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, 2015
-------------------------
Item 1. Reports to Stockholders
[PHOTO]
ANNUAL REPORT 2015
SUNAMERICA
Equity Funds
[LOGO]
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.............................. 41
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, 2015. It was a period wherein
international equity performance was driven largely by economic conditions,
monetary policies of global central banks, concerns surrounding geopolitical
events and falling oil prices.
As the annual period began in October 2014, the nearly six-year-old global
stock rally marched on, and it continued through the fourth quarter of 2014 and
first quarter of 2015. There was no shortage of headlines for investors to
worry about - Ebola fears escalated; Japan's and Brazil's recessions deepened;
tensions in Ukraine heightened; Europe's economy remained near stalling speed;
Russia faced a currency crisis; oil prices plunged; fears about Greece's future
in the European Union resurfaced; and Chinese manufacturing data disappointed.
However, there were a few bright spots in the global landscape. The
U.S. economy continued to experience solid growth, and Europe furthered its
accommodative monetary policy and presented encouraging economic data,
including positive trends in manufacturing, exports and economic sentiment.
Japanese equities led the export-driven economies of the Pacific Basin higher
in local currency terms. However, given the yen's 8.5% decline versus the
U.S. dollar during the first half of the annual period, Japan's equity market
returns were more modest, albeit still positive, in U.S. dollar terms.
The climb of global equities ended in the second quarter of 2015 when it
declined for the first time in 12 quarters.+ Late in the second calendar
quarter, the Greek debt crisis took center stage. Negotiations between top
Greek officials and creditors broke down, increasing the likelihood that Greece
would miss its next scheduled payment to the International Monetary Fund. On
June 30, 2015, Greece officially defaulted on a 1.6 billion euro repayment. The
Greek government held a referendum on July 5, 2015, asking its citizens to
accept or reject the creditors' final terms, and they ultimately voted to
reject them. In contrast to global equities broadly, Japanese equities actually
posted solid positive returns during the second quarter of 2015, based largely
on improved economic data.
Financial markets came under more significant pressure in the third quarter of
2015, as global equities posted their worst quarterly returns in four years++
amid fresh worries about the global economic outlook. Although Greece's
troubles dominated headlines at the beginning of the third calendar quarter, by
quarter end, the Greek debt crisis was firmly in the rearview mirror, and the
China-induced sell-off and the U.S. Federal Reserve's (the "Fed's") interest
rate hike timing were front and center in investors' minds. The unexpected
devaluation in China's currency further rattled global financial markets,
deepening fears about the Chinese economic slowdown and potential spillover
effects. During September 2015, Chinese manufacturing activity fell to its
lowest level since 2009. The details pointed to softness in both domestic and
external demand. Stocks in the export-driven economies of the Pacific Basin
pulled back for the first time in six quarters++, with Japanese equities
leading the region lower amid a tepid economic backdrop. Falling commodity
prices, the European Central Bank's action to cut its Eurozone economic and
inflation outlooks, and uncertainty about the timing of the first Fed rate hike
further muddied the waters.
A major factor impacting returns for U.S. investors in international equities
during the annual period was the surging U.S. dollar against most currencies,
as the U.S. dollar was supported by diverging monetary policy and economic
performance. Commodity currencies declined, with currencies of oil exporters
taking a particularly large hit. For example, for the 12 months ended
September 30, 2015, the Australian dollar declined 19.7% versus the
U.S. dollar; the Canadian dollar declined 16.6%; and the Russian ruble declined
39.7%. Within emerging markets, countries with large current account deficits
and shaky policy frameworks also depreciated. For instance, the Brazilian real
fell 38.5% versus the U.S. dollar. Elsewhere, the Japanese yen fell 8.4% versus
the U.S. dollar; the euro declined 11.6%; and the British pound fell 6.6%.
Against this backdrop, international equities, as represented by the MSCI ACWI
ex-U.S. (Net)/*/, posted a return of -12.16% in U.S. dollar terms for the
12-month period ended September 30, 2015. Japanese equities, as represented by
the MSCI Japan Index
2
(Net)/*/, performed relatively better, generating a return of -2.22% in
U.S. dollar terms for the same period. To compare, U.S. equities, as
represented by the S&P 500(R) Index/*/, returned -0.61% for the same 12-month
period.
Not surprisingly amid these conditions, each of the portfolios in the
SunAmerica Equity Funds generated negative absolute returns during the annual
period ended September 30, 2015. On the following pages, you will find detailed
financial statements and portfolio information for each of the SunAmerica
Equity Funds.
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 adviser 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.
+//Market Update Second Quarter 2015, Wellington Management
++//Market Update Third Quarter 2015, Wellington Management
/*/The MSCI ACWI (ALL COUNTRY WORLD INDEX) EX-U.S. (NET) is a free
float-adjusted market capitalization-weighted index designed to provide a
broad measure of the global equity market performance of 45 developed and
emerging markets throughout the world, 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. 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. 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. Indices are not managed and an investor cannot
invest directly in an index.
3
SUNAMERICA EQUITY FUNDS
EXPENSE EXAMPLE -- SEPTEMBER 30, 2015 -- (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, 2015 and held until September 30, 2015.
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, 2015" 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, 2015"
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, 2015" 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, 2015" 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, 2015" 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, 2015" 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, 2015" 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, 2015 -- (UNAUDITED) (CONTINUED)
ACTUAL HYPOTHETICAL
------------------------------------------ ------------------------------------------
ENDING ACCOUNT
ENDING ACCOUNT EXPENSE PAID VALUE USING EXPENSE PAID
VALUE USING DURING THE A HYPOTHETICAL DURING THE
BEGINNING ACTUAL SIX MONTHS BEGINNING 5% ASSUMED SIX MONTHS
ACCOUNT VALUE RETURN AT ENDED ACCOUNT VALUE RETURN AT ENDED ANNUALIZED
AT APRIL 1, SEPTEMBER 30, SEPTEMBER 30, AT APRIL 1, SEPTEMBER 30, SEPTEMBER 30, EXPENSE
FUND 2015 2015 2015 2015 2015 2015 RATIO*
---- ------------- -------------- ------------- ------------- -------------- ------------- ----------
INTERNATIONAL DIVIDEND STRATEGY
FUND
Class A#...................... $1,000.00 $843.35 $ 8.87 $1,000.00 $1,015.44 $ 9.70 1.92%
Class C#...................... $1,000.00 $840.92 $11.72 $1,000.00 $1,012.33 $12.81 2.54%
Class I....................... $1,000.00 $844.56 $ 7.86 $1,000.00 $1,016.55 $ 8.59 1.70%
Class W+#..................... $1,000.00 $843.74 $ 7.86 $1,000.00 $1,016.55 $ 8.59 1.70%
JAPAN FUND#
Class A....................... $1,000.00 $906.76 $ 9.08 $1,000.00 $1,015.54 $ 9.60 1.90%
Class C....................... $1,000.00 $902.95 $12.16 $1,000.00 $1,012.28 $12.86 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,
2015" 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, 2015" and the annualized "Expense
Ratio" would have been lower.
+ Commenced operations on January 29, 2015.
5
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 2015
INTERNATIONAL
DIVIDEND
STRATEGY FUND JAPAN FUND
------------- -----------
ASSETS:
Investments at value (unaffiliated)*................ $ 103,024,774 $38,144,390
Repurchase agreements (cost approximates value)..... 1,801,000 1,066,000
------------- -----------
Total investments.................................. 104,825,774 39,210,390
------------- -----------
Cash................................................ 14,937 801
Foreign cash*....................................... 8,245,464 142,728
Receivable for:
Fund shares sold................................... 45,452 212,591
Dividends and interest............................. 408,573 266,927
Investments sold................................... -- 152,414
Prepaid expenses and other assets................... 2,154 2,225
Due from investment adviser for expense
reimbursements/fee waivers......................... -- 29,145
------------- -----------
Total assets........................................ 113,542,354 40,017,221
------------- -----------
LIABILITIES:
Payable for:
Fund shares redeemed............................... 607,902 280,725
Investments purchased.............................. 7,240,051 --
Investment advisory and management fees............ 90,666 38,259
Distribution and service maintenance fees.......... 42,488 15,480
Transfer agent fees and expenses................... 21,573 7,831
Trustees' fees and expenses........................ 68 --
Other accrued expenses............................. 191,109 91,051
Due to investment adviser for expense recoupment... 7,146 --
------------- -----------
Total liabilities................................... 8,201,003 433,346
------------- -----------
Net Assets.......................................... $ 105,341,351 $39,583,875
============= ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value...... $ 133,633 $ 59,497
Paid-in capital..................................... 232,388,397 42,747,716
------------- -----------
232,522,030 42,807,213
Accumulated undistributed net investment income
(loss)............................................. (333,885) (170,211)
Accumulated undistributed net realized gain (loss)
on investments, futures contracts, options
contracts, securities sold short, and foreign
exchange transactions.............................. (115,320,765) 992,572
Unrealized appreciation (depreciation) on
investments........................................ (11,494,990) (4,025,558)
Unrealized foreign exchange gain (loss) on other
assets and liabilities............................. (31,039) (20,141)
------------- -----------
Net Assets.......................................... $ 105,341,351 $39,583,875
============= ===========
*Cost
Investments (unaffiliated)......................... $ 114,519,764 $42,169,948
============= ===========
Foreign cash....................................... $ 8,302,131 $ 158,020
============= ===========
See Notes to Financial Statements
6
SUNAMERICA EQUITY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- SEPTEMBER 30, 2015 -- (CONTINUED)
INTERNATIONAL
DIVIDEND
STRATEGY FUND JAPAN FUND
------------- -----------
CLASS A (UNLIMITED SHARES AUTHORIZED):
Net assets.......................................... $71,968,977 $32,240,862
Shares of beneficial interest issued and outstanding 8,945,366 4,806,201
Net asset value and redemption price per share...... $ 8.05 $ 6.71
Maximum sales charge (5.75% of offering price)...... $ 0.49 $ 0.41
----------- -----------
Maximum offering price to public.................... $ 8.54 $ 7.12
=========== ===========
CLASS C (UNLIMITED SHARES AUTHORIZED):
Net assets.......................................... $22,445,276 $ 7,343,013
Shares of beneficial interest issued and outstanding 3,059,968 1,143,494
Net asset value, offering and redemption price per
share (excluding any applicable contingent
deferred sales charge)............................. $ 7.34 $ 6.42
=========== ===========
CLASS I (UNLIMITED SHARES AUTHORIZED):
Net assets.......................................... $ 283,030 $ --
Shares of beneficial interest issued and outstanding 34,790 --
Net asset value, offering and redemption price per
share.............................................. $ 8.14 $ --
=========== ===========
CLASS W# (UNLIMITED SHARES AUTHORIZED):
Net assets.......................................... $10,644,068 $ --
Shares of beneficial interest issued and outstanding 1,323,206 --
Net asset value, offering and redemption price per
share.............................................. $ 8.04 $ --
=========== ===========
# See Note 1
See Notes to Financial Statements
7
SUNAMERICA EQUITY FUNDS
STATEMENT OF OPERATIONS -- SEPTEMBER 30, 2015
INTERNATIONAL
DIVIDEND
STRATEGY FUND JAPAN FUND
------------- -----------
INVESTMENT INCOME:
Dividends (unaffiliated)............................................................. $ 6,530,902 $ 576,836
Interest (unaffiliated).............................................................. -- --
------------ -----------
Total investment income*............................................................ 6,530,902 576,836
------------ -----------
EXPENSES:
Investment advisory and management fees.............................................. 1,541,176 455,524
Distribution and service maintenance fees:
Class A............................................................................. 387,562 120,161
Class B#............................................................................ 24,673 1,545
Class C............................................................................. 336,324 51,245
Service fees:
Class I............................................................................. 886 --
Class W#............................................................................ 10,397 --
Transfer agent fees and expenses:
Class A............................................................................. 264,425 77,768
Class B#............................................................................ 6,308 713
Class C............................................................................. 79,302 12,588
Class I............................................................................. 862 --
Class W#............................................................................ 15,803 --
Registration fees:
Class A............................................................................. 79,775 23,154
Class B#............................................................................ 3,732 6,082
Class C............................................................................. 28,036 15,597
Class W#............................................................................ 21,944 --
Custodian and accounting fees........................................................ 92,795 27,871
Reports to shareholders.............................................................. 89,744 8,405
Audit and tax fees................................................................... 76,931 65,512
Legal fees........................................................................... 27,418 11,929
Directors' fees and expenses......................................................... 25,757 1,566
Interest expense..................................................................... 3,598 96
Other expenses....................................................................... 13,680 20,561
------------ -----------
Total expenses before fee waivers, expense reimbursements, and expense recoupments.. 3,131,128 900,317
Net (Fees waived and expenses reimbursed)/recouped by investment adviser (Note 3)... (3,461) (113,398)
------------ -----------
Net expenses........................................................................ 3,127,667 786,919
------------ -----------
Net investment income (loss)........................................................... 3,403,235 (210,083)
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**............................... (50,473,042) 1,400,654
Net realized foreign exchange gain (loss) on other assets and liabilities.............. (856,729) (8,525)
------------ -----------
Net realized gain (loss) on investments and foreign currencies......................... (51,329,771) 1,392,129
------------ -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)......... (1,026,404) (4,036,179)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities...... 15,598 (12,932)
Change in accrued capital gains tax on unrealized appreciation (depreciation).......... 146,174 --
------------ -----------
Net unrealized gain (loss) on investments and foreign currencies....................... (864,632) (4,049,111)
------------ -----------
Net realized and unrealized gain (loss) on investments and foreign currencies.......... (52,194,403) (2,656,982)
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $(48,791,168) $(2,867,065)
============ ===========
* Net of foreign withholding taxes on interest and dividends of........................ $ 619,448 $ 66,686
============ ===========
** Net of foreign withholding taxes on capital gains of................................ $ 139,681 $ --
============ ===========
# See Note 1
See Notes to Financial Statements
8
SUNAMERICA EQUITY FUNDS
STATEMENT OF CHANGES IN NET ASSETS -- SEPTEMBER 30, 2015
INTERNATIONAL
DIVIDEND
STRATEGY FUND
---------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2015 2014
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)........................................................... $ 3,403,235 $ 5,624,412
Net realized gain (loss) on investments and foreign currencies......................... (51,329,771) 5,545,743
Net unrealized gain (loss) on investments and foreign currencies....................... (864,632) (15,250,279)
------------- ------------
Net increase (decrease) in net assets resulting from operations.......................... (48,791,168) (4,080,124)
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (Class A)........................................................ (2,162,271) (4,140,584)
Net investment income (Class B)#....................................................... (22,454) (195,830)
Net investment income (Class C)........................................................ (561,676) (934,780)
Net investment income (Class I)........................................................ (8,089) (19,978)
Net investment income (Class W)#....................................................... (301,775) --
Net realized gain on securities (Class A).............................................. -- --
Net realized gain on securities (Class B)#............................................. -- --
Net realized gain on securities (Class C).............................................. -- --
Net realized gain on securities (Class I).............................................. -- --
Net realized gain on securities (Class W)#............................................. -- --
------------- ------------
Total distributions to shareholders...................................................... (3,056,265) (5,291,172)
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS (NOTE 6). (60,269,130) 98,901,371
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (112,116,563) 89,530,075
NET ASSETS:
Beginning of period...................................................................... $ 217,457,914 127,927,839
------------- ------------
End of period+........................................................................... $ 105,341,351 $217,457,914
============= ============
+ Includes accumulated undistributed net investment income (loss)........................ $ (333,885) (110,190)
============= ============
# See Note 1
JAPAN FUND
--------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2015 2014
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)........................................................... $ (210,083) $ (77,156)
Net realized gain (loss) on investments and foreign currencies......................... 1,392,129 3,619,719
Net unrealized gain (loss) on investments and foreign currencies....................... (4,049,111) (2,334,213)
----------- -----------
Net increase (decrease) in net assets resulting from operations.......................... (2,867,065) 1,208,350
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (Class A)........................................................ (215,951) (495,798)
Net investment income (Class B)#....................................................... (932) (5,794)
Net investment income (Class C)........................................................ (7,704) (39,909)
Net investment income (Class I)........................................................ -- --
Net investment income (Class W)#....................................................... -- --
Net realized gain on securities (Class A).............................................. (2,474,268) (1,975,339)
Net realized gain on securities (Class B)#............................................. (38,677) (27,616)
Net realized gain on securities (Class C).............................................. (319,855) (190,215)
Net realized gain on securities (Class I).............................................. -- --
Net realized gain on securities (Class W)#............................................. -- --
----------- -----------
Total distributions to shareholders...................................................... (3,057,387) (2,734,671)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS (NOTE 6). 5,293,840 14,227,530
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................................................. (630,612) 12,701,209
NET ASSETS:
Beginning of period...................................................................... $40,214,487 27,513,278
----------- -----------
End of period+........................................................................... $39,583,875 $40,214,487
=========== ===========
+ Includes accumulated undistributed net investment income (loss)........................ $ (170,211) $ (21,510)
=========== ===========
# See Note 1
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 RATIO OF
VALUE INVESTMENT REALIZED TOTAL FROM FROM NET FROM TOTAL VALUE END OF EXPENSES
BEGINNING INCOME AND INVESTMENT INVESTMENT CAPITAL DISTRI- END OF TOTAL PERIOD TO AVERAGE
PERIOD ENDED OF PERIOD (LOSS)(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S) NET ASSETS
------------------ --------- ---------- ----------- ---------- ---------- ------- ------- ------ --------- -------- ----------
CLASS A
-
09/30/11 $11.84 $ 0.08 $(1.64) $(1.56) $(0.00) $-- $(0.00) $10.28 (13.17)% $ 50,177 1.84%
09/30/12 10.28 0.23 0.66 0.89 (0.26) -- (0.26) 10.91 8.77 51,309 1.90(3)
09/30/13 10.91 0.47 0.50 0.97 (0.47) -- (0.47) 11.41 9.24 96,020 1.90(3)
09/30/14 11.41 0.40 (0.14) 0.26 (0.34) -- (0.34) 11.33 2.20 162,284 1.90(3)
09/30/15 11.33 0.23 (3.29) (3.06) (0.22) -- (0.22) 8.05 (27.24) 71,969 1.88(3)
CLASS C
-
09/30/11 10.93 (0.02) (1.49) (1.51) -- -- -- 9.42 (13.82) 13,190 2.55(3)
09/30/12 9.42 0.14 0.61 0.75 (0.14) -- (0.14) 10.03 7.98 12,571 2.55(3)
09/30/13 10.03 0.36 0.47 0.83 (0.41) -- (0.41) 10.45 8.56 24,776 2.55(3)
09/30/14 10.45 0.30 (0.13) 0.17 (0.27) -- (0.27) 10.35 1.56 46,349 2.55(3)
09/30/15 10.35 0.16 (3.01) (2.85) (0.16) -- (0.16) 7.34 (27.70) 22,445 2.55(3)
CLASS I
-
09/30/11 11.93 0.08 (1.65) (1.57) (0.00) -- (0.00) 10.36 (13.13) 1,625 1.80(3)
09/30/12 10.36 0.24 0.66 0.90 (0.27) -- (0.27) 10.99 8.84 1,289 1.80(3)
09/30/13 10.99 0.44 0.56 1.00 (0.48) -- (0.48) 11.51 9.41 1,184 1.80(3)
09/30/14 11.51 0.32 (0.02) 0.30 (0.36) -- (0.36) 11.45 2.45 426 1.77(3)
09/30/15 11.45 0.26 (3.34) (3.08) (0.23) -- (0.23) 8.14 (27.13) 283 1.71
CLASS W
-
01/29/15*-09/30/15 9.80 0.27 (1.84) (1.57) (0.19) -- (0.19) 8.04 (16.23) 10,644 1.70(3)(4)
RATIO
OF NET
INVESTMENT
INCOME (LOSS)
TO AVERAGE PORTFOLIO
NET ASSETS TURNOVER
------------- ---------
0.63% 262%
2.07(3) 248
4.42(3) 32
3.47(3) 80
2.31(3) 160
(0.14)(3) 262%
1.38(3) 248
3.70(3) 32
2.85(3) 80
1.69(3) 160
0.59(3) 262%
2.14(3) 248
3.98(3) 32
2.66(3) 80
2.61 160
3.98(3)(4) 160%
--------
* Commencement of Operations. See Note 1
(1)Calculated based upon average shares outstanding.
(2)Total return does not reflect sales load. Total return does include expense
reimbursements (recoupments).
(3)Net of the following expense reimbursements (recoupments) (based on average
net assets) (See Note 3):
09/30/11 09/30/12 09/30/13 09/30/14 09/30/15
-------- -------- -------- -------- --------
International Dividend Strategy Class A. -- % 0.25% 0.16% (0.09)% (0.01)%
International Dividend Strategy Class C. (0.00) 0.33 0.20 (0.05) (0.02)
International Dividend Strategy Class I. (0.09) 0.17 0.09 (0.09) --
International Dividend Strategy Class W. -- -- -- -- 0.20
(4)Annualized
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 RATIO OF
VALUE INVESTMENT REALIZED TOTAL FROM FROM NET FROM TOTAL VALUE END OF EXPENSES
BEGINNING INCOME AND INVESTMENT INVESTMENT CAPITAL DISTRI- END OF TOTAL PERIOD TO AVERAGE
PERIOD ENDED OF PERIOD (LOSS)(1) UNREALIZED) OPERATIONS INCOME GAINS BUTIONS PERIOD RETURN(2) (000'S) NET ASSETS(3)
------------ --------- ---------- ----------- ---------- ---------- ------- ------- ------ --------- ------- -------------
CLASS A
-
09/30/11 $9.10 $ 0.00 $(1.11) $(1.11) $(0.26) $ -- $(0.26) $7.73 (12.68)% $31,292 1.90%
09/30/12 7.73 0.04 0.02 0.06 (0.01) (1.37) (1.38) 6.41 1.38 20,714 1.90
09/30/13 6.41 (0.01) 1.86 1.85 (0.16) -- (0.16) 8.10 29.54 25,053 1.90
09/30/14 8.10 (0.01) 0.37 0.36 (0.15) (0.58) (0.73) 7.73 4.81 35,178 1.90
09/30/15 7.73 (0.03) (0.36) (0.39) (0.05) (0.58) (0.63) 6.71 (4.91) 32,241 1.90
CLASS C
-
09/30/11 8.92 (0.04) (1.11) (1.15) (0.23) -- (0.23) 7.54 (13.35) 888 2.55
09/30/12 7.54 (0.02) 0.05 0.03 -- (1.37) (1.37) 6.20 0.85 438 2.55
09/30/13 6.20 (0.03) 1.77 1.74 (0.10) -- (0.10) 7.84 28.58 2,222 2.55
09/30/14 7.84 (0.05) 0.34 0.29 (0.12) (0.58) (0.70) 7.43 4.07 4,542 2.55
09/30/15 7.43 (0.07) (0.35) (0.42) (0.01) (0.58) (0.59) 6.42 (5.52) 7,343 2.55
RATIO
OF NET
INVESTMENT
INCOME (LOSS)
TO AVERAGE PORTFOLIO
NET ASSETS(3) TURNOVER
------------- ---------
0.04% 79%
0.52 192
(0.12) 162
(0.19) 111
(0.46) 144
(0.48) 79%
(0.23) 192
(0.43) 162
(0.65) 111
(0.95) 144
--------
(1)Calculated based upon average shares outstanding.
(2)Total return does not reflect sales load. Total return does include expense
reimbursements (recoupments).
(3)Net of the following expense reimbursements (based on average net assets)
(See Note 3):
09/30/11 09/30/12 09/30/13 09/30/14 09/30/15
-------- -------- -------- -------- --------
Japan Class A........................... 0.27% 0.59% 0.55% 0.29% 0.24%
Japan Class C........................... 1.19 2.80 1.57 0.84 0.50
See Notes to Financial Statements
11
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
PORTFOLIO PROFILE -- SEPTEMBER 30, 2015 -- (UNAUDITED)
INDUSTRY ALLOCATION*
Cellular Telecom............................. 7.7%
Real Estate Operations & Development......... 6.3
Food-Retail.................................. 6.0
Computers.................................... 5.9
Electronic Components-Misc................... 5.7
Distribution/Wholesale....................... 4.2
Metal-Diversified............................ 3.6
Auto-Cars/Light Trucks....................... 2.3
Transport-Services........................... 2.1
Food-Misc./Diversified....................... 2.1
Retail-Apparel/Shoe.......................... 2.0
Retail-Consumer Electronics.................. 2.0
Telecom Services............................. 2.0
Aerospace/Defense............................ 2.0
Oil Companies-Integrated..................... 2.0
Gambling (Non-Hotel)......................... 2.0
Machinery-Electrical......................... 2.0
Multimedia................................... 2.0
Public Thoroughfares......................... 2.0
Finance-Other Services....................... 2.0
Oil Companies-Exploration & Production....... 2.0
Steel-Producers.............................. 2.0
Explosives................................... 1.9
Electric-Generation.......................... 1.9
Coal......................................... 1.9
Oil-Field Services........................... 1.9
Power Converter/Supply Equipment............. 1.9
Semiconductor Components-Integrated Circuits. 1.9
Tobacco...................................... 1.9
Building & Construction Products-Misc........ 1.9
Integrated Oils.............................. 1.9
Computers-Periphery Equipment................ 1.8
Telephone-Integrated......................... 1.8
Metal Processors & Fabrication............... 1.8
Investment Management/Advisor Services....... 1.8
Electronic Components-Semiconductors......... 1.8
Oil & Gas Drilling........................... 1.8
Repurchase Agreements........................ 1.7
----
99.5%
====
COUNTRY ALLOCATION*
Taiwan......... 15.2%
China.......... 11.8
Australia...... 11.8
France......... 9.6
United Kingdom. 7.9
Cayman Islands. 6.3
South Africa... 5.7
Bermuda........ 4.4
Turkey......... 3.9
Brazil......... 3.8
Switzerland.... 3.8
Russia......... 3.7
Germany........ 2.1
Sweden......... 2.0
Norway......... 2.0
Japan.......... 1.9
Hong Kong...... 1.9
United States.. 1.7
----
99.5%
====
--------
*Calculated as a percentage of net assets
12
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2015
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
COMMON STOCKS -- 97.8%
AUSTRALIA -- 11.8%
ASX, Ltd.(1).................................. 77,191 $ 2,058,902
Orica, Ltd.(1)................................ 193,828 2,053,113
Rio Tinto, Ltd.(1)............................ 58,307 2,003,616
Wesfarmers, Ltd.(1)........................... 76,246 2,108,710
Woodside Petroleum, Ltd.(1)................... 100,668 2,058,299
Woolworths, Ltd.(1)........................... 120,420 2,105,724
------------
12,388,364
------------
BERMUDA -- 4.4%
GOME Electrical Appliances Holding, Ltd.(1)... 13,834,000 2,164,143
Li & Fung, Ltd.(1)............................ 3,282,000 2,525,783
Peace Mark Holdings, Ltd.+(2)(3).............. 800,000 0
------------
4,689,926
------------
BRAZIL -- 3.8%
CCR SA........................................ 674,300 2,069,928
Telefonica Brasil SA (preference shares)...... 209,151 1,934,561
------------
4,004,489
------------
CAYMAN ISLANDS -- 6.3%
Belle International Holdings, Ltd.(1)......... 2,498,000 2,181,583
Country Garden Holdings Co., Ltd.(1).......... 6,223,000 2,256,688
Shimao Property Holdings, Ltd.(1)............. 1,440,500 2,185,951
------------
6,624,222
------------
CHINA -- 11.8%
China National Building Material Co., Ltd.(1). 3,444,000 1,998,255
China Shenhua Energy Co., Ltd., Class H(1).... 1,311,500 2,020,924
China Vanke Co., Ltd.(1)...................... 1,002,300 2,143,974
Great Wall Motor Co., Ltd.(1)................. 2,122,500 2,402,198
Huaneng Power International, Inc.(1).......... 1,866,000 2,029,571
Jiangxi Copper Co., Ltd.(1)................... 1,541,000 1,889,960
------------
12,484,882
------------
FRANCE -- 9.6%
Casino Guichard Perrachon SA(1)............... 38,784 2,065,439
Rexel SA(1)................................... 154,976 1,905,751
Schneider Electric SE(1)...................... 35,915 2,014,074
Technip SA(1)................................. 42,633 2,014,250
Vivendi SA(1)................................. 88,486 2,094,901
------------
10,094,415
------------
GERMANY -- 2.1%
Deutsche Post AG(1)........................... 80,171 2,218,858
------------
HONG KONG -- 1.9%
Lenovo Group, Ltd. (1)........................ 2,324,000 1,973,306
------------
JAPAN -- 1.9%
Japan Tobacco, Inc. (1)....................... 64,600 2,009,565
------------
NORWAY -- 2.0%
Statoil ASA(1)................................ 144,626 2,109,651
------------
RUSSIA -- 3.7%
MMC Norilsk Nickel PJSC ADR................... 127,950 1,838,642
Mobile TeleSystems PJSC ADR................... 293,816 2,121,352
------------
3,959,994
------------
SHARES/
PRINCIPAL VALUE
SECURITY DESCRIPTION AMOUNT (NOTE 2)
SOUTH AFRICA -- 5.7%
MTN Group, Ltd.(1)....................... 158,780 2,044,161
Sasol, Ltd(1)............................ 69,240 1,943,888
Vodacom Group, Ltd.(1)................... 205,067 2,038,119
------------
6,026,168
------------
SWEDEN -- 2.0%
Tele2 AB, Class B(1)..................... 219,795 $ 2,144,046
------------
SWITZERLAND -- 3.8%
ABB, Ltd.(1)............................. 118,479 2,098,212
Transocean, Ltd.(1)...................... 144,167 1,865,028
------------
3,963,240
------------
TAIWAN -- 15.2%
Asustek Computer, Inc.(1)................ 243,000 2,087,826
AU Optronics Corp.(1).................... 6,354,000 1,868,490
Foxconn Technology Co., Ltd.(1).......... 726,000 2,096,410
Hon Hai Precision Industry Co., Ltd.(1).. 818,000 2,139,652
Innolux Corp.(1)......................... 6,186,000 1,941,002
MediaTek, Inc.(1)........................ 251,000 1,873,115
Pegatron Corp.(1)........................ 805,000 1,982,538
Siliconware Precision Industries Co.,
Ltd.(1)................................. 1,620,000 2,011,116
------------
16,000,149
------------
TURKEY -- 3.9%
Eregli Demir ve Celik Fabrikalari TAS(1). 1,645,803 2,030,373
Turkcell Iletisim Hizmetleri AS(1)....... 581,220 2,028,176
------------
4,058,549
------------
UNITED KINGDOM -- 7.9%
Aberdeen Asset Management PLC(1)......... 418,264 1,881,183
BAE Systems PLC(1)....................... 314,553 2,135,571
Unilever PLC(1).......................... 52,955 2,157,150
William Hill PLC(1)...................... 395,233 2,101,046
------------
8,274,950
------------
TOTAL LONG-TERM INVESTMENT SECURITIES
(cost $114,519,764)..................... 103,024,774
------------
REPURCHASE AGREEMENTS -- 1.7%
State Street Bank & Trust Co. Joint
Repurchase Agreement(4)
(cost $1,801,000)....................... $1,801,000 1,801,000
------------
TOTAL INVESTMENTS --
(cost $116,320,764)(5).................. 99.5% 104,825,774
Other assets less liabilities.............. 0.5 515,577
---------- ------------
NET ASSETS -- 100.0% $105,341,351
========== ============
--------
+ Non-income producing security
(1)Security was valued using fair value procedures at September 30, 2015. The
aggregate value of these securities was $95,060,291 representing 90.2% of
net assets. Securities are classified as Level 2 based on the securities
valuation inputs. See Note 2 regarding fair value pricing for foreign equity
securities.
(2)Fair valued security. Securities are classified as Level 3 based on the
Securities Valuations inputs; See Note 2.
(3)Illiquid security. At September 30, 2015, the aggregate value of these
securities was $0 representing 0.0% of net assets.
(4)See Note 2 for details of Joint Repurchase Agreements.
(5)See Note 5 for cost of investments on a tax basis.
ADR-- American Depositary Receipt
13
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
The following is a summary of the inputs used to value the Portfolio's net
assets as of September 30, 2015 (see Note 2):
LEVEL 1 -- UNADJUSTED LEVEL 2 -- OTHER LEVEL 3 -- SIGNIFICANT
QUOTED PRICES OBSERVABLE INPUTS UNOBSERVABLE INPUTS TOTAL
- --------------------- ----------------- ---------------------- ------------
ASSETS:
Investments at Value:*
Common Stocks:
Bermuda.................. $ -- $ 4,689,926 $ 0 $ 4,689,926
Brazil................... 4,004,489 -- -- 4,004,489
Russia................... 3,959,994 -- -- 3,959,994
Other Countries.......... -- 90,370,365 -- 90,370,365
Repurchase Agreements...... -- 1,801,000 -- 1,801,000
---------- ----------- --- ------------
TOTAL INVESTMENTS AT VALUE. $7,964,483 $96,861,291 $ 0 $104,825,774
========== =========== === ============
--------
* For a detailed presentation of investments, 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 currently valued at $4,197,477 were transferred
from Level 1 to Level 2 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, 2015 -- (UNAUDITED)
INDUSTRY ALLOCATION*
Auto/Truck Parts & Equipment-Original. 9.0%
Insurance-Life/Health................. 8.8
Telephone-Integrated.................. 8.0
Television............................ 6.8
E-Commerce/Products................... 5.1
Computers-Integrated Systems.......... 4.7
Auto-Cars/Light Trucks................ 4.6
Chemicals-Specialty................... 4.3
Banks-Commercial...................... 4.1
Diversified Banking Institutions...... 3.8
Brewery............................... 3.3
Real Estate Operations & Development.. 2.9
Repurchase Agreements................. 2.7
Electronic Components-Semiconductors.. 2.4
Computer Services..................... 2.4
Toys.................................. 2.2
Retail-Consumer Electronics........... 2.2
Auto-Heavy Duty Trucks................ 2.1
Food-Retail........................... 2.1
Non-Ferrous Metals.................... 2.0
Insurance-Property/Casualty........... 1.9
Computers-Memory Devices.............. 1.9
Medical Instruments................... 1.7
Building Products-Cement.............. 1.6
Steel-Specialty....................... 1.4
Medical-Drugs......................... 1.4
Transport-Rail........................ 1.3
Diversified Operations................ 1.0
Electronic Components-Misc............ 1.0
Rental Auto/Equipment................. 0.8
Electric Products-Misc................ 0.6
Entertainment Software................ 0.5
E-Services/Consulting................. 0.5
----
99.1%
====
COUNTRY ALLOCATION*
Japan......... 96.4%
United States. 2.7
----
99.1%
====
--------
*Calculated as a percentage of net assets
15
SUNAMERICA JAPAN FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2015
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
COMMON STOCKS -- 96.4%
AUTO-CARS/LIGHT TRUCKS -- 4.6%
Mazda Motor Corp.(1)........................ 54,900 $ 871,581
Nissan Motor Co., Ltd.(1)................... 104,100 958,914
-----------
1,830,495
-----------
AUTO-HEAVY DUTY TRUCKS -- 2.1%
Hino Motors, Ltd.(1)........................ 81,600 833,523
-----------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 9.0%
NGK Spark Plug Co., Ltd.(1)................. 51,500 1,182,591
Sumitomo Electric Industries, Ltd.(1)....... 61,750 793,337
Toyota Industries Corp.(1).................. 33,580 1,600,617
-----------
3,576,545
-----------
BANKS-COMMERCIAL -- 4.1%
Mizuho Financial Group, Inc.(1)............. 520,700 978,061
Shinsei Bank, Ltd.(1)....................... 304,900 629,804
-----------
1,607,865
-----------
BREWERY -- 3.3%
Asahi Group Holdings, Ltd.(1)............... 39,500 1,285,470
-----------
BUILDING PRODUCTS-CEMENT -- 1.6%
Taiheiyo Cement Corp.(1).................... 209,000 628,827
-----------
CHEMICALS-SPECIALTY -- 4.3%
Shin-Etsu Chemical Co., Ltd.(1)............. 26,600 1,367,213
Tokyo Ohka Kogyo Co., Ltd.(1)............... 12,060 321,175
-----------
1,688,388
-----------
COMPUTER SERVICES -- 2.4%
SCSK Corp.(1)............................... 25,400 955,105
-----------
COMPUTERS-INTEGRATED SYSTEMS -- 4.7%
Fujitsu, Ltd.(1)............................ 427,105 1,862,561
-----------
COMPUTERS-MEMORY DEVICES -- 1.9%
TDK Corp.(1)................................ 13,400 762,198
-----------
DIVERSIFIED BANKING INSTITUTIONS -- 3.8%
Mitsubishi UFJ Financial Group, Inc.(1)..... 250,120 1,511,689
-----------
DIVERSIFIED OPERATIONS -- 1.0%
Seiko Holdings Corp.(1)..................... 69,500 405,119
-----------
E-COMMERCE/PRODUCTS -- 5.1%
Rakuten, Inc.(1)............................ 157,560 2,020,673
-----------
E-SERVICES/CONSULTING -- 0.5%
Digital Garage, Inc.(1)..................... 14,200 197,100
-----------
ELECTRIC PRODUCTS-MISC. -- 0.6%
Funai Electric Co., Ltd.(1)................. 24,800 230,016
-----------
ELECTRONIC COMPONENTS-MISC. -- 1.0%
Minebea Co., Ltd.(1)........................ 35,700 380,092
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 2.4%
Rohm Co., Ltd.(1)........................... 3,600 160,957
Sumco Corp.(1).............................. 89,000 798,829
-----------
959,786
-----------
VALUE
SECURITY DESCRIPTION SHARES (NOTE 2)
ENTERTAINMENT SOFTWARE -- 0.5%
Nexon Co., Ltd.(1)......................... 15,700 $ 210,282
-----------
FOOD-RETAIL -- 2.1%
Seven & I Holdings Co., Ltd.(1)............ 17,700 810,971
-----------
INSURANCE-LIFE/HEALTH -- 8.8%
Sony Financial Holdings, Inc.(1)........... 112,795 1,857,502
T&D Holdings, Inc.(1)...................... 137,890 1,633,206
-----------
3,490,708
-----------
INSURANCE-PROPERTY/CASUALTY -- 1.9%
Tokio Marine Holdings, Inc.(1)............. 20,380 762,708
-----------
MEDICAL INSTRUMENTS -- 1.7%
Olympus Corp.(1)........................... 21,550 671,083
-----------
MEDICAL-DRUGS -- 1.4%
Takeda Pharmaceutical Co., Ltd.(1)......... 12,500 550,963
-----------
MISCELLANEOUS MANUFACTURING -- 0.0%
Peace Mark Holdings, Ltd.+(2)(3)........... 8,000 0
-----------
NON-FERROUS METALS -- 2.0%
Mitsubishi Materials Corp.(1).............. 264,205 805,958
-----------
REAL ESTATE OPERATIONS & DEVELOPMENT -- 2.9%
Leopalace21 Corp.+(1)...................... 241,600 1,132,337
-----------
RENTAL AUTO/EQUIPMENT -- 0.8%
Kanamoto Co., Ltd.(1)...................... 17,300 311,437
-----------
RETAIL-CONSUMER ELECTRONICS -- 2.2%
K's Holdings Corp.(1)...................... 27,200 856,386
-----------
STEEL-SPECIALTY -- 1.4%
Hitachi Metals, Ltd.(1).................... 47,465 553,273
-----------
TELEPHONE-INTEGRATED -- 8.0%
Nippon Telegraph & Telephone Corp.(1)...... 32,240 1,132,260
SoftBank Group Corp.(1).................... 44,200 2,033,660
-----------
3,165,920
-----------
TELEVISION -- 6.8%
Nippon Television Holdings, Inc.(1)........ 121,450 1,966,548
TV Asahi Holdings Corp.(1)................. 48,210 738,750
-----------
2,705,298
-----------
TOYS -- 2.2%
Bandai Namco Holdings, Inc.(1)............. 17,100 398,275
Nintendo Co., Ltd.(1)...................... 2,740 462,901
-----------
861,176
-----------
TRANSPORT-RAIL -- 1.3%
East Japan Railway Co.(1).................. 6,150 520,438
-----------
TOTAL LONG-TERM INVESTMENT SECURITIES
(cost $42,169,948)........................ 38,144,390
-----------
16
SUNAMERICA JAPAN FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
PRINCIPAL VALUE
SECURITY DESCRIPTION AMOUNT (NOTE 2)
REPURCHASE AGREEMENTS -- 2.7%
Agreement with State Street Bank and Trust Co.,
bearing interest at 0.00%, dated 09/30/2015,
to be repurchased 10/01/2015 in the amount
$1,066,000 collateralized by $1,070,000 of
U.S. Treasury Notes, bearing interest at
2.00% due 02/15/2020 and having an
approximate value of $1,091,400
(cost $1,066,000)............................... $1,066,000 $ 1,066,000
-----------
TOTAL INVESTMENTS
(cost $43,235,948)(4)........................... 99.1% 39,210,390
Other assets less liabilities...................... 0.9 373,485
---------- -----------
NET ASSETS 100.0% $39,583,875
========== ===========
--------
+ Non-income producing security
(1)Security was valued using fair value procedures at September 30, 2015. The
aggregate value of these securities was $38,144,390 representing 96.4% of
net assets. Securities are classified as Level 2 based on the securities
valuation inputs. See Note 2 regarding fair value pricing for foreign equity
securities.
(2)Fair valued security. Securities are classified as Level 3 based on the
Securities Valuations inputs; See Note 2.
(3)Illiquid security. At September 30, 2015, the aggregate value of these
securities was $0 representing 0.0% of net assets.
(4)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, 2015 (see Note 2):
LEVEL 1 -- UNADJUSTED LEVEL 2 -- OTHER LEVEL 3 -- SIGNIFICANT
QUOTED PRICES OBSERVABLE INPUTS UNOBSERVABLE INPUTS TOTAL
--------------------- ----------------- ---------------------- -----------
ASSETS:
Investments at Value:*
Common Stocks:
Miscellaneous Manufacturing. $-- $ -- $ 0 $ 0
Other Industries............ -- 38,144,390 -- 38,144,390
Repurchase Agreements......... -- 1,066,000 -- 1,066,000
--- ----------- --- -----------
TOTAL INVESTMENTS AT VALUE.... $-- $39,210,390 $ 0 $39,210,390
=== =========== === ===========
--------
* For a detailed presentation of investments, 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 currently valued at $22,163,453 were transferred
from Level 1 to Level 2 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, 2015
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"). 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.
Class W shares are offered at net asset value per share. The class is
offered exclusively through advisory fee-based programs sponsored by certain
financial intermediaries and other programs.
Class W shares of the International Dividend Strategy Fund commenced
operations effective January 29, 2015. The International Dividend Strategy
Fund and the Japan Fund stopped offering Class B shares for sale as of the
close of business December 2, 2014. As of the close of business January 27,
2015, Class B shares of International Dividend Strategy Fund and Japan Fund
converted to Class A shares.
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 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 Class C shares are subject to
higher distribution fee rates. Class I and Class W shares have not adopted a
12b-1 plan and make no payments thereunder, however, Class I and Class W
shares pay a service fee to the Funds' distributor for providing
administrative and shareholder services.
18
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
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 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
establishes 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 the Funds' assets and liabilities classified in the fair
value hierarchy as of September 30, 2015, is 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
19
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
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 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. Such
securities are generally categorized as Level 1. However, depending on the
foreign market, closing prices may be up to 15 hours old when they are used
to price a Fund's shares, and a 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, and other long-term debt securities 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,
maturity date, option adjusted spread 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.
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 OTC 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
20
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
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 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, 2015, the
repurchase agreements held by the Funds are subject to master netting
agreements. See the Portfolio of Investments 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 Trust's 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, a Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If
the seller defaults and the value of the collateral declines or if
bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by a Fund may be delayed or limited.
As of September 30, 2015, the following Fund held an undivided interest in
the joint repurchase agreement with State Street Bank & Trust Co.:
PERCENTAGE PRINCIPAL
FUND OWNERSHIP AMOUNT
---- ---------- ----------
International Dividend Strategy........................... 0.50% $1,801,000
As of such date, the repurchase agreement in that joint account and the
collateral thereof were as follows:
State Street Bank & Trust Co., dated September 30, 2015, bearing interest at
a rate of 0.00% per annum, with a principal amount of $359,908,000, a
repurchase price of $359,908,000, and a maturity date of October 1, 2015.
The repurchase agreement is collateralized by the following:
INTEREST PRINCIPAL
TYPE OF COLLATERAL RATE MATURITY DATE AMOUNT VALUE
------------------ -------- ------------- ------------ ------------
U.S. Treasury Notes........... 1.63% 12/31/2019 $100,000,000 $101,625,000
U.S. Treasury Notes........... 1.75 05/15/2023 92,165,000 91,819,381
U.S. Treasury Notes........... 2.63 08/15/2020 112,160,000 118,749,400
U.S. Treasury Notes........... 3.38 11/15/2019 50,000,000 54,914,050
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.
21
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
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 share activity of the respective class).
Expenses common to all 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 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 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
2012 - 2014 or expected to be taken in each Fund's 2015 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 2012.
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.
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
22
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
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
For the year ended September 30, 2015, 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.
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
International Dividend Strategy Fund Class W.................... 1.70
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, 2015, pursuant to the contractual expense
limitations referred to above, SunAmerica has waived or reimbursed expenses
as follows:
OTHER EXPENSE
FUND REIMBURSED
---- -------------
Japan Fund....................................................... $9,052
FUND AMOUNT
---- -------
International Dividend Strategy Fund Class A............................ $ 204
International Dividend Strategy Fund Class B............................ 1,166
International Dividend Strategy Fund Class C............................ 12,717
International Dividend Strategy Fund Class I............................ --
International Dividend Strategy Fund Class W............................ 14,601
Japan Fund Class A...................................................... 73,638
Japan Fund Class B...................................................... 6,695
Japan Fund Class C...................................................... 24,456
23
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
For the year ended September 30, 2015, the amounts recouped by SunAmerica
are as follows:
FUND AMOUNT
---- -------
International Dividend Strategy Class A................................. $ 6,671
International Dividend Strategy Class B................................. 148
International Dividend Strategy Class C................................. 17,817
International Dividend Strategy Class I................................. --
International Dividend Strategy Class W................................. 591
Japan Fund Class A...................................................... --
Japan Fund Class B...................................................... --
Japan Fund Class C...................................................... 443
At September 30, 2015, expenses previously waived and/or reimbursed by
SunAmerica during the prior two years that remain subject to recoupment and
expires during the time periods indicated are as follows:
OTHER EXPENSES REIMBURSED
-------------------------------------
SEPTEMBER 30, 2016 SEPTEMBER 30, 2017
FUND ------------------ ------------------
Japan Fund............................... $16,212 $9,052
CLASS SPECIFIC EXPENSES REIMBURSED
-------------------------------------
SEPTEMBER 30, 2016 SEPTEMBER 30, 2017
FUND ------------------ ------------------
International Dividend Strategy Fund
Class A................................. $ -- $ --
International Dividend Strategy Fund
Class C................................. 1,721 12,717
International Dividend Strategy Fund
Class I................................. -- --
International Dividend Strategy Fund
Class W................................. -- 14,010
Japan Fund Class A....................... 71,156 73,638
Japan Fund Class C....................... 24,375 24,456
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 and Class W 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" 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 and Class C Plan, the Distributor receives a
distribution fee from a Fund at an annual rate of 0.10% and 0.75%,
respectively, of the average daily net assets of the Fund's Class A 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 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, 2015, ACS received fees (see Statement of Operations) based
upon the aforementioned rates.
In addition, ACS is paid a fee of 0.25% and 0.15% of average daily net
assets of Class I and Class W shares, respectively, in connection with
providing administrative and shareholder services to Class I and Class W
shareholders. For the year ended September 30, 2015, 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 and Class C shares. ACS has advised the Funds that for the
year ended
24
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
September 30, 2015, the proceeds received from sales (and paid out to
affiliated and non-affiliated broker-dealers) and redemptions are as follows:
CLASS A CLASS C
---------------------------------------------------- -------------
CONTINGENT CONTINGENT
SALES AFFILIATED NON-AFFILIATED DEFERRED DEFERRED
FUND CHARGES BROKER-DEALERS BROKER-DEALERS SALES CHARGES SALES CHARGES
---- -------- -------------- -------------- ------------- -------------
International Dividend Strategy Fund. $202,551 $55,594 $114,802 $18,189 $27,319
Japan Fund........................... 130,962 4,392 107,161 5,405 3,486
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, 2015, 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, 2015
-------------------------------- -------------------------------
FUND CLASS A CLASS C CLASS I CLASS W CLASS A CLASS C CLASS I CLASS W
---- -------- ------- ------- ------- ------- ------- ------- -------
International Dividend Strategy Fund. $239,411 $73,192 $780 $15,249 $9,347 $3,484 $53 $2,063
Japan Fund........................... 75,128 11,250 -- -- 5,619 1,275 -- --
At September 30, 2015, 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 10% and 8%,
respectively, of the International Dividend Strategy Fund and Focused
Multi-Asset Strategy Portfolio and Focused Balanced Strategy Portfolio owned
34% and 7%, 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, 2015 were as follows:
INTERNATIONAL
DIVIDEND STRATEGY
FUND JAPAN FUND
----------------- -----------
Purchases (excluding U.S. government securities)... $245,325,560 $57,173,008
Sales (excluding U.S. government securities)....... 308,398,669 55,322,824
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, post October losses, investments in passive foreign
investment companies and derivative transactions.
FOR THE YEAR ENDED SEPTEMBER 30, 2015
----------------------------------------------------------------
DISTRIBUTABLE EARNINGS TAX DISTRIBUTIONS
-------------------------------------- ------------------------
LONG-TERM UNREALIZED
ORDINARY GAINS/CAPITAL APPRECIATION ORDINARY LONG-TERM
FUND INCOME LOSS CARRYOVER (DEPRECIATION)* INCOME CAPITAL GAINS
---- -------- -------------- --------------- ---------- -------------
International Dividend Strategy Fund. $ -- $(78,248,204) $(12,244,533) $3,056,264 $ --
Japan Fund........................... 605,141 632,720 (4,435,143) 2,692,687 364,700
--------
* Unrealized appreciation (depreciation) includes amounts for derivatives and
other assets and liabilities denominated in foreign currency.
25
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
TAX DISTRIBUTIONS
FOR THE YEAR ENDED
SEPTEMBER 30, 2014
------------------------
ORDINARY LONG-TERM
FUND INCOME CAPITAL GAINS
---- ---------- -------------
International Dividend Strategy Fund.................... $5,291,172 $ --
Japan Fund.............................................. 1,911,294 823,377
For Federal income tax purposes, the Funds indicated below have capital loss
carryforwards, which expire in the year indicated, as of September 30, 2015,
which are available to offset future capital gains, if any:
FUND CAPITAL LOSS CARRYFORWARD+ UNLIMITED+
---- ----------------------------------- ----------------------
2016 2017 2018 ST LT
----------- ----------- ----------- ----------- ----------
International Dividend Strategy Fund*..... $25,210,425 $16,578,456 $19,381,525 $11,958,054 $5,119,744
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, 2015, 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 had expired capital loss carryforwards in the year
ended September 30, 2015.
CAPITAL LOSS
CARRYFORWARD
FUND EXPIRED
---- ------------
International Dividend Strategy Fund............................... $31,528,888
Japan Fund......................................................... --
Under the current law, capital losses realized after October 31 and late
year ordinary losses may be deferred and treated as occurring on the first
day of the following year. For the fiscal year ended September 30, 2015, the
Funds elected to defer late year ordinary losses and post October capital
losses as follows:
DEFERRED DEFERRED POST- DEFERRED POST-
LATE YEAR OCTOBER SHORT- OCTOBER LONG-
ORDINARY TERM CAPITAL TERM CAPITAL
FUND LOSS LOSS LOSS
---- --------- -------------- --------------
International Dividend Strategy Fund. $312,126 $21,574,237 $14,779,821
Japan Fund........................... -- -- --
For the year ended September 30, 2015, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to disposition of passive foreign investment companies securities, net
operating losses, expired capital loss carryforwards 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.............................. $(570,665) $32,099,553 $(31,528,888)
Japan Fund......................... 285,969 (285,969) --
26
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (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, 2015:
INTERNATIONAL
DIVIDEND
STRATEGY FUND JAPAN FUND
------------- -----------
Cost (tax basis)....................................... $117,039,267 $43,625,417
============ ===========
Appreciation........................................... 1,333,110 641,266
Depreciation........................................... (13,546,603) (5,056,293)
------------ -----------
Net unrealized appreciation (depreciation)............. $(12,213,493) $(4,415,027)
============ ===========
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 FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPTEMBER 30, 2015 SEPTEMBER 30, 2014 JANUARY 27, 2015+ SEPTEMBER 30, 2014
------------------------ ------------------------ --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares
sold(1)(2).... 3,815,299 $ 38,450,295 10,141,651 $122,319,215 75,544 $ 739,541 706,588 $ 7,873,260
Reinvested
dividends..... 208,390 1,922,494 278,544 3,325,814 2,001 17,288 13,528 148,269
Shares
redeemed(1)(2) (9,399,622) (94,027,602) (4,515,532) (52,501,032) (887,831) (8,119,762) (478,112) (5,107,918)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net
increase
(decrease).... (5,375,933) $(53,654,813) 5,904,663 $ 73,143,997 (810,286) $(7,362,933) 242,004 $ 2,913,611
========== ============ ========== ============ ======== =========== ======== ===========
INTERNATIONAL DIVIDEND STRATEGY FUND
------------------------------------------------------------------------------------------------
CLASS C CLASS I
-------------------------------------------------- --------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2015 SEPTEMBER 30, 2014 SEPTEMBER 30, 2015 SEPTEMBER 30, 2014
------------------------ ------------------------ --------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares
sold.......... 759,519 $ 6,998,554 2,566,050 $ 28,424,533 -- $ -- -- $ --
Reinvested
dividends..... 47,193 397,757 64,750 706,088 868 8,089 1,694 19,978
Shares
redeemed...... (2,224,195) (20,040,819) (524,134) (5,543,315) (3,310) (33,283) (67,379) (763,521)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net
increase
(decrease).... (1,417,483) $(12,644,508) 2,106,666 $ 23,587,306 (2,442) $ (25,194) (65,685) $ (743,543)
========== ============ ========== ============ ======== =========== ======== ===========
INTERNATIONAL DIVIDEND STRATEGY FUND
--------------------------------------------------
CLASS W+
--------------------------------------------------
FOR THE
PERIOD JANUARY 29, 2015*
THROUGH
SEPTEMBER 30, 2015
------------------------
SHARES AMOUNT
---------- ------------
Shares
sold.......... 2,449,993 $ 24,413,106
Reinvested
dividends..... 13,417 124,765
Shares
redeemed...... (1,140,204) (11,119,553)
---------- ------------
Net
increase
(decrease).... 1,323,206 $ 13,418,318
========== ============
--------
(1)For the year ended September 30, 2015, includes automatic conversion of
406,607 shares of Class B shares in the amount of $3,699,759 to 371,580
shares of Class A shares in the amount of $3,699,759.
(2)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.
+ See Note 1
* Commencement of operations
27
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
JAPAN FUND JAPAN FUND
------------------------------------------------ --------------------------------------
CLASS A CLASS B
------------------------------------------------ --------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
SEPTEMBER 30, 2015 SEPTEMBER 30, 2014 JANUARY 27, 2015+ SEPTEMBER 30, 2014
------------------------ ---------------------- ------------------ ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ----------- ------- --------- ------- ---------
Shares
sold(1)(2).... 1,683,479 $ 12,676,567 2,116,814 $16,579,584 1,981 $ 13,696 58,674 $ 441,558
Reinvested
dividends..... 343,801 2,275,963 309,873 2,283,764 6,208 39,607 4,679 33,410
Shares
redeemed(1)(2) (1,774,614) (12,993,637) (966,612) (7,367,031) (74,653) (498,060) (27,265) (197,151)
---------- ------------ --------- ----------- ------- --------- ------- ---------
Net
increase
(decrease).... 252,666 $ 1,958,893 1,460,075 $11,496,317 (66,464) $(444,757) 36,088 $ 277,817
========== ============ ========= =========== ======= ========= ======= =========
JAPAN FUND
------------------------------------------------
CLASS C
------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2015 SEPTEMBER 30, 2014
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
Shares
sold.......... 773,451 $ 5,476,838 435,837 $ 3,249,375
Reinvested
dividends..... 28,554 181,886 9,799 69,866
Shares
redeemed...... (269,844) (1,879,020) (117,582) (865,845)
---------- ------------ --------- -----------
Net
increase
(decrease).... 532,161 $ 3,779,704 328,054 $ 2,453,396
========== ============ ========= ===========
--------
(1)For the year ended September 30, 2015, includes automatic conversion of
36,409 shares of Class B shares in the amount of $242,562 to 35,052 shares
of Class A shares in the amount of $242,562.
(2)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.
+ See Note 1
Note 7. Line of Credit
The Trust, along with certain other funds managed by the Adviser, has access
to a $75 million committed and a $50 million uncommitted line of credit. The
committed and uncommitted lines of credit are renewable on an annual basis
with State Street Bank and Trust Company, the Trust's custodian. Interest is
currently payable on the committed line of credit at the higher of the
Federal Funds Rate (but not less than zero) plus 125 basis points or the
One-Month London Interbank Offered Rate (but not less than zero) plus 125
basis points and State Street Bank and Trust Company's discretionary bid
rate on the uncommitted line of credit. There is also a commitment fee of 20
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. Borrowings under the line of credit will commence when the
respective Portfolio's cash shortfall exceeds $100,000. For the year ended
September 30, 2015, the following Funds had borrowings:
AVERAGE WEIGHTED
DAYS INTEREST DEBT AVERAGE
FUND OUTSTANDING CHARGES UTILIZED INTEREST
---- ----------- -------- ---------- --------
International Dividend Strategy Fund.... 35 $1,568 $1,184,655 1.38%
Japan Fund.............................. 5 96 500,108 1.38
At September 30, 2015, there were no borrowings outstanding.
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, 2015, none of the Funds participated in
this program.
28
SUNAMERICA EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS -- SEPTEMBER 30, 2015 -- (CONTINUED)
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 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, 2015
-----------------------------------------------
International Dividend Strategy Fund. $-- $1 $444
=== == ====
Note 10. Investment Concentration
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 countries. These securities may be denominated in
currencies other than U.S. dollars. While investing internationally may
reduce portfolio risk by increasing the diversification of portfolio
investments, 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. These risks are primary risks of the Japan Fund.
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 "Funds") at September 30,
2015, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period 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 Funds' 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, 2015 by correspondence with the
custodian, transfer agent, 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 20, 2015
30
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2015 -- (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, 2016 at an in-person meeting held on June 2, 2015 (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, 2016 (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 the 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, 2015 -- (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,
2015, SunAmerica managed, advised and/or administered approximately $74.7
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
Fund as set forth in the Fund's prospectus. 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 fee 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, 2015. 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 and that the Fund underperformed its Lipper
Index for the one-year period. 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 concluded that the Fund's performance
was being addressed.
Japan Fund. The Board considered that the Fund's performance was below the
median of its Peer Group for the one-, two- and three-year periods, and below
the median of its Peer Universe for the one-year period and above the median of
its Peer Universe for the two- and three-year periods. The Board also
considered that the Fund outperformed its Lipper Index for the two-year period
and underperformed its Lipper Index for the one- and three-year periods. The
Board further considered that effective January 27, 2012, the Fund changed its
name and certain of the Fund's principal investment strategies and techniques,
and the Subadviser was appointed as
32
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2015 -- (UNAUDITED)
(CONTINUED)
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 and concluded that the Fund's
performance was satisfactory in view of all factors considered.
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 FEE 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 fee, the Board received a
report independently prepared by Lipper. The report showed comparative fee
information of the Fund's Peer Group and/or Peer Universe that the Board used
as a guide to help assess the reasonableness of the subadvisory fee. 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 Trustees also considered that the
subadvisory fee is 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 fee paid out by SunAmerica and the amount
of the management fee which it retained and determined that these amounts were
reasonable in light of the services performed by SunAmerica and the Subadviser,
respectively.
33
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2015 -- (UNAUDITED)
(CONTINUED)
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 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 fee paid by SunAmerica to the
Subadviser was 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.
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 equal to the median of its Peer Group and
above the median of its Peer Universe. The Board took into account management's
discussion of the Fund's expenses, including the size of the Peer Group.
PROFITABILITY. The Board also considered SunAmerica's profitability and the
benefits SunAmerica and its affiliates received from their 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 limiting total
fees 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.
34
SUNAMERICA EQUITY FUNDS
APPROVAL OF ADVISORY AGREEMENTS -- SEPTEMBER 30, 2015 -- (UNAUDITED)
(CONTINUED)
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.
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
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 also considered the benefits SunAmerica and the
Subadviser derive from their soft dollar arrangements, including arrangements
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, 2016. 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, 2015 -- (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. 77 Director, Sysco Corp. (1996
Age: 69 to present); Director, Luby's,
Inc. (1998 to present).
William F. Devin Trustee 2001-present Retired. 77 None
Age: 76
Richard W. Grant Trustee 2011-present Retired. Prior to that, 28 None
Age: 69 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 28 None
Age: 72 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).
INTERESTED TRUSTEES
Peter A. Harbeck(3) Trustee 1995-present President, CEO and Director, 137 None
Age: 61 SunAmerica. (1995 to
present); Director, AIG
Capital Services, Inc.
("ACS") (1993 to present);
Chairman (2004-Present),
President and CEO, Advisor
Group, Inc. (2013-Present).
William J. Shea(5) Trustee 2004-present Executive Chairman, Caliber, 28 Director, Boston Private
Age: 67 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, 2015 -- (UNAUDITED)
(CONTINUED)
NUMBER OF
POSITION HELD TERM OF PORTFOLIOS IN
NAME, 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)
-------------------- ------------- -------------- ----------------------------- ------------- -------------------
OFFICERS
John T. Genoy President 2007-present Chief Financial Officer, N/A N/A
Age: 47 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: 49 General Counsel,
SunAmerica (2005 to
present).
Kathleen Fuentes Chief Legal 2013-present Vice President and Deputy N/A N/A
Age: 46 Officer and General Counsel,
Assistant SunAmerica (2006 to
Secretary present)
James Nichols Vice 2006-present Director, President and CEO, N/A N/A
Age: 49 President ACS (2006 to present);
Senior Vice President,
SunAmerica (2002 to
present).
Katherine Stoner Vice 2011-present Vice President, SunAmerica N/A N/A
Age: 58 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).
Kara Murphy Vice 2014-present Chief Investment Officer, N/A N/A
Age: 42 President SunAmerica (2013 to
present)
Gregory R. Kingston Treasurer 2014-present Vice President and Head of N/A N/A
Age: 49 Mutual Fund Administration,
SunAmerica (2014 to
present)
37
SUNAMERICA EQUITY FUNDS
TRUSTEE AND OFFICER INFORMATION -- SEPTEMBER 30, 2015 -- (UNAUDITED)
(CONTINUED)
NUMBER OF
POSITION HELD TERM OF PORTFOLIOS IN
NAME, 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)
--------------------- ------------- -------------- ---------------------------- ------------- -------------------
Shawn Parry Vice 2005-present Vice President (2014- N/A N/A
Age: 43 President Present) and Assistant Vice
and President, SunAmerica
Assistant (2005-2014)
Treasurer
Donna McManus Vice 2014-present Vice President, SunAmerica N/A N/A
Age: 54 President (2014 to present); Managing
and Director, BNY Mellon
Assistant (2009-2014).
Treasurer
Matthew J. Hackethal Anti- 2006-present Chief Compliance Officer, N/A N/A
Age: 43 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 (3 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 (20
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.
(5)Interested Trustee, as defined within the 1940 Act, because of a family
member affiliation with Wellington Management.
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 capital gain
distributions for the taxable year ended September 30, 2015. The information
and capital gain distributions reported herein may differ from the information
and distributions taxable to the shareholders for the calendar year ending
December 31, 2015. The information necessary to complete your tax returns will
be included with your Form 1099-DIV to be received under separate cover in
early 2016.
During the year ended September 30, 2015, 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........................... 0.07 --
Japan Class B........................... 0.07 --
Japan Class C........................... 0.07 --
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, 2015 was
$607,770 and $67,186, respectively. The gross foreign source income for the
information reporting is $7,112,849 and $643,522, respectively.
For the year ended September 30, 2015, 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. $3,056,265
Japan........................... 2,692,687
39
(THIS PAGE INTENTIONALLY LEFT BLANK)
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.
41
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
SUNAMERICA INTERNATIONAL DIVIDEND STRATEGY FUND
The SunAmerica International Dividend Strategy Fund Class A shares returned
-27.24% (before maximum sales charge) for the 12-month period ended
September 30, 2015. The Fund underperformed its benchmark, the MSCI ACWI
ex-U.S. (Net)/*/, which returned -12.16% during the same period.
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 detracted, as the Brazilian
equity market returned -48.19%/**/ during the annual period. Positioning in
Canada, Norway, Turkey and Thailand hurt the Fund's relative results as well.
Conversely, having an overweighted allocation to Taiwanese equities contributed
to relative results, as Taiwan's equity market posted a return of -10.56%
during the annual period, outpacing the MSCI ACWI ex-U.S. (Net). A combination
of allocation positioning and security selection in Australia, the Netherlands,
Israel, the U.K., Belgium and South Korea also proved effective.
From a sector perspective, stocks held within the Energy, Utilities,
Telecommunication Services, Materials, Industrials and Consumer Staples sectors
hampered results most. Having an overweighted allocation to Energy, which was
the weakest sector in the MSCI ACWI ex-U.S. (Net) during the annual period,
also hurt. Such detractors were only partially offset by the positive
contributions made by stocks held within the Consumer Discretionary and
Information Technology sectors. Having an overweighted allocation to the
Telecommunication Services sector, which outpaced the MSCI ACWI ex-U.S. (Net)
during the annual period, and an underweighted allocation to Materials, 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 Colombian oil and gas exploration and production company PTT
Exploration and Production PCL, Brazilian cosmetics manufacturer Natura
Cosmeticos SA, Brazilian electric utilities network Cia Energetica de Minas
Gerais (CEMIG), Brazilian integrated oil company Petroleo Brasileiro SA
(Petrobras) and Brazilian steel producer Cia Siderugico Nacional. PTT
Exploration suffered as a result of the steep decline in oil prices and the
resulting impact of such on its cash flows and dividend. The other four major
detractors from Fund results were Brazilian companies, each impacted by what
was a difficult macro environment in the country. Some also faced
company-specific or industry-focused headwinds. For example, shares of Natura
Cosmeticos SA were also hurt by tougher competition and weak results. Petrobras
additionally faced declining oil prices and a corruption scandal. Cia
Siderugico Nacional saw its share price decline driven by weak global steel
demand, which, in turn, led to a pricing environment that detracted from the
company's profitability and cash flow.
The top individual positive contributors to Fund performance during the annual
period were Taiwanese information technology components designer and
manufacturer Pegatron Corp., Japanese homebuilder Sekisui House, Ltd.,
Netherlands-based international consumer staples retailer Koninklijke Ahold NV,
U.K. cable and satellite TV and Internet services provider Sky PLC and Swiss
reinsurance and insurance company Swiss Re AG. Pegatron Corp. performed
strongly, particularly during the fourth quarter of 2014 and first quarter of
2015 on strong iPhone shipments, improving personal computer shipment data and
good operating margin results. Supporting shares of Sekisui House, Ltd. was a
solid recovery in housing market orders, especially during the first half of
2015. Shares of Koninklijke Ahold NV traded up on improved execution, market
share gains, strong return of cash to shareholders and news flow around merger
speculation. Sky benefited from solid customer growth as well as lower churn,
or subscriber turnover, though much of the annual period. The company also saw
good growth in and acceptance of its original content. Swiss Re's performance
was driven primarily by steady quarterly results and strong capital returns to
shareholders.
--------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
When investing internationally, the value of an 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. 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
42
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
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-weighted index designed to provide a
broad measure of the global equity market performance of 45 developed and
emerging markets throughout the world, 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.
/**/All market returns are expressed in U.S. dollar terms unless specified
otherwise.
The Fund's holdings are subject to change. Accordingly, securities listed may
or may not be a part of current portfolio construction.
43
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 $7,415. The same amount invested in
securities mirroring the performance of the MSCI ACWI ex-U.S. (Net) would be
valued at $13,481.
[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 C++ Class I Class W
------------------ ------------------ ------------------ ------------------
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 -31.42% -27.24% -28.41% -27.70% -27.13% -27.13% N/A N/A
----------------------------------------------------------------------------------------------
5 Year Return -6.28% -23.28% -5.80% -25.82% -5.04% -22.77% N/A N/A
----------------------------------------------------------------------------------------------
10 Year Return -2.95% -21.30% -3.00% -26.27% -2.26% -20.42% N/A N/A
----------------------------------------------------------------------------------------------
Since Inception* -0.79% -8.72% -1.19% -19.86% 1.01% 14.95% N/A -16.23%
----------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would have been lower.
* Inception date: Class A: 11/19/96; Class C: 03/06/97; Class I: 11/16/01;
Class W: 01/29/15.
# 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 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, 2015, the SunAmerica International
Dividend Strategy Class A returned -31.42% compared to -12.16% 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% 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 (All Country World Index) ex-U.S. (Net) is a free
float-adjusted market capitalization-weighted index designed to provide a
broad measure of the global equity market performance of 45 developed and
emerging markets throughout the world, 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.
44
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
SUNAMERICA JAPAN FUND
The SunAmerica Japan Fund Class A shares returned -4.91% (before maximum sales
charge) for the 12-month period ended September 30, 2015. The Fund
underperformed its benchmark, the MSCI Japan Index (Net)/*/, which returned
-2.22% during the same period.
The Japanese equity market advanced in local currency terms in the fourth
quarter of 2014 and the first half of 2015, as several market-friendly policy
moves led to foreign buying and yen weakness. These policy moves included the
extension of the quantitative easing by the Bank of Japan, public pension fund
reform, postponement of a second round sales tax hike and re-election of the
Liberal Democratic Party government. Japanese equities were further supported
by favorable supply/demand conditions, including buying by domestic public
pension funds and foreign investors amid ongoing worldwide quantitative easing.
The Japanese economy also seemed to be improving, expanding at an annualized
rate of 3.9% in the first quarter of 2015, beating forecasts. A strong pickup
in business investment and inventory buildup led the economic expansion.
Further, the jobless rate in Japan unexpectedly fell to 3.3% in the second
quarter of 2015 - its lowest level since April 1997 - and Japan's Purchasing
Managers' Index (PMI) composite exceeded estimates. This market optimism more
than offset the weaknesses created by global events that drove broad "risk off"
investor sentiment. However, Japanese equities declined in the third quarter of
2015, as growth in Japanese exports slowed to 3.1% (versus 4.1% expected), hit
by slower demand from China and Europe. Japanese machinery orders unexpectedly
fell 3.6% (versus an expected increase of 3%), adding pressure on the Bank of
Japan to inject more stimulus into the economy. Finally, the Japanese
manufacturing PMI came in at 50.9 in September 2015, below estimates of 51.2,
as exports were sapped by weaker international demand. While the MSCI Japan
Index (Net) posted solid positive returns for the annual period overall in
local currency terms, the Japanese yen's decline of 8.4% versus the U.S. dollar
during the 12 months ended September 30, 2015 led to negative returns in
U.S. dollar terms.
The Fund's relative underperformance during the annual period was driven
primarily by security selection overall. Individual security selection was
weakest in the Information Technology sector. To a more modest degree,
bottom-up stock selection in the Financials, Materials, Health Care, Energy and
Consumer Discretionary sectors also detracted. Effective stock selection in the
Consumer Staples, Telecommunication Services and Industrials sectors partially
offset the weak relative results.
The individual stocks that detracted from Fund performance most during the
annual period were information technology services company Fujitsu, Ltd.,
semiconductor company Sanken Electric Co., Ltd. and specialty steel company
Hitachi Metals, Ltd. Fujitsu, Ltd., a new position in the Fund during the
annual period, detracted most from its relative results. During the first
quarter of 2015, the company reported extraordinary losses worth 30 billion
yen, which the market perceived negatively. Fujitsu's stock further declined
later in the annual period on negative sentiment due to foreign exchange
headwinds and a seasonal slowdown in telecommunications equipment demand. We
initiated a position in Sanken Electric Co., Ltd. and subsequently eliminated
it during the annual period, as the stock declined on higher than expected
costs and lower operating profits. We believe its profitability may continue to
be challenged due to higher fixed costs, and we therefore exited the position.
Shares of Hitachi Metals, Ltd. declined due to delays in Chinese power
infrastructure build-outs and weaker Japanese auto production.
The top individual contributors to Fund performance during the annual period
were Nippon Telegraph & Telephone (NTT), a telecommunications company; SCSK
Corp., a high quality information technology services company with balanced
exposure to most major industrial segments; and Ryohin Keikaku Co., Ltd., a
retail company. NTT was a key contributor to the Fund's results after the
company announced in-line full-year results and provided details on an
encouraging medium-term plan for three-year earnings per share growth of more
than 50%. SCSK Corp. performed well due to stronger than expected results,
driven by growth in large-scale projects for the telecommunications industry.
We had initiated a Fund position in SCSK Corp., as we saw pricing power return
and an acceleration in its core orders as the overall market tightened. Shares
of Ryohin Keikaku Co., Ltd. rose based on positive earnings and a significant
increase in its operating profits from its overseas business. We eliminated the
Fund's position in Ryohin Keikaku Co., Ltd. as it reached our target price.
Another factor that detracted from the Fund's relative results was the broad
Japanese equity market's favoring of momentum stocks during the annual period,
which served as a headwind for the contrarian approach implemented by the Fund.
Also, small-cap stocks within the MSCI Japan Index (Net) lagged their larger
counterparts, and thus the Fund's allocation to small-cap stocks detracted from
its relative results.
45
SUNAMERICA EQUITY FUNDS
COMPARISONS: FUNDS VS. INDICES -- (UNAUDITED) (CONTINUED)
Sector allocation overall, a residual of Wellington Management's bottom-up
stock selection process, contributed positively to the Fund's relative
performance during the annual period. An underweighted allocation to
Industrials, which lagged the MSCI Japan Index (Net), and overweighted
exposures to Consumer Discretionary and Financials, which each outpaced the
benchmark index, contributed most positively to relative results. Partially
offsetting these positive contributors was the detracting effect of the Fund's
overweighted allocation to Telecommunication Services, which underperformed the
MSCI Japan Index (Net), and not having any exposure to Utilities, which was one
of the strongest sectors in the benchmark index 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.
46
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 $8,213. The same amount invested in
securities mirroring the performance of the MSCI Japan Index (Net) would be
valued at $8,915.
[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 C
------------------ ------------------
SunAmerica Average Average
Japan Annual Cumulative Annual Cumulative
Fund# Return Return+ Return Return+
----------------- ------- ---------- ------- ----------
1 Year Return -10.36% -4.91% -6.38% -5.52%
-------------------------------------------------------
5 Year Return 1.49% 14.29% 2.01% 10.48%
-------------------------------------------------------
Since Inception* -2.07% -12.88% -2.10% -18.13%
-------------------------------------------------------
+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 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 C shares have been deducted, as applicable.
For the 12 month period ended September 30, 2015, the SunAmerica Japan Class A
returned -10.36% compared to -2.22% 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% 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.
47
[LOGO]
HARBORSIDE FINANCIAL CENTER
3200 PLAZA 5
JERSEY CITY, NJ 07311-4992
TRUSTEES SHAREHOLDER SERVICING This report is submitted
Richard W. Grant AGENT solely for the general
Peter A. Harbeck SunAmerica Fund information of
Dr. Judith L. Craven Services, Inc. shareholders of the
William F. Devin Harborside Financial Funds. Distribution of
Stephen J. Gutman Center this report to persons
William J. Shea 3200 Plaza 5 other than shareholders
OFFICERS Jersey City, NJ of the Funds is
John T. Genoy, President 07311-4992 authorized only in
and Chief Executive CUSTODIAN AND TRANSFER con-nection with a
Officer AGENT currently effective
Kara Murphy, Vice State Street Bank and pro-spectus, setting
President Trust Company forth details of the
James Nichols, Vice P.O. Box 5607 Funds, which must precede
President Boston, MA 02110 or accom-pany this report.
Katherine Stoner, Vice VOTING PROXIES ON TRUST DELIVERY OF SHAREHOLDER
President and Chief PORTFOLIO SECURITIES DOCUMENTS
Compliance Officer A description of the The Funds have adopted a
Gregory N. Bressler, policies and procedures policy that allows them
Secretary that the Trust uses to to send only one copy of
Gregory R. Kingston, determine how to vote a Fund's prospectus,
Treasurer proxies relating to proxy material, annual
Shawn Parry, Vice securities held in a report and semi-annual
President and Fund's portfolio which is report (the "shareholder
Assistant Treasurer available in the Trust's documents") to
Donna McManus, Vice Statement of Additional shareholders with
President and Information, may be multiple accounts
Assistant Treasurer obtained without charge residing at the same
Kathleen Fuentes, Chief upon request, by calling "household." This
Legal Officer and (800) 858-8850. This practice is called
Assistant Secretary in-formation is also householding and reduces
Matthew Hackethal, available from the EDGAR Fund expenses, which
Anti-Money Laundering database on the U.S. benefits you and other
Compliance Officer Securities and Ex-change shareholders. Unless the
Chris Okeke, Assistant Commission's website at Funds receive
Treasurer http://www.sec.gov. instructions to the
INVESTMENT ADVISER PROXY VOTING RECORD ON con-trary, you will only
SunAmerica Asset SUNAMERICA EQUITY FUNDS receive one copy of the
Management, LLC Information regarding how shareholder documents.
Harborside Financial SunAmerica Equity Funds The Funds will continue
Center voted proxies relating to to household the
3200 Plaza 5 securities held in share-holder documents
Jersey City, NJ SunAmerica Equity Funds indefinitely, until we
07311-4992 during the most recent are instructed otherwise.
DISTRIBUTOR twelve month period ended If you do not wish to
AIG Capital Services, June 30 is available, participate in
Inc. once filed with the U.S. householding, please
Harborside Financial Securities and Exchange contact Shareholder
Center Commission, without Services at (800)
3200 Plaza 5 charge, upon request, by 858-8850 ext. 6010 or
Jersey City, NJ calling (800) 858-8850 or send a written request
07311-4992 on the U.S. Securities with your name, the name
and Exchange Commission's of your fund(s) and your
website at account number(s) to
http://www.sec.gov. SunAmerica Mutual Funds
DISCLOSURE OF QUARTERLY c/o BFDS, P.O. Box
PORTFOLIO HOLDINGS 219186, Kansas City MO,
The Trust is required to 64121-9186. We will
file its complete resume individual
schedule of portfolio mailings for your account
holdings with the U.S. within thirty (30) days
Securities and Exchange of receipt of your
Commission for its first request.
and third fiscal quarters This report is submitted
on Form N-Q. The Trust's solely for the general
Forms N-Q are available information of
on the U.S. Securities shareholders of the
and Exchange Commission's Funds. Distribution of
website at this report to persons
http://www.sec.gov. You other than shareholders
can also review and of the Funds is
obtain copies of the authorized only in
Forms N-Q at the U.S. con-nection with a
Securities and Exchange currently effective
Com-mission's Public pro-spectus, setting
Reference Room in forth details of the
Wash-ington, DC Funds, which must precede
(information on the or accom-pany this report.
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 - 9/15
[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 2015, 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.
Currently, the registrant does not have an Audit Committee member who
possesses all of the attributes required to be an "audit committee
financial expert," as defined in instruction 2(b) of Item 3 of
Form N-CSR. However, the Board of Trustees believes that the members
of the Audit Committee have substantial experience relating to the
review of financial statements and the operations of audit committees.
Accordingly, the Board believes that the members are qualified to
evaluate the registrant's financial statements, supervise the
registrant's preparation of its financial statements, and oversee the
work of the registrant's independent auditors.
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:
2014 2015
(a) Audit Fees ....................$ 103,925 $ 106,005
(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:
2014 2015
(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 2014 and 2015 were $0 and $36,665, 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, 2015
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, 2015
By: /s/ Gregory R. Kingston
-----------------------
Gregory R. Kingston
Treasurer
Date: December 8, 2015