UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04801
---------------------------------------------
SunAmerica Equity Funds
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
John T. Genoy
Senior Vice President
SunAmerica Asset Management, LLC
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
--------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6414
-----------------------------
Date of fiscal year end: September 30
--------------------------
Date of reporting period: September 30, 2014
-------------------------
Item 1. Reports to Stockholders
[PHOTO]
ANNUAL REPORT 2014
SUNAMERICA
Equity Funds
[LOGO]
SEPTEMBER 30, 2014 ANNUAL REPORT
SUNAMERICA EQUITY FUNDS
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND (SIEAX)
SUNAMERICA JAPAN FUND (SAESX)
TABLE OF CONTENTS
SHAREHOLDER LETTER.......................................... 2
EXPENSE EXAMPLE............................................. 4
STATEMENT OF ASSETS AND LIABILITIES......................... 6
STATEMENT OF OPERATIONS..................................... 8
STATEMENT OF CHANGES IN NET ASSETS.......................... 9
FINANCIAL HIGHLIGHTS........................................ 10
PORTFOLIO OF INVESTMENTS.................................... 12
NOTES TO FINANCIAL STATEMENTS............................... 18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..... 30
APPROVAL OF ADVISORY AGREEMENTS............................. 31
TRUSTEE AND OFFICER INFORMATION............................. 36
SHAREHOLDER TAX INFORMATION................................. 39
COMPARISONS: FUNDS VS. INDICES.............................. 40
SHAREHOLDER LETTER -- (UNAUDITED)
Dear Shareholders,
We are pleased to present this annual update for the SunAmerica Equity Funds
for the 12 months ended September 30, 2014. It was a period wherein
international equity performance was driven largely by economic conditions and
monetary policies of global central banks, both of which diverged as the fiscal
year progressed, as well as by concerns surrounding geopolitical events.
As the annual period began in October 2013, generally solid economic data,
coupled with continued accommodative monetary policy from central banks around
the world, raised many investors' expectations for 2014. Despite liquidity
concerns in China and tepid economic growth in Europe, market participants were
emboldened by signs of expansionary traction in the U.S. and Japan, the world's
largest and third-largest economies, respectively. In the first quarter of
2014, global equities continued to advance. Despite ongoing geopolitical
tensions surrounding the crisis in Ukraine, concerns about a Chinese growth
slowdown and unsettling economic and political developments in several other
emerging market countries, the global equity markets posted positive returns.
Investors appeared to take solace from comments out of the European Central
Bank ("ECB") and Chinese government suggesting that stimulus measures may be
ramped up. Continued evidence of a Eurozone recovery, solid U.S. corporate
earnings and robust merger and acquisition activity also aided bullish
sentiment. Global equities continued their rally in the second quarter of 2014,
as the ECB introduced a set of unconventional measures to fight disinflationary
forces and rekindle growth in the Eurozone. In addition, the People's Bank of
China ("PBOC") announced a cut in its reserve requirement ratio for major banks
in order to stimulate lending and support growth.
Global equities then returned a modest gain in the third quarter of 2014 for
the ninth consecutive quarter of positive returns. However, ongoing
geopolitical tensions in Ukraine and the Middle East, Portuguese banking woes,
Argentine government debt default, European economic malaise and the prospect
of an accelerated U.S. Federal Reserve (the "Fed") interest rate hike timeline
all conspired to stall the five-year-old global stock rally in September 2014.
In addition, China's property slump and poor GDP readings in Japan and the
Eurozone raised the specter of a slowdown in global economic growth.
Nevertheless, there were several positive developments during the third
calendar quarter. The ECB increased its accommodative monetary policy to spur
growth; the PBOC eased monetary conditions to reduce financial fragilities and
lower the risk of a recession; and the U.S. corporate earnings season painted a
generally encouraging picture. Even with these upbeat events, many market
participants found ample reason to reassess their risk appetites, especially
given the strong bull market in recent years.
Against this backdrop, international equities, as measured by the MSCI ACWI
ex-U.S. (Net)*, posted positive returns but lagged the U.S. equity market,
returning 4.77% for the 12-month period ended September 30, 2014. To compare,
U.S. equities, as measured by the S&P 500(R) Index*, returned 19.73% for the
same 12 month period. Japanese equities, as measured by the MSCI Japan Index
(Net)*, posted a positive return of 0.62% during the same annual period.
Amid these conditions, each of the portfolios in the SunAmerica Equity Funds
generated positive absolute returns during the annual period ended September
30, 2014. On the following pages, you will find detailed financial statements
and portfolio information for each of the SunAmerica Equity Funds.
2
We thank you for being a part of the SunAmerica Equity Funds. We value your
ongoing confidence in us and look forward to serving your investment needs in
the future. As always, if you have any questions regarding your investments,
please contact your financial advisor or get in touch with us directly at
800-858-8850 or www.safunds.com.
Sincerely,
THE SUNAMERICA EQUITY FUNDS INVESTMENT PROFESSIONALS
Timothy Pettee Jun Oh Timothy Campion
Andrew Sheridan Kara Murphy Jane Bayar
--------
Past performance is no guarantee of future results.
*The MSCI ACWI (ALL COUNTRY WORLD INDEX) EX-U.S. (NET) is a free float-adjusted
market capitalization-weighted index designed to measure the equity market
performance of 45 global developed and emerging markets, excluding the U.S.
The S&P 500 INDEX is Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of U.S. common stock prices. The MSCI JAPAN
INDEX (NET) is a free-float adjusted market capitalization weighted index that
is designed to track the equity market performance of Japanese securities
listed on Tokyo Stock Exchange, Osaka Stock Exchange, JASDAQ and Nagoya Stock
Exchange. Net total return indices reinvest dividends after the deduction of
withholding taxes, using (for international indices) a tax rate applicable to
non-resident institutional investors who do not benefit from double taxation
treaties. Indices are not managed and an investor cannot invest directly in an
index.
3
SUNAMERICA EQUITY FUNDS
EXPENSE EXAMPLE -- SEPTEMBER 30, 2014 -- (UNAUDITED)
DISCLOSURE OF PORTFOLIO EXPENSES IN SHAREHOLDER REPORTS
As a shareholder of a Fund (each, a "Fund" and collectively, the "Funds") in
the SunAmerica Equity Funds (the "Trust"), you may incur two types of costs:
(1) transaction costs, including sales charges (loads) on purchase payments,
contingent deferred sales charges and (2) ongoing costs, including management
fees, distribution and service fees and other Fund expenses. The Example set
forth below is intended to help you understand your ongoing costs (in dollars)
of investing in the Funds and to compare these costs with the ongoing costs of
investing in other mutual funds. The Example is based on an investment of
$1,000 invested at April 1, 2014 and held until September 30, 2014.
ACTUAL EXPENSES
The "Actual" section of the table provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the column under the heading entitled "Expenses Paid During the Six
Months Ended September 30, 2014" to estimate the expenses you paid on your
account during this period. For shareholder accounts in classes other than
Class I, the "Expenses Paid During the Six Months Ended September 30, 2014"
column and the "Annualized Expense Ratio" column does not include small account
fees that may be charged if your account balance is below $500 ($250 for
retirement plan accounts). In addition, the "Expenses Paid During the Six
Months Ended September 30, 2014" column does not include administrative fees
that may apply to qualified retirement plan accounts. See the Funds'
prospectus, your retirement plan document and/or materials from your financial
adviser, for a full description of these fees. Had these fees been included,
the "Expenses Paid During the Six Months Ended September 30, 2014" column would
have been higher and the "Ending Account Value" would have been lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" section of the table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds. For shareholder accounts in classes other than Class I
the "Expenses Paid During the Six Months Ended September 30, 2014" column and
the "Annualized Expense Ratio" column does not include small account fees that
may be charged if your account balance is below $500 ($250 for retirement plan
accounts). In addition, the "Expenses Paid During the Six Months Ended
September 30, 2014" column does not include administrative fees that may apply
to qualified retirement plan accounts. See the Funds' prospectus, your
retirement plan document and/or materials from your financial adviser, for a
full description of these fees. Had these fees been included, the "Expenses
Paid During the Six Months Ended September 30, 2014" column would have been
higher and the "Ending Account Value" would have been lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, including sales
charges on purchase payments, contingent deferred sales charges, small account
fees and administrative fees, if applicable to your account. Please refer to
the Fund's prospectus, your retirement plan document and/or materials from your
financial adviser, for more information. Therefore, the "Hypothetical" example
is useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transaction costs and other fees were included, your costs would have been
higher.
4
SUNAMERICA EQUITY FUNDS
EXPENSE EXAMPLE -- SEPTEMBER 30, 2014 -- (UNAUDITED) (CONTINUED)
ACTUAL HYPOTHETICAL
------------------------------------------ -------------------------------------------
ENDING ACCOUNT
ENDING ACCOUNT EXPENSE PAID VALUE USING A
VALUE USING DURING THE HYPOTHETICAL EXPENSE PAID
BEGINNING ACTUAL SIX MONTHS BEGINNING 5% ASSUMED DURING THE SIX
ACCOUNT VALUE RETURN AT ENDED ACCOUNT VALUE RETURN AT MONTHS ENDED
AT APRIL 1, SEPTEMBER 30, SEPTEMBER 30, AT APRIL 1, SEPTEMBER 30, SEPTEMBER 30,
FUND 2014 2014 2014 2014 2014 2014
---- ------------- -------------- ------------- ------------- -------------- --------------
INTERNATIONAL DIVIDEND STRATEGY FUND#
Class A............................. $1,000.00 $ 983.32 $ 9.45 $1,000.00 $1,015.54 $ 9.60
Class B............................. $1,000.00 $ 980.59 $12.66 $1,000.00 $1,012.28 $12.86
Class C............................. $1,000.00 $ 980.55 $12.66 $1,000.00 $1,012.28 $12.86
Class I............................. $1,000.00 $ 985.06 $ 8.56 $1,000.00 $1,016.44 $ 8.69
JAPAN FUND#
Class A............................. $1,000.00 $1,043.19 $ 9.73 $1,000.00 $1,015.54 $ 9.60
Class B............................. $1,000.00 $1,039.11 $13.03 $1,000.00 $1,012.28 $12.86
Class C............................. $1,000.00 $1,039.16 $13.04 $1,000.00 $1,012.28 $12.86
ANNUALIZED
EXPENSE
FUND RATIO*
---- ----------
INTERNATIONAL DIVIDEND STRATEGY FUND#
Class A............................. 1.90%
Class B............................. 2.55%
Class C............................. 2.55%
Class I............................. 1.72%
JAPAN FUND#
Class A............................. 1.90%
Class B............................. 2.55%
Class C............................. 2.55%
--------
* Expenses are equal to each Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 183 days divided by 365
days (to reflect the one-half year period). These ratios do not reflect
transaction costs, including sales charges on purchase payments, contingent
deferred sales charges, small account fees and administrative fees, if
applicable to your account. Please refer to your Prospectus, your retirement
plan documents and/or materials from your financial advisor for more
information.
# During the stated period, the investment advisor either waived a portion of
or all of the fees and assumed a portion of or all expenses for the Funds or
through recoupment provisions, recovered a portion of or all fees and
expenses waived or reimbursed in the previous two fiscal years. As a result,
if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended September 30,
2014" and the "Expense Ratios" would have been higher. If these fees and
expenses had not been recouped, the "Actual/Hypothetical Ending Account
Value" would have been higher and the "Actual/Hypothetical Expenses Paid
During the Six Months Ended September 30, 2014" and the annualized "Expense
Ratio" would have been lower.
5
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 2014
INTERNATIONAL
DIVIDEND STRATEGY JAPAN
FUND FUND
----------------- -----------
ASSETS:
Investments at value (unaffiliated)*............ $217,457,727 $38,929,732
Repurchase agreements (cost approximates value). -- 1,381,000
------------ -----------
Total investments.............................. 217,457,727 40,310,732
------------ -----------
Cash............................................ -- 182
Foreign cash*................................... 1,571,439 154,495
Receivable for:
Fund shares sold............................... 1,172,216 348,855
Dividends and interest......................... 899,429 259,887
Investments sold............................... 6,018,057 164,107
Prepaid expenses and other assets............... 3,238 2,568
Due from investment adviser for expense
reimbursements/fee waivers..................... 12,269 23,479
------------ -----------
Total assets.................................... 227,134,375 41,264,305
------------ -----------
LIABILITIES:
Payable for:
Fund shares redeemed........................... 3,133,589 37,301
Investments purchased.......................... 177,053 837,511
Investment advisory and management fees........ 195,798 37,601
Distribution and service maintenance fees...... 99,569 14,013
Transfer agent fees and expenses............... 51,007 8,159
Trustees' fees and expenses.................... 2,007 628
Other accrued expenses......................... 248,211 114,605
Line of credit................................. 5,623,053 --
Accrued foreign tax on capital gains........... 146,174 --
------------ -----------
Total liabilities............................... 9,676,461 1,049,818
------------ -----------
Net Assets...................................... $217,457,914 $40,214,487
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value.. $ 196,463 $ 52,313
Paid-in capital................................. 324,123,585 37,461,060
------------ -----------
324,320,048 37,513,373
Accumulated undistributed net investment income
(loss)......................................... (110,190) (21,510)
Accumulated undistributed net realized gain
(loss) on investments, futures contracts,
options contracts, securities sold short and
foreign exchange transactions.................. (96,090,547) 2,719,212
Unrealized appreciation (depreciation) on
investments.................................... (10,468,586) 10,621
Unrealized foreign exchange gain (loss) on
other assets and liabilities................... (46,637) (7,209)
Accrued capital gains tax on unrealized
appreciation (depreciation).................... (146,174) --
------------ -----------
Net Assets...................................... $217,457,914 $40,214,487
============ ===========
*Cost
Investments (unaffiliated)..................... $227,926,313 $38,919,111
============ ===========
Foreign cash................................... $ 1,579,543 $ 158,020
============ ===========
See Notes to Financial Statements
6
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 2014 -- (CONTINUED)
INTERNATIONAL
DIVIDEND STRATEGY JAPAN
FUND FUND
----------------- -----------
CLASS A (UNLIMITED SHARES AUTHORIZED):
Net assets....................................... $162,283,780 $35,177,686
Shares of beneficial interest issued and
outstanding..................................... 14,321,299 4,553,535
Net asset value and redemption price per share... $ 11.33 $ 7.73
Maximum sales charge (5.75% of offering price)... $ 0.69 $ 0.47
------------ -----------
Maximum offering price to public................. $ 12.02 $ 8.20
============ ===========
CLASS B (UNLIMITED SHARES AUTHORIZED):
Net assets....................................... $ 8,399,146 $ 494,405
Shares of beneficial interest issued and
outstanding..................................... 810,286 66,464
Net asset value, offering and redemption price
per share (excluding any applicable contingent
deferred sales charge).......................... $ 10.37 $ 7.44
============ ===========
CLASS C (UNLIMITED SHARES AUTHORIZED):
Net assets....................................... $ 46,348,832 $ 4,542,396
Shares of beneficial interest issued and
outstanding..................................... 4,477,451 611,333
Net asset value, offering and redemption price
per share (excluding any applicable contingent
deferred sales charge).......................... $ 10.35 $ 7.43
============ ===========
CLASS I (UNLIMITED SHARES AUTHORIZED):
Net assets....................................... $ 426,156 $ --
Shares of beneficial interest issued and
outstanding..................................... 37,232 --
Net asset value, offering and redemption price
per share....................................... $ 11.45 $ --
============ ===========
See Notes to Financial Statements
7
SUNAMERICA EQUITY FUNDS
STATEMENT OF OPERATIONS -- SEPTEMBER 30, 2014
INTERNATIONAL DIVIDEND
STRATEGY FUND JAPAN FUND
---------------------- -----------
INVESTMENT INCOME:
Dividends (unaffiliated).................. $ 9,111,176 $ 562,504
Interest (unaffiliated)................... 5,201 --
------------ -----------
Total investment income*................ 9,116,377 562,504
------------ -----------
EXPENSES:
Investment advisory and management fees... 1,697,802 373,571
Distribution and service maintenance
fees:
Class A................................. 448,178 101,603
Class B................................. 73,749 3,453
Class C................................. 336,998 31,096
Service Fees Class I.................... 1,637 --
Transfer agent fees and expenses:
Class A................................. 298,932 66,179
Class B................................. 18,963 1,874
Class C................................. 79,810 8,192
Class I................................. 1,474 --
Registration fees:
Class A................................. 28,966 22,245
Class B................................. 12,125 17,696
Class C................................. 18,354 18,132
Class I................................. -- --
Custodian and accounting fees............. 138,883 23,217
Reports to shareholders................... 64,889 3,980
Audit and tax fees........................ 64,462 67,196
Legal fees................................ 21,221 11,674
Directors' fees and expenses.............. 8,468 1,737
Interest expense.......................... 815 178
Other expenses............................ 46,013 16,099
------------ -----------
Total expenses before fee waivers,
expense reimbursements and expense
recoupments............................ 3,361,739 768,122
Net (Fees waived and expenses
reimbursed)/recouped by investment
adviser (Note 3)....................... 130,226 (128,462)
------------ -----------
Net expenses............................ 3,491,965 639,660
------------ -----------
Net investment income (loss)............... 5,624,412 (77,156)
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments
(unaffiliated)............................ 6,053,676 3,617,631
Net realized foreign exchange gain (loss)
on other assets and liabilities........... (507,933) 2,088
------------ -----------
Net realized gain (loss) on investments
and foreign currencies.................... 5,545,743 3,619,719
------------ -----------
Change in unrealized appreciation
(depreciation) on investments
(unaffiliated)............................ (15,050,008) (2,325,214)
Change in unrealized foreign exchange
gain (loss) on other assets and
liabilities............................... (54,097) (8,999)
Change in accrued capital gains tax on
unrealized appreciation (depreciation).... (146,174) --
------------ -----------
Net unrealized gain (loss) on investments
and foreign currencies.................... (15,250,279) (2,334,213)
------------ -----------
Net realized and unrealized gain (loss)
on investments and foreign currencies..... (9,704,536) 1,285,506
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................. $ (4,080,124) $ 1,208,350
============ ===========
*Net of foreign withholding taxes on
interest and dividends of................. $ 1,062,821 $ 62,959
============ ===========
See Notes to Financial Statements
8
SUNAMERICA EQUITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS
INTERNATIONAL DIVIDEND
STRATEGY FUND JAPAN FUND
-------------------------- --------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2014 2013 2014 2013
------------- ------------- ------------- -------------
INCREASE (DECREASE)
IN NET ASSETS
OPERATIONS:
Net investment
income (loss)...... $ 5,624,412 $ 4,029,916 $ (77,156) $ (30,906)
Net realized gain
(loss) on
investments and
foreign currencies. 5,545,743 (664,280) 3,619,719 2,137,022
Net unrealized gain
(loss) on
investments and
foreign currencies. (15,250,279) 4,531,110 (2,334,213) 3,476,971
------------ ------------ ----------- -----------
Net increase
(decrease) in net
assets resulting
from operations...... (4,080,124) 7,896,746 1,208,350 5,583,087
------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment
income (Class A)... (4,140,584) (3,097,332) (495,798) (470,762)
Net investment
income (Class B)... (195,830) (207,523) (5,794) (3,078)
Net investment
income (Class C)... (934,780) (761,162) (39,909) (6,981)
Net investment
income (Class I)... (19,978) (51,338) -- --
Net realized gain on
securities (Class
A)................. -- -- (1,975,339) --
Net realized gain on
securities (Class
B)................. -- -- (27,616) --
Net realized gain on
securities (Class
C)................. -- -- (190,215) --
Net realized gain on
securities (Class
I)................. -- -- -- --
------------ ------------ ----------- -----------
Total distributions
to shareholders...... (5,291,172) (4,117,355) (2,734,671) (480,821)
------------ ------------ ----------- -----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 6) 98,901,371 54,407,385 14,227,530 1,061,292
------------ ------------ ----------- -----------
TOTAL INCREASE
(DECREASE) IN NET
ASSETS............... 89,530,075 58,186,776 12,701,209 6,163,558
NET ASSETS:
Beginning of period... 127,927,839 69,741,063 27,513,278 21,349,720
------------ ------------ ----------- -----------
End of period+........ $217,457,914 $127,927,839 $40,214,487 $27,513,278
============ ============ =========== ===========
+ Includes
accumulated
undistributed net
investment income
(loss)............... $ (110,190) $ 36,713 $ (21,510) $ 45,538
============ ============ =========== ===========
See Notes to Financial Statements
9
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS
INTERNATIONAL DIVIDEND STRATEGY FUND
------------------------------------
NET GAIN
(LOSS) ON
NET INVESTMENTS DISTRI- NET NET
ASSET NET (BOTH DIVIDENDS BUTIONS ASSET ASSETS
VALUE INVESTMENT REALIZED TOTAL FROM FROM NET FROM DISTRIBUTIONS TOTAL VALUE END OF
BEGINNING INCOME AND INVESTMENT INVESTMENT CAPITAL FROM RETURN DISTRI- END OF TOTAL PERIOD
PERIOD ENDED OF PERIOD (LOSS)(1) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL BUTIONS PERIOD RETURN(2) (000'S)
------------ --------- ---------- ----------- ---------- ---------- ------- ------------- ------- ------ --------- --------
CLASS A
-
09/30/10 $11.58 $(0.01) $ 0.33 $ 0.32 $(0.00) $-- $(0.06) $(0.06) $11.84 2.79% $100,990
09/30/11 11.84 0.08 (1.64) (1.56) (0.00) -- -- (0.00) 10.28 (13.17) 50,177
09/30/12 10.28 0.23 0.66 0.89 (0.26) -- -- (0.26) 10.91 8.77 51,309
09/30/13 10.91 0.47 0.50 0.97 (0.47) -- -- (0.47) 11.41 9.24 96,020
09/30/14 11.41 0.40 (0.14) 0.26 (0.34) -- -- (0.34) 11.33 2.20 162,284
CLASS B
-
09/30/10 10.72 (0.09) 0.31 0.22 -- -- -- -- 10.94 2.05 8,815
09/30/11 10.94 (0.02) (1.49) (1.51) -- -- -- -- 9.43 (13.80) 5,130
09/30/12 9.43 0.13 0.62 0.75 (0.14) -- -- (0.14) 10.04 7.97 4,572
09/30/13 10.04 0.34 0.50 0.84 (0.41) -- -- (0.41) 10.47 8.65 5,948
09/30/14 10.47 0.29 (0.12) 0.17 (0.27) -- -- (0.27) 10.37 1.56 8,399
CLASS C
-
09/30/10 10.70 (0.09) 0.32 0.23 -- -- -- -- 10.93 2.15 19,763
09/30/11 10.93 (0.02) (1.49) (1.51) -- -- -- -- 9.42 (13.82) 13,190
09/30/12 9.42 0.14 0.61 0.75 (0.14) -- -- (0.14) 10.03 7.98 12,571
09/30/13 10.03 0.36 0.47 0.83 (0.41) -- -- (0.41) 10.45 8.56 24,776
09/30/14 10.45 0.30 (0.13) 0.17 (0.27) -- -- (0.27) 10.35 1.56 46,349
CLASS I
-
09/30/10 11.67 (0.02) 0.35 0.33 (0.01) -- (0.06) (0.07) 11.93 2.80 2,600
09/30/11 11.93 0.08 (1.65) (1.57) (0.00) -- -- (0.00) 10.36 (13.13) 1,625
09/30/12 10.36 0.24 0.66 0.90 (0.27) -- -- (0.27) 10.99 8.84 1,289
09/30/13 10.99 0.44 0.56 1.00 (0.48) -- -- (0.48) 11.51 9.41 1,184
09/30/14 11.51 0.32 (0.02) 0.30 (0.36) -- -- (0.36) 11.45 2.45 426
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE PORTFOLIO
NET ASSETS NET ASSETS TURNOVER
---------- ------------- ---------
1.85%(4) (0.11)%(4) 295%
1.84 0.63 262
1.90(3) 2.07(3) 248
1.90(3) 4.42(3) 32
1.90(3) 3.47(3) 80
2.55(3)(4) (0.86)(3)(4) 295%
2.55(3) (0.18)(3) 262
2.55(3) 1.29(3) 248
2.55(3) 3.40(3) 32
2.55(3) 2.71(3) 80
2.55(3)(4) (0.82)(3)(4) 295%
2.55(3) (0.14)(3) 262
2.55(3) 1.38(3) 248
2.55(3) 3.70(3) 32
2.55(3) 2.85(3) 80
1.80(3)(4) (0.16)(3)(4) 295%
1.80(3) 0.59(3) 262
1.80(3) 2.14(3) 248
1.80(3) 3.98(3) 32
1.77(3) 2.66(3) 80
--------
(1)Calculated based upon average shares outstanding.
(2)Total return does not reflect sales load. Total return does include expense
reimbursements.
(3)Net of the following expense reimbursements (recoupments) (based on average
net assets) (See Note 3):
09/30/10 09/30/11 09/30/12 09/30/13 09/30/14
-------- -------- -------- -------- --------
International Dividend Strategy Class A. -- % -- % 0.25% 0.16% (0.09)%
International Dividend Strategy Class B. 0.11 0.07 0.53 0.44 0.07
International Dividend Strategy Class C. 0.02 (0.00) 0.33 0.20 (0.05)
International Dividend Strategy Class I. 0.01 (0.09) 0.17 0.09 (0.09)
(4)Includes expense reimbursements, but excludes expense reductions. If the
expense reductions had been applied the ratio of expenses to average net
assets would have been lower and the ratio of net investment income to
average net assets would have been higher by:
09/30/10
--------
International Dividend Strategy Class A. 0.01%
International Dividend Strategy Class B. 0.00
International Dividend Strategy Class C. 0.01
International Dividend Strategy Class I. 0.00
See Notes to Financial Statements
10
SUNAMERICA EQUITY FUNDS
FINANCIAL HIGHLIGHTS -- (CONTINUED)
JAPAN FUND
----------
NET GAIN
(LOSS) ON
NET INVESTMENTS DISTRI- NET NET
ASSET NET (BOTH DIVIDENDS BUTIONS ASSET ASSETS
VALUE INVESTMENT REALIZED TOTAL FROM FROM NET FROM DISTRIBUTIONS TOTAL VALUE END OF
BEGINNING INCOME AND INVESTMENT INVESTMENT CAPITAL FROM RETURN DISTRI- END OF TOTAL PERIOD
PERIOD ENDED OF PERIOD (LOSS)(1) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL BUTIONS PERIOD RETURN(2) (000'S)
------------ --------- ---------- ----------- ---------- ---------- ------- ------------- ------- ------ --------- -------
CLASS A
09/30/10 $8.34 $(0.02) $ 1.07 $ 1.05 $(0.29) $ -- $-- $(0.29) $9.10 13.01% $58,538
09/30/11 9.10 0.00 (1.11) (1.11) (0.26) -- -- (0.26) 7.73 (12.68) 31,292
09/30/12 7.73 0.04 0.02 0.06 (0.01) (1.37) -- (1.38) 6.41 1.38 20,714
09/30/13 6.41 (0.01) 1.86 1.85 (0.16) -- -- (0.16) 8.10 29.54 25,053
09/30/14 8.10 (0.01) 0.37 0.36 (0.15) (0.58) -- (0.73) 7.73 4.81 35,178
CLASS B
09/30/10 8.17 (0.07) 1.04 0.97 (0.22) -- -- (0.22) 8.92 12.16 377
09/30/11 8.92 (0.05) (1.09) (1.14) (0.23) -- -- (0.23) 7.55 (13.24) 316
09/30/12 7.55 (0.01) 0.04 0.03 -- (1.37) -- (1.37) 6.21 0.87 197
09/30/13 6.21 (0.05) 1.79 1.74 (0.10) -- -- (0.10) 7.85 28.54 238
09/30/14 7.85 (0.05) 0.34 0.29 (0.12) (0.58) -- (0.70) 7.44 4.07 494
CLASS C
09/30/10 8.16 (0.07) 1.05 0.98 (0.22) -- -- (0.22) 8.92 12.30 691
09/30/11 8.92 (0.04) (1.11) (1.15) (0.23) -- -- (0.23) 7.54 (13.35) 888
09/30/12 7.54 (0.02) 0.05 0.03 -- (1.37) -- (1.37) 6.20 0.85 438
09/30/13 6.20 (0.03) 1.77 1.74 (0.10) -- -- (0.10) 7.84 28.58 2,222
09/30/14 7.84 (0.05) 0.34 0.29 (0.12) (0.58) -- (0.70) 7.43 4.07 4,542
RATIO
OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE PORTFOLIO
NET ASSETS(3) NET ASSETS(3) TURNOVER
------------- ------------- ---------
1.90% (0.24)% 77%
1.90 0.04 79
1.90 0.52 192
1.90 (0.12) 162
1.90 (0.19) 111
2.55 (0.85) 77%
2.55 (0.55) 79
2.55 (0.16) 192
2.55 (0.76) 162
2.55 (0.65) 111
2.55 (0.86) 77%
2.55 (0.48) 79
2.55 (0.23) 192
2.55 (0.43) 162
2.55 (0.65) 111
--------
(1)Calculated based upon average shares outstanding.
(2)Total return does not reflect sales load. Total return does include expense
reimbursements.
(3)Net of the following expense reimbursements (based on average net assets)
(See Note 3):
09/30/10 09/30/11 09/30/12 09/30/13 09/30/14
-------- -------- -------- -------- --------
Japan Class A........................... 0.18% 0.27% 0.59% 0.55% 0.29%
Japan Class B........................... 5.60 3.06 6.15 6.25 5.66
Japan Class C........................... 2.66 1.19 2.80 1.57 0.84
See Notes to Financial Statements
11
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
PORTFOLIO PROFILE -- SEPTEMBER 30, 2014 -- (UNAUDITED)
INDUSTRY ALLOCATION*
Oil Companies-Integrated............... 11.8%
Electric-Integrated.................... 9.1
Telephone-Integrated................... 8.9
Medical-Drugs.......................... 8.2
Oil Companies-Exploration & Production. 4.9
Cellular Telecom....................... 4.2
Oil Refining & Marketing............... 3.8
Electric-Generation.................... 3.7
Electronic Components-Misc............. 3.6
Water.................................. 3.5
Transport-Rail......................... 2.8
Chemicals-Diversified.................. 2.7
Computers.............................. 2.6
Computers-Periphery Equipment.......... 2.5
Machinery-General Industrial........... 2.5
Retail-Hypermarkets.................... 2.3
Coal................................... 2.2
Shipbuilding........................... 2.2
Real Estate Operations & Development... 2.1
Television............................. 1.9
Insurance-Multi-line................... 1.9
Transport-Services..................... 1.9
Brewery................................ 1.8
Insurance-Life/Health.................. 1.7
Medical-Generic Drugs.................. 1.7
Public Thoroughfares................... 1.5
Metal-Iron............................. 1.4
Cosmetics & Toiletries................. 1.4
Telecom Services....................... 1.2
-----
100.0%
=====
COUNTRY ALLOCATION*
Brazil.................................. 23.9%
Taiwan.................................. 11.8
Thailand................................ 11.3
Finland................................. 8.1
United Kingdom.......................... 7.1
Israel.................................. 4.7
Japan................................... 4.2
Singapore............................... 4.1
Canada.................................. 3.3
Belgium................................. 2.7
Norway.................................. 2.6
France.................................. 2.4
Italy................................... 2.2
Chile................................... 2.1
Russia.................................. 2.0
Germany................................. 1.9
Denmark................................. 1.9
Colombia................................ 1.4
Cayman Islands.......................... 1.3
Austria................................. 1.0
Bermuda................................. 0.0
-----
100.0%
=====
--------
*Calculated as a percentage of net assets
12
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2014
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
-----------------------------------------------------------------------------
COMMON STOCKS -- 93.0%
AUSTRIA -- 1.0%
OMV AG................................................ 64,568 $ 2,172,970
-----------
BELGIUM -- 2.7%
Belgacom SA........................................... 171,634 5,974,523
-----------
BERMUDA -- 0.0%
Peace Mark Holdings, Ltd.+(1)(2)...................... 800,000 0
-----------
BRAZIL -- 16.9%
AMBEV SA.............................................. 598,000 3,918,668
Cia de Saneamento Basico do Estado de Sao Paulo....... 470,500 3,802,059
Cia de Saneamento de Minas Gerais-COPASA.............. 295,600 3,743,683
EcoRodovias Infraestrutura e Logistica SA............. 658,100 3,242,441
EDP-Energias do Brasil SA............................. 836,900 3,419,058
Natura Cosmeticos SA.................................. 205,554 3,105,459
Odontoprev SA......................................... 1,030,600 3,747,254
Porto Seguro SA+...................................... 361,100 4,191,135
Tractebel Energia SA.................................. 277,500 3,901,042
Transmissora Alianca de Energia Eletrica SA........... 471,000 3,765,691
-----------
36,836,490
-----------
CANADA -- 3.3%
BCE, Inc.............................................. 62,633 2,678,240
Canadian Oil Sands, Ltd............................... 241,195 4,449,385
-----------
7,127,625
-----------
CAYMAN ISLANDS -- 1.3%
TPK Holding Co., Ltd.................................. 484,000 2,903,730
-----------
CHILE -- 2.1%
Enersis SA............................................ 14,307,686 4,527,847
-----------
COLOMBIA -- 1.4%
Ecopetrol SA.......................................... 2,010,200 3,141,876
-----------
DENMARK -- 1.9%
TDC A/S............................................... 542,781 4,122,282
-----------
FINLAND -- 8.1%
Elisa Oyj............................................. 191,307 5,079,071
Metso Oyj............................................. 148,706 5,296,614
Orion Oyj, Class B.................................... 182,197 7,133,844
-----------
17,509,529
-----------
FRANCE -- 2.4%
Total SA.............................................. 79,371 5,157,841
-----------
GERMANY -- 1.9%
ProSiebenSat.1 Media AG............................... 105,392 4,199,791
-----------
ISRAEL -- 4.7%
Bezeq The Israeli Telecommunication Corp., Ltd........ 2,540,274 4,387,429
Israel Chemicals, Ltd................................. 306,474 2,205,178
Teva Pharmaceutical Industries, Ltd................... 68,186 3,678,725
-----------
10,271,332
-----------
ITALY -- 2.2%
Eni SpA............................................... 197,751 4,713,150
-----------
JAPAN -- 4.2%
NTT DOCOMO, Inc....................................... 289,915 4,838,745
TonenGeneral Sekiyu KK................................ 498,073 4,355,159
-----------
9,193,904
-----------
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
------------------------------------------------------------------------------
NORWAY -- 2.6%
Statoil ASA.......................................... 206,128 $ 5,621,017
------------
RUSSIA -- 2.0%
Mobile Telesystems OJSC ADR.......................... 285,617 4,267,118
------------
SINGAPORE -- 4.1%
Hutchison Port Holdings Trust........................ 5,866,000 4,106,200
Yangzijiang Shipbuilding Holdings, Ltd............... 5,086,000 4,704,460
------------
8,810,660
------------
TAIWAN -- 11.8%
Asustek Computer, Inc................................ 587,000 5,596,081
Chicony Electronics Co., Ltd......................... 1,836,615 5,494,238
Radiant Opto-Electronics Corp.+...................... 1,276,000 5,054,587
Ruentex Development Co., Ltd......................... 2,812,000 4,543,460
Ruentex Industries, Ltd.............................. 2,208,000 4,914,006
------------
25,602,372
------------
THAILAND -- 11.3%
Banpu PCL............................................ 5,264,038 4,789,179
BTS Group Holdings PCL............................... 20,496,000 6,194,628
PTT Exploration & Production PCL..................... 1,224,300 6,041,264
PTT Global Chemical PCL.............................. 1,977,679 3,720,537
Thai Oil PCL......................................... 2,455,922 3,900,693
------------
24,646,301
------------
UNITED KINGDOM -- 7.1%
AstraZeneca PLC...................................... 89,378 6,435,519
BP PLC............................................... 659,686 4,849,421
GlaxoSmithKline PLC.................................. 184,397 4,223,955
------------
15,508,895
------------
TOTAL COMMON STOCKS
(cost $210,494,074)................................ 202,309,253
------------
PREFERRED SECURITIES -- 7.0%
BRAZIL -- 7.0%
AES Tiete SA......................................... 475,102 4,182,800
Cia Energetica de Minas Gerais....................... 552,571 3,383,940
Cia Paranaense de Energia, Class B................... 328,606 4,475,834
Vale SA.............................................. 319,700 3,105,900
------------
TOTAL PREFERRED SECURITIES
(cost $17,432,239)................................. 15,148,474
------------
TOTAL LONG-TERM INVESTMENT SECURITIES
(cost $227,926,313)................................ 217,457,727
------------
TOTAL INVESTMENTS --
(cost $227,926,313)(3)............................. 100.0% 217,457,727
Other assets less liabilities......................... 0.0 187
---------- ------------
NET ASSETS -- 100.0% $217,457,914
========== ============
--------
+ Non-income producing security
(1) Fair valued security. Securities are classified as Level 3 based on the
securities valuation inputs; see Note 2.
(2) Illiquid security. At September 30, 2014, the aggregate value of these
securities was $0 representing 0.0% of net assets.
(3) See Note 5 for cost of investments on a tax basis.
ADR -- AmericanDepository Receipt
13
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
The following is a summary of the inputs used to value the Fund's net assets as
of September 30, 2014 (see Note 2):
LEVEL 1 -- UNADJUSTED LEVEL 2 -- OTHER LEVEL 3 -- SIGNIFICANT
QUOTED PRICES OBSERVABLE INPUTS UNOBSERVABLE INPUTS TOTAL
- --------------------- ----------------- ---------------------- ------------
ASSETS
LONG-TERM INVESTMENT SECURITIES:
Common Stock:
Bermuda....................... $ -- $-- $ 0 $ 0
Brazil........................ 36,836,490 -- -- 36,836,490
Finland....................... 17,509,529 -- -- 17,509,529
Taiwan........................ 25,602,372 -- -- 25,602,372
Thailand...................... 24,646,301 -- -- 24,646,301
United Kingdom................ 15,508,895 -- -- 15,508,895
Other Countries*.............. 82,205,666 -- -- 82,205,666
Preferred Securities:
Brazil........................ 15,148,474 -- -- 15,148,474
------------ --- --- ------------
Total............................ $217,457,727 $-- $ 0 $217,457,727
============ === === ============
--------
* Sum of all other countries each of which individually has an aggregate
market value of less than 5% of net assets. For a detailed presentation of
securities by country classification, please refer to the Portfolio of
Investments.
The Fund's policy is to recognize transfers between Levels as of the end of the
reporting period. Securities held at the beginning of the period currently
valued at $59,409,703 were transferred from Level 2 to Level 1 due to foreign
equity securities whose values were previously adjusted for fair value pricing
procedures for foreign equity securities. There were no additional transfers
between Levels during the reporting period.
At the beginning and end of the reporting period, Level 3 investments in
securities were not considered a material portion of the Fund.
See Notes to Financial Statements
14
SUNAMERICA JAPAN FUND
PORTFOLIO PROFILE -- SEPTEMBER 30, 2014 -- (UNAUDITED)
SUNAMERICA JAPAN FUND
PORTFOLIO PROFILE -- SEPTEMBER 30, 2014 -- (UNAUDITED)
INDUSTRY ALLOCATION*
Auto/Truck Parts & Equipment-Original.. 13.5%
Auto-Cars/Light Trucks................. 8.5
Telephone-Integrated................... 6.0
Television............................. 5.5
Electronic Components-Misc............. 5.4
Banks-Commercial....................... 4.3
Insurance-Life/Health.................. 4.2
Diversified Banking Institutions....... 3.6
Repurchase Agreements.................. 3.4
E-Commerce/Products.................... 3.0
Brewery................................ 2.9
Non-Ferrous Metals..................... 2.9
Real Estate Management/Services........ 2.6
Chemicals-Diversified.................. 2.4
Electronic Measurement Instruments..... 2.4
Insurance-Property/Casualty............ 2.3
Machinery-Farming...................... 2.2
Machine Tools & Related Products....... 2.0
Real Estate Operations & Development... 1.9
Machinery-General Industrial........... 1.9
Transport-Marine....................... 1.7
Computers-Integrated Systems........... 1.6
Auto-Heavy Duty Trucks................. 1.6
Chemicals-Specialty.................... 1.5
Retail-Discount........................ 1.3
Steel-Specialty........................ 1.3
Photo Equipment & Supplies............. 1.2
Medical-Drugs.......................... 1.2
Cosmetics & Toiletries................. 1.1
Oil Companies-Exploration & Production. 1.1
Machinery-Electrical................... 1.1
Web Portals/ISP........................ 1.0
Steel-Producers........................ 0.9
Retail-Drug Store...................... 0.9
Capacitors............................. 0.9
Retail-Misc./Diversified............... 0.5
Travel Services........................ 0.4
-----
100.2%
=====
COUNTRY ALLOCATION*
Japan................................... 96.8%
United States........................... 3.4
Bermuda................................. 0.0
-----
100.2%
=====
--------
*Calculated as a percentage of net assets
15
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
------------------------------------------------------------------
COMMON STOCKS -- 96.8%
AUTO-CARS/LIGHT TRUCKS -- 8.5%
Daihatsu Motor Co., Ltd...................... 17,720 $ 281,291
Fuji Heavy Industries, Ltd................... 32,100 1,061,268
Honda Motor Co., Ltd......................... 17,000 589,013
Isuzu Motors, Ltd............................ 44,000 621,837
Mitsubishi Motors Corp....................... 72,000 873,782
----------
3,427,191
----------
AUTO-HEAVY DUTY TRUCKS -- 1.6%
Hino Motors, Ltd............................. 45,600 637,797
----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 13.5%
Aisin Seiki Co., Ltd......................... 21,167 763,305
Denso Corp................................... 23,850 1,099,264
KYB Co., Ltd................................. 169,500 763,465
NOK Corp..................................... 9,000 206,464
Sumitomo Electric Industries, Ltd............ 46,840 692,083
TACHI-S Co., Ltd............................. 20,644 298,531
Toyota Industries Corp....................... 16,380 791,557
TS Tech Co., Ltd............................. 33,020 802,656
----------
5,417,325
----------
BANKS-COMMERCIAL -- 4.3%
Shinsei Bank, Ltd............................ 379,000 812,081
Sumitomo Mitsui Financial Group, Inc......... 22,580 920,494
----------
1,732,575
----------
BREWERY -- 2.9%
Asahi Group Holdings, Ltd.................... 15,400 445,536
Kirin Holdings Co., Ltd...................... 55,200 733,064
----------
1,178,600
----------
CAPACITORS -- 0.9%
Mitsumi Electric Co., Ltd.................... 52,200 376,954
----------
CHEMICALS-DIVERSIFIED -- 2.4%
Mitsubishi Gas Chemical Co., Inc............. 153,000 975,127
----------
CHEMICALS-SPECIALTY -- 1.5%
Tokyo Ohka Kogyo Co., Ltd.................... 22,310 590,119
----------
COMPUTERS-INTEGRATED SYSTEMS -- 1.6%
OBIC Co., Ltd.+.............................. 17,850 637,994
----------
COSMETICS & TOILETRIES -- 1.1%
Pigeon Corp.................................. 3,600 203,838
Pola Orbis Holdings, Inc..................... 6,470 253,373
----------
457,211
----------
DIVERSIFIED BANKING INSTITUTIONS -- 3.6%
Mitsubishi UFJ Financial Group, Inc.......... 255,520 1,444,937
----------
E-COMMERCE/PRODUCTS -- 3.0%
Rakuten, Inc................................. 103,210 1,188,550
----------
ELECTRONIC COMPONENTS-MISC. -- 5.4%
Anritsu Corp................................. 71,300 544,136
Japan Display, Inc.+......................... 79,400 382,973
Toshiba Corp................................. 267,000 1,237,196
----------
2,164,305
----------
ELECTRONIC MEASUREMENT INSTRUMENTS -- 2.4%
Yokogawa Electric Corp....................... 73,000 959,799
----------
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
------------------------------------------------------------------
INSURANCE-LIFE/HEALTH -- 4.2%
Sony Financial Holdings, Inc................. 49,780 $ 805,195
T&D Holdings, Inc............................ 67,425 865,905
----------
1,671,100
----------
INSURANCE-PROPERTY/CASUALTY -- 2.3%
Tokio Marine Holdings, Inc................... 29,800 924,500
----------
MACHINE TOOLS & RELATED PRODUCTS -- 2.0%
DMG Mori Seiki Co., Ltd...................... 61,900 793,539
----------
MACHINERY-ELECTRICAL -- 1.1%
Mitsubishi Electric Corp..................... 31,930 425,200
----------
MACHINERY-FARMING -- 2.2%
Kubota Corp.................................. 55,300 873,556
----------
MACHINERY-GENERAL INDUSTRIAL -- 1.9%
Makino Milling Machine Co., Ltd.............. 104,460 772,437
----------
MEDICAL-DRUGS -- 1.2%
Takeda Pharmaceutical Co., Ltd............... 11,100 482,560
----------
MISCELLANEOUS MANUFACTURING -- 0.0%
Peace Mark Holdings, Ltd.+(1)(2)............. 8,000 0
----------
NON-FERROUS METALS -- 2.9%
Mitsubishi Materials Corp.................... 362,000 1,171,735
----------
OIL COMPANIES-EXPLORATION & PRODUCTION -- 1.1%
Inpex Corp................................... 30,600 432,320
----------
PHOTO EQUIPMENT & SUPPLIES -- 1.2%
FUJIFILM Holdings Corp....................... 15,820 486,104
----------
REAL ESTATE MANAGEMENT/SERVICES -- 2.6%
Mitsubishi Estate Co., Ltd................... 45,680 1,028,138
----------
REAL ESTATE OPERATIONS & DEVELOPMENT -- 1.9%
Leopalace21 Corp.+........................... 142,900 784,370
----------
RETAIL-DISCOUNT -- 1.3%
Don Quijote Holdings Co., Ltd................ 9,100 521,897
----------
RETAIL-DRUG STORE -- 0.9%
Tsuruha Holdings, Inc........................ 6,800 378,208
----------
RETAIL-MISC./DIVERSIFIED -- 0.5%
Ryohin Keikaku Co., Ltd...................... 1,725 205,569
----------
STEEL-PRODUCERS -- 0.9%
Yamato Kogyo Co., Ltd........................ 11,400 380,433
----------
STEEL-SPECIALTY -- 1.3%
Hitachi Metals, Ltd.......................... 28,500 513,481
----------
TELEPHONE-INTEGRATED -- 6.0%
KDDI Corp.................................... 19,100 1,148,177
Nippon Telegraph & Telephone Corp............ 12,570 781,764
SoftBank Corp................................ 6,900 483,739
----------
2,413,680
----------
TELEVISION -- 5.5%
Nippon Television Holdings, Inc.............. 80,150 1,223,352
TV Asahi Holdings Corp....................... 63,560 1,002,587
----------
2,225,939
----------
TRANSPORT-MARINE -- 1.7%
Mitsui OSK Lines, Ltd........................ 221,139 705,709
----------
16
SUNAMERICA JAPAN FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2014
SUNAMERICA JAPAN FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
-----------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
TRAVEL SERVICES -- 0.4%
HIS Co., Ltd................................. 6,100 $ 162,574
-----------
WEB PORTALS/ISP -- 1.0%
Yahoo Japan Corp............................. 102,100 388,199
-----------
TOTAL LONG-TERM INVESTMENT SECURITIES
(cost $38,919,111).......................... 38,929,732
-----------
REPURCHASE AGREEMENT -- 3.4%
Agreement with State Street Bank & Trust
bearing interest at 0.00% dated 09/30/2014
to be repurchased 10/01/2014 in the amount
of $1,381,000 and collateralized by
$1,525,000 of Federal Home Loan Mtg. Corp.
Notes bearing interest at 2.00% due
01/30/2023 and having an approximate value
of $1,413,192 (cost $1,381,000)............. $1,381,000 1,381,000
-----------
TOTAL INVESTMENTS
(cost $40,300,111)(3)....................... 100.2% 40,310,732
Liabilities in excess of other assets.......... (0.2) (96,245)
---------- -----------
NET ASSETS 100.0% $40,214,487
========== ===========
--------
+ Non-income producing security
(1)Fair valued security. Securities are classified as Level 3 based on the
securities valuation inputs; see Note 2.
(2)Illiquid security. At September 30, 2014, the aggregate value of these
securities was $0 representing 0.0% of net assets.
(3)See Note 5 for cost of investments on a tax basis.
The following is a summary of the inputs used to value the Fund's net assets as
of September 30, 2014 (see Note 2):
LEVEL 1 -- UNADJUSTED LEVEL 2 -- OTHER LEVEL 3 -- SIGNIFICANT
QUOTED PRICES OBSERVABLE INPUTS UNOBSERVABLE INPUTS TOTAL
- --------------------- ----------------- ---------------------- -----------
ASSETS:
LONG-TERM INVESTMENT SECURITIES:
Common Stock:
Auto-Cars/Light Trucks................. $ 3,427,191 $ -- $-- $ 3,427,191
Auto/Truck Parts & Equipment-Original.. 5,417,325 -- -- 5,417,325
Electronic Components-Misc............. 2,164,305 -- -- 2,164,305
Miscellaneous Manufacturing............ -- -- 0 0
Telephone-Integrated................... 2,413,680 -- -- 2,413,680
Television............................. 2,225,939 -- -- 2,225,939
Other Industries*...................... 23,281,292 -- -- 23,281,292
Repurchase Agreement...................... -- 1,381,000 -- 1,381,000
----------- ---------- --- -----------
Total..................................... $38,929,732 $1,381,000 $ 0 $40,310,732
=========== ========== === ===========
--------
* Sum of all other industries each of which individually has an aggregate
market value of less than 5% of net assets. For a detailed presentation of
securities by industry classification, please refer to the Portfolio of
Investments.
The Fund's policy is to recognize transfers between Levels as of the end of the
reporting period. Securities held at the beginning of the period currently
valued at $16,317,306 were transferred from Level 2 to Level 1 due to foreign
equity securities whose values were previously adjusted for fair value pricing
procedures for foreign equity securities. There were no additional transfers
between Levels during the reporting period.
At the beginning and end of the reporting period, Level 3 investments in
securities were not considered a material portion of the Fund.
See Notes to Financial Statements
17
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014
Note 1. Organization
SunAmerica Equity Funds is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management investment
company and was organized as a Massachusetts business trust (the "Trust" or
"Equity Funds") on June 18, 1986. It currently consists of two different
funds (each, a "Fund" and collectively, the "Funds"). Each Fund is a
separate series of the Trust with a distinct objective and/or strategy. Each
Fund is advised and/or managed by SunAmerica Asset Management, LLC (the
"Adviser" or "SunAmerica"). An investor may invest in one or more of the
following Funds: SunAmerica International Dividend Strategy Fund
("International Dividend Strategy Fund") or SunAmerica Japan Fund ("Japan
Fund"). On October 28, 2013 the SunAmerica Value Fund was reorganized into
SunAmerica Focused Alpha Large Cap Fund, a series of SunAmerica Specialty
Series. The Funds are considered to be separate entities for financial and
tax reporting purposes.
The investment objective and principal investment techniques for each of the
Funds are as follows:
INTERNATIONAL DIVIDEND STRATEGY FUND seeks total return by employing a "buy
and hold" strategy to identify approximately 50 to 100 high dividend
yielding equity securities selected annually from the MSCI ACWI ex-U.S.
Index. At least 80% of the Fund's net assets, plus any borrowing for
investment purposes, will be invested in dividend yielding equity securities.
JAPAN FUND seeks long-term capital appreciation by active trading of
securities of Japanese issuers and other investments that are tied
economically to Japan ("Japanese companies"). Under normal circumstances, at
least 80% of the Fund's net assets, plus any borrowings for investment
purposes, will be invested in Japanese companies.
Each Fund is organized as a "diversified" fund within the meaning of the
1940 Act.
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 are offered at net asset value per share plus an initial
sales charge. Additionally, purchases of Class A shares in amounts
$1,000,000 or more will be purchased at net asset value but will be subject
to a contingent deferred sales charge on redemptions made within two years
of purchase.
Class B shares are offered without an initial sales charge, although a
declining contingent deferred sales charge may be imposed on redemptions
made within six years of purchase. Class B shares of each Fund convert
automatically to Class A shares approximately eight years after purchase of
such Class B shares and at such time will be subject to the lower
distribution fee applicable to Class A shares.
Class C shares are offered at net asset value per share without an initial
sales charge, although may be subject to a contingent deferred sales charge
on redemptions made within 12 months of purchase.
Class I shares are closed to new purchases, however, existing investors may
continue to purchase shares through reinvestments of dividends and capital
gains distributions.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions, except as may otherwise be provided in the Trust's
registration statement. Class A, Class B and Class C shares each make
distribution and account maintenance fee payments under the distribution
plans pursuant to Rule 12b-1 under the 1940 Act, except that Class B and
Class C shares are subject to higher distribution fee rates. Class I shares
have not adopted a 12b-1 plan and make no payments thereunder, however,
Class I shares pay a service fee to the Funds' distributor for providing
administrative and shareholder services.
INDEMNIFICATIONS: Under the Trust's organizational documents, its officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Trust. In addition, pursuant to
Indemnification Agreements between the Trust and each of the current
trustees who is not an "interested person," as defined in Section 2(a)(19)
of the 1940 Act, of the Trust (collectively, the "Disinterested Trustees"),
the Trust provides the Disinterested Trustees with a limited indemnification
against liabilities arising out of the performance of their duties to the
Trust, whether such liabilities are asserted during or after their service
as trustees. In addition, in the normal course of business the Trust enters
into contracts that contain the obligation to
18
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
indemnify others. The Trust's maximum exposure under these arrangements is
unknown. Currently, however, the Trust expects the risk of loss to be remote.
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates and those differences could be significant. The following is a
summary of significant accounting policies consistently followed by the
Trust in the preparation of its financial statements:
SECURITY VALUATION: In accordance with the authoritative guidance on fair
value measurements and disclosures under GAAP, the Funds disclose the fair
value of their investments in a hierarchy that prioritizes the inputs to
valuation techniques used to measure the fair value. In accordance with
GAAP, fair value is defined as the price that the Funds would receive upon
selling an asset or transferring a liability in a timely transaction to an
independent third party in the principal or most advantageous market. GAAP
established a three-tier hierarchy to provide more transparency around the
inputs used to measure fair value and to establish classification of fair
value measurements for disclosure purposes. Inputs refer broadly to the
assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk. Inputs may be observable or
unobservable. Observable inputs are inputs that reflect the assumptions
market participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of the reporting
entity. Unobservable inputs are inputs that reflect the reporting entity's
own assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information
available in the circumstances. The three-tiers are as follows:
Level 1 -- Unadjusted quoted prices in active markets for identical
securities
Level 2 -- Other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk,
referenced indices, quoted prices in inactive markets, adjusted quoted
prices in active markets, adjusted quoted prices on foreign equity
securities that were adjusted in accordance with pricing procedures approved
by the Board of Trustees ("the Board") , etc.)
Level 3 -- Significant unobservable inputs (includes inputs that reflect the
Funds' own assumptions about the assumptions market participants would use
in pricing the security, developed based on the best information available
under the circumstances)
Changes in valuation techniques may result in transfers in or out of an
investment's assigned Level within the hierarchy. The methodology used for
valuing investments is not necessarily an indication of the risk associated
with investing in those investments and the determination of the
significance of a particular input to the fair value measurement in its
entirety requires judgment and consideration of factors specific to each
security.
The availability of observable inputs can vary from security to security and
is affected by a wide variety of factors, including, for example, the type
of security, whether the security is recently issued and not yet established
in the marketplace, the liquidity of markets, and other characteristics
particular to the security. To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the
determination of fair value requires more judgment. Accordingly, the degree
of judgment exercised in determining fair value is greatest for instruments
categorized in Level 3.
The summary of inputs used to value the Funds' net assets as of
September 30, 2014 are reported on a schedule following the Portfolio of
Investments.
Stocks are generally valued based upon closing sales prices reported on
recognized securities exchanges on which the securities are principally
traded and are generally categorized as Level 1. Stocks listed on the NASDAQ
are valued using the NASDAQ Official Closing Price ("NOCP"). Generally, the
NOCP will be the last sale price unless the reported trade for the stock is
outside the range of the bid/ask price. In such cases, the NOCP will be
normalized to the nearer of the bid or ask price. For listed securities
having no sales reported and for unlisted securities, such securities will
be valued based upon the last reported bid price.
As of the close of regular trading on the New York Stock Exchange ("NYSE"),
securities traded primarily on security exchanges outside the United States
are valued at the last sale price on such exchanges on the day of valuation,
or if there is no sale on the
19
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
day of valuation, at the last-reported bid price. If a security's price is
available from more than one exchange, the Funds use the exchange that is
the primary market for the security. However, depending on the foreign
market, closing prices may be up to 15 hours old when they are used to price
the Fund's shares, and the Fund may determine that certain closing prices do
not reflect the fair value of the security. This determination will be based
on review of a number of factors, including developments in foreign markets,
the performance of U.S. securities markets, and the performance of
instruments trading in U.S. markets that represent foreign securities and
baskets of foreign securities. If a Fund determines that closing prices do
not reflect the fair value of the securities, the Fund will adjust the
previous closing prices in accordance with pricing procedures approved by
the Board to reflect what it believes to be the fair value of the securities
as of the close of regular trading on the NYSE. The Funds may also fair
value securities in other situations, for example, when a particular foreign
market is closed but a Fund is open. For foreign equity securities and
foreign equity futures contracts, the Funds use an outside pricing service
to provide it with closing market prices and information used for adjusting
those prices and when so adjusted, such securities and futures are generally
categorized as Level 2.
Bonds, debentures, other long-term debt securities, and short term debt
securities with maturities in excess of 60 days, are valued at evaluated bid
prices obtained for the day of valuation from a Board-approved pricing
service, and are generally categorized as Level 2. The pricing service may
use valuation models or matrix pricing which considers information with
respect to comparable bond and note transactions, quotations from bond
dealers, or by reference to other securities that are considered comparable
in such characteristics as rating, interest rate, and maturity date, option
adjusted spreads models, prepayments projections, interest rate spreads, and
yield curves to determine current value. If a price is unavailable from a
Board-approved pricing service, the securities may be priced at the mean of
two independent quotes obtained from brokers.
Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund on the 60th day, are amortized to
maturity based on the value determined on the 61st day, and are generally
categorized as Level 2.
Investments in registered investment companies that do not trade on an
exchange are valued at the end of day net asset value per share. Investments
in registered investment companies that trade on an exchange are valued at
the last sales price or official closing price as of the close of the
customary trading session on the exchange where the security is principally
traded. Registered investment companies are generally categorized as Level 1.
Other securities are valued on the basis of last sale or bid price (if a
last sale price is not available) which is, in the opinion of the Adviser,
the broadest and most representative market, that may be either a securities
exchange or over-the-counter market and are generally categorized as Level 1
or Level 2.
The Board is responsible for the share valuation process and has adopted
policies and procedures (the "PRC Procedures") for valuing the securities
and other assets held by the Funds, including procedures for the fair
valuation of securities and other assets for which market quotations are not
readily available or are unreliable. The PRC Procedures provide for the
establishment of a pricing review committee, which is responsible for, among
other things, making certain determinations in connection with the Trust's
fair valuation procedures. Securities for which market quotations are not
readily available or the values of which may be significantly impacted by
the occurrence of developments or significant events are generally
categorized as Level 3. There is no single standard for making fair value
determinations, which may result in prices that vary from those of other
funds.
MASTER AGREEMENTS: The Funds have entered into Master Repurchase Agreements
("Master Agreements") with certain counterparties that govern repurchase
agreement transactions. The Master Agreements may contain provisions
regarding, among other things, the parties' general obligations,
representations, agreements, collateral requirements and events of default.
Collateral can be in the form of cash or securities as agreed to by the
Funds and applicable counterparty. The Master Agreements typically specify
certain standard termination events, such as failure of a party to pay or
deliver, credit support defaults and other events of default. Upon the
occurrence of an event of default, the other party may elect to terminate
early and cause settlement of all repurchase agreement transactions
outstanding pursuant to a particular Master Agreement, including the payment
of any losses and costs resulting from such early termination, as reasonably
determined by the terminating party. Any decision by one or more of the
Funds' counterparties to elect early termination could cause the Funds to
accelerate the payment of liabilities. Typically, the Master Agreement will
permit a single net payment in the event of default. Note, however, that
bankruptcy or
20
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset in bankruptcy, insolvency or other
events. As of September 30, 2014, the repurchase agreements held by the
Funds are subject to master netting agreements. See the Portfolio of
Investments and Notes to the Financial Statements for more information about
a Fund's holdings in repurchase agreements.
REPURCHASE AGREEMENTS: The Funds, along with other affiliated registered
investment companies, pursuant to procedures adopted by the Board and
applicable guidance from the Securities and Exchange Commission ("SEC"), may
transfer uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or federal agency obligations. In a
repurchase agreement, the seller of a security agrees to repurchase the
security at a mutually agreed-upon time and price, which reflects the
effective rate of return for the term of the agreement. For repurchase
agreements and joint repurchase agreements, the Trusts' custodian takes
possession of the collateral pledged for investments in such repurchase
agreements ("repo" or collectively "repos"). The underlying collateral is
valued daily on a mark to market basis, plus accrued interest to ensure that
the value, at the time the agreement is entered into, is equal to at least
102% of the repurchase price, including accrued interest. In the event of
default of the obligation to repurchase, the 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 Trust may be delayed or
limited.
SECURITIES TRANSACTIONS, INVESTMENT INCOME, EXPENSES, DIVIDENDS AND
DISTRIBUTIONS TO SHAREHOLDERS: Security transactions are recorded on a trade
date basis. Realized gains and losses on the sale of investments are
calculated on the identified cost basis. For financial statement purposes,
the Funds amortize all premiums and accrete all discounts on fixed income
securities.
Interest income is accrued daily from settlement date except when collection
is not expected. Dividend income is recorded on the ex-dividend date except
for certain dividends from foreign securities, which are recorded as soon as
the Trust is informed after the ex-dividend date.
Funds which earn foreign income and capital gains may be subject to foreign
withholding taxes and capital gains taxes at various rates. Under applicable
foreign law, a withholding of tax may be imposed on interest, dividends, and
capital gains from the sale of foreign securities at various rates.
Net investment income, expenses other than class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class
of shares based upon the relative net asset value of outstanding shares of
each class of shares at the beginning of the day (after adjusting for
current capital shares activity of the respective class).
Expenses common to all Funds, not directly related to individual Funds are
allocated among the Funds based upon relative net assets or other
appropriate allocation methods. In all other respects, expenses are charged
to each Fund as incurred on a specific identification basis.
Dividends from net investment income, if any, are normally paid quarterly
for the International Dividend Strategy Fund. The Japan Fund pays annually.
Capital gain distributions, if any, are paid annually. Each of the Funds
reserves the right to declare and pay dividends less frequently than
disclosed above, provided that the net realized capital gains and net
investment income, 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 GAAP. 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 at fiscal year-end based on their
federal tax-basis treatment; temporary differences do not require
reclassification. Net assets are not affected by these reclassifications.
Each Fund is considered a separate entity for tax purposes and intends to
comply with the requirements of the Internal Revenue Code, as amended,
applicable to regulated investment companies and distribute all of its
taxable income, including any net capital gains on investments, to its
shareholders. Each Fund also intends to distribute sufficient net investment
income and net
21
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
capital gains, if any, so that each Fund will not be subject to excise tax
on undistributed income and gains. Therefore, no federal income tax or
excise tax provision is required.
Each Fund recognizes the tax benefits of uncertain tax positions only when
the position is more likely than not to be sustained, assuming examination
by tax authorities. Management has analyzed each Fund's tax positions and
concluded that no liability for unrecognized tax benefits should be recorded
related to uncertain tax positions taken on returns filed for open tax years
2011 - 2013 or expected to be taken in each Fund's 2014 tax return. The
Funds are not aware of any tax provisions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will change
materially in the next twelve months. The Funds file U.S. federal and
certain state income tax returns. With few exceptions, the Funds are no
longer subject to U.S. federal and state tax examinations by tax authorities
for tax returns ending before 2011.
FOREIGN CURRENCY TRANSLATION: The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars based on the exchange rate of such currencies
against U.S. dollars on the date of valuation.
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 the end of the year.
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 located in the Statements of Operations include realized
foreign exchange gains and losses from currency gains or losses between the
trade and the settlement dates of securities transactions, the difference
between the amounts of interest, dividends and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent amounts actually
received or paid and changes in the unrealized foreign exchange gains and
losses relating to the other assets and liabilities arising as a result of
changes in the exchange rates.
NEW ACCOUNTING PRONOUNCEMENTS: In December 2011 the FASB issued Accounting
Standards Update ("ASU") No. 2011-11 "Disclosures about Offsetting Assets
and Liabilities, which was subsequently clarified in FASB ASU 2013-01
"Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities" which was issued January 2013. The amended Standard requires an
entity to disclose information about offsetting and related arrangements to
enable users of its financial statements to understand the effect of those
arrangements on its financial position. The new and revised disclosures are
effective for annual reporting periods beginning on or after January 1,
2013, and interim periods within those annual periods. All required changes
to accounting policies have been made in accordance with ASU No. 2011-11 and
2013-01.
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 SunAmerica. Under the Agreement,
SunAmerica provides continuous supervision of a Fund's portfolio and
administers its corporate affairs, subject to general review by the
Trustees. In connection therewith, SunAmerica furnishes the Funds with
office facilities, maintains certain of the Funds' books and records, and
pays the salaries and expenses of all personnel, including officers of the
Funds who are employees of SunAmerica and its affiliates.
The Funds pay SunAmerica a monthly investment advisory and management fee
calculated daily at the following annual percentages of each Fund's average
daily net assets:
MANAGEMENT
FUND FEES
---- ----------
International Dividend Strategy Fund+. 1.00%
Japan Fund............................ 1.15
22
--------
+ Pursuant to a Fee Waiver Agreement, SunAmerica was contractually obligated
to waive its advisory fee so that the aggregate advisory fee payable by the
Fund to SunAmerica did not exceed an annual rate of 0.95% of average daily
net assets. For the year ended September 30, 2014, the amount of the
advisory fees waived were $23,391. These amounts are reflected in the
Statement of Operations. Effective January 31, 2014, this Fee Waiver
Agreement terminated pursuant to its terms.
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
For the year ended September 30, 2014, SunAmerica earned fees in the amounts
stated in the Statement of Operations.
The Japan Fund is subadvised by Wellington Management Company, LLP
("Wellington Management") pursuant to a subadvisory agreement with
SunAmerica. Wellington Management receives an annual fee of 0.45% of average
daily net assets of the Japan Fund, which is paid by SunAmerica. In
addition, Wellington Management had agreed to voluntarily waive 50% or
0.225% of the subadvisory fee payable to it by SunAmerica. Effective June 1,
2014, Wellington Management discontinued this voluntary fee waiver.
SunAmerica has contractually agreed to waive fees or reimburse expenses to
the extent necessary to cap the Funds' annual fund operating expenses at the
following percentages of each Class's average daily net assets. For the
purposes of waived fee and/or reimbursed expense calculations, annual fund
operating expenses shall not include extraordinary expenses, as determined
under generally accepted accounting principles, such as litigation, or
acquired fund fees and expenses, brokerage commissions and other
transactional expenses relating to the purchase and sale of portfolio
securities, interest, taxes governmental fees and other expenses not
incurred in the ordinary course of the Funds' business. The contractual fee
waivers and expense reimbursements will continue in effect indefinitely
unless terminated by the Trustees, including a majority of the Disinterested
Trustees.
FUND PERCENTAGE
---------------
International Dividend Strategy Fund Class A. 1.90%
International Dividend Strategy Fund Class B. 2.55
International Dividend Strategy Fund Class C. 2.55
International Dividend Strategy Fund Class I. 1.80
Japan Fund Class A........................... 1.90
Japan Fund Class B........................... 2.55
Japan Fund Class C........................... 2.55
Any contractual waivers and/or reimbursements made by SunAmerica are subject
to recoupment from the Funds within two years after the occurrence of the
waiver and/or reimbursement, provided that the Funds are able to effect such
payments to SunAmerica and remain in compliance with the expense limitations
in effect at the time the waivers and/or reimbursements were made.
For the year ended September 30, 2014, pursuant to the contractual expense
limitations referred to above, SunAmerica has waived or reimbursed expenses
as follows:
OTHER EXPENSES
FUND REIMBURSED
---- --------------
Japan Fund................................... $16,387
FUND AMOUNT
---- --------------
International Dividend Strategy Fund Class A. $ 6,467
International Dividend Strategy Fund Class B. 7,910
International Dividend Strategy Fund Class C. 5,661
International Dividend Strategy Fund Class I. --
Japan Fund Class A........................... 71,156
Japan Fund Class B........................... 19,365
Japan Fund Class C........................... 24,375
For the year ended September 30, 2014, the amounts recouped by SunAmerica
are as follows:
OTHER EXPENSES
FUND RECOUPED
---- --------------
International Dividend Strategy Fund......... $ 51,925
FUND AMOUNT
---- --------------
International Dividend Strategy Fund Class A. $101,628
International Dividend Strategy Fund Class B. 1,370
International Dividend Strategy Fund Class C. 18,108
International Dividend Strategy Fund Class I. 624
Japan Fund Class A........................... 2,821
23
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
At September 30, 2014, expenses previously waived and/or reimbursed by
SunAmerica that remain subject to recoupment and expire during the time
periods indicated are as follows:
OTHER EXPENSES REIMBURSED
-------------------------------------
FUND SEPTEMBER 30, 2015 SEPTEMBER 30, 2016
---- ------------------ ------------------
Japan Fund............................... $58,268 $16,387
CLASS SPECIFIC EXPENSES REIMBURSED
-------------------------------------
FUND SEPTEMBER 30, 2015 SEPTEMBER 30, 2016
---- ------------------ ------------------
International Dividend Strategy Fund
Class A................................. $ -- $ 6,467
International Dividend Strategy Fund
Class B................................. 19,805 7,910
International Dividend Strategy Fund
Class C................................. 26,135 5,661
International Dividend Strategy Fund
Class I................................. -- --
Japan Fund Class A....................... 62,143 71,156
Japan Fund Class B....................... 12,355 19,365
Japan Fund Class C....................... 14,362 24,375
The Trust, on behalf of each Fund, has entered into a Distribution Agreement
with AIG Capital Services, Inc.* ("ACS" or the "Distributor"), an affiliate
of the Adviser. Each Fund has adopted a Distribution Plan on behalf of each
class of shares (other than Class I shares) (each a "Plan" and collectively,
the "Plans") in accordance with the provisions of Rule 12b-1 under the 1940
Act, hereinafter referred to as the "Class A Plan," "Class B Plan" and
"Class C Plan." In adopting the Plans, the Trustees determined that there
was a reasonable likelihood that each such Plan would benefit the Fund and
the shareholders of the respective class. The sales charge and distribution
fees of a particular class will not be used to subsidize the sale of shares
of any other class.
Under the Class A Plan, Class B Plan and Class C Plan, the Distributor
receives a distribution fee from a Fund at an annual rate of 0.10%, 0.75%
and 0.75%, respectively, of the average daily net assets of the Fund's
Class A, Class B and Class C shares to compensate the Distributor and
certain securities firms for providing sales and promotional activities for
distributing that class of shares. The distribution costs for which the
Distributor may be compensated 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 Plans provide that the Class A, Class B and
Class C shares of each Fund will pay the Distributor an account maintenance
fee up to an annual rate of 0.25% of the aggregate average daily net assets
of such class of shares for payments to compensate the Distributor and
certain securities firms for account maintenance activities. Accordingly,
for the year ended September 30, 2014, ACS received fees (see Statement of
Operations) based upon the aforementioned rates.
In addition, ACS is paid a fee of 0.25% of average daily net assets of
Class I shares in connection with providing administrative and shareholder
services to Class I shareholders. For the year ended September 30, 2014, ACS
earned fees (see Statement of Operations) based upon the aforementioned
rates.
ACS receives sales charges on each Fund's Class A shares, portions of which
are reallocated to affiliated broker-dealers and non-affiliated
broker-dealers. ACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of each
Fund's Class A, Class B and Class C shares. ACS has advised the funds that
for the year ended September 30, 2014, the proceeds received from sales (and
paid out to affiliated and non-affiliated broker-dealers) and redemptions
are as follows:
CLASS A CLASS B CLASS C
---------------------------------------------------- ------------- -------------
CONTINGENT CONTINGENT CONTINGENT
SALES AFFILIATED NON-AFFILIATED DEFERRED DEFERRED DEFERRED
FUND CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES SALES CHARGES SALES CHARGES
---- -------- -------------- -------------- ------------- ------------- -------------
International Dividend
Strategy Fund................ $599,584 $58,389 $447,542 $47,026 $9,410 $6,547
Japan Fund.................... 246,246 5,229 202,305 3,971 25 1,644
24
--------
* Effective February 28, 2014, SunAmerica Capital Services, Inc. changed its
name to AIG Capital Services, Inc.
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
The Trust has entered into a Service Agreement with SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent, State Street Bank and Trust Company, in
connection with the services that it offers to the shareholders of the
Funds. Pursuant to the Service Agreement, the Funds pay a fee to SAFS for
services rendered based upon an annual rate of 0.22% of average daily net
assets. For the year ended September 30, 2014, the Funds incurred the
following expenses which are included in transfer agent fees payable in the
Statement of Asset and Liabilities and in transfer agent fees and expenses
in the Statement of Operations to compensate SAFS pursuant to the terms of
the Service Agreement.
EXPENSE PAYABLE AT SEPTEMBER 30, 2014
-------------------------------- -------------------------------
FUND CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I
---- -------- ------- ------- ------- ------- ------- ------- -------
International Dividend Strategy Fund. $278,916 $16,077 $73,697 $1,441 $29,676 $1,610 $8,319 $82
Japan Fund........................... 63,368 736 6,817 -- 5,826 61 759 --
At September 30, 2014, the following affiliates owned a percentage of the
outstanding shares of the following funds: Focused Multi-Asset Strategy
Portfolio and Focused Balanced Strategy Portfolio owned 8% and 6%,
respectively, of the SunAmerica International Dividend Strategy Fund;
Focused Multi-Asset Strategy Portfolio and Focused Balanced Strategy
Portfolio owned 40% and 9%, respectively, of the Japan Fund.
Note 4. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales and maturities of long-term
investments during the year ended September 30, 2014 were as follows:
INTERNATIONAL
DIVIDEND STRATEGY
FUND JAPAN FUND
----------------- -----------
Purchases (excluding U.S. government securities)... $240,148,004 $46,232,013
Sales (excluding U.S. government securities) ...... 131,413,032 35,238,816
Purchase of U.S. government securities ............ -- --
Sales and maturities of U.S. government securities. -- --
Note 5. Federal Income Taxes
The following details the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of
distributable earnings differ from the amounts reflected in the Statement of
Assets and Liabilities by temporary book/tax differences primarily arising
from wash sales, investments in passive foreign investment companies,
deferred compensation payments, foreign taxes payable and derivative
transactions.
FOR THE YEAR ENDED SEPTEMBER 30, 2014
------------------------------------------------------------------
DISTRIBUTABLE EARNINGS TAX DISTRIBUTIONS
---------------------------------------- ------------------------
LONG-TERM UNREALIZED
ORDINARY GAINS/CAPITAL APPRECIATION ORDINARY LONG-TERM
INCOME LOSS CARRYOVER (DEPRECIATION)* INCOME CAPITAL GAINS
---------- -------------- --------------- ---------- -------------
International Dividend Strategy Fund. $ 402,718 $(95,426,863) $(11,750,768) $5,291,172 $ --
Japan Fund........................... 2,692,598 364,693 (329,621) 1,911,294 823,377
--------
* Unrealized appreciation (depreciation) includes amounts for derivatives and
other assets and liabilities denominated in foreign currency.
TAX DISTRIBUTIONS
FOR THE YEAR ENDED
SEPTEMBER 30, 2013
------------------------
ORDINARY LONG-TERM
INCOME CAPITAL GAINS
---------- -------------
International Dividend Strategy Fund. $4,117,355 $ --
Japan Fund........................... 480,821 --
25
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for federal income tax purposes, including short-term securities
and repurchase agreements, were as follows at September 30, 2014:
INTERNATIONAL
DIVIDEND
STRATEGY FUND JAPAN FUND
------------- -----------
Cost (tax basis)........................... $229,015,684 $40,636,562
============ ===========
Appreciation............................... 9,034,647 1,744,411
Depreciation............................... (20,592,604) (2,070,241)
------------ -----------
Net unrealized appreciation (depreciation). $(11,557,957) $ (325,830)
============ ===========
For the year ended September 30, 2014, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to disposition of passive foreign investment companies securities, and
foreign currency transactions to the components of net assets as follows:
ACCUMULATED ACCUMULATED
UNDISTRIBUTED NET UNDISTRIBUTED NET
FUND INVESTMENT INCOME (LOSS) REALIZED GAIN (LOSS) CAPITAL PAID-IN
---- ------------------------ -------------------- ---------------
International Dividend Strategy Fund. $(480,143) $480,143 $--
Japan Fund........................... 551,609 (551,609) --
For Federal income tax purposes, the Funds indicated below have capital loss
carryforwards, which expire in the year indicated, as of September 30, 2014,
which are available to offset future capital gains, if any:
FUND CAPITAL LOSS CARRYFORWARD+ UNLIMITED+
---- ----------------------------------------------- ----------------
2015 2016 2017 2018 ST LT
----------- ----------- ----------- ----------- ---------- -----
International Dividend Strategy Fund*. $31,528,888 $25,210,425 $16,578,456 $19,381,525 $2,727,569 $ --
Japan Fund............................ -- -- -- -- -- --
--------
+ On December 22, 2010, the Regulated Investment Company Modernization Act of
2010 (the "Act") was enacted, which changed various technical rules
governing the tax treatment of regulated investment companies. The changes
are generally effective for taxable years beginning after the date of
enactment. Under the Act, the fund will be permitted to carry forward
capital losses incurred in taxable years beginning after the date of
enactment for an unlimited period. However, any losses incurred during those
future taxable years will be required to be utilized prior to the losses
incurred in pre-enactment taxable years, which carry an expiration date. As
a result of this ordering rule, pre-enactment capital loss carryforwards may
be more likely to expire unused. Additionally, post-enactment capital losses
that are carried forward will retain their character as either short-term or
long-term losses rather than being considered all short-term as under
previous law.
* The capital loss carryforwards include realized capital losses from the
acquisition of other funds. Certain losses may be subject to annual
limitations imposed by the Internal Revenue Code. Therefore, it is possible
that not all of the capital losses will be available for use. As of
September 30, 2014, based on current tax law, the International Dividend
Strategy Fund has $0 of capital losses that will not be available for use.
The Funds indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the current year ended September 30, 2014.
CAPITAL LOSS
CARRYFORWARD
FUND UTILIZED
---- ------------
International Dividend Strategy Fund. $5,655,349
Japan Fund........................... --
26
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each Fund were as follows:
INTERNATIONAL DIVIDEND STRATEGY FUND
------------------------------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------------------------- --------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2014 SEPTEMBER 30, 2013 SEPTEMBER 30, 2014 SEPTEMBER 30, 2013
------------------------ ------------------------ --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold(1)(2)........ 10,141,651 $122,319,215 5,798,641 $ 64,710,792 706,588 $ 7,873,260 235,651 $ 2,417,773
Reinvested dividends..... 278,544 3,325,814 255,296 2,731,325 13,528 148,269 16,359 161,707
Shares redeemed(1)(2)(3). (4,515,532) (52,501,032) (2,342,145) (25,651,140) (478,112) (5,107,918) (138,911) (1,403,186)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase (decrease).. 5,904,663 $ 73,143,997 3,711,792 $ 41,790,977 242,004 $ 2,913,611 113,099 $ 1,176,294
========== ============ ========== ============ ======== =========== ======== ===========
INTERNATIONAL DIVIDEND STRATEGY FUND
------------------------------------------------------------------------------------------------
CLASS C CLASS I
-------------------------------------------------- --------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2014 SEPTEMBER 30, 2013 SEPTEMBER 30, 2014 SEPTEMBER 30, 2013
------------------------ ------------------------ --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold(1)(2)........ 2,566,050 $ 28,424,533 1,498,326 $ 15,393,857 -- $ -- -- $ --
Reinvested dividends..... 64,750 706,088 63,771 627,446 1,694 19,978 4,748 51,338
Shares redeemed(1)(2)(3). (524,134) (5,543,315) (444,666) (4,419,530) (67,379) (763,521) (19,146) (212,997)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase (decrease).. 2,106,666 $ 23,587,306 1,117,431 $ 11,601,773 (65,685) $ (743,543) (14,398) $ (161,659)
========== ============ ========== ============ ======== =========== ======== ===========
--------
(1)For the year ended September 30, 2014, includes automatic conversion of
45,073 shares of Class B shares in the amount of $486,223 to 41,253 shares
of Class A shares in the amount of $486,223.
(2)For the year ended September 30, 2013, includes automatic conversion of
49,437 shares of Class B shares in the amount of $502,149 to 45,403 shares
of Class A shares in the amount of $502,149.
(3)For the year ended September 30, 2013, net of redemption fees of $13,719,
$1,004, $3,582 and $244 for Class A, Class B, Class C and Class I shares,
respectively.
JAPAN FUND
-------------------------------------------------------------------------------------
CLASS A CLASS B
----------------------------------------------- ------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2014 SEPTEMBER 30, 2013 SEPTEMBER 30, 2014 SEPTEMBER 30, 2013
---------------------- ----------------------- ------------------ ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ----------- ------- --------- ------ --------
Shares sold(1)(2)........ 2,116,814 $16,579,584 1,031,698 $ 7,749,168 58,674 $ 441,558 5,743 $ 41,942
Reinvested dividends..... 309,873 2,283,764 73,705 468,763 4,679 33,410 496 3,078
Shares redeemed(1)(2)(3). (966,612) (7,367,031) (1,241,592) (8,747,150) (27,265) (197,151) (7,663) (51,206)
--------- ----------- ---------- ----------- ------- --------- ------ --------
Net increase (decrease).. 1,460,075 $11,496,317 (136,189) $ (529,219) 36,088 $ 277,817 (1,424) $ (6,186)
========= =========== ========== =========== ======= ========= ====== ========
JAPAN FUND
-----------------------------------------------
CLASS C
-----------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2014 SEPTEMBER 30, 2013
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- -----------
Shares sold(1)(2)........ 435,837 $ 3,249,375 233,230 $ 1,735,449
Reinvested dividends..... 9,799 69,866 1,039 6,443
Shares redeemed(1)(2)(3). (117,582) (865,845) (21,622) (145,195)
--------- ----------- ---------- -----------
Net increase (decrease).. 328,054 $ 2,453,396 212,647 $ 1,596,697
========= =========== ========== ===========
--------
(1)For the year ended September 30, 2014, includes automatic conversion of
4,388 shares of Class B shares in the amount of $32,062 to 4,236 shares of
Class A shares in the amount of $32,062.
(2)For the year ended September 30, 2013, includes automatic conversion of
1,472 shares of Class B shares in the amount of $10,020 to 1,428 shares of
Class A shares in the amount of $10,020.
(3)For the year ended September 30, 2013, net of redemption fees of $1,974,
$19, and $43 for Class A, Class B, Class C shares, respectively.
27
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
Note 7. Line of Credit
The SunAmerica family of mutual funds has established a $75 million
committed and a $50 million uncommitted line of credit with State Street
Bank and Trust Company, the Funds' custodian. Interest is currently payable
at the higher of the Federal Funds Rate plus 125 basis points or the
overnight London Interbank Offered Rate plus 125 basis points on the
committed line and State Street Bank and Trust Company's discretionary bid
rate on the uncommitted line of credit. There is also a commitment fee of 15
basis points per annum on the daily unused portion of the committed line of
credit and a one-time closing fee of 5 basis points on the uncommitted line
of credit both of which are included in other expenses on the Statements of
Operations. Prior to September 12, 2014, the commitment fee was 10 basis
points per annum on the daily unused portion of the committed line of credit
and there was no closing fee on the uncommitted line of credit. Borrowings
under the line of credit will commence when the respective Fund's cash
shortfall exceeds $100,000. For the year ended September 30, 2014, the
following Funds had borrowings:
AVERAGE WEIGHTED
DAYS INTEREST DEBT AVERAGE
FUND OUTSTANDING CHARGES UTILIZED INTEREST
---- ----------- -------- ---------- --------
International Dividend Strategy Fund. 10 $815 $2,187,865 1.34%
Japan Fund........................... 7 178 681,787 1.34
At September 30, 2014, the following Fund has an outstanding borrowing:
FUND AMOUNT
---- ----------
International Dividend Strategy Fund. $5,623,053
Note 8. Interfund Lending Agreement
Pursuant to the exemptive relief granted by the SEC, the Funds are permitted
to participate in an interfund lending program among investment companies
advised by SunAmerica or an affiliate. The interfund lending program allows
the participating Funds to borrow money from and lend money to each other
for temporary or emergency purposes. An interfund loan will be made under
this facility only if the participating Funds receive a more favorable
interest rate than would otherwise be available from a typical bank for a
comparable transaction.
For the year ended September 30, 2014, none of the Funds participated in
this program.
Note 9. Trustees' Retirement Plan
The Board has adopted the SunAmerica Disinterested Trustees' and Directors'
Retirement Plan (the "Retirement Plan") effective January 1, 1993, as
amended, for the Disinterested Trustees. The Retirement Plan provides
generally that a Disinterested Trustee may become a participant
("Participant") in the Retirement Plan if he or she has at least 10 years of
consecutive service as a Disinterested Trustee of any of the adopting
SunAmerica mutual funds (the "Adopting Funds") or has attained the age of 60
while a Trustee and completed five (5) consecutive years of service as a
Trustee of any Adopting Fund (an "Eligible Trustee/Director"). Pursuant to
the Retirement Plan, an Eligible Trustee may receive benefits upon (i) his
or her death or disability while a Trustee or (ii) the termination of his or
her tenure as a Trustee, other than removal for cause from each of the
Adopting Funds with respect to which he or she is an Eligible Trustee.
As of each of the first 10 birthdays after becoming a Participant and on
which he or she is both a Trustee and Participant, 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
Adopting Fund for the calendar year in which such birthday occurs. In
addition, an amount equal to 8.50% of any amounts credited under the
preceding statement during prior years is added to each Eligible Trustee's
account. The rights of any Participant to benefits under the Retirement Plan
shall be an unsecured claim against the assets of the Adopting Funds. 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 15 annual
installments. Any undistributed amounts shall continue to accrue interest at
8.50%.
Effective December 3, 2008, the Retirement Plan was amended to, among other
things, (1) freeze the Retirement Plan as to future accruals for active
Participants as of December 31, 2008, (2) prohibit Disinterested Trustees
from first becoming
28
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2014 -- (CONTINUED)
participants in the Retirement Plan after December 31, 2008 and (3) permit
active Participants to elect to receive a distribution of their entire
Retirement Plan account balance in 2009. The freeze on future accruals does
not apply to Participants that have commenced receiving benefits under the
Retirement Plan on or before December 31, 2008.
The following amounts for the Retirement Plan Liabilities are included in
the Trustees' fees and expenses payable line on the Statements of Assets and
Liabilities and the amounts for the Retirement Plan Expenses are included in
the Trustees' fees and expenses line on the Statements of Operations.
RETIREMENT PLAN RETIREMENT PLAN RETIREMENT PLAN
FUND LIABILITY EXPENSE PAYMENTS
---- --------------- --------------- ---------------
AS OF SEPTEMBER 30, 2014
-----------------------------------------------
International Dividend Strategy Fund. $443 $12 $868
Note 10. Investment Concentration
Each of the Funds invest internationally, including in "emerging market"
countries. Emerging market securities involve risks not typically associated
with investing in securities of issuers in more developed markets. The
markets of emerging market countries are typically more volatile and
potentially less liquid than more developed markets. Emerging market
countries may have relatively unstable government and may present the risk
of nationalization of businesses, expropriation, confiscatory taxation or,
in certain instances, reversion to closed market, centrally planned
economies. These securities may be denominated in currencies other than U.S.
dollars. When investing internationally, the value of the investment may be
affected by fluctuating currency values, changing local and regional
economic, political and social conditions, and greater market volatility. In
addition, because the Japan Fund concentrates its investments in Japan, the
Fund's performance is expected to be closely tied to social, political and
economic conditions of that country. At September 30, 2014, the
International Dividend Strategy Fund had 23.9%, 11.8% and 11.3% of its net
assets invested in equity securities domiciled in Brazil, Taiwan and
Thailand respectively, while the Japan Fund had 96.8% of its net assets
invested in equity securities domiciled Japan.
29
SUNAMERICA EQUITY FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of the SunAmerica Equity Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of each of the two
funds constituting the SunAmerica Equity Funds (the "Trust") at September 30,
2014, the results of each of their operations for the year then ended, the
changes in each of their net assets for the two years then ended and the
financial highlights for each of the five years then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust'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 the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits 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, 2014 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where securities purchased had not been
received, provide a reasonable basis for our opinion expressed above.
PricewaterhouseCoopers LLP
Houston, Texas
November 21, 2014
30
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2014 -- (UNAUDITED)
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND SUBADVISORY
AGREEMENT
The Board of Trustees (the "Board," the members of which are referred to as
"Trustees") of SunAmerica Equity Funds (the "Trust"), including the Trustees
who are not "interested persons," as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent
Trustees"), of the Trust or its separate series (each, a "Fund," and
collectively, the "Funds"), SunAmerica Asset Management, LLC ("SunAmerica") or
Wellington Management Company, LLP (" the "Subadviser"), approved the
continuation of the Investment Advisory and Management Agreement between the
Trust, on behalf of the Funds, and SunAmerica (the "Advisory Agreement") for a
one-year period ending June 30, 2015 at an in-person meeting held on June 3,
2014 (the "Meeting"). The Trust currently consists of the following two
separate Funds: SunAmerica International Dividend Strategy Fund ("International
Dividend Strategy Fund") and the SunAmerica Japan Fund ("Japan Fund"). At the
Meeting, the Board, including the Independent Trustees, also approved the
continuation of the Subadvisory Agreement between SunAmerica and the Subadviser
with respect to the Japan Fund for a one-year period ending June 30, 2015 (the
"Subadvisory Agreement," and together with the Advisory Agreement, the
"Agreements").
In accordance with Section 15(c) of the 1940 Act, the Board requested, and
SunAmerica and the Subadviser provided, materials relating to the Board's
consideration of whether to approve the continuation of the Agreements. These
materials included, among other things: (a) a summary of the services provided
to the Funds by SunAmerica and its affiliates, and by the Subadviser; (b)
information independently compiled and prepared by Lipper, Inc. ("Lipper"), an
independent third-party provider of mutual fund data, on fees and expenses of
the Funds, and the investment performance of the Funds as compared with a peer
group of funds, along with fee and performance data with respect to the Funds
and any other mutual funds or other accounts advised or subadvised by
SunAmerica or the Subadviser with similar investment objectives and/or
strategies, as applicable; (c) information on the profitability of SunAmerica,
and its affiliates, and a discussion relating to indirect benefits; (d)
information relating to economies of scale; (e) information about SunAmerica's
general compliance policies and procedures and the services it provides in
connection with its oversight of subadvisers; (f) information about
SunAmerica's and the Subadviser's risk management processes; (g) information
regarding brokerage and soft dollar practices; and (h) information about the
key personnel of SunAmerica and its affiliates, and the Subadviser, that are
involved in the investment management, administration, compliance and risk
management activities with respect to the Funds, as well as current and
projected staffing levels and compensation practices.
In determining whether to approve the continuation of the Agreements, the
Board, including Independent Trustees, considered at the Meeting, and from time
to time as appropriate, factors that it deemed relevant, including the
following information:
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY SUNAMERICA AND THE
SUBADVISER. The Board, including the Independent Trustees, considered the
nature, extent and quality of services provided by SunAmerica. The Board noted
that the services include acting as investment manager and adviser to the
Funds, managing the daily business affairs of the Funds, and obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment policies. Additionally, the Board observed that SunAmerica
provides office space, bookkeeping, accounting, legal, and compliance, clerical
and administrative services and has authorized its officers and employees, if
elected, to serve as officers or trustees of the Trust without compensation.
The Board noted that SunAmerica is responsible for monitoring and reviewing the
activities of affiliated and unaffiliated third-party service providers,
including the Subadviser. In addition to the quality of the advisory services
provided by SunAmerica, the Board considered the quality of the administrative
and other services provided by SunAmerica to the Funds pursuant to the Advisory
Agreement.
In connection with the services provided by SunAmerica, the Board analyzed the
structure and duties of SunAmerica's fund administration, accounting,
operations, legal and compliance departments and concluded that they were
adequate to meet the needs of the Funds. The Board also reviewed the personnel
responsible for providing advisory services to the Funds and other key
personnel of SunAmerica, in addition to current and projected staffing levels
and compensation practices. The Board further considered certain strategic
changes that SunAmerica had implemented with respect to its investment
department, and concluded, based on their experience and interaction with
SunAmerica, that: (i) SunAmerica would continue to be able to retain quality
investment and other personnel; (ii) SunAmerica has exhibited a high level of
diligence and attention to detail in carrying out its advisory and other
responsibilities under the Advisory Agreement; (iii) SunAmerica has been
responsive to requests of the Board; and (iv) SunAmerica has kept the Board
apprised of developments relating to the Funds and the industry in general. The
Board concluded that the nature and extent of services provided under the
Advisory Agreement were reasonable and appropriate in relation to the
management fee and that the quality of services continues to be high.
31
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2014 -- (UNAUDITED)
(CONTINUED)
The Board also considered SunAmerica's reputation and long-standing
relationship with the Funds and considered the benefit to shareholders of
investing in funds that are part of a family of funds offering a variety of
types of mutual funds and shareholder services. The Board considered
SunAmerica's experience in providing management and investment advisory and
administrative services to advisory clients and noted that as of March 31,
2014, SunAmerica managed, advised and/or administered approximately $66.7
billion in assets. In addition, the Board considered SunAmerica's code of
ethics and its commitment to compliance generally and with respect to its
management and administration of the Funds. The Board also considered
SunAmerica's risk management processes. The Board further observed that
SunAmerica has developed internal procedures for monitoring compliance with the
investment objectives, policies and restrictions of the Funds as set forth in
the Funds' prospectuses. The Board also reviewed SunAmerica's compliance and
regulatory history and noted that there were no material legal, regulatory or
compliance issues that would potentially impact SunAmerica from effectively
serving as the investment adviser to the Funds.
The Board also considered the nature, quality and extent of services provided
by the Subadviser with respect to the Japan Fund. The Board observed that the
Subadviser is responsible for providing day-to-day investment management
services, including investment research, advice and supervision, and
determining which securities will be purchased or sold by the Japan Fund,
subject to the oversight and review of SunAmerica. The Board reviewed the
Subadviser's history, structure, size, visibility and resources, which are
needed to attract and retain highly qualified investment professionals. The
Board reviewed the personnel that are responsible for providing subadvisory
services to the Funds and other key personnel of the Subadviser, in addition to
current and projected staffing levels and compensation practices, and
concluded, based on its experience with the Subadviser, that the Subadviser:
(i) has been able to retain high quality portfolio managers and other
investment personnel; (ii) has exhibited a high level of diligence and
attention to detail in carrying out its responsibilities under the Subadvisory
Agreement; and (iii) has been responsive to requests of the Board and of
SunAmerica. In addition, the Board considered the Subadviser's code of ethics
and its risk management processes. The Board further observed that the
Subadviser has developed internal policies and procedures for monitoring
compliance with the investment objectives, policies and restrictions of the
Funds as set forth in the Funds' prospectuses. The Board also reviewed the
Subadviser's compliance and regulatory history and noted that there were no
material legal, regulatory or compliance issues that would potentially impact
the Subadviser from effectively serving as a subadviser to the Fund. The Board
concluded that the nature and extent of services provided by the Subadviser
under the Subadvisory Agreement were reasonable and appropriate in relation to
the subadvisory fees and that the quality of services continues to be high.
INVESTMENT PERFORMANCE. The Board, including the Independent Trustees, also
considered the investment performance of SunAmerica and the Subadviser with
respect to the Funds, as applicable. In connection with its review, the Board
received and reviewed information regarding the investment performance of the
Funds as compared to each Fund's peer group ("Peer Group") and/or peer universe
("Peer Universe") as independently determined by Lipper and to an appropriate
index or combination of indices, including the Funds' benchmarks. The Board was
provided with a description of the methodology used by Lipper to select the
funds in the Peer Groups and Peer Universes.
The Board noted that performance information was for the periods ended March
31, 2014. The Board also noted that it regularly reviews the performance of the
Funds throughout the year. The Board further noted that, while it monitors
performance of the Funds closely, it generally attaches more importance to
performance over relatively long periods of time, typically three to five years.
International Dividend Strategy Fund. The Board considered that the Fund's
performance was below the median of its Peer Group and Peer Universe for the
one-, three- and five-year periods. The Board noted management's discussion of
the Fund's performance, including the fact that SunAmerica had assumed
day-to-day management of the Fund in July 2012 and that, in connection with
this change, the Fund changed its name and certain other changes were made to
the Fund's investment goal, principal investment strategy and principal
investment techniques, and that performance prior to July 2012 does not reflect
that of the Fund's current strategy. The Board further noted that, since
SunAmerica assumed day-to-day management of the Fund, the Fund's performance
has improved. The Board concluded that the Fund's performance was being
addressed.
Japan Fund. The Board considered that the Fund's performance was above the
median of its Peer Group and Peer Universe for the one- and two-year periods.
The Board also considered that the Fund outperformed its Lipper Index for the
one-year period and underperformed its Lipper Index for the two-year period.
The Board further considered that effective January 27, 2012, the Fund changed
its name of and certain of the Fund's principal investment strategies and
techniques, and the Subadviser was appointed as the subadviser to the Fund. The
Board noted management's discussion of the Fund's performance, including that
such performance had improved since the Subadviser assumed management of the
Fund.
32
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2014 -- (UNAUDITED)
(CONTINUED)
While the Board noted its concern with respect to the performance of the Funds,
it further considered the strategy and manager changes that had been made to
the International Dividend Strategy Fund and the Japan Fund in July 2012 and
January 2012, respectively. Accordingly, the Board observed that appropriate
resources were being dedicated to the Funds to address these performance
concerns. The Board also noted that it would continue to evaluate each Fund's
performance, including in connection with the strategy and manager changes.
CONSIDERATION OF THE MANAGEMENT FEES AND SUBADVISORY FEES AND THE COST OF THE
SERVICES AND PROFITS TO BE REALIZED BY SUNAMERICA, THE SUBADVISER AND THEIR
AFFILIATES FROM THE RELATIONSHIP WITH THE FUNDS. The Board, including the
Independent Trustees, received and reviewed information regarding the fees to
be paid by the Funds to SunAmerica pursuant to the Advisory Agreement and the
fees paid by SunAmerica to the Subadviser pursuant to the Subadvisory
Agreement. The Board examined this information in order to determine the
reasonableness of the fees in light of the nature and quality of services to be
provided and any potential additional benefits to be received by SunAmerica,
the Subadviser or their affiliates in connection with providing such services
to the Funds.
To assist in analyzing the reasonableness of the management fee for each of the
Funds, the Board received reports independently prepared by Lipper. The reports
showed comparative fee information for each Fund's Peer Group and/or Peer
Universe as determined by Lipper, including rankings within each category. In
considering the reasonableness of the management fee to be paid by each Fund to
SunAmerica, the Board reviewed a number of expense comparisons, including: (i)
contractual and actual management fees; and (ii) actual total operating
expenses. In considering each Fund's total operating expenses, the Board
analyzed the level of fee waivers and expense reimbursements and the net
expense caps contractually agreed upon by SunAmerica with respect to the Funds.
The Board further considered that, unlike the funds in the Peer Group and Peer
Universe, the fee waivers and/or reimbursements being made by SunAmerica with
respect to the Funds are only reflected in the total expenses category of the
Lipper reports, rather than also being reflected as specific management fee
waivers in the actual management fees category of the Lipper reports. As a
result, the Board took into account that the actual management fees presented
by Lipper for the funds in the Peer Group and Peer Universe may appear lower on
a relative basis. The Board also considered the various expense components of
the Funds and compared each Fund's net expense ratio (taking into account the
contractual fee caps) to those of other funds within its Peer Group and/or Peer
Universe as a guide to help assess the reasonableness of the Fund's management
fee. The Board acknowledged that it was difficult to make precise comparisons
with other funds in the Peer Groups and Peer Universes since the exact nature
of services provided under the various fund agreements is often not apparent.
The Board noted, however, that the comparative fee information provided by
Lipper as a whole was useful in assessing whether SunAmerica was providing
services at a cost that was competitive with other, similar funds.
The Board also considered the management fees received by SunAmerica with
respect to other mutual funds and accounts with similar investment strategies
to the Funds, to the extent applicable. The Board further noted that SunAmerica
serves as subadviser to certain of these similar mutual funds and observed that
the services SunAmerica provides as subadviser are much more limited in scope
than in its role as investment manager and adviser to the Fund. The Board then
noted the management fees paid by the Funds were reasonable as compared to the
fees SunAmerica was receiving from other mutual funds and accounts for which it
serves as adviser or subadviser.
The Board also received and reviewed information regarding the fees paid by
SunAmerica to the Subadviser pursuant to the Subadvisory Agreement. To assist
in analyzing the reasonableness of the subadvisory fees, the Board received a
report independently prepared by Lipper. The report showed comparative fee
information of each Portfolio's Peer Group and/or Peer Universe that the Board
used as a guide to help assess the reasonableness of the subadvisory fees. The
Board noted that the Peer Group/Universe information as a whole was useful in
assessing whether the Subadviser was providing services at a cost that was
competitive with other, similar funds. The Directors also considered that the
subadvisory fees are paid by SunAmerica out of its management fee and not by
the Japan Fund, and that subadvisory fees may vary widely within a Peer Group
for various reasons, including market pricing demands, existing relationships,
experience and success, and individual client needs. The Board further
considered the amount of subadvisory fees paid out by SunAmerica and the amount
of the management fees which it retained and determined that these amounts were
reasonable in light of the services performed by SunAmerica and the Subadviser,
respectively.
The Board also considered fees received by the Subadviser with respect to other
mutual funds and accounts with similar investment strategies to the Japan Fund
for which it serves as subadviser, to the extent applicable. The Board noted in
particular that the similar accounts identified by the Subadviser were
institutional separate accounts, and the Subadviser highlighted certain
differences between
33
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2014 -- (UNAUDITED)
(CONTINUED)
these separate accounts and the Fund, including that these separate accounts
are subject to different investment limitations and restrictions and do not
experience daily cash flows in a manner similar to the Fund. The Board then
noted that the subadvisory fees paid by SunAmerica to the Subadviser were
reasonable as compared to fees the Subadviser receives for other accounts for
which it serves as subadviser.
International Dividend Strategy Fund. The Board considered that the Fund's
actual management fees were above the median of its Peer Group and Peer
Universe. The Board also considered that the Fund's total expenses were above
the median of its Peer Group and Peer Universe. The Board also took into
account management's discussion of the Fund's expenses, including the limited
size of the Peer Group.
Japan Fund. The Board considered that the Fund's actual management fees were
above the median of its Peer Group and Peer Universe. The Board also considered
that the Fund's total expenses were above the median of its Peer Group and Peer
Universe. The Board took into account management's discussion of the Fund's
expenses, including the limited size of the Peer Group.
PROFITABILITY. The Board also considered SunAmerica's profitability and the
benefits SunAmerica and its affiliates received from its relationship with the
Funds. The Board received and reviewed financial statements relating to
SunAmerica's financial condition and profitability with respect to the services
it provided the Funds and considered how profit margins could affect
SunAmerica's ability to attract and retain high quality investment
professionals and other key personnel. The Board was also provided with a
profitability analysis that detailed the revenues earned and the expenses
incurred by SunAmerica and its affiliates that provide services to the Funds on
a Fund by Fund basis. In particular, the Board considered the contractual fee
waivers and/or expense reimbursement agreed to by SunAmerica.
The Board considered the profitability of SunAmerica under the Advisory
Agreement, including the amount of management fees it retained after payment to
the Subadviser, and considered the profitability of SunAmerica's affiliates
under the Rule 12b-1 Plans, Service Agreements, and Administrative and
Shareholder Services Agreements. Additionally, the Board considered whether
SunAmerica and its affiliates received any indirect benefits from the
relationship with the Funds. Specifically, the Board observed that AIG Federal
Savings Bank, an affiliate of SunAmerica, serves as custodian with respect to
certain shareholder retirement accounts that are administered by SunAmerica and
receives a fee payable by the qualifying shareholders. The Board further
considered whether there were any collateral or "fall-out" benefits that
SunAmerica and its affiliates may derive as a result of their relationship with
the Funds. The Board noted that SunAmerica believes that any such benefits are
de minimis and do not impact the reasonableness of the management fees.
The Board also reviewed financial reports from the Subadviser and considered
whether the Subadviser had the financial resources necessary to attract and
retain high quality investment management personnel and to provide a high
quality of services.
The Board concluded that SunAmerica and the Subadviser had the financial
resources necessary to perform their obligations under the Agreements and to
continue to provide the Funds with the high quality services that they had
provided in the past. The Board also concluded that the management fees and
subadvisory fees were reasonable in light of the factors discussed above.
ECONOMIES OF SCALE. The Board, including the Independent Trustees, considered
whether the shareholders would benefit from economies of scale and whether
there was potential for future realization of economies with respect to the
Funds. The Board considered that as a result of being part of the SunAmerica
fund complex, the Funds share common resources and may share certain expenses,
and if the size of the complex increases, each Fund could incur lower expenses
than they otherwise would achieve as stand-alone entities. The Board further
noted that SunAmerica has agreed to contractually cap the total annual
operating expenses of one or more classes of the Funds, at certain levels. The
Board observed that those expense caps benefited shareholders by keeping total
fees down even in the absence of breakpoints or economies of scale. The Board
concluded that the Funds' management fee structure was reasonable and that it
would continue to review fees in connection with the renewal of the Advisory
Agreement, including whether the implementation of breakpoints would be
appropriate in the future due to an increase in asset size or otherwise.
The Board did not review specific information regarding whether there have been
economies of scale with respect to the Subadviser's management of the Fund
because it regards that information as less relevant at the subadviser level.
Rather, the Board considered information regarding economies of scale in the
context of the renewal of the Advisory Agreement.
34
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2014 -- (UNAUDITED)
(CONTINUED)
OTHER FACTORS. In consideration of the Agreements, the Board also received
information regarding SunAmerica's and the Subadviser's brokerage and soft
dollar practices. The Board considered that SunAmerica and the Subadviser are
responsible for decisions to buy and sell securities for the applicable Funds,
selection of broker-dealers and negotiation of commission rates. The Board also
noted that it receives reports from SunAmerica and from an independent third
party that include information on brokerage commissions and execution
throughout the year. The Board further considered the benefits SunAmerica and
the Subadviser derive from their soft dollar arrangements, including
arrangement under which brokers provide brokerage and/or research services to
SunAmerica and/or the Subadviser in return for allocating brokerage.
CONCLUSION. After a full and complete discussion, the Board approved the
Agreements, each for a one-year period ending June 30, 2015. Based upon their
evaluation of all these factors in their totality, the Board, including the
Independent Trustees, was satisfied that the terms of the Agreements were fair
and reasonable and in the best interests of the Funds and the Funds'
shareholders. In arriving at a decision to approve the Agreements, the Board
did not identify any single factor or group of factors as all-important or
controlling, but considered all factors together, and each Independent Trustee
may have attributed different weights to different factors. The Independent
Trustees were also assisted by the advice of independent legal counsel in
making this determination.
35
SUNAMERICA EQUITY FUNDS
TRUSTEE AND OFFICER INFORMATION -- SEPTEMBER 30, 2014 -- (UNAUDITED)
The following table contains basic information regarding the Trustees and
Officers that oversee operations of the Funds and other investment companies
within the Fund complex.
NUMBER OF
POSITION TERM OF PORTFOLIOS IN
NAME, HELD WITH OFFICE AND FUND COMPLEX
ADDRESS AND SUNAMERICA LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY OTHER DIRECTORSHIPS
AGE* COMPLEX TIME SERVED(4) DURING PAST 5 YEARS TRUSTEE(1) HELD BY TRUSTEE(2)
----------------------- ---------- -------------- ------------------------------ ------------- -------------------------------
DISINTERESTED TRUSTEES
Dr. Judith L. Craven Trustee 2001-present Retired. 78 Director, Sysco Corp. (1996
Age: 68 to present); Director, Luby's,
Inc. (1998 to present).
William F. Devin Trustee 2001-present Retired. 78 None
Age: 75
Richard W. Grant Trustee 2011-present Retired. Prior to that, 29 None
Age: 68 Chairman Attorney and partner at
of the Morgan Lewis & Bockius
Board LLP (1989 to 2011).
Stephen J. Gutman Trustee 1985-present Vice President and Associate 29 None
Age: 71 Broker, Corcoran Group (real
estate) (2002 to present);
President and Member of
Managing Directors, Beau
Brummell Soho LLC
(licensing of menswear
specialty retailing and other
activities) (1995 to 2009).
President, SJG Marketing
Inc. (2009 to present).
William J. Shea Trustee 2004-present Executive Chairman, Caliber, 29 Director, Boston Private
Age: 66 Inc. (formerly Lucid, Inc.), Financial Holdings (2004 to
(medical devices) (2007 to present); Chairman, Demoulas
present); Managing Partner, Supermarkets (1999-present).
DLB Capital, LLC (private
equity) (2006 to 2007).
36
SUNAMERICA EQUITY FUNDS
TRUSTEE AND OFFICER INFORMATION -- SEPTEMBER 30, 2014 -- (UNAUDITED)
(CONTINUED)
NUMBER OF
POSITION TERM OF PORTFOLIOS IN
NAME, HELD WITH OFFICE AND FUND COMPLEX
ADDRESS AND SUNAMERICA LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY OTHER DIRECTORSHIPS
AGE* COMPLEX TIME SERVED(4) DURING PAST 5 YEARS TRUSTEE(1) HELD BY TRUSTEE(2)
-------------------- ------------ -------------- ----------------------------- ------------- -------------------
INTERESTED TRUSTEE
Peter A. Harbeck(3) Trustee 1995-present President, CEO and 139 None
Age: 60 Director, SunAmerica.
(1995 to present); Director,
AIG Capital Services, Inc.
("ACS") (1993 to present).
OFFICERS
John T. Genoy President 2007-present Chief Financial Officer, N/A N/A
Age: 46 SunAmerica (2002 to
present); Senior Vice
President, SunAmerica
(2003 to present); Chief
Operating Officer,
SunAmerica (2006
to present).
Gregory N. Bressler Secretary 2005-present Senior Vice President and N/A N/A
Age: 48 General Counsel,
SunAmerica (2005 to
present).
Kathleen Fuentes Chief Legal 2013 to Vice President and Deputy N/A N/A
Age: 45 Officer and Present General Counsel,
Assistant SunAmerica (2006 to
Secretary present)
James Nichols Vice 2006-present Director, President and N/A N/A
Age: 48 President CEO, ACS (2006 to
present); Senior Vice
President, SunAmerica
(2002 to present).
Katherine Stoner Vice 2011-present Vice President, SunAmerica N/A N/A
Age: 57 President (2011 to present). Vice
and President, The Variable
Chief Annuity Life Insurance
Compliance Company ("VALIC") and
Officer Western National Life
("CCO") Insurance Company
("WNL") and American
General Distributors, Inc.
(2006-present); Deputy
General Counsel and
Secretary, VALIC and WNL
(2007-2011); Vice
President, VALIC Financial
Advisors, Inc. and VALIC
Retirement Services
Company (2010-present).
37
SUNAMERICA EQUITY FUNDS
TRUSTEE AND OFFICER INFORMATION -- SEPTEMBER 30, 2014 -- (UNAUDITED)
(CONTINUED)
NUMBER OF
POSITION TERM OF PORTFOLIOS IN
NAME, HELD WITH OFFICE AND FUND COMPLEX
ADDRESS AND SUNAMERICA LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY OTHER DIRECTORSHIPS
AGE* COMPLEX TIME SERVED(4) DURING PAST 5 YEARS TRUSTEE(1) HELD BY TRUSTEE(2)
--------------------- ----------- -------------- --------------------------- ------------- -------------------
Nori L. Gabert Vice 2002-present Vice President and Deputy N/A N/A
Age: 61 President General Counsel,
and SunAmerica (2005 to
Assistant present).
Secretary
Kara Murphy Vice 2014 to Chief Investment Officer, N/A N/A
Age: 41 President Present SunAmerica (2013 to
present)
Gregory R. Kingston Treasurer 2002-present Vice President and Head of N/A N/A
Age: 48 Mutual Fund Administration
(2014 to present)
Shawn Parry Vice 2005 to Assistant Vice President, N/A N/A
Age: 42 President Present SunAmerica (2005 to
and present)
Assistant
Treasurer
Donna McManus Vice 2014 to Vice President, SunAmerica N/A N/A
Age: 51 President Present (2014 to present)
and
Assistant
Treasurer
Matthew J. Hackethal Anti- 2006-present Chief Compliance Officer, N/A N/A
Age: 42 Money SunAmerica (2006 to
Laundering present).
Compliance
Officer
--------
* The business address for each Trustee is the Harborside Financial Center,
3200 Plaza 5, Jersey City, NJ 07311-4992.
(1)The "Fund Complex" means two or more registered investment companies that
hold themselves out to investors as related companies for purposes of
investment services or have a common investment adviser or an investment
adviser that is an affiliated person of the Adviser. The "Fund Complex"
includes the Trust (2 funds), SunAmerica Money Market Funds Inc. (1 fund),
SunAmerica Income Funds (4 funds), SunAmerica Series, Inc. (6 portfolios),
Anchor Series Trust (8 portfolios), SunAmerica Senior Floating Rate Fund,
Inc. (1 fund), SunAmerica Series Trust (40 portfolios), VALIC Company I
(34 portfolios), VALIC Company II (15 funds), Seasons Series Trust (21
portfolios) and SunAmerica Specialty Series (7 portfolios).
(2)Directorships of companies required to report to the SEC under the
Securities Exchange Act of 1934 (i.e., "public companies") or other
investment companies registered under the 1940 Act.
(3)Interested Trustee, as defined within the 1940 Act, because he is an officer
and a director of the Adviser and a director of the principal underwriter of
the Trust.
(4)Trustees serve until their successors are duly elected and qualified,
subject to the Trustee's Retirement Plan as discussed in Note 9 of the
financial statements. Each officer will hold office for an indefinite term,
until the date he or she resigns or retires or until his/her successor is
duly elected and qualifies.
Additional information concerning the Trustees is contained in the Statement of
Additional Information which is available, without charge, by calling (800)
858-8850.
38
SUNAMERICA EQUITY FUNDS
SHAREHOLDER TAX INFORMATION -- (UNAUDITED)
Certain tax information regarding the SunAmerica Equity Funds is required to be
provided to the shareholders based upon each Fund's income and distributions
for the taxable year ended September 30, 2014. The information and
distributions reported herein may differ from the information and distributions
taxable to the shareholders for the calendar year ending December 31, 2014. The
information necessary to complete your tax returns will be included with your
Form 1099-DIV to be received under separate cover in early 2015.
During the year ended September 30, 2014, the Funds paid the following
long-term capital gains dividends along with the percentage of ordinary income
dividends that qualified for the 70% dividends received deduction for
corporations:
NET LONG- QUALIFYING % FOR THE
TERM 70% DIVIDENDS
FUND CAPITAL GAINS RECEIVED DEDUCTIONS
---- ------------- --------------------
International Dividend Strategy Class A. $ -- -- %
International Dividend Strategy Class B. -- --
International Dividend Strategy Class C. -- --
International Dividend Strategy Class I. -- --
Japan Class A........................... 0.22 --
Japan Class B........................... 0.22 --
Japan Class C........................... 0.22 --
The International Dividend Strategy Fund and Japan Fund intend to make an
election under Internal Revenue Code Section 853 to pass through foreign taxes
paid by the Fund to its shareholders. The total amount of foreign taxes passed
through to the shareholders for the fiscal year ended September 30, 2014 was
$553,901 and $51,092, respectively. The gross foreign source income for the
information reporting is $10,173,997 and $625,463, respectively.
For the year ended September 30, 2014, certain dividends paid by the following
funds may be subject to a maximum tax rate of 15%, as provided by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during
the fiscal year, the following represents the maximum amount that may be
considered qualified dividend income:
FUND INCOME
---- ----------
International Dividend Strategy. $5,291,172
Japan........................... 1,911,294
39
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED)
As required by the Securities and Exchange Commission, the graphs on the
following pages 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 on which a specific
class of shares commenced operations. 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
largest class of that particular Fund. The performance of the other classes
will vary based upon the difference in sales charges and fees assessed to
shareholders of that class.
40
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
The SunAmerica International Dividend Strategy Fund Class A shares returned
2.20% (before maximum sales charge) for the 12-month period ended September 30,
2014. The Fund underperformed its benchmark, the MSCI ACWI ex-U.S. (Net)*,
which returned 4.77% during the same period.
The Fund posted positive absolute returns but its "buy and hold" strategy,
which identifies stocks based on certain selection criteria, produced
unfavorable results relative to the benchmark index. Importantly, the Fund's
holdings had an average dividend yield as of September 30, 2014 of 5.56%
compared to a 2.91% dividend yield for the constituents of the MSCI ACWI
ex-U.S. (Net).
In terms of regional factors, the Fund's overweighted allocation to emerging
market equities detracted from relative results. In particular, the Fund's
overweighted allocation to Brazilian equities, especially Utilities and
Materials names, detracted from relative results, as the Brazilian equity
market declined 6.02% during the annual period. Conversely, having an
overweighted allocation to Israeli equities contributed positively to relative
results, as Israel's equity market gained 29.01% during the annual period. To a
more modest degree, overweighted allocations to Finland and Greece also helped
results. Security selection in the equity markets of the U.K., France, South
Korea and Belgium also proved particularly effective.
From a sector perspective, stocks held within the Consumer Staples, Utilities,
Industrials and Energy sectors hampered results most. Having an overweighted
allocation to Materials, which was the weakest sector in the MSCI ACWI ex-U.S.
(Net) during the annual period, also hurt. Further detracting from the Fund's
relative results was having a position in cash of approximately 3.4% of the
Fund's total net assets during an annual period when the international equity
market generally rallied. Such detractors were only partially offset by the
positive contributions made by stocks held within the Financials, Consumer
Discretionary, Health Care and Materials sectors. Having overweighted
allocations to the Utilities, Health Care and Telecommunication Services
sectors, each of which outpaced the MSCI ACWI ex-U.S. (Net) during the annual
period, and an underweighted allocation to Consumer Discretionary, which was
the second weakest sector in the MSCI ACWI ex-U.S. (Net) during the annual
period, also buoyed the Fund's relative results.
Individual stock holdings that detracted most from Fund performance during the
annual period were Brazilian cosmetics manufacturer Natura Cosmeticos,
Taiwan-based touch screen manufacturer TPK Holding, Austrian integrated oil
company OMV, Colombian integrated oil company Ecopetrol and Brazilian road
concession group EcoRodovias Infraestrustura e Logistica. Natura Cosmeticos'
share price decline can be attributed primarily to the fourth quarter of 2013,
when it reported third quarter 2013 earnings that trailed estimates by the most
since 2006. Its stated increased planned outlays on marketing, advertising and
other expenses were also believed by many investors to pressure Natura
Cosmeticos' cash flow and profits. TPK Holding, a supplier of touch screens to
Apple, was hurt by expectations of a margin contraction during the third
quarter of 2014 due to a lower revenue mix and by weaker earnings impacted by
higher research and development expenses. Since Apple delayed the release of
its highly anticipated wearable products, TPK Holding's product shipment
expectations were lowered for September 2014. Shares of OMV declined as it
experienced decreasing oil production in Libya, a challenging European oil
refining and gas environment, and concerns about lower earnings amid decreasing
oil prices. Ecopetrol received approval to raise up to $2 billion to finance
its long-term investment plan, which negatively affected its stock. EcoRodovias
Infraestrustura e Logistica was pressured by regulatory uncertainty regarding
airport and road infrastructure management in advance of the 2014 World Cup and
2016 Olympics in Brazil.
The top individual positive contributors to Fund performance during the annual
period were Greek sports events betting and lottery game organizer Greek
Organisation of Football Prognostics SA (OPAP), Finnish specialty
pharmaceuticals company Orion Oyj, Israeli generic and branded pharmaceuticals
manufacturer Teva Pharmaceutical Industries, Belgium-based telecommunications
carrier Belgacom and U.K. pharmaceuticals and medical products company
AstraZeneca. OPAP rallied on better than expected earnings, especially during
the fourth quarter of 2013 and first quarter of 2014. Orion Oyj benefited from
signing an agreement with Bayer for the development and commercialization of a
novel non-metastatic prostate cancer treatment. Teva Pharmaceutical Industries
delivered
41
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
strong operating margins growth in the first and second quarters of 2014 and
raised its annual guidance. Belgacom has been successful in cost-cutting
initiatives, sustaining good quarterly earnings results and maintaining its
healthy margins in a competitive environment. Shares of AstraZeneca rose on the
news of a possible acquisition by Pfizer, which was later rejected.
--------
Past performance is no guarantee of future results.
When investing internationally, the value of an investment may be affected by
fluctuation currency values, changing local and regional economic, political
and social conditions, and greater market volatility. In addition, foreign
securities may not be as liquid as domestic securities. Also, while the Fund
seeks to invest in a wide range of countries, volatility in a single country or
region in which the Fund invests a significant portion of its assets may affect
performance. In addition, the markets of emerging market countries are
typically more volatile and potentially less liquid than more developed
markets. Stocks of small-cap companies, and to a lesser extent, mid-cap
companies, may be more volatile than, and not as readily marketable as, those
of larger companies.
The Fund employs a Disciplined Strategy and will not deviate from its strategy
(except to the extent necessary to comply with federal tax laws or other
applicable laws). If the Fund is committed to a strategy that is unsuccessful,
the Fund will not meet its investment goal. Because the Fund will not use
certain techniques available to other mutual funds to reduce stock market
exposure, the Fund may be more susceptible to general market declines than
other mutual funds.
*The MSCI ACWI (All Country World Index) ex-U.S. (Net) is a free float-adjusted
market capitalization index designed to measure the equity market performance
of 45 global developed and emerging markets, excluding the U.S. Net total
return indices reinvest dividends after the deduction of withholding taxes,
using (for international indices) a tax rate applicable to non-resident
institutional investors who do not benefit from double taxation treaties.
Indices are not managed and an investor cannot invest directly into an index.
The Fund's holdings are subject to change. Accordingly, securities listed may
or may not be a part of current portfolio construction.
42
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
Over the past ten years, $10,000 invested in International Dividend Strategy
Fund Class A shares would be valued at $13,035. The same amount invested in
securities mirroring the performance of the MSCI ACWI ex-U.S. (Net) would be
valued at $19,788.
[CHART]
International MSCI All
Dividend Strategy ex-U.S.
Class A/#/ Index (Net)**
------------------ ------------------
9/30/2004 $ 9,427 $10,000.00
10/31/2004 9,787 10,347.16
11/30/2004 10,397 11,062.54
12/31/2004 10,887 11,536.64
1/31/2005 10,712 11,336.26
2/28/2005 11,220 11,892.34
3/31/2005 10,896 11,565.42
4/30/2005 10,739 11,268.87
5/31/2005 10,749 11,328.81
6/30/2005 10,896 11,537.13
7/31/2005 11,294 11,961.02
8/31/2005 11,747 12,263.32
9/30/2005 12,052 12,893.34
10/31/2005 11,756 12,423.11
11/30/2005 12,116 12,837.56
12/31/2005 13,031 13,453.88
1/31/2006 13,993 14,389.98
2/28/2006 13,762 14,345.82
3/31/2006 14,233 14,756.20
4/30/2006 15,092 15,507.80
5/31/2006 14,510 14,777.14
6/30/2006 14,298 14,756.00
7/31/2006 14,399 14,904.08
8/31/2006 14,713 15,321.81
9/30/2006 14,649 15,328.66
10/31/2006 15,065 15,951.43
11/30/2006 15,481 16,526.17
12/31/2006 15,887 17,039.67
1/31/2007 16,007 17,100.90
2/28/2007 15,961 17,202.73
3/31/2007 16,368 17,679.41
4/30/2007 16,895 18,485.79
5/31/2007 17,246 18,971.70
6/30/2007 17,468 19,126.53
7/31/2007 17,237 19,068.57
8/31/2007 17,043 18,770.63
9/30/2007 18,299 20,010.02
10/31/2007 19,473 21,124.56
11/30/2007 18,383 20,170.51
12/31/2007 18,281 19,877.13
1/31/2008 16,251 17,950.75
2/29/2008 16,604 18,465.05
3/31/2008 16,473 18,059.33
4/30/2008 17,614 19,152.43
5/31/2008 17,947 19,455.83
6/30/2008 16,624 17,856.77
7/31/2008 15,796 17,213.75
8/31/2008 14,847 16,408.16
9/30/2008 12,564 13,943.47
10/31/2008 9,575 10,873.27
11/30/2008 8,969 10,244.35
12/31/2008 9,275 10,828.02
1/31/2009 8,330 9,871.08
2/28/2009 7,644 8,949.87
3/31/2009 8,091 9,668.22
4/30/2009 9,025 10,985.72
5/31/2009 10,396 12,473.03
6/30/2009 10,241 12,335.67
7/31/2009 11,113 13,541.82
8/31/2009 11,331 14,043.01
9/30/2009 12,027 14,764.24
10/31/2009 11,746 14,581.33
11/30/2009 12,297 14,999.26
12/31/2009 12,676 15,316.05
1/31/2010 11,778 14,567.53
2/28/2010 11,882 14,567.63
3/31/2010 12,770 15,558.61
4/30/2010 12,446 15,421.75
5/31/2010 11,005 13,798.77
6/30/2010 10,629 13,621.71
7/31/2010 11,538 14,851.77
8/31/2010 11,162 14,443.77
9/30/2010 12,363 15,880.57
10/31/2010 12,937 16,421.56
11/30/2010 12,300 15,787.87
12/31/2010 13,241 17,024.19
1/31/2011 13,387 17,191.71
2/28/2011 13,680 17,644.58
3/31/2011 13,742 17,603.99
4/30/2011 14,379 18,464.06
5/31/2011 14,014 17,931.50
6/30/2011 13,763 17,671.37
7/31/2011 13,575 17,430.20
8/31/2011 12,197 15,936.54
9/30/2011 10,735 14,163.60
10/31/2011 11,716 15,655.57
11/30/2011 11,351 14,856.64
12/31/2011 11,049 14,690.60
1/31/2012 11,907 15,687.23
2/29/2012 12,436 16,568.54
3/31/2012 12,351 16,340.67
4/30/2012 12,277 16,083.03
5/31/2012 10,890 14,256.69
6/30/2012 11,303 15,097.51
7/31/2012 11,006 15,310.79
8/31/2012 11,303 15,630.96
9/30/2012 11,676 16,214.93
10/31/2012 11,494 16,277.95
11/30/2012 11,526 16,588.20
12/31/2012 12,274 17,163.03
1/31/2013 12,655 17,860.84
2/28/2013 12,415 17,671.87
3/31/2013 12,013 17,707.20
4/30/2013 12,328 18,358.06
5/31/2013 11,762 17,933.39
6/30/2013 11,204 17,155.69
7/31/2013 11,779 17,906.99
8/31/2013 11,812 17,659.96
9/30/2013 12,754 18,886.85
10/31/2013 13,023 19,580.38
11/30/2013 12,855 19,613.93
12/31/2013 12,918 19,786.92
1/31/2014 12,252 18,887.64
2/28/2014 12,805 19,836.44
3/31/2014 13,256 19,887.35
4/30/2014 13,696 20,149.96
5/31/2014 13,832 20,541.69
6/30/2014 14,353 20,887.36
7/31/2014 13,896 20,679.54
8/31/2014 14,296 20,794.17
9/30/2014 13,035 19,787.51
Class A Class B Class C++ Class I
------------------ ------------------ ------------------ ------------------
International Average Average Average Average
Dividend Strategy Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Fund# Return Return+ Return Return+ Return Return+ Return Return+
----------------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -3.71% 2.20% -2.40% 1.56% 0.57% 1.56% 2.45% 2.45%
----------------------------------------------------------------------------------------------
5 Year Return 0.42% 8.38% 0.57% 4.80% 0.94% 4.81% 1.73% 8.95%
----------------------------------------------------------------------------------------------
10 Year Return 2.69% 38.27% 2.76% 31.26% 2.62% 29.47% 3.41% 39.79%
----------------------------------------------------------------------------------------------
Since Inception* 0.94% 25.45% 0.99% 19.26% 0.59% 10.84% 3.61% 57.74%
----------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would have been lower.
* Inception date: Class A and Class B: 11/19/96; Class C: 03/06/97; Class I:
11/16/01.
# For the purposes of the graph, it has been assumed that the maximum sales
charge of 5.75% of offering price, was deducted from the initial $10,000
investment in the Fund. For purposes of the average annual returns in the
table, it has been assumed that the maximum sales charge with respect to the
Class A shares was deducted from the initial investment in the Fund and that
the CDSCs with respect to the Class B and Class C shares have been deducted,
as applicable.
++ Effective February 23, 2004, Class II shares were redesignated as Class C
shares.
For the 12 month period ended September 30, 2014, the SunAmerica International
Dividend Strategy Class A returned -3.71% compared to 4.77% for the MSCI ACWI
ex-U.S. Index (Net). (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
--------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 5.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net assets
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.safunds.com.
** The MSCI ACWI ex-U.S. (Net) is a free float-adjusted market capitalization
index designed to measure the equity market performance of 45 global
developed and emerging markets, excluding the U.S. Net total return indices
reinvest dividends after the deduction of withholding taxes, using (for
international indices) a tax rate applicable to non-resident institutional
investors who do not benefit from double taxation treaties. Indices are not
managed and an investor cannot invest directly into an index.
43
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
SUNAMERICA JAPAN FUND
The SunAmerica Japan Fund Class A shares returned 4.81% (before maximum sales
charge) for the 12-month period ended September 30, 2014. The Fund outperformed
its benchmark, the MSCI Japan Index (Net)*, which returned 0.62% during the
same period.
As the annual period began in October 2013, Japanese equities were finishing
the last months of the calendar year strongly, closing 2013 with an impressive
annual gain of 54.8%. However, Japanese equities subsequently gave some of
those gains back during what proved to be a difficult first quarter of 2014. It
was reported during the first quarter of 2014 that Japan's economy had expanded
at a slower pace than initially estimated in the fourth quarter of 2013,
dragged down by weaker capital spending and private consumption. Consumer
confidence dipped to its lowest level since September 2011 ahead of Japan's
consumption tax increase, which took effect at the start of April 2014. Other
disconcerting news included a record trade deficit, as a significant climb in
import costs outweighed slowing export growth. Japanese equities rebounded
during the second quarter of 2014, as Japan's first calendar quarter Gross
Domestic Product (GDP) grew more than initially estimated, thanks to stronger
capital spending. Investor sentiment was also boosted after Prime Minister
Shinzo Abe unveiled a package of reform measures aimed at bolstering Japan's
long-term economic growth, including lowering the corporate tax rate and
increasing the risk posture of Japan's Government Pension Investment Fund, the
world's largest pension fund. The third quarter of 2014 brought continued
strong performance in local-currency terms. Indeed, Japan's 5.9% return in
local-currency terms during the third calendar quarter led the Asian region
higher. However, given the yen's 8.3% decline versus the U.S. dollar during the
third quarter, Japan's equity market results looked far less impressive in U.S.
dollar terms -- the quarterly return was -2.2%. On the economic front, data was
mixed. Following the April 1, 2014 sales tax hike, Japan's economy contracted
by an annualized 7.1% during the second calendar quarter, more than initial
estimates of a 6.8% decline. This was Japan's largest quarterly contraction
since 2009. On the bright side, Japan's unemployment rate fell to 3.5% compared
to a consensus estimate of 3.8%, and average monthly wages climbed 2.6% from a
year earlier, the largest jump since 1997.
The Fund's relative outperformance during the annual period was driven
primarily by security selection overall. Individual security selection was
especially strong within the Industrials, Materials, Consumer Discretionary and
Telecommunication Services sectors and was only partially offset by weaker
selection within the Information Technology sector.
The top individual contributors to Fund performance during the annual period
were Minebea, a manufacturer of miniature ball-bearings and LED backlights;
Hitachi Metals, a metal components maker; and Itochu Techno, a system
integrator. Minebea, not a component of the MSCI Japan Index (Net), enjoyed a
robust double-digit share price increase because demand for both miniature
ball-bearings and backlight units was showing a strong recovery. The company
was also gaining market share for LED backlight units and was undergoing a
well-received company restructuring. Hitachi Metals performed well, as
investors gained greater confidence in potential synergies related to the
firm's acquisition of U.S.-based Waupaca Foundry. Itochu Techno gained
strongly, as information technology spending recovered rather steadily in Japan.
The individual stocks that detracted from Fund performance most during the
annual period were TV Asahi Holdings, a broadcasting company; Anritsu, a global
leader in the communications test and measurement market; and Mitsubishi
Estate, a real estate developer. TV Asahi Holdings detracted amidst concerns
about domestic advertising spending due to the consumption tax hike.
Importantly, the company's fundamentals remained strong, and its viewer rating
was number one in Japan. Anritsu saw its share price decline largely due to a
concern about its cost increases. While order trends for testers were good as
Chinese telecommunications carriers moved to Long-Term Evolution (LTE),
operating costs rose, and thus the market grew concerned that the company's
profit growth might not be strong. Mitsubishi Estate, the largest real estate
developer in Japan, underperformed the MSCI Japan Index (Net) amidst concerns
about the possible end of Japan's asset reflation story and about the impact of
the consumption tax on condominium sales.
44
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
Sector allocation overall, a residual of Wellington Management's bottom-up
stock selection process, also contributed positively to the Fund's relative
performance during the annual period. An underweighted allocation to Utilities,
which lagged the MSCI Japan Index (Net), and overweighted exposures to Energy
and Information Technology, each of which outpaced the benchmark index,
contributed positively to relative results. Partially offsetting these positive
contributors was the detracting effect of the Fund's underweighted allocations
to Industrials and Health Care, each of which outperformed the MSCI Japan Index
(Net) during the annual period.
--------
Past performance is no guarantee of future results.
When investing internationally, the value of your investment may be affected by
fluctuating currency values, changing local and regional economic, political
and social conditions, and greater market volatility. In addition, foreign
securities may not be as liquid as domestic securities. In addition, the Fund's
performance may be affected by the broader Asian region, which includes
emerging markets. Emerging markets are typically more volatile than more
developed markets. Stocks of small-cap companies, and to a lesser extent,
mid-cap companies, may be more volatile than, and not as readily marketable as,
those of larger companies.
Because the Fund concentrates its investments in Japan, the Fund's performance
is expected to be closely tied to social, political and economic conditions of
that country. As a result, the Fund is likely to be more volatile than more
geographically diverse international funds.
*The MSCI Japan Index (Net) is a free-float adjusted market capitalization
weighted index that is designed to track the equity market performance of
Japanese securities listed on Tokyo Stock Exchange, Osaka Stock Exchange,
JASDAQ and Nagoya Stock Exchange. Net total return indices reinvest dividends
after the deduction of withholding taxes, using (for international indices) a
tax rate applicable to non-resident institutional investors who do not benefit
from double taxation treaties. Indices are not managed and an investor cannot
invest directly into an index.
The Fund is actively managed and its holdings are subject to change.
Accordingly, securities listed may or may not be a part of current portfolio
construction.
45
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
Since the Fund's inception on May 2, 2006, $10,000 invested in SunAmerica Japan
Fund Class A shares would be valued at $8,637. The same amount invested in
securities mirroring the performance of the MSCI Japan Index (Net) would be
valued at $9,117.
[CHART]
SunAmerica
Japan MSCI Japan
Class A/#/ Index (Net)/a/
----------- ---------------
5/1/2006 $ 9,427 $10,000.00
5/31/2006 8,650 9,174.82
6/30/2006 8,431 9,073.09
7/31/2006 8,213 9,022.87
8/31/2006 8,311 9,158.28
9/30/2006 8,333 9,008.11
10/31/2006 8,673 9,164.91
11/30/2006 8,959 9,229.88
12/31/2006 9,336 9,459.23
1/31/2007 9,578 9,539.25
2/28/2007 9,608 9,922.98
3/31/2007 9,970 9,791.81
4/30/2007 10,294 9,601.23
5/31/2007 10,558 9,757.92
6/30/2007 10,596 9,728.66
7/31/2007 10,603 9,712.83
8/31/2007 10,181 9,427.51
9/30/2007 10,558 9,644.99
10/31/2007 10,988 9,608.18
11/30/2007 10,113 9,432.08
12/31/2007 9,712 9,058.75
1/31/2008 8,675 8,644.73
2/29/2008 8,896 8,704.28
3/31/2008 8,980 8,351.22
4/30/2008 9,163 8,957.99
5/31/2008 9,422 9,183.46
6/30/2008 8,743 8,557.42
7/31/2008 8,195 8,265.77
8/31/2008 7,569 7,936.95
9/30/2008 6,357 7,047.21
10/31/2008 4,711 6,005.48
11/30/2008 4,513 5,930.66
12/31/2008 4,811 6,412.60
1/31/2009 4,559 5,976.75
2/28/2009 4,178 5,236.70
3/31/2009 4,308 5,346.65
4/30/2009 4,628 5,861.31
5/31/2009 5,253 6,465.11
6/30/2009 5,322 6,578.81
7/31/2009 5,825 6,860.17
8/31/2009 5,985 7,130.12
9/30/2009 6,359 7,007.32
10/31/2009 6,283 6,831.59
11/30/2009 6,435 6,761.54
12/31/2009 6,507 6,813.69
1/31/2010 6,349 6,943.03
2/28/2010 6,325 7,020.73
3/31/2010 6,649 7,371.35
4/30/2010 6,783 7,359.83
5/31/2010 6,033 6,764.66
6/30/2010 6,049 6,628.92
7/31/2010 6,649 6,864.90
8/31/2010 6,460 6,708.09
9/30/2010 7,186 7,015.13
10/31/2010 7,463 7,158.24
11/30/2010 7,257 7,308.71
12/31/2010 7,874 7,865.49
1/31/2011 7,801 7,875.46
2/28/2011 7,915 8,234.57
3/31/2011 7,972 7,478.06
4/30/2011 8,329 7,505.33
5/31/2011 8,134 7,383.12
6/30/2011 8,037 7,491.27
7/31/2011 7,923 7,756.58
8/31/2011 7,103 7,126.14
9/30/2011 6,275 7,008.91
10/31/2011 6,697 6,991.62
11/30/2011 6,519 6,682.91
12/31/2011 6,362 6,738.26
1/31/2012 6,650 7,042.89
2/29/2012 6,838 7,398.31
3/31/2012 6,918 7,497.32
4/30/2012 6,858 7,257.88
5/31/2012 6,034 6,609.98
6/30/2012 6,392 6,949.76
7/31/2012 6,302 6,783.80
8/31/2012 6,372 6,734.54
9/30/2012 6,362 6,891.17
10/31/2012 6,292 6,762.13
11/30/2012 6,421 6,922.70
12/31/2012 6,603 7,289.45
1/31/2013 6,847 7,557.08
2/28/2013 6,959 7,758.57
3/31/2013 7,254 8,137.42
4/30/2013 7,905 8,851.13
5/31/2013 7,396 8,349.77
6/30/2013 7,753 8,495.74
7/31/2013 7,803 8,546.96
8/31/2013 7,620 8,363.06
9/30/2013 8,241 9,061.64
10/31/2013 8,312 9,061.55
11/30/2013 8,414 9,196.32
12/31/2013 8,447 9,269.50
1/31/2014 8,156 8,911.87
2/28/2014 8,346 8,864.07
3/31/2014 8,279 8,749.92
4/30/2014 8,168 8,524.00
5/31/2014 8,425 8,868.69
6/30/2014 8,916 9,332.46
7/31/2014 8,804 9,386.49
8/31/2014 8,659 9,182.68
9/30/2014 8,637 9,117.37
Class A Class B Class C
------------------ ------------------ ------------------
SunAmerica Average Average Average
Japan Annual Cumulative Annual Cumulative Annual Cumulative
Fund# Return Return+ Return Return+ Return Return+
----------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -1.17% 4.81% 0.28% 4.07% 3.13% 4.07%
--------------------------------------------------------------------------
5 Year Return 5.06% 35.83% 5.30% 31.31% 5.60% 31.31%
--------------------------------------------------------------------------
Since Inception* -1.73% -8.38% -1.63% -12.94% -1.69% -13.35%
--------------------------------------------------------------------------
+Cumulative returns do not include sales load. If sales load had been included,
the return would have been lower.
*Inception date: Class A, Class B and Class C: 05/02/06.
#For the purposes of the graph, it has been assumed that the maximum sales
charge of 5.75% of offering price, was deducted from the initial $10,000
investment in the Fund. For purposes of the average annual returns in the
table, it has been assumed that the maximum sales charge with respect to the
Class A shares was deducted from the initial investment in the Fund and that
the CDSCs with respect to the Class B and Class C shares have been deducted,
as applicable.
For the 12 month period ended September 30, 2014, the SunAmerica Japan Class A
returned -1.17% compared to 0.62% for the MSCI Japan Index (Net). (The
performance data and graph do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.)
--------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 5.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net assets
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.safunds.com.
@ The MSCI Japan Index (Net) is a free-float adjusted market capitalization
weighted index that is designed to track the equity market performance of
Japanese securities listed on Tokyo Stock Exchange, Osaka Stock Exchange,
JASDAQ and Nagoya Stock Exchange. Net total return indices reinvest
dividends after the deduction of withholding taxes, using (for international
indices) a tax rate applicable to non-resident institutional investors who
do not benefit from double taxation treaties. Indices are not managed and an
investor cannot invest directly into an index.
46
[LOGO]
HARBORSIDE FINANCIAL CENTER
3200 PLAZA 5
JERSEY CITY, NJ 07311-4992
TRUSTEES SHAREHOLDER SERVICING DELIVERY OF SHAREHOLDER
Richard W. Grant AGENT DOCUMENTS
Peter A. Harbeck SunAmerica Fund The Funds have adopted a
Dr. Judith L. Craven Services, Inc. policy that allows them
William F. Devin Harborside Financial to send only one copy of
Stephen J. Gutman Center a Fund's prospectus,
William J. Shea 3200 Plaza 5 proxy material, annual
OFFICERS Jersey City, NJ report and semi-annual
John T. Genoy, President 07311-4992 report (the "shareholder
and Chief Executive CUSTODIAN AND TRANSFER documents") to
Officer AGENT shareholders with
Kara Murphy, Vice State Street Bank and multiple accounts
President Trust Company residing at the same
James Nichols, Vice P.O. Box 5607 "household." This
President Boston, MA 02110 practice is called
Katherine Stoner, Vice VOTING PROXIES ON TRUST householding and reduces
President and Chief PORTFOLIO SECURITIES Fund expenses, which
Compliance Officer A description of the benefits you and other
Gregory N. Bressler, policies and procedures shareholders. Unless the
Secretary that the Trust uses to Funds receive
Gregory R. Kingston, determine how to vote instructions to the
Vice President and proxies relating to con-trary, you will only
Treasurer securities held in a receive one copy of the
Shawn Parry, Vice Fund's portfolio which is shareholder documents.
President and available in the Trust's The Funds will continue
Assistant Treasurer Statement of Additional to household the
Donna McManus, Vice Information, may be share-holder documents
President and obtained without charge indefinitely, until we
Assistant Treasurer upon request, by calling are instructed otherwise.
Kathleen Fuentes, Chief (800) 858-8850. This If you do not wish to
Legal Officer and in-formation is also participate in
Assistant Secretary available from the EDGAR householding, please
Nori L. Gabert, Vice database on the U.S. contact Shareholder
President and Securities and Ex-change Services at (800)
Assistant Secretary Commission's website at 858-8850 ext. 6010 or
Matthew Hackethal, http://www.sec.gov. send a written request
Anti-Money Laundering PROXY VOTING RECORD ON with your name, the name
Compliance Officer SUNAMERICA EQUITY FUNDS of your fund(s) and your
Chris A Okeke, Assistant Information regarding how account number(s) to
Treasurer SunAmerica Equity Funds SunAmerica Mutual Funds
INVESTMENT ADVISER voted proxies relating to c/o BFDS, P.O. Box
SunAmerica Asset securities held in 219186, Kansas City MO,
Management, LLC SunAmerica Equity Funds 64121-9186. We will
Harborside Financial during the most recent resume individual
Center twelve month period ended mailings for your account
3200 Plaza 5 June 30 is available, within thirty (30) days
Jersey City, NJ once filed with the U.S. of receipt of your
07311-4992 Securities and Exchange request.
DISTRIBUTOR Commission, without This report is submitted
AIG Capital Services, charge, upon request, by solely for the general
Inc. calling (800) 858-8850 or information of
Harborside Financial on the U.S. Securities shareholders of the
Center and Exchange Commission's Funds. Distribution of
3200 Plaza 5 website at this report to persons
Jersey City, NJ http://www.sec.gov. other than shareholders
07311-4992 DISCLOSURE OF QUARTERLY of the Funds is
PORTFOLIO HOLDINGS authorized only in
The Trust is required to con-nection with a
file its complete currently effective
schedule of portfolio pro-spectus, setting
holdings with the U.S. forth details of the
Securities and Exchange Funds, which must precede
Commission for its first or accom-pany this report.
and third fiscal quarters
on Form N-Q. The Trust's
Forms N-Q are available
on the U.S. Securities
and Exchange Commission's
website at
http://www.sec.gov. You
can also review and
obtain copies of the
Forms N-Q at the U.S.
Securities and Exchange
Com-mission's Public
Reference Room in
Wash-ington, DC
(information on the
operation of Public
Reference Room may be
obtained by calling
1-800-SEC-0330).
[GRAPHIC]
GO PAPERLESS!!
DID YOU KNOW THAT YOU HAVE THE OPTION TO
RECEIVE YOUR SHAREHOLDER REPORTS ONLINE?
By choosing this convenient service, you will no longer receive paper copies of
Fund documents such as annual reports, semi-annual reports, prospectuses and
proxy statements in the mail. Instead, you are provided with quick and easy
access to this information via the Internet.
Why Choose Electronic Delivery?
IT'S QUICK -- Fund documents will be received faster than via traditional mail.
IT'S CONVENIENT -- Elimination of bulky documents from personal files.
IT'S COST EFFECTIVE -- Reduction of your Fund's printing and mailing costs.
TO SIGN UP FOR ELECTRONIC DELIVERY, FOLLOW
THESE SIMPLE STEPS:
1 GO TO WWW.SAFUNDS.COM
2 CLICK ON THE LINK TO "GO PAPERLESS!!"
The email address you provide will be kept strictly confidential. Once your
enrollment has been processed, you will begin receiving email notifications
when anything you receive electronically is available online.
You can return to www.safunds.com at any time to change your email
address, edit your preferences or to cancel this service if you choose to
resume physical delivery of your Fund documents.
Please note - this option is only available to accounts opened through the
Funds.
FOR INFORMATION ON RECEIVING THIS REPORT ONLINE, SEE INSIDE BACK COVER.
FUNDS DISTRIBUTED BY AIG CAPITAL SERVICES, INC.
This fund report must be preceded by or accompanied by a prospectus.
Investors should carefully consider a Fund's investment objectives, risks,
charges and expenses before investing. The prospectus, containing this and
other important information, can be obtained from your financial advisor, the
SunAmerica Sales Desk at 800-858-8850, ext. 6003, or at www.safunds.com. Read
the prospectus carefully before investing.
WWW.SAFUNDS.COM
EQANN - 9/14
[LOGO]
AIG
Sun America
Mutual Funds
Item 2. Code of Ethics
The SunAmerica Equity Funds (the "registrant") has adopted a Code of
Ethics applicable to its Principal Executive and Principal Accounting
Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.
During the fiscal year ended 2014, there were no reportable amendments,
waivers or implicit waivers to a provision of the Code of Ethics that
applies to the registrant's Principal Executive and Principal
Accounting Officers.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that William J. Shea,
the Chairman of the registrant's Audit Committee, qualifies as an audit
committee financial expert, as defined in Item 3(b) of Form N-CSR.
Mr. Shea is considered to be "independent" for purposes of Item 3(a)(2)
of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)--(d) Aggregate fees billed to the registrant for the last two
fiscal years for professional services rendered by the registrant's
principal accountant were as follows:
2013 2014
(a) Audit Fees ....................$ 100,119 $ 103,925
(b) Audit-Related Fees ............$ 0 $ 0
(c) Tax Fees ......................$ 0 $ 0
(d) All Other Fees ................$ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
principal accountant in connection with statutory and regulatory
filings.
Aggregate fees billed to the investment adviser and Adviser Affiliates
(as defined below in Item 4(e)) that are required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X for
the last two fiscal years for services rendered by the registrant's
principal accountant were as follows:
2013 2014
(b) Audit-Related Fees ............$ 0 $ 0
(c) Tax Fees ......................$ 0 $ 0
(d) All Other Fees ................$ 0 $ 0
(e) (1) The registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliates") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the operations and
financial reporting of the registrant. The audit committee has not
presently established any pre-approval policies and procedures that
permit the pre-approval of the above services other than by the full
audit committee. Certain de minimis exceptions are allowed for non-
audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation
S-X as set forth in the registrant's audit committee charter.
(2) No services included in (b)-(d) above in connection with fees
billed to the registrant or the investment adviser or Adviser
Affiliates were approved pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the registrant's principal accountant for
non-audit services rendered to the registrant, its investment adviser,
and Adviser Affiliates that provides ongoing services to the registrant
for 2013 and 2014 were $45,982 and $0, respectively.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders
may recommend nominees to the registrant's Board of Trustees that were
implemented after the registrant last provided disclosure in response
to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a-
101), or this Item 10.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures (as defined under Rule 30a-3(c)
under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))). Based
on that evaluation, the registrant's management, including the
President and Treasurer, concluded that the registrant's disclosure
controls and procedures are effective.
(b) There was no change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act
of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant's
last fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal contro1 over financial reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and
Principle Accounting Officers pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406.
Code of Ethics.
(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the Sarbanes-
Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Equity Funds
By: /s/ John T. Genoy
------------------
John T. Genoy
President
Date: December 8, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John T. Genoy
-----------------
John T. Genoy
President
Date: December 8, 2014
By: /s/ Gregory R. Kingston
-----------------------
Gregory R. Kingston
Treasurer
Date: December 8, 2014