<PAGE>
As filed with the Securities and Exchange Commission on January 27, 1997
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. 19 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 -
Amendment No. 18 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)
_ immediately upon filing pursuant to paragraph (b) of Rule 485
X on January 30, 1997 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
- -------------------------------------------------------------------
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, 1996 was filed on
November 22, 1996.
<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 Objectives, Policies and
Restrictions; Investment Techniques and Risk
Factors; General Information
5 Management of the Fund Management of the Trust; Portfolio
Transactions, Brokerage and Turnover
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 Objectives 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, Sub-Adviser, Distributor and
Services Administrator; Additional Information
17 Brokerage Allocation and Other Practices 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, Sub-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.
<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 (the
"Trust") the Trust currently offers six different investment funds (each, a
"Fund" and collectively, the "Funds") 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 of the SunAmerica
Global Balanced Fund. (AIG Global is referred to hereinafter as the "Sub-
Adviser"). An investor may invest in one or more of the following Funds with
the corresponding investment objectives:
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 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
("CDSC") 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 30, 1997, 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 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus......................... Cover
Summary of Fund Expenses........... 2
Financial Highlights............... 4
Investment Objectives, Policies and
Restrictions 7
Balanced Assets Fund............... 7
Global Balanced Fund............... 7
Blue Chip Growth Fund.............. 9
Mid-Cap Growth Fund................ 9
Small Company Growth Fund.......... 10
Growth and Income Fund............. 10
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Techniques and
Risk Factors...................... 11
Management of the Trust............ 17
Purchase of Shares................. 20
Redemption of Shares............... 23
Exchange Privilege................. 24
Portfolio Transactions, Brokerage
and Turnover...................... 25
Determination of Net Asset Value... 26
Performance Data................... 26
Dividends, Distributions and
Taxes............................. 26
General Information................ 27
</TABLE>
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% 0.60% 0.60% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.43% 0.43%
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......... 0.42% 0.37% 1.20% 1.20% 0.47% 0.48% 0.52% 0.57% 0.43% 0.41% 0.50% 0.50%
----- ----- ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
Total Operating
Expenses(/6/).......... 1.52% 2.12% 2.15% 2.80% 1.57% 2.23% 1.62% 2.32% 1.53% 2.16% 1.28% 1.93%
===== ===== ====== ====== ===== ===== ===== ===== ===== ===== ===== =====
</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
CDSC on redemptions made within one year of purchase. The CDSC 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, 1996, 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, 1996, the total operating expenses
(on a gross basis) for Global Balanced Fund Class A and Class B, and Growth
and Income Fund Class A and Class B were: 2.59%, 3.21%, 1.97% and 2.72%,
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 $103 $136 $228
(Class B shares)*............................. $62 $ 96 $134 $223
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 $104 $138 $234
(Class B shares)*............................. $63 $100 $139 $232
MID-CAP GROWTH FUND
(Class A shares).............................. $73 $106 $141 $239
(Class B shares)*............................. $64 $102 $144 $240
SMALL COMPANY GROWTH FUND
(Class A shares).............................. $72 $103 $136 $229
(Class B shares)*............................. $62 $ 98 $136 $226
GROWTH AND INCOME FUND
(Class A shares).............................. $70 $ 96 $124 $203
(Class B shares)*............................. $60 $ 91 $124 $201
</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 $103 $136 $228
(Class B shares)*............................. $22 $ 66 $114 $223
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 $104 $138 $234
(Class B shares)*............................. $23 $ 70 $119 $232
MID-CAP GROWTH FUND
(Class A shares).............................. $73 $106 $141 $239
(Class B shares)*............................. $24 $ 72 $124 $240
SMALL COMPANY GROWTH FUND
(Class A shares).............................. $72 $103 $136 $229
(Class B shares)*............................. $22 $ 68 $116 $226
GROWTH AND INCOME FUND
(Class A shares).............................. $70 $ 96 $124 $203
(Class B shares)*............................. $20 $ 61 $104 $201
</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 three years ended
September 30, 1996 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, 1996 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, 1996 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)
- ------------------------------------------------------------------------------------------------------------------------
BALANCED ASSETS FUND
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(/5/) (0.23) 0.07 (0.28) (0.30) (0.58) 14.62 0.50 52,098
09/30/95 14.62 0.32(/5/) 2.51 2.83 (0.45) (0.58) (1.03) 16.42 20.68 119,916
09/30/96 16.42 0.27(5) 1.39 1.66 (0.28) (0.99) (1.27) 16.81 10.65 147,035
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/2/)
- -------------------------------------------------------------------------------
BALANCED ASSETS FUND
CLASS A
<S> <C> <C> <C> <C>
09/24/93-
09/30/93(/3/) 1.54%(4) 0.46%(4) 25% N/A
09/30/94 1.58 2.00 141 N/A
09/30/95 1.50 2.13 130 N/A
09/30/96 1.52 1.63 187 0.0611
<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)
- ------------------------------------------------------------------------------------------------------------------------
BALANCED ASSETS FUND
CLASS B(6)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/87 $13.99 $0.14(/5/) $ 1.32 $ 1.46 $(0.11) $(0.62) $(0.73) $14.72 9.87 % $141,055
06/30/88 14.72 0.23(/5/) (0.52) (0.29) (0.23) (0.72) (0.95) 13.48 (1.49) 151,924
06/30/89 13.48 0.37(/5/) 0.70 1.07 (0.38) -- (0.38) 14.17 8.22 131,317
06/30/90 14.17 0.53(/5/) 1.26 1.79 (0.53) -- (0.53) 15.43 12.89 123,611
06/30/91 15.43 0.39(/5/) 0.18 0.57 (0.25) -- (0.25) 15.75 4.41 90,239
06/30/92 15.75 0.33(/5/) 0.98 1.31 (0.42) (1.01) (1.43) 15.63 7.51 83,234
06/30/93 15.63 0.30(/5/) 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(/5/) 0.49 0.54 (0.06) (1.21) (1.27) 15.13 3.44 137,456
09/30/94 15.13 0.20(/5/) (0.23) (0.03) (0.18) (0.30) (0.48) 14.62 (0.14) 180,655
09/30/95 14.62 0.23(/5/) 2.51 2.74 (0.36) (0.58) (0.94) 16.42 19.96 162,115
09/30/96 16.42 0.17(/5/) 1.38 1.55 (0.18) (0.99) (1.17) 16.80 9.93 171,197
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/2/)
- -------------------------------------------------------------------------------
BALANCED ASSETS FUND
CLASS B(6)
<S> <C> <C> <C> <C>
06/30/87 2.13% 0.95% 76% N/A
06/30/88 2.01 1.65 58 N/A
06/30/89 2.02 2.74 59 N/A
06/30/90 1.92 3.55 33 N/A
06/30/91 1.94(/7/) 2.65(/7/) 56 N/A
06/30/92 1.93(/8/) 2.04(/8/) 151 N/A
06/30/93 1.91(/9/) 1.94(/9/) 251 N/A
07/01/93-
09/30/93 2.10(4)(10) 1.36(4)(10) 25 N/A
09/30/94 2.21 1.36 141 N/A
09/30/95 2.12 1.59 130 N/A
09/30/96 2.12 1.03 187 0.0611
<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)
- ------------------------------------------------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND(11)
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/08/93-
09/30/94(/3/) $16.24 $ 0.09(/5/) $(0.26) $(0.17) $ -- $(0.65) $(0.65) $15.42 (1.05)% $ 3,207
09/30/95 15.42 0.02(/5/) 2.99 3.01 -- (1.09) (1.09) 17.34 21.29 42,407
09/30/96 17.34 (0.03)(/5/) 2.22 2.19 -- (1.91) (1.91) 17.62 13.88 51,993
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/2/)
- -------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND(11)
CLASS A
<S> <C> <C> <C> <C>
10/08/93-
09/30/94(/3/) 1.64%(/4/)(/1//2/) 0.65%(/4/)(/1//2/) 170% N/A
09/30/95 1.58(/3/) 0.11(13) 251 N/A
09/30/96 1.57 (0.18) 269 0.0600
<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)
- ------------------------------------------------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND(11)
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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)(/5/) 2.71 2.69 -- -- -- 16.28 19.79 79,774
09/30/94 16.28 (0.01)(/5/) (0.28) (0.29) -- (0.65) (0.65) 15.34 (1.81) 71,749
09/30/95 15.34 (0.01)(/5/) 2.89 2.88 -- (1.09) (1.09) 17.13 20.51 39,533
09/30/96 17.13 (0.14)(/5/) 2.19 2.05 -- (1.91) (1.91) 17.27 13.17 36,199
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/2/)
- -------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND(11)
CLASS B
<S> <C> <C> <C> <C>
12/31/87 2.41%(/1//4/) 3.32%(/1//4/) 41% N/A
12/31/88 2.35 1.20 47 N/A
12/31/89 2.36 1.12 67 N/A
12/31/90 2.51 3.36 90 N/A
12/31/91 2.50 (0.42) 79 N/A
12/31/92 2.53 (0.75) 192 N/A
01/01/93-
09/30/93 2.46(/4/) (0.14)(/4/) 171 N/A
09/30/94 2.28 (0.05) 170 N/A
09/30/95 2.22 (0.09) 251 N/A
09/30/96 2.23 (0.83) 269 0.0600
</TABLE>
- -------
(1) Total return is not annualized and does not reflect sales load.
(2) The average commission per share is derived by taking the agency
commissions paid on equity securities trades and dividing by the number of
shares purchased or sold.
(3) Commencement of sale of respective class of shares.
(4) Annualized.
(5) Calculated based upon average shares outstanding.
(6) 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.
(7) Net of expense reimbursement equivalent to .29% of average net assets in
fiscal 1991.
(8) Net of expense reimbursement equivalent to .12% of average net assets in
fiscal 1992.
(9) Net of expense reimbursement equivalent to .05% of average net assets in
fiscal 1993.
(10) Net of expense reimbursement equivalent to .04% of average net assets for
the period ended September 30, 1993.
(11) Blue Chip Growth Fund changed its fiscal year end to September 30,
effective September 24, 1993.
(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.
(14) Net of fee waiver equivalent to .05% of average net assets in fiscal 1987.
4
<PAGE>
The following financial highlights for the periods through September 30,
1996, 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, 1996 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)
- ------------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH FUND(3)
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/87(/4/) $11.91 $ 0.07 $(1.44) $(1.37) $(0.04) -- $(0.04) $10.50 (11.61)% $ 18,429
11/30/88 10.50 0.47 2.36 2.83 (0.08) -- (0.08) 13.25 26.97 28,082
11/30/89 13.25 0.17 4.42 4.59 (0.29) $(0.54) (0.83) 17.01 36.39 48,188
11/30/90 17.01 0.30 (3.08) (2.78) (0.24) (1.09) (1.33) 12.90 (17.62) 27,460
11/30/91 12.90 0.16 3.09 3.25 (0.25) (2.60) (2.85) 13.30 31.13 29,142
11/30/92 13.30 (0.07) 2.87 2.80 (0.02) (0.44) (0.46) 15.64 21.42 30,024
12/01/92-
09/30/93 15.64 (0.09)(/7/) 3.17 3.08 -- (0.69) (0.69) 18.03 20.42 34,918
09/30/94 18.03 0.04 (/7/) (1.64) (1.60) -- (2.65) (2.65) 13.78 (9.60) 32,906
09/30/95 13.78 (0.08)(/7/) 4.14 4.06 (0.04) -- (0.04) 17.80 29.51 37,714
09/30/96 17.80 (0.12)(/7/) 2.21 2.09 -- (2.11) (2.11) 17.78 12.92 41,904
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME PORT- AVERAGE
AVERAGE TO FOLIO COMMISSION
PERIOD NET AVERAGE TURN- PER
ENDED ASSETS NET ASSETS OVER SHARE(/2/)
- -------------------------------------------------------------------------
MID-CAP GROWTH FUND(3)
CLASS A
<S> <C> <C> <C> <C>
11/30/87(/4/) 1.30%(/5/)(/6/) 1.10%(/5/)(/6/) 202% N/A
11/30/88 1.84 3.47 89 N/A
11/30/89 1.83 0.85 54 N/A
11/30/90 1.84 1.72 65 N/A
11/30/91 1.76 1.20 225 N/A
11/30/92 1.76 (0.46) 98 N/A
12/01/92-
09/30/93 1.81(5) 1.18(/5/) 231 N/A
09/30/94 1.76 0.28 555 N/A
09/30/95 1.66 (0.51) 392 N/A
09/30/96 1.62 (0.69) 307 0.0603
<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)
- ------------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH FUND(3)
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/04/93-
09/30/94(/8/) $18.12 $ 0.03 (/7/) $(1.80) $(1.77) $ -- $(2.65) $(2.65) $13.70 (10.56)% $ 4,039
09/30/95 13.70 (0.18)(/7/) 4.08 3.90 (0.02) -- (0.02) 17.58 28.55 9,544
17.58 (0.24)(/7/) 2.18 1.94 -- (2.11) (2.11) 17.41 12.16 13,784
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME PORT- AVERAGE
AVERAGE TO FOLIO COMMISSION
PERIOD NET AVERAGE TURN- PER
ENDED ASSETS NET ASSETS OVER SHARE(/2/)
- -------------------------------------------------------------------------
MID-CAP GROWTH FUND(3)
CLASS B
<S> <C> <C> <C> <C>
10/04/93-
09/30/94(/8/) 2.43%(5)(9) 0.20%(/5/)(/9/) 555% N/A
09/30/95 2.31(11) (0.17)(11) 392 N/A
2.32 (1.43) 307 0.0603
<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)
- ------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND(3)
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/87(4)(10) $12.10 $(0.12)(/7/) $(3.13) $(3.25) $ -- $ -- $ -- $ 8.85 26.87 % $ 8,326
11/30/88(10) 8.85 (0.11)(/7/) 5.18 5.07 -- -- -- 13.92 57.29 22,180
11/30/89(10) 13.92 (0.01)(/7/) 4.03 4.02 -- (0.29) (0.29) 17.65 29.41 48,956
11/30/90(10) 17.65 (0.04)(/7/) (5.19) (5.23) -- (0.54) (0.54) 11.88 (30.58) 23,548
11/30/91(10) 11.88 (0.01)(/7/) 4.92 4.91 -- (2.91) (2.91) 13.88 52.05 27,832
11/30/92(10) 13.88 (0.12)(/7/) 3.39 3.27 -- (0.69) (0.69) 16.46 24.31 32,056
12/01/92-
09/30/93(/10/) 16.46 (0.02)(/7/) 4.07 4.05 -- (0.73) (0.73) 19.78 25.68 39,238
09/30/94 19.78 (0.10)(/7/) (1.40) (1.50) -- (1.46) (1.46) 16.82 (7.74) 38,570
09/30/95 16.82 (0.04)(/7/) 8.28 8.24 -- (0.41) (0.41) 24.65 50.00 89,510
09/30/96 24.65 (0.16)(/7/) 4.29 4.13 -- (4.53) (4.53) 24.25 19.35 158,567
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME PORT- AVERAGE
AVERAGE TO FOLIO COMMISSION
PERIOD NET AVERAGE TURN- PER
ENDED ASSETS NET ASSETS OVER SHARE(/2/)
- -------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND(3)
CLASS A
<S> <C> <C> <C> <C>
11/30/87(4)(10) 1.84%(/5/)(/6/) (1.06)%(/5/)(/6/) 98% N/A
11/30/88(10) 2.16 (0.80) 54 N/A
11/30/89(10) 1.82 (0.04) 32 N/A
11/30/90(10) 2.05 (0.26) 27 N/A
11/30/91(10) 1.86 (0.06) 110 N/A
11/30/92(10) 1.90 (0.88) 209 N/A
12/01/92-
09/30/93(/10/) 1.83(5) (0.15)(5) 216 N/A
09/30/94 1.67 (0.60) 411 N/A
09/30/95 1.57 (0.22) 351 N/A
09/30/96 1.53 (0.68) 240 0.0607
<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)
- ------------------------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND(3)
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/24/93-
09/30/93(/7/) $19.66 $ -- $ 0.12 $ 0.12 $ -- $ -- $ -- $19.78 0.61 % $ 38,898
09/30/94 19.78 (0.20)(/7/) (1.42) (1.62) -- (1.46) (1.46) 16.70 (8.40) 52,208
09/30/95 16.70 (0.16)(/7/) 8.19 8.03 -- (0.41) (0.41) 24.32 49.08 68,313
09/30/96 24.32 (0.29)(/7/) 4.20 3.91 -- (4.53) (4.53) 23.70 18.60 107,839
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME PORT- AVERAGE
AVERAGE TO FOLIO COMMISSION
PERIOD NET AVERAGE TURN- PER
ENDED ASSETS NET ASSETS OVER SHARE(/2/)
- -------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND(3)
CLASS B
<S> <C> <C> <C> <C>
09/24/93-
09/30/93(/7/) 2.34%(5) (1.70)%(5) 216% N/A
09/30/94 2.31 (1.23) 411 N/A
09/30/95 2.22 (0.84) 351 N/A
09/30/96 2.16 (1.30) 240 0.0607
</TABLE>
- -------
(1) Does not reflect sales load.
(2) The average commission per share is dervied by taking the agency
commissions paid on equity securities trades and dividing by the number of
shares purchased or sold.
(3) Mid-Cap Growth Fund and Small Company Growth Fund both changed their
fiscal year ends to September 30, effective September 24, 1993.
(4) For the period January 28, 1987 (commencement of operations) to November
30, 1987.
(5) Annualized.
(6) 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.
(7) Calculated based upon average shares outstanding.
(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) Restated to reflect a 0.984460367 for 1.00 stock split effective September
24, 1993.
(11) 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, 1996 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)
- -------------------------------------------------------------------------------------------------------------------
GLOBAL BALANCED FUND
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/15/94-
09/30/94(/4/).. $6.94 $0.02 $(0.05) $(0.03) $ -- $ -- $ -- $6.91 (0.43)% $13,100
09/30/95........ 6.91 0.10 0.36 0.46 (0.01) -- (0.01) 7.36 6.72 9,615
09/30/96........ 7.36 0.06 0.71 0.77 (0.42) -- (0.42) 7.71 11.00 10,035
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/3/)
- --------------------------------------------------------------------------
GLOBAL BALANCED FUND
CLASS A
<S> <C> <C> <C> <C>
06/15/94-
09/30/94(/4/).. 2.15%(/5/)(/6/) 0.93%(/5/)(/6/) 18% N/A
09/30/95........ 2.15(/6/) 1.36(/6/) 169 N/A
09/30/96........ 2.15(/6/) 0.84(/6/) 103 0.0074
<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)
- -------------------------------------------------------------------------------------------------------------------
GLOBAL BALANCED FUND
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/16/94-
9/30/94(/4/) $6.94 $0.01 $(0.05) $(0.04) $ -- $ -- $ -- $6.90 (0.58)% $13,532
09/30/95........ 6.90 0.05 0.36 0.41 (0.01) -- (0.01) 7.30 5.91 13,976
09/30/96........ 7.30 0.02 0.70 0.72 (0.38) -- (0.38) 7.64 10.21 16,112
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/3/)
- --------------------------------------------------------------------------
GLOBAL BALANCED FUND
CLASS B
<S> <C> <C> <C> <C>
06/16/94-
9/30/94(/4/) 2.80%(5)(6) 0.33%(/5/)(/6/) 18% N/A
09/30/95........ 2.80(/6/) 0.75(/6/) 169 N/A
09/30/96........ 2.80(/6/) 0.21(/6/) 1.03 0.0074
<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)
- -------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/01/094-
09/30/94(4).... $7.33 $0.07 $ 0.10 $0.17 $(0.06) $ -- $(0.06) $7.44 2.34% $ 3,098
09/30/95........ 7.44 0.32 1.08 1.40 (0.30) (0.15) (0.45) 8.39 19.53 3,532
09/30/96........ 8.39 0.14 2.50 2.64 (0.17) (0.39) (0.56) 10.47 32.59 21,099
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/3/)
- --------------------------------------------------------------------------
GROWTH AND INCOME FUND
CLASS A
<S> <C> <C> <C> <C>
07/01/094-
09/30/94(4).... 1.50%(/5/)(/6/) 3.48%(/5/)(/6/) 8% N/A
09/30/95........ 0.46(/6/) 4.16(/6/) 230 N/A
09/30/96........ 0.96(/6/) 1.52(/6/) 161 0.0600
<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)
- -------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/06/94-
09/30/94(/4/).. $7.33 $0.05 $0.11 $0.16 $(0.05) $ -- $(0.05) $7.44 2.19% $ 229
09/30/95........ 7.44 0.35 1.03 1.38 (0.28) (0.15) (0.43) 8.39 19.19 2,538
09/30/96........ 8.39 0.08 2.50 2.58 (0.13) (0.39) (0.52) 10.45 31.75 13,903
<CAPTION>
RATIO
OF NET
RATIO OF INVEST-
EXPENSES MENT
TO INCOME AVERAGE
AVERAGE TO COMMISSION
PERIOD NET AVERAGE PORTFOLIO PER
ENDED ASSETS NET ASSETS TURNOVER SHARE(/3/)
- --------------------------------------------------------------------------
GROWTH AND INCOME FUND
CLASS B
<S> <C> <C> <C> <C>
07/06/94-
09/30/94(/4/).. 2.15%(5)(6) 2.86%(5)(6) 8% N/A
09/30/95........ 0.30(/6/) 4.48(/6/) 230 N/A
09/30/96........ 1.58(/6/) 0.73(/6/) 161 0.0600
</TABLE>
- --------
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load.
(3) The average commission per share is derived by taking the agency
commissions paid on equity securities trades and dividing by the number of
shares purchased or sold.
(4) Commencement of sale of respective class of shares.
(5) Annualized.
(6) Net of the following fee waivers/expense reimbursements (based on average
net assets):
<TABLE>
<CAPTION>
09/30/94 09/30/95 09/30/96
-------- -------- --------
<S> <C> <C> <C>
Global Balanced Class A............................ 1.14% 0.40% 0.44%
Global Balanced Class B............................ 0.93 0.45 0.41
Growth and Income Class A.......................... 4.48 2.96 1.01
Growth and Income Class B.......................... 20.35 5.07 1.14
</TABLE>
6
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
A description of each Fund's investment objective and a summary of the in-
vestment policies followed by the Funds are set forth below. However, please
also refer to the section captioned "Investment Techniques and Risk Factors"
for a more detailed description of the characteristics and risks associated
with the Funds and the types of securities in which they invest. There can be
no assurance that the investment objective of a Fund will be achieved.
Each Fund has certain investment restrictions which are described in the
Statement of Additional Information. Except as specifically indicated, a
Fund's investment policies and strategies described herein are not fundamental
and may be changed by the Board of Trustees (the "Trustees") without the ap-
proval of shareholders. Each Fund's respective investment objective and funda-
mental investment restrictions, however, may not be changed without approval
of shareholders of the affected Fund. See "General Information."
Each of the other Funds is classified as diversified within the meaning of
the 1940 Act. The Global Balanced Fund is classified as non-diversified within
the meaning of the 1940 Act, subject, however, to certain tax diversification
requirements. To the extent that the Fund assumes large positions in the secu-
rities of a small number of issuers, the Fund may be more susceptible to any
single economic, political or regulatory occurrence and to the financial con-
ditions of the issuer in which it invests.
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. The Adviser considers both the opportu-
nity for gain and the risk of loss in making investments. The Adviser antici-
pates that, over the long term, the portfolio will consist of equity invest-
ments, in the form of common and preferred stocks, warrants and other rights
as well as long-term bonds and other debt securities such as convertible secu-
rities, short-term investments and U.S. government securities. The Adviser may
invest in both domestic and foreign securities. The Balanced Assets Fund will,
under normal circumstances, invest at least 25% of its assets in fixed-income
senior securities; however, the fixed income component will exceed 25% when
the Adviser believes such an adjustment in portfolio mix to be necessary in
order to conserve principal, such as in anticipation of a decline in the equi-
ties market. See "Investment Techniques and Risk Factors."
In selecting equity investments, the Adviser typically seeks companies of
medium to large capitalizations (generally $1 billion or more) that, based on
their future prospects or opportunities, it believes are undervalued in the
marketplace. The Fund intends to limit its investments in companies with mar-
ket capitalizations of less than $1 billion to 20% of its total assets. In-
vestments in companies with market capitalizations of less than $1 billion may
be more volatile than investments in companies with larger market capitaliza-
tions.
In selecting debt investments, the Adviser seeks debt securities with longer
maturities during periods of anticipated lower interest rates and shorter-term
debt securities when interest rates are expected to rise. The Adviser gener-
ally selects long-term debt securities from high-quality bonds (rated "AA" or
higher by Standard & Poor's Ratings Services, 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 securities (such as commercial
paper rated "A-1" by S&P or "P-1" by Moody's or determined by the Adviser to
be of equivalent quality if unrated). However, the Adviser may invest up to
10% of the value of the Fund's total assets (measured at the time of invest-
ment) in securities rated as low as "BBB" by S&P or "Baa" by Moody's (or de-
termined 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-Adviser have the flexibility to select among a combi-
nation of domestic and foreign equity and debt secu
7
<PAGE>
rities 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 economic trends. Country selection is a significant
part of each Adviser's investment process. Investment in foreign securities
involves risks not generally associated with investment in domestic securi-
ties. See "Investment Techniques and Risk Factors" below and the Statement of
Additional Information for a full discussion of the risks associated with in-
vestment in foreign securities.
It is anticipated that, over the long term, the portfolio will consist of
foreign and domestic equity securities, in the form of common and preferred
stocks, warrants and other rights, as well as global bonds and other global
debt securities such as convertible securities, short-term instruments and se-
curities of U.S. and foreign governments. Under normal circumstances, the Fund
will invest at least (i) 25% of its assets in global fixed-income senior secu-
rities; (ii) 10% of its assets in domestic equity securities; and (iii) 45% of
its assets in foreign equity securities. 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). Furthermore, the Fund reserves the right to invest substan-
tially all of its assets in U.S. markets or U.S. dollar-denominated obliga-
tions when market conditions warrant such an investment decision. The alloca-
tion among the components will be reviewed by the Adviser and Sub-Adviser on
at least a monthly basis.
In selecting securities denominated in foreign currencies, the Adviser and
Sub-Adviser will consider, among other factors, the effect of movement in cur-
rency exchange rates on the U.S. dollar value of such securities. The Adviser
or Sub-Adviser may seek to hedge all or a portion of the Fund's foreign secu-
rities through the use of forward foreign currency contracts, currency op-
tions, futures contracts and options thereon. The Fund will also engage in
such transactions to enhance returns. See "Investment Techniques and Risk Fac-
tors" 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, options on futures, forward foreign currency exchange
contracts, currency options 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 expose it to risks independent of its securities posi-
tions. See "Risks of Foreign Securities" 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 considered to be
emerging markets. The term "emerging markets" applies to any country that is
generally considered to be an emerging or developing country by the interna-
tional financial community. None of the Fund's fixed income investments will
be in emerging markets or countries. See "Investment Techniques and Risk Fac-
tors" below for a discussion of the risks associated with investments in
emerging markets.
The Fund may also invest in the securities of small and emerging growth com-
panies. 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 attributes, but
may also have greater risks than investing in larger companies. See "Invest-
ment Techniques and Risk Factors" below.
8
<PAGE>
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. 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, the Adviser expects that at least 30% of the fixed income component,
adjusted 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, the Adviser may invest more than 25% of the fixed income component in
the securities 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 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 the judgment of the Adviser, possess similar
credit characteristics ("investment grade bonds"). Notwithstanding the forego-
ing, 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 the Adviser at the time of investment to
be of comparable quality, with the remainder of such component invested in se-
curities rated of high quality by S&P or Moody's (i.e., "AA" or "Aa") or of
comparable quality. However, with respect to obligations of a government issu-
er, the Fund may invest in such obligations if rated "A" or better by S&P or
Moody's, or if unrated, determined by the Adviser to be of comparable credit
quality; provided that the obligations are denominated in the issuer's own
currency. See "Fixed Income Securities" in "Investment Techniques and Risk
Factors" below. See also the Statement of Additional Information for more in-
formation regarding ratings of debt securities. The ratings assigned by S&P
and Moody's are considered as one of several factors in the Adviser's indepen-
dent credit analysis of issuers.
The average maturity of the Fund's portfolio of debt securities will vary
from time to time. 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 se-
curities generally fluctuate more in response to interest rate changes than do
the prices of shorter-term securities. Under normal circumstances, the Fund
will maintain 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 "Investment Techniques and Risk Factors" below.
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; or (ii) 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 security to security. In pur-
suing its investment objective, the Fund may, under normal circumstances, in-
vest up to 35% of its total assets in debt securities that have the potential
for capital appreciation. 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.
MID-CAP GROWTH FUND
The Mid-Cap Growth Fund will invest, under normal circumstances, at least
65% of its total assets
9
<PAGE>
in the equity securities of medium-sized companies ("Mid-Cap Companies") with
market capitalizations of $1 billion to $5 billion, and which have conducted
operations for at least five years. The Fund may also invest in equity securi-
ties that are issued by small companies which are believed by the Adviser to
have significant growth potential. 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 secu-
rities, 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 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 apprecia-
tion. 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.
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 invest up to
35% of its total assets in debt securities that have the potential for capital
appreciation. The Fund may invest in securities rated as low as "BBB" or
"Baa." See "Fixed Income Securities" in "Investment Techniques and Risk Fac-
tors" 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 capital appreciation, current income, or both. The Fund may also
purchase corporate bonds, notes, debentures, preferred stocks, convertible se-
curities (both debt securities and preferred stocks) or U.S. government secu-
rities, if the Adviser determines that their purchase would help further the
achievement of the Fund's investment objectives. In addition, the Fund may in-
vest in equity securities that are (i) issued by small companies which are be-
lieved by the Adviser to have significant growth potential; or (ii) 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 security to security. The types of securities held by
the Fund may vary from time to time in light of the Fund's investment objec-
tives, 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. When
market conditions warrant, the Fund may, as a temporary defensive measure, in-
vest without limitation in debt securities, preferred stocks, or invest in any
other securities which the Adviser considers consistent with a defensive pos-
ture. See "Investment 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 (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. 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
10
<PAGE>
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 "Fixed Income
Securities" in "Investment Techniques and Risk Factors" below and the
Statement of Additional Information for additional information regarding high
yield bonds.
INVESTMENT TECHNIQUES AND RISK FACTORS
ILLIQUID SECURITIES. No more than 15% of the value of a Fund's net assets
may be invested in securities which are illiquid, including repurchase
agreements that have a maturity of longer than seven days, interest rate
swaps, currency swaps, caps, floors and collars. For this purpose, not all
securities which are restricted are deemed to be illiquid. For example,
restricted securities which the Board of Trustees, or the Adviser pursuant to
guidelines established by the Board of Trustees, has determined to be
marketable, such as securities eligible for sale under Rule 144A promulgated
under the Securities Act of 1933, as amended, or certain private placements of
commercial paper issued in reliance on an exemption from such Act pursuant to
Section 4(2) thereof, may be deemed to be liquid for purposes of this
restriction. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers (as defined in Rule 144A) become for a time uninterested in purchasing
these restricted securities. In addition, a repurchase agreement which by its
terms can be liquidated before its nominal fixed-term on seven days or less
notice is regarded as a liquid instrument. Subject to the applicable
limitation on illiquid securities investments, a Fund may acquire securities
issued by the U.S. government, its agencies or instrumentalities in a private
placement. See "Illiquid Securities" in the Statement of Additional
Information for a further discussion of investments in such securities.
REPURCHASE AGREEMENTS. Under these types of agreements, a Fund buys a
security and obtains a simultaneous commitment from the seller to repurchase
the security at a specified time (generally within seven days) and price. The
seller must maintain collateral with the Fund's custodian (or at an
appropriate sub-custodian in the case of tri- or quad-party repurchase
agreements) equal to at least 102% of the repurchase price, plus accrued
interest. A Fund will only enter into repurchase agreements involving
securities in which it could otherwise invest and with selected banks and
securities dealers whose financial condition is monitored by the Adviser (or
Sub-Adviser), subject to the guidance of the Trustees. If the seller under the
repurchase agreement defaults, the Fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined, and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the
collateral by the Fund may be delayed or limited. 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-Adviser 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 securities guaranteed by
the U.S. government, which include the following: (1) direct obligations of
the U.S. Treasury (such as Treasury bills, notes and bonds) and (2) federal
agency obligations guaranteed as to principal and interest by the U.S.
Treasury (such as Government National Mortgage Association ("GNMA")
certificates and Federal Housing Administration debentures). For these
securities, the payment of principal and interest is unconditionally
11
<PAGE>
guaranteed by the U.S. government. They are of the highest possible credit
quality. These securities are subject to variations in market value due to
fluctuations in interest rates, but if held to maturity, are guaranteed by the
U.S. government to be paid in full.
Each Fund may also invest in securities issued by U.S. government
instrumentalities and certain federal agencies that are neither direct
obligations of, nor are they guaranteed by, the U.S. Treasury. However, they
involve federal sponsorship in one way or another. For example, some are
backed by specific types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the issuer; and
others are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC"), Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and Federal Home Loan Banks.
Mortgage-backed Government Securities. The Balanced Assets Fund and the
Global Balanced Fund may invest in mortgage-backed securities, including those
representing an undivided ownership interest in a pool of mortgages, e.g.,
GNMA, FNMA and FHLMC 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
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-Adviser to determine the appropriate course of action.
In addition, the Global Balanced Fund may invest in high yield bonds. High
yield bonds can be expected to provide higher yields, but such securities may
be subject to greater market price fluctuations and risk of loss of principal
than lower yielding, higher rated fixed income securities. High yield bonds
may be issued by less creditworthy companies or by larger, highly leveraged
companies.
High yield bonds tend to be more volatile than higher rated fixed income
securities so that adverse economic events may have a greater impact on the
prices of high yield bonds than on higher rated fixed
12
<PAGE>
income securities. The high yield bond market may be less liquid than the
market for higher rated fixed income securities even under normal economic
conditions. Also, there may be significant disparities in the prices quoted
for high yield bonds by various dealers. Adverse economic conditions or
investor perceptions (whether or not based on economic fundamentals) 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 experience difficulty
in liquidating a portion of its portfolio. Under such conditions, 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.
ASSET-BACKED SECURITIES. The Global Balanced Fund may invest in asset-backed
securities. These securities represent an interest in a pool of consumer or
other types of loans. Payments of principal and interest on the underlying
loans are passed through to the holders of asset-backed securities over the
life of the securities.
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. PIK bonds are debt obligations which
provide that the issuer thereof may, at its option, pay interest on such bonds
in cash or in the form of additional debt obligations. Such investments may
experience greater volatility in market value due to changes in interest rates
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 are options to buy a stated
number of shares of common stock at a specified price any time during the life
of the warrants (generally two or more years).
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 are at an earlier stage of
development and therefore have limited product lines, market access for such
products, financial resources and depth in management than larger, more
established companies, and their securities may be subject to more abrupt or
erratic market movements than securities of larger, more established companies
or the market averages in general. In addition, certain smaller issuers may
face difficulties in obtaining the capital necessary to continue in operation
and may go into bankruptcy, which could result in a complete loss of an
investment. Smaller companies also may be less significant factors within
their industries and may have difficulty withstanding competition from larger
companies. While smaller companies may be subject to these additional risks,
they may also realize more substantial growth than larger, more established
companies.
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
13
<PAGE>
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.
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. 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.
In addition, the Funds may invest in securities denominated in other currency
"baskets." See 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 government securities of, developing countries or emerging mar-
kets. Although there is no universally accepted definition, a developing coun-
try is generally considered to be a country in the initial stages of its in-
dustrialization cycle with a low per capita gross national product. Historical
experience indicates that the markets of developing countries or emerging mar-
kets have been more volatile than the markets of developed countries; however,
such markets can provide higher rates of return to investors. Investment in an
emerging market country may involve certain risks, including a less diverse
and mature economic structure, a less stable political system, an economy
based on only a few industries or dependent on international aid or develop-
ment assistance, the vulnerability to local or global trade conditions, ex-
treme debt burdens, or volatile inflation rates.
Risks of Foreign Securities. Foreign investments may be affected favorably
or unfavorably by changes in currency rates and exchange-control regulations
and costs will be incurred in connection with conversions between various cur-
rencies. The value of a security may fluctuate as a result of currency ex-
change 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 ac-
counting, auditing and financial reporting standards and requirements compara-
ble to those applicable to U.S. companies. Securities of some foreign compa-
nies may be less liquid or more volatile than securities of U.S. companies,
and foreign brokerage commissions and custodian fees are generally higher than
in the U.S. In addition, there is generally less governmental regulation of
stock exchanges, brokers and listed companies abroad than in the U.S. Invest-
ments in foreign securities may also be subject to other risks, different from
those affecting U.S. investments, including local political or economic devel-
opments, expropriation or nationalization of assets, confiscatory taxation and
imposition of withholding taxes on income from sources within such countries.
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.
14
<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.
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. The purchase of an option on cur-
rency may constitute an effective hedge against exchange rate fluctuations;
however, in the event of exchange rate movements adverse to the Fund's posi-
tion, the Fund may forfeit the entire amount of the premium plus related
transaction costs. As with other kinds of option transactions, the writing of
an option on currency will constitute only a partial hedge, up to an amount of
the premium received, and the Fund could be required to purchase or sell cur-
rencies at disadvantageous exchange rates, thereby incurring losses.
The Global Balanced Fund may enter into forward foreign currency exchange
contracts, currency options and currency swaps for non-hedging purposes when
the Adviser or Sub-Adviser anticipates that a foreign currency will appreciate
or depreciate in value, but securities denominated in that currency do not
present attractive investment opportunities or are not included in the 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 con tract transactions for
hedging or non-hedging purposes, the Fund will segregate cash or liquid secu-
rities in an amount sufficient to meet its payment obligations in these trans-
actions or otherwise "cover" the obligation. 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 ex-
ceed 5% of the Fund's total assets in the case of non-bona fide hedging trans-
actions.
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. Currency swaps usually
involve the delivery of the entire principal value of one designated currency
in exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations. The Fund will main-
tain in a segregated account with its custodian cash or liquid securities
equal to the net amount, if any, of the excess of the Fund's obligations over
its entitlements with respect to swap transactions. To the extent that the net
amount of a swap is held in a segregated account consisting of cash or liquid
securities, the Fund believes that swaps do not constitute senior securities
under the 1940 Act and, accordingly, they will not be treated 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 the
Adviser or Sub-Adviser is incorrect in its forecasts of market values and cur-
rency exchange rates, the investment performance of the Fund would be less fa-
vorable than, it would have been if this investment technique 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 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 secu-
rities' potential for capital appreciation. As with any extensions of credit,
there are risks of delay in recovery and, in some cases, even loss of rights
in the collateral should the borrower of the securities fail financially. How-
ever, these loans of portfolio securities will be made only to firms deemed by
the Adviser or Sub-Adviser to be credit
15
<PAGE>
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-Adviser) in light of chang-
ing facts and circumstances, including general economic and market conditions,
and will be subject to applicable lending regulations of the Board of Gover-
nors 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 Fund will not use Futures and options on Futures for speculation.
All puts and calls on securities, interest rate futures or stock and bond in-
dex 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 as-
sets in yield curve options. See "Foreign Securities--Foreign Currency Trans-
actions."
Each Fund may use spread transactions for any lawful purpose consistent with
the Fund's investment objective such as hedging or managing risk, but not for
speculation. A Fund may purchase covered spread options from securities
dealers. Such covered spread options are not presently exchange-listed or
exchange-traded. The purchase of a spread option gives a Fund the right to
put, or sell, a security that it owns at a fixed dollar spread or fixed yield
spread in relationship to another security that the Fund does not own, but
which is used as a benchmark. The risk to a Fund in purchasing covered spread
options is the cost of the premium paid for the spread option and any
transaction costs. In addition, there is not assurance that closing
transactions will be available. The purchase of spread options will be used to
protect a Fund against adverse changes in prevailing credit quality spreads,
i.e., the yield spread between high quality and lower quality securities. Such
protection is only provided during the life of the spread option.
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 a 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
16
<PAGE>
the Adviser's (or Sub-Adviser's) ability to predict correctly movements in the
direction of interest rates, securities prices and currency markets; (2) im-
perfect correlation between the price of options and Futures contracts and op-
tions thereon and movements in the prices of the securities or currencies be-
ing hedged; (3) the fact that skills needed to use these strategies are dif-
ferent from those needed to select portfolio securities; (4) the possible ab-
sence of a liquid secondary 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 pur-
chase or sell a portfolio security at a time that otherwise would be favorable
for it to do so, or the possible need for the Fund to sell a portfolio secu-
rity at a disadvantageous time, due to the need for the Fund to maintain "cov-
er" or to segregate securities 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 re-
quirements. See the Statement of Additional Information for further informa-
tion concerning income enhancement 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." A "special situation" arises when, the opinion of the Adviser or Sub-
Adviser, the securities of a particular issuer will be recognized and appreci-
ated in value due to a specific development with respect to that issuer. De-
velopments creating a special situation might include, among others, a new
product or process, a technological breakthrough, a management change or other
extraordinary corporate event, or differences in market supply of and demand
for the security. Investments in special situations may carry an additional
risk of loss in the event that the anticipated development does not occur or
does not attract the expected attention.
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.
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 as of September 30, 1996 held as-
sets of over $36 billion. SunAmerica's principal executive offices are located
at 1 SunAmerica Center, Los Angeles, CA 90067-6022. In addition to serving as
adviser to the Funds, the Adviser and its affiliates serve as adviser, manager
and/or administrator for Anchor Pathway Fund, SunAmerica Income Funds,
SunAmerica Money Market Funds, Inc., Style Select Series, Inc., Anchor Series
Trust and SunAmerica Series Trust. The Adviser and its affiliates managed, ad-
vised and/or administered assets of approximately $9.1 billion as of December
31, 1996 for investment companies, individuals, pension accounts, and corpo-
rate and trust accounts.
17
<PAGE>
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, 1996, 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 same period, the
Global Balanced Fund and the Growth and Income Fund paid the Adviser a fee
equal to .41% and .75% respectively, of the Fund's average daily net assets
pursuant to a voluntary fee reimbursement by the Adviser.
THE SUB-ADVISER. The Adviser has entered into a sub-advisory agreement with
AIG Global pursuant to which 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 affili-
ated 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 mem-
ber companies write insurance in approximately 130 countries and jurisdictions
and are engaged in a range of financial services businesses. As of September
30, 1996, AIG Global Investment Corp., and its foreign affiliates advised on
more than $68 billion of assets, of which approximately $10 billion repre-
sented assets of non-affiliated clients. The Adviser pays AIG Global a monthly
fee with respect to those net assets of the Global Balanced Fund actually man-
aged by AIG Global and its affiliates (as described above), computed on aver-
age daily net assets at the following annual rates: .50% on the first $50 mil-
lion 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 September 30, 1996, the Adviser paid to AIG
Global a fee equal to .50% of the Global Balanced Fund's average daily net as-
sets. The foregoing fees are paid from the management fee paid to the Adviser
and do not increase Fund expenses. The Sub-Adviser discharges its responsibil-
ities subject to the direction and control of the Trustees and the oversight
and review of the Adviser.
PORTFOLIO MANAGERS. There are six 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 portfolio manager of the 1) Balanced Assets
Fund and Blue Chip Growth Fund since February 1992 and 2) domestic equity
component of the Global Balanced Fund since the inception date of June 15,
1994, and 3) Growth and Income Fund from the inception date of July 1, 1994 to
July 1996. Mr. Feeley is an Executive Vice President of the Adviser and serves
as the firm's Chief Investment Officer. Prior to joining the Adviser in
February 1992, Mr. Feeley was Senior Portfolio Manager for Delaware Management
Company, Inc.
P. Christopher Leary has served as 1) portfolio manager of the global bond
component of the Global Balanced Fund since April 1996 and 2) 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.
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.
18
<PAGE>
Gerald P. Sullivan, formerly assistant portfolio manager of the Growth and
Income Fund, assumed full responsibility for the portfolio management of the
Fund effective July 2, 1996. Prior to joining the Adviser as an equity analyst
in February 1995, 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.
David J. Leary, who had served as a co-portfolio manager for the foreign
equity component of the Global Balanced Fund since the inception date of June
15, 1994, assumed full responsibility for the portfolio management of the Fund
effective May 17, 1996. Mr. Leary, Senior Investment Manager of AIG Global
Investment Corp. (Europe) Ltd., is responsible for implementing the investment
decisions made by AIG Global's Investment Committee relating to asset
allocation, strategy and currency management. Mr. Leary has been a portfolio
manager of AIG Global Investment Corp. (Europe) Ltd. since 1988.
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 for meetings or seminars of a business na-
ture. In addition, the following types of non-cash compensation may be offered
through sales contests: (i) travel mileage on major air carriers; (ii) tickets
for entertainment events (such as concerts or sporting events); or (iii) mer-
chandise (such as clothing, trophies, clocks, pens or other electronic equip-
ment). 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 bo-
nuses or other incentives may be deemed to be underwriters under the Securi-
ties 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.
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 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
19
<PAGE>
Distribution Plans hereinafter referred to as the "Class A Plan" and the
"Class B Plan, and collectively as the "Distribution Plans." In adopting each
Distribution Plan, the Trustees determined that there was a reasonable
likelihood that each such Plan would benefit the Fund 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, 1996, 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, 1996, the Growth
and Income Fund (Class A and Class B shares) paid the Distributor a fee equal
to .34% and .96%, 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 services. Pursuant to the Service Agreement, as compensation for
services rendered, SAFS receives a fee from each Fund, accrued daily and
payable monthly, at an annual rate of 0.22% of average daily net assets. See
the Statement of Additional Information for more information.
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 should consult
their investment adviser for help in determining which class of shares is most
appropriate for them. Generally, investors making large investments, qualify-
ing for a reduced initial sales charge, might consider Class A shares because
there is a lower distribution fee than Class B shares. Shareholders who pur-
chase $1,000,000 or more of shares of the Funds should only purchase Class A
shares. Investors making small investments might consider Class B shares be-
cause
20
<PAGE>
100% of the purchase price is invested immediately. Dealers may receive dif-
ferent levels of compensation depending 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
but no certificate is issued for fractional shares. 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 CDSC 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 CDSC is paid to the Distributor. Redemptions of such shares held longer
than twelve months would not be subject to a CDSC. However, one-half of the
commission paid with respect to such a purchase is subject to forfeiture 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 distribu-
tions 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 or certain other advisory accounts for the benefit of
clients of broker-dealers, financial institutions, registered investment
advisers 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 a 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 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.
21
<PAGE>
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 and the Distributor reserve the right to reject any purchase
order and may at any time discontinue the sale of any class of shares of any
Fund.
Shares of the Funds may be purchased through the Distributor or SAFS, by
check or federal funds wire.
Shareholders who have met the minimum initial investment of the Fund may
elect to have periodic purchases made through a dollar cost averaging program.
At the shareholder's election, such purchases may be made from their bank
checking or savings account on a monthly, quarterly, semi-annual or annual
basis. Purchases can be made via electronic funds transfer through the
Automated Clearing House or by physical draft check. Purchases made via
physical draft check require an authorization card to be filed with the
shareholder's bank.
Checks should be made payable to the specific Fund or to "SunAmerica Funds"
or, for retirement plan accounts for which the Adviser serves as fiduciary, to
"Resources Trust Company." Payments to open new accounts should be mailed to
22
<PAGE>
SunAmerica Fund Services, Inc., Mutual Fund Operations, The SunAmerica Center,
733 Third Avenue, New York, New York 10017-3204, together with a completed New
Account Application. Payment for subsequent purchases should be mailed to
SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas City,
Missouri 64141-6373 and the shareholder's Fund account number should appear on
the check. For fiduciary retirement plan accounts, both initial and subsequent
purchases should be mailed to SunAmerica Fund Services, Inc., Mutual Fund
Operations, The SunAmerica Center, 733 Third Avenue, New York, New York 10017-
3204. SAFS reserves the right to reject any check made payable other than in
the manner indicated above. Under certain circumstances, a Fund will accept a
multi-party check (e.g., a check made payable to the shareholder by another
party and then endorsed by the shareholder to the Fund in payment for the
purchase of shares); however, the processing of such a check may be subject to
a delay. The Funds do not verify the authenticity of the endorsement of such
multi-party check, and acceptance of the check by a Fund should not be
considered verification thereof. Neither the Funds nor their affiliates will
be held liable for any losses incurred as a result of a fraudulent
endorsement.
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) 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 CDSC, 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 THE 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
applicable class of shares of a Fund next determined after the repurchase or-
der is received, less any applicable CDSC. Repurchase orders received by the
Distributor after the Fund's close of business 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 Distributor imposes any
such charge. The offer to repurchase may be suspended at any time, as de-
scribed 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
23
<PAGE>
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 Trust's records, (ii) his or her account number with the
Trust, (iii) the name of the Fund, (iv) the amount to be redeemed and (v) 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. Payment may be made by check or by
electronic funds transfer through the Automated Clearing House. At the share-
holder'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 mini-
mum periodic payment is $50. Maintenance of a withdrawal plan concurrently
with purchases of additional 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. Payment is normally 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 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 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 SunAmerica fund that offers
such class at the respective net asset value per share. Before making an ex-
change, a shareholder should obtain and review the prospectus of the fund
whose shares are being acquired. All exchanges are subject to applicable mini-
mum initial or subsequent investment requirements. Notwithstanding the forego-
ing, shareholders may elect to make periodic exchanges on a monthly, quarter-
ly, semi-annual and annual basis through the Systematic Exchange Program.
Through this program, the minimum exchange amount is $25 and there is no fee
for exchanges made. All exchanges can only be effected if the shares to be ac-
quired 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
SunAmerica fund where
24
<PAGE>
the original purchase of such fund's Class A shares was not subject to an ini-
tial 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 re-
demptions. 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 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
SunAmerica fund 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 deter-
mining 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
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 is responsible for decisions
to buy and sell foreign equity securities, selection of broker-dealers and ne-
gotiation of commission rates for its component of the portfolio. 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 in-
cludes an underwriter's concession or discount. On occasion, certain money
market securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
As a general matter, the Adviser (or Sub-Adviser) 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 and AIG Global 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.
25
<PAGE>
DETERMINATION OF NET ASSET VALUE
The Fund is open for business on any day the NYSE is open for regular
trading. Shares are valued each day as of the close of regular trading on the
NYSE (generally, 4:00 P.M., Eastern time). 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. 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, average, year-to-date, or other total return
figures. Further, the Fund may advertise 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, if any,
and the excess of net realized long-term capital gains over net capital losses
("capital gain distributions"), if any, will be distributed to the
shareholders at least annually. 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. With respect to capital gain
distributions, 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. 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 amounts in excess of $10 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).
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
26
<PAGE>
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 shareholders 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 proportion-
ate share as taxes paid by them, and deduct such proportionate share in com-
puting their taxable incomes or, alternatively, use them as foreign tax cred-
its 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. 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
27
<PAGE>
Fund. The Trustees have the authority to issue an unlimited number of shares
of beneficial interest 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, 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 per-sonally
liable for any Trust obligation. Thus the risk of a shareholder being personally
liable, as a partner for obligations 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.
28
<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.
[LOGO]SUNAMERICA
CAPITAL SERVICES
Distributor
EFPRO
<PAGE>
SUNAMERICA EQUITY FUNDS
(SunAmerica Balanced Assets Fund and SunAmerica Small Company Growth Fund)
(Class Z Shares)
SunAmerica Balanced Assets Fund and SunAmerica Small Company Growth Fund
(each, a "Fund" and collectively, the "Funds") are two of six separate series of
SunAmerica Equity Funds, which is an open-end management investment company
organized as a Massachusetts business trust (the "Trust"). Each Fund is advised
and/or managed by SunAmerica Asset Management Corp. More general information
about the Funds can be found in the attached Prospectus dated January 30, 1997,
(the "Retail Class Prospectus"), which is incorporated by reference into this
Prospectus.
SunAmerica Balanced Assets Fund ("Balanced Assets Fund") seeks to conserve
principal by maintaining at all times a balanced portfolio of stocks and bonds.
The Balanced Assets Fund seeks to achieve its investment objective by selecting
among different types of investments for capital growth and income and may alter
the composition of the portfolio as economic and market trends change.
SunAmerica Small Company Growth Fund ("Small Company Growth Fund") seeks
capital appreciation by investing primarily in equity securities of small
capitalization growth companies. The Small Company Growth Fund pursues its
investment objective by investing, under normal circumstances, at least 65% of
its total assets in the equity securities of small, lesser known or new growth
companies or industries, such as telecommunications, media and biotechnology.
See "Investment Objectives and Policies" for more information about each Fund.
There can be no assurance that the Funds' objectives will be achieved.
Class Z shares are offered exclusively for sale to participants in the
SunAmerica Profit Sharing and Retirement Plan, an employee benefit plan
sponsored by Fidelity Investments (the "401(k) Plan" or the "Plan"). Class Z
shares are only available in the following states: AL, AZ, CA, CO, CT, FL, GA,
IL, IN, KS, KY, MN, MO, NJ, NY, NC, OH, PA, SC, TX, VA and WA. Only Class Z
shares are offered through this Prospectus. The Funds also offer Class A and
Class B shares through the Retail Class Prospectus.
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
Class Z shares of either 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 31, 1997, 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, which may be obtained without charge by contacting the
Trust at The SunAmerica Center, 733 Third Avenue, New York, NY 10017 or by
calling (800) 858-8850.
__________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES 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 30, 1997
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
Small
Balanced Company
Assets Fund Growth Fund
Class Z Class Z
------------ ------------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Initial Sales Load........ None None
Maximum Sales Load on
Reinvested Dividends............ None None
Maximum Deferred Sales Load....... None None
Redemption Fees................... None None
Exchange Fees..................... None None
Annual Fund Operating Expenses
Management Fees................... 0.75% 0.75%
12b-1 Fees........................ None None
Other Expenses.................... 0.25% 0.32%
Total Operating Expenses.......... 1.00% 1.07%
</TABLE>
Actual expenses may be greater or less than those shown.
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 Z shares)......... $10 $32 $55 $123
Small Company Growth Fund
(Class Z shares)......... $11 $34 $59 $131
</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.
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS "MANAGEMENT OF THE TRUST--THE DISTRIBUTOR"
IN THE RETAIL CLASS PROSPECTUS.
SunAmerica Capital Services, Inc. serves as the Distributor of Class Z
shares and incurs the expenses of distributing the Funds' Class Z shares under a
Distribution Agreement with respect to the Funds, none of which are reimbursed
by or paid for by the Funds. There is no distribution plan in effect for the
Class Z shares.
THE FOLLOWING INFORMATION SUPPLEMENTS "MANAGEMENT OF THE TRUST--THE
ADMINISTRATOR" IN THE RETAIL CLASS PROSPECTUS.
SunAmerica Fund Services, Inc. serves as the Administrator for Class Z
shares and may receive reimbursement from the Trust of its costs through a fee,
none of which is reimbursed by or paid for by the Class Z shares of the Funds.
The Class Z shares, however, pay all direct transfer agency fees and out-of-
pocket expenses.
THE FOLLOWING INFORMATION SUPPLEMENTS "DIVIDENDS, DISTRIBUTIONS AND TAXES--
TAXES" IN THE RETAIL CLASS PROSPECTUS.
As a qualified plan, the 401(k) Plan generally pays no federal income tax.
Individual participants in the 401(k) Plan should consult Plan documents and
their own tax advisers for information on the tax consequences associated with
participating in the 401(k) Plan.
The per share dividends on Class Z shares will generally be higher than the
per share dividends on Class A or Class B shares as a result of the fact that
Class Z shares are not subject to any distribution or service fee.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION UNDER "PURCHASE OF SHARES"
AND "REDEMPTION OF SHARES."
Class Z shares of the Funds are offered exclusively for sale to
participants in the 401(k) Plan. Such shares may be purchased or redeemed only
by the 401(k) Plan on behalf of individual Plan participants at net asset value
without any sales or redemption charge. Class Z shares are not subject to any
minimum investment requirements. The Plan purchases and redeems shares to
implement the investment choices of individual Plan participants with respect to
their contributions in the Plan. All purchases of Fund shares through the Plan
will be of Class Z shares.
The net asset value per share at which shares of the Funds are purchased or
redeemed by the Plan for the accounts of individual Plan participants might be
more or less than the net asset value per share prevailing at the time that such
participants made their investment choices or made their contributions to the
Plan.
THE FOLLOWING INFORMATION SUPPLEMENTS "EXCHANGE PRIVILEGE" IN THE RETAIL CLASS
PROSPECTUS.
Class Z shareholders of one Fund may exchange their shares for Class Z
shares of another Fund (Balanced Assets and Small Company Growth Funds only) on
the basis of relative net asset value per share. See "Purchase of Shares"
above.
THE FOLLOWING INFORMATION SUPPLEMENTS "DETERMINATION OF NET ASSET VALUE" IN THE
RETAIL CLASS PROSPECTUS.
Because Class Z shares are not subject to any distribution or service fees,
the net asset value per share of the Class Z shares will generally be higher
than the net asset value per share of each of Class A and Class B shares, except
following the payment of dividends and distributions.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION UNDER "GENERAL
INFORMATION--SHAREHOLDER INQUIRIES" IN THE RETAIL CLASS PROSPECTUS.
<PAGE>
Inquiries regarding the purchase, redemption or exchange of Class Z shares
or the making or changing of investment choices in the 401(k) Plan should be
directed to the Fidelity Participant Center at (800) 835-5098.
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 30, 1997
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 30, 1997. 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HISTORY OF THE FUNDS.......................................... B-2
INVESTMENT OBJECTIVES AND POLICIES............................ B-3
PORTFOLIO TURNOVER............................................ B-33
INVESTMENT RESTRICTIONS....................................... B-34
TRUSTEES AND OFFICERS......................................... B-36
ADVISER, SUB-ADVISER, PERSONAL TRADING, DISTRIBUTOR AND
ADMINISTRATOR............................................... B-41
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................... B-48
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES........... B-51
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES......... B-59
DETERMINATION OF NET ASSET VALUE.............................. B-59
PERFORMANCE DATA.............................................. B-60
DIVIDENDS, DISTRIBUTIONS AND TAXES............................ B-66
RETIREMENT PLANS.............................................. B-71
DESCRIPTION OF SHARES......................................... B-72
ADDITIONAL INFORMATION........................................ B-74
FINANCIAL STATEMENTS.......................................... B-75
APPENDIX.................................................. APPENDIX-1
</TABLE>
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, the Sub-Adviser 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.
On June 18, 1996, the Trustees authorized the designation of Class Z
shares of the Balanced Assets Fund and the Small Company
B-2
<PAGE>
Growth Fund. The offering of such Class Z shares commenced on October 1, 1996.
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. No more than 15% of the value of a Fund's net assets,
determined as of the date of purchase, may be invested in illiquid securities
including repurchase agreements which have a maturity of longer than seven days,
interest-rate swaps, currency swaps, caps, floors and collars, or 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 (except in
the case of Rule 144A securities).
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
B-3
<PAGE>
in which the unregistered security can be readily resold or on an issuer's
ability to honor a demand for repayment. The fact that there are contractual or
legal restrictions on resale to the general public or to certain institutions
may not be indicative of the liquidity of such investments.
Restricted securities eligible for resale pursuant to Rule 144A under
the Securities Act for which there is a readily available market may be deemed
to be liquid. 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 (i.e., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
Commercial paper issues in which a Fund's net assets may be invested
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 15%
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
have 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.
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements with
banks, brokers or securities dealers. In such agreements, the seller agrees to
repurchase the security at a mutually agreed-upon time and price. The period of
maturity is
B-4
<PAGE>
usually quite short, either overnight or a few days, although it may extend over
a number of months. The repurchase price is in excess of the purchase price by
an amount which reflects 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 equal to at least
102% of the repurchase price, including accrued interest. The instruments held
as collateral are valued daily and if the value of the instruments declines, the
Fund will require additional collateral. If the seller defaults and the value
of the collateral securing the repurchase agreements declines, the 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 15% 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 or liquid
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 Ratings Services, a
Division of the McGraw-Hill Companies, Inc. ("S&P")(and comparable unrated
securities) (commonly known as "junk bonds"). For a description of 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)
B-5
<PAGE>
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 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
B-6
<PAGE>
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 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
B-7
<PAGE>
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 include 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
B-8
<PAGE>
purposes. Interest-rate swaps are individually negotiated, and 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 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 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-Adviser 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 or other liquid
securities 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-Adviser 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
B-9
<PAGE>
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.
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
Adviser of the 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 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.
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<PAGE>
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 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
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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 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
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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.
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 does 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:
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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 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
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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 which are the general obligations
of the issuer thereof (i.e., 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
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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
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 may each invest, in
the securities of small companies having market capitalizations under $1
billion. 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.
Companies with market capitalization of $1 billion to $5 billion
("Mid-Cap Companies") may also suffer more significant losses as well as realize
more substantial growth than larger, more established issuers. Thus,
investments in such companies tend to be more volatile and somewhat speculative.
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.
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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 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.
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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.
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
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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.
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 (i.e.,
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.
PASSIVE FOREIGN INVESTMENT COMPANIES ("PFICS"). The Global Balanced Fund may
invest in PFICs, which are any foreign corporations which generate certain
amounts of passive income or hold certain amounts of passive income or hold
certain amounts of assets for the production of passive income. Passive income
includes dividends, interest, royalties, rents and annuities. To the extent that
a Portfolio invests in PFICs, income tax regulations may require the Portfolio
to recognize income associated with the PFIC prior to the actual receipt of any
such income.
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. 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
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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.
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 its custodian, have
deposited and maintained cash or liquid securities denominated in U.S. dollars
or non-U.S. currencies with a securities depository with a value equal to or
greater than the
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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 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.
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OPTIONS
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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.
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. 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
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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 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.
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
B-23
<PAGE>
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 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 or liquid 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 liquid
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
B-24
<PAGE>
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.
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
B-25
<PAGE>
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 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.
B-26
<PAGE>
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.")
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.
B-27
<PAGE>
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.
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.
B-28
<PAGE>
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 will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency being hedged. To the extent that a Fund is
not able to cover its forward currency positions with underlying portfolio
securities, the Fund's custodian will place cash or liquid 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
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
B-29
<PAGE>
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.
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
B-30
<PAGE>
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.
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
B-31
<PAGE>
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
liquid securities in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
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
B-32
<PAGE>
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
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.
B-33
<PAGE>
The following table sets forth the portfolio turnover rates for the
fiscal years ended September 30, 1996 and 1995.
PORTFOLIO TURNOVER
<TABLE>
<CAPTION>
FUND 1996 1995
- ----------------------------------------
<S> <C> <C>
Balanced Assets Fund 187% 130%
- ----------------------------------------
Blue Chip Growth Fund 269% 251%
- ----------------------------------------
Global Balanced Fund 103% 169%
- ----------------------------------------
Growth and Income Fund 161% 230%
- ----------------------------------------
Mid-Cap Growth Fund 307% 392%
- ----------------------------------------
Small Company Growth Fund 240% 351%
- ----------------------------------------
</TABLE>
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.
B-34
<PAGE>
(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 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 res-triction (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 and the Global Balanced Fund for non-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
B-35
<PAGE>
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:
(10) Enter into any repurchase agreement maturing in more than seven days or
invest in any other illiquid security if, as a result, more than 15% of a
Fund's net assets would be so invested. 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 15% limitation on illiquid securities.
(11) 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 not more than 10% of its total assets
---
(determined at the time of investment) would be invested in such
securities, or except as part of a merger, consolidation or other
acquisition.
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 SunAmerica Money Market Funds, Inc. and Style Select
Series, Inc. An asterisk indicates those Trustees who are interested persons of
the Trust within the meaning of the 1940 Act.
B-36
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupations
Name, Age and Address with the Fund During Past 5 Years
- --------------------- ------------- -------------------
<S> <C> <C>
S. James Coppersmith, 63 Trustee Director/Trustee of the Boston
Emerson College Stock Exchange, Uno Restaurant
100 Beacon Street Corp., Waban Corp., Kushner-
Boston, MA 02116 Locke Co., Chyron Inc.; Chairman
of the Board of Emerson College;
formerly, President and General
Manager, WCVB-TV, a division of
the Hearst Corp. from 1982 to
1994 (retired); Director/Trustee
of the SunAmerica Mutual Funds
and Anchor Series Trust.
Samuel M. Eisenstat, 56 Chairman of Attorney in private practice;
430 East 86 Street the Board President and Chief Executive
New York, NY 10028 Officer, Abjac Energy Corp.;
Director/Trustee of Atlantic Realty
Trust, UMB Bank and Trust(a
subsidiary of United Mizrachi Bank),
North European Royalty Trust, Volt
Information Sciences Funding, Inc.
(a subsidiary of Volt Information
Sciences, Inc.) and Venture Partners
International (an Israeli venture
capital fund); Chairman of the Boards
of the SunAmerica Mutual Funds and
Director/Trustee of the Anchor Series
Trust.
Stephen J. Gutman, 53 Trustee Partner and Chief Operating
515 East 79th Street Officer of B.B. Associates LLC
New York, NY 10021 (menswear specialty retailing and
other activities) since May 1989;
Director/Trustee of the SunAmerica
Mutual Funds and Anchor Series Trust.
Peter A. Harbeck*, 42 Trustee and Director and President,
The SunAmerica Center President SunAmerica Asset Management
733 Third Avenue Corp. ("SAAMCo"); Director,
New York, NY 10017-3204 SunAmerica Capital Services, Inc.
("SACS"), since February 1993;
Director and President, SunAmerica
Fund Services, Inc.("SAFS"),
since May 1988; President of the
SunAmerica
</TABLE>
B-37
<PAGE>
<TABLE>
<S> <C> <C>
Mutual Funds and Anchor Series
Trust; Executive Vice President
and Chief Operating Officer,
SAAMCo, from May 1988 to August
1995; Executive Vice President,
SACS, from November 1991 to
August 1995; Director, Resources
Trust Company.
Peter McMillan III*, 38 Trustee Executive Vice President and
1 SunAmerica Center Chief Investment Officer, Los
Angeles, CA 90067 SunAmerica Investments, Inc. since
August 1989; Director/Trustee of
the SunAmerica Mutual Funds;
Director, Resources Trust Company.
Sebastiano Sterpa, 67 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 invest-
ments and management com-
pany; Trustee/Director of
the SunAmerica Mutual Funds.
Stanton J. Feeley, 59 Executive Vice Executive Vice President and
The SunAmerica Center President Chief Investment Officer,
733 Third Avenue SAAMCo, since February 1992;
New York, NY 10017-3204 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 President, Whitehorne
New York, NY 10017-3204 & 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.
</TABLE>
B-38
<PAGE>
<TABLE>
<S> <C> <C>
Peter C. Sutton, 32 Treasurer Vice President, SAAMCo, since
The SunAmerica Center September 1994; Treasurer,
733 Third Avenue SunAmerica Mutual Funds, since
New York, NY 10017-3204 February 1996 and Style Select
Series, Inc. since September
1996; Vice President,
SunAmerica Series Trust and
Anchor Pathway Fund, since
October 1994; Controller,
SunAmerica Mutual Funds (March
1993 to February 1996);
Assistant Controller, SunAmerica
Mutual Funds (1990-1993).
Robert M. Zakem, 39 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.
</TABLE>
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
B-39
<PAGE>
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' 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 December 31, 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, 1996. Neither the Trustees who are interested persons of the
Trust nor any officers of the Trust receive any compensation.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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> <C> <C> <C>
S. James Coppersmith $13,513 34,643 $ 65,000
- ----------------------------------------------------------------------
Samuel M. Eisenstat $14,143 26,544 $ 69,000
- ----------------------------------------------------------------------
Stephen J. Gutman $13,513 27,625 $ 65,000
- ----------------------------------------------------------------------
Sebastiano Sterpa $13,445 21,286** $43,333**
- ----------------------------------------------------------------------
</TABLE>
* Information is as of September 30, 1996 for the five 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.
B-40
<PAGE>
The following shareholders owned of record or beneficially 5% or more of
the Growth and Income Fund's shares outstanding as of December 31, 1996: Class A
- - SunAmerica Asset Management Corp., New York, NY 10017 - owned beneficially
19%; Eli Broad, Los Angeles, CA 90067 -owned beneficially 6%; SunAmerica Capital
Services, Inc., New York, NY 10017 - owned beneficially 11%; Class B - JBC
Profit Sharing Plan & Trust, St. Louis, MO 63131 - owned of record 9%.
ADVISER, SUB-ADVISER, PERSONAL TRADING,
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 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, 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),
B-41
<PAGE>
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 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, 1996, 1995, and 1994.
ADVISORY FEES
<TABLE>
<CAPTION>
ADVISORY FEES PAYABLE ADVISORY FEES WAIVED
- ------------------------------------------------------------------------------------------
FUND 1996 1995 1994 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced Assets -- -- --
Fund $2,282,018 $1,821,586 $1,642,572
- ------------------------------------------------------------------------------------------
Blue Chip -- -- --
Growth Fund $ 644,774 $ 565,835 $ 615,050
- ------------------------------------------------------------------------------------------
Global
Balanced Fund $ 240,640 $ 269,441 $ 54,220* $98,765 $115,214 $48,797
- ------------------------------------------------------------------------------------------
Growth and
Income Fund $ 91,558 $ 32,455 $ 6,177** $91,558 $ 32,455 $ 6,177
- ------------------------------------------------------------------------------------------
Mid-Cap -- -- --
Growth Fund $ 375,398 $ 294,505 $ 284,308
- ------------------------------------------------------------------------------------------
Small Company -- -- --
Growth Fund $1,487,650 $ 819,449 $ 607,020
- ------------------------------------------------------------------------------------------
</TABLE>
* For the period 06/15/94 (commencement of operations) through 09/30/94
** For the period 07/01/94 (commencement of operations) through 09/30/94
NET ADVISORY FEES PAID
<TABLE>
<CAPTION>
FUND 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $2,282,018 $1,821,586 $1,642,572
- -------------------------------------------------------------------------------------------------------------
Blue Chip Growth Fund $ 644,774 $ 565,835 $ 615,050
- -------------------------------------------------------------------------------------------------------------
Global Balanced Fund $ 141,875 $ 154,227 $ 5,423*
- -------------------------------------------------------------------------------------------------------------
Growth and Income Fund -- -- --
- -------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund $ 375,398 $ 294,505 $ 284,308
- -------------------------------------------------------------------------------------------------------------
Small Company Growth Fund $1,487,650 $ 819,449 $ 607,020
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period 06/15/94 (commencement of operations) through 09/30/94
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, 1996,
1995, and 1994.
B-42
<PAGE>
FEE WAIVERS AND EXPENSE REIMBURSEMENTS
<TABLE>
<CAPTION>
FUND 1996 1995 1994
- ---------------------------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced
Assets Fund -- -- -- -- -- --
- ---------------------------------------------------------------------------
Blue Chip
Growth Fund -- -- $13,179 -- $ 25,518 --
- ---------------------------------------------------------------------------
Global
Balanced Fund $40,660 $61,050 $51,038 $64,176 $ 35,826* $ 21,221*
- ---------------------------------------------------------------------------
Growth and
Income Fund $73,696 $56,264 $95,986 $55,267 $34,720** $9,874 **
- ---------------------------------------------------------------------------
Mid-Cap
Growth Fund -- $ 66 -- $10,554 $ 17,806 --
- ---------------------------------------------------------------------------
Small Company
Growth Fund -- -- -- -- -- --
- ---------------------------------------------------------------------------
</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
The Advisory Agreement continues in effect with respect to each Fund from
year to year provided that such continuance is approved annually by vote of a
majority of the Trustees including a majority of the disinterested Trustees.
The Advisory Agreement was last so approved on May 16, 1996. 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, except in the case of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
THE SUB-ADVISER. The Adviser has entered into a sub-advisory agreement (the
"Sub-Advisory Agreement") with AIG Global Investment Corp. ("AIG Global")
pursuant to which the Sub-Adviser provides the Global Balanced Fund with
investment advisory services, including the continuous review and administration
of such Fund's investment program. AIG Global 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. 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.
The Sub-Advisory Agreement continues in effect and may be renewed from year
to year so long as continuance is specifically
B-43
<PAGE>
approved at least annually in accordance with the requirements of the 1940 Act.
The Sub-Advisory Agreement was last so renewed on May 16, 1996. The Sub-
Advisory Agreement provides that it will terminate in the event of an assignment
(as defined in the 1940 Act) or upon termination of the Advisory Agreement. The
Sub-Advisory Agreement may be terminated by the Fund, the Adviser or the Sub-
Adviser upon 60 days' prior written notice.
AIG Global 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.
The Adviser pays AIG Global a monthly fee with respect to the actual
component of the Fund for which AIG Global performs services, computed on
average daily net assets, at the following annual rates:
AIG Global .50% on the first $50 million
.40% on the next $100 million
.30% on the next $150 million
.25% thereafter
PRIOR SUB-ADVISER. Prior to April 23, 1996, Goldman Sachs Asset Management
International ("GSAM") was sub-adviser to the global bond component of the
Global Balanced Fund, pursuant to which the Adviser paid a monthly fee, computed
on average daily net assets, at the following rates:
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, 1996, 1995 and 1994.
SUB-ADVISORY FEES
<TABLE>
<CAPTION>
SUB-ADVISER 1996 1995 1994
- -----------------------------------------
<S> <C> <C> <C>
AIG Global $66,942 $75,883 $14,947*
- -----------------------------------------
GSAM $14,483* $29,912 $ 5,328*
- -----------------------------------------
</TABLE>
* For the period 6/15/94 (commencement of operations) through 9/30/94
* GSAM served as sub-adviser to the global bond component of the Global Balanced
Fund until April 22, 1996.
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
B-44
<PAGE>
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-Adviser has adopted a written Code of Ethics, the provisions of
which are materially similar to those in the Code, and has undertaken to comply
with the provisions of the Code to the extent such provisions are more
restrictive. Further, the Sub-Adviser reports 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 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 Class A and Class B shares of the Funds (see "Distribution Plans"
below).
SACS serves as Distributor of Class Z shares, with respect to the Small
Company Growth and Balanced Assets Funds, and incurs the expenses of
distributing the Funds' Class Z shares under the Distribution Agreement, none of
which expenses are reimbursed or paid by the Trust.
Continuance of the Distribution Agreement with respect to each 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 was last so approved on May 16, 1996. 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
B-45
<PAGE>
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 Class A and Class B shares of each Fund have adopted
Distribution Plans (the "Class A Plan" and the "Class B Plan," and collectively,
the "Distribution Plans")pursuant to Rule 12b-1 under the 1940 Act. There is no
Distribution Plan in effect for Class Z shares. 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 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 following table sets forth the distribution and service maintenance
fees the Distributor received from the Funds for the fiscal years ended
September 30, 1996, 1995, and 1994.
B-46
<PAGE>
DISTRIBUTION AND SERVICE MAINTENANCE FEES
<TABLE>
<CAPTION>
FUND 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced Assets
Fund $478,455 $ 1,675,676 $ 237,888 $1,749,100 $158,785 $1,736,424
- --------------------------------------------------------------------------------------------------------------
Blue Chip
Growth Fund $164,198 $ 390,560 $ 42,755 $ 632,288 $ 5,390 $ 804,627
- --------------------------------------------------------------------------------------------------------------
Global Balanced
Fund $ 32,163 $ 148,748 $ 44,919 $ 141,100 $ 11,026* $ 22,717*
- --------------------------------------------------------------------------------------------------------------
Growth and
Income Fund $ 25,462 $49,329**** $11,338** $10,876*** $2,714** $ 480**
- --------------------------------------------------------------------------------------------------------------
Mid-Cap Growth
Fund $136,912 $ 109,353 $ 115,641 $ 62,270 $119,773 $ 36,868
- --------------------------------------------------------------------------------------------------------------
Small Company
Growth Fund $408,943 $ 815,125 $ 187,524 $ 556,816 $132,081 $ 431,989
- --------------------------------------------------------------------------------------------------------------
</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
*** For the fiscal year ended 9/30/95 the Distributor waived fees
in the amount of $16,747 for Growth and Income Fund.
**** For the fiscal year ended 9/30/96 the Distributor waived fees
in the amount of $3,265 for the 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. The Distribution Plans were last so approved on May 16,
1996. 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
B-47
<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 Service Agreement dated September 23, 1993 as amended August 21, 1996,
continues in effect from year to year provided that such continuance is approved
annually by vote of a majority of the Trustees including a majority of the
disinterested Trustees. The Service Agreement was last so renewed on May 16,
1996.
Pursuant to the Service Agreement, as compensation for services rendered,
SAFS receives a fee from each Fund, computed and payable monthly based upon an
annual rate of 0.22% of average daily net assets. 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 of the Transfer Agent which are paid by the Trust). No
portion of such fee is paid or reimbursed by Class Z shares. Class Z shares,
however, will pay all direct transfer agency fees and out-of pocket expenses.
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 is responsible for decisions to buy and sell foreign equity securities,
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 or AIG Global.
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 money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
B-48
<PAGE>
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 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 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.
B-49
<PAGE>
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, 1996, 1995
and 1994.
1996 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
AMOUNT PAID
AGGREGATE TO PERCENTAGE PAID TO
FUND BROKERAGE AFFILIATED AFFILIATED BROKER-
COMMISSIONS BROKER- DEALERS
DEALERS
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets
Fund $952,056 $21,450 2.3%
- --------------------------------------------------------------------------
Blue Chip Growth
Fund $424,304 $ 0 0.0%
- --------------------------------------------------------------------------
Global Balanced
Fund $ 83,133 $ 0 0.0%
- --------------------------------------------------------------------------
Growth and Income
Fund $ 66,513 $ 2,130 3.2%
- --------------------------------------------------------------------------
Mid-Cap Growth
Fund $238,176 $ 3,150 1.3%
- --------------------------------------------------------------------------
Small Company
Growth Fund $408,277 $11,880 2.9%
- --------------------------------------------------------------------------
</TABLE>
1995 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
AMOUNT PAID
AGGREGATE TO PERCENTAGE PAID TO
FUND BROKERAGE AFFILIATED AFFILIATED BROKER-
COMMISSIONS BROKER- DEALERS
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%
- --------------------------------------------------------------------------
</TABLE>
B-50
<PAGE>
1994 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
AMOUNT PAID
AGGREGATE TO PERCENTAGE PAID TO
FUND BROKERAGE AFFILIATED AFFILIATED BROKER-
COMMISSIONS BROKER- DEALERS
DEALERS
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets
Fund $715,367 $16,950 2.4%
- --------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------
</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
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 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, 1996, 1995 and 1994.
1996
<TABLE>
<CAPTION>
FRONT-END AMOUNT CONTINGENT
SALES REALLOWED DEFERRED
FUND CONCESSIONS- TO AFFILIATED SALES CHARGE-
CLASS A SHARES BROKER-DEALERS CLASS B SHARES
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $1,139,306 $ 830,997 $303,405
- -----------------------------------------------------------------------------------
Blue Chip Growth Fund $ 84,051 $ 48,653 $ 37,223
- -----------------------------------------------------------------------------------
Global Balanced Fund $ 96,613 $ 60,930 $ 45,769
- -----------------------------------------------------------------------------------
Growth and Income Fund $ 384,542 $ 188,254 $ 1,820
- -----------------------------------------------------------------------------------
Mid-Cap Growth Fund $ 185,300 $ 125,403 $ 15,696
- -----------------------------------------------------------------------------------
Small Company Growth Fund $2,007,194 $1,156,919 $118,032
- -----------------------------------------------------------------------------------
</TABLE>
B-51
<PAGE>
1995
<TABLE>
<CAPTION>
FRONT-END AMOUNT CONTINGENT
SALES REALLOWED DEFERRED
FUND CONCESSIONS- TO AFFILIATED SALES CHARGE-
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 AMOUNT CONTINGENT
SALES REALLOWED DEFERRED
FUND CONCESSIONS- TO AFFILIATED SALES CHARGE-
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
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>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS
YEAR SINCE PURCHASE PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
- -------------------------------------- ---------------------------------
- ------------------------------------------------------------------------
<S> <C>
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
B-52
<PAGE>
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:
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
Fund's 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 Fund's close of business will be executed at the offering
price determined after the close of regular trading 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.
B-53
<PAGE>
PURCHASE BY CHECK. With respect to the purchase of Class A and Class B shares,
checks should be made payable to the specific Fund or to "SunAmerica Funds" or,
for retirement plan accounts for which the Adviser serves as fiduciary, to
"Resources Trust Company." 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, New
York 10017-3204, together with payment for the purchase price of such shares and
a completed New Account Application. Payment for subsequent purchases should be
mailed to SunAmerica Fund Services, Inc., c/o NFDS, P.O. Box 419373, Kansas
City, Missouri 64141-6373 and the shareholder's Fund account number should
appear on the check. For fiduciary retirement plan accounts, both initial and
subsequent purchases should be mailed to SunAmerica Fund Services, Inc., Mutual
Fund Operations, The SunAmerica Center, 733 Third Avenue, New York, New York
10017-3204. 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 United States. 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. Subsequent
purchases of shares of each Fund may be purchased directly through the Transfer
Agent. SAFS reserves the right to reject any check made payable other than in
the manner indicated above. Under certain circumstances, a Fund will accept a
multi-party check (i.e., a check made payable to the shareholder by another
party and then endorsed by the shareholder to the Fund in payment for the
purchase of shares); however, the processing of such a check may be subject to a
delay. The Funds do not verify the authenticity of the endorsement of such
multi-party check, and acceptance of the check by a Fund should not be
considered verification thereof. Neither the Funds nor their affiliates will be
held liable for any losses incurred as a result of a fraudulent endorsement.
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 the Fund's close of business, the purchase of shares of a Fund
will be effected on that day. If the order is received after the Fund's close
of business, 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
B-54
<PAGE>
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 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;
B-55
<PAGE>
(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 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, 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
B-56
<PAGE>
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 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
B-57
<PAGE>
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 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 first 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.
B-58
<PAGE>
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 Value," and such valuation will be
made as of the same time the redemption price is determined.
DETERMINATION OF NET ASSET VALUE
The Fund is open for business on any day the NYSE is open for regular trading.
Shares are valued each day as of the close of regular trading on the NYSE
(generally, 4:00 p.m., Eastern time). 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 such class outstanding. 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
B-59
<PAGE>
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 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
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<PAGE>
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, Class B and
Class Z 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
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, 1996, are as follows:
B-61
<PAGE>
<TABLE>
<CAPTION>
CLASS A
- ------- SINCE ONE FIVE TEN
SHARES INCEPTION YEAR YEARS YEARS
- ------ --------- ------ ------ ------
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced
Assets Fund 8.23%/1/ 4.29% N/A N/A
- -----------------------------------------------------------------------------------
Blue Chip
Growth Fund 8.86%/1/ 7.33% N/A N/A
- -----------------------------------------------------------------------------------
Mid-Cap
Growth Fund 12.08%/2/ 6.43% 11.68% N/A
- -----------------------------------------------------------------------------------
Small Company
Growth 14.87%/2/ 12.48% 18.63% N/A
- -----------------------------------------------------------------------------------
Global
Balanced Fund 4.82%/3/ 4.62% N/A N/A
- -----------------------------------------------------------------------------------
Growth and
Income Fund 20.76%/4/ 24.97% N/A N/A
- -----------------------------------------------------------------------------------
</TABLE>
- ----------------
(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.
<TABLE>
<CAPTION>
CLASS B
- ------- SINCE ONE FIVE TEN
SHARES INCEPTION YEAR YEARS YEARS
- ------ --------- ----- ----- -----
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced
Assets Fund 11.62%/1/ 5.93% 10.01% 10.03%
- -----------------------------------------------------------------------------------
Blue Chip
Growth Fund 10.53%/1/ 9.17% 12.86% 9.09%
- -----------------------------------------------------------------------------------
Mid-Cap
Growth Fund 8.03%/2/ 8.16% N/A N/A
- -----------------------------------------------------------------------------------
Small Company
Growth 16.83%/2/ 14.60% N/A N/A
- -----------------------------------------------------------------------------------
Global
Balanced Fund 5.50%/3/ 6.21% N/A N/A
- -----------------------------------------------------------------------------------
Growth and
Income Fund 22.52%/4/ 27.75% 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
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<PAGE>
average annual total return, except that the actual cumulative return will be
computed. Class Z shares were not available on September 30, 1996.
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 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.
B-63
<PAGE>
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.
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
B-64
<PAGE>
"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.
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.
B-65
<PAGE>
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. Dividends from net investment income, if any, and
the excess of net realized long-term capital gains over net capital losses
("capital gain distributions"), if any, will be distributed to the registered
holders at least annually. With respect to capital gain distributions, 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.
Dividends and distributions will be paid in additional Fund shares
based on the net asset value at the Fund's close of business on the Ex or ,
unless the shareholder notifies the Fund at least five business days prior to
the payment date to receive such distributions in excess of $10 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
B-66
<PAGE>
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 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
(whether through dividend reinvestment or otherwise) 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
B-67
<PAGE>
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 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
B-68
<PAGE>
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 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
B-69
<PAGE>
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 Global Balanced Fund may, from time to time, invest in "passive
foreign investment companies" ("PFICs"). A PFIC is a foreign corporation that,
in general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If the Global Balanced Fund
acquires and holds stock in a PFIC beyond the end of the year of its
acquisition, the Fund will be subject to federal income tax on a portion of any
"excess distribution" received on the stock or of any gain from disposition of
the stock (collectively, "PFIC income"), plus interest thereon, even if the
Global Balanced Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Global
Balanced Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its shareholders.
Proposed Treasury regulations provide that the Fund may make a "mark-to-market"
election with respect to any stock it holds of a PFIC. If the election is in
effect, at the end of the Global Balanced Fund's taxable year, the Global
Balanced Fund will recognize the amount of gains, if any, with respect to PFIC
stock. No loss will be recognized on PFIC stock. Alternatively, the Global
Balanced Fund may elect to treat any PFIC in which it invests as a "qualified
electing fund," in which case, in lieu of the foregoing tax and interest
obligation, the Global Balanced Fund will be required to include in income each
year its pro rata share of the qualified electing fund's annual ordinary
earnings and net capital gain, even if they are not distributed to the Global
Balanced Fund; those amounts would be subject to the distribution requirements
applicable to the Global Balanced Fund described above. It may be very
B-70
<PAGE>
difficult, if not impossible, to make this election because of certain
requirements thereof.
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 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 Section 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.
B-71
<PAGE>
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
are not included in the employee's income and therefore are not reported or
deducted on his or her tax return.
DESCRIPTION OF SHARES
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. The Global Balanced Fund,
the Blue Chip Growth Fund, the Mid-Cap Growth Fund and the Growth and Income
Fund have each been divided into two classes of shares, designated as Class A
and Class B shares. The Balanced Assets Fund and Small Company Growth Fund have
each been divided into three classes of shares, designated as Class A, Class B
and Class Z 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
B-72
<PAGE>
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.
All 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 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, (vi) Class Z shares are not subject to any sales charge or any
distribution, account maintenance or service fee, and (vii) 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.
B-73
<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, 1996.
<TABLE>
<CAPTION>
Balanced Assets Blue Chip Growth Global Balanced
Fund + Fund Fund
-------------------- -------------------- ------------------
Class A Class B Class A Class B Class A Class B
-------------------- -------------------- ------------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Assets................. $147,035,456 $171,196,506 $51,993,425 $36,199,481 $ 10,035,090 $ 16,111,902
Number of Shares
Outstanding............... 8,748,465 10,187,608 2,950,757 2,096,657 1,301,793 2,107,949
Net Asset Value Per
Shares (net assets
divided by number
of shares)................ $ 16.81 $ 16.80 $ 17.62 $ 17.27 $ 7.71 $ 7.64
Sales Charge) for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share))*.................. $ 1.03 $ ** $ 1.07 $ ** $ .47 $ **
Offering Price............. $ 17.84 $ 16.80 $ 18.69 $ 17.27 $ 8.18 $ 7.64
</TABLE>
<TABLE>
<CAPTION>
Small Company
Growth and Income Fund Mid-Cap Growth Fund Growth Fund +
-------------------------- -------------------- --------------------
Class A Class B Class A Class B Class A Class B
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets................. $ 21,099,017 $ 13,903,004 $41,904,384 $13,783,802 $158,567,071 $107,839,397
Number of Shares
Outstanding.............. 2,015,981 $ 1,330,114 2,356,510 791,770 6,538,057 4,550,952
Net Asset Value Per
Share (net assets
divided by number
of shares)............... $ 10.47 $ 10.45 $ 17.78 $ 17.41 $ 24.25 $ 23.70
Sales Charge (for
Class A Shares:
5.75% of offering
price (6.10% of net
asset value per
share))*................. $ .64 $ ** $ 1.08 $ ** $ 1.48 $ **
Offering Price............. $ 11.11 $ 10.45 $ 18.86 $ 17.41 $ 25.73 $ 23.70
</TABLE>
_______________
* Rounded to nearest one-hundredth percent; assumes maximum sales charge is
applicable
** Class B shares are not subject to an initial charge but may be subject to a
contingent deferred sales charge on redemption of shares within six years of
purchase.
+ The offering of Class Z shares commenced on October 1, 1996.
REPORTS TO SHAREHOLDERS. The Trust sends audited annual and unaudited semi-
annual reports to shareholders of each of the Funds. 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,
B-74
<PAGE>
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, 1996.
B-75
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 1996
<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:
Investments securities,
at value (identified
cost $277,773,099;
$74,972,693;
$41,512,876;
$192,419,854;
$21,240,451 and
$28,517,818,
respectively)........... $294,588,658 $80,872,707 $52,121,375 $249,986,112 $23,007,462 $30,316,656
Short-term securities
(cost equals market).... -- -- -- -- 1,302,000 --
Repurchase agreements
(cost equals market).... 8,398,000 1,189,000 4,072,000 9,766,000 1,160,000 4,353,000
Cash..................... 916 954 106 984 5,746 43,371
Foreign cash (identified
cost $303,982).......... -- -- -- -- 301,859 --
Receivable for
investments sold........ 16,737,801 6,086,322 -- 11,679,582 145,472 214,693
Receivable for shares of
beneficial interest
sold.................... 536,009 224,618 83,333 1,231,552 55,202 811,954
Interest and dividends
receivable.............. 1,501,234 60,893 13,589 47,108 197,383 43,577
Prepaid expenses......... 14,818 33,144 6,646 11,998 1,116 973
Receivable from
investment adviser...... -- -- -- -- 6,635 18,817
Unrealized appreciation
of foreign currency
contracts............... -- -- -- -- 146,021 --
Deferred organizational
expenses................ -- -- -- -- 2,334 758
------------ ----------- ----------- ------------ ----------- -----------
Total assets........... 321,777,436 88,467,638 56,297,049 272,723,336 26,331,230 35,803,799
------------ ----------- ----------- ------------ ----------- -----------
LIABILITIES:
Payable for investments
purchased............... 2,411,915 46,000 455,000 5,519,101 72,694 722,860
Payable for shares of
beneficial interest
redeemed................ 511,772 48,834 44,412 373,908 2,870 11,987
Accrued expenses......... 186,061 83,710 54,487 141,863 58,126 30,297
Investment advisory and
management fees payable. 192,235 52,362 32,727 155,384 20,963 18,990
Distribution and service
maintenance fees
payable................. 179,614 43,245 22,133 126,612 15,754 15,130
Dividends payable........ 63,877 581 104 -- -- 2,514
Unrealized depreciation
of foreign currency
contracts............... -- -- -- -- 13,831 --
------------ ----------- ----------- ------------ ----------- -----------
Total liabilities...... 3,545,474 274,732 608,863 6,316,868 184,238 801,778
------------ ----------- ----------- ------------ ----------- -----------
Net assets........... $318,231,962 $88,192,906 $55,688,186 $266,406,468 $26,146,992 $35,002,021
============ =========== =========== ============ =========== ===========
NET ASSETS WERE COMPOSED
OF:
Shares of beneficial
interest, $.01 par
value................... $ 189,361 $ 50,474 $ 31,483 $ 110,890 $ 34,097 $ 33,461
Paid-in capital.......... 272,569,518 71,074,447 44,047,107 209,435,190 23,933,064 31,382,012
------------ ----------- ----------- ------------ ----------- -----------
272,758,879 71,124,921 44,078,590 209,546,080 23,967,161 31,415,473
Accumulated undistributed
net investment income
(loss).................. (18,577) -- -- -- 512,906 (2,516)
Accumulated undistributed
net realized gain (loss)
on investments, foreign
currency and other
assets and liabilities.. 28,676,101 11,167,971 1,001,097 (705,870) (229,373) 1,790,226
Net unrealized
appreciation of
investments............. 16,815,559 5,900,014 10,608,499 57,566,258 1,767,011 1,798,838
Net unrealized
appreciation of foreign
currency, other assets
and liabilities......... -- -- -- -- 129,287 --
------------ ----------- ----------- ------------ ----------- -----------
Net assets........... $318,231,962 $88,192,906 $55,688,186 $266,406,468 $26,146,992 $35,002,021
============ =========== =========== ============ =========== ===========
CLASS A (UNLIMITED SHARES
AUTHORIZED):
Net asset value and
redemption price per
share
($147,035,456/8,748,465;
$51,993,425/2,950,757;
$41,904,384/2,356,510;
$158,567,071/6,538,057;
$10,035,090/1,301,793
and
$21,099,017/2,015,981
net assets and shares of
beneficial interest
issued and outstanding,
respectively)........... $ 16.81 $ 17.62 $ 17.78 $ 24.25 $ 7.71 $ 10.47
Maximum sales charge
(5.75% of offering
price).................. 1.03 1.07 1.08 1.48 0.47 0.64
------------ ----------- ----------- ------------ ----------- -----------
Maximum offering price to
public.................. $ 17.84 $ 18.69 $ 18.86 $ 25.73 $ 8.18 $ 11.11
============ =========== =========== ============ =========== ===========
CLASS B (UNLIMITED SHARES
AUTHORIZED):
Net asset value, offering
and redemption price
(excluding any
applicable contingent
deferred sales charge)
per share
($171,196,506/10,187,608;
$36,199,481/2,096,657;
$13,783,802/791,770;
$107,839,397/4,550,952;
$16,111,902/2,107,949
and
$13,903,004/1,330,114
net assets and shares of
beneficial interest
issued and outstanding,
respectively)........... $ 16.80 $ 17.27 $ 17.41 $ 23.70 $ 7.64 $ 10.45
============ =========== =========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF OPERATIONS -- For the year ended September 30, 1996
<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
$2,403 on Global
Balanced Fund)........ $ 6,647,500 $ 281,114 $ 293,829 $ 1,324,606 $ 436,750 $ 87,928
Dividends (net of
withholding taxes of
$32,895, $13,450,
$1,459, $3,296,
$32,882 and $854,
respectively)......... 2,928,724 919,680 166,238 366,438 285,671 214,138
----------- ----------- ---------- ----------- ---------- ----------
Total investment
income................ 9,576,224 1,200,794 460,067 1,691,044 722,421 302,066
----------- ----------- ---------- ----------- ---------- ----------
Expenses:
Investment advisory and
management fees....... 2,282,018 644,774 375,398 1,487,650 240,640 91,559
Distribution and
service maintenance
fees-Class A.......... 478,455 164,198 136,912 408,943 32,163 25,462
Distribution and
service maintenance
fees-Class B.......... 1,675,676 390,560 109,353 815,125 148,748 49,329
Transfer agent fees and
expenses-Class A...... 424,921 141,422 111,673 352,438 28,239 18,652
Transfer agent fees and
expenses-Class B...... 453,492 120,037 34,129 235,323 43,907 15,231
Custodian fees and
expenses.............. 140,540 82,285 68,740 111,265 188,610 50,281
Registration fees-Class
A..................... 20,989 7,423 11,199 29,818 5,888 7,257
Registration fees-Class
B..................... 9,105 5,996 6,873 14,911 6,906 6,374
Audit and tax
consulting fees....... 56,410 20,825 16,395 36,270 12,800 10,910
Trustees' fees and
expenses.............. 35,822 10,995 6,178 22,946 2,783 1,141
Printing expense....... 25,575 10,695 4,350 22,020 2,210 --
Insurance expense...... 6,055 1,716 1,092 3,511 550 123
Legal fees and
expenses.............. 4,890 790 -- 3,335 -- --
Interest expense....... 4,189 4,689 1,603 -- -- 248
Amortization of
organizational
expenses.............. -- -- -- -- 878 278
Miscellaneous expenses. 7,750 3,019 2,215 5,197 1,432 596
----------- ----------- ---------- ----------- ---------- ----------
Total expenses......... 5,625,887 1,609,424 886,110 3,548,752 715,754 277,441
Less: expenses
waived/reimbursed by
investment adviser.... -- -- (66) -- (101,710) (129,960)
----------- ----------- ---------- ----------- ---------- ----------
Net expenses........... 5,625,887 1,609,424 886,044 3,548,752 614,044 147,481
----------- ----------- ---------- ----------- ---------- ----------
Net investment income
(loss)................. 3,950,337 (408,630) (425,977) (1,857,708) 108,377 154,585
----------- ----------- ---------- ----------- ---------- ----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on
investments............ 33,912,222 13,200,391 1,634,384 14,472 1,153,686 1,853,730
Net realized gain on
foreign currency and
other assets and
liabilities............ -- -- -- 36 797,602 2
Net change in unrealized
appreciation
(depreciation) of
investments............ (8,691,595) (2,296,867) 4,688,230 33,583,299 218,368 1,445,861
Net change in unrealized
appreciation
(depreciation) of
foreign currency and
other assets and
liabilities............ -- -- -- -- 83,360 --
----------- ----------- ---------- ----------- ---------- ----------
Net realized and
unrealized gain on
investments, foreign
currency and other
assets and liabilities. 25,220,627 10,903,524 6,322,614 33,597,807 2,253,016 3,299,593
----------- ----------- ---------- ----------- ---------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $29,170,964 $10,494,894 $5,896,637 $31,740,099 $2,361,393 $3,454,178
=========== =========== ========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements
4
<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,
1996 1995 1996 1995 1996 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 3,950,337 $ 4,234,844 $ (408,630) $ (42,924) $ (425,977) $ (237,687)
Net realized gain on
investments........... 33,912,222 13,383,399 13,200,391 7,615,892 1,634,384 7,432,643
Net realized loss on
foreign currency,
other assets and
liabilities........... -- -- -- (10,667) -- --
Net change in
unrealized
appreciation
(depreciation) of
investments........... (8,691,595) 28,115,267 (2,296,867) 6,757,773 4,688,230 3,253,371
------------ ------------ ----------- ----------- ----------- -----------
Net increase in net
assets resulting from
operations............. 29,170,964 45,733,510 10,494,894 14,320,074 5,896,637 10,448,327
------------ ------------ ----------- ----------- ----------- -----------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... (2,345,435) (1,892,197) -- -- -- (81,917)
From net investment
income (Class B)...... (1,868,201) (4,315,134) -- -- -- (10,723)
From net realized gains
on investments
(Class A)............. (7,282,221) (2,033,487) (4,646,750) (221,327) (4,337,142) --
From net realized gains
on investments
(Class B)............. (9,730,482) (7,043,145) (4,492,488) (5,263,567) (1,083,506) --
------------ ------------ ----------- ----------- ----------- -----------
Total dividends and
distributions to
shareholders........... (21,226,339) (15,283,963) (9,139,238) (5,484,894) (5,420,648) (92,640)
------------ ------------ ----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 8).. 28,256,172 18,827,961 4,897,454 (1,851,797) 7,954,560 (43,053)
------------ ------------ ----------- ----------- ----------- -----------
TOTAL INCREASE IN NET
ASSETS................. 36,200,797 49,277,508 6,253,110 6,983,383 8,430,549 10,312,634
NET ASSETS:
Beginning of period..... 282,031,165 232,753,657 81,939,796 74,956,413 47,257,637 36,945,003
------------ ------------ ----------- ----------- ----------- -----------
End of period [including
undistributed net
investment income
(loss) for September
30, 1996 and September
30,1995 of $(18,577),
$243,698; $0, $0; $0,
and $0, respectively].. $318,231,962 $282,031,165 $88,192,906 $81,939,796 $55,688,186 $47,257,637
============ ============ =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
5
<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 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,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ (1,857,708) $ (587,404) $ 108,377 $ 305,478 $ 154,585 $ 183,673
Net realized gain
(loss) on investments. 14,472 31,433,571 1,153,686 (2,564,836) 1,853,730 346,652
Net realized gain on
foreign currency,
other assets and
liabilities........... 36 10,951 797,602 1,756,424 2 --
Net change in
unrealized
appreciation
(depreciation) of
investments........... 33,583,299 15,112,125 218,368 1,847,343 1,445,861 297,243
Net change in
unrealized
appreciation
(depreciation) of
foreign currency,
other assets and
liabilities........... -- -- 83,360 42,526 -- --
------------ ------------ ----------- ----------- ----------- ----------
Net increase in net
assets resulting from
operations............. 31,740,099 45,969,243 2,361,393 1,386,935 3,454,178 827,568
------------ ------------ ----------- ----------- ----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... -- -- (478,740) (24,601) (123,623) (127,668)
From net investment
income (Class B)...... -- -- (693,095) (12,084) (58,296) (54,591)
From net realized gains
on investments
(Class A)............. (16,561,192) (985,792) -- (3,604) (175,889) (63,470)
From net realized gains
on investments
(Class B)............. (12,782,675) (1,122,738) -- (3,671) (127,334) (13,320)
------------ ------------ ----------- ----------- ----------- ----------
Total dividends and
distributions to
shareholders........... (29,343,867) (2,108,530) (1,171,835) (43,960) (485,142) (259,049)
------------ ------------ ----------- ----------- ----------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 8).. 106,187,132 23,184,310 1,366,433 (4,383,749) 25,962,674 2,174,079
------------ ------------ ----------- ----------- ----------- ----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 108,583,364 67,045,023 2,555,991 (3,040,774) 28,931,710 2,742,598
NET ASSETS:
Beginning of period..... 157,823,104 90,778,081 23,591,001 26,631,775 6,070,311 3,327,713
------------ ------------ ----------- ----------- ----------- ----------
End of period [including
undistributed net
investment income
(loss) for September
30, 1996 and September
30, 1995 $0, $0;
$512,906, $871,462;
$(2,516), and $2,915,
respectively].......... $266,406,468 $157,823,104 $26,146,992 $23,591,001 $35,002,021 $6,070,311
============ ============ =========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
BALANCED ASSETS FUND
- --------------------
<TABLE>
<CAPTION>
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/24/93-
9/30/93(3)..... $15.07 $ -- $ 0.06 $ 0.06 $ -- $ -- $ -- $15.13 0.40% $ 33,381
9/30/94......... 15.13 0.30 (0.23) 0.07 (0.28) (0.30) (0.58) 14.62 0.50 52,098
9/30/95......... 14.62 0.32 2.51 2.83 (0.45) (0.58) (1.03) 16.42 20.68 119,916
9/30/96......... 16.42 0.27 1.39 1.66 (0.28) (0.99) (1.27) 16.81 10.65 147,035
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
9/24/93-
9/30/93(3)..... 1.54%(4) 0.46%(4) 25% $ NA
9/30/94......... 1.58 2.00 141 NA
9/30/95......... 1.50 2.13 130 NA
9/30/96......... 1.52 1.63 187 0.0611
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/93(5)...... $15.63 $ 0.30 $ 2.63 $ 2.93 $(0.30) $(2.40) $(2.70) $15.86 20.29% $113,871
7/01/93-
9/30/93(5)..... 15.86 0.05 0.49 0.54 (0.06) (1.21) (1.27) 15.13 3.44 137,456
9/30/94......... 15.13 0.20 (0.23) (0.03) (0.18) (0.30) (0.48) 14.62 (0.14) 180,655
9/30/95......... 14.62 0.23 2.51 2.74 (0.36) (0.58) (0.94) 16.42 19.96 162,115
9/30/96......... 16.42 0.17 1.38 1.55 (0.18) (0.99) (1.17) 16.80 9.93 171,197
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
6/30/93(5)...... 1.91%(6) 1.94%(6) 251% $ NA
7/01/93-
9/30/93(5)..... 2.10(4)(6) 1.36(4)(6) 25 NA
9/30/94......... 2.21 1.36 141 NA
9/30/95......... 2.12 1.59 130 NA
9/30/96......... 2.12 1.03 187 0.0611
- --------------------------------------------------------------------------------
<CAPTION>
BLUE CHIP GROWTH FUND
- ---------------------
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/08/93-
9/30/94(3)..... $16.24 $ 0.09 (1) $(0.26) $(0.17) $ -- $(0.65) $(0.65) $15.42 (1.05)% $ 3,207
9/30/95......... 15.42 0.02 (1) 2.99 3.01 -- (1.09) (1.09) 17.34 21.29 42,407
9/30/96......... 17.34 (0.03)(1) 2.22 2.19 -- (1.91) (1.91) 17.62 13.88 51,993
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
10/08/93-
9/30/94(3)..... 1.64%(4)(6) 0.65%(4)(6) 170% $ NA
9/30/95......... 1.58(6) 0.11(6) 251 NA
9/30/96......... 1.57 (0.18) 269 0.0600
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/92(5)..... $12.53 $(0.13) $ 1.19 $ 1.06 $ -- $ -- $ -- $13.59 8.46% $ 83,237
1/01/93-
9/30/93(5)..... 13.59 (0.02)(1) 2.71 2.69 -- -- -- 16.28 19.79 79,774
9/30/94......... 16.28 (0.01)(1) (0.28) (0.29) -- (0.65) (0.65) 15.34 (1.81) 71,749
9/30/95......... 15.34 (0.01)(1) 2.89 2.88 -- (1.09) (1.09) 17.13 20.51 39,533
9/30/96......... 17.13 (0.14)(1) 2.19 2.05 -- (1.91) (1.91) 17.27 13.17 36,199
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
12/31/92(5)..... 2.53% (0.75)% 192% $ NA
1/01/93-
9/30/93(5)..... 2.46(4) (0.14)(4) 171 NA
9/30/94......... 2.28 (0.05) 170 NA
9/30/95......... 2.22 (0.09) 251 NA
9/30/96......... 2.23 (0.83) 269 0.0600
</TABLE>
- ------------
@ The average commission per share is derived by taking the agency commissions
paid on equity securities trades and dividing by the number of shares
purchased or sold.
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Pursuant to a reorganization of the SunAmerica Mutual Funds, the Equity
Funds fiscal year ends were changed to September 30
(6) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
6/30/93 9/30/93 9/30/94 9/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balanced Assets Class B...................... .05% .04% -- --
Blue Chip Growth Class A..................... -- -- 1.66% .11%
</TABLE>
See Notes to Financial Statements
7
<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)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/92(4)..... $13.30 $(0.07) $ 2.87 $ 2.80 $(0.02) $(0.44) $(0.46) $15.64 21.42% $30,024
12/01/92-
9/30/93(4)..... 15.64 (0.09)(2) 3.17 3.08 -- (0.69) (0.69) 18.03 20.42 34,918
9/30/94......... 18.03 0.04 (2) (1.64) (1.60) -- (2.65) (2.65) 13.78 (9.60) 32,906
9/30/95......... 13.78 (0.08)(2) 4.14 4.06 (0.04) -- (0.04) 17.80 29.51 37,714
9/30/96......... 17.80 (0.12)(2) 2.21 2.09 -- (2.11) (2.11) 17.78 12.92 41,904
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
11/30/92(4)..... 1.76% (0.46)% 98% $ NA
12/01/92-
9/30/93(4)..... 1.81(3) 1.18 (3) 231 NA
9/30/94......... 1.76 0.28 555 NA
9/30/95......... 1.66 (0.51) 392 NA
9/30/96......... 1.62 (0.69) 307 0.0603
<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)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/04/93-
9/30/94(5)..... $18.12 $ 0.03 (2) $(1.80) $(1.77) $ -- $(2.65) $(2.65) $13.70 (10.56)% $ 4,039
9/30/95......... 13.70 (0.18)(2) 4.08 3.90 (0.02) -- (0.02) 17.58 28.55 9,544
9/30/96......... 17.58 (0.24)(2) 2.18 1.94 -- (2.11) (2.11) 17.41 12.16 13,784
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
10/04/93-
9/30/94(5)..... 2.43%(3)(6) 0.20%(3)(6) 555% $ NA
9/30/95......... 2.31(7) (0.17)(7) 392 NA
9/30/96......... 2.32 (1.43) 307 0.0603
- --------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/92(4)(8).. $13.88 $(0.12) $ 3.39 $3.27 $ -- $(0.69) $(0.69) $16.46 24.31% $32,056
12/01/92-
9/30/93(4)(8).. 16.46 (0.02) 4.07 4.05 -- (0.73) (0.73) 19.78 25.68 39,238
9/30/94......... 19.78 (0.10) (1.40) (1.50) -- (1.46) (1.46) 16.82 (7.74) 38,570
9/30/95......... 16.82 (0.04) 8.28 8.24 -- (0.41) (0.41) 24.65 50.00 89,510
9/30/96......... 24.65 (0.16) 4.29 4.13 -- (4.53) (4.53) 24.25 19.35 158,567
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
11/30/92(4)(8).. 1.90% (0.88)% 209% $ NA
12/01/92-
9/30/93(4)(8).. 1.83(3) (0.15)(3) 216 NA
9/30/94......... 1.67 (0.60) 411 NA
9/30/95......... 1.57 (0.22) 351 NA
9/30/96......... 1.53 (0.68) 240 0.0607
<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(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/24/93-
9/30/93(5)..... $19.66 $ -- $ 0.12 $ 0.12 $ -- $ -- $ -- $19.78 0.61% $38,898
9/30/94......... 19.78 (0.20) (1.42) (1.62) -- (1.46) (1.46) 16.70 (8.40) 52,208
9/30/95......... 16.70 (0.16) 8.19 8.03 -- (0.41) (0.41) 24.32 49.08 68,313
9/30/96......... 24.32 (0.29) 4.20 3.91 -- (4.53) (4.53) 23.70 18.60 107,839
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- -------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
9/24/93-
9/30/93(5)..... 2.34%(3) (1.70)%(3) 216% $ NA
9/30/94......... 2.31 (1.23) 411 NA
9/30/95......... 2.22 (0.84) 351 NA
9/30/96......... 2.16 (1.30) 240 0.0607
</TABLE>
- ------------
@ The average commission per share is derived by taking the agency commissions
paid on equity securities trades and dividing by the number of shares
purchased or sold.
(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
8
<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)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
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
9/30/96......... 7.36 0.06 0.71 0.77 (0.42) -- (0.42) 7.71 11.00 10,035
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- ------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
6/15/94-
9/30/94(3)..... 2.15%(4)(5) 0.93%(4)(5) 18% $ NA
9/30/95......... 2.15(5) 1.36(5) 169 NA
9/30/96......... 2.15(5) 0.84(5) 103 0.0074
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/16/94-
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
9/30/96......... 7.30 0.02 0.70 0.72 (0.38) -- (0.38) 7.64 10.21 16,112
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- ------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
6/16/94-
9/30/94(3)..... 2.80%(4)(5) 0.33%(4)(5) 18% $ NA
9/30/95......... 2.80(5) 0.75(5) 169 NA
9/30/96......... 2.80(5) 0.21(5) 103 0.0074
- --------------------------------------------------------------------------------
GROWTH AND INCOME FUND
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/01/94-
9/30/94(3)..... $7.33 $0.07 $ 0.10 $ 0.17 $(0.06) $ -- $(0.06) $7.44 2.34% $ 3,098
9/30/95......... 7.44 0.32 1.08 1.40 (0.30) (0.15) (0.45) 8.39 19.53 3,532
9/30/96......... 8.39 0.14 2.50 2.64 (0.17) (0.39) (0.56) 10.47 32.59 21,099
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- ------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
7/01/94-
9/30/94(3)..... 1.50%(4)(5) 3.48%(4)(5) 8% $ NA
9/30/95......... 0.46(5) 4.16(5) 230 NA
9/30/96......... 0.96(5) 1.52(5) 161 0.0600
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS b
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/06/94-
9/30/94(3)..... $7.33 $0.05 $ 0.11 $ 0.16 $(0.05) $ -- $(0.05) $7.44 2.19% $ 229
9/30/95......... 7.44 0.35 1.03 1.38 (0.28) (0.15) (0.43) 8.39 19.19 2,538
9/30/96......... 8.39 0.08 2.50 2.58 (0.13) (0.39) (0.52) 10.45 31.75 13,903
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME AVERAGE
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO COMMISSION
ENDED NET ASSETS NET ASSETS TURNOVER PER SHARE@
- ---------------- ------------- -------------- --------- ----------
<S> <C> <C> <C> <C>
7/06/94-
9/30/94(3)..... 2.15%(4)(5) 2.86%(4)(5) 8% $ NA
9/30/95......... 0.30(5) 4.48(5) 230 NA
9/30/96......... 1.58(5) 0.73(5) 161 0.0600
</TABLE>
- ------------
@ The average commission per share is derived by taking the agency commissions
paid on equity securities trades and dividing by the number of shares
purchased or sold.
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95 9/30/96
------- ------- -------
<S> <C> <C> <C>
Global Balanced Class A.............................. 1.14% .40% .44%
Global Balanced Class B.............................. .93 .45 .41
Growth and Income Class A............................ 4.48 2.96 1.01
Growth and Income Class B............................ 20.35 5.07 1.14
</TABLE>
See Notes to Financial Statements
9
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--62.8%
AEROSPACE & MILITARY TECHNOLOGY--1.6%
Boeing Co............................................... 30,000 $ 2,835,000
Raytheon Co............................................. 40,000 2,225,000
-----------
5,060,000
-----------
APPAREL & TEXTILES--3.1%
Fila Holding SpA ADR(1)................................. 20,000 1,922,500
NIKE, Inc. Class B...................................... 25,000 3,037,500
Oakley, Inc.+........................................... 58,000 2,465,000
Reebok International Ltd. .............................. 35,000 1,216,250
Tommy Hilfiger Corp.+................................... 20,000 1,185,000
-----------
9,826,250
-----------
AUTOMOTIVE--0.9%
Ford Motor Co........................................... 40,000 1,250,000
Harley-Davidson, Inc. .................................. 35,000 1,505,000
-----------
2,755,000
-----------
BANKS--5.6%
Bank of Boston Corp..................................... 25,000 1,446,875
BankAmerica Corp........................................ 25,000 2,053,125
Chase Manhattan Corp.................................... 40,000 3,205,000
Citicorp................................................ 20,000 1,812,500
First Bank System, Inc.................................. 25,000 1,671,875
First Union Corp. ...................................... 35,000 2,336,250
Summit Bancorp.......................................... 130,000 5,167,500
-----------
17,693,125
-----------
BROADCASTING & MEDIA--0.3%
Comcast Corp. Class A+.................................. 50,000 768,750
Univision Communications, Inc. Class A+................. 2,000 67,000
-----------
835,750
-----------
BUSINESS SERVICES--0.2%
CUC International, Inc.+................................ 20,000 797,500
-----------
CHEMICALS--3.3%
Cabot Corp.............................................. 35,000 975,625
du Pont (E.I.) de Nemours & Co.......................... 20,000 1,765,000
Monsanto Co............................................. 55,000 2,007,500
Olin Corp. ............................................. 50,000 4,200,000
Union Carbide Corp...................................... 35,000 1,596,875
-----------
10,545,000
-----------
COMMUNICATION EQUIPMENT--2.6%
Ericsson (L.M.) Telephone Co., Class B ADR(1)........... 100,000 2,537,500
Nokia Corp. ADR(1)...................................... 40,000 1,770,000
Octel Communications Corp.+............................. 70,000 2,030,000
Tellabs, Inc.+.......................................... 30,000 2,118,750
-----------
8,456,250
-----------
</TABLE>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<TABLE>
<S> <C> <C>
COMPUTERS & BUSINESS EQUIPMENT--3.9%
American Pad & Paper Co.+................................. 111,000 $ 2,358,750
CellNet Data Systems, Inc.+............................... 20,000 315,000
Cisco Systems, Inc.+...................................... 25,000 1,551,563
Electronic Data Systems Corp.............................. 30,000 1,841,250
International Business Machines Corp. .................... 40,000 4,980,000
Sun Microsystems, Inc.+................................... 25,000 1,553,125
-----------
12,599,688
-----------
CONGLOMERATE--1.5%
General Electric Co....................................... 25,000 2,275,000
United Technologies Corp.................................. 20,000 2,402,500
-----------
4,677,500
-----------
DEPARTMENT STORES--1.3%
Penney (J.C.), Inc........................................ 30,000 1,623,750
Wal-Mart Stores, Inc. .................................... 100,000 2,637,500
-----------
4,261,250
-----------
ELECTRONICS--2.2%
Diebold, Inc.............................................. 40,000 2,335,000
Intel Corp................................................ 15,000 1,431,563
Lexmark International Group, Inc. Class A................. 50,000 1,018,750
Micron Technology, Inc.................................... 70,000 2,135,000
-----------
6,920,313
-----------
ENERGY SERVICES--2.5%
Mobil Corp. .............................................. 50,000 5,787,500
Royal Dutch Petroleum Co. ................................ 15,000 2,341,875
-----------
8,129,375
-----------
ENERGY SOURCES--1.0%
Burlington Resources, Inc. ............................... 30,000 1,331,250
Enron Corp................................................ 46,000 1,874,500
-----------
3,205,750
-----------
FINANCIAL SERVICES--4.1%
Alex Brown, Inc........................................... 30,000 1,736,250
Capital One Financial Corp. .............................. 70,000 2,100,000
Dean Witter, Discover & Co. .............................. 35,000 1,925,000
Federal National Mortgage Association..................... 60,000 2,092,500
Litchfield Financial Corp................................. 52,500 735,000
MBNA Corp................................................. 20,000 695,000
Morgan Stanley Group, Inc................................. 50,000 2,487,500
ReliaStar Financial Corp.................................. 25,000 1,187,500
-----------
12,958,750
-----------
FOOD, BEVERAGE & TOBACCO--1.9%
Dole Food, Inc............................................ 35,000 1,470,000
Philip Morris Cos., Inc................................... 30,000 2,692,500
Seagram Co., Ltd.......................................... 50,000 1,868,750
-----------
6,031,250
-----------
</TABLE>
10
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
HEALTH SERVICES--1.3%
Apria Healthcare Group, Inc.+............................. 30,000 $ 562,500
Beverly Enterprises, Inc.+................................ 75,000 815,625
MedPartners, Inc.+........................................ 60,500 1,376,375
NovaCare, Inc.+........................................... 150,000 1,406,250
------------
4,160,750
------------
HOUSEHOLD PRODUCTS--2.7%
Corning, Inc. ............................................ 40,000 1,560,000
Estee Lauder Cos., Inc. Class A........................... 30,000 1,346,250
Procter & Gamble Co....................................... 30,000 2,925,000
Warner-Lambert Co......................................... 40,000 2,640,000
------------
8,471,250
------------
INSURANCE--1.7%
Aetna, Inc................................................ 31,738 2,233,562
Allstate Corp............................................. 53,000 2,610,250
Lawyers Title Corp........................................ 25,000 531,250
------------
5,375,062
------------
LEISURE & TOURISM--4.5%
Callaway Golf Co.......................................... 35,000 1,194,375
Carnival Corp. Class A.................................... 47,000 1,457,000
Disney (Walt) Co.......................................... 35,000 2,218,125
HFS, Inc.+................................................ 30,500 2,039,687
Hilton Hotels Corp........................................ 80,000 2,270,000
MGM Grand, Inc.+.......................................... 65,000 2,746,250
Mirage Resorts, Inc.+..................................... 45,000 1,153,125
Sun International Hotels Ltd.+............................ 25,000 1,281,250
------------
14,359,812
------------
MEDICAL PRODUCTS--3.2%
Baxter International, Inc................................. 75,000 3,506,250
Imagyn Medical, Inc.+..................................... 45,000 483,750
Johnson & Johnson Co...................................... 40,000 2,050,000
Medtronic, Inc............................................ 30,000 1,923,750
Nitinol Medical Technologies, Inc.+....................... 10,000 112,500
Perkin-Elmer Corp......................................... 35,000 2,025,625
------------
10,101,875
------------
PHARMACEUTICALS--9.8%
Allergan, Inc............................................. 70,000 2,668,750
American Home Products Corp............................... 25,000 1,593,750
Bristol-Myers Squibb Co................................... 30,000 2,891,250
Chiron Corp.+............................................. 80,000 1,520,000
Genzyme Corp.+............................................ 40,000 1,020,000
Gilead Sciences, Inc.+.................................... 61,800 1,745,850
Glaxo Holdings PLC ADR(1)................................. 80,000 2,490,000
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Lilly (Eli) & Co................................ 60,000 $ 3,870,000
Merck & Co., Inc................................ 40,000 2,815,000
Neurex Corp.+................................... 65,000 1,243,125
Pfizer, Inc..................................... 60,000 4,747,500
Schering-Plough Corp............................ 40,000 2,460,000
Teva Pharmaceutical Industries Ltd. ADR(1)...... 40,000 1,855,000
Virus Research Institute, Inc.+................. 35,000 284,375
------------
31,204,600
------------
SOFTWARE--1.4%
Computer Associates International, Inc.+........ 20,000 1,195,000
Document Sciences Corp.+........................ 5,000 63,125
Microsoft Corp.+................................ 15,000 1,978,125
NETCOM On-Line Communications Services+......... 40,000 685,000
PSINet, Inc.+................................... 60,000 652,500
------------
4,573,750
------------
SPECIALTY RETAIL--0.7%
Melville Corp................................... 50,000 2,206,250
------------
TELECOMMUNICATIONS--1.5%
Advanced Fibre Communications+(2)............... 10,000 250,000
Andrew Corp.+................................... 30,000 1,496,250
AT&T Corp....................................... 25,000 1,306,250
Lucent Technologies, Inc........................ 35,000 1,605,625
------------
4,658,125
------------
TOTAL COMMON STOCK
(cost $182,931,590)............................. 199,864,225
------------
PREFERRED STOCK--0.0%
INSURANCE--0.0%
Aetna, Inc.
(cost $146,757)................................. 2,247 163,750
------------
BONDS & NOTES--5.5%
AEROSPACE & MILITARY TECHNOLOGY--1.3%
Lockheed Martin Corp.
7.25% due 5/15/06............................... $ 4,000 4,000,880
------------
BANKS--0.6%
Chase Manhattan Corp.
7.88% due 8/01/04............................... 2,000 2,008,420
------------
</TABLE>
11
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
BONDS & NOTES (CONTINUED)
FINANCIAL SERVICES--3.6%
Bear Stearns Cos., Inc.
6.63% due 1/15/04................................. $ 5,000 $4,802,150
DLJ Mortgage Acceptance Corp.
7.35% due 9/18/03................................. 4,689 4,687,398
Donaldson Lufkin & Jenrette, Inc.
6.88% due 11/01/05................................ 2,000 1,911,640
----------
11,401,188
----------
TOTAL BONDS & NOTES
(cost $17,129,808)................................ 17,410,488
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.1%
6.50% due 9/01/10
(cost $3,549,898)................................. 3,631 3,531,720
----------
U.S. TREASURY NOTES--16.5%
5.75% due 10/31/97................................ 5,000 4,995,300
6.25% due 5/31/00................................. 5,000 4,978,100
6.75% due 5/31/99................................. 5,000 5,060,150
6.88% due 7/31/99-3/31/00......................... 13,000 13,197,620
7.25% due 2/15/98-8/15/04......................... 13,300 13,713,025
7.50% due 10/31/99................................ 6,000 6,194,040
9.25% due 8/15/98................................. 4,000 4,218,120
----------
TOTAL U.S. TREASURY NOTES
(cost $52,624,421)................................ 52,356,355
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
U.S. TREASURY BONDS--6.7%
6.75% due 8/15/26.............................. $ 10,000 $ 9,773,400
11.25% due 2/15/15............................. 8,000 11,488,720
-------------
TOTAL U.S. TREASURY BONDS
(cost $21,390,625)............................. 21,262,120
-------------
TOTAL INVESTMENT SECURITIES--92.6%
(cost $277,773,099)............................ 294,588,658
-------------
REPURCHASE AGREEMENT--2.6%
Joint Repurchase Agreement
Account (Note 3)
(cost $8,398,000).............................. 8,398 8,398,000
-------------
TOTAL INVESTMENTS--
(cost $286,171,099)............................ 95.2% 302,986,658
Other assets less liabilities................... 4.8 15,245,304
----- -------------
NET ASSETS-- 100.0% $318,231,962
===== =============
</TABLE>
- --------
+Non-income producing security
(1)ADR ("American Depositary Receipt")
(2)Fair valued security, see Note 2
See Notes to Financial Statements
12
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--91.6%
AEROSPACE & MILITARY TECHNOLOGY--2.7%
Boeing Co.................................................. 10,000 $ 945,000
Raytheon Co................................................ 20,000 1,112,500
Remec, Inc.+............................................... 25,000 353,125
-----------
2,410,625
-----------
APPAREL & TEXTILES--4.6%
Fila Holding SpA ADR(1).................................... 5,000 480,625
NIKE, Inc.................................................. 10,000 1,215,000
Oakley, Inc.+.............................................. 35,000 1,487,500
Tommy Hilfiger Corp.+...................................... 15,000 888,750
-----------
4,071,875
-----------
AUTOMOTIVE--1.3%
Ford Motor Co. ............................................ 15,000 468,750
Harley-Davidson, Inc....................................... 15,000 645,000
-----------
1,113,750
-----------
BANKS--5.3%
BankAmerica Corp........................................... 5,000 410,625
Citicorp................................................... 10,000 906,250
First Union Corp........................................... 15,000 1,001,250
Standard Federal Bancorp................................... 25,000 1,143,750
Summit Bancorp............................................. 30,000 1,192,500
-----------
4,654,375
-----------
BROADCASTING & MEDIA--1.0%
Comcast Corp. Class A+..................................... 15,000 230,625
National Media Corp.+...................................... 40,000 595,000
Univision Communications, Inc.
Class A+.................................................. 2,000 67,000
-----------
892,625
-----------
BUSINESS SERVICES--0.4%
CUC International, Inc.+................................... 10,000 398,750
-----------
CHEMICALS--5.3%
Cabot Corp................................................. 15,000 418,125
du Pont (E.I.) de Nemours & Co............................. 5,000 441,250
Hercules, Inc.............................................. 10,000 547,500
Monsanto Co................................................ 20,000 730,000
Olin Corp. ................................................ 25,000 2,100,000
Union Carbide Corp......................................... 10,000 456,250
-----------
4,693,125
-----------
COMMUNICATION EQUIPMENT--4.1%
Ericsson (L.M.) Telephone Co., Class B ADR(1).............. 30,000 761,250
Nokia Corp. ADR(1)......................................... 20,000 885,000
Octel Communications Corp.+................................ 30,000 870,000
Tellabs, Inc.+............................................. 15,000 1,059,375
-----------
3,575,625
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMPUTERS & BUSINESS EQUIPMENT--9.0%
American Pad & Paper Co.+.................................. 50,000 $ 1,062,500
Cisco Systems, Inc.+....................................... 15,000 930,937
Electronic Data Systems Corp............................... 20,000 1,227,500
International Business Machines Corp....................... 10,000 1,245,000
Lexmark International Group, Inc.+......................... 25,000 509,375
Micron Technology, Inc..................................... 48,000 1,464,000
Storage Technology Corp.+.................................. 15,000 568,125
Sun Microsystems, Inc.+.................................... 15,000 931,875
-----------
7,939,312
-----------
CONGLOMERATE--2.4%
General Electric Co. ...................................... 10,000 910,000
United Technologies Corp. ................................. 10,000 1,201,250
-----------
2,111,250
-----------
CONSUMER GOODS--0.4%
Whitman Corp............................................... 15,000 346,875
-----------
DEPARTMENT STORES--1.8%
Penney (J.C.), Inc......................................... 15,000 811,875
Wal-Mart Stores, Inc....................................... 30,000 791,250
-----------
1,603,125
-----------
ELECTRONICS--1.9%
Diebold, Inc. ............................................. 20,000 1,167,500
Intel Corp................................................. 5,000 477,188
-----------
1,644,688
-----------
ENERGY SERVICES--2.8%
Mobil Corp................................................. 15,000 1,736,250
Royal Dutch Petroleum Co................................... 5,000 780,625
-----------
2,516,875
-----------
ENERGY SOURCES--0.5%
Burlington Resources, Inc. ................................ 10,000 443,750
-----------
ENTERTAINMENT PRODUCTS--1.2%
Callaway Golf Co........................................... 15,000 511,875
Toy Biz, Inc. Class A+..................................... 30,000 532,500
-----------
1,044,375
-----------
FINANCIAL SERVICES--4.2%
Alex Brown, Inc............................................ 10,000 578,750
Capital One Financial Corp................................. 20,000 600,000
Dean Witter, Discover & Co................................. 15,000 825,000
Federal National Mortgage Association...................... 10,000 348,750
MBNA Corp. ................................................ 10,000 347,500
Morgan Stanley Group, Inc. ................................ 10,000 497,500
ReliaStar Financial Corp................................... 10,000 475,000
-----------
3,672,500
-----------
</TABLE>
13
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOOD, BEVERAGE & TOBACCO--2.9%
Dole Food, Inc............................................. 15,000 $ 630,000
Odwalla, Inc.+............................................. 25,000 443,750
Philip Morris Cos., Inc.................................... 10,000 897,500
Seagram Co., Ltd. ......................................... 15,000 560,625
-----------
2,531,875
-----------
HEALTH SERVICES--1.5%
Apria Healthcare Group, Inc.+.............................. 20,000 375,000
Beverly Enterprises, Inc.+................................. 25,000 271,875
Health Management Associates+.............................. 15,000 373,125
Healthsource, Inc.+........................................ 20,000 295,000
-----------
1,315,000
-----------
HOUSEHOLD PRODUCTS--3.0%
Corning, Inc. ............................................. 15,000 585,000
Estee Lauder Cos., Inc., Class A........................... 20,000 897,500
Procter & Gamble Co........................................ 5,000 487,500
Warner-Lambert Co.......................................... 10,000 660,000
-----------
2,630,000
-----------
INSURANCE--4.2%
Aetna, Inc................................................. 18,369 1,292,718
Allstate Corp.............................................. 20,000 985,000
Lawyers Title Corp. ....................................... 25,000 531,250
UICI+...................................................... 35,000 910,000
-----------
3,718,968
-----------
LEISURE & TOURISM--7.3%
Extended Stay America, Inc.+............................... 50,000 1,025,000
HFS, Inc.+................................................. 15,000 1,003,125
Hilton Hotels Corp......................................... 40,000 1,135,000
MGM Grand, Inc.+........................................... 45,000 1,901,250
Mirage Resorts, Inc.+...................................... 25,000 640,625
Sun International Hotels Ltd.+............................. 15,000 768,750
-----------
6,473,750
-----------
MEDICAL PRODUCTS--5.2%
Baxter International, Inc.................................. 25,000 1,168,750
Chiron Corp.+.............................................. 42,000 798,000
Johnson & Johnson Co....................................... 15,000 768,750
Medtronic, Inc............................................. 15,000 961,875
Perkin Elmer Corp.......................................... 15,000 868,125
-----------
4,565,500
-----------
PHARMACEUTICALS--12.8%
Allergan, Inc.............................................. 30,000 1,143,750
American Home Products Corp. .............................. 10,000 637,500
Bristol-Myers Squibb Co. .................................. 15,000 1,445,625
Gilead Sciences, Inc.+..................................... 18,200 514,150
Lilly (Eli) & Co. ......................................... 20,000 1,290,000
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
PHARMACEUTICALS (CONTINUED)
Merck & Co., Inc................................... 15,000 $ 1,055,625
Neurex Corp.+...................................... 40,000 765,000
Pfizer, Inc........................................ 25,000 1,978,125
Schering-Plough Corp............................... 20,000 1,230,000
Teva Pharmaceutical Industries Ltd. ADR(1)......... 20,000 927,500
Virus Research Institute, Inc.+.................... 40,000 325,000
-----------
11,312,275
-----------
POLLUTION CONTROL--0.8%
Republic Industries, Inc.+......................... 25,000 725,000
-----------
SOFTWARE--2.1%
Computer Associates International, Inc............. 10,000 597,500
Microsoft Corp.+................................... 5,000 659,375
NETCOM On-Line Communications Services+............ 20,000 342,500
PSINet, Inc.+...................................... 20,000 217,500
-----------
1,816,875
-----------
SPECIALTY RETAIL--1.0%
Melville Corp. .................................... 20,000 882,500
-----------
TELECOMMUNICATIONS--1.9%
Andrew Corp.+...................................... 20,000 997,500
Lucent Technologies, Inc........................... 15,000 688,125
-----------
1,685,625
-----------
TOTAL COMMON STOCK
(cost $74,899,347)................................... 80,790,868
-----------
PREFERRED STOCK--0.1%
INSURANCE--0.1%
Aetna, Inc. Class C................................ 1,123 81,839
-----------
TOTAL INVESTMENT SECURITIES--91.7%
(cost $74,972,693)................................. 80,872,707
-----------
REPURCHASE AGREEMENT--1.3%
Joint Repurchase Agreement Account (Note 3)
(cost $1,189,000).................................. $1,189 1,189,000
-----------
TOTAL INVESTMENTS--
(cost $76,161,693)................................. 93.0% 82,061,707
Other assets less liabilities....................... 7.0 6,131,199
------ -----------
NET ASSETS-- 100.0% $88,192,906
====== ===========
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
See Notes to Financial Statements
14
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--92.9%
AEROSPACE & MILITARY TECHNOLOGY--1.3%
Hexcel Corp.+............................................. 10,000 $ 193,750
REMEC, Inc.+.............................................. 37,000 522,625
----------
716,375
----------
APPAREL & TEXTILES--9.6%
Fila Holding SpA ADR(1)................................... 2,000 192,250
Gucci Group NV ADR(1)..................................... 10,000 725,000
Jones Apparel Group, Inc.+................................ 15,000 956,250
NIKE, Inc. ............................................... 6,000 729,000
Nine West Group, Inc.+.................................... 12,000 651,000
North Face, Inc.+......................................... 23,000 649,750
Pacific Sunwear of California+............................ 15,000 493,125
Reebok International Ltd. ................................ 15,000 521,250
Tommy Hilfiger Corp.+..................................... 7,000 414,750
----------
5,332,375
----------
BANKS--1.4%
Charter One Financial, Inc. .............................. 10,500 420,000
PNC Bank Corp. ........................................... 10,000 333,750
----------
753,750
----------
BUSINESS SERVICES--1.8%
Applied Graphics Technologies+............................ 20,100 298,988
Data Processing Resources Corp.+.......................... 14,200 312,400
TeleSpectrum Worldwide, Inc.+............................. 20,000 390,000
----------
1,001,388
----------
CHEMICALS--2.7%
Nalco Chemical Co. ....................................... 10,000 362,500
Praxair, Inc. ............................................ 15,000 645,000
Waters Corp.+............................................. 15,000 491,250
----------
1,498,750
----------
COMMUNICATION EQUIPMENT--2.9%
Cascade Communications Co.+............................... 6,000 489,000
Octel Communications Corp.+............................... 15,000 435,000
Tellabs, Inc.+............................................ 10,000 706,250
----------
1,630,250
----------
COMPUTERS & BUSINESS EQUIPMENT--9.8%
Amati Communications Corp.+............................... 10,000 220,000
Bay Networks, Inc.+....................................... 10,000 272,500
Cabletron Systems, Inc.+.................................. 5,000 341,875
CellNet Data Systems, Inc.+............................... 20,000 315,000
CIBER, Inc.+.............................................. 18,200 691,600
Cisco Systems, Inc.+...................................... 12,000 744,750
COMPAQ Computer Corp.+.................................... 7,000 448,875
Gateway 2000, Inc. ....................................... 7,000 335,125
HBO & Co. ................................................ 10,000 667,500
Micron Technology, Inc. .................................. 15,000 457,500
</TABLE>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<TABLE>
<S> <C> <C>
COMPUTERS & BUSINESS EQUIPMENT (CONTINUED)
Newbridge Networks Corp.+................................... 5,000 $ 318,750
Sun Microsystems, Inc.+..................................... 10,000 621,250
----------
5,434,725
----------
CONGLOMERATE--0.8%
Tyco International Ltd. .................................... 10,000 431,250
----------
DEPARTMENT STORES--0.6%
Woolworth Corp.+............................................ 15,000 309,375
----------
ELECTRONICS--4.7%
Analog Devices, Inc.+....................................... 10,000 271,250
Diebold, Inc. .............................................. 17,000 992,375
National Semiconductor Corp.+............................... 20,000 402,500
Telco Systems, Inc.+........................................ 10,000 190,000
VeriFone, Inc.+............................................. 10,000 447,500
Xilinx, Inc.+............................................... 10,000 340,000
----------
2,643,625
----------
ENERGY SERVICES--3.4%
Global Marine, Inc.+........................................ 25,000 393,750
Noble Drilling Corp.+....................................... 22,500 340,313
Rowan Cos., Inc.+........................................... 30,000 558,750
Transocean Offshore, Inc.................................... 10,000 612,500
----------
1,905,313
----------
ENERGY SOURCES--2.2%
Flores & Rucks, Inc.+....................................... 25,000 965,625
Parker & Parsley Petroleum Co. ............................. 10,000 261,250
----------
1,226,875
----------
ENTERTAINMENT PRODUCTS--0.6%
Callaway Golf Co............................................ 10,000 341,250
----------
FINANCIAL SERVICES--1.4%
Alex Brown, Inc. ........................................... 6,000 347,250
Associates First Capital Corp., Class A..................... 10,000 410,000
----------
757,250
----------
HOUSEHOLD PRODUCTS--1.0%
Blyth Industries, Inc.+..................................... 4,700 227,950
Corning, Inc. .............................................. 8,000 312,000
----------
539,950
----------
INSURANCE--2.7%
Allmerica Financial Corp. .................................. 10,000 325,000
Lawyers Title Corp. ........................................ 20,000 425,000
Maxicare Health Plans, Inc.+................................ 10,000 190,000
Progressive Corp. .......................................... 10,000 572,500
----------
1,512,500
----------
</TABLE>
15
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
LEISURE & TOURISM--1.9%
HFS, Inc.+................................................. 3,800 $ 254,125
Sun International Hotels Ltd.+............................. 16,000 820,000
----------
1,074,125
----------
MACHINERY--3.2%
Allied Products Corp. ..................................... 15,000 375,000
Flanders Corp.+(2)(3)...................................... 100,000 900,000
Precision Castparts Corp. ................................. 10,000 485,000
----------
1,760,000
----------
MEDICAL PRODUCTS--2.6%
Boston Scientific Corp.+................................... 12,000 690,000
Cohr, Inc.+................................................ 20,000 555,000
Nitinol Medical Technologies, Inc.+........................ 5,000 56,250
Serologicals Corp.+........................................ 5,000 173,750
----------
1,475,000
----------
METALS & MINING--0.7%
Crown, Cork & Seal, Inc. .................................. 9,000 415,125
----------
PHARMACEUTICALS--7.0%
ABR Information Services, Inc.+............................ 10,000 720,000
Allergan, Inc. ............................................ 20,000 762,500
Centocor, Inc.+............................................ 10,000 355,000
Guilford Pharmaceuticals, Inc.+............................ 10,000 275,000
Ligand Pharmaceuticals, Inc.+.............................. 15,000 204,375
Neurex Corp.+.............................................. 25,000 478,125
Teva Pharmaceutical Industries Ltd. ADR(1)................. 23,500 1,089,812
----------
3,884,812
----------
POLLUTION CONTROL--4.2%
Culligan Water Technologies, Inc.+......................... 15,000 568,125
United States Filter Corporation........................... 5,000 170,625
United Waste Systems, Inc. ................................ 30,000 1,042,500
USA Waste Services, Inc.+.................................. 17,000 535,500
----------
2,316,750
----------
REAL ESTATE--0.3%
Green Tree Financial Corp. ................................ 5,000 196,250
----------
REAL ESTATE INVESTMENT TRUSTS--2.0%
Bay Apartment Communities, Inc. ........................... 15,000 427,500
Innkeepers USA Trust....................................... 25,000 281,250
Starwood Lodging Trust..................................... 10,000 418,750
----------
1,127,500
----------
RESTAURANTS--0.6%
Starbucks Corp.+........................................... 10,000 330,000
----------
SOFTWARE--8.5%
Baan Co. NV+............................................... 10,000 333,750
BDM International, Inc.+................................... 10,000 595,000
BMC Software, Inc.+........................................ 5,000 397,500
Cognos, Inc.+.............................................. 10,000 326,250
Computer Associates International, Inc. ................... 8,000 478,000
Innovus Corp.+............................................. 14,000 84,000
JDA Software Group, Inc.+.................................. 12,000 330,000
Microsoft Corp.+........................................... 4,000 527,500
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SOFTWARE (CONTINUED)
PeopleSoft, Inc.+................................. 5,000 $ 416,250
Rational Software Corp.+.......................... 10,000 341,250
RemedyTemp, Inc.+................................. 15,000 318,750
VIASOFT, Inc.+.................................... 14,000 588,000
-----------
4,736,250
-----------
SPECIALTY RETAIL--7.3%
Eagle Hardware And Groden+........................ 20,000 540,000
Global DirectMail Corp.+.......................... 20,000 955,000
Just For Feet, Inc.+.............................. 10,000 501,250
MacFrugals Bargains Closeouts+.................... 25,000 590,625
Melville Corp. ................................... 12,000 529,500
Saks Holdings Incorporated+....................... 10,000 350,000
Tiffany & Co. .................................... 15,000 600,000
-----------
4,066,375
-----------
TELECOMMUNICATIONS--6.5%
ACC Corp. ........................................ 4,500 212,625
Ascend Communications, Inc. ...................... 5,000 330,625
Lucent Technologies, Inc. ........................ 5,000 229,375
NICE Systems Ltd. ADR +(1)........................ 20,000 458,125
Pacific Gateway Exchange, Inc.+................... 22,000 649,000
PairGain Technologies, Inc.+...................... 6,300 492,187
Teleport Communications Group
Class A+......................................... 24,000 567,000
Westell Technologies, Inc. Class A+............... 16,000 708,000
-----------
3,646,937
-----------
UTILITIES--1.2%
El Paso Natural Gas Co. .......................... 15,000 660,000
-----------
TOTAL COMMON STOCK
(cost $41,236,289)................................ 51,724,125
-----------
WARRANTS--0.7%+
ELECTRONICS--0.7%
Intel Corp........................................ 7,000 397,250
-----------
TOTAL INVESTMENT SECURITIES--93.6%
(cost $41,512,876)................................ 52,121,375
-----------
REPURCHASE AGREEMENT--7.3%
Joint Repurchase Agreement
Account (Note 3)
(cost $4,072,000)................................. $4,072 4,072,000
-----------
TOTAL INVESTMENTS--
(cost $45,584,876)................................ 100.9% 56,193,375
Liabilities in excess of other assets.............. (0.9) (505,189)
------ -----------
NET ASSETS-- 100.0% $55,688,186
====== ===========
</TABLE>
- -------
+ Non-income producing security
(1) ADR ("American Depositary Receipts")
(2) Fair valued security, see Note 2
(3) At September 30, 1996 the Fund held a restricted security amounting to
1.62% of net assets. The Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in the
connection with the disposition of the securities.
<TABLE>
<CAPTION>
DATE OF UNIT VALUATION AS OF
DESCRIPTION ACQUISITION COST SEPTEMBER 30, 1996
- -------------- ----------- ----- ------------------
<S> <C> <C> <C>
Flanders Corp. 5/09/96 $5.00 $9.00
</TABLE>
See Notes to Financial Statements
16
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--93.3%
AEROSPACE & MILITARY TECHNOLOGY--1.5%
Hexcel Corp.+........................................... 30,000 $ 581,250
Nichols Research Corp.+................................. 40,000 1,190,000
REMEC, Inc.+............................................ 100,500 1,419,563
Rohr, Inc.+............................................. 40,000 785,000
------------
3,975,813
------------
APPAREL & TEXTILES--2.7%
Fila Holding SpA ADR(1)................................. 8,000 769,000
Gucci Group NV.......................................... 10,000 725,000
Jones Apparel Group, Inc.+.............................. 20,000 1,275,000
Nautica Enterprises, Inc.+.............................. 30,000 967,500
North Face, Inc.+....................................... 45,000 1,271,250
Pacific Sunwear of California+.......................... 62,500 2,054,687
------------
7,062,437
------------
BANKS--2.5%
First American Corp. (Tennessee)........................ 50,000 2,400,000
Long Island Bancorp, Inc................................ 55,000 1,588,125
PNC Bank Corp........................................... 39,500 1,318,313
Summit Bancorp.......................................... 31,500 1,252,125
------------
6,558,563
------------
BROADCASTING & MEDIA--2.4%
Mecklermedia Corp.+..................................... 115,600 2,080,800
National Media Corp.+................................... 70,700 1,051,663
Sinclair Broadcast Group, Inc. Class A+................. 40,800 1,626,900
United Video Satellite Group Class A+................... 80,000 1,620,000
Univision Communications, Inc. Class A+................. 3,000 100,500
------------
6,479,863
------------
BUSINESS SERVICES--5.9%
Abacus Direct Corp.+.................................... 6,500 136,500
Childrens Comprehensive
Services, Inc.+........................................ 90,000 1,597,500
Datamark Holdings, Inc.+................................ 96,774 1,185,481
Datamark Holdings, Inc.+(2)(3).......................... 193,549 1,887,103
International Network Services+......................... 33,000 1,159,125
Learning Tree International, Inc+....................... 12,500 462,500
Mecon, Inc.+............................................ 45,100 1,127,500
Paychex, Inc............................................ 25,000 1,450,000
ProSoft Development, Inc.+(2)(3)........................ 250,000 2,500,000
RTW, Inc.+.............................................. 48,000 1,386,000
SOS Staffing Services, Inc.+............................ 75,000 843,750
TeleSpectrum Worldwide, Inc.+........................... 80,000 1,560,000
Vincam Group, Inc.+..................................... 10,000 382,500
------------
15,677,959
------------
CHEMICALS--2.0%
Betz Laboratories, Inc.................................. 43,100 2,262,750
Nalco Chemical Co....................................... 87,000 3,153,750
------------
5,416,500
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
COMMUNICATION EQUIPMENT--3.3%
Cascade Communications Co.+............................... 28,000 $ 2,282,000
DSP Communications, Inc.+................................. 35,000 1,955,625
Octel Communications Corp.+............................... 40,000 1,160,000
Registry, Inc.+........................................... 50,500 1,919,000
Tellabs, Inc.+............................................ 20,000 1,412,500
------------
8,729,125
------------
COMPUTERS & BUSINESS EQUIPMENT--9.0%
3Com Corp.+............................................... 20,000 1,201,250
Amati Communications Corp.+............................... 40,000 880,000
Bay Networks, Inc.+....................................... 25,000 681,250
CellNet Data Systems, Inc.+............................... 20,000 315,000
Chips & Technologies, Inc.+............................... 90,000 1,226,250
CIBER, Inc.+.............................................. 69,300 2,633,400
Cisco Systems, Inc.+...................................... 32,000 1,986,000
Daisytek International Corp.+............................. 21,000 908,250
FORE Systems, Inc.+....................................... 20,000 827,500
HMT Technology Corp.+..................................... 45,000 978,750
ITI Technologies, Inc.+................................... 35,000 1,233,750
Lexmark International Group, Inc.+........................ 75,000 1,528,125
Linear Technology Corp.................................... 50,000 1,843,750
M-Systems Flash Disk Pioneers Ltd.+....................... 100,000 887,500
Micron Electronics, Inc.+................................. 50,000 1,031,250
Micron Technology, Inc.................................... 45,000 1,372,500
Newbridge Networks Corp.+................................. 20,000 1,275,000
Versant Object Technology Corp.+.......................... 60,000 1,425,000
Whittman-Hart, Inc.+...................................... 35,500 1,677,375
------------
23,911,900
------------
ELECTRICAL EQUIPMENT--0.2%
UCAR International, Inc.+................................. 15,000 607,500
------------
ELECTRONICS--5.7%
Altera Corp.+............................................. 10,000 506,250
Cymer, Inc.+.............................................. 25,000 443,750
Diebold, Inc.............................................. 59,000 3,444,125
DuPont Photomasks, Inc.+.................................. 40,000 1,120,000
ESS Technology, Inc.+..................................... 50,000 856,250
Micrel, Inc.+............................................. 30,000 712,500
Photronics, Inc.+......................................... 45,000 1,395,000
Sawtek, Inc.+............................................. 32,500 845,000
Supertex, Inc.+........................................... 80,000 1,450,000
Telco Systems, Inc.+...................................... 55,000 1,045,000
Uniphase Corp.+........................................... 35,000 1,478,750
Vitesse Semiconductor Corp.+.............................. 30,000 1,158,750
Xilinx, Inc.+............................................. 20,000 680,000
------------
15,135,375
------------
ENERGY SERVICES--3.6%
ENSCO International, Inc.+................................ 37,500 1,218,750
Falcon Drilling, Inc.+.................................... 60,000 1,560,000
Marine Drilling Co., Inc.+................................ 75,000 721,875
Noble Drilling Corp.+..................................... 132,500 2,004,062
Parallel Petroleum Corp.+................................. 90,000 455,625
</TABLE>
17
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
ENERGY SERVICES (CONTINUED)
Reading & Bates Corp.+.................................... 65,000 $ 1,763,125
Transocean Offshore, Inc. ................................ 30,000 1,837,500
-----------
9,560,937
-----------
ENERGY SOURCES--2.0%
Belco Oil & Gas Corp.+.................................... 15,500 414,625
Benton Oil & Gas Co. +.................................... 80,000 1,740,000
Flores & Rucks, Inc.+..................................... 40,000 1,545,000
Parker & Parsley Petroleum Co. ........................... 40,000 1,045,000
Pride Petroleum Services, Inc.+........................... 50,000 706,250
-----------
5,450,875
-----------
FOOD, BEVERAGE & TOBACCO--0.4%
Northland Cranberries, Inc. .............................. 55,000 935,000
-----------
HEALTH SERVICES--3.1%
Apache Medical Systems, Inc.+............................. 24,000 324,000
Applied Analytical Industries, Inc.+...................... 76,000 1,729,000
Health Images, Inc. ...................................... 100,000 1,337,500
NovaCare, Inc.+........................................... 175,000 1,640,625
OccuSystems, Inc.+........................................ 17,500 525,000
Pediatrix Medical Group+.................................. 30,000 1,503,750
Sunrise Assisted Living, Inc.+............................ 21,000 588,000
Veterinary Centers of America, Inc.+...................... 30,000 658,125
-----------
8,306,000
-----------
INSURANCE--1.8%
Allmerica Financial Corp.+................................ 15,000 487,500
Lawyers Title Corp. ...................................... 70,000 1,487,500
Maxicare Health Plans, Inc.+.............................. 40,000 760,000
Penn Treaty American Corp.+............................... 90,000 2,137,500
-----------
4,872,500
-----------
LEISURE & TOURISM--1.4%
Bally Entertainment Corp. ................................ 40,000 1,135,000
HFS, Inc.+................................................ 23,700 1,584,938
Studio Plus Hotels, Inc.+................................. 67,500 1,113,750
-----------
3,833,688
-----------
MACHINERY--3.0%
DT Industries Inc. ....................................... 45,000 1,518,750
Flanders Corp.+(2)(3)..................................... 500,000 4,500,000
Precision Castparts Corp. ................................ 40,000 1,940,000
-----------
7,958,750
-----------
MEDICAL PRODUCTS--4.0%
ADAC Laboratories......................................... 80,000 1,610,000
Cardiovascular Dynamics, Inc. ............................ 100,000 1,525,000
Cohr, Inc.+............................................... 70,000 1,942,500
Neurex Corp.+............................................. 127,500 2,438,437
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
MEDICAL PRODUCTS (CONTINUED)
Nitinol Medical Technologies, Inc.+........................ 5,000 $ 56,250
Serologicals Corp.+........................................ 90,000 3,127,500
-----------
10,699,687
-----------
METALS & MINING--1.1%
Diamond Offshore Drilling, Inc.+........................... 26,400 1,452,000
Mueller Industries, Inc.+.................................. 35,000 1,421,875
-----------
2,873,875
-----------
PHARMACEUTICALS--5.8%
ABR Information Services, Inc.+............................ 20,000 1,440,000
Agouron Pharmaceuticals, Inc.+............................. 17,000 741,625
Allergan Ligand Retinoid Theraputics, Inc.+(4)............. 75,000 2,193,750
DepoTech Corp.+............................................ 25,900 446,775
Guilford Pharmaceuticals, Inc.+............................ 65,000 1,787,500
Ligand Pharmaceuticals, Inc.+.............................. 85,000 1,158,125
M.I.M. Corp.+.............................................. 55,000 797,500
Medicis Pharmaceutical Corp. Class A+...................... 10,000 482,500
Millenium Pharmaceuticals, Inc.+........................... 4,000 73,000
Noven Pharmaceuticals, Inc.+............................... 75,000 946,875
PAREXAL International Corp.+............................... 30,000 1,890,000
Pharmaceutical Product Development, Inc.+.................. 36,500 985,500
Teva Pharmaceutical Industries Ltd. ADR(1)................. 57,500 2,666,562
-----------
15,609,712
-----------
POLLUTION CONTROL--0.9%
United Waste Systems, Inc.+................................ 35,000 1,216,250
USA Waste Services, Inc.+.................................. 34,000 1,071,000
-----------
2,287,250
-----------
REAL ESTATE INVESTMENT TRUSTS -- 1.3%
Bay Apartment Communities, Inc............................. 20,000 570,000
FelCor Suite Hotels, Inc................................... 40,000 1,290,000
Innkeepers USA Trust....................................... 95,000 1,068,750
Starwood Lodging Trust..................................... 10,000 418,750
-----------
3,347,500
-----------
SOFTWARE--15.7%
BDM International, Inc.+................................... 62,500 3,718,750
Black Box Corp.+........................................... 60,000 1,980,000
CCC Information Services Group, Inc.+...................... 12,500 262,500
Citrix Systems, Inc.+...................................... 26,500 1,358,125
Cognos, Inc.+.............................................. 59,800 1,950,975
Document Sciences Corp.+................................... 75,000 946,875
DST Systems, Inc.+......................................... 20,000 640,000
Finish Line, Inc. Class A+................................. 20,000 950,000
Forte Software, Inc.+...................................... 13,500 529,875
</TABLE>
18
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
SOFTWARE (CONTINUED)
Ikos Systems, Inc.+........................................ 30,000 $ 596,250
Innovus Corp.+............................................. 92,700 556,200
Innovus Corp.+(2)(3)....................................... 54,000 189,000
JDA Software Group, Inc.................................... 80,000 2,200,000
Legato Systems, Inc.+...................................... 35,000 1,662,500
National Data Corp......................................... 17,000 741,625
Pc Docs Group International, Inc.+......................... 66,000 891,000
PeopleSoft, Inc.+.......................................... 15,000 1,248,750
Rational Software Corp+.................................... 40,000 1,365,000
RemedyTemp, Inc. Class A+.................................. 62,000 1,317,500
Restrac, Inc.+............................................. 122,000 2,287,500
S3, Inc.+.................................................. 60,000 1,185,000
Saville Systems PLC ADR+(1)................................ 50,000 1,762,500
Segue Software, Inc.+...................................... 100,000 1,375,000
Spyglass, Inc.+............................................ 8,200 154,775
Sykes Enterprises, Inc.+................................... 70,650 3,408,862
Symantec Corp.+............................................ 45,000 489,375
Verilink Corp.+............................................ 105,100 2,574,950
Veritas Software Co.+...................................... 30,000 2,122,500
VIASOFT, Inc.+............................................. 60,000 2,520,000
Xionics Document Technologies+............................. 47,500 712,500
----------
41,697,887
----------
SPECIALTY RETAIL--3.2%
Central Garden & Pet Co.+.................................. 35,000 704,375
Gadzooks, Inc.+............................................ 52,500 1,824,375
Global DirectMail Corp.+................................... 30,000 1,432,500
Hot Topic, Inc.+........................................... 67,500 1,586,250
MacFrugals Bargains Closeouts+............................. 75,000 1,771,875
PETsMART, Inc.+............................................ 50,000 1,293,750
----------
8,613,125
----------
TELECOMMUNICATIONS--9.5%
ACC Corp.+................................................. 15,000 708,750
ACE*COMM Corp.+............................................ 100,000 1,200,000
ADC Telecommunications, Inc.+.............................. 20,000 1,280,000
Advanced Fibre Communications+(3).......................... 10,000 250,000
Ascend Communications, Inc.+............................... 10,000 661,250
Boston Communications Group+............................... 65,000 1,056,250
Davox Corp.+............................................... 40,000 1,510,000
Harmonic Lightwaves, Inc.+................................. 80,000 1,570,000
LCC International, Inc.+................................... 54,000 985,500
Nexus Telecommunication Systems Ltd........................ 100,000 450,000
NICE Systems Ltd. ADR+(1).................................. 72,500 1,660,703
Omnipoint Corp.+........................................... 25,000 728,125
Orckit Communications Ltd.+................................ 54,100 994,088
Pacific Gateway Exchange, Inc.+............................ 120,000 3,540,000
PairGain Technologies, Inc.+............................... 21,400 1,671,875
Retix+..................................................... 115,000 934,375
Teledata Communications, Inc.+............................. 85,000 1,561,875
Teleport Communications Group Class A+..................... 58,000 1,370,250
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
Westell Technologies, Inc. Class A+........... 55,000 $ 2,433,750
Winstar Communications, Inc.+................. 50,000 831,250
------------
25,398,041
------------
TRANSPORTATION--1.3%
Eagle USA Airfreight, Inc. +.................. 40,000 1,040,000
Trico Marine Services, Inc.+.................. 80,000 2,440,000
------------
3,480,000
------------
TOTAL COMMON STOCK
(cost $191,441,211)........................... 248,479,862
------------
WARRANTS--0.5%+
ELECTRONICS--0.5%
Intel Corp.................................... 25,000 1,418,750
------------
TELECOMMUNICATIONS--0.0%
Nexus Telecommunication Systems Ltd. Class D.. 100,000 87,500
------------
TOTAL WARRANTS
(cost $978,643)................................. 1,506,250
------------
TOTAL INVESTMENT SECURITIES--93.8%
(cost $192,419,854)........................... 249,986,112
------------
REPURCHASE AGREEMENT--3.7%
Joint Repurchase Agreement
Account (Note 3)
(cost $9,766,000)............................ $9,766 9,766,000
------------
TOTAL INVESTMENTS--
(cost $202,185,854)........................... 97.5% 259,752,112
Other assets less liabilities.................. 2.5 6,654,356
----
------------
NET ASSETS-- 100.0% $266,406,468
===== ============
</TABLE>
- -------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
(2) At September 30, 1996 the Fund held restricted securities amounting to
2.5% of net assets. The Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in the
connection with the disposition of the securities.
<TABLE>
<CAPTION>
DATE OF UNIT VALUATION AS OF
DESCRIPTION ACQUISITION COST SEPTEMBER 30, 1996
----------- ----------- ------ ------------------
<S> <C> <C> <C>
Datamark Holdings, Inc. 4/01/96 $ 7.50 $ 9.75
ProSoft Development, Inc. 7/02/96 10.00 10.00
Flanders Corp. 5/09/96 5.00 9.00
Flanders Corp. 8/30/96 9.00 9.00
Innovus Corp. 3/21/95 3.50 3.50
</TABLE>
(3) Fair valued security, see Note 2
(4) Consists of stocks and warrants traded together as a unit
See Notes to Financial Statements
19
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
INVESTMENT PORTFOLIO -- September 30, 1996
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--65.1%
DOMESTIC EQUITY--17.1%
AEROSPACE & MILITARY TECHNOLOGY--0.8%
Boeing Co................................................... 1,000 $ 94,500
Raytheon Co................................................. 2,000 111,250
-----------
205,750
-----------
AUTOMOTIVE--0.3%
Ford Motor Co............................................... 2,500 78,125
-----------
BANKS--0.6%
Chase Manhattan Corp. ...................................... 1,000 80,125
Citicorp.................................................... 1,000 90,625
-----------
170,750
-----------
BROADCASTING & MEDIA--0.4%
Applied Graphics Technologies+.............................. 5,000 74,375
Chancellor Broadcasting Corp. Class A+...................... 1,000 41,500
-----------
115,875
-----------
BUSINESS SERVICES--0.3%
CUC International, Inc.+.................................... 2,000 79,750
-----------
CHEMICALS--1.7%
du Pont (E.I.) de Nemours & Co.............................. 1,000 88,250
Hercules, Inc............................................... 1,000 54,750
Olin Corp................................................... 1,000 84,000
Union Carbide Corp.......................................... 3,000 136,875
Waters Corp.+............................................... 2,500 81,875
-----------
445,750
-----------
COMMUNICATION EQUIPMENT--0.5%
Tellabs, Inc.+.............................................. 2,000 141,250
-----------
COMPUTERS & BUSINESS EQUIPMENT--0.4%
American Pad & Paper Co.+................................... 5,000 106,250
-----------
CONGLOMERATE--0.8%
AlliedSignal, Inc........................................... 2,000 131,750
General Electric Co......................................... 800 72,800
-----------
204,550
-----------
CONSTRUCTION & HOUSING--0.5%
Armstrong World Industries, Inc............................. 2,000 124,750
-----------
CONSTRUCTION MATERIALS--0.3%
Dal-Tile International, Inc.+............................... 5,000 81,875
-----------
ENERGY SERVICES--0.2%
Baker Hughes, Inc........................................... 2,000 60,750
-----------
ENERGY SOURCES--0.5%
Belco Oil & Gas Corp.+...................................... 1,000 26,750
Benton Oil & Gas Co.+....................................... 5,000 108,750
-----------
135,500
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
FINANCIAL SERVICES--0.7%
Associates First Capital Corp., Class A..................... 2,000 $ 82,000
Morgan Stanley Group, Inc................................... 2,000 99,500
-----------
181,500
-----------
FOOD, BEVERAGE & TOBACCO--0.5%
Consolidated Cigar Holdings, Inc. Class A+.................. 1,000 30,625
Philip Morris Cos., Inc..................................... 1,000 89,750
-----------
120,375
-----------
HEALTH SERVICES--0.2%
Paracelsus Healthcare Corp.+................................ 5,000 50,625
Urocor, Inc................................................. 1,000 12,625
-----------
63,250
-----------
HOUSEHOLD PRODUCTS--1.1%
Eastman Kodak Co............................................ 1,050 82,425
Warner-Lambert Co........................................... 3,000 198,000
-----------
280,425
-----------
INSURANCE--0.2%
Guarantee Life Cos., Inc.................................... 2,500 49,687
-----------
LEISURE & TOURISM--0.7%
Callaway Golf Co............................................ 2,000 68,250
Red Roof Inn's, Inc.+....................................... 1,000 13,625
Sun International Hotels Ltd.+.............................. 2,000 102,500
-----------
184,375
-----------
MACHINERY--0.3%
Allied Products Corp........................................ 3,000 75,000
-----------
MANUFACTURING--0.1%
Strategic Distribution, Inc................................. 5,000 25,313
-----------
MEDICAL PRODUCTS--1.3%
Johnson & Johnson Co........................................ 4,000 205,000
Medtronic, Inc.............................................. 2,000 128,250
-----------
333,250
-----------
PHARMACEUTICALS--3.2%
Allergan, Inc............................................... 3,000 114,375
Lilly (Eli) & Co............................................ 2,000 129,000
Merck & Co., Inc............................................ 2,000 140,750
Neurex Corp.+............................................... 5,000 95,625
Pfizer, Inc................................................. 1,200 94,950
Pharmaceutical Product Development, Inc.+................... 2,500 67,500
Schering-Plough Corp........................................ 3,200 196,800
-----------
839,000
-----------
</TABLE>
20
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
INVESTMENT PORTFOLIO -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
DOMESTIC EQUITY (CONTINUED)
POLLUTION CONTROL--0.2%
Allied Waste Industries, Inc.+.......... 5,000 $ 46,250
-----------
SOFTWARE--1.0%
Documentum, Inc.+....................... 2,000 63,500
Engineering Animation, Inc.+............ 1,000 24,000
Forte Software, Inc.+................... 500 19,625
Metromail Corp.+........................ 5,300 114,612
Sterling Commerce, Inc.+................ 1,000 29,500
-----------
251,237
-----------
SPECIALTY RETAIL--0.3%
Loehmanns, Inc.+........................ 2,500 67,031
-----------
TELECOMMUNICATIONS--0.0%
American Portable Telecom, Inc.+........ 700 7,088
-----------
TOTAL DOMESTIC EQUITY
(COST $3,388,580)......................... 4,474,706
-----------
FOREIGN EQUITY--48.0%
APPAREL & TEXTILES--0.5%
Adidas AG (Germany)..................... 1,450 131,904
Gerry Weber International AG+ (Germany). 130 5,194
-----------
137,098
-----------
AUTOMOTIVE--4.0%
Bridgestone Corp. (Japan)............... 10,000 180,107
Continental AG+ (Germany)............... 7,000 127,952
Honda Motor Co., Ltd. (Japan)........... 12,000 301,075
Mitsubishi Heavy Industrial Ltd.
(Japan)................................ 20,000 162,545
Nokian Tyres (Finland).................. 5,000 85,317
PT Selamat Sempurna alien+ (Indonesia).. 50,000 38,205
Toyota Motor Corp. (Japan).............. 6,000 153,226
-----------
1,048,427
-----------
BANKS--5.8%
Banca Pop Di Milano+ (Italy)............ 15,000 79,271
Banco Credito del Peru (Peru)........... 18,386 27,689
Banco Intercontinental Espanol+ (Spain). 700 80,635
Banco Santander-Chile ADR Series A (1)
(Chile)................................ 800 10,700
Banco Totta & Acores+ (Portugal)........ 2,500 43,688
Bangkok Bank PLC alien (Thailand)....... 1,900 24,804
Bank Of Tokyo-Mitsubishi (Japan)........ 12,600 274,355
CS Holding+ (Switzerland)............... 1,020 100,765
Development Bank of Singapore alien
(Singapore)............................ 3,000 36,856
HSBC Holdings PLC (Hong Kong)........... 6,000 111,341
Industrial Bank of Japan Ltd. (Japan)... 8,000 178,495
Krung Thai Bank PCL alien+ (Thailand)... 7,800 33,738
National Westminster Bank PLC
(United Kingdom)....................... 8,000 85,021
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
BANKS (CONTINUED)
Siam Commercial Bank Co., Ltd. alien (Thailand)............ 3,700 $ 44,811
Societe Generale (France).................................. 1,000 110,541
Toronto-Dominion Bank (Canada)............................. 2,500 50,749
Toyo Trust & Banking (Japan)............................... 25,000 228,495
-----------
1,521,954
-----------
BROADCASTING & MEDIA--0.1%
Singapore Press Holdings Ltd. alien (Singapore)............ 1,000 18,250
-----------
CHEMICALS--1.5%
Laporte PLC (United Kingdom)............................... 10,000 116,059
Sekisui Chemical Co., Ltd. (Japan)......................... 15,000 177,419
Toagosei Co., Ltd.+ (Japan)................................ 20,000 93,369
-----------
386,847
-----------
COMMUNICATION EQUIPMENT--0.7%
Ericsson (L.M.) Telephone Co., Class B ADR(1) (Sweden)..... 4,000 101,500
Nokia Corp. ADR(1)+ (Finland).............................. 2,000 88,500
-----------
190,000
-----------
COMPUTERS & BUSINESS EQUIPMENT-- 1.9%
Ricoh Co. (Japan).......................................... 15,000 153,226
Strafor Facom SA (France).................................. 1,200 95,224
Tokyo Electron Ltd. (Japan)................................ 5,000 144,713
Videologic Group PLC+ (United Kingdom)..................... 100,000 93,912
-----------
487,075
-----------
CONGLOMERATE--1.9%
Alusuisse-Lonza Holdings AG+ (Switzerland)................. 100 74,968
BTR PLC (United Kingdom)................................... 30,000 127,015
Eaux (cie Generale) (France)............................... 1,000 108,605
Lyonnaise des Eaux SA (France)............................. 500 44,720
Nissho Iwai Corp. (Japan).................................. 30,000 137,366
-----------
492,674
-----------
CONSTRUCTION & HOUSING--4.2%
Cheung Kong Infrastructure
(Hong Kong)............................................... 40,000 65,951
Glynwed International PLC
(United Kingdom).......................................... 25,000 144,193
Henry Walker Group Ltd. (Australia)........................ 46,492 93,852
Kajima Corp. (Japan)....................................... 20,000 184,588
Konecranes International Corp.+ (Finland).................. 9,000 250,044
Metacorp Bhd (Malaysia).................................... 29,000 83,307
Nishimatsu Construction (Japan)............................ 20,000 193,548
Pioneer International Ltd. (Australia)..................... 30,000 81,935
-----------
1,097,418
-----------
</TABLE>
21
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOREIGN EQUITY (CONTINUED)
CONSTRUCTION MATERIALS--2.3%
Cemex SA, Class B+ (Mexico)................................ 6,000 $ 24,550
Grafton Group PLC (Ireland)................................ 10,000 109,079
Lion Land Bhd (Malaysia)................................... 64,000 68,688
Marley PLC (United Kingdom)................................ 60,000 122,554
Nippon Electric Glass Co., Ltd. (Japan).................... 5,000 81,541
PT Semen Gresik+ (Indonesia)............................... 4,000 11,881
Schneider SA (France)...................................... 4,000 188,172
-----------
606,465
-----------
ELECTRONICS--5.4%
Advantest Corp. (Japan).................................... 4,400 179,785
Canon, Inc. (Japan)........................................ 10,000 196,237
Electric & Eltek International Co., Ltd. (Singapore)....... 40,000 113,200
Fanuc Ltd. (Japan)......................................... 2,500 91,846
Hoganas AG (Sweden)........................................ 6,000 186,518
NEC Corp. (Japan).......................................... 15,000 176,075
Pressac Holdings PLC
(United Kingdom).......................................... 30,000 92,503
Rohm Co. (Japan)........................................... 3,000 188,978
Samsung Electronics Co., Ltd. GDR*(2) (Korea).............. 57 2,850
Samsung Electronics Co., Ltd. GDR*(2) (Korea).............. 391 9,677
Ushio, Inc. (Japan)........................................ 15,000 170,699
-----------
1,408,368
-----------
ENERGY SERVICES--0.5%
Suncor, Inc.+ (Canada)..................................... 900 23,952
Total SA, Series B (France)................................ 1,500 118,043
-----------
141,995
-----------
ENERGY SOURCES--0.2%
Crestar Energy, Inc.+ (Canada)............................. 600 11,563
Renaissance Energy Ltd.+ (Canada).......................... 600 17,598
Shell Canada Ltd. Class A (Canada)......................... 140 4,507
TransCanada Pipelines Ltd. (Canada)........................ 1,400 22,458
-----------
56,126
-----------
ENTERTAINMENT PRODUCTS--0.7%
Bluebird Toys PLC (United Kingdom)......................... 30,000 65,236
RBI Holdings Ltd. (Bermuda)................................ 800,000 104,487
-----------
169,723
-----------
FINANCIAL SERVICES--1.1%
Hutchison Whampoa Ltd. alien
(Hong Kong)............................................... 9,000 60,520
National Finance & Securities Co., Ltd. (Thailand)......... 10,000 34,210
Nomura Securities International, Inc. (Japan).............. 10,000 183,692
-----------
278,422
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--1.7%
Allied Domecq PLC
(United Kingdom)....... 10,000 $ 70,277
Heineken NV
(Netherlands).......... 500 91,230
Katokichi Co.+ (Japan).. 7,000 151,165
Seagram Ltd. (Canada)... 320 11,923
Vaux Group PLC (United
Kingdom)............... 30,000 122,554
---------
447,149
---------
FOREST PRODUCTS--1.0%
Fletcher Challenge Ltd.
Class A (Canada)....... 1,000 13,509
Maderas Y Sinteticos SA
ADR(1) (Chile)......... 1,900 26,838
New Oji Paper Co., Ltd.
(Japan)................ 15,000 113,575
Waddington (John) PLC
(United Kingdom)....... 25,000 101,737
West Fraser Timber Co.,
Ltd. (Canada).......... 400 10,278
---------
265,937
---------
INSURANCE--1.8%
Corporacion Mapfre SA+
(Spain)................ 1,600 77,833
Legal & General Group
PLC
(United Kingdom)....... 10,000 126,076
Riunione Adriatica de
Sicur+ (Italy)......... 8,800 86,801
Tokio Marine & Fire
Insurance Co., Ltd.
(Japan)................ 15,000 177,420
---------
468,130
---------
LEISURE & TOURISM--1.1%
Air Canada, Inc.+
(Canada)............... 1,800 6,475
Airtours PLC (United
Kingdom)............... 10,000 94,303
Manchester United PLC
(United Kingdom)....... 15,000 106,824
Stanley Leisure PLC
(United Kingdom)....... 20,000 74,190
---------
281,792
---------
MACHINERY--0.3%
Seino Transportation+
(Japan)................ 6,000 85,484
---------
MANUFACTURING--0.5%
Bombardier, Inc. Class B
(Canada)............... 1,100 15,667
Graystone (United
Kingdom)............... 500,000 107,607
Hanjaya Mandala
Sampoerna alien+
(Indonesia)............ 1,750 17,025
---------
140,299
---------
METALS & MINING--3.0%
Barrick Gold Corp.
(Canada)............... 690 17,249
Cameco Corp. (Canada)... 300 14,768
Clutha Ltd.+(4)
(Australia)............ 120,000 950
Cominco Ltd. (Canada)... 240 4,934
CRA Ltd. (Australia).... 5,375 80,846
Diamond Fields
International Ltd.+(4)
(Canada)............... 400 279
</TABLE>
22
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOREIGN EQUITY (CONTINUED)
METALS & MINING (CONTINUED)
Inco Ltd. (Canada)................................ 322 $ 9,881
Inco Ltd., Class V (Canada)....................... 1,000 30,688
M.I.M. Holdings Ltd. (Australia).................. 50,000 60,956
Nippon Steel Corp. (Japan)........................ 40,000 124,014
SMH AG (Switzerland).............................. 100 67,240
Sumitomo Metal Mining Co., Ltd.
(Japan).......................................... 20,000 168,638
Western Mining Corp. Holdings Ltd. ADS+(3)
(Australia)...................................... 30,000 193,081
--------
773,524
--------
PHARMACEUTICALS--2.1%
Astra AB Series A+ (Sweden)....................... 1,600 67,605
Genset SP ADR+(1) (Finland)....................... 1,000 17,250
Glaxo Holdings PLC ADR(1)
(United Kingdom)................................. 1,000 31,125
Glaxo Wellcome PLC
(United Kingdom)................................. 5,000 78,377
Kissei Pharmaceutical Co. (Japan)................. 4,400 114,337
Roche Holdings AG+ (Switzerland).................. 14 103,004
Sankyo Co., Ltd. (Japan).......................... 5,000 127,688
--------
539,386
--------
REAL ESTATE COMPANIES--0.7%
Cheung Kong Holdings Ltd.
(Hong Kong)...................................... 8,000 61,554
FIL-Estate Land, Inc.+ (Philippines).............. 48,300 44,646
Sun Hung Kai Properties Ltd.
(Hong Kong)...................................... 8,000 85,090
--------
191,290
--------
SOFTWARE--0.6%
Getronics NV (Netherlands)........................ 6,388 161,873
--------
SPECIALTY RETAIL--1.1%
Aoki International Co., Ltd. (Japan).............. 5,000 96,774
Koninklijke Ahold NV (Netherlands)................ 3,600 203,679
--------
300,453
--------
TELECOMMUNICATIONS--2.2%
BCE, Inc. (Canada)................................ 800 34,212
Cable & Wireless PLC
(United Kingdom)................................. 10,000 70,199
Korea Mobile Telecommunications ADR+(1) (Korea)... 5,010 75,776
Nippon Telegraph & Telecommunications Corp.
(Japan).......................................... 12 88,172
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
Northern Telecom Ltd (Canada)............... 300 $ 17,289
P.T. Indonesian Satellite Corp. ADR+(1)
(Indonesia)................................ 1,000 33,000
STET non-convertible+ (Italy)............... 30,000 81,142
Telecomunic Brasileiras SA+ (Brazil)........ 1,000,000 65,028
Telus Corp. (Canada)........................ 1,140 15,693
Vodafone Group PLC ADR(1)
(United Kingdom)........................... 2,500 85,313
-----------
565,824
-----------
TELEPHONE--0.1%
Telefonos de Mexico SA ADR+(1) (Mexico)..... 750 24,094
-----------
UTILITIES--1.0%
Cogeneration PLC alien+ (Thailand).......... 15,000 46,596
CPT Telefonica de Peru+ (Peru).............. 9,000 20,331
Electricity Generating PLC alien+
(Thailand)................................. 10,000 31,458
Veba AG (Germany)........................... 3,300 172,683
-----------
271,068
-----------
TOTAL FOREIGN EQUITY
(COST $11,972,003).......................... 12,557,145
-----------
TOTAL COMMON STOCK
(COST $15,360,583).......................... 17,031,851
-----------
PREFERRED STOCK--1.5%
APPAREL & TEXTILES--0.4%
Gerry Weber International AG non-voting
(Germany).................................. 2,730 109,064
-----------
ENERGY SOURCES--0.2%
Cemig Cia Energy MG (Brazil)................ 1,650,000 49,285
-----------
HOUSEHOLD PRODUCTS--0.4%
Friedrich Grohe AG non-voting (Germany)..... 400 109,896
-----------
METALS & MINING--0.0%
Inco Ltd. Series E (Canada)................. 36 1,845
-----------
SPECIALTY RETAIL--0.5%
Hornbach Holding AG non-voting (Germany).... 1,600 115,266
-----------
TOTAL PREFERRED STOCK
(COST $398,100)............................. 385,356
-----------
RIGHTS--0.1%+
BANKS--0.0%
Industrial Bank of Japan Ltd.(4) (Japan).... 640 7,398
-----------
CHEMICALS--0.1%
Tessenderlo Chemie (Belgium)................ 290 10,238
-----------
TOTAL RIGHTS
(COST $10,385).............................. 17,636
-----------
</TABLE>
23
<PAGE>
SUNAMERICA GLOBAL BALANCED FUND
INVESTMENT PORTFOLIO--SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT
(DENOMINATED IN
LOCAL CURRENCY) VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS--0.6%+
BANKS--0.6%
Affin Holdings Bhd (11/99)....................... 112,000 $ 100,989
Credit Lyonnais (4/97)........................... 1,000,000 62,072
-----------
TOTAL WARRANTS
(COST $148,517).................................. 163,061
-----------
FOREIGN BONDS--14.2%
Commonwealth of Australia
7.50% due 7/15/05................................ 100 78,079
Federal Republic of Germany
5.88% due 5/15/00................................ 300 204,905
6.75% due 7/15/04................................ 300 206,988
7.13% due 12/20/02............................... 300 212,686
7.38% due 1/03/05................................ 500 356,638
Government of Canada
7.50% due 9/01/00 Series A81..................... 200 154,247
Government of France
7.00% due 11/12/99............................... 700 145,177
Government of Spain
10.00% due 2/28/05............................... 10,000 87,944
Japan Development Bank
6.50% due 9/20/01................................ 20,000 216,622
Kingdom of Belgium
6.50% due 3/31/05................................ 4,000 130,916
Kingdom of Denmark
9.00% due 11/15/00............................... 1,000 192,705
Kingdom of Sweden
10.25% due 5/05/03............................... 1,500 263,208
13.00% due 6/15/01............................... 1,500 282,520
Republic of Ireland
8.00% due 10/18/00............................... 100 170,115
Republic of Italy
10.50% due 11/01/00.............................. 400,000 285,075
Treuhandanstalt (Germany)
6.13% due 6/25/98................................ 100 68,236
United Kingdom Treasury
8.50% due 12/07/05............................... 300 497,143
9.00% due 3/03/00................................ 100 166,742
-----------
TOTAL FOREIGN BONDS
(cost $3,658,883)................................ 3,719,946
-----------
U.S. TREASURY NOTES--6.5%
5.25% due 1/31/01................................ $ 100 95,812
6.13% due 9/30/00................................ 150 148,453
6.38% due 3/31/01................................ 200 199,468
6.50% due 8/15/05................................ 500 493,595
7.88% due 11/15/04............................... 700 752,284
-----------
TOTAL U.S. TREASURY NOTES
(COST $1,663,983)................................ 1,689,612
-----------
TOTAL INVESTMENT SECURITIES--88.0%
(COST $21,240,451)............................... 23,007,462
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SHORT-TERM SECURITIES--5.0%
Cayman Island Time Deposit 4.50% due 10/01/96
(cost $1,302,000)................................ $1,302 $ 1,302,000
-----------
REPURCHASE AGREEMENT--4.4%
Joint Repurchase Agreement Account (Note 3)
(cost $1,160,000)................................ 1,160 1,160,000
-----------
TOTAL INVESTMENTS--
(COST $23,702,451)................................ 97.4% 25,469,462
Other assets less liabilities...................... 2.6 677,530
------ -----------
NET ASSETS-- 100.0% $26,146,992
====== ===========
</TABLE>
- -------
+ Non-income producing security
* Resale restricted to qualified institutional buyers
(1) ADR ("American Depositary Receipt")
(2) GDR ("Global Depositary Receipt")
(3) ADS ("American Depositary Shares")
(4) Fair valued security, see Note 2
Allocation of net assets by
currency as of September 30,
1996:
U.S. Dollar 35.3%
Japanese Yen 20.3
British Pound 9.4
Deutsche Mark 7.0
French Franc 3.1
Swedish Krona 3.1
Australian
Dollar 2.3
Hong Kong
Dollar 2.1
Italian Lira 2.0
Canadian
Dollar 1.9
Netherland
Guilder 1.7
Swiss Franc 1.3
Finnish
Markka 1.3
Irish Punt 1.1
Malaysian
Ringgit 1.1
Spanish
Peseta 0.9
Thailand Baht 0.8
Danish Kroner 0.7
Belgian Franc 0.5
Brazilian
Real 0.4
Indonesian
Rupiah 0.3
Singapore
Dollar 0.2
Peruvian New
Sol 0.2
Philippines
Peso 0.2
Portuguese
Escudo 0.2
---
97.4%
====
See Notes to Financial Statements
24
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--86.5%
AEROSPACE & MILITARY TECHNOLOGY--1.0%
Boeing Co. ............................................... 2,500 $ 236,250
Raytheon Co. ............................................. 2,000 111,250
-----------
347,500
-----------
APPAREL & TEXTILES--0.9%
Guess, Inc.+.............................................. 10,000 133,750
Warnaco Group, Inc. Class A.............................. 7,000 166,250
-----------
300,000
-----------
AUTOMOTIVE--1.1%
Ford Motor Co. ........................................... 7,000 218,750
Harley-Davidson, Inc. .................................... 4,000 172,000
-----------
390,750
-----------
BANKS--2.3%
Chase Manhattan Corp. .................................... 3,000 240,375
First Union Corp. ........................................ 5,000 333,750
Mellon Bank Corp. ........................................ 4,000 237,000
-----------
811,125
-----------
BROADCASTING & MEDIA--0.2%
Comcast Corp.+............................................ 5,000 76,875
-----------
BUSINESS SERVICES--1.4%
Ecolab, Inc. ............................................. 7,000 236,250
Service Corp. International............................... 8,000 242,000
-----------
478,250
-----------
CHEMICALS--7.4%
Cabot Corp. .............................................. 9,000 250,875
du Pont (E.I.) de Nemours & Co. .......................... 3,000 264,750
Hanna (M.A). Co. ......................................... 17,000 388,875
Hercules, Inc. ........................................... 11,000 602,250
Intertape Polymer Group, Inc. ............................ 8,500 190,187
Nalco Chemical Co. ....................................... 4,000 145,000
Olin Corp. ............................................... 3,500 294,000
Waters Corp.+............................................. 14,000 458,500
-----------
2,594,437
-----------
COMMUNICATION EQUIPMENT--1.9%
Motorola, Inc. ........................................... 2,500 129,063
Nokia Corp. ADR(1)........................................ 7,000 309,750
Tellabs, Inc.+............................................ 2,000 141,250
U.S. Robotics Corp.+...................................... 1,000 64,625
-----------
644,688
-----------
COMPUTERS & BUSINESS EQUIPMENT--2.8%
American Pad & Paper Co.+................................. 12,000 255,000
Cisco Systems, Inc.+...................................... 4,500 279,281
Honeywell, Inc. .......................................... 4,000 252,500
Micron Technology, Inc. .................................. 6,000 183,000
-----------
969,781
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
CONGLOMERATE--4.7%
AlliedSignal, Inc. ......................................... 4,500 $ 296,437
General Electric Co. ....................................... 7,000 637,000
ITT Industries, Inc. ....................................... 15,000 361,875
United Technologies Corp. .................................. 3,000 360,375
-----------
1,655,687
-----------
CONSTRUCTION & HOUSING--2.2%
Armstrong World Industries, Inc. ........................... 4,000 249,500
Potash Corp. of Saskatchewan, Inc. ......................... 7,000 511,875
-----------
761,375
-----------
CONSTRUCTION MATERIALS--1.6%
Dal-Tile International, Inc.+............................... 33,000 540,375
-----------
CONSUMER GOODS--0.6%
Whitman Corp. .............................................. 9,000 208,125
-----------
DEPARTMENT STORES--1.7%
Federated Department Stores, Inc.+.......................... 8,500 284,750
Penney (J.C.), Inc. ........................................ 1,000 54,125
Wal-Mart Stores, Inc. ...................................... 10,000 263,750
-----------
602,625
-----------
ELECTRICAL EQUIPMENT--0.6%
Cooper Industries, Inc. .................................... 5,000 216,250
-----------
ELECTRONICS--1.7%
Emerson Electric Co. ....................................... 2,000 180,250
Intel Corp. ................................................ 3,000 286,312
Texas Instruments, Inc. .................................... 2,500 137,813
-----------
604,375
-----------
ENERGY SERVICES--2.8%
Amoco Corp. ................................................ 2,000 141,000
Chevron Corp. .............................................. 2,500 156,563
Mobil Corp. ................................................ 4,000 463,000
Transocean Offshore, Inc. .................................. 3,500 214,375
-----------
974,938
-----------
ENERGY SOURCES--3.1%
Benton Oil & Gas Co.+....................................... 5,000 108,750
Burlington Resources, Inc. ................................. 2,000 88,750
Enron Corp. ................................................ 4,000 163,000
Noble Affiliates, Inc. ..................................... 2,000 84,500
Panhandle Eastern Corp. .................................... 12,000 415,500
Parker & Parsley Petroleum Co. ............................. 5,000 130,625
Union Texas Petroleum Holdings, Inc. ....................... 5,000 108,125
-----------
1,099,250
-----------
ENTERTAINMENT PRODUCTS--1.3%
Mattel, Inc. ............................................... 11,000 284,625
Toy Biz, Inc. Class A+...................................... 10,000 177,500
-----------
462,125
-----------
</TABLE>
25
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES--3.6%
Advanta Corp.+.............................................. 7,500 $ 345,000
Associates First Capital Corp., Class A..................... 10,500 430,500
Federal National Mortgage Association....................... 13,500 470,812
-----------
1,246,312
-----------
FOOD, BEVERAGE & TOBACCO--5.6%
Dole Food, Inc. ............................................ 18,000 756,000
Heinz (H.J.) Co. ........................................... 6,000 202,500
PepsiCo, Inc. .............................................. 5,000 141,250
Philip Morris Cos., Inc. ................................... 8,000 718,000
Seagram Co., Ltd. .......................................... 4,000 149,500
-----------
1,967,250
-----------
FOREST PRODUCTS--2.8%
Boise Cascade Corp. ........................................ 5,000 170,000
Fort Howard Corp.+.......................................... 11,000 268,125
Kimberly-Clark Corp. ....................................... 5,500 484,688
Willamette Industries, Inc. ................................ 1,000 65,500
-----------
988,313
-----------
HEALTH SERVICES--4.4%
Apria Healthcare Group, Inc.+............................... 15,000 281,250
Columbia/HCA Healthcare Corp. .............................. 9,000 511,875
OrNda Healthcorp+........................................... 16,000 438,000
Paracelsus Healthcare Corp.+................................ 28,000 283,500
Physician Corp. of America+................................. 3,000 36,375
-----------
1,551,000
-----------
HOUSEHOLD PRODUCTS--2.7%
Corning, Inc. .............................................. 10,500 409,500
Eastman Kodak Co. .......................................... 2,000 157,000
Procter & Gamble Co. ....................................... 4,000 390,000
-----------
956,500
-----------
INSURANCE--1.3%
Aetna, Inc. ................................................ 2,000 140,750
ITT Corp+................................................... 2,000 87,250
UICI+....................................................... 8,000 208,000
-----------
436,000
-----------
LEISURE & TOURISM--1.8%
Carnival Corp. Class A...................................... 11,000 341,000
Red Roof Inn's, Inc.+....................................... 12,000 163,500
Sun International Hotels Ltd.+.............................. 2,500 128,125
-----------
632,625
-----------
MACHINERY--0.4%
Case Corp. ................................................. 3,000 146,250
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
MEDICAL PRODUCTS--4.0%
Baxter International, Inc. ................................. 20,000 $ 935,000
CNS, Inc.+.................................................. 16,000 284,000
Sola International, Inc.+................................... 5,000 186,250
-----------
1,405,250
-----------
METALS & MINING--3.4%
Aluminum Co. of America..................................... 1,000 59,000
Crown, Cork & Seal, Inc. ................................... 18,000 830,250
Santa Fe Pacific Gold Corp. ................................ 10,000 125,000
Wolverine Tube, Inc.+....................................... 4,000 172,000
-----------
1,186,250
-----------
PHARMACEUTICALS--4.0%
Bristol-Myers Squibb Co. ................................... 3,000 289,125
Chiron Corp.+............................................... 14,000 266,000
Lilly (Eli) & Co. .......................................... 2,000 129,000
Merck & Co., Inc. .......................................... 8,000 563,000
Teva Pharmaceutical Industries
Ltd. ADR(1)................................................ 3,000 139,125
-----------
1,386,250
-----------
REAL ESTATE INVESTMENT TRUSTS--2.4%
Crescent Real Estate Equities............................... 10,000 411,250
Patriot American Hospitality, Inc........................... 4,000 134,500
Reckson Associates Realty Corp. ............................ 8,000 297,000
-----------
842,750
-----------
SOFTWARE--4.6%
Fiserv, Inc.+............................................... 7,000 267,750
Metromail Corp.+............................................ 7,000 151,375
Microsoft Corp.+............................................ 4,000 527,500
Oracle Systems Corp.+....................................... 3,000 127,687
Reynolds & Reynolds Co. Class A............................. 15,000 391,875
Sterling Software, Inc.+.................................... 2,000 152,750
-----------
1,618,937
-----------
SPECIALTY RETAIL--0.6%
Mail Boxes Etc.+............................................ 5,000 113,125
Zale Corp.+................................................. 5,000 109,375
-----------
222,500
-----------
TELECOMMUNICATIONS--1.9%
AT&T Corp. ................................................. 4,000 209,000
Frontier Corp. ............................................. 4,000 106,500
Lucent Technologies, Inc. .................................. 5,000 229,375
NYNEX Corp. ................................................ 3,000 130,500
-----------
675,375
-----------
</TABLE>
26
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- September 30, 1996 -- (continued)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- ---------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TELEPHONE--1.5%
Ameritech Corp. ................................... 3,000 $ 157,875
Bell Atlantic Corp. ............................... 1,500 89,813
GTE Corp. ......................................... 7,000 269,500
-----------
517,188
-----------
TRANSPORTATION--0.5%
Canadian National Railway Co. ..................... 8,000 164,000
-----------
UTILITIES--1.7%
Baltimore Gas & Electric Co. ...................... 5,000 130,625
GPU, Inc. ......................................... 5,000 153,750
MAPCO, Inc. ....................................... 5,000 298,125
-----------
582,500
-----------
TOTAL COMMON STOCK
(cost $28,466,914)................................. 30,263,781
-----------
BONDS & NOTES--0.1%
FOREST PRODUCTS--0.1%
Stone Container Corp.
11.88% due 12/01/98
(cost $50,904).................................... $ 50 52,875
-----------
TOTAL INVESTMENT SECURITIES--86.6%
(cost $28,517,818)................................. 30,316,656
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
REPURCHASE AGREEMENT--12.5%
Joint Repurchase Agreement
Account (Note 3)
(cost $4,353,000)................................ $4,353 $ 4,353,000
-----------
TOTAL INVESTMENTS--
(cost $32,870,818)............................... 99.1% 34,669,656
Other assets less liabilities..................... 0.9 332,365
------ -----------
NET ASSETS-- 100.0% $35,002,021
====== ===========
</TABLE>
- --------
+ Non-income producing security
(1) ADR ("American Depositary Receipt")
See Notes to Financial Statements
27
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996
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. The investment objective
for each of the Funds is as follows:
Balanced Assets seeks to conserve principal by maintaining at all times a
balanced portfolio of stocks and bonds.
Blue Chip Growth seeks capital appreciation by investing primarily in
equity securities of companies with large market capitalizations.
Mid-Cap Growth seeks capital appreciation by investing primarily in equity
securities of medium-sized companies.
Small Company Growth seeks capital appreciation by investing primarily in
equity securities of small capitalization growth companies.
Global Balanced seeks capital appreciation while conserving principal by
maintaining at all times a balanced portfolio of domestic and foreign
stocks and bonds.
Growth and Income seeks capital appreciation and current income by
investing primarily in common stocks.
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
28
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
valued at the quoted bid price provided by principal market makers.
Securities listed on the New York Stock Exchange ("NYSE") or other national
securities exchanges, are valued on the basis of the last sale price on the
exchange on which they are primarily traded. If there is no sale on that
day, then securities are valued at the closing bid price on the NYSE or
other primary exchange for that day. However, if the last sale price on the
NYSE is different than the last sale price on any other exchange, the NYSE
price is used. Securities that are traded on foreign exchanges are
ordinarily valued at the last quoted sales price available before the time
when the assets are valued. If a security's price is available from more
than one foreign exchange, a Fund uses the exchange that is the primary
market for the security. Values of portfolio securities primarily traded on
foreign exchanges are already translated into U.S. dollars when received
from a quotation service. Options traded on national securities exchanges
are valued as of the close of the exchange on which they are traded.
Futures and options traded on commodities exchanges are valued at their
last sale price as of the close of such exchange. The Funds may make use of
a pricing service in the determination of their net asset values.
Securities for which market quotations are not readily available and other
assets are valued at fair value as determined pursuant to procedures
adopted in good faith by the Trustees. Short-term investments which mature
in less than 60 days are valued at amortized cost, if their original
maturity was 60 days or less, or by amortizing their value on the 61st day
prior to maturity, if their original term to maturity exceeded 60 days.
REPURCHASE AGREEMENTS: The Funds, along with other affiliated registered
investment companies, transfer uninvested cash balances into a single joint
account, the daily aggregate balance of which is invested in one or more
repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. The Funds' custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral
is valued daily on a mark to market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In
the event of default of the obligation to repurchase, a Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of
the security, realization of the collateral by the Fund may be delayed or
limited.
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 option 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.
29
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
SECURITIES TRANSACTIONS, INVESTMENT INCOME, DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS: Securities transactions are recorded on the first business
day following 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. Funds investing in foreign securities 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. The Equity Funds, except for
the Global Balanced Fund and the Growth and Income Fund, do not amortize
premiums or accrue discounts except for original issue discounts and on
interest only securities for which amortization is required for federal
income tax purposes.
Net investment income, other than class specific expenses and realized and
unrealized gains and losses, is allocated daily to each class of shares
based upon the relative net asset value of outstanding shares (or the value
of the dividend-eligible shares, as appropriate) of each class of shares at
the beginning of the day (after adjusting for the current capital shares
activity of the respective class).
Dividends from net investment income, if any, are paid semiannually, except
for Balanced Assets Fund and Growth and Income Fund, which pay quarterly,
and Global Balanced Fund, which pays annually. Capital gain distributions,
if any, are paid annually.
INVESTMENT SECURITIES LOANED: During the year ended September 30, 1996,
Balanced Assets Fund, Mid-Cap Growth Fund and Small Company Growth 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
102% 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.
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.
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.
30
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
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.
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.
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.
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.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION: The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements.
Actual results could differ from these estimates.
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 in the Statement of Assets and Liabilities. Net
investment income/loss, net realized gain/loss, and net assets are not
affected. The following table discloses the current year reclassifications
between paid in capital, 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............... $ (1,024) $ 1,024 $ --
Blue Chip Growth Fund.............. (408,630) 408,630 --
Mid-Cap Growth Fund................ (399,630) 425,977 (26,347)
Small Company Growth Fund.......... -- 1,857,708 (1,857,708)
Global Balanced Fund............... (704,902) 704,902 --
Growth and Income Fund............. (21,903) 21,903 --
</TABLE>
31
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
Note 3. Joint Repurchase Agreement Account
As of September 30, 1996, 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 6.4%, 0.9%, 3.1%, 7.4%, 0.9% and 3.3% undivided
interest, respectively, which represented $8,398,000, $1,189,000,
$4,072,000, $9,766,000, $1,160,000 and $4,353,000, respectively, in
principal amount in a joint repurchase agreement with Yamaichi
International, Inc. As of such date, the repurchase agreement in the joint
account and the collateral therefore were as follows:
Yamaichi International, Inc. Repurchase Agreement, 5.65% dated 9/30/96, in
the principal amount of $132,158,000 repurchase price $132,178,741 due
10/01/96 collateralized by $33,325,000 U.S. Treasury Bond 6.25% due
8/15/23, $37,500,000 U.S. Treasury Note 6.875% due 3/31/00, $20,370,000
U.S. Treasury Note 6.125% due 5/15/98, $32,910,000 U.S. Treasury Note 6.00%
due 8/31/97, and $12,410,000 U.S. Treasury Note 5.75% due 9/30/97,
approximate aggregate value $136,584,546.
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, 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, 1996, SAAMCo earned fees in the amounts stated on
the Statement of Operations, of which SAAMCo agreed to voluntarily waive
$98,765 and $91,558 on the Global Balanced Fund and Growth and Income Fund,
respectively. In addition to the aforementioned, SAAMCo, on behalf of
SunAmerica Global Balanced Fund, 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. As
of April 23, 1996, GSAM resigned their role as sub-adviser. Pursuant to the
Agreement with the Trust SAAMCo assumed portfolio management
responsibilities for the component previously sub-advised by GSAM.
SAAMCo pays 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 paid
GSAM a monthly fee with respect to those net assets of the Global Balanced
Fund actually managed by GSAM computed based on average daily net assets,
32
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
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, 1996, SAAMCo paid AIGAM fees of $66,942
and for the period October 1, 1995 through April 23, 1996 paid GSAM fees of
$14,483.
SAAMCo agreed that it would 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
was 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, 1996, SAAMCo has agreed to voluntarily
reimburse expenses of $66 on Mid-Cap Growth Fund Class B, $2,945 on Global
Balanced Fund Class A and, $18,080 and $17,057 on Growth and Income Fund
(Class A, Class B), respectively, related to both class specific and fund
level expenses excluding management fees and distribution and service
maintenance fees which are stated separately in the Notes.
The Trust, on behalf of each Fund, has a Distribution Agreement with
SunAmerica Capital Services, Inc. ("SACS"), an indirect wholly owned
subsidiary of SunAmerica Inc. Each Fund has adopted a Distribution Plan
(the "Plan") in accordance with the provisions of Rule 12b-1 under the 1940
Act. Rule 12b-1 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 trustees and approved by its shareholders.
Pursuant to such rule, the Trustees and the shareholders of each class of
shares of each Fund have adopted Distribution Plans hereinafter referred to
as the "Class A Plan" and the "Class B Plan." In adopting the Class A Plan
and the Class B Plan, the Trustees determined that there was a reasonable
likelihood that each such Plan would benefit the Trust and the shareholders
of the respective class. The sales charge and distribution fees of a
particular class will not be used to subsidize the sale of shares of any
other class.
Under the Class A Plan and Class B Plan, the Distributor receives payments
from a Fund at an annual rate of up to 0.10% and 0.75%, respectively, of
average daily net assets of such Fund's Class A and Class B shares to
compensate the Distributor and certain securities firms for providing sales
and promotional activities for distributing that class of shares. The
distribution costs for which the Distributor may be reimbursed out of such
distribution fees include fees paid to broker-dealers that have sold Fund
shares, commissions and other expenses such as those incurred for sales
literature, prospectus printing and distribution and compensation to
wholesalers. It is possible that in any given year the amount paid to the
Distributor under the Class A Plan or Class B Plan may exceed the
Distributor's distribution costs as described above. The Distribution Plans
provide that each class of shares of each Fund may also pay the Distributor
an account maintenance and service fee up to an annual rate of 0.25% of the
aggregate average daily net assets of such class of shares for payments to
broker-dealers for providing continuing account maintenance. Accordingly,
for the year ended September 30, 1996, SACS received fees (see Statement of
Operations) based upon the aforementioned rates, (of which $3,265 was
waived on Growth and Income Fund).
33
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
SACS receives sales charges on each Fund's Class A shares, portions of
which are reallowed to affiliated broker-dealers and non-affiliated broker-
dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of each
Fund's Class B shares. SACS has advised the Funds that for the year ended
September 30, 1996 the proceeds received from Class A sales (and paid out
to affiliated and non-affiliated broker-dealers) and Class B redemptions
are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------------- -------------------
SALES AFFILIATED NON-AFFILIATED CONTINGENT DEFERRED
CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES
---------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
Balanced Assets Fund.... $1,139,306 $ 830,997 $132,907 $303,405
Blue Chip Growth Fund... 84,051 48,653 23,355 37,223
Mid-Cap Growth Fund..... 185,300 125,403 31,855 15,696
Small Company Growth
Fund................... 2,007,194 1,156,919 568,659 118,032
Global Balanced Fund.... 96,613 60,930 22,339 45,769
Growth and Income Fund.. 384,542 188,254 140,834 1,820
</TABLE>
The Trust has entered into a Service Agreement with SunAmerica Fund
Services, Inc. ("SAFS"), an indirect wholly-owned subsidiary of SunAmerica
Inc. Under the Service Agreement, SAFS performs certain shareholder account
functions by assisting the Funds' transfer agent in connection with the
services that it offers to the shareholders of the Funds. The Service
Agreement 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, 1996, the Funds incurred the following expenses to
reimburse SAFS pursuant to the terms of the Service Agreement.
<TABLE>
<CAPTION>
PAYABLE AT
SEPTEMBER 30,
EXPENSE 1996
----------------- ---------------
CLASS A CLASS B CLASS A CLASS B
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Balanced Assets Fund...................... $300,743 $368,649 $25,959 $30,429
Blue Chip Growth Fund..................... 103,210 85,923 8,993 6,366
Mid-Cap Growth Fund....................... 86,059 24,058 7,278 2,322
Small Company Growth Fund................. 257,049 179,827 27,269 18,310
Global Balanced Fund...................... 20,216 32,724 1,763 2,849
Growth and Income Fund.................... 16,005 10,853 3,449 2,122
</TABLE>
34
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
Note 5. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
investments (excluding U.S. Government securities and short-term
investments) during the year ended September 30, 1996 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..... $470,062,644 $219,833,010 $146,077,784 $518,886,339 $20,776,926 $41,022,581
============ ============ ============ ============ =========== ===========
Aggregate sales......... $481,037,139 $222,057,848 $134,646,378 $404,167,995 $21,191,381 $18,134,966
============ ============ ============ ============ =========== ===========
</TABLE>
Note 6. Portfolio Securities (Tax Basis)
The cost of securities and the aggregate gross unrealized appreciation and
depreciation of securities for federal income tax purposes at September 30,
1996 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)........ $286,714,065 $76,704,287 $45,886,063 $204,188,516 $23,714,810 $32,870,818
============ =========== =========== ============ =========== ===========
Appreciation............ $ 20,942,612 $ 7,779,818 $10,645,466 $ 57,614,727 $ 2,614,967 $ 2,188,075
Depreciation............ (4,670,019) (2,422,398) (338,154) (2,051,181) (860,315) (389,237)
------------ ----------- ----------- ------------ ----------- -----------
Unrealized appreciation/
depreciation--net...... $ 16,272,593 $ 5,357,420 $10,307,312 $ 55,563,546 $ 1,754,652 $ 1,798,838
============ =========== =========== ============ =========== ===========
</TABLE>
At September 30, 1996, Global Balanced Fund had net capital loss
carryforwards of $217,014 which are available to the extent provided in
regulations to offset future capital gains of which $17,364 will expire in
2003 and $199,650 will expire in 2004. 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.
35
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
Note 7. Open Forward Currency Contracts
At September 30, 1996, 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, 1996:
<TABLE>
<CAPTION>
GROSS
CONTRACT IN DELIVERY UNREALIZED
TO DELIVER EXCHANGE FOR DATE APPRECIATION
---------------------- ------------------------- -------- ------------
<S> <C> <C> <C> <C> <C>
BEF 3,467,742 USD 114,142 12/05/96 $ 3,359
DEM 2,044,653 USD 1,386,337 12/04/96 41,553
DEM 2,000,000 USD 1,332,001 12/12/96 15,828
DKK 1,109,003 USD 194,201 10/22/96 4,697
ESP 10,484,525 USD 81,576 10/15/96 30
FRF 782,303 USD 156,102 10/23/96 4,458
JPY 59,315,200 USD 544,176 10/17/96 11,322
JPY 300,000,000 USD 2,781,125 12/12/96 64,720
*USD 172,143 IEP 107,348 10/1/96 54
--------
146,021
--------
<CAPTION>
GROSS
UNREALIZED
DEPRECIATION
------------
<S> <C> <C> <C> <C> <C>
AUD 94,642 USD 74,247 10/30/96 $ (583)
CAD 216,167 USD 158,051 11/12/96 (930)
GBP 420,664 USD 652,282 11/14/96 (5,805)
IEP 107,348 USD 172,106 12/02/96 (38)
ITL 421,970,840 USD 273,138 10/15/96 (3,548)
SEK 3,074,685 USD 462,567 11/15/96 (1,757)
*IEP 107,348 USD 171,026 10/01/96 (1,170)
--------
(13,831)
--------
Net Appreciation....................................... $132,190
========
</TABLE>
*Represents open forward foreign currency contracts and offsetting open
forward foreign currency contracts that do not have additional market risk
but have continued counterparty settlement risk.
AUD--Australian Dollar ESP--Spanish Peseta ITL--Italian Lira
BEF--Belgian Franc FRF--French Franc JPY--Japanese Yen
CAD--Canadian Dollar GBP--Great Britain Pound SEK--Swedish Krona
DEM--Deutsche Mark IEP--Irish Punt USD--United States
DKK--Danish Kroner Dollar
36
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (continued)
Note 8. Capital Share Transactions
At September 30, 1996, the Adviser and SACS in the aggregate, owned 843,915
Class A shares of the Growth and Income Fund representing 25.24% of the
Fund's net assets.
Transactions in capital shares of each class of each series were as
follows:
<TABLE>
<CAPTION>
BALANCED ASSETS FUND
--------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ----------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------ ------------------------ ------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 3,119,474 $ 50,864,950 4,667,503 $ 71,426,588 3,055,442 $ 49,865,609 3,071,975 $ 45,998,809
Reinvested
dividends...... 583,832 9,290,744 265,763 3,756,343 690,103 10,949,550 769,696 10,686,782
Shares redeemed. (2,257,335) (36,956,739) (1,193,984) (17,782,121) (3,430,716) (55,757,942) (6,322,402) (95,258,440)
---------- ------------ ---------- ------------ ---------- ------------ ----------- -------------
Net increase
(decrease)..... 1,445,971 $ 23,198,955 3,739,282 $ 57,400,810 314,829 $ 5,057,217 (2,480,731) $ (38,572,849)
========== ============ ========== ============ ========== ============ =========== =============
<CAPTION>
BLUE CHIP GROWTH FUND
--------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ----------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------ ------------------------ ------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 753,893 $ 12,709,149 2,404,163 $ 37,806,801 3,214,655 $ 53,717,531 8,964,323 $ 134,971,138
Reinvested
dividends...... 285,095 4,507,347 14,956 207,075 277,108 4,315,647 372,862 5,128,338
Shares redeemed. (533,503) (8,978,653) (181,804) (2,884,125) (3,702,537) (61,373,567) (11,706,255) (177,081,024)
---------- ------------ ---------- ------------ ---------- ------------ ----------- -------------
Net increase
(decrease)..... 505,485 $ 8,237,843 2,237,315 $ 35,129,751 (210,774) $ (3,340,389) (2,369,070) $ (36,981,548)
========== ============ ========== ============ ========== ============ =========== =============
<CAPTION>
MID-CAP GROWTH FUND
--------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- ----------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------ ------------------------ ------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 585,749 $ 10,047,757 247,141 $ 3,926,322 1,569,285 $ 26,612,848 4,235,563 $ 62,818,790
Reinvested
dividends...... 262,450 4,236,039 5,781 79,602 66,071 1,049,943 1,748 24,200
Shares redeemed. (609,879) (10,404,579) (521,946) (7,755,976) (1,386,338) (23,587,448) (3,989,374) (59,135,991)
---------- ------------ ---------- ------------ ---------- ------------ ----------- -------------
Net increase
(decrease)..... 238,320 $ 3,879,217 (269,024) $ (3,750,052) 249,018 $ 4,075,343 247,937 $ 3,706,999
========== ============ ========== ============ ========== ============ =========== =============
</TABLE>
37
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (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, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------- ------------------------- ------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 6,607,402 $ 153,907,782 6,544,632 $ 130,462,164 6,285,098 $ 144,713,218 9,886,153 $ 196,092,402
Reinvested
dividends...... 725,288 15,398,224 54,753 964,756 543,295 11,327,669 62,016 1,085,149
Shares redeemed. (4,425,505) (102,867,176) (5,262,148) (102,586,803) (5,086,621) (116,292,585) (10,265,178) (202,833,358)
---------- ------------- ---------- ------------- ---------- ------------- ----------- -------------
Net increase
(decrease)..... 2,907,185 $ 66,438,830 1,337,237 $ 28,840,117 1,741,772 $ 39,748,302 (317,009) $ (5,655,807)
========== ============= ========== ============= ========== ============= =========== =============
<CAPTION>
GLOBAL BALANCED FUND
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
---------------------------------------------------- -----------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------- ------------------------- ------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 419,512 $ 3,129,820 750,764 $ 5,173,301 771,725 $ 5,700,564 1,150,637 $ 7,847,490
Reinvested
dividends...... 63,292 449,372 4,067 27,252 93,522 662,149 2,161 14,461
Shares redeemed. (488,115) (3,602,549) (1,342,777) (9,319,908) (672,645) (4,972,923) (1,199,716) (8,126,345)
---------- ------------- ---------- ------------- ---------- ------------- ----------- -------------
Net increase
(decrease)..... (5,311) $ (23,357) (587,946) $ (4,119,355) 192,602 $ 1,389,790 (46,918) $ (264,394)
========== ============= ========== ============= ========== ============= =========== =============
<CAPTION>
GROWTH AND INCOME FUND
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS B
---------------------------------------------------- -----------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------- ------------------------- ------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 1,608,366 $ 15,926,962 542,589 $ 4,112,191 1,180,720 $ 11,686,226 301,384 $ 2,380,132
Reinvested
dividends...... 32,680 297,897 25,040 190,918 19,593 176,116 7,758 61,110
Shares redeemed. (46,202) (441,023) (562,875) (4,274,466) (172,820) (1,683,504) (37,348) (295,806)
---------- ------------- ---------- ------------- ---------- ------------- ----------- -------------
Net increase.... 1,594,844 $ 15,783,836 4,754 $ 28,643 1,027,493 $ 10,178,838 271,794 $ 2,145,436
========== ============= ========== ============= ========== ============= =========== =============
</TABLE>
38
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- September 30, 1996 -- (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, the
Funds' custodian, with interest payable at the Federal Funds rate plus 100
basis points. Borrowings under the line of credit will commence when the
respective Fund's cash shortfall exceeds $100,000.
Note 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, but in no event
for a period greater than 10 years, each Eligible Trustee will be credited
with an amount equal to 50% of his or her regular fees (excluding committee
fees) for services as a Disinterested Trustee of each SunAmerica mutual
fund for the calendar year in which such birthday occurs. In addition, an
amount equal to 8.5% of any amounts credited under the preceding clause
during prior years, is added to each Eligible Trustee's account until such
Eligible Trustee reaches his or her 70th birthday. An Eligible Trustee may
receive any benefits payable under the Retirement Plan, at his or her
election, either in one lump sum or in up to fifteen annual installments.
As of September 30, 1996, Balanced Assets Fund, Blue Chip Growth Fund, Mid-
Cap Growth Fund, Small Company Growth Fund, Global Balanced Fund and Growth
and Income Fund had accrued $15,032, $4,872, $2,539, $7,974, $1,258 and
$298, respectively, for the Retirement Plan, which is included in accrued
expenses on the Statement of Assets and Liabilities, and for the year ended
September 30, 1996 expensed $9,912, $3,005, $1,653, $5,731, $822 and $240,
respectively, for the Retirement Plan, which is included in Trustees' fees
and expenses on the Statement of Operations.
Note 11. Subsequent Event
On October 1, 1996 Balanced Assets Fund and Small Company Growth Fund
offered Class Z shares exclusively for sale to employees participating in
the SunAmerica profit sharing and retirement plan.
39
<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, 1996, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 1996 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 15, 1996
40
<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, 1996. The information and
distributions reported herein may differ from the information and
distributions taxable to the shareholders for the calendar year ending
December 31, 1996. 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 1997.
During the year ended September 30, 1996 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..... $1.27 $.28 $ .73 $.26
Balanced Assets Class B..... 1.17 .18 .73 .26
Blue Chip Growth Class A.... 1.91 -- 1.39 .52
Blue Chip Growth Class B.... 1.91 -- 1.39 .52
Mid-Cap Growth Class A...... 2.11 -- 1.52 .59
Mid-Cap Growth Class B...... 2.11 -- 1.52 .59
Small Company Growth Class
A.......................... 4.53 -- 4.43 .10
Small Company Growth Class
B.......................... 4.53 -- 4.43 .10
Global Balanced Class A..... .42 .42 -- --
Global Balanced Class B..... .38 .38 -- --
Growth and Income Class A... .56 .17 .39 --
Growth and Income Class B... .52 .13 .39 --
</TABLE>
For the year ended September 30, 1996, 19.44%, 17.42%, 3.87%, 28.30% and
14.43% 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.
41
<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 Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal
Appendix-1
<PAGE>
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
-- 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
Appendix-2
<PAGE>
-- 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 result of public interest
questions and preparations to meet such obligations.
Appendix-3
<PAGE>
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.
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
Appendix-4
<PAGE>
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 D rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
Appendix-5
<PAGE>
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.
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
Appendix-6
<PAGE>
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.
Appendix-7
<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, 1996. 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 is incorporated herein by
reference to Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed
on January 12, 1996.
(2) By-Laws, as amended are incorporated herein by reference to
Post-Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January
12, 1996.
(3) Inapplicable.
(4) Inapplicable.
(5)(a) Investment Advisory and Management Agreement.
(5)(b) Sub-Advisory Agreement.
(6)(a) Distribution Agreement.
(6)(b) Form of Dealer Agreement.
(7) Directors'/Trustees' Retirement Plan.
(8) Custodian Contract, as amended.
(9)(a) Transfer Agency and Service Agreement.
(9)(b) Service Agreement, as amended.
(10) Inapplicable.
(11) Consent of Independent Accountants.
(12) Inapplicable.
<PAGE>
(13) Inapplicable.
(14) Model Retirement Plans are incorporated herein by reference
to Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed
on January 12, 1996.
(15) Distribution Plans.
(16) Schedule of Computation of Performance Quotations is
incorporated herein by reference to Post-Effective Amendment
No. 17 to Registrant's Registration Statement on Form N-1A
(File No. 33-8021) filed on January 12, 1996.
(17) Powers of Attorney are incorporated herein by reference to
Post-Effective Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January
12, 1996.
(18) Plan Pursuant to Rule 18f-3.
Item 25. Persons Controlled By or Under Common Control With Registrant.
There are no persons controlled by or under common control with
Registrant.
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class Z Shares
Number of Record Number of Record Number of Record
Holders as of Holders as of Holders as of
Title of Class December 31, 1996 December 31, 1996 December 31, 1996
- ------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Balanced Assets Fund 16,014 9,761 2
Shares of Beneficial Interest
($.01 par value)
Blue Chip Growth Fund 7,249 3,752
Shares of Beneficial Interest
($.01 par value)
Mid-Cap Growth Fund 3,674 1,349
Shares of Beneficial Interest
($.01 par value)
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Small Company Growth Fund 17,031 8,919 2
Shares of Beneficial Interest
($.01 par value)
Global Balanced Fund 1,015 1,436
Shares of Beneficial Interest
($.01 par value)
Growth and Income Fund 1,741 1,562
Shares of Beneficial Interest
($.01 par value)
</TABLE>
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.
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 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.
C-3
<PAGE>
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.
Style Select Series, 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
------------------ ---------------- -----------------
J. Steven Neamtz President None
The SunAmerica Center
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
Susan L. Harris Secretary None
SunAmerica Inc.
1 SunAmerica Center
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.
1. 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.
C-4
<PAGE>
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-5
<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. 19 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 27th of January, 1997.
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. 19 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 24, 1997
Peter A. Harbeck (Principal Executive Officer)
* Treasurer January 24, 1997
- --------------------- (Principal Accounting
Peter C. Sutton and Financial Officer)
* Trustee January 24, 1997
- ---------------------
Peter McMillan III
* Trustee January 24, 1997
- ---------------------
S. James Coppersmith
* Trustee January 24, 1997
- ---------------------
Samuel M. Eisenstat
* Trustee January 24, 1997
- ---------------------
Stephen J. Gutman
* Trustee January 24, 1997
- ---------------------
Sebastiano Sterpa
*By:/s/Robert M. Zakem
Robert M. Zakem, Attorney-in-Fact
<PAGE>
SUNAMERICA EQUITY FUNDS
EXHIBIT INDEX
Exhibit No. Name
(5)(a) Investment Advisory and Management Agreement.
(5)(b) Sub-Advisory Agreement.
(6)(a) Distribution Agreement.
(6)(b) Form of Dealer Agreement.
(7) Directors'/Trustees' Retirement Plan.
(8) Custodian Contract, as amended.
(9)(a) Transfer Agency and Service Agreement.
(9)(b) Service Agreement, as amended.
(11) Consent of Independent Accountants.
(15) Distribution Plans.
(18) Plan Pursuant to Rule 18f-3.
(27) Financial Data Schedules
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> SUNAMERICA SMALL CO. GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 202,185,854<F1>
<INVESTMENTS-AT-VALUE> 259,752,112<F1>
<RECEIVABLES> 12,958,242<F1>
<ASSETS-OTHER> 11,998<F1>
<OTHER-ITEMS-ASSETS> 984<F1>
<TOTAL-ASSETS> 272,723,336<F1>
<PAYABLE-FOR-SECURITIES> 5,519,101<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 797,767<F1>
<TOTAL-LIABILITIES> 6,316,868<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 209,546,080<F1>
<SHARES-COMMON-STOCK> 6,538,057<F2>
<SHARES-COMMON-PRIOR> 3,630,872<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (705,870)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 57,566,258<F1>
<NET-ASSETS> 266,406,468<F1>
<DIVIDEND-INCOME> 366,438<F1>
<INTEREST-INCOME> 1,324,606<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,548,752)<F1>
<NET-INVESTMENT-INCOME> (1,857,708)<F1>
<REALIZED-GAINS-CURRENT> 14,508<F1>
<APPREC-INCREASE-CURRENT> 33,583,299<F1>
<NET-CHANGE-FROM-OPS> 31,740,099<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> (16,561,192)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 6,607,402<F2>
<NUMBER-OF-SHARES-REDEEMED> (4,425,505)<F2>
<SHARES-REINVESTED> 725,288<F2>
<NET-CHANGE-IN-ASSETS> 108,583,364<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 28,623,489<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,487,650<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,548,752<F1>
<AVERAGE-NET-ASSETS> 116,840,816<F2>
<PER-SHARE-NAV-BEGIN> 24.65<F2>
<PER-SHARE-NII> (0.16)<F2>
<PER-SHARE-GAIN-APPREC> 4.29<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (4.53)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 24.25<F2>
<EXPENSE-RATIO> 1.53<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Small Co. Growth Fund as a whole.
<F2>Information given pertains to SunAmerica Small Co. Growth Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> SUNAMERICA MID-CAP GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 45,584,876<F1>
<INVESTMENTS-AT-VALUE> 56,193,375<F1>
<RECEIVABLES> 96,922<F1>
<ASSETS-OTHER> 6,646<F1>
<OTHER-ITEMS-ASSETS> 106<F1>
<TOTAL-ASSETS> 56,297,049<F1>
<PAYABLE-FOR-SECURITIES> 455,000<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 153,863<F1>
<TOTAL-LIABILITIES> 608,863<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 44,078,590<F1>
<SHARES-COMMON-STOCK> 791,770<F2>
<SHARES-COMMON-PRIOR> 542,752<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,001,097<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 10,608,499<F1>
<NET-ASSETS> 55,688,186<F1>
<DIVIDEND-INCOME> 166,238<F1>
<INTEREST-INCOME> 293,829<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (886,044)<F1>
<NET-INVESTMENT-INCOME> (425,977)<F1>
<REALIZED-GAINS-CURRENT> 1,634,384<F1>
<APPREC-INCREASE-CURRENT> 4,688,230<F1>
<NET-CHANGE-FROM-OPS> 5,896,637<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> (1,083,506)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,569,285<F2>
<NUMBER-OF-SHARES-REDEEMED> (1,386,338)<F2>
<SHARES-REINVESTED> 66,071<F2>
<NET-CHANGE-IN-ASSETS> 8,430,549<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,186,991<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 375,398<F1>
<INTEREST-EXPENSE> 1,603<F1>
<GROSS-EXPENSE> 886,110<F1>
<AVERAGE-NET-ASSETS> 10,395,302<F2>
<PER-SHARE-NAV-BEGIN> 17.58<F2>
<PER-SHARE-NII> (0.24)<F2>
<PER-SHARE-GAIN-APPREC> 2.18<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (2.11)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.41<F2>
<EXPENSE-RATIO> 2.32<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Mid-Cap Growth Fund as a whole.
<F2>Information given pertains to SunAmerica Mid-Cap Growth Fund Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> SUNAMERICA MID-CAP GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 45,584,876<F1>
<INVESTMENTS-AT-VALUE> 56,193,375<F1>
<RECEIVABLES> 96,922<F1>
<ASSETS-OTHER> 6,646<F1>
<OTHER-ITEMS-ASSETS> 106<F1>
<TOTAL-ASSETS> 56,297,049<F1>
<PAYABLE-FOR-SECURITIES> 455,000<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 153,863<F1>
<TOTAL-LIABILITIES> 608,863<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 44,078,590<F1>
<SHARES-COMMON-STOCK> 2,356,510<F2>
<SHARES-COMMON-PRIOR> 2,118,190<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,001,097<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 10,608,499<F1>
<NET-ASSETS> 55,688,186<F1>
<DIVIDEND-INCOME> 166,238<F1>
<INTEREST-INCOME> 293,829<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (886,044)<F1>
<NET-INVESTMENT-INCOME> (425,977)<F1>
<REALIZED-GAINS-CURRENT> 1,634,384<F1>
<APPREC-INCREASE-CURRENT> 4,688,230<F1>
<NET-CHANGE-FROM-OPS> 5,896,637<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> (4,337,142)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 585,749<F2>
<NUMBER-OF-SHARES-REDEEMED> (609,879)<F2>
<SHARES-REINVESTED> 262,450<F2>
<NET-CHANGE-IN-ASSETS> 8,430,549<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 5,186,991<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 375,398<F1>
<INTEREST-EXPENSE> 1,603<F1>
<GROSS-EXPENSE> 886,110<F1>
<AVERAGE-NET-ASSETS> 39,117,818<F2>
<PER-SHARE-NAV-BEGIN> 17.80<F2>
<PER-SHARE-NII> (0.12)<F2>
<PER-SHARE-GAIN-APPREC> 2.21<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (2.11)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.78<F2>
<EXPENSE-RATIO> 1.62<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Mid-Cap Growth Fund as a whole.
<F2>Information given pertains to SunAmerica Mid-Cap Growth Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> SUNAMERICA BLUE CHIP GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 76,161,693<F1>
<INVESTMENTS-AT-VALUE> 82,061,707<F1>
<RECEIVABLES> 6,371,833<F1>
<ASSETS-OTHER> 33,144<F1>
<OTHER-ITEMS-ASSETS> 954<F1>
<TOTAL-ASSETS> 88,467,638<F1>
<PAYABLE-FOR-SECURITIES> 46,000<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 228,732<F1>
<TOTAL-LIABILITIES> 274,732<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 71,124,921<F1>
<SHARES-COMMON-STOCK> 2,096,657<F2>
<SHARES-COMMON-PRIOR> 2,307,431<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 11,167,971<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5,900,014<F1>
<NET-ASSETS> 88,192,906<F1>
<DIVIDEND-INCOME> 919,680<F1>
<INTEREST-INCOME> 281,114<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,609,424)<F1>
<NET-INVESTMENT-INCOME> (408,630)<F1>
<REALIZED-GAINS-CURRENT> 13,200,391<F1>
<APPREC-INCREASE-CURRENT> (2,296,867)<F1>
<NET-CHANGE-FROM-OPS> 10,494,894<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> (4,492,488)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 3,214,655<F2>
<NUMBER-OF-SHARES-REDEEMED> (3,702,537)<F2>
<SHARES-REINVESTED> 277,108<F2>
<NET-CHANGE-IN-ASSETS> 6,253,110<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 7,515,448<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 644,774<F1>
<INTEREST-EXPENSE> 4,689<F1>
<GROSS-EXPENSE> 1,609,424<F1>
<AVERAGE-NET-ASSETS> 39,109,594<F2>
<PER-SHARE-NAV-BEGIN> 17.13<F2>
<PER-SHARE-NII> (0.14)<F2>
<PER-SHARE-GAIN-APPREC> 2.19<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (1.91)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.27<F2>
<EXPENSE-RATIO> 2.23<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Blue Chip Growth Fund as a whole.
<F2>Information given pertains to SunAmerica Blue Chip Growth Fund Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> SUNAMERICA BLUE CHIP GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 76,161,693<F1>
<INVESTMENTS-AT-VALUE> 82,061,707<F1>
<RECEIVABLES> 6,371,833<F1>
<ASSETS-OTHER> 33,144<F1>
<OTHER-ITEMS-ASSETS> 954<F1>
<TOTAL-ASSETS> 88,467,638<F1>
<PAYABLE-FOR-SECURITIES> 46,000<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 228,732<F1>
<TOTAL-LIABILITIES> 274,732<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 71,124,921<F1>
<SHARES-COMMON-STOCK> 2,950,757<F2>
<SHARES-COMMON-PRIOR> 2,445,272<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 11,167,971<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 5,900,014<F1>
<NET-ASSETS> 88,192,906<F1>
<DIVIDEND-INCOME> 919,680<F1>
<INTEREST-INCOME> 281,114<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (1,609,424)<F1>
<NET-INVESTMENT-INCOME> (408,630)<F1>
<REALIZED-GAINS-CURRENT> 13,200,391<F1>
<APPREC-INCREASE-CURRENT> (2,296,867)<F1>
<NET-CHANGE-FROM-OPS> 10,494,894<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> (4,646,750)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 753,893<F2>
<NUMBER-OF-SHARES-REDEEMED> (533,503)<F2>
<SHARES-REINVESTED> 285,095<F2>
<NET-CHANGE-IN-ASSETS> 6,253,110<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 7,515,448<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 644,774<F1>
<INTEREST-EXPENSE> 4,689<F1>
<GROSS-EXPENSE> 1,609,424<F1>
<AVERAGE-NET-ASSETS> 46,966,603<F2>
<PER-SHARE-NAV-BEGIN> 17.34<F2>
<PER-SHARE-NII> (0.03)<F2>
<PER-SHARE-GAIN-APPREC> 2.22<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (1.91)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 17.62<F2>
<EXPENSE-RATIO> 1.57<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Blue Chip Growth Fund as a whole.
<F2>Information given pertains to SunAmerica Blue Chip Growth Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 052
<NAME> SUNAMERICA GLOBAL BALANCED FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 23,702,451<F1>
<INVESTMENTS-AT-VALUE> 25,469,462<F1>
<RECEIVABLES> 404,692<F1>
<ASSETS-OTHER> 149,491<F1>
<OTHER-ITEMS-ASSETS> 307,585<F1>
<TOTAL-ASSETS> 26,331,230<F1>
<PAYABLE-FOR-SECURITIES> 72,694<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 111,544<F1>
<TOTAL-LIABILITIES> 184,238<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 23,967,161<F1>
<SHARES-COMMON-STOCK> 2,107,949<F2>
<SHARES-COMMON-PRIOR> 1,915,347<F2>
<ACCUMULATED-NII-CURRENT> 512,906<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (229,373)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,896,298<F1>
<NET-ASSETS> 26,146,992<F1>
<DIVIDEND-INCOME> 285,671<F1>
<INTEREST-INCOME> 436,750<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (614,044)<F1>
<NET-INVESTMENT-INCOME> 108,377<F1>
<REALIZED-GAINS-CURRENT> 1,951,288<F1>
<APPREC-INCREASE-CURRENT> 301,728<F1>
<NET-CHANGE-FROM-OPS> 2,361,393<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (693,095)<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 771,725<F2>
<NUMBER-OF-SHARES-REDEEMED> (672,645)<F2>
<SHARES-REINVESTED> 93,522<F2>
<NET-CHANGE-IN-ASSETS> 2,555,991<F1>
<ACCUMULATED-NII-PRIOR> 871,462<F1>
<ACCUMULATED-GAINS-PRIOR> (1,475,759)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 240,640<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 715,754<F1>
<AVERAGE-NET-ASSETS> 14,874,702<F2>
<PER-SHARE-NAV-BEGIN> 7.30<F2>
<PER-SHARE-NII> 0.02<F2>
<PER-SHARE-GAIN-APPREC> 0.70<F2>
<PER-SHARE-DIVIDEND> (0.38)<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 7.64<F2>
<EXPENSE-RATIO> 2.80<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Global Balanced Fund as a whole.
<F2>Information given pertains to SunAmerica Global Balanced Fund Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 051
<NAME> SUNAMERICA GLOBAL BALANCED FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 23,702,451<F1>
<INVESTMENTS-AT-VALUE> 25,469,462<F1>
<RECEIVABLES> 404,692<F1>
<ASSETS-OTHER> 149,491<F1>
<OTHER-ITEMS-ASSETS> 307,585<F1>
<TOTAL-ASSETS> 26,331,230<F1>
<PAYABLE-FOR-SECURITIES> 72,694<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 111,544<F1>
<TOTAL-LIABILITIES> 184,238<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 23,967,161<F1>
<SHARES-COMMON-STOCK> 1,301,793<F2>
<SHARES-COMMON-PRIOR> 1,307,104<F2>
<ACCUMULATED-NII-CURRENT> 512,906<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (229,373)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,896,298<F1>
<NET-ASSETS> 26,146,992<F1>
<DIVIDEND-INCOME> 285,671<F1>
<INTEREST-INCOME> 436,750<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (614,044)<F1>
<NET-INVESTMENT-INCOME> 108,377<F1>
<REALIZED-GAINS-CURRENT> 1,951,288<F1>
<APPREC-INCREASE-CURRENT> 301,728<F1>
<NET-CHANGE-FROM-OPS> 2,361,393<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (478,740)<F2>
<DISTRIBUTIONS-OF-GAINS> 0<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 419,512<F2>
<NUMBER-OF-SHARES-REDEEMED> (488,115)<F2>
<SHARES-REINVESTED> 63,292<F2>
<NET-CHANGE-IN-ASSETS> 2,555,991<F1>
<ACCUMULATED-NII-PRIOR> 871,462<F1>
<ACCUMULATED-GAINS-PRIOR> (1,475,759)<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 240,640<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 715,754<F1>
<AVERAGE-NET-ASSETS> 9,189,339<F2>
<PER-SHARE-NAV-BEGIN> 7.36<F2>
<PER-SHARE-NII> 0.06<F2>
<PER-SHARE-GAIN-APPREC> 0.71<F2>
<PER-SHARE-DIVIDEND> (0.42)<F2>
<PER-SHARE-DISTRIBUTIONS> 0<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 7.71<F2>
<EXPENSE-RATIO> 2.15<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Global Balanced Fund as a whole.
<F2>Information given pertains to SunAmerica Global Balanced Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> SUNAMERICA BALANCED ASSETS FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 286,171,099<F1>
<INVESTMENTS-AT-VALUE> 302,986,658<F1>
<RECEIVABLES> 18,775,044<F1>
<ASSETS-OTHER> 14,818<F1>
<OTHER-ITEMS-ASSETS> 916<F1>
<TOTAL-ASSETS> 321,777,436<F1>
<PAYABLE-FOR-SECURITIES> 2,411,915<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,133,559<F1>
<TOTAL-LIABILITIES> 3,545,474<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 272,758,879<F1>
<SHARES-COMMON-STOCK> 10,187,608<F2>
<SHARES-COMMON-PRIOR> 9,872,779<F2>
<ACCUMULATED-NII-CURRENT> (18,577)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 28,676,101<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 16,815,559<F1>
<NET-ASSETS> 318,231,962<F1>
<DIVIDEND-INCOME> 2,928,724<F1>
<INTEREST-INCOME> 6,647,500<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,625,887)<F1>
<NET-INVESTMENT-INCOME> 3,950,337<F1>
<REALIZED-GAINS-CURRENT> 33,912,222<F1>
<APPREC-INCREASE-CURRENT> (8,691,595)<F1>
<NET-CHANGE-FROM-OPS> 29,170,964<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (1,868,201)<F2>
<DISTRIBUTIONS-OF-GAINS> (9,730,482)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 3,055,442<F2>
<NUMBER-OF-SHARES-REDEEMED> (3,430,716)<F2>
<SHARES-REINVESTED> 690,103<F2>
<NET-CHANGE-IN-ASSETS> 36,200,797<F1>
<ACCUMULATED-NII-PRIOR> 243,698<F1>
<ACCUMULATED-GAINS-PRIOR> 11,777,606<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,282,018<F1>
<INTEREST-EXPENSE> 4,189<F1>
<GROSS-EXPENSE> 5,625,887<F1>
<AVERAGE-NET-ASSETS> 167,567,547<F2>
<PER-SHARE-NAV-BEGIN> 16.42<F2>
<PER-SHARE-NII> 0.17<F2>
<PER-SHARE-GAIN-APPREC> 1.38<F2>
<PER-SHARE-DIVIDEND> (0.18)<F2>
<PER-SHARE-DISTRIBUTIONS> (0.99)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.80<F2>
<EXPENSE-RATIO> 2.12<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Balanced Assets Fund as a whole.
<F2>Information given pertains to SunAmerica Balanced Assets Fund Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> SUNAMERICA BALANCED ASSETS FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 286,171,099<F1>
<INVESTMENTS-AT-VALUE> 302,986,658<F1>
<RECEIVABLES> 18,775,044<F1>
<ASSETS-OTHER> 14,818<F1>
<OTHER-ITEMS-ASSETS> 916<F1>
<TOTAL-ASSETS> 321,777,436<F1>
<PAYABLE-FOR-SECURITIES> 2,411,915<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 1,133,559<F1>
<TOTAL-LIABILITIES> 3,545,474<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 272,758,879<F1>
<SHARES-COMMON-STOCK> 8,748,465<F2>
<SHARES-COMMON-PRIOR> 7,302,494<F2>
<ACCUMULATED-NII-CURRENT> (18,577)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 28,676,101<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 16,815,559<F1>
<NET-ASSETS> 318,231,962<F1>
<DIVIDEND-INCOME> 2,928,724<F1>
<INTEREST-INCOME> 6,647,500<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (5,625,887)<F1>
<NET-INVESTMENT-INCOME> 3,950,337<F1>
<REALIZED-GAINS-CURRENT> 33,912,222<F1>
<APPREC-INCREASE-CURRENT> (8,691,595)<F1>
<NET-CHANGE-FROM-OPS> 29,170,964<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (2,345,435)<F2>
<DISTRIBUTIONS-OF-GAINS> (7,282,221)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 3,119,474<F2>
<NUMBER-OF-SHARES-REDEEMED> (2,257,335)<F2>
<SHARES-REINVESTED> 583,832<F2>
<NET-CHANGE-IN-ASSETS> 36,200,797<F1>
<ACCUMULATED-NII-PRIOR> 243,698<F1>
<ACCUMULATED-GAINS-PRIOR> 11,777,606<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 2,282,018<F1>
<INTEREST-EXPENSE> 4,189<F1>
<GROSS-EXPENSE> 5,625,887<F1>
<AVERAGE-NET-ASSETS> 136,701,461<F2>
<PER-SHARE-NAV-BEGIN> 16.42<F2>
<PER-SHARE-NII> 0.27<F2>
<PER-SHARE-GAIN-APPREC> 1.39<F2>
<PER-SHARE-DIVIDEND> (0.28)<F2>
<PER-SHARE-DISTRIBUTIONS> (0.99)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 16.81<F2>
<EXPENSE-RATIO> 1.52<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Balanced Assets Fund as a whole.
<F2>Information given pertains to SunAmerica Balanced Assets Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 062
<NAME> SUNAMERICA GROWTH AND INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 32,870,818<F1>
<INVESTMENTS-AT-VALUE> 34,669,656<F1>
<RECEIVABLES> 1,089,041<F1>
<ASSETS-OTHER> 1,731<F1>
<OTHER-ITEMS-ASSETS> 43,371<F1>
<TOTAL-ASSETS> 35,803,799<F1>
<PAYABLE-FOR-SECURITIES> 722,860<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 78,918<F1>
<TOTAL-LIABILITIES> 801,778<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 31,415,473<F1>
<SHARES-COMMON-STOCK> 1,330,114<F2>
<SHARES-COMMON-PRIOR> 302,621<F2>
<ACCUMULATED-NII-CURRENT> (2,516)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,790,226<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,798,838<F1>
<NET-ASSETS> 35,002,021<F1>
<DIVIDEND-INCOME> 214,138<F1>
<INTEREST-INCOME> 87,928<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (147,481)<F1>
<NET-INVESTMENT-INCOME> 154,585<F1>
<REALIZED-GAINS-CURRENT> 1,853,732<F1>
<APPREC-INCREASE-CURRENT> 1,445,861<F1>
<NET-CHANGE-FROM-OPS> 3,454,178<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (58,296)<F2>
<DISTRIBUTIONS-OF-GAINS> (127,334)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,180,720<F2>
<NUMBER-OF-SHARES-REDEEMED> (172,820)<F2>
<SHARES-REINVESTED> 19,593<F2>
<NET-CHANGE-IN-ASSETS> 28,931,710<F1>
<ACCUMULATED-NII-PRIOR> 2,915<F1>
<ACCUMULATED-GAINS-PRIOR> 261,620<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 91,559<F1>
<INTEREST-EXPENSE> 248<F1>
<GROSS-EXPENSE> 277,441<F1>
<AVERAGE-NET-ASSETS> 4,932,990<F2>
<PER-SHARE-NAV-BEGIN> 8.39<F2>
<PER-SHARE-NII> 0.08<F2>
<PER-SHARE-GAIN-APPREC> 2.50<F2>
<PER-SHARE-DIVIDEND> (0.13)<F2>
<PER-SHARE-DISTRIBUTIONS> (0.39)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 10.45<F2>
<EXPENSE-RATIO> 1.58<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Growth and Income Fund as a whole.
<F2>Information given pertains to SunAmerica Growth and Income Fund Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> SUNAMERICA GROWTH AND INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 32,870,818<F1>
<INVESTMENTS-AT-VALUE> 34,669,656<F1>
<RECEIVABLES> 1,089,041<F1>
<ASSETS-OTHER> 1,731<F1>
<OTHER-ITEMS-ASSETS> 43,371<F1>
<TOTAL-ASSETS> 35,803,799<F1>
<PAYABLE-FOR-SECURITIES> 722,860<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 78,918<F1>
<TOTAL-LIABILITIES> 801,778<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 31,415,473<F1>
<SHARES-COMMON-STOCK> 2,015,981<F2>
<SHARES-COMMON-PRIOR> 421,137<F2>
<ACCUMULATED-NII-CURRENT> (2,516)<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> 1,790,226<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 1,798,838<F1>
<NET-ASSETS> 35,002,021<F1>
<DIVIDEND-INCOME> 214,138<F1>
<INTEREST-INCOME> 87,928<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (147,481)<F1>
<NET-INVESTMENT-INCOME> 154,585<F1>
<REALIZED-GAINS-CURRENT> 1,853,732<F1>
<APPREC-INCREASE-CURRENT> 1,445,861<F1>
<NET-CHANGE-FROM-OPS> 3,454,178<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> (123,623)<F2>
<DISTRIBUTIONS-OF-GAINS> (175,889)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 1,608,366<F2>
<NUMBER-OF-SHARES-REDEEMED> (46,202)<F2>
<SHARES-REINVESTED> 32,680<F2>
<NET-CHANGE-IN-ASSETS> 28,931,710<F1>
<ACCUMULATED-NII-PRIOR> 2,915<F1>
<ACCUMULATED-GAINS-PRIOR> 261,620<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 91,559<F1>
<INTEREST-EXPENSE> 248<F1>
<GROSS-EXPENSE> 277,441<F1>
<AVERAGE-NET-ASSETS> 7,274,822<F2>
<PER-SHARE-NAV-BEGIN> 8.39<F2>
<PER-SHARE-NII> 0.14<F2>
<PER-SHARE-GAIN-APPREC> 2.50<F2>
<PER-SHARE-DIVIDEND> (0.17)<F2>
<PER-SHARE-DISTRIBUTIONS> (0.39)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 10.47<F2>
<EXPENSE-RATIO> 0.96<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Growth and Income Fund as a whole.
<F2>Information given pertains to SunAmerica Growth and Income Fund Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> SUNAMERICA SMALL CO. GROWTH FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 202,185,854<F1>
<INVESTMENTS-AT-VALUE> 259,752,112<F1>
<RECEIVABLES> 12,958,242<F1>
<ASSETS-OTHER> 11,998<F1>
<OTHER-ITEMS-ASSETS> 984<F1>
<TOTAL-ASSETS> 272,723,336<F1>
<PAYABLE-FOR-SECURITIES> 5,519,101<F1>
<SENIOR-LONG-TERM-DEBT> 0<F1>
<OTHER-ITEMS-LIABILITIES> 797,767<F1>
<TOTAL-LIABILITIES> 6,316,868<F1>
<SENIOR-EQUITY> 0<F1>
<PAID-IN-CAPITAL-COMMON> 209,546,080<F1>
<SHARES-COMMON-STOCK> 4,550,952<F2>
<SHARES-COMMON-PRIOR> 2,809,180<F2>
<ACCUMULATED-NII-CURRENT> 0<F1>
<OVERDISTRIBUTION-NII> 0<F1>
<ACCUMULATED-NET-GAINS> (705,870)<F1>
<OVERDISTRIBUTION-GAINS> 0<F1>
<ACCUM-APPREC-OR-DEPREC> 57,566,258<F1>
<NET-ASSETS> 266,406,468<F1>
<DIVIDEND-INCOME> 366,438<F1>
<INTEREST-INCOME> 1,324,606<F1>
<OTHER-INCOME> 0<F1>
<EXPENSES-NET> (3,548,752)<F1>
<NET-INVESTMENT-INCOME> (1,857,708)<F1>
<REALIZED-GAINS-CURRENT> 14,508<F1>
<APPREC-INCREASE-CURRENT> 33,583,299<F1>
<NET-CHANGE-FROM-OPS> 31,740,099<F1>
<EQUALIZATION> 0<F1>
<DISTRIBUTIONS-OF-INCOME> 0<F2>
<DISTRIBUTIONS-OF-GAINS> (12,782,675)<F2>
<DISTRIBUTIONS-OTHER> 0<F2>
<NUMBER-OF-SHARES-SOLD> 6,285,098<F2>
<NUMBER-OF-SHARES-REDEEMED> (5,086,621)<F2>
<SHARES-REINVESTED> 543,295<F2>
<NET-CHANGE-IN-ASSETS> 108,583,364<F1>
<ACCUMULATED-NII-PRIOR> 0<F1>
<ACCUMULATED-GAINS-PRIOR> 28,623,489<F1>
<OVERDISTRIB-NII-PRIOR> 0<F1>
<OVERDIST-NET-GAINS-PRIOR> 0<F1>
<GROSS-ADVISORY-FEES> 1,487,650<F1>
<INTEREST-EXPENSE> 0<F1>
<GROSS-EXPENSE> 3,548,752<F1>
<AVERAGE-NET-ASSETS> 81,512,453<F2>
<PER-SHARE-NAV-BEGIN> 24.32<F2>
<PER-SHARE-NII> (0.29)<F2>
<PER-SHARE-GAIN-APPREC> 4.20<F2>
<PER-SHARE-DIVIDEND> 0<F2>
<PER-SHARE-DISTRIBUTIONS> (4.53)<F2>
<RETURNS-OF-CAPITAL> 0<F2>
<PER-SHARE-NAV-END> 23.70<F2>
<EXPENSE-RATIO> 2.16<F2>
<AVG-DEBT-OUTSTANDING> 0<F2>
<AVG-DEBT-PER-SHARE> 0<F2>
<FN>
<F1>Information given pertains to SunAmerica Small Co. Growth Fund as a whole.
<F2>Information given pertains to SunAmerica Small Co. Growth Fund Class B
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.B(5)(a)
SUNAMERICA EQUITY FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT is dated as of September
23, 1993, and amended as of June 15, 1994, by and between SunAmerica Equity
Funds, a Massachusetts business trust (the "Trust"), and SUNAMERICA ASSET
MANAGEMENT CORP., a Delaware corporation (the "Adviser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company and may
issue shares of beneficial interest, par value $.01 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes (each, a "Fund" and collectively, the
"Funds"); and
WHEREAS, the Adviser is engaged in the business of rendering investment
management, advisory and administrative services and is registered as an
investment adviser under the Investment Advisers Act of 1940; and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
management, advisory and administrative services to the Trust and the Funds and
the Adviser is willing to furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Duties of the Adviser. The Adviser shall manage the affairs of the
---------------------
Funds including, but not limited to, continuously providing the Funds with
investment management, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Funds, making
purchases and sales of securities on behalf of the Funds and determining how
voting and other rights with respect to securities owned by the Funds shall be
exercised, subject in each case to the control of the Board of Trustees of the
Trust (the "Trustees") and in accordance with the objectives, policies and
principles set forth in the Trust's Registration Statement and the Funds'
current Prospectus and Statement of Additional Information, as amended from time
to time, the requirements of the Act and other applicable law. In performing
such duties, the Adviser (i) shall provide such office space, such bookkeeping,
accounting, clerical, secretarial and administrative services (exclusive of, and
in addition to, any such service provided by any others retained by the Funds or
Trust on behalf of the Funds) and such executive and other personnel as shall be
necessary for the operations of the Funds, (ii) shall be responsible for the
financial and accounting records required to be maintained by the Funds
(including those maintained by Trust's custodian) and (iii)
<PAGE>
shall oversee the performance of services provided to the Funds by others,
including the custodian, transfer and shareholder servicing agent. The Trust
understands that the Adviser also acts as the manager of other investment
companies.
Subject to Section 36 of the Act, the Adviser shall not be liable to the
Funds or Trust for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the management of
the Funds and the performance of its duties under this Agreement except for
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement.
2. Retention by Adviser of Sub-Advisers, etc. In carrying out its
-----------------------------------------
responsibilities hereunder, the Adviser may employ, retain or otherwise avail
itself of the services of other persons or entities including, without
limitation, affiliates of the Adviser, on such terms as the Adviser shall
determine to be necessary, desirable or appropriate. Without limiting the
generality of the foregoing, and subject to the requirements of Section 15 of
the Act, the Adviser may retain one or more sub-advisers to manage all or a
portion of the investment portfolio of a Fund, at the Adviser's own cost and
expense. Retention of one or more sub-advisers, or the employment or retention
of other persons or entities to perform services, shall in no way reduce the
responsibilities or obligations of the Adviser under this Agreement and the
Adviser shall be responsible for all acts and omissions of such sub-advisers, or
other persons or entities, in connection with the performance of the Adviser's
duties hereunder.
3. Expenses. The Adviser shall pay all of its expenses arising from the
--------
performance of its obligations under Section 1 and shall pay any salaries, fees
and expenses of the Trust's Trustees and Officers who are employees of the
Adviser. The Adviser shall not be required to pay any other expenses of the
Funds, including, but not limited to, direct charges relating to the purchase
and sale of portfolio securities, interest charges, fees and expenses of
independent attorneys and auditors, taxes and governmental fees, cost of share
certificates and any other expenses (including clerical expenses) of issue,
sale, repurchase or redemption of shares, expenses of registering and qualifying
shares for sale, expenses of printing and distributing reports, notices and
proxy materials to shareholders, expenses of data processing and related
services, shareholder record keeping and shareholder account service, expenses
of printing and filing reports and other documents filed with governmental
agencies, expenses of printing and distributing prospectuses, expenses of annual
and special shareholders meetings, fees and disbursements of transfer agents and
custodians, expenses of disbursing dividends and distributions, fees and
expenses of Trustees who are not employees of the Adviser or its affiliates,
membership dues in the Investment Company Institute, insurance premiums and
extraordinary expenses such as litigation expenses.
4. Compensation of the Adviser. (a) As full compensation for the
---------------------------
services rendered, facilities furnished and expenses paid by the Adviser under
this Agreement, the Trust agrees to pay to the Adviser a fee at the annual rates
set forth in Schedule A hereto with respect to each Fund indicated thereon.
Such fee shall be accrued daily and paid monthly as soon as practicable after
the end of each month (i.e., the applicable annual fee rate divided by 365 is
applied to each prior days'
-2-
<PAGE>
net assets in order to calculate the daily accrual). For purposes of calculating
the Adviser's fee with respect to any Fund, the average daily net asset value of
a Fund shall be determined by taking an average of all determinations of such
net asset value during the month. If the Adviser shall serve for less than the
whole of any month the foregoing compensation shall be prorated.
(b) The Adviser agrees that if total expenses of a Fund for any
fiscal year of the Trust exceed the permissible limits applicable to that Fund
in any state in which shares of that Fund are then qualified for sale, the
compensation due the Adviser for such fiscal year shall be reduced by the amount
of such excess by a reduction or refund thereof at the time such compensation is
payable after the end of each calendar month, subject to readjustment during
such fiscal year. In no event shall the amount of such reduction or refund
exceed the amount of the fee payable to the Adviser with respect to such Fund.
5. Purchase and Sale of Securities; Broker-Dealer Selection. The Adviser
--------------------------------------------------------
is responsible for decisions to buy or sell securities and other investments for
each Fund, broker-dealer and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing portfolio transactions, the Adviser may employ or
deal with such broker-dealers or futures commission merchants as may, in the
Adviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Adviser shall consider
all relevant factors, including price (including the applicable brokerage
commission, dealer spread or futures commission merchant rate), the size of the
order, the nature of the market for the security or other investment, the timing
of the transaction, the reputation, experience and financial stability of the
broker-dealer or futures commission merchant involved, the quality of the
service, the difficulty of execution, and the execution capabilities and
operational facilities of the firm involved, and, in the case of securities, the
firm's risk in positioning a block of securities. Subject to such policies as
the Trustees may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of the Adviser's having caused a Fund to
pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such member of an exchange, broker or dealer viewed in
terms of either that particular transaction or the Adviser's overall
responsibilities with respect to such Fund and to the other clients as to which
the Adviser exercises investment discretion. In accordance with Section 11(a) of
the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other applicable
laws and regulations including Section 17(e) of the Act and Rule 17e-1
thereunder, the Adviser may engage its affiliates, or any sub-adviser to the
Trust and its respective affiliates, as broker-dealers or futures commission
merchants to effect portfolio transactions in securities and other investments
for a Fund.
-3-
<PAGE>
6. Term of Agreement. This agreement shall continue in full force and
-----------------
effect for two years from the date hereof, and shall continue in full force and
effect from year to year thereafter if such continuance is approved in the
manner required by the Act and the Adviser has not notified the Trust in writing
at least 60 days prior to the anniversary date of the previous continuance that
it does not desire such continuance. With respect to each Fund, this Agreement
may be terminated at any time, without payment of penalty by the Fund or the
Trust, on 60 days written notice to the Adviser, by vote of the Trustees, or by
vote of a majority of the outstanding voting securities (as defined by the Act)
of the Fund, voting separately from any other series of the Trust. The
termination of this Agreement with respect to any Fund or the addition of any
Fund to Schedule A hereto (in the manner required by the Act) shall not affect
the continued effectiveness of this Agreement with respect to each other Fund
subject hereto. This Agreement shall automatically terminate in the event of
its assignment (as defined by the Act).
The Trust hereby agrees that if (i) the Adviser ceases to act as investment
manager and adviser to the Trust and (ii) the continued use of the Trust's
present name would create confusion in the context of the Adviser's business,
then the Trust will use its best efforts to change its name in order to delete
the word "SunAmerica" from its name.
7. Liability of the Adviser. In the absence of willful misfeasance, bad
------------------------
faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with the Adviser) the Adviser shall not be subject
to liability to the Trust or to any shareholder of the Trust for any act or
omission in the course of, or connected with, rendering services hereunder,
including without limitation, any error of judgment or mistake of law or for any
loss suffered by any of them in connection with the matters to which this
Agreement relates, except to the extent specified in Section 36(b) of the Act
concerning loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services. Except for such disabling conduct, the
Trust shall indemnify the Adviser (and its officers, directors, partners,
agents, employees, controlling persons, shareholders and any other person or
entity affiliated with the Adviser) (collectively, the "Indemnified Parties")
from any liability arising from the Adviser's conduct under this Agreement.
Indemnification to the Adviser or any of its personnel or affiliates
shall be made when (i) a final decision on the merits rendered, by a court or
other body before whom the proceeding was brought, that the person to be
indemnified was not liable by reason of disabling conduct or, (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum of the Trustees who
are neither "interested persons" of the Trust as defined in section 2(a)(19) of
the Act nor parties to the proceeding ("disinterested, non-party Trustees") or
(b) an independent legal counsel in a written opinion. The Trust may, by vote
of a majority of the disinterested, non-party Trustees advance attorneys' fees
or other expenses incurred by an Indemnified Party in defending a proceeding
upon the undertaking by or on behalf of the Indemnified Party to repay the
advance unless it is ultimately determined that he is entitled to
indemnification.
-4-
<PAGE>
Such advance shall be subject to at least one of the following: (1) the person
to be indemnified shall provide a security for his undertaking, (2) the Trust
shall be insured against losses arising by reason of any lawful advances, or (3)
a majority of a quorum of the disinterested, non-party Trustees or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts, that there is reason to believe that the
person to be indemnified ultimately will be found entitled to indemnification.
8. Non-Exclusivity. Nothing in this Agreement shall limit or restrict
---------------
the right of any director, officer or employee of the Adviser who may also be a
Trustee, officer or employee of the Trust to engage in any other business or
devote his or her time and attention in part to the management or other aspects
of any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Adviser to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
9. Amendments. This Agreement may be amended by mutual consent in
----------
writing, but the consent of the Trust must be obtained in conformity with the
requirements of the Act.
10. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall apply.
11. Personal Liability. The Declaration of Trust establishing the Trust,
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
-5-
<PAGE>
12. Separate Series. Pursuant to the provisions of the Declaration, each
---------------
Fund is a separate series of the Trust, and all debts, liabilities, obligations
and expenses of a particular Fund shall be enforceable only against the assets
of that Fund and not against the assets of any other Fund or of the Trust as a
whole.
IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first above
written.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
-----------------------------------
Name: Peter A. Harbeck
Title: Executive Vice President
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Robert M. Zakem
-----------------------------------
Name: Robert M. Zakem
Title: Senior Vice President and
General Counsel
-6-
<PAGE>
SCHEDULE A
(as amended)
FEE RATE
(as a % of average
FUND daily net asset value)
- ---- ----------------------
SunAmerica Value Fund .75% to $350MM
.70% next $350MM
.65% over $700MM
SunAmerica Growth Fund .75% to $350MM
.70% next $350MM
.65% over $700MM
SunAmerica Emerging Growth Fund .75% to $350MM
.70% next $350MM
.65% over $700MM
SunAmerica Balanced Assets Fund .75% to $350MM
.70% next $350MM
.65% over $700MM
SunAmerica Global Balanced Fund 1.00% to $350MM
.90% next $350MM
.85% over $700MM
SunAmerica Growth and Income Fund .75% to $350MM
.70% next $350MM
.65% over $700MM
June 15, 1994
<PAGE>
EXHIBIT 99.B(5)(b)
SUNAMERICA EQUITY FUNDS
SUB-ADVISORY AGREEMENT
This SUB-ADVISORY AGREEMENT is dated April 22, 1994, as revised February
21, 1996, by and between SunAmerica Asset Management Corp., a Delaware
corporation (the "Adviser"), and AIG Global Investment Corp., a New Jersey
corporation (the "Sub-Adviser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Adviser and SunAmerica Equity Funds, a Massachusetts business
trust (the "Trust"), have entered into an Investment Advisory and Management
Agreement of even date herewith (the Advisory Agreement") pursuant to which the
Adviser has agreed to provide investment management, advisory and administrative
services to the Trust; and
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company and may
issue shares of beneficial interest, par value $.01 per share, in separately
designated series representing separate funds with their own investment
objectives, policies and purposes (each, a "Fund" and collectively, the
"Funds"); and
WHEREAS, the Sub-Adviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment advisory services to the separate investment series of the Trust
listed in Schedule A hereto (the "Funds"), and the Sub-Adviser is willing to
furnish such services;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Duties of the Sub-Adviser. The Adviser hereby engages the services of
-------------------------
the Sub-Adviser in furtherance of the Advisory Agreement. Pursuant to this Sub-
Advisory Agreement and subject to the oversight and review of the Adviser, the
Sub-Adviser will manage the investment and reinvestment of a portion of the
assets of each Fund. The Sub-Adviser will determine in its discretion, subject
to the oversight and review of the Adviser, the securities to be purchased or
sold, will provide the Adviser with records concerning its activities which the
Adviser or the Trust is required to maintain, and will render regular reports
to the Adviser and to officers and the Board of Trustees (the "Trustees") of the
Trust concerning its discharge of the foregoing responsibilities. The Sub-
Adviser shall discharge the foregoing responsibilities subject to the control of
the officers and the Trustees of the Trust and in compliance with such policies
as the Trustees of the Trust may from time to time establish, and in compliance
with (a) the objectives, policies, and limitations for the Funds set forth in
the Funds' current prospectus and statement of additional information, and (b)
applicable laws and regulations. The Sub-Adviser accepts such employment and
agrees, at its own
<PAGE>
expense, to render the services and to provide the office space, furnishings,
equipment and personnel required by it to perform the services on the terms and
for the compensation provided in this Agreement.
2. Portfolio Transactions. The Sub-Adviser is responsible for decisions
----------------------
to buy or sell securities and other investments for a portion of the assets of
each Fund, broker-dealer and futures commission merchants' selection, and
negotiation of brokerage commission and futures commission merchants' rates. As
a general matter, in executing portfolio transactions, the Sub-Adviser may
employ or deal with such broker-dealers or futures commission merchants as may,
in the Sub-Adviser's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In selecting
such broker-dealers or futures commission merchants, the Sub-Adviser shall
consider all relevant factors, including price (including the applicable
brokerage commission, dealer spread or futures commission merchant rate), the
size of the order, the nature of the market for the security or other
investment, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer or futures commission merchant
involved, the quality of the service, the difficulty of execution, and the
execution capabilities and operational facilities of the firm involved, and, in
the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Trustees may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Sub-Adviser's having caused a Fund to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Sub-Adviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member of an
exchange, broker or dealer viewed in terms of either that particular transaction
or the Sub-Adviser's overall responsibilities with respect to such Fund and to
the other clients as to which the Sub-Adviser exercises investment discretion.
In accordance with Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder,
and subject to any other applicable laws and regulations including Section 17(e)
of the Act and Rule 17e-1 thereunder, the Sub-Adviser may engage its affiliates,
the Adviser and its affiliates or any other sub-adviser to the Trust and its
respective affiliates, as broker-dealers or futures commission merchants to
effect portfolio transactions in securities and other investments for a Fund.
The Sub-Adviser will promptly communicate to the Adviser and to the officers and
the Trustees of the Trust such information relating to portfolio transactions as
they may reasonably request.
3. Compensation of the Sub-Adviser. The Sub-Adviser shall not be entitled
-------------------------------
to receive any payment from the Trust and shall look solely and exclusively to
the Adviser for payment of all fees for the services rendered, facilities
furnished and expenses paid by it hereunder. As full compensation for the Sub-
Adviser under this Agreement, the Adviser agrees to pay to the Sub-Adviser a fee
at the annual rates set forth in Schedule A hereto with respect to the assets
managed by the Sub-Adviser for each Fund listed thereon. Such fee shall be
accrued daily and paid monthly as soon as practicable after the end of each
month (i.e., the applicable annual fee rate divided by 365
-2-
<PAGE>
is applied to each prior days' net assets in order to calculate the daily
accrual). For purposes of calculating the Sub-Adviser's fee, the average daily
net asset value of a Fund shall mean the average daily net assets for which the
Sub-Adviser actually provides advisory services, and shall be determined by
taking an average of all determinations of such net asset value during the
month. If the Sub-Adviser shall serve for less than the whole of any month the
foregoing compensation shall be prorated.
4. Other Services. At the request of the Trust or the Adviser, the Sub-
--------------
Adviser in its discretion may make available to the Trust, office facilities,
equipment, personnel and other services. Such office facilities, equipment,
personnel and services shall be provided for or rendered by the Sub-Adviser and
billed to the Trust or the Adviser at the Sub-Adviser's cost.
5. Reports. The Trust, the Adviser, and the Sub-Adviser agree to furnish
-------
to each other, if applicable, current prospectuses and statements of additional
information, proxy statements, reports to shareholders, copies of their
financial statements, and such other information with regard to their affairs as
each may reasonably request.
6. Status of the Sub-Adviser. The services of the Sub-Adviser to the
-------------------------
Adviser and the Trust are not to be deemed exclusive, and the Sub-Adviser shall
be free to render similar services to others so long as its services to the
Trust are not impaired thereby. The Sub-Adviser shall be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
7. Certain Records. Any records required to be maintained and preserved
---------------
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the
Act which are prepared or maintained by the Sub-Adviser on behalf of the Trust
are the property of the Trust and will be surrendered promptly to the Trust or
the Adviser on request.
8. Reference to the Sub-Adviser. Neither the Trust nor the Adviser, or
----------------------------
any affiliate or agent thereof, shall make reference to or use the name of the
Sub-Adviser or any of its affiliates in any advertising or promotional materials
without the prior approval of the Sub-Adviser, which approval shall not be
unreasonably withheld.
9. Liability of the Sub-Adviser. In the absence of willful misfeasance,
----------------------------
bad faith, gross negligence or reckless disregard of obligations or duties
("disabling conduct") hereunder on the part of the Sub-Adviser (and its
officers, directors, agents, employees, controlling persons, shareholders and
any other person or entity affiliated with the Sub-Adviser) the Sub-Adviser
shall not be subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with, rendering
services hereunder, including without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this Agreement relates, except to the extent specified in
Section 36(b) of the Act concerning loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services.
-3-
<PAGE>
Except for such disabling conduct, the Trust shall indemnify the Sub-Adviser
(and its officers, directors, partners, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Sub-Adviser)
(collectively, the "Indemnified Parties") from any liability arising from the
Sub-Adviser's conduct under this Agreement.
Indemnification to the Sub-Adviser or any of its personnel or affiliates
shall be made when (i) a final decision on the merits rendered, by a court or
other body before whom the proceeding was brought, that the person to be
indemnified was not liable by reason of disabling conduct or, (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum of the Trustees who
are neither "interested persons" of the Trust as defined in section 2(a)(19) of
the Act nor parties to the proceeding ("disinterested, non-party Trustees") or
(b) an independent legal counsel in a written opinion. The Trust may, by vote
of a majority of the disinterested, non-party Trustees advance attorneys' fees
or other expenses incurred by an Indemnified Party in defending a proceeding
upon the undertaking by or on behalf of the Indemnified Party to repay the
advance unless it is ultimately determined that he is entitled to
indemnification. Such advance shall be subject to at least one of the
following: (1) the person to be indemnified shall provide a security for his
undertaking, (2) the Trust shall be insured against losses arising by reason of
any lawful advances, or (3) a majority of a quorum of the disinterested, non-
party Trustees or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that there is reason to
believe that the person to be indemnified ultimately will be found entitled to
indemnification.
10. Permissible Interests. Trustees and agents of the Trust are or may be
---------------------
interested in the Sub-Adviser (or any successor thereof) as directors,
partners, officers, or shareholders, or otherwise; directors, partners,
officers, agents, and shareholders of the Sub-Adviser are or may be interested
in the Trust as trustees, or otherwise; and the Sub-Adviser (or any successor)
is or may be interested in the Trust in some manner.
11. Term of Agreement. This agreement shall continue in full force and
-----------------
effect for two years from the date hereof, and shall continue in full force and
effect from year to year thereafter if such continuance is approved in the
manner required by the Act and the Sub-Adviser has not notified the Adviser in
writing at least 60 days prior to the anniversary date of the previous
continuance that it does not desire such continuance. With respect to each
Fund, this Agreement may be terminated at any time, without payment of penalty
by the Fund, by vote of the Trustees, or by vote of a majority of the
outstanding voting securities (as defined in the Act) of the Fund, voting
separately from any other series of the Trust, or by the Trust, the Adviser or
Sub-Adviser, on 60 days' written notice to the other party. The termination of
this Agreement with respect to any Fund or the addition of any Fund to Schedule
A hereto (in the manner required by the Act) shall not affect the continued
effectiveness of this Agreement with respect to each other Fund subject hereto.
This Agreement shall automatically terminate in the event of its assignment (as
defined by the Act).
This Agreement will also terminate in the event that the Advisory Agreement
by and between the Trust and the Adviser dated of even date is terminated.
-4-
<PAGE>
12. Severability. If any provision of this Agreement shall be held or
------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
13. Amendments. This Agreement may be amended by mutual consent in
----------
writing, but the consent of the Trust must be obtained in conformity with the
requirements of the Act.
14. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of New York and the applicable provisions of the Act. To
the extent the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Act, the
latter shall control.
15. Personal Liability. The Declaration of Trust establishing the Trust,
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
16. Separate Series. Pursuant to the provisions of the Declaration, each
---------------
Fund is a separate series of the Trust, and all debts, liabilities, obligations
and expenses of a particular Fund shall be enforceable only against the assets
of that Fund and not against the assets of any other Fund or of the Trust as a
whole.
17. Notices. All notices shall be in writing and deemed properly given
-------
when delivered or mailed by United States Certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
AIG Global Investment Corp.
70 Pine Street
New York, NY 10270
Attn: John H. Blevins
SunAmerica Asset Management Corp.
733 Third Avenue
New York, NY 10017
Attn: Robert M. Zakem, Esq.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the date first above written.
-5-
<PAGE>
SUNAMERICA ASSET MANAGEMENT CORP.
By: /s/ Peter A. Harbeck
----------------------------
Name: Peter A. Harbeck
Title: President
AIG GLOBAL INVESTMENT CORP.
By: /s/ Win J. Neuger
----------------------------
Name: Win J. Neuger
Title: Chief Executive Officer
-6-
<PAGE>
SCHEDULE A
FEE RATE
(as a % of average
FUND daily net asset value)
- ---- ---------------------
SunAmerica Global Balanced Fund .50% on first $50 million
.40% on next $100 million
.30% on next $150 million
.25% thereafter
<PAGE>
EXHIBIT 99.B(6)(a)
SUNAMERICA EQUITY FUNDS
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT is dated as of September 23, 1993 by and
between SunAmerica Equity Funds, a Massachusetts business trust (the "Trust")
and SUNAMERICA CAPITAL SERVICES, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest,
par value $.01 per share (the "Shares"), in separately designated series
representing separate funds with their own investment objectives, policies and
restrictions (the "Funds") and has registered the Shares of the Funds under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement on Form N-1A (the "Registration Statement"), including a
prospectus (the "Prospectus") and a statement of additional information (the
"Statement of Additional Information"); and
WHEREAS, the Trust has adopted a Plan of Distribution pursuant to Rule 12b-
1 under the Investment Company Act on behalf of each Fund (the "Distribution
Plans") and may enter into related agreements providing for the distribution of
the Shares of the Funds; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
WHEREAS, the Trust wishes to engage the services of the Distributor as
distributor of the Shares of the Funds and the Distributor is willing to serve
in that capacity;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. EXCLUSIVE DISTRIBUTOR. The Funds hereby agree that the Distributor
---------------------
shall and for the period of this Agreement be exclusive agent for distribution
within the United States and its territories, and the Distributor agrees to use
its best efforts during such period to effect such distribution of the Shares ;
provided, however, that nothing herein shall prevent a Fund, if it so elects,
from selling or otherwise distributing its Shares directly to any persons other
than dealers. In connection therewith, it is contemplated that the Distributor
will enter into agreements with selected securities dealers. The Funds
understand that the Distributor also acts as agent for distribution of shares of
capital stock or beneficial interest, as the case may be, of other open-end
investment companies which have entered into management and advisory agreements
with the Funds' current investment adviser.
<PAGE>
2. SALE OF THE SHARES. The Distributor is authorized as agent for the
------------------
Funds and not as principal, to sell the Shares to other purchasers on such terms
as may be provided in the then current Prospectus of the Funds; provided,
however, that no sales shall be confirmed by the Distributor at any time when,
according to advice received by the Distributor from a Fund, the officers of
the Trust have for any reason sufficient to them temporarily or permanently
suspended or discontinued the sale and issuance of such Fund's Shares. Each
sale shall be effected by the Distributor only at the applicable price, plus the
applicable sales charge, if any, determined by a Fund in the manner prescribed
in its then current Prospectus. The Distributor shall, insofar as they concern
it, comply with all applicable laws, rules and regulations including, without
limiting the generality of the foregoing, all rules or regulations made or
adopted pursuant to Section 22 of the Act by the Securities and Exchange
Commission or any securities association registered under the Exchange Act .
The Funds agree, as long as the Shares may legally be issued, to fill all
orders confirmed by the Distributor in accordance with the provisions of this
Agreement.
3. EXPENSES; COMPENSATION. The Distributor agrees promptly to pay or
----------------------
reimburse the Funds for all expenses (except expenses incurred by the Funds in
connection with the preparation, printing and distribution of any prospectus or
report or other communication to shareholders, to the extent that such expenses
are incurred to effect compliance with the Federal or state laws or to enable
such distribution to shareholders) (a) of printing and distributing copies of
any prospectus and of preparing, printing and distributing any other material
used by the Distributor in connection with offering the Shares for sale, and
(b) of advertising in connection with such offering. The Funds agree to pay all
expenses in connection with the registration of the Shares under the Securities
Act , all fees and related expenses which may be incurred in connection with the
qualification of the Shares for sale in such states (as well as the District of
Columbia, Puerto Rico and other territories) as the Distributor may designate,
and all expenses in connection with maintaining facilities for the issue and
transfer of the Shares, of supplying information, prices and other data to be
furnished by it hereunder and through its agents of all data processing and
related services related to the share distribution activity contemplated hereby.
As compensation for its services hereunder, the Funds agree to pay to the
Distributor all amounts received as sales charges as described in the Funds'
most current Prospectus. Out of such sales charges, the Distributor may allow
such concessions or reallowances to dealers as it may from time to time
determine.
The Trust agrees to execute such documents and to furnish such information
as may be reasonably necessary, in the discretion of the Board of Trustees
("Trustees") of the Trust, in connection with the qualification of the Shares
for sale in such states (as well as the District of Columbia, Puerto Rico and
other territories) as the Distributor may designate. The Distributor also
agrees to pay all fees and related expenses connected with its own qualification
as a broker or dealer under Federal or state laws and, except as otherwise
specifically provided in this Agreement or agreed to by the Trust, all other
expenses incurred by the Distributor in connection with the sale of the Shares
as contemplated in this Agreement (including the expenses of qualifying the
Trust as a dealer or broker under the laws of such states as may be designated
by the Distributor, if deemed necessary or advisable by the Trust).
2
<PAGE>
4. PROSPECTUS AND OTHER INFORMATION. The Trust represents and warrants to
--------------------------------
and agrees with the Distributor that:
(a) The Registration Statement, including the Prospectus and Statement of
Additional Information, relating to the Shares has been filed under both the Act
and the Securities Act and has become effective.
(b) At all times during the term of this Agreement, except when the
officers of the Trust have suspended or discontinued the sale and issuance of
the Shares of a Fund as contemplated by Section 2 hereof, the Registration
Statement, Prospectus and Statement of Additional Information will conform in
all material respects to the requirements of the Act and the rules and
regulations of the Securities and Exchange Commission, and none of such
documents will include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, except that the foregoing does not apply to
any statements or omissions in any of such documents based upon written
information furnished to the Trust by the Distributor specifically for use
therein.
(c) The Trust agrees to prepare and furnish to the Distributor from time to
time, a copy of the Prospectus, and authorizes the Distributor to use such
Prospectus, in the form furnished to the Distributor from time to time, in
connection with the sale of the Shares. The Trust also agrees to furnish the
Distributor from time to time, for use in connection with the sale of such
Shares, such information (including the Statement of Additional Information)
with respect to the Funds and the Shares as the Distributor may reasonably
request.
5. INDEMNIFICATION.
---------------
(a) The Trust will indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor within the meaning of the Act
against any losses, claims, damages or liabilities to which the Distributor or
such controlling person may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, Prospectus or
Statement of Additional Information or any other written sales material prepared
by the Trust or the Funds which is utilized by the Distributor in connection
with the sale of Shares of the Fund or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or (in the case of the Registration Statement, Prospectus and
Statement of Additional Information) necessary to make the statement therein not
misleading or (in the case of such other sales material) necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made; and will reimburse the Distributor and each such controlling
person for any legal or other expenses reasonably incurred by the Distributor or
such controlling person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Trust or
the Funds will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement, Prospectus or Statement of Additional Information in
conformity with written information furnished to the Trust by the Distributor
specifically for use therein; and provided, further, that nothing herein shall
-------- -------
be so
3
<PAGE>
construed as to protect the Distributor against any liability to the Trust or
the Funds, or the security holders of the Funds to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence, in the performance of its duties, or by reason of the reckless
disregard by the Distributor of its obligations and duties under this Agreement.
This indemnity provision will be in addition to any liability which the Trust
may otherwise have.
(b) The Distributor will indemnify and hold harmless the Trust, each of its
Trustees and officers and each person, if any, who controls the Trust within the
meaning of the Act, against any losses, claims, damages or liabilities to which
the Trust or any such Trustee, officer or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, Prospectus or Statement of Additional Information or any
sales material not prepared by the Trust or the Funds which is utilized in
connection with the sale of the Shares or arise out of or are based upon the
omissions or the alleged omission to state therein a material fact required to
be stated therein or (in the case of the Registration Statement, Prospectus and
Statement) necessary to make the statements therein not misleading or (in the
case of such other sales material) necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, in the
case of the Registration Statement, Prospectus and Statement of Additional
Information to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in conformity
with written information furnished to the Trust by the Distributor specifically
for use therein; and the Distributor will reimburse any legal or other expenses
reasonably incurred by the Trust or any such Trustee, officer or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. This indemnity provision will be in addition to any
liability which the Distributor may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from liability
which it may have to any indemnified party otherwise than under this Section.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
6. TERM OF AGREEMENT. This Agreement shall continue in full force and
-----------------
effect for two years from the date hereof, and shall continue in full force and
effect from year to year thereafter if such continuance is approved in the
manner required by the Act, and the Distributor has not have notified the Trust
in writing at least 60 days prior to the anniversary date of the previous
continuance that it does not desire such continuance. This Agreement may be
terminated at any time, without payment of penalty by the Trust on 60 days'
written notice to the Distributor by vote of the Trustees of the Trust or by
vote of a majority of the outstanding voting
4
<PAGE>
securities of the Trust (as defined by the Act). This Agreement shall
automatically terminate in the event of its assignment (as defined by the Act).
7. MISCELLANEOUS. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the Trust and the Distributor have caused this
Agreement to be executed by their duly authorized officers as of the date above
written.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------------
Peter A. Harbeck
Executive Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By: /s/ Peter A. Harbeck
------------------------------
Peter A. Harbeck
Executive Vice President
5
<PAGE>
EXHIBIT 99.B(6)(b)
[LOGO] SUNAMERICA
CAPITAL SERVICES INC.
________________________________________
Name of Firm
________________________________________
City State Zip Code
RE: DEALER AGREEMENT
Gentlemen:
We are the national distributor and principal underwriter of the shares of
mutual funds sponsored, managed and/or advised by SunAmerica Asset Management
Corp. (hereinafter referred to individually as a "Fund," or collectively as the
"Funds"). The Funds and each individual investment series thereof are set forth
on Schedule A, which may be amended from time to time. We invite you to
participate in making available to your customers shares of the Funds on the
following terms:
1a. NON-BANK PARTICIPANTS ONLY. You represent and warrant that you are a
member of the National Association of Securities Dealers, Inc. (the "NASD").
You agree to abide by the Rules of Fair Practice, the Constitution and By-Laws
of the NASD and to all other rules and regulations that are now or may become
applicable to transactions thereunder.
b. BANK PARTICIPANTS ONLY. You represent and warrant to us that (i)(a)
you are a "Bank" as such term is defined in Section 3(a)(6) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or (b) you are a "bank
holding company" as such term is defined in the Bank Holding Act of 1956, as
amended (the "Act"); (ii) you are duly organized and an existing "bank" or "bank
holding company" in good standing under the laws of jurisdiction in which you
were organized; (iii) all authorization (if any) required for your lawful
execution of this Agreement and your performance hereunder have been obtained;
and (iv) upon execution and delivery by you, and assuming due and valid
execution and delivery by us, this Agreement will constitute a valid and binding
agreement, enforceable against you in accordance with its terms. In the event
you are a "bank holding company" as such term is defined in the Act, you shall
attach as an exhibit, and which will be made a part of this Agreement, which
sets forth the names and addresses of the "banks" on whose behalf you are
authorized to execute this Agreement. You agree to give written notice to us
promptly in the event you shall cease to be a "bank" as such term is defined in
Section 3(a)(6) of the Exchange Act or a "bank holding company" as such term is
defined in the Act. In such event, this Agreement shall be automatically
terminated upon such written notice. You also agree to abide by the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. applicable
to the sale of investment company shares to your customers.
We recognize that you may be subject to the provisions of the Glass-Stegall
Act and other laws governing, among other things, the conduct of activities by
federally chartered and supervised banks and affiliated organizations. Because
you will be the only one having a direct relationship with the customer, you
will comply and are complying with all laws and regulations, including those of
the applicable regulatory authorities and any federal or state regulatory body
having jurisdiction over you or your customers, to the extent applicable to
securities purchases hereunder for the account of your customer.
2a. Orders for shares received from you and accepted by a Fund will be at
its next-determined net asset value, plus the applicable sales charge, if any,
at the time of such acceptance as established pursuant to the then-current
prospectus of the Fund. Procedures relating to the handling of orders, including
the Policies and Procedures With Respect to Sales of SunAmerica Mutual Funds
Under the Multiple Pricing Structure, as may be amended from time to time, set
forth as Schedule B hereto, shall be subject to instructions which we shall
forward from time to time to all firms (the "Participants") through which we
make available shares of the Funds. All orders are subject to acceptance by the
applicable Fund, which reserves the right in its sole discretion to reject any
order in whole or in part. We will confirm transactions for each of your
customers, it being understood in all cases that (a) you are acting as the agent
for the customer; (b) the transactions are without recourse against you by the
customer except to the extent that (i) your failure to transmit orders in a
timely fashion results in a loss to your customer, or (ii) in the event you do
not receive a confirmation of the transaction within ten (10) business days
following the order date, your failure to inquire as to the status of the
transaction during such time period results in a loss to your customer; (c) as
between you and the customer, the customer shall have beneficial ownership of
the Fund shares; (d) each transaction is initiated solely upon the order of the
customer; and (e) each transaction is for the account of the customer and not
for your account.
<PAGE>
b. Checks should be made payable to the specific Fund or to "SunAmerica
Funds" or, for retirement plan accounts for which the Adviser serves as
fiduciary, to "Resources Trust Company." SAFS reserves the right to reject any
check made payable other than in the manner indicated above. Under certain
circumstances, a Fund will accept a multi-party check (e.g., a check made
payable to the shareholder by another party and then endorsed by the shareholder
to the Fund in payment for the purchase of shares); however, the processing of
such a check may be subject to a delay. The Funds do not verify the
authenticity of the endorsement of such multi-party checks, and acceptance of
the check by a Fund should not be considered verification thereof. Neither the
Funds nor their affiliates will be held liable for any losses incurred as a
result of a fraudulent endorsement.
3. As a Participant, you agree to purchase shares of the Funds only
through us or from your customers. Purchases through us shall be made only for
the purpose of covering purchase orders already received from your customers or
for your own bona fide investment.
4. You agree to sell shares of the Funds only (a) to your customers at
the net asset value plus applicable sales charge, if any, then in effect as
established by the then-current prospectus of the applicable Fund or (b) to us
as agent for the Fund or the Fund itself at the redemption price as described in
the prospectus.
5. We reserve the right in our discretion, and without notice to you, to
suspend sales or withdraw the offering of shares entirely, or to modify or
cancel this Agreement. All sales shall
<PAGE>
be subject to the terms and provisions set forth in the Funds' then-current
prospectuses.
6. No person is authorized to make any representations concerning a Fund
or its shares except those contained in its prospectus and any such information
(including any applicable "Statement of Additional Information") as may be
approved by a Fund as information supplemental to its prospectus. In purchasing
shares through us, you shall rely solely on the representations contained in the
then-effective Prospectus and supplemental information above-mentioned. You
agree to hold us harmless and indemnify the Funds and us in the event that you,
or any of your sales representatives, should violate any law, rule or
regulation, or any provisions of this Agreement, which may result in liability
to the Funds or us. Additional copies of any prospectus and/or supplemental
information (including any applicable "Statement of Additional Information")
will be supplied by us to you in reasonable quantities upon request.
7. You shall have no authority whatever to act as agent of the Funds or
us, or any other Participant, and nothing in this Agreement shall constitute you
or the Funds as the agent of the other. In all transactions in these shares
between you and us, we are acting as agent for the Funds and not as principal.
8. All communication to us shall be sent to SunAmerica Capital Services,
Inc., The SunAmerica Center, 733 Third Avenue, New York, New York 10017-3204.
Any notice to you shall be duly given if mailed or telegraphed to you at your
address set forth below, unless you give us written instructions otherwise. It
is your responsibility to provide us with updated information concerning where
written communications should be sent.
9. This Agreement may be terminated without penalty upon written notice
by either party at any time, and shall automatically terminate upon its
assignment, or upon any event that terminates a Fund's Distribution Agreement
with us. This Agreement shall be goverened by and construed in accordance with
the laws of the State of New York. The indemnification provision in Section 6
hereof shall survive any termination of this Agreement hereunder.
10. NON-BANK PARTICIPANTS ONLY. By accepting this Agreement, you
represent that you are (i) registered as a broker-dealer under the Securities
Exchange Act of 1934; (ii) are qualified to act as a dealer in the states or
other jurisdictions where you transact business; and (iii) are a member in good
standing of the NASD. You agree that you will maintain such registration,
qualifications, and membership in full force and effect throughout the terms of
this Agreement. You further agree to comply with all applicable federal laws,
the laws of the states or other jurisdictions concerned, and the rules and
regulations promulgated thereunder, and with the Constitution, By-Laws and Rules
of Fair Practice of the NASD and that you will not offer or sell the shares of
the Funds in any state or jurisdiction where they may not lawfully be offered or
sold, or where you are not registered as a broker-dealer.
11a. SERVICE FEES. We expect you to provide administration and marketing
services in the promotion of the Funds' shares, including services and
assistance to your customers who own Fund shares. For such services, you will be
entitled to compensation as set forth in Schedule A, as may be amended from time
to time, and in the Funds' current prospectuses.
b. CONTINGENT DEFERRED SALES CHARGE ("CDSC"). For purchases of Class B
shares (of for certain purchases of Class A shares), we advance commissions with
the presumption that assets will remain in the Fund(s) long enough for expenses
to be recouped. In the event of a redemption of shares purchased before the
holding period expires, a CDSC is deducted for the redemption proceeds as
described in the Funds' prospectuses.
<PAGE>
c. CDSC Waivers. An exemptive order issued by the Securities and
Exchange Commission provides for a waiver of the CDSC on the following
redemptions: (a) CDSC Shares (Class B shares and certain Class A shares)
requested to be redeemed within one year of the death or initial determination
of disability, as defined in Section 72(m)(7) of the Internal Revenue Code of
1986 (the "Code"), of a shareholder; (b) Class B shares representing taxable
distributions made by qualified retirement plans or retirement accounts (not
including rollovers) for which SunAmerica Asset Management Corp. serves as
fiduciary; provided that, the plan participant or account holder has attained
the age of 59 1/2 at the time the redemption is made; (c) Class B shares being
redeemed up to the limit specified in the Funds' prospectuses made pursuant to
any systematic withdrawal plan established by the Funds. The CDSC waiver, with
respect to (a) above (i.e., death or disability), is only applicable in cases
where the shareholder account is registered (i) in the name of an individual
person, (ii) as a joint tenency with rights of survivorship, (iii) as community
property, or (iv) in the name of a minor under the Uniform Gift or Uniform
Transfer to Minors Acts. Notwithstanding the foregoing, we reserve the right to
terminate any or all of these waiver provisions in the future.
d. Commission Reclaims. With respect to shares redeemed on which
the CDSC is waived pursuant to (b) above (i.e., taxable distributions from the
qualified retirement plans as described therein), 100% of the commission
advanced to the selling Broker/Dealer in respect of such shares is subject to
reclaim in the event the redemption occurs within the first year from the date
of purchase, and 50% of the commission advanced if the redemption occurs in the
second year from the date of purchase. With respect to Class A shares purchased
at net asset value (which were part of a purchase of $1 million or more, and
which were subject to a CDSC if redeemed within one year of purchase), 50% of
the commission advanced is subject to reclaim if the redemption occurs during
the second year from the date of purchase. For all other purchases of Class A
share at net asset value, the entire commission advanced is subject to reclaim
for any redemption occurring within the first two years form the date of
purchase. The foregoing reclamations will be subtracted from future dealer
concession payments payable according to Schedule A and, if sufficient dealer
concession payments are not available to offset these reclamations, you will
reimburse us for these amounts.
12. This Agreement shall become effective upon receipt by us of a signed
copy hereof, and shall continue in effect until and unless terminated (i)
pursuant to Section 9, above, or (ii) on account of your violation of any
representation contained herein. This Agreement shall supersede all prior
Selling Agreements with you relating to the shares of the Funds. This Agreement
may be amended in writing signed by each of the parties hereto, except that we
may amend Schedule A in our sole discretion upon notice to you. Any such
amendment shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
SUNAMERICA CAPITAL SERVICES, INC.
By: ___________________________________
Name: ___________________________________
Date ___________________ Title: ___________________________________
The undersigned accepts your invitation to make available to its customers
shares of the Funds and agrees to abide by the foregoing terms and conditions.
The undersigned acknowledges receipt of prospectuses of the Funds in connection
with this offering.
_________________________________ ________________________________
Firm Name Authorized Signatory
_________________________________ ________________________________
Address Print Name
_________________________________ ________________________________
Title of Signatory
_________________________________ ________________________________
Telephone Number Date
_________________________________
Fax Number
<PAGE>
SCHEDULE A
SUNAMERICA MUTUAL FUNDS
SunAmerica Income Funds
SunAmerica Federal Securities Fund
SunAmerica U.S. Government Securities Fund
SunAmerica High Income Fund
SunAmerica Diversified Income Fund
SunAmerica Tax Exempt Insured Fund
Compensation (concession to selling dealer is based on amount of purchase)
<TABLE>
<CAPTION>
A SHARES
Purchase Amount Dealer Concession
<S> <C> <C> <C>
$0 to $ 99,999 4.00%
$100,000 to $249,999 3.00%
$250,000 to $499,999 2.25%
$500,000 to $999,999 1.35%
$1,000,000 or more 1.00%
Up to .25%
Service
Fee, paid
quarterly,
effective
immediately
</TABLE>
B SHARES - 4.00% (no breakpoints)
Up to .25% Service Fee, paid quarterly, beginning the 13th month following
purchase
SunAmerica Equity Funds
SunAmerica Blue Chip Growth Fund
SunAmerica Mid-Cap Growth Fund
SunAmerica Small Company Growth Fund
SunAmerica Balanced Assets Fund
SunAmerica Global Balanced Fund
SunAmerica Growth and Income Fund
Compensation (concession to selling dealer is based on amount of purchase)
<TABLE>
<CAPTION>
A SHARES
Purchase Amount Dealer Concession
<C> <S> <C> <C>
$ 0 to $ 49,999 5.00%
$ 50,000 to $ 99,999 4.00%
$ 100,000 to $249,999 3.00%
$ 250,000 to $499,999 2.25%
$ 500,000 to $999,999 1.35%
$1,000,000 or more 1.00%
Up to .25% Service Fee and .25% Marketing Allowance, paid
quarterly, effective immediately
</TABLE>
B SHARES - 4.00% (no breakpoints)
Up to .25% Service Fee, paid quarterly, beginning the 13th month following
purchase
SunAmerica Money Market Funds, Inc.
SunAmerica Money Market Fund
A SHARES
A-1
<PAGE>
Up to .15% Service Fee, paid quarterly, effective immediately
B SHARES - 4.00% (no breakpoints)
Up to .15% Service Fee, paid quarterly, beginning the 13th month
following purchase
A-2
<PAGE>
SCHEDULE B
Policies and Procedures with Respect to Sales of SunAmerica
Mutual Funds under the Multiple Pricing Structure
As certain SunAmerica mutual funds (the "Multiple Pricing Funds") offer
shares subject to a front-end sales load ("Class A Shares") and shares subject
to a contingent deferred sales charge ("Class B Shares"), it is important for
investors, not only to choose a mutual fund that best suits their investment
objectives, but also to choose the sales financing method best suits their
particular needs. To assist your clients in these decisions and to ensure
proper supervision of mutual fund purchase recommendations, we are instituting
the following policies:
(1) Any purchase of a SunAmerica Mutual Fund, for less than $100,000, may
be of either Class A Shares or Class B shares.
(2) Any purchase of a SunAmerica Mutual Fund, for either Class A Shares or
Class B Shares, in the amount of $100,000 or more, but less than $1 million,
must be reviewed and approved for appropriateness by the Broker/Dealer (who must
maintain a written record of this review) in light of the relevant facts and
circumstances pertaining to your client, including, but not limited to:
(a) the specific purchase order dollar amount;
(b) the length of time the client expects to hold his or her shares;
and
(c) any other relevant circumstances, such as the availability of
purchases under letters of intent or pursuant to rights of
accumulation.
(3) A purchase of any SunAmerica Mutual Fund for $1 million or more must be
for Class A Shares.
(4) Generally, initial purchases of the SunAmerica Money Market Fund must
be of Class A Shares. Class B Shares of such Fund are only available to those
investors exchanging from Class B shares of another SunAmerica Mutual Fund, or
those investors making an initial purchase who intend to exchange into Class B
shares of another SunAmerica Mutual Fund within 90 days.
B-1
<PAGE>
General Guidelines
There are instances where one financing method may be more advantageous to
an investor than the other. For example, investors who may take advantage of
breakpoints and those qualifying for a discount from the maximum sales load on
Class A Shares, may determine that the purchase of Class A Shares with the
payment of a reduced front-end sales charge is preferable to payment of the
ongoing distribution fee imposed upon Class B Shares for the first seven years.
On the other hand, investors whose orders would not take advantage of
breakpoints to qualify for a discount may wish to defer the sales load and have
all of their funds invested in Class B Shares initially. After a holding period
of seven years, the Class B Shares convert to Class A Shares, and ongoing
charges are thereafter equal.
A National Association of Securities Dealers, Inc. rule specifically
prohibits "breakpoint sales" of front-end load shares. A "breakpoint sale" is a
sale to an investor of an amount of front-end load (Class A) shares just below
the amount which would be subject to the next breakpoint on the fund's sales
charge schedule. Because the deferred sales charge on Class B shares is
gradually reduced to 0% over the six-year period in which the shares are held, a
redemption of Class B shares just before an "anniversary date" is in some ways
analogous to a breakpoint sale. An investor might wish to redeem just before an
anniversary date for tax or other reasons, and an investor who chose to wait
would continue to be at market risk. Nevertheless, you should inform your
clients intending to redeem Class B shares near an anniversary date that, if the
redemption were delayed, the deferred sales charge might be reduced.
Responsibilities of the Broker/Dealer
You must ensure that all employees receiving investor inquiries about the
purchase of shares of Multiple Pricing Funds have advised the investor of the
available financing methods offered by the mutual funds, and the impact of
choosing one method over another. In certain instances, it may be appropriate
to discuss the purchase directly with the investor. The foregoing guidelines,
as well as the examples cited above, should assist you in reviewing purchase
orders less than, equal to, or greater than $100,000.
B-2
<PAGE>
Effectiveness
This policy is effective as of October 1, 1993 with respect to any order
for shares of all Multiple Pricing Funds.
Question relating to this policy should be directed to SunAmerica Capital
Services, Inc., The SunAmerica Center, 733 Third Avenue, New York, NY 10017-
3204.
B-3
<PAGE>
EXHIBIT 99.B(7)
SunAmerica Disinterested Trustees' and Directors'
Retirement Plan
Section 1. Adoption and Purpose. The SunAmerica Fund or the Anchor Series
--------------------
Trust designated on Schedule A, as the case may be (the "Adopting Fund"), has
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement Plan
(the "Plan"). The purpose of this Plan is to provide, in accordance with the
following terms, deferred compensation in the nature of pension benefits for (i)
Trustees of the Adopting Fund, if it is organized as a Massachusetts business
trust, and (ii) Directors of the Adopting Fund, if it is organized as a
corporation, who in either such case are not "interested persons" (as that term
is defined in the Investment Company Act of 1940, as amended). Such
disinterested Trustees or disinterested Directors are referred to herein
collectively as "Trustees."
Section 2. Effective Date. This Plan shall be effective as of January 1,
--------------
1993.
Section 3. Participation. Each Trustee shall become a participant in this
-------------
Plan ("Participant") upon the earlier of (a) attainment of age 55 and completion
of ten consecutive years of service as a Trustee of any of the SunAmerica Funds
or the Anchor Series Trust or (b) attainment of age 60 and completion of five
consecutive years of service as a Trustee of any of the SunAmerica Funds or the
Anchor Series Trust. Notwithstanding the foregoing, a Trustee who was a Trustee
on January 1, 1993, and who at that time, was under age 55, shall become a
Participant in this Plan upon completion of ten consecutive years of service,
without regard to his age at the time of completion of such service. Years of
service shall include service prior to the adoption of this Plan, and service as
a Trustee of any predecessor fund of an Adopting Fund.
Section 4. Eligibility for Benefits. Any Participant shall be eligible for
------------------------
the benefits described in Section 5 of the Plan upon (i) his death or disability
(within the meaning of Subsection 5(c) of the Plan) while a Trustee or (ii) the
termination of his tenure as a Trustee, other than by removal for cause, after
becoming a Participant, as provided in Section 3 of the Plan, and on or before
his 70th birthday. No benefits shall be payable to any Trustee whose service as
a Trustee terminates otherwise than as provided in this Section 4. Failure to
satisfy the requirements of this Section 4 shall result in forfeiture of any
benefits to which a Trustee might otherwise have been entitled under this Plan.
Section 5. Benefits.
--------
(a) Amount. As of each of the first ten birthdays, prior to his 70th
------
birthday, on which he is both a Trustee and a Participant, each Participant
shall be credited with an amount equal to 50% of his regular fees,
excluding separate committee meeting fees, for his services as a Trustee of
the Adopting
<PAGE>
Fund for the calendar year in which such birthday occurs (but in no event
shall such amount be less than 50% of the regular fees, excluding separate
committee meeting fees, in effect for 1993). As of each birthday, prior to
his 70th birthday, on which he is both a Trustee and a Participant, each
Participant shall also be credited with an amount equal to 8.50% of any
amount credited under this Section 5(a) as of any previous birthday.
Following a Participant's satisfaction of the requirements of Section 4 for
eligibility for benefits under the Plan, any amounts previously credited
under this Section 5 that have not been distributed as of any subsequent
birthday of the Participant (or any subsequent corresponding date on which
the Participant's birthday would have occurred if he were alive) shall be
credited as of such subsequent birthday or corresponding date with 8.5% of
such undistributed amounts.
(b) Retirement Benefits. On or before the earlier of (i) the last day of
-------------------
the calendar year immediately preceding the calendar year in which payment
of benefits commences under this Subsection 5(b) or (ii) the date six
months preceding the date on which payment of benefits commences under this
Subsection 5(b), each Participant may elect in writing, in a form and
manner acceptable to the Committee, as defined herein in Section 7, the
form for payment of benefits under the Plan. Any such election may be
revoked and a new election made prior to the earlier of (i) the last day of
the calendar year immediately preceding the calendar year in which payment
of benefits commences under this Subsection 5(b) or (ii) the date six
months preceding the date on which payment of benefits commences under this
Subsection 5(b), but any election in effect as of the earlier of such dates
shall be irrevocable. No Participant may make more than one election in any
calendar year, and all elections shall be subject to approval by the
Committee. A Participant may elect to receive such benefits in the form of
either (i) a lump sum or (ii) quarterly, semi-annual or annual installments
for a period of 5, 10 or 15 years, as the Participant may elect, with
payment of each installment on the quarterly, semiannual or annual
anniversary of the initial payment hereunder. The amount of each
installment shall be a quotient, the numerator of which is the aggregate
amount credited to the Participant under Subsection 5(a) as of the date for
payment under this Subsection 5(b), reduced by the amount of all previous
payments under the Plan, and the denominator of which is the number of
installments remaining. Payment of benefits shall commence as soon as
practicable following the Participant's satisfaction of the requirements of
Section 4 by reason of the termination of his tenure as a Trustee. If no
election is in effect at such time, benefits shall be paid in a lump SUM.
(c) Disability Benefits. If a Participant satisfies the requirements of
-------------------
Section 4 by becoming disabled while a Trustee, all amounts credited to him
under Subsection 5(a) shall be paid to him as soon as practicable in
accordance with
<PAGE>
his election for the form for payment of retirement benefits. If no
election is in effect at such time, benefits shall be paid in a lump sum. A
Participant shall be disabled if the Committee determines, in its sole
discretion, that he is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long-continued and
indefinite duration.
(d) Death Benefits. If a Participant dies after satisfying the
--------------
requirements of Section 4 (or satisfies such requirements by reason of his
death) but before receiving all amounts credited to him under Subsection
5(a), any such remaining amounts shall be paid to the beneficiary
designated in writing by the Participant, which designation shall be in a
form and manner acceptable to the Committee, with payment commencing as
soon as practicable after the Participant's death. Payment to the
Participant's designated beneficiary shall be in a lump sum or installments
for a period of years, in accordance with the Participant's election for
the form for payment of retirement benefits. If no election is in effect at
such time, benefits shall be paid in a lump sum. If the Participant fails
to execute a valid beneficiary designation, any amounts otherwise payable
to a designated beneficiary under this Subsection 5(d) shall be paid in a
lump sum to the Participant's estate as soon as practicable after the
Participant's death. If the Committee is unable to locate the Participant's
beneficiary within two years following the Participant's death, any amounts
otherwise payable to the beneficiary under this Subsection 5(d) shall be
paid in a lump sum to the Participant's estate. Notwithstanding any
provision of this Subsection 5(d) or any beneficiary designation by the
Participant to the contrary, any Participant's surviving spouse whose
interests in marital property are determined under the community property
laws of any state shall receive 50% of amounts otherwise payable under this
Subsection 5(d), and the remainder of such amounts shall be paid in
accordance with this Subsection 5(d).
Section 6. Participants' Rights Unfunded and Unsecured. This Plan shall
-------------------------------------------
not be deemed to create any trust, escrow or other funding arrangement. The
right of any Participant to benefits under this Plan shall be an unsecured claim
against the general assets of the Adopting Fund. If the Adopting Fund is merged
with any other SunAmerica Fund(s), the obligations of the Adopting Fund under
this Plan shall become obligations of the merged fund and shall be aggregated
with any similar pre-merger obligations of the other SunAmerica Fund(s) involved
in the merger under any similar retirement plan. If the Adopting Fund is
liquidated, all amounts credited to a Participant under Section 5(a) as of the
liquidation date shall be paid to him in a lump sum as soon as practicable,
provided that if the Participant has not yet reached age 60, such amounts shall
be discounted to reflect payment prior to age 60, using the interest rates used
by the Pension Benefit Guaranty
<PAGE>
Corporation as of the date of distribution to determine the present value of a
lump sum distribution on termination of a tax-qualified pension plan.
Section 7. Administration. This Plan shall be administered by a committee
--------------
(the "Committee"), the members of which shall be appointed by the Board of
Trustees or Board of Directors of the Adopting Fund. The Committee shall be
responsible for the interpretation of the Plan and establishment of the rules
and regulations governing Plan administration. Any decision or action made or
taken by the Committee, arising out of or in connection with the construction,
administration or interpretation of the Plan or of its rules and regulations,
shall be conclusive and binding upon all Participants. In making any such
decision or taking any such action, the Committee shall have full and complete
discretion and authority to make eligibility determinations, construe provisions
of the Plan and resolve factual issues. All expenses of administering the Plan
shall be paid by the Adopting Fund and shall not affect the Participants, right
to or amount of benefits.
Section 8. Termination of Plan. The Board of Trustees of the Adopting Fund
-------------------
may terminate the Plan at any time. Upon termination of the Plan, benefits
shall continue to be credited and paid in accordance with Section 5 hereof to,
or in respect of, any deceased Participant or any Trustee or former Trustee who
is a Participant as of the date of termination of the Plan. No other payments
shall be made to any person under the Plan after the date of termination of the
Plan.
Section 9. Amendment of Plan. The Board of Trustees or Board of Directors
-----------------
of the Adopting Fund may, without the consent of any Participant, amend the Plan
at any time and from time to time, provided, however, that no amendment shall
divest any Participant of rights to which he would have been entitled under
Section 8 if the Plan had been terminated on the effective date of such
amendment.
Section 10. Rights Non-Assignable. The rights of a Participant to receive
---------------------
payments under Section 5 shall not be assignable, nor shall they be subject to
garnishment, attachment, or any other legal process of creditors of a
Participant. Nothing in the Plan shall create any benefit, right, cause of
action, assignment, transfer or encumbrance in favor of any spouse, heirs or the
estate of any Participant. Notwithstanding the provisions of this Section 10,
each Participant agrees, as a condition of participation, to hold the Adopting
Fund, its officers, Board of Trustees or Board of Directors, employees and
agents harmless from any claim that may arise out of the Adopting Fund's
compliance with an order of any state or Federal court, whether such order
effects a judgment of such court or is issued to enforce a judgment or order of
another court.
Section 11. Withholding of Taxes. The Adopting Fund shall have the right
--------------------
to retain from distributions payable to a
<PAGE>
Participant amounts required by any government to be withheld and paid to such
government with respect to such payments.
Section 12. No Agreement to Retain Trustees. Nothing in this Plan shall
-------------------------------
be construed to provide any Trustee with an agreement or understanding, express
or implied, that the Trustee shall be retained as a Trustee for any specified
period of time or that the Board of Trustees or Board of Directors of the
Adopting Fund shall nominate the Trustee for reelection.
Section 13. Acceptance. The acceptance of payments under this Plan by any
----------
Participant constitutes his acceptance of the terms of the Plan and his
agreement to be bound thereby.
<PAGE>
SUNAMERICA DIRECTORS'/TRUSTEES' RETIREMENT PLAN
ENROLLMENT APPLICATION FORM
1. PERSONAL DATA
Name:_________________________ Date Elected:___________________________________
Address:______________________ Social Securities Number:_____________________
______________________________ Telephone Number:_______________________________
City, State, Zip:_____________ Birthdate:______________________________________
________________________________________________________________________________
2. METHOD OF PAYMENT OF BENEFITS (Please Check One)
(a)___Lump Sum or
(b)___Quarterly, ___Semi-Annual or ___ Annual installments made over a period
of:
___5 years ___10 years ___15 years
Any such election may be revoked and a new election made prior to the
earlier of (i) the last day of the calendar year immediately preceding the
calendar year in which payment of benefits commences under Subsection 5(b)of the
Plan or (ii) the date six months preceding the date on which payment of benefits
commences under Subsection 5(b), but any election in effect as of the earlier of
such dates shall be irrevocable.
You may make only one election per calendar year, and all elections are
subject to approval by the Committee.
________________________________________________________________________________
3. DESIGNATION OF BENEFICIARY
Name: __________________________________________________________________________
Address: _______________________________________________________________________
Telephone:______________________________________________________________________
Social Security Number:_________________________________________________________
If you fail to designate a beneficiary or your beneficiary cannot be
located within two (2) years after your death, any death benefits shall be paid
to your estate in accordance with the provisions of Subsection 5(d) of the Plan.
Notwithstanding any beneficiary designation, if you are subject to the
community property laws of any state, 50% of the amount of the death benefits
shall be payable to your surviving
<PAGE>
spouse under Subsection 5(d) of the Plan.
Any beneficiary named which can be located by reasonable efforts within two
(2) years after your death will receive payments in accordance with your
election for the method of payment of benefits in Part 2 above.
This Form automatically revokes any prior beneficiary designations you have
made.
- ------------------------------------- ---------------------------------------
Participant's Signature Date
- --------------------------------------------------------------------------------
Acknowledgment
--------------
I understand that I shall become a participant in the Retirement Plan in
accordance with the provisions of Section 3 of the Plan.
Signature ________________________ Date___________________________________
<PAGE>
EXHIBIT 99.B(8)
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and SunAmerica Equity Funds (the "Trust").
WHEREAS, the Custodian and the Trust are parties to a custodian contract
dated November 29, 1994 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Trust; and
WHEREAS, the Custodian and the Trust desire to amend the terms and
conditions under which the Custodian maintains the Trust's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Trust hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Trust, with a foreign sub-
custodian in a single account that is identified as belonging to the Custodian
for the benefit of its customers, provided however, that (i) the records of the
-------- -------
Custodian with respect to securities and other non-cash property of the Trust
which are maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to the Trust and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign subcustodian be held separately from any assets of the foreign sub-
custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 20th day of May, 1996.
SUNAMERICA EQUITY FUNDS
By: /s/ Robert M. Zakem
-------------------------------
Robert M. Zakem
Title: Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/
-------------------------------
Title: Vice President
-------------------------------
<PAGE>
CUSTODIAN CONTRACT
between
SUNAMERICA EQUITY FUNDS
and
STATE STREET BANK AND TRUST COMPANY
2lES93
WP2569CR
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It...................................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States...............3
2.1 Holding Securities..............................................3
2.2 Delivery of Securities..........................................3
2.3 Registration of Securities......................................8
2.4 Bank Accounts...................................................9
2.5 Availability of Federal Funds..................................10
2.6 Collection of Income...........................................10
2.7 Payment of Fund Monies.........................................11
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased...........................................14
2.9 Appointment of Agents..........................................14
2.10 Deposit of Fund Assets in Securities System....................14
2.11 Segregated Account.............................................17
2.12 Ownership Certificates for Tax Purposes........................19
2.13 Proxies........................................................19
2.14 Communications Relating to Portfolio
Securities.....................................................19
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States..........................20
3.1 Appointment of Foreign Sub-Custodians..........................20
3.2 Assets to be Held..............................................21
3.3 Foreign Securities Depositories................................21
3.4 Agreements with Foreign Banking Institutions...................22
3.5 Access of Independent Accountants of the Fund..................22
3.6 Reports by Custodian...........................................23
3.7 Transactions in Foreign Custody Account........................23
3.8 Liability of Foreign Sub-Custodians............................24
3.9 Liability of Custodian.........................................25
3.10 Reimbursement for Advances.....................................26
3.11 Monitoring Responsibilities....................................26
3.12 Branches of U.S. Banks.........................................27
3.13 Tax Law........................................................27
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund...............................................28
5. Proper Instructions.................................................29
6. Actions Permitted Without Express Authority.........................30
7. Evidence of Authority...............................................30
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income...................31
<PAGE>
9. Records.............................................................32
10. Opinion of Fund's Independent Accountants...........................32
11. Reports to Fund by Independent Public Accountants...................33
12. Compensation of Custodian...........................................33
13. Responsibility of Custodian.........................................33
14. Effective Period, Termination and Amendment.........................35
15. Successor Custodian.................................................36
16. Interpretive and Additional Provisions..............................38
17. Additional Funds....................................................38
18. Massachusetts Law to Apply..........................................38
19. Prior Contracts.....................................................39
20. Shareholder Communications Election.................................39
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between SunAmerica Equity Funds, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at 733 Third Avenue, New York, New York 10017-3204 hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and WHEREAS, the Fund intends to initially offer
shares in six series, SunAmerica Blue Chip Growth Fund, SunAmerica Mid-Cap
Growth Fund, SunAmerica Small Company Growth Fund, SunAmerica Balanced Assets
Fund, SunAmerica Global Balanced Fund and SunAmerica Growth and Income Fund
(such series together with all other series subsequently established by the
Fund and made subject to this Contract in accordance with paragraph 17, being
herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets
of the Portfolios of the Fund, including securities
<PAGE>
which the Fund, on behalf of the applicable Portfolio desires to be held in
places within the United States ("domestic securities") and securities it
desires to be held outside the United States ("foreign securities) pursuant to
the provisions of the Declaration of Trust. The Fund on behalf of the
Portfolio(s) agrees to deliver to the Custodian all securities and cash of the
Portfolios, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios, ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian. The Custodian may employ as sub-custodian for
the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated
2
<PAGE>
in Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
- ----------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
------------------
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as
"Securities System".
2.2 Delivery of Securities. The Custodian shall release and deliver
----------------------
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
3
<PAGE>
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub custodian appointed
pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities
--------
are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for
4
<PAGE>
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, but only
--- ----
5
<PAGE>
against receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge
of assets by the Fund on behalf of the Portfolio, but only
--- ----
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered
6
<PAGE>
national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the
Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection
with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time
to time in the currently effective prospectus and statement
of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by
holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
--- ----
receipt of, in addition to Proper
7
<PAGE>
Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee signed by an officer
of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
--------------------------
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
------
in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any agent
appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms
of this Contract shall be in "street name" or other good delivery
form. If, however,
8
<PAGE>
the Fund directs the Custodian to maintain securities in "street
name", the Custodian shall utilize its best efforts only to timely
collect income due the Fund on such securities and to notify the Fund
on a best efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange
offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
-------------
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained
by the Portfolio in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds held
by the Custodian for a Portfolio may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem
necessary or desirable; provided, however, that every such bank or
--------
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of
9
<PAGE>
Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
-----------------------------
on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
--------------------
Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder
to which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held
10
<PAGE>
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Portfolio
is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
----------------------
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of
11
<PAGE>
the Custodian referred to in section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case
of repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another bank,
or a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Portfolio or (d) for transfer to a
time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the
Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
12
<PAGE>
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect
of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
--- ----
addition to Proper Instructions from the Fund on behalf of
the Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee of the Fund signed
by an officer of the Fund and certified by its Secretary or
an Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such payment is
to be made, declaring such
13
<PAGE>
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
-------------------------------------------------------------------
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received
by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
---------------------
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any
-------- -------
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
--------------------------------------------
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities
14
<PAGE>
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of
the Portfolio which are maintained in a Securities System
shall identify by book-entry those securities belonging to
the Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the
15
<PAGE>
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i)
receipt of advice from the Securities System that payment
for such securities has been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian
to reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities System
of transfers of securities for the account of the Portfolio
shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at
its request. Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form
of a written advice or notice and shall furnish to the Fund
on behalf of the Portfolio copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
16
<PAGE>
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or
from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or
any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Portfolio has not been made whole for any such loss
or damage.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
------------------
Instructions from the Fund on behalf of each
17
<PAGE>
applicable Portfolio establish and maintain a segregated account or
accounts for and on behalf of each such Portfolio, into which account
or accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and
a broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio, (ii) for purposes of segregating
cash or government securities in connection with options purchased,
sold or written by the Portfolio or commodity futures contracts or
options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required
by Investment Company Act Release No. 10666, or any subsequent release
or releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only, in the case of
--- ----
clause (iv), upon
18
<PAGE>
receipt of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer
of the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
---------------------------------------
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
-------
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Portfolio such proxies, all
proxy soliciting materials and all notices relating to such
securities.
2.14 Communications Relating to Portfolio Securities
-----------------------------------------------
Subject to the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund for each Portfolio all written information
(including, without limitation,
19
<PAGE>
pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
Outside of the United States
- ----------------------------
3.1 Appointment of Foreign Sub-Custodians
-------------------------------------
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other assets
maintained outside the United States the foreign banking institutions
and foreign securities depositories designated on Schedule A hereto
("foreign sub custodians"). Upon receipt of "Proper Instructions", as
defined in Section 5 of this Contract, together with a certified
resolution of the Fund's Board of Trustees, the
20
<PAGE>
Custodian and the Fund may agree to amend Schedule A hereto from time
to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt
of Proper Instructions, the Fund may instruct the Custodian to cease
the employment of any one or more such sub-custodians for maintaining
custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
-----------------
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(l) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign
securities transactions. The Custodian shall identify on its books as
belonging to the Fund, the foreign securities of the Fund held by each
foreign sub custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed
-------------------------------
upon in writing by the Custodian and the Fund, assets of the
Portfolios shall be maintained in foreign securities depositories only
through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof. Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.4 hereof.
21
<PAGE>
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
--------------------------------------------
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the assets as
belonging to each applicable Portfolio; (d) officers of or auditors
employed by, or other representatives of the Custodian, including to
the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and
records of the foreign banking institution relating to its actions
under its agreement with the Custodian; and (e) assets of the
Portfolios held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
---------------------------------------------
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub
22
<PAGE>
custodian insofar as such books and records relate to the performance
of such foreign banking institution under its agreement with the
Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
--------------------
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign sub-
custodians, including but not limited to an identification of entities
having possession of the Portfolio(s) securities and other assets and
advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking institution for
the Custodian on behalf of each applicable Portfolio indicating, as to
securities acquired for a Portfolio the identity of the entity having
physical possession of such securities.
3.7 Transactions in Foreign Custody Account
---------------------------------------
(a) Except as otherwise provided in paragraph (b) of this Section 3.7,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside
------- --------
the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance
with the customary established securities trading or securities
processing
23
<PAGE>
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign subcustodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of
record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
-----------------------------------
the Custodian employs a foreign banking institution as a foreign sub-
custodian shall require the institution to exercise reasonable care in
the performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss (including reasonable
attorneys fees and court cost), damage, cost, expense, liability or
claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall
be entitled to be subrogated to the rights of the Custodian with
respect to any claims against a foreign banking institution as a
consequence of any such loss (including reasonable attorneys fees and
court cost), damage, cost, expense,
24
<PAGE>
liability or claim (if and to the extent that the Fund has not been
made whole for any such 108s, damage, cost, expense, liability or
claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
----------------------
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the
Custodian shall not be liable for any 1088, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 3.9, in
delegating custody duties to State Street London Ltd., the Custodian
shall not be relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result from (a)
unforeseen political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or
other losses under circumstances beyond the control of the Custodian
and State Street.
25
<PAGE>
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
--------------------------
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios assets to the extent
necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is
26
<PAGE>
notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below S200 million (U.S. dollars or the equivalent thereof) or that
its shareholders equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
3.12 Branches of U.S. Banks (a) Except as otherwise set forth in this
----------------------
contract, the provisions hereof shall not apply where the custody of
the Portfolios' assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a sub
custodian shall be governed by paragraph 1 of this Contract. (b) Cash
held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject to
the direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law The Custodian shall have no responsibility or liability for
-------
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States of
America or any state or political
27
<PAGE>
subdivision thereof. It shall be the responsibility of the Fund to
notify the Custodian of the obligations imposed on the Fund or the
Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or
from the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that Portfolio
issued or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
28
<PAGE>
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialled by two or more persons as the Board of Trustees shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices
29
<PAGE>
provided that the Board of Trustees and the Custodian are satisfied that such
procedures afford adequate safeguards for the Portfolios' assets. For purposes
of this Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which requires a segregated
asset account in accordance with Section 2.11.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from
the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund on behalf of
- --------
the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise directed
by the Board of Trustees of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may
30
<PAGE>
receive and accept a certified copy of a vote of the Board of Trustees of the
Fund as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
- ---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to such Portfolio.
31
<PAGE>
9. Records
-------
The Custodian shall with respect to each Portfolio create and
maintain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to Section 31 thereof
and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of
the Fund and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinion from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form NlA, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
32
<PAGE>
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the
33
<PAGE>
terms of a three-party futures or options agreement. The Custodian shall be held
to the exercise of reasonable care in carrying out the provisions of this
Contract, but shall be kept indemnified by and shall be without liability to the
Fund for any action taken or omitted by it in good faith without negligence. It
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
If the Fund on behalf of a Portfolio requires the Custodian to take
any action with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable for
the payment of money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise
34
<PAGE>
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent necessary
to obtain reimbursement.
14. Effective Period. Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; Provided,
--------
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such Portfolio and
the receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by such Portfolio of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended; provided further, however, that the Fund shall
-------- -------
not amend or terminate this Contract in contravention of any applicable federal
or state regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or
35
<PAGE>
more of the Portfolios may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System. If no such successor custodian shall
be appointed, the Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees of the Fund, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such vote.
36
<PAGE>
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than S25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
37
<PAGE>
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
--------
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of Trust of the
Fund. No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares
in addition to SunAmerica Blue Chip Growth Fund, SunAmerica Mid-Cap Growth
Fund, SunAmerica Small Company Growth Fund, SunAmerica Balanced Assets Fund,
SunAmerica Global Balanced Fund and SunAmerica Growth and Income Fund with
respect to which it desires to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such series of Shares
shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
38
<PAGE>
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
20. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which
hold securities for the account of customers to respond to requests by issuers
of securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
39
<PAGE>
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ X ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 29th day of November, 1994.
ATTEST SUNAMERICA EQUITY FUNDS
/s/ Robert M. Zakem By: /s/Peter A. Harbeck
- ---------------------------- -------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By:
- ---------------------------- -------------------------------
Executive Vice President
40
<PAGE>
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of SunAmerica Equity
Funds for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Fund's Authorized Officer
Date:
<PAGE>
EXHIBIT 99.B(9)(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
SUNAMERICA EQUITY FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Article 1 Terms of Appointment; Duties of the Bank.... 2
Article 2 Fees and Expenses........................... 6
Article 3 Representations and Warranties of the Bank.. 6
Article 4 Representations and Warranties of the Fund.. 6
Article 5 Data Access and Proprietary Information..... 7
Article 6 Indemnification.............................10
Article 7 Standard of Care............................12
Article 8 Covenants of the Fund and the Bank..........12
Article 9 Termination of Agreement....................14
Article 10 Additional Funds............................14
Article 11 Assignment..................................14
Article 12 Amendment...................................15
Article 13 Massachusetts Law to Apply..................15
Article 14 Force Majeure...............................15
Article 15 Consequential Damages.......................16
Article 16 Merger of Agreement.........................16
Article 17 Limitations of Liability of the Trustees
and the Shareholders........................16
Article 18 Counterparts................................16
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the 29th day of November, 1994, by and between SUNAMERICA
EQUITY FUNDS, a Massachusetts business trust, having its principal office and
place of business at 733 Third Avenue, New York, New York 10017-3204 (the
"Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company
having its principal office and place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in six series, SunAmerica
Blue Chip Growth Fund, SunAmerica Mid-Cap Growth Fund, SunAmerica Small Company
Growth Fund, SunAmerica Balanced Assets Fund, SunAmerica Global Balanced Fund
and SunAmerica Growth and Income Fund (each such series, together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Article 10, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as
its transfer agent, dividend disbursing agent, custodian of certain retirement
plans and agent in connection with certain other activities, and the Bank
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
<PAGE>
Article 1 Terms of Appointment: Duties of the Bank
----------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund, on behalf of the Portfolios, hereby employs and appoints the Bank to
act as, and the Bank agrees to act as its transfer agent for the authorized and
issued shares of beneficial interest of the Fund representing interests in each
of the respective Portfolios ("Shares"), dividend disbursing agent, custodian of
certain retirement plans and agent in connection with any accumulation, open-
account or similar plans provided to the shareholders of each of the respective
Portfolios of the Fund ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as applicable
and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof to
the Custodian of the Fund authorized pursuant to the Declaration of
Trust of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
2
<PAGE>
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof to
the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii) above,
the Bank shall execute transactions directly with broker-dealers
authorized by the Fund who shall thereby be deemed to be acting on
behalf of the Fund;
(v) At the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and protecting the Bank
and the Fund, and the Bank at its option, may issue replacement
certificates in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
3
<PAGE>
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(x) Record the issuance of Shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of Shares which
are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the services
set forth in the above paragraph (a), the Bank shall: (i) perform the customary
services of a transfer agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with accumulation, open-
account or similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to: maintaining
all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
mailing Shareholder reports and prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and other
4
<PAGE>
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing those
transactions and assets to be treated as exempt from blue sky reporting for each
State and (ii) verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The responsibility of the Bank for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and the reporting of such transactions to the
Fund as provided above.
(d) Procedures as to who shall provide certain of these services in Article
1 may be established from time to time by agreement between the Fund on behalf
of each Portfolio and the Bank per the attached service responsibility schedule.
The Bank may at times perform only a portion of these services and the Fund or
its agent may perform these services on the Fund's behalf.
5
<PAGE>
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing between the
Fund and the Bank.
Article 2 Fees and Expenses
-----------------
2.01 The Custodian shall be entitled to reasonable compensation
(including out of pocket expenses) for its services and expenses as Custodian,
as agreed upon from time to time between the Fund on behalf of each applicable
Portfolio and the Custodian.
Article 3 Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
6
<PAGE>
4.02 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust
and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of the Fund being
offered for sale.
Article 5 Data Access and Proprietary Information
---------------------------------------
5.01 The Fund acknowledges that the data bases, computer programs,
screen format, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank on
data bases under the control and ownership of the Bank or other third party
("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of substantial
value to the Bank or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all Proprietary
7
<PAGE>
Information as proprietary to the Bank and further agrees that it shall not
divulge any Proprietary Information to any person or organization except as may
be provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated in
writing by the Bank and solely in accordance with the Bank's applicable
user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained, to
inform in a timely manner of such fact and dispose of such information in
accordance with the Bank's instructions;
(d) to refrain from causing or allowing third-party data required hereunder
from being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized transactions
agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect at
the Bank's expense the rights of the Bank in Proprietary Information at
8
<PAGE>
common law, under federal copyright law and under other federal or state
law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article shall
survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access Services do
not operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner to
correct such failure. Organizations from which the Bank may obtain certain data
included in the Data Access Services are solely responsible for the contents of
such data and the Fund agrees to make no claim against the Bank arising out of
the contents of such third-party data, including, but not limited to, the
accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS
AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash of Shares or (ii) transmit Shareholder information
or other information (such transactions constituting a "COEFI"), then in such
event the Bank shall be entitled to rely on the validity and authenticity of
such instruction without undertaking any further inquiry as long as such
9
<PAGE>
instruction is undertaken in conformity with security procedures established by
the Bank from time to time.
Article 6 Indemnification
---------------
6.01 The Bank shall not be responsible for, and the Fund shall on behalf of
the applicable Portfolio indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.
(b) The negligent or willful breach of any representation or warranty of the
Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by the Bank
or its agents or subcontractors, and (ii) have been prepared, maintained or
performed by the Fund or any other person or firm on behalf of the Fund
including but not limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf of the
applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other
10
<PAGE>
determination or ruling by any federal agency or any state with respect to the
offer or sale of such Shares in such state.
6.02 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund on behalf of the applicable Portfolio for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank, its
agents and subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a co-
transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in this Article 6
shall apply, upon the assertion of a
11
<PAGE>
claim for which the Fund may be required to indemnify the Bank, the Bank shall
promptly notify the Fund of such assertion, and shall keep the Fund advised with
respect to all developments concerning such claim. The Fund shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank shall in
no case confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Bank except with the Fund's prior written
consent.
Article 7 Standard of Care
----------------
7.01 The Bank shall at all times act in good faith and agrees to use its best
efforts to insure the accuracy of all services performed under this Agreement,
but assumes no responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith, or willful
misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
----------------------------------
8.01 The Fund shall on behalf of each of the Portfolios promptly furnish to
the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Fund authorizing
the appointment of the Bank and the execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
8.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile
12
<PAGE>
signature imprinting devices, if any; and for the preparation or use, and for
keeping account of, such certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.04 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person, except
as may be required by law.
8.05 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection. The
Bank reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
13
<PAGE>
Article 9 Termination of Agreement
------------------------
9.01 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund on behalf of the applicable Portfolio(s). Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated with
such termination and/or a charge equivalent to the average of three (3) months'
fees.
Article 10 Additional Funds
----------------
10.01 In the event that the Fund establishes one or more series of Shares in
addition to SunAmerica Blue Chip Growth Fund, SunAmerica Mid-Cap Growth Fund,
SunAmerica Small Company Growth Fund, SunAmerica Balanced Assets Fund,
SunAmerica Global Balanced Fund and SunAmerica Growth and Income Fund with
respect to which it desires to have the Bank render services as transfer agent
under the terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
Article 11 Assignment
----------
11.01 Except as provided in Section 11.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
14
<PAGE>
11.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
11.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
Article 12 Amendment
---------
12.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Trustees of the Fund.
Article 13 Massachusetts Law to Apply
----------------------------
13.01 This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
Article 14 Force Majeure
-------------
14.01 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
beyond its control, such party shall not be liable for damages to the other for
any
15
<PAGE>
damages resulting from such failure to perform or otherwise from such causes.
Article 15 Consequential Damages
---------------------
15.01 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
Article 16 Merger of Agreement
-------------------
16.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 17 Limitations of Liability of the Trustees and Shareholders
---------------------------------------------------------
17.01 A copy of the Declaration of Trust of the Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or Shareholders individually but are
binding only upon the assets and property of the Fund.
Article 18 Counterparts
------------
18.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SUNAMERICA EQUITY FUNDS
BY /s/
-----------------------------------
ATTEST:
/s/
- -----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY /s/
-----------------------------------
Executive Vice President
ATTEST:
/s/
- -----------------------------------
17
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
----------------- --------------
Bank Fund/Agent
---- ----------
1. Receives orders for the purchase
of Shares. X X
2. Issue Shares and hold Shares in
Shareholders accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above
directly with broker-dealers. X
5. Pay over monies to redeeming
Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends
and distributions. X X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and
accurate control book for each
issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current
Shareholders. X
15. Withhold taxes on U.S. resident
and non-resident alien accounts. X
16. Prepare and file U.S. Treasury
Department forms. X
17. Prepare and mail account and
confirmation statements for
Shareholders. X
18
<PAGE>
Service Performed Responsibility
----------------- --------------
Bank Fund/Agent
---- ----------
18. Provide Shareholder account
information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a), (b) and (c)
of the Agreement.
SUNAMERICA EQUITY FUNDS
BY /s/
-----------------------------------
ATTEST:
/s/
- -----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY /s/
-----------------------------------
Executive Vice President
ATTEST:
/s/
- -----------------------------------
19
<PAGE>
EXHIBIT 99.B(9)(b)
AMENDMENT TO SERVICE AGREEMENT
Amendment to the Agreement made by and between SunAmerica Equity Funds (the
"Trust") and SunAmerica Fund Services, Inc. ("Fund Services").
WHEREAS, the Trust and Fund Services are parties to a Service
Agreement dated September 23, 1993 governing the terms and conditions under
which Fund Services provides certain shareholder servicing activities; and
WHEREAS, the Board of Trustees of the Trust has established and
designated a new class of shares, Class Z shares, of each series of the
Trust; and
WHEREAS, the Trust and Fund Services desire to amend the terms
governing the payment for such services rendered by Fund Services;
NOW, THEREFORE, the parties agree to amend the Service Agreement as
follows:
1. Paragraph 9A. shall include the following additional term:
"No portion of such fees shall be paid or reimbursed by the Class
Z shares of the Trust's series. Class Z shares shall pay all direct
transfer agency fees and out-of-pocket expenses."
2. Except as specifically modified herein, the terms and provisions of
the Service Agreement shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 21 day of August, 1996.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
President
SUNAMERICA FUND SERVICES, INC.
By: /s/ Robert M. Zakem
-------------------------
Robert M. Zakem
Vice President
<PAGE>
SUNAMERICA EQUITY FUNDS
SERVICE AGREEMENT
This AGREEMENT made as of this 23 day of September, 1993 by and between
SunAmerica Equity Funds, a Massachusetts business trust having its principal
place of business at 733 Third Avenue, New York, New York 10017 (hereinafter
called the "Trust") and SunAmerica Fund Services, Inc., a Delaware corporation,
having its principal place of business at 733 Third Avenue, New York, New York
10017 (hereinafter called "Fund Services").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust desires to appoint Fund Services as its agent in
connection with certain shareholder servicing activities, and Fund Services
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Terms of Appointment; Duties of Fund Services
---------------------------------------------
A. Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints Fund Services to act, and Fund Services agrees
to act, as servicing agent to assist State Street Bank and Trust Company and its
affiliates, the Trust's transfer agent (the "Transfer Agent") for the authorized
and issued shares of beneficial interest, $.01 par value of the Trust (the
"Shares"), in connection with certain services offered to the shareholders of
the Trust (the "Shareholders") as set out in the current prospectus of the
Trust, as may be amended from time to time, as on file with the Securities and
Exchange Commission.
B. Fund Services agrees that it will perform the following services:
(a) In accordance with procedures established from time to time between the
Trust, the Transfer Agent and Fund Services, Fund Services shall:
(i) receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor
to the custodian of the Trust authorized pursuant to the
Declaration of Trust of the Trust (the "Custodian"):
(ii) pursuant to purchase orders, assist the Transfer Agent to issue
the appropriate number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) receive for acceptance, redemption requests and redemption
directions and deliver the appropriate documentation therefor to
the Custodian;
(iv) at the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or
cause to be paid
<PAGE>
over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) assist the Transfer Agent to effect transfers of Shares by the
registered owners thereof upon receipt of appropriate
documentation;
(vi) assist the Transfer Agent to prepare and transmit payments for
dividends and distributions declared by the Trust; and
(vii) assist the Transfer Agent to maintain records of account for the
Trust and its Shareholders as to the foregoing.
2. Services with Respect to the Registration of Shares.
----------------------------------------------------
On each day on which an issuance or redemption of Shares occurs, Fund
Services shall assist the Transfer Agent to prepare for the Trust account
records opening, crediting, debiting and closing affected Shareholders' accounts
as necessary to reflect the issuances or redemptions occurring on that day. All
credits to Shareholders' accounts shall be for the price of the Shares at the
time of purchase, determined in accordance with the Trust's current prospectus.
3. Share Price for Purchase and Redemption
---------------------------------------
A. Fund Services shall assist the Transfer Agent to identify all share
transactions which involve purchase and redemption orders that are processed at
a time other than the time of the computation of net asset value per share next
computed after receipt of such orders, and shall compute the net effect upon the
Trust of such transactions so identified on a daily and cumulative basis.
B. Fund Services shall supply to the Trust monthly reports summarizing the
transactions identified pursuant to paragraph A. above, and the daily and
cumulative net effects of such transactions, and shall advise the Trust at the
end of each month of the net cumulative effect at such time.
4. Books and Records
-----------------
Fund Services shall prepare for the Trust and assist the Transfer Agent in
maintaining records showing for each Shareholder's account the following:
A. The name, address and tax identification number of such Shareholder;
B. The number of Shares held by such Shareholder;
C. Historical information including dividends paid and date and price for
all transactions;
D. Any stop or restraining order placed against such account;
E. Information with respect to the withholding of any portion of income
dividends or capital gains distributions;
2
<PAGE>
F. Any dividend or distribution reinvestment election, withdrawal plan
application, and correspondence relating to the current maintenance of
the account;
G. The certificate numbers and denominations of any share certificates
issued to such Shareholder; and
H. Any additional information required by Fund Services to perform the
services contemplated by this Agreement.
Any such records required to be maintained by the Trust pursuant to Rule
31a-1 under the Investment Company Act of 1940, as amended (the "Act") or any
successor rule shall be preserved by the Transfer Agent or Fund Services for the
periods prescribed by Rule 31a-2 under the Act or any successor rule. Such
record retention shall be at the expense of the Trust. Fund Services may, at its
option at any time, turn over to the Trust and cease to retain records created
and maintained by Fund Services pursuant to this Agreement which are no longer
required by Fund Services to perform the services contemplated by this
Agreement. If not turned over to the Trust, such records shall be preserved by
Fund Services for six years from the year of creation, during the first two of
which years such records shall be in readily accessible form. At the conclusion
of such six-year period, such records shall either be turned over to the Trust
or destroyed in accordance with the Trust's authorization.
5. Information To Be Furnished To The Trust
----------------------------------------
Fund Services shall assist the Transfer Agent to furnish to the Trust
periodically as agreed upon between the Trust, Fund Services and the Transfer
Agent the following information:
A. Copies of the daily transaction register for each business day of the
Trust;
B. Copies of all dividend, distribution and reinvestment blotters;
C. Schedules of the quantities of Shares distributed in each state for
purposes of any state's laws or regulations as specified in
instructions given to Fund Services from time to time by the Trust or
its agents;
D. Reports on transactions described in Paragraph 3 of this Agreement.
E. Such other information, including Shareholder lists, and statistical
information as may be requested by the Trust from time to time.
6. Confirmations and Statements of Account
---------------------------------------
Fund Services shall assist the Transfer Agent to prepare and mail to each
Shareholder at his address as set forth on the transfer books of the Trust such
confirmations of the Trust for each purchase or sale of Shares by each
Shareholder and periodic statements of such Shareholder's account with the Trust
as may be specified from time to time by the Trust.
3
<PAGE>
7. Correspondence
--------------
Fund Services shall respond to correspondence from Shareholders relating to
their accounts with the Trust and such other correspondence as may from time to
time be mutually agreed upon by the Trust, the Transfer Agent and Fund Services.
8. Proxies
-------
Fund Services shall assist the Transfer Agent to mail to Shareholders
notices of meetings, proxy statements, forms of proxy and other material
supplied to it by the Trust in connection with Shareholder meetings of the Trust
and shall receive, examine and tabulate returned proxies and certify such
tabulations to the Trust in such written form as the Trust may require.
9. Fees And Charges
----------------
A. For the services rendered by Fund Services as described above, subject
to the conditions described below, the Trust shall pay to Fund Services a fee
calculated and payable monthly based upon the annual rate of .22% of average
daily net assets. Fund Services shall also be reimbursed for the cost of forms
used by it in communicating with Shareholders of the Trust or specially prepared
for use in connection with its services hereunder, as well as the cost of
postage, telephone and telegraph (or similar electronic media) used in
communicating with Shareholders of the Trust. It is agreed in this regard that
Fund Services, prior to ordering any form shall obtain the written consent of
the Trust. All forms for which Fund Services has received reimbursement from the
Trust shall be the property of the Trust. Such fees and out-of-pocket expenses
and advances described herein may be changed from time to time subject to mutual
written agreement between the Trust and Fund Services.
B. No fee shall be payable to Fund Services pursuant to this Agreement in
the event that the Board of Trustees of the Trust (the "Trustees") determines
that Fund Services did not provide the services required by this Agreement or
provided services which were inadequate as determined by the Trustees, in its
sole discretion.
10. Compliance With Government Rules And Regulations
------------------------------------------------
The Trust understands and agrees that it shall be solely responsible for
ensuring that each prospectus of the Trust complies with all applicable
provisions of, or regulations adopted pursuant to, the Securities Act of 1933,
as amended (the "Securities Act"), the Act, and any other laws, rules and
regulations of Federal, state or foreign governmental authorities having
jurisdiction in connection with the offering or sale of Shares.
11. Representations and Warranties of Fund Services
-----------------------------------------------
Fund Services represents and warrants to the Trust that:
A. It is a corporation duly organized and existing and in good standing
under the laws of the State of Delaware.
4
<PAGE>
B. It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
C. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
D. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
12. Representations and Warranties of the Trust
-------------------------------------------
The Trust represents and warrants to Fund Services that:
A. It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
B. It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
C. All proceedings required by said Declaration of Trust and By-Laws have
been taken to authorize it to enter into and perform this Agreement.
D. It is an investment company registered under the Act.
E. A registration statement under the Securities Act is currently effective
and will remain effective, and appropriate state securities law filings have
been made and will continue to be made, with respect to all Shares of the Trust
being offered for sale; information to the contrary will result in immediate
notification to Fund Services.
13. Indemnification
---------------
A. Fund Services shall not be responsible for, and the Trust shall
indemnify and hold Fund Services harmless from and against, any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of Fund Services or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence or
willful misconduct which arise out of the breach of any representation or
warranty of the Trust hereunder.
(c) The reliance on or use by Fund Services or its agents or
subcontractors of information, records and documents which (i) are received by
Fund Services or its agents
5
<PAGE>
or subcontractors and furnished to it by or on behalf of the Trust, and (ii)
have been prepared or maintained by the Trust.
(d) The reliance on, or the carrying out by Fund Services or its
agents or subcontractors of any instructions or requests of the Trust
representative.
(e) The offer or sale of Shares in violation of any requirement under
the Federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any Federal agency or any state
with respect to the offer or sale of such Shares in such state.
B. Fund Services shall indemnify and hold the Trust harmless from Fund
Services refusal or failure to comply with the terms of this Agreement, or which
arise out of Fund Services lack of good faith, negligence or willful misconduct
or which arise out of the breach of any representation or warranty of Fund
Services or its agents or subcontractors hereunder.
C. At any time Fund Services may apply to any officer of the Trust for
instructions, and may consult with outside legal counsel with respect to any
matter arising in connection with the services to be performed by Fund Services
under this Agreement, and Fund Services and its agents or subcontractors shall
not be liable and shall be indemnified by the Trust for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of such
counsel. Fund Services, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Trust, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided Fund Services or its agents or subcontractors by telephone,
in person, machine readable input, telex, CRT data entry or other similar means
authorized by the Trust, and shall not be held to have notice of any change of
authority of any person, until receipt of written notice thereof from the Trust.
Fund Services, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the appropriate officer or
officers of the Trust, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
D. In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
E. Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
F. In order that the indemnification provisions contained in this
Paragraph 13 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification
6
<PAGE>
in the defense of such claim. The party seeking indemnification shall in no case
confess any claim or make any compromise in any case in which the other party
may be required to indemnify it except with the other party's prior written
consent.
14. Further Actions
---------------
Each party agrees to perform such further acts and execute and deliver such
further documents as are necessary to effectuate the purposes hereof.
15. Amendment, Termination and Delegation of Obligations
----------------------------------------------------
Upon its approval by the Trustees and appropriate execution, this Agreement
shall remain in effect for two years and thereafter automatically for successive
one-year periods, provided that such continuance is specifically approved at
least annually by a vote of a majority of the Trustees and by a majority of the
members who are not parties to this Agreement or interested persons, as defined
in the Act, of any such party. The Trustees shall approve and renew this
Agreement upon determining that the fees provided by Paragraph 9 of this
Agreement are fair and reasonable in light of the usual and customary charges
made by others for services of the same nature and quality. This Agreement may
be modified or amended from time to time by written agreement between the
parties hereto. This Agreement may be terminated at any time by one hundred
twenty (120) days' written notice given by one party to the other. Upon
termination hereof, the Trust shall pay to Fund Services such compensation as
may be due as of the date of such termination, and shall likewise reimburse Fund
Services in accordance herewith for its costs, expenses and disbursements.
16. Assignment
----------
A. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party.
B. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
17. New York Law to Apply
---------------------
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: SUNAMERICA EQUITY FUNDS
/s/ Robert M. Zakem By: /s/ Peter A. Harbeck
- ---------------------- ------------------------
Peter A. Harbeck,
Executive Vice President
ATTEST: SUNAMERICA FUND SERVICES, INC.
/s/ Robert M. Zakem By: /s/ Peter A. Harbeck
- ----------------------- ---------------------------
Peter A. Harbeck, President
8
<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. 19 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 15, 1996, relating to the financial statements and financial highlights
of SunAmerica Equity Funds, which appears in such Statement of Additional
Information. We also consent to the reference to us under the heading
"Additional Information - Independent Accountants and Legal Counsel" in such
Statement of Additional Information and to the references to us under the
heading "Financial highlights" and "General Information - Independent
Accountants and Legal Counsel" in the Prospectus which constitutes part of this
Registration Statement.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, New York
January 21, 1997
<PAGE>
EXHIBIT 99.B(15)
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 20 day of May, 1994, by SunAmerica
Equity Funds, a Massachusetts business trust (the "Trust"), on behalf of the
Class A shares of its separately designated series, SunAmerica Global Balanced
Fund (the "Fund").
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class A shares.
Such expenditures
<PAGE>
may consist of sales commissions to financial consultants for selling Class A
shares, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Class A shares of
the Fund and the costs of preparing and distributing promotional materials with
respect to such Class A shares. Payment of the distribution fee described in
this Section 1 shall be subject to any limitations set forth in applicable
regulations of the National Association of Securities Dealers, Inc. Nothing
herein shall prohibit the Distributor from collecting distribution fees in any
given year, as provided hereunder, in excess of expenditures made in such year
for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class A
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting
-2-
<PAGE>
called for the purpose of voting on such approval, of a majority of both the (i)
the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
-3-
<PAGE>
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class A shares of the Fund shall be enforceable only against the assets of
Class A shares of the Fund and not against the assets of any other fund or class
of shares or of the Trust as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 20 day of May, 1994, by SunAmerica
Equity Funds, a Massachusetts business trust (the "Trust"), on behalf of the
Class B shares of its separately designated series, SunAmerica Global Balanced
Fund (the "Fund").
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class B shares.
Such expenditures
<PAGE>
may consist of sales commissions to financial consultants for selling Class B
shares, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Class B shares of
the Fund and the costs of preparing and distributing promotional materials with
respect to such Class B shares. Payment of the distribution fee described in
this Section 1 shall be subject to any limitations set forth in applicable
regulations of the National Association of Securities Dealers, Inc. Nothing
herein shall prohibit the Distributor from collecting distribution fees in any
given year, as provided hereunder, in excess of expenditures made in such year
for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class B
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting
-2-
<PAGE>
called for the purpose of voting on such approval, of a majority of both the (i)
the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
-3-
<PAGE>
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class B shares of the Fund shall be enforceable only against the assets of
Class B shares of the Fund and not against the assets of any other fund or class
of shares or of the Trust as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 20 day of May, 1994, by SunAmerica
Equity Funds, a Massachusetts business trust (the "Trust"), on behalf of the
Class A shares of its separately designated series, SunAmerica Growth & Income
Fund (the "Fund").
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class A shares.
Such expenditures
<PAGE>
may consist of sales commissions to financial consultants for selling Class A
shares, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Class A shares of
the Fund and the costs of preparing and distributing promotional materials with
respect to such Class A shares. Payment of the distribution fee described in
this Section 1 shall be subject to any limitations set forth in applicable
regulations of the National Association of Securities Dealers, Inc. Nothing
herein shall prohibit the Distributor from collecting distribution fees in any
given year, as provided hereunder, in excess of expenditures made in such year
for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class A
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting
-2-
<PAGE>
called for the purpose of voting on such approval, of a majority of both the (i)
the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
-3-
<PAGE>
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class A shares of the Fund shall be enforceable only against the assets of
Class A shares of the Fund and not against the assets of any other fund or class
of shares or of the Trust as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 20 day of May, 1994, by SunAmerica
Equity Funds, a Massachusetts business trust (the "Trust"), on behalf of the
Class B shares of its separately designated series, SunAmerica Growth & Income
Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class B shares.
Such expenditures
<PAGE>
may consist of sales commissions to financial consultants for selling Class B
shares, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Class B shares of
the Fund and the costs of preparing and distributing promotional materials with
respect to such Class B shares. Payment of the distribution fee described in
this Section 1 shall be subject to any limitations set forth in applicable
regulations of the National Association of Securities Dealers, Inc. Nothing
herein shall prohibit the Distributor from collecting distribution fees in any
given year, as provided hereunder, in excess of expenditures made in such year
for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class B
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting
-2-
<PAGE>
called for the purpose of voting on such approval, of a majority of both the (i)
the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
-3-
<PAGE>
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class B shares of the Fund shall be enforceable only against the assets of
Class B shares of the Fund and not against the assets of any other fund or class
of shares or of the Trust as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class A shares of its separately designated series, SunAmerica Value Fund
(the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class A shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class A shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
A shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class A shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class A
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class A shares of the
<PAGE>
Fund shall be enforceable only against the assets of Class A shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class B shares of its separately designated series, SunAmerica Value Fund
(the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class B shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class B shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
B shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class B shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund .
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class B
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class B shares of the Fund shall be enforceable only against the assets of
Class B shares of the
-3-
<PAGE>
Fund and not against the assets of any other fund or class of shares or of the
Trust as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class A shares of its separately designated series, SunAmerica Growth
Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class A shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class A shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
A shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class A shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class A
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class A shares of the
-3-
<PAGE>
Fund shall be enforceable only against the assets of Class A shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class B shares of its separately designated series, SunAmerica Growth
Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class B shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class B shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
B shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class B shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class B
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class B shares of the
-3-
<PAGE>
Fund shall be enforceable only against the assets of Class B shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class A shares of its separately designated series, SunAmerica Emerging
Growth Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class A shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class A shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
A shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class A shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributior from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class A
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class A shares of the
-3-
<PAGE>
Fund shall be enforceable only against the assets of Class A shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class B shares of its separately designated series, SunAmerica Emerging
Growth Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class B shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class B shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
B shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class B shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class B
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class B shares of the
-3-
<PAGE>
Fund shall be enforceable only against the assets of Class B shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class A shares of its separately designated series, SunAmerica Balanced
Assets Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class A shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class A
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.10% of average daily net assets attributable to Class A shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class A shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class A shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
A shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class A shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class A shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class A
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class A shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class A shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class A shares of the
-3-
<PAGE>
Fund shall be enforceable only against the assets of Class A shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the 23 day of September, 1993, by
SunAmerica Equity Funds, a Massachusetts business trust (the "Trust"), on behalf
of the Class B shares of its separately designated series, SunAmerica Balanced
Assets Fund (the "Fund").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company; and
WHEREAS, the Fund is a separately designated investment series of the Trust
with its own investment objective, policies and purposes offering two separate
classes of shares of beneficial interest, par value $.01 per share, of the Trust
(the "Shares"); and
WHEREAS, the Trust has entered into a Distribution Agreement with
SunAmerica Capital Services, Inc. (the "Distributor"), pursuant to which the
Distributor acts as the exclusive distributor and representative of the Trust in
the offer and sale of the Shares to the public; and
WHEREAS, the Trust desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to the
Distributor with respect to Class B shares of the Fund; and
WHEREAS, the Board of Trustees of the Trust (the "Trustees") as a whole,
and the Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "12b-1 Trustees"), having determined, in the
exercise of reasonable business judgment and in light of their fiduciary duties
under state law and under Sections 36(a) and (b) of the Act, that there is a
reasonable likelihood that this Plan will benefit the Fund and its Class B
shareholders, have approved this Plan by votes cast in person at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
NOW THEREFORE, the Trust on behalf of the Fund hereby adopts this Plan on
the following terms:
1. Distribution Activities. The Fund shall pay the Distributor a
-----------------------
distribution fee under the Plan at the end of each month at the annual rate of
0.75% of average daily net assets attributable to Class B shares of the Fund to
compensate the Distributor and certain securities firms ("Securities Firms") for
providing sales and promotional activities and services. Such activities and
services will relate to the sale, promotion and marketing of the Class B shares.
Such expenditures may consist of sales commissions to financial consultants for
selling
<PAGE>
Class B shares, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Class
B shares of the Fund and the costs of preparing and distributing promotional
materials with respect to such Class B shares. Payment of the distribution fee
described in this Section 1 shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
Nothing herein shall prohibit the Distributor from collecting distribution fees
in any given year, as provided hereunder, in excess of expenditures made in such
year for sales and promotional activities with respect to the Fund.
2. Account Maintenance Activities. The Fund shall pay the Distributor an
------------------------------
account maintenance fee under the Plan at the end of each month at the annual
rate of up to 0.25% of average daily net assets attributable to Class B shares
of the Fund to compensate the Distributor and Securities Firms for account
maintenance activities.
3. Payments to Other Parties. The Fund hereby authorizes the Distributor
-------------------------
to enter into agreements with Securities Firms to provide compensation to such
Securities Firms for activities and services of the type referred to in Sections
1 and 2 hereof. The Distributor may reallocate all or a portion of its account
maintenance fee or distribution fee to such Securities Firms as compensation for
the above-mentioned activities and services. Such agreements shall provide that
the Securities Firms shall deliver to the Distributor such information as is
reasonably necessary to permit the Distributor to comply with the reporting
requirements set forth in Section 5 hereof.
4. Related Agreements. All agreements with any person relating to
------------------
implementation of this Plan shall be in writing, and any agreement related to
this Plan shall provide:
(a) that such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Trustees or, by vote of a
majority of the outstanding voting securities (as defined in the Act) of Class B
shares of the Fund, on not more than 60 days' written notice to any other party
to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
5. Quarterly Reports. The Treasurer of the Trust shall provide to the
-----------------
Trustees and the Trustees shall review, at least quarterly, a written report of
the amounts expended pursuant to this Plan with respect to Class B shares of the
Fund and any related agreement and the purposes for which such expenditures were
made.
6. Term and Termination. (a) This Plan shall become effective as of the
--------------------
date hereof, and, unless terminated as herein provided, shall continue from year
to year thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person
-2-
<PAGE>
at a meeting called for the purpose of voting on such approval, of a majority of
both the (i) the Trustees of the Trust, and (ii) the 12b-1 Trustees.
(b) This Plan may be terminated at any time by vote of a majority of the
12b-1 Trustees or by vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund.
7. Amendments. This Plan may not be amended to increase materially the
----------
maximum expenditures permitted by Sections 1 and 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities (as
defined in the Act) of Class B shares of the Fund, and no material amendment to
this Plan shall be made unless approved in the manner provided for the annual
renewal of this Plan in Section 6(a) hereof.
8. Selection and Nomination of Trustees. While this Plan is in effect,
------------------------------------
the selection and nomination of those Trustees of the Trust who are not
interested persons of the Trust shall be committed to the discretion of such
disinterested Trustees.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
-------------
related agreement and all reports made pursuant to Section 5 hereof for a period
of not less than six years from the date of this Plan, any such related
agreement or such reports, as the case may be, the first two years in an easily
accessible place.
10. Definition of Certain Terms. For purposes of this Plan, the terms
---------------------------
"assignment," "interested person," "majority of the outstanding voting
securities," and "principal underwriter" shall have their respective meanings
defined in the Act and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted to either the Trust or the principal
underwriter of the Shares by the Securities and Exchange Commission, or its
staff under the Act.
11. Personal Liability. The Declaration of Trust establishing the Trust
------------------
dated June 18, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "SunAmerica Equity Funds" 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 the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the "Trust Property" only shall be
liable.
12. Separate Series. Pursuant to the provisions of the Declaration, the
---------------
Fund is a separate series of the Trust, and all debts, liabilities and expenses
of Class B shares of the
-3-
<PAGE>
Fund shall be enforceable only against the assets of Class B shares of the Fund
and not against the assets of any other fund or class of shares or of the Trust
as a whole.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed as of the
day and year first written above.
SUNAMERICA EQUITY FUNDS
By: /s/ Peter A. Harbeck
------------------------
Peter A. Harbeck
Executive Vice President
-4-
<PAGE>
EXHIBIT 99.B(18)
SUNAMERICA EQUITY FUNDS
PLAN PURSUANT TO RULE 18F-3
SunAmerica Equity Funds (the "Trust") hereby adopts this plan pursuant to
Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940
Act"), setting forth the separate arrangement and expense allocation of each
class of shares. Any material amendment to this plan is subject to prior
approval of the Board of Trustees, including a majority of the disinterested
Trustees.
CLASS CHARACTERISTICS
CLASS A SHARES: Class A shares are subject to an initial sales charge, and a
- -------------- distribution fee pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1 fee") payable at the annual rate of 0.10% of the
average daily net assets of the class, and an account
maintenance fee under the Rule 12b-1 Plan payable at the
annual rate of up to 0.25% of the average daily net assets of
the class. The initial sales charge is waived or reduced for
certain eligible investors.
CLASS B SHARES: Class B shares are not subject to an initial sales charge but
- -------------- are subject to a contingent deferred sales charge which will
be imposed on certain redemptions, a Rule 12b-1 fee payable
at the annual rate of up to 0.75% of the average daily net
assets of the class, and an account maintenance fee under the
Rule 12b-1 Plan payable at the annual rate of up to 0.25% of
the average daily net assets of the class. The contingent
deferred sales charge is waived for certain eligible
investors. Class B shares automatically convert to Class A
shares on the first business day of the month following the
seventh anniversary of the issuance of such Class B shares.
CLASS C SHARES: Class C shares are not subject to an initial sales charge but
- -------------- are subject to a contingent deferred sales charge which will
be imposed on certain redemptions, a Rule 12b-1 fee payable
at the annual rate of up to 0.75% of the average annual net
assets of the class, and an account maintenance fee under the
Rule 12b-1 Plan payable at the annual rate of up to 0.25% of
the average daily net assets of the class.
CLASS Z SHARES: Class Z shares are not subject to either an initial or
- -------------- contingent deferred sales charge nor are they subject to any
Rule 12b-1 fee.
<PAGE>
INCOME AND EXPENSE ALLOCATIONS
Income, any realized and unrealized capital gains and losses, and expenses
not allocated to a particular class, will be allocated to each class on the
basis of the total value of each class of shares in relation to the total
value of each class of shares of each series of the Trust (each a "Fund"
and collectively, the "Funds").
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by each Fund to each class of
shares, to the extent paid, will be paid on the same day and at the same
time, and will be determined in the same manner and will be in the same
amount, except that the amount of the dividends and other distributions
declared and paid by a particular class may be different from that paid by
another class because of Rule 12b-1 fees and other expenses borne
exclusively by that class.
EXCHANGE PRIVILEGE
Each class of shares is generally exchangeable for the same class of shares
(or the class of shares with similar characteristics), if any, of the other
SunAmerica Mutual Funds (subject to certain minimum investment
requirements) at the relative net asset value per share.
CONVERSION FEATURES
Class B shares 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. Conversions will be effected at the relative net
asset values of Class B and Class A shares, without the imposition of any
sales load, fee or charge. Class C and Class Z shares will have no
conversion rights.
GENERAL
A. Each class of shares shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and shall
have separate voting rights on any matter submitted to shareholders in
which the interests of one class differ from the interests of any other
class.
B. On an ongoing basis, the Trustees, pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the Trust
for the existence of any material conflicts among the interests of its
several classes. The Trustees, including a majority of the disinterested
Trustees, shall take such action as is reasonably necessary to eliminate
any such conflicts that
-2-
<PAGE>
may develop. SunAmerica Asset Management Corp., the Trust's investment
manager and adviser, will be responsible for reporting any potential or
existing conflicts to the Trustees.
C. For purposes of expressing an opinion on the financial statements of the
Trust, the methodology and procedures for calculating the net asset value
and dividends/distributions of the Trust's several classes and the proper
allocation of income and expenses among such classes will be examined
annually by the Trust's independent auditors who, in performing such
examination, shall consider the factors set forth in the relevant auditing
standards adopted, from time to time, by the American Institute of
Certified Public Accountants and Financial Accounting Standards Board.
Dated: August 21, 1996
-3-
