<PAGE>
As filed with the Securities and Exchange Commission on November 26, 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. 20 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 19 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 on (date) pursuant to paragraph
-- to paragraph (b) of Rule 485 -- (b) of Rule 485
60 days after filing pursuant to X on January 28, 1998 pursuant
-- paragraph (a) of Rule 485 -- to paragraph (a) of Rule 485
____________________
________________________________________________________________________________
<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
<CAPTION>
PART B Caption in Statement
Item No. Registration Statement Caption of Additional Information
- ------- ------------------------------ -------------------------
<S> <C> <C>
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, Distributor and Administrator;
Services 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, 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 five 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"). 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 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 Small Company
Growth Fund and the Growth and Income Fund also offer Class C 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 and Class C
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. Class C shares may be subject to a CDSC imposed on redemptions made
within one year of purchase. 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 28, 1998, 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 28, 1998
<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
Blue Chip Growth Fund.............. 7
Mid-Cap Growth Fund................ 8
Small Company Growth Fund.......... 8
Growth and Income Fund............. 8
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Investment Techniques
and Risk Factors................... 9
Management of the Trust............ 14
Purchase of Shares................. 16
Redemption of Shares............... 20
Exchange Privilege................. 21
Portfolio Transactions,
Brokerage and Turnover............. 22
Determination of Net As-
set Value.......................... 22
Performance Data................... 22
Dividends, Distributions
and Taxes.......................... 23
General Information................ 24
</TABLE>
SUMMARY OF FUND EXPENSES
A general comparison of the sales arrangements and other non-recurring
expenses applicable to Class A, Class B and Class C shares follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND
ASSETS 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 C A B C
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<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 None 5.75% None 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% 4.00% None 4.00% 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% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.43% 0.43% 0.43%
12b-1 Fees(/5/)........ 0.35% 1.00% 0.35% 1.00% 0.35% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other Expenses......... 0.42% 0.37% 0.47% 0.48% 0.52% 0.57% 0.43% 0.41% 0.41% 0.50% 0.50% 0.50%
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Operating
Expenses(/6/).......... 1.52% 2.12% 1.57% 2.23% 1.62% 2.32% 1.53% 2.16% 2.16% 1.28% 1.93% 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. The CDSC on Class C shares applies only on redemptions made
within one year of purchase.
(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 or Class C 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
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
(Class C shares).............................. $62 $ 98 $136 $226
GROWTH AND INCOME FUND
(Class A shares).............................. $70 $ 96 $124 $203
(Class B shares)*............................. $60 $ 91 $124 $201
(Class C 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
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
(Class C 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
(Class C 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)
- ------------------------------------------------------------------------------------------------------------------------
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)/
- --------------------------------------------------------------------------------
<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)/
- ------------------------------------------------------------------------------------------------------------------------
<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)
- ------------------------------------------------------------------------------------------------------------------------
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)/
- ------------------------------------------------------------------------------------------------------------------------
<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)/
- --------------------------------------------------------------------------
<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)
- ------------------------------------------------------------------------------------------------------------------------
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)/
- --------------------------------------------------------------------------
<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/(1)(0)/ 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)/
- --------------------------------------------------------------------------
<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/(1)(0)/ 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)
- ------------------------------------------------------------------------------------------------------------------------
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)/
- --------------------------------------------------------------------------
<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 derived 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)/
- --------------------------------------------------------------------------
<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)
- -------------------------------------------------------------------------------------------------------------------
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)/
- --------------------------------------------------------------------------
<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)/
- --------------------------------------------------------------------------
<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)
- -------------------------------------------------------------------------------------------------------------------
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)/
- --------------------------------------------------------------------------
<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 Fund is
classified as diversified within the meaning of the 1940 Act.
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.
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 Ex-
7
<PAGE>
change ("NYSE"), American Stock Exchange ("AMEX") or on other national ex-
changes or on foreign exchanges. 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 secu-
rity to security. In pursuing its investment objective, the Fund may, under
normal circumstances, invest up to 35% of its total assets in debt securities
that have the potential for capital appreciation. The Fund may invest in secu-
rities rated as low as "BBB" or "Baa." See "Fixed Income Securities" in "In-
vestment Techniques and Risk Factors" below for a discussion of the risks as-
sociated with investing in such securities.
MID-CAP GROWTH FUND
The Mid-Cap Growth Fund will invest, under normal circumstances, at least
65% of its total assets in the equity securities of medium-sized companies
("Mid-Cap Companies") with market capitalizations of $1 billion to $5 billion,
and which have conducted operations for at least five years. The Fund may also
invest in equity securities that are issued by small companies which are be-
lieved by the Adviser to have significant growth potential. A significant por-
tion of the Fund's equity investments are in securities listed on the NYSE or
other national securities exchanges or on foreign exchanges. The Fund will
also invest in unlisted securities, but these will generally be securities
that have an established over-the-counter market, although the depth and li-
quidity of that market may vary from time to time and from security to securi-
ty. In pursuing its investment objective, the Fund may, under normal circum-
stances, 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 Factors" below for a discussion of the risks associated with invest-
ing 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
8
<PAGE>
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 sta-
tistical rating organization or in unrated securities which, in the Adviser's
judgment, possess similar credit characteristics ("high yield bonds"). The Ad-
viser 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 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 sharehold-
ers, 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 agree-
ments 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 secu-
rities which the Board of Trustees, or the Adviser pursuant to guidelines es-
tablished 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 (the "Securities Act"), 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 re-
striction. 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 limita-
tion on illiquid securities investments, a Fund may acquire securities issued
by the U.S. government, its agencies or instrumentalities in a private place-
ment. 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 secu-
rity 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 appropri-
ate sub-custodian in the case of tri- or quad-party repurchase agreements)
equal to at least 102% (100% if such collateral is in cash) of the repurchase
price, plus accrued interest. A Fund will only enter into repurchase agree-
ments involving securities in which it could otherwise invest and with se-
lected banks and securities dealers whose financial condition is monitored by
the 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 dis-
position costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization of the col-
lateral 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
9
<PAGE>
temporary defensive purposes, each Fund may invest up to 100% of its total as-
sets in fixed-income securities, including corporate debt obligations and
money market instruments rated in one of the two highest categories by a na-
tionally recognized statistical rating organization (or determined by the Ad-
viser to be of equivalent quality). Money market instruments include securi-
ties issued or guaranteed by the U.S. government, its agencies or instrumen-
talities, repurchase agreements, commercial paper, bankers' acceptances and
certificates of deposit. See the Appendix to the Statement of Additional In-
formation 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. Trea-
sury (such as Government National Mortgage Association ("GNMA") certificates
and Federal Housing Administration debentures). For these securities, the pay-
ment of principal and interest is unconditionally guaranteed by the U.S. gov-
ernment. 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 instrumen-
talities 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 Trea-
sury 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 Corpo-
ration ("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 may invest
in mortgage-backed securities, including those representing an undivided own-
ership interest in a pool of mortgages, e.g., GNMA, FNMA and FHLMC Certifi-
cates. The U.S. government or the issuing agency guarantees the payment of in-
terest and principal of these securities. However, the guarantees do not ex-
tend 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 in-
terest 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 obli-
gations 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 secu-
rities backed by fixed-rate mortgages and determined to be liquid under guide-
lines 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
10
<PAGE>
payments than is the case with higher grade bonds. As a consequence 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 securities
whose ratings fall below investment grade, each occurrence is examined by the
Adviser to determine the appropriate course of action.
In addition, the Growth and Income 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 se-
curities so that adverse economic events may have a greater impact on the
prices of high yield bonds than on higher rated fixed income securities. 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 vari-
ous 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 re-
duced, 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.
ZERO COUPON BONDS, DEFERRED INTEREST BONDS AND PIK BONDS. Fixed income secu-
rities in which the 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 obliga-
tions 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 in-
vestments 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 disadvanta-
geous 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 capital-
izations of under $1 billion. It may be difficult to obtain reliable informa-
tion 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 estab-
lished 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 de-
velopment and therefore have limited product lines, market access for such
products, financial resources and depth in management than larger, more estab-
lished companies, and their securities may be subject to more abrupt or er-
ratic 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 in-
vestment. Smaller companies also may be less significant factors within their
industries and may have difficulty withstanding competition from larger compa-
nies. While smaller companies may be subject to these additional risks, they
may also realize more substantial growth than larger, more established compa-
nies.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Each Fund may purchase or
sell securities on a when-issued or delayed-delivery basis. When-issued or de-
layed-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-de-
11
<PAGE>
livery basis with the intention of acquiring the securities, the Fund may sell
the securities before the settlement date, if it is deemed advisable. At the
time the Fund makes the commitment to purchase securities on a when-issued or
delayed-delivery basis, the Fund will record the transaction and thereafter
reflect the value, each day, of such security in determining the net asset
value of the Fund. At the time of delivery of the securities, the value may be
more or less than the purchase price. The Fund will maintain in a segregated
account of the Fund liquid assets having a value equal to or greater than the
Fund's purchase commitments. The Fund will likewise segregate liquid assets in
respect of securities sold on a delayed-delivery basis. Subject to this re-
quirement, 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, 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 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 denomi-
nated 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
12
<PAGE>
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.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend portfolio securities in
amounts up to 33 1/3% of its respective total assets to brokers, dealers and
other financial institutions, provided such loans are callable at any time by
the Fund and are at all times secured by cash or equivalent collateral. By
lending its portfolio securities, a Fund will receive income while retaining
the securities' potential for capital appreciation. As with any extensions of
credit, there are risks of delay in recovery and, in some cases, even loss of
rights in the collateral should the borrower of the securities fail financial-
ly. However, these loans of portfolio securities will be made only to firms
deemed by the Adviser to be creditworthy. 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 Small Company
Growth Fund and Growth and Income Fund may borrow money for investment pur-
poses and may each pledge assets to secure such borrowings. This is the specu-
lative 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 in-
crease. In the event the return on an investment of borrowed 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 substan-
tial borrowings, the net asset value of a Fund's shares would be reduced due
to the added expense of interest on borrowed monies. 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 in light of changing facts and circumstances, including general eco-
nomic and market conditions, and will be subject to applicable lending regula-
tions of the Board of Governors of the Federal Reserve Board. The Funds' poli-
cies regarding the use of leverage are fundamental policies which may not be
changed without the approval 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. See "Foreign Securities--Foreign Currency Transactions."
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 deal-
ers. Such covered spread options are not presently exchange-listed or ex-
change-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 transac-
tion costs. In addition, there is not assurance that closing transactions will
be available. The purchase of spread options will be used to protect a
13
<PAGE>
Fund against adverse changes in prevailing credit quality spreads, i.e., the
yield spread between high quality and lower quality securities. Such protec-
tion 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 predictions 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 the Adviser's ability to predict correctly
movements in the direction of interest rates, securities prices and currency
markets; (2) imperfect correlation between the price of options and Futures
contracts and options thereon and movements in the prices of the securities or
currencies being hedged; (3) the fact that skills needed to use these strate-
gies are different from those needed to select portfolio securities; (4) the
possible absence 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 purchase or sell a portfolio security at a time that otherwise would be fa-
vorable for it to do so, or the possible need for the Fund to sell a portfolio
security at a disadvantageous time, due to the need for the Fund to maintain
"cover" or to segregate 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.
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, the se-
curities of a particular issuer will be recognized and appreciated in value
due to a specific development with respect to that issuer. Developments creat-
ing a special situation might include, among others, a new product or process,
a technological breakthrough, a management change or other extraordinary cor-
porate 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 October 31, 1997 held ap-
proximately $52 billion in assets. 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 serves as adviser, manager and/or
administrator for Anchor Pathway Fund, SunAmerica
14
<PAGE>
Income Funds, SunAmerica Money Market Funds, Inc., Style Select Series, Inc.,
Anchor Series Trust, Seasons Series Trust and SunAmerica Series Trust. The Ad-
viser managed, advised and/or administered assets of approximately $12 billion
as of October 31, 1997 for investment companies, individuals, pension ac-
counts, and corporate and trust accounts.
Pursuant to the Investment Advisory and Management Agreement entered into
between the Adviser and the Trust, on behalf of each Fund, each Fund pays the
Adviser a fee, payable monthly, computed 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. These advisory fee rates are higher than those paid by most other
investment 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%; Growth
and Income Fund -- .75%; Mid-Cap Growth Fund -- .75% and Small Company
Growth Fund -- .75%. For the same period, the Growth and Income Fund paid the
Adviser a fee equal to .75% of the Fund's average daily net assets pursuant to
a voluntary fee reimbursement by the Adviser.
PORTFOLIO MANAGERS. The Domestic Equity Investment Team is responsible for
the portfolio management of each of the Funds. The Team is composed of nine
portfolio managers, research analysts and traders. Individual members of the
Team may focus more heavily on particular Funds or particular aspects of the
domestic equity markets.
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 Dis-
tributor 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 Distrib-
utor 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, 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,
Class B or Class C 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 sponsored special events. In some instances,
this compensation will be made available only to certain broker-dealers whose
representatives have sold a significant amount of shares of the Fund. Compen-
sation may also include payment for travel expenses, including lodging, in-
curred in connection with trips taken by invited registered representatives
for meetings or seminars of a business nature. 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) merchandise (such as clothing,
trophies, clocks, pens or other electronic equipment). Broker-dealers may not
use sales of the Funds' shares to qualify for this compensation to the extent
receipt of such compensation may be prohibited by the laws of any state or any
self-regulatory agency, such as, for example, the National Association of Se-
curities Dealers, Inc. Dealers who receive bonuses or other incentives may be
deemed to be underwriters under the Securities Act.
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.
15
<PAGE>
DISTRIBUTION PLANS. Rule 12b-1 under the 1940 Act permits an investment com-
pany 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 Class A, Class B and Class C shares of
each Fund have adopted Distribution Plans hereinafter referred to as the
"Class A Plan," the "Class B Plan" and the "Class C Plan," and collectively as
the "Distribution Plans." In adopting each Distribution Plan, the Trustees de-
termined that there was a reasonable likelihood that each such Plan would ben-
efit the Fund and the shareholders of each 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 and Class C Plans, 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 and Class C shares, respectively, to compensate the Dis-
tributor and certain securities firms for providing sales and promotional ac-
tivities for distributing each such class of shares. The distribution costs
for which the Distributor may be reimbursed out of such distribution fees in-
clude fees paid to broker-dealers that have sold Fund shares, commissions, and
other expenses such as those incurred for sales literature, prospectus print-
ing and distribution and compensation to wholesalers. It is possible that in
any given year the amount paid to the Distributor under one or more of the
Distribution Plans may exceed the Distributor's distribution costs as de-
scribed 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 mainte-
nance. In this regard, some payments are used to compensate broker-dealers
with account maintenance and service fees in an amount up to 0.25% per year of
the assets maintained in a Fund by their customers.
For the 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%;
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 As-
sets Fund --1.00%; Blue Chip Growth 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, pursuant 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 share-
holder services. Pursuant to the Service Agreement, as compensation for serv-
ices 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 and Class C
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, invest-
16
<PAGE>
ors making large investments, qualifying for a reduced initial sales charge,
might consider Class A shares because there is a lower distribution fee than
Class B and Class C shares. Shareholders who purchase $1,000,000 or more of
shares of the Funds should only purchase Class A shares. Investors making
small investments might consider Class B or Class C shares because 100% of the
purchase price is invested immediately. Dealers may receive different levels
of compensation depending on which class of shares they sell. Investors should
consider the CDSC period and any conversion rights in the context of their in-
vestment time frame. For example, while Class C shares have a shorter CDSC pe-
riod than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing distribution fee. Accordingly, Class B
shares may be more appropriate than Class C shares for investors with a longer
term investment time frame.
Upon making an investment in shares of a Fund, an open account will be es-
tablished under which shares of the applicable Fund and additional shares ac-
quired 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") (collec-
tively, the "Transfer Agent"). Shareholders will not be issued certificates
for their shares unless they specifically so request in writing but no certif-
icate 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 ini-
tial 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. In addition, shares may be purchased at net asset value, without
payment of a sales charge, by employee benefit plans qualified under Sections
401 or 457 of the Internal Revenue Code of 1986, as amended (the "Code"), or
employee benefit plans created pursuant to Section 403(b) of the Code and
sponsored by nonprofit organizations defined under Section 501(c)(3) of the
Code (collectively, "Plans"). A Plan will qualify for purchases at net asset
value provided that (a) the initial amount invested in one or more of the
Funds (or in combination with the shares of other funds in the SunAmerica Fam-
ily of Mutual Funds) is at least $1,000,000, (b) the sponsor signs a
$1,000,000 Letter of Intent, (c) such shares are purchased by an employer-
sponsored plan with at least 100 eligible employees, or (d) the purchases are
by trustees or other fiduciaries for certain employer-sponsored plans, the
trustee, fiduciary or administrator for which has an agreement with the Dis-
tributor with respect to such purchases and all such transactions for the plan
are executed through a single omnibus account. 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. Redemp-
tions 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 dur-
ing the second year from the date of purchase. In determining whether a de-
ferred sales charge is payable, it is assumed that shares purchased with rein-
vested dividends and distributions and then other shares held the longest are
redeemed first.
To the extent that sales are made for personal investment purposes, the
sales charge is waived as to Class A shares purchased by current or retired
officers, directors, and other full-time employees of SunAmerica and its af-
filiates, 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 pur-
chased by wrap or certain other advisory accounts for the benefit of clients
of broker-dealers, financial institutions, registered investment
17
<PAGE>
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 de-
tails 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 re-
demptions 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 re-
deemed. 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 redemp-
tion 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 rein-
vested dividends and distributions), third of shares held for more than six
years and fourth of shares held the longest during the six-year period. The
CDSC will not be applied to dollar amounts representing an increase in the net
asset value of the shares being redeemed since the time of purchase of such
redeemed shares. The amount of the CDSC, if any, will vary depending on the
number of years from the time of payment for the purchase of Fund shares until
the time of redemption of such shares. Solely for purposes of determining the
number of years from the time of any payment for the purchase of shares, all
payments during a month are aggregated and deemed to have been made on the
first day of the month. The following table sets forth the rates of the CDSC.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
YEAR SINCE PURCHASE DOLLARS INVESTED OR
PAYMENT WAS MADE REDEMPTION PROCEEDS
- ------------------- -------------------------
<S> <C>
First................................................. 4%
Second................................................ 4%
Third................................................. 3%
Fourth................................................ 3%
Fifth................................................. 2%
Sixth................................................. 1%
Seventh and thereafter................................ 0%
</TABLE>
Shareholders of a Fund that acquired their Class B shares pursuant to a re-
organization 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 Re-
garding Purchase of Shares" in the Statement of Additional Information.
Conversion Feature--Class B Shares. Class B shares (including a pro-rata
portion of the Class B shares purchased through the reinvestment of dividends
and distributions) 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.
CLASS C SHARES. Class C shares are offered at net asset value. Certain re-
demptions of Class C shares within the first year of the date of purchase are
subject to a CDSC of 1%. The method for calculating any such CDSC will be the
same method used for calculating the CDSC for Class B shares. See "Class B
Shares" above.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C shares will be
waived, subject to certain conditions, in connection with redemptions which
are (a) requested within one year of the death of the shareholder of an indi-
vidual account or of a joint tenant where the surviving joint tenant is the
deceased's spouse; (b) requested within one year after the shareholder of an
individual account or of a joint tenant on a spousal joint tenant account be-
comes disabled; (c) taxable distributions or loans to participants made by
qualified retirement plans or retire -
18
<PAGE>
ment accounts (not including rollovers) for which the Adviser serves as fidu-
ciary (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; (d) 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 (e) 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 condi-
tions with respect to (a) and (b) above. For information on the waiver of the
CDSC contact Shareholder/Dealer services at (800)858-8850.
Other CDSC Information. For Federal income tax purposes, the amount of the
CDSC will reduce the amount realized on the redemption of shares, concomi-
tantly reducing gain or increasing loss. For information on the imposition and
waiver of the CDSC contact Shareholder/Dealer Services at (800) 858-8850.
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 ba-
sis. 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."
If the payment is for a retirement plan account for which the Adviser serves
as fiduciary, please indicate on the check that payment is for such an ac-
count. Payments to open new accounts should be mailed to SunAmerica Fund Serv-
ices, Inc., Mutual Fund Operations, The SunAmerica Center, 733 Third Avenue,
New York, New York 10017-3204, together with a completed New Account Applica-
tion. 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 fi-
duciary 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 re-
serves the right to reject any check made payable other than in the manner in-
dicated 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 lia-
ble 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 infor-
mation 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 pro-
ceeds. See " Net Asset Value Transfer Program" in the Statement of Additional
Information for more details regarding this privilege.
19
<PAGE>
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 redemp-
tion request in proper form. Any capital gain or loss realized by a share-
holder upon any redemption of shares must be recognized for federal income tax
purposes. See "Dividends, Distributions and Taxes."
GENERAL. Payment is normally made by check mailed 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 redemp-
tion 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.
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. Requests for redemption of shares with a
value of less than $100,000 will be made by check payable to the sharehold-
er(s) and mailed to the address of record. All written requests for redemption
of shares with a value of $100,000 or more, or those mailed to an address
other than the address of record, 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 associations. Guarantees must be signed by an
authorized signatory of the eligible guarantor and the words "Signature Guar-
anteed" must appear with the signature. Signature guarantees by notaries will
not be accepted. SAFS may request further documentation from corporations, ex-
ecutors, 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 redemp-
tion may be sent by check payable to the shareholder(s) and mailed to the ad-
dress of record, or by wire to the shareholder's bank account as set forth in
the New Account Application Form or in a subsequent written authorization.
Shareholders utilizing the redemption through the electronic funds transfer
method will incur a $15.00 transaction fee. The Trust will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Failure to do so may result in liability to the Trust for losses incurred due
to unauthorized or fraudulent telephone instructions. Such procedures include,
but are not limited to, requiring some form of personal identification prior
to acting upon instructions received by telephone and/or tape recording of
telephone instructions.
A shareholder making a telephone redemption should call Shareholder/Dealer
Services at (800) 858-8850, and state (i) the name of the shareholder(s) ap-
pearing 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 ter-
minate 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
20
<PAGE>
to comply with certain additional procedures in order to redeem shares. Fur-
ther information may be obtained by calling Shareholder/Dealer Services at
(800) 858-8850.
OTHER REDEMPTION INFORMATION. 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 purchase 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 and Class C shares), all or any part of the redemption proceeds in
shares of the Fund at the then-current net asset value. Reinstatement may af-
fect 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 the original purchase of such fund's Class A shares was
not subject to an initial sales charge because the purchase was in excess of
$1 million, such shareholder will remain subject to the 1% CDSC, if any, ap-
plicable to such redemptions. In such event, the period for which the original
shares were held prior to the exchange will be "tacked" with the holding pe-
riod 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 or Class C 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 determining what, if any, CDSC is applicable upon a redemption of
any of such shares.
RESTRICTIONS ON EXCHANGES. Because excessive trading (including short-term
"market timing" trading) can hurt a Fund's performance, each Fund may refuse
any exchange sell order (1) if it appears to be a market timing transaction
involving a significant portion of a Fund's assets or (2) from any shareholder
account if previous use of the exchange privilege is considered excessive. Ac-
counts under common ownership or control, including, but not limited to, those
with the same taxpayer identification number and those administered so as to
redeem or purchase shares based upon certain predetermined market indications,
will be considered one account for this purpose.
21
<PAGE>
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. 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 com-
mission (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 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 selects broker-dealers which, in its best
judgment, provide prompt and reliable execution at favorable security prices
and reasonable commission rates. The 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 which other broker-dealers may have
charged, if in the Adviser'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 may
effect portfolio transactions through an affiliated broker-dealer, acting as
agent and not as principal, in accordance with Rule 17e-1 under the 1940 Act
and other applicable securities laws.
Each Fund has no limitation regarding its policy with respect to portfolio
turnover. The portfolio turnover rate is calculated by dividing the lesser of
sales or purchases of portfolio securities, excluding short-term securities,
by the average monthly value of the Fund's long-term portfolio securities.
High portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs which will be borne directly by the Fund. In addi-
tion, high portfolio turnover may result in increased short-term capital
gains, which, when distributed to shareholders, are treated as ordinary in-
come.
DETERMINATION OF NET ASSET VALUE
The Fund is open for business on any day the NYSE is open for regular trad-
ing. 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. Fur-
22
<PAGE>
ther, 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 and Class C shares may be higher than those
for Class A shares, the performance of Class B and Class C shares may be
higher than the performance of Class A shares after giving effect to the im-
pact 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 sharehold-
ers 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 De-
cember 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 quali-
fied, the Trust and each of the Funds will not be subject to U.S. Federal in-
come tax on the portion of its investment company taxable income and net capi-
tal gains distributed to its shareholders.
For Federal income tax purposes, dividends of net investment income and dis-
tributions of any net realized short-term capital gain, whether paid in cash
or reinvested in shares of the Fund, are taxable to shareholders as ordinary
income. To the extent a Fund's income is derived from certain dividends re-
ceived from domestic corporations, a portion of the dividends paid to corpo-
rate shareholders of such Fund will be eligible for the 70% dividends received
deduction.
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 Growth and Income Fund may purchase debt securities (such as zero-coupon
or pay-in-kind securities) that contain original issue discount. Original is-
sue discount that accrues in a taxable year is treated as earned by the 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
23
<PAGE>
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 regard-
ing the foreign tax consequences of ownership of interests in a Fund. See
"Dividends, Distributions and Taxes" in the Statement of Additional Informa-
tion.
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 five investment series or funds: the Balanced Assets Fund,
the Blue Chip Growth Fund, the Mid-Cap Growth Fund, the Small Company Growth
Fund, and the Growth and Income Fund. The Trustees have the authority to issue
an unlimited number of shares of beneficial 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 and Class C
shares than for Class A shares. See the Statement of Additional Information
for more information 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 obliga-tions of the Trust, is limited to
the unlikely circumstance in which the Trust itself would be unable to meet
its obligations.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL. Price Waterhouse LLP has been se-
lected as independent accountants for the Funds. The firm of Shereff, Fried-
man, 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.
24
<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 OF SUN AMERICA CAPITAL SERVICES DISTIBUTOR APPEARS HERE]
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 28, 1998, 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 28, 1998
<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 28, 1998
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 five different
investment funds: SunAmerica Balanced Assets Fund, SunAmerica Blue Chip Growth
Fund, SunAmerica Mid-Cap Growth Fund, SunAmerica Small Company Growth Fund and
SunAmerica Growth and Income Fund. 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 28, 1998. 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>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
HISTORY OF THE FUNDS.................................................. B-2
INVESTMENT OBJECTIVES AND POLICIES.................................... B-3
PORTFOLIO TURNOVER................................................... B-24
INVESTMENT RESTRICTIONS.............................................. B-25
TRUSTEES AND OFFICERS................................................ B-27
ADVISER, PERSONAL TRADING, DISTRIBUTOR AND
ADMINISTRATOR........................................................ B-32
PORTFOLIO TRANSACTIONS AND BROKERAGE................................. B-38
ADDITIONAL INFORMATION REGARDING PURCHASE OF SHARES.................. B-40
ADDITIONAL INFORMATION REGARDING REDEMPTION OF SHARES................ B-47
DETERMINATION OF NET ASSET VALUE..................................... B-48
PERFORMANCE DATA..................................................... B-49
DIVIDENDS, DISTRIBUTIONS AND TAXES................................... B-54
RETIREMENT PLANS..................................................... B-57
DESCRIPTION OF SHARES................................................ B-59
ADDITIONAL INFORMATION............................................... B-60
FINANCIAL STATEMENTS................................................. B-62
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 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 five 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 five Funds are: SunAmerica Balanced Assets Fund
("Balanced Assets Fund"), SunAmerica Blue Chip Growth Fund ("Blue Chip Growth
Fund"), SunAmerica Mid-Cap Growth Fund ("Mid-Cap Growth Fund"), SunAmerica Small
Company Growth Fund ("Small Company Growth Fund") and SunAmerica Growth and
Income Fund ("Growth and Income Fund").
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 Growth Fund. The
offering of such Class Z shares commenced on October 1, 1996.
On September 29, 1997, pursuant to an Agreement and Plan of
Reorganization, all of the assets and liabilities of the Global Balanced Fund
were transferred to the International Equity Portfolio, a series of Style Select
Series, Inc., in exchange for shares of International Equity Portfolio and the
Fund has ceased to exist. Shares of International Equity Portfolio were
distributed to the
B-2
<PAGE>
shareholders of the Fund in complete liquidation thereof. Class A and Class B
shareholders of the Fund received the respective class of shares of
International Equity Portfolio.
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 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
B-3
<PAGE>
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 will monitor the liquidity of such restricted
securities subject to the supervision of the Trustees. In reaching liquidity
decisions the 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 has determined to be liquid
pursuant to guidelines established by the Trustees. The Trustees have delegated
to the Adviser the function of making day-to-day determinations of liquidity
with respect to Section 4(2) paper, pursuant to guidelines approved by the
Trustees that require the Adviser to take into account the same factors
described above for other restricted securities and require the Adviser to
perform the same monitoring and reporting functions.
REPURCHASE AGREEMENTS. Each 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 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. However, a Fund may collaterize the amount of such transaction at
100% If the collateral is cash. 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 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
B-4
<PAGE>
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) 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
B-5
<PAGE>
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 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.
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 to be of equivalent quality). A description of securities ratings is
contained in the Appendix to this Statement of Additional Information.
Subject to the limitations described above, the following is a
description of the types of money market and fixed-income securities in which
the Funds may invest:
U.S. Government Securities: See section entitled "U.S. Government
Securities" below.
Commercial Paper: Commercial paper consists of short-term (usually
from 1 to 270 days) unsecured promissory notes issued by entities in order to
finance their current operations. Each Fund's commercial paper investments may
include variable amount master 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
B-6
<PAGE>
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).
Certificates of Deposit and Bankers' Acceptances: Certificates of
deposit are receipts issued by a bank in exchange for the deposit of funds. The
issuer agrees to pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The certificate usually can
be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by another bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the 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.
B-7
<PAGE>
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 may, in addition to the U.S. government
securities noted above, invest in mortgage-backed securities (including private
mortgage-backed securities), such as GNMA, FNMA or FHLMC certificates (as
defined below), which represent an undivided ownership interest in a pool of
mortgages. The mortgages backing these securities include conventional thirty-
year fixed-rate mortgages, fifteen-year fixed-rate mortgages, graduated payment
mortgages and adjustable rate mortgages. These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments, including prepayments, on the mortgages
underlying the certificate, net of certain fees.
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 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
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 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
B-8
<PAGE>
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 may purchase mortgage-backed
securities at a premium or at a discount.
The following is a description of GNMA, FNMA and FHLMC certificates,
the most widely available mortgage-backed securities:
GNMA Certificates. GNMA Certificates are mortgage-backed securities
which evidence an undivided interest in a pool or pools of mortgages. GNMA
Certificates that the Balanced Assets 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
B-9
<PAGE>
a pro rata share of all interest and principal payments made and owed on the
underlying pool. FNMA guarantees timely payment of interest and principal on
FNMA Certificates. The FNMA guarantee is not backed by the full faith and
credit of the U.S. Government.
Another type of mortgage-backed security in which the Balanced Assets
Fund 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 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 may also invest in stripped mortgage-backed
securities. Stripped mortgage-backed securities are often structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. Stripped mortgage-backed securities
have greater market volatility than other types of U.S. Government securities in
which a Fund invests. A common type of stripped mortgage-backed security has
one class receiving some of the interest and all or most of the principal (the
"principal only" class) from the mortgage pool, while the other class will
receive all or most of the interest (the "interest only" class). The yield to
maturity on an interest only class is 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
B-10
<PAGE>
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.
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.
B-11
<PAGE>
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 before settlement will affect the value of
such securities and may cause a loss to a Fund.
When-issued transactions and forward commitments may be used to offset
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling prices, a Fund might sell securities in its
portfolio on a forward commitment basis to attempt to limit its exposure to
anticipated falling prices. In periods of falling interest rates and rising
prices, a Fund might sell portfolio securities and purchase the same or similar
securities on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields.
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
B-12
<PAGE>
ownership rather than direct stock certificates, the use of the depository
receipts in the United States can reduce costs and delays as well as potential
currency exchange and other difficulties. The Fund may purchase securities in
local markets and direct delivery of these ordinary shares to the local
depository of an ADR agent bank in the foreign country. Simultaneously, the ADR
agents create a certificate which settles at the Fund's custodian in five days.
The Fund may also execute trades on the U.S. markets using existing ADRs. A
foreign issuer of the security underlying an ADR is generally not subject to the
same reporting requirements in the United States as a domestic issuer.
Accordingly the information available to a U.S. investor will be limited to the
information the foreign issuer is required to disclose in its own country and
the market value of an ADR may not reflect undisclosed material information
concerning the issuer of the underlying security. For purposes of a Fund's
investment policies, the Fund's investments in these types of securities will be
deemed to be investments in the underlying securities. Generally ADRs, in
registered form, are dollar denominated securities designed for use in the U.S.
securities markets, which represent and may be converted into the underlying
foreign security. EDRs, in bearer form, are designed for use in the European
securities markets.
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.
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 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 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
B-13
<PAGE>
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 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 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
B-14
<PAGE>
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.
OPTIONS
- -------
Options on Securities. As noted above, each Fund may write and
purchase call and put options (including yield curve options) on equity and debt
securities.
When a Fund writes a call on a security it receives a premium and
agrees to sell the underlying security to a purchaser of a corresponding call on
the same security during the call period (usually not more than 9 months) at a
fixed price (which may differ from the market price of the underlying security),
regardless of market price changes during the call period. A Fund has retained
the risk of loss should the price of the underlying security decline during the
call period, which may be offset to some extent by the premium.
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.
B-15
<PAGE>
A put option on securities gives the purchaser the right to sell, and
the writer the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by segregated liquid
assets equal to the exercise price of the put has the same economic effect to a
Fund as writing a covered call. The premium a Fund receives from writing a put
option represents a profit as long as the price of the underlying investment
remains above the exercise price. However, a Fund has also assumed the
obligation during the option period to buy the underlying investment from the
buyer of the put at the exercise price, even though the value of the investment
may fall below the exercise price. If the put expires unexercised, a Fund (as
the writer of the put) realizes a gain in the amount of the premium. If the put
is exercised, a Fund must fulfill its obligation to purchase the underlying
investment at the exercise price, which will usually exceed the market value of
the investment at that time. In that case, a Fund may incur a loss, equal to
the sum of the sale price of the underlying investment and the premium received
minus the sum of the exercise price and any transaction costs incurred.
A Fund may effect a closing purchase transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore, effecting such a closing purchase transaction will
permit a Fund to write another put option to the extent that the exercise price
thereof is secured 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 a Fund as the put writer continues, it may be assigned an exercise
notice by the broker-dealer through whom such
B-16
<PAGE>
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 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
B-17
<PAGE>
Future is marked to market to reflect changes in its market value, subsequent
margin payments, called variation margin, will be paid to or by the futures
broker on a daily basis. Prior to expiration of the Future, if a Fund elects to
close out its position by taking an opposite position, a final determination of
variation margin is made, additional cash is required to be paid by or released
to the Fund, and any loss or gain is realized for tax purposes. All Futures
transactions are effected through a clearinghouse associated with the exchange
on which the Futures are traded.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Fund's current or intended investments in fixed-income securities. For example,
if a Fund owned long-term bonds and interest rates were expected to increase,
that Fund might sell interest rate futures contracts. Such a sale would have
much the same effect as selling some of the long-term bonds in that Fund's
portfolio. However, since the Futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique allows
a Fund to hedge its interest rate risk without having to sell its portfolio
securities. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of that Fund's interest rate futures
contracts would be expected to increase at approximately the same rate, thereby
keeping the net asset value of that Fund from declining as much as it otherwise
would have. On the other hand, if interest rates were expected to decline,
interest rate futures contracts may be purchased to hedge in anticipation of
subsequent purchases of long-term bonds at higher prices. Since the
fluctuations in the value of the interest rate futures contracts should be
similar to that of long-term bonds, a Fund could protect itself against the
effects of the anticipated rise in the value of long-term bonds without actually
buying them until the necessary cash became available or the market had
stabilized. At that time, the interest rate futures contracts could be
liquidated and that Fund's cash reserves could then be used to buy long-term
bonds on the cash market.
Purchases or sales of stock or bond index futures contracts are used
for hedging purposes to attempt to protect a Fund's current or intended
investments from broad fluctuations in stock or bond prices. For example, a
Fund may sell stock or bond index futures contracts in anticipation of or during
a market decline to 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
B-18
<PAGE>
value of such currency relative to the dollar. In the event such decline occurs,
the resulting adverse effect on the value of foreign-denominated securities may
be offset, in whole or in part, by gains on the Futures contracts. However, if
the value of the foreign currency increases relative to the dollar, the Fund's
loss on the foreign currency futures contract may or may not be offset by an
increase in the value of the securities since a decline in the price of the
security stated in terms of the foreign currency may be greater than the
increase in value as a result of the change in exchange rates.
Conversely, each Fund could protect against a rise in the dollar cost
of foreign-denominated securities to be acquired by purchasing Futures contracts
on the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. When a Fund purchases futures contracts under such
circumstances, however, and the price of securities to be acquired instead
declines as a result of appreciation of the dollar, the Fund will sustain losses
on its futures position which could reduce or eliminate the benefits of the
reduced cost of portfolio securities to be acquired.
Options on Futures. As noted above, the Funds may purchase and write
options on interest rate futures contracts, stock and bond index futures
contracts and foreign currency futures contracts. (Unless otherwise specified,
options on interest rate futures contracts, options on stock and bond index
futures contracts and options on foreign currency futures contracts are
collectively referred to as "Options on Futures.")
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
B-19
<PAGE>
on Futures, rather than purchasing the underlying Futures contract. If the
market advances, the increased cost of securities to be purchased may be offset
by a profit on the call. However, if the market declines, the Fund will suffer a
loss equal to the price of the call but the securities which the Fund intends to
purchase may be less expensive.
FORWARD CONTRACTS
- -----------------
A Forward Contract involves bilateral obligations of one party to
purchase, and another party to sell, a specific currency at a future date (which
may be any fixed number of days from the date of the contract agreed upon by the
parties), at a price set at the time the contract is entered into. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. No price is paid
or received upon the purchase or sale of a Forward Contract.
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 will not
speculate with Forward Contracts or foreign currency exchange rates.
A Fund may enter into Forward Contracts with respect to specific
transactions. For example, when a Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, or when a Fund
anticipates receipt of dividend payments in a foreign currency, the Fund may
desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the purchase or sale of
the amount of foreign currency involved in the underlying transaction. A Fund
will thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are made or
received.
A Fund may also use Forward Contracts to lock in the U.S. dollar value
of portfolio positions ("position hedge"). In a position hedge, for example,
when a Fund believes that foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a Forward Contract to sell an amount
of that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when a Fund
believes that the U.S. dollar may suffer a substantial decline against a foreign
currency, it may enter into a Forward Contract to buy that foreign currency for
a fixed dollar amount. In this situation a Fund may, in the alternative, enter
into a Forward Contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
B-20
<PAGE>
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 or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a Fund may
close out a Forward Contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. A Fund would realize a gain
or loss as a result of entering into such an offsetting Forward Contract under
either circumstance to the extent the exchange rate or rates between the
currencies involved moved between the execution dates of the first contract and
offsetting contract.
B-21
<PAGE>
The cost to a Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts are usually
entered into on a principal basis, no fees or commissions are involved. Because
such contracts are not traded on an exchange, a Fund must evaluate the credit
and performance risk of each particular counterparty under a Forward Contract.
Although a Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. A Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the difference between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE
- --------------------------------------------------------------
The Fund's custodian, or a securities depository acting for the
custodian, will act as the Fund's escrow agent, through the facilities of the
Options Clearing Corporation ("OCC"), as to the securities on which the Fund has
written options or as to other acceptable escrow securities, so that no margin
will be required for such transaction. OCC will release the securities on the
expiration of the option or upon a Fund's entering into a closing transaction.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. A Fund's option
activities may affect its turnover rate and brokerage commissions. The exercise
by a Fund of puts on securities will cause the sale of related investments,
increasing portfolio turnover. Although such exercise is within a Fund's
control, holding a put might cause the Fund to sell the related investments for
reasons which would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys a put or call, sells a call, or buys or
sells an underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct purchases
or sales of such underlying investments. Premiums paid for options are small in
relation to the market value of the related investments, and consequently, put
and call options offer large amounts of leverage. The leverage offered by
trading in options could result in a Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
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.
B-22
<PAGE>
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. Margin deposits may consist of cash or securities acceptable to the
broker and the relevant contract market.
Transactions in options by a Fund are subject to limitations
established by each of the exchanges governing the maximum number of options
which may be written or held by a single investor or group of investors acting
in concert, regardless of whether the options were written or purchased on the
same or different exchanges or are held in one or more accounts or through one
or more exchanges or brokers. Thus, the number of options which a Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same or an affiliated investment
adviser. Position limits also apply to Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the 1940 Act, when a Fund
purchases a Future, the Fund will maintain, in a segregated account or accounts
with its custodian bank, cash or 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
B-23
<PAGE>
ordinary spreads between prices in the cash and Futures markets are subject to
distortions due to differences in the natures of those markets. First, all
participants in the Futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close Futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
Futures markets. Second, the liquidity of the Futures markets depend on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the Futures markets could be reduced, thus producing distortion. Third, from
the point-of-view of speculators, the deposit requirements in the Futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the Futures markets may
cause temporary price distortions.
If a Fund uses Hedging Instruments to establish a position in the debt
securities markets as a temporary substitute for the purchase of individual debt
securities (long hedging) by buying Futures and/or calls on such Futures or on
debt securities, it is possible that the market may decline; if the Adviser then
determines not to invest in such securities at that time because of concerns as
to possible further market decline or for other reasons, the Fund will realize a
loss on the Hedging Instruments that is not offset by a reduction in the price
of the debt securities purchased.
LEVERAGE. In seeking to enhance investment performance, the 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
B-24
<PAGE>
denominator. Transactions in Futures or the exercise of calls written by a Fund
may cause the Fund to sell portfolio securities, thus increasing its turnover
rate. The exercise of puts also may cause a sale of securities and increase
turnover; although such exercise is within a Fund's control, holding a
protective put might cause the Fund to sell the underlying securities for
reasons which would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys or sells a security in connection with
the exercise of a put or call. Some commissions may be higher than those which
would apply to direct purchases or sales of portfolio securities.
The following table sets forth the portfolio turnover rates for the
fiscal years ended September 30, 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%
B-25
<PAGE>
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").
(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 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 Growth and
Income Fund required pledging of assets, the Fund may pledge assets in
connection with such transactions. For purposes of this restriction and
restriction (5) below, collateral arrangements with respect to the options,
financial futures and options thereon described in the Prospectus and
Statement of Additional Information are not deemed to constitute a pledge
or loan of assets.
(4) Invest more than 25% of each Fund's assets in the securities of issuers
engaged in the same industry.
(5) Engage in arbitrage transactions, buy or sell commodities or commodity
contracts or real estate or interests in real estate, except that each Fund
may (a) purchase or sell financial futures and options thereon for hedging
purposes, as described in the Prospectus and Statement of Additional
Information, under policies developed by the Trustees and (b) purchase and
sell marketable securities which are secured by real estate and marketable
securities of companies which invest or deal in real estate.
(6) Act as underwriter, except to the extent that in connection with the
disposition of portfolio securities, the Funds may be deemed to be
underwriters under certain Federal securities laws.
(7) Make loans, except through (i) repurchase agreements, (ii) loans of
portfolio securities, or (iii) the purchase of portfolio securities
consistent with a Fund's investment objectives and policies, as described
in the Prospectus.
(8) Make short sales of securities or maintain a short position, except that
each Fund may effect short sales against the box.
(9) Issue senior securities as defined in the 1940 Act, except that each Fund
may enter into repurchase agreements, lend its portfolio securities and
borrow money from banks, as
B-26
<PAGE>
described in restriction (3).
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 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 ("SAMF") 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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Principal Occupations
Name, Age and Address Position with the Fund During Past 5 Years
--------------------- ---------------------- -------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
S. James Coppersmith, 64 Trustee Director/Trustee of the Boston Stock
Emerson College Exchange, Uno Restaurant Corp.,
100 Beacon Street Waban Corp., Kushner-Locke Co.,
Boston, MA 02116 Chyron Inc.; Chairman of the Board of
Emerson College; formerly, President
and General Manager, WCVB-TV, a
division of the Hearst Corp. (1982-1994
(retired); Director/Trustee of SAMF and
Anchor Series Trust ("AST").
- ---------------------------------------------------------------------------------------------
</TABLE>
B-27
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Samuel M. Eisenstat, 57 Chairman of the Attorney in private practice; President
430 East 86 Street Board and Chief Executive Officer, Abjac
New York, NY 10028 Energy Corporation; 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 Directors/
Trustees, SAMF and AST.
- ------------------------------------------------------------------------------------------
Stephen J. Gutman, 54 Trustee Partner and Chief Operating Officer of
515 East 79th Street B.B. Associates LLC (menswear
New York, NY 10021 specialty retailing and other activities)
since May 1989; Director/Trustee of
SAMF and AST.
- ------------------------------------------------------------------------------------------
Peter A. Harbeck*, 44 Trustee and President Director and President, SunAmerica
The SunAmerica Center Asset Management Corp.
733 Third Avenue ("SAAMCo"); Director, SunAmerica
New York, NY 10017-3204 Capital Services, Inc. ("SACS"), since
February 1993; Director and President,
SunAmerica Fund Services,
Inc.("SAFS"), since May 1988;
President, SAMF and AST; 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*, 39 Trustee Executive Vice President and Chief
1 SunAmerica Center Investment Officer, SunAmerica
Los Angeles, CA 90067 Investments, Inc., since August 1989;
Director/ Trustee, SAMF; Director,
Resources Trust Company.
- ------------------------------------------------------------------------------------------
</TABLE>
B-28
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Sebastiano Sterpa, 68 Trustee Founder of Sterpa Realty Inc., a full
Suite 200 service real estate firm, since 1962;
200 West Glenoaks Blvd. Chairman of the Sterpa Group, real
Glendale, CA 91202 estate investments and management
company, since 1962; Trustee/
Director of SAMF.
- ------------------------------------------------------------------------------------------
Nancy Kelly, 46 Vice President Vice President and Head Trader,
The SunAmerica Center SAAMCo, since 1994; Formerly, Vice
733 Third Avenue President, Whitehorne & Co. Ltd.,
New York, NY 10017-3204 from 1991 to 1994; Sales Trader,
Lynch Jones & Ryan, from 1992 to
1994.
- ------------------------------------------------------------------------------------------
Audrey L. Snell, 44 Vice President Vice President and Equity Portfolio
The SunAmerica Center Manager, SAAMCo, since March
733 Third Avenue 1991; Formerly, held investment
New York, NY 10017-3204 management position with Campbell
Associates, Inc., from 1986 to 1991.
- ------------------------------------------------------------------------------------------
Gerald P. Sullivan, Vice President Vice President, SAAMCo since
The SunAmerica Center February 1995; Portfolio Manager
733 Third Avenue since July 1996; Portfolio Manager for
New York, NY 10017-3204 the SAAMCo equity and Co-Portfolio
Manager of the balanced SSAMCo
components of the Multi-Managed
Growth, Moderate Growth,
Income/Equity and Income Portfolios
of Seasons Series Trust, since March
1997; formerly, Portfolio Manager,
Texas Commerce Investment
Management.
- ------------------------------------------------------------------------------------------
</TABLE>
B-29
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Peter C. Sutton, 33 Treasurer Senior Vice President, SAAMCo since
The SunAmerica Center April 1997; Treasurer, SAMF and AST
733 Third Avenue since February 1996; Vice President,
New York, NY 10017-3204 SunAmerica Series Trust and Anchor
Pathway Fund since October 1994;
Vice President, Seasons Series Trust,
Since April 1997; formerly, Vice
President SAAMCo, from 1994 to
1997; Controller, SAMF and AST
form March 1993 to February 1996;
Assistant Controller, SAMF, from
1990 to 1993.
- ------------------------------------------------------------------------------------------
Robert M. Zakem, 40 Secretary and Chief Senior Vice President and General
The SunAmerica Center Compliance Officer Counsel of SAAMCo, since April
733 Third Avenue 1993; Executive Vice President,
New York, NY 10017-3204 General Counsel and Director, SACS
since February 1993; Vice President,
General Counsel and Assistant
Secretary, SAFS, since January 1994;
Vice President, SunAmerica Series
Trust, Anchor Pathway and Seasons
Series Trust; Assistant Secretary,
SunAmerica Series Trust and Anchor
Pathway Fund, since September 1993;
Assistant Secretary, Seasons Series
Trust, Since April 1997; formerly, Vice
President and Associate General
Counsel, SAAMCo, March 1992 to
April 1993.
- ------------------------------------------------------------------------------------------
</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
B-30
<PAGE>
receive no direct remuneration in such capacity from the Trust or any of the
Funds.
In addition, each disinterested Trustee also serves on the Audit Committee
of the Board of Trustees. Each member of the Audit Committee receives an
aggregate of $5,000 in annual compensation for serving on the Audit Committees
of all of the SunAmerica Family of Mutual Funds. With respect to the Trust,
each member of the committee receives a pro rata portion of the $5,000 annual
compensation, based on the relative net assets of the Trust. The Trust also has
a Nominating Committee, comprised solely of disinterested Trustees, which
recommends to the Trustees those persons to be nominated for election as
Trustees by shareholders and selects and proposes nominees for election by
Trustees between shareholders' meetings. Members of the Nominating Committee
serve without compensation.
The Trustees (and Directors) of the SunAmerica Mutual Funds have adopted
the SunAmerica Disinterested Trustees' and Directors' 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 November 24, 1997, 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
RETIREMENT TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED FROM REGISTRANT AND
COMPENSATION AS PART OF FUND FUND COMPLEX PAID
TRUSTEE FROM REGISTRANT EXPENSES* TO TRUSTEES*
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
S. James Coppersmith $13,513 34,643 $ 65,000
- -----------------------------------------------------------------------------------
Samuel M. Eisenstat $14,143 26,544 $ 69,000
- -----------------------------------------------------------------------------------
</TABLE>
B-31
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Stephen J. Gutman $13,513 27,625 $65,000
- -----------------------------------------------------------------------------------
Sebastiano Sterpa $13,445 21,286** $43,333**
- ---------------------------------------------------------------------------------
</TABLE>
* Information is as of September 30, 1997 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.
The following shareholders owned of record or beneficially 5% or more of
the Growth and Income Fund's shares outstanding as of November 8, 1997: Class A
- - SunAmerica Asset Management Corp., New York, NY 10017 - owned beneficially 8%;
Eli Broad, Los Angeles, CA 90067 - owned beneficially 5%.
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.
B-32
<PAGE>
As compensation for its services to the Funds, the Adviser receives a fee
from each Fund, payable monthly, computed daily at the annual rate of.75% on the
first $350 million of such Fund's average daily assets, .70% on the next $350
million of net assets and .65% on net assets over $700 million.
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
B-33
<PAGE>
The following table sets forth the fee waivers and expense reimbursements
made to the Funds by the Adviser for the fiscal years ended September 30, 1996,
1995 and 1994.
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 22, 1997. 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.
PRIOR SUB-ADVISERS. Prior to September 29, 1997, AIG Global Investment Corp. was
sub-adviser to the Global Balanced Fund, pursuant to which the Adviser paid a
monthly fee, computed on average daily net assets, at the following annual
rates:
B-34
<PAGE>
AIG Global .50% on the first $50 million
.40% on the next $100 million
.30% on the next $150 million
.25% thereafter
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. The guidelines on personal securities trading include: (i)
securities being considered for purchase or sale, or purchased or sold, by any
Investment Company advised by the Adviser, (ii) Initial Public Offerings, (iii)
private placements, (iv) blackout periods, (v) short-term trading profits, (vi)
gifts, and (vii) services as a director. These guidelines are substantially
similar to those contained in the Report of the Advisory Group on Personal
Investing issued by the Investment Company Institute's Advisory Panel. The
Adviser reports to the Board of Trustees on a quarterly basis, as to whether
there were any violations of the Code by Access Persons of the Trust or the
Adviser during the quarter.
THE 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 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 22, 1997. 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,
B-35
<PAGE>
including Royal Alliance Associates, Inc., SunAmerica Securities, Inc., Keogler
Morgan & Company, Financial Service Corporation and Advantage Capital
Corporation, affiliates of the Distributor, that sell or are expected to sell
during specified time periods certain minimum amounts of shares of the Funds, or
of other funds underwritten by the Distributor. In addition, the terms and
conditions of any given promotional incentive may differ from firm to firm. Such
differences will, nevertheless, be fair and equitable, and based on such factors
as size, geographic location, or other reasonable determinants, and will in no
way affect the amount paid to any investor.
DISTRIBUTION PLANS. As indicated in the Prospectus, the Trustees of the Trust
and the shareholders of each class of shares of each Fund have adopted
Distribution Plans (the "Class A Plan," the "Class B Plan," and the "Class C
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 and Class C Plans, 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 and Class C 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 any of the Distribution Plans 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-36
<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 22,
1997. 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 servicing agent assisting State Street
Bank and Trust Company ("State Street") in
B-37
<PAGE>
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 22,
1997.
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. 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.
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.
The 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 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 with clients other than the
Trust. No specific value can be determined for research services furnished
without cost to the Adviser by a broker. The 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
B-38
<PAGE>
may be beneficial in supplementing the Adviser's research and analysis.
Therefore, it may tend to benefit the Funds by improving the quality of the
Adviser's investment advice. The investment advisory fees paid by the Funds are
not reduced because the Adviser receives such services. When making purchases of
underwritten issues with fixed underwriting fees, the Adviser may designate the
use of broker-dealers who have agreed to provide the 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 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. The 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.
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>
- --------------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO
BROKERAGE AFFILIATED BROKER- PERCENTAGE PAID TO
FUND COMMISSIONS DEALERS AFFILIATED BROKER-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>
B-39
<PAGE>
1995 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO
BROKERAGE AFFILIATED BROKER- PERCENTAGE PAID TO
FUND COMMISSIONS DEALERS AFFILIATED BROKER-DEALERS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $758,880 $13,735 1.8%
- --------------------------------------------------------------------------------------------
Blue Chip Growth Fund $479,902 $ 7,125 1.5%
- --------------------------------------------------------------------------------------------
Global Balanced Fund $136,225 $ 1,500 1.1%
- --------------------------------------------------------------------------------------------
Growth and Income Fund $ 19,916 $ 0 0.0%
- --------------------------------------------------------------------------------------------
Mid-Cap Growth Fund $255,418 $ 250 0.1%
- --------------------------------------------------------------------------------------------
Small Company Growth
Fund $338,503 $ 0 0.0%
- --------------------------------------------------------------------------------------------
</TABLE>
1994 BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
AGGREGATE AMOUNT PAID TO
BROKERAGE AFFILIATED BROKER- PERCENTAGE PAID TO
FUND COMMISSIONS DEALERS AFFILIATED BROKER-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 and Class C
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.
B-40
<PAGE>
1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FRONT-END SALES AMOUNT REALLOWED TO CONTINGENT DEFERRED SALES
CONCESSIONS- CLASS A AFFILIATED BROKER- CHARGE-
FUND SHARES 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>
1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FRONT-END SALES AMOUNT REALLOWED TO CONTINGENT DEFERRED SALES
CONCESSIONS- CLASS A AFFILIATED BROKER- CHARGE-
FUND SHARES DEALERS CLASS B SHARES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balanced Assets Fund $565,677 $411,596 $367,583
- ---------------------------------------------------------------------------------------------------------
Blue Chip Growth Fund $33,816 $27,360 $88,628
- ---------------------------------------------------------------------------------------------------------
Global Balanced Fund $139,083 $100,770 $47,198
- ---------------------------------------------------------------------------------------------------------
Growth and Income Fund $22,142 $14,608 $1,965
- ---------------------------------------------------------------------------------------------------------
Mid-Cap Growth Fund $104,245 $69,230 $40,076
- ---------------------------------------------------------------------------------------------------------
Small Company Growth Fund $602,843 $317,796 $105,710
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FRONT-END SALES AMOUNT REALLOWED TO CONTINGENT DEFERRED SALES
CONCESSIONS- CLASS A AFFILIATED BROKER- CHARGE-
FUND SHARES 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
B-41
<PAGE>
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 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 CDSC. As discussed under "Purchase of Shares" in the Prospectus,
CDSCs may be waived on redemptions of Class B and Class C 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.
B-42
<PAGE>
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.
PURCHASE BY CHECK. Checks should be made payable to the specific Fund or to
"SunAmerica Funds." If the payment is for a retirement plan account for which
SunAmerica serves as fiduciary, please note on the check that payment is for
such an account. 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 purchased 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 Portfolio 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, the 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 Fund does not verify the authenticity of the endorsement of such
multi-party check, and acceptance of the check by the Fund should not be
considered verification thereof. Neither the Fund nor its 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" in the Prospectus.)
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.
B-43
<PAGE>
PURCHASE BY FEDERAL FUNDS WIRE. An investor may make purchases by having his or
her bank wire Federal funds to the Trust's Transfer Agent. Federal funds
purchase orders will be accepted only on a day on which the Trust and the
Transfer Agent are open for business. In order to insure prompt receipt of a
Federal funds wire, it is important that these steps be followed:
1. You must have an existing SunAmerica Fund Account before wiring funds.
To establish an account, complete the New Account Application and send
it via facsimile to SunAmerica Fund Services, Inc. at: (212) 551-5343.
2. Call SunAmerica Fund Services' Shareholder/Dealer Services, toll free at
(800) 858-8850, extension 5125 to obtain your new account number.
3. Instruct the bank to wire the specified amount to the Transfer Agent:
State Street Bank and Trust Company, Boston, MA, ABA# 0110-00028; DDA#
99029712, SunAmerica [name of Fund, Class __] (include shareholder name
and account number).
WAIVER OF SALES CHARGES WITH RESPECT TO CERTAIN PURCHASES OF CLASS A SHARES. To
the extent that sales are made for personal investment purposes, the sales
charge is waived as to Class A shares purchased by current or retired officers,
directors, and other full-time employees of SunAmerica and its affiliates, as
well as members of the selling group and family members of the foregoing. In
addition, the sales charge is waived with respect to shares purchased by certain
qualified retirement plans or employee benefit plans (other than IRAs), which
are sponsored or administered by SunAmerica or an affiliate thereof. Further,
the sales charge is waived with respect to shares purchased by "wrap accounts"
for the benefit of clients of broker-dealers, financial institutions or
financial planners adhering to the following standards established by the
Distributor: (i) the broker-dealer, financial institution or financial planner
charges its client(s) an advisory fee based on the assets under management on an
annual basis, and (ii) such broker-dealer, financial institution or financial
planner does not advertise that shares of the Funds may be purchased by clients
at 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
B-44
<PAGE>
own account;
(iii) a trustee or other fiduciary purchasing for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Internal Revenue Code);
(iv) tax-exempt organizations qualifying under Section 501(c)(3) of the
Internal Revenue Code (not including 403(b) plans);
(v) employee benefit plans of a single employer or of affiliated employers,
other than 403(b) plans; and
(vi) group purchases as described below.
A combined purchase currently may also include shares of other funds in the
SunAmerica Mutual Funds (other than money market funds) purchased at the same
time through a single investment dealer, if the dealer places the order for such
shares directly with the Distributor.
RIGHTS OF ACCUMULATION. A purchaser of Fund shares may qualify for a
reduced sales charge by combining a current purchase (or combined purchases as
described above) with shares previously purchased and still owned; provided the
cumulative value of such shares (valued at cost or current net asset value,
whichever is higher), amounts to $50,000 or more. In determining the shares
previously purchased, the calculation will include, in addition to 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 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).
B-45
<PAGE>
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 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
B-46
<PAGE>
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.
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
B-47
<PAGE>
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 to be over-
the-counter, are valued on the basis of the bid prices provided by principal
market makers. Securities listed on the NYSE or other national securities
exchanges, other than those principally traded over-the-counter, are valued on
the basis of the last sale price on the exchange on which they are primarily
traded. However, if the last sale price on the NYSE is different than the last
sale price on any other exchange, the NYSE price will be used. If there are no
sales on that day, then the securities are valued at the bid price on the NYSE
or other primary exchange for that day. Options traded on national securities
exchanges are valued at the last sale price on such exchanges preceding the
valuation, and Futures and options thereon, which are traded on commodities
exchanges, are valued at their last sale price as of the close of such
commodities exchanges.
Securities that are traded on foreign exchanges are ordinarily valued at
the last quoted sales price available before the time when the assets are
valued. If a securities price is available from more than one foreign exchange,
a Fund uses the exchange that is the primary market for the security. Values of
portfolio securities primarily traded on foreign exchanges are already
translated into U.S. dollars when received from a quotation service.
The above procedures need not be used to determine the value of debt
securities owned by a Fund if, in the opinion of the Trustees, some other method
would more accurately reflect the fair market value of such debt securities in
the quantities owned by such Fund. Securities for which quotations are not
readily available and other assets are appraised at fair value, as determined
pursuant to procedures adopted in good faith by the Trustees. Short-term debt
securities are valued at their current market value or fair value, which for
securities with remaining maturities of 60 days
B-48
<PAGE>
or less has been determined in good faith by the Trustees to be represented by
amortized cost value, absent unusual circumstances. A pricing service may be
utilized to value the Funds' assets under the procedures set forth above. Any
use of a pricing service will be approved and monitored by the Trustees. The
value of all assets and liabilities initially expressed in foreign currencies
will be converted into U.S. dollars at the mean between the bid and offered
prices of such currencies against U.S. dollars last quoted by any large New York
bank which is a dealer in foreign currency.
The values of securities held by the Funds, and other assets used in
computing net asset value, are determined as of the time trading in such
securities is completed each day, which in the case of foreign securities may be
at a time prior to 4:00 P.M., Eastern time. On occasion, the values of foreign
securities and exchange rates may be affected by events occurring between the
time as of which determinations of such values or exchange rates are made and
4:00 P.M., Eastern time. When such events materially affect the values of
securities held by the Funds or their liabilities, such securities and
liabilities will be valued at fair value as determined in good faith by the
Trustees.
PERFORMANCE DATA
Each Fund may advertise performance data that reflects various measures of
total return and the Balanced Assets Fund may advertise data that reflects
yield. An explanation of the data presented and the methods of computation that
will be used are as follows.
A Fund's performance may be compared to the historical returns of various
investments, performance indices of those investments or economic indicators,
including, but not limited to, stocks, bonds, certificates of deposit, money
market funds and U.S. Treasury Bills. Certain of these alternative investments
may offer fixed rates of return and guaranteed principal and may be insured.
Average annual total return is determined separately for Class A, Class B,
Class C 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
B-49
<PAGE>
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 or Class C 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:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
CLASS A SHARES SINCE ONE FIVE TEN
-------------- 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 A SHARES SINCE ONE FIVE TEN
-------------- 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
- -----------------------------------------------------------
</TABLE>
B-50
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
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 average annual total return, except that
the actual cumulative return will be computed.
COMPARISONS
Each Fund may compare its total return or yield to similar measures as
calculated by various publications, services, indices, or averages. Such
comparisons are made to assist in evaluating an investment in a Fund. The
following references may be used:
a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks (Dow Jones Utilities Average),
and 20 transportation company stocks (Dow Jones Transportation Average).
Comparisons of performance assume reinvestment of dividends.
b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utilities stocks, and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends.
Standard & Poor's 100 Stock Index -- an unmanaged index based on the
prices of 100 blue chip stocks, including 92 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
B-51
<PAGE>
individual mutual fund performance over specified time periods assuming
reinvestment of all distributions, exclusive of sales charges.
f) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.,
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
g) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, risk and total return for the mutual fund industry.
h) Financial publications: Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Pension and Investment Age,
United Mutual Fund Selector, and Wiesenberger Investment Companies Service, and
other publications containing financial analyses which rate mutual fund
performance over specified time periods.
i) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of periodic change in the
price of goods and services in major expenditure groups.
j) Stocks, Bonds, Bills, and Inflation, published by Ibbotson Associates --
historical measure of yield, price, and total return for common and small
company stock, long-term government bonds, treasury bills, and inflation.
k) Savings and Loan Historical Interest Rates as published in the U.S.
Savings & Loan League Fact Book.
l) Shearson-Lehman Municipal Bond Index and Government/Corporate Bond Index
- -- unmanaged indices that track a basket of intermediate and long-term bonds.
Reflect total return and yield and assume dividend reinvestment.
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.
B-52
<PAGE>
o) Morgan Stanley Capital International EAFE Index -- an arithmetic, market
value-weighted average of the performance of over 900 securities on the stock
exchanges of countries in Europe, Australia and the Far East.
p) Goldman Sachs 100 Convertible Bond Index -- currently includes 67 bonds
and 33 preferred stocks. The original list of names was generated by screening
for convertible issues of $100 million or more in market capitalization. The
index is priced monthly.
q) Salomon Brothers High Grade Corporate Bond Index -- consists of publicly
issued, non-convertible corporate bonds rated "AA" or "AAA". It is a value-
weighted, total return index, including approximately 800 issues.
r) Salomon Brothers Broad Investment Grade Bond Index -- is a market-
weighted index that contains approximately 4700 individually priced investment
grade corporate bonds rated "BBB" or better, U.S. Treasury/agency issues and
mortgage pass-through securities.
s) Salomon Brother World Bond Index -- measures the total return
performance of high-quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10 currencies:
Australian Dollars Netherlands Guilders
Canadian Dollars Swiss Francs
European Currency Units UK Pound Sterling
French Francs U.S. Dollars
Japanese Yen German Deutsche Marks
t) J.P. Morgan Global Government Bond Index -- a total return, market
capitalization-weighted index, rebalanced monthly, consisting of the following
countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
The Netherlands, Spain, Sweden, the United Kingdom, and the United States.
u) Shearson Lehman LONG-TERM Treasury Bond Index -- is comprised of all
bonds covered by the Shearson Lehman Hutton Treasury Bond Index with maturities
of 10 years or greater.
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.
B-53
<PAGE>
x) First Boston High Yield Index -- generally includes over 180 issues with
an average maturity range of seven to ten years with a minimum capitalization of
$100 million. All issues are individually trader-priced monthly.
y) Morgan Stanley Capital International World Index -- An arithmetic,
market value-weighted average of the performance of over 1,470 securities list
on the stock exchanges of countries in Europe, Australia, the Far East, Canada
and the United States.
z) Russell 3000 and 2000 Index -- represents the top 3,000 and the next
2,000 stocks traded on the New York Stock Exchange, American Stock Exchange and
National Association of Securities Dealers Automated Quotations, by market
capitalizations.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to a Fund's portfolio, that the averages are generally
unmanaged and that the items included in the calculations of such averages may
not be identical to the formula used by a Fund to calculate its figures.
Specifically, a Fund may compare its performance to that of certain indices
which include securities with government guarantees. However, a Fund's shares do
not contain any such guarantees. In addition, there can be no assurance that a
Fund will continue its performance as compared to such other standards.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. 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
B-54
<PAGE>
of its assets is invested in the securities of any one issuer (other than
government securities or the securities of other regulated investment
companies).
As a regulated investment company, each Fund will not be subject to U.S.
Federal income tax on its income and capital gains which it distributes as
dividends or capital gains distributions to shareholders provided that it
distributes to shareholders at least 90% of its investment company taxable
income for the taxable year. Each Fund intends to distribute sufficient income
to meet this qualification requirement.
Under the Code, amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To avoid the tax, each Fund must distribute during each calendar
year (1) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (2) at least 98% of its capital
gains in excess of its capital losses for the 12-month period ending on October
31 of the calendar year, and (3) all ordinary income and net capital gains for
the previous years that were not distributed during such years. To avoid
application of the excise tax, each Fund intends to make distributions in
accordance with the calendar year distribution requirement. A distribution will
be treated as paid on December 31 of the calendar year if declared by each Fund
in October, November or December of such year, payable to shareholders of record
on a date in such month and paid by each Fund during January of the following
year. Any such distributions paid during January of the following year will be
taxable to 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 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
B-55
<PAGE>
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 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.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time such Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly, gains or losses on
forward foreign currency exchange contracts, sale of currencies or dispositions
of debt securities denominated in a foreign currency attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security and the date of disposition generally also are
treated as ordinary gain or loss. These gains, referred to under the Code as
"Section 988" gains or losses, increase or decrease the amount of each Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income.
The Code includes special rules applicable to the listed non-equity
options, regulated futures contracts, and options on futures contracts which a
Fund may write, purchase or sell. Such options and contracts are classified as
Section 1256 contracts under the Code. The character of gain or loss resulting
from the sale, disposition, closing out, expiration or other termination of
Section 1256 contracts, except forward foreign currency exchange contracts, is
generally treated as long-term capital gain or loss to the extent of 60% thereof
and short-term capital gain or loss to the extent of 40% thereof ("60/40 gain or
loss"). Such contracts, when held by a Fund at the end of a fiscal year,
generally are required to be treated as sold at market value on the last day of
such fiscal year for Federal income tax purposes ("marked-to-market"). Over-the-
counter options are not classified as Section 1256 contracts and are not subject
to the marked-to-market rule or to 60/40 gain or loss treatment. Any gains or
losses recognized by a Fund from transactions in over-the-counter options
generally constitute short-term capital gains or losses. When call options
written, or put options purchased, by a Fund are exercised, the gain or loss
realized on the sale of the underlying securities may be either short-term or
long-term, depending on the holding period 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.
B-56
<PAGE>
A substantial portion of each Fund's transactions in options, futures
contracts and options on futures contracts, particularly its hedging
transactions, may constitute "straddles" which are defined in the Code as
offsetting positions with respect to personal property. A straddle consisting of
a listed option, futures contract, or option on a futures contract and of U.S.
Government securities would constitute a "mixed straddle" under the Code. The
Code generally provides with respect to straddles (i) "loss deferral" rules
which may postpone recognition for tax purposes of losses from certain closing
purchase transactions or other dispositions of a position in the straddle to the
extent of unrealized gains in the offsetting position, (ii) "wash sale" rules
which may postpone recognition for tax purposes of losses where a position is
sold and a new offsetting position is acquired within a prescribed period, (iii)
"short sale" rules which may terminate the holding period of securities owned by
a Fund when offsetting positions are established and which may convert certain
losses from short-term to long-term, and (iv) "conversion transaction" rules
which recharacterize capital gains as ordinary income. The Code provides that
certain elections may be made for mixed straddles that can alter the character
of the capital gain or loss recognized upon disposition of positions which form
part of a straddle. Certain other elections also are provided in the Code; no
determination has been reached to make any of these elections.
The Growth and Income Fund may purchase debt securities (such as zero-
coupon or pay-in-kind securities) that contain original issue discount. Original
issue discount that accrues in a taxable year is treated as earned by a Fund and
therefore is subject to the distribution requirements of the Code. Because the
original issue discount earned by the Fund in a taxable year may not be
represented by cash income, the Fund may have to dispose of other securities and
use the proceeds to make distributions to shareholders.
A Fund may be required to backup withhold U.S. Federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail to
provide their correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's U.S. Federal
income tax liability.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect.
Shareholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes. In addition, foreign investors
should consult with their own tax advisors regarding the particular tax
consequences to them of an investment in each Fund. Qualification as a regulated
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
B-57
<PAGE>
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.
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.
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES ("SIMPLE IRA"). This plan was
introduced by a provision of the Small Business Job Protection Act of 1996 to
provide small employers with a simplified tax-favored retirement plan.
Contributions are deducted from the employee's paycheck before taxes and are
deposited into a SIMPLE IRA by the employer, who must make either matching
contributions or non-elective contributions. Contributions are tax-deductible
for the employer and participants do not pay taxes on contributions on earnings
until they are withdrawn.
ROTH IRA. This plan, introduced by Section 302 of the Taxpayer Relief Act of
1997, generally permits individuals with adjusted gross income of up to $95,000,
and married couples with joint adjusted gross income of up to $150,000, to
contribute to a "Roth IRA." Contributions are not tax-deductible, but
distribution of assets (contributions and earnings) held in the account for at
least five years may be distributed tax-free under certain qualifying
conditions.
EDUCATION IRA. Established by the Taxpayer Relief Act of 1997, under Section 530
of the Code, this plan permits individuals to contribute to an IRA on behalf of
any child under the age of 18.
B-58
<PAGE>
Contributions are not tax-deductible but distributions are tax-free if used for
qualified educational expenses.
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, five series of shares of the Trust have been authorized pursuant
to the Declaration of Trust: the Balanced Assets Fund, the Blue Chip Growth
Fund, the Mid-Cap Growth Fund, the Small Company Growth Fund and the Growth and
Income Fund. The Blue Chip Growth Fund and the Mid-Cap Growth Fund have each
been divided into two classes of shares, designated as Class A and Class B
shares. The Growth and Income Fund has been divided into three classes of
shares, designated as Class A, Class B and Class C shares. The Balanced Assets
Fund has been divided into three classes of shares, designated as Class A, Class
B and Class Z shares. The Small Company Growth Fund has been divided into four
classes of shares, designated as Class A, Class B, Class C 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 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.
B-59
<PAGE>
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 and Class C shares are each subject to a CDSC, 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.
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 Fund+ Blue Chip Growth Fund
-------------------- ---------------------
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Assets.... $147,035,456 $171,196,506 $51,993,425 $36,199,481
Number of Shares Outstanding....
8,748,465 10,187,608 2,950,757 2,096,657
Net Asset Value Per Share (net assets
divided by number of shares)...... $ 16.81 $ 16.80 $ 17.62 $ 17.27
Sales Charge for Class A Shares: 5.75%
of offering price (6.10% of net asset
value per share)*...... $ 1.03 $ ** $ 1.07 $ **
Offering Price.......... $ 17.84 $ 16.80 $ 18.69 $ 17.27
</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
B-60
<PAGE>
on redemption of shares within six years of purchase.
+ The offering of Class Z shares commenced on October 1, 1996.
<TABLE>
<CAPTION>
Growth and Income Fund++ Mid-Cap Growth Fund
---------------------- -------------------
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Assets.......................... $21,099,017 $13,903,004 $41,904,384 $13,783,802
Number of Shares Outstanding........ 2,015,981 $ 1,330,114 2,356,510 791,770
Net Asset Value Per Shares (net
assets divided by number of
shares)............................ $ 10.47 $ 10.45 $ 17.78 $ 17.41
Sales Charge for Class A Shares:
5.75% of offering price (6.10% of
net asset value per share)*........ $ .64 $ ** $ 1.08 $ **
Offering Price...................... $ 11.11 $ 10.45 $ 18.86 $ 17.41
</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.
<TABLE>
<CAPTION>
Small Company Growth Fund ++
----------------------------
Class A Class B
------- -------
<S> <C> <C>
Net Assets.......................... $158,567,071 $107,839,397
Number of Shares Outstanding........ 6,538,057 4,550,952
Net Asset Value Per Shares (net
assets divided by number of
shares)............................ $ 24.25 $ 23.70
Sales Charge for Class A Shares:
5.75% of offering price (6.10% of
net asset value per share)*........ $ 1.48 $ **
Offering Price...................... $ 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, 1776
Heritage Drive, North Quincy, MA 02171, serves as Custodian and Transfer Agent
for the Funds and in those
B-61
<PAGE>
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-62
<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 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.
Appendix-1
<PAGE>
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
-- 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
Appendix-2
<PAGE>
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.
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.
Appendix-3
<PAGE>
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 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
Appendix-4
<PAGE>
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.
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
Appendix-5
<PAGE>
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 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
Appendix-6
<PAGE>
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. 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. 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. Incorporated
herein by reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A (File No. 33-
8021) filed on January 27, 1997.
(5)(b) Sub-Advisory Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed on
January 27, 1997.
(6)(a) Distribution Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed on
January 27, 1997.
(6)(b) Form of Dealer Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed on
January 27, 1997.
(7) Directors'/Trustees' Retirement Plan. Incorporated herein by
reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement
<PAGE>
on Form N-1A (File No. 33-8021) filed on January 27, 1997.
(8) Custodian Contract, as amended. Incorporated herein by
reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A (File No. 33-
8021) filed on January 27, 1997.
(9)(a) Transfer Agency and Service Agreement. Incorporated herein by
reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A (File No. 33-
8021) filed on January 27, 1997.
(9)(b) Service Agreement, as amended. Incorporated herein by reference
to Post-Effective Amendment No. 19 to the Registrant's
Registration Statement on Form N-1A (File No. 33-8021) filed on
January 27, 1997.
(10) Inapplicable.
(11) Consent of Independent Accountants. Incorporated herein by
reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A (File No. 33-
8021) filed on January 27, 1997.
(12) Inapplicable.
(13) Inapplicable.
(14) Model Retirement Plans. 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 pursuant to Rule 12b-1 (Class A Shares and
Class B Shares). Incorporated herein by reference to Post-
Effective Amendment No. 19 to the Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January 27,
1997.
(16) Schedule of Computation of Performance Quotations. 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. 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. Incorporated herein by reference
to Post-
C-2
<PAGE>
Effective Amendment No. 19 to the Registrant's Registration
Statement on Form N-1A (File No. 33-8021) filed on January 27,
1997.
(27) Financial Data Schedules.
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 October 31, 1997 October 31, 1997 October 31, 1997
- ------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Balanced Assets Fund 16,896 8,747 2
Shares of Beneficial Interest
($.01 par value)
Blue Chip Growth Fund 7,002 3,310
Shares of Beneficial Interest
($.01 par value)
Mid-Cap Growth Fund 3,350 1,244
Shares of Beneficial Interest
($.01 par value)
Small Company Growth Fund 16,960 8,705 3
Shares of Beneficial Interest
($.01 par value)
Growth and Income Fund 3,292 3,259
Shares of Beneficial Interest
($.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,
C-3
<PAGE>
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),
which is 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, Distributor and Administrator" and "Trustees and Officers"
constituting Part B of the Registration Statement.
Item 29. Principal Underwriters.
(a) The principal underwriter of the Registrant also acts as principal
underwriter for:
SunAmerica Income Funds
SunAmerica Money Market Funds, Inc.
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:
<TABLE>
<CAPTION>
Name and Principal Position Position with the
Business Address With Underwriter Registrant
--------------------------------------- ------------------- -----------------
<S> <C> <C>
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.
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C> <C>
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.
</TABLE>
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.
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. 20 to the Registration Statement (the "Post-Effective
Amendment") pursuant to Rule 485(a) 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 25th of November, 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. 20 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 November 25, 1997
Peter A. Harbeck (Principal Executive Officer)
* Treasurer November 25, 1997
- ----------------------- (Principal Accounting
Peter C. Sutton and Financial Officer)
* Trustee November 25, 1997
- -----------------------
Peter McMillan III
* Trustee November 25, 1997
- -----------------------
S. James Coppersmith
* Trustee November 25, 1997
- -----------------------
Samuel M. Eisenstat
* Trustee November 25, 1997
- -----------------------
Stephen J. Gutman
* Trustee November 25, 1997
- -----------------------
Sebastiano Serpa
*By: /s/ Robert M. Zakem
Robert M. Zakem, Attorney-in-Fact
<PAGE>
SUNAMERICA EQUITY FUNDS
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. NAME
- ----------- ----------------------------------
<S> <C>
27 Financial Data Schedules
</TABLE>
<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>
