<PAGE>
SunAmerica Equity Funds Annual Report
REPORT FROM THE SUNAMERICA DOMESTIC EQUITY INVESTMENT TEAM
Donna Calder
Brian Clifford
John DiVito
Jeff Easter
Erik Franklin
Francis Gannon
P. Christopher Leary
Heather Rice
Dear Shareholders:
After the market peaked on July 17th, it has since corrected nearly
20% as the repercussions of the Asian crisis upon the domestic and
global economies widened. And while troubles continue in Latin America
and Asia, we do not believe this will have any long-term disastrous
effect. In fact, we are encouraged by longer-term growth prospects. We
continue to believe the U.S. is in a moderate-growth, low-inflationary
period and enjoys a strong economy. Our research shows job expansion and
a budget surplus, even though the U.S. is not entirely immune to
overseas economic conditions. While the volatile markets have triggered
large stock price swings, the underlying fundamentals of companies are
generally solid and continue to be well managed. It our belief that
corporate earnings will likely grow 5% to 6% in 1998 and we anticipate
1999 to be yet another year of economic and profit growth. We believe
the long-term direction of the market will be led by company earnings
which, although challenged in the near-term, may benefit from low
interest rates and powerful demographic spending patterns.
In anticipation of a market correction, our management team had
assumed a more defensive posture and had built up a cash position in
many of our equity funds from 4% (on average) to as high as 23% to
prepare for attractive buying opportunities. At SunAmerica, we continue
to focus on those companies that we believe can generate consistent,
double-digit growth in any economic environment. With this backdrop, we
present you with a portfolio review for each SunAmerica Equity Fund.
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SUNAMERICA BALANCED ASSETS FUND
PERFORMANCE
SunAmerica Balanced Assets Fund demonstrated superior
performance compared with many of its peers, ranking in the top
15% for the year-to-date and one-year periods through the end of
the third quarter, according to Lipper Analytical Services.
Balanced Assets Class A returned 9.32% on a cumulative basis
compared to 3.2% for the Lipper category, for the year ended
September 30, 1998. (Neither return reflects the impact of sales
charges.) Your Fund's strong performance was largely attributable
to a higher exposure to equities than the traditional balanced
fund as well as a large weighting in long-duration U.S.
Treasuries. Specifically, 60% to 65% of the assets have been
invested in equities, whereas a typical balanced fund may normally
maintain only 55% in stocks. In general, sector allocation
overweightings in healthcare, technology and financial stocks
enhanced performance through the end of the third quarter.
PORTFOLIO REVIEW
SunAmerica Balanced Assets Fund aims to conserve principal by
investing in a balanced portfolio of stocks and bonds. It
typically divides its assets between stocks of companies with
market capitalizations of over $1 billion and high-quality bonds.
Your portfolio continues to hold growth stocks which have
consistently posted double-digit returns in varied economic
environments. Top holdings include large pharmaceutical companies,
such as Warner-Lambert, Johnson & Johnson, Schering Plough and
Pfizer. These companies have performed well this year because
consumer spending on drugs and other medical supplies has been
strong and successful new products have been introduced into the
market. Your portfolio has also benefited from some of the
technology leaders which have fared well -- Dell, Cisco Systems,
Microsoft, Intel and Lucent Technologies. Many of these leaders
have strong managements who can navigate their companies towards
increasing market share despite market turmoil. Dell, for example,
experienced 33% growth in Asia. Also, Intel surprised investors
with an early announcement of revenue growth that was 8% to 10%
ahead of expectations.
Prior to the market downturn, management locked in gains for
your portfolio by reducing exposure to retail stocks such as Gap,
Home Depot and Wal-Mart and financial holdings such as Morgan
Stanley/Dean Witter. Management's decision to lower the Fund's
exposure to the retail and financial sectors during the quarter
was in response to the changing market environment,
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dwindling consumer confidence and, in the case of money center
banks and brokerages, trading losses in Russia and Latin America as
well as potential bad loans. Earlier, the financial sector had
benefited from declining interest rates as well as corporate
restructurings, mergers and investments in information technology.
In addition, we increased some energy and utility holdings. We also
increased certain pharmaceutical positions, such as Merck and
Schering Plough, many of which have been off as much as 10% and
thus represented good buying opportunities.
On the bond side, 30-year U.S. Treasuries have been attractive
due to uncertainty in Asia and slower domestic economic growth as
well as the recent federal budget surplus. Other fixed income
sectors such as corporate bonds and mortgage-backed securities have
performed well, albeit lagging somewhat behind Treasuries. The Fund
also holds investment-grade corporate bonds, such as Texas
Instruments, Hershey Foods and Goldman Sachs to enhance the Fund's
yield.
WINNERS AND LOSERS
Specifically, Dell (computers), Microsoft (computer software),
Biogen (a biotech firm specializing in treatments for various human
illnesses including Multiple Sclerosis), CVS (retail drugstore),
Gap, Home Depot, IBM, AT&T and Warner Lambert (pharmaceuticals)
have been some of the top performing names in your portfolio.
We have experienced some disappointments -- some market-driven
and others company-specific. For example, management sold positions
in Donaldson, Lufkin and Jenrette and its parent company, The
Equitable, due to concern for their excessive high-yield exposure
and the effect this might have on future earnings.
However, while some stocks posted losses on paper, management
continues to retain those positions because we still believe in
their fundamental stories. Examples include Motorola and Texas
Instruments, both of which have already demonstrated promising
results from their respective restructurings.
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SUNAMERICA BLUE CHIP GROWTH FUND
PERFORMANCE
SunAmerica Blue Chip Growth Fund has turned in solid
performance, placing it in the top 30% of its peer group for one-
year through the end of the third quarter and in the top 38% for
the third quarter, according to Lipper Analytical Services. Blue
Chip Growth Class A posted a cumulative gain of 5.09% compared to
a loss of 1.43% for the Lipper group, for the year ended September
30, 1998. (Neither return reflects the impact of sales charges.)
In general, your Fund benefited from significant overweightings in
healthcare, technology and financial stocks, which enhanced
performance through the end of the third quarter. The Fund
continues to prosper from long-term reliables like AT&T, Microsoft
and Dell.
PORTFOLIO REVIEW
Blue Chip Growth Fund seeks capital appreciation by investing
primarily in stocks of companies with large market capitalizations
of over $5 billion.
The Fund has prospered from certain long-term holdings such as
AT&T and EMC. AT&T recently announced plans to acquire Tele-
Communications, Inc. (TCI), which expands AT&T's reach to TCI's
millions of cable television subscribers. AT&T also recently
announced a new digital subscriber program called "One Rate" that
makes it a leading wireless provider. EMC Corp. has established
itself as the leading vendor of enterprise storage hardware with a
five-year estimated growth rate of 30%. It is also expanding to
provide proprietary storage management software.
Your Fund locked in profits from financial and retail holdings.
However, in anticipation of that sector's troubles resulting from
uncertainty and volatility in the international markets, we
reduced those positions and, in turn, increased oil, utility and
pharmaceutical holdings. These securities may provide yield-
related benefits and downside market protection. Your portfolio
now features large domestic and international oil concerns such as
Mobile, Chevron and Texaco and prominent pharmaceutical companies
such as Merck & Co. and Schering Plough. During the past year,
these companies have been attractively priced relative to the
overall stock market. More specifically, the "oil patch" has
become increasingly attractive to investors due to above-market
yield and bottom-of-the-barrel oil prices. In addition, we
anticipate further consolidation within the industry, which may
spur growth.
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WINNERS AND LOSERS
Top performers include Dell (computers), Microsoft (computer
software), Biogen (a biotech firm specializing in treatments for
various human illnesses including Multiple Sclerosis), Pfizer,
Lucent Technologies, Cisco Systems, AT&T, IBM, Merck & Co. and
Schering Plough.
The Fund has experienced disappointments. For example, Associates
First Capital, a recent spin-off from Ford Motor Company, has been
hurt by the rapid sell-off in financial stocks. We maintain a lower
position in that stock because of the financial strength of the
company, its increasingly balanced book of business and its
execution skills. Also, concerns over trading and international
exposure have negatively impacted Chase Manhattan Bank. We retain
this position because we believe it is currently undervalued
relative to improving fundamentals. Finally, BMC Software's stock
has also depreciated in value, we have not realized these losses
and continue to hold it because we believe the company will benefit
from a strong resurgence in its mainframe revenues.
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SUNAMERICA MID-CAP GROWTH FUND
PERFORMANCE
Since investment management responsibilities were assumed by
team members Brian Clifford and Erik Franklin, SunAmerica Mid-Cap
Growth Fund's performance ranking, which measures returns relative
to funds with similar objectives, has steadily improved. For the
year ended September 30, 1998, your Fund ranked in the top 10% to
15% of its peer group, according to Lipper Analytical Services.
Mid-Cap Growth Class A posted a cumulative loss of 4.20% compared
to a loss of 11.9% for its Lipper peer group, for the year ended
September 30, 1998. (Neither return reflects the impact of sales
charges.) In difficult market conditions, your Fund capitalized on
beneficial stock selection, proprietary risk/reward analysis and
management's efforts to shield your portfolio from stocks with
negatively changing fundamentals.
Mid-cap stocks offer some of the best opportunities from the
small-company market that have propelled themselves into mid-cap
market capitalization through fast growth and leading business
practices. This growth path often continues during the mid-cap
stage as these businesses expand and mature. In fact, the 1998
earnings growth expectations for the S&P 400 Mid-Cap Index is
17.4% compared to 4.8% for S&P 500 Index, according to a report by
Morgan Stanley Dean Witter Research, First Call, I/B/E/S, and
FactSet.
PORTFOLIO REVIEW
SunAmerica Mid-Cap Growth Fund seeks capital appreciation by
investing primarily in stocks of companies that generally have
market capitalizations of between $1 billion and $5 billion and
have been in operation for at least five years. It may also invest
in stocks issued by smaller companies that are believed to have
significant growth potential.
Your portfolio has benefited from a paring down of the number of
companies held to 78, compared to 112 previously. We believe this
number provides ample diversification along with stocks of
companies promising excellent revenue and earnings potential. We
have also repositioned the Fund to focus on the fastest-growing
segments in the economy -- healthcare and technology -- while
increasing the weighting in utilities for a more defensive posture
in anticipation of any economic slowdown. Management also
substantially reduced weightings in financials, basic materials
and transportation as we believe these sectors do not currently
offer as many promising opportunities.
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WINNERS AND LOSERS
Your portfolio reaped the rewards from big winners like Biogen,
Apple Computer (which introduced iMac, the first consumer desktop
in years), Diamond Offshore Drilling (an oil service company) and
Peregrine Systems (a Year 2000 beneficiary which makes software to
help businesses manage their assets).
Of course, the Fund did not escape fallout from market
turbulence. We accepted losses from companies such as Siebel
Systems (a sales force automation software), ICG Communications (a
competitive local exchange carrier) and Hambrecht & Quist (an
investment bank rocked by the market, fears of trading losses, a
decline in the number of underwritings and uncertain business
conditions).
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SUNAMERICA SMALL COMPANY GROWTH FUND
PERFORMANCE
SunAmerica Small Company Growth Fund has benefitted from changes
made last March including the addition of Donna Calder to
SunAmerica's Small-Cap Equity team. Unfortunately, however, the
Fund couldn't entirely escape the highly volatile market and its
effect on small company stock valuations. The average loss for the
Lipper peer group for the year ended September 30, 1998 was 20.58%
and the SunAmerica Small Company Growth Class A was down 25.00%.
(Neither return reflects the impact of sales charges.)
Management restructured the portfolio mid-year to assume a more
defensive posture. Your fund benefited from this strategy as
economic and financial conditions worsened. The results of this
move are demonstrated in the Fund's relative performance. Class A
Shares of your Fund ranked in the top 35% of its peer group year-
to-date, according to Lipper Analytical Services.
Management believes that now may be the time for long-term
investment in small-cap companies. The current valuations of these
stocks are quite compelling and many of the fundamentals remain
intact. The long-term trends driving the performance of these
stocks are evident and we believe many leading small-cap
companies, whose stocks are now priced cheaply, may offer strong
growth prospects over the next three to five years.
PORTFOLIO REVIEW
SunAmerica Small Company Growth Fund seeks capital appreciation
by investing primarily in equity securities of small, lesser known
or new growth companies or industries, such as telecommunications,
broadcasting and media and biotechnology. These companies
typically have market capitalizations of $1 billion or less and
have achieved, or are expected to achieve, growth or earnings over
various major business cycles.
The Fund was restructured to reduce the names in the portfolio
to 84, in order to better focus on the leaders and direct
beneficiaries of the positive trends occurring in the technology,
telecommunications, media and financial services sectors. We also
built up a cash position in preparation for new investment
prospects.
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WINNERS AND LOSERS
Your Fund has been able to capitalize on leading Internet stocks
ranging from small-company names including CMG Information Services
and Double Click to larger companies such as America Online and
Yahoo. As you may recall, the Fund has the ability to invest up to
the 25% of assets in larger companies under special situations
which, we believe, are likely to enhance the Fund's performance and
counter adverse effects of small-company market volatility. As
such, your Portfolio profited from holdings including Apple
Computer and Niagara Mohawk, a New York State utility that
benefited from deregulation as well as a restructuring. Other big
winners in your Fund included: Sepracor, a company that develops
and commercializes potentially improved versions of widely-
prescribed drugs such as Claritin, as well as American Disposal
Services (which has recently merged with Allied Waste).
As we mentioned earlier, the small-cap market has been under
severe pressure. The Fund had its share of setbacks and accepted
losses from holdings such as Checkpoint Software, Star Telecom,
Startek Global (a telecommunications services concern) and Novoste,
(a cardiovascular device manufacturer).
There are also a number of holdings in the Fund that have shown a
loss on paper, however, we have not realized these losses and
continue to believe in the underlying fundamentals of these small-
company issues. We hope to profit from these holdings in the
future. Names include Intermedia Communications Inc., (a leading
competitive local exchange carrier offering telecommunications
services to business customers) and Cinar Films, (a Canadian
company specializing in producing children's television programs,
including the number one rated show, Arthur, which airs on PBS).
Due to current market conditions and stock valuations, the
SunAmerica Small Company Equity Team anticipates future gains from
current portfolio holdings and attractive investment opportunities
in this market.
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SUNAMERICA GROWTH AND INCOME FUND
PERFORMANCE
SunAmerica Growth & Income Fund has posted strong gains compared
to its peers for the past three years. Your high-rated portfolio's
performance ranks in the top 3% of all Growth & Income funds over
the three years through the end of the third quarter, according to
Lipper Analytical Services. In addition, the Fund also ranked in
the top 23% for the latest month through the end of September and
the top 35% on a year-to-date basis. Growth and Income Class A
posted a cumulative gain of 5.53% compared to a loss of 1.09% for
the Lipper category, for the year ended September 30, 1998.
(Neither return reflects the impact of sales charges.)
Two strategic decisions have spurred this strong performance.
First, your Fund benefited from a reduction of the portfolio's
holdings to 86 names from 140. Moreover, its consistent
performance benefited from a "sector neutral" approach to stock
selection. This means management strives to lessen downside market
exposure by investing across multiple sectors.
PORTFOLIO REVIEW
SunAmerica Growth & Income Fund seeks capital appreciation and
current income by investing primarily in dividend-paying common
stocks. It normally buys stock of companies of any size, but will
generally look for stocks that pay dividends and offer the
potential for capital growth.
Your portfolio concentrates on high-yielding, high-growth
companies that have generated consistent double-digit returns in
varied economic environments. Emphasis is on the
telecommunications, healthcare and technology sectors. Top
holdings include MCI WorldCom, Pfizer, IBM and Tyco International.
In restructuring the portfolio, we reduced the Fund's number of
holdings to 86 and have lowered our exposure to the Real Estate
Investment Trust sector due to concern about future growth
potential. Your portfolio has benefited from the utilities sector
as well as large energy concerns including Exxon, Chevron and
Mobil Oil. These names offer solid yields and attractive growth.
Going forward, we will be looking to increase our weightings in
the financial sector as the Federal Reserve Bank becomes
increasingly proactive about providing liquidity and focusing on
growth measures. For example, the stocks of regional banks such as
Bank of New York, Fleet
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Bank, Mellon Bancorp and First Union offer attractive yields and
growth prospects at extremely inexpensive valuations.
WINNERS AND LOSERS
Top performers include Pfizer and Merck & Co. on the
pharmaceuticals side and Dell and IBM on the technology side. Peco
Energy, Enron, Consolidated Natural Gas and Philip Morris are other
big winners in your Portfolio.
As you might expect, the portfolio did contain some
disappointments. We sold positions in Savings & Loan Mortgage
Association (SLMA) securities, Federated Department Stores, and JC
Penney because of lagging underlying fundamentals. In contrast,
while the portfolio also suffered from investments in Carnival
Corp., we continue to maintain our position. We are convinced that
deteriorating consumer confidence will not impact this aspect of
leisure spending and the stock's performance will rebound. In fact,
1999 bookings already look quite strong.
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SUNAMERICA "DOGS" OF WALL STREET FUND
INTRODUCING OUR NEW PORTFOLIO
SunAmerica Asset Management this year introduced the SunAmerica
"Dogs" of Wall Street Fund to provide investors with a value
strategy of investing with a twist. Your Fund capitalizes on the
traditional "Dogs" of the Dow theory, but offers greater
diversity, higher total return possibilities, and potentially
lower risk. In addition to the 10 highest yielding stocks of the
Dow, your Fund invests in 20 other highest-yielding companies
among the 400 largest industrial companies. Each boasts $1 billion
or more in market capitalization plus high growth and earnings
rankings from an independent ranking agency. Although past
performance is not an indication of future results, SunAmerica's
"Dogs" of Wall Street strategy's annual average compounded return
would have been slightly over 31% in 1997, slightly over 29% on a
three-year basis and slightly over 21% on a five-year basis.
GENERAL "DOGS" PERFORMANCE
Since the market began retreating in July, the "Dogs" of the Dow
stocks have provided investors with good downside protection. The
group was up 2.7% (including dividends) through the third quarter
of this year, compared to 1% for the Dow Jones Industrial Average.
To offer historical perspective, the "Dogs" gained about 2% during
the bear market of 1973-1974, while the Dow was off 30%.
Another measure of the "Dogs" stocks is yield. The "Dogs"
currently pay dividends averaging 3%, compared to the 1.9% yield
on the Dow. General Motors stock yields 4% and Philip Morris
yields 3.6%. In addition, many "Dogs" stocks are selling at
attractively low Price/Earnings multiples -- Philip Morris at 14
and GM at around 6, based on anticipated 1999 earnings.
PORTFOLIO REVIEW
SunAmerica "Dogs" of Wall Street Fund seeks total return
(including capital appreciation and current income) through a
passively managed strategy resulting in a concentrated value
approach to investing which promotes consistent investing
regardless of market conditions. It is designed to provide a long-
term growth component through exposure to blue chip companies with
proven track records. The "Dogs" strategy offers a contrarian
investment approach, which may
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fare well in the current market environment because value stocks
have been out of favor and thus provide attractive investment
opportunities. In addition, a well-diversified portfolio should
contain a value component.
Given the disciplined nature of our investment strategy,
employing precise stock selection criteria analyzing the underlying
fundamentals of the stock market or individual stocks are not
considered a primary concern in the management of the "Dogs" of
Wall Street Fund.
PORTFOLIO CHARACTERISTICS
<TABLE>
<CAPTION>
MEDIAN PRICE/
NUMBER CAPITALIZATION EARNINGS
OF STOCKS ($BILLIONS) RATIO
<S> <C> <C> <C>
"DOGS" OF WALL STREET
FUND 30 14.0 21.3
DOW 10 PORTFOLIO 10 44.0 21.4
</TABLE>
IF YOU WOULD LIKE ADDITIONAL INFORMATION:
[_] CALL FAST FACTS -- CALL OUR 24-HOUR AUTOMATED ACCOUNT AND
FUND INFORMATION HOTLINE AT 800-654-4760.
[_] VISIT SUNAMERICA ON THE WORLD WIDE WEB. VISIT OUR SITE AT
WWW.SUNAMFUNDS.COM FOR MORE UP-TO-DATE INFORMATION.
SUNAMERICA MUTUAL FUNDS
THANKS YOU FOR YOUR CONTINUED SUPPORT.
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SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND "DOGS" OF
ASSETS GROWTH GROWTH GROWTH INCOME WALL STREET
FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments securities,
at value*.............. $319,254,090 $ 97,620,414 $47,534,013 $127,372,539 $122,856,638 $55,018,295
Short-term securities*.. -- -- -- -- 49,750 --
Repurchase agreements
(cost equals market)... 34,469,000 10,865,000 1,938,000 38,447,000 13,902,000 257,000
Cash.................... 44,589 215 697 223 272 106,315
Interest and dividends
receivable............. 1,639,110 89,156 36,410 31,259 114,198 109,250
Receivable for
investments sold....... 841,789 -- 2,498,319 4,307,616 -- --
Receivable for shares of
beneficial interest
sold................... 510,696 347,549 274,035 52,751 580,297 2,257,982
Prepaid expenses........ 10,823 32,195 5,962 15,047 7,747 55,872
Deferred organizational
expenses............... -- -- -- -- 203 --
Receivable from
investment adviser..... -- -- -- 5,286 3,686 28,565
------------ ------------ ----------- ------------ ------------ -----------
Total assets.......... 356,770,097 108,954,529 52,287,436 170,231,721 137,514,791 57,833,279
------------ ------------ ----------- ------------ ------------ -----------
LIABILITIES:
Payable for shares of
beneficial interest
redeemed............... 435,878 71,009 38,332 359,534 42,700 8,994
Accrued expenses........ 271,854 126,239 87,682 202,682 119,816 51,908
Investment advisory and
management fees
payable................ 216,259 65,816 28,624 104,059 82,387 14,022
Distribution and service
maintenance fees
payable................ 189,109 49,750 18,522 81,762 79,901 31,991
Dividends payable....... 62,831 -- -- -- -- --
Payable for investments
purchased.............. -- -- 3,650,349 1,379,657 -- 1,212,303
Written options at value
(proceeds $649,698 on
Small Company Growth).. -- -- -- 729,500 -- --
------------ ------------ ----------- ------------ ------------ -----------
Total liabilities..... 1,175,931 312,814 3,823,509 2,857,194 324,804 1,319,218
------------ ------------ ----------- ------------ ------------ -----------
Net assets.......... $355,594,166 $108,641,715 $48,463,927 $167,374,527 $137,189,987 $56,514,061
============ ============ =========== ============ ============ ===========
NET ASSETS WERE COMPOSED
OF:
Shares of beneficial
interest, $.01 par
value.................. $ 197,305 $ 59,211 $ 30,160 $ 88,965 $ 108,068 $ 51,189
Paid-in capital......... 282,347,132 85,172,302 40,298,327 158,441,241 121,988,753 60,750,415
------------ ------------ ----------- ------------ ------------ -----------
282,544,437 85,231,513 40,328,487 158,530,206 122,096,821 60,801,604
Accumulated
undistributed net
investment income
(loss)................. (85,057) (12,409) (6,950) (28,365) (5,954) 234,485
Accumulated
undistributed net
realized gain on
investments, foreign
currency and other
assets and liabilities. 23,387,622 6,773,487 3,419,179 10,474,869 4,562,107 --
Net unrealized
appreciation
(depreciation) of
investments............ 49,747,164 16,649,124 4,723,211 (1,522,381) 10,537,013 (4,522,028)
Net unrealized
depreciation on written
options contracts...... -- -- -- (79,802) -- --
------------ ------------ ----------- ------------ ------------ -----------
Net assets.......... $355,594,166 $108,641,715 $48,463,927 $167,374,527 $137,189,987 $56,514,061
============ ============ =========== ============ ============ ===========
*Identified cost
Investment securities... $269,506,926 $ 80,971,290 $42,810,802 $128,894,920 $112,319,299 $59,540,323
============ ============ =========== ============ ============ ===========
Short-term securities... -- -- -- -- $ 50,076 --
============ ============ =========== ============ ============ ===========
</TABLE>
See Notes to Financial Statements
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SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND "DOGS" OF
ASSETS GROWTH GROWTH GROWTH INCOME WALL STREET
FUND FUND FUND FUND FUND FUND
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. $189,667,959 $72,535,570 $38,437,342 $105,243,111 $57,128,985 $16,671,775
Shares of beneficial
interest issued and
outstanding............ 10,519,109 3,897,584 2,369,890 5,510,694 4,463,782 1,507,576
Net asset value and
redemption price per
share.................. $ 18.03 $ 18.61 $ 16.22 $ 19.10 $ 12.80 $ 11.06
Maximum sales charge
(5.75% of offering
price)................. 1.10 1.14 0.99 1.16 0.78 0.67
------------ ----------- ----------- ------------ ----------- -----------
Maximum offering price
to public.............. $ 19.13 $ 19.75 $ 17.21 $ 20.26 $ 13.58 $ 11.73
============ =========== =========== ============ =========== ===========
CLASS B (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. $165,926,207 $36,106,145 $10,026,585 $ 61,398,079 $79,004,085 $19,734,004
Shares of beneficial
interest issued and
outstanding............ 9,211,366 2,023,562 646,152 3,347,400 6,259,325 1,788,369
Net asset value,
offering and redemption
price per share
(excluding any
applicable contingent
deferred sales charge). $ 18.01 $ 17.84 $ 15.52 $ 18.34 $ 12.62 $ 11.03
============ =========== =========== ============ =========== ===========
CLASS C (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. -- -- -- $ 168,485 $ 963,496 --
Shares of beneficial
interest issued and
outstanding............ -- -- -- 9,188 76,408 --
Net asset value,
offering and redemption
price per share
(excluding any
applicable contingent
deferred sales charge). -- -- -- $ 18.34 $ 12.61 --
============ =========== =========== ============ =========== ===========
CLASS II (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. -- -- -- -- -- $20,108,282
Shares of beneficial
interest issued and
outstanding............ -- -- -- -- -- 1,822,909
Net asset value and
redemption price per
share (excluding any
applicable contigent
deferred sales charge). -- -- -- -- -- $ 11.03
Maximum sales charge
(1.00% of offering
price)................. -- -- -- -- -- 0.11
------------ ----------- ----------- ------------ ----------- -----------
Maximum offering price
to public.............. -- -- -- -- -- $ 11.14
============ =========== =========== ============ =========== ===========
CLASS Z (UNLIMITED
SHARES AUTHORIZED):
Net assets.............. -- -- -- $ 564,852 $ 93,421 --
Shares of beneficial
interest issued and
outstanding............ -- -- -- 29,216 7,276 --
Net asset value,
offering and redemption
price per share........ -- -- -- $ 19.33 $ 12.84 --
============ =========== =========== ============ =========== ===========
</TABLE>
See Notes to Financial Statements
15
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SUNAMERICA EQUITY FUNDS
STATEMENT OF OPERATIONS -- FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND "DOGS" OF
ASSETS GROWTH GROWTH GROWTH INCOME WALL STREET
FUND FUND FUND FUND FUND FUND
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................. $ 8,050,065 $ 198,532 $ 145,326 $ 898,624 $ 267,943 $ 18,026
Dividends (net of
withholding taxes of
$19,920, $7,282, $0,
$1,760, $8,172 and
$3,242, respectively)... 2,977,204 1,281,746 336,760 805,043 1,836,811 307,479
----------- ---------- ----------- ------------ ---------- -----------
Total investment income.. 11,027,269 1,480,278 482,086 1,703,667 2,104,754 325,505
----------- ---------- ----------- ------------ ---------- -----------
Expenses:
Investment advisory and
management fees......... 2,704,740 844,891 412,690 1,818,045 977,786 39,290
Distribution and service
maintenance fees--Class
A....................... 645,087 257,768 151,368 515,835 200,444 16,281
Distribution and service
maintenance fees--Class
B....................... 1,770,905 390,042 117,776 939,577 728,174 34,839
Distribution and service
maintenance fees--Class
C....................... -- -- -- 1,105 2,563 --
Distribution and service
maintenance fees--Class
II...................... -- -- -- -- -- 30,904
Transfer agent fees and
expenses--Class A....... 523,992 200,307 113,919 408,271 151,273 13,489
Transfer agent fees and
expenses--Class B....... 452,068 108,473 34,251 243,036 178,476 10,301
Transfer agent fees and
expenses--Class C....... -- -- -- 1,570 3,022 --
Transfer agent fees and
expenses--Class II...... -- -- -- -- -- 9,146
Transfer agent fees and
expenses--Class Z....... 8,816 -- -- 17,640 6,020 --
Custodian fees and
expenses................ 126,300 73,135 69,000 125,460 87,535 9,994
Registration fees--Class
A....................... 21,385 12,850 12,618 19,170 9,910 6,248
Registration fees--Class
B....................... 20,100 6,661 6,814 16,296 15,833 9,363
Registration fees--Class
C....................... -- -- -- 13,772 15,583 --
Registration fees--Class
II...................... -- -- -- -- -- 5,704
Registration fees--Class
Z....................... 175 -- -- 1,421 1,884 --
Trustee's fees and
expenses................ 37,426 11,466 6,594 27,630 12,740 575
Printing expense......... 30,615 14,465 5,425 32,220 10,200 2,570
Audit and tax consulting
fees.................... 27,470 35,110 34,855 31,120 34,600 13,075
Legal fees and expenses.. 5,230 5,150 2,775 4,785 1,825 2,300
Insurance expense........ 4,869 1,368 816 3,941 760 4
Interest expense......... 2,899 -- 5,179 33,733 971 --
Amortization of
organizational expenses. -- -- -- -- 277 --
Miscellaneous expenses... 5,189 2,163 1,621 4,340 2,118 795
----------- ---------- ----------- ------------ ---------- -----------
Total expenses........... 6,387,266 1,963,849 975,701 4,258,967 2,441,994 204,878
Less: expenses
reimbursed by
investment adviser...... (8,754) -- -- (32,661) (25,805) (55,500)
----------- ---------- ----------- ------------ ---------- -----------
Net expenses............. 6,378,512 1,963,849 975,701 4,226,306 2,416,189 149,378
----------- ---------- ----------- ------------ ---------- -----------
Net investment income
(loss)................... 4,648,757 (483,571) (493,615) (2,522,639) (311,435) 176,127
----------- ---------- ----------- ------------ ---------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on
investments.............. 24,425,420 7,610,662 5,342,697 20,153,760 5,999,035 --
Net realized gain (loss)
on option contracts...... -- -- 182,906 (141,399) -- --
Net realized gain on
foreign currency and
other assets
and liabilities.......... -- 6 42 -- -- --
Net change in unrealized
appreciation/depreciation
on investments........... 1,642,258 (1,920,853) (6,869,735) (82,111,504) (864,910) (4,522,028)
Net change in unrealized
appreciation/depreciation
on written options
contracts................ -- -- -- (79,802) -- --
----------- ---------- ----------- ------------ ---------- -----------
Net realized and
unrealized gain (loss) on
investments, foreign
currency and other assets
and liabilities.......... 26,067,678 5,689,815 (1,344,090) (62,178,945) 5,134,125 (4,522,028)
----------- ---------- ----------- ------------ ---------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS.......... $30,716,435 $5,206,244 $(1,837,705) $(64,701,584) $4,822,690 $(4,345,901)
=========== ========== =========== ============ ========== ===========
</TABLE>
See Notes to Financial Statements
16
<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,
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
OPERATIONS:
Net investment income
(loss)................ $ 4,648,757 $ 5,015,077 $ (483,571) $ (335,991) $ (493,615) $ (562,601)
Net realized gain on
investments........... 24,425,420 34,784,767 7,610,662 13,956,312 5,342,697 10,239,030
Net realized gain on
option contracts...... -- -- -- -- 182,906 --
Net realized gain on
foreign currency,
other assets and
liabilities........... -- -- 6 -- 42 --
Net change in
unrealized
appreciation/
depreciation on
investments........... 1,642,258 31,289,347 (1,920,853) 12,669,963 (6,869,735) 984,447
------------ ------------ ------------ ------------ ----------- -----------
Net increase (decrease)
in net assets resulting
from operations........ 30,716,435 71,089,191 5,206,244 26,290,284 (1,837,705) 10,660,876
------------ ------------ ------------ ------------ ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)...... (3,066,976) (2,846,051) -- -- -- --
From net investment
income (Class B)...... (1,812,490) (2,063,991) -- -- -- --
From net investment
income (Class Z)...... (2,188) (641) -- -- -- --
From net realized gains
on investments
(Class A)............. (16,001,494) (14,835,171) (8,287,237) (7,108,685) (7,536,397) (1,856,886)
From net realized gains
on investments
(Class B)............. (16,263,710) (17,300,021) (4,747,751) (5,010,638) (2,258,592) (619,105)
From net realized gains
on investments
(Class Z)............. (35,253) (994) -- -- -- --
------------ ------------ ------------ ------------ ----------- -----------
Total dividends and
distributions to
shareholders........... (37,182,111) (37,046,869) (13,034,988) (12,119,323) (9,794,989) (2,475,991)
------------ ------------ ------------ ------------ ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 6).. 19,370,777 (9,585,219) 11,025,071 3,081,521 266,590 (4,043,040)
------------ ------------ ------------ ------------ ----------- -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS................. 12,905,101 24,457,103 3,196,327 17,252,482 (11,366,104) 4,141,845
NET ASSETS:
Beginning of period..... 342,689,065 318,231,962 105,445,388 88,192,906 59,830,031 55,688,186
------------ ------------ ------------ ------------ ----------- -----------
End of period [including
undistributed net
investment income
(loss) for
September 30, 1998 and
September 30, 1997 of
($85,057), $91,715;
($12,409), ($8,538);
($6,950), and ($4,811),
respectively].......... $355,594,166 $342,689,065 $108,641,715 $105,445,388 $48,463,927 $59,830,031
============ ============ ============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements
17
<PAGE>
SUNAMERICA EQUITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND GROWTH AND INCOME FUND "DOGS" OF WALL STREET
---------------------------- ---------------------------- ---------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED JUNE 8, 1998*
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, THROUGH
1998 1997 1998 1997 SEPTEMBER 30, 1998
------------- ------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss).................. $ (2,522,639) $ (3,953,450) $ (311,435) $ 73,082 $ 176,127
Net realized gain on
investments............. 20,153,760 32,482,170 5,999,035 10,454,215 --
Net realized loss on
option contracts........ (141,399) (72,208) -- -- --
Net realized loss on
foreign currency, other
assets and liabilities.. -- -- -- (8) --
Net change in unrealized
appreciation/depreciation
on investments.......... (82,111,504) 23,022,865 (864,910) 9,603,085 (4,522,028)
Net change in unrealized
appreciation/depreciation
on written option
contracts............... (79,802) -- -- -- --
------------- ------------ ------------ ------------ -----------
Net increase (decrease) in
net assets resulting from
operations............... (64,701,584) 51,479,377 4,822,690 20,130,374 (4,345,901)
------------- ------------ ------------ ------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income (Class A)........ -- -- -- (72,848) --
From net investment
income (Class B)........ -- -- -- (30,158) --
From net realized gains
on investments (Class
A)...................... (15,001,692) (5,628,252) (5,129,665) (1,193,264) --
From net realized gains
on investments (Class
B)...................... (10,065,127) (3,985,469) (6,103,333) (917,178) --
From net realized gains
on investments (Class
Z)...................... (106,214) (7,070) -- -- --
------------- ------------ ------------ ------------ -----------
Total dividends and
distributions to
shareholders............. (25,173,033) (9,620,791) (11,232,998) (2,213,448) --
------------- ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
CAPITAL SHARE
TRANSACTIONS (NOTE 6).... (53,359,166) 2,343,256 40,851,375 49,829,973 60,859,962
------------- ------------ ------------ ------------ -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS............ (143,233,783) 44,201,842 34,441,067 67,746,899 56,514,061
NET ASSETS:
Beginning of period....... 310,608,310 266,406,468 102,748,920 35,002,021 --
------------- ------------ ------------ ------------ -----------
End of period [including
undistributed net
investment income (loss)
for September 30, 1998
and September 30, 1997 of
($28,365), ($18,299);
($5,954), ($2,144);
$234,485 and $0,
respectively]............ $ 167,374,527 $310,608,310 $137,189,987 $102,748,920 $56,514,061
============= ============ ============ ============ ===========
</TABLE>
*Commencement of Operations
See Notes to Financial Statements
18
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
BALANCED ASSETS 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(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
-------
9/30/94......... $15.13 $ 0.30 $ (0.23) $ 0.07 $(0.28) $(0.30) $(0.58) $14.62 0.50% $ 52,098
9/30/95......... 14.62 0.32 2.51 2.83 (0.45) (0.58) (1.03) 16.42 20.68 119,916
9/30/96......... 16.42 0.27 1.39 1.66 (0.28) (0.99) (1.27) 16.81 10.65 147,035
9/30/97......... 16.81 0.31 3.43 3.74 (0.31) (1.75) (2.06) 18.49 24.81 169,201
9/30/98......... 18.49 0.29 1.29 1.58 (0.30) (1.74) (2.04) 18.03 9.32 189,668
CLASS B
-------
9/30/94......... $15.13 $ 0.20 $ (0.23) $ (0.03) $(0.18) $(0.30) $(0.48) $14.62 (0.14)% $180,655
9/30/95......... 14.62 0.23 2.51 2.74 (0.36) (0.58) (0.94) 16.42 19.96 162,115
9/30/96......... 16.42 0.17 1.38 1.55 (0.18) (0.99) (1.17) 16.80 9.93 171,197
9/30/97......... 16.80 0.21 3.43 3.64 (0.21) (1.75) (1.96) 18.48 24.09 173,435
9/30/98......... 18.48 0.18 1.28 1.46 (0.19) (1.74) (1.93) 18.01 8.62 165,926
- -----------------------------------------------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND
- ---------------------
<CAPTION>
NET
GAIN(LOSS)
ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET NET MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, INVEST- REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING MENT AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD INCOME(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
-------
10/08/93-
9/30/94(3)..... $16.24 $ 0.09 $ (0.26) $ (0.17) $ -- $(0.65) $(0.65) $15.42 (1.05)% $ 3,207
9/30/95......... 15.42 0.02 2.99 3.01 -- (1.09) (1.09) 17.34 21.29 42,407
9/30/96......... 17.34 (0.03) 2.22 2.19 -- (1.91) (1.91) 17.62 13.88 51,993
9/30/97......... 17.62 (0.02) 5.05 5.03 -- (2.43) (2.43) 20.22 32.96 67,812
9/30/98......... 20.22 (0.04) 0.91 0.87 -- (2.48) (2.48) 18.61 5.09 72,536
CLASS B
-------
9/30/94......... $16.28 $(0.01) $ (0.28) $ (0.29) $ -- $(0.65) $(0.65) $15.34 (1.81)% $ 71,749
9/30/95......... 15.34 (0.01) 2.89 2.88 -- (1.09) (1.09) 17.13 20.51 39,533
9/30/96......... 17.13 (0.14) 2.19 2.05 -- (1.91) (1.91) 17.27 13.17 36,199
9/30/97......... 17.27 (0.13) 4.90 4.77 -- (2.43) (2.43) 19.61 32.02 37,633
9/30/98......... 19.61 (0.16) 0.87 0.71 -- (2.48) (2.48) 17.84 4.36 36,106
<CAPTION>
BALANCED ASSETS FUND
- --------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- --------------- ---------
<S> <C> <C> <C>
9/30/94......... 1.58% 2.00% 141%
9/30/95......... 1.50 2.13 130
9/30/96......... 1.52 1.63 187
9/30/97......... 1.50 1.86 149
9/30/98......... 1.46 1.59 80
9/30/94......... 2.21% 1.36% 141%
9/30/95......... 2.12 1.59 130
9/30/96......... 2.12 1.03 187
9/30/97......... 2.11 1.26 149
9/30/98......... 2.08 0.97 80
- -----------------------------------------------------------------------------------------------------------------------
BLUE CHIP GROWTH FUND
- ---------------------
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- --------------- ---------
<S> <C> <C> <C>
10/08/93-
9/30/94(3)..... 1.64%(4)(5) 0.65%(4)(5) 170%
9/30/95......... 1.58(5) 0.11(5) 251
9/30/96......... 1.57 (0.18) 269
9/30/97......... 1.54 (0.11) 211
9/30/98......... 1.52 (0.20) 90
9/30/94......... 2.28% (0.05)% 170%
9/30/95......... 2.22 (0.09) 251
9/30/96......... 2.23 (0.83) 269
9/30/97......... 2.22 (0.77) 211
9/30/98......... 2.17 (0.86) 90
</TABLE>
- ------------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95
------- -------
<S> <C> <C>
Blue Chip Growth Class A..................................... 1.66% .11%
</TABLE>
See Notes to Financial Statements
19
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MID-CAP GROWTH FUND
- -------------------
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS)(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/94......... $18.03 $ 0.04 $ (1.64) $ (1.60) $ -- $(2.65) $(2.65) $ 13.78 (9.60)% $ 32,906
9/30/95......... 13.78 (0.08) 4.14 4.06 (0.04) -- (0.04) 17.80 29.51 37,714
9/30/96......... 17.80 (0.12) 2.21 2.09 -- (2.11) (2.11) 17.78 12.92 41,904
9/30/97......... 17.78 (0.15) 3.83 3.68 -- (0.80) (0.80) 20.66 21.54 46,051
9/30/98......... 20.66 (0.13) (0.78) (0.91) -- (3.53) (3.53) 16.22 (4.20) 38,437
<CAPTION>
CLASS B
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/04/93-
9/30/94(4)..... $18.12 $ 0.03 $ (1.80) $ (1.77) $ -- $(2.65) $(2.65) $ 13.70 (10.56)% $ 4,039
9/30/95......... 13.70 (0.18) 4.08 3.90 (0.02) -- (0.02) 17.58 28.55 9,544
9/30/96......... 17.58 (0.24) 2.18 1.94 -- (2.11) (2.11) 17.41 12.16 13,784
9/30/97......... 17.41 (0.28) 3.73 3.45 -- (0.80) (0.80) 20.06 20.65 13,779
9/30/98......... 20.06 (0.25) (0.76) (1.01) -- (3.53) (3.53) 15.52 (4.93) 10,027
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SMALL COMPANY GROWTH FUND
- -------------------------
NET
GAIN (LOSS)
NET ON INVEST- TOTAL DIVIDENDS DISTRI-
NET ASSET INVEST- MENTS (BOTH FROM FROM NET BUTIONS NET ASSET NET ASSETS
VALUE, MENT REALIZED INVEST- INVEST- FROM TOTAL VALUE, END OF
PERIOD BEGINNING INCOME AND MENT MENT CAPITAL DISTRI- END OF TOTAL PERIOD
ENDED OF PERIOD (LOSS)(2) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(1) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- ------- --------- --------- ----------
CLASS A
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/94......... $19.78 $ (0.10) $ (1.40) $ (1.50) $ -- $(1.46) $(1.46) $ 16.82 (7.74)% $ 38,570
9/30/95......... 16.82 (0.04) 8.28 8.24 -- (0.41) (0.41) 24.65 50.00 89,510
9/30/96......... 24.65 (0.16) 4.29 4.13 -- (4.53) (4.53) 24.25 19.35 158,567
9/30/97......... 24.25 (0.30) 5.18 4.88 -- (0.86) (0.86) 28.27 20.84 185,241
9/30/98......... 28.27 (0.18) (6.59) (6.77) -- (2.40) (2.40) 19.10 (25.00) 105,243
<CAPTION>
CLASS B
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/94......... $19.78 $ (0.20) $ (1.42) $ (1.62) $ -- $(1.46) $(1.46) $ 16.70 (8.40)% $ 52,208
9/30/95......... 16.70 (0.16) 8.19 8.03 -- (0.41) (0.41) 24.32 49.08 68,313
9/30/96......... 24.32 (0.29) 4.20 3.91 -- (4.53) (4.53) 23.70 18.60 107,839
9/30/97......... 23.70 (0.44) 5.03 4.59 -- (0.86) (0.86) 27.43 20.08 124,450
9/30/98......... 27.43 (0.33) (6.36) (6.69) -- (2.40) (2.40) 18.34 (25.52) 61,398
<CAPTION>
CLASS C
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/2/98-
9/30/98(4)..... $21.11 $ (0.19) $ (2.58) $ (2.77) $ -- $ -- $ -- $ 18.34 (13.12)% $ 168
<CAPTION>
CLASS Z
-------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/07/96-
9/30/97(4)..... $24.61 $ (0.15) $ 4.85 $ 4.70 $ -- $(0.86) $(0.86) $ 28.45 19.78 % $ 948
9/30/98......... 28.45 (0.07) (6.65) (6.72) -- (2.40) (2.40) 19.33 (24.64) 565
<CAPTION>
MID-CAP GROWTH FUND
- -------------------
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS)
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- -------------- ---------
<S> <C> <C> <C>
9/30/94......... 1.76% 0.28% 555%
9/30/95......... 1.66 (0.51) 392
9/30/96......... 1.62 (0.69) 307
9/30/97......... 1.64 (0.84) 332
9/30/98......... 1.62 (0.75) 377
<CAPTION>
<S> <C> <C> <C>
10/04/93-
9/30/94(4)..... 2.43%(3)(5) 0.20 %(3)(5) 555%
9/30/95......... 2.31(5) (0.17)(5) 392
9/30/96......... 2.32 (1.43) 307
9/30/97......... 2.35 (1.56) 332
9/30/98......... 2.33 (1.45) 377
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SMALL COMPANY GROWTH FUND
- -------------------------
RATIO OF NET
INVESTMENT
RATIO OF INCOME
EXPENSES (LOSS)
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- -------------- -------------- ---------
<S> <C> <C> <C>
9/30/94......... 1.67% (0.60)% 411%
9/30/95......... 1.57 (0.22) 351
9/30/96......... 1.53 (0.68) 240
9/30/97......... 1.72 (1.27) 343
9/30/98......... 1.50 (0.79) 292
<CAPTION>
<S> <C> <C> <C>
9/30/94......... 2.31% (1.23)% 411%
9/30/95......... 2.22 (0.84) 351
9/30/96......... 2.16 (1.30) 240
9/30/97......... 2.34 (1.89) 343
9/30/98......... 2.14 (1.44) 292
<CAPTION>
<S> <C> <C> <C>
2/2/98-
9/30/98(4)..... 2.15%(3)(5) (1.35)%(3)(5) 292%
<CAPTION>
<S> <C> <C> <C>
10/07/96-
9/30/97(4)..... 1.07%(3)(5) (0.67)%(3)(5) 343%
9/30/98......... 1.01 (5) (0.30) (5) 292
</TABLE>
- ------------
(1) Total return is not annualized and does not reflect sales load
(2) Calculated based upon average shares outstanding
(3) Annualized
(4) Commencement of sale of respective class of shares
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95 9/30/97 9/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Mid-Cap Growth Class B....................... .48% .17% -- --
Small Company Growth Class C................. -- -- -- 13.58%
Small Company Growth Class Z................. -- -- 2.19% 1.85
</TABLE>
See Notes to Financial Statements
20
<PAGE>
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH AND INCOME 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(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
-------
7/01/94-
9/30/94(3)..... $ 7.33 $0.07 $ 0.10 $ 0.17 $(0.06) $ -- $ (0.06) $ 7.44 2.34% $ 3,098
9/30/95......... 7.44 0.32 1.08 1.40 (0.30) (0.15) (0.45) 8.39 19.53 3,532
9/30/96......... 8.39 0.14 2.50 2.64 (0.17) (0.39) (0.56) 10.47 32.59 21,099
9/30/97......... 10.47 0.05 3.40 3.45 (0.03) (0.44) (0.47) 13.45 34.18 47,219
9/30/98......... 13.45 0.02 0.68 0.70 -- (1.35) (1.35) 12.80 5.53 57,129
CLASS B
-------
7/06/94-
9/30/94(3)..... $ 7.33 $0.05 $ 0.11 $ 0.16 $(0.05) $ -- $ (0.05) $ 7.44 2.19% $ 229
9/30/95......... 7.44 0.35 1.03 1.38 (0.28) (0.15) (0.43) 8.39 19.19 2,538
9/30/96......... 8.39 0.08 2.50 2.58 (0.13) (0.39) (0.52) 10.45 31.75 13,903
9/30/97......... 10.45 (0.03) 3.39 3.36 (0.01) (0.44) (0.45) 13.36 33.30 55,530
9/30/98......... 13.36 (0.07) 0.68 0.61 -- (1.35) (1.35) 12.62 4.84 79,004
CLASS C
-------
2/02/98-
9/30/98(3)..... $12.78 $(0.04) $(0.13) $(0.17) $ -- $ -- $ -- $12.61 (1.33)% $ 963
CLASS Z
-------
4/15/98-
9/30/98(3)..... $14.35 $ 0.04 $(1.55) $(1.51) $ -- $ -- $ -- $12.84 (10.52)% $ 93
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
"DOGS" OF WALL STREET 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(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S)
- ---------------- --------- --------- ----------- ---------- --------- ------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
-------
6/08/98-
9/30/98(3)..... $12.50 $ 0.07 $(1.51) $(1.44) $ -- $ -- $ -- $11.06 (11.52)% $16,672
CLASS B
-------
6/08/98-
9/30/98(3)..... $12.50 $ 0.04 $(1.51) $(1.47) $ -- $ -- $ -- $11.03 (11.76)% $19,734
CLASS II
--------
6/08/98-
9/30/98(3)..... $12.50 $ 0.04 $(1.51) $(1.47) $ -- $ -- $ -- $11.03 (11.76)% $20,108
<CAPTION>
GROWTH AND INCOME FUND
- ----------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- ----------- ------------- ---------
<S> <C> <C> <C>
7/01/94-
9/30/94(3)..... 1.50%(4)(5) 3.48%(4)(5) 8%
9/30/95......... 0.46(5) 4.16(5) 230
9/30/96......... 0.96(5) 1.52(5) 161
9/30/97......... 1.38(5) 0.45(5) 200
9/30/98......... 1.50 0.12 150
7/06/94-
9/30/94(3)..... 2.15%(4)(5) 2.86% (4)(5) 8%
9/30/95......... 0.30(5) 4.48 (5) 230
9/30/96......... 1.58(5) 0.73 (5) 161
9/30/97......... 2.05(5) (0.27)(5) 200
9/30/98......... 2.13 (0.52) 150
2/02/98-
9/30/98(3)..... 2.15%(4)(5) (0.57)%(4)(5) 150%
4/15/98-
9/30/98(3)..... 0.93%(4)(5) 0.57%(4)(5) 150%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
"DOGS" OF WALL STREET FUND
- --------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
ENDED NET ASSETS NET ASSETS TURNOVER
- ---------------- ----------- ------------- ---------
<S> <C> <C> <C>
6/08/98-
9/30/98(3)..... 0.95%(4)(5) 1.78%(4)(5) 0%
6/08/98-
9/30/98(3)..... 1.60%(4)(5) 1.39%(4)(5) 0%
6/08/98-
9/30/98(3)..... 1.60%(4)(5) 1.45%(4)(5) 0%
</TABLE>
- --------
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Commencement of sale of respective class of shares
(4) Annualized
(5) Net of the following expense reimbursements (based on average net assets):
<TABLE>
<CAPTION>
9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Growth and Income Class A............ 4.48% 2.96% 1.01% 0.22% --
Growth and Income Class B............ 20.35 5.07 1.14 0.21 --
Growth and Income Class C............ -- -- -- -- 6.99%
Growth and Income Class Z............ -- -- -- -- 28.17
"Dogs" of Wall Street Class A........ -- -- -- -- 0.43
"Dogs" of Wall Street Class B........ -- -- -- -- 0.58
"Dogs" of Wall Street Class II....... -- -- -- -- 0.50
</TABLE>
See Notes to Financial Statements
21
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--57.9%
APPAREL & TEXTILES--1.2%
Gap, Inc. ................................................ 55,000 $ 2,901,250
Oakley, Inc.+............................................. 125,000 1,203,125
------------
4,104,375
------------
AUTOMOTIVE--1.2%
Ford Motor Co. ........................................... 40,000 1,877,500
General Motors Corp. ..................................... 45,000 2,460,938
------------
4,338,438
------------
BANKS--5.1%
BankAmerica Corp. ........................................ 50,000 2,675,000
Chase Manhattan Corp...................................... 50,000 2,162,500
Citicorp.................................................. 20,000 1,858,750
First Union Corp.......................................... 40,000 2,047,500
Mellon Bank Corp. ........................................ 50,000 2,753,125
Summit Bancorp............................................ 177,500 6,656,250
------------
18,153,125
------------
BUSINESS SERVICES--1.1%
American Express Co....................................... 50,000 3,881,250
------------
CHEMICALS--0.8%
du Pont (E.I.) de Nemours & Co............................ 50,000 2,806,250
------------
COMPUTERS & BUSINESS EQUIPMENT--6.7%
Cisco Systems, Inc.+...................................... 90,000 5,563,125
Dell Computer Corp.+...................................... 80,000 5,260,000
EMC Corp.+................................................ 70,000 4,003,125
Hewlett-Packard Co........................................ 25,000 1,323,438
International Business Machines Corp. .................... 40,000 5,120,000
Micron Technology, Inc.+.................................. 85,000 2,587,187
------------
23,856,875
------------
CONGLOMERATE--3.7%
General Electric Co....................................... 100,000 7,956,250
Schlumberger Ltd.......................................... 40,000 2,012,500
United Technologies Corp.................................. 40,000 3,057,500
------------
13,026,250
------------
DEPARTMENT STORES--1.2%
Wal-Mart Stores, Inc...................................... 80,000 4,370,000
------------
ELECTRONICS--2.5%
Intel Corp................................................ 50,000 4,287,500
Motorola, Inc............................................. 35,000 1,494,063
Texas Instruments, Inc.................................... 55,000 2,901,250
------------
8,682,813
------------
ENERGY SERVICES--3.3%
Chevron Corp. ............................................ 50,000 4,203,125
Mobil Corp. .............................................. 20,000 1,518,750
Royal Dutch Petroleum Co.................................. 82,500 3,929,062
Texaco, Inc............................................... 30,000 1,880,625
------------
11,531,562
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
FINANCIAL SERVICES--6.7%
American General Corp................................... 35,000 $ 2,235,625
Associates First Capital Corp., Class A................. 60,000 3,915,000
Capital One Financial Corp. ............................ 30,000 3,105,000
Equitable Cos., Inc. ................................... 30,000 1,241,250
Fleet Financial Group, Inc.............................. 45,000 3,304,687
Morgan Stanley, Dean Witter & Co. ...................... 35,000 1,507,188
PaineWebber Group, Inc.................................. 50,000 1,500,000
Providian Financial Corp................................ 40,000 3,392,500
ReliaStar Financial Corp................................ 50,300 1,961,700
Travelers Group, Inc.................................... 47,500 1,781,250
------------
23,944,200
------------
FOOD, BEVERAGE & TOBACCO--1.3%
Philip Morris Cos., Inc................................. 100,000 4,606,250
------------
HEALTH SERVICES--0.3%
Allegiance Corp......................................... 40,000 1,190,000
------------
HOUSEHOLD PRODUCTS--1.9%
Warner-Lambert Co....................................... 90,000 6,795,000
------------
INSURANCE--0.9%
Allstate Corp........................................... 80,000 3,335,000
------------
LEISURE & TOURISM--0.7%
Carnival Corp., Class A................................. 80,000 2,545,000
------------
MEDICAL PRODUCTS--2.0%
Amgen, Inc.+............................................ 35,000 2,644,687
Johnson & Johnson....................................... 55,000 4,303,750
------------
6,948,437
------------
PHARMACEUTICALS--5.8%
Biogen, Inc.+........................................... 60,000 3,948,750
Bristol-Myers Squibb Co. ............................... 25,000 2,596,875
Lilly (Eli) & Co. ...................................... 35,000 2,740,937
Merck & Co., Inc. ...................................... 30,000 3,886,875
Pfizer, Inc. ........................................... 30,000 3,178,125
Schering-Plough Corp. .................................. 40,000 4,142,500
------------
20,494,062
------------
SOFTWARE--2.9%
BMC Software, Inc.+..................................... 50,000 3,003,125
Microsoft Corp.+........................................ 45,000 4,952,813
Sun Microsystems, Inc.+................................. 50,000 2,490,625
------------
10,446,563
------------
SPECIALTY RETAIL--2.7%
CVS Corp. .............................................. 70,000 3,066,875
Dayton Hudson Corp. .................................... 70,000 2,502,500
Home Depot, Inc. ....................................... 100,000 3,950,000
------------
9,519,375
------------
</TABLE>
22
<PAGE>
SUNAMERICA BALANCED ASSETS FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS--4.5%
AT&T Corp. ...................................... 100,000 $ 5,843,750
Lucent Technologies, Inc. ....................... 70,000 4,834,375
MCI WorldCom, Inc.+.............................. 110,000 5,376,250
------------
16,054,375
------------
TRANSPORTATION--0.5%
Burlington Northern Santa Fe Corp. .............. 60,000 1,920,000
------------
UTILITIES--0.9%
Enron Corp. ..................................... 60,000 3,168,750
------------
TOTAL COMMON STOCK
(cost $162,813,590).............................. 205,717,950
------------
BONDS & NOTES--16.5%
AEROSPACE & MILITARY TECHNOLOGY--1.2%
Lockheed Martin Corp.
7.25% due 5/15/06............................... $ 4,000 4,400,040
------------
AUTOMOTIVE--1.6%
Chrysler Corp.
7.45% due 3/01/27............................... 5,000 5,668,050
------------
BANKS--0.6%
Chase Manhattan Corp.
7.88% due 8/01/04............................... 2,000 2,041,080
------------
ELECTRONICS--0.9%
Texas Instruments, Inc.
6.13% due 2/01/06............................... 3,000 3,090,390
------------
FINANCIAL SERVICES--10.6%
Bear Stearns Cos., Inc.
6.63% due 1/15/04............................... 5,000 5,152,700
CS First Boston Mortgage Securities Corp.
6.48% due 5/17/08............................... 5,000 5,183,594
Donaldson, Lufkin & Jenrette, Inc.
6.88% due 11/01/05.............................. 2,000 2,055,340
Ford Motor Credit Co.
8.00% due 6/15/02............................... 5,000 5,457,150
Goldman Sachs Group-L. P.* 6.60% due 7/15/02..... 5,000 5,235,000
Morgan Stanley, Dean Witter, Discover & Co.
6.88% due 3/01/07............................... 4,000 4,170,320
Private Export Funding Corp. 5.87% due 7/31/08... 10,000 10,620,300
------------
37,874,404
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
FOOD, BEVERAGE & TOBACCO--1.6%
Hershey Foods Corp.
7.20% due 8/15/27................................ $ 5,000 $ 5,728,600
------------
TOTAL BONDS & NOTES
(cost $54,866,514)............................... 58,802,564
------------
U.S. GOVERNMENT AND AGENCIES--15.4%
FEDERAL NATIONAL MORTGAGE ASSOCIATION--3.5%
5.63% due 3/15/01................................ 5,000 5,120,300
5.75% due 4/15/03-2/15/08........................ 4,620 4,834,064
6.50% due 9/01/10................................ 2,612 2,668,649
------------
12,623,013
------------
SMALL BUSINESS ADMINISTRATION--1.5%
6.30% due 6/01/18................................ 5,000 5,175,000
------------
U.S. TREASURY BONDS--5.9%
6.13% due 11/15/27............................... 5,000 5,764,050
7.50% due 11/15/16............................... 570 725,593
8.75% due 8/15/20................................ 3,800 5,548,608
12.50% due 8/15/14............................... 5,400 8,887,212
------------
20,925,463
------------
U.S. TREASURY NOTES--4.5%
5.50% due 1/31/03................................ 7,500 7,836,300
5.88% due 11/15/05............................... 7,500 8,173,800
------------
16,010,100
------------
TOTAL U.S. GOVERNMENT AND AGENCIES
(COST $51,826,822)............................... 54,733,576
------------
TOTAL INVESTMENT SECURITIES--89.8%
(cost $269,506,926).............................. 319,254,090
------------
REPURCHASE AGREEMENTS--9.7%
Joint Repurchase Agreement with PaineWebber, Inc.
(Note 2)........................................ 14,469 14,469,000
Joint Repurchase Agreement with State Street Bank
& Trust Co. (Note 2)............................ 20,000 20,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(COST $34,469,000)............................... 34,469,000
------------
TOTAL INVESTMENTS--(COST $303,975,926)............ 99.5% 353,723,090
Other assets less liabilities..................... 0.5 1,871,076
------- ------------
NET ASSETS-- 100.0% $355,594,166
======= ============
</TABLE>
- --------
+ Non-income producing security
* Resale restricted to qualified institutional buyers
See Notes to Financial Statements
23
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--89.9%
APPAREL & TEXTILES--2.4%
Gap, Inc. ................................................ 30,000 $ 1,582,500
Oakley, Inc.+............................................. 100,000 962,500
------------
2,545,000
------------
AUTOMOTIVE--2.4%
Ford Motor Co. ........................................... 30,000 1,408,125
General Motors Corp. ..................................... 22,000 1,203,125
------------
2,611,250
------------
BANKS--6.6%
BankAmerica Corp. ........................................ 15,000 802,500
Chase Manhattan Corp. .................................... 30,000 1,297,500
Citicorp. ................................................ 12,000 1,115,250
First Union Corp. ........................................ 20,000 1,023,750
Mellon Bank Corp. ........................................ 25,000 1,376,562
Summit Bancorp. .......................................... 40,000 1,500,000
------------
7,115,562
------------
BUSINESS SERVICES--1.4%
American Express Co. ..................................... 20,000 1,552,500
------------
CHEMICALS--0.8%
du Pont (E.I.) de Nemours & Co. .......................... 15,000 841,875
------------
COMPUTERS & BUSINESS EQUIPMENT--12.8%
Cisco Systems, Inc.+...................................... 52,500 3,245,156
Dell Computer Corp.+...................................... 54,000 3,550,500
EMC Corp.+................................................ 40,000 2,287,500
Hewlett-Packard Co. ...................................... 10,000 529,375
International Business Machines Corp. .................... 25,000 3,200,000
Micron Technology, Inc.+.................................. 37,000 1,126,188
------------
13,938,719
------------
CONGLOMERATE--4.9%
General Electric Co. ..................................... 40,000 3,182,500
Schlumberger Ltd. ........................................ 20,000 1,006,250
United Technologies Corp. ................................ 15,000 1,146,562
------------
5,335,312
------------
DEPARTMENT STORES--1.5%
Wal-Mart Stores, Inc. .................................... 30,000 1,638,750
------------
ELECTRONICS--4.2%
Intel Corp. .............................................. 25,000 2,143,750
Motorola, Inc. ........................................... 25,000 1,067,188
Texas Instruments, Inc. .................................. 25,000 1,318,750
------------
4,529,688
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
ENERGY SOURCES--4.4%
Chevron Corp. ............................................. 20,000 $ 1,681,250
Mobil Corp. ............................................... 10,000 759,375
Royal Dutch Petroleum Co. ................................. 30,000 1,428,750
Texaco, Inc. .............................................. 15,000 940,312
------------
4,809,687
------------
FINANCIAL SERVICES--8.4%
American General Corp. .................................... 15,000 958,125
Associates First Capital Corp., Class A.................... 25,000 1,631,250
Capital One Financial Corp. ............................... 15,000 1,552,500
Equitable Cos., Inc. ...................................... 10,000 413,750
Fleet Financial Group, Inc. ............................... 15,000 1,101,562
Morgan Stanley, Dean Witter & Co. ......................... 15,000 645,938
PaineWebber Group, Inc. ................................... 30,000 900,000
ReliaStar Financial Corp. ................................. 30,000 1,170,000
Travelers Group, Inc. ..................................... 20,000 750,000
------------
9,123,125
------------
FOOD, BEVERAGE & TOBACCO--1.5%
Philip Morris Cos., Inc. .................................. 35,000 1,612,188
------------
HOUSEHOLD PRODUCTS--3.1%
Warner-Lambert Co. ........................................ 45,000 3,397,500
------------
INSURANCE--1.5%
Allstate Corp. ............................................ 40,000 1,667,500
------------
LEISURE & TOURISM--1.2%
Carnival Corp., Class A.................................... 40,000 1,272,500
------------
MEDICAL PRODUCTS--3.2%
Amgen, Inc.+............................................... 20,000 1,511,250
Johnson & Johnson.......................................... 25,000 1,956,250
------------
3,467,500
------------
PHARMACEUTICALS--9.2%
Biogen, Inc.+.............................................. 25,000 1,645,312
Bristol-Myers Squibb Co. .................................. 15,000 1,558,125
Lilly (Eli) & Co. ......................................... 15,000 1,174,688
Merck & Co., Inc. ......................................... 15,000 1,943,437
Pfizer, Inc. .............................................. 20,000 2,118,750
Schering-Plough Corp. ..................................... 15,000 1,553,438
------------
9,993,750
------------
</TABLE>
24
<PAGE>
SUNAMERICA BLUE CHIP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
POLLUTION CONTROL--0.8%
Waste Management, Inc.+......................... 18,125 $ 871,133
------------
SOFTWARE--5.6%
BMC Software, Inc.+............................. 20,000 1,201,250
HBO & Co. ...................................... 50,000 1,443,750
Microsoft Corp.+................................ 20,000 2,201,250
Sun Microsystems, Inc.+......................... 25,000 1,245,312
------------
6,091,562
------------
SPECIALTY RETAIL--4.2%
CVS Corp. ...................................... 40,000 1,752,500
Dayton Hudson Corp.............................. 35,000 1,251,250
Home Depot, Inc. ............................... 40,000 1,580,000
------------
4,583,750
------------
TELECOMMUNICATIONS--7.7%
AT&T Corp. ..................................... 45,000 2,629,687
Frontier Corp. ................................. 40,000 1,095,000
Lucent Technologies, Inc. ...................... 35,000 2,417,188
MCI WorldCom, Inc.+............................. 45,000 2,199,375
------------
8,341,250
------------
TRANSPORTATION--0.9%
Burlington Northern Santa Fe Corp. ............. 30,000 960,000
------------
UTILITIES--1.2%
Enron Corp. .................................... 25,000 1,320,313
------------
TOTAL INVESTMENT SECURITIES--89.9%
(cost $80,971,290)............................. 97,620,414
------------
REPURCHASE AGREEMENT--10.0%
Joint Repurchase Agreement with PaineWebber,
Inc. (Note 2)
(cost $10,865,000).............................. $10,865 10,865,000
------------
TOTAL INVESTMENTS--
(cost $91,836,290).............................. 99.9% 108,485,414
Other assets less liabilities.................... 0.1 156,301
------- ------------
NET ASSETS-- 100.0% $108,641,715
======= ============
</TABLE>
- --------
+Non-income producing security
See Notes to Financial Statements
25
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--98.1%
APPAREL & TEXTILES--0.8%
Oakley, Inc.+............................................. 40,000 $ 385,000
-----------
BANKS--4.3%
Compass Bancshares, Inc................................... 13,000 429,000
First American Corp....................................... 12,000 460,500
North Fork Bancorp., Inc.................................. 22,000 440,000
Union Planters Corp....................................... 15,000 753,750
-----------
2,083,250
-----------
BROADCASTING & MEDIA--2.5%
Cinar Films, Inc., Class B+............................... 27,200 487,900
Comcast Corp., Class A.................................... 15,000 704,063
-----------
1,191,963
-----------
BUSINESS SERVICES--7.2%
American Bank Note Holographics, Inc.+.................... 20,000 157,500
BISYS Group, Inc.+........................................ 12,000 529,500
CMG Information Services, Inc.+........................... 7,000 372,750
Equifax, Inc.............................................. 10,000 356,875
Liberty Media Group, Series A+............................ 20,000 733,750
Paychex, Inc.............................................. 15,000 773,437
Professional Detailing, Inc.+............................. 20,000 560,000
-----------
3,483,812
-----------
COMMUNICATION EQUIPMENT--0.9%
General Instrument Corp.+................................. 20,000 432,500
-----------
COMPUTERS & BUSINESS EQUIPMENT--8.5%
Apple Computer, Inc.+..................................... 36,000 1,372,500
Dell Computer Corp. +..................................... 15,000 986,250
EMC Corp. +............................................... 20,000 1,143,750
Rambus, Inc.+............................................. 10,000 640,000
-----------
4,142,500
-----------
ELECTRONICS--2.2%
Tandy Corp................................................ 10,000 535,000
Teradyne, Inc.+........................................... 30,000 547,500
-----------
1,082,500
-----------
ENERGY SERVICES--5.7%
Diamond Offshore Drilling, Inc............................ 10,000 260,000
Dominion Resources, Inc................................... 10,000 446,250
Global Industries Ltd.+................................... 10,000 115,625
Halliburton Co............................................ 10,000 285,625
Ipalco Enterprises, Inc. ................................. 23,000 1,082,438
Transocean Offshore, Inc.................................. 10,000 346,875
Weatherford International, Inc............................ 10,000 216,250
-----------
2,753,063
-----------
HEALTH SERVICES--3.5%
Allegiance Corp........................................... 20,000 595,000
HealthCare Financial Partners, Inc.+...................... 6,900 289,800
IDX Systems Corp.+........................................ 15,000 795,000
-----------
1,679,800
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
HOUSEHOLD PRODUCTS--3.5%
American Home Products Corp................................. 11,000 $ 576,125
Warner-Lambert Co........................................... 15,000 1,132,500
-----------
1,708,625
-----------
INSURANCE--0.9%
Reliance Group Holdings, Inc................................ 30,000 421,875
-----------
MEDICAL PRODUCTS--10.5%
Agouron Pharmaceuticals, Inc.+.............................. 20,000 688,750
Amgen, Inc.+................................................ 10,000 755,625
Bard (C.R.), Inc............................................ 10,000 368,750
Baxter International, Inc................................... 10,000 595,000
Becton Dickinson & Co....................................... 20,000 822,500
Incyte Pharmacuticals, Inc.+................................ 20,000 425,000
Millenium Pharmaceuticals, Inc.+............................ 30,000 521,250
Pharmacia & Upjohn, Inc..................................... 10,000 501,875
SmithKline Beecham PLC ADR.................................. 5,000 273,750
Zonagen, Inc.+.............................................. 10,000 155,000
-----------
5,107,500
-----------
PHARMACEUTICALS--9.6%
Biogen, Inc.+............................................... 20,000 1,316,250
Centocor, Inc.+............................................. 10,000 396,250
Medicis Pharmaceutical Corp., Class A+...................... 15,000 594,375
Merck & Co., Inc............................................ 10,000 1,295,625
Schering-Plough Corp........................................ 10,000 1,035,625
-----------
4,638,125
-----------
POLLUTION CONTROL--0.8%
American Disposal Services, Inc.+........................... 10,000 389,375
-----------
SOFTWARE--18.5%
America Online, Inc.+....................................... 10,000 1,112,500
At Home Corp., Series A+.................................... 12,000 574,500
Compuware Corp.+............................................ 15,000 883,125
DST Systems, Inc.+.......................................... 20,000 1,055,000
HBO & Co.................................................... 15,000 433,125
J.D. Edwards & Co.+......................................... 2,500 120,000
Microsoft Corp.+............................................ 5,000 550,312
MicroStrategy, Inc.+........................................ 15,000 562,500
Novell, Inc.+............................................... 20,000 245,000
Peregrine Systems, Inc.+.................................... 20,000 805,000
Segue Software, Inc.+....................................... 60,000 990,000
Siebel Systems, Inc.+....................................... 30,000 860,625
SOFTWORKS, Inc.+............................................ 15,000 75,000
Veritas Software Co.+....................................... 13,000 718,250
-----------
8,984,937
-----------
SPECIALTY RETAIL--1.9%
CVS Corp. .................................................. 15,000 657,188
Trans World Entertainment Corp.+............................ 15,000 273,750
-----------
930,938
-----------
</TABLE>
26
<PAGE>
SUNAMERICA MID-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TELECOMMUNICATIONS--5.4%
Coyote Network Systems, Inc. ................... 35,000 $ 297,500
Frontier Corp. ................................. 20,000 547,500
MCI WorldCom, Inc.+............................. 20,000 977,500
Tele-Communications, Inc.,
Series A+...................................... 20,000 782,500
-----------
2,605,000
-----------
UTILITIES--11.4%
DQE, Inc. ...................................... 28,000 1,081,500
DTE Energy Co. ................................. 10,000 451,875
Montana Power Co. .............................. 10,000 446,875
New Century Energies, Inc. ..................... 10,000 486,875
Niagara Mohawk Power Corp.+..................... 60,000 922,500
PP&L Resources, Inc.+........................... 42,000 1,086,750
TECO Energy, Inc. .............................. 20,000 571,250
Texas Utilities Co. ............................ 10,000 465,625
-----------
5,513,250
-----------
TOTAL INVESTMENT SECURITIES--98.1%
(cost $42,810,802).............................. 47,534,013
-----------
REPURCHASE AGREEMENT--4.0%
Joint Repurchase Agreement with PaineWebber,
Inc. (Note 2)
(cost $1,938,000)............................... $1,938 1,938,000
-----------
TOTAL INVESTMENTS--
(cost $44,748,802).............................. 102.1% 49,472,013
Liabilities in excess of other assets............ (2.1) (1,008,086)
------ -----------
NET ASSETS-- 100.0% $48,463,927
====== ===========
</TABLE>
- --------
+ Non-income producing security
ADR ("American Depository Receipt")
See Notes to Financial Statements
27
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--75.3%
APPAREL & TEXTILES--2.3%
Abercrombie & Fitch Co.+*................................. 58,100 $ 2,556,400
Gerber Childrenswear, Inc.+............................... 79,700 632,619
Oakley, Inc.+............................................. 74,200 714,175
------------
3,903,194
------------
BANKS--2.1%
Hamilton Bancorp, Inc.+................................... 50,000 1,303,125
Hibernia Corp., Class A................................... 44,000 635,250
U.S. Bancorp.............................................. 42,000 1,493,625
------------
3,432,000
------------
BROADCASTING & MEDIA--5.8%
Cablevision Systems Corp., Class A+....................... 46,600 2,012,537
Cinar Films, Inc., Class B+............................... 87,200 1,564,150
Comcast Corp., Class A.................................... 31,200 1,464,450
HA-LO Industries, Inc.+................................... 80,800 2,363,400
Jacor Communications, Inc.+............................... 31,700 1,604,813
Source Media, Inc.+....................................... 21,200 166,950
SportsLine USA, Inc.+..................................... 26,000 453,375
------------
9,629,675
------------
BUSINESS SERVICES--10.4%
AnswerThink Consulting Group+............................. 65,800 1,188,513
Caliber Learning Network, Inc.+........................... 23,600 143,075
CMG Information Services, Inc.+........................... 29,600 1,576,200
ITT Educational Services, Inc.+........................... 62,800 2,009,600
Mac-Gray Corp.+........................................... 116,400 1,047,600
Mohawk Industries, Inc.+.................................. 93,200 2,551,350
Paychex, Inc.............................................. 42,500 2,191,406
ProSoft Development, Inc.+(1)(2).......................... 94,200 312,626
RCM Technologies, Inc.+................................... 114,400 1,687,400
Snyder Communications, Inc.+.............................. 52,000 1,742,000
Sylvan Learning Systems, Inc.+............................ 49,000 1,145,375
The Kroll-O'Gara Co.+..................................... 78,900 1,844,287
------------
17,439,432
------------
COMMUNICATION EQUIPMENT--0.5%
AVT Corp.+................................................ 34,600 782,825
------------
COMPUTERS & BUSINESS EQUIPMENT--6.0%
Apple Computer, Inc.+..................................... 95,000 3,621,875
DoubleClick, Inc.+........................................ 43,900 1,048,113
Entrust Technologies, Inc.+............................... 63,500 940,594
FORE Systems, Inc.+....................................... 75,000 1,246,875
Office Depot, Inc.+....................................... 58,600 1,314,837
Rambus, Inc.+............................................. 29,400 1,881,600
------------
10,053,894
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
DEPARTMENT STORES--0.7%
Wal-Mart Stores, Inc...................................... 21,700 $ 1,185,363
------------
ELECTRONICS--0.9%
Lumen Technologies, Inc.+................................. 305,000 1,525,000
------------
ENERGY SERVICES--1.1%
Smith International, Inc.+................................ 68,600 1,882,212
------------
FINANCIAL SERVICES--1.6%
Crestar Financial Corp.................................... 18,300 1,038,525
Fleet Financial Group, Inc................................ 22,000 1,615,625
------------
2,654,150
------------
HEALTH SERVICES--1.6%
HealthCare Financial Partners, Inc.+...................... 47,200 1,982,400
Medaphis Corp.+........................................... 142,000 639,000
------------
2,621,400
------------
HOUSING--1.0%
D.R. Horton, Inc.......................................... 68,800 1,100,800
Restoration Hardware, Inc.+............................... 26,600 548,625
------------
1,649,425
------------
INSURANCE--1.0%
Reliance Group Holdings, Inc.............................. 115,000 1,617,188
------------
LEISURE & TOURISM--4.0%
Carnival Corp., Class A................................... 54,800 1,743,325
Family Golf Centers, Inc.+................................ 25,600 454,400
Preview Travel, Inc.+..................................... 41,500 757,375
Royal Caribbean Cruises Ltd............................... 61,000 1,620,312
Steiner Leisure Ltd.+..................................... 81,700 1,276,562
Travel Services International, Inc.+...................... 61,000 827,313
------------
6,679,287
------------
MEDICAL PRODUCTS--1.8%
ADAC Laboratories+........................................ 27,000 648,000
MedImmune, Inc.+*......................................... 37,700 2,441,075
Symphonix Devices, Inc.+.................................. 100 375
------------
3,089,450
------------
PHARMACEUTICALS--1.2%
Sepracor, Inc.+*.......................................... 31,000 2,038,250
------------
POLLUTION CONTROL--1.9%
American Disposal Services, Inc.+......................... 80,000 3,115,000
North American Scientific, Inc.+.......................... 25,000 118,750
------------
3,233,750
------------
</TABLE>
28
<PAGE>
SUNAMERICA SMALL COMPANY GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
SOFTWARE--15.4%
America Online, Inc. +*.................................. 30,000 $ 3,337,500
At Home Corp., Series A+................................. 37,000 1,771,375
BroadVision, Inc.+....................................... 55,000 580,938
Compuware Corp. +........................................ 57,700 3,397,087
DSET Corp.+.............................................. 215,000 1,827,500
Excite, Inc.+............................................ 24,000 979,500
HBO & Co................................................. 76,000 2,194,500
J.D. Edwards & Co.+...................................... 49,300 2,366,400
Keane, Inc.+............................................. 40,000 1,440,000
Legato Systems, Inc.+.................................... 38,000 1,952,250
Lycos, Inc.+............................................. 43,000 1,453,937
Mobius Management Systems, Inc.+......................... 62,000 372,000
Network Appliance, Inc.+................................. 36,600 1,852,875
Yahoo!, Inc.+*........................................... 16,800 2,175,600
------------
25,701,462
------------
SPECIALTY RETAIL--3.4%
CDnow, Inc.+............................................. 71,000 639,000
Home Depot, Inc.......................................... 54,000 2,133,000
Krause's Furniture, Inc.+................................ 150,100 178,244
Movado Group, Inc........................................ 82,900 1,740,900
U.S. Vision, Inc.+....................................... 124,000 1,038,500
------------
5,729,644
------------
TELECOMMUNICATIONS--9.1%
Ascend Communications, Inc.+............................. 74,400 3,385,200
Frontier Corp............................................ 76,300 2,088,713
GST Telecommunications, Inc+............................. 232,300 1,451,875
ICG Communications, Inc.+................................ 80,600 1,360,125
Intermedia Communications, Inc.+......................... 33,600 825,300
Qwest Communications International, Inc.+................ 80,900 2,533,181
Saville Systems PLC ADR+................................. 26,300 381,350
Scientific-Atlanta, Inc.................................. 67,000 1,415,375
Tele-Communications, Inc., Series A+..................... 47,400 1,854,525
------------
15,295,644
------------
TELEPHONE--1.4%
Century Telephone Enterprises, Inc....................... 50,000 2,362,500
------------
UTILITIES--2.1%
Niagara Mohawk Power Corp.+.............................. 225,000 3,459,375
------------
TOTAL COMMON STOCK
(cost $127,497,578)...................................... 125,965,120
------------
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
PUT OPTIONS--0.8%
America Online, Inc. exp. 11/98................ 260 $ 331,500
At Home Corp. exp. 11/98....................... 79 494
CMG Information Services, Inc. exp. 11/98...... 251 147,463
Excite, Inc. exp. 11/98........................ 195 117,000
Lycos, Inc. exp. 11/98......................... 417 244,987
MedImmune, Inc. exp. 11/98..................... 100 5,625
U.S. Bancorp Delaware exp. 11/98............... 350 284,375
Yahoo!, Inc. exp. 11/98........................ 166 275,975
------------
TOTAL PUT OPTIONS
(cost $1,397,342).............................. 1,407,419
------------
TOTAL INVESTMENT SECURITIES--76.1%
(cost $128,894,920)............................ 127,372,539
------------
REPURCHASE AGREEMENTS--23.0%
Joint Repurchase Agreement with PaineWebber,
Inc. (Note 2)................................. $20,447 20,447,000
Joint Repurchase Agreement with State Street
Bank & Trust Co. (Note 2)..................... 18,000 18,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost $38,447,000)............................. 38,447,000
------------
TOTAL INVESTMENTS--
(cost $167,341,920)............................ 99.1% 165,819,539
Total written call options...................... (0.4) (729,500)
Other assets less liabilities................... 1.3 2,284,488
----- ------------
NET ASSETS-- 100.0% $167,374,527
===== ============
</TABLE>
- -------
+ Non-income producing security
* The security or a portion thereof has been segregated as collateral for the
written option contracts.
ADR ("American Depository Receipt")
(1) Fair valued security, see Note 2
(2) At September 30, 1998 the Fund held restricted securities amounting to
0.2% of net assets. The Fund will not bear any costs, including those
involved in registration under the Securities Act of 1933, in the
connection with the disposition of the securities.
<TABLE>
<CAPTION>
VALUATION AS OF
DATE OF UNIT SEPTEMBER 30,
DESCRIPTION ACQUISITION COST 1998
----------- ----------- ------ ---------------
<S> <C> <C> <C>
ProSoft Development, Inc. 3/12/97 $10.50 $3.31875
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
OPEN COVERED
WRITTEN CALL
OPTIONS
</TABLE>
<TABLE>
<CAPTION>
EXPIRATION STRIKE
CALL OPTIONS CONTRACTS DATE PRICE VALUE
------------ --------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Abercrombie & Fitch Co.................. 96 10/98 $ 50 $ (7,800)
America Online, Inc..................... 260 11/98 120 (204,750)
MedImmune, Inc.......................... 100 10/98 60 (66,250)
Sepracor, Inc........................... 280 10/98 60 (210,000)
Yahoo!, Inc............................. 166 11/98 135 (240,700)
---------
TOTAL OPEN COVERED WRITTEN CALL OPTIONS
(proceeds $649,698)................................................ $(729,500)
=========
</TABLE>
See Notes to Financial Statements
29
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--89.6%
APPAREL & TEXTILES--1.0%
Gap, Inc. ............................................... 25,000 $ 1,318,750
------------
AUTOMOTIVE--1.9%
Ford Motor Co. .......................................... 30,000 1,408,125
General Motors Corp. .................................... 22,000 1,203,125
------------
2,611,250
------------
BANKS--5.0%
BankAmerica Corp. ....................................... 15,000 802,500
Chase Manhattan Corp. ................................... 20,000 865,000
Citicorp................................................. 15,000 1,394,062
First Union Corp. ....................................... 20,000 1,023,750
Mellon Bank Corp. ....................................... 30,000 1,651,875
Summit Bancorp. ......................................... 30,000 1,125,000
------------
6,862,187
------------
BUSINESS SERVICES--1.1%
American Express Co. .................................... 20,000 1,552,500
------------
CHEMICALS--1.0%
du Pont (E.I.) de Nemours & Co. ......................... 25,000 1,403,125
------------
COMPUTERS & BUSINESS EQUIPMENT--11.8%
Cisco Systems, Inc.+..................................... 45,000 2,781,562
Compaq Computer, Corp.+.................................. 40,000 1,265,000
Dell Computer Corp.+..................................... 50,000 3,287,500
EMC Corp.+............................................... 50,000 2,859,375
Hewlett-Packard Co. ..................................... 13,500 714,656
Honeywell, Inc. ......................................... 15,000 960,938
International Business Machines Corp. ................... 25,000 3,200,000
Micron Technology, Inc.+................................. 36,700 1,117,056
------------
16,186,087
------------
CONGLOMERATE--5.3%
General Electric Co. .................................... 50,000 3,978,125
Schlumberger Ltd. ....................................... 20,000 1,006,250
Tyco International Ltd. ................................. 40,000 2,210,000
------------
7,194,375
------------
CONSUMER SERVICES--0.9%
Service Corp. International.............................. 40,000 1,275,000
------------
DEPARTMENT STORES--2.0%
Federated Department Stores, Inc.+....................... 23,000 836,625
Wal-Mart Stores, Inc. ................................... 34,000 1,857,250
------------
2,693,875
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
<S> <C> <C>
ELECTRONICS--3.6%
Intel Corp. .............................................. 25,000 $ 2,143,750
Motorola, Inc. ........................................... 35,000 1,494,063
Texas Instruments, Inc. .................................. 25,000 1,318,750
------------
4,956,563
------------
ENERGY SOURCES--5.7%
Chevron Corp. ............................................ 25,000 2,101,562
Exxon Corp. .............................................. 27,000 1,895,062
Mobil Corp. .............................................. 15,000 1,139,063
Royal Dutch Petroleum Co. ................................ 35,000 1,666,875
Texaco, Inc. ............................................. 15,000 940,313
------------
7,742,875
------------
FINANCIAL SERVICES--6.7%
Associates First Capital Corp., Class A................... 30,300 1,977,075
Capital One Financial Corp. .............................. 20,000 2,070,000
Equitable Cos., Inc. ..................................... 15,000 620,625
Federal National Mortgage Association..................... 25,000 1,606,250
Fleet Financial Group, Inc. .............................. 20,000 1,468,750
Morgan Stanley, Dean Witter & Co. ........................ 15,000 645,937
Travelers Group, Inc. .................................... 20,000 750,000
------------
9,138,637
------------
FOOD, BEVERAGE & TOBACCO--2.3%
Philip Morris Cos., Inc. ................................. 55,000 2,533,437
UST, Inc. ................................................ 22,200 656,288
------------
3,189,725
------------
HOUSEHOLD PRODUCTS--1.5%
Warner-Lambert Co. ....................................... 27,000 2,038,500
------------
INSURANCE--2.8%
Allstate Corp. ........................................... 40,000 1,667,500
Chubb Corp. .............................................. 20,000 1,260,000
The Hartford Financial Services Group, Inc. .............. 20,000 948,750
------------
3,876,250
------------
LEISURE & TOURISM--0.9%
Carnival Corp., Class A................................... 40,000 1,272,500
------------
MEDICAL PRODUCTS--4.9%
Amgen, Inc.+.............................................. 25,000 1,889,063
Bard (C.R.), Inc. ........................................ 30,000 1,106,250
Baxter International, Inc. ............................... 30,000 1,785,000
Johnson & Johnson......................................... 25,000 1,956,250
------------
6,736,563
------------
</TABLE>
30
<PAGE>
SUNAMERICA GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
METALS & MINING--0.8%
Martin Marietta Materials, Inc. .......................... 25,000 $ 1,079,688
------------
PHARMACEUTICALS--9.5%
Abbott Laboratories, Inc. ................................ 35,000 1,520,313
American Home Products Corp. ............................. 25,000 1,309,375
Biogen, Inc.+............................................. 20,000 1,316,250
Bristol-Myers Squibb Co. ................................. 15,000 1,558,125
Lilly (Eli) & Co. ........................................ 15,000 1,174,688
Merck & Co., Inc. ........................................ 15,000 1,943,437
Pfizer, Inc. ............................................. 25,000 2,648,437
Schering-Plough Corp. .................................... 15,000 1,553,437
------------
13,024,062
------------
POLLUTION CONTROL--1.2%
Waste Management, Inc..................................... 35,000 1,682,188
------------
RESTAURANTS--1.3%
McDonald's Corp. ......................................... 30,000 1,790,625
------------
SOFTWARE--3.9%
BMC Software, Inc.+....................................... 20,000 1,201,250
Microsoft Corp.+.......................................... 26,000 2,861,625
Sun Microsystems, Inc.+................................... 25,000 1,245,313
------------
5,308,188
------------
SPECIALTY RETAIL--3.2%
CVS Corp. ................................................ 40,000 1,752,500
Dayton Hudson Corp. ...................................... 30,000 1,072,500
Home Depot, Inc. ......................................... 40,000 1,580,000
------------
4,405,000
------------
TELECOMMUNICATIONS--6.4%
AT&T Corp. ............................................... 35,000 2,045,312
Frontier Corp. ........................................... 30,000 821,250
Lucent Technologies, Inc. ................................ 30,000 2,071,875
MCI WorldCom, Inc.+....................................... 50,000 2,443,750
SBC Communications, Inc. ................................. 30,000 1,333,125
------------
8,715,312
------------
TRANSPORTATION--1.4%
Burlington Northern, Inc. ................................ 39,000 1,248,000
Norfolk Southern Corp. ................................... 25,000 726,563
------------
1,974,563
------------
UTILITIES--3.5%
Consolidated Natural Gas Co. ............................. 16,000 872,000
Energy East Corp. ........................................ 25,000 1,275,000
Enron Corp. .............................................. 30,000 1,584,375
PECO Energy Co. .......................................... 30,000 1,096,875
------------
4,828,250
------------
TOTAL INVESTMENT SECURITIES--89.6%
(cost $112,319,299)....................................... 122,856,638
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
SHORT-TERM SECURITIES--0.0%
FOREST PRODUCTS--0.0%
Stone Container Corp.
11.88% due 12/01/98
(cost $50,076).................................. $ 50 $ 49,750
------------
REPURCHASE AGREEMENT--10.1%
Joint Repurchase Agreement with PaineWebber,
Inc. (Note 2)
(cost $13,902,000).............................. 13,902 13,902,000
------------
TOTAL INVESTMENTS--
(cost $126,271,375)............................. 99.7% 136,808,388
Other assets less liabilities.................... 0.3 381,599
------- ------------
NET ASSETS-- 100.0% $137,189,987
======= ============
</TABLE>
- --------
+ Non-income producing security
See Notes to Financial Statements
31
<PAGE>
SUNAMERICA "DOGS" OF WALL STREET FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK--97.3%
AUTOMOTIVE--6.2%
General Motors Corp......................................... 32,145 $ 1,757,930
Genuine Parts Co............................................ 57,553 1,730,187
-----------
3,488,117
-----------
BUSINESS SERVICES--6.4%
Bemis Co., Inc.............................................. 44,327 1,554,215
Pall Corp................................................... 94,431 2,095,188
-----------
3,649,403
-----------
CHEMICALS--5.8%
du Pont (E.I.) de Nemours & Co.............................. 32,511 1,824,680
Nalco Chemical Co........................................... 49,368 1,456,356
-----------
3,281,036
-----------
CONGLOMERATE--2.2%
National Service Industries, Inc............................ 39,405 1,256,034
-----------
CONSTRUCTION & HOUSING--1.7%
Foster Wheeler Corp......................................... 72,179 992,461
-----------
DEPARTMENT STORES--3.4%
May Department Stores Co.................................... 37,062 1,908,693
-----------
ELECTRONICS--3.8%
Emerson Electric Co......................................... 34,595 2,153,539
-----------
ENERGY SOURCES--10.8%
Chevron Corp................................................ 25,354 2,131,321
Exxon Corp.................................................. 31,911 2,239,753
Royal Dutch Petroleum Co.................................... 36,037 1,716,262
-----------
6,087,336
-----------
ENTERTAINMENT PRODUCTS--4.4%
Eastman Kodak Co............................................ 32,235 2,492,168
-----------
FINANCIAL SERVICES--2.6%
J.P. Morgan & Co., Inc...................................... 17,289 1,463,082
-----------
FOOD, BEVERAGE & TOBACCO--15.8%
Anheuser-Busch Cos., Inc.................................... 44,392 2,397,168
Kellogg Co.................................................. 39,355 1,296,255
Philip Morris Cos., Inc..................................... 43,162 1,988,150
UST, Inc.................................................... 52,880 1,563,265
Winn Dixie Stores, Inc...................................... 44,704 1,662,430
-----------
8,907,268
-----------
FOREST PRODUCTS--3.7%
International Paper Co...................................... 45,284 2,111,367
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL AMOUNT VALUE
SECURITY DESCRIPTION (IN THOUSANDS) (NOTE 2)
<S> <C> <C>
HOUSEHOLD PRODUCTS--12.9%
American Home Products Corp...................... 51,068 $ 2,674,686
International Flavors & Fragrances, Inc.......... 35,183 1,161,039
Kimberly-Clark Corp.............................. 39,603 1,603,922
Rubbermaid, Inc.................................. 78,142 1,870,524
-----------
7,310,171
-----------
METALS & MINING--3.1%
Minnesota Mining & Manufacturing Co.............. 23,783 1,752,510
-----------
SPECIALTY RETAIL--3.0%
Limited, Inc..................................... 76,610 1,680,632
-----------
TELECOMMUNICATIONS--11.5%
Alltel Corp...................................... 47,565 2,253,392
AT&T Corp........................................ 31,850 1,861,234
SBC Communications, Inc.......................... 53,330 2,369,852
-----------
6,484,478
-----------
TOTAL INVESTMENT SECURITIES--97.3%
(cost $59,540,323)............................... 55,018,295
-----------
REPURCHASE AGREEMENT--0.5%
Joint Repurchase Agreement with PaineWebber, Inc.
(Note 2)
(cost $257,000).................................. $ 257 257,000
-----------
TOTAL INVESTMENTS--
(cost $59,797,323)............................... 97.8% 55,275,295
Other assets less liabilities..................... 2.2 1,238,766
------ -----------
NET ASSETS-- 100.0% $56,514,061
====== ===========
</TABLE>
See Notes to Financial Statements
32
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998
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 indirect wholly-owned
subsidiary of SunAmerica Inc. 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 Growth and Income Fund
("Growth and Income Fund") and SunAmerica "Dogs" of Wall Street Fund
(" "Dogs" of Wall Street 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.
Growth and Income seeks capital appreciation and current income by
investing primarily in common stocks.
"Dogs" of Wall Street seeks total return (including capital appreciation
and current income) through a passively managed strategy involving the
annual selection of thirty high dividend yielding common stocks from the
Dow Jones Industrial Average and the broader market.
Each Fund offers multiple classes of shares. The classes within each Fund
are presented in the Statement of Assets and Liabilities. The cost
structure for each class is as follows:
Class A shares--Offered at net asset value per share plus an initial sales
charge. 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--Offered at net asset value per share without an initial
sales charge, although a declining contingent deferred
sales charge may be imposed on redemptions made within six
years of purchase. Class B shares will convert
automatically to Class A shares on the first business day
of the month after seven years from the issuance of such
shares and at such time will be subject to the lower
distribution fee applicable to Class A shares.
Class C shares--Offered at net asset value per share without an initial
sales charge. Certain redemptions made within the first
year of the date of purchase are subject to a contingent
deferred sales charge.
33
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
Class II shares--Offered at net asset value per share plus an initial sales
charge. Certain redemptions made within the first year of
the date of purchase are subject to a contingent deferred
sales charge.
Class Z shares-- Offered at net asset value per share exclusively for sale
to employees participating in the SunAmerica profit
sharing and retirement plan.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions. Class A, Class B, Class C, and Class II shares each
make distribution and account maintenance and service fee payments under
the distribution plans pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), except that Class B, Class C and Class II shares
are subject to higher distribution fee rates. There are no distribution or
service fee payments applicable to Class Z.
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates.
The following is a summary of the significant accounting policies followed
by the Funds in the preparation of their financial statements:
SECURITY VALUATIONS: Securities that are actively traded in the over-the-
counter market, including listed securities for which the primary market is
believed by the Adviser to be over-the-counter, are valued at the quoted
bid price provided by principal market makers. Securities listed on the New
York Stock Exchange ("NYSE") or other national securities exchanges, are
valued on the basis of the last sale price on the exchange on which they
are primarily traded. If there is no sale on that day, then securities are
valued at the closing bid price on the NYSE or other primary exchange for
that day. However, if the last sale price on the NYSE is different than the
last sale price on any other exchange, the NYSE price is used. Securities
that are traded on foreign exchanges are ordinarily valued at the last
quoted sales price available before the time when the assets are valued. If
a security's price is available from more than one foreign exchange, a Fund
uses the exchange that is the primary market for the security. 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
34
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
obligations. The Funds' custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral
is valued daily on a mark to market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In
the event of default of the obligation to repurchase, a Fund has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines
or if bankruptcy proceedings are commenced with respect to the seller of
the security, realization of the collateral by the Fund may be delayed or
limited.
As of September 30, 1998, Balanced Assets Fund, Blue Chip Growth Fund, Mid-
Cap Growth Fund, Small Company Growth Fund, Growth and Income Fund and
"Dogs" of Wall Street Fund had a 11.0%, 8.3%, 1.5%, 15.6%, 10.6% and 0.2%
undivided interest, respectively, which represented $14,469,000,
$10,865,000, $1,938,000, $20,447,000, $13,902,000, and $257,000
respectively, in principal amount in a joint repurchase agreement with
PaineWebber, Inc. In addition, the Balanced Assets Fund and Small Company
Growth Fund had a 15.4% and 13.8% undivided interest, respectively, which
represented $20,000,000 and $18,000,000, respectively, in principal amount
in a joint repurchase agreement with State Street Bank & Trust Co. As of
such date, the repurchase agreement in the joint accounts and the
collateral therefor were as follows:
PaineWebber, Inc. Repurchase Agreement 5.20% dated 9/30/98, in the
principal amount of $131,433,000, repurchase price $131,451,985 due
10/01/98, collaterized by $50,000,000 U.S. Treasury Bonds 5.25% due
8/15/03, $40,000,000 U.S. Treasury Bonds 6.125% due 11/15/27, and
$32,400,000 U.S. Treasury Bonds 6.25% due 2/15/03, approximate aggregate
collateral value $134,487,192.
State Street Bank & Trust Co. Repurchase Agreement 5.33% dated 9/30/98, in
the principal amount of $130,000,000 repurchase price $130,019,247 due
10/01/98, collaterized by $40,000,000 U.S. Treasury Note 5.50% due
12/31/00, $20,000,000 U.S. Treasury Note 6.125% due 12/31/01, $20,000,000
U.S. Treasury Bonds 6.875% due 08/15/25, $10,000,000 U.S. Treasury Note
7.75% due 11/30/99, $20,000,000 U.S. Treasury Note 6.25% due 08/31/02,
$20,000,000 U.S. Treasury Bonds 12.75% due 11/15/10, approximate aggregate
collateral value $132,620,236.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: As customary in the mutual fund industry,
securities transactions are recorded on a trade date basis. Realized gains
and losses on sales of investments are calculated on the identified cost
basis. Interest income is recorded on the accrual basis; dividend income is
recorded on the ex-dividend date. Funds investing in foreign securities may
be subject to taxes imposed by countries in which they invest. Such taxes
are generally based on either income or gains earned or repatriated. The
Equity Funds, except for the Growth and Income Fund, do not amortize
premiums or accrete discounts except for original issue discounts and on
interest only securities for which amortization is required for federal
income tax purposes.
Net investment income, other than class specific expenses, and realized and
unrealized gains and losses, is allocated daily to each class of shares
based upon the relative net asset value of outstanding shares (or the value
of the dividend-eligible shares, as appropriate) of each class of shares at
the beginning of the day (after adjusting for the current capital shares
activity of the respective class).
35
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
Expenses common to all Funds, not directly related to individual Funds, are
allocated among the Equity Funds based upon their relative net asset value
or other appropriate methods.
The Funds issue and redeem their shares, invest in securities and
distribute dividends from net investment income and net realized gains
which are paid in cash or are reinvested at the discretion of shareholders.
These activities are reported in the Statement of Changes in Net Assets.
Dividends from net investment income, if any, are paid semiannually, except
for Balanced Assets Fund and Growth and Income Fund, which pay quarterly.
Capital gain distributions, if any, are paid at least annually.
The Funds record dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined and
presented in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Net
investment income/loss, net realized gain/loss, and net assets are not
affected.
For the fiscal year ended September 30, 1998, the following
reclassifications arising from book/tax differences were primarily the
result of reclassifications due to net operating losses.
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED PAID
NET REALIZED NET INVESTMENT IN
GAIN/LOSS INCOME/LOSS CAPITAL
------------- -------------- --------
<S> <C> <C> <C>
Balanced Assets Fund................. $ (56,125) $ 56,125 $ --
Blue Chip Growth Fund................ (479,700) 479,700 --
Mid-Cap Growth Fund.................. (489,325) 491,476 (2,151)
Small Company Growth Fund............ (2,505,817) 2,512,573 (6,756)
Growth and Income Fund............... (298,630) 307,625 (8,995)
"Dogs" of Wall Street Fund........... -- 58,358 (58,358)
</TABLE>
FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the mean of the quoted bid
and asked prices of such currencies against the U.S. dollar.
The Funds do not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in
the market prices of securities held at fiscal year-end. Similarly, the
Funds do not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and
36
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
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.
OPTIONS: An option is a contract conveying a right to buy or sell a
financial instrument at a specified price during a stipulated period. The
premium paid by a Fund for the purchase of a call or a put option is
included in the Fund's Statement of Assets and Liabilities as an investment
and subsequently marked to market to reflect the current market value of
the option. When a Fund writes a call or a put option, an amount equal to
the premium received by the Fund is included in the Fund's Statement of
Assets and Liabilities as a liability and is subsequently marked to market
to reflect the current market value of the option written. If an option
which the Fund has written either expires on its stipulated expiration
date, or if the Fund enters into a closing purchase transaction, the Fund
realizes a gain (or loss if the cost of a closing purchase transaction
exceeds the premium received when the option was written) without regard to
any unrealized gain or loss on the underlying security, and the liability
related to such options is extinguished. If a call option which the Fund
has written is exercised, the Fund realizes a capital gain or loss from the
sale of the underlying security and the proceeds from such sale are
increased by the premium originally received. If a put option which the
Fund has written is exercised, the amount of the premium originally
received reduces the cost of the security which the Fund purchased upon
exercise of the option.
During the fiscal year ended September 30, 1998, transactions in written
option contracts were as follows:
<TABLE>
<CAPTION>
MID- SMALL COMPANY
CAP GROWTH FUND GROWTH FUND
------------------ --------------------
CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- ----------
<S> <C> <C> <C> <C>
Written option contracts as of
9/30/97......................... -- $ -- -- $ --
Options written during the year. (370) (298,773) (2,488) (2,078,701)
Written options assigned during
the year........................ -- -- 90 48,103
Written options closed during
the year........................ 370 197,870 1,496 897,591
Net realized gain on written
options closed.................. -- 100,903 -- 483,309
---- -------- ------ ----------
Written option contracts as of
9/30/98......................... -- $ -- (902) ($ 649,698)
==== ======== ====== ==========
</TABLE>
ORGANIZATIONAL EXPENSES: Expenses incurred by SAAMCo in connection with the
organization of new Funds or new classes of shares are being amortized on a
straight line basis by the Fund over a period not to exceed 60 months from
the date the Fund commenced operations.
Note 3. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and
Management Agreement (the "Agreement") with SAAMCo. Under the Agreement,
SAAMCo provides continuous supervision of a Fund's portfolio and
administers its corporate affairs, subject to general review by the
Trustees. In connection therewith, SAAMCo furnishes the Funds with office
facilities, maintains certain of the Funds' books and records, and pays the
salaries and expenses of all personnel, including officers of the Funds
37
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
who are employees of SAAMCo and its affiliates. The investment advisory and
management fee paid to SAAMCo with respect to each Fund is computed daily
and payable monthly, at an annual rate of .75% of a Fund's average daily
net assets up to $350 million, .70% of the next $350 million, and .65%
thereafter, except for the "Dogs" of Wall Street Fund, which pays at an
annual rate of .35% of the Fund's average daily net assets. For the fiscal
year ended September 30, 1998, SAAMCo earned fees in the amounts stated on
the Statement of Operations.
For the fiscal year ended September 30, 1998, SAAMCo has agreed to
voluntarily reimburse class specific expenses as follows:
<TABLE>
<S> <C>
Balanced Assets Class Z........................................ $ 8,754
Small Company Growth Class C................................... 15,005
Small Company Growth Class Z................................... 17,656
Growth and Income Class C...................................... 17,914
Growth and Income Class Z...................................... 7,891
"Dogs" of Wall Street Class A.................................. 19,810
"Dogs" of Wall Street Class B.................................. 20,253
"Dogs" of Wall Street Class II................................. 15,437
</TABLE>
The Trust, on behalf of each Fund, has a Distribution Agreement with
SunAmerica Capital Services, Inc. ("SACS"), an indirect wholly-owned
subsidiary of SunAmerica Inc. Each Fund has adopted a Distribution Plan
(the "Plan") in accordance with the provisions of Rule 12b-1 under the 1940
Act. Rule 12b-1 permits an investment company directly or indirectly to pay
expenses associated with the distribution of its shares ("distribution
expenses") in accordance with a plan adopted by the investment company's
board of trustees and approved by its shareholders. Pursuant to such rule,
the Trustees and the shareholders of each class of shares of each Fund have
adopted Distribution Plans hereinafter referred to as the "Class A Plan",
"Class B Plan", "Class C Plan" and "Class II Plan". In adopting the
Distribution Plans, 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, Class B Plan, Class C Plan and Class II Plan, the
Distributor receives payments from a Fund at an annual rate of up to 0.10%,
0.75%, 0.75% and 0.75%, respectively, of average daily net assets of such
Fund's Class 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 each Class' 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
fiscal year ended September 30, 1998, SACS received fees (see Statement of
Operations) based upon the aforementioned rates.
38
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
SACS receives sales charges on each Fund's Class A and Class II 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, Class C and Class II shares. SACS has
advised the Funds that for the fiscal year ended September 30, 1998 the
proceeds received from sales (and paid out to affiliated and non-affiliated
broker-dealers) and redemptions are as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------------- ------------- -------------
CONTINGENT CONTINGENT
SALES AFFILIATED NON-AFFILIATED DEFERRED DEFERRED
CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES SALES CHARGES
-------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balanced Assets Fund.... $953,420 $709,993 $104,244 $218,815 $--
Blue Chip Growth Fund... 147,096 69,677 56,467 43,371 --
Mid-Cap Growth Fund..... 52,243 31,728 13,351 28,118 --
Small Company Growth
Fund................... 425,373 218,719 145,997 291,969 --
Growth and Income Fund.. 706,772 329,966 263,370 177,476 --
"Dogs" of Wall Street
Fund................... 935,429 53,735 762,364 5,159 --
<CAPTION>
CLASS II CLASS II
-------------------------------------- -------------
CONTINGENT
SALES AFFILIATED NON-AFFILIATED DEFERRED
CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES
-------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balanced Assets Fund.... $ -- $ -- $ -- $ --
Blue Chip Growth Fund... -- -- -- --
Mid-Cap Growth Fund..... -- -- -- --
Small Company Growth
Fund................... -- -- -- --
Growth and Income Fund.. -- -- -- --
"Dogs" of Wall Street
Fund................... 329,611 20,369 309,242 970
</TABLE>
The Trust has entered into a Service Agreement with SunAmerica Fund
Services, Inc. ("SAFS"), an indirect wholly-owned subsidiary of SunAmerica
Inc. Under the Service Agreement, SAFS performs certain shareholder account
functions by assisting the Funds' transfer agent in connection with the
services that it offers to the shareholders of the Funds. The Service
Agreement, which permits the Funds to compensate SAFS for services rendered
based upon an annual rate of 0.22% of average daily net assets, is approved
annually by the Trustees. For the fiscal year ended September 30, 1998, the
Funds incurred the following expenses which are included in transfer agent
fees in the Statement of Operations to compensate SAFS pursuant to the
terms of the Service Agreement.
<TABLE>
<CAPTION>
PAYABLE AT
EXPENSE SEPTEMBER 30, 1998
---------------------------------- --------------------------------
CLASS A CLASS B CLASS C CLASS II CLASS A CLASS B CLASS C CLASS II
-------- -------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced Assets Fund.... $405,484 $389,600 $ -- $ -- $33,670 $29,819 $ -- $ --
Blue Chip Growth Fund... 162,025 85,809 -- -- 12,863 6,443 -- --
Mid-Cap Growth Fund..... 95,146 25,911 -- -- 6,649 1,748 -- --
Small Company Growth
Fund................... 324,239 206,707 243 -- 19,117 11,267 30 --
Growth and Income Fund.. 125,994 160,198 564 -- 10,110 13,910 130 --
"Dogs" of Wall Street
Fund................... 10,233 7,665 -- 6,799 2,732 3,137 -- 2,944
</TABLE>
39
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
Note 4. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales and maturities of long-term
investments during the fiscal year ended September 30, 1998 were as
follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND "DOGS" OF
ASSETS GROWTH GROWTH GROWTH INCOME WALL STREET
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Purchases (excluding
U.S. government
securities)............ $212,345,695 $ 96,794,744 $195,447,481 $643,952,410 $199,772,367 $59,540,323
Sales (excluding U.S.
government securities). 220,912,797 108,052,054 207,075,935 762,512,718 183,901,067 --
Purchases of U.S.
government securities.. 62,804,244 -- 1,925,656 8,297,187 -- --
Sales of U.S. government
securities............. 93,951,631 -- 1,919,332 8,378,258 -- --
</TABLE>
Note 5. Portfolio Securities (Tax Basis)
Each Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute all of its
taxable income, including any net realized gain on investments, to its
shareholders. Therefore, no federal tax provision is required.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for tax purposes, including short-term securities, were as
follows:
<TABLE>
<CAPTION>
BALANCED BLUE CHIP MID-CAP SMALL COMPANY GROWTH AND "DOGS" OF
ASSETS GROWTH GROWTH GROWTH INCOME WALL STREET
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Cost.................... $304,730,087 $92,221,829 $44,828,441 $169,105,656 $126,843,529 $59,797,323
============ =========== =========== ============ ============ ===========
Appreciation............ $ 53,655,765 $19,459,889 $ 5,870,556 $ 19,072,944 $ 16,677,884 $ 1,216,386
Depreciation............ (4,662,762) (3,196,304) (1,226,984) (22,359,061) (6,713,025) (5,738,414)
------------ ----------- ----------- ------------ ------------ -----------
Net unrealized
appreciation
(depreciation)......... $ 48,993,003 $16,263,585 $ 4,643,572 $ (3,286,117) $ 9,964,859 $(4,522,028)
============ =========== =========== ============ ============ ===========
</TABLE>
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each series were as
follows:
<TABLE>
<CAPTION>
BALANCED ASSETS FUND
------------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- --------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------------ ------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 2,254,719 $ 41,748,177 2,014,610 $ 33,670,422 1,661,113 $ 30,769,547 1,601,187 $ 26,977,385
Reinvested
dividends...... 1,076,384 18,447,868 1,098,904 17,076,435 1,020,631 17,400,232 1,191,203 18,422,134
Shares redeemed. (1,961,244) (36,288,098) (2,712,729) (45,625,149) (2,853,943) (52,660,559) (3,596,433) (60,154,848)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 1,369,859 $ 23,907,947 400,785 $ 5,121,708 (172,199) $ (4,490,780) (804,043) $(14,755,329)
========== ============ ========== ============ ========== ============ ========== ============
</TABLE>
40
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
BALANCED ASSETS FUND
-----------------------------------------------------
CLASS Z
-----------------------------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED OCTOBER 7, 1996* THROUGH
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 20,923 $ 385,182 3,052 $ 51,485
Reinvested
dividends...... 2,209 37,435 102 1,635
Shares redeemed. (26,003) (469,007) (283) (4,718)
----------- ------------- ---------- -------------
Net increase (decrease). (2,871) $ (46,390) 2,871 $ 48,402
=========== ============= ========== =============
<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, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------------- ------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOU NT
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 735,069 $ 14,494,612 623,963 $ 10,925,394 845,608 $ 16,159,070 1,259,797 $ 21,456,617
Reinvested
dividends...... 464,861 8,130,414 455,714 6,972,433 270,094 4,553,792 319,329 4,764,382
Shares redeemed. (656,032) (13,020,484) (676,748) (11,828,552) (1,011,200) (19,292,333) (1,756,723) (29,208,753)
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... 543,898 $ 9,604,542 402,929 $ 6,069,275 104,502 $ 1,420,529 (177,597) $ (2,987,754)
=========== ============= ========== ============= ========== ============ ========== ============
<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, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------------- ------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 1,824,307 $ 32,027,068 1,195,858 $ 22,039,862 141,012 $ 2,392,690 361,032 $ 6,440,002
Reinvested
dividends...... 463,048 7,413,406 105,242 1,820,690 141,127 2,175,071 35,395 598,248
Shares redeemed. (2,146,098) (38,180,050) (1,428,977) (26,234,993) (322,783) (5,561,595) (501,401) (8,706,849)
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... 141,257 $ 1,260,424 (127,877) $ (2,374,441) (40,644) $ (993,834) (104,974) $ (1,668,599)
=========== ============= ========== ============= ========== ============ ========== ============
<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, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------------- ------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold..... 8,331,031 $ 192,281,985 4,356,568 $ 104,158,132 1,709,037 $ 38,946,749 2,294,947 $ 52,824,439
Reinvested
dividends...... 667,493 14,571,367 231,823 5,468,761 459,359 9,686,009 165,485 3,806,222
Shares redeemed. (10,040,494) (233,026,673) (4,573,784) (108,631,540) (3,358,273) (75,980,708) (2,474,107) (56,073,072)
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... (1,041,970) $ (26,173,321) 14,607 $ 995,353 (1,189,877) $(27,347,950) (13,675) $ 557,589
=========== ============= ========== ============= ========== ============ ========== ============
</TABLE>
* Inception of the class
41
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND
---------------------------------------------------------------------------
CLASS C CLASS Z
------------------------ -------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
FEBRUARY 2, 1998* FOR THE OCTOBER 7, 1996*
THROUGH YEAR ENDED THROUGH
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------------ ----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 9,190 $ 203,790 27,354 $ 655,620 36,250 $ 860,624
Reinvested dividends.. -- -- 4,828 106,220 300 7,070
Shares redeemed....... (2) (40) (36,314) (803,485) (3,202) (77,380)
---------- ------------ --------- ------------ ---------- ------------
Net increase (decrease). 9,188 $ 203,750 (4,132) $ (41,645) 33,348 $ 790,314
========== ============ ========= ============ ========== ============
<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, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------------ ----------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------ ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 1,912,402 $ 25,967,840 2,346,608 $ 27,325,734 3,176,130 $ 42,351,160 3,556,104 $41,322,565
Reinvested dividends.. 403,557 5,004,107 118,133 1,248,669 459,379 5,645,769 86,070 908,039
Shares redeemed....... (1,363,478) (18,739,155) (969,421) (11,704,696) (1,533,431) (20,501,966) (815,041) (9,270,338)
---------- ------------ --------- ------------ ---------- ------------ --------- -----------
Net increase.......... 952,481 $ 12,232,792 1,495,320 $ 16,869,707 2,102,078 $ 27,494,963 2,827,133 $32,960,266
========== ============ ========= ============ ========== ============ ========= ===========
<CAPTION>
GROWTH AND INCOME FUND
-------------------------------------------------
CLASS C CLASS Z
------------------------ -----------------------
FOR THE PERIOD FOR THE PERIOD
FEBRUARY 2, 1998* APRIL 15, 1998*
THROUGH THROUGH
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 95,450 $ 1,274,778 7,288 $101,080
Reinvested dividends.. -- -- -- --
Shares redeemed....... (19,042) (252,084) (12) (154)
---------- ------------ --------- ------------
Net increase.......... 76,408 $ 1,022,694 7,276 $100,926
========== ============ ========= ============
<CAPTION>
"DOGS" OF WALL STREET FUND
---------------------------------------------------------------------------
CLASS A CLASS B CLASS II
------------------------ ----------------------- ------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
JUNE 8, 1998* THROUGH JUNE 8, 1998* THROUGH JUNE 8, 1998* THROUGH
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------------ ----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold........... 3,596,931 $ 43,876,855 1,811,906 $21,338,291 1,874,062 $21,947,206
Reinvested dividends.. -- -- -- -- -- --
Shares redeemed....... (2,089,355) (25,427,269) (23,537) (272,423) (51,153) (602,698)
---------- ------------ --------- ------------ ---------- ------------
Net increase.......... 1,507,576 $ 18,449,586 1,788,369 $21,065,868 1,822,909 $21,344,508
========== ============ ========= ============ ========== ============
</TABLE>
* Inception of the class
42
<PAGE>
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 1998 -- (CONTINUED)
Note 7. Commitments and Contingencies
The SunAmerica family of mutual funds may borrow up to $75,000,000 under an
uncommitted line of credit with State Street Bank and Trust Company, the
Funds' custodian, with interest payable at the Federal Funds rate plus 100
basis points. Borrowings under the line of credit will commence when the
respective Fund's cash shortfall exceeds $100,000.
Note 8. Trustees Retirement Plan
The Trustees (and Directors) of the SunAmerica Family of Mutual Funds have
adopted the SunAmerica Disinterested Trustees' and Directors' Retirement
Plan (the "Retirement Plan") effective January 1, 1993 for the unaffiliated
Trustees. The Retirement Plan provides generally that if an unaffiliated
Trustee who has at least 10 years of consecutive service as a Disinterested
Trustee of any of the SunAmerica mutual funds (an "Eligible Trustee")
retires after reaching age 60 but before age 70 or dies while a Trustee,
such person will be eligible to receive a retirement or death benefit from
each SunAmerica mutual fund with respect to which he or she is an Eligible
Trustee. As of each birthday, prior to the 70th birthday, but in no event
for a period greater than 10 years, each Eligible Trustee will be credited
with an amount equal to 50% of his or her regular fees (excluding committee
fees) for services as a Disinterested Trustee of each SunAmerica mutual
fund for the calendar year in which such birthday occurs. In addition, an
amount equal to 8.5% of any amounts credited under the preceding clause
during prior years, is added to each Eligible Trustee's account until such
Eligible Trustee reaches his or her 70th birthday. An Eligible Trustee may
receive any benefits payable under the Retirement Plan, at his or her
election, either in one lump sum or in up to fifteen annual installments.
As of September 30, 1998, Balanced Assets Fund, Blue Chip Growth Fund, Mid-
Cap Growth Fund, Small Company Growth Fund and Growth and Income Fund had
accrued $41,084, $12,409, $6,950, $28,365 and $5,954, respectively, for the
Retirement Plan, which is included in accrued expenses on the Statement of
Assets and Liabilities, and for the fiscal year ended September 30, 1998
expensed $13,171, $3,871, $2,139, $10,066 and $3,810, respectively, for the
Retirement Plan, which is included in Trustees' fees and expenses on the
Statement of Operations.
Note 9. Subsequent Events
On August 19, 1998, SunAmerica Inc. entered into an agreement with American
International Group, Inc. ("AIG"). Under the terms of the agreement,
SunAmerica Inc. will merge with and into AIG, and consequently, SAAMCo,
which acts as investment adviser of the Trust, will become a subsidiary of
AIG. SAAMCo will not change its name and no organizational changes are
currently planned which would affect services provided to the Trust. As a
result of the merger, Trust shareholders of record as of October 30, 1998
are being asked to approve a new investment advisory and management
agreement with SAAMCo, to take effect upon consummation of the merger. The
new agreement will be identical to the current agreement in all respects
except for its effective date and termination date and will have no effect
on the fees or expenses payable by the Trust or its shareholders. The
merger transaction is expected to be consummated in late 1998 or early
1999.
Effective December 1, 1998, Small Company Growth Fund and Growth and Income
Fund will offer Class II shares in place of Class C shares. The cost
structure for Class II shares is presented in Note 1.
43
<PAGE>
SUNAMERICA EQUITY FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of SunAmerica Equity Funds
In our opinion, the accompanying statement 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 Growth and
Income Fund and "Dogs" of Wall Street Fund (constituting SunAmerica Equity
Funds, hereafter referred to as the "Fund") at September 30, 1998, the results
of each of their operations for the period then ended and the changes in each
of their net assets and the financial highlights for each of the periods
indicated, 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, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 10, 1998
44
<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, 1998. The information and
distributions reported herein may differ from the information and
distributions taxable to the shareholders for the calendar year ending
December 31, 1998. 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 1999.
During the year ended September 30, 1998 the Funds paid the following
dividends per share:
<TABLE>
<CAPTION>
NET NET
SHORT- LONG-
NET TERM TERM
TOTAL INVESTMENT CAPITAL CAPITAL
DIVIDENDS INCOME GAINS GAINS
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
Balanced Assets Class A.................... $2.04 $.30 $ .96 $ .78
Balanced Assets Class B.................... 1.93 .19 .96 .78
Balanced Assets Class Z.................... 1.89 .15 .96 .78
Blue Chip Growth Class A................... 2.48 -- 1.52 .96
Blue Chip Growth Class B................... 2.48 -- 1.52 .96
Mid-Cap Growth Class A..................... 3.53 -- 1.88 1.65
Mid-Cap Growth Class B..................... 3.53 -- 1.88 1.65
Small Company Growth Class A............... 2.40 -- .99 1.41
Small Company Growth Class B............... 2.40 -- .99 1.41
Small Company Growth Class C............... -- -- -- --
Small Company Growth Class Z............... 2.40 -- .99 1.41
Growth and Income Class A.................. 1.35 -- 1.21 .14
Growth and Income Class B.................. 1.35 -- 1.21 .14
Growth and Income Class C.................. -- -- -- --
Growth and Income Class Z.................. -- -- -- --
"Dogs" of Wall Street Class A.............. -- -- -- --
"Dogs" of Wall Street Class B.............. -- -- -- --
"Dogs" of Wall Street Class II............. -- -- -- --
</TABLE>
For the year ended September 30, 1998, 13.36%, 12.57%, 6.97%, 12.20% and
12.72% of the dividends paid from ordinary income by Balanced Assets Fund,
Blue Chip Growth Fund, Mid-Cap Growth Fund, Small Company Growth Fund and
Growth and Income Fund respectively, qualified for the 70% dividends received
deductions for corporations.
45
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in the SunAmerica Equity Funds'
portfolios to a similar investment in an index. Please note that "inception" as
used herein reflects the date a Fund commenced operations without regard to
when a second class of shares was introduced. It is important to note that the
SunAmerica Equity Funds are professionally managed mutual funds while the
indices are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only. The graphs present the performance of the
class of that particular Fund which has been in existence the longest. The
performance of the other classes will vary based upon the difference in sales
charges and fees assessed to shareholders of that class. Each index has been
chosen by the Equity Investment Team as an appropriate comparison and a brief
discussion about the portfolio's performance has been included in the
shareholder letter.
Balanced Assets Fund
Balanced
Assets S&P 500 (dividends Lehman Bros.
Class B reinvested) Int Gov't Index
-------- ------------------ ---------------
9/88 $10,000 $10,000 $10,000
6/89 11,102 12,014 10,839
6/90 12,532 13,995 11,677
6/91 13,019 15,030 12,907
6/92 13,995 17,046 14,565
6/93 16,836 19,369 16,028
9/93 17,415 19,869 16,389
9/94 17,390 20,603 16,143
9/95 20,861 24,765 17,585
9/96 22,934 32,167 18,452
9/97 28,459 45,183 20,238
9/98 30,911 49,272 22,385
- -------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------------------
SEC SEC
Balanced Cumulative Average Cumulative Average
Assets Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- -------------------------------------------------------------------------------
1 Year Return 9.32% 3.04% 8.62% 4.62%
- -------------------------------------------------------------------------------
5 Year Return N/A N/A 77.49% 11.91%
- -------------------------------------------------------------------------------
10 Year Return N/A N/A 210.72% 12.00%
- -------------------------------------------------------------------------------
Since Inception* 83.86% 11.58% 386.25% 12.27%
- -------------------------------------------------------------------------------
+ Traditional returns do not include sales load.
* Inception Date - Class A: 9/24/93; Class B: 1/29/85
Fund changed its fiscal year end from June 30 as of September 24, 1993.
For the 12 month period ending September 30, 1998, SunAmerica Balanced Assets
Class B returned 4.62%, compared to 9.05% for the S&P 500 Index. (Past
performance is no guarantee of future results.)
46
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (CONTINUED)
Blue Chip Growth Fund
Blue Chip S&P 500 Index (dividends
Growth Class B reinvested)
-------------- ------------------------
9/88 $10,000 $10,000
12/88 10,029 10,309
12/89 11,309 13,575
12/90 8,469 13,154
12/91 10,997 17,161
12/92 11,927 18,469
9/93 14,288 19,869
9/94 14,029 20,603
9/95 16,908 26,734
9/96 19,134 32,167
9/97 25,262 45,183
9/98 26,362 49,272
- ------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------------------
SEC SEC
Blue Chip Cumulative Average Cumulative Average
Growth Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- ------------------------------------------------------------------------------
1 Year Return 5.09% -0.95% 4.36% 0.36%
- ------------------------------------------------------------------------------
5 Year Return N/A N/A 84.51% 12.79%
- ------------------------------------------------------------------------------
10 Year Return N/A N/A 163.62% 10.18%
- ------------------------------------------------------------------------------
Since Inception* 90.97% 12.53% 337.88% 11.51%
- ------------------------------------------------------------------------------
+ Traditional returns do not include sales load.
* Inception Date - Class A: 10/08/93; Class B: 3/13/85
Fund changed its fiscal year end from December 31 to September 30 as of
September 24, 1993.
For the 12 month period ending September 30, 1998, SunAmerica Blue Chip Growth
Class B returned 0.36%, compared to 9.05% for the S&P 500 Index. (Past
performance is no guarantee of future results.)
47
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (CONTINUED)
Mid-Cap Growth Fund
Mid-Cap Growth S&P 500 Index (dividends S&P 400 Mid-Cap
Class A reinvested) Index
-------------- ------------------------ ---------------
9/88 $ 9,425 $10,000 $10,000
11/88 9,189 10,132 9,873
11/89 12,533 13,257 13,442
11/90 10,324 12,797 12,485
11/91 13,538 15,400 17,731
11/92 16,438 18,245 21,463
9/93 19,795 19,869 24,618
9/94 17,895 20,603 25,012
9/95 23,175 26,734 31,450
9/96 26,171 32,167 35,846
9/97 31,808 45,183 49,858
9/98 30,473 49,272 46,722
- -------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------------------
SEC SEC
Mid-Cap Cumulative Average Cumulative Average
Growth Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- -------------------------------------------------------------------------------
1 Year Return -4.20% -9.71% -4.93% -8.73%
- -------------------------------------------------------------------------------
5 Year Return 53.95% 7.73% N/A N/A
- -------------------------------------------------------------------------------
10 Year Return 223.32% 11.79% N/A N/A
- -------------------------------------------------------------------------------
Since Inception* 272.20% 11.35% 47.91% 7.85%
- -------------------------------------------------------------------------------
+ Traditional returns do not include sales load.
* Inception Date - Class A: 01/28/87; Class B: 10/04/93
Fund changed its fiscal year end from November 30 to September 30 as of
September 24, 1993.
For the 12 month period ending September 30, 1998, SunAmerica Mid-Cap Growth
Class A returned -9.71%, compared to -6.33% for the S&P 400 Mid-Cap Index.
(Past performance is no guarantee of future results.)
48
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (CONTINUED)
Small Company Growth Fund
Small Company NASDAQ Russell 2000
Growth Class A Industrials Index
-------------- ----------- ------------
9/88 $ 9,425 $10,000 $10,000
11/88 8,682 9,381 9,525
11/89 11,237 11,471 11,280
11/90 7,802 10,031 8,553
11/91 11,861 15,190 11,830
11/92 14,743 18,153 14,342
9/93 18,515 20,096 16,968
9/94 17,082 20,030 17,180
9/95 25,623 27,354 20,820
9/96 30,581 30,866 23,592
9/97 36,954 38,324 31,379
9/98 27,714 28,751 25,449
- -------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------------------
Small SEC SEC
Company Cumulative Average Cumulative Average
Growth Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- -------------------------------------------------------------------------------
1 Year Return -25.00% -29.32% -25.52% -28.50%
- -------------------------------------------------------------------------------
5 Year Return 49.68% 7.12% 44.85% 7.39%
- -------------------------------------------------------------------------------
10 Year Return 193.95% 10.73% N/A N/A
- -------------------------------------------------------------------------------
Since Inception* 267.26% 11.23% 45.73% 7.65%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Class Z
---------------------------------------------------------------
Small SEC SEC
Company Cumulative Average Cumulative Average
Growth Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- -------------------------------------------------------------------------------
1 Year Return N/A N/A -24.64% -24.64%
- -------------------------------------------------------------------------------
5 Year Return N/A N/A N/A N/A
- -------------------------------------------------------------------------------
10 Year Return N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Since Inception* -13.12% N/A -9.70% -5.02%
- -------------------------------------------------------------------------------
+ Traditional returns do not include sales load.
* Inception Date - Class A: 1/28/87; Class B: 9/24/93; Class C: 2/02/98;
Class Z: 10/07/96.
Fund changed its fiscal year end from November 30 to September 30 as of
September 24, 1993.
For the 12 month period ending September 30, 1998, SunAmerica Small Company
Growth Class A returned -29.32%, compared to -24.68% for the NASDAQ
Industrials Index. (Past performance is no guarantee of future results.)
49
<PAGE>
SUNAMERICA EQUITY FUNDS
COMPARISONS: PORTFOLIOS VS. INDEXES -- (CONTINUED)
Growth and Income Fund
Growth and Growth S&P 500
Income and Income (dividends
Class A Class B reinvested)
---------- ---------- -----------
7/94 $ 9,425 $10,000 $10,000
9/94 9,645 9,819 10,489
9/95 11,529 11,779 13,610
9/96 15,286 16,045 16,377
9/97 20,511 21,388 23,003
9/98 21,646 22,241 25,085
- -------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------------------
Growth SEC SEC
and Cumulative Average Cumulative Average
Income Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- -------------------------------------------------------------------------------
1 Year Return 5.53% -0.54% 4.84% -0.84%
- -------------------------------------------------------------------------------
5 Year Return N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Since Inception* 129.67% 19.93% 124.41% 20.77%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C Class Z
---------------------------------------------------------------
Growth SEC SEC
and Cumulative Average Cumulative Average
Income Traditional Annual Traditional Annual
Fund Return+ Return Return+ Return
- -------------------------------------------------------------------------------
1 Year Return N/A N/A N/A N/A
- -------------------------------------------------------------------------------
5 Year Return N/A N/A N/A N/A
- -------------------------------------------------------------------------------
Since Inception* -1.33% N/A -10.52% N/A
- -------------------------------------------------------------------------------
+ Traditional returns do not include sales load.
* Inception Date - Class A: 7/01/94; Class B: 7/06/94; Class C: 2/02/98;
Class Z: 4/15/98
For the 12 month period ending September 30, 1998, SunAmerica Growth and
Income Class B returned 0.84%, compared to 9.05% for the S&P 500 Index. (Past
performance is no guarantee of future results.)
50
<PAGE>
Trustees
S. James Coppersmith
Samuel M. Eisenstat
Stephen J. Gutman
Peter A. Harbeck
Peter McMillan III
Sebastiano Sterpa
Officers
Peter A. Harbeck, President
Francis D. Gannon, Vice President
Nancy Kelly, Vice President
P. Christopher Leary, Vice President
Robert M. Zakem, Secretary
Peter C. Sutton, Treasurer
John T. Genoy, Assistant Treasurer
Donna M. Handel, Assistant Treasurer
Cheryl L. Hawthorne, Assistant Treasurer
Abbe P. Stein, Assistant Secretary
Investment Adviser
SunAmerica Asset Management Corp.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Distributor
SunAmerica Capital Services, Inc.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Shareholder Servicing Agent
SunAmerica Fund Services, Inc.
The SunAmerica Center
733 Third Avenue
New York, NY 10017-3204
Custodian and Transfer Agent
State Street Bank and Trust Company
P.O. Box 419572
Kansas City, MO 64141-6572
This report is submitted solely for the general information of shareholders of
the Fund. Distribution of this report to persons other than shareholders of the
Fund is authorized only in connection with a currently effective prospectus,
setting forth details of the Fund, which must precede or accompany this report.
[LOGO] SunAmerica
Mutual Funds
-----------------
The SunAmerica Center, Bulk Rate
733 Third Avenue U.S. Postage
New York, NY 10017-3204 PAID
Kansas City, MO
Permit No. 2891
-----------------
EF ANN
