specific type of dollar roll for which there is an offsetting cash position or a
cash equivalent security position which matures on or before the forward
settlement date of the dollar roll transaction. The Fund will only enter into
covered rolls. Because "roll" transactions involve both the sale and purchase of
a security, they may cause the reported portfolio turnover rate to be higher
than that reflecting typical portfolio management activities.
Dollar rolls involve certain risks including the following: if the broker-dealer
to whom the Fund sells the security becomes insolvent, the Fund's right to
purchase or repurchase the security subject to the dollar roll may be restricted
and the instrument which the Fund is required to repurchase may be worth less
than an instrument which the Fund originally held. Successful use of dollar
rolls will depend upon the Adviser's or Sub-Adviser's ability to predict
correctly interest rates and in the case of mortgage dollar rolls, mortgage
prepayments. For these reasons, there is no assurance that dollar rolls can be
successfully employed.
Interest-Rate Swaps, Mortgage Swaps, Caps, Collars and Floors. In order to
protect the value of the Global Balanced Fund from interest rate fluctuations
and to hedge against fluctuations in the fixed income market in which certain of
the Fund's investments are traded, the Fund may enter into interest-rate swaps
and mortgage swaps or purchase or sell interest-rate caps, floors or collars.
The Fund will enter into these hedging transactions primarily to preserve a
return or spread on a particular investment or portion of the portfolio and to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. The Fund may also enter into interest-rate swaps for
non-hedging purposes. Interest-rate swaps are individually negotiated, the Fund
expects to achieve an acceptable degree of correlation between its portfolio
investments and interest-rate positions. The Fund will only enter into interest-
rate swaps on a net basis, which
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means that the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments. Interest-
rate swaps do not involve the delivery of securities, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest-rate swaps is
limited to the net amount of interest payments that the Fund is contractually
obligated to make. If the other party to an interest-rate swap defaults, the
Fund's risk of loss consists of the net amount of interest payments that the
Fund is contractually entitled to receive. The use of interest-rate swaps is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions.
All of these investments may be deemed to be illiquid for purposes of the Fund's
10% limitation on investment in such securities. Inasmuch as these investments
are entered into for good faith hedging purposes, and inasmuch as segregated
accounts will be established with respect to such transactions, the Adviser,
Sub-Advisers and the Fund believe such obligations do not constitute senior
securities and accordingly, will not treat them as being subject to its
borrowing restrictions. The net amount of the excess if any, of the Fund's
obligations over its entitlements with respect to each interest-rate swap will
be accrued on a daily basis and an amount of cash, U.S. government securities or
other liquid high grade debt obligations having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated account by
a custodian that satisfies the requirements of the 1940 Act. The Fund will also
establish and maintain such segregated accounts with respect to its total
obligations under any interest-rate swaps that are not entered into on a net
basis and with respect to any interest-rate caps, collars and floors that are
written by the Fund.
The Fund will enter into these transactions only with banks and recognized
securities dealers believed by the Adviser and Sub-Advisers to present minimal
credit risk in accordance with guidelines established by the Fund's Board of
Trustees. If there is a default by the other party to such a transaction, the
Fund will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreements related to
the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps, collars and floors are more
recent innovations for which documentation is less standardized, and
accordingly, they are less liquid than swaps.
Mortgage swaps are similar to interest-rate swaps in that they represent
commitments to pay and receive interest. The notional principal amount, upon
which the value of the interest payments is based, is tied to reference pool or
pools of mortgages.
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The purchase of an interest-rate cap entitles the purchaser, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest-rate cap. The purchase of an interest-rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest-rate floor. The Global Balanced Fund will
not enter into any mortgage swap, interest-rate swap, cap or floor transaction
unless the unsecured commercial paper, senior debt, or the claims paying ability
of the other party thereto is rated either AA or A-1 or better by S&P or Aa or
P-1 or better by Moody's, or is determined to be of equivalent quality by the
applicable Sub-Adviser.
Inverse Floaters. The Global Balanced Fund may invest in leveraged inverse
floating rate debt instruments ("inverse floaters"). The interest rate on an
inverse floater resets in the opposite direction from the market rate of
interest to which the inverse floater is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values. Accordingly, the
duration of an inverse floater may exceed its stated final maturity. Certain
inverse floaters may be deemed to be illiquid securities for purposes of the
Fund's 10% limitation on investments in such securities.
Short-Term and Temporary Defensive Instruments. In addition to their primary
investments, each Fund may also invest up to 10% of its total assets in money
market instruments for liquidity purposes (to meet redemptions and expenses).
For temporary defensive purposes, each Fund may invest up to 100% of its total
assets in fixed-income securities, including corporate debt obligations and
money market instruments rated in one of the two highest categories by a
nationally recognized statistical rating organization (or determined by the
Adviser or Sub-Adviser to be of equivalent quality). A description of securities
ratings is contained in the Appendix to this Statement of Additional
Information.
Subject to the limitations described above, the following is a description
of the types of money market and fixed-income securities in which the Funds may
invest:
U.S. Government Securities: See section entitled "U.S. Government
Securities" below.
Commercial Paper: Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by entities in order to finance
their current operations. Each Fund's commercial paper investments may include
variable amount master
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demand notes and floating rate or variable rate notes. Variable amount master
demand notes and variable amount floating rate notes are obligations that permit
the investment of fluctuating amounts by a Fund at varying rates of interest
pursuant to direct arrangements between a Fund, as lender, and the borrower.
Master demand notes permit daily fluctuations in the interest rates while the
interest rate under variable amount floating rate notes fluctuates on a weekly
basis. These notes permit daily changes in the amounts borrowed. A Fund has the
right to increase the amount under these notes at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the borrower may
repay up to the full amount of the note without penalty. Because these types of
notes are direct lending arrangements between the lender and the borrower, it is
not generally contemplated that such instruments will be traded and there is no
secondary market for these notes. Master demand notes are redeemable (and, thus,
immediately repayable by the borrower) at face value, plus accrued interest, at
any time. Variable amount floating rate notes are subject to next-day redemption
14 days after the initial investment therein. With both types of notes,
therefore, a Fund's right to redeem depends on the ability of the borrower to
pay principal and interest on demand. In connection with both types of note
arrangements, a Fund considers earning power, cash flow and other liquidity
ratios of the issuer. These notes, as such, are not typically rated by credit
rating agencies. Unless they are so rated, a Fund may invest in them only if at
the time of an investment the issuer has an outstanding issue of unsecured debt
rated in one of the two highest categories by a nationally recognized
statistical rating organization.
The Funds will generally purchase commercial paper only of companies of
medium to large capitalizations (i.e., $1 billion or more). In addition, the
Global Balanced Fund may purchase commercial paper rated in the two highest
rating categories, or deemed by the Adviser (or Sub-Adviser) to be of comparable
quality, without regard to the size of the issuer.
Certificates of Deposit and Bankers' Acceptances: Certificates of deposit
are receipts issued by a bank in exchange for the deposit of funds. The issuer
agrees to pay the amount deposited plus interest to the bearer of the receipt on
the date specified on the certificate. The certificate usually can be traded in
the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by another bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the
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accepting bank as an earning asset or it may be sold in the secondary market at
the going rate of discount for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most maturities are six months or less.
The Funds will generally open interest-bearing accounts only with, or
purchase certificates of deposit, time deposits or bankers' acceptances only
from, banks or savings and loan associations whose deposits are federally-
insured and whose capital is at least $50 million.
Corporate Obligations: Corporate debt obligations (including master demand
notes). For a further description of variable amount master demand notes, see
the section entitled "Commercial Paper" above.
Repurchase Agreements: See the section entitled "Repurchase Agreements"
above.
U.S. Government Securities. Each Fund may invest in U.S. Treasury securities,
including bills, notes, bonds and other debt securities issued by the U.S.
Treasury. These instruments are direct obligations of the U.S. government and,
as such, are backed by the "full faith and credit" of the United States. They
differ primarily in their interest rates, the lengths of their maturities and
the dates of their issuances. Each Fund may also invest in securities issued by
agencies of the U.S. government or instrumentalities of the U.S. government.
These obligations, including those which are guaranteed by federal agencies or
instrumentalities, may or may not be backed by the "full faith and credit" of
the United States. Obligations of the Government National Mortgage Association
("GNMA"), the Farmers Home Administration and the Export-Import Bank are backed
by the full faith and credit of the United States. In the case of securities not
backed by the full faith and credit of the United States, a Fund must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States if the
agency or instrumentality does not meet its commitments.
The Balanced Assets Fund and the Global Balanced Fund may, in addition to
the U.S. government securities noted above, invest in mortgage-backed securities
(including private mortgage-backed securities), such as GNMA, FNMA or FHLMC
certificates (as defined below), which represent an undivided ownership interest
in a pool of mortgages. The mortgages backing these securities include
conventional thirty-year fixed-rate mortgages, fifteen-year fixed-rate
mortgages, graduated payment mortgages and adjustable rate mortgages. These
certificates are in most cases pass-through instruments, through which the
holder receives a share of all interest and principal payments, including
prepayments, on the mortgages underlying the certificate, net of certain fees.
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The yield on mortgage-backed securities is based on the average expected
life of the underlying pool of mortgage loans. The actual life of any particular
pool will be shortened by any unscheduled or early payments of principal and
interest. Principal prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to predict accurately
the average life of a particular pool. Yield on such pools is usually computed
by using the historical record of prepayments for that pool, or, in the case of
newly-issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield realized
by the Balanced Assets Fund or Global Balanced Fund to differ from the yield
calculated on the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. When prevailing interest rates rise, the value of a pass-through
security may decrease as do the value of other debt securities, but, when
prevailing interest rates decline, the value of a pass-through security is not
likely to rise on a comparable basis with other debt securities because of the
prepayment feature of pass-through securities. The reinvestment of scheduled
principal payments and unscheduled prepayments that the Balanced Assets Fund or
Global Balanced Fund receives may occur at higher or lower rates than the
original investment, thus affecting the yield of the Fund. Monthly interest
payments received by the Balanced Assets Fund or Global Balanced Fund have a
compounding effect which may increase the yield to shareholders more than debt
obligations that pay interest semi-annually. Because of those factors, mortgage-
backed securities may be less effective than U.S. Treasury bonds of similar
maturity at maintaining yields during periods of declining interest rates.
Accelerated prepayments adversely affect yields for pass-through securities
purchased at a premium (i.e., at a price in excess of principal amount) and may
involve additional risk of loss of principal because the premium may not have
been fully amortized at the time the obligation is repaid. The opposite is true
for pass-through securities purchased at a discount. The Balanced Assets Fund or
Global Balanced Fund may purchase mortgage-backed securities at a premium or at
a discount.
The following is a description of GNMA, FNMA and FHLMC certificates, the
most widely available mortgage-backed securities:
GNMA Certificates. GNMA certificates ("GNMA Certificates") are mortgage-
backed securities which evidence an undivided interest in a pool or pools of
mortgages. GNMA Certificates that the Balanced Assets Fund or Global Balanced
Fund may purchase are the modified pass-through type, which entitle the holder
to receive
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timely payment of all interest and principal payments due on the mortgage pool,
net of fees paid to the issuer and GNMA, regardless of whether or not the
mortgagor actually makes the payment.
GNMA guarantees the timely payment of principal and interest on securities
backed by a pool of mortgages insured by the Federal Housing Administration
("FHA") or the Farmers' Home Administration ("FMHA"), or guaranteed by the
Veterans Administration ("VA"). The GNMA guarantee is authorized by the National
Housing Act and is backed by the full faith and credit of the United States. The
GNMA is also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosure will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that a Fund has
purchased the certificates at a premium in the secondary market.
FHLMC Certificates. The Federal Home Loan Mortgage Corporation ("FHLMC")
issues two types of mortgage pass-through securities: mortgage participation
certificates ("Pcs") and guaranteed mortgage certificates ("GMCs")
(collectively, "FHLMC Certificates"). Pcs resemble GNMA Certificates in that
each PC represents a pro rata share of all interest and principal payments made
and owed on the underlying pool. The FHLMC guarantees timely monthly payment of
interest (and, under certain circumstances, principal) of Pcs and the ultimate
payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
FNMA Certificates. The Federal National Mortgage Association ("FNMA")
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates represent a pro rata share of all interest and principal payments
made and owed on the underlying pool. FNMA guarantees timely payment of interest
and principal on FNMA Certificates. The FNMA guarantee is not backed by the full
faith and credit of the U.S. Government.
Another type of mortgage-backed security in which the Balanced Assets Fund
or Global Balanced Fund may invest is a collateralized mortgage obligation
("CMO"). CMOs are fully collateralized bonds
B-14
<PAGE>
which are the general obligations of the issuer thereof (e.g., the U.S.
government, a U.S. government instrumentality, or a private issuer). Such bonds
generally are secured by an assignment to a trustee (under the indenture
pursuant to which the bonds are issued) of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are made
to the trustee under the indenture. Payments of principal and interest on the
underlying mortgages are not passed through to the holders of the CMOs as such
(i.e., the character of payments of principal and interest is not passed
through, and therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such payments
are dedicated to payment of interest on and repayment of principal of the CMOs.
CMOs often are issued in two or more classes with varying maturities and stated
rates of interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying maturities
may be secured by the same pool of mortgages, the payments on which are used to
pay interest on each class and to retire successive maturities in sequence.
Unlike other mortgage-backed securities, CMOs are designed to be retired as the
underlying mortgages are repaid. In the event of prepayment on such mortgages,
the class of CMO first to mature generally will be paid down. Therefore,
although in most cases the issuer of CMOs will not supply additional collateral
in the event of such prepayment, there will be sufficient collateral to secure
CMOs that remain outstanding.
Certain CMOs may be deemed to be investment companies under the 1940 Act.
The Balanced Assets Fund or Global Balanced Fund intends to conduct operations
in a manner consistent with this view, and therefore generally may not invest
more than 10% of its total assets in such issuers without obtaining appropriate
regulatory relief. In reliance on recent SEC staff interpretations, a Fund may
invest in those CMOs and other mortgage-backed securities that are not by
definition excluded from the provisions of the 1940 Act, but have obtained
exemptive orders from the SEC from such provisions.
The Balanced Assets Fund or Global Balanced Fund may also invest in
stripped mortgage-backed securities. Stripped mortgage-backed securities are
often structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. Stripped
mortgage-backed securities have greater market volatility than other types of
U.S. Government securities in which a Fund invests. A common type of stripped
mortgage-backed security has one class receiving some of the interest and all or
most of the principal (the "principal only" class) from the mortgage pool, while
the other class will receive all or most of the interest (the "interest only"
class). The yield to maturity on an interest only class is
B-15
<PAGE>
extremely sensitive not only to changes in prevailing interest rates, but also
to the rate of principal payments, including principal prepayments, on the
underlying pool of mortgage assets, and a rapid rate of principal payment may
have a material adverse effect on the Fund's yield. While interest-only and
principal-only securities are generally regarded as being illiquid, such
securities may be deemed to be liquid if they can be disposed of promptly in the
ordinary course of business at a value reasonably close to that used in the
calculation of the Fund's net asset value per share. Only government interest
only and principal only securities backed by fixed-rate mortgages and determined
to be liquid under guidelines and standards established by the Trustees may be
considered liquid securities not subject to a Fund's limitation on investments
in illiquid securities.
Investment in Small, Unseasoned Companies. As described in the Prospectus, the
Small Company Growth Fund will invest, and the other Funds Growth Fund may each
invest, in the securities of small companies having market capitalizations under
$800 million. These securities may have a limited trading market, which may
adversely affect their disposition and can result in their being priced lower
than might otherwise be the case. If other investment companies and investors
who invest in such issuers trade the same securities when a Fund attempts to
dispose of its holdings, the Fund may receive lower prices than might otherwise
be obtained.
Warrants. Each Fund may invest in warrants which give the holder of the warrant
a right to purchase a given number of shares of a particular issue at a
specified price until expiration. Such investments generally can provide a
greater potential for profit or loss than investments of equivalent amounts in
the underlying common stock. The prices of warrants do not necessarily move with
the prices of the underlying securities. If the holder does not sell the
warrant, he risks the loss of his entire investment if the market price of the
underlying stock does not, before the expiration date, exceed the exercise price
of the warrant plus the cost thereof. Investment in warrants is a speculative
activity. Warrants pay no dividends and confer no rights (other than the right
to purchase the underlying stock) with respect to the assets of the issuer.
When-Issued and Delayed Delivery Securities. Each Fund may purchase or sell such
securities on a "when-issued" or "delayed delivery" basis. Although a Fund will
enter into such transactions for the purpose of acquiring securities for its
portfolio or for delivery pursuant to options contracts it has entered into, the
Fund may dispose of a commitment prior to settlement. "When-issued" or "delayed
delivery" refers to securities whose terms and indenture are available and for
which a market exists, but which are not available for immediate delivery. When
such transactions are negotiated, the price (which is generally expressed in
yield terms) is fixed at the time the commitment is made, but delivery
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<PAGE>
and payment for the securities take place at a later date. During the period
between commitment by a Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by the
purchaser, and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation, and the value at delivery may be
less than the purchase price. A Fund will maintain a segregated account with its
custodian, consisting of cash, U.S. government securities or other high grade
debt obligations at least equal to the value of purchase commitments until
payment is made. A Fund will likewise segregate liquid assets in respect of
securities sold on a delayed delivery basis.
A Fund will engage in when-issued transactions in order to secure what is
considered to be an advantageous price and yield at the time of entering into
the obligation. When a Fund engages in when-issued or delayed delivery
transactions, it relies on the buyer or seller, as the case may be, to
consummate the transaction. Failure to do so may result in a Fund losing the
opportunity to obtain a price and yield considered to be advantageous. If a Fund
chooses to (i) dispose of the right to acquire a when-issued security prior to
its acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss. (At the time a Fund makes a
commitment to purchase or sell a security on a when-issued or forward commitment
basis, it records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received in determining its net
asset value.)
To the extent a Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling securities
consistent with its investment objectives and policies and not for the purposes
of investment leverage. A Fund enters into such transactions only with the
intention of actually receiving or delivering the securities, although (as noted
above) when-issued securities and forward commitments may be sold prior to the
settlement date. In addition, changes in interest rates in a direction other
than that expected by the Adviser (or Sub-Adviser) before settlement will affect
the value of such securities and may cause a loss to a Fund.
When-issued transactions and forward commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Fund might sell securities in its
portfolio on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and rising
prices, a Fund might sell portfolio securities and purchase the same or similar
securities on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields.
B-17
<PAGE>
Foreign Securities. Investments in foreign securities offer potential benefits
not available from investments solely in securities of domestic issuers by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or business
cycles different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a manner
parallel to U.S. markets.
Each Fund may invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs), Global
Depository Receipts (GDRs) or other similar securities convertible into
securities of foreign issuers. ADRs are securities, typically issued by a U.S.
financial institution, that evidence ownership interests in a security or a pool
of securities issued by a foreign issuer and deposited with the depository. ADRs
may be sponsored or unsponsored. A sponsored ADR is issued by a depository which
has an exclusive relationship with the issuer of the underlying security. An
unsponsored ADR may be issued by any number of U.S. depositories. Holders of
unsponsored ADRs generally bear all the costs associated with establishing the
unsponsored ADR. The depository of an unsponsored ADR is under no obligation to
distribute shareholder communications received from the underlying issuer or to
pass through to the holders of the unsponsored ADR voting rights with respect to
the deposited securities or pool of securities. A Fund may invest in either type
of ADR. Although the U.S. investor holds a substitute receipt of ownership
rather than direct stock certificates, the use of the depository receipts in the
United States can reduce costs and delays as well as potential currency exchange
and other difficulties. The Fund may purchase securities in local markets and
direct delivery of these ordinary shares to the local depository of an ADR agent
bank in the foreign country. Simultaneously, the ADR agents create a certificate
which settles at the Fund's custodian in five days. The Fund may also execute
trades on the U.S. markets using existing ADRs. A foreign issuer of the security
underlying an ADR is generally not subject to the same reporting requirements in
the United States as a domestic issuer. Accordingly the information available to
a U.S. investor will be limited to the information the foreign issuer is
required to disclose in its own country and the market value of an ADR may not
reflect undisclosed material information concerning the issuer of the underlying
security. For purposes of a Fund's investment policies, the Fund's investments
in these types of securities will be deemed to be investments in the underlying
securities. Generally ADRs, in registered form, are dollar denominated
securities designed for use in the U.S. securities markets, which represent and
may be converted into the underlying foreign security. EDRs, in bearer form, are
designed for use in the European securities markets.
B-18
<PAGE>
Investments in foreign securities, including securities of developing
countries, present special additional investment risks and considerations not
typically associated with investments in domestic securities, including
reduction of income by foreign taxes; fluctuation in value of foreign portfolio
investments due to changes in currency rates and control regulations (e.g.,
currency blockage); transaction charges for currency exchange; lack of public
information about foreign issuers; lack of uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
issuers; less volume on foreign exchanges than on U.S. exchanges; greater
volatility and less liquidity on foreign markets than in the U.S.; less
regulation of foreign issuers, stock exchanges and brokers than the U.S.;
greater difficulties in commencing lawsuits; higher brokerage commission rates
than the U.S.; increased possibilities in some countries of expropriation,
confiscatory taxation, political, financial or social instability or adverse
diplomatic developments; and differences (which may be favorable or unfavorable)
between the U.S. economy and foreign economies.
Loans of Portfolio Securities. Consistent with applicable regulatory
requirements, each Fund may lend portfolio securities in amounts up to 33% of
total assets to brokers, dealers and other financial institutions, provided,
that such loans are callable at any time by the Fund and are at all times
secured by cash or equivalent collateral that is equal to at least the market
value, determined daily, of the loaned securities. In lending its portfolio
securities, a Fund receives income while retaining the securities' potential for
capital appreciation. The advantage of such loans is that a Fund continues to
receive the interest and dividends on the loaned securities while at the same
time earning interest on the collateral, which will be invested in short-term
obligations. A loan may be terminated by the borrower on one business day's
notice or by a Fund at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Fund could use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail financially.
However, these loans of portfolio securities will only be made to firms deemed
by the Adviser (or Sub-Adviser) to be creditworthy. On termination of the loan,
the borrower is required to return the securities to a Fund; and any gain or
loss in the market price of the loaned security during the loan would inure to
the Fund. Each Fund will pay reasonable finders', administrative and custodial
fees in connection with a loan of its securities or may share the interest
earned on collateral with the borrower. Loans of portfolio securities will only
be made to firms deemed by the Adviser (or Sub-Adviser) to be creditworthy.
B-19
<PAGE>
Since voting or consent rights which accompany loaned securities pass to
the borrower, each Fund will follow the policy of calling the loan, in whole or
in part as may be appropriate, to permit the exercise of such rights if the
matters involved would have a material effect on the Fund's investment in the
securities which are the subject of the loan.
Income Enhancement Strategies. Each Fund may write (i.e., sell) call options
("calls") on securities that are traded on U.S. and foreign securities exchanges
and over-the-counter markets to enhance income through the receipt of premiums
from expired calls and any net profits from closing purchase transactions. After
any such sale up to 100% of a Fund's total assets may be subject to calls. All
such calls written by a Fund must be "covered" while the call is outstanding
(i.e., the Fund must own the securities subject to the call or other securities
acceptable for applicable escrow requirements). Calls on Futures (defined below)
used to enhance income must be covered by deliverable securities or by liquid
assets segregated to satisfy the Futures contract. If a call written by the Fund
is exercised, the Fund forgoes any profit from any increase in the market price
above the call price of the underlying investment on which the call was written.
In addition, the Fund could experience capital losses which might cause
previously distributed short-term capital gains to be re-characterized as a non-
taxable return of capital to shareholders.
The Balanced Assets Fund and Global Balanced Fund also may write put
options ("puts") which give the holder of the option the right to sell the
underlying security to the Fund at the stated exercise price. A Fund will
receive a premium for writing a put option which increases the Fund's return. A
Fund writes only covered put options which means that so long as the Fund is
obligated as the writer of the option it will, through it custodian, have
deposited and maintained cash, cash equivalents, U.S. government securities or
other high grade liquid debt or equity securities denominated in U.S. dollars or
non-U.S. currencies with a securities depository with a value equal to or
greater than the exercise price of the underlying securities. Puts on Futures
(defined below) will be considered "covered" if the a Fund owns an option to
sell that Futures contract having a strike price equal to or greater than the
strike price of the "covered" option, or if the Fund segregates and maintains
with its custodian for the term of the option cash, U.S. government securities
or liquid high-grade debt obligations at all times equal in value to the
exercise price of the put (less any initial margin deposited by the Fund with
its custodian with respect to such option).
Hedging Strategies. For hedging purposes as a temporary defensive maneuver, each
Fund may use interest rate futures contracts, foreign currency futures
contracts, and stock and bond index futures contracts (together, "Futures");
forward contracts on foreign currencies ("Forward Contracts"); and call and put
options
B-20
<PAGE>
on equity and debt securities, Futures, stock and bond indices and foreign
currencies (all the foregoing referred to as "Hedging Instruments"). Hedging
Instruments may be used to attempt to: (i) protect against possible declines in
the market value of a Fund's portfolio resulting from downward trends in the
equity and debt securities markets (generally due to a rise in interest rates);
(ii) protect a Fund's unrealized gains in the value of its equity and debt
securities which have appreciated; (iii) facilitate selling securities for
investment reasons; (iv) establish a position in the equity and debt securities
markets as a temporary substitute for purchasing particular equity and debt
securities; or (v) reduce the risk of adverse currency fluctuations.
A Fund's strategy of hedging with Futures and options on Futures will be
incidental to its activities in the underlying cash market. When hedging to
attempt to protect against declines in the market value of a Fund's portfolio,
to permit a Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, a Fund could: (i) sell Futures; (ii) purchase puts on such Futures or
securities; or (iii) write calls on securities held by it or on Futures. When
hedging to attempt to protect against the possibility that portfolio securities
are not fully included in a rise in value of the debt securities market, a Fund
could: (i) purchase Futures, or (ii) purchase calls on such Futures or on
securities. When hedging to protect against declines in the dollar value of a
foreign currency-denominated security, a Fund could: (i) purchase puts on that
foreign currency and on foreign currency Futures; (ii) write calls on that
currency or on such Futures; or (iii) enter into Forward Contracts at a lower
rate than the spot ("cash") rate. Additional information about the Hedging
Instruments the Funds may use is provided below.
The Global Balanced Fund may engage in the foregoing for non-hedging
purposes as well.
Options
Options on Securities. As noted above, each Fund may write and purchase
call and put options (including yield curve options) on equity and debt
securities.
When a Fund writes a call on a security it receives a premium and agrees to
sell the underlying security to a purchaser of a corresponding call on the same
security during the call period (usually not more than 9 months) at a fixed
price (which may differ from the market price of the underlying security),
regardless of market price changes during the call period. A Fund has retained
the risk of loss should the price of the underlying security decline during the
call period, which may be offset to some extent by the premium.
B-21
<PAGE>
To terminate its obligation on a call it has written, a Fund may purchase a
corresponding call in a "closing purchase transaction." A profit or loss will be
realized, depending upon whether the net of the amount of the option transaction
costs and the premium received on the call written was more or less than the
price of the call subsequently purchased. A profit may also be realized if the
call expires unexercised, because a Fund retains the underlying security and the
premium received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable as
ordinary income. If a Fund could not effect a closing purchase transaction due
to lack of a market, it would hold the callable securities until the call
expired or was exercised.
When a Fund purchases a call (other than in a closing purchase
transaction), it pays a premium and has the right to buy the underlying
investment from a seller of a corresponding call on the same investment during
the call period at a fixed exercise price. A Fund benefits only if the call is
sold at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price plus the transaction
costs and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless at its
expiration date and a Fund will lose its premium payment and the right to
purchase the underlying investment.
A put option on securities gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying investment at the exercise price
during the option period. Writing a put covered by segregated liquid assets
equal to the exercise price of the put has the same economic effect to a Fund as
writing a covered call. The premium a Fund receives from writing a put option
represents a profit as long as the price of the underlying investment remains
above the exercise price. However, a Fund has also assumed the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even though the value of the investment may fall below the
exercise price. If the put expires unexercised, a Fund (as the writer of the
put) realizes a gain in the amount of the premium. If the put is exercised, a
Fund must fulfill its obligation to purchase the underlying investment at the
exercise price, which will usually exceed the market value of the investment at
that time. In that case, a Fund may incur a loss, equal to the sum of the sale
price of the underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
A Fund may effect a closing purchase transaction to realize a profit on an
outstanding put option it has written or to prevent an underlying security from
being put. Furthermore, effecting such a closing purchase transaction will
permit a Fund to write another put option to the extent that the exercise price
thereof is secured
B-22
<PAGE>
by the deposited assets, or to utilize the proceeds from the sale of such assets
for other investments by the Fund. A Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or more than
the premium received from writing the option. As described above for writing
covered calls, any and all such profits described herein from writing puts are
considered short-term gains for Federal tax purposes, and when distributed by a
Fund, are taxable as ordinary income.
When a Fund purchases a put, it pays a premium and has the right to sell
the underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on an
investment a Fund owns enables the Fund to protect itself during the put period
against a decline in the value of the underlying investment below the exercise
price by selling such underlying investment at the exercise price to a seller of
a corresponding put. If the market price of the underlying investment is equal
to or above the exercise price and as a result the put is not exercised or
resold, the put will become worthless at its expiration date, and the Fund will
lose its premium payment and the right to sell the underlying investment
pursuant to the put. The put may, however, be sold prior to expiration (whether
or not at a profit.)
Buying a put on an investment a Fund does not own permits the Fund either
to resell the put or buy the underlying investment and sell it at the exercise
price. The resale price of the put will vary inversely with the price of the
underlying investment. If the market price of the underlying investment is above
the exercise price and as a result the put is not exercised, the put will become
worthless on its expiration date. In the event of a decline in the stock market,
a Fund could exercise or sell the put at a profit to attempt to offset some or
all of its loss on its portfolio securities.
When writing put options on securities, to secure its obligation to pay for
the underlying security, a Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying securities.
A Fund therefore forgoes the opportunity of investing the segregated assets or
writing calls against those assets. As long as the obligation of a Fund as the
put writer continues, it may be assigned an exercise notice by the broker-dealer
through whom such option was sold, requiring a Fund to take delivery of the
underlying security against payment of the exercise price. A Fund has no control
over when it may be required to purchase the underlying security, since it may
be assigned an exercise notice at any time prior to the termination of its
obligation as the writer of the put. This obligation terminates upon expiration
of the put, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously sold. Once
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<PAGE>
a Fund has been assigned an exercise notice, it is thereafter not allowed to
effect a closing purchase transaction.
Options on Foreign Currencies. Each Fund may write and purchase puts and
calls on foreign currencies. A call written on a foreign currency by a Fund is
"covered" if the Fund owns the underlying foreign currency covered by the call
or has an absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A put option is "covered" if the Fund
deposits with its custodian cash, U.S. government securities or other high-grade
liquid debt securities with a value at least equal to the exercise price of the
put option. A call written by a Fund on a foreign currency is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against a
decline in the U.S. dollar value of a security which the Fund owns or has the
right to acquire and which is denominated in the currency underlying the option
due to an adverse change in the exchange rate. In such circumstances, a Fund
collateralizes the option by maintaining in a segregated account with the Fund's
custodian, cash or U.S. government securities in an amount not less than the
value of the underlying foreign currency in U.S. dollars marked-to-market daily.
Options on Securities Indices. As noted above, each Fund may write and
purchase call and put options on securities indices. Puts and calls on broadly-
based securities indices are similar to puts and calls on securities except that
all settlements are in cash and gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally) rather
than on price movements in individual securities or Futures. When a Fund buys a
call on a securities index, it pays a premium. During the call period, upon
exercise of a call by a Fund, a seller of a corresponding call on the same
investment will pay the Fund an amount of cash to settle the call if the closing
level of the securities index upon which the call is based is greater than the
exercise price of the call. That cash payment is equal to the difference between
the closing price of the index and the exercise price of the call times a
specified multiple (the "multiplier") which determines the total dollar value
for each point of difference. When a Fund buys a put on a securities index, it
pays a premium and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver to the Fund
an amount of cash to settle the put if the closing level of the securities index
upon which the put is based is less than the exercise price of the put. That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.
B-24
<PAGE>
Futures and Options on Futures
Futures. Upon entering into a Futures transaction, a Fund will be required
to deposit an initial margin payment with the futures commission merchant (the
"futures broker"). The initial margin will be deposited with the Fund's
custodian in an account registered in the futures broker's name; however the
futures broker can gain access to that account only under specified conditions.
As the Future is marked to market to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or by the
futures broker on a daily basis. Prior to expiration of the Future, if a Fund
elects to close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to be
paid by or released to the Fund, and any loss or gain is realized for tax
purposes. All Futures transactions are effected through a clearinghouse
associated with the exchange on which the Futures are traded.
Interest rate futures contracts are purchased or sold for hedging purposes
to attempt to protect against the effects of interest rate changes on a Fund's
current or intended investments in fixed-income securities. For example, if a
Fund owned long-term bonds and interest rates were expected to increase, that
Fund might sell interest rate futures contracts. Such a sale would have much the
same effect as selling some of the long-term bonds in that Fund's portfolio.
However, since the Futures market is more liquid than the cash market, the use
of interest rate futures contracts as a hedging technique allows a Fund to hedge
its interest rate risk without having to sell its portfolio securities. If
interest rates did increase, the value of the debt securities in the portfolio
would decline, but the value of that Fund's interest rate futures contracts
would be expected to increase at approximately the same rate, thereby keeping
the net asset value of that Fund from declining as much as it otherwise would
have. On the other hand, if interest rates were expected to decline, interest
rate futures contracts may be purchased to hedge in anticipation of subsequent
purchases of long-term bonds at higher prices. Since the fluctuations in the
value of the interest rate futures contracts should be similar to that of long-
term bonds, a Fund could protect itself against the effects of the anticipated
rise in the value of long-term bonds without actually buying them until the
necessary cash became available or the market had stabilized. At that time, the
interest rate futures contracts could be liquidated and that Fund's cash
reserves could then be used to buy long-term bonds on the cash market.
Purchases or sales of stock or bond index futures contracts are used for
hedging purposes to attempt to protect a Fund's current or intended investments
from broad fluctuations in stock or bond prices. For example, a Fund may sell
stock or bond index futures contracts in anticipation of or during a market
decline to
B-25
<PAGE>
attempt to offset the decrease in market value of the Fund's securities
portfolio that might otherwise result. If such decline occurs, the loss in value
of portfolio securities may be offset, in whole or part, by gains on the Futures
position. When a Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock or bond index
futures contracts in order to gain rapid market exposure that may, in part or
entirely, offset increases in the cost of securities that the Fund intends to
purchase. As such purchases are made, the corresponding positions in stock or
bond index futures contracts will be closed out.
As noted above, each Fund may purchase and sell foreign currency futures
contracts for hedging or income enhancement purposes to attempt to protect its
current or intended investments from fluctuations in currency exchange rates.
Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. Each Fund may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may be offset, in
whole or in part, by gains on the Futures contracts. However, if the value of
the foreign currency increases relative to the dollar, the Fund's loss on the
foreign currency futures contract may or may not be offset by an increase in the
value of the securities since a decline in the price of the security stated in
terms of the foreign currency may be greater than the increase in value as a
result of the change in exchange rates.
Conversely, each Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing Futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When a Fund purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Fund will sustain losses
on its futures position which could reduce or eliminate the benefits of the
reduced cost of portfolio securities to be acquired.
Options on Futures. As noted above, the Funds may purchase and write
options on interest rate futures contracts, stock and bond index futures
contracts and foreign currency futures contracts. (Unless otherwise specified,
options on interest rate futures contracts, options on stock and bond index
futures contracts and options on foreign currency futures contracts are
collectively referred to as "Options on Futures.")
B-26
<PAGE>
The writing of a call option on a Futures contract constitutes a partial
hedge against declining prices of the securities in a Fund's portfolio. If the
Futures price at expiration of the option is below the exercise price, the Fund
will retain the full amount of the option premium, which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a Futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the Futures contract. If the Futures
price at expiration of the put option is higher than the exercise price, a Fund
will retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Fund intends to
purchase. If a put or call option a Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its Options on Futures
positions, a Fund's losses from exercised Options on Futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
The Fund may purchase Options on Futures for hedging purposes, instead of
purchasing or selling the underlying Futures contract. For example, where a
decrease in the value of portfolio securities is anticipated as a result of a
projected market-wide decline or changes in interest or exchange rates, a Fund
could, in lieu of selling a Futures contract, purchase put options thereon. In
the event that such decrease occurs, it may be offset, in whole or part, by a
profit on the option. If the market decline does not occur, the Fund will suffer
a loss equal to the price of the put. Where it is projected that the value of
securities to be acquired by a Fund will increase prior to acquisition, due to a
market advance or changes in interest or exchange rates, a Fund could purchase
call Options on Futures, rather than purchasing the underlying Futures contract.
If the market advances, the increased cost of securities to be purchased may be
offset by a profit on the call. However, if the market declines, the Fund will
suffer a loss equal to the price of the call but the securities which the Fund
intends to purchase may be less expensive.
Forward Contracts
A Forward Contract involves bilateral obligations of one party to purchase,
and another party to sell, a specific currency at a future date (which may be
any fixed number of days from the date of the contract agreed upon by the
parties), at a price set at the time the contract is entered into. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. No price is paid
or received upon the purchase or sale of a Forward Contract.
B-27
<PAGE>
A Fund may use Forward Contracts to protect against uncertainty in the
level of future exchange rates. The use of Forward Contracts does not eliminate
fluctuations in the prices of the underlying securities a Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase. A Fund (other than the
Global Balanced Fund) will not speculate with Forward Contracts or foreign
currency exchange rates.
A Fund may enter into Forward Contracts with respect to specific
transactions. For example, when a Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when a Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction. A Fund
will thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are made or
received.
A Fund may also use Forward Contracts to lock in the U.S. dollar value of
portfolio positions ("position hedge"). In a position hedge, for example, when a
Fund believes that foreign currency may suffer a substantial decline against the
U.S. dollar, it may enter into a Forward Contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when a Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a Forward Contract to buy that foreign currency for a fixed
dollar amount. In this situation a Fund may, in the alternative, enter into a
Forward Contract to sell a different foreign currency for a fixed U.S. dollar
amount where the Fund believes that the U.S. dollar value of the currency to be
sold pursuant to the forward contract will fall whenever there is a decline in
the U.S. dollar value of the currency in which portfolio securities of the Fund
are denominated ("cross-hedged").
The Fund's custodian will place cash not available for investment or U.S.
government securities or other liquid high-quality debt securities in a separate
account of the Fund having a value equal to the aggregate amount of the Fund's
commitments under Forward Contracts entered into with respect to position hedges
and cross-hedges. If the value of the securities placed in a separate
B-28
<PAGE>
account declines, additional cash or securities will be placed in the account on
a daily basis so that the value of the account will equal the amount of the
Fund's commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, a Fund may purchase a call
option permitting the Fund to purchase the amount of foreign currency being
hedged by a forward sale contract at a price no higher than the Forward Contract
price or the Fund may purchase a put option permitting the Fund to sell the
amount of foreign currency subject to a forward purchase contract at a price as
high or higher than the Forward Contract price. Unanticipated changes in
currency prices may result in poorer overall performance for a Fund than if it
had not entered into such contracts.
The precise matching of the Forward Contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold. Accordingly, it may be necessary for a
Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency a Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if its market value
exceeds the amount of foreign currency a Fund is obligated to deliver. The
projection of short-term currency market movements is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be accurately predicted, causing a Fund to sustain losses on these contracts and
transactions costs.
At or before the maturity of a Forward Contract requiring a Fund to sell a
currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. A Fund would realize a gain
or loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
B-29
<PAGE>
The cost to a Fund of engaging in Forward Contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because Forward Contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, a Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward Contract.
Although a Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. A Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer.
Additional Information About Hedging Instruments and Their Use
The Fund's custodian, or a securities depository acting for the custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the securities on which the Fund has written
options or as to other acceptable escrow securities, so that no margin will be
required for such transaction. OCC will release the securities on the expiration
of the option or upon a Fund's entering into a closing transaction.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. A Fund's option
activities may affect its turnover rate and brokerage commissions. The exercise
by a Fund of puts on securities will cause the sale of related investments,
increasing portfolio turnover. Although such exercise is within a Fund's
control, holding a put might cause the Fund to sell the related investments for
reasons which would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys a put or call, sells a call, or buys or
sells an underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct purchases
or sales of such underlying investments. Premiums paid for options are small
in relation to the market value of the related investments, and consequently,
put and call options offer large amounts of leverage. The leverage offered by
trading in options could result in a Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
B-30
<PAGE>
In the future, each Fund may employ Hedging Instruments and strategies that
are not presently contemplated but which may be developed, to the extent such
investment methods are consistent with a Fund's investment objectives, legally
permissible and adequately disclosed.
Regulatory Aspects of Hedging Instruments
Each Fund must operate within certain restrictions as to its long and short
positions in Futures and options thereon under a rule (the "CFTC Rule") adopted
by the Commodity Futures Trading Commission (the "CFTC") under the Commodity
Exchange Act (the "CEA"), which excludes the Fund from registration with the
CFTC as a "commodity pool operator" (as defined in the CEA) if it complies with
the CFTC Rule. In particular, the Fund may (i) purchase and sell Futures and
options thereon for bona fide hedging purposes, as defined under CFTC
regulations, without regard to the percentage of the Fund's assets committed to
margin and option premiums, and (ii) enter into non-hedging transactions,
provided that the Fund may not enter into such non-hedging transactions if,
immediately thereafter, the sum of the amount of initial margin deposits on the
Fund's existing Futures positions and option premiums would exceed 5% of the
fair value of its portfolio, after taking into account unrealized profits and
unrealized losses on any such transactions. Each Fund intends to engage in
Futures transactions and options thereon only for hedging purposes, but the
Global Balanced Fund may also engage in such transactions for non-hedging
purposes. Margin deposits may consist of cash or securities acceptable to the
broker and the relevant contract market.
Transactions in options by a Fund are subject to limitations established by
each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options which a Fund may write or hold
may be affected by options written or held by other entities, including other
investment companies having the same or an affiliated investment adviser.
Position limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain other
sanctions. Due to requirements under the 1940 Act, when a Fund purchases a
Future, the Fund will maintain, in a segregated account or accounts with its
custodian bank, cash or readily marketable, short-term (maturing in one year or
less) debt instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
B-31
<PAGE>
Tax Aspects of Hedging Instruments
Each Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). One of the tests for
such qualification is that less than 30% of its gross income must be derived
from gains realized on the sale of stock or securities held for less than three
months. This limitation may limit the ability of a Fund to engage in options
transactions and, in general, to hedge investment risk.
Possible Risk Factors in Hedging
In addition to the risks discussed in the Prospectus and above, there is a
risk in using short hedging by selling Futures to attempt to protect against
decline in value of a Fund's portfolio securities (due to an increase in
interest rates) that the prices of such Futures will correlate imperfectly with
the behavior of the cash (i.e., market value) prices of the Fund's securities.
The ordinary spreads between prices in the cash and Futures markets are subject
to distortions due to differences in the natures of those markets. First, all
participants in the Futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close Futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
Futures markets. Second, the liquidity of the Futures markets depend on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the Futures markets could be reduced, thus producing distortion. Third, from
the point-of-view of speculators, the deposit requirements in the Futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the Futures markets may
cause temporary price distortions.
If a Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Futures and/or calls on such Futures or on
debt securities, it is possible that the market may decline; if the Adviser then
determines not to invest in such securities at that time because of concerns as
to possible further market decline or for other reasons, the Fund will realize a
loss on the Hedging Instruments that is not offset by a reduction in the price
of the debt securities purchased.
Leverage. In seeking to enhance investment performance, the Global Balanced
Fund, Small Company Growth Fund, and Growth and Income Fund may increase their
ownership of securities by borrowing from banks at fixed rates of interest and
investing the borrowed funds, subject to the restrictions stated in the
Prospectus. Any such borrowing will be made only from banks and pursuant to the
B-32
<PAGE>
requirements of the 1940 Act and will be made only to the extent that the value
of each Fund's assets less its liabilities, other than borrowings, is equal to
at least 300% of all borrowings including the proposed borrowing. If the value
of a Fund's assets, so computed, should fail to meet the 300% asset coverage
requirement, the Fund is required, within three business days, to reduce its
bank debt to the extent necessary to meet such requirement and may have to sell
a portion of its investments at a time when independent investment judgment
would not dictate such sale. Interest on money borrowed is an expense the Fund
would not otherwise incur, so that it may have little or no net investment
income during periods of substantial borrowings. Since substantially all of a
Fund's assets fluctuate in value, but borrowing obligations are fixed when the
Fund has outstanding borrowings, the net asset value per share of a Fund
correspondingly will tend to increase and decrease more when the Fund's assets
increase or decrease in value than would otherwise be the case. A Fund's policy
regarding use of leverage is a fundamental policy which may not be changed
without approval of the shareholders of the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate is calculated for each Fund by dividing (a) the
lesser of purchases or sales of portfolio securities for the fiscal year by (b)
the monthly average of the value of portfolio securities owned during the fiscal
year. For purposes of this calculation, securities which at the time of purchase
had a remaining maturity of one year or less are excluded from the numerator and
the denominator. Transactions in Futures or the exercise of calls written by a
Fund may cause the Fund to sell portfolio securities, thus increasing its
turnover rate. The exercise of puts also may cause a sale of securities and
increase turnover; although such exercise is within a Fund's control, holding a
protective put might cause the Fund to sell the underlying securities for
reasons which would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys or sells a security in connection with
the exercise of a put or call. Some commissions may be higher than those which
would apply to direct purchases or sales of portfolio securities.
The following table sets forth the portfolio turnover rates for the fiscal
years ended September 30, 1995 and 1994.
Portfolio Turnover
- -------------------------------------------------------------------------------
Fund 1995 1994
- -------------------------------------------------------------------------------
Balanced Assets Fund 130% 141%
- -------------------------------------------------------------------------------
Blue Chip Growth Fund 251% 170%
- -------------------------------------------------------------------------------
B-33
<PAGE>
- -----------------------------------------------------------------------------
Global Balanced Fund 169% 18%*
- -----------------------------------------------------------------------------
Growth and Income Fund 230% 8%**
- -----------------------------------------------------------------------------
Mid-Cap Growth Fund 392% 555%
- -----------------------------------------------------------------------------
Small Company Growth Fund 351% 411%
- -----------------------------------------------------------------------------
* For the period 6/15/94 (commencement of operations) through 9/30/94
** For the period 7/1/94 (commencement of operations) through 9/30/94
High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by a Fund.
High portfolio turnover may also involve a possible increase in short-term
capital gains or losses.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that are
fundamental policies and may not be changed without the approval of the holders
of a majority of that Fund's outstanding voting securities. A "majority of the
outstanding voting securities" of a Fund for this purpose means the lesser of
(i) 67% of the shares of the Fund represented at a meeting at which more than
50% of the outstanding shares are present in person or represented by proxy or
(ii) more than 50% of the outstanding shares. Unless otherwise indicated, all
percentage limitations apply to each Fund on an individual basis, and apply only
at the time the investment is made; any subsequent change in any applicable
percentage resulting from fluctuations in value will not be deemed an investment
contrary to these restrictions. Under these restrictions, no Fund may:
(1) With respect to 75% of its total assets, invest more than 5% of its total
assets (taken at market value at the time of each investment) in the
securities of any one issuer or purchase more than 10% of the outstanding
voting securities of any one company or more than 10% of any class of a
company's outstanding securities, except that these restrictions shall not
apply to securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities ("U.S. government securities"). The foregoing
restriction shall not apply to the Global Balanced Fund.
(2) Invest more than 5% of its total assets (taken at market value at the time
of each investment) in securities of companies having a record, together
with predecessors, of less than three years of continuous operations,
except that this restriction shall not apply to U.S. government securities.
(3) Purchase securities on margin, borrow money or pledge their assets, except
that the Global Balanced Fund, Small Company
B-34
<PAGE>
Growth Fund and Growth and Income Fund may borrow money to purchase
securities as set forth in the Prospectus and Statement of Additional
Information and each Fund may borrow from a bank for temporary or emergency
purposes in amounts not exceeding 5% (taken at the lower of cost or current
value) of its total assets (not including the amount borrowed) and pledge
its assets to secure such borrowings. Further, to the extent that an
investment technique engaged in by the Global Balanced Fund or Growth and
Income Fund required pledging of assets, the Funds may pledge assets in
connection with such transactions. For purposes of this restriction and
restriction (5) below, collateral arrangements with respect to the options,
financial futures and options thereon described in the Prospectus and
Statement of Additional Information are not deemed to constitute a pledge
or loan of assets.
(4) Invest more than 25% of each Fund's assets in the securities of issuers
engaged in the same industry.
(5) Engage in arbitrage transactions, buy or sell commodities or commodity
contracts or real estate or interests in real estate, except that each Fund
may (a) purchase or sell financial futures and options thereon for hedging
purposes, as described in the Prospectus and Statement of Additional
Information, under policies developed by the Trustees and (b) purchase and
sell marketable securities which are secured by real estate and marketable
securities of companies which invest or deal in real estate.
(6) Act as underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Funds may be deemed to be
underwriters under certain Federal securities laws.
(7) Make loans, except through (i) repurchase agreements, (ii) loans of
portfolio securities, or (iii) the purchase of portfolio securities
consistent with a Fund's investment objectives and policies, as described
in the Prospectus.
(8) Make short sales of securities or maintain a short position, except that
each Fund may effect short sales against the box.
(9) Issue senior securities as defined in the 1940 Act, except that each Fund
may enter into repurchase agreements, lend its portfolio securities and
borrow money from banks, as described in restriction (3), and the Global
Balanced Fund may enter into dollar rolls.
The following additional restrictions are not fundamental policies and may
be changed by the Trustees without a vote of shareholders. Each Fund may
not:
B-35
<PAGE>
(10) Invest in securities of any issuer if, to the knowledge of the Trust, any
officer, trustee or director of the Trust or the Adviser (or Sub-Adviser),
owns more than 1/2% of the outstanding securities of such issuer and such
officers, trustees and directors who own more than 1/2%, own in the
aggregate, more than 5% of the outstanding securities of such issuer.
(11) Make investments for the purpose of exercising control or management.
(12) Invest more than 10% of its net assets in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale and securities
that are not readily marketable in securities markets either within or
without the United States. Restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act that have a readily
available market, and commercial paper exempted from registration under the
Securities Act pursuant to Section 4(2) of that Act that may be offered and
sold to "qualified institutional buyers" as defined in Rule 144A, which the
Adviser (or Sub-Adviser) has determined to be liquid pursuant to guidelines
established by the Trustees, will not be considered illiquid for purposes
of this 10% limitation on illiquid securities.
(13) Invest in securities of other registered investment companies, except by
purchases in the open market involving only customary brokerage commissions
and as a result of which the Fund will not hold more than 3% of the
outstanding voting securities of any one investment company, will not have
invested more than 5% of its total assets in any one investment company and
will not have invested more than 10% of its total assets in such securities
of one or more investment companies (each of the above percentages to be
determined at the time of investment), or except as part of a merger,
consolidation or other acquisition.
(14) Invest in interests in oil, gas or other mineral exploration or development
programs, or mineral leases, although it may invest in the common stocks of
companies which invest in or sponsor such programs.
The Trust, on behalf of each of the Funds, has undertaken with certain
securities commissions not to invest (i) more than 5% of the total assets of
each Fund in puts, calls, straddles, spreads or any combination thereof, (ii) in
real estate limited partnerships, or (iii) more than 10% of total assets in real
estate investment trusts. The Funds have also undertaken that investments in
unseasoned issuers and illiquid or restricted securities, together
B-36
<PAGE>
with investments in Rule 144A securities and/or Section 4(2) commercial paper,
will not exceed 15% of a Fund's total assets.
TRUSTEES AND OFFICERS
The following table lists the Trustees and executive officers of the Trust,
their ages, business addresses, and principal occupations during the past five
years. The SunAmerica Mutual Funds consist of SunAmerica Equity Funds,
SunAmerica Income Funds and SunAmerica Money Market Funds, Inc. An asterisk
indicates those Trustees who are interested persons of the Trust within the
meaning of the 1940 Act.
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
S. James Coppersmith, 62 Trustee Formerly, President and
7 Elmwood Road General Manager, WCVB-TV, a
Marblehead, MA 01945 division of the Hearst
Corporation from 1982 to
1994 (retired); Trustee/
Director of the SunAmerica
Mutual Fund Family and
Trustee of Anchor Series
Trust.
Samuel M. Eisenstat, 55 Chairman of Attorney in private practice;
430 East 86 Street the Board Trustee of RPS Realty Trust
New York, NY 10028 since December 1988;
Director of Volt Information
Sciences Funding, Inc., a
subsidiary of Volt Information
Sciences, Inc. since October 1993;
Chairman of the Board of the
SunAmerica Mutual Fund Family and
Anchor Series Trust.
Stephen J. Gutman, 52 Trustee Chairman of the Board, Chief
340 East 79 Street Operating and Executive
New York, NY 10021 Officer of Beau Brummel
Casuals Limited, Inc., a menswear
specialty retailer since May 1989;
Trustee/ Director of the SunAmerica
Mutual Fund Family and Trustee of
Anchor Series Trust.
Peter A. Harbeck*, 42 Trustee and President, SunAmerica Asset
The SunAmerica Center President Management Corp. ("SAAMCo")and
733 Third Avenue SunAmerica Capital Services,
New York, NY 10017-3204 Inc.("SACS") since August, 1995;
Director of SAAMCo and
B-37
<PAGE>
President of SunAmerica Fund
Services, Inc.,("SAFS") since May
1988; President of SunAmerica
Mutual Funds and Anchor Series
Trust; Executive Vice President and
Chief Operating Officer of SAAMCo,
from May 1988 to August 1995;
Executive Vice President, SACS,
from November 1991 to August 1995;
and Director, Resources Trust
Company.
Peter McMillan III*, 38 Trustee Executive Vice President and
1 SunAmerica Center Chief Investment Officer of
Century City SunAmerica Investments, Inc.
Los Angeles, CA 90067 since August 1989.
Sebastiano Sterpa, 66 Trustee Founder of Sterpa Realty
Suite 200 Inc., a full service real
200 West Glenoaks Blvd estate firm, since 1962;
Glendale, CA 91202 Chairman of the Sterpa Group, real
estate investments and management
company; Trustee/Director of the
SunAmerica Mutual Fund Family.
Stanton J. Feeley, 58 Executive Vice Executive Vice President and
The SunAmerica Center President Chief Investment Officer, Sun-
733 Third Avenue America Asset Management
New York, NY 10017-3204 Corp., since February 1992;
Formerly, Senior Portfolio Manager,
Delaware Management Company, Inc.
from December 1987 to February
1992.
Nancy Kelly, 45 Vice Vice President and Head
The SunAmerica Center President Trader, SAAMCo, since April
733 Third Avenue 1994; Formerly, Vice
New York, NY 10017-3204 President, Whitehorne & Co.
Ltd. (1991-1994); Sales
Trader, Lynch Jones & Ryan
(1992-1994).
Audrey L. Snell, 43 Vice Vice President and Equity
The SunAmerica Center President Portfolio Manager, SAAMCo,
733 Third Avenue since March 1991; Formerly,
New York, NY 10017-3204 held investment management position
with Campbell Associates, Inc. from
1986 to 1991.
B-38
<PAGE>
Peter C. Sutton, 31 Controller Vice President, SAAMCo, since
The SunAmerica Center September 1994; Controller,
733 Third Avenue SunAmerica Funds (since
New York, NY 10017-3204 March 1993); Assistant
Controller, SunAmerica Funds
(1990-1993).
Robert M. Zakem, 37 Secretary and Senior Vice President and
The SunAmerica Center Chief Compli- General Counsel of SAAMCo,
733 Third Avenue ance Officer since April 1993; Executive
New York, NY 10017-3204 Vice President and Director,
SACS, since February 1993; and
Vice President of SAFS, since
January 1994; Formerly, Vice
President and Associate General
Counsel, SAAMCo, from March 1992
to April 1993; Associate, Piper
& Marbury from 1989 to 1992.
Trustees and officers of the Trust are also trustees and officers of some
or all of the other investment companies managed, administered or advised by the
Adviser, and distributed by SunAmerica Capital Services, Inc. ("SACS" or the
"Distributor") and other affiliates of SunAmerica Inc.
The Trust pays each Trustee who is not an interested person of the Trust or
the Adviser (each a "disinterested" Trustee) annual compensation in addition to
reimbursement of out-of-pocket expenses in connection with attendance at
meetings of the Trustees. Specifically, each disinterested Trustee receives a
pro rata portion (based upon the Trust's net Assets) aggregate of $40,000 in
annual compensation for acting as director or trustee to all the retail funds in
the SunAmerica Mutual Funds. In addition, Mr. Eisenstat receives an aggregate of
$2,000 in annual compensation for serving as Chairman of the Boards of the
retail funds in the SunAmerica Mutual Funds. Officers of the Trust receive no
direct remuneration in such capacity from the Trust or any of the Funds.
In addition, each disinterested Trustee also serves on the Audit Committee
of the Board of Trustees. Each member of the Audit Committee receives an
aggregate of $5,000 in annual compensation for serving on the Audit Committees
of all of the SunAmerica Family of Mutual Funds. With respect to the Trust, each
member of the committee receives a pro rata portion of the $5,000 annual
compensation, based on the relative net assets of the Trust. The Trust also has
a Nominating Committee, comprised solely of disinterested Trustees, which
recommends to the Trustees those persons to be nominated for election as
Trustees by shareholders and selects and proposes nominees for election by
Trustees between shareholders' meetings. Members of the Nominating Committee
serve without compensation.
The Trustees (and Directors) of the SunAmerica Mutual Funds have adopted
the SunAmerica Disinterested Trustees' and Directors'
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<PAGE>
Retirement Plan (the "Retirement Plan") effective January 1, 1993 for the
unaffiliated Trustees. The Retirement Plan provides generally that if a
disinterested 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, each Eligible Trustee
will be credited with an amount equal to (i) 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, plus
(ii) 8.5% of any amounts credited under clause (i) during prior years. 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 January 4, 1996, the Trustees and officers of the Trust owned in the
aggregate, less than 1% of the Trust's total outstanding shares.
The following table sets forth information summarizing the compensation of
each disinterested Trustee for his services as Trustee for the fiscal year ended
September 30, 1995. Neither the Trustees who are interested persons of the Trust
receive any compensation.
COMPENSATION TABLE
- --------------------------------------------------------------------------------
Pension or Total
Retirement Compensation
Aggregate Benefits from Registrant
Compensation Accrued as and Fund
from Part of Fund Complex Paid to
Trustee Registrant Expenses* Trustees*
- --------------------------------------------------------------------------------
S. James Coppersmith $10,109 $39,472 $65,000
- --------------------------------------------------------------------------------
Samuel M. Eisenstat $10,590 $ 9,678 $69,000
- --------------------------------------------------------------------------------
Stephen J. Gutman $10,109 $16,460 $65,000
- --------------------------------------------------------------------------------
Sebastiano Sterpa $10,256 $14,960 $43,333**
- --------------------------------------------------------------------------------
* Information is as of September 30, 1995 for the four investment companies in
the complex which pay fees to these directors/trustees. The complex consists
of the SunAmerica Mutual Funds and Anchor Series Trust.
**Mr. Sterpa is not a trustee of Anchor Series Trust.
ADVISER, SUB-ADVISERS, DISTRIBUTOR AND ADMINISTRATOR
The Adviser. The Adviser, organized as a Delaware corporation in 1982, is
located at The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204, and
acts as adviser to each of the Funds pursuant to the Investment Advisory and
Management Agreement dated September 23, 1993 as amended May 20, 1994 (the
"Advisory Agreement") with the Trust, on behalf of each Fund. The Adviser is an
indirect wholly
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<PAGE>
owned subsidiary of SunAmerica Inc. (formerly, Broad Inc.). SunAmerica Inc., is
incorporated in the State of Maryland and maintains its principal executive
offices at 1 SunAmerica Center, Century City, Los Angeles, CA 90067-6022,
telephone (310) 772-6000.
Under the Advisory Agreement, the Adviser manages the investment of the
assets of each Fund and obtains and evaluates economic, statistical and
financial information to formulate and implement investment policies for each
Fund. Any investment program undertaken by the Adviser will at all times be
subject to the policies and control of the Trustees. The Adviser also provides
certain administrative services to each Fund.
Except to the extent otherwise specified in the Advisory Agreement, each
Fund pays, or causes to be paid, all other expenses of the Trust and each of the
Funds, including, without limitation, charges and expenses of any registrar,
custodian, transfer and dividend disbursing agent; brokerage commissions; taxes;
engraving and printing of share certificates; registration costs of the Funds
and their shares under Federal and state securities laws; the cost and expense
of printing, including typesetting, and distributing Prospectuses and Statements
of Additional Information respecting the Funds, and supplements thereto, to the
shareholders of the Funds; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing proxy statements and reports to
shareholders; all expenses incident to any dividend, withdrawal or redemption
options; fees and expenses of legal counsel and independent accountants;
membership dues of industry associations; interest on borrowings of the Funds;
postage; insurance premiums on property or personnel (including Officers and
Trustees) of the Trust which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification relating thereto); and all other costs of the
Trust's operation.
As compensation for its services to the Funds, the Adviser receives a fee
from each Fund (other than the Global Balanced Fund), payable monthly, computed
daily at the annual rate of.75% on the first $350 million of such Fund's average
daily assets, .70% on the next $350 million of net assets and .65% on net assets
over $700 million. With respect to the Global Balanced Fund, the Adviser
receives a fee, payable monthly, computed daily at the annual rate of 1.00% on
the first $250 million of the Fund's average daily net assets, .90% on the next
$350 million of net assets and .85% on net assets over $700 million.
The Advisory Agreement with respect to each Fund, other than the Global
Balanced Fund and Growth and Income Fund, was approved by the Trustees,
including a majority of the Trustees who are not parties to the Advisory
Agreement or "interested persons" of any such party, on March 31, 1993 and, with
respect to the Class A shares of Mid-Cap Growth Fund and Small Company Growth
Fund, by the shareholders of each Fund on September 23, 1993 and with respect to
the Class A shares and Class B shares of Blue Chip Growth Fund, Class B shares
of Mid-Cap Growth Fund, Class B shares of Small Company Growth Fund, and Class A
and Class B shares of Balanced Assets Fund, by the Adviser, the sole
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<PAGE>
initial shareholder, on September 23, 1993. The Advisory Agreement with respect
to each Fund, other than the Global Balanced Fund and Growth and Income Fund,
became effective on September 24, 1993. The Advisory Agreement in respect of the
Global Balanced Fund and Growth and Income Fund, which became effective on June
15, 1994, was approved by the Trustees, including a majority of the
disinterested Trustees, on May 20, 1994 and, with respect to the Global Balanced
Fund, by its sole initial shareholder on June 14, 1994 and, with respect to the
Growth and Income Fund, by its sole initial shareholder on June 30, 1994.
The following table sets forth the total advisory fees received by the
Adviser from each Fund pursuant to the Advisory Agreement for the fiscal years
ended September 30, 1995, 1994, and 1993.
Advisory Fees
- -------------------------------------------------------------------------------
Fund 1995 1994 1993
- -------------------------------------------------------------------------------
Balanced Assets Fund $1,821,586 $1,642,572 $229,811
- -------------------------------------------------------------------------------
Amount Waived -- -- $11,979
- -------------------------------------------------------------------------------
Blue Chip Growth Fund $565,835 $615,020 $463,678
- -------------------------------------------------------------------------------
Global Balanced Fund $269,441 $54,220* n/a
- -------------------------------------------------------------------------------
Amount Waived $115,214 $48,797 --
- -------------------------------------------------------------------------------
Growth and Income Fund $32,455 $6,177** n/a
- -------------------------------------------------------------------------------
Amount Waived $32,455 $6,177 --
- -------------------------------------------------------------------------------
Mid-Cap Growth Fund $294,505 $284,308 $189,944
- -------------------------------------------------------------------------------
Small Company Growth Fund $819,449 $607,020 $214,110
- -------------------------------------------------------------------------------
* For the period 6/15/94 (commencement of operations) through 9/30/94
** For the period 7/1/94 (commencement of operations) through 9/30/94
Certain states in which the shares of the Funds are qualified for sale
impose limitations on the expenses of the Funds. The current annual expense
limitations require that the Adviser reimburse each Fund in any amount necessary
to prevent such Fund's aggregate ordinary operating expenses (excluding
interest, taxes, distribution and brokerage fees and commissions, and
extraordinary charges such as litigation costs) from exceeding, in any fiscal
year, 2-1/2% of the first $30 million of the average daily net assets of each
Fund, 2% of the next $70 million of such assets, plus 1-1/2% of such assets in
excess of $100 million. In accordance with the terms of the Advisory Agreement,
if the expenses of a Fund exceed the amount of the fees paid by the Fund to the
Adviser, then the Adviser will reimburse the Fund the amount of such excess. For
the fiscal year ended September 30, 1995, pursuant to the foregoing limitation,
the Adviser waived its management fee in the amount of $32,455 for the Growth
and Income Fund.
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<PAGE>
The following table sets forth the fee waivers and expense reimbursements
made to the Funds by the Adviser for the fiscal years ended September 30, 1995,
1994, and 1993.
Fee Waivers and Expense Reimbursements
_______________________________________________________________________________
Fund 1995 1994 1993
_______________________________________________________________________________
Class A Class B Class A Class B
_______________________________________________________________________________
Balanced
Assets Fund -- -- -- -- $11,979
_______________________________________________________________________________
Blue Chip
Growth Fund $13,179 -- $25,518 -- --
_______________________________________________________________________________
Global
Balanced Fund -- -- $35,826 * $21,221 * n/a
_______________________________________________________________________________
Growth and
Income Fund $64,080 $37,971 $34,720 ** $9,874 ** n/a
_______________________________________________________________________________
Mid-Cap
Growth Fund $10,554 -- $17,806 -- --
_______________________________________________________________________________
Small Company
Growth Fund -- -- -- -- --
_______________________________________________________________________________
* For the period 6/15/94 (commencement of operations) through 9/30/94
** For the period 7/1/94 (commencement of operations) through 9/30/94
Continuance of the Advisory Agreement with respect to each Fund, other than
the Global Balanced Fund and Growth and Income Fund, is subject to annual
approval by vote of a majority of the Trustees or by the holders of a majority
of the respective Fund's outstanding voting securities. The Advisory Agreement
will continue in effect with respect to the Global Balanced Fund and the Growth
and Income Fund, until June 15, 1996, and thereafter from year-to-year, if
approved at least annually by vote of a majority of the Trustees or by the
holders of a majority of the respective Fund's outstanding voting securities.
Any such continuation also requires approval by a majority of the Trustees who
are not parties to the Advisory Agreement or "interested persons" of any such
party as defined in the 1940 Act by vote cast in person at a meeting called for
such purpose. The Advisory Agreement may be terminated with respect to a Fund at
any time, without penalty, on 60 days' written notice by the Trustees, by the
holders of a majority of the respective Fund's outstanding voting securities or
by the Adviser. The Advisory Agreement automatically terminates with respect to
each Fund in the event of its assignment (as defined in the 1940 Act and the
rules thereunder).
Under the terms of the Advisory Agreement, the Adviser is not liable to the
Funds, or their shareholders, for any act or omission by it or for any losses
sustained by the Funds or their shareholders,
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<PAGE>
except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
The Sub-Advisers. The Adviser has entered into a sub-advisory agreement (the
"Sub-Advisory Agreement") with each of AIG Global and GSAM pursuant to which the
Sub-Advisers provide the Global Balanced Fund with investment advisory services,
including the continuous review and administration of such Fund's investment
program. Each Sub-Adviser discharges its responsibilities subject to the
direction and control of the Trustees and the oversight and review of the
Adviser. AIG Global serves as sub-adviser for the foreign equity component of
the Fund, and GSAM serves as sub-adviser for its global bond component. In
providing sub-advisory services to the foreign equity component of the Fund with
respect to European, Japanese, and Southeast Asian securities and markets, AIG
Global will utilize the services of certain of its affiliates.
Each Sub-Adviser is a professional investment counseling firm which
provides investment services to investment companies, employee benefit plans,
endowments, foundations and/or other institutions and individuals. AIG Global is
located at 70 Pine Street, New York, NY 10270. GSAM is located at 85 Broad
Street, New York, NY 10004.
The Adviser pays each Sub-Adviser a monthly fee with respect to the actual
component of the Fund for which the Sub-Adviser performs services, computed on
average daily net assets, at the following annual rates:
Sub-Adviser Fee
AIG Global .50% on the first $50 million
.40% on the next $100 million
.30% on the next $150 million
.25% thereafter
GSAM .40% on the first $50 million
.30% on the next $100 million
.25% on the next $100 million
.20% thereafter
The following table sets forth the fees paid to AIG Global and GSAM for the
fiscal years ended September 30, 1995 and 1994.
Sub-Advisory Fees
- -------------------------------------------------------------------------------
Sub-Adviser 1995 1994
- -------------------------------------------------------------------------------
AIG Global $75,883 $14,947*
- -------------------------------------------------------------------------------
GSAM $29,912 $5,328*
- -------------------------------------------------------------------------------
* For the period 6/15/94 (commencement of operations) through 9/30/94
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<PAGE>
The Sub-Advisory Agreements were approved by the Trustees, including a
majority of the Trustees who are not parties to the Sub-Advisory Agreement or
"interested persons" of any such party, on May 20, 1994, and by the sole initial
shareholder on June 14, 1994. The Sub-Advisory Agreements became effective on
June 15, 1994.
The Sub-Advisory Agreements will expire on April 22, 1996. They may be
renewed from year-to-year thereafter, so long as continuance is specifically
approved at least annually in accordance with the requirements of the 1940 Act.
The Sub-Advisory Agreements provide that they will terminate in the event of an
assignment (as defined in the 1940 Act) or upon termination of the Advisory
Agreement. The Sub-Advisory Agreements may be terminated by the Fund, the
Adviser or the respective Sub-Adviser upon 60 days' prior written notice.
Personal Trading. The Trust and the Adviser have adopted a written Code of
Ethics (the "Code") which prescribes general rules of conduct and sets forth
guidelines with respect to personal securities trading by "Access Persons"
thereof. An Access Person as defined in the Code is an individual who is a
trustee, director, officer, general partner or advisory person of the Trust or
the Adviser. Among the guidelines on personal securities trading include: (i)
securities being considered for purchase or sale, or purchased or sold, by any
Investment Company advised by the Adviser, (ii) Initial Public Offerings, (iii)
private placements, (iv) blackout periods, (v) short-term trading profits, (vi)
gifts, and (vii) services as a director. These guidelines are substantially
similar to those contained in the Report of the Advisory Group on Personal
Investing issued by the Investment Company Institute's Advisory Panel. The
Adviser reports to the Board of Trustees on a quarterly basis, as to whether
there were any violations of the Code by Access Persons of the Trust or the
Adviser during the quarter.
The Sub-Advisers have adopted a written Code of Ethics, the provisions of
which are materially similar to those in the Code, and have undertaken to comply
with the provisions of the Code to the extent such provisions are more
restrictive. Further, the Sub-Advisers report to the Adviser on a quarterly
basis, as to whether there were any Code of Ethics violations by employees
thereof who may be deemed Access Persons of the Trust. In turn, the Adviser
reports to the Board of Trustees as to whether there were any violations of the
Code by Access Persons of the Trust or the Adviser.
The Distributor. The Trust, on behalf of each Fund, has entered into a
distribution agreement (the "Distribution Agreement") with the Distributor, a
registered broker-dealer and an indirect wholly owned subsidiary of SunAmerica
Inc., to act as the principal underwriter of the shares of each Fund. The
address of the Distributor is The SunAmerica Center, 733 Third Avenue, New York,
NY 10017-3204. The Distribution Agreement provides that the Distributor has the
exclusive right to distribute shares of the Funds through its registered
representatives and authorized broker-dealers. The Distribution Agreement also
provides that the Distributor will pay the promotional expenses, including the
incremental cost of printing prospectuses, annual reports and other
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<PAGE>
periodic reports respecting each Fund, for distribution to persons who are not
shareholders of such Fund and the costs of preparing and distributing any other
supplemental sales literature. However, certain promotional expenses may be
borne by the Funds (see "Distribution Plans" below).
The Distribution Agreement with respect to each Fund, other than the Global
Balanced Fund and the Growth and Income Fund, was approved by the Trustees,
including a majority of those Trustees who are not "interested persons" of the
Trust, on March 31, 1993, and with respect to the Global Balanced Fund and the
Growth and Income Fund on May 20, 1994. The Distribution Agreement became
effective with respect to each Fund, other than the Global Balanced Fund and
Growth and Income Fund, on September 24, 1993, and with respect to the Global
Balanced Fund and the Growth and Income Fund on June 15, 1994. Continuance of
the Distribution Agreement with respect to each Fund, other than the Global
Balanced Fund and the Growth and Income Fund, is subject to annual approval by
vote of the Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust. The Distribution Agreement will remain in
effect until June 15, 1996 and thereafter from year-to-year with respect to the
Global Balanced Fund and the Growth and Income Fund, if such continuance is
approved at least annually by the Trustees, including a majority of the Trustees
who are not "interested persons" of the Trust. The Trust and the Distributor
each has the right to terminate the Distribution Agreement with respect to a
Fund on 60 days' written notice, without penalty. The Distribution Agreement
will terminate automatically in the event of its assignment as defined in the
1940 Act and the rules thereunder.
The Distributor may, from time to time, pay additional commissions or
promotional incentives to brokers, dealers or other financial services firms
that sell shares of the Funds. In some instances, such additional commissions,
fees or other incentives may be offered only to certain firms, including Royal
Alliance Associates, Inc. and SunAmerica Securities, Inc. affiliates of the
Distributor, that sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Funds, or of other funds underwritten
by the Distributor. In addition, the terms and conditions of any given
promotional incentive may differ from firm to firm. Such differences will,
nevertheless, be fair and equitable, and based on such factors as size,
geographic location, or other reasonable determinants, and will in no way affect
the amount paid to any investor.
Distribution Plans. As indicated in the Prospectus, the Trustees of the Trust
and the shareholders of each class of shares of each Fund have adopted
Distribution Plans (the "Class A Plan" and the "Class B Plan," and collectively,
the "Distribution Plans"). Reference is made to "Management of the Trust -
Distribution Plans" in the Prospectus for certain information with respect to
the Distribution Plans.
Under the Class A Plan, the Distributor may receive payments from a Fund at
an annual rate of up to 0.10% of average daily net
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<PAGE>
assets of such Fund's Class A shares to compensate the Distributor and certain
securities firms for providing sales and promotional activities for distributing
that class of shares. Under the Class B Plan, the Distributor may receive
payments from a Fund at the annual rate of up to 0.75% of the average daily net
assets of such Fund's 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 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 will 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 of up to 0.25% of the aggregate average daily net assets of such
class of shares for payments to broker-dealers for providing continuing account
maintenance. In this regard, some payments are used to compensate broker-dealers
with trail commissions or account maintenance and service fees in an amount up
to 0.25% per year of the assets maintained in a Fund by their customers.
The Distribution Plans with respect to each Fund, other than the Global
Balanced Fund and the Growth and Income Fund, were approved on March 31, 1993 by
the Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Distribution Plans (the "Independent Trustees"), and with
respect to the Class A shares of Mid-Cap Growth Fund and Small Company Growth
Fund, by the shareholders of each Fund on September 23, 1993, and with respect
to the Class A shares and Class B shares of Blue Chip Growth Fund, Class B
shares of Mid-Cap Growth Fund, Class B shares of Small Company Growth Fund, and
Class A and Class B shares of Balanced Assets Fund, by the Adviser, the sole
initial shareholder, on September 23, 1993. These Distribution Plans became
effective on September 24, 1993. The Distribution Plans in respect of the Global
Balanced Fund and Growth and Income Fund were approved by the Trustees,
including a majority of the Independent Trustees, on May 20, 1994 and with
respect to the Global Balanced Fund by its sole initial shareholder on June 14,
1994 and with respect to the Growth and Income Fund, by its sole initial
shareholder on June 30, 1994.
The following table sets forth the distribution and service maintenance
fees the Distributor received from the Funds for the fiscal years ended
September 30, 1995, 1994, and 1993.
B-47
<PAGE>
Distribution and Service Maintenance Fees
- --------------------------------------------------------------------------------
Fund 1995 1994 1993
- --------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B
- --------------------------------------------------------------------------------
Balanced
Assets Fund $237,888 $1,749,100 $158,785 $1,736,424 $1,268 $243,481
- --------------------------------------------------------------------------------
Blue Chip
Growth Fund $42,755 $632,288 $5,390 $804,627 $0 $706,958
- --------------------------------------------------------------------------------
Global
Balanced Fund $44,919 $141,100 $11,026* $22,717* n/a n/a
- --------------------------------------------------------------------------------
Growth and
Income Fund $11,338*** $10,876*** $2,714** $480** n/a n/a
- --------------------------------------------------------------------------------
Mid-Cap
Growth Fund $115,641 $62,270 $119,773 $36,868 $88,640 $0
- --------------------------------------------------------------------------------
Small Company
Growth Fund $187,524 $556,816 $132,081 $431,989 $98,420 $4,133
- --------------------------------------------------------------------------------
* For the period 6/15/94 (commencement of operations) through 9/30/94
** For the period 7/1/94 (commencement of operations) through 9/30/94
*** For the fiscal year ended 9/30/95 the Distributor waived fees in the
amount of $16,747 for Growth and Income Fund.
Continuance of the Distribution Plans with respect to each Fund is subject
to annual approval by vote of the Trustees, including a majority of the
Independent Trustees. A Distribution Plan may not be amended to increase
materially the amount authorized to be spent thereunder with respect to a class
of shares of a Fund, without approval of the shareholders of the affected class
of shares of the Fund. In addition, all material amendments to the Distribution
Plans must be approved by the Trustees in the manner described above. A
Distribution Plan may be terminated at any time with respect to a Fund without
payment of any penalty by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the affected class of shares of the Fund. So long as the Distribution
Plans are in effect, the election and nomination of the Independent Trustees of
the Trust shall be committed to the discretion of the Independent Trustees. In
the Trustees' quarterly review of the Distribution Plans, they will consider the
continued appropriateness of, and the level of, compensation provided in the
Distribution Plans. In their consideration of the Distribution Plans with
respect to a Fund, the Trustees must consider all factors they deem relevant,
including information as to the benefits of the Fund and the shareholders of the
relevant class of the Fund.
The Administrator. The Trust has entered into a Service Agreement, under the
terms of which SunAmerica Fund Services, Inc. ("SAFS"), an indirect wholly owned
subsidiary of SunAmerica Inc., acts as a
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<PAGE>
servicing agent assisting State Street Bank and Trust Company ("State Street")
in connection with certain services offered to the shareholders of each of the
Funds. Under the terms of the Service Agreement, SAFS may receive reimbursement
of its costs in providing such shareholder services. SAFS is located at The
SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204.
The Trustees, including a majority of the Trustees who are not parties to
the Service Agreement or "interested persons", as that term is defined in the
1940 Act, approved the Service Agreement with respect to each Fund, other than
the Global Balanced Fund and Growth and Income Fund, on March 31, 1993, and with
respect to the Global Balanced Fund and Growth and Income Fund on May 20, 1994.
The Service Agreement will remain in effect until June 15, 1996 and from year-
to-year thereafter provided its continuance is approved annually by vote of the
Trustees including a majority of the disinterested Trustees.
Pursuant to the Service Agreement, as compensation for services rendered,
SAFS will receive a fee from the Trust subject to review and approval by the
Trustees. This fee represents the full cost of providing shareholder and
transfer agency services to the Trust. From this fee, SAFS pays a fee to State
Street, and its affiliate, National Financial Data Services ("NFDS" and with
State Street, the "Transfer Agent") (other than out-of-pocket charges which
would be paid by the Trust). For further information regarding the Transfer
Agent see the section entitled "Additional Information" below.
PORTFOLIO TRANSACTIONS AND BROKERAGE
As discussed in the Prospectus, the Adviser is responsible for decisions to
buy and sell securities for each Fund, selection of broker-dealers and
negotiation of commission rates. With respect to the Global Balanced Fund, AIG
Global and GSAM are responsible for decisions to buy and sell foreign equity and
global fixed income securities, respectively, selection of broker-dealers and
negotiation of commission rates for their respective component of the portfolio.
Purchases and sales of securities on a securities exchange are effected through
brokers-dealers who charge a negotiated commission for their services. Orders
may be directed to any broker-dealer including, to the extent and in the manner
permitted by applicable law, an affiliated brokerage subsidiary of the Adviser,
AIG Global or GSAM.
In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission (although the price of the security usually includes a profit to the
dealer). In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain
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<PAGE>
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid.
The Adviser's (or Sub-Adviser's) primary consideration in effecting a
security transaction is to obtain the best net price and the most favorable
execution of the order. However, the Adviser (or Sub-Adviser) may select broker-
dealers which provide it with research services and may cause a Fund to pay such
broker-dealers commissions which exceed those that other broker-dealers may have
charged, if in its view the commissions are reasonable in relation to the value
of the brokerage and/or research services provided by the broker-dealer. Certain
research services furnished by brokers may be useful to the Adviser (or Sub-
Adviser) with clients other than the Trust. No specific value can be determined
for research services furnished without cost to the Adviser (or Sub-Adviser) by
a broker. The Adviser (and each Sub-Adviser) is of the opinion that because the
material must be analyzed and reviewed by its staff, its receipt does not tend
to reduce expenses, but may be beneficial in supplementing the Adviser's (or
Sub-Adviser's) research and analysis. Therefore, it may tend to benefit the
Funds by improving the quality of the Adviser's (or Sub-Adviser's) investment
advice. The investment advisory fees paid by the Funds are not reduced because
the Adviser (or Sub-Adviser) receives such services. When making purchases of
underwritten issues with fixed underwriting fees, the Adviser (or Sub-Adviser)
may designate the use of broker-dealers who have agreed to provide the Adviser
(or Sub-Adviser) with certain statistical, research and other information.
Subject to applicable law and regulations, consideration may also be given
to the willingness of particular brokers to sell shares of a Fund as a factor in
the selection of brokers for transactions effected on behalf of a Fund, subject
to the requirement of best price and execution.
Although the objectives of other accounts or investment companies which the
Adviser (or Sub-Adviser) manages may differ from those of the Funds, it is
possible that, at times, identical securities will be acceptable for purchase by
one or more of the Funds and one or more other accounts or investment companies
which the Adviser manages. However, the position of each account or company in
the securities of the same issue may vary with the length of the time that each
account or company may choose to hold its investment in those securities. The
timing and amount of purchase by each account and company will also be
determined by its cash position. If the purchase or sale of a security is
consistent with the investment policies of one or more of the Funds and one or
more of these other accounts or companies is considered at or about the same
time, transactions in such securities will be allocated in a manner deemed
equitable by the Adviser (or Sub-Adviser). The Adviser (or Sub-Adviser) may
combine such transactions, in accordance with applicable laws and regulations,
where the size of
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<PAGE>
the transaction would enable it to negotiate a better price or
reduced commission. However, simultaneous transactions could
adversely affect the ability of a Fund to obtain or dispose of the
full amount of a security, which it seeks to purchase or sell, or
the price at which such security can be purchased or sold.
The following tables set forth the brokerage commissions paid
by the Funds and the amounts of the brokerage commissions which
were paid to affiliated broker-dealers by the Funds for the fiscal
years ended September 30, 1995, 1994, and 1993.
1995 Brokerage Commissions
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Aggregate Amount paid to Percentage paid
Brokerage Affiliated to Affiliated
Fund Commissions Broker-Dealers Broker-Dealers
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced
Assets Fund $758,880 $13,735 1.8%
- -------------------------------------------------------------------------------
Blue Chip
Growth Fund $479,902 $7,125 1.5%
- -------------------------------------------------------------------------------
Global
Balanced Fund $136,225 $1,500 1.1%
- -------------------------------------------------------------------------------
Growth and
Income Fund $19,916 $0 0.0%
- -------------------------------------------------------------------------------
Mid-Cap Growth
Fund $255,418 $250 0.1%
- -------------------------------------------------------------------------------
Small Company
Growth Fund $338,503 $0 0.0%
- -------------------------------------------------------------------------------
1994 Brokerage Commissions
- -------------------------------------------------------------------------------
Aggregate Amount paid to Percentage paid
Brokerage Affiliated to Affiliated
Fund Commissions Broker-Dealers Broker-Dealers
- -------------------------------------------------------------------------------
Balanced
Assets Fund $715,367 $16,950 2.4%
- -------------------------------------------------------------------------------
</TABLE>
B-51
<PAGE>
- -------------------------------------------------------------------------------
Blue Chip
Growth Fund $302,994 $6,054 2.0%
- --------------------------------------------------------------------------------
Global
Balanced Fund $58,702* $0* 0.0%*
- --------------------------------------------------------------------------------
Growth and
Income Fund $3,930** $0** %0.0**
- --------------------------------------------------------------------------------
Mid-Cap Growth
Fund $443,261 $16,518 3.7%
- --------------------------------------------------------------------------------
Small Company
Growth Fund $534,360 $20,400 3.8%
- --------------------------------------------------------------------------------
* For the period 6/15/94 (commencement of operations) through 9/30/94
** For the period 7/1/94 (commencement of operations) through 9/30/94
1993 Brokerage Commissions
- --------------------------------------------------------------------------------
Aggregate Amount paid to Percentage paid
Brokerage Affiliated to Affiliated
Fund Commissions Broker-Dealers Broker-Dealers
- --------------------------------------------------------------------------------
Balanced
Assets Fund $94,633 $0 0.0%
- --------------------------------------------------------------------------------
Blue Chip
Growth Fund $264,610 $9,744 3.7%
- --------------------------------------------------------------------------------
Mid-Cap Growth
Fund $171,251 $360 0.2%
- --------------------------------------------------------------------------------
Small Company
Growth Fund $177,179 $450 0.25%
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES
Shares of each of the Funds are sold at the respective net asset value next
determined after receipt of a purchase order, plus a sales charge, which, at the
election of the investor, may be imposed either (i) at the time of purchase
(Class A shares), or (ii) on a deferred basis (Class B shares and certain Class
A shares). Reference is made to "Purchase of Shares" in the Prospectus for
certain information as to the purchase of Fund shares.
The following tables set forth the front-end sales concessions with respect
to Class A shares of each Fund, the amount of the front-end sales concessions
which was reallowed to affiliated
B-52
<PAGE>
broker-dealers, and the contingent deferred sales charges with respect to Class
B shares of each Fund, received by the Distributor for the fiscal years ended
September 30, 1995, 1994, and 1993.
1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Front-End Sales Amount Reallowed Contingent Deferred
Concessions- to Affiliated Sales Charge-
Fund Class A Shares Broker-Dealers Class B Shares
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $565,677 $411,596 $367,583
- -----------------------------------------------------------------------------------
Blue Chip Growth Fund $ 33,816 $ 27,360 $ 88,628
- -----------------------------------------------------------------------------------
Global Balanced Fund $139,083 $100,770 $ 47,198
- -----------------------------------------------------------------------------------
Growth and Income Fund $ 22,142 $ 14,608 $ 1,965
- -----------------------------------------------------------------------------------
Mid-Cap Growth Fund $104,245 $ 69,230 $ 40,076
- -----------------------------------------------------------------------------------
Small Company Growth Fund $602,843 $317,796 $105,710
- -----------------------------------------------------------------------------------
</TABLE>
1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Front-End Sales Amount Reallowed Contingent Deferred
Concessions- to Affiliated Sales Charge-
Fund Class A Shares Broker-Dealers Class B Shares
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $637,524 $447,006 $268,455
- -----------------------------------------------------------------------------------
Blue Chip Growth Fund $ 70,030 $ 55,499 $ 80,423
- -----------------------------------------------------------------------------------
Global Balanced Fund $187,819* $138,775* $ 4,745*
- -----------------------------------------------------------------------------------
Growth and Income Fund $ 715** $ 620** --
- -----------------------------------------------------------------------------------
Mid-Cap Growth Fund $186,243 $118,270 $ 6,456
- -----------------------------------------------------------------------------------
Small Company Growth Fund $295,035 $187,986 $ 54,793
- -----------------------------------------------------------------------------------
</TABLE>
* For the period 6/15/94 (commencement of operations) through 9/30/94
** For the period 7/1/94 (commencement of operations) through 9/30/94
1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Front-End Sales Amount Reallowed Contingent Deferred
Concessions- to Affiliated Sales Charge-
Fund Class A Shares Broker-Dealers Class B Shares
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $13,473 $ 7,493 $31,326
- -----------------------------------------------------------------------------------
Blue Chip Growth Fund $0 $0 $71,659
- -----------------------------------------------------------------------------------
</TABLE>
B-53
<PAGE>
<TABLE>
- ----------------------------------------------------
<S> <C> <C> <C>
Mid-Cap Growth Fund $382,025 $214,533 $0
- ----------------------------------------------------
Small Company Growth Fund $266,721 $152,859 $4
- ----------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES ("CDSCS") APPLICABLE TO CERTAIN CLASS B
SHARES. Class B shares of the Small Company Growth Fund and the Balanced Assets
Fund issued to shareholders in exchange for shares of Old Emerging Growth and
Old Balanced Assets, respectively, in the Reorganization, are subject to the
CDSC schedule that applied to redemptions of shares of these funds at the time
of reorganization. Upon a redemption of these shares, the shareholder will
receive credit for the periods both prior to and after the Reorganization during
which the shares were held. The following table sets forth the rates of the CDSC
applicable to these shares:
<TABLE>
<CAPTION>
=============================================================================
<S> <C>
Contingent Deferred Sales Charge
as a Percentage of Dollars
Year Since Purchase Payment Was Made Invested or Redemption Proceeds
- -----------------------------------------------------------------------------
First 5%
- -----------------------------------------------------------------------------
Second 4%
- -----------------------------------------------------------------------------
Third 3%
- -----------------------------------------------------------------------------
Fourth 2%
- -----------------------------------------------------------------------------
Fifth 1%
- -----------------------------------------------------------------------------
Sixth and thereafter 0%
=============================================================================
</TABLE>
Any Class B shares purchased after the date of the Reorganization (other
than through the reinvestment of dividends and distributions, which are not
subject to the CDSC) will be subject to the CDSC schedule reflected in the
Prospectus.
CONVERSION FEATURE APPLICABLE TO CERTAIN CLASS B SHARES. Shareholders of Class B
shares of the Small Company Growth Fund and the Balanced Assets Fund issued in
exchange for shares of Old Emerging Growth and Old Balanced Assets,
respectively, in the Reorganization, will receive credit for the periods both
prior to and after the Reorganization during which the shares were held, for
purposes of computing the seven year holding period applicable to the conversion
feature.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES. As discussed under "Purchase of
Shares" in the Prospectus, CDSCs may be waived on redemptions of Class B shares
under certain circumstances. The conditions set forth below are applicable with
respect to the following situations with the proper documentation:
B-54
<PAGE>
Death. CDSCs may be waived on redemptions within one year following the
death (i) of the sole shareholder on an individual account, (ii) of a joint
tenant where the surviving joint tenant is the deceased's spouse, or (iii) of
the beneficiary of a Uniform Gifts to Minors Act, Uniform Transfers to Minors
Act or other custodial account. The CDSC waiver is also applicable in the case
where the shareholder account is registered as community property. If, upon the
occurrence of one of the foregoing, the account is transferred to an account
registered in the name of the deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B shares are not redeemed within one year of the death, they will
remain Class B shares and be subject to the applicable CDSC, when redeemed.
Disability. CDSCs may be waived on redemptions occurring within one year
after the sole shareholder on an individual account or a joint tenant on a
spousal joint tenant account becomes disabled (as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, as amended). To be eligible for such waiver,
(i) the disability must arise after the purchase of shares and (ii) the disabled
shareholder must have been under age 65 at the time of the initial determination
of disability. If the account is transferred to a new registration and then a
redemption is requested, the applicable CDSC will be charged.
Purchases through the Distributor. An investor may purchase shares of a Fund
through dealers which have entered into selected dealer agreements with the
Distributor. An investor's dealer who has entered into a distribution
arrangement with the Distributor is expected to forward purchase orders and
payment promptly to the Fund. Orders received by the Distributor before the
close of business will be executed at the offering price determined at the close
of regular trading on the NYSE that day. Orders received by the Distributor
after the close of business will be executed at the offering price determined
after the close of the NYSE on the next trading day. The Distributor reserves
the right to cancel any purchase order for which payment has not been received
by the fifth business day following the investment. A Fund will not be
responsible for delays caused by dealers.
Purchase by Check. In the case of a new account, purchase orders by check must
be submitted directly by mail to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, NY 10017-3204,
together with payment for the purchase price of such shares and a completed New
Account Application. Shares of each Fund may be purchased directly through the
Transfer Agent. Upon receipt of the completed New Account Application and
payment check, the Transfer Agent will purchase full and fractional shares of
the applicable Fund at the net asset value next computed after the check is
received, plus the applicable sales charge. Certified checks are not necessary,
but checks are accepted subject to collection at full face value in United
States funds and must be drawn on a bank located in the
B-55
<PAGE>
United States. There are restrictions on the redemption of shares purchased by
check for which funds are being collected. (See "Redemption of Shares.")
Purchase through SAFS. SAFS will effect a purchase order on behalf of a customer
who has an investment account upon confirmation of a verified credit balance at
least equal to the amount of the purchase order (subject to the minimum $500
investment requirement for wire orders). If such order is received at or prior
to 4:00 P.M., Eastern time, on a day the NYSE is open for business, the purchase
of shares of a Fund will be effected on that day. If the order is received after
4:00 P.M., Eastern time, the order will be effected on the next business day.
Purchase by Federal Funds Wire. An investor may make purchases by having his or
her bank wire Federal funds to the Trust's Transfer Agent. Federal funds
purchase orders will be accepted only on a day on which the Trust and the
Transfer Agent are open for business. In order to insure prompt receipt of a
Federal funds wire, it is important that these steps be followed:
1. You must have an existing SunAmerica Fund Account before wiring funds.
To establish an account, complete the New Account Application and send
it via facsimile to SunAmerica Fund Services, Inc. at: (212) 551-5343.
2. Call SunAmerica Fund Services' Shareholder/Dealer Services, toll free at
(800) 858-8850, extension 5125 to obtain your new account number.
3. Instruct the bank to wire the specified amount to the Transfer Agent:
State Street Bank and Trust Company, Boston, MA, ABA# 0110-00028; DDA#
99029712, SunAmerica [name of Fund, Class __] (include shareholder name
and account number).
Waiver of Sales Charges with Respect to Certain Purchases of Class A Shares. To
the extent that sales are made for personal investment purposes, the sales
charge is waived as to Class A shares purchased by current or retired officers,
directors, and other full-time employees of SunAmerica and its affiliates, as
well as members of the selling group and family members of the foregoing. In
addition, the sales charge is waived with respect to shares purchased by certain
qualified retirement plans or employee benefit plans (other than IRAs), which
are sponsored or administered by SunAmerica or an affiliate thereof. Further,
the sales charge is waived with respect to shares purchased by "wrap accounts"
for the benefit of clients of broker-dealers, financial institutions or
financial planners adhering to the following standards established by the
Distributor: (i) the broker-dealer, financial institution or financial planner
charges its client(s) an advisory fee based on the assets under management on an
annual basis, and (ii) such broker-dealer, financial institution or financial
planner does not advertise that shares of the Funds may be purchased by clients
at
B-56
<PAGE>
net asset value. Shares purchased under this waiver may not be resold except to
the Fund. Shares are offered at net asset value to the foregoing persons because
of anticipated economies in sales effort and sales related expenses. Reductions
in sales charges apply to purchases or shares by a "single person" including an
individual; members of a family unit comprising husband, wife and minor
children; or a trustee or other fiduciary purchasing for a single fiduciary
account. Complete details concerning how an investor may purchase shares at
reduced sales charges may be obtained by contacting the Distributor.
Reduced Sales Charges (Class A Shares only). As discussed under "Purchase of
Shares" in the Prospectus, investors in Class A shares of a Fund may be entitled
to reduced sales charges pursuant to the following special purchase plans made
available by the Trust.
Combined Purchase Privilege. The following persons may qualify for the
sales charge reductions or eliminations by combining purchases of Fund shares
into a single transaction:
(i) an individual, or a "company" as defined in Section 2(a)(8) of the 1940
Act (which includes corporations which are corporate affiliates of each other);
(ii) an individual, his or her spouse and their minor children, purchasing
for his, her or their own account;
(iii) a trustee or other fiduciary purchasing for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Internal Revenue Code);
(iv) tax-exempt organizations qualifying under Section 501(c)(3) of the
Internal Revenue Code (not including 403(b) plans);
(v) employee benefit plans of a single employer or of affiliated employers,
other than 403(b) plans; and
(vi) group purchases as described below.
A combined purchase currently may also include shares of other funds in the
SunAmerica Mutual Funds (other than money market funds) purchased at the same
time through a single investment dealer, if the dealer places the order for such
shares directly with the Distributor.
Rights of Accumulation. A purchaser of Fund shares may qualify for a
reduced sales charge by combining a current purchase (or combined purchases as
described above) with shares previously purchased and still owned; provided the
cumulative value of such shares (valued at cost or current net asset value,
whichever is higher), amounts to $50,000 or more. In determining the shares
previously purchased, the calculation will include, in addition to
B-57
<PAGE>
other Class A shares of the particular Fund that were previously purchased,
shares of the other classes of the same Fund, as well as shares of any class of
any other Fund or of any of the other Funds advised by the Adviser, as long as
such shares were sold with a sales charge or acquired in exchange for shares
purchased with such a sales charge.
The shareholder's dealer, if any, or the shareholder, must notify the
Distributor at the time an order is placed of the applicability of the reduced
charge under the Right of Accumulation. Such notification must be in writing by
the dealer or shareholder when such an order is placed by mail. The reduced
sales charge will not be granted if: (a) such information is not furnished at
the time of the order; or (b) a review of the Distributor's or the Transfer
Agent's records fails to confirm the investor's represented holdings.
Letter of Intent. A reduction of sales charges is also available to an
investor who, pursuant to a written Letter of Intent which is set forth in the
New Account Application in the Prospectus, establishes a total investment goal
in Class A shares of one or more Funds to be achieved through any number of
investments over a thirteen-month period, of $50,000 or more. Each investment in
such Funds made during the period will be subject to a reduced sales charge
applicable to the goal amount. The initial purchase must be at least 5% of the
stated investment goal and shares totaling 5% of the dollar amount of the Letter
of Intent will be held in escrow by the Transfer Agent, in the name of the
investor. Shares of any class of shares of any Fund, or of other funds advised
by the Adviser which impose a sales charge at the time of purchase, which the
investor intends to purchase or has previously purchased during a 30-day period
prior to the date of execution of the Letter of Intent and still owns, may also
be included in determining the applicable reduction; provided, the dealer or
shareholder notifies the Distributor of such prior purchase(s).
The Letter of Intent does not obligate the investor to purchase, nor the
Trust to sell, the indicated amounts of the investment goal. In the event the
investment goal is not achieved within the thirteen-month period, the investor
is required to pay the difference between the sales charge otherwise applicable
to the purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the Distributor
is authorized by the Letter of Intent to liquidate a sufficient number of
escrowed shares to obtain such difference. If the goal is exceeded and purchases
pass the next sales charge break-point, the sales charge on the entire amount of
the purchase that results in passing that break-point, and on subsequent
purchases, will be subject to a further reduced sales charge in the same manner
as set forth above under "Rights of Accumulation," but there will be no
retroactive reduction of sales charges on previous purchases. At any time while
a Letter of Intent is in effect, a shareholder may, by written notice to the
Distributor, increase the amount of the stated goal. In that
B-58
<PAGE>
event, shares of the applicable Funds purchased during the previous 90-day
period and still owned by the shareholder will be included in determining the
applicable sales charge. The 5% escrow and the minimum purchase requirement will
be applicable to the new stated goal. Investors electing to purchase shares of
one or more of the Funds pursuant to this purchase plan should carefully read
such Letter of Intent.
Reduced Sales Charge for Group Purchases. Members of qualified groups may
purchase Class A shares of the Funds under the combined purchase privilege as
described above.
To receive a rate based on combined purchases, group members must purchase
Class A shares of a Fund through a single investment dealer designated by the
group. The designated dealer must transmit each member's initial purchase to the
Distributor, together with payment and completed New Account Application. After
the initial purchase, a member may send funds for the purchase of Class A shares
directly to the Transfer Agent. Purchases of a Fund's shares are made at the
public offering price based on the net asset value next determined after the
Distributor or the Transfer Agent receives payment for the Class A shares. The
minimum investment requirements described above apply to purchases by any group
member.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or other
organized groups of persons (the members of which may include other qualified
groups) provided that: (i) the group has at least 25 members of which at least
ten members participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some purpose in addition
to the purchase of investment company shares at a reduced sales charge; (iv) the
group's sole organizational nexus or connection is not that the members are
credit card customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) the group agrees to provide its
designated investment dealer access to the group's membership by means of
written communication or direct presentation to the membership at a meeting on
not less frequently than an annual basis; (vi) the group or its investment
dealer will provide annual certification, in form satisfactory to the Transfer
Agent, that the group then has at least 25 members and that at least ten members
participated in group purchases during the immediately preceding 12 calendar
months; and (vii) the group or its investment dealer will provide periodic
certification, in form satisfactory to the Transfer Agent, as to the eligibility
of the purchasing members of the group.
Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is carried
on the records of the group or on the records of any constituent member of the
group as being a good standing employee, partner, member or person of like
status of the
B-59
<PAGE>
group or constituent member; or (iii) any fiduciary purchasing shares for the
account of a member of a qualified group or a member's beneficiary. For example,
a qualified group could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and corporations. The
members of the group would then consist of the individuals, the sole proprietors
and their employees, the members of the partnership and their employees, and the
corporations and their employees, as well as the trustees of employee benefit
trusts acquiring a Fund's shares for the benefit of any of the foregoing.
Interested groups should contact their investment dealer or the
Distributor. The Trust reserves the right to revise the terms of or to suspend
or discontinue group sales with respect to shares of the Funds at any time.
Net Asset Value Transfer Program. Investors may purchase Class A shares of
a Fund at net asset value to the extent that the investment represents the
proceeds from a redemption of a non-SunAmerica mutual fund in which the investor
either (a) paid a front-end sales load or (b) was subject to, or paid a CDSC on
the redemption proceeds. Nevertheless, the Distributor will pay a commission to
any dealer who initiates or is responsible for such an investment, in the amount
of .50% of the amount invested, subject, however, to forfeiture in the event of
a redemption during the fiscal year from the date of purchase. In addition, it
is essential that a NAV Transfer Program Form accompany the New Account
Application to indicate that the investment is intended to participate in the
Net Asset Value Transfer Program (formerly, Exchange Program for Investment
Company Shares). This program may be revised or terminated without notice by the
Distributor. For current information, contact Shareholder/Dealer Services at
(800) 858-8850.
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption of Fund shares.
If the Trustees determine that it would be detrimental to the best
interests of the remaining shareholders of a Fund to make payment wholly or
partly in cash, the Trust, having filed with the SEC a notification of election
pursuant to Rule 18f-1 on behalf of each of the Funds, may pay the redemption
price in whole, or in part, by a distribution in kind of securities from a Fund
in lieu of cash. In conformity with applicable rules of the SEC, the Funds are
committed to pay in cash all requests for redemption, by any shareholder of
record, limited in amount with respect to each shareholder during any 90-day
period to the lesser of (i) $250,000, or (ii) 1% of the net asset value of the
applicable Fund at the beginning of such period. If shares are redeemed in kind,
the redeeming shareholder would incur brokerage costs in converting the assets
into cash. The method of valuing portfolio securities is described below in the
section entitled "Determination of Net Asset
B-60
<PAGE>
Value," and such valuation will be made as of the same time the redemption price
is determined.
DETERMINATION OF NET ASSET VALUE
Each Fund calculates the net asset value of its shares separately by
dividing the total value of each class's net assets by the shares of such class
outstanding. Shares are valued each day the New York Stock Exchange ("NYSE") is
open as of approximately 4:00 P.M., Eastern time. The net asset value of a
Fund's shares will also be computed on each other day in which there is a
sufficient degree of trading in such Fund's securities that the net asset value
of its shares might be materially affected by changes in the values of the
portfolio securities; provided, however, that on such day the Trust receives a
request to purchase or redeem such Fund's shares. The days and times of such
computation may, in the future, be changed by the Trustees in the event that the
portfolio securities are traded in significant amounts in markets other than the
NYSE, or on days or at times other than those during which the NYSE is open for
trading.
Securities that are actively traded over-the-counter, including listed
securities for which the primary market is believed by the Adviser (or Sub-
Adviser) to be over-the-counter, are valued on the basis of the bid prices
provided by principal market makers. Securities listed on the NYSE or other
national securities exchanges, other than those principally traded over-the-
counter, are valued on the basis of the last sale price on the exchange on which
they are primarily traded. However, if the last sale price on the NYSE is
different than the last sale price on any other exchange, the NYSE price will be
used. If there are no sales on that day, then the securities are valued at the
bid price on the NYSE or other primary exchange for that day. Options traded on
national securities exchanges are valued at the last sale price on such
exchanges preceding the valuation, and Futures and options thereon, which are
traded on commodities exchanges, are valued at their last sale price as of the
close of such commodities exchanges.
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 securities 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.
The above procedures need not be used to determine the value of debt
securities owned by a Fund if, in the opinion of the Trustees, some other method
would more accurately reflect the fair market value of such debt securities in
the quantities owned by such Fund. Securities for which quotations are not
readily available and other assets are appraised at fair value, as determined
pursuant to procedures adopted in good faith by the
B-61
<PAGE>
Trustees. Short-term debt securities are valued at their current market value or
fair value, which for securities with remaining maturities of 60 days or less
has been determined in good faith by the Trustees to be represented by amortized
cost value, absent unusual circumstances. A pricing service may be utilized to
value the Funds' assets under the procedures set forth above. Any use of a
pricing service will be approved and monitored by the Trustees. The value of all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and offered prices of
such currencies against U.S. dollars last quoted by any large New York bank
which is a dealer in foreign currency.
The values of securities held by the Funds, and other assets used in
computing net asset value, are determined as of the time trading in such
securities is completed each day, which in the case of foreign securities may be
at a time prior to 4:00 P.M., Eastern time. On occasion, the values of foreign
securities and exchange rates may be affected by events occurring between the
time as of which determinations of such values or exchange rates are made and
4:00 P.M., Eastern time. When such events materially affect the values of
securities held by the Funds or their liabilities, such securities and
liabilities will be valued at fair value as determined in good faith by the
Trustees.
PERFORMANCE DATA
Each Fund may advertise performance data that reflects various measures of
total return and the Balanced Assets Fund may advertise data that reflects
yield. An explanation of the data presented and the methods of computation that
will be used are as follows.
A Fund's performance may be compared to the historical returns of various
investments, performance indices of those investments or economic indicators,
including, but not limited to, stocks, bonds, certificates of deposit, money
market funds and U.S. Treasury Bills. Certain of these alternative investments
may offer fixed rates of return and guaranteed principal and may be insured.
Average annual total return is determined separately for Class A and Class
B shares in accordance with a formula specified by the SEC. Average annual total
return is computed by finding the average annual compounded rates of return for
the 1-, 5-, and 10-year periods or for the lesser included periods of
effectiveness. The formula used is as follows:
P(1 + T)/n/ = ERV
P = a hypothetical initial purchase payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1-, 5-, or 10- year periods at
B-62
<PAGE>
the end of the 1-, 5-, or 10-year periods (or fractional portion thereof).
The above formula assumes that:
1. The maximum sales load (i.e., either the front-end sales load in the
case of the Class A shares or the deferred sales load that would be
applicable to a complete redemption of the investment at the end of the
specified period in the case of the Class B shares) is deducted from the
initial $1,000 purchase payment;
2. All dividends and distributions are reinvested at net asset value; and
3. Complete redemption occurs at the end of the 1-, 5-, or 10-year periods
or fractional portion thereof with all nonrecurring charges deducted
accordingly.
The Funds' average annual total return for the 1-, 5- and 10-year periods
(or from date of inception, if sooner) ended September 30, 1995, are as
follows:
- -------------------------------------------------------------------------------
Class A Since One Five Ten
Shares Inception Year Years Years
------- --------- ---- ----- -----
- -------------------------------------------------------------------------------
Balanced 7.07%/1/ 13.75% N/A N/A
Assets Fund
- -------------------------------------------------------------------------------
Blue Chip 6.43%/1/ 14.32% N/A N/A
Growth Fund
- -------------------------------------------------------------------------------
Mid-Cap 11.99%/2/ 22.06% 16.87% N/A
Growth Fund
- -------------------------------------------------------------------------------
Small Company 14.36%/2/ 41.37% 25.87% N/A
Growth
- -------------------------------------------------------------------------------
Global 0.12%/3/ 0.59% N/A N/A
Balanced Fund
- -------------------------------------------------------------------------------
Growth and 12.06%/4/ 12.66% N/A N/A
Income Fund
- -------------------------------------------------------------------------------
(1) From date of September 24, 1993.
(2) From date of inception of January 27, 1987.
(3) From date of inception of June 15, 1994.
(4) From date of inception of July 1, 1994.
B-63
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Class B Since One Five Ten
Shares Inception Year Years Years
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced
Assets Fund 11.78%/1/ 15.16% 13.67% 11.63%
- -------------------------------------------------------
Blue Chip
Growth Fund 10.33%/1/ 15.69% 14.56% 10.44%
- -------------------------------------------------------
Mid-Cap
Growth Fund 5.06%/2/ 23.41% N/A N/A
- -------------------------------------------------------
Small Company
Growth 15.31%/2/ 43.12% N/A N/A
- -------------------------------------------------------
Global
Balanced Fund 0.87%/3/ 1.68% N/A N/A
- -------------------------------------------------------
Growth and
Income Fund 13.32%/4/ 14.42% N/A N/A
- -------------------------------------------------------
</TABLE>
- ------------------
(1) From dates of inception of April 15, 1985 and March 13, 1985, respectively.
(2) From date of September 24, 1993.
(3) From date of inception of June 15, 1994.
(4) From date of inception of July 1, 1994.
Each Fund may advertise cumulative, rather than average return, for each
class of its shares for periods of time other than the 1-, 5-, and 10-year
periods or fractions thereof, as discussed above. Such return data will be
computed in the same manner as that of average annual total return, except that
the actual cumulative return will be computed.
Comparisons
- -----------
Each Fund may compare its total return or yield to similar measures as
calculated by various publications, services, indices, or averages. Such
comparisons are made to assist in evaluating an investment in a Fund. The
following references may be used:
a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks (Dow Jones Utilities Average),
and 20 transportation company stocks (Dow Jones Transportation Average).
Comparisons of performance assume reinvestment of dividends.
b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks, and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.
Standard & Poor's 100 Stock Index -- an unmanaged index based on the prices
of 100 blue chip stocks, including 92
B-64
<PAGE>
industrials, one utility, two transportation companies, and five financial
institutions. The Standard & Poor's 100 Stock Index is a smaller, more flexible
index for options trading.
c) The New York Stock Exchange composite or component indices-- unmanaged
indices of all industrial, utilities, transportation, and finance stocks listed
on the New York Stock Exchange.
d) Wilshire 5000 Equity Index or its component indices --represents the
return on the market value of all common equity securities for which daily
pricing is available. Comparisons of performance assume reinvestment of
dividends.
e) Lipper: Mutual Fund Performance Analysis, Fixed Income Analysis, and
Mutual Fund Indices -- measures total return and average current yield for the
mutual fund industry. Ranks individual mutual fund performance over specified
time periods assuming reinvestment of all distributions, exclusive of sales
charges.
f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.,
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
g) Mutual Fund Source Book, published by Morningstar, Inc. --analyzes
price, risk and total return for the mutual fund industry.
h) Financial publications: Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Pension and Investment Age,
United Mutual Fund Selector, and Wiesenberger Investment Companies Service, and
other publications containing financial analyses which rate mutual fund
performance over specified time periods.
i) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of periodic change in the
price of goods and services in major expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates --
historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, treasury bills, and inflation.
k) Savings and Loan Historical Interest Rates as published in the U.S.
Savings & Loan League Fact Book.
l) Shearson-Lehman Municipal Bond Index and Government/Corporate Bond
Index -- unmanaged indices that track a basket of intermediate and long-term
bonds. Reflect total return and yield and assume dividend reinvestment.
B-65
<PAGE>
m) Salomon GNMA Index published by Salomon Brothers Inc. -- Market value of
all outstanding 30-year GNMA Mortgage Pass-Through Securities that includes
single family and graduated payment mortgages.
Salomon Mortgage Pass-Through Index published by Salomon Brothers Inc.
- -- Market value of all outstanding agency mortgage pass-through securities that
includes 15- and 30-year FNMA, FHLMC and GNMA Securities.
n) Value Line Geometric Index -- broad based index made up of approximately
1700 stocks each of which have an equal weighting.
o) Morgan Stanley Capital International EAFE Index -- an arithmetic, market
value-weighted average of the performance of over 900 securities on the stock
exchanges of countries in Europe, Australia and the Far East.
p) Goldman Sachs 100 Convertible Bond Index -- currently includes 67 bonds
and 33 preferred stocks. The original list of names was generated by screening
for convertible issues of $100 million or more in market capitalization. The
index is priced monthly.
q) Salomon Brothers High Grade Corporate Bond Index -- consists of publicly
issued, non-convertible corporate bonds rated "AA" or "AAA". It is a value-
weighted, total return index, including approximately 800 issues.
r) Salomon Brothers Broad Investment Grade Bond Index -- is a market-
weighted index that contains approximately 4700 individually priced investment
grade corporate bonds rated "BBB" or better, U.S. Treasury/agency issues and
mortgage pass-through securities.
s) Salomon Brother World Bond Index -- measures the total return
performance of high-quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
Australian Dollars Netherlands Guilders
Canadian Dollars Swiss Francs
European Currency Units UK Pound Sterling
French Francs U.S. Dollars
Japanese Yen German Deutsche Marks
t) J.P. Morgan Global Government Bond Index -- a total return, market
capitalization-weighted index, rebalanced monthly, consisting of the following
countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
The Netherlands, Spain, Sweden, the United Kingdom, and the United States.
u) Shearson Lehman LONG-TERM Treasury Bond Index -- is comprised of all
bonds covered by the Shearson Lehman Hutton Treasury Bond Index with maturities
of 10 years or greater.
B-66
<PAGE>
v) NASDAQ Industrial Index -- is comprised of more than 3,000 industrial
issues. It is a value-weighted index calculated on pure change only and does not
include income.
w) The MSCI Combined Far East Free ex Japan Index -- a market
capitalization weighted index comprised of stocks in Hong Kong, Indonesia,
Korea, Malaysia, Philippines, Singapore and Thailand. Korea is included in this
index at 20% of its market capitalization.
x) First Boston High Yield Index -- generally includes over 180 issues with
an average maturity range of seven to ten years with a minimum capitalization of
$100 million. All issues are individually trader-priced monthly.
y) Morgan Stanley Capital International World Index -- An arithmetic,
market value-weighted average of the performance of over 1,470 securities list
on the stock exchanges of countries in Europe, Australia, the Far East, Canada
and the United States.
z) Russell 3000 and 2000 Index -- represents the top 3,000 and the next
2,000 stocks traded on the New York Stock Exchange, American Stock Exchange and
National Association of Securities Dealers Automated Quotations, by market
capitalizations.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to a Fund's portfolio, that the averages are generally
unmanaged and that the items included in the calculations of such averages may
not be identical to the formula used by a Fund to calculate its figures.
Specifically, a Fund may compare its performance to that of certain indices
which include securities with government guarantees. However, a Fund's shares do
not contain any such guarantees. In addition, there can be no assurance that a
Fund will continue its performance as compared to such other standards.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. Each Fund intends to distribute to the registered
holders of its shares substantially all of its net investment income, which
includes dividends, interest and net short-term capital gains, if any, in excess
of any net long-term capital losses. Each Fund intends to distribute any net
long-term capital gains in excess of any net short-term capital losses. The
current policy of the Balanced Assets Fund and Growth and Income Fund is to pay
investment income dividends quarterly. The current policy of each of the Blue
Chip Growth Fund, the Mid-Cap Growth Fund and the Small Company Growth Fund is
to pay investment income dividends semi-annually. The current policy of the
Global Balanced Fund is to pay investment income dividends, if any, annually.
Each Fund intends to pay net capital gains, if any, annually. In determining
amounts of capital gains to be distributed, any capital
B-67
<PAGE>
loss carry-forwards from prior years will be offset against capital gains.
Distributions will be paid in additional Fund shares based on the net asset
value at the close of business on the Ex or reinvestment date, unless the
shareholder notifies the Fund at least five business days prior to the payment
date to receive such distributions in cash.
Taxes. Each Fund is qualified and intends to remain qualified and elects to be
treated as a regulated investment company under Subchapter M of the Code for
each taxable year. In order to be qualified as a regulated investment company,
each Fund generally must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, proceeds from loans of stock or
securities and certain other related income; (b) derive less than 30% of its
gross income from the sale or other disposition of stock or securities held less
than 3 months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) 50% of the market value of each Fund's assets is represented by
cash, government securities, securities of other regulated investment companies
and other securities limited, in respect of any one issuer, to an amount no
greater than 5% of each Fund's assets and not greater than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
government securities or the securities of other regulated investment
companies).
As a regulated investment company, each Fund will not be subject to U.S.
Federal income tax on its income and capital gains which it distributes as
dividends or capital gains distributions to shareholders provided that it
distributes to shareholders at least 90% of its investment company taxable
income for the taxable year. Each Fund intends to distribute sufficient income
to meet this qualification requirement.
Under the Code, amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To avoid the tax, each Fund must distribute during each calendar
year (1) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (2) at least 98% of its capital
gains in excess of its capital losses for the 12-month period ending on October
31 of the calendar year, and (3) all ordinary income and net capital gains for
the previous years that were not distributed during such years. To avoid
application of the excise tax, each Fund intends to make distributions in
accordance with the calendar year distribution requirement. A distribution will
be treated as paid on December 31 of the calendar year if declared by each Fund
in October, November or December of such year, payable to shareholders of record
on a date in such month and paid by each Fund during January of the following
year. Any such distributions paid during January of the following year will be
taxable to
B-68
<PAGE>
shareholders as of such December 31, rather than the date on which the
distributions are received.
Distributions of net investment income and short-term capital gains are
taxable to the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional shares or in cash. The
portion of such dividends received from each Fund that will be eligible for the
dividends received deduction for corporations will be determined on the basis of
the amount of each Fund's gross income, exclusive of capital gains from sales of
stock or securities, which is derived as dividends from domestic corporations,
other than certain tax-exempt corporations and certain real estate investment
trusts, and will be designated as such in a written notice to shareholders
mailed not later than 60 days after the end of each fiscal year. Distributions
of net long-term capital gains, if any, are taxable as long-term capital gains
regardless of whether the shareholder receives such distributions in additional
shares or in cash or how long the investor has held his or her shares, and are
not eligible for the dividends received deduction for corporations.
Upon a sale or exchange of its shares, a shareholder will realize a taxable
gain or loss depending upon its basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of. Any loss realized by a shareholder on the sale of shares
of a Fund held by the shareholder for six months or less will be treated for tax
purposes as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.
Under certain circumstances (such as the exercise of an exchange
privilege), the tax effect of sales load charges imposed on the purchase of
shares in a regulated investment company is deferred if the shareholder does not
hold the shares for at least 90 days.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which a Fund will be subject, since the amount of that Fund's
assets to be invested in various countries is not known. It is not anticipated
that any Fund (other than the Global Balanced Fund) will qualify to pass through
to its shareholders the ability to claim as a foreign tax credit their
respective shares of foreign taxes paid by such Fund. If more than 50% in value
of Global Balanced Fund's total assets at the close of its taxable year consists
of securities of foreign corporations, the Fund will be
B-69
<PAGE>
eligible, and intends, to file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include their
proportionate share of such withholding taxes in their U.S. income tax returns
as gross income, treat such proportionate share as taxes paid by them, and
deduct such proportionate share in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their U.S. income taxes.
No deductions for foreign taxes, however, may be claimed by non-corporate
shareholders who do not itemize deductions. Of course, certain retirement
accounts which are not subject to tax cannot claim foreign tax credits on
investments in foreign securities held in the Fund. A shareholder that is a
nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such shareholder.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time such Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly, gains or losses on
forward foreign currency exchange contracts, sale of currencies or dispositions
of debt securities denominated in a foreign currency attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition generally also are
treated as ordinary gain or loss. These gains, referred to under the Code as
"Section 988" gains or losses, increase or decrease the amount of each Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income.
The Code includes special rules applicable to the listed non-equity
options, regulated futures contracts, and options on futures contracts which a
Fund may write, purchase or sell. Such options and contracts are classified as
Section 1256 contracts under the Code. The character of gain or loss resulting
from the sale, disposition, closing out, expiration or other termination of
Section 1256 contracts, except forward foreign currency exchange contracts, is
generally treated as long-term capital gain or loss to the extent of 60% thereof
and short-term capital gain or loss to the extent of 40% thereof ("60/40 gain or
loss"). Such contracts, when held by a Fund at the end of a fiscal year,
generally are required to be treated as sold at market value on the last day of
such fiscal year for Federal income tax purposes ("marked-to-market"). Over-the-
counter options are not classified as Section 1256 contracts and are not subject
to the marked-to-market rule or to 60/40 gain or loss treatment. Any gains or
losses recognized by a Fund from transactions in over-the-counter options
generally constitute short-term capital gains or losses. When call options
written, or put options purchased, by a Fund are exercised, the gain or loss
realized on the sale of the underlying securities may be either short-term or
long-term, depending on the holding period
B-70
<PAGE>
of the securities. In determining the amount of gain or loss, the sales proceeds
are reduced by the premium paid for the puts or increased by the premium
received for calls.
A substantial portion of each Fund's transactions in options, futures
contracts and options on futures contracts, particularly its hedging
transactions, may constitute "straddles" which are defined in the Code as
offsetting positions with respect to personal property. A straddle consisting of
a listed option, futures contract, or option on a futures contract and of U.S.
Government securities would constitute a "mixed straddle" under the Code. The
Code generally provides with respect to straddles (i) "loss deferral" rules
which may postpone recognition for tax purposes of losses from certain closing
purchase transactions or other dispositions of a position in the straddle to the
extent of unrealized gains in the offsetting position, (ii) "wash sale" rules
which may postpone recognition for tax purposes of losses where a position is
sold and a new offsetting position is acquired within a prescribed period, (iii)
"short sale" rules which may terminate the holding period of securities owned by
a Fund when offsetting positions are established and which may convert certain
losses from short-term to long-term, and (iv) "conversion transaction" rules
which recharacterize capital gains as ordinary income. The Code provides that
certain elections may be made for mixed straddles that can alter the character
of the capital gain or loss recognized upon disposition of positions which form
part of a straddle. Certain other elections also are provided in the Code; no
determination has been reached to make any of these elections.
The Global Balanced Fund and Growth and Income Fund may purchase debt
securities (such as zero-coupon or pay-in-kind securities) that contain original
issue discount. Original issue discount that accrues in a taxable year is
treated as earned by a Fund and therefore is subject to the distribution
requirements of the Code. Because the original issue discount earned by the Fund
in a taxable year may not be represented by cash income, the Fund may have to
dispose of other securities and use the proceeds to make distributions to
shareholders.
A Fund may be required to backup withhold U.S. Federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail to
provide their correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's U.S. Federal
income tax liability.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisors regarding the particular tax
consequences to them of an investment in each Fund. Qualification as a regulated
B-71
<PAGE>
investment company under the Code for tax purposes does not entail government
supervision of management and investment policies.
RETIREMENT PLANS
Shares of each Fund are eligible to be purchased in conjunction with
various types of qualified retirement plans. The summary below is only a brief
description of the Federal income tax laws for each plan and does not purport to
be complete. Further information or an application to invest in shares of a Fund
by establishing any of the retirement plans described below may be obtained by
calling Retirement Plans at (800) 858-8850. However, it is recommended that a
shareholder considering any retirement plan consult a tax adviser before
participating.
PENSION AND PROFIT-SHARING PLANS. Sections 401(a) and 401(k) of the Code permit
business employers and certain associations to establish pension and profit
sharing plans for employees. Shares of a Fund may be purchased by those who
would have been covered under the rules governing old H.R. 10 (Keogh) Plans, as
well as by corporate plans. Each business retirement plan provides tax
advantages for owners and participants. Contributions made by the employer are
tax-deductible, and participants do not pay taxes on contributions or earnings
until withdrawn.
TAX-SHELTERED CUSTODIAL ACCOUNTS. Section 403(b)(7) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Sections 501(c)(3) of the Code, to
purchase shares of a Fund and, subject to certain limitations, exclude the
amount of purchase payments from gross income for tax purposes.
INDIVIDUAL RETIREMENT ACCOUNTS (IRA). Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program, including
Simplified Employee Pension Plans, commonly referred to as SEP-IRA. These IRA's
are subject to limitations with respect to the amount that may be contributed,
the eligibility of individuals, and the time in which distributions would be
allowed to commence. In addition, certain distributions from some other types of
retirement plans may be placed on a tax-deferred basis in an IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION. This plan was introduced by a
provision of the Tax Reform Act of 1986 as a unique way for small employers to
provide the benefit of retirement planning for their employees. Contributions
are deducted from the employee's paycheck before tax deductions and are
deposited into an IRA by the employer. These contributions and are not included
in the employee's income and therefore are not reported or deducted on his or
her tax return.
DESCRIPTION OF SHARES
B-72
<PAGE>
Ownership of the Trust is represented by transferable shares of beneficial
interest. The Declaration of Trust of the Trust (the "Declaration of Trust")
permits the Trustees to issue an unlimited number of full and fractional shares,
$.01 par value, and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
of the Trust.
Currently, six series of shares of the Trust have been authorized pursuant
to the Declaration of Trust: the Balanced Assets Fund, the Global Balanced Fund,
the Blue Chip Growth Fund, the Mid-Cap Growth Fund, the Small Company Growth
Fund and the Growth and Income Fund. Each series has been divided into two
classes of shares, designated as Class A and Class B shares. The Trustees may
authorize the creation of additional series of shares so as to be able to offer
to investors additional investment portfolios within the Trust that would
operate independently from the Trust's present portfolios, or to distinguish
among shareholders, as may be necessary, to comply with future regulations or
other unforeseen circumstances. Each series of the Trust's shares represents the
interests of the shareholders of that series in a particular portfolio of Trust
assets. In addition, the Trustees may authorize the creation of additional
classes of shares in the future, which may have fee structures different from
those of existing classes and/or may be offered only to certain qualified
investors.
Shareholders are entitled to a full vote for each full share held. The
Trustees have terms of unlimited duration (subject to certain removal
procedures) and have the power to alter the number of Trustees, and appoint
their own successors, provided that at all times at least a majority of the
Trustees have been elected by shareholders. The voting rights of shareholders
are not cumulative, so that holders of more than 50% of the shares voting can,
if they choose, elect all Trustees being elected, while the holders of the
remaining shares would be unable to elect any Trustees. Although the Trust need
not hold annual meetings of shareholders, the Trustees may call special meetings
of shareholders for action by shareholder vote as may be required by the 1940
Act or the Declaration of Trust. Also, a shareholders meeting must be called, if
so requested in writing by the holders of record of 10% or more of the
outstanding shares of the Trust. In addition, the Trustees may be removed by the
action of the holders of record of two-thirds or more of the outstanding shares.
All series of shares will vote with respect to certain matters, such as election
of Trustees. When all series of shares are not affected by a matter to be voted
upon, such as approval of investment advisory agreements or changes in a Fund's
policies, only shareholders of the series affected by the matter may be entitled
to vote.
Both classes of shares of a given series are identical in all respects,
except that (i) each class may bear differing amounts of certain class-specific
expenses, (ii) Class A shares are subject to an initial sales charge, a
distribution fee and an ongoing account
B-73
<PAGE>
maintenance and service fee, (iii) Class B shares are subject to a contingent
deferred sales charge, a distribution fee and an ongoing account maintenance and
service fee, (iv) Class B shares convert automatically to Class A shares on the
first business day of the month seven years after the purchase of such Class B
Shares, (v) each class has voting rights on matters that pertain to the
Rule 12b-1 plan adopted with respect to such class, except that under certain
circumstances, the holders of Class B shares may be entitled to vote on material
changes to the Class A Rule 12b-1 plan, and (vi) each class of shares will be
exchangeable only into the same class of shares of any other Fund or other funds
in the SunAmerica Family of Mutual Funds that offers that class. All shares of
the Trust issued and outstanding and all shares offered by the Prospectus when
issued, are fully paid and non-assessable. Shares have no preemptive or other
subscription rights and are freely transferable on the books of the Trust. In
addition, shares have no conversion rights, except as described above.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Trust is liable to the Trust or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Trust, except as such liability may arise from his or
its own bad faith, willful misfeasance, gross negligence or reckless disregard
of his duties. It also provides that all third persons shall look solely to the
Trust's property for satisfaction of claims arising in connection with the
affairs of the Trust. With the exceptions stated, the Declaration of Trust
provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
The Trust shall continue, without limitation of time, subject to the provisions
in the Declaration of Trust concerning termination by action of the
shareholders.
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<PAGE>
ADDITIONAL INFORMATION
Computation of Offering Price per Share
- ---------------------------------------
The following is the offering price calculation for Class A and Class B
shares of the Funds, based on the value of each Fund's net assets as of
September 30, 1995.
<TABLE>
<CAPTION>
Balanced Assets Fund Global Balanced Fund Blue Chip Growth Fund
-------------------------- ----------------------- -----------------------
Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Assets..... $119,916,366 $162,114,799 $9,614,966 $13,976,035 $42,407,289 $39,532,507
Number of Shares
Outstanding..... 7,302,494 9,872,779 1,307,104 1,915,347 2,445,272 2,307,431
Net Asset Value Per
Shares (net assets
divided by number
of shares)..... $ 16.42 $ 16.42 $ 7.36 $ 7.30 $ 17.34 $ 17.13
Sales Charge (for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share))*..... $ 1.00 $ ** $ .45 $ ** $ 1.06 $ **
Offering Price..... $ 17.42 $ 16.42 $ 7.81 $ 7.30 $ 18.40 $ 17.13
</TABLE>
<TABLE>
<CAPTION>
Mid-Cap Growth Fund Small Company Growth Fund Growth and Income Fund
------------------------- ------------------------- ----------------------
Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Assets......... $37,714,102 $9,543,535 $89,510,083 $68,313,021 $ 3,532,261 $ 2,538,050
Number of Shares
Outstanding....... 2,118,190 542,752 3,630,872 2,809,180 $ 421,137 $ 302,621
Net Asset Value Per
Share (net assets
divided by number
of shares)....... $ 17.80 $ 17.58 $ 24.65 $ 24.32 $ 8.39 $ 8.39
Sales Charge (for
Class A Shares:
5.75% of offering
price (6.10% of
net asset value
per share))*..... $ 1.09 $ ** $ 1.50 $ ** $ .51 $ **
Offering Price..... $ 18.89 $ 17.58 $ 26.15 $ 24.32 $ 8.90 $ 8.39
</TABLE>
_______________
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable
** Class B shares are not subject to an initial sales charge but may be
subject to a contingent deferred sales charge on redemption of shares
within six years of purchase.
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<PAGE>
Reports to Shareholders. The Trust sends audited annual and unaudited semi-
annual reports to shareholders of each of the Funds. Price Waterhouse LLP serves
as the Trust's independent accountants, and in that capacity, audits the annual
financial statements of the Trust. In addition, the Transfer Agent sends a
statement to each shareholder having an account directly with the Trust to
confirm transactions in the account.
Custodian and Transfer Agency. State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Funds and in those capacities maintains certain financial and accounting
books and records pursuant to agreements with the Trust. Transfer agent
functions are performed for State Street, by National Financial Data Services,
P.O. Box 419572, Kansas City, MO 64141-6572, an affiliate of State Street.
Independent Accountants and Legal Counsel. Price Waterhouse LLP, 1177 Avenue of
the Americas, New York, NY 10036, has been selected to serve as the Trust's
independent accountants and in that capacity examines the annual financial
statements of the Trust. The firm of Shereff, Friedman, Hoffman & Goodman, LLP,
919 Third Avenue, New York, NY 10022, has been selected as legal counsel to the
Trust.
FINANCIAL STATEMENTS
Set forth following this Statement of Additional Information are the
financial statements of SunAmerica Equity Funds with respect to Registrant's
fiscal year ended September 30, 1995.
B-76
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 1995
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GLOBAL GROWTH AND
ASSETS GROWTH GROWTH GROWTH BALANCED INCOME
FUND FUND FUND FUND FUND FUND
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities,
at value (identified
cost $236,158,791;
$63,392,694;
$28,510,444;
$94,238,597;
$20,578,840 and
$3,921,404,
respectively).......... $261,665,945 $71,589,575 $34,430,713 $118,221,556 $22,127,483 $4,274,381
Short-term securities
(identified cost of
$569,000 on the Global
Balanced Fund)......... -- -- -- -- 569,000 --
Joint repurchase
agreements............. 15,638,000 4,715,000 3,059,000 19,896,000 121,000 1,881,000
Cash.................... 342,333 -- 548 719 93,816 732
Foreign cash............ -- -- -- -- 128,425 --
Receivable for
investments sold....... 15,015,794 6,705,700 11,356,656 23,577,696 1,271,173 52,865
Receivable for shares of
beneficial interest
sold................... 3,138,698 25,207 73,705 638,514 67,214 11,957
Interest and dividends
receivable............. 1,344,687 87,275 23,633 26,798 218,994 18,901
Prepaid expenses........ 11,209 32,317 6,124 7,429 840 111
Receivable from
investment adviser..... -- -- -- -- 11,623 13,253
Unrealized appreciation
of foreign currency
contracts.............. -- -- -- -- 283,650 --
Receivable for foreign
currency contracts
sold................... -- -- -- -- 521,653 --
Deferred organizational
expenses............... -- -- -- -- 3,212 1,036
------------ ----------- ----------- ------------ ----------- ----------
Total assets........... 297,156,666 83,155,074 48,950,379 162,368,712 25,418,083 6,254,236
------------ ----------- ----------- ------------ ----------- ----------
LIABILITIES:
Payable for investments
purchased.............. 8,815,756 348,800 1,535,577 1,536,032 942,954 140,000
Payable for securities
loaned................. 5,443,750 -- -- -- -- --
Payable for shares of
beneficial interest
redeemed............... 289,601 113,557 50,734 2,719,806 12,710 --
Accrued expenses........ 182,908 91,909 55,683 112,302 75,756 36,041
Investment advisory and
management fees
payable................ 168,922 48,920 30,451 96,799 20,067 3,441
Distribution and service
maintenance fees
payable................ 162,858 42,830 20,297 80,669 14,445 2,760
Dividends payable....... 61,706 -- -- -- -- 1,683
Due to custodian........ -- 569,262 -- -- -- --
Unrealized depreciation
of foreign currency
contracts.............. -- -- -- -- 239,008 --
Payable for foreign
currency contracts
purchased.............. -- -- -- -- 522,142 --
------------ ----------- ----------- ------------ ----------- ----------
Total liabilities...... 15,125,501 1,215,278 1,692,742 4,545,608 1,827,082 183,925
------------ ----------- ----------- ------------ ----------- ----------
Net assets.......... $282,031,165 $81,939,796 $47,257,637 $157,823,104 $23,591,001 $6,070,311
============ =========== =========== ============ =========== ==========
NET ASSETS WERE COMPOSED
OF:
Shares of beneficial
interest, $.01 par
value.................. $ 171,753 $ 47,527 $ 26,609 $ 64,401 $ 32,225 $ 7,238
Paid-in capital......... 244,330,954 66,179,940 36,123,768 105,152,255 22,568,503 5,445,561
------------ ----------- ----------- ------------ ----------- ----------
244,502,707 66,227,467 36,150,377 105,216,656 22,600,728 5,452,799
Accumulated
undistributed net
investment income...... 243,698 -- -- -- 871,462 2,915
Accumulated
undistributed net
realized gain (loss) on
investments............ 11,777,606 7,526,115 5,186,991 28,612,538 (3,146,792) 261,620
Accumulated net realized
gain (loss) on foreign
currency and other
assets and liabilities. -- (10,667) -- 10,951 1,671,033 --
Net unrealized
appreciation of
investments............ 25,507,154 8,196,881 5,920,269 23,982,959 1,548,643 352,977
Net unrealized
appreciation of foreign
currency, other assets
and liabilities........ -- -- -- -- 45,927 --
------------ ----------- ----------- ------------ ----------- ----------
Net assets.......... $282,031,165 $81,939,796 $47,257,637 $157,823,104 $23,591,001 $6,070,311
============ =========== =========== ============ =========== ==========
CLASS A (UNLIMITED
SHARES AUTHORIZED):
Net asset value and
redemption price per
share
($119,916,366/7,302,494;
$42,407,289/2,445,272;
$37,714,102/2,118,190;
$89,510,083/3,630,872;
$9,614,966/1,307,104
and $3,532,261/421,137
net assets and shares
of beneficial interest
issued and outstanding,
respectively........... $ 16.42 $ 17.34 $ 17.80 $ 24.65 $ 7.36 $ 8.39
Maximum sales charge
(5.75% of offering
price)................. 1.00 1.06 1.09 1.50 0.45 0.51
------------ ----------- ----------- ------------ ----------- ----------
Maximum offering price
to public.............. $ 17.42 $ 18.40 $ 18.89 $ 26.15 $ 7.81 $ 8.90
============ =========== =========== ============ =========== ==========
CLASS B (UNLIMITED
SHARES AUTHORIZED):
Net asset value,
offering and redemption
price per share
($162,114,799/9,872,779;
$39,532,507/2,307,431;
$9,543,535/542,752;
$68,313,021/2,809,180;
$13,976,035/1,915,347
and $2,538,050/302,621
net assets and shares
of beneficial interest
issued and outstanding,
respectively).......... $ 16.42 $ 17.13 $ 17.58 $ 24.32 $ 7.30 $ 8.39
============ =========== =========== ============ =========== ==========
</TABLE>
See Notes to Financial Statements
B-77
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF OPERATIONS -- For the year ended September 30, 1995
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GLOBAL GROWTH AND
ASSETS GROWTH GROWTH GROWTH BALANCED INCOME
FUND FUND FUND FUND FUND FUND
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest (net of
withholding taxes of
$956 on Global Balanced
Fund)................... $ 4,942,478 $ 253,003 $ 231,890 $ 1,097,775 $ 609,969 $ 96,252
Dividends (net of
withholding taxes of
$27,389, $5,333, $2,899,
$1,707, $40,293, and
$889, respectively) .... 4,015,774 1,302,059 223,932 391,999 366,522 105,515
----------- ----------- ----------- ----------- ---------- --------
Total investment income.. 8,958,252 1,555,062 455,822 1,489,774 976,491 201,767
----------- ----------- ----------- ----------- ---------- --------
Expenses:
Investment advisory and
management fees......... 1,821,586 565,835 294,505 819,449 269,441 32,455
Distribution and service
maintenance fees-Class
A....................... 237,888 42,755 115,641 187,524 44,919 11,338
Distribution and service
maintenance fees-Class
B....................... 1,749,100 632,288 62,270 556,816 141,100 10,876
Transfer agent fees and
expenses-Class A........ 193,217 47,893 93,922 155,365 31,674 8,357
Transfer agent fees and
expenses-Class B........ 484,587 174,235 23,037 160,957 39,736 8,412
Custodian fees and
expenses................ 117,005 67,220 61,920 91,545 196,515 48,290
Registration fees-Class
A....................... 12,313 8,186 12,884 19,527 9,712 10,219
Registration fees-Class
B....................... -- 16,918 7,908 19,315 12,594 7,609
Audit and tax consulting
fees.................... 46,222 16,040 16,170 33,470 14,445 10,360
Trustees' fees and
expenses................ 26,521 8,116 3,999 11,191 3,043 400
Printing expense......... 10,665 8,560 5,345 12,530 2,281 1,340
Insurance expense........ 6,098 2,196 1,004 2,316 163 83
Legal fees and expenses.. 5,330 3,685 1,388 3,915 2,285 1,735
Interest expense......... -- 14,080 1,645 -- -- --
Amortization of
organizational expenses. -- -- -- -- 876 16,343
Miscellaneous expenses... 12,876 3,158 2,425 3,258 17,443 1,530
----------- ----------- ----------- ----------- ---------- --------
Total expenses........... 4,723,408 1,611,165 704,063 2,077,178 786,227 169,347
Less: expenses
waived/reimbursed by
investment
adviser/distributor..... -- (13,179) (10,554) -- (115,214) (151,253)
----------- ----------- ----------- ----------- ---------- --------
Net expenses............. 4,723,408 1,597,986 693,509 2,077,178 671,013 18,094
----------- ----------- ----------- ----------- ---------- --------
Net investment income
(loss)................... 4,234,844 (42,924) (237,687) (587,404) 305,478 183,673
----------- ----------- ----------- ----------- ---------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss)
on investments........... 13,383,399 7,615,892 7,432,643 31,433,571 (2,564,836) 346,652
Net realized gain (loss)
on foreign currency and
other assets and
liabilities.............. -- (10,667) -- 10,951 1,756,424 --
Net change in unrealized
appreciation/depreciation
of investments........... 28,115,267 6,757,773 3,253,371 15,112,125 1,847,343 297,243
Net change in unrealized
appreciation/depreciation
of foreign currency and
other assets and
liabilities.............. -- -- -- -- 42,526 --
----------- ----------- ----------- ----------- ---------- --------
Net realized and
unrealized gain (loss) on
investments, foreign
currency and other assets
and liabilities.......... 41,498,666 14,362,998 10,686,014 46,556,647 1,081,457 643,895
----------- ----------- ----------- ----------- ---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS: ............. $45,733,510 $14,320,074 $10,448,327 $45,969,243 $1,386,935 $827,568
=========== =========== =========== =========== ========== ========
</TABLE>
See Notes to Financial Statements
B-78
<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,
1995 1994 1995 1994 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 4,234,844 $ 3,273,547 $ (42,924) $ (29,169) $ (237,687) $ 103,839
Net realized gain
(loss) on investments. 13,383,399 10,239,438 7,615,892 8,104,529 7,432,643 (562,925)
Net realized loss on
foreign currency and
other assets and
liabilities........... -- -- (10,667) -- -- --
Net change in
unrealized
appreciation/
depreciation of
investments........... 28,115,267 (14,392,701) 6,757,773 (9,743,916) 3,253,371 (3,332,519)
------------ ------------ ----------- ----------- ----------- -----------
Increase (decrease) in
net assets resulting
from operations........ 45,733,510 (879,716) 14,320,074 (1,668,556) 10,448,327 (3,791,605)
------------ ------------ ----------- ----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... (1,892,197) (888,983) -- -- (81,917) --
From net investment
income (Class B)...... (4,315,134) (2,111,163) -- -- (10,723) --
From net realized gains
on investments (Class
A).................... (2,033,487) (701,263) (221,327) (15,869) -- (5,265,913)
From net realized gains
on investments (Class
B).................... (7,043,145) (3,102,237) (5,263,567) (3,262,131) -- (617,587)
------------ ------------ ----------- ----------- ----------- -----------
Total dividends and
distributions to
shareholders........... (15,283,963) (6,803,646) (5,484,894) (3,278,000) (92,640) (5,883,500)
------------ ------------ ----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 8).. 18,827,961 69,599,491 (1,851,797) 128,688 (43,053) 11,701,924
------------ ------------ ----------- ----------- ----------- -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 49,277,508 61,916,129 6,983,383 (4,817,868) 10,312,634 2,026,819
NET ASSETS:
Beginning of period..... 232,753,657 170,837,528 74,956,413 79,774,281 36,945,003 34,918,184
------------ ------------ ----------- ----------- ----------- -----------
End of period [including
undistributed net
investment income
(loss) for September
30, 1995 and September
30, 1994 of $243,698,
$2,216,185; $0, $0; $0
and $92,829,
respectively].......... $282,031,165 $232,753,657 $81,939,796 $74,956,413 $47,257,637 $36,945,003
============ ============ =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
B-79
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND GLOBAL BALANCED FUND GROWTH AND INCOME FUND
---------------------------- ---------------------------- ---------------------------
FOR THE
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994 (a) 1995 1994 (a)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss).................. $ (587,404) $ (758,937) $ 305,478 $ 36,678 $ 183,673 $ 28,400
Net realized gain (loss)
on investments.......... 31,433,571 2,130,417 (2,564,836) (8,690) 346,652 (8,242)
Net realized gain (loss)
on foreign currency and
other assets and
liabilities............. 10,951 -- 1,756,424 (85,391) -- --
Net change in unrealized
appreciation/depreciation
of investments.......... 15,112,125 (7,542,139) 1,847,343 (298,700) 297,243 55,734
Net change in unrealized
appreciation/depreciation
of foreign currency and
other assets and
liabilities............. -- -- 42,526 3,401 -- --
------------ ----------- ----------- ----------- ---------- ----------
Increase (decrease) in net
assets resulting from
operations............... 45,969,243 (6,170,659) 1,386,935 (352,702) 827,568 75,892
------------ ----------- ----------- ----------- ---------- ----------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)........ -- -- (24,601) -- (127,668) (25,414)
From net investment
income (Class B)........ -- -- (12,084) -- (54,591) (1,485)
From net realized gains
on investments (Class
A)...................... (985,792) (3,220,794) (3,604) -- (63,470) --
From net realized gains
on investments (Class
B)...................... (1,122,738) (3,913,206) (3,671) -- (13,320) --
------------ ----------- ----------- ----------- ---------- ----------
Total dividends and
distributions to
shareholders............. (2,108,530) (7,134,000) (43,960) -- (259,049) (26,899)
------------ ----------- ----------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE
TRANSACTIONS (NOTE 8).... 23,184,310 25,945,929 (4,383,749) 26,984,477 2,174,079 3,278,720
------------ ----------- ----------- ----------- ---------- ----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............ 67,045,023 12,641,270 (3,040,774) 26,631,775 2,742,598 3,327,713
NET ASSETS:
Beginning of period....... 90,778,081 78,136,811 26,631,775 -- 3,327,713 --
------------ ----------- ----------- ----------- ---------- ----------
End of period [including
undistributed net
investment income for
September 30, 1995 and
September 30, 1994 $0,
$0; $871,462, $36,678;
$2,915 and $1,501,
respectively]............ $157,823,104 $90,778,081 $23,591,001 $26,631,775 $6,070,311 $3,327,713
============ =========== =========== =========== ========== ==========
</TABLE>
- ------------
(a) For the periods beginning June 15, 1994 and July 1, 1994 for the Global
Balanced Fund and Growth and Income Fund, respectively.
See Notes to Financial Statements
B-80
<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)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/24/93-
09/30/93(3).... $15.07 $ -- $ 0.06 $ 0.06 $ -- $ -- $ -- $15.13 0.40% $ 33,381
09/30/94........ 15.13 0.30 (0.23) 0.07 (0.28) (0.30) (0.58) 14.62 0.50 52,098
09/30/95........ 14.62 0.32 2.51 2.83 (0.45) (0.58) (1.03) 16.42 20.68 119,916
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- ------------- -------------- ---------
<S> <C> <C> <C>
09/24/93-
09/30/93(3).... 1.54%(4) 0.46%(4) 25%
09/30/94........ 1.58 2.00 141
09/30/95........ 1.50 2.13 130
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
06/30/92(5)..... $15.75 $0.33 $ 0.98 $ 1.31 $(0.42) $(1.01) $(1.43) $15.63 7.51% $ 83,234
06/30/93(5)..... 15.63 0.30 2.63 2.93 (0.30) (2.40) (2.70) 15.86 20.29 113,871
07/01/93-
09/30/93(5).... 15.86 0.05 0.49 0.54 (0.06) (1.21) (1.27) 15.13 3.44 137,456
09/30/94........ 15.13 0.20 (0.23) (0.03) (0.18) (0.30) (0.48) 14.62 (0.14) 180,655
09/30/95........ 14.62 0.23 2.51 2.74 (0.36) (0.58) (0.94) 16.42 19.96 162,115
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- ------------- -------------- ---------
<S> <C> <C> <C>
06/30/92(5)..... 1.93%(6) 2.04%(6) 151%
06/30/93(5)..... 1.91(6) 1.94(6) 251
07/01/93-
09/30/93(5).... 2.10(4)(6) 1.36(4)(6) 25
09/30/94........ 2.21 1.36 141
09/30/95........ 2.12 1.59 130
</TABLE>
- --------------------------------------------------------------------------------
BLUE CHIP GROWTH 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 UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- ------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<CAPTION>
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
09/30/95........ 15.42 0.02(1) 2.99 3.01 -- (1.09) (1.09) 17.34 21.29 42,407
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- -------------- ---------
<S> <C> <C> <C>
10/08/93-
9/30/94(3)..... 1.64%(4)(6) 0.65%(4)(6) 170%
09/30/95........ 1.58(6) 0.11(6) 251
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
12/31/91(5)..... $ 9.65 $(0.06) $ 2.94 $ 2.88 $ -- $ -- $ -- $12.53 29.84% $105,734
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
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- -------------- ---------
12/31/91(5)..... 2.50% (0.42) % 79%
12/31/92(5)..... 2.53 (0.75) 192
1/01/93-
9/30/93(5)..... 2.46(4) (0.14) (4) 171
9/30/94......... 2.28 (0.05) 170
9/30/95......... 2.22 (0.09) 251
</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>
6/30/92 6/30/93 9/30/93 9/30/94 9/30/95
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balanced Assets Class B.............. .12% .05% .04% -- --
Blue Chip Growth Class A............. -- -- -- 1.66% .11%
</TABLE>
See Notes to Financial Statements
B-81
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
MID-CAP GROWTH 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 UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- ------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/91(4)..... $12.90 $ 0.16 $ 3.09 $ 3.25 $(0.25) $(2.60) $(2.85) $13.30 31.13% $29,142
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
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- ---------------- ---------
<S> <C> <C> <C>
11/30/91(4)..... 1.76% 1.20 % 225%
11/30/92(4)..... 1.76 (0.46) 98
12/01/92-
9/30/93(4)..... 1.81(3) 1.18 (3) 231
9/30/94......... 1.76 0.28 555
9/30/95......... 1.66 (0.51) 392
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(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
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- ---------------- ---------
<S> <C> <C> <C>
10/04/93-
9/30/94(5)..... 2.43%(3)(6) 0.20 %(3)(6) 555%
9/30/95......... 2.31(7) (0.17)(7) 392
</TABLE>
- -------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS RATIO OF
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF EXPENSES
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD TO AVERAGE
ENDED OF PERIOD INCOME(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S) NET ASSETS
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ---------- ----------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/91(4)(8).. $11.88 $(0.01) $ 4.92 $ 4.91 $ -- $(2.91) $(2.91) $13.88 52.05% $27,832 1.86%
11/30/92(4)(8).. 13.88 (0.12) 3.39 3.27 -- (0.69) (0.69) 16.46 24.31 32,056 1.90
12/01/92-
9/30/93(4)(8).. 16.46 (0.02) 4.07 4.05 -- (0.73) (0.73) 19.78 25.68 39,238 1.83(3)
9/30/94......... 19.78 (0.10) (1.40) (1.50) -- (1.46) (1.46) 16.82 (7.74) 38,570 1.67
9/30/95......... 16.82 (0.04) 8.28 8.24 -- (0.41) (0.41) 24.65 50.00 89,510 1.57
RATIO OF NET
INVESTMENT
INCOME
PERIOD TO AVERAGE PORTFOLIO
ENDED NET ASSETS TURNOVER
- ---------------- ------------- ---------
<S> <C> <C>
11/30/91(4)(8).. (0.06)% 110%
11/30/92(4)(8).. (0.88) 209
12/01/92-
9/30/93(4)(8).. (0.15)(3) 216
9/30/94......... (0.60) 411
9/30/95......... (0.22) 351
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS RATIO OF
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF EXPENSES
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD TO AVERAGE
ENDED OF PERIOD INCOME(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S) NET ASSETS
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ---------- ----------
CLASS B
9/24/93-
9/30/93(5)..... $19.66 $ -- $ 0.12 $ 0.12 $ -- $ -- $ -- $19.78 0.61% $38,898 2.34%(3)
9/30/94......... 19.78 (0.20) (1.42) (1.62) -- (1.46) (1.46) 16.70 (8.40) 52,208 2.31
9/30/95......... 16.70 (0.16) 8.19 8.03 -- (0.41) (0.41) 24.32 49.08 68,313 2.22
RATIO OF NET
INVESTMENT
INCOME
PERIOD TO AVERAGE PORTFOLIO
ENDED NET ASSETS TURNOVER
- ---------------- ------------- ---------
<S> <C> <C>
9/24/93-
9/30/93(5)..... (1.70)%(3) 216%
9/30/94......... (1.23) 411
9/30/95......... (0.84) 351
</TABLE>
- -----------
(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) Net of expense reimbursement equivalent to .48% of average net assets for
the period ended 9/30/94
(7) Net of expense reimbursement equivalent to .17% of average net assets for
the year ended 9/30/95
(8) Restated to reflect a 0.984460367 for 1.00 stock split effective September
24, 1993
See Notes to Financial Statements
B-82
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
GLOBAL BALANCED 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)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<CAPTION>
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/15/94-
9/30/94(3)..... $6.94 $0.02 $(0.05) $(0.03) $ -- $ -- $ -- $6.91 (0.43)% $13,100
9/30/95......... 6.91 0.10 0.36 0.46 (0.01) -- (0.01) 7.36 6.72 9,615
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- --------------- ---------
<S> <C> <C> <C>
6/15/94-
9/30/94(3)..... 2.15%(4)(5) 0.93%(4)(5) 18%
9/30/95......... 2.15(5) 1.36(5) 169
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
6/16/94-
9/30/94(3)..... $6.94 $0.01 $(0.05) $(0.04) $ -- $ -- $ -- $6.90 (0.58)% $13,532
9/30/95......... 6.90 0.05 0.36 0.41 (0.01) -- (0.01) 7.30 5.91 13,976
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- --------------- ---------
6/16/94-
9/30/94(3)..... 2.80%(4)(5) 0.33%(4)(5) 18%
9/30/95......... 2.80(5) 0.75(5) 169
</TABLE>
- --------------------------------------------------------------------------------
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)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<CAPTION>
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
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- ------------- -------------- ---------
<S> <C> <C> <C>
7/01/94-
9/30/94(3)..... 1.50%(4)(5) 3.48%(4)(5) 8%
9/30/95......... 0.46(5) 4.16(5) 230
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
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
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- ------------- -------------- ---------
<S> <C> <C> <C>
7/06/94-
9/30/94(3)..... 2.15%(4)(5) 2.86%(4)(5) 8%
9/30/95......... 0.30(5) 4.48(5) 230
</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
------- -------
<S> <C> <C>
Global Balanced Class A...................................... 1.14% .40%
Global Balanced Class B...................................... .93 .45
Growth and Income Class A.................................... 4.48 2.96
Growth and Income Class B.................................... 20.35 5.07
</TABLE>
See Notes to Financial Statements
B-83
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--65.8%
AEROSPACE & MILITARY TECHNOLOGY--0.6%
Boeing Co. .............................................. 25,000 $ 1,706,250
-----------
APPAREL & TEXTILES--1.8%
NIKE, Inc. .............................................. 20,000 2,222,500
Reebok International Ltd. ............................... 30,000 1,031,250
Warnaco Group, Inc....................................... 75,000 1,800,000
-----------
5,053,750
-----------
AUTOMOTIVE--2.8%
Chrysler Corp. .......................................... 70,000 3,710,000
Ford Motor Co. .......................................... 30,000 933,750
General Motors Corp. .................................... 30,000 1,406,250
Goodyear Tire & Rubber Co. .............................. 50,000 1,968,750
-----------
8,018,750
-----------
BANKS--5.3%
Bank Of Boston Corp. .................................... 40,000 1,905,000
Citicorp................................................. 50,000 3,537,500
First Bank Systems, Inc. ................................ 25,000 1,203,125
First Interstate Bancorp................................. 15,000 1,511,250
Mellon Bank Corp. ....................................... 25,000 1,115,625
Shawmut National Corp. .................................. 50,000 1,681,250
Summit Bancorp........................................... 100,000 2,787,500
UJB Financial Corp. ..................................... 40,000 1,280,000
-----------
15,021,250
-----------
BROADCASTING & MEDIA--1.8%
Disney (Walt) Co. ....................................... 25,000 1,434,375
Scripps (E.W.) Co., Class A.............................. 25,000 865,625
Time Warner, Inc. ....................................... 30,000 1,192,500
Viacom, Inc.+............................................ 30,000 1,492,500
-----------
4,985,000
-----------
BUSINESS SERVICES--0.4%
ITT Corp. ............................................... 10,000 1,240,000
-----------
CHEMICALS--1.2%
Cabot Corp. ............................................. 33,700 1,790,313
du Pont (E.I.) de Nemours & Co. ......................... 20,000 1,375,000
-----------
3,165,313
-----------
COMMUNICATION EQUIPMENT--2.6%
Ericsson (L.M.) Telephone Co. Class B ADR(1)............. 30,000 735,000
Motorola, Inc. .......................................... 40,000 3,055,000
Nokia Corp. ADR(1)....................................... 20,000 1,395,000
United Technologies Corp. ............................... 25,000 2,209,375
-----------
7,394,375
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMPUTERS & BUSINESS EQUIPMENT--0.2%
International Business Machines Corp. .................... 5,000 $ 471,875
-----------
CONGLOMERATE--1.7%
AlliedSignal, Inc. ....................................... 50,000 2,206,250
General Electric Co....................................... 40,000 2,550,000
-----------
4,756,250
-----------
DEPARTMENT STORES--3.9%
Dayton Hudson Corp. ...................................... 25,000 1,896,875
Dillard Department Stores, Inc. .......................... 50,000 1,593,750
Penney (J.C.), Inc. ...................................... 40,000 1,985,000
Woolworth Corp. .......................................... 350,000 5,512,500
-----------
10,988,125
-----------
ELECTRONICS--1.3%
Micron Technology, Inc. .................................. 10,000 795,000
Texas Instruments, Inc. .................................. 20,000 1,597,500
Xerox Corp. .............................................. 10,000 1,343,750
-----------
3,736,250
-----------
ENERGY SERVICES--3.6%
Baker Hughes, Inc. ....................................... 70,000 1,426,250
BJ Services Co.+.......................................... 50,000 1,262,500
Halliburton Co. .......................................... 50,000 2,087,500
Rowan Cos., Inc.+......................................... 90,000 675,000
Schlumberger Ltd. ADR(1).................................. 30,000 1,957,500
Sonat Offshore Drilling, Inc. ............................ 28,000 913,500
Tenneco, Inc. ............................................ 40,557 1,875,761
-----------
10,198,011
-----------
ENERGY SOURCES--3.4%
Amerada Hess Corp. ....................................... 15,000 729,375
Amoco Corp. .............................................. 15,000 961,875
Anadarko Petroleum Corp. ................................. 20,000 947,500
Burlington Resources, Inc. ............................... 50,000 1,937,500
Chevron Corp. ............................................ 10,000 486,250
Exxon Corp. .............................................. 20,000 1,445,000
Kerr-McGee Corp. ......................................... 25,000 1,387,500
Pacific Enterprises....................................... 50,000 1,256,250
Reading & Bates Corp. .................................... 45,000 540,000
-----------
9,691,250
-----------
FINANCIAL SERVICES--2.4%
Capital One Financial Corp. .............................. 25,000 734,375
Dean Witter, Discover & Co. .............................. 25,000 1,406,250
First USA, Inc. .......................................... 40,000 2,170,000
</TABLE>
B-84
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Golden West Financial Corp. ............................... 25,000 $ 1,262,501
MBNA Corp. ................................................ 30,000 1,248,750
------------
6,821,876
------------
FOOD, BEVERAGE & TOBACCO--2.3%
Coca-Cola Co. ............................................. 20,000 1,380,000
Heinz (H.J.) Co. .......................................... 85,000 3,888,750
Quaker Oats Co. ........................................... 10,000 331,250
RJR Nabisco Holdings Corp. ................................ 30,000 971,250
------------
6,571,250
------------
FOREST PRODUCTS--0.4%
Stone Container Corp.+..................................... 60,000 1,140,000
------------
HEALTH SERVICES--7.3%
Amerisource Health Corp. .................................. 30,000 810,000
Caremark International, Inc. .............................. 75,000 1,612,500
Foundation Health Corp.+................................... 50,000 1,906,250
Health Systems International, Inc. ........................ 35,300 1,063,412
HEALTHSOUTH Rehabilitation+................................ 60,000 1,530,000
Humana, Inc.+.............................................. 40,000 805,000
McKesson Corp. ............................................ 25,000 1,125,000
OrNda Healthcorp+.......................................... 40,000 850,000
Pacificare Health Systems, Inc.+........................... 55,000 3,740,000
U.S. HealthCare, Inc. ..................................... 60,000 2,122,500
United Healthcare Corp. ................................... 45,000 2,199,375
Vencor, Inc.+.............................................. 88,825 2,842,400
------------
20,606,437
------------
HOTELS & CASINOS--0.5%
Hilton Hotels Corp. ....................................... 20,000 1,277,500
------------
HOUSEHOLD PRODUCTS--0.6%
Avon Products.............................................. 20,000 1,435,000
------------
INSURANCE--3.4%
Aetna Life & Casualty Co. ................................. 75,000 5,503,125
Equitable Cos., Inc. ...................................... 60,000 1,470,000
St. Paul Cos., Inc. ....................................... 25,000 1,459,375
Travelers Group, Inc. ..................................... 22,000 1,168,750
------------
9,601,250
------------
MACHINERY--0.5%
Millipore Corp. ........................................... 40,000 1,500,000
------------
MEDICAL PRODUCTS--4.5%
Abbott Laboratories........................................ 25,000 1,065,625
Amgen, Inc.+............................................... 40,000 1,995,000
Becton Dickinson & Co. .................................... 30,000 1,886,250
Chiron Corp.+.............................................. 15,000 1,357,500
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
MEDICAL PRODUCTS (CONTINUED)
Medtronic, Inc. ........................................... 80,000 $ 4,300,000
Perkin Elmer Corp. ........................................ 30,000 1,068,750
Scherer (R.P.) Corp. ADR(1)+............................... 25,000 1,084,375
------------
12,757,500
------------
METALS & MINING--0.4%
Aluminum Co. of America.................................... 20,000 1,057,500
Carbide/Graphite Group, Inc.+.............................. 2,000 28,250
------------
1,085,750
------------
PHARMACEUTICALS--7.0%
American Home Products Corp. .............................. 20,000 1,697,500
Biogen, Inc.+.............................................. 10,000 600,000
Depotech Corp.+............................................ 20,000 280,000
Glaxo Holdings PLC ADR(1).................................. 50,000 1,206,250
IVAX Corp. ................................................ 40,000 1,205,000
Lilly (Eli) & Co. ......................................... 15,000 1,348,125
Merck & Co., Inc. ......................................... 44,000 2,464,000
Pfizer, Inc. .............................................. 30,000 1,601,250
Schering-Plough Corp. ..................................... 40,000 2,060,000
Smithkline Beecham PLC ADR(1).............................. 35,000 1,771,875
Teva Pharmaceutical Industries Ltd. ADR(1)................. 30,000 1,083,750
Warner-Lambert Co. ........................................ 45,000 4,286,250
------------
19,604,000
------------
POLLUTION CONTROL--0.4%
Browning-Ferris Industries, Inc. .......................... 40,000 1,215,000
------------
REAL ESTATE COMPANIES--0.4%
Healthcare Realty Trust.................................... 55,000 1,141,250
------------
SPECIALTY RETAIL--1.4%
Barnes & Noble, Inc.+...................................... 20,000 765,000
Home Depot, Inc.+.......................................... 50,000 1,993,750
Lowe's Cos., Inc. ......................................... 40,000 1,200,000
------------
3,958,750
------------
TELECOMMUNICATIONS--3.0%
AT&T Corp. ................................................ 60,000 3,945,000
Frontier Corp. ............................................ 50,000 1,331,250
PanAmSat Corp. ............................................ 75,000 1,143,750
Tele Danmark A/S ADR(1).................................... 40,000 1,035,000
Worldcom, Inc.+............................................ 28,000 899,500
------------
8,354,500
------------
TRANSPORTATION--0.7%
Union Pacific Corp. ....................................... 30,000 1,987,500
------------
TOTAL COMMON STOCK
(cost $160,846,297)........................................ 185,484,012
------------
</TABLE>
B-85
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
SHARES/RIGHTS
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK--1.3%
ENERGY SERVICES--1.3%
Occidental Petroleum Corp. (cost $3,000,000)..... 60,000 $ 3,532,500
------------
RIGHTS--0.0%
Ericsson (L.M.) Telephone Co. ADR(1)
(cost $0)....................................... 60,000 0
------------
BONDS & NOTES--4.4%
APPAREL & TEXTILES--1.1%
Bass America, Inc.
8.13% due 3/31/02............................... $ 3,000 3,222,510
------------
BANKS--0.7%
Chase Manhattan Corp.
7.88% due 8/01/04............................... 2,000 2,046,120
------------
COMPUTERS & BUSINESS EQUIPMENT--0.9%
Apple Computer, Inc.
6.50% due 2/15/04............................... 2,500 2,411,925
------------
FINANCIAL SERVICES--1.7%
Bear Stearns Cos, Inc.
6.63% due 1/15/04............................... 5,000 4,875,850
------------
TOTAL BONDS & NOTES
(cost $12,007,995)............................... 12,556,405
------------
U.S. TREASURY NOTES--18.9%
4.38% due 8/15/96................................ 5,000 4,942,950
5.13% due 2/28/98................................ 5,000 4,915,600
5.50% due 9/30/97-4/15/00........................ 7,750 7,649,042
5.75% due 8/15/03................................ 7,000 6,810,790
6.50% due 8/15/05................................ 2,500 2,561,325
6.75% due 5/31/99................................ 5,000 5,123,450
6.88% due 7/31/99................................ 8,000 8,237,520
7.25% due 2/15/98................................ 3,300 3,396,921
7.50% due 2/15/05(2)............................. 5,000 5,446,100
9.25% due 8/15/98................................ 4,000 4,346,240
------------
53,429,938
------------
TOTAL U.S. TREASURY NOTES
(cost $53,437,780)............................... 53,429,938
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
U.S. TREASURY BONDS--2.4%
6.25% due 8/15/23
(cost $6,866,719)............................... $ 7,000 $ 6,663,090
------------
TOTAL INVESTMENT SECURITIES--92.8%
(cost $236,158,791)............................. 261,665,945
------------
REPURCHASE AGREEMENT--5.5%
Joint Repurchase Agreement Account (Note 3)
(cost $15,638,000).............................. 15,638 15,638,000
------------
TOTAL INVESTMENTS--
(cost $251,796,791)............................. 98.3% 277,303,945
Other assets less liabilities.................... 1.7 4,727,220
-----
------------
NET ASSETS-- 100.0% $282,031,165
===== ============
</TABLE>
- --------
+Non-income producing securities
(1)ADR ("American Depositary Receipts")
(2)Security on Loan, see Note 2
See Notes to Financial Statements
B-86
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--87.4%
AEROSPACE & MILITARY TECHNOLOGY--1.2%
Boeing Co. ................................................. 15,000 $ 1,023,750
-----------
APPAREL & TEXTILES--2.2%
NIKE, Inc. ................................................. 10,000 1,111,250
Reebok International Ltd. .................................. 20,000 687,500
-----------
1,798,750
-----------
AUTOMOTIVE--2.8%
Chrysler Corp. ............................................. 25,000 1,325,000
General Motors Corp. ....................................... 20,000 937,500
-----------
2,262,500
-----------
BANKS--5.1%
BankAmerica Corp. .......................................... 15,000 898,125
Citicorp.................................................... 10,000 707,500
Signet Banking Corp. ....................................... 25,000 656,250
Standard Federal Bancorporation............................. 30,000 1,170,000
Summit Bancorp.............................................. 27,500 766,562
-----------
4,198,437
-----------
BROADCASTING & MEDIA--3.5%
Scholastic Corp.+........................................... 20,000 1,255,000
Time Warner, Inc. .......................................... 15,000 596,250
Viacom, Inc. Class B+....................................... 20,000 995,000
-----------
2,846,250
-----------
BUSINESS SERVICES--0.7%
Transaction Network Services, Inc.+......................... 20,000 537,500
-----------
CHEMICALS--2.5%
Cabot Corp.................................................. 26,100 1,386,563
du Pont (E.I.) de Nemours & Co. ............................ 10,000 687,500
-----------
2,074,063
-----------
COMMUNICATION EQUIPMENT--4.4%
Adtran, Inc.+............................................... 20,000 695,000
Ericsson (L.M.) Telephone Co. Class B ADR(1)................ 30,000 735,000
Motorola, Inc. ............................................. 10,000 763,750
Nokia Corp. ADR(1).......................................... 20,000 1,395,000
-----------
3,588,750
-----------
COMPUTERS & BUSINESS EQUIPMENT--3.2%
BT Office Products International, Inc.+..................... 72,000 945,000
Madge NV+................................................... 25,000 800,000
StorMedia, Inc.+............................................ 20,000 905,000
-----------
2,650,000
-----------
CONGLOMERATE--2.6%
AlliedSignal, Inc........................................... 20,000 882,500
General Electric Co......................................... 20,000 1,275,000
-----------
2,157,500
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
CONSUMER SERVICES--1.2%
Service Corp. International................................. 25,000 $ 978,125
-----------
DEPARTMENT STORES--1.0%
Woolworth Corp. ............................................ 50,000 787,500
-----------
ELECTRICAL EQUIPMENT--0.6%
AVX Corp. .................................................. 15,000 502,500
-----------
ELECTRONICS--2.2%
Philips Electronics NV...................................... 20,000 975,000
Texas Instruments, Inc...................................... 10,000 798,750
-----------
1,773,750
-----------
ENERGY SERVICES--4.0%
Baker Hughes, Inc. ......................................... 20,000 407,500
BJ Services Co.+............................................ 30,000 757,500
Halliburton Co. ............................................ 20,000 835,000
Schlumberger Ltd. ADR(1).................................... 10,000 652,500
Sonat Offshore Drilling, Inc. .............................. 20,000 652,500
-----------
3,305,000
-----------
ENERGY SOURCES--3.7%
Anadarko Petroleum Corp. ................................... 20,000 947,500
Burlington Resources, Inc. ................................. 25,000 968,750
Kerr-McGee Corp. ........................................... 20,000 1,110,000
-----------
3,026,250
-----------
FINANCIAL SERVICES--1.0%
Dean Witter, Discover & Co. ................................ 15,000 843,750
-----------
FOOD, BEVERAGE & TOBACCO--3.0%
Heinz (H.J.) Co. ........................................... 40,000 1,830,000
Mondavi Robert Corp. ....................................... 25,000 637,500
-----------
2,467,500
-----------
FOREST PRODUCTS--1.2%
Crown Cork & Seal, Inc...................................... 25,000 968,750
-----------
HEALTH SERVICES--11.1%
Caremark International, Inc. ............................... 25,000 537,500
Columbia/HCA Healthcare Corp. .............................. 20,000 972,500
Health Management Associates+............................... 30,000 963,750
Healthsource, Inc.+......................................... 18,200 875,875
Humana, Inc.+............................................... 45,000 905,625
McKesson Corp............................................... 15,000 675,000
Pacificare Health Systems, Inc.+............................ 15,000 1,020,000
U.S. HealthCare, Inc. ...................................... 20,000 707,500
United Healthcare Corp. .................................... 35,000 1,710,625
Vencor, Inc+................................................ 23,375 748,000
-----------
9,116,375
-----------
</TABLE>
B-87
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
INSURANCE--3.8%
Aetna Life & Casualty Co. .................................. 35,000 $ 2,568,125
Travelers Group, Inc. ...................................... 10,000 531,250
-----------
3,099,375
-----------
MACHINERY--0.9%
Millipore Corp. ............................................ 20,000 750,000
-----------
MEDICAL PRODUCTS--7.9%
Becton Dickinson & Co. ..................................... 10,000 628,750
Boston Scientific Corp.+.................................... 25,000 1,065,625
Medtronic, Inc.............................................. 60,000 3,225,000
Scherer (R.P.) Corp. ADR(1)+................................ 20,000 867,500
Sola International, Inc.+................................... 30,000 663,750
-----------
6,450,625
-----------
PHARMACEUTICALS--11.1%
Abbott Laboratories......................................... 15,000 639,375
Agouron Pharmaceuticals, Inc. .............................. 13,000 373,750
ALZA Corp.+................................................. 20,000 460,000
Amgen, Inc.+................................................ 20,000 997,500
Biogen, Inc.+............................................... 5,000 300,000
Chiron Corp.+............................................... 10,000 905,000
Gilead Sciences, Inc.+...................................... 25,000 550,000
IVAX Corp. ................................................. 20,000 602,500
Merck & Co., Inc. .......................................... 20,000 1,120,000
Schering-Plough Corp. ...................................... 20,000 1,030,000
Teva Pharmaceutical Industries Ltd. ADR(1).................. 20,000 722,500
Warner-Lambert Co. ......................................... 15,000 1,428,750
-----------
9,129,375
-----------
POLLUTION CONTROL--0.4%
Browning-Ferris Industries, Inc. ........................... 10,000 303,750
-----------
SPECIALTY RETAIL--0.7%
Barnes & Noble, Inc.+....................................... 14,600 558,450
-----------
TELECOMMUNICATIONS--4.6%
AT&T Corp. ................................................. 30,000 1,972,500
MobileMedia Corp.+.......................................... 13,000 351,000
PanAmSat Corp............................................... 50,000 762,500
Worldcom, Inc.+............................................. 20,000 642,500
-----------
3,728,500
-----------
TRANSPORTATION--0.8%
Union Pacific Corp.......................................... 10,000 662,500
-----------
TOTAL COMMON STOCK
(cost $63,392,694).......................................... 71,589,575
-----------
</TABLE>
<TABLE>
<CAPTION>
RIGHTS
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
RIGHTS--0.0%+
COMMUNICATION EQUIPMENT--0.0%
Ericsson (L.M.) Telephone Co. ADR(1)
(cost $0) ....................................... 60,000 $ 0
-----------
TOTAL INVESTMENT SECURITIES--87.4%
(cost $63,392,694)............................... 71,589,575
-----------
REPURCHASE AGREEMENT--5.7%
Joint Repurchase Agreement
Account (Note 3)
(cost $4,715,000)................................ $4,715 4,715,000
-----------
TOTAL INVESTMENTS--
(cost $68,107,694)............................... 93.1% 76,304,575
Other assets less liabilities..................... 6.9 5,635,221
-----
-----------
NET ASSETS-- 100.0% $81,939,796
===== ===========
</TABLE>
- --------
+ Non-income producing securities
(1) ADR ("American Depositary Receipts")
See Notes to Financial Statements
B-88
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--72.3%
APPAREL & TEXTILES--8.5%
Authentic Fitness Corp. .................................. 10,000 $ 225,000
Jones Apparel Group, Inc.+................................ 15,000 534,375
Kenneth Cole Productions, Inc. ........................... 5,500 193,188
Liz Claiborne, Inc. ...................................... 25,000 631,250
Nautica Enterprises, Inc.+................................ 15,000 513,750
Oakley, Inc.+............................................. 5,000 148,125
Quiksilver, Inc.+......................................... 12,500 339,062
Tommy Hilfiger Corp.+..................................... 22,000 715,000
Warnaco Group, Inc. ...................................... 30,000 720,000
-----------
4,019,750
-----------
BANKS--5.7%
First Tennessee National Corp. ........................... 10,000 555,000
Long Island Bancorp, Inc. ................................ 30,000 735,000
Mercantile Bancorp, Inc. ................................. 10,000 447,500
Midlantic Corp. .......................................... 6,000 325,500
RCSB Financial, Inc. ..................................... 10,000 241,250
Signet Banking Corp. ..................................... 15,000 393,750
-----------
2,698,000
-----------
BROADCASTING & MEDIA--2.0%
Scholastic Corp.+......................................... 15,000 941,250
-----------
CHEMICALS--2.5%
Arcadian Corp. ........................................... 20,000 407,500
Bush Boake Allen, Inc.+................................... 10,200 288,150
Cabot Corp. .............................................. 9,000 478,125
-----------
1,173,775
-----------
COMMUNICATION EQUIPMENT--3.4%
Adtran, Inc.+............................................. 10,000 347,500
Ericsson (L.M.) Telephone Co. Class B ADR(1).............. 15,000 367,500
QUALCOMM, Inc.+........................................... 15,000 688,125
Tellabs, Inc.+............................................ 5,000 210,625
-----------
1,613,750
-----------
COMPUTERS & BUSINESS EQUIPMENT--6.5%
3Com Corp.+............................................... 15,000 682,500
Bay Networks, Inc.+....................................... 5,000 266,875
BT Office Products International, Inc.+................... 55,000 721,875
Cisco Systems, Inc.+...................................... 5,000 345,000
Shiva Corp.+.............................................. 10,000 612,500
United States Robotics Corp. ............................. 5,000 426,250
-----------
3,055,000
-----------
DEPARTMENT STORES--1.3%
Woolworth Corp. .......................................... 40,000 630,000
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
ELECTRICAL EQUIPMENT--3.9%
Alpha Industries, Inc. ..................................... 55,000 $ 983,125
AVX Corp. .................................................. 5,000 167,500
LSI Logic Corp.+............................................ 12,000 693,000
-----------
1,843,625
-----------
ELECTRONICS--3.1%
Cirrus Logic, Inc.+......................................... 5,000 286,250
Micron Technology, Inc. .................................... 5,000 397,500
TriQuint Semiconductor, Inc.+............................... 11,000 251,625
Ultratech Stepper, Inc.+.................................... 12,500 528,125
-----------
1,463,500
-----------
ENERGY SERVICES--2.6%
Global Marine, Inc.+........................................ 80,000 570,000
Sonat Offshore Drilling, Inc. .............................. 20,000 652,500
-----------
1,222,500
-----------
ENTERTAINMENT PRODUCTS--0.8%
Acclaim Entertainment, Inc.+................................ 15,000 386,250
-----------
FINANCIAL SERVICES--4.6%
Capital One Financial Corp. ................................ 25,000 734,375
Green Tree Financial Corp. ................................. 7,000 427,000
Lehman Brothers Holdings, Inc. ............................. 15,000 346,875
United Companies Financial Corp. ........................... 10,000 682,500
-----------
2,190,750
-----------
HEALTH SERVICES--1.4%
Health Management Associates+............................... 10,000 321,250
Pacificare Health Systems, Inc.+............................ 5,000 340,000
-----------
661,250
-----------
LEISURE & TOURISM--0.9%
Showboat, Inc. ............................................. 20,000 432,500
-----------
MACHINERY--2.0%
Millipore Corp. ............................................ 20,000 750,000
Parker Hannifin Corp. ...................................... 5,500 209,000
-----------
959,000
-----------
MEDICAL PRODUCTS--4.8%
ADAC Laboratories........................................... 40,000 480,000
Guidant Corp. .............................................. 23,000 672,750
</TABLE>
B-89
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
MEDICAL PRODUCTS (CONTINUED)
Perkin Elmer Corp. ......................................... 17,000 $ 605,625
St. Jude Medical, Inc. ..................................... 8,000 506,000
-----------
2,264,375
-----------
PHARMACEUTICALS--5.0%
IVAX Corp. ................................................. 10,000 301,250
Sepracor, Inc.+............................................. 10,000 216,250
Teva Pharmaceutical Industries Ltd. ADR(1).................. 20,000 722,500
Upjohn Co. ................................................. 10,000 446,250
Watson Pharmaceuticals, Inc.+............................... 16,000 656,000
-----------
2,342,250
-----------
POLLUTION CONTROL--1.3%
United Waste Systems, Inc.+................................. 15,000 626,250
-----------
RESTAURANTS--0.5%
Apple South, Inc. .......................................... 10,000 227,500
-----------
SOFTWARE--3.9%
BMC Software, Inc.+......................................... 10,000 460,000
Electronic Arts+............................................ 10,000 367,500
Innovus Corp.+.............................................. 14,000 120,750
Netscape Communications Corp.+.............................. 5,000 312,500
Pc Docs Group International, Inc.+.......................... 40,000 597,500
-----------
1,858,250
-----------
SPECIALTY RETAIL--1.1%
Sunglass Hut International, Inc.+........................... 10,000 500,000
-----------
TELECOMMUNICATIONS--6.5%
ADC Telecommunications, Inc.+............................... 10,000 455,000
Allen Group, Inc. .......................................... 15,000 543,750
Andrew Corp.+............................................... 7,000 427,875
Glenayre Technologies, Inc.+................................ 7,000 504,000
MobileMedia Corp.+.......................................... 20,000 540,000
Octel Communications Corp.+................................. 10,500 366,188
PictureTel Corp.+........................................... 5,000 226,250
-----------
3,063,063
-----------
TOTAL COMMON STOCK
(cost $27,903,815).......................................... 34,172,588
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES/RIGHTS
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
OPTIONS--0.5%+
STOCK INDEX PUT OPTIONS--0.5%
Nasdaq 100 Index, Dec./530(2)
(cost $606,629).................................. 35,000 $ 258,125
-----------
RIGHTS--0.0%+
COMMUNICATION EQUIPMENT--0.0%
Ericsson (L.M.) Telephone Co. ADR(1)
(cost $0)....................................... 40,000 0
-----------
TOTAL INVESTMENT SECURITIES--72.8%
(cost $28,510,444)............................... 34,430,713
-----------
REPURCHASE AGREEMENT--6.5%
Joint Repurchase Agreement
Account (Note 3)
(cost $3,059,000)................................ $ 3,059 3,059,000
-----------
TOTAL INVESTMENTS--
(cost $31,569,444)............................... 79.3% 37,489,713
Other assets less liabilities..................... 20.7 9,767,924
-------
-----------
NET ASSETS-- 100.0% $47,257,637
===== ===========
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
(2) Fair valued security, see Note 2
See Notes to Financial Statements
B-90
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--74.2%
APPAREL & TEXTILES--4.8%
Authentic Fitness Corp. .................................. 60,000 $ 1,350,000
Donnkenny, Inc.+.......................................... 17,000 478,125
Jones Apparel Group, Inc.+................................ 20,000 712,500
Kenneth Cole Productions, Inc. ........................... 10,000 351,250
Nautica Enterprises, Inc.+................................ 37,500 1,284,375
Oakley, Inc.+............................................. 30,000 888,750
Quiksilver, Inc.+......................................... 57,500 1,559,688
Warnaco Group, Inc. ...................................... 40,000 960,000
------------
7,584,688
------------
BANKS--3.7%
Bay View Capital Corp. ................................... 25,000 675,000
First American Corp. (Tennessee).......................... 15,000 646,875
Long Island Bancorp, Inc. ................................ 30,000 735,000
Peoples Bank (Bridgeport, Connecticut).................... 50,000 1,075,000
Provident Bankshares Corp. ............................... 20,000 600,000
RCSB Financial, Inc. ..................................... 50,000 1,206,250
Summit Bancorp............................................ 35,000 975,626
------------
5,913,751
------------
BROADCASTING & MEDIA--5.6%
American Radio Systems Corp.+............................. 30,000 742,500
Edmark Corp.+............................................. 25,000 1,203,125
Emmis Broadcasting Corp.+................................. 20,000 627,500
Evergreen Media Corp.+.................................... 25,000 712,500
National Media Corp.+..................................... 100,700 1,372,037
Regal Cinemas, Inc.+...................................... 55,000 2,261,875
Scholastic Corp.+......................................... 15,000 941,250
Sinclair Broadcast Group, Inc.+........................... 32,500 934,375
------------
8,795,162
------------
BUSINESS SERVICES--0.4%
RTW, Inc.+................................................ 22,000 610,500
------------
CHEMICALS--0.4%
Bush Boake Allen, Inc.+................................... 20,200 570,650
------------
COMMUNICATION EQUIPMENT--2.9%
Adtran, Inc.+............................................. 10,000 347,500
DSC Communications Corp.+................................. 10,000 592,500
DSP Communications, Inc.+................................. 20,000 660,000
NETCOM On-Line Communications Services+................... 22,000 968,000
QUALCOMM, Inc.+........................................... 32,500 1,490,938
Tellabs, Inc.+............................................ 10,000 421,250
------------
4,480,188
------------
COMPUTERS & BUSINESS EQUIPMENT--5.0%
Bay Networks, Inc.+....................................... 15,000 800,625
Cisco Systems, Inc.+...................................... 12,000 828,000
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMPUTERS & BUSINESS EQUIPMENT (CONTINUED)
Comverse Technology, Inc.+................................ 33,000 $ 717,750
Daisytek International Corp.+............................. 21,000 690,375
Integrated Measurement Systems, Inc.+..................... 25,000 331,250
Madge NV+................................................. 40,000 1,280,000
Shiva Corp.+.............................................. 25,000 1,531,250
StorMedia, Inc.+.......................................... 19,000 859,750
Structural Dynamics Research Corp.+....................... 50,000 928,125
------------
7,967,125
------------
ELECTRICAL EQUIPMENT--3.4%
Alpha Industries, Inc. ................................... 125,000 2,234,375
ANADIGICS, Inc.+.......................................... 66,000 1,831,500
C-Cube Microsystems, Inc.+................................ 20,000 915,000
California Amplifier, Inc.+............................... 2,500 52,188
ITI Technologies, Inc.+................................... 15,000 406,875
------------
5,439,938
------------
ELECTRONICS--7.0%
Cirrus Logic, Inc.+....................................... 15,000 858,750
Eltron International, Inc.+............................... 25,000 706,250
Kulicke & Soffa Industries, Inc. ......................... 15,000 547,500
OnTrak Systems, Inc.+..................................... 16,500 455,812
Paradigm Technology, Inc.+................................ 21,000 645,750
Sierra Semi-Conductor Corp.+.............................. 30,000 1,473,750
TelCom Semiconductor, Inc.+............................... 65,000 747,500
Tencor Instruments+....................................... 20,000 885,000
TriQuint Semiconductor, Inc.+............................. 44,000 1,006,500
Ultratech Stepper, Inc.+.................................. 15,000 633,750
Uniphase Corp.+........................................... 25,000 881,250
Veeco Instruments, Inc.+.................................. 55,000 1,443,750
Xilinx, Inc.+............................................. 15,000 721,875
------------
11,007,437
------------
ENERGY SERVICES--2.6%
Arethusa (Offshore) Ltd. ................................. 50,000 1,031,250
Reading & Bates Corp. .................................... 100,000 1,200,000
Sonat Offshore Drilling, Inc. ............................ 35,000 1,141,873
Varco International, Inc.+................................ 70,000 708,750
------------
4,081,873
------------
ENERGY SOURCES--0.4%
Pride Petroleum Services, Inc.+........................... 60,000 600,000
------------
ENTERTAINMENT PRODUCTS--0.4%
Challenger International Ltd.+............................ 100,000 637,500
------------
FINANCIAL SERVICES--0.8%
Security Capital Corp.+................................... 10,000 532,500
WFS Financial, Inc.+...................................... 30,000 682,500
------------
1,215,000
------------
</TABLE>
B-91
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
HEALTH SERVICES--1.6%
Occusystems, Inc.+........................................ 37,500 $ 778,125
Veterinary Centers of America, Inc.+...................... 100,000 1,700,000
------------
2,478,125
------------
LEISURE & TOURISM--1.8%
Showboat, Inc. ........................................... 60,000 1,297,500
Studio Plus America, Inc.+................................ 70,000 1,610,000
------------
2,907,500
------------
MACHINERY--0.4%
AG Associates, Inc.+...................................... 27,000 688,500
------------
MEDICAL PRODUCTS--2.6%
ADAC Laboratories......................................... 90,000 1,080,000
American Oncology Resources, Inc.+........................ 14,000 602,000
Metra Biosystems, Inc.+................................... 31,000 604,500
Perkin Elmer Corp. ....................................... 20,000 712,500
VISX, Inc.+............................................... 50,000 1,135,157
------------
4,134,157
------------
PHARMACEUTICALS--5.8%
Agouron Pharmaceuticals, Inc. ............................ 22,000 632,500
Depotech Corp.+........................................... 40,900 572,600
Gilead Sciences, Inc.+.................................... 25,000 550,000
Guilford Pharmaceuticals, Inc.+........................... 100,000 1,200,000
Immulogic Pharmaceutical Corp.+........................... 75,000 918,750
Ligand Pharmaceuticals, Inc.+............................. 100,000 987,500
ResMed, Inc.+............................................. 50,000 887,500
Sepracor, Inc.+........................................... 40,000 865,000
Teva Pharmaceutical Industries Ltd. ADR(1)................ 30,000 1,083,750
Watson Pharmaceuticals, Inc.+............................. 34,000 1,394,000
------------
9,091,600
------------
POLLUTION CONTROL--0.7%
United Waste Systems, Inc.+............................... 27,500 1,148,125
------------
RESTAURANTS--0.7%
Apple South, Inc. ........................................ 25,000 568,750
Cheesecake Factory, Inc.+................................. 20,000 535,000
------------
1,103,750
------------
SOFTWARE--12.8%
Activision, Inc.+......................................... 75,000 1,190,625
Discreet Logic, Inc.+..................................... 11,500 632,500
Epic Design Technology, Inc.+............................. 20,000 970,000
Harbinger Corp.+.......................................... 52,000 715,000
HNC Software, Inc.+....................................... 40,000 1,050,000
HPR, Inc.+................................................ 20,500 476,625
IMNET Systems, Inc.+...................................... 35,000 901,250
Innovus Corp.+............................................ 92,700 799,537
</TABLE>
<TABLE>
<CAPTION>
SHARES/ VALUE
SECURITY DESCRIPTION OPTIONS (NOTE 2)
<S> <C> <C>
SOFTWARE (CONTINUED)
Innovus Corp.+(2)(3)...................................... 54,000 $ 189,000
Integrated Silicon Systems, Inc.+......................... 30,000 900,000
Legato Systems, Inc.+..................................... 15,000 397,500
Maxis, Inc.+.............................................. 32,500 1,430,000
Minnesota Educational Computing Corp.+.................... 30,000 810,000
Netscape Communications Corp.+............................ 10,000 625,000
On Technology Corp.+...................................... 25,000 431,250
Pc Docs Group International, Inc.+........................ 190,000 2,838,125
Premenos Technology Corp.+................................ 15,000 487,500
Project Software & Development, Inc.+..................... 25,000 650,000
Pure Software, Inc.+...................................... 45,000 1,608,750
Sanctuary Woods Multimedia+............................... 100,000 700,000
Simware, Inc.+............................................ 27,500 275,000
Spyglass, Inc.+........................................... 13,100 599,325
UUNET Technologies, Inc.+................................. 15,000 693,750
Videoserver, Inc.+........................................ 23,500 828,375
-----------
20,199,112
-----------
SPECIALTY RETAIL--2.7%
Garden Ridge Corp.+....................................... 25,000 731,250
Just For Feet, Inc.+...................................... 38,750 1,191,563
Moovies, Inc.+............................................ 40,000 785,000
Neostar Retail Group, Inc.+............................... 21,000 359,625
Sunglass Hut International, Inc.+......................... 25,000 1,250,000
-----------
4,317,438
-----------
TELECOMMUNICATIONS--7.7%
Aspect Telecommunications Corp.+.......................... 30,000 810,000
Inter-Tel, Inc.+.......................................... 45,000 793,125
Octel Communications Corp.+............................... 24,500 854,437
P-COM, Inc.+.............................................. 22,500 1,006,875
PictureTel Corp.+......................................... 5,000 226,250
Premisys Communications, Inc.+............................ 12,500 1,009,375
TCSI Corp.+............................................... 59,500 892,500
Teltrend, Inc.+........................................... 45,000 1,485,000
Transaction Network Services, Inc.+....................... 52,000 1,397,500
United States Order, Inc.+................................ 60,000 1,110,000
Vtel Corp.+............................................... 40,000 995,000
Winstar Communications, Inc.+............................. 80,000 1,600,000
-----------
12,180,062
-----------
TOTAL COMMON STOCK
(cost $91,731,329)........................................ 117,152,181
-----------
OPTIONS--0.7%+
STOCK INDEX PUT OPTIONS--0.7%
Nasdaq 100 Index Dec./530(3)
(cost $2,507,268)......................................... 145,000 1,069,375
-----------
TOTAL INVESTMENT SECURITIES--74.9%
(cost $94,238,597)........................................ 118,221,556
-----------
</TABLE>
B-92
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT--12.6%
Joint Repurchase Agreement Account (Note 3)
(cost $19,896,000).............................. $19,896 $ 19,896,000
------------
TOTAL INVESTMENTS--
(cost $114,134,597)............................. 87.5% 138,117,556
Other assets less liabilities.................... 12.5 19,705,548
-----
------------
NET ASSETS-- 100.0% $157,823,104
===== ============
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
(2) At September 30, 1995 the Fund held a restricted security amounting to 0.1%
of net assets. The Fund will not bear any costs, including those involved
in registration under the Securities Act of 1933, in connection with the
disposition of the security.
<TABLE>
<CAPTION>
DATE OF UNIT VALUATION AS OF
DESCRIPTION ACQUISITION COST SEPTEMBER 30, 1995
----------- ----------- ----- ------------------
<S> <C> <C> <C>
Innovus Corp. 3/21/95 $3.50 $3.50
</TABLE>
(3) Fair valued security, see Note 2.
See Notes to Financial Statements
B-93
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--69.1%
DOMESTIC EQUITY--15.9%
AEROSPACE & MILITARY TECHNOLOGY--0.6%
Boeing Co................................................... 2,000 $ 136,500
-----------
APPAREL & TEXTILES--0.7%
NIKE, Inc................................................... 1,000 111,125
Oakley, Inc.+............................................... 400 11,850
Warnaco Group, Inc. ........................................ 2,000 48,000
-----------
170,975
-----------
AUTOMOTIVE--0.2%
General Motors Corp......................................... 1,000 46,875
-----------
BANKS--1.0%
BankAmerica Corp............................................ 2,000 119,750
Citicorp.................................................... 1,750 123,812
-----------
243,562
-----------
BROADCASTING & MEDIA--0.3%
Young Broadcasting, Inc.+................................... 2,000 62,500
-----------
CHEMICALS--0.5%
Union Carbide Corp.......................................... 3,000 119,250
-----------
COMMUNICATION EQUIPMENT--0.3%
Motorola, Inc............................................... 850 64,919
-----------
COMPUTERS & BUSINESS EQUIPMENT--0.9%
IMNET Systems, Inc.+........................................ 2,200 56,650
International Business Machines Corp........................ 1,600 151,000
-----------
207,650
-----------
CONGLOMERATE--0.6%
AlliedSignal, Inc........................................... 2,000 88,250
General Electric Co......................................... 800 51,000
-----------
139,250
-----------
ELECTRONICS--0.1%
Integrated Measurement Systems, Inc.+....................... 2,000 26,500
-----------
ENERGY SOURCES--0.9%
Amoco Corp.................................................. 700 44,888
Baker Hughes, Inc........................................... 2,000 40,750
Halliburton Co.............................................. 1,200 50,100
Texaco, Inc................................................. 1,000 64,625
-----------
200,363
-----------
FINANCIAL SERVICES--0.5%
Dean Witter, Discover & Co.................................. 2,000 112,500
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--0.5%
Heinz (H.J.) Co............................................. 2,500 $ 114,375
-----------
HEALTH SERVICES--1.0%
Becton Dickinson & Co....................................... 1,000 62,875
Humana, Inc.+............................................... 1,000 20,125
St. Jude Medical, Inc....................................... 1,000 63,250
United Healthcare Corp...................................... 1,800 87,975
-----------
234,225
-----------
HOUSEHOLD PRODUCTS--1.3%
Eastman Kodak Co............................................ 2,850 168,862
Johnson & Johnson Co........................................ 2,000 148,250
-----------
317,112
-----------
INSURANCE--0.3%
Travelers Group, Inc........................................ 1,200 63,750
-----------
MEDICAL PRODUCTS--1.0%
Chiron Corp.+............................................... 1,000 90,500
Medtronic, Inc.............................................. 2,000 107,500
Sola International, Inc.+................................... 2,000 44,250
-----------
242,250
-----------
METALS & MINING--0.4%
Carbide/Graphite Group, Inc.+............................... 500 7,063
Phelps Dodge Corp........................................... 650 40,706
Reynolds Metals Co.......................................... 1,000 57,750
-----------
105,519
-----------
PHARMACEUTICALS--2.9%
Abbott Laboratories......................................... 2,000 85,250
Lilly (Eli) & Co............................................ 1,400 125,825
Merck & Co., Inc............................................ 1,000 56,000
Pfizer, Inc................................................. 1,200 64,050
Schering-Plough Corp........................................ 3,200 164,800
Warner-Lambert Co........................................... 2,000 190,500
-----------
686,425
-----------
POLLUTION CONTROL--0.3%
Browning-Ferris Industries, Inc............................. 2,000 60,750
-----------
SOFTWARE--0.3%
ArcSys, Inc.+............................................... 1,000 41,250
Netscape Communications Corp.+.............................. 500 31,250
-----------
72,500
-----------
</TABLE>
B-94
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
DOMESTIC EQUITY (CONTINUED)
SPECIALTY RETAIL--0.5%
Barnes & Noble, Inc.+....................................... 2,000 $ 76,500
Toys R Us, Inc.+............................................ 1,500 40,500
-----------
117,000
-----------
TELECOMMUNICATIONS--0.8%
AT&T Corp................................................... 1,500 98,625
PamAmSat Corp. ............................................. 2,000 30,500
Worldcom, Inc............................................... 2,000 64,250
-----------
193,375
-----------
TOTAL DOMESTIC EQUITY
(COST $2,945,325)........................................... 3,738,125
-----------
FOREIGN EQUITY--53.2%
APPAREL & TEXTILES--0.1%
Marzotto & Figli (Italy).................................... 5,000 33,023
-----------
AUTOMOTIVE--2.9%
Autoliv AB (Sweden)......................................... 2,200 134,193
Bridgestone Corp. (Japan)................................... 10,000 148,402
Honda Motor Co., Ltd. (Japan)............................... 20,000 359,396
SA D'Ieteren NV (Belgium)................................... 515 42,742
-----------
684,733
-----------
BANKS--7.5%
Banco Intercontinental Espanol (Spain)...................... 350 30,493
Banco Osorno Y La Union ADR(1) (Chile)...................... 800 12,400
Bangkok Bank Public Co. Ltd. (Thailand)..................... 1,900 21,351
Bank of Montreal (Canada)................................... 1,250 27,435
Bank of Tokyo Ltd. (Japan).................................. 20,000 300,843
Bank Of Tokyo Mitsubishi (Japan)............................ 15,000 299,833
Canadian Imperial Bank Toronto (Canada)..................... 2,655 69,136
Commonwealth Bank Of Australia (Australia).................. 13,000 100,605
Credito Italiano SpA (Italy)................................ 40,000 47,454
Development Bank of Singapore (Singapore)................... 3,000 34,148
Generale de Banque Belge Pour l'Etranger SA (Belgium)....... 185 57,891
Kampa Haus AG (Denmark)..................................... 1,485 61,832
Mitsubishi Trust & Banking Corp (Japan)..................... 20,000 312,957
National Australia Bank Ltd. (Australia).................... 10,000 88,422
National Westminster Bank PLC (United Kingdom).............. 9,000 90,156
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
BANKS (CONTINUED)
Overseas Chinese Banking Corp. Ltd. (Singapore)............. 4,000 $ 45,250
Siam Commercial Bank PLC (Thailand)......................... 3,700 41,578
Societe Generale (France)................................... 450 46,055
Stadshyotek AB (Sweden)..................................... 4,500 79,260
-----------
1,767,099
-----------
CHEMICALS--1.3%
Laporte PLC (United Kingdom)................................ 5,000 64,070
P.T. Tri Polyta Indonesia ADR(1) (Indonesia)................ 2,500 53,750
Sekisui Chemical Co., Ltd. (Japan).......................... 10,000 127,202
Tessenderlo Chemie NV (Belgium)............................. 145 53,019
-----------
298,041
-----------
COMMUNICATION EQUIPMENT--1.1%
Ericsson (L.M.) Telephone Co. Class B ADR(1) (Brazil)....... 4,000 98,000
Nokia Corp. (Finland)....................................... 2,200 154,328
-----------
252,328
-----------
COMPUTERS & BUSINESS EQUIPMENT--0.6%
Getronics NV (Netherlands).................................. 2,400 118,207
Videologic Group PLC (United Kingdom)....................... 43,283 23,936
-----------
142,143
-----------
CONGLOMERATE--1.6%
BTR PLC (United Kingdom).................................... 20,000 102,702
Hanson PLC (United Kingdom)................................. 25,000 79,791
Sonae Investimento (Portugal)............................... 1,750 40,955
Strafor-Facom SA (France)................................... 600 71,886
Williams Holdings PLC (United Kingdom)...................... 15,000 77,856
-----------
373,190
-----------
CONSTRUCTION & HOUSING--3.9%
BWT AG (Austria)............................................ 200 24,782
Glynwed International (United Kingdom)...................... 15,000 84,951
Hopewell Holdings Ltd. (Hong Kong).......................... 42,000 28,519
Italian Thai Development Public Co. Ltd. (Thailand)......... 1,500 16,737
Kajima Corp. (Japan)........................................ 20,000 197,062
Keppel Corp. Ltd. (Singapore)............................... 2,000 16,020
Koninklijke Volker Stevin (Netherlands)..................... 500 33,377
Nishimatsu Construction (Japan)............................. 30,000 366,463
Pioneer International Ltd. (Australia)...................... 30,000 79,353
Siebe PLC (United Kingdom).................................. 7,000 80,076
-----------
927,340
-----------
</TABLE>
B-95
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOREIGN EQUITY (CONTINUED)
CONSTRUCTION MATERIALS--3.1%
Cement Industries (Malaysia)............................. 2,000 $ 6,409
Grafton Group PLC (Ireland).............................. 10,000 72,663
Lion Land Bhd (Malaysia)................................. 122,000 146,672
Marley PLC (United Kingdom).............................. 60,000 103,334
Plettac AG (Germany)..................................... 300 79,566
Schneider SA (France).................................... 4,000 155,711
Semen Gresik (Indonesia)................................. 9,000 25,425
Siam City Cement (Thailand).............................. 1,800 30,699
Southeast Asia Cement (Philippines)...................... 400,000 50,662
Walker Greenbank PLC (United Kingdom).................... 48,000 61,432
-----------
732,573
-----------
ELECTRONICS--3.6%
Electric & Eltek International Co. Ltd. (Singapore)...... 40,000 87,600
Hoganas AG (Sweden)...................................... 6,000 178,442
LG Electronics, Inc. (India)............................. 116 1,421
NEC Corp. (Japan)........................................ 20,000 278,633
Pressac Holdings PLC (United Kingdom).................... 45,000 100,964
Samsung Electronics Co. GDS(2) (Korea)................... 1,210 78,650
Samsung Electronics GDR(3) (Korea)....................... 89 12,504
Samsung Electronics GDR(3) (Korea)....................... 6 422
Siemens AG (Germany)..................................... 160 80,761
Telebras (Brazil)........................................ 1,000,000 40,185
-----------
859,582
-----------
ENERGY SERVICES--0.2%
Lyonnaise des Eaux-Dumez (France)........................ 500 45,792
-----------
ENERGY SOURCES--0.5%
Petro Canada (Canada).................................... 12,270 60,478
Petron Corp. (Philippines)............................... 45,000 21,157
Schlumberger Ltd. ADR(1) (France)........................ 700 45,675
-----------
127,310
-----------
ENVIRONMENTAL--0.2%
Eaux (cie Generale) (France)............................. 500 48,025
-----------
FINANCIAL SERVICES--0.5%
Credit Foncier de France (France)........................ 1,500 31,617
First Philipine Holdings Corp. (Philippines)............. 1,599 3,866
Hutchison Whampoa (Hong Kong)............................ 10,000 54,193
National Finance & Securities Co., Ltd. (Thailand)....... 3,000 14,465
Philippine Savings (Philippines)......................... 8,393 19,811
-----------
123,952
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--1.9%
Bolswessanen (Koninklijke) (Netherlands).................... 7,250 $ 140,930
Nestle SA (Switzerland)..................................... 190 194,438
Whitbread PLC (United Kingdom).............................. 12,000 116,227
-----------
451,595
-----------
FOREST PRODUCTS--1.2%
Jefferson Smurfit Group (Ireland)........................... 50,000 149,313
Maderas Y Sinteticos SA ADR(1) (Chile)...................... 1,900 36,575
Waddington (John) PLC (United Kingdom)...................... 30,000 106,178
-----------
292,066
-----------
HEALTH SERVICES--0.1%
Guidant Corp. (India)....................................... 1,000 29,250
-----------
HOTELS & CASINOS--1.4%
Manchester United PLC (United Kingdom)...................... 25,000 82,162
Stanley Leisure PLC (United Kingdom)........................ 20,000 118,818
Thorn EMI PLC (United Kingdom).............................. 5,000 116,211
-----------
317,191
-----------
HOUSEHOLD PRODUCTS--5.3%
Advantest Corp. (Japan)..................................... 5,000 295,795
Bluebird Toys PLC (United Kingdom).......................... 30,000 113,762
Hunter Douglas NV (Netherlands)............................. 1,442 71,203
Kyocera Corp. (Japan)....................................... 3,000 246,530
Philips Electronics NV (Netherlands)........................ 2,600 126,758
Rohm Co. (Japan)............................................ 4,000 252,789
Salomon SA (France)......................................... 100 52,777
Sunbeam Victa Holdings Ltd. (Australia)..................... 50,000 37,787
Zodiac (France)............................................. 400 53,772
-----------
1,251,173
-----------
INSURANCE--1.5%
Irish Life (Ireland)........................................ 25,000 89,214
Legal & General Group PLC (United Kingdom).................. 10,000 93,222
RAS SpA (Italy)............................................. 8,000 85,829
Zurich Versicherun (Switzerland)............................ 275 77,076
-----------
345,341
-----------
LEISURE & TOURISM--0.4%
Airtours PLC (United Kingdom)............................... 17,000 102,338
-----------
</TABLE>
B-96
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOREIGN EQUITY (CONTINUED)
MACHINERY--3.3%
Canon, Inc. ADR(1) (Japan)................................. 20,000 $ 357,377
Mitsubishi Heavy Industrial Ltd. (Japan)................... 20,000 153,450
Ricoh Co. (Japan).......................................... 27,000 270,396
-----------
781,223
-----------
MANUFACTURING--0.6%
Graystone (United Kingdom)................................. 500,000 102,702
Hanjaya Mandala Sampoerna (Indonesia)...................... 3,750 34,926
-----------
137,628
-----------
MEDICAL PRODUCTS--0.2%
Spectral Diagnostics, Inc. (Canada)........................ 2,930 56,678
-----------
METALS & MINING--1.8%
Clutha Ltd. (Australia)(5)................................. 120,000 907
Comalco Ltd. (Australia)................................... 15,000 74,252
CRA Ltd. (Australia)....................................... 5,000 78,219
Inco Ltd. (Canada)......................................... 1,000 34,317
M.I.M. Holdings Ltd. (Australia)........................... 50,000 71,796
Noranda, Inc. (Canada)..................................... 2,000 40,919
Western Mining Corp. Holdings Ltd. ADS(4) (Australia)...... 20,000 130,895
-----------
431,305
-----------
PHARMACEUTICALS--1.2%
Glaxo Holdings PLC (United Kingdom)........................ 10,000 121,346
Glaxo Holdings PLC ADR(1) (United Kingdom)................. 2,000 48,250
Smithkline Beecham PLC (United Kingdom).................... 10,000 100,964
-----------
270,560
-----------
POLLUTION CONTROL--0.2%
Laidlaw, Inc. (Canada)..................................... 6,500 57,427
-----------
REAL ESTATE COMPANIES--0.3%
Cheung Kong Holdings Ltd. (Hong Kong)...................... 8,000 43,561
Land & Houses Public Co. Ltd. (Thailand)................... 1,500 23,550
-----------
67,111
-----------
SOFTWARE--0.1%
Simware, Inc.+ (Canada).................................... 2,000 20,000
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
SPECIALTY RETAIL--1.9%
Interform Ceramics Technologies Ltd. (Hong Kong)........ 208,000 $ 23,674
Next PLC (United Kingdom)............................... 17,000 109,003
Tokyo Electron Ltd. (Japan)............................. 7,000 304,578
-----------
437,255
-----------
TELECOMMUNICATIONS--3.1%
Advanced Information Service PLC Ltd. (Thailand)........ 1,000 16,099
Cable & Wireless PLC (United Kingdom)................... 15,000 98,357
DDI Corp. (Japan)....................................... 25 206,451
Hong Kong Telecommunications Ltd. (Hong Kong)........... 25,000 45,430
Nippon Telegraph & Telecommunications Corp. (Japan)..... 25 215,284
P.T. Indonesian Satellite Corp. ADR(1) (Indonesia)...... 1,000 35,125
Philippine Long Distance Telephone Co. (Philippines).... 170 11,353
Vodafone Group PLC ADR(1) (United Kingdom).............. 2,500 102,500
-----------
730,599
-----------
TRANSPORTATION--0.6%
Nedlloyd Groep NV (Netherlands)......................... 1,300 46,153
TNT Ltd. (Australia).................................... 60,000 92,050
-----------
138,203
-----------
UTILITIES--1.0%
Electrabel NPV (Belgium)................................ 350 76,548
Electric Reunidas de Zaragoza (Spain)................... 1,000 21,679
Hong Kong Electric Holdings Ltd. (Hong Kong)............ 12,000 40,121
Veba AG (Germany)....................................... 2,200 87,307
-----------
225,655
-----------
TOTAL FOREIGN EQUITY
(cost $11,849,166)...................................... 12,557,729
-----------
TOTAL COMMON STOCK
(cost $14,794,491)...................................... 16,295,854
-----------
PREFERRED STOCK--0.6%
AUTOMOTIVE--0.1%
Fiat SpA(Italy)......................................... 15,000 34,884
-----------
ENERGY SOURCES--0.2%
Cemig Cia Energ Mg(Brazil).............................. 1,650,000 36,874
-----------
</TABLE>
B-97
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
SHARES/RIGHTS
PRINCIPAL AMOUNT
(DENOMINATED IN
LOCAL CURRENCY) VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK (CONTINUED)
HOUSEHOLD PRODUCTS--0.3%
Friedrich Grohe AG(Germany)...................... 300 $ 78,936
-----------
TOTAL PREFERRED STOCK
(cost $157,778).................................. 150,694
-----------
RIGHTS--0.0%+
COMMUNICATION EQUIPMENT--0.0%
Ericsson (L.M.) Telephone Co. ADR(1) (Brazil)
(cost $0)........................................ 4,000 0
-----------
WARRANTS--0.0%+
CONSTRUCTION & HOUSING--0.0%
Chevalier International Holdings
(cost $0)........................................ 111,200 5,250
-----------
FOREIGN BOND--17.6%
Federal Republic of Germany
8.38% due 5/21/01 ............................... 300 232,085
Government of Canada
7.50% due 9/01/00 ............................... 800 598,764
Government of France
8.25% due 2/27/04 ............................... 600 128,297
8.50% due 3/28/00 ............................... 1,000 216,469
8.50% due 3/15/02 ............................... 250 339,507
Government of New Zealand
10.00% due 3/15/02 .............................. 500 363,580
Government of Spain
10.00% due 2/28/05 .............................. 50,000 383,599
Government of Japan
4.10% due 12/22/03 .............................. 25,000 277,094
6.60% due 6/20/01 ............................... 40,000 499,076
Kingdom of Belgium
6.50% due 3/31/05 ............................... 7,000 226,881
Treuhandanstalt (Germany)
6.13% due 6/25/98 ............................... 100 72,120
United Kingdom Treasury
8.50% due 12/07/05 .............................. 400 648,009
9.00% due 3/03/00 ............................... 100 166,298
-----------
TOTAL FOREIGN BOND
(cost $4,212,571)................................ 4,151,779
-----------
U.S. TREASURY NOTES--6.5%
United States Treasury
Notes 6.88% due 7/31/99......................... $ 400 411,876
United States Treasury
Notes 7.88% due 11/15/04........................ 1,000 1,112,030
-----------
TOTAL U.S. TREASURY NOTES
(cost $1,414,000)................................ 1,523,906
-----------
TOTAL INVESTMENT SECURITIES--93.8%
(cost $20,578,840)............................... 22,127,483
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT
(DENOMINATED IN
LOCAL CURRENCY) VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SHORT-TERM SECURITIES--2.4%
Cayman Island Time Deposit 3.25% due 10/02/95.... $ 434 $ 434,000
State Street Bank Time Deposit 5.50% due
10/02/95........................................ 135 135,000
-----------
TOTAL SHORT-TERM SECURITIES
(cost $569,000).................................. 569,000
-----------
REPURCHASE AGREEMENT--0.5%
Joint Repurchase Agreement Account 6.25% due
10/02/95 (Note 3) (cost $121,000)............... 121 121,000
-----------
TOTAL INVESTMENTS--
(cost $21,268,840)............................... 96.7% 22,817,483
Other assets less liabilities..................... 3.3 773,518
----- -----------
NET ASSETS-- 100.0% $23,591,001
===== ===========
</TABLE>
- -------
+Non-income producing securities
(1)ADR ("American Depositary Receipt")
(2)GDS ("Global Depositary Shares")
(3)GDR ("Global Depositary Receipt")
(4)ADS ("American Depositary Shares")
(5)Fair valued security, see Note 2.
Allocation of net assets by
currency as of September 30,
1995:
Japanese Yen 23.2%
U.S. Dollar 22.3
British
Pound 13.7
French Franc 5.2
Canadian
Dollar 4.1
Australian
Dollar 3.2
German Mark 2.6
Dutch Guilder 2.3
Belgium Franc 2.0
Spanish
Peseta 1.8
Swedish Krona 1.7
New Zealand
Dollar 1.5
Irish Punt 1.3
Swiss Franc 1.1
Hong-Kong
Dollar 1.0
Brazilian
Real 0.8
Italian Lira 0.8
Singapore
Dollar 0.8
Finnish
Markka 0.7
Thailand Baht 0.7
Indonesian
Rupiah 0.6
Malaysian
Ringgit 0.6
Philippines
Peso 0.5
Korean Won 0.4
Danish Kroner 0.3
Chilean Peso 0.2
Portuguese
Escudo 0.2
Austrian
Schilling 0.1
Indian Rupee 0.1
See Note to Financial Statements
B-98
<PAGE>
SUNAMERICA GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--66.5%
AUTOMOTIVE--1.0%
Ford Motor Co............................................... 2,000 $ 62,250
-----------
BANKS--1.3%
First Union Corp. .......................................... 1,500 76,500
-----------
BROADCASTING & MEDIA--2.4%
NYNEX Cablecomms Group PLC ADR(1)+.......................... 3,000 69,000
Viacom, Inc. Class B+....................................... 1,500 74,625
-----------
143,625
-----------
CHEMICALS--1.1%
du Pont (E.I.) de Nemours & Co.............................. 1,000 68,750
-----------
COMMUNICATION EQUIPMENT--2.5%
Motorola, Inc............................................... 2,000 152,750
-----------
CONGLOMERATE--4.3%
AlliedSignal, Inc........................................... 3,000 132,375
General Electric Co......................................... 2,000 127,500
-----------
259,875
-----------
DEPARTMENT STORES--2.6%
Woolworth Corp. ............................................ 10,000 157,500
-----------
ENERGY SERVICES--2.1%
Reading & Bates Corp........................................ 5,000 60,000
Sonat Offshore Drilling, Inc................................ 2,000 65,250
-----------
125,250
-----------
ENERGY SOURCES--3.3%
Amoco Corp.................................................. 1,000 64,125
Royal Dutch Petroleum Co. ADR(1)............................ 500 61,375
Tatham Offshore, Inc.+...................................... 5,000 10,625
Texaco, Inc................................................. 1,000 64,625
-----------
200,750
-----------
FINANCIAL SERVICES--2.0%
Dean Witter, Discover & Co.................................. 1,500 84,375
Quorum Growth, Inc.+........................................ 7,000 39,068
-----------
123,443
-----------
FOOD, BEVERAGE & TOBACCO--5.9%
Heinz (H.J.) Co............................................. 4,500 205,875
Philip Morris Cos., Inc..................................... 1,000 83,500
Quaker Oats Co.............................................. 2,000 66,250
-----------
355,625
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
FOREST PRODUCTS--0.5%
Gaylord Container Corp.+..................................... 3,000 $ 28,313
----------
HEALTH SERVICES--2.2%
OrNda Healthcorp+............................................ 3,000 63,750
U.S. HealthCare, Inc......................................... 2,000 70,750
----------
134,500
----------
HOUSEHOLD PRODUCTS--2.3%
Duracell International, Inc.................................. 1,500 67,313
USA Detergents, Inc.+........................................ 3,500 72,625
----------
139,938
----------
INSURANCE--2.4%
Aetna Life & Casualty Co..................................... 2,000 146,750
----------
LEISURE & TOURISM--2.6%
Harrah's Entertainment, Inc.................................. 3,000 87,750
Promus Hotel Corp.+.......................................... 3,000 68,250
----------
156,000
----------
METALS & MINING--0.1%
Carbide/Graphite Group, Inc.+................................ 500 7,063
----------
PHARMACEUTICALS--10.3%
Abbott Laboratories.......................................... 2,000 85,250
Amgen, Inc.+................................................. 2,000 99,750
Bristol-Myers Squibb Co...................................... 1,000 72,875
Glaxo Holdings PLC ADR(1).................................... 4,000 96,500
Merck & Co., Inc. ........................................... 1,500 84,000
Warner-Lambert Co. .......................................... 2,000 190,500
----------
628,875
----------
REAL ESTATE INVESTMENT TRUSTS--2.1%
Patriot American Hospitality, Inc.+.......................... 5,000 128,125
----------
SOFTWARE--2.1%
Computron Software, Inc.+.................................... 2,500 43,125
Netscape Communications Corp.+............................... 1,000 62,500
Simware, Inc.+............................................... 2,000 20,000
----------
125,625
----------
TELECOMMUNICATIONS--4.7%
AT&T Corp.................................................... 2,000 131,500
Frontier Corp................................................ 3,000 79,875
PanAmSat Corp................................................ 3,000 45,750
Tel-Save Holdings, Inc.+..................................... 2,000 30,750
----------
287,875
----------
</TABLE>
B-99
<PAGE>
SUNAMERICA GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TELEPHONE--4.0%
Bell Atlantic Corp........................................... 1,500 $ 92,062
BellSouth Corp............................................... 1,000 73,125
GTE Corp..................................................... 2,000 78,500
----------
243,687
----------
UTILITIES--4.7%
Baltimore Gas & Electric Co.................................. 3,000 77,625
FPL Group, Inc............................................... 2,000 81,750
General Public Utilities Corp................................ 2,500 77,812
Pacific Enterprises.......................................... 2,000 50,250
----------
287,437
----------
TOTAL COMMON STOCK
(cost $3,693,134)............................................ 4,040,506
----------
PREFERRED STOCK--3.0%
BANKS--1.3%
Wells Fargo & Co. ........................................... 3,000 77,625
----------
FOREST PRODUCTS--0.8%
James River Corp............................................. 2,000 50,250
----------
RESTAURANTS--0.9%
McDonald's Corp.............................................. 2,000 52,250
----------
TOTAL PREFERRED STOCK
(cost $176,645).............................................. 180,125
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
BONDS & NOTES--0.9%
FOREST PRODUCTS--0.9%
Stone Container Corp.
11.88% due 12/01/98
(cost $51,625).................................. $ 50 $ 53,750
----------
TOTAL INVESTMENT SECURITIES--70.4%
(cost $3,921,404)................................ 4,274,381
----------
REPURCHASE AGREEMENT--31.0%
Joint Repurchase Agreement Account with Yamaichi
International, Inc. (Note 3).................... 940 940,000
Joint Repurchase Agreement Account with Chemical
Securities, Inc. (Note 3)....................... 941 941,000
----------
TOTAL REPURCHASE AGREEMENTS
(cost $1,881,000)................................ 1,881,000
----------
TOTAL INVESTMENTS--
(cost $5,802,404)................................ 101.4% 6,155,381
Liabilities in excess of other assets............. (1.4) (85,070)
----- ----------
NET ASSETS-- 100.0% $6,070,311
===== ==========
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
See Notes to Financial Statements
B-100
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995
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 six 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 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"), SunAmerica Global
Balanced Fund ("Global Balanced 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.
Each Fund currently offers two classes of shares. 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. Additionally, 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 and each makes 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.
Note 2. Significant Accounting Policies
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 or, if there is no sale on such day, the last bid
price quoted on such day. If there is no sale on that day, then securities
are valued at the 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. 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
B-101
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
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.
OPTIONS: The premium paid by a Fund for the purchase of a call or a put
option is included in the Fund's Statement of Assets and Liabilities as an
investment and subsequently marked to market to reflect the current market
value of the option. When a Fund writes a call or a put option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as a liability and is subsequently
marked to market to reflect the current market value of the option written.
If an option which the Fund has written either expires on its stipulated
expiration date, or if the Fund enters into a closing purchase transaction,
the Fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security,
and the liability related to such options is extinguished. If a call option
which the Fund has written is exercised, the Fund realizes a capital gain
or loss from the sale of the underlying security and the proceeds from such
sale are increased by the premium originally received. If a put option
which the Fund has written is exercised, the amount of the premium
originally received reduces the cost basis of the security which the Fund
purchased upon exercise of the option.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS: Securities transactions are recorded on the trade date.
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. The Equity Funds,
except for the Global Balanced Fund and the Growth and Income Fund, do not
amortize premiums or accrue discounts except 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 (of 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).
B-102
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
Dividends from net investment income are paid semiannually, except for
Balanced Assets Fund and Growth and Income Fund which pay quarterly.
Capital gain distributions, if any, are paid annually.
INVESTMENT SECURITIES LOANED: During the year ended September 30, 1995,
Balanced Assets Fund participated in securities lending with qualified
brokers. In lending portfolio securities to brokers the Funds receive cash
as collateral against the loaned securities, which must be maintained at
not less than 100% of the market value of the loaned securities during the
period of the loan. To the extent income is earned on the cash collateral
invested, it is recorded as interest income. As with other extensions of
credit, should the borrower of the securities fail financially, the Funds
may bear the risk of delay in recovery or may be subject to replacing the
loaned securities by purchasing them with the cash collateral held, which
may be less than 100% of the market value of such securities at the time of
replacement.
At September 30, 1995, Balanced Assets Fund had loaned a security having a
value of $5,446,100 and held cash collateral of $5,443,750 for this loan.
The value of the collateral was sufficient at the time the loan agreement
was entered into. As a result of an increase in the market value of the
loaned security, the Fund was furnished with additional collateral on the
following business day.
FOREIGN CURRENCY TRANSACTION: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at published rates on the following basis:
(i) market value of investment securities, other assets and
liabilities--at the closing rate of exchange.
(ii) purchases and sales of investment securities, income and expenses--
at the rate of exchange prevailing on the respective dates of such
transactions.
Assets and liabilities denominated in foreign currencies and commitments
under forward foreign currency contracts are translated into U.S. dollars
at the mean of the quoted bid and asked prices of such currencies against
the U.S. dollar. Purchases and sales of portfolio securities are translated
at the rate of exchange prevailing when such securities were acquired or
sold. Income and expenses are translated at rates of exchange prevailing
when earned or incurred.
The Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in
the market prices of securities held at fiscal year-end. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange 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.
B-103
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
FEDERAL INCOME TAXES: It is the Funds' policy to meet the requirements of
the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to distribute all of their taxable net income to
their shareholders. Therefore, no federal income tax or excise tax
provisions are required.
Global Balanced Fund may be subject to taxes imposed by countries in which
it invests. Such taxes are generally based on either income or gains earned
or repatriated. The Fund accrues such taxes when the related income is
earned.
ORGANIZATIONAL EXPENSES: Costs incurred by SAAMCo in connection with the
organization of Global Balanced Fund and Growth and Income Fund amounted to
$4,347 and $1,383, respectively. These costs are being amortized on a
straight line basis by the Funds over a period not to exceed 60 months from
the date the Funds commenced operations. Costs incurred by SAAMCo in
connection with the registration of Global Balanced (Class A, Class B) and
Growth and Income Fund (Class A, Class B) amounted to $10,808 for each
class of each Fund. These costs are being amortized on a straight line
basis by the classes over a period not to exceed 12 months from the date
each class commenced operations.
EXPENSES: Expenses common to all Funds, not directly related to individual
Funds, are allocated among the Equity Funds based upon their relative net
asset values.
STATEMENT OF POSITION 93-2: As required by Statement of Position 93-2,
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies,
permanent book-tax differences relating to shareholder distributions have
been reclassified. Net investment income/loss, net realized gain/loss, and
net assets are not affected. The following table discloses the current year
reclassifications between accumulated undistributed net investment
income/loss and accumulated undistributed net realized gain/loss on
investments.
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
------------- -------------- -------
<S> <C> <C> <C>
Balanced Assets Fund.................... $ 0 $ 0 $ 0
Blue Chip Growth Fund................... (42,924) 42,924 0
Mid-Cap Growth Fund..................... (237,498) 237,498 0
Small Company Growth Fund............... (587,404) 587,404 0
Global Balanced Fund.................... (565,991) 565,991 0
Growth and Income Fund.................. 0 0 0
</TABLE>
Note 3. Joint Repurchase Agreement Account
As of September 30, 1995, Balanced Assets Fund, Blue Chip Growth Fund, Mid-
Cap Growth Fund, Small Company Growth Fund, Global Balanced Fund and Growth
and Income Fund had a 15.2%, 4.6%, 3.0%, 19.3%, 0.1% and 0.9% undivided
interest, respectively, which represented $15,638,000, $4,715,000,
$3,059,000, $19,896,000, $121,000 and $941,000, respectively, in principal
amount in a joint repurchase agreement with Chemical Securities, Inc. In
addition, the Growth and Income Fund
B-104
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS --September 30, 1995 -- (continued)
had a 0.8% undivided interest which represented $940,000 in principal
amount in a joint repurchase agreement with Yamaichi International, Inc. As
of such date, the cash repurchase agreement in the joint account and the
collateral therefore was as follows:
Chemical Securities, Inc. Repurchase Agreement, 6.25% dated 9/29/95, in the
principal amount of $102,947,000 repurchase price $103,000,618 due 10/02/95
collateralized by $50,000,000 U.S. Treasury Notes 6.875% due 10/31/96,
$50,000,000 U.S. Treasury Notes 6.125% due 5/31/97 and $1,850,000 U.S.
Treasury Notes 6.125% due 5/31/97, approximate aggregate value
$105,092,351.
Yamaichi International, Inc. Repurchase Agreement, 6.45% dated 9/29/95, in
the principal amount of $120,864,000 repurchase price $120,928,964 due
10/02/95 collateralized by $49,250,000 U.S. Treasury Notes 8.75% due
11/15/08, $22,375,000 U.S. Treasury Bills 5.365% due 8/22/96, $19,375,000
U.S. Treasury Notes 6.25% due 8/15/23, $13,090,000 U.S. Treasury Notes
8.75% due 8/15/00 and $8,500,000 U.S. Treasury Notes 9.25% due 2/15/16,
approximate aggregate value $128,362,436.
Note 4. 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 (the "Adviser"), an
indirect wholly-owned subsidiary of SunAmerica Inc. 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 Fund's 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 (other than the Global
Balanced 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. The Global Balanced Fund pays the
Adviser a fee, payable monthly, computed daily at the annual rate of 1.00%
on the first $350 million of the Fund's average daily net assets, .90% on
the next $350 million of net assets and .85% on net assets over $700
million. For the year ended September 30, 1995, SAAMCo earned fees of
$1,821,586, $565,835, $294,505, $819,449, $269,441 and $32,455 for Balanced
Assets Fund, Blue Chip Growth Fund, Mid-Cap Growth Fund, Small Company
Growth Fund, Global Balanced Fund and Growth and Income Fund, respectively
(of which SAAMCo agreed to waive $115,214 and $32,455 for Global Balanced
and Growth and Income Fund, respectively.) In addition to the
aforementioned, SAAMCo, on behalf of SunAmerica Global Balanced Fund, has
entered into Sub-Advisory Agreements with AIG Asset Management, Inc.
("AIGAM") and Goldman Sachs Asset Management International ("GSAM") under
which AIGAM and GSAM act as sub-advisers for the Fund.
SAAMCo pays to AIGAM a monthly fee with respect to those net assets of the
Global Balanced Fund actually managed by AIGAM computed based on average
daily net assets at the following annual rates: .50% on the first $50
million of such assets, .40% of the next $100 million of such assets, .30%
on the next $150 million of such assets, and .25% of such assets in excess
of $300 million. Also, from the investment advisory fee the Adviser pays
GSAM a monthly fee with respect to those net assets of
B-105
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
the Global Balanced Fund actually managed by GSAM computed based on average
daily net assets, at the following annual rates: .40% on the first $50
million of such assets, .30% on the next $100 million of such assets, .25%
on the next $100 million of such assets, and .20% of such assets in excess
of $250 million. For the year ended September 30, 1995, SAAMCo paid AIGAM
and GSAM fees of $75,883 and $29,912, respectively.
SAAMCo has agreed that, in any fiscal year, it will refund or rebate its
management fees to each of the Funds to the extent that the Fund's expenses
(including the fees of SAAMCo and amortization of organizational expenses,
but excluding interest, taxes, brokerage commissions, distribution fees and
other extraordinary expenses) exceed the most restrictive expense
limitation imposed by states where the Fund's shares are sold. The most
restrictive expense limitation is presently believed to be 2 1/2% of the
first $30 million of the Fund's average daily net assets, 2% of the next
$70 million of average net assets and 1 1/2% of such net assets in excess
of $100 million. For the year ended September 30, 1995, SAAMCo refunded its
management fee in the amount of $32,455 for Growth and Income Fund.
For the year ended September 30, 1995, SAAMCo has agreed to voluntarily
waive fees and reimburse expenses of $13,179 and $10,554, for Blue Chip
Growth Fund (Class A) and Mid-Cap Growth Fund (Class B), respectively,
related to registration and transfer agent fees.
For the year ended September 30, 1995, SAAMCo has agreed to voluntarily
reimburse expenses of $64,080 and $37,971 for Growth and Income Fund (Class
A, Class B), respectively, related to both class specific and fund level
expenses.
The Trust, on behalf of each Fund, has a Distribution Agreement with
SunAmerica Capital Services, Inc. ("SACS"). 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 under the Act 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 directors 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, the Distributor receives payments from a Fund at an
annual rate of up to 0.10% of average daily net assets of such Fund's Class
A shares to compensate the Distributor and certain securities firms for
providing sales and promotional activities for distributing that class of
shares. Under the Class B Plan, the Distributor receives payments from a
Fund at the annual rate of up to 0.75% of the average daily net assets of
such Fund's 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
B-106
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS --September 30, 1995 -- (continued)
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. In this regard, some payments are used to compensate broker-
dealers with account maintenance and service fees in an amount up to 0.25%
per year of the assets maintained in a Fund by their customers. For the
year ended September 30, 1995, SACS earned fees of $1,986,988, $675,044,
$177,911, $744,340, $186,019 and $22,214 for Balanced Assets Fund, Blue
Chip Growth Fund, Mid-Cap Growth Fund, Small Company Growth Fund, Global
Balanced Fund and Growth and Income Fund, respectively (of which $16,747
was waived on Growth and Income Fund.)
For the year ended September 30, 1995, SACS has advised the Funds that it
has received sales concessions on each Fund's Class A shares, portions of
which are reallowed to affiliated broker-dealers and non-affiliated broker-
dealers as follows:
<TABLE>
<CAPTION>
SALES AFFILIATED NON-AFFILIATED
CONCESSIONS BROKER-DEALERS BROKER-DEALERS
----------- -------------- --------------
<S> <C> <C> <C>
Balanced Assets Fund............... $565,677 $411,596 $ 75,078
Blue Chip Growth Fund.............. 33,816 27,360 1,368
Mid-Cap Growth Fund................ 104,245 69,230 18,014
Small Company Growth Fund.......... 602,843 317,796 201,595
Global Balanced Fund............... 139,083 100,770 21,897
Growth and Income Fund............. 22,142 14,608 4,434
</TABLE>
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. For the year ended September 30, 1995, SACS informed the Balanced
Assets Fund, Blue Chip Growth Fund, Mid-Cap Growth Fund, Small Company
Growth Fund, Global Balanced Fund and Growth and Income Fund that it
received approximately $367,583, $88,628, $40,076, $105,710, $47,198, and
$1,965, respectively, in contingent deferred sales charges.
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 permits the Funds to reimburse SAFS for costs incurred in
providing such services which is approved annually by the Trustees. For the
year ended September 30, 1995, Balanced Assets Fund (Class A, Class B),
Blue Chip Growth Fund (Class A, Class B), Mid-Cap Growth Fund (Class A,
Class B), and Small Company Growth Fund (Class A, Class B), Global Balanced
Fund (Class A, Class B) and Growth and Income Fund (Class A, Class B)
incurred expenses of $137,209, $352,821, $25,108, $116,049, $61,957,
$10,794, $105,105, $107,097, $23,995, $25,833, $5,388 and $2,143,
respectively, to reimburse SAFS pursuant to the terms of the Service
Agreement. Of these amounts, $21,110, $28,440, $7,580, $6,769, $6,872,
$2,060, $16,380, $12,014, $1,903, $2,512, $619 and $391, respectively, were
payable to SAFS at September 30, 1995.
B-107
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
Note 5. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds form sales and maturities of
investments (excluding U.S. Government securities and short-term
investments) during the year ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GLOBAL GROWTH AND
ASSETS GROWTH GROWTH GROWTH BALANCED INCOME
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Aggregate purchases..... $289,525,306 $176,523,353 $133,977,805 $310,166,932 $34,724,172 $8,000,782
------------ ------------ ------------ ------------ ----------- ----------
Aggregate sales......... $304,093,080 $192,027,508 $143,477,529 $309,617,601 $34,079,727 $7,248,528
============ ============ ============ ============ =========== ==========
</TABLE>
Note 6. Portfolio Securities (Tax Basis)
The cost of securities and the aggregate gross unrealized appreciation and
depreciation of securities at September 30, 1995 were as follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GLOBAL GROWTH AND
ASSETS GROWTH GROWTH GROWTH BALANCED INCOME
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cost (tax basis)........ $252,420,918 $68,330,019 $31,572,324 $114,199,842 $21,283,331 $5,802,404
============ =========== =========== ============ =========== ==========
Appreciation............ $ 27,334,681 $ 8,673,797 $ 6,469,040 $26,162,037 $ 2,161,547 $ 416,349
Depreciation............ (2,451,654) (699,241) (551,651) (2,244,323) (627,395) (63,372)
------------ ----------- ----------- ------------ ----------- ----------
Unrealized appreciation/
depreciation--net...... $ 24,883,027 $ 7,974,556 $ 5,917,389 $23,917,714 $ 1,534,152 $ 352,977
============ =========== =========== ============ =========== ==========
</TABLE>
Capital losses incurred after October 31 within the taxable year are deemed
to arise on the first business day of the Funds' next taxable year.
Accordingly, the Global Balanced Fund incurred and will defer net capital
losses of $1,443,904 to the taxable year ended September 30, 1996. To the
extent these losses are used to offset future gains, it is probable that
the gains so offset will not be distributed.
At September 30, 1995, Global Balanced Fund had net capital loss
carryforwards of $17,364 which are available to the extent provided in
regulations to offset future capital gains and which will expire in 2003.
To the extent that these carryforwards are used to offset future capital
gains, it is probable that the gains so offset will not be distributed.
B-108
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
Note 7. Open Forward Currency Contracts
At September 30, 1995, the Global Balanced Fund engaged in the trading of
forward foreign currency exchange contracts ("forward contracts") in order
to hedge against changes in future foreign exchange rates and enhance
return. Forward contracts involve elements of market risk in excess of the
amount reflected in the Statement of Assets and Liabilities. The Fund bears
the risk of an unfavorable change in the foreign exchange rate underlying
the forward contract. Global Balanced Fund held the following forward
currency contracts at September 30, 1995:
<TABLE>
<CAPTION>
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
---------------- ------------- -------- ------------
<S> <C> <C> <C>
BEL 6,665,750 USD 234,927 10/31/95 $ 7,227
BEL 9,584,224 DEM 464,622 9/09/96 409
JPY 30,219,570 DEM 467,000 10/13/95 21,232
JPY 49,071,257 USD 564,362 10/17/95 67,440
JPY 48,360,804 USD 552,253 10/17/95 62,526
XEU 268,005 USD 356,326 10/20/95 9,047
*USD 149,488 CAD 203,608 11/14/95 1,903
*DEM 341,037 USD 247,074 10/24/95 8,108
*USD 235,523 DEM 341,037 10/24/95 3,444
*DEM 331,553 USD 240,204 10/24/95 7,882
*JPY 29,325,945 USD 330,000 10/27/95 32,520
*JPY 30,200,840 USD 340,000 10/27/95 33,645
*JPY 30,905,600 USD 320,000 10/27/95 6,496
*JPY 26,957,385 USD 278,981 10/27/95 5,528
*JPY 2,997,295 USD 31,019 10/27/95 615
*ITL 506,947,500 DEM 458,838 11/16/95 9,390
*NZD 210,401 USD 139,286 10/13/95 965
*NZD 292,409 USD 195,329 10/13/95 3,096
*NZD 474,431 USD 314,073 10/13/95 2,177
--------
283,650
--------
</TABLE>
B-109
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
<TABLE>
<CAPTION>
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE DEPRECIATION
---------------- ----------------- -------- ------------
<S> <C> <C> <C>
CAD 800,853 USD 585,783 11/14/95 $ (9,686)
DEM 594,535 USD 399,733 10/13/95 (16,622)
DEM 324,653 USD 220,403 10/24/95 (7,084)
DEM 2,000,000 USD 1,344,538 12/12/95 (60,203)
ESP 51,087,641 USD 408,570 11/27/95 (2,227)
FRF 642,305 USD 126,513 11/30/95 (3,818)
FRF 1,114,500 USD 224,970 11/30/95 (1,175)
GBP 424,431 USD 656,383 12/11/95 (13,183)
GBP 103,663 USD 163,477 12/11/95 (58)
JPY 2,295,584 USD 22,888 10/27/95 (398)
JPY 330,000,000 USD 3,356,899 12/12/95 (13,119)
JPY 34,349,179 USD 339,813 12/18/95 (11,314)
NZD 551,972 USD 356,353 12/12/95 (4,715)
*USD 513,821 NZD 766,840 10/13/95 (9,692)
*USD 140,758 NZD 210,401 10/13/95 (2,438)
*DEM 450,000 ITL 506,947,500 11/16/95 (3,205)
*DEM 36,322 USD 24,658 10/24/95 (793)
*USD 25,579 DEM 36,322 10/24/95 (127)
*USD 233,488 DEM 331,553 10/24/95 (1,166)
*USD 339,944 JPY 29,325,945 10/27/95 (42,464)
*USD 315,677 JPY 30,200,840 10/27/95 (9,322)
*USD 323,044 JPY 30,905,600 10/27/95 (9,540)
*USD 40,992 JPY 4,026,616 10/27/95 (146)
*JPY 4,026,616 USD 40,147 10/27/95 (699)
*USD 274,431 JPY 26,957,385 10/27/95 (978)
*USD 31,279 JPY 2,992,460 10/27/95 (924)
*USD 56 JPY 4,835 10/27/95 (7)
*USD 353,637 AUD 466,047 10/30/95 (1,912)
*AUD 466,047 USD 342,195 10/30/95 (9,530)
*CAD 203,608 USD 148,928 11/14/95 (2,463)
---------
(239,008)
---------
Net Appreciation..................................... $ 44,642
=========
</TABLE>
*Represents open forward currency contracts and offsetting open forward foreign
currency contracts that do not have additional market risk but have continued
counterparty settlement risk.
AUD--Australian DEM--Deutsche Mark GBP--Great Britain NZD--New Zealand
Dollar Pound Dollar
BEF--Belgium ESP--Spanish Peseta ITL--Italian Lira USD--United States
Franc Dollar
CAD--Canadian FRF--French Franc JPY--Japanese Yen XEU--European
Dollar Currency
B-110
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
Note 8. Capital Share Transactions
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, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 4,667,503 $ 71,426,588 2,698,104 $ 40,272,932 3,071,975 $ 45,998,809 7,440,392 $110,364,992
Reinvested
dividends...... 265,763 3,756,343 102,965 1,508,917 769,696 10,686,782 332,957 4,879,992
Shares redeemed. (1,193,984) (17,782,121) (1,444,087) (21,386,612) (6,322,402) (95,258,440) (4,503,874) (66,040,730)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 3,739,282 $ 57,400,810 1,356,982 $ 20,395,237 (2,480,731) $(38,572,849) 3,269,475 $ 49,204,254
========== ============ ========== ============ =========== ============= =========== =============
<CAPTION>
BLUE CHIP GROWTH FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
INCEPTION
FOR THE (OCTOBER 8, 1993)(a) FOR THE FOR THE
YEAR ENDED TO YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 2,404,163 $37,806,801 303,594 $ 4,654,762 8,964,323 $ 134,971,138 10,324,732 $ 160,567,760
Reinvested
dividends...... 14,956 207,075 943 14,611 372,862 5,128,338 204,303 3,166,759
Shares redeemed. (181,804) (2,884,125) (96,580) (1,455,849) (11,706,255) (177,081,024) (10,751,734) (166,819,355)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... 2,237,315 $35,129,751 207,957 $ 3,213,524 (2,369,070) $ (36,981,548) (222,699) $ (3,084,836)
========== ============ ========== ============ =========== ============= =========== =============
<CAPTION>
MID-CAP GROWTH FUND
----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ------------------------------------------------------
INCEPTION
FOR THE FOR THE FOR THE (OCTOBER 4, 1993)(a)
YEAR ENDED YEAR ENDED YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------ ------------------------ -------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 247,141 $ 3,926,322 2,337,824 $ 35,777,463 4,235,563 $ 62,818,790 4,151,875 $ 60,390,157
Reinvested
dividends...... 5,781 79,602 352,721 5,115,552 1,748 24,200 41,302 598,471
Shares redeemed. (521,946) (7,755,976) (2,239,597) (33,937,663) (3,989,374) (59,135,991) (3,898,362) (56,242,056)
---------- ------------ ---------- ------------ ----------- ------------- ----------- -------------
Net increase
(decrease)..... (269,024) $ (3,750,052) 450,948 $ 6,955,352 247,937 $ 3,706,999 294,815 $ 4,746,572
========== ============ ========== ============ =========== ============= =========== =============
</TABLE>
(a) Commencement of sale of respective class of shares
B-111
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
<TABLE>
<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, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------- ------------------------ -------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------ ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 6,544,632 $ 130,462,164 9,770,630 $171,305,427 9,886,153 $ 196,092,402 9,949,146 $170,413,433
Reinvested
dividends...... 54,753 964,756 177,646 3,055,538 62,016 1,085,149 222,219 3,817,482
Shares redeemed. (5,262,148) (102,586,803) (9,637,891) (168,923,280) (10,265,178) (202,833,358) (9,011,396) (153,722,671)
---------- ------------- ---------- ------------ ----------- ------------- ---------- ------------
Net increase
(decrease)..... 1,337,237 $ 28,840,117 310,385 $ 5,437,685 (317,009) $ (5,655,807) 1,159,969 $ 20,508,244
========== ============= ========== ============ =========== ============= ========== ============
<CAPTION>
GLOBAL BALANCED FUND
---------------------------------------------------------------------------------------------------------
CLASS A CLASS B
--------------------------------------------------- ----------------------------------------------------
INCEPTION INCEPTION
FOR THE (JUNE 15, 1994)(a) FOR THE (JUNE 16, 1994)(a)
YEAR ENDED TO YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------- ------------------------ -------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------ ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 750,764 $ 5,173,301 1,933,627 $ 13,483,754 1,150,637 $ 7,847,490 2,132,333 $ 14,947,304
Reinvested
dividends...... 4,067 27,252 -- -- 2,161 14,461 -- --
Shares redeemed. (1,342,777) (9,319,908) (38,577) (268,643) (1,199,716) (8,126,345) (170,068) (1,177,938)
---------- ------------- ---------- ------------ ----------- ------------- ---------- ------------
Net increase.... (587,946) $ (4,119,355) 1,895,050 $ 13,215,111 (46,918) $ (264,394) 1,962,265 $ 13,769,366
========== ============= ========== ============ =========== ============= ========== ============
<CAPTION>
GROWTH AND INCOME FUND
---------------------------------------------------------------------------------------------------------
CLASS A CLASS B
--------------------------------------------------- ----------------------------------------------------
INCEPTION INCEPTION
FOR THE (JULY 1, 1994)(a) FOR THE (JULY 6, 1994)(a)
YEAR ENDED TO YEAR ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------- ------------------------ -------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------ ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 542,589 $ 4,112,191 414,349 $ 3,037,584 301,384 $ 2,380,132 68,811 $ 510,253
Reinvested
dividends...... 25,040 190,918 3,411 25,414 7,758 61,110 154 1,146
Shares redeemed. (562,875) (4,274,466) (1,377) (10,263) (37,348) (295,806) (38,138) (285,414)
---------- ------------- ---------- ------------ ----------- ------------- ---------- ------------
Net increase.... 4,754 $ 28,643 416,383 $ 3,052,735 271,794 $ 2,145,436 30,827 $ 225,985
========== ============= ========== ============ =========== ============= ========== ============
</TABLE>
(a) Commencement of sale of respective class of shares
B-112
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1995 -- (continued)
Note 9. 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 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 10. 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, each Eligible
Trustee will be credited with an amount equal to (i) 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, plus (ii) 8.5% of any amounts credited under clause (i)
during prior years. 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, 1995, the
Funds had accrued $5,120, $1,867, $886, $2,243, $436 and $58 which is
included in accrued expenses on the Statement of Assets and Liabilities,
and for the year ended September 30, 1995 expensed $3,883, $1,381, $670,
$1,716, $436 and $56 for the Balanced Assets Fund, Blue Chip Growth Fund,
Mid-Cap Growth Fund, Small Company Growth Fund, Global Balanced Fund and
Growth and Income Fund, respectively, for the Retirement Plan which is
included in Trustees' fees and expenses on the Statement of Operations.
B-113
<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 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, SunAmerica Global Balanced Fund and
SunAmerica Growth and Income Fund (constituting SunAmerica Equity Funds,
hereafter referred to as the "Fund") at September 30, 1995, and the results of
each of their operations, the changes in each of their net assets 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, 1995 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 10, 1995
B-114
<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, 1995. The information and
distributions reported herein may differ from the information and
distributions taxable to the shareholders for the calendar year ending
December 31, 1995. 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 1996.
During the year ended September 30, 1995 the Funds paid the following
dividends per share:
<TABLE>
<CAPTION>
TOTAL ORDINARY NET SHORT-TERM NET LONG-TERM
DIVIDENDS INCOME CAPITAL GAINS CAPITAL GAINS
--------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Balanced Assets Class A..... $1.03 $.45 $.26 $.32
Balanced Assets Class B..... .94 .36 .26 .32
Blue Chip Growth Class A.... 1.09 -- .27 .82
Blue Chip Growth Class B.... 1.09 -- .27 .82
Mid-Cap Growth Class A...... .04 .04 -- --
Mid-Cap Growth Class B...... .02 .02 -- --
Small Company Growth Class
A.......................... .41 -- .22 .19
Small Company Growth Class
B.......................... .41 -- .20 .21
Global Balanced Class A..... .01 .01 -- --
Global Balanced Class B..... .01 .01 -- --
Growth and Income Class A... .45 .30 .15 --
Growth and Income Class B... .43 .28 .15 --
</TABLE>
For the year ended September 30, 1995, 24.5%, 19.5%, 4.1%, 34.9% and 17.2%
of the dividends paid from ordinary income by Balanced Assets Fund, Blue Chip
Growth Fund, Mid-Cap Growth Fund, Global Balanced Fund and Growth and Income
Fund, respectively, qualified for the 70% dividends received deductions for
corporations.
B-115
<PAGE>
APPENDIX
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
Description of Moody's Investors Service, Inc.'s ("Moody's") Corporate Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and therefore not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.
B-116
<PAGE>
B Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of the generic rating
category.
Description of Moody's Commercial Paper Ratings
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the Securities Act.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act, nor does it represent that
any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries
-- High rates of return on funds employed
B-117
<PAGE>
-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
level of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its commercial paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal validity or enforceability of any support arrangement. You are cautioned
to review with your counsel any questions regarding particular support
arrangements.
Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a
B-118
<PAGE>
result of public interest questions and preparations to meet such obligations.
Description of Standard & Poor's Corporate Debt Ratings
A Standards & Poor's corporate or municipal rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligers such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other reasons.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation: (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-
rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt
in higher-rated categories.
B-119
<PAGE>
Debt rated BB, B, CCC, CC and C are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest
and repay principal. BB indicates the least degree of speculation and
C the highest degree of speculation. While such debt will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposure to adverse conditions.
BB Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties
or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payment. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB-rating.
B Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB or BB-rating.
CCC Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayments of
principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been
filed but debt service payments are continued.
CI The rating CI is reserved for income bonds on which no interest is
being paid.
D Debt rated D is in default. The D rating is assigned on the day an
interest or principal payment is missed. The
B-120
<PAGE>
D rating also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
Plus (+) or minus (-): The ratings of AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within these
ratings categories.
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood or risk of default upon failure of such completion. The investor
should exercise judgment with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is insured by the Federal Savings & Loan Insurance Corp. or
the Federal Deposit Insurance Corp. and interest is adequately
collateralized.
* Continuance of the rating is contingent upon Standard & Poor's receipt
of an executed copy of the escrow agreement or closing documentation
confirming investments and cash flows.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
Debt Obligations of Issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the credit worthiness of the obligor but do not take into
account currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
B-121
<PAGE>
Description of Standard & Poor's Commercial Paper Ratings.
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of not more
than 365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest.
A Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree
of safety.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus
(+) sign designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effect of changes in circumstances than obligations carrying
the higher designations.
B Issues rated "B" are regarded as having only adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D This rating indicates that the issue is either in default or is
expected to be in default upon maturity.
The commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
B-122
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Set forth in Part B of Registrant's Statement of Additional
Information are the audited financial statements of the SunAmerica
Equity Funds with respect to Registrant's fiscal year ended
September 30, 1995. Selected per share data and ratios are set
forth in Part A of the Prospectus under the caption "Financial
Highlights." No financial statements are included in Part C.
All other financial statements, schedules and historical financial
information are omitted because the conditions requiring their
filing do not exist.
(b) Exhibits:
(1) Declaration of Trust, as amended.
(2) By-Laws, as amended.
(3) Inapplicable.
(4) Specimen Certificates with respect to Global Balanced Fund
and Growth and Income Fund series. Incorporated herein by
reference to Post-Effective Amendment No. 15 to Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed
on January 27, 1995. Specimen Certificates with respect to
Balanced Assets Fund, Value Fund, Growth Fund and Emerging
Growth Fund series. Incorporated herein by reference to
Post-Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January
27, 1994.
(5)(a) Investment Advisory and Management Agreement between
Registrant and SunAmerica Asset Management Corp. with
respect to the Balanced Assets Fund, Blue Chip Growth Fund,
Mid-Cap Growth, and Small Company Growth Fund. Incorporated
herein by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File No.
33-8021) filed on January 27, 1994. Form of Investment
Advisory and Management Agreement between Registrant and
SunAmerica Asset Management Corp. with respect to the Global
Balanced Fund and Growth and Income Fund series.
Incorporated herein by reference to Post-Effective Amendment
No. 13 to Registrant's Registration Statement on Form N-1A
(File No. 33-8021) filed on April 7, 1994.
(5)(b) Form of Sub-Advisory Agreement between SunAmerica Asset
Management Corp. and Goldman Sachs Asset Management
International
<PAGE>
("GSAMI") with respect to the Global Balanced Fund series,
and a form of Sub-Advisory Agreement between SunAmerica
Asset Management Corp. and AIG Asset Management, Inc.
("AIGAM") with respect to the Global Balanced Fund series.
Incorporated herein by reference to Post-Effective Amendment
No. 13 to Registrant's Registration Statement on Form N-1A
(File No. 33-8021) filed on April 7, 1994.
(5)(c) Form of Sub-Sub-Advisory Agreement between AIGAM and AIGAM
International Limited with respect to the foreign equity
component of the Global Balanced Fund series. Incorporated
herein by referenced to Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A (File No.
33-8021) filed on June 7, 1994.
(6)(a) Distribution Agreement between Registrant and SunAmerica
Capital Services, Inc. with respect to the Balanced Assets,
Blue Chip Growth Fund, Mid-Cap Growth, and Small Company
Growth Fund. Incorporated herein by reference to Post-
Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January
27, 1994. Form of Distribution Agreement between Registrant
and SunAmerica Capital Services, Inc. with respect to the
Global Balanced Fund and Growth and Income Fund series.
Incorporated herein by reference to Post-Effective Amendment
No. 13 to Registrant's Registration Statement on Form N-1A
(File No. 33-8021) filed on April 7, 1994.
(6)(b) Dealer Agreement. Incorporated herein by reference to
Registrant's Registration Statement on Form N-1A (File No.
33-8021) filed on August 14, 1986.
(7) Directors'/Trustees' Retirement Plan. Incorporated
herein by reference to Post-Effective Amendment No. 13
to Registrant's Registration Statement on Form N-1A
(File No. 33-8021) filed on April 7, 1994.
(8) Custodian Agreement between Registrant and State Street
Bank and Trust Company. Incorporated herein by
reference to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form N-1A (File
No. 33-8021) filed on January 27, 1995.
(9)(a) Transfer Agency and Service Agreement between Registrant and
State Street Bank and Trust Company. Incorporated herein by
reference to Post-Effective Amendment No. 15 to Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed
on January 27, 1995.
(9)(b) Service Agreement between Registrant and SunAmerica Fund
Services, Inc. with respect to the Balanced Assets Fund,
Blue Chip Growth Fund, Mid-Cap Growth, and Small Company
Growth Fund series. Incorporated herein by reference to
Post-Effective Amendment No. 12 to Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January
27, 1994. Form of Service Agreement between
C-2
<PAGE>
Registrant and SunAmerica Fund Services, Inc. with respect
to the Global Balanced Fund and Growth and Income Fund
series. Incorporated herein by reference to Post-Effective
Amendment No. 13 to Registrant's Registration Statement on
Form N-1A (File No. 33-8021) filed on April 7, 1994.
(10) Opinion and Consent of Counsel. Incorporated herein by
reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A (File
No. 33-8021) filed on April 7, 1994.
(11) Consent of Independent Accountants.
(12) Inapplicable.
(13) Inapplicable.
(14) Model Retirement Plans.
(15) Distribution Plans pursuant to Rule 12b-1 (Class A
Shares and Class B Shares) with respect to the Balanced
Assets Fund, Blue Chip Growth Fund, Mid-Cap Growth, and
Small Company Growth Fund series. Incorporated herein
by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File
No. 33-8021) filed on January 27, 1994. Forms of
Distribution Plans pursuant to Rule 12b-1 (Class A
Shares and Class B Shares) with respect to the Global
Balanced Fund and Growth and Income Fund series.
Incorporated herein by reference to Post-Effective
Amendment No. 13 to Registrant's Registration Statement
on Form N-1A (File No. 33-8021) filed on April 7, 1994.
(16) Schedule of Computation of Performance Quotations.
(17) Powers of Attorney.
Item 25. Persons Controlled By or Under Common Control With Registrant.
There are no persons controlled by or under common control with
Registrant.
C-3
<PAGE>
Item 26. Number of Holders of Securities.
Class A Shares Class B Shares
Number of Record Number of Record
Holders as of Holders as of
Title of Class December 31, 1995 December 31, 1995
-------------- ----------------- -----------------
Balanced Assets Fund 14,310 10,384
Shares of Beneficial Interest
($.01 par value)
Blue Chip Growth Fund 6,896 4,461
Shares of Beneficial Interest
($.01 par value)
Mid-Cap Growth Fund 3,618 901
Shares of Beneficial Interest
($.01 par value)
Small Company Growth Fund` 10,635 5,439
Shares of Beneficial Interest
($.01 par value)
Global Balanced Fund 874 1,206
Shares of Beneficial Interest
($.01 par value)
Growth and Income Fund 156 273
Shares of Beneficial Interest
($.01 par value)
Item 27. Indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by
a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted
against the Registrant by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by the controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
C-4
<PAGE>
Item 28. Business and Other Connections of the Investment Adviser.
Information concerning the business and other connections of
SunAmerica Asset Management Corp. is incorporated herein by
reference to SunAmerica Asset Management Corp.'s Form ADV (File No.
801-19813) and information concerning the business and other
connections of GSAMI is incorporated herein by reference to GSAMI's
Form ADV (File No. 801-16048), and information concerning the
business and other connections of AIGAM is incorporated herein by
reference to AIGAM's Form ADV (File No. 801-42213), which are
currently on file with the Securities and Exchange Commission.
Reference is also made to the caption "Management of the Trust" in
the Prospectus constituting Part A of the Registration Statement and
"Adviser, Sub-Advisers, Distributor and Administrator" and "Trustees
and Officers" constituting Part B of the Registration Statement.
Item 29. Principal Underwriters.
(a) The principal underwriter of the Registrant also acts as principal
underwriter for:
SunAmerica Income Funds
SunAmerica Money Market Funds, Inc.
(b) The following persons are the officers and directors of SunAmerica
Capital Services, Inc., the principal underwriter of Registrant's
Shares:
Name and Principal Position Position with the
Business Address With Underwriter Registrant
------------------ ---------------- -----------------
Peter A. Harbeck President President and
The SunAmerica Center Trustee
733 Third Avenue
New York, NY 10017-3204
Robert M. Zakem Executive Vice Secretary and
The SunAmerica Center President and Chief Compliance
733 Third Avenue Director Officer
New York, NY 10017-3204
C-5
<PAGE>
Name and Principal Position Position with the
Business Address With Underwriter Registrant
------------------ ---------------- -----------------
Susan L. Harris Secretary None
SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067-6022
Steven E. Rothstein Treasurer None
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
(c) Inapplicable.
Item 30. Location of Accounts and Records.
SunAmerica Asset Management Corp., The SunAmerica Center, 733 Third
Avenue, New York, NY 10017-3204, or an affiliate thereof, maintains
physical possession of each such accounts, books or other documents
of Registrant, except for those maintained by Registrant's
custodian, State Street Bank and Trust Company, 1776 Heritage Drive,
North Quincy, MA 02171, and its affiliate, National Financial Data
Services, P.O. Box 419572, Kansas City, MO 64141-6572.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
Registrant hereby undertakes:
(c) To furnish, upon request and without charge, to each person to
whom a Prospectus is delivered a copy of the Registrant's
latest annual report to shareholders.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
(the "1933 Act") and the Investment Company Act of 1940, as amended, Registrant
certifies that it meets all of the requirements for effectiveness of the Post-
Effective Amendment No. 17 to the Registration Statement (the "Post-Effective
Amendment") pursuant to Rule 485(b) under the 1933 Act and that Registrant has
duly caused the Post-Effective Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and State of
New York, on the 11th of January, 1996.
SUNAMERICA EQUITY FUNDS
By:/s/Peter A. Harbeck
________________________
Peter A. Harbeck,
President and Trustee
Pursuant to the requirements of the 1933 Act, the Post-Effective Amendment
No. 17 to Registrant's Registration Statement on Form N-1A has been signed below
by the following persons in the capacities and on the dates indicated:
/s/Peter A. Harbeck President and Trustee January 11, 1996
- --------------------- (Principal Executive Officer)
Peter A. Harbeck
* Controller January 11, 1996
- --------------------- (Principal Accounting
Peter C. Sutton and Financial Officer)
* Trustee January 11, 1996
- ---------------------
Peter McMillan III
* Trustee January 11, 1996
- ---------------------
S. James Coppersmith
* Trustee January 11, 1996
- ---------------------
Samuel M. Eisenstat
* Trustee January 11, 1996
- ---------------------
Stephen J. Gutman
* Trustee January 11, 1996
- ---------------------
Sebastiano Sterpa
*By:/s/Robert M. Zakem
__________________________________
Robert M. Zakem, Attorney-in-Fact
<PAGE>
SUNAMERICA EQUITY FUNDS
EXHIBIT INDEX
Exhibit No. Name Page No.
- ----------- ---------------------------------- --------
1 Declaration of Trust, as amended --------
2 By-Laws, as amended --------
11 Consent of Independent Accountants --------
14 Model Retirement Plan --------
16 Schedule of Computation
of Performance Quotations --------
17 Powers of Attorney --------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 011
<NAME> SUNAMERICA BALANCED ASSETS FUNDS CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 251,796,791<F1>
<INVESTMENTS-AT-VALUE> 277,303,945<F1>
<RECEIVABLES> 19,499,179<F1>
<ASSETS-OTHER> 11,209<F1>
<OTHER-ITEMS-ASSETS> 342,333<F1>
<TOTAL-ASSETS> 297,156,666<F1>
<PAYABLE-FOR-SECURITIES> 8,815,756<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,309,745<F1>
<TOTAL-LIABILITIES> 15,125,501<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 244,502,707<F1>
<SHARES-COMMON-STOCK> 7,302,494<F2>
<SHARES-COMMON-PRIOR> 3,563,212<F2>
<ACCUMULATED-NII-CURRENT> 243,698<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 11,777,606<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 25,507,154<F1>
<NET-ASSETS> 282,031,165<F1>
<DIVIDEND-INCOME> 4,015,774<F1>
<INTEREST-INCOME> 4,942,478<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 4,723,408<F1>
<NET-INVESTMENT-INCOME> 4,234,844<F1>
<REALIZED-GAINS-CURRENT> 13,383,399<F1>
<APPREC-INCREASE-CURRENT> 28,115,267<F1>
<NET-CHANGE-FROM-OPS> 45,733,510<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 6,207,331<F1>
<DISTRIBUTIONS-OF-GAINS> 9,076,632<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 4,667,503<F2>
<NUMBER-OF-SHARES-REDEEMED> 1,913,984<F2>
<SHARES-REINVESTED> 265,763<F2>
<NET-CHANGE-IN-ASSETS> 49,277,508<F1>
<ACCUMULATED-NII-PRIOR> 2,216,185<F1>
<ACCUMULATED-GAINS-PRIOR> 7,470,839<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,821,586<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,723,408<F1>
<AVERAGE-NET-ASSETS> 67,968,140<F2>
<PER-SHARE-NAV-BEGIN> 14.62<F2>
<PER-SHARE-NII> .32<F2>
<PER-SHARE-GAIN-APPREC> 2.51<F2>
<PER-SHARE-DIVIDEND> .45<F2>
<PER-SHARE-DISTRIBUTIONS> .58<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.42<F2>
<EXPENSE-RATIO> 1.50<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This information pertains to the SunAmerica Balanced Asset fund as a whole.
<F2>This information pertains to SunAmerica Balanced Assets Class A.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 012
<NAME> SUNAMERICA BALANCED ASSETS FUNDS CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 251,796,791<F1>
<INVESTMENTS-AT-VALUE> 277,303,945<F1>
<RECEIVABLES> 19,499,179<F1>
<ASSETS-OTHER> 11,209<F1>
<OTHER-ITEMS-ASSETS> 342,333<F1>
<TOTAL-ASSETS> 297,156,666<F1>
<PAYABLE-FOR-SECURITIES> 8,815,756<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 6,309,745<F1>
<TOTAL-LIABILITIES> 15,125,501<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 244,502,707<F1>
<SHARES-COMMON-STOCK> 9,872,779<F2>
<SHARES-COMMON-PRIOR> 12,353,510<F2>
<ACCUMULATED-NII-CURRENT> 243,698<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 11,777,606<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 25,507,154<F1>
<NET-ASSETS> 282,031,165<F1>
<DIVIDEND-INCOME> 4,015,774<F1>
<INTEREST-INCOME> 4,942,478<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 4,723,408<F1>
<NET-INVESTMENT-INCOME> 4,234,844<F1>
<REALIZED-GAINS-CURRENT> 13,383,399<F1>
<APPREC-INCREASE-CURRENT> 28,115,267<F1>
<NET-CHANGE-FROM-OPS> 45,733,510<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 6,207,331<F1>
<DISTRIBUTIONS-OF-GAINS> 9,076,632<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,071,975<F2>
<NUMBER-OF-SHARES-REDEEMED> 6,322,402<F2>
<SHARES-REINVESTED> 769,696<F2>
<NET-CHANGE-IN-ASSETS> 49,277,508<F1>
<ACCUMULATED-NII-PRIOR> 2,216,185<F1>
<ACCUMULATED-GAINS-PRIOR> 7,470,839<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,821,586<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 4,723,408<F1>
<AVERAGE-NET-ASSETS> 174,909,930<F2>
<PER-SHARE-NAV-BEGIN> 14.62<F2>
<PER-SHARE-NII> .23<F2>
<PER-SHARE-GAIN-APPREC> 2.51<F2>
<PER-SHARE-DIVIDEND> .36<F2>
<PER-SHARE-DISTRIBUTIONS> .58<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.42<F2>
<EXPENSE-RATIO> 2.12<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This information pertains to the SunAmerica Balanced Assets fund as a whole.
<F2>This information pertains to SunAmerica Balanced Assets Class B.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 051
<NAME> SUNAMERICA GLOBAL BALANCED FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 21,268,840<F1><F2>
<INVESTMENTS-AT-VALUE> 22,817,483<F1>
<RECEIVABLES> 2,090,657<F1>
<ASSETS-OTHER> 287,702<F1>
<OTHER-ITEMS-ASSETS> 222,241<F1>
<TOTAL-ASSETS> 25,418,083<F1>
<PAYABLE-FOR-SECURITIES> 942,954<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 884,128<F1>
<TOTAL-LIABILITIES> 1,827,082<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 22,600,728<F1>
<SHARES-COMMON-STOCK> 1,307,104<F2>
<SHARES-COMMON-PRIOR> 1,895,050<F2>
<ACCUMULATED-NII-CURRENT> 871,462<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (1,475,759)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,594,570<F1>
<NET-ASSETS> 23,591,001<F1>
<DIVIDEND-INCOME> 366,522<F1>
<INTEREST-INCOME> 609,969<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 671,013<F1>
<NET-INVESTMENT-INCOME> 305,478<F1>
<REALIZED-GAINS-CURRENT> (808,412)<F1>
<APPREC-INCREASE-CURRENT> 1,889,869<F1>
<NET-CHANGE-FROM-OPS> 1,386,935<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 36,685<F1>
<DISTRIBUTIONS-OF-GAINS> 7,275<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 750,764<F2>
<NUMBER-OF-SHARES-REDEEMED> 1,342,777<F2>
<SHARES-REINVESTED> 4,067<F2>
<NET-CHANGE-IN-ASSETS> (3,040,774)<F1>
<ACCUMULATED-NII-PRIOR> 36,678<F1>
<ACCUMULATED-GAINS-PRIOR> (94,081)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 269,441<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 786,227<F1>
<AVERAGE-NET-ASSETS> 12,834,081<F2>
<PER-SHARE-NAV-BEGIN> 6.91<F2>
<PER-SHARE-NII> .10<F2>
<PER-SHARE-GAIN-APPREC> .36<F2>
<PER-SHARE-DIVIDEND> .01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 7.36<F2>
<EXPENSE-RATIO> 2.15<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This information pertains to the SunAmerica Global Balanced Fund as a whole.
<F2>This information pertains to SunAmerica Global Balanced Fund Class A.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 052
<NAME> SUNAMERICA GLOBAL BALANCED FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 21,268,840<F1>
<INVESTMENTS-AT-VALUE> 22,817,483<F1>
<RECEIVABLES> 2,090,657<F1>
<ASSETS-OTHER> 287,702<F1>
<OTHER-ITEMS-ASSETS> 222,241<F1>
<TOTAL-ASSETS> 25,418,083<F1>
<PAYABLE-FOR-SECURITIES> 942,954<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 884,128<F1>
<TOTAL-LIABILITIES> 1,827,082<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 22,600,728<F1>
<SHARES-COMMON-STOCK> 1,915,347<F2>
<SHARES-COMMON-PRIOR> 1,962,265<F2>
<ACCUMULATED-NII-CURRENT> 871,462<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (1,475,759)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,594,570<F1>
<NET-ASSETS> 23,591,001<F1>
<DIVIDEND-INCOME> 366,522<F1>
<INTEREST-INCOME> 609,969<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 671,013<F1>
<NET-INVESTMENT-INCOME> 305,478<F1>
<REALIZED-GAINS-CURRENT> (808,412)<F1>
<APPREC-INCREASE-CURRENT> 1,889,869<F1>
<NET-CHANGE-FROM-OPS> 1,386,935<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 36,685<F1>
<DISTRIBUTIONS-OF-GAINS> 7,275<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,150,637<F2>
<NUMBER-OF-SHARES-REDEEMED> 1,199,716<F2>
<SHARES-REINVESTED> 2,161<F2>
<NET-CHANGE-IN-ASSETS> (3,040,774)<F1>
<ACCUMULATED-NII-PRIOR> 36,678<F1>
<ACCUMULATED-GAINS-PRIOR> (94,081)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 269,441<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 786,227<F1>
<AVERAGE-NET-ASSETS> 14,109,998<F2>
<PER-SHARE-NAV-BEGIN> 6.90<F2>
<PER-SHARE-NII> .05<F2>
<PER-SHARE-GAIN-APPREC> .36<F2>
<PER-SHARE-DIVIDEND> .01<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 7.30<F2>
<EXPENSE-RATIO> 2.80<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>This information pertains to the SunAmerica Global Balanced Fund as a whole.
<F2>This information pertains to SunAmerica Global Balanced Fund Class B.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 021
<NAME> SUNAMERICA BLUE CHIP GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995<F1>
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 68,107,694<F1>
<INVESTMENTS-AT-VALUE> 76,304,575<F1>
<RECEIVABLES> 6,818,182<F1>
<ASSETS-OTHER> 32,317<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 83,155,074<F1>
<PAYABLE-FOR-SECURITIES> 348,800<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 866,478<F1>
<TOTAL-LIABILITIES> 1,215,278<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 66,227,467<F1>
<SHARES-COMMON-STOCK> 2,445,272<F2>
<SHARES-COMMON-PRIOR> 207,957<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 7,515,448<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 8,196,881<F1>
<NET-ASSETS> 81,939,796<F1>
<DIVIDEND-INCOME> 1,302,059<F1>
<INTEREST-INCOME> 253,003<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,597,986<F1>
<NET-INVESTMENT-INCOME> (42,924)<F1>
<REALIZED-GAINS-CURRENT> 7,605,225<F1>
<APPREC-INCREASE-CURRENT> 6,757,773<F1>
<NET-CHANGE-FROM-OPS> 14,320,074<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 5,484,894<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,404,163<F2>
<NUMBER-OF-SHARES-REDEEMED> 181,804<F2>
<SHARES-REINVESTED> 14,956<F2>
<NET-CHANGE-IN-ASSETS> 6,983,383<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,438,041<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,835<F1>
<INTEREST-EXPENSE> 14,080<F1>
<GROSS-EXPENSE> 1,611,165<F1>
<AVERAGE-NET-ASSETS> 12,215,780<F2>
<PER-SHARE-NAV-BEGIN> 15.42<F2>
<PER-SHARE-NII> .02<F2>
<PER-SHARE-GAIN-APPREC> 2.99<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 1.09<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.34<F2>
<EXPENSE-RATIO> 1.58<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information pertains to SunAmerica Blue Chip Growth fund as a whole.
<F2>Information pertains to SunAmerica Blue Chip Growth fund Class A.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 022
<NAME> SUNAMERICA BLUE CHIP GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995<F1>
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 68,107,694<F1>
<INVESTMENTS-AT-VALUE> 76,304,575<F1>
<RECEIVABLES> 6,818,182<F1>
<ASSETS-OTHER> 32,317<F1>
<OTHER-ITEMS-ASSETS> 0<F1>
<TOTAL-ASSETS> 83,155,074<F1>
<PAYABLE-FOR-SECURITIES> 348,800<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 866,478<F1>
<TOTAL-LIABILITIES> 1,215,278<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 66,227,467<F1>
<SHARES-COMMON-STOCK> 2,307,431<F2>
<SHARES-COMMON-PRIOR> 4,676,502<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 7,515,448<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 8,196,881<F1>
<NET-ASSETS> 81,939,796<F1>
<DIVIDEND-INCOME> 1,302,059<F1>
<INTEREST-INCOME> 253,003<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> 1,597,986<F1>
<NET-INVESTMENT-INCOME> (42,924)<F1>
<REALIZED-GAINS-CURRENT> 7,605,225<F1>
<APPREC-INCREASE-CURRENT> 6,757,773<F1>
<NET-CHANGE-FROM-OPS> 14,320,074<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 5,484,894<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 8,964,323<F2>
<NUMBER-OF-SHARES-REDEEMED> 11,706,255<F2>
<SHARES-REINVESTED> 372,862<F2>
<NET-CHANGE-IN-ASSETS> 6,983,383<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,438,041<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 565,835<F1>
<INTEREST-EXPENSE> 14,080<F1>
<GROSS-EXPENSE> 1,611,165<F1>
<AVERAGE-NET-ASSETS> 63,228,852<F2>
<PER-SHARE-NAV-BEGIN> 15.34<F2>
<PER-SHARE-NII> (.01)<F2>
<PER-SHARE-GAIN-APPREC> 2.89<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> 1.09<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.13<F2>
<EXPENSE-RATIO> 2.22<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information pertains to SunAmerica Blue Chip Growth fund as a whole.
<F2>Information pertains to SunAmerica Blue Chip Growth fund Class B.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 031
<NAME> SUNAMERICA MID-CAP GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 31,569,444<F1>
<INVESTMENTS-AT-VALUE> 37,489,713<F1>
<RECEIVABLES> 11,453,994<F1>
<ASSETS-OTHER> 6,124<F1>
<OTHER-ITEMS-ASSETS> 548<F1>
<TOTAL-ASSETS> 48,950,379<F1>
<PAYABLE-FOR-SECURITIES> 1,535,577<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 157,165<F1>
<TOTAL-LIABILITIES> 1,692,742<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 36,150,377<F1>
<SHARES-COMMON-STOCK> 2,118,190<F2>
<SHARES-COMMON-PRIOR> 2,387,214<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 5,186,991<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5,920,269<F1>
<NET-ASSETS> 47,257,637<F1>
<DIVIDEND-INCOME> 223,932<F1>
<INTEREST-INCOME> 231,890<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (693,509)<F1>
<NET-INVESTMENT-INCOME> (237,687)<F1>
<REALIZED-GAINS-CURRENT> 7,432,643<F1>
<APPREC-INCREASE-CURRENT> 3,253,371<F1>
<NET-CHANGE-FROM-OPS> 10,448,327<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (92,640)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 247,141<F2>
<NUMBER-OF-SHARES-REDEEMED> (521,946)<F2>
<SHARES-REINVESTED> 5,781<F2>
<NET-CHANGE-IN-ASSETS> 10,312,634<F1>
<ACCUMULATED-NII-PRIOR> 92,829<F1>
<ACCUMULATED-GAINS-PRIOR> (2,008,154)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 294,505<F1>
<INTEREST-EXPENSE> 1,645<F1>
<GROSS-EXPENSE> 704,063<F1>
<AVERAGE-NET-ASSETS> 33,040,346<F2>
<PER-SHARE-NAV-BEGIN> 13.78<F2>
<PER-SHARE-NII> (0.08)<F2>
<PER-SHARE-GAIN-APPREC> 4.14<F2>
<PER-SHARE-DIVIDEND> (0.04)<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.80<F2>
<EXPENSE-RATIO> 1.66<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information pertains to SunAmerica Mid-Cap Growth fund as a whole.
<F2>Information pertains to SunAmerica Mid-Cap Growth fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 032
<NAME> SUNAMERICA MID-CAP GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 31,569,444<F1>
<INVESTMENTS-AT-VALUE> 37,489,713<F1>
<RECEIVABLES> 11,453,994<F1>
<ASSETS-OTHER> 6,124<F1>
<OTHER-ITEMS-ASSETS> 548<F1>
<TOTAL-ASSETS> 48,950,379<F1>
<PAYABLE-FOR-SECURITIES> 1,535,577<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 157,165<F1>
<TOTAL-LIABILITIES> 1,692,742<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 36,150,377<F1>
<SHARES-COMMON-STOCK> 542,752<F2>
<SHARES-COMMON-PRIOR> 294,815<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 5,186,991<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5,920,269<F1>
<NET-ASSETS> 47,257,637<F1>
<DIVIDEND-INCOME> 223,932<F1>
<INTEREST-INCOME> 231,890<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (693,509)<F1>
<NET-INVESTMENT-INCOME> (237,687)<F1>
<REALIZED-GAINS-CURRENT> 7,432,643<F1>
<APPREC-INCREASE-CURRENT> 3,253,371<F1>
<NET-CHANGE-FROM-OPS> 10,448,327<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (92,640)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 4,235,563<F2>
<NUMBER-OF-SHARES-REDEEMED> (3,989,374)<F2>
<SHARES-REINVESTED> 1,748<F2>
<NET-CHANGE-IN-ASSETS> 10,312,634<F1>
<ACCUMULATED-NII-PRIOR> 92,829<F1>
<ACCUMULATED-GAINS-PRIOR> (2,008,154)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 294,505<F1>
<INTEREST-EXPENSE> 1,645<F1>
<GROSS-EXPENSE> 704,063<F1>
<AVERAGE-NET-ASSETS> 6,226,985<F2>
<PER-SHARE-NAV-BEGIN> 13.70<F2>
<PER-SHARE-NII> (0.18)<F2>
<PER-SHARE-GAIN-APPREC> 4.08<F2>
<PER-SHARE-DIVIDEND> (0.02)<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.58<F2>
<EXPENSE-RATIO> 2.31<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information pertains to SunAmerica Mid-Cap Growth fund as a whole.
<F2>Information pertains to SunAmerica Mid-Cap Growth fund Class B.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 041
<NAME> SUNAMERICA SMALL CO. GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 114,134,597<F1>
<INVESTMENTS-AT-VALUE> 138,117,556<F1>
<RECEIVABLES> 24,243,008<F1>
<ASSETS-OTHER> 7,429<F1>
<OTHER-ITEMS-ASSETS> 719<F1>
<TOTAL-ASSETS> 162,368,712<F1>
<PAYABLE-FOR-SECURITIES> 1,536,032<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 3,009,576<F1>
<TOTAL-LIABILITIES> 4,545,608<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 105,216,656<F1>
<SHARES-COMMON-STOCK> 3,630,872<F2>
<SHARES-COMMON-PRIOR> 2,293,635<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 28,623,489<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 23,982,959<F1>
<NET-ASSETS> 157,823,104<F1>
<DIVIDEND-INCOME> 391,999<F1>
<INTEREST-INCOME> 1,097,775<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,077,178)<F1>
<NET-INVESTMENT-INCOME> (587,404)<F1>
<REALIZED-GAINS-CURRENT> 31,444,522<F1>
<APPREC-INCREASE-CURRENT> 15,112,125<F1>
<NET-CHANGE-FROM-OPS> 45,969,243<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> (2,108,530)<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 6,544,632<F2>
<NUMBER-OF-SHARES-REDEEMED> (5,262,148)<F2>
<SHARES-REINVESTED> 54,753<F2>
<NET-CHANGE-IN-ASSETS> 67,045,023<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> (125,099)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 819,449<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,077,178<F1>
<AVERAGE-NET-ASSETS> 53,578,282<F2>
<PER-SHARE-NAV-BEGIN> 16.82<F2>
<PER-SHARE-NII> (0.04)<F2>
<PER-SHARE-GAIN-APPREC> 8.28<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (0.41)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 24.65<F2>
<EXPENSE-RATIO> 1.57<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information pertains to SunAmerica Small Co. Growth fund as a whole.
<F2>Information pertains to SunAmerica Small Co. Growth fund Class A.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 042
<NAME> SUNAMERICA SMALL CO. GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 114,134,597<F1>
<INVESTMENTS-AT-VALUE> 138,117,556<F1>
<RECEIVABLES> 24,243,008<F1>
<ASSETS-OTHER> 7,429<F1>
<OTHER-ITEMS-ASSETS> 719<F1>
<TOTAL-ASSETS> 162,368,712<F1>
<PAYABLE-FOR-SECURITIES> 1,536,032<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 3,009,576<F1>
<TOTAL-LIABILITIES> 4,545,608<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 105,216,656<F1>
<SHARES-COMMON-STOCK> 2,809,180<F2>
<SHARES-COMMON-PRIOR> 3,126,189<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 28,623,489<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 23,982,959<F1>
<NET-ASSETS> 157,823,104<F1>
<DIVIDEND-INCOME> 391,999<F1>
<INTEREST-INCOME> 1,097,775<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (2,077,178)<F1>
<NET-INVESTMENT-INCOME> (587,404)<F1>
<REALIZED-GAINS-CURRENT> 31,444,522<F1>
<APPREC-INCREASE-CURRENT> 15,112,125<F1>
<NET-CHANGE-FROM-OPS> 45,969,243<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> (2,108,530)<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 9,886,153<F2>
<NUMBER-OF-SHARES-REDEEMED> (10,265,178)<F2>
<SHARES-REINVESTED> 62,016<F2>
<NET-CHANGE-IN-ASSETS> 67,045,023<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> (125,099)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 819,449<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 2,077,178<F1>
<AVERAGE-NET-ASSETS> 55,681,578<F2>
<PER-SHARE-NAV-BEGIN> 16.70<F2>
<PER-SHARE-NII> (0.16)<F2>
<PER-SHARE-GAIN-APPREC> 8.19<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (0.41)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 24.32<F2>
<EXPENSE-RATIO> 2.22<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information pertains to SunAmerica Small Co. Growth fund as a whole.
<F2>Information pertains to SunAmerica Small Co. Growth fund Class B.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 061
<NAME> SUNAMERICA GROWTH & INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 5,802,404<F1>
<INVESTMENTS-AT-VALUE> 6,155,381<F1>
<RECEIVABLES> 96,976<F1>
<ASSETS-OTHER> 1,147<F1>
<OTHER-ITEMS-ASSETS> 732<F1>
<TOTAL-ASSETS> 6,254,236<F1>
<PAYABLE-FOR-SECURITIES> 140,000<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 43,925<F1>
<TOTAL-LIABILITIES> 183,925<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 5,452,799<F1>
<SHARES-COMMON-STOCK> 421,137<F2>
<SHARES-COMMON-PRIOR> 416,383<F2>
<ACCUMULATED-NII-CURRENT> 2,915<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 261,620<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 352,977<F1>
<NET-ASSETS> 6,070,311<F1>
<DIVIDEND-INCOME> 105,515<F1>
<INTEREST-INCOME> 96,252<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (18,094)<F1>
<NET-INVESTMENT-INCOME> 183,673<F1>
<REALIZED-GAINS-CURRENT> 346,652<F1>
<APPREC-INCREASE-CURRENT> 297,243<F1>
<NET-CHANGE-FROM-OPS> 827,568<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (182,259)<F1>
<DISTRIBUTIONS-OF-GAINS> (76,790)<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 542,589<F2>
<NUMBER-OF-SHARES-REDEEMED> (562,875)<F2>
<SHARES-REINVESTED> 25,040<F2>
<NET-CHANGE-IN-ASSETS> 2,742,598<F1>
<ACCUMULATED-NII-PRIOR> 1,501<F1>
<ACCUMULATED-GAINS-PRIOR> (8,242)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 32,455<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 169,347<F1>
<AVERAGE-NET-ASSETS> 3,239,423<F2>
<PER-SHARE-NAV-BEGIN> 7.44<F2>
<PER-SHARE-NII> 0.32<F2>
<PER-SHARE-GAIN-APPREC> 1.08<F2>
<PER-SHARE-DIVIDEND> (0.30)<F2>
<PER-SHARE-DISTRIBUTIONS> (0.15)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 8.39<F2>
<EXPENSE-RATIO> 0.46<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to SunAmerica Growth & Income fund as a whole.
<F2>Information given pertains to SunAmerica Growth & Income fund Class A.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000799084
<NAME> SUNAMERICA EQUITY FUNDS
<SERIES>
<NUMBER> 062
<NAME> SUNAMERICA GROWTH & INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 5,802,404<F1>
<INVESTMENTS-AT-VALUE> 6,155,381<F1>
<RECEIVABLES> 96,976<F1>
<ASSETS-OTHER> 1,147<F1>
<OTHER-ITEMS-ASSETS> 732<F1>
<TOTAL-ASSETS> 6,254,236<F1>
<PAYABLE-FOR-SECURITIES> 140,000<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 43,925<F1>
<TOTAL-LIABILITIES> 183,925<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 5,452,799<F1>
<SHARES-COMMON-STOCK> 302,621<F2>
<SHARES-COMMON-PRIOR> 30,827<F2>
<ACCUMULATED-NII-CURRENT> 2,915<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 261,620<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 352,977<F1>
<NET-ASSETS> 6,070,311<F1>
<DIVIDEND-INCOME> 105,515<F1>
<INTEREST-INCOME> 96,252<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (18,094)<F1>
<NET-INVESTMENT-INCOME> 183,673<F1>
<REALIZED-GAINS-CURRENT> 346,652<F1>
<APPREC-INCREASE-CURRENT> 297,243<F1>
<NET-CHANGE-FROM-OPS> 827,568<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (182,259)<F1>
<DISTRIBUTIONS-OF-GAINS> (76,790)<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 301,384<F2>
<NUMBER-OF-SHARES-REDEEMED> (37,348)<F2>
<SHARES-REINVESTED> 7,758<F2>
<NET-CHANGE-IN-ASSETS> 2,742,598<F1>
<ACCUMULATED-NII-PRIOR> 1,501<F1>
<ACCUMULATED-GAINS-PRIOR> (8,242)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 32,455<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 169,347<F1>
<AVERAGE-NET-ASSETS> 1,090,504<F2>
<PER-SHARE-NAV-BEGIN> 7.44<F2>
<PER-SHARE-NII> 0.35<F2>
<PER-SHARE-GAIN-APPREC> 1.03<F2>
<PER-SHARE-DIVIDEND> (0.28)<F2>
<PER-SHARE-DISTRIBUTIONS> (0.15)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 8.39<F2>
<EXPENSE-RATIO> 0.30<F2>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Information given pertains to SunAmerica Growth & Income fund as a whole.
<F2>Informaton given pertains to SunAmerica Growth & Income fund Class B.
</FN>
</TABLE>
<PAGE>
DECLARATION OF TRUST
OF
INTEGRATED EQUITY PORTFOLIOS
THE DECLARATION OF TRUST of INTEGRATED EQUITY PORTFOLIOS is made the 18th
day of June, 1986 by the parties signatory hereto, as trustees (such persons, so
long as they shall continue in office in accordance with the terms of this
Declaration of Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the provisions of
this Declaration of Trust and are then in office, being hereinafter called the
"Trustees").
W I T N E S S E T H:
--------------------
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
Name and Definitions
--------------------
1.1. Name. The name of the trust created hereby (the "Trust") shall be
"Integrated Equity Portfolios," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall refer to the Trustees as trustees, and not individually, and shall not
refer to the officers, agents, employees or shareholders of the Trust. However,
should the Trustees determine that the use of such name is not advisable, they
may
<PAGE>
select such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name. Any name change
shall become effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name. Any such instrument shall have the
status of an amendment to this Declaration.
1.2. Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The terms "Affiliated Person," "Assignment," "Commission," "Interested
Person" and "Principal Underwriter" shall have the meanings given them in the
1940 Act, as amended from time to time.
"Declaration" shall mean this Declaration of Trust as amended from time to
time. References in this Declaration to "Declaration," "hereof," "herein" and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"Fundamental Policies" shall mean the investment objectives, policies and
restrictions set forth in the Prospectus or Statement of Additional Information
of the Trust and designated therein as policies or restrictions which may be
changed only upon a vote of Shareholders of the Trust.
"Majority Shareholder Vote" means the vote of the holders of: (i) a
majority of Shares represented in person or by proxy and entitled to vote at a
meeting of Shareholders at which a quorum, as determined in accordance with the
By-Laws, is present and (ii) a majority of Shares issued and outstanding and
entitled to vote when action is taken by written consent of Shareholders. For
these purposes, however, the term "majority" shall mean a "majority of the
outstanding voting securities," as the phrase is defined in the 1940 Act, when
any action is required by the 1940 Act by such majority as so defined.
-2-
<PAGE>
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Prospectus" and "Statement of Additional Information" shall mean the
currently effective Prospectus and Statement of Additional Information of the
Trust under the Securities Act of 1933, as amended.
"Series" means one of the separately managed components of the Trust as set
forth in Section 6.1 hereof or as may be established and designated from time to
time by the Trustees pursuant to that section.
"Shares" shall mean the equal proportionate transferable units of interest
into which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole shares.
"Shareholders" shall mean as of any particular time all holders of record
of outstanding Shares at such time.
"Trustees" shall mean the signatories to this Declaration of Trust, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly elected or appointed
and have qualified as trustees in accordance with the provisions hereof and are
then in office, and reference in this Declaration of Trust to a Trustee or
Trustees shall refer to such person or persons in their capacity as trustees
hereunder.
"Trust Property" shall mean as of any particular time any and all property,
real or personal, tangible or intangible, which at such time is owned or held by
or for the account of the Trust or the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940 and the rules
and regulations promulgated thereunder, as amended from time to time.
-3-
<PAGE>
ARTICLE II
Trustees
--------
2.1. Number of Trustees. The number of Trustees shall be such number as
shall be fixed from time to time by a written instrument signed by a majority of
the Trustees, provided, however, that the number of Trustees shall in no event
be less than three nor more than fifteen.
2.2. Election, Term. Each Trustee named herein, or elected or appointed
hereafter, shall (except in the event of resignation, removal or vacancy) hold
office until a successor has been elected or appointed and has qualified to
serve as Trustee. Trustees shall have terms of unlimited duration, subject to
the resignation and removal provisions of Section 2.3 hereof. Except as herein
provided and subject to Section 16(a) of the 1940 Act, Trustees need not be
elected by Shareholders, and the Trustees may elect and appoint their own
successors and may, pursuant to Section 2.4 hereof, appoint Trustees to fill
vacancies. The Trustees may adopt By-Laws not inconsistent with this Declaration
or any provision of law to provide for election of Trustees by Shareholders at
such time or times as the Trustees shall determine to be necessary or advisable.
Except for the Trustees named herein, an individual may not commence to serve as
Trustee except if appointed pursuant to a written instrument signed by a
majority of the Trustees then in office or unless elected by Shareholders, and
any such election or appointment shall not become effective until the individual
appointed or elected shall have accepted such election or appointment and agreed
in writing to be bound by the terms of this Declaration of Trust. A Trustee
shall be an individual at least 21 years of age who is not under a legal
disability.
2.3. Resignation and Removal. Any Trustee may resign his trust (without
need for prior or subsequent accounting) by an instrument in writing signed by
him and delivered to the other Trustees and such resignation shall be effective
upon such delivery, or at a later date according to the terms of the instrument.
Any of the Trustees may be removed (provided the aggregate number of Trustees
after such removal shall not be less than the number required by Section 2.1
hereof) with cause, by action of two thirds of the remaining Trustees or by the
action of the Shareholders of record of not less than two-thirds of the Shares
outstanding. For purposes of determining the circumstances and procedures under
which such removal by the Shareholders may take place, the provisions of Section
16(c) of the 1940 Act shall be applicable to the same extent as if the Trust
were subject to the provisions of that Section. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property
-4-
<PAGE>
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustees shall require as provided in the
preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, bankruptcy,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of a vacancy caused by reason of
an increase in the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by the
appointment of such other person as they, in their discretion, shall see fit. An
appointment of a Trustee may be made in anticipation of a vacancy to occur at a
later date by reason of retirement, resignation or increase in the number of
Trustees. Whenever a vacancy in the number of Trustees shall occur, until such
vacancy is filled as provided in this Section 2.4, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of the existence of such
vacancy.
2.5. Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary or any two
Trustees of the Trust. Regular meetings of the Trustees may be held without call
or notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be mailed or otherwise given not
less than 48 hours before the meeting but may be waived in writing by any
Trustee either before or after such meeting. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except where a
Trustee attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. The Trustees may act with or without a meeting. A quorum for
all meetings of the Trustees shall be a majority of the Trustees. Unless
provided otherwise in this Declaration of Trust or by applicable law, any action
of the Trustees may be taken at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consents of all
of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
-5-
<PAGE>
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.2 hereof or otherwise interested in any action to be taken may be counted for
quorum purposes under this Section and shall be entitled to vote to the extent
permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications systems shall constitute presence in person at such meeting.
2.6. Officers. The Trustees shall annually elect a President, a Secretary
and a Treasurer and may elect a Chairman. The Trustees may elect or appoint or
authorize the Chairman, if any, or President to appoint such other officers or
agents with such powers as the Trustees may deem to be advisable. The Chairman
and President shall be and the Secretary and Treasurer may, but need not, be a
Trustee.
2.7. By-Laws. The Trustees may adopt and from time to time amend or
repeal the By-Laws for the conduct of the business of the Trust.
2.8. Delegation of Power to Other Trustees. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees; provided that in no case shall less than
two Trustees personally exercise the powers granted to the Trustees under the
Declaration except as herein otherwise expressly provided.
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ARTICLE III
Powers of Trustees
------------------
3.1. General. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power, subject to the
Fundamental Policies, to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of securities and other investments and assets
of whatever kind, or retain Trust assets in cash and from time to time
change the investments of the assets of the Trust, and exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments and assets of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more persons, firms,
associations or corporations to exercise any of said rights, powers and
privileges in respect of any of said investments and assets.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be vested in
the Trustees as joint tenants, except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust therein is appropriately protected.
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<PAGE>
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property, and the right, title
and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
3.4. Issuance and Repurchase of Securities. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including shares
in fractional denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
Trust whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the Commonwealth of Massachusetts governing
business corporations.
3.5. Borrow Money; Lend Assets. Subject to the Fundamental Policies, the
Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
assets of the Trust, including the lending of portfolio securities, and to
endorse, guarantee or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
3.6. Delegation; Committees. The Trustees shall have power, consistent with
their continuing exclusive authority over the management of the Trust and the
Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or names of the
Trustees or otherwise as the Trustees may deem expedient, to the same extent as
such delegation is permitted to directors of a Massachusetts business
corporation and is permitted by the 1940 Act.
3.7. Collection and Payment. The Trustees shall have power to collect all
property due to the Trust; and to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and pay any expenses
which in the opinion of the Trustees are necessary or incidental to carry out
any of the purposes of this Declaration of Trust, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, em-
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<PAGE>
ployees and Trustees. The Trustees may pay themselves such compensation for
special services, including legal, underwriting, syndicating and brokerage
services, as they in good faith may deem reasonable and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust.
3.9. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) remove
Trustees or fill vacancies in or add to their number elect and remove such
officers and appoint and terminate such agents or employees as they consider
appropriate, and appoint from their own number, and terminate, any one or more
committees which may exercise some or all of the power and authority of the
Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, share purchase and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (f) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic or similar
purposes; (g) to the extent permitted by law, indemnify any Person with whom the
Trust has dealings, including the investment adviser, distributor, transfer
agent and selected dealers, to such extent as the Trustees shall determine; (h)
guarantee indebtedness or contractual obligations of others; (i) determine and
change the fiscal year of the Trust and the method in which its accounts shall
be kept; (j) adopt a seal for the Trust, but the absence of such seal shall not
impair the validity of any instrument executed on behalf of the Trust; and (k)
call for meetings of Shareholders as may be necessary or appropriate.
3.10. Further Powers. The Trustees shall have power to conduct the business
of the trust and carry on its operations in any and all of its branches and
maintain offices both within and without the Commonwealth of Massachusetts, in
any and all states of the United States of America, in the District of Columbia,
and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith small be conclusive. In construing the provisions of
this Declaration, the presump-
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tion shall be in favor of a grant of power to the Trustees. The Trustees will
not be required to obtain any court order to deal with the Trust Property.
3.11. Principal Transactions. Except in transactions permitted by the 1940
Act or any rule or regulation thereunder, or any order of exemption issued by
the Commission, or effected to implement the provisions of any agreement to
which the Trust is a party, the Trustees shall not knowingly, on behalf of the
Trust, buy any securities (other than Shares) from or sell any securities (other
than Shares) to, or lend any assets of the Trust to, any Trustee or officer of
the Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, distributor or
transfer agent or with any Affiliated Person of such Person; but the Trust may
employ any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
3.12. Litigation. The Trustees shall have the power to engage in and to
prosecute, defend, compromise, abandon, or adjust, by arbitration or otherwise,
any actions, suits, proceedings, disputes, claims and demands relating to the
Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims
or expenses incurred in connection therewith, including those of litigation, and
such power shall include without limitation the power of the Trustees or any
appropriate committee thereof, in the exercise of their or its good faith
business judgment, to dismiss any action, suit, proceeding, dispute, claim or
demand, derivative or otherwise, brought by any person, including a Shareholder
in its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
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ARTICLE IV
Management and Distribution Arrangements
----------------------------------------
4.1. Management Arrangements. Subject to approval by a Majority Shareholder
Vote, the Trustees may in their discretion from time to time enter into
advisory, administration or management contracts whereby the other party to such
contract shall undertake to furnish such advisory, administrative, management,
accounting, legal, statistical and research facilities and services, promotional
or marketing activities, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provisions of this Declaration of Trust, the Trustees may authorize any
adviser, administrator or manager (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of portfolio securities of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
adviser, administrator or manager (all without further action by the Trustees).
Any such purchases, sales, loans and exchanges shall be deemed to have been
authorized by all of the Trustees. The Trustees may, in their sole discretion,
call a meeting of Shareholders in order to submit to a vote of Shareholders at
such meeting the approval or continuance of any such investment advisory,
management or other contract. If the Shareholders of any one or more of the
Series of the Trust should fail to approve any such investment advisory or
management contract, the Investment Adviser may nonetheless serve as Investment
Adviser with respect to any Series whose Shareholders approved such contract.
4.2. Administrative Services. The Trustees may in their discretion from
time to time contract for administrative personnel and services whereby the
other party shall agree to provide to the Trustees or the Trust administrative
personnel and services to operate the Trust on a daily or other basis on such
terms and conditions as the Trustees may in their discretion determine. Such
services may be provided by one or more persons or entities.
4.3. Distribution Arrangements. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of the Shares of the
Trust to net the Trust not less than the par value per share, whereby the Trust
may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. Such contract may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust and may provide that such other party may enter into
selected dealer agreements with regis-
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<PAGE>
tered securities dealers to further the purpose of the distribution or
repurchase of the Shares. The contract shall be on such terms and conditions as
the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV or the By-Laws.
4.4. Parties to Contract. Any contract of the character described in
Sections 4.1, 4.2 or 4.3 of this Article IV, or in Article VI or in Article VII
hereof, may be entered into with any corporation, firm, trust or association,
although one or more of the Trustees or officers of the Trust may be an officer,
director, Trustee, shareholder, employee or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship, nor shall any person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the By-Laws. The same person (including a firm,
corporation, trust or association) may be the other party to contracts entered
into pursuant to Sections 4.1, 4.2 or 4.3 above or Article VI or VII, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all of the contracts mentioned in this Section 4.4.
4.5. Provisions and Amendments. Any contract entered into pursuant to
Sections 4.1, 4.2 or 4.3 of this Article IV shall be consistent with and subject
to all applicable requirements of the 1940 Act with respect to its adoption,
continuance, termination and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract entered into
pursuant to such sections shall be effective unless entered into in accordance
with applicable provisions of the 1940 Act.
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ARTICLE V
Limitations of Liability of Shareholders,
Trustees and Others
-------------------
5.1. No Personal Liability of Shareholders, Trustees, etc. No Shareholder,
as such, shall be subject to any personal liability whatsoever to any Person in
connection with Trust Property or the acts, obligations or affairs of the Trust.
No Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust, and
all such Persons shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee or agent, as such, of the Trust, is made
a party to any suit or proceeding to enforce any such liability, he shall not on
account thereof be held to any personal liability. The Trust shall indemnify and
hold each Shareholder harmless from and against all claims and liabilities to
which such Shareholder may become subject by reason of his being or having been
a Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability; provided that Shareholders of a particular Series who are subject to
claims or liabilities solely by reason of their status as Shareholders of that
Series shall be limited to the assets of that Series for recovery of any loss
and related expenses. The rights accruing to a Shareholder under this Section
5.1 shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee or agent
of the Trust shall be liable to the Trust, its Shareholders or to any
Shareholder, Trustee, officer, employee or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.
5.3. Indemnification. The Trustees shall provide for indemnification by the
Trust of any person who is, or has been a Trustee, officer, employee or agent of
the Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurrred by him
in the settlement thereof, in such manner as the Trustees may provide from time
to time in the By-Laws.
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The words "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
5.4. No Bond Required of Trustees. No Trustee, as such, shall be obligated
to give any bond or surety or other security for the performance of any of his
duties hereunder.
5.5. No Duty of Investigation; Notice in Trust, Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as Trustees under this Declaration of Trust or in their
capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees or by any officers,
employees or agents of the Trust, in their capacity as such, shall contain an
appropriate recital to the effect that the writing is executed or made by them
not individually, but as Trustees under the Declaration that the Shareholders,
Trustees, officers, employees and agents of the Trust shall not personally be
bound by or liable thereunder, nor shall resort be had to their private property
for the satisfaction of any obligation or claim thereunder but only to the Trust
Estate or, in the case of any such obligation which relates only to a specific
Series, only to the property of such Series, and appropriate references shall be
made therein to the Declaration of Trust, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, Shareholders,
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, officers, employees
and agents in such amount as the Trustees shall deem adequate to cover possible
tort liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
5.6. Reliance on Experts, etc. Each Trustee and officer or employee of the
Trust shall, in the performance of his duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any investment adviser,
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distributor, transfer agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
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ARTICLE VI
Shares of Beneficial Interest
-----------------------------
6.1. Beneficial Interest. The interest of the beneficiaries hereunder
shall be divided into transferable shares of beneficial interest, with par value
$.0l per share. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees may initially issue whole and fractional
shares of a single class, each of which shall represent an equal proportionate
share in the Trust with each other Share. As provided by the provisions of
Section 6.9 hereof, the Trustees may authorize the creation of series of shares
(the proceeds of which may be invested in separate, independently managed
portfolios) and additional classes of shares within any series. All Shares
issued hereunder including, without limitation, Shares issued in connection with
a dividend in Shares or a split of Shares, shall be fully paid and
nonassessable.
6.2. Rights of Shareholders. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights in this Declaration specifically set forth. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights (except for rights of appraisal specified in Section 11.4 and as the
Trustees may determine with respect to any series or class of Shares).
6.3. Trust Only. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
6.4. Issuance of Shares. The Trustees, in their discretion, may from time
to time without a vote of the Shareholders issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount not less than par value and type of consideration,
including cash or property, at such time or times, and on such terms as the
Trustees may deem best, and may in such
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manner acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares into a greater or
lesser number without thereby changing the proportionate beneficial interests in
the Trust.
6.5. Register of Shares. A register shall be kept at the Trust or a
transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein provided, until he has given his address to a
transfer agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. It is not required that certificates be issued
for the Shares; however, the Trustees, in their discretion, may authorize the
issuance of share certificates and promulgate appropriate rules and regulations
as to their use.
6.6. Transfer Agent and Registrar. The Trustee shall have power to employ
a transfer agent or transfer agents, and a registrar or registrars. The transfer
agent or transfer agents may keep the said register and record therein the
original issues and transfers, if any, of the said Shares. Any such transfer
agent and registrars shall perform the duties usually performed by transfer
agents and registrars of certificates of stock in a corporation, except as
modified by the Trustees.
6.7. Transfer of Shares. Shares shall be transferable on the records of
the Trust only by the record holder thereof or by his agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or a transfer
agent of the Trust, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for
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all purposes hereof and neither the Trustees nor any transfer agent or registrar
nor any officer or agent of the Trust shall be affected by any notice of such
death, bankruptcy or incompetence, or other operation of 1aw.
6.8. Treasury Shares. Shares held in the treasury shall, until reissued,
not confer any voting rights on the Trustees, nor shall such shares be entitled
to any dividends or other distributions declared with respect to the Shares.
6.9. Series Designation. The Trustees, in their discretion, may authorize
the division of Shares into two or more series or two or more classes, and the
different series or classes shall be established and designated, and the
variations in the relative rights and preferences as between the different
series or classes shall be fixed and determined, by the Trustees; provided, that
all Shares shall be identical except that there may be variations so fixed and
determined between different series or classes as to investment objective,
purchase price, right of redemption, special and relative rights as to dividends
and on liquidation and conversion rights, and the several series or classes
shall have separate voting rights, as set forth in Section 10.1 of this
Declaration. All references to Shares in this Declaration shall be deemed to be
shares of any or all series and classes as the context may require.
If the Trustees shall divide the Shares of the Trust into two or more
series or two or more classes, the following provisions shall be applicable:
(a) The number of authorized Shares and the number of Shares of each
series or of each class that may be issued shall be unlimited. The Trustees
may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any series or class into one or more series or one
or more classes that may be established and designated from time to time.
The Trustees may hold as treasury shares (of the same or some other series
or class), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series or any class reacquired by
the Trust at their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with respect
to any one or more series which represents the interests in the assets of
the Trust immediately prior to the establishment of two or more series and
the power of the Trustees to invest and reinvest assets applicable to any
other series shall be the same, except as otherwise set forth in the
instrument of the Trustees establishing such series which is hereinafter
described.
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(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series or class, together with all assets in which
such consideration is invested or reinvested, all income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that series or class for all purposes, subject
only to the rights of creditors and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of
the Trust. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series or class, the Trustees
shall allocate them among any one or more of the series or classes
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all series or classes for all purposes.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series. All
expenses and liabilities incurred or arising in connection with a
particular Series, or in connection with the management thereof, shall be
payable solely out of the assets of that Series and creditors of a
particular Series shall be entitled to look solely to the property of such
Series for satisfaction of their claims. Any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily identifiable
as belonging to any particular series shall be allocated and charged by the
Trustees to and among any one or more of the series established and
designated and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the holders of all series
for all purposes. The Trustees shall have full discretion, to the extent
not inconsistent with the 1940 Act, to determine which items are capital;
and each such determination and allocation shall be conclusive and binding
upon the Shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 9.2 of this Declaration with respect to any
one or more series or classes which represents the interests in the assets
of the Trust immediately prior to the establishment of two or more series
or classes. With respect to any other series or class, dividends and
distributions on Shares of a particular series or class may be paid with
such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may
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<PAGE>
determine, to the holders of Shares of that series or class, from such of
the income and capital gains, accrued or realized, from the assets
belonging to that series or class, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that series or
class. All dividends and distributions on Shares of a particular series or
class shall be distributed pro rata to the holders of that series or class
in proportion to the number of Shares of that series or class held by such
holders at the date and time of record established for the payment of such
dividends or distributions.
(f) Subject to the requirements of the 1940 Act, particularly Section
18(f) and Rule 18f-2, the Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights of each class
and series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares of
any series or class shall have the right to convert or exchange said Shares
into Shares of one or more series of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
(h) The establishment and designation of any series or class of
Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation
and the relative rights and preferences of such series or class, or as
otherwise provided in such instrument. At any time that there are no Shares
outstanding of any particular series or class previously established and
designated, the Trustees may by an instrument executed by a majority of
their number abolish that series or class and the establishment and
designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
(i) In the event of the liquidation of a particular series, the
Shareholders of that series which has been established and designated and
which is being liquidated shall be entitled to receive, when and as
declared by the Trustees, the excess of the assets belonging to that series
over the liabilities belonging to that series. The holders of Shares of any
series shall not be entitled hereby to any distribution upon liquidation of
any other series. The assets so distributable to the Shareholders of any
series shall be distributed among such Shareholders in proportion to the
number of Shares of that series held by them and recorded on the books of
the Trust. The liquidation of any particular series in which there are
Shares then outstanding may be authorized by an instrument in writing,
without a meeting, signed by a majority of the Trustees then in office,
subject to the approval of a
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<PAGE>
majority of the outstanding voting securities of that series, as that
phrase is defined in the 1940 Act.
6.10. Notices. Any and all notices to which any Shareholder hereunder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
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<PAGE>
ARTICLE VII
Custodian
---------
7.1. Appointment and Duties. The Trustees shall at all times employ a
custodian or custodians, meeting the qualifications for custodians contained in
the 1940 Act, as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the By-Laws of the Trust and the 1940 Act, for purposes of maintaining custody
of the Trust's securities and similar investments.
7.2. Central Certificate System. Subject to applicable rules, regulations
and orders, the Trustees may direct the custodian to deposit all or any part of
the securities and similar investments owned by the Trust in a system for the
central handling of securities pursuant to which all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities.
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<PAGE>
ARTICLE VIII
Redemption
----------
8.1. Redemptions. All outstanding Shares may be redeemed at the option of
the holders thereof, upon and subject to the terms and conditions provided in
this Article VIII. The Trust shall, upon application of any Shareholder or
pursuant to authorization from any Shareholder, redeem or repurchase from such
Shareholder for cash or in kind outstanding Shares for an amount per share
determined by the application of a formula adopted for such purpose by
resolution of the Trustees (which formula shall be consistent with applicable
provisions of the 1940 Act); provided that (a) such amount per Share shall not
exceed the cash equivalent of the proportionate interest of each Share in the
assets of the Trust at the time of the purchase or redemption and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting such redemption, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act, and may, at any
time and from time to time, pursuant to such Act or an order thereunder, suspend
such right of redemption. The procedures for effecting redemption shall be as
set forth in the Prospectus and the Statement of Additional Information, as
amended from time to time.
8.2. Redemption of Shares; Disclosure of Holding. If the Trustees shall, at
any time and in good faith, be of the opinion that direct or indirect ownership
of Shares or other securities of the Trust has or may become concentrated in any
person to an extent which would disqualify the Trust as a regulated investment
company under the Internal Revenue Code, then the Trustees shall have the power
by lot or other means deemed equitable by them (i) to call for redemption a
number, or principal amount, of Shares or other securities of the Trust
sufficient, in the opinion of the Trustees, to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements of such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would in the opinion of
the Trustees result in such disqualification. The redemption shall be effected
at a redemption price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
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<PAGE>
8.3. Redemptions of Account of Less than $500. The Trustees shall have the
power to redeem shares at a redemption price determined in accordance with
Section 8.1 if at any time the total investment in a Shareholder account does
not have a value of at least $500 (or such lesser amount as the Trustees may
determine); provided, however, that the Trustees may not exercise such power
with respect to Shares if the Prospectus does not describe such power (and
applicable amount). In the event the Trustees determine to exercise their power
to redeem Shares provided in this Section 8.3., shareholders shall be notified
that the value of their account is less than $500 (or such lesser amount as
determined above) and allowed a reasonable period of time to make an additional
investment before the redemption is effected.
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<PAGE>
ARTICLE IX
Determination of Net Asset Value,
Net Income and Distributions
----------------------------
9.1. Net Asset Value. The net asset value of each outstanding Share of the
Trust shall be determined in such manner and at such time or times on such days
as the Trustees may determine, in accordance with applicable provisions of the
1940 Act, as described from time to time in the Trust's currently effective
Prospectus and Statement of Additional Information. The power and duty to make
the daily calculations may be delegated by the Trustees to the adviser,
administrator, manager, custodian, transfer agent or such other person as the
Trustees may determine. The Trustees may suspend the daily determination of net
asset value to the extent permitted by the 1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from time to time
distribute ratably among the Shareholders such proportion of the net profits,
including net income, surplus (including paid-in surplus), capital or assets
held by the Trustees as they may deem proper. Such distribution shall be made in
cash or Shares, and the Trustees may distribute ratably among the Shareholders
additional Shares issuable hereunder in such manner, at such times, and on such
terms as the Trustees may deem proper. Such distributions may be among the
Shareholders of record at the time of declaring a distribution or among the
Shareholders of record at such later date as the Trustees shall determine. The
Trustees may always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the Trust or to meet obligations of
the Trust, or as they may deem desirable to use in the conduct of its affairs or
to retain for future requirements or extensions of the business. The Trustees
may adopt and offer to Shareholders such dividend reinvestment plan, cash
dividend payout plans or related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of the Trust, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
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<PAGE>
ARTICLE X
Shareholders Voting and Reports
-------------------------------
10.1. Voting. The Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article II hereof, (ii) for the removal of
Trustees as provided in Section 2.3 hereof; (iii) with respect to any investment
advisory, management or other contract as provided in Section 4.1, (iv) with
respect to termination of the Trust as provided in Section 11.2, (v) with
respect to any amendment of the Declaration to the extent and as provided in
Section 11.3, (vi) with respect to any merger, consolidation or sale of assets
as provided in Section 11.4, (vii) with respect to incorporation of the Trust to
the extent and as provided in Section 11.5, (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or Shareholders,
provided that Shareholders of a Series are not entitled to vote with respect to
a matter which does not affect that series, and (ix) with respect to such
additional matters relating to the Trust as may be required by law, the
Declaration, the By-Laws or any registration statement of the Trust filed with
any federal or state regulatory authority, or as and when the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust as of the record date, as determined in accordance with
the By-Laws, shall not be voted. A Majority Shareholder Vote shall be sufficient
to take or authorize action upon any matter except as otherwise provided herein.
There shall be no cumulative voting in the election of Trustees. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration or the By-Laws to be taken by
Shareholders.
In the event of the establishment of series or classes as contemplated by
Section 6.9, Shareholders of each such series or class shall, with respect to
those matters upon which Shareholders are entitled to vote, be entitled to vote
only on matters affecting such series or class, and voting shall be by series or
class and require a Majority Shareholder Vote of each series or class that would
be affected by such matter, except that all Shares (regardless of series or
class) shall be voted as a single voting class, or a Majority Shareholder Vote
of each series or class shall be necessary, where required by applicable law.
Except as otherwise required by law, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if
Shareholders constituting a Majority Shareholder Vote consent to the action in
writing and such consents are filed with the records of the Trust. Such consents
shall be treated for
-26-
<PAGE>
all purposes as votes taken at a meeting of Shareholders. The By-Laws may
include further provisions for Shareholders' votes and meetings and related
matters not inconsistent with the Declaration.
10.2. Reports. The Trustees shall transmit to Shareholders such written
financial reports of the operations of the Trust, including financial statements
certified by independent public accountants, as may be required under applicable
law.
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<PAGE>
ARTICLE XI
Duration; Termination of Trust;
Amendment; Mergers, Etc.
------------------------
11.1. Duration. Subject to possible termination in accordance with the
provisions of Section 11.2 hereof, the Trust created hereby shall continue
without limitation of time.
11.2. Termination of Trust.
(a) The Trust may be terminated (i) by a Majority Shareholder Vote at any
meeting of Shareholders, (ii) by an instrument in writings without a meeting,
signed by a majority of the Trustees and consented to by holders constituting a
Majority Shareholder Vote or (iii) by the Trustees by written notice to the
Shareholders. Upon the termination of the Trust,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
and all of the powers of the Trustees under the this
Declaration shall continue until the affairs of the Trust shall
have been wound up, including the power to fulfill or discharge
the contracts of the Trust, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any
part of the remaining Trust Property to one or more persons at
public or private sale for consideration which may consist in
whole or in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer or other disposition
of all or substantially all the Trust Property shall require
approval as set forth in Section 11.4.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their
protection, the Trustees may distribute the remaining Trust
Property, in cash or in kind or partly each, among Shareholders
according to their respective rights.
(b) After termination of the Trust and distribution to Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among
the records of the Trust an instrument in writing setting
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<PAGE>
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Shareholders shall thereupon cease.
11.3. Amendment Procedure.
(a) This Declaration may be amended by vote of the Shareholders. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to change the name of the Trust, to supply any omission, to
cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, or if they deem it necessary or desirable to conform this
Declaration to the requirements of applicable federal or state laws or
regulations or the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be
liable for failing so to do.
(b) No amendment may be made, under Section 11.3(a) above, which would
change any rights with respect to any Shares of the Trust by reducing the
amount payable thereon upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of affected Shareholders. Nothing contained in this Declaration
shall permit the amendment of this Declaration to impair the exemption from
personal liability of the Shareholders, Trustees, officers, employees and
agents of the Trust or to permit assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of the
Trustees or by the Secretary or any Assistant Secretary of the Trust,
setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration,
as amended, in recordable form, and executed by a majority of the Trustees,
shall be conclusive evidence of such amendment when lodged among the
records of the Trust.
11.4. Merger, Consolidation and Sale of Assets. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized by a Majority Shareholder Vote, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. In respect of any such merger, consolidation,
sale or exchange of assets, any Shareholder shall be entitled to rights of
appraisal of his Shares to the same extent as a shareholder of a Massachusetts
business corporation in respect of a merger, consolidation, sale or exchange of
assets of a Massachusetts business
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<PAGE>
corporation, and such rights shall be his exclusive remedy in respect of
his dissent from any such action.
11.5. Incorporation. Upon a Majority Shareholder Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for shares or securities thereof or
otherwise, and to lend money to, subscribe for shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire shares or any
other interest. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property to such organizations or
entities.
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<PAGE>
ARTICLE XII
Miscellaneous
-------------
12.1. Filing. This Declaration and all amendments hereto shall be filed
in the office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, containing the original Declaration and all
amendments theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
12.2. Resident Agent. The Trust hereby appoints CT Corporation System as
its resident agent in the Commonwealth of Massachusetts, whose post office
address is 2 Oliver Street, Boston, Massachusetts 02109.
12.3. Governing Law. This Declaration is executed by the Trustees and
delivered in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
12.4. Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
12.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at
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<PAGE>
any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any person dealing with the
Trustees and their successors.
12.6. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in
any manner affect such provision in any other jurisdiction or any other
provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ Harvey P. Eisen
------------------------
,as Trustee
/s/ Geoffrey H. Bobroff
------------------------
,as Trustee
/s/ David M. Elwood
------------------------
,as Trustee
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<PAGE>
STATE OF NEW YORK
) ss.:
COUNTY OF NEW YORK
On the 13 day of June, 1986, before me personally appeared Harvey Eisen and
Geoffrey Bobroff, to me known to be the persons described in and who executed
the foregoing instrument, and acknowledged that they executed the same.
/s/ Dale Kaplan
- -----------------
Notary Public
Commission Expires March 30, 1987
[SEAL]
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Ss.:
COUNTY OF SUFFOLK
On this 18th day of June, 1986, before me personally appeared David M.
Elwood, to me known to be the person described in and who executed the
foregoing instrument, and acknowledged that he executed the same as his
free act and deed.
/s/ Pauline Frances Martin
Notary Public
PAULINE FRANCES MARTIN, Notary Public
MY Commission Expires October 31, 1986
[SEAL]
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<PAGE>
INTEGRATED EQUITY PORTFOLIOS
Amendment to Declaration of Trust
dated June 18, 1986
The undersigned, being all of the Trustees of INTEGRATED EQUITY PORTFOLIOS,
a Massachusetts business trust, acting pursuant to the Declaration of Trust,
hereby amend the Declaration of Trust as follows:
"The name of the Trust shall be SUNAMERICA EQUITY PORTFOLIOS."
WITNESS the due execution hereof this 19th day of January, 1990.
/s/ S. James Coppersmith /s/ Samuel M. Eisenstat
________________________ ________________________
S. James Coppersmith Samuel M. Eisenstat
/s/ Harvey P. Eisen /s/ Stephen J. Gutman
___________________ ______________________
Harvey P. Eisen Stephen J. Gutman
<PAGE>
SUNAMERICA EQUITY PORTFOLIOS
CERTIFICATE OF AMENDMENT TO DECLARATION OF TRUST
I, Robert M. Zakem, the duly elected Secretary of SunAmerica Equity
Portfolios (the "Trust"), a Massachusetts business trust, hereby certify as
follows:
1. That the Trust was organized as a Massachusetts business trust under a
Declaration of Trust dated June 18, 1986, as amended on January 19, 1990
(hereinafter, as so amended, referred to as the "Declaration of Trust");
2. That the following amendment to the Declaration of Trust has been duly
adopted by a majority of the Board of Trustees of the Trust at a special
meeting of the Board of Trustees held on March 31, 1993:
RESOLVED: That Section 1.1 of the Declaration of Trust be, and it
hereby is amended as follows:
Section 1.1 Name. The name of the Trust shall be SunAmerica Equity
Funds.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of September,
1993.
By: /s/ Robert M. Zakem
___________________
Robert M. Zakem, Secretary
SunAmerica Equity
Portfolios
<PAGE>
A C K N O W L E D G E M E N T
- - - - - - - - - - - - - - -
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK ) September 24, 1993
Then personally appeared before me the above named Robert M. Zakem and
acknowledged the foregoing instrument to be his free act and deed.
/s/Jennifer Muzzey
-----------------------
Jennifer Muzzey
Notary Public
Qualified in New York County
My Commission Expires May 7, 1994
<PAGE>
SUNAMERICA EQUITY FUNDS
Establishment and Designation of Shares
----------------------------------------
The undersigned, being the Secretary of SunAmerica Equity Funds
(hereinafter referred to as the "Trust"), a trust with transferable shares of
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Sections 1.1, 6.9 and/or 11.3 of the Declaration of Trust, dated June 18, 1986,
as amended on January 10, 1990, and September 24, 1993, respectively
(hereinafter, as so amended, referred to as the "Declaration of Trust"), and by
the affirmative vote of a majority of the Board of Trustees of the Trust at a
special meeting duly called and held on March 30, 1994, the Declaration of Trust
is amended as follows:
(1) That two series of the Trust's unissued shares of beneficial interest,
$.01 par value, are hereby established to have all the rights and preferences
described in the Declaration of Trust, to be designated as follows:
SunAmerica Global Balanced Fund
SunAmerica Growth and Income Fund
(2) That SunAmerica Emerging Growth Fund shall be renamed "SunAmerica
Small Company Growth Fund."
(3) That SunAmerica Growth Fund shall be renamed "SunAmerica Mid-Cap
Growth Fund."
(4) That SunAmerica Value Fund shall be renamed "SunAmerica Blue Chip
Growth Fund."
The SunAmerica Global Balanced Fund, SunAmerica Growth and Income Fund,
SunAmerica Small Company Growth Fund, SunAmerica Mid-Cap Growth Fund and
SunAmerica Blue Chip Growth Fund are hereinafter referred to individually as a
"Fund" and collectively as the "Funds."
(5) That the shares of beneficial interest of the Trust, $.01 par value,
of each Fund are hereby further classified as three classes of shares, which are
designated Class A, Class B and Class C shares.
(5) That the Class A, Class B and Class C shares of each particular Fund
shall represent identical interests in the Trust and have identical voting
(except with respect to those matters affecting a particular class of shares),
dividend, liquidation and
<PAGE>
other rights, as set forth in the Declaration of Trust; provided,
however, that notwithstanding anything in the Declaration of Trust
to the contrary:
(a) the Class A, Class B and Class C shares may be issued and sold
subject to such different front-end sales loads, contingent deferred sales
charges, or front-end sales loads and contingent deferred sales charges as the
Board of Trustees shall from time to time determine;
(b) expenses related solely to a particular class (including, without
limitation, distribution expenses under a Rule 12b-1 plan and administrative
expenses under an administration or service agreement, plan or other
arrangement, however designated) shall be borne by that class and shall be
appropriately reflected (in the manner determined by the Board of Trustees) in
the net asset value of, or the dividends and distributions on, the shares of
that class;
(c) except as otherwise provided, on the first business day of the
month following the seventh anniversary of the issuance of Class B shares to a
holder thereof, such Class B shares (as well as a pro rata portion of any Class
B shares purchased through the reinvestment of dividends and other distributions
paid in respect of all Class B shares held by such holder) shall automatically
convert to Class A shares of the same Fund on the basis of the respective
current net asset values per share of the Class B shares and the Class A shares
of that Fund on the conversion date; provided, however, that any conversion of
Class B shares shall be subject to the continuing availability of an opinion of
counsel to the effect that (i) the assessment of higher distribution fees or
transfer agency costs with respect to Class B shares does not result in the
Trust's dividends or distributions constituting "preferred dividends" under the
Internal Revenue Code of 1986, as amended, and (ii) such conversion does not
constitute a taxable event under federal income tax law, and the Board of
Trustees, in its sole discretion, may suspend the conversion of Class B shares
if such opinion is no longer available.
The actions contained herein shall be effective as of June 1,
1994.
By: /s/ Robert M. Zakem
-------------------
Robert M. Zakem, Secretary
SunAmerica Equity Funds
-2-
<PAGE>
A C K N O W L E D G E M E N T
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK ) May 18, 1994
Then personally appeared before me the above named Robert M. Zakem and
acknowledged the foregoing instrument to be his free act and deed.
/s/Jennifer M. Muzzey
---------------------
Jennifer M. Muzzey
Notary Public
-3-
<PAGE>
SUNAMERICA EQUITY FUNDS
(Formerly SunAmerica Equity Portfolios)
Establishment and Designation of Shares
---------------------------------------
The undersigned, being the Secretary of SunAmerica Equity Funds
(hereinafter referred to as the "Trust"), a trust with transferable shares of
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Sections 1.1, 6.9 and/or 11.3 of the Declaration of Trust, dated June 18, 1986,
as amended on January 10, 1990 and September 24, 1993, respectively
(hereinafter, as so amended, referred to as the "Declaration of Trust"), and by
the affirmative vote of a majority of the Board of Trustees of the Trust at a
special meeting duly called and held on March 31, 1993, the Declaration of Trust
is amended as follows:
(1) That two series of the Trust's unissued shares of beneficial
interest, $.01 par value, are hereby established to have all the rights and
preferences described in the Declaration of Trust, to be designated as follows:
SunAmerica Balanced Assets Fund
SunAmerica Value Fund
(2) That SunAmerica Aggressive Growth Portfolio shall be renamed
"SunAmercia Emerging Growth Fund".
(3) That SunAmerica Growth Portfolio shall be renamed "SunAmerica Growth
Fund".
The SunAmerica Balanced Assets Fund, SunAmerica Value Fund, SunAmerica
Emerging Growth Fund and SunAmerica Growth Fund are hereinafter referred to
individually as a "Fund" and collectively as the "Funds".
(4) That the shares of beneficial interest of the Trust, $.01 par value,
of each Fund are hereby further classified as three classes of shares, which are
designated Class A, Class B and Class C shares.
(5) That the Class A, Class B and Class C shares of each particular Fund
shall represent identical interests in the Trust and have identical voting
(except with respect to those matters affecting a particular class of shares),
dividend, liquidation and other rights, as set forth in the Declaration of
Trust; provided, however, that notwithstanding anything in the Declaration of
Trust to the contrary:
<PAGE>
(a) the Class A, Class B and Class C shares may be issued and sold
subject to such different front-end sales loads, contingent deferred sales
charges, or front-end sales loads and contingent deferred sales charges as the
Board of Trustees shall from time to time determine;
(b) expenses related solely to a particular class (including, without
limitation, distribution expenses under a Rule 12b-1 plan and administrative
expenses under an administration or service agreement, plan or other
arrangement, however designated) shall be borne by that class and shall be
appropriately reflected (in the manner determined by the Board of Trustees) in
the net asset value of, or the dividends and distributions on, the shares of
that class;
(c) except as otherwise provided, on the first business day of the month
following the seventh anniversary of the issuance of Class B shares to a holder
thereof, such Class B shares (as well as a pro rata portion of any Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of all Class B shares held by such holder) shall automatically
convert to Class A shares of the same Fund on the basis of the respective
current net asset values per share of the Class B shares and the Class A shares
of that Fund on the conversion date; provided, however, that any conversion of
Class B shares shall be subject to the continuing availability of an opinion of
counsel to the effect that (i) the assessment of higher distribution fees or
transfer agency costs with respect to Class B shares does not result in the
Trust's dividends or distributions constituting "preferred dividends" under the
Internal Revenue Code of 1986, as amended, and (ii) such conversion does not
constitute a taxable event under federal income tax law, and the Board of
Trustees, in its sole discretion, may suspend the conversion of Class B shares
if such opinion is no longer available.
The actions contained herein shall be effective as of September 24, 1993.
By: /s/ Robert M. Zakem
-------------------
Robert M. Zakem, Secretary
SunAmerica Equity Funds
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<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK }
} ss:
COUNTY OF NEW YORK } September 24, 1993
Then personally appeared before me the above named Robert M. Zakem and
acknowledged the foregoing instrument to be his free act and deed.
/s/ Jennifer M. Muzzey
----------------------
Jennifer M. Muzzey
Notary Public
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<PAGE>
BY-LAWS
OF
INTEGRATED EQUITY PORTFOLIOS
ARTICLE I
Definitions
-----------
The terms "Commission," "Declaration," "Majority Shareholder Vote," "1940
Act," "Shareholders," "Shares," "Trust," "Trust Property" and "Trustees" have
the respective meanings given them in the Declaration of Trust of Integrated
Equity Portfolios dated June 16, 1986, as amended from time to time.
ARTICLE II
Offices
-------
2.1 Principal Office. Until changed by the Trustees, the principal office
of the Trust in the Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk.
2.2 Other Offices. In addition to its principal office in the Commonwealth
of Massachusetts, the Trust may have an office or offices in the State of New
York, and at such other places within and without the Commonwealth as the
Trustees may from time to time designate or the business of the Trust may
require.
ARTICLE III
Shareholders' Meetings
----------------------
3.1 Place of Meetings. Meetings of Shareholders shall be held at such
place, within or without the Commonwealth of Massachusetts, as may be designated
from time to time by the Trustees.
3.2 Meetings. Meetings of Shareholders of the Trust, as a whole or by
series or class, shall be held whenever called by a majority of the Trustees or
the President of the Trust and as a whole whenever election of a Trustee or
Trustees by Shareholders is required by the provisions of Section 16 of the 1940
Act for that purpose. Meetings of Shareholders, as a whole
<PAGE>
or by series or class, as the case may be, shall also be called by the Secretary
upon the written request, which request shall state the purpose or purposes of
such meeting and the matters proposed to be acted on thereat, of the holders of
Shares entitled to vote not less than twenty-five percent (25%) of all the votes
entitled to be cast at such meeting, provided, however, that pursuant to Section
16(c) of the 1940 Act, that a meeting requested exclusively for the stated
purpose of removing a Trustee shall be called by the Secretary upon the written
request of the holders of Shares entitled to vote not less than ten percent
(10%) of all the votes entitled to be cast at such meeting as to the matter be
acted on thereat. The Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the meeting,
and upon payment to the Trust of such costs, the Secretary shall give notice
stating the purpose or purposes of the meeting to all entitled to vote at such
meeting. Except as otherwise required by law, no meeting need be called upon
the request of the holders of Shares entitled to cast less than a majority of
all votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of the same
Shareholders held during the preceding twelve months.
3.3 Notice of Meetings; Waiver. Written or printed notice of every
Shareholders' meeting stating the place, date and purpose or purposes thereof,
shall be given by the Secretary not less than seven (7) nor more than ninety
(90) days before such meeting to each Shareholder entitled to vote at such
meeting, either by mail or by presenting it to him personally, or by leaving it
at his residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the Shareholder at his address as it appears on the records of the
Trust. Any such notice may be waived by any person or persons entitled to such
notice, by a notice signed by such person or persons and filed with the records
of the meeting, whether before or after the holding thereof, or by actual
attendance at the meeting, in person or by proxy, except where the Shareholder
attends a meeting for the express purpose of objecting to the transaction of
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<PAGE>
business on the grounds that the meeting has not been lawfully called or
convened.
3.4 Quorum and Adjournment of Meetings. Except as otherwise provided by
law, by the Declaration or by these By-Laws, at all meetings of Shareholders the
holders of a majority of the Shares issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall be requisite and shall
constitute a quorum for the transaction of business. In the absence of a quorum,
the Shareholders present or represented by proxy and entitled to vote thereat
shall have power to adjourn the meeting from time to time. Any adjourned meeting
may be held as adjourned without further notice. At any adjourned meeting at
which a quorum shall be present, any business may be transacted as if the
meeting had been held as originally called.
3.5 Voting Rights, Proxies. At each meeting of Shareholders, each holder
of record of Shares entitled to vote thereat shall be entitled to one vote in
person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Trust on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting. No proxy shall be valid after six months from its date, unless
otherwise provided in the proxy, and no proxy shall be valid as to such a
meeting, if executed after the final adjournment of such a meeting. At all
meetings of Shareholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or Officers of the Trust.
3.6 Vote Required. Except as otherwise provided by law, by the Declaration
of Trust, or by these By-Laws, at each meeting of Shareholders at which a quorum
is present, all matters shall be decided by Majority Shareholder Vote.
3.7 Inspectors of Election. In advance of any meeting of Shareholders, the
Trustees may appoint Inspectors of Election to act at the meeting or any
adjournment thereof. If Inspectors of Election are not so appointed, the
chairman of any meeting of Shareholders may and on the request of any
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<PAGE>
Shareholder or his proxy shall, appoint Inspectors of Election of the meeting.
In case any person appointed as Inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made by the Trustees in advance of
the convening of the meeting or at the meeting by the person acting as chairman.
The Inspectors of Election shall determine the number of Shares outstanding, the
Shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents, shall
hear and determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Shareholders. On request of the chairman
of the meeting or of any Shareholder or his proxy, the Inspectors of Election
shall make a report in writing of any challenge or question or matter determined
by them and shall execute a certificate of any facts found by them.
3.8 Inspection of Books and Records. Shareholders shall have such rights
and procedures of inspection of the books and records of the Trust as are
granted to Shareholders under the Massachusetts Business Corporation Law.
3.9 Action by Shareholders Without Meeting. Except as otherwise provided
by law, the provisions of these By-Laws relating to notices and meetings to the
contrary notwithstanding, any action required or permitted to be taken at any
meeting of Shareholders may be taken without a meeting if a majority of the
Shareholders entitled to vote upon the action consent to the action in writing
and such consents are filed with the records of the Trust. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders. No such
consent shall be valid for longer than six months from this date of execution.
ARTICLE IV
Trustees
--------
4.1 Meetings of the Trustees. The Trustees may in their discretion provide
for regular or special meetings of the Trustees to be held at such time and
place as shall be determined from time to time by the Trustees without further
notice.
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<PAGE>
4.2 Notice of Special Meetings. Written notice of special meetings of the
Trustees, stating the place, date and time thereof, shall be given to each
Trustee personally, by telegram, by mail or by leaving such notice at his place
of residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid, directed
to the Trustee at his address as it appears on the records of the Trust.
4.3 Quorum and Adjournment of Meetings. If at any meeting of the Trustees
there be less than a quorum present, the Trustees present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall have been obtained.
4.4 Action by Trustees Without Meeting. All written consents of Trustees
evidencing action taken by the Trustees without a meeting shall set forth such
action, shall be signed by all of the Trustees entitled to vote upon such action
and shall be filed with the minutes of proceedings of the Trustees.
4.5 Expenses and Fees. Each Trustee may be allowed expenses, if any, for
attendance at each regular or special meeting of the Trustees, and each Trustee
shall receive for services rendered as a Trustee of the Trust such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
ARTICLE V
Indemnification
---------------
5.1 Indemnification of Trustees, Officers, Employees and Agents. The
Trust shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Trust or any of its shareholders) by reason
of the fact that he is or was a Trustee, officer, employee or agent of the
Trust. The indemnification shall be against expenses, including attorneys' fees,
judgments, fines and amounts paid in settle-
-5-
<PAGE>
ment, actually and reasonably incurred by him in connection with the action,
suit or proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust or any of its shareholders to obtain a
judgment or decree in its favor by reason of the fact that he is or was a
Trustee, officer, employee or agent of the Trust. The indemnification shall be
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust; except that such indemnification
shall preclude payment upon any liability, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duties as described in section 17(h)
and (i) of the Investment Company Act of 1940.
(c) To the extent that a Trustee, officer, employee or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(d)(1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
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<PAGE>
(2) The determination shall be made:
(i) by the Trustees, by a majority vote of a quorum which
consists of Trustees who were not parties to the action, suit or
proceeding; or
(ii) if the required quorum is not obtainable, or if a
quorum of disinterested Trustees so directs, by independent legal
counsel in a written opinion; or
(iii) by the Shareholders.
(3) Notwithstanding the provisions of this Section 5.1, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
malfeasance, bad faith, gross negligence or reckless disregard of duties
as described in Sections 17(h) and (i) of the Investment Company Act of
1940 ("Disabling Conduct"). A person shall be deemed not liable by reason
of Disabling Conduct if, either:
(i) a final decision on the merits is made by a court or
other body before whom the proceeding was brought that the person to
be indemnified ("Indemnitee") was not liable by reason of Disabling
Conduct; or
(ii) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Indemnitee
was not liable by reason of Disabling Conduct, is made by either
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in section
2(a)(19) of the Investment Company Act of 1940, nor parties to
the action, suit or proceeding; or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the
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<PAGE>
Trust in defending a civil or criminal action, suit or proceeding may De paid by
the Trust in advance of the final disposition thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if
it is not ultimately determined that such person is entitled to be
indemnified by the Trust; and
(3) either,
(i) such person provides a security for his undertaking; or
(ii) the Trust is insured against losses by reason of any lawful
advances; or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either
(A) A majority of a quorum which consists of Trustees who
are neither "interested persons" of the Trust, as defined in
section 2(a)(19) of the Investment Company Act of 1940, nor
parties to the action, suit or proceeding; or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any by-
law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding office, and shall continue as to a person who has ceased to be a
Trustee, officer, employee or agent and inure to the benefit of the heirs,
executors and administrators of such person; provided that no person may satisfy
any right of indemnity or reimbursement granted herein or to which he may be
otherwise entitled except out of the property of the Trust, and no Shareholder,
as such, shall be personally liable with respect to any claim for indemnity or
reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust pay that
portion of insurance premiums, if any, attributable to coverage which would
indemnify any officer of Trustee against liability for Disabling Conduct.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
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<PAGE>
ARTICLE VI
Committees
----------
6.1 Executive and Other Committees. The Trustees, by resolution adopted by
a majority of the Trustees, may designate an Executive Committee and/or other
committees, each committee to consist of two (2) or more of the Trustees of the
Trust and may delegate to such committees, in the intervals between meetings of
the Trustees, any or all of the powers of the Trustees in the management of the
business and affairs of the Trust, except those powers which by law, the
Declaration or these By-Laws they are prohibited from delegating. In the absence
of any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. The Executive Committee and any other committee shall fix
its own rules or procedure. Each such committee shall keep a record of its
proceedings. All actions of the Executive Committee shall be reported to the
Trustees at the meeting thereof next succeeding to the taking of such action.
6.2 Advisory Committee. The Trustees may appoint an advisory committee
which shall be composed of persons who do not serve the Trust in any other
capacity and which shall have advisory functions with respect to the investments
of
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<PAGE>
the Trust but which shall have no power to determine that any security or other
investment shall be purchased, sold or otherwise disposed of by the Trust. The
number of persons constituting any such advisory committee shall be determined
from time to time by the Trustees. The members of any such advisory committee
may receive compensation for their services and may be allowed such fees and
expenses for the attendance at meetings as the Trustees may from time to time
determine to be appropriate.
6.3 Committee Action Without Meeting. All written consents of the
committee members evidencing action taken by such committee without a meeting
shall set forth such action, shall be signed by the required number of committee
members and shall be filed with the records of the proceedings of such
committee.
ARTICLE VII
Officers
--------
7.1 Executive Officers. In addition to the officers required or permitted
by the Declaration, the Trustees may also elect one or more Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers and
may elect, or may delegate to the President the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable. Two or more offices, except those of President and Vice President,
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity. The executive officers of the
Trust shall be elected annually by the Trustees and each executive officer so
elected shall hold office until his successor is elected and is qualified.
7.2 Execution of Instruments and Documents and Signing of Checks and
Other Obligations and Transfers. All instruments, documents and other papers
shall be executed in the name and on behalf of the trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfers of securities standing in the name of the Trust shall
be executed, by the President, any Vice President or the Treasurer, or by any
one or more officers or agents of the Trust as may be designated by vote of the
Trustees.
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<PAGE>
7.3 Term and Removal and Vacancies. Each Officer of the Trust shall hold
office until his successor is elected and is qualified. Any officer or agent of
the Trust may be removed by the Trustees whenever, in their judgment, the best
interests of the Trust will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
7.4 Compensation of Officers. The compensation of officers and agents of
the Trust shall be fixed by the Trustees, or by the President to the extent
provided by the Trustees with respect to officers appointed by the President.
7.5 Power and Duties. All officers and agents of the Trust, as between
themselves and the Trust, shall have such authority and perform such duties in
the management of the Trust as may be provided in or pursuant to these By-Laws,
or to the extent not so provided, as may be prescribed by the Trustees;
provided, that no rights of any third party shall be affected or impaired by any
such By-Laws or resolution of the Trustees unless he has knowledge thereof.
7.6 The Chairman. The Chairman, if any, or in his absence the President,
shall preside at all meetings of the Shareholders and of the Trustees, shall be
a signatory on all Annual and Semi-Annual Reports as may be sent to
Shareholders, and he shall perform such other duties as the Trustees may from
time to time prescribe.
7.7 The President. The President shall be the chief executive officer
of the Trust, he shall have general and active management of the business of the
Trust, shall see that all orders and resolutions of the Trustees are carried
into effect, and, in connection therewith, shall be authorized to delegate to
one or more Vice Presidents such of his powers and duties at such times and in
such manner as he may deem advisable. Subject to the control of the Trustees and
to the control of any committees of the Trustees, within their respective
spheres, as provided by the Trustees, he shall at all times exercise a general
supervision and direction over the affairs of the Trust. Be shall have the power
to employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. Be shall also have the power to grant, issue, execute or
sign such powers of attorney, proxies or other documents as may be deemed
advisable or necessary in furtherance of the interests of the Trust. The
President shall have such other powers and duties, as from time to time may be
conferred upon or assigned to him by the Trustees.
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<PAGE>
7.8 The Vice Presidents. The Vice Presidents shall be of such number and
shall have such titles as may be determined from time to time by the Trustees.
The Vice President, or, if there be more than one, the Vice Presidents in the
order of their seniority as may be determined from time to time by the Trustees
or the President, shall, in the absence or disability of the President, exercise
the powers and perform the duties of the President; and he or they shall perform
such other duties as the Trustees or the President may from time to time
prescribe.
7.9 The Assistant Vice Presidents. The Assistant Vice President, or, if
there be more than one, the Assistant Vice Presidents, shall perform such duties
and have such powers as may be assigned them from time to time by the Trustees
or the President.
7.10 The Secretary. The Secretary shall attend all meetings of the
Trustees and all meetings of the Shareholders and record all the proceedings of
the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Trustees, and shall perform such other
duties and have such powers as the Trustees, or the President, may from time to
time prescribe. He shall keep in safe custody the seal of the Trust and affix or
cause the same to be affixed to any instrument requiring it, and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
7.11 The Assistant Secretaries. The Assistant Secretary, or if there shall
be more than one, the Assistant Secretaries, in the order determined by the
Trustees or the President, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Trustees, or the President,
may from time to time prescribe.
7.12 The Treasurer. The Treasurer shal1 be the chief financial officer of
the Trust. He shall keep or cause to be kept full and accurate accounts or
receipts and disbursements in books belonging to the Trust, and he shall
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<PAGE>
render to the Trustees and the President whenever any of them require it, an
account of his transactions as Treasurer and of the financial condition of the
Trust; and he shall perform such other duties as the Trustee, or the President,
may from time to time prescribe.
7.13 The Assistant Treasurers. The Assistant Treasurer, or, if there shall
be more than one, the Assistant Treasurers in the order determined by the
Trustees or the President, shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Trustee, or the President,
may from time to time prescribe.
ARTICLE VIII
Custodian
---------
The custodian of the Trust shall be appointed, among other things:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
(4) to keep the books and accounts of the Trust and furnish clerical
and accounting services;
(5) to compute the net income of the Trust and the net asset value
of the Trust and its shares;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more sub-
custodians from time to time to
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<PAGE>
perform such of the acts and services of the custodian and upon such terms and
conditions, as may be agreed upon between the custodian and such sub-custodian
and approved by the Trustees.
ARTICLE IX
Miscellaneous
-------------
9.1 Location of Books and Records. The books and records of the Trust may
be kept outside the Commonwealth of Massachusetts at such place or places as
the Trustees may from time to time determine, except as otherwise required by
law.
9.2 Record Date. The Trustees may fix in advance a date as the record date
for the purpose of determining Shareholders entitled to notice of, or to vote
at, any meeting of Shareholders, or Shareholders entitled to receive payment of
any dividend or the allotment of any rights, or in order to make a determination
of Shareholders for any other proper purpose. Such-date, in any case shall be
not more than sixty (60) days, and in case of a meeting of Shareholders not less
than ten (10) days prior to the date on which particular action requiring such
determination of Shareholders is to be taken. In lieu of fixing a record date,
the Trustees may provide that the transfer books shall be closed for a stated
period but not to exceed, in any case, twenty (20) days. If the transfer books
are closed for the purpose of determining Shareholders entitled to notice of a
vote at a meeting of Shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting.
9.3 Seal. The Trustees shall adopt a seal, which shall be in such form and
shall have such inscription thereon as the Trustees may from time to time
provide. The seal of the Trust may be affixed to any document, and the seal and
its attestation may be lithographed, engraved or otherwise printed on any
document with the same force and effect as if it had been imprinted and attested
manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
9.4 Fiscal Year. The fiscal year of the Trust shall end on such date as
the Trustees may by resolution
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specify, and the Trustees may by resolution change such date for future fiscal
years at any time and from time to time.
9.5 Orders for Payment of Money. All orders or instructions for the
payment of money of the Trust, and all notes or other evidences of indebtedness
issued in the name of the Trust, shall be signed by such officer or officers or
such other person or persons as the Trustees may from time to time designate, or
as may be specified in or pursuant to the agreement between the Trust and the
bank or trust company appointed as Custodian of the securities and funds of the
Trust.
ARTICLE X
Compliance with Federal Regulations
-----------------------------------
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XI
Amendments
----------
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no such amendment, adoption or repeal requires, pursuant to law,
the Declaration or these By-Laws, a vote of the Shareholders. The Trustees
shall in no event adopt By-Laws which are in conflict with the Declaration, and
any apparent inconsistency shall be construed in favor of the related provision
in the Declaration.
ARTICLE XII
Declaration of Trust
--------------------
The Declaration establishing Integrated Income Portfolios, a copy of which,
together with all amendments hereto, is on file in the office of the Secretary
of the Commonwealth of Massachusetts, provides that the name Integrated Income
Portfolios refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, Shareholder,
officer, employee or agent of Integrated Income Portfolios shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Integrated Income Portfolios, but the Trust Property only shall
be liable.
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SUNAMERICA EQUITY FUNDS
AMENDMENT NO. 1 TO THE BY-LAWS
The By-Laws of the SunAmerica Equity Funds, formerly SunAmerica Equity
Portfolios, (the "Trust") shall be amended in the following respects:
1. The name of the Trust shall be SunAmerica Equity Funds.
2. The following supplements the provisions of Article VII, paragraph 7.6
of the Trust's By-Laws:
If the elected Chairman is deemed to be an independent trustee, as defined
in the Investment Company Act of 1940, as amended, then such Chairman shall not
be an officer of the Trust under the provisions of this Article VII. The duties
of such Chairman shall be limited to presiding over all meetings of the Board of
Trustees, and may include such other duties that may be prescribed by the
Trustees which shall not otherwise be in conflict with his or her role as an
independent trustee.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of February,
1994.
By /s/ Robert M. Zakem
---------------------------
Robert M. Zakem, Secretary
SunAmerica Equity Funds
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 17 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
November 10, 1995, relating to the financial statements and financial highlights
of SunAmerica Equity Funds, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Reports to Shareholders" and
"Independent Accountants and Legal Counsel" in such Statement of Additional
Information and to the references to us under the headings "Financial
Highlights" and "Independent Accountants and Legal Counsel" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 9, 1996
<PAGE>
SUNAMERICA
MUTUAL FUND
SARSEP PLAN
[ART WORK LOGO APPEARS HERE]
Salary
Reduction
Employee
Pension Plan
[LOGO] SunAmerica
Asset Management
<PAGE>
THE SUNAMERICA MUTUAL FUND SARSEP PLAN
===============================================================================
INTRODUCTION
SARSEP - Salary Reduction SEP, is a low-cost, easily manageable, retirement plan
that the small business owner can establish for employees. Employees contribute
their own income into the plan, on a pretax basis, up to $9,240 (for 1995) in
deferred compensation.
To establish a SARSEP, the employer must have 25 or fewer employees and at least
half of the company's eligible employees must elect to defer part of their
compensation into the plan.
OTHER ADVANTAGES OF A SARSEP PLAN INCLUDE:
. MINIMAL ADMINISTRATIVE COSTS - Reporting and disclosure requirements are few
as opposed to complicated and costly qualified retirement plans.
. CONTRIBUTION FLEXIBILITY - Employee contributions may vary. Employers can
terminate the plan at any time.
. PARTICIPANT DIRECTED INVESTMENTS - Employees control the investment allocation
of their account. Having a choice of mutual funds yields investment
flexibility and increases the likelihood of realizing your individual
investment goals.
. LOWER TAXES - The SARSEP is a salary reduction plan which reduces the taxable
wage base for the employee. Both income taxes and FICA taxes are reduced by
contributions to the Plan.
. TAX-DEFERRED ACCUMULATION - Earnings and return on earnings accumulate on a
tax-deferred basis until withdrawn.
. EMPLOYER CONTRIBUTIONS - A combination of employer contributions and the
employee elective deferral cannot exceed the lesser of 15% or $22,500 (for
1995).
Please read on for more details.
1
<PAGE>
QUESTIONS AND ANSWERS ABOUT SARSEPS
===============================================================================
Q. WHO MAY ESTABLISH A SARSEP?
A. This SARSEP may be established by an incorporated or unincorporated business
provided:
A) THE BUSINESS IS NOT A STATE OR LOCAL GOVERNMENT OR A TAX-EXEMPT
ORGANIZATION.
B) THE BUSINESS HAS NO MORE THAN 25 EMPLOYEES ELIGIBLE TO PARTICIPATE IN
THE SARSEP.
C) THE BUSINESS HAS AT LEAST ONE EMPLOYEE WHO IS NOT HIGHLY COMPENSATED.
Q. HOW DOES A SARSEP WORK?
A. SARSEP contributions are deducted from the employees paycheck and are
deposited by the employer into the employee's Individual Retirement Account.
They are not included in the employee's income and therefore are not
reported or deducted by the employee on his or her tax return. Salary
reduction contributions are not subject to federal or state (except
Pennsylvania) income tax withholding, however, they are subject to FICA
withholding.
Q. WHICH EMPLOYEES ARE ELIGIBLE TO PARTICIPATE IN THE SARSEP?
A. The plan must include non-union employees who meet all of the following
requirements:
. ARE AT LEAST 21 YEARS OLD.
. HAVE WORKED FOR THE EMPLOYER FOR ANY PART OF ANY THREE OF THE
PRECEDING FIVE PLAN YEARS.
. HAVE EARNED AT LEAST $396 FOR 1994 OR $400 FOR 1995 (INDEXED FOR
INFLATION) DURING THE YEAR FOR WHICH THE CONTRIBUTION IS MADE.
Less restrictive eligibility requirements may be imposed in lieu of the
above requirements.
At least 50% of the employees eligible to participate must elect to make
salary reduction contributions in order for the SARSEP to be qualified.
Q. HOW MUCH CAN AN EMPLOYEE ELECT TO CONTRIBUTE TO THE SARSEP?
A. The maximum amount that an employee can elect to contribute to the SARSEP
for a calendar year is 15% of his or her compensation, not to exceed $9,240
(indexed for 1995).
Q. WHAT HAPPENS WHEN AN EMPLOYEE LEAVES BEFORE RETIREMENT?
A. All SARSEP contributions made by an employee, or by the employer, belong to
that employee as soon as they are made. Should an employee terminate
employment before retirement, his or her entire account may then go directly
to the employee. In most instances, the employee will maintain the account
on an individual basis so that it would continue to accumulate on a tax-
deferred basis until withdrawn at retirement, or some later date.
Q. WHEN MAY WITHDRAWALS BE MADE?
A. Contributions and earnings on contributions will ordinarily remain in the
plan until age 59-1/2. After that, they may be withdrawn at any time without
penalty and will be taxed as ordinary income. Distributions taken before age
59-1/2 are taxed as ordinary income and are subject to a 10% federal penalty
tax. In the event of death or disability, payments may begin immediately
without penalty. Payments from the SARSEP Plan must begin no later than
April 1st of the year following the year in which the participant reaches
age 70-1/2. Further contributions may be made to the participant's account
after age 70-1/2 as long as the participant is still an employee.
2
<PAGE>
Q. WHAT ARE THE NONDISCRIMINATION REQUIREMENTS FOR A SARSEP?
A. In no case may contributions, or the manner of making contributions,
discriminate in favor of any highly compensated employee. Therefore, the
SARSEP must meet the requirements for top-heavy defined contribution plans.
A plan is considered "top-heavy" if 60% or more of the assets were in the
accounts of key employees on the last day of the preceding plan year (the
last day of the first plan year for new plans). Employers establishing a
SARSEP may elect to have the top-heavy test based upon 60% of the aggregate
plan contributions. This service is not provided by SunAmerica.
Also, the Actual Deferral Percentage (ADP) of each highly compensated
employee cannot be greater than 1.25 times the average deferral of all non-
highly compensated employees. The ADP is calculated by dividing the
employee's elective deferral for any year by his or her compensation for the
year.
Q. WHAT ARE "KEY EMPLOYEES" AND "HIGHLY COMPENSATED EMPLOYEES"?
A. I. A "key employee" is defined as:
a) an officer who earned $45,000 or more.
b) a more than 5% owner of the business.
c) a 1% or more owner in the business having annual compensation of
more than $150,000.
d) an employee who is one of the ten largest owners and makes more than
$30,000 annual compensation.
II. A "highly compensated employee" is defined as:
a) a 5% owner of the business.
b) received more than $75,000 in annual compensation.
c) received more than $50,000 in compensation and was in the top-paid
20% of the employees, ranked by compensation.
d) was an officer of the employer's business and received more than
$45,000 in annual compensation.
3
<PAGE>
PRIME COMPARISONS:
SEP-IRA VS. PROFIT SHARING
SARSEP VS. 401(K)
===============================================================================
The chart below compares the features of SEP-IRA, Profit Sharing, SARSEP and
401(k) Plans.
- -------------------------------------------------------------------------------
SEP-IRA/Profit Sharing Plan
- -------------------------------------------------------------------------------
SIMILARITIES
. Employer sponsored and funded
. Employer contributions cannot exceed 15% of compensation or $22,500,
whichever is less
. Contributions can be discretionary; employer does not need to fund in a year
in which there are no profits
DIFFERENCES
SEP-IRA PROFIT SHARING
- -------------------------------------------------------------------------------
Plan Establishment Requires IRS Form Requires adoption
5305-SEP or Prototype agreement
Administration Not required Required
Vesting 100% immediate 5 year cliff/3-7 year graded
Set up Tax Filing Deadline Calendar year or fiscal year end
- -------------------------------------------------------------------------------
SARSEP/401(k) Plan
- -------------------------------------------------------------------------------
SIMILARITIES
. Salary reduction contributions are made at the request of the employees
. Employee elective deferrals are limited to 15% or $9,240 (for 1995),
whichever is less
. Actual deferral percentage testing is required to comply with non-
discrimination testing
DIFFERENCES
SARSEP 401(K)
- -------------------------------------------------------------------------------
Plan Establishment Requires IRS Form Requires adoption agreement
5305A-SEP or Prototype
Administration Not required Required
Vesting 100% immediate 5 year cliff/3-7 year graded
Set up Tax Filing Deadline Calendar year or fiscal year end
Eligibility Firms with 25 or fewer No limit on number of
employees and at participants, but need
least 50% participation 56% participation
4
<PAGE>
HOW TO ESTABLISH A SARSEP
===============================================================================
1) The SunAmerica SARSEP Kit contains the following pieces:
. ADOPTION AGREEMENT - the agreement completed by the employer
specifying the terms of the SARSEP (page 9).
. SALARY REDUCTION AGREEMENT - an extension of the adoption agreement
allowing employees to make contributions to the SARSEP (page 11).
. SALARY REDUCTION ELECTION - an election by each employee to participate
in the SARSEP and indicating deferral percentages for contributions
(page 13).
. SARSEP DISCLOSURE STATEMENT - the definition of a SARSEP and how it
works, including how an employer makes contributions and how the Code
treats contributions for tax purposes (page 15).
2) To establish the plan, read the Plan Document and complete the Adoption
Agreement.
3) A Salary Reduction Agreement and an Individual Retirement Account
application (if not previously prepared) must be completed and signed by
each employee to allow for the plan elective deferrals.
4) A Salary Reduction Election must be completed and signed by each employee to
indicate allocation instructions for contributions.
5) Conduct the nondiscrimination test and monitor participation to determine if
your plan is likely to unfairly benefit certain employees and to make sure
that 50% of eligible employees will be participating. In performing this
test, it is recommended that you project the numbers to the end of the year.
This would give you a meaningful indication of whether or not you will pass
the test. Your tax advisor should review this test with you.
6) The Actual Deferral Percentage (ADP) test must be completed annually,
showing the contribution formula for the year and how contributions will be
allocated.
7) Group investment lists can be provided to a plan administrator for
allocation of employee deferrals (page 14).
8) Employer mails the following items to SunAmerica Fund Services Attn:
Retirement Plans Department, 733 Third Avenue, 3rd floor, New York, NY
10017-3204:
. Signed Adoption Agreement including Salary Reduction Agreement
(employer must keep a file copy)
. Check for the first contributions, made payable to the Trustee, Resources
Trust Company
. Salary Reduction Election (allocation instructions for each employee)
. Employee IRA application (if applicable)
5
<PAGE>
INSTRUCTIONS
FOR COMPLETING THE SEP ADOPTION AGREEMENTS
===============================================================================
ARTICLE I
DEFINITIONS
1.01 PLAN. Fill in the name of the employer.
1.04 EMPLOYEE. The employer should complete this section of the adoption
agreement by checking the appropriate exclusions, if any. If the definition of
"employee" is to be all inclusive, the employer should check Option (a)
indicating no exclusions.
1.06 COMPENSATION. Options (a) and (b) represent two alternative safe harbor
definitions of compensation which satisfy Code Section 408(k)(7)(B). Both
definitions are very similar and contain only minor differences. For example,
both definitions include basic compensation items such as salary, overtime,
bonuses and commissions. Since the definitions are very similar, the determining
factor for the employer should be administrative convenience.
Options (c) and (d) represent safe harbor modifications to compensation as
permitted under Treas. Reg. Section 1.414(s)-1(c). By checking Option (c), the
plan "grosses up" the compensation definition for certain elective amounts
(e.g., SARSEP deferrals). The gross up will apply to whichever definition the
employer elects (i.e., (a) or (b)). By checking Option (d), the plan excludes
certain extraordinary forms of compensation (e.g., fringe benefits) from the
definition of compensation elected under (a) or (b).
1.09 EFFECTIVE DATE. If the employer is adopting a new plan, it must specify
the effective date in the first sentence. In general, the effective date would
be the first day of the plan year for which the employer adopts the SEP Plan
(e.g., January 1, 1993) unless the employer started its business during the
calendar year. If the employer is amending an existing SEP Plan, the employer
must specify the restated effective date in the first blank and the original
plan execution date (e.g., "April 13, 1986") or effective date (e.g., "as of
January 1, 1986") in the second blank. If the employer is restating the SEP for
TRA, the restated effective date should be the later of (1) the first day of the
first plan year beginning after December 31, 1988, or (2) the first day of the
first plan year for which the SEP was effective.
1.11 PLAN YEAR. The plan year of the SEP may be the calendar year or the
employer's taxable year. No other measuring period is acceptable. If the
employer elects a calendar plan year and the employer's taxable year is not the
calendar year, the employer must determine its deduction limitation on the basis
of the calendar year ending within the employer's taxable year. The employee's
gross income exclusion limitation also applies on a plan year basis.
ARTICLE II
ELIGIBILITY TO PARTICIPATE IN EMPLOYER CONTRIBUTIONS
2.01 PARTICIPATION.
(a) Insert the age desired. If the employer does not wish to condition
eligibility upon age, do not check (a), or complete (a) with "N/A."
(b) (1) Insert the number of prior years of service required as an
eligibility condition.
(2) Check Option (b)(2) if service in a prior year is not an
eligibility condition; for example, in the case of a new
business established during the plan year.
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.01 AMOUNT. The only contribution formula the plan provides is a
discretionary contributions formula.
Options (a) and (b) relate to the allocation of the employer's discretionary
contribution to the participant's IRA. Option (a) is a "nonintegrated formula"
which allocates employer contributions pro rata on the basis of compensation (as
defined in Section 1.06). Option (b) is an "integrated" formula which
incorporates the Code Section 401(l) safe harbor permitted disparity rules. If
the employer elects an integrated formula, it also must define excess
compensation by completing the blank spaces in Option (b). Excess compensation
is simply the employee's compensation in excess of a
6
<PAGE>
specified integration level. The amount of the integration level also will
affect the "applicable percentage" portion of the integrated formula. The
"applicable percentage" in the integrated portion of the formula can be 5.7%,
5.4% or 4.3%, depending on the integration level.
Option (b) provides for a "floating" integration level. This approach permits
the employer to select a percentage of the taxable wage base for purposes of the
"float." Please note the maximum floating integration level for a plan year is
the taxable wage base in effect at the beginning of that plan year. If the
employer wishes to "float" the integration level with the full taxable wage
base, the employer should insert "100%" in the first space provided in Option
(b) and insert an "N/A" in the second space. The taxable wage base for 1993 is
$57,600.
For many highly compensated employees, experience has shown an "applicable
percentage" of 5.4% is the most advantageous. To use 5.4%, the integration level
must exceed 80% of the taxable wage base. For example, the employer may specify
80% in the first space in Option (b) rounded to the next "$1,000." By rounding
to the next $1,000, the plan ensures the integration level is greater than 80%
of the taxable wage base (permitting use of the 5.4% applicable percentage) and
at the same time provides a rounded number for simpler administration.
The integrated contribution formula under Option (b) is a two-tiered formula.
Under the first tier, the employer contributes a uniform percentage of
compensation to each eligible participant. The second tier is the integrated
contribution. However, to ensure the plan is in compliance with the top-heavy
rules, the employer may not contribute under the second tier unless the first
tier contribution percentage is at least 3%. Under the second tier, the employer
contributes a uniform percentage of excess compensation which may not exceed the
lesser of (1) the percentage contributed under the fast tier, or (2) the
percentage determined in the maximum disparity table.
7.01 SALARY REDUCTION CONTRIBUTION. If the employer is not establishing a SEP
with a salary reduction agreement, the employer should elect Option (a) and
complete the "Execution" section. If the employer wishes to permit employees to
make salary reduction contributions to the plan, the employer must elect Option
(b) and complete Appendix A of the agreement.
ACTUAL DEFERRAL PERCENTAGE TEST. Section 7.06 of the basic plan document
describes the actual deferral percentage ("ADP") test each highly compensated
employee must satisfy. Please note the ADP test is on a plan year basis, whereas
the annual deferral limitation under Code Section 402(g) is on a calendar year
basis. The maximum ADP each highly compensated employee may have depends on the
average ADP of the non highly compensated employees.
Section 7.06(C) of the basic plan document satisfies Code Section 408(k)(6),
under which the plan may distribute excess contributions which cause the plan to
fail to satisfy the ADP test. Under a SEP, the excess contributions are part of
the highly compensated employee's IRA to which the employer makes the
contributions. Accordingly, it is the sponsor of the highly compensated
employee's IRA that will need to distribute the excess contributions adjusted
for allocable income or loss. The plan directs the employer to notify the IRA
sponsor of the amount of the excess contribution. However, the highly
compensated employee should request the necessary withdrawal from his IRA. The
highly compensated employee must receive the distribution of excess
contributions, as adjusted for allocable income or loss, by the last day of the
following plan year for the elective deferral arrangement to continue to
qualify. However, the employer is liable for a 10% excise tax on the excess
contributions not distributed by the 15th day of the third month of the
following plan year. The highly compensated employee must include in his gross
income the excess contribution (plus allocable income, if any) distributed from
his IRA. However, the taxable year in which the highly compensated employee
includes this amount in income depends on the timing of the distribution from
the IRA. The disclosure statement explains the income tax consequences to the
highly compensated employee.
COORDINATION WITH DISCRETIONARY CONTRIBUTIONS. If the employees make elective
deferrals for a plan year, the employer should not make its discretionary
contribution until after the close of that plan year. The law requires a SEP to
allocate discretionary contributions on the basis of a uniform percentage of
compensation, subject to the integration option. Therefore, if the employer
elects a nonintegrated allocation for the discretionary contribution, all
eligible employees must receive the same percentage of compensation as an
allocation of discretionary contributions. If the employer elects an integrated
allocation for the discretionary contribution, all eligible employees must
receive the same percentage of excess compensation, under the integrated portion
of the allocation formula, plus the same percentage of compensation under the
nonintegrated portion of the allocation formula. The employer cannot determine
the maximum uniform percentage it can contribute for the eligible employees
until it determines the highest elective deferral rate elected by an employee.
In addition, the employer cannot determine the maximum percentage until after
the employer has reduced the employee's compensation for his salary reduction
contributions. An employer's SEP contribution will not be includible in the
employee's gross income to the extent the contribution does not exceed the
lesser of (1) 15% of the employer compensation for the year, or (2) a specified
dollar amount (currently $30,000). In applying the 15% limit, the Code
determines compensation after the reduction for the salary reduction
contributions.
7
<PAGE>
For example, assume after the close of the plan year the employer determines
eligible employee A had the highest deferral rate. A's compensation is $70,000,
and he deferred $7,000 of that amount. Accordingly, A's compensation for 15%
allocation limit is $63,000. A's maximum SEP contribution is 15% of $63,000, or
$9,450. Therefore, A's allocation of employer discretionary contributions cannot
exceed $2,450 [$9,450 - $7,000]. If the employer elected a nonintegrated
allocation formula, the maximum discretionary contribution is 3.88%, which is
the maximum percentage A may receive and, thus, all participants may receive. If
the employer elected an integrated allocation formula, the computation becomes
more complicated because the employer must factor in not only the uniform rate
of contribution requirement and the contribution limits but also the permitted
disparity rules. For example, assume the same facts as in the example above
except the employer elected an integrated contribution formula. Assume further
the employer elects an integration level of 80% of the taxable wage base rounded
to the next $1,000 ($47,000 for 1993) to maximize the permitted disparity
contribution. As with the nonintegrated contribution formula, A's contribution
may not exceed $2,450. Therefore, the maximum integrated contribution A may
receive and thus, the maximum all participants may receive is: 3.1% of total
compensation [3.1% x $63,000 = $1,953] plus 3.1% of excess compensation [3.1% x
16,000 = $497].
APPENDIX A OF ADOPTION AGREEMENT
Complete Appendix A only if the employer checked Section 7.01(b). Appendix A
includes three Sections: 7.02, 8.01 and 8.04.
7.02 SALARY REDUCTION AGREEMENTS. Option (a) provides limitations on the
employees' salary reduction contributions. It is not necessary to prescribe the
Code 402(g) limitations (see Section 7.04 of the basic plan document) nor the
Code Section 415 limitation (see Section 3.02 of the basic plan document). The
employer should complete Option (a) to provide a lesser limitation (e.g., 10% of
compensation for the plan year). A lesser limitation may minimize the chance of
an employee's elective deferrals causing a Code Section 415 violation or a
chance of exceeding the deduction limitation of Code Section 404.
Options (b) and (c) set parameters on the frequency of changing the salary
reduction agreement. Option (b) addresses the complete revocation of the salary
reduction agreement and the execution of a new agreement following revocation.
Option (c) addresses increases or decreases in the level of salary reduction
contributions.
8.01 TOP-HEAVY REQUIREMENTS. If the plan permits salary reduction
contributions to the plan, the employer must specify whether the plan will
operate as a "deemed top-heavy plan" or as a "not deemed top-heavy plan". If the
employer elects Option (a), the employer will not need to make a determination
as to whether the plan is top-heavy. However, the plan will require the employer
to make a top-heavy minimum contribution for each plan year, even if the plan is
not top-heavy. If the employer elects Option (b), the employer will need to make
a top-heavy minimum contribution only in plan years in which the plan is top-
heavy.
The top-heavy minimum contribution is the lesser of 3% of the participant's
compensation for the plan year or the highest contribution rate for a key
employee for the plan year. A key employee's contribution rate is the sum of the
employer contributions and salary reduction contributions, divided by the key
employee's compensation for the plan year.
The following example demonstrates the effect of the top-heavy election.
Assume for the 1993 plan year, employer X adopts a SEP with a salary reduction
feature. Assume further the plan is not top-heavy for the 1993 plan year. For
the 1993 plan year, X makes no contribution other than the participant's
elective deferrals. The elective deferral contributions for the two key
employees are 6% and 4% respectively, while the elective deferral contributions
for the four nonkey employees are 4%, 3%, 2% and 0% respectively. If the
employer elects Option (a) under Section 8.01, the employer will need to make a
3% top-heavy minimum contribution to each nonkey employee because the plan is
operating as a deemed top-heavy plan. However, if the employer elects Option
(b), the employer will not need to make a top-heavy minimum contribution for the
1993 plan year because the plan is not top-heavy.
8.04 TOP-HEAVY MINIMUM ALLOCATION. The employer may complete Section 8.04 to
specify a different plan to satisfy the top-heavy minimum benefit requirement.
For example, if the employer is adopting both a SEP and a profit sharing plan,
the employer might specify the profit sharing plan as the plan which guarantees
the top-heavy minimum allocation. If the employer maintains only one plan, it
never would complete Section 8.04.
EXECUTION
On page 10, the Employer must complete the date of execution. The employer
then must execute the adoption agreement and complete the employer informational
items. There is no provision within the adoption agreement for the designation
of a plan administrator. Therefore, the employer is the plan administrator. The
employer's acting as plan administrator avoids the necessity of a separate EIN
for an individual plan administrator. However, the employer must designate the
person (by name or title) who will provide additional information to
participants regarding the SEP.
8
<PAGE>
<TABLE>
<CAPTION>
ADOPTION AGREEMENT
PROTOTYPE SIMPLIFIED EMPLOYEE PENSION PLAN
==================================================================================================================================
<S> <C>
The undersigned Employer establishes a Simplified Employee Pension Plan under Resources Trust Company Prototype Simplified Employee
Pension Plan which the undersigned incorporates within this Adoption Agreement by this reference. The undersigned Employer makes the
following elections granted under the Plan:
1.01 PLAN. The name of the Plan as adopted by the Employer is -------------------------------------------------------------------
Simplified Employee Pension Plan. (Name of Company)
1.04 EMPLOYEE. The following Employees are not eligible to participate in the Plan: (Choose (a) or at least one of (b) or (c))
_______ (a) No exclusions.
_______ (b) Collective bargaining employees. [Note: If the Employer excludes union employees from the Plan, the Employer must be
able to provide evidence that retirement benefits were the subject of good faith bargaining.]
_______ (c) Nonresident aliens who do not receive any earned income (as defined in Code Section 911(d)(2)) from the Employer which
constitutes United States source income (as defined in Code Section 861(a)(3)).
1.06 COMPENSATION.
DEFINITION OF COMPENSATION (SEE SECTION 1.06 OF THE PLAN). Compensation means: (Choose (a) or (b); (c) and (d) are available only as
additional selections.)
_______ (a) Federal income tax wages.
_______ (b) W-2 wages.
_______ (c) The Plan increases Compensation by the amount of elective contributions made by the Employer on the Employee's behalf.
_______ (d) The Plan excludes reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses,
deferred compensation and welfare benefits.
1.09 EFFECTIVE DATE. The effective date of the Plan as adopted by the Employer is ______________________________________________ .
This Plan replaces a simplified employee pension plan adopted ___________________________________________________________________ .
1.11 PLAN YEAR. Plan Year means: (Choose (a) or (b))
_______ (a) The calendar year.
_______ (b) The Employer's taxable year, ending every __________________________________________________________________________ .
2.01 PARTICIPATION. For each Plan Year on account of which the Employer makes a contribution under the Plan, the Employer will
contribute on behalf of each Employee who: (Choose (a) or (b) or both)
_______ (a) Has attained age _________________________ (may not exceed age 21), and
_______ (b) Has performed any service for the Employer:
_______ (1) During at least ________________ (may not exceed 3) of the 5 Plan Years immediately preceding the Plan
Year.
_______ (2) During the Plan Year.
</TABLE>
9
<PAGE>
3.01 AMOUNT. The Employer will make its discretionary contribution under the
following formula: (Choose (a) or (b)).
_______ (a) Uniform contribution allocation formula.
_______ (b) Permitted disparity contribution formula. For purposes of this
formula, "Excess Compensation" means Compensation in excess of the
following Integration Level:______% (not exceeding 100%) of the
taxable wage base, as determined under Section 230 of the Social
Security Act, in effect on the first day of the Plan Year rounded
to the next $________(but not exceeding the taxable wage base).
7.01 SALARY REDUCTION CONTRIBUTIONS. The Plan: (Choose (a) or (b))
_______ (a) Does not permit Participant Salary Reduction Contributions.
_______ (b) Permits Participant Salary Reduction Contributions (If the Employer
elects (b), the Employer must complete Appendix A.)
IN WITNESS WHEREOF, the Employer has executed this Adoption Agreement, in
duplicate, each constituting an original Adoption Agreement, on this ____ day
of ______ , 199 .
By:_________________________________________________
"EMPLOYER"
The name or title of the individual the Employer has designated to provide
additional information to Participants concerning this SEP is _______________
_______________________________________________.
[Name or Title]
_____________________________________ _____________________________________
Street Address City State ZIP
_____________________________________ _____________________________________
Telephone Number Federal Employer Identification Number
For inquiries regarding the SEP, please contact the Sponsor at the following
address and telephone number:
SUNAMERICA FUND SERVICES
RETIREMENT PLANS DEPARTMENT
733 THIRD AVENUE
3RD FLOOR
NEW YORK, NY 10017-3204
212/551-5134
800/858-8850 EXTENSION 5134
10
<PAGE>
APPENDIX A
SALARY REDUCTION AGREEMENT
===============================================================================
[Note: Complete this Appendix A only if the Employer elected Adoption Agreement
Section 7.01(b). Leave this page blank if the Employer elected Adoption
Agreement Section 7.01(a).]
7.02 SALARY REDUCTION AGREEMENTS. The following rules and restrictions apply to
an Employee's salary reduction agreement: (Choose the applicable elections).
_______ (a) LIMITATION ON AMOUNT. The Employee's salary reduction contributions
are subject to the following limitations:__________________________
___________________________________________________________________
_________________________________________________________________.
[Note: If the Employer does not elect Option (a), the salary
reduction contributions are not subject to any limitations other
than the 15% limitation described in Section 3.02 of the Plan and
the 402(g) limitation described in Section 7.02 of the Plan.]
_______ (b) REVOCATION. An Employee, on a prospective basis, may revoke a
salary reduction agreement or may file a new agreement following a
prior revocation: (Choose one)
_______ (1) As of any Plan Entry Date.
_______ (2) As of the first day of each Plan Year quarter.
_______ (3) (Specify at least once per Plan Year)_______________
_________________________________________________________ .
_______ (c) MODIFYING ELECTIONS. An Employee, on a prospective basis, may
increase or may decrease his salary reduction percentage or dollar
amount: (Choose one)
_______ (1) As of the beginning of each payroll period.
_______ (2) As of the first day of each Plan Year quarter.
_______ (3) As of any Plan Entry Date.
_______ (4) (Specify at least once per Plan Year)________________
__________________________________________________________.
8.01 TOP-HEAVY REQUIREMENTS. For purposes of the top-heavy requirements, the
Employer will treat this Plan as a:
_______ (a) Deemed Top-Heavy Plan.
_______ (b) Not Deemed Top-Heavy Plan.
8.04 TOP-HEAVY MINIMUM ALLOCATION. The Employer will satisfy the top heavy
minimum allocation under the following plan it maintains:______________________
_______________________________________________________________________________
_______________________________________________________________________________.
11
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12
<PAGE>
SUNAMERICA SIMPLIFIED EMPLOYEE PENSION [LOGO]
PLAN SALARY REDUCTION ELECTION
===============================================================================
Complete this form to indicate the amount of money to be deferred from your
salary and contributed to your account each pay period. Both you and your
Employer must sign where indicated. This form should be retained by the
Employer; you should keep a copy for your records and send a copy to SunAmerica
Fund Services.
PARTICIPANT INFORMATION
___________________________________________________________________
Name
___________________________________________________________________
Address
___________________________________________________________________
___________________________________________________________________
Social Security Number
[_] New Enrollment [_] Change
ELECTION TO PARTICIPATE IN A SALARY REDUCTION SEP
[_] I DO WISH to participate in the Company's SARSEP.
Subject to the requirements of the Company's SARSEP, I
authorize the following amount or percentage of my Compensation
to be withheld from each paycheck and contributed to my
SEP-IRA:
[_] __________% of my Compensation (not in excess of 15% ); or
[_] $__________________ (not in excess of $9,240 (as adjusted))
Subject to the requirements of the Company's SARSEP, I
authorize the following amount to be contributed to my SEP-IRA,
rather than paid to me in cash:
[_] Cash Bonus Deferral: $________________ (not in excess of
$9,240 (as adjusted)).
I understand that the total amount I defer in any calendar year
to this SEP may not exceed the lesser of 15% of my Compensation
(determined without including any SEP IRA contributions) or
$9,240 (adjusted annually for inflation). This deferral
election shall remain in effect until, in writing, I either
terminate or change it. I may make future contribution changes
and may stop my pay deductions at any time. I further
understand that I should not withdraw or transfer any amounts
from my SEP that are attributable to elective deferrals and
income on elective deferrals for a particular plan year (except
for excess elective deferrals) until 2-1/2 months after the end
of the plan year, or if sooner, when my employer notifies me
that the deferral percentage limitation test for that plan year
has been completed. Any such amounts that I withdraw or
transfer before this time will be included in income for
purposes of sections 72(t) and 408(d)91 of the Code.
13
<PAGE>
[_] I DO NOT WISH to participate in the Company's SARSEP, subject to the
provisions of the plan regarding such election. I release and hold harmless
the Company from and against any and all claims the undersigned may have or
hereafter claim to have against said Company with respect to my election to
not participate in the SARSEP. I understand that the Company shall not be
responsible or liable for any loss or expense which may arise or result
from compliance with this election. This designation shall remain in effect
until such time as I specifically revoke it by delivering such revocation,
in writing, to the Company.
SIGNATURES
_____________________________ ______________________________
Employee Signature Date
_____________________________ ______________________________
Company Signature (Employer) Date
<TABLE>
<CAPTION>
INVESTMENT INSTRUCTIONS
CLASS A CLASS B
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund (24) [_] (524) [_] $_______ or _______ %
Balanced Assets Fund (51) [_] (551) [_] $_______ or _______ %
Global Balanced Fund (23) [_] (523) [_] $_______ or _______ %
Blue Chip Growth Fund (522) [_] (22) [_] $_______ or _______ %
Mid-Cap Growth Fund (71) [_] (571) [_] $_______ or _______ %
Small Company Growth Fund (36) [_] (536) [_] $_______ or _______ %
U.S. Gov't Securities Fund (70) [_] (570) [_] $_______ or _______ %
Federal Securities Fund (534) [_] (34) [_] $_______ or _______ %
Tax Exempt Insured Fund (33) [_] (533) [_] $_______ or _______ %
Diversified Income Fund (580) [_] (80) [_] $_______ or _______ %
High Income Fund (28) [_] (228) [_] $_______ or _______ %
Money Market Fund (35) [_] (535) [_] $_______ or _______ %
TOTAL AMOUNT ENCLOSED $_________
</TABLE>
[_] CHECK HERE TO RECEIVE A MONTHLY GROUP INVESTMENT LIST
SEND monthly transmittal forms for employee contributions to:
Company's Name:______________________________________________________________
Company's Address:___________________________________________________________
______________________________________________________________________________
Contact:_____________________________________________________________________
Telephone #: (__________)____________________________________________________
Instructions for the above Salary Reduction Election
. Sign as employee
. Employer should keep original copy on file
. Send in copy to SunAmerica
14
<PAGE>
PROTOTYPE
SIMPLIFIED EMPLOYEE PENSION PLAN
===============================================================================
Resources Trust Company hereby provides a prototype simplified employee pension
which an employer may adopt by completing and executing the complementary
adoption agreement.
ARTICLE I
DEFINITIONS
1.01 "PLAN" means the simplified employee pension established by the Employer in
the form of this document, including the Employer's Adoption Agreement. The
Employer will designate the name of the Plan in its Adoption Agreement. The
Employer must use this Plan only in conjunction with an individual retirement
account or individual retirement annuity for which the Internal Revenue Service
has issued a favorable opinion or ruling letter or in conjunction with model
individual retirement accounts issued by the Internal Revenue Service.
1.02 "EMPLOYER" means each employer who adopts this Plan by executing an
Adoption Agreement, and any other employer which is a member with the Employer
of the same controlled group of corporations as defined in Code Section 414(b),
which is a trade or business (whether or not incorporated) under the same common
control as defined in Code Section 414(c) or which is a member of an affiliated
service group within the meaning of Code Section 414(m) or Code Section 414(o).
1.03 "CUSTODIAN" means Resources Trust Company.
1.04 "EMPLOYEE" means any employee of the Employer, including a self-employed
individual who is an employee of the Employer by reason of Code Section
401(c)(1), except as otherwise provided in the Employer's Adoption Agreement.
Employee also means any individual (who otherwise is not an Employee of the
Employer) who is the Employer's leased employee under Code Section 414(n).
1.05 "PARTICIPANT" means an eligible Employee for whose benefit the Employer
makes a contribution to an Account.
1.06 "COMPENSATION" means Compensation as defined in the Employer's Adoption
Agreement. For a Self-Employed Individual, Compensation means Earned Income. Any
reference in this Plan to Compensation is a reference to the definition in this
Section 1.06, unless the Plan reference specifies a modification to this
definition. The Plan will take into account only Compensation actually paid, or
Compensation which the Employee had the right to receive, for the relevant
period. A Compensation payment includes Compensation paid by the Employer
through another person under the common paymaster provisions in Code Sections
3121 and 3306.
(A) DEFINITIONS. For purposes of the Compensation definition elections in the
Adoption Agreement, the following definitions apply:
(1) "FEDERAL INCOME TAX WAGES" definition of Compensation. All wages
for federal income tax withholding purposes, as defined under Code
Section 3401(a) (for purposes of income tax withholding at the
source), disregarding any rules limiting the remuneration included
as wages based on the nature or location of the employment or the
services performed.
(2) "W-2 WAGES" definition of Compensation. All wages as described in
the "federal income tax wages" definition, and all other payments
to an Employee in the course of the Employer's trade or business,
for which the Employer must furnish the Employee a written
statement under Code Sections 6041(d) and 6051(a)(3). As long as
the instructions to Form W-2, Box 10, remain consistent with the
instructions for the 1990 or 1991 Form W-2, the Employer may treat
the amount reported in Box 10 as satisfying this definition.
(3) "ELECTIVE CONTRIBUTIONS." Elective contributions are amounts
excludible from the Employee's gross income under Code Sections
125, 402(a)(8), 402(h) or 403(b), and contributed by the Employer,
at the Employee's election, to a Code Section 401(k) arrangement,
a Simplified Employee Pension, cafeteria plan or tax-sheltered
annuity. Elective contributions also include Compensation deferred
under a Code Section 457 plan maintained by the Employer and
Employee contributions "picked up" by a governmental entity and,
pursuant to Code Section 414(h)(2), treated as Employer
contributions.
The definitions of Compensation in paragraphs (1) and (2) do not include
elective contributions, unless otherwise specified in the Plan or in the
Adoption Agreement.
(B) COMPENSATION DOLLAR LIMITATION. The Plan must take into account only the
first $200,000 (or such larger amount as the Commissioner of Internal Revenue
may prescribe) of any Participant's Compensation. This dollar limitation applies
on a prorated basis to any measuring period less than 12 months.
1.07 "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, during the Plan Year
or during the preceding 12-month period:
(a) is more than 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles of Code
Section 318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the Commissioner of
Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the Commissioner of
Internal Revenue for the relevant year) and is part of the top-paid 20%
group of employees (based on Compensation for the relevant year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in Code
Section 415(b)(1)(A) (relating to defined benefit plans) and is an
officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the Plan
Year but does not satisfy clause (b), (c) or (d) during the preceding 12-month
period and does not satisfy clause (a) in either period, the Employee is a
Highly Compensated Employee only if he is one of the 100 most highly compensated
Employees for the Plan Year. The number of officers taken into account under
clause (d) will not exceed the greater of 3 or 10% of the total number (after
application of the Code Section 414(q) exclusions) of Employees, but no more
than 50 officers. If no Employee satisfies the Compensation requirement in
clause (d) for the relevant year, the Employer will treat the highest paid
officer as satisfying clause (d) for that year.
For purposes of applying this definition, compensation must include elective
contributions and the Employer will disregard any exclusions elected in Adoption
Agreement Section 1.06. The Employer must make the determination of who is a
Highly Compensated Employee, including the determinations of the number of
identity of the top paid 20% group, the top 100 paid Employees, the number of
officers includible in clause (d) and the relevant Compensation, consistent with
Code Section 414(q) and regulations issued under that Code section. The Employer
may make a calendar year election to determine the Highly Compensated Employees
for the Plan Year, as prescribed by Treasury regulations. A calendar year
election must apply to all plans and arrangements of the Employer.
For purposes of applying any nondiscrimination test, the Employer will treat a
Highly Compensated Employee and all family members (a spouse, a lineal ascendant
or descendant, or a spouse of a lineal ascendant or descendant) as a single
Highly Compensated Employee, but only if the Highly Compensated Employee is more
15
<PAGE>
than 5% owner or is one of the 10 Highly Compensated Employees with the greatest
Compensation for the Plan Year. This aggregation rule applies to a family member
even if that family member is a Highly Compensated Employee without family
aggregation. This family aggregation rule will apply only for Plan Years in
which Code Section 414(q) requires its application.
1.08 "ACCOUNT" means the IRA account or annuity contract established and
maintained by a Participant to which the Employer makes contributions pursuant
to the Plan.
1.09 "NONFORFEITABLE" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Account.
1.10 "EFFECTIVE DATE" of this Plan is the date specified by the Employer in its
Adoption Agreement.
1.11 "CODE" means the Internal Revenue Code of 1986, as amended.
1.12 "PLAN YEAR" means the fiscal year of the Plan, as specified in the
Employer's Adoption Agreement.
ARTICLE II
ELIGIBILITY TO PARTICIPATE IN EMPLOYER CONTRIBUTIONS
2.01 PARTICIPATION. The Employer will specify in its Adoption Agreement the
conditions for eligibility to participate in the Plan.
2.02 PARTICIPANTS' RIGHT TO EMPLOYMENT. Nothing contained in this Plan, or in
the establishment of a Participant's Account, or any modification or amendment
to the Plan or a Participant's Account, or in the creation of any Account, or
the payment of any benefit, shall give any Employee, even if he is a
Participant, or any Beneficiary, any right to continue employment, any legal or
equitable right against the Employer or any officer, or employee of the
Employer, except as expressly provided by the Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS
3.01 AMOUNT. In the Adoption Agreement, the Employer will elect to contribute
under a uniform contribution formula or under a permitted disparity contribution
formula. For each Plan Year, the Employer will contribute to each Participant's
Account, the lesser of the amount determined under this Section 3.01 or the
maximum amount permitted under Section 3.02.
(A) UNIFORM CONTRIBUTION FORMULA. For each Plan Year, the Employer will
contribute to each Participant's Account a uniform percentage of Compensation,
as determined in the Employer's sole discretion.
(B) PERMITTED DISPARITY CONTRIBUTION FORMULA. For each Plan Year the Employer
will contribute the following amount to each Participant's Account:
(1) A uniform percentage of Compensation, as determined in the Employer's
sole discretion; plus
(2) A uniform percentage of Excess Compensation, as determined in the
Employer's sole discretion.
The percentage described in (2) may not exceed the lesser of the percentage
determined in (1) or the percentage determined in the Maximum Disparity Table in
the next paragraph. Furthermore, the Employer may not contribute an amount
described in (2) unless the contribution percentage under ( 1 ) is at least 3%.
If at any time during the Plan Year, the Employer maintains a qualified plan or
another SEP that also uses a permitted disparity formula (or imputes permitted
disparity to satisfy the nondiscrimination requirements), the Employer may not
contribute an amount described in (2).
Maximum Disparity Table
Integration Level (as percentage Applicable
of taxable wage base). Percentages
- ---------------------------------------- -----------
100% 5.7%
More than 80% but less than 100% 5.4%
More than 20% (but at least more
than $10,000) and no more than 80% 4.3%
20% (or $10,000, if greater) or less 5.7%
(C) OTHER REQUIREMENTS. Employment by a Participant on the last day of the Plan
Year is not a condition to an allocation of an Employer contribution under the
Plan for that Plan Year. However, the Employer will not make a contribution for
the Plan Year for any Participant whose Compensation is less than $300 (or the
adjusted dollar amount determined by the Internal Revenue Service). For this
purpose, a Participant's compensation must include elective contributions and
the Employer will disregard any exclusions elected in Adoption Agreement Section
1.06.
(D) DEDUCTION. Contributions to the SEP are deductible by the Employer for the
taxable year with or within which the Plan Year of the SEP ends. The Code treats
contributions made for a particular taxable year and contributed by the due date
of the Employer's income tax return, including extensions, as made during that
taxable year.
3.02 CONTRIBUTION LIMITATION. The total of the Employer contributions (as
determined under Sections 3.01 and 7.01) allocated to a Participant's Account
for any Plan Year may not exceed the lesser of 15% of the Participant's
Compensation or $30,000 (or, if greater, one fourth of the defined benefit
dollar limitation under Code Section 415(b)(1)(A)).
3.03 EMPLOYER CONTRIBUTIONS NOT CONDITIONAL. The Employer does not condition any
contribution made under the Plan on behalf of a Participant upon the retention
by the Participant of the contribution within the Participant's Account.
Furthermore, the Employer does not impose any restriction on a Participant's
withdrawal of any amount from the Participant's Account.
ARTICLE IV
PARTICIPANT'S SIMPLIFIED EMPLOYEE
PENSION IRA
4.01 ESTABLISHMENT OF ACCOUNT. Each Participant must establish in his own name
an individual retirement account with the Custodian or with any bank or other
institution maintaining individual retirement accounts or individual retirement
annuities. The Employer may establish an Account with the Custodian for the
benefit of an eligible Employee if the Employee is unable or unwilling to
execute the necessary documents to establish an Account or if the Employer is
unable to locate the Employee.
4.02 NONFORFEITABLE ACCOUNT. The interest of any Participant in the balance of
his Account is at all times 100% Nonforfeitable.
4.03 EXCLUSIVE BENEFIT. The Employer will have no beneficial interest in any
asset of a Participant's Account and no part of any asset in a Participant's
Account will revert to or be repaid to the Employer, either directly or
indirectly; nor will any part of the corpus or income of a Participant's
Account, or any asset of a Participant's Account, be (at any time) used for, or
diverted to, purposes other than the exclusive benefit of the Participant or his
Beneficiaries.
4.04 ADMINISTRATION OF ACCOUNT. The provisions of the document under which a
Participant maintains his Account will determine the administration,
distribution and investment of the Employer's and the Employee's, if any,
contribution(s) to a Participant's Account. The Employer does not in any way
guarantee a Participant's Account from loss or depreciation.
4.05 PARTICIPANT CONTRIBUTIONS. Nothing in the Plan prohibits a Participant from
making IRA contributions (deductible or nondeductible) to his Account, as
permitted by Code Sections 219 and 408.
16
<PAGE>
ARTICLE V
MISCELLANEOUS
5.01 SUCCESSORS. The Plan is binding upon all persons entitled to benefits under
the Plan and their respective heirs and legal representatives.
5.02 WORD USAGE AND TITLES. Words used in the masculine will apply to the
feminine where applicable, and wherever the context of the Plan dictates, the
plural includes as the singular and the singular includes the plural. Article
and Section titles are for reference only.
5.03 STATE LAW. Except to the extent superseded by Federal statute, the law of
the state of the Employer's principal place of business will determine all
questions arising with respect to the provisions of this Plan.
5.04 PARTICIPATION IN PROTOTYPE. If the Employer ever maintained a defined
benefit plan which is now terminated or, subsequent to the adoption of this
Plan, terminates a defined benefit plan, the Employer can no longer be a
participating Employer in this Prototype. If the Employer currently maintains a
defined benefit plan, the Employer may not elect under Adoption Agreement
Section 7.01 to permit Employees to make salary reduction contributions. An
Employer which is not a participating Employer in this Prototype cannot rely on
the Sponsor's opinion letter issued by the Revenue Service and must treat this
Plan as an individually designed plan.
ARTICLE VI
AMENDMENT AND TERMINATION
6.01 AMENDMENT. The Employer has the right at any time and from time to time:
(a) To amend this Plan and its Adoption Agreement, without any Participant's
consent, in any manner it deems necessary or advisable in order to
qualify (or maintain qualification of) this Plan under the provisions of
Code Section 408(k); and
(b) To amend this Plan and its Adoption Agreement in any other manner.
However, no amendment may authorize or permit any portion of an Account
to be used for or diverted to purposes other than for the exclusive
benefit of the Participant, his Beneficiaries or their estates.
If the Employer amends this Plan and its Adoption Agreement, other than by
changing its elections in the Adoption Agreement, the Employer no longer can
participate in this Prototype. See Section 5.04.
6.02 NOTICE OF AMENDMENT. The Sponsor will inform the Employer of any amendments
to the prototype SEP or if the Sponsor has discontinued sponsorship of this
prototype SEP.
6.03 DISCONTINUANCE. The Employer has the right to suspend or discontinue its
contributions under the Plan, and to terminate this Plan, at any time.
ARTICLE VII
ELECTIVE DEFERRAL ARRANGEMENT
7.01 APPLICATION. This Article VII applies to an Employer's Plan only if the
Employer elects in Section 7.01 of the Adoption Agreement to permit Employees
to make salary reduction contributions to the Plan. The Sponsor intends for this
arrangement to qualify as a salary reduction simplified employee pension
("SARSEP") under Code Section 408(k)(6) and the applicable regulations.
7.02 ELECTIVE DEFERRALS. The Employer will contribute to each Participant's
Account the elective deferrals the Participant has elected the Employer to
withhold from his Compensation under his salary reduction agreement on file with
the Employer. The salary reduction agreement will not apply to Compensation
actually paid before its effective date. The effective date of the salary
reduction agreement may not be earlier than its execution date. The salary
reduction agreement will apply to subsequent increases in the Participant's
Compensation unless the Participant revokes or modifies the salary reduction
agreement. The Employer only may contribute elective deferrals for a Plan Year
to any Participant's Account if:
(a) At least 50% of Employer's eligible Employees have salary reduction
agreements in effect for at least part of that Plan Year; and
(b) The Employer has no more than 25 Employees eligible to participate in the
Plan at any time during the prior Plan Year.
(A) DISALLOWED DEFERRALS. If the Plan does not satisfy the 50% requirement at
any time during the Plan Year, the Plan will consider all elective deferrals
made by Employees for than Plan Year as "disallowed deferrals." Disallowed
deferrals are IRA contributions which are not SEP-IRA contributions. If the
Employer determines the Plan has made contributions to Participants' IRAs which
are disallowed deferrals, the Plan must notify each affected Employee the Code
Section no longer considers the deferrals as SEP-IRA contributions. The Employer
must provide the notification within 21/2 months following the end of the Plan
Year to which the disallowed deferrals relate.
(B) NOTIFICATION PROCEDURE. The notification must specify (1) the amount of the
disallowed deferrals (2) that the disallowed deferrals are includible in the
Employee's gross income for the calendar year or years in which the amounts
deferred would have been received by the Employee in cash had he not made an
election to defer and that the income allocable to the disallowed deferrals is
includible in the year withdrawn from the IRA; and (3) that the Employee must
withdraw the disallowed deferrals (and allocable income) from the SEP-IRA by
April 15 following the calendar year of notification by the Employer. The Code
will subject disallowed deferrals not withdrawn by April 15 following the year
of notification to the IRA contribution limitations of Code Sections 219 and
408. The Code will consider disallowed deferrals in excess of the limitations as
excess IRA contributions and subject to the 6% excise tax on excess
contributions under Code Section 4973. If income allocable to a disallowed
deferral is not withdrawn by April 15 following the year of notification by the
Employer, the income may be subject to the 10% tax on early distributions under
Code Section 72(t) when withdrawn. The Employer will report disallowed deferrals
in the same manner as excess SEP contributions.
7.03 PARTICIPATION. To the extent prohibited by law, an Employer which is a
state or local government or a tax-exempt organization may not permit
Participant salary reduction contributions. In addition, an Employer with leased
employees as defined under Code Section 414(n)(2) may not permit Participant
salary reduction contributions.
7.04 ANNUAL ELECTIVE DEFERRAL LIMITATIONS. A Participant's elective deferrals
may not exceed the lesser of 15% of the Participant's Compensation, or 402(g)
limitation. The 402(g) limitation is the greater of $7,000 or the adjusted
amount determined by the Secretary of the Treasury. If, pursuant to a salary
reduction agreement, the Employer determines the Participant's elective
deferrals to the Plan for a calendar year would exceed the 402(g) limitation,
the Employer will suspend the employee's salary reduction agreement, if any,
until the following January 1 and refund any elective deferrals in excess of the
402(g) limitation which the Employer has not contributed to the Participant's
Account. The Employer will make all refunds no later than April 15 of the
following calendar year.
7.05 DEFINITIONS. For purposes of this Article VII:
(a) "Highly Compensated Employee" means an Eligible Employee who satisfies
the definition in Section 1.07 of the Plan. Family members aggregated as
a single Employee under Section 1.07 constitute a single Highly
Compensated Employee, whether a particular family member is a Highly
Compensated Employee or a Nonhighly Compensated Employee without the
application of family aggregation.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is not a
Highly Compensated Employee and who is not a family member treated as a
Highly Compensated Employee.
17
<PAGE>
(c) "Eligible Employee" means an Employee who is eligible to enter into a
salary reduction agreement for the Plan Year, regardless of whether he
actually enters into such an agreement.
(d) "Nonhighly Compensated Group" means the group of Eligible Employees who
are Nonhighly Compensated Employees for the Plan Year.
(e) "Compensation" means any definition of Compensation which is permissible
under Adoption Agreement Section 1.06, regardless of the actual elections
made by the Employer in the Adoption Agreement. The definition used by
the Employer for a Plan Year must apply uniformly to all Eligible
Employees.
7.06 ACTUAL DEFERRAL PERCENTAGE TEST. For each Plan Year, the Employer must
determine whether the elective deferrals for each Highly Compensated Employee
satisfy the actual deferral percentage ("ADP") test. A Highly Compensated
Employee satisfies the ADP test if his ADP does not exceed 1.25 times the
average ADP of the Nonhighly Compensated Group.
(A) CALCULATION OF ADP. The average ADP for the Nonhighly Compensated group is
the average of the separate ADPs calculated for each Eligible Employee who is a
member of that group. An Eligible employee's ADP for a Plan Year is the ratio of
the Eligible Employee's deferral contributions for the Plan Year to the
Employee's Compensation for the Plan Year. In calculating the average ADP, the
percentage for an eligible Nonhighly Compensated Employee who does not make
deferral contributions for the Plan Year is 0%. For aggregated family members
treated as a single Highly Compensated Employee, the ADP of the family unit is
the ADP determined by combining the deferral contributions and Compensation of
all aggregated family members. A Nonhighly Compensated Employee's ADP does not
include elective deferrals made to this Plan or to any other Plan maintained by
the Employer, to the extent such elective deferrals exceed the 402(g) limitation
described in this Section.
(B) EXCESS SEP CONTRIBUTIONS. If the Employer determines a Highly Compensated
Employee fails to satisfy the ADP test for a Plan Year, the Employer must notify
the affected employee of the excess contribution and tax consequences of the
excess contribution during the next Plan Year. However, the Employer will incur
an excise tax equal to 10% of the amount of the excess SEP contribution if the
Employer does not notify the Employee during the first 21/2 months of that next
Plan Year. The excess SEP contributions are that amount if deferral
contributions made by a Highly Compensated Employee which exceeds 1.25 times the
average ADP of the Nonhighly Compensated Group. An Excess SEP contribution is
includible in an Employee's gross income on the earliest date any elective
deferral made by an Employee during the Plan Year would have been received by
the Employee had he originally elected to receive the amounts in cash. However,
if the excess SEP contribution (not including allocable income) totals less than
$100, then the excess contribution is includible in the Employee's gross income
in the year of notification. Income allocable to the excess SEP contribution is
includible in the year of withdrawal from the IRA.
(C) NOTIFICATION PROCEDURE. The Employer's notification to each affected Highly
Compensated Employee of the excess SEP contributions must state specifically, in
a manner calculated to be understood by the average Participant: (1) the amount
of the excess contribution attributable to that Employee's elective deferrals;
(2) the calendar year for which the excess SEP contribution is includible in the
employee's gross income; (3) that the employee must withdraw the excess SEP
contribution (and allocable income) from the SEP-IRA by April 15 following the
year of notification by the Employer. Excess SEP contributions not withdrawn by
April 15 following the year of notification will be subject to the IRA
contribution limitations of Code Sections 219 and 408 for the preceding calendar
year. The Code will consider contributions in excess of the limitations as
excess IRA contributions and subject to the 6% excise tax on excess
contributions under Code Section 4973. If income allocable to an excess SEP
contribution is not withdrawn by April 15 following the year of notification by
the Employer, the income when withdrawn may be subject to the 10% tax on early
distributions under Code Section 72(t).
If the Employer fails to notify Employees by the end of the Plan year following
the Plan Year in which the Employees made the excess SEP contribution, the
Revenue Service will no longer consider the SEP to meet the requirements of Code
Sections 408(k)(6). If the SEP no longer meets the requirements of Code Section
408(k)(6), any contribution to an Employee's IRA will be subject to the
contribution limitations of Code Section 219 and 408. The Code will consider
contributions in excess of the limitations as excess IRA contributions.
(D) WITHDRAWAL RESTRICTIONS. For each Eligible Employee who makes an elective
deferral to a SEP-IRA, the Employer will provide a notice explaining the IRA
distribution rules of Code Section 408(d)(1) and the penalty tax provisions of
Code Section 72(t) will apply to the transfer or distribution from a SEP-IRA of
any elective deferrals prior to the earlier of (1) 21/2 months after the close
of the Plan Year or (2) the determination of whether the SEP satisfies the ADP
test.
ARTICLE VIII
TOP HEAVY REQUIREMENTS
8.01 DEEMED TOP HEAVY PLAN ELECTION. If the Employer does not permit Participant
salary reduction contributions, the Plan must operate the SEP as a Deemed Top
Heavy Plan. If the Employer permits salary reduction contributions, the Employer
must specify in its Adoption Agreement whether the Plan will operate as a Deemed
Top Heavy Plan or as a Not Deemed Top Heavy Plan.
(A) DEEMED TOP HEAVY PLAN. If the Employer elects in the Adoption Agreement to
treat the Plan as a Deemed Top Heavy Plan, the top heavy minimum allocation
requirement applies in all Plan Years even if the Plan is not top heavy.
(B) NOT DEEMED TOP HEAVY PLAN. The top heavy minimum allocation requirement
applies to a Not Deemed Top Heavy Plan only in Plan Years for which the Plan is
top heavy.
8.02 DETERMINATION OF TOP HEAVY STATUS. The Plan is top heavy for a Plan Year if
the top heavy ratio as of the Determination Date exceeds 60%. The top heavy
ratio is a fraction, the numerator of which is the sum of the Employer
contributions (including election deferrals, if any) made to the Accounts of all
Key Employees as of the Determination Date and the denominator of which is a
similar sum determined for all Employees. The Plan must calculate the top heavy
ratio by disregarding the Employer Contributions of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Employer Contributions of an
individual who has not received credit for at least one Hour of Service with the
Employer during the Determination Period. The Plan must calculate the top heavy
ratio in accordance with Code Section 416 and the regulations under that Code
section. Under a Deemed Top Heavy Plan, the Plan need not determine whether the
Plan actually is top heavy.
If the Employer maintains (or maintained within the prior 5 years) any other SEP
or qualified plan in which a key employee participates or participated, the
Employer must aggregate contributions, accrued benefits or account balances
(whichever is applicable), with contributions made to this SEP to determine top
heavy status.
8.03 DEFINITIONS. For purposes of applying the top heavy provisions:
(1) "Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan Year
in the Determination Period: (i) has Compensation in excess of 50% of the
dollar amount prescribed in Code Section 415(b)(1)(A) and is an officer
of the Employer; (ii) has Compensation in excess of the dollar amount
prescribed in Code Section 415(c)(1)(A) and is one of the Employees
owning the ten largest interests in the Employer; (iii) is a more than 5%
owner of the Employer; or (iv) is a more than 1% owner of the Employer
and has Compensation of more than $150,000. The constructive ownership
rules of Code Section 318 (or the principles of that section, in the case
of an unincorporated Employer,) will apply to determine ownership in the
18
<PAGE>
Employer. The number of officers taken into account under clause (i) will
not exceed the greater of 3 or 10% of the total number (after application
of the Code Section 414(q) exclusions) of Employees, but no more than 50
officers. The Plan will make the determination of who is a Key Employee
in accordance with Code Section 416(i)(1) and the regulations under that
Code Section.
(2) "Non-Key Employee" means an Employee who does not meet the definition of
Key Employee.
(3) The Plan defines "Hour of Service" in accordance with the rules of Labor
Reg. Section 2530.200b-2, which the Plan, by this reference, specifically
incorporates in full.
(4) "Determination Date" for any Plan Year is the last day of the preceding
Plan Year or, in the case of the first Plan Year of the Plan, the last
day of that Plan Year. The "Determination Period" is the 5 year period
ending on the Determination Date.
(5) "Participant" includes any Employee otherwise eligible to participate in
the Plan but who is not a Participant because of his failure to make
elective deferrals under the salary reduction arrangement.
(6) "Compensation" The Employer will determine Compensation by excluding
elective contributions (even if included under Adoption Agreement Section
1.06) and by disregarding any exclusion from compensation elected in
Adoption Agreement Section 1.06.
8.04 TOP HEAVY MINIMUM ALLOCATION. Unless the Employer designates in the
Adoption Agreement another plan to satisfy the top heavy minimum requirements,
the Employer will make a minimum contribution each year to the Account of each
Non-Key Employee eligible to participate in this Plan. The top heavy minimum
contribution is the lesser of 3% of the Participant's Compensation for the Plan
Year or the highest Key Employee contribution rate for the Plan Year. A Key
Employee's contribution is the sum of the Employer contributions made to the Key
Employee's Account under Sections 3.01 and 7.01, divided by the Key Employee's
Compensation. A Non-Key Employee's contribution rate is the Employer's
contributions made to the Non-Key Employee's Account, exclusive of the elective
deferrals, divided by the Non-Key Employee's Compensation.
19
<PAGE>
SEP DISCLOSURE STATEMENT
===============================================================================
A Simplified Employee Pension, or SEP, is a written arrangement through which an
employer can make a contribution toward its employees' retirement income without
becoming involved in more complex retirement plans. Under a SEP, an employer
makes contributions directly to each employee's Individual Retirement Account or
Annuity ("IRA"). The IRA to which the employer contributes is referred to as a
SEP-IRA.
An employer who signs a SEP agreement is not statutorily required to make any
contribution to the SEP-IRAs of eligible employees. However, if the employer
makes any contribution, the SEP must allocate the contribution in accordance
with a written formula which does not discriminate in favor of highly
compensated employees.
The employer does not report SEP contributions made on behalf of participants as
gross income on Form W-2, unless the contribution exceeds certain limits. For
more specific instructions regarding the income tax exclusion for SEP
contributions, see Question 4. If an eligible employee makes less than $300 in
the year for which the employer makes a contribution, the employer need not make
a SEP contribution for that employee. The Revenue Service will increase the $300
amount, on an annual basis, by a cost of living adjustment factor ($400 for
1995).
The employer may impose participation requirements which may not be more
restrictive than the Internal Revenue Code ("Code") permits, but they may be
less restrictive. Under the Code, all employees who have attained age 21 and
have worked for the employer for some period of time (however short) in any
three of the immediately preceding five plan years, are eligible to receive the
employer's SEP contribution (if any). The plan year of the SEP must be either
the calendar year or the employer's taxable year. The SEP document defines the
plan year. The employer also may exclude from participation certain nonresident
aliens and certain union employees who already have negotiated with respect to
retirement benefits.
This information and the following "Questions and Answers" should provide a
basic understanding of what a SEP is, how an employer makes its contribution,
and how the Code treats the contribution for tax purposes. An employee who has
unresolved questions concerning SEPs should call the Federal tax information
number, or the toll free number, shown in the white pages of the local telephone
directory.
(1) WHAT IS A SIMPLIFIED EMPLOYEE PENSION, OR SEP?
A SEP is a retirement income arrangement under which your employer may
contribute any amount each year up to the lesser of $22,500 or 15% of your
compensation into your own IRA.
Your employer will provide you with a copy of the agreement containing
participation requirements and a description of the method under which the SEP
allocates its employer contribution to your IRA.
All amounts contributed to your IRA by your employer belong to you, even after
you separate from service with the employer.
(2) MUST MY EMPLOYER CONTRIBUTE TO MY IRA UNDER THE SEP?
Whether or not your employer makes a contribution to the SEP is entirely within
the employer's discretion. If a contribution is made under the SEP, an employer
makes a contribution under the SEP, the SEP agreement, must provide a method for
allocating the contribution to all eligible employees.
(3) HOW MUCH MAY MY EMPLOYER CONTRIBUTE TO MY SEP-IRA IN ANY YEAR?
Under a SEP, your employer will determine each year the amount of contribution
it wishes to make to your IRA. However, the contribution for any year may not
exceed the lesser of $22,500 or 15% of your compensation for that year. The
compensation used to determine this limit does not include any amount which the
employer contributed to your IRA under the SEP. The agreement does not require
an employer to maintain a particular level of contributions. It is possible the
employer may not make a contribution for a particular year. Also see Question 5.
(4) HOW DO I TREAT MY EMPLOYER'S SEP CONTRIBUTIONS FOR MY TAXES?
The amount your employer contributes is excludible from your gross income
subject to certain limitations (see Question 1) and is not includible as taxable
wages on your Form W-2.
(5) MAY I ALSO CONTRIBUTE TO AN IRA IF I AM A PARTICIPANT IN A SEP?
Yes. You may still contribute the lesser of $2,000 or 100% of your compensation
to an IRA. However, the amount which is deductible is subject to various
limitations. Also see Question 11.
(6) ARE THERE ANY RESTRICTIONS ON THE IRA I SELECT TO DEPOSIT MY SEP
CONTRIBUTIONS IN?
Under the SEP which is approved by the IRS, contributions must be made to either
a Model IRA which is executed on an IRS form or a master or prototype IRA for
which the IRS has issued a favorable opinion letter.
(7) WHAT IF I DON'T WANT A SEP-IRA?
Your employer may require you become a participant in such an arrangement as a
condition of employment. If the employer does not require all eligible employees
to become participants and an eligible employee elects not to participate, the
Code would prohibit the employer from contributing to the SEP-IRAs of all other
employees of the same employer. If one or more eligible employees do not
participate and the employer attempts to establish a SEP-IRA agreement with the
remaining employees, the resulting arrangement may result in adverse tax
consequences to the participating employees.
(8) CAN I MOVE FUNDS FROM MY SEP-IRA TO ANOTHER TAX-SHELTERED IRA?
Yes, it is permissible for you to withdraw, or receive, funds from your SEP-IRA,
and no more than 60 days later, place such funds in another IRA, or SEP-IRA. The
Code refers to this as a "rollover" and you may not make more than one rollover
per IRA during a one-year interval. However, there are no restrictions on the
number of times you may make "transfers" if you arrange to have your IRA funds
transferred between the trustees, so you never have possession of the funds.
(9) WHAT HAPPENS IF I WITHDRAW MY EMPLOYER'S CONTRIBUTION FROM MY IRA?
If you do not want to leave the employer's contribution in your IRA, you may
withdraw it at any time, but any amount withdrawn is includible in your income.
Also, if withdrawals occur before attainment of age 59 1/2, and not on account
of death or disability, you may be subject to a penalty tax.
(10) MAY I PARTICIPATE IN A SEP EVEN THOUGH I'M COVERED BY ANOTHER PLAN?
Yes. You can participate in a SEP (other than the IRS Model SEP) even though you
participate in another plan of the same employer. However, the Code imposes
combined contribution limits. Also, if you work for several employers, one
employer may cover you under a SEP and the other employer may cover you under a
pension or profit sharing plan.
(11) WHAT HAPPENS IF AN EMPLOYER CONTRIBUTES TOO MUCH TO MY SEP-IRA IN ONE
YEAR?
You may withdraw any contribution which exceeds the yearly limitations without
penalty by the due date (plus extensions) for filing your tax return (normally
April 15th). The withdrawn contribution is includible in your gross income.
Excess contributions left in your SEP-IRA account after the prescribed time for
withdrawal may have adverse tax consequences. Withdrawals of the excess
contributions may be subject to the premature distribution penalty tax
withdrawals.
20
<PAGE>
(12) DO I NEED TO FILE ANY ADDITIONAL FORMS WITH THE IRS BECAUSE I PARTICIPATE
IN A SEP?
No.
(13) IS MY EMPLOYER REQUIRED TO PROVIDE ME WITH INFORMATION ABOUT SEP-IRAS AND
THE SEP AGREEMENT?
Yes. In addition to the SEP Disclosure Information contained in this document,
your employer must provide you with the following information:
(a) At the time you become eligible to participate in the SEP your
employer must inform you in writing it has adopted a SEP agreement
and state which employees may participate, how the SEP allocates
employer contributions, and who can provide you with additional
information.
(b) Your employer must inform you in writing of all employer
contributions to your SEP-IRA (the employer must supply this
information by January 31st of the year following the year for which
the employer makes the contribution, or 30 days after the employer
makes the contribution, whichever is later).
(c) If your employer amends the SEP, or replaces it with another SEP, the
employer must furnish a copy of the amendment or new SEP (with a
clear written explanation of its terms and effects) to each
participant within 30 days of the date the SEP or amendment becomes
effective.
(d) If your employer selects or recommends the IRAs into which it will
deposit the SEP contribution (or substantially influences you or
other employees to choose them), your employer must ensure a clear
written explanation of the terms of those IRAs is provided at the
time each employee becomes eligible to participate. The explanation
must include information about the terms of those IRAs, such as rates
of return and any restrictions on a Participant's ability to
"rollover," transfer, or withdraw funds from the IRAs (including
restrictions which allow rollovers or withdrawals but reduce earnings
of the IRAs or impose other penalties).
(e) If your employer selects, recommends, or substantially influences you
to choose a specific IRA and the IRA prohibits the withdrawal of
funds, the Department of Labor may require your employer to provide
you additional information.
(14) IS THE FINANCIAL INSTITUTION WHERE I ESTABLISH MY IRA ALSO REQUIRED TO
PROVIDE ME WITH INFORMATION?
Yes, it must provide you with a disclosure statement which contains the
following items of information in plain, nontechnical language:
(1) the statutory requirements which relate to your IRA;
(2) the tax consequences which follow the exercise of various options and
what those options are;
(3) participation eligibility rules, and rules on the deductibility and
nondeductibility of retirement savings;
(4) the circumstances and procedures under which you may revoke your IRA,
including the name, address and telephone number of the person
designated to receive notice of revocation (this explanation must be
prominently displayed at the beginning of the disclosure statement);
(5) explanations of when penalties may be assessed against you because of
specified prohibited or penalized activities concerning your IRA; and
(6) financial disclosure information which:
(a) either projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method
of computing and allocating the annual earnings and charges
which the financial institution may assess;
(b) describes whether, and for what period, the financial
institution guarantees growth projections for the plan, or a
statement describing the basis of earnings rate projections;
(c) states the sales commission the financial institution will
charge in each year expressed as a percentage of $1,000; and
(d) states the proportional amount of any nondeductible life
insurance which may be a feature of your IRA.
(15) CAN SEP CONTRIBUTIONS BE REDUCED BY EMPLOYER CONTRIBUTIONS TO SOCIAL
SECURITY?
Although employer contributions under the SEP agreement must bear a uniform
relationship to employees' compensation, your employer may take into
consideration certain amounts it already has paid on your account as Social
Security taxes. This is called "integration" and is permissible only if the
employer satisfies certain statutory requirements. If your employer chooses an
integration formula, the SEP allocation information your employer provides you
must clearly show the integration formula.
See Publication 590 available at most IRS offices, for a more complete
explanation of disclosure requirements. In addition to this disclosure
statement, the financial institution must provide you with a financial statement
each year. It may be necessary to retain and refer to statements for more than
one year to evaluate the investment performance of the IRA and in order that you
will know how to report IRA distributions for tax purposes.
21
<PAGE>
DISCLOSURE STATEMENT ADDENDUM
ELECTIVE DEFERRAL ARRANGEMENT
===============================================================================
The SEP your employer has adopted includes an elective deferral arrangement.
Under a SEP elective deferral arrangement, you may elect to reduce your
compensation (usually by a payroll deduction agreement) by an amount you wish
the employer to contribute to your SEP-IRA. The SEP refers to these amounts you
elect to have the Employer contribute from your compensation as "elective
deferrals."
(16) WHAT IS A SEP ELECTIVE DEFERRAL ARRANGEMENT?
A SEP elective deferral arrangement is a SEP which permits you to defer
compensation to your own IRA. You may elect to defer from your regular salary or
on a bonus. This type of elective SEP is available only to an employer with 25
or fewer eligible employees.
Your Employer will provide you with a copy of the agreement containing
eligibility requirements and a description of the method for making elective
deferral contributions to your IRA.
All amounts contributed to your IRA belong to you, even after you separate from
service with the employer.
(17) MUST I MAKE ELECTIVE DEFERRALS TO AN IRA?
No. However, if more than half of the eligible employees choose not to make
elective deferrals in a particular year, then no employee may participate in an
elective SEP of that employer for the year.
(18) HOW MUCH MAY I ELECT TO DEFER TO MY SEP-IRA IN A PARTICULAR YEAR?
For any year, the amount which you may defer to this SEP may not exceed the
lesser of:
(1) 15% of compensation; or
(2) $7,000 (as adjusted for increases in the cost of living.)
If your employer also makes non-elective contributions to the SEP, the total
contributions on your behalf to the SEP (non-elective contributions and elective
contributions) may not exceed the lesser of $22,500 or 15% of your compensation.
The $7,000 is an overall cap on the maximum amount you may defer in each
calendar year to all elective SEPs and cash-or-deferred arrangements under Code
401(k), even if maintained by unrelated employers. If you participate in two
arrangements which permit elective deferrals, you are responsible for
determining whether you exceed this limit for any calendar year.
If you are a highly compensated employee, the Code imposes a further limit on
the amount you may contribute to a SEP-IRA for a particular year. The employer
calculates this limit on the basis of a mathematical formula which limits the
percentage of pay that highly compensated employees may elect to defer to a SEP-
IRA. As discussed below, your employer will notify you if you have exceeded the
ADP limits.
(19) HOW DO I TREAT ELECTIVE DEFERRALS FOR TAX PURPOSES?
The amount you elect to defer to your SEP-IRA is excludable from your gross
income, subject to the limitations discussed above, and is not includible as
taxable wages on your Form W-2. However, elective deferrals are subject to FICA
taxes.
(20) HOW WILL I KNOW IF THE EMPLOYER CONTRIBUTES TOO MUCH TO MY SEP-IRA IN ONE
YEAR?
There are two different ways in which you may contribute too much to your SEP-
IRA. One way is to make elective deferrals in excess of the $7,000 limitation
described above ("excess elective deferrals"). The second way is to make
elective deferrals which violate the ADP test ("excess SEP contributions"). You
are responsible for calculating whether or not you have exceeded the $7,000
limitation. Your employer is responsible for determining whether you have made
any excess SEP contributions.
The Code requires your employer to notify you by March 15 if you have made any
excess SEP contributions for the preceding calendar year. Your employer will
notify you of an excess SEP contribution by providing you with any required form
for the preceding calendar year.
(21) WHAT MUST I DO ABOUT EXCESS DEFERRALS TO AVOID ADVERSE TAX CONSEQUENCES?
Excess deferrals are includible in your gross income in the year of the
deferral. You should withdraw excess deferrals under this SEP and any income
allocable to the excess deferrals from your SEP-IRA by April 15. You may not
transfer or rollover excess deferrals to another SEP-IRA.
If you fail to withdraw your excess deferrals and any income allocable to the
excess deferrals by April 15 of the following year, your excess deferrals will
be subject to a 6% excise tax for each year they remain in the SEP-IRA.
If you have both excess deferrals and excess SEP contributions (as described in
21a below), the amount of excess deferrals you withdraw by April 15 will reduce
your excess SEP contributions.
(21A) WHAT MUST I DO ABOUT EXCESS SEP CONTRIBUTIONS TO AVOID ADVERSE TAX
CONSEQUENCES?
Excess SEP contributions are includible in your gross income in the year of the
deferral. You should withdraw excess SEP contributions for a calendar year and
any income allocable to the excess SEP contributions by the due date (including
extensions) for filing your income tax return for the year. You may not transfer
or rollover excess SEP contributions to another SEP-IRA.
If you fail to withdraw your excess SEP contributions and income allocable to
the excess SEP contributions by the due date (including extensions) for filing
your income tax return, your excess SEP contributions will be subject to a 6%
excise tax for each year they remain in the SEP-IRA.
(22) CAN I REDUCE EXCESS ELECTIVE DEFERRALS OR EXCESS SEP CONTRIBUTIONS BY
ROLLING OVER OR TRANSFERRING AMOUNTS FROM MY SEP-IRA TO ANOTHER IRA ?
No. You may reduce excess elective deferrals or excess SEP contributions only by
a distribution to you. Excess amounts rolled over or transferred to another IRA
will be includible in income and subject to the penalties discussed above.
(23) HOW DO I KNOW HOW MUCH INCOME IS ALLOCABLE TO MY EXCESS ELECTIVE DEFERRALS
OR ANY EXCESS SEP CONTRIBUTIONS?
The rules for determining and allocating income to excess elective deferrals or
SEP contributions are the same as those governing regular IRA contributions. The
trustee or custodian of your SEP-IRA may be able to inform you of the amount of
income allocable to your excess amounts.
(24) WHAT HAPPENS IF I WITHDRAW MY ELECTIVE DEFERRALS TO MY SEP-IRA?
If you don't want to leave the money in the IRA, you may withdraw it at any
time, but any amount withdrawn is includible in your income. Also, if
withdrawals occur before you are 591/2, and not on account of death or
disability, you may be subject to a 10% penalty tax. (As discussed above,
different rules apply to the removal of excess amounts contributed to your SEP-
IRA.)
(25) WHAT HAPPENS IF I TRANSFER OR DISTRIBUTE CONTRIBUTIONS FROM MY SEP BEFORE
THE ADP TEST DESCRIBED IN QUESTION 3 HAS BEEN SATISFIED ?
If you make a transfer or a distribution from your SEP before the Employer
satisfies the nondiscrimination test, the distribution will be subject to
regular income tax and the additional 10% tax on early distributions.
22
<PAGE>
[LOGO] SunAmerica
Asset Management
To order additional brochures or prospectuses
relating to the shares of SunAmerica's funds call:
800/858-8850, extension 5134.
Please read the prospectuses carefully before investing.
SunAmerica Fund Services
Retirement Plans Department
733 Third Avenue
New York, NY 10017-3204
<PAGE>
Exhibit 16(a)
BALANCED ASSETS FUND - CLASS A
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + (.1375))/1/= ERV = 1,137.50
five-year = P(1 + T)/5/ = ERV = N/A
/736/
since inception = P(1 + (.0707))/365/ = ERV = 1,147.69
<PAGE>
Exhibit 16(b)
BALANCED ASSETS FUND - CLASS B
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + (.1516))/1/= ERV = 1,151.60
five-year = P(1 + .1367)/5/ = ERV = 1,897.71
/128/
since inception = P(1 + .1178)/12/ = ERV = 3,280.08
<PAGE>
Exhibit 16(c)
BLUE CHIP GROWTH FUND - CLASS A
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + .1432)/1/ = ERV = 1,143.20
five-year = P(1 + T)/5/ = ERV = N/A
/722/
since inception = P(1 + (.0643))/365/ = ERV = 1,131.19
<PAGE>
Exhibit 16(d)
BLUE CHIP GROWTH FUND - CLASS B
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + (.1569))/1/= ERV = 1,156.90
five-year = P(1 + .1456)/5/ = ERV = 1,973.17
/126/
since inception = P(1 + .1033) /12/ = ERV = 2,807.26
<PAGE>
Exhibit 16(e)
MID-CAP GROWTH FUND - CLASS A
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + (.2206))/1/ = ERV = 1,220.60
five-year = P(1 + .1687)/5/ = ERV = 2,180.29
/104/
since inception = P(1 + (.1199))/12/ = ERV = 2,668.21
<PAGE>
Exhibit 16(f)
MID-CAP GROWTH FUND - CLASS B
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + .2341)/1/ = ERV = 1,234.10
five-year = P(1 + T)/5/ = ERV = N/A
/727/
since inception = P(1 + (.0506))/365/ = ERV = 1,103.31
<PAGE>
Exhibit 16(g)
SMALL COMPANY GROWTH FUND - CLASS A
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + (.4137))/1/= ERV = 1,413.70
five-year = P(1 + .2587)/5/ = ERV = 3,159.45
/104/
since inception = P(1 + (.1436))/12/ = ERV = 3,199.21
<PAGE>
Exhibit 16(h)
SMALL COMPANY GROWTH FUND - CLASS B
PERFORMANCE CALCULATION
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + (.4312))/1/= ERV = 1,431.20
five-year = P(1 + T)/5/ = ERV = N/A
/736/
since inception = P(1 + .1531)/365/ = ERV = 1,332.76
<PAGE>
Exhibit 16(i)
GLOBAL BALANCED FUND - CLASS A
PERFORMANCE CALCULATION
FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + .0059)/1/ = ERV = 1,005.90
five-year = P(1 + T)/5/ = ERV = N/A
/473/
since inception = P(1 + (.0012))/365/ = ERV = 1,001.56
<PAGE>
Exhibit 16(j)
GLOBAL BALANCED FUND - CLASS B
PERFORMANCE CALCULATION
FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + .0168)/1/ = ERV = 1,016.80
five-year = P(1 + T)/5/ = ERV = N/A
/472/
since inception = P(1 + (.0087))/365/ = ERV = 1,011.26
<PAGE>
Exhibit 16(k)
GROWTH AND INCOME FUND - CLASS A
PERFORMANCE CALCULATION
FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + .1266)/1/ = ERV = 1,126.60
five-year = P(1 + T)/5/ = ERV = N/A
/457/
since inception = P(1 + (.1206))/365/ = ERV = 1,153.23
<PAGE>
Exhibit 16(l)
GROWTH AND INCOME FUND - CLASS B
PERFORMANCE CALCULATION
FOR THE FISCAL PERIOD ENDED SEPTEMBER 30, 1995
Average Annual Total Return:
P(1 + T)/n/ = ERV
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1-, 5-, or 10-year periods
at the end of the 1-, 5-, or 10-year periods (or
fractional portion thereof).
one-year = P(1 + .1442)/1/ = ERV = 1,144.20
five-year = P(1 + T)/5/ = ERV = N/A
/452/
since inception = P(1 + (.1332))/365/ = ERV = 1,167.48
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of SunAmerica
Equity Funds do hereby severally constitute and appoint Peter A. Harbeck, Peter
Sutton and Robert M. Zakem or any of them, the true and lawful agents and
attorneys-in-fact of the undersigned with respect to all matters arising in
connection with the Registration Statement on Form N-1A and any and all
amendments (including post-effective amendments) thereto, with full power and
authority to execute said Registration Statement for and on behalf of the
undersigned, in our names and in the capacity indicated below, and to file the
same, together with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission. The undersigned hereby
gives to said agents and attorneys-in-fact full power and authority to act in
the premises, including, but not limited to, the power to appoint a substitute
or substitutes to act hereunder with the same power and authority as said agents
and attorneys-in fact would have if personally acting. The undersigned hereby
ratify and confirm all that said agents and attorneys-in-fact, or any substitute
or substitutes, may do by virtue hereof.
WITNESS the due execution hereof on the date and in the capacity set forth
below.
Signature Title Date
- --------- ----- ----
/s/ Peter A. Harbeck Trustee and President November 30, 1994
- -------------------- (Principal Executive Officer)
Peter A. Harbeck
/s/ Peter C. Sutton Controller (Principal November 30, 1994
- ------------------- Financial and Accounting Officer)
Peter C. Sutton
/s/ S. James Coppersmith Trustee November 30, 1994
- ------------------------
S. James Coppersmith
/s/ Samuel M. Eisenstat Trustee November 30, 1994
- -----------------------
Samuel M. Eisenstat
/s/ Stephen J. Gutman Trustee November 30, 1994
- ---------------------
Stephen J. Gutman
/s/ Sebastiano Sterpa Trustee November 30, 1994
- ---------------------
Sebastiano Sterpa
/s/ Peter McMillan III Trustee December 4, 1995
- ----------------------
Peter McMillan III
