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 5, 185 Hudson Street, Jersey City, NJ 07311
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
John T. Genoy
Senior Vice President
SunAmerica Asset Management, LLC
Harborside 5,
185 Hudson Street,
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, 2017
-------------------------
Item 1. Reports to Stockholders
ANNUAL REPORT 2017
SUNAMERICA
Equity Funds
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[LOGO]
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Table of Contents
SHAREHOLDER LETTER.......................................... 2
EXPENSE EXAMPLE............................................. 5
STATEMENT OF ASSETS AND LIABILITIES......................... 7
STATEMENT OF OPERATIONS..................................... 9
STATEMENT OF CHANGES IN NET ASSETS.......................... 10
FINANCIAL HIGHLIGHTS........................................ 11
PORTFOLIO OF INVESTMENTS.................................... 13
NOTES TO FINANCIAL STATEMENTS............................... 19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..... 31
APPROVAL OF ADVISORY AGREEMENTS............................. 32
TRUSTEE AND OFFICER INFORMATION............................. 37
SHAREHOLDER TAX INFORMATION................................. 40
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, 2017. Please note that effective
February 28, 2017, SunAmerica Mutual Funds were rebranded as AIG Funds, and
each Fund's name was changed accordingly. SunAmerica Asset Management, LLC, the
investment adviser to each Fund, continues to serve as investment adviser of
the Funds and retains its current name. In addition, there was no change in the
Funds' investment goals or strategies, portfolio managers or ticker symbols in
connection with the rebranding.
From a broad perspective, the 12 months ended September 30, 2017 was a period
wherein global equity markets rallied despite unexpected political events both
in the U.S. and abroad, heightened geopolitical risk and three Federal Reserve
(the "Fed") interest rate raises.
As the annual period began in October 2016, a combination of hawkish Fed
commentary and improving U.S. economic data led to increased anticipation of a
December 2016 interest rate hike by the Fed. Elsewhere, the European Central
Bank (ECB) minutes stressed a commitment to ongoing monthly bond-buying of
80 billion euros at least through March 2017, helping to dispel concerns about
potential tapering. The U.K.'s first official GDP growth figure since the
Brexit vote was more robust than consensus-expected at 0.5%. Japanese equities
enjoyed strong performance owing to weakness of the yen, as Bank of Japan
governor Kuroda stated there was room for further easing if necessary to
achieve its 2% inflation target.
Following the unexpected victory of Donald Trump in the November 2016 U.S.
elections, U.S. and international equities quickly reversed a short-lived
sell-off and surged on anticipation of a pro-growth effect of Mr. Trump's
fiscal stimulus plan. However, U.S. dollar appreciation against local
currencies detracted from international equities' U.S. dollar returns, driving
a November 2016 decline. The Fed raised the targeted federal funds rate by 25
basis points+ in December 2016, for the first time in a year. The increase had
largely been anticipated, and set a more hawkish hike path for 2017, causing
equities to decline, albeit modestly, following the announcement. International
equities rallied during an eventful December 2016, with the resignation of
Prime Minister Renzi after Italian voters' rejection of that nation's
constitutional reform referendum and the ECB's decision to slow its monthly
pace of quantitative easing while extending the program to the end of 2017.
During the first quarter of 2017, global equities advanced. While U.S. equity
markets flirted with new highs, international equity markets performed even
better, boosted by a weakening U.S. dollar and by the accommodative monetary
stance from the ECB and the Bank of Japan that remained in place. Additionally,
the European economies and the Chinese economy showed some signs of
strengthening during the quarter. Europe surprised on the upside due to
cyclical factors in spite of political uncertainties, including several
upcoming elections. China remained on its government-targeted 6% to 7% growth
path, as export volumes appeared to be increasing on strengthening global
demand. Against this strengthening demand, the People's Bank of China raised
its repo rate in concert with the Fed's March interest rate increase. Japan, by
contrast, maintained a slow pace of economic growth, despite the extraordinary
monetary accommodation by the Bank of Japan, with cash earnings and consumption
particularly low. Emerging market equities saw particularly robust gains, as
riskier positions took the lead and as corporate earnings expectations
increased. Indeed, emerging market currencies strengthened during the quarter,
despite various factors including the Fed's gradual rise in interest rates.
Within the U.S., favorable sentiment persisted amid anticipation of more
growth-oriented government policies, such as lower taxes and reduced
regulation. The markets were also encouraged by accelerating economic growth,
highlighted by strengthening employment and increases in both consumer and
business confidence. The rally lost some steam after the Fed raised interest
rates by 25 basis points again in March 2017. Despite the weaker performance
for stocks in March 2017, the major equity indices finished the quarter with
strong positive returns.
2
Global equities continued to rally in the second quarter of 2017, as solid
global economic data and strong corporate earnings growth bolstered investors'
optimism. Market participants appeared relieved in May 2017 after the
independent centrist candidate won the French presidential election by a large
margin, a victory widely seen as supportive for the stability of the European
Union. Further, European economic growth indicators signaled strong regional
momentum. Chinese manufacturing and services data surprised to the upside.
Japan's equity market performed well as its central bank maintained its
accommodative policy stance. Japan displayed accelerating export growth, and
business sentiment seemed to improve, as suggested by the uptrend in the Tankan
Survey of Large Enterprises. Emerging market equities extended their winning
streak, buoyed by an improving economic landscape, a weaker U.S. dollar and
upbeat earnings results. Meanwhile, U.S. fiscal stimulus hopes faded near the
end of the quarter after a vote on health care reform was delayed due to
insufficient support from Senate Republicans. Even so, this, along with
plunging oil prices, heightened geopolitical risk and another 25 basis point
rate increase by the Fed in June 2017, were not enough to derail what was the
seventh straight quarter of positive results for U.S. equities.
A broad-based expansion of economic growth, supportive monetary policy and
benign inflation helped drive global equity markets higher during the third
quarter of 2017, the sixth consecutive quarter of gains for global equities.
Eurozone confidence reached a decade-high in September 2017 on the back of
solid employment and manufacturing data and a resurgence in the services
sector. Japanese equities were supported by an accelerating manufacturing
sector, greater exports and improved inflation data. The nation's second
quarter 2017 GDP was reported to have expanded at a 4% annualized rate, the
fastest pace in more than three years. Reflecting this, the Tankan Survey of
Large Enterprises similarly reached a 10-year high. Emerging market equities
performed strongly, drawing support from improving fundamentals, higher
commodity prices and encouraging corporate earnings. U.S. equities rose despite
continued political turmoil, as the U.S. economy continued on an upward
trajectory and corporate earnings remained strong. Signs of slightly firming
inflation and improving employment data increased investors' expectation of
further monetary policy tightening by the Fed at the end of the calendar year.
Also, in a widely anticipated move, the Fed announced its balance sheet
normalization++ program would begin in October 2017, stating the process would
be gradual. On the political front, Angela Merkel was reelected for a fourth
term as German Chancellor but faced a more fractured parliament. Global
geopolitical tensions were elevated by North Korean missile tests and a new
Russian sanctions bill signed by the U.S. President.
Against this backdrop, international equities, as measured by the MSCI ACWI
ex-U.S. (Net),/*/ posted a return of 19.61% in U.S. dollar terms for the
12-month period ended September 30, 2017. Japanese equities, as measured by the
MSCI Japan Index (Net),/*/ posted robust gains but lagged on a comparative
basis, generating a return of 14.09% in U.S. dollar terms for the same period.
To compare, U.S. equities, as measured by the S&P 500(R) Index,/*/ returned
18.61%, and emerging market equities, as measured by the MSCI Emerging Markets
Index (Net),/*/ returned 22.46% for the same 12-month period.
Amid these conditions, each of the SunAmerica Equity Funds generated positive
absolute returns during the annual period ended September 30, 2017. On the
following pages, you will find financial statements and portfolio information
for each of the SunAmerica Equity Funds.
3
Shareholder Letter -- (unaudited) (continued)
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 via our website, www.aig.com/funds.
Sincerely,
The SunAmerica Equity Funds Investment Professionals
Timothy Pettee Jun Oh Timothy Campion
Andrew Sheridan Kara Murphy Jane Algieri
--------
Past performance is no guarantee of future results.
+ A basis point is 1/100/th/ of a percentage point.
++Balance sheet normalization refers to the steps the Fed will take to reverse
quantitative easing and reduce the substantial monetary accommodation it has
provided to the economy since the financial crisis began in 2007.
* The Morgan Stanley Capital International All Country World Index (MSCI ACWI)
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 the 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. The MSCI Emerging Markets Index
(Net) is a free float-adjusted market capitalization index that is designed
to measure equity performance of emerging markets. It consists of 23 emerging
market country indices. Net total return indices reinvest dividends after the
deduction of withholding taxes, using (for international indices) a tax rate
applicable to non-resident institutional investors who do not benefit from
double taxation treaties. Indices are not managed and an investor cannot
invest directly in an index.
4
SunAmerica Equity Funds
EXPENSE EXAMPLE -- September 30, 2017 -- (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, 2017 and held until September 30, 2017.
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
Period Ended September 30, 2017" 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 Period Ended September 30, 2017" column
and the "Annualized Expense Ratio" column do 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 Period Ended
September 30, 2017" 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 Period Ended September 30, 2017" 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 Period Ended September 30, 2017" column and the
"Annualized Expense Ratio" column do 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 Period Ended September
30, 2017" 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 Period Ended September 30, 2017" 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.
5
SunAmerica Equity Funds
EXPENSE EXAMPLE -- September 30, 2017 -- (unaudited) (continued)
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending Account
Ending Account Expense Paid Value using Expense Paid
Value Using During the a Hypothetical During the
Beginning Actual Period Beginning 5% Assumed Period
Account Value Return at Ended Account Value Return at Ended
at April 1, September 30, September 30, at April 1, September 30, September 30,
Fund 2017 2017 2017 2017 2017 2017
---- ------------- -------------- ------------- ------------- -------------- -------------
AIG International Dividend Strategy
Fund(2)(3)
Class A........................... $1,000.00 $1,074.36 $ 9.88 $1,000.00 $1,015.54 $ 9.60
Class C........................... $1,000.00 $1,070.55 $13.24 $1,000.00 $1,012.28 $12.86
Class I........................... $1,000.00 $1,075.27 $ 9.36 $1,000.00 $1,016.04 $ 9.10
Class W........................... $1,000.00 $1,075.99 $ 8.85 $1,000.00 $1,016.55 $ 8.59
AIG Japan Fund(2)(3)
Class A........................... $1,000.00 $1,103.71 $10.02 $1,000.00 $1,015.54 $ 9.60
Class C........................... $1,000.00 $1,099.60 $13.42 $1,000.00 $1,012.28 $12.86
Class W(4)........................ $1,000.00 $1,117.88 $ 8.09 $1,000.00 $1,016.55 $ 8.59
Annualized
Expense
Fund Ratio(1)
---- ----------
AIG International Dividend Strategy
Fund(2)(3)
Class A........................... 1.90%
Class C........................... 2.55%
Class I........................... 1.80%
Class W........................... 1.70%
AIG Japan Fund(2)(3)
Class A........................... 1.90%
Class C........................... 2.55%
Class W(4)........................ 1.70%
--------
(1)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) except for AIG Japan Fund Class W
"Actual Return" information, which was multiplied by 164 days divided by 365
days. 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.
(2)During the stated period, the investment advisor either waived a portion of
or all of the fees 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 Period
Ended September 30, 2017" 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 Period Ended September 30, 2017" and the annualized
"Expense Ratio" would have been lower.
(3)See Note 1
(4)Commenced operations on April 20, 2017.
6
SunAmerica Equity Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2017
AIG International
Dividend
Strategy Fund+ AIG Japan Fund+
----------------- ---------------
ASSETS:
Investments at value (unaffiliated)*................ $ 90,923,512 $28,233,957
Repurchase agreements (cost approximates value)..... 1,495,000 503,000
Cash................................................ 831 843
Foreign cash*....................................... 53,597 7,073
Receivable for:
Fund shares sold................................... 16,808 2,494
Dividends and interest............................. 180,431 202,680
Investments sold................................... -- 165,048
Prepaid expenses and other assets................... 5,630 5,603
Due from investment adviser for expense
reimbursements/fee waivers......................... -- 56,215
------------ -----------
Total assets........................................ 92,675,809 29,176,913
------------ -----------
LIABILITIES:
Payable for:
Fund shares redeemed............................... 35,347 5,373
Investments purchased.............................. -- 78,984
Investment advisory and management fees............ 75,909 26,874
Distribution and service maintenance fees.......... 32,694 10,922
Transfer agent fees and expenses................... 20,262 7,931
Trustees' fees and expenses........................ 132 242
Other accrued expenses............................. 232,427 109,178
Accrued foreign tax on capital gains................ 47,169 --
Due to investment advisor expense recoupment........ 45,708 --
------------ -----------
Total liabilities................................... 489,648 239,504
------------ -----------
Net Assets.......................................... $ 92,186,161 $28,937,409
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value...... $ 98,134 $ 33,902
Paid-in capital..................................... 162,843,103 24,744,374
------------ -----------
162,941,237 24,778,276
Accumulated undistributed net investment income
(loss)............................................. 110,851 113,188
Accumulated undistributed net realized gain (loss)
on investments, futures contracts, options
contracts, securities sold short, and foreign
exchange transactions.............................. (80,964,205) 850,259
Unrealized appreciation (depreciation) on
investments........................................ 10,151,801 3,195,681
Unrealized foreign exchange gain (loss) on other
assets and liabilities............................. (6,354) 5
Accrued capital gains tax on unrealized
appreciation (depreciation)........................ (47,169) --
------------ -----------
Net Assets.......................................... $ 92,186,161 $28,937,409
============ ===========
*Cost
Investments (unaffiliated)......................... $ 80,771,711 $25,038,276
============ ===========
Foreign cash....................................... $ 54,009 $ 7,079
============ ===========
--------
+ See Note 1
See Notes to Financial Statements
7
SunAmerica Equity Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2017 -- (continued)
AIG International
Dividend
Strategy Fund+ AIG Japan Fund+
----------------- ---------------
Class A (unlimited shares authorized):
Net assets.......................................... $72,696,160 $23,422,515
Shares of beneficial interest issued and outstanding 7,627,037 2,717,012
Net asset value and redemption price per share...... $ 9.53 $ 8.62
Maximum sales charge (5.75% of offering price)...... $ 0.58 $ 0.53
----------- -----------
Maximum offering price to public.................... $ 10.11 $ 9.15
=========== ===========
Class C (unlimited shares authorized):
Net assets.......................................... $13,125,710 $ 5,273,837
Shares of beneficial interest issued and outstanding 1,518,877 645,286
Net asset value, offering and redemption price per
share (excluding any applicable contingent
deferred sales charge)............................. $ 8.64 $ 8.17
=========== ===========
Class I (unlimited shares authorized):
Net assets.......................................... $ 264,817 $ --
Shares of beneficial interest issued and outstanding 27,453 --
Net asset value, offering and redemption price per
share.............................................. $ 9.65 $ --
=========== ===========
Class W+ (unlimited shares authorized):
Net assets.......................................... $ 6,099,474 $ 241,057
Shares of beneficial interest issued and outstanding 639,997 27,941
Net asset value, offering and redemption price per
share.............................................. $ 9.53 $ 8.63
=========== ===========
--------
+ See Note 1
See Notes to Financial Statements
8
SunAmerica Equity Funds
STATEMENT OF OPERATIONS -- September 30, 2017
AIG International
Dividend
Strategy Fund+ AIG Japan Fund+
----------------- ---------------
INVESTMENT INCOME:
Dividends (unaffiliated)............................................................. $ 4,567,190 $ 485,374
Interest (unaffiliated).............................................................. 608 360
----------- ----------
Total investment income*............................................................ 4,567,798 485,734
----------- ----------
EXPENSES:
Investment advisory and management fees................................................ 884,572 342,050
Distributionand service maintenance fees:
Class A............................................................................. 238,489 85,486
Class C............................................................................. 138,331 51,392
Servicefees:
Class I............................................................................. 632 --
Class W+............................................................................ 8,622 78
Transferagent fees and expenses:
Class A............................................................................. 170,597 56,495
Class C............................................................................. 36,697 13,035
Class I............................................................................. 1,188 --
Class W+............................................................................ 13,565 3,910
Registrationfees:
Class A............................................................................. 16,579 17,676
Class C............................................................................. 14,557 11,888
Class I............................................................................. 1,287 --
Class W+............................................................................ 12,648 5,003
Custodian and accounting fees........................................................ 39,542 29,772
Reports to shareholders.............................................................. 69,719 32,624
Audit and tax fees................................................................... 76,723 75,575
Legal fees........................................................................... 15,867 16,335
Trustees' fees and expenses.......................................................... 3,209 1,130
Interest expense..................................................................... 4,398 387
Other expenses....................................................................... 27,224 39,159
----------- ----------
Total expenses before fee waivers, expense reimbursements, and expense recoupments.. 1,774,446 781,995
Net (Fees waived and expenses reimbursed)/recouped by investment adviser (Note 3)... (11,843) (183,569)
----------- ----------
Net expenses........................................................................ 1,762,603 598,426
----------- ----------
Net investment income (loss)........................................................... 2,805,195 (112,692)
----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**............................... (707,834) 3,572,143
Net realized foreign exchange gain (loss) on other assets and liabilities.............. (50,999) (24,012)
----------- ----------
Net realized gain (loss) on investments and foreign currencies......................... (758,833) 3,548,131
----------- ----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)......... 9,392,803 1,821,749
Change in unrealized foreign exchange gain (loss) on other assets and liabilities...... 13,710 1,150
Change in accrued capital gains tax on unrealized appreciation (depreciation).......... (47,169) --
----------- ----------
Net unrealized gain (loss) on investments and foreign currencies....................... 9,359,344 1,822,899
----------- ----------
Net realized and unrealized gain (loss) on investments and foreign currencies.......... 8,600,511 5,371,030
----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $11,405,706 $5,258,338
=========== ==========
* Net of foreign withholding taxes on interest and dividends of........................ $ 433,311 $ 55,793
=========== ==========
** Net of foreign withholding taxes on capital gains of................................ $ 1,055 $ --
=========== ==========
--------
+ See Note 1
See Notes to Financial Statements
9
SunAmerica Equity Funds
STATEMENT OF CHANGES IN NET ASSETS -- September 30, 2017
AIG International
Dividend
Strategy Fund++
--------------------------
For the year For the year
ended ended
September 30, September 30,
2017 2016
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss).................................................................. $ 2,805,195 $ 2,347,183
Net realized gain (loss) on investments and foreign currencies................................ (758,833) (6,646,222)
Net unrealized gain (loss) on investments and foreign currencies.............................. 9,359,344 12,264,963
----------- ------------
Net increase (decrease) in net assets resulting from operations................................ 11,405,706 7,965,924
----------- ------------
Distributions to shareholders from:
Net investment income (Class A)............................................................... (2,312,658) (1,412,918)
Net investment income (Class C)............................................................... (401,325) (249,596)
Net investment income (Class I)............................................................... (8,541) (5,394)
Net investment income (Class W)++............................................................. (206,258) (138,218)
Net realized gain on securities (Class A)..................................................... -- --
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............................................................ (2,928,782) (1,806,126)
----------- ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6)....... (6,007,193) (21,784,719)
----------- ------------
Total increase (decrease) in net assets........................................................ 2,469,731 (15,624,921)
NET ASSETS:
Beginning of period............................................................................ $89,716,430 $105,341,351
----------- ------------
End of period+................................................................................. $92,186,161 $ 89,716,430
=========== ============
+ Includes accumulated undistributed net investment income (loss).............................. $ 110,851 $ 211,371
=========== ============
AIG Japan Fund++
--------------------------
For the year For the year
ended ended
September 30, September 30,
2017 2016
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss).................................................................. $ (112,692) $ (52,275)
Net realized gain (loss) on investments and foreign currencies................................ 3,548,131 (1,746,666)
Net unrealized gain (loss) on investments and foreign currencies.............................. 1,822,899 5,418,486
------------ -----------
Net increase (decrease) in net assets resulting from operations................................ 5,258,338 3,619,545
------------ -----------
Distributions to shareholders from:
Net investment income (Class A)............................................................... (133,702) --
Net investment income (Class C)............................................................... (1,525) --
Net investment income (Class I)............................................................... -- --
Net investment income (Class W)++............................................................. -- --
Net realized gain on securities (Class A)..................................................... -- (1,096,454)
Net realized gain on securities (Class C)..................................................... -- (263,731)
Net realized gain on securities (Class I)..................................................... -- --
Net realized gain on securities (Class W)++................................................... -- --
------------ -----------
Total distributions to shareholders............................................................ (135,227) (1,360,185)
------------ -----------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6)....... (12,866,375) (5,162,562)
------------ -----------
Total increase (decrease) in net assets........................................................ (7,743,264) (2,903,202)
NET ASSETS:
Beginning of period............................................................................ $ 36,680,673 $39,583,875
------------ -----------
End of period+................................................................................. $ 28,937,409 $36,680,673
============ ===========
+ Includes accumulated undistributed net investment income (loss).............................. $ 113,188 $ (74,695)
============ ===========
++ See Note 1
See Notes to Financial Statements
10
SunAmerica Equity Funds
FINANCIAL HIGHLIGHTS
AIG INTERNATIONAL DIVIDEND STRATEGY FUND#
-----------------------------------------
Net gain
(loss) on
Net investments Distri- Net Net
Asset Net (both Dividends butions Asset Assets
Value investment realized Total from from net from Total Value end of
beginning income and investment investment capital distri- end of Total period
Period Ended of period (loss)(1) unrealized) operations income gains butions period Return(2) (000's)
------------------ --------- ---------- ----------- ---------- ---------- ------- ------- ------ --------- --------
Class A
-
09/30/13 $10.91 $0.47 $ 0.50 $ 0.97 $(0.47) $-- $(0.47) $11.41 9.24% $ 96,020
09/30/14 11.41 0.40 (0.14) 0.26 (0.34) -- (0.34) 11.33 2.20 162,284
09/30/15 11.33 0.23 (3.29) (3.06) (0.22) -- (0.22) 8.05 (27.24) 71,969
09/30/16 8.05 0.21 0.54 0.75 (0.17) -- (0.17) 8.63 9.49(6) 68,775
09/30/17 8.63 0.30 0.91 1.21 (0.31) -- (0.31) 9.53 14.11 72,696
Class C
-
09/30/13 10.03 0.36 0.47 0.83 (0.41) -- (0.41) 10.45 8.56 24,776
09/30/14 10.45 0.30 (0.13) 0.17 (0.27) -- (0.27) 10.35 1.56 46,349
09/30/15 10.35 0.16 (3.01) (2.85) (0.16) -- (0.16) 7.34 (27.70) 22,445
09/30/16 7.34 0.14 0.49 0.63 (0.12) -- (0.12) 7.85 8.73(6) 15,182
09/30/17 7.85 0.21 0.83 1.04 (0.25) -- (0.25) 8.64 13.40 13,126
Class I
-
09/30/13 10.99 0.44 0.56 1.00 (0.48) -- (0.48) 11.51 9.41 1,184
09/30/14 11.51 0.32 (0.02) 0.30 (0.36) -- (0.36) 11.45 2.45 426
09/30/15 11.45 0.26 (3.34) (3.08) (0.23) -- (0.23) 8.14 (27.13) 283
09/30/16 8.14 0.22 0.55 0.77 (0.18) -- (0.18) 8.73 9.60(6) 260
09/30/17 8.73 0.30 0.93 1.23 (0.31) -- (0.31) 9.65 14.28 265
Class W
-
01/29/15*-09/30/15 9.80 0.27 (1.84) (1.57) (0.19) -- (0.19) 8.04 (16.23)(7) 10,644
09/30/16 8.04 0.21 0.57 0.78 (0.19) -- (0.19) 8.63 9.83(6) 5,500
09/30/17 8.63 0.32 0.90 1.22 (0.32) -- (0.32) 9.53 14.33 6,099
Ratio
of net
Ratio of investment
expenses income (loss)
to average to average Portfolio
net assets net assets Turnover
---------- ------------- ---------
1.90%(3) 4.42%(3) 32%
1.90(3) 3.47(3) 80
1.88(3) 2.31(3) 160
1.90(3)(5) 2.61(3) 80
1.90(3) 3.28(3) 22
2.55(3) 3.70(3) 32%
2.55(3) 2.85(3) 80
2.55(3) 1.69(3) 160
2.55(3)(5) 1.78(3) 80
2.55(3) 2.48(3) 22
1.80(3) 3.98(3) 32%
1.77(3) 2.66(3) 80
1.71 2.61 160
1.80(3)(5) 2.66(3) 80
1.80(3) 3.32(3) 22
1.70(3)(4) 3.98(3)(4) 160%
1.70(3)(5) 2.50(3) 80
1.70(3) 3.55(3) 22
--------
* 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):
09/30/13 09/30/14 09/30/15 09/30/16 09/30/17
-------- -------- -------- -------- --------
AIG International Dividend Strategy Class A. 0.16% (0.09)% (0.01)% 0.03% (0.02)%
AIG International Dividend Strategy Class C. 0.20 (0.05) (0.02) 0.08 0.08
AIG International Dividend Strategy Class I. 0.09 (0.09) -- 1.95 0.69
AIG International Dividend Strategy Class W. -- -- 0.20 0.15 0.17
(4)Annualized
(5)Excludes a one time reimbursement the Fund received for custody expenses
paid in the prior years. If the reimbursement had been applied, the ratio of
expenses to the average net assets would have been 1.68%, 2.35%, 1.59% and
1.51% for Class A, Class C, Class I and Class W, respectively.
(6)The Fund's performance figure was increased by 0.25%, 0.28%, 0.25%, 0.25%
for Class A, Class C, Class I and Class W, respectively, for a reimbursement
of custody expenses from prior years.
(7)Total return is not annualized.
See Notes to Financial Statements
11
SunAmerica Equity Funds
FINANCIAL HIGHLIGHTS -- (continued)
AIG 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
-
09/30/13 $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
09/30/16 6.71 0.00 0.75 0.75 -- (0.22) (0.22) 7.24 11.26 30,895 1.90
09/30/17 7.24 (0.02) 1.44 1.42 (0.04) -- (0.04) 8.62 19.69 23,423 1.90
Class C
-
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
09/30/16 6.42 (0.05) 0.72 0.67 -- (0.22) (0.22) 6.87 10.50 5,785 2.55
09/30/17 6.87 (0.07) 1.37 1.30 (0.00) -- (0.00) 8.17 18.96 5,274 2.55
Class W
-
04/20/17*-09/30/17 7.72 0.06 0.85 0.91 -- -- -- 8.63 11.79(5) 241 1.70(4)
Ratio
of net
investment
income (loss)
to average Portfolio
net assets(3) Turnover
------------- ---------
(0.12)% 162%
(0.19) 111
(0.46) 144
0.01 151
(0.28) 115
(0.43) 162%
(0.65) 111
(0.95) 144
(0.78) 151
(0.89) 115
1.80(4) 115%
--------
* 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 (based on average net assets)
(See Note 3):
09/30/13 09/30/14 09/30/15 09/30/16 09/30/17
-------- -------- -------- -------- --------
AIG Japan Class A....................... 0.55% 0.29% 0.24% 0.41% 0.55%
AIG Japan Class C....................... 1.57 0.84 0.50 0.56 0.75
AIG Japan Class W#...................... -- -- -- -- 17.99(4)
(4)Annualized
(5)Total return is not annualized.
See Notes to Financial Statements
12
AIG International Dividend Strategy Fund#
PORTFOLIO PROFILE -- September 30, 2017 -- (unaudited)
Industry Allocation*
Food-Retail.................................. 7.0%
Medical-Drugs................................ 5.9
Cellular Telecom............................. 5.2
Human Resources.............................. 4.8
Airlines..................................... 4.5
Telephone-Integrated......................... 4.0
Building-Heavy Construction.................. 4.0
Building-Residential/Commercial.............. 3.8
Television................................... 3.1
Oil Refining & Marketing..................... 3.1
Telecom Services............................. 2.5
Transport-Services........................... 2.5
Electronic Components-Misc................... 2.4
Building & Construction Products-Misc........ 2.4
Internet Content-Information/News............ 2.4
Real Estate Operations & Development......... 2.2
Aerospace/Defense............................ 2.2
Rubber-Tires................................. 2.2
Power Converter/Supply Equipment............. 2.2
Cosmetics & Toiletries....................... 2.2
Fisheries.................................... 2.2
Electronic Components-Semiconductors......... 2.1
Office Automation & Equipment................ 2.1
Retail-Major Department Stores............... 2.0
Retail-Apparel/Shoe.......................... 2.0
Metal-Diversified............................ 2.0
Metal Processors & Fabrication............... 2.0
Electric-Generation.......................... 1.9
Semiconductor Components-Integrated Circuits. 1.9
Insurance-Multi-line......................... 1.7
Auto-Cars/Light Trucks....................... 1.6
Circuit Boards............................... 1.6
Repurchase Agreements........................ 1.6
Diversified Financial Services............... 1.6
Computers.................................... 1.5
Tobacco...................................... 1.5
Food-Wholesale/Distribution.................. 1.3
Electric-Integrated.......................... 1.1
-----
100.3%
=====
Country Allocation*
United Kingdom. 20.3%
France......... 14.3
Japan.......... 11.8
Taiwan......... 8.4
Germany........ 5.2
Norway......... 4.7
Switzerland.... 4.2
Spain.......... 3.8
China.......... 3.8
Turkey......... 3.1
Australia...... 3.0
Netherlands.... 2.4
Thailand....... 2.2
Russia......... 2.0
Sweden......... 1.8
South Africa... 1.8
Brazil......... 1.7
Cayman Islands. 1.6
United States.. 1.6
Hong Kong...... 1.5
South Korea.... 1.1
-----
100.3%
=====
--------
*Calculated as a percentage of net assets
#See Note 1
13
AIG International Dividend Strategy Fund#
PORTFOLIO OF INVESTMENTS -- September 30, 2017
Value
Security Description Shares (Note 2)
COMMON STOCKS -- 98.7%
Australia -- 3.0%
Telstra Corp., Ltd................. 414,922 $ 1,135,872
Wesfarmers, Ltd.................... 50,293 1,630,461
-----------
2,766,333
-----------
Bermuda -- 0.0%
Peace Mark Holdings, Ltd.+(1)(2)... 800,000 0
-----------
Brazil -- 1.7%
BB Seguridade Participacoes SA..... 170,174 1,538,317
-----------
Cayman Islands -- 1.6%
Zhen Ding Technology Holding, Ltd.. 742,000 1,502,401
-----------
China -- 3.8%
China Galaxy Securities Co., Ltd... 1,654,500 1,450,833
China Vanke Co., Ltd............... 629,000 2,069,397
-----------
3,520,230
-----------
France -- 14.3%
Carrefour SA....................... 62,432 1,261,413
Casino Guichard Perrachon SA....... 33,448 1,983,726
Cie de Saint-Gobain................ 37,472 2,233,009
Engie SA+.......................... 105,667 1,794,639
Orange SA.......................... 106,551 1,745,427
Sanofi............................. 21,389 2,123,745
Schneider Electric SE.............. 23,254 2,023,640
-----------
13,165,599
-----------
Germany -- 5.2%
Deutsche Post AG................... 52,017 2,315,603
METRO AG........................... 54,264 1,147,048
ProSiebenSat.1 Media SE............ 38,002 1,295,112
-----------
4,757,763
-----------
Hong Kong -- 1.5%
Lenovo Group, Ltd.................. 2,530,000 1,395,911
-----------
Japan -- 11.8%
Bridgestone Corp................... 44,700 2,028,333
Canon, Inc......................... 56,900 1,944,284
Japan Airlines Co., Ltd............ 53,600 1,813,897
Japan Tobacco, Inc................. 41,500 1,360,160
Mixi, Inc.......................... 45,200 2,181,169
Subaru Corp........................ 42,400 1,529,829
-----------
10,857,672
-----------
Netherlands -- 2.4%
Randstad Holding NV................ 35,570 2,200,384
-----------
Norway -- 4.7%
Marine Harvest ASA................. 101,786 2,012,844
Telenor ASA........................ 110,973 2,346,394
-----------
4,359,238
-----------
Russia -- 2.0%
MMC Norilsk Nickel PJSC ADR........ 105,724 1,820,039
-----------
South Africa -- 1.8%
MTN Group, Ltd..................... 177,160 1,627,562
-----------
South Korea -- 1.1%
Korea Electric Power Corp.......... 30,182 1,027,719
-----------
Spain -- 3.8%
ACS Actividades de Construccion y
Servicios SA...................... 54,454 2,017,983
Shares/
Principal Value
Security Description Amount (Note 2)
Spain (continued)
Distribuidora Internacional de
Alimentacion SA............................... 258,706 $ 1,508,949
-----------
3,526,932
-----------
Sweden -- 1.8%
Skanska AB, Class B............................ 70,703 1,638,038
-----------
Switzerland -- 4.2%
Adecco Group AG................................ 29,104 2,266,166
Roche Holding AG............................... 6,497 1,658,551
-----------
3,924,717
-----------
Taiwan -- 8.4%
Catcher Technology Co., Ltd.................... 194,000 1,807,314
Foxconn Technology Co., Ltd.................... 6,013 17,351
Hon Hai Precision Industry Co., Ltd............ 645,000 2,233,379
MediaTek, Inc.................................. 208,500 1,956,149
Novatek Microelectronics Corp.................. 453,000 1,703,008
-----------
7,717,201
-----------
Thailand -- 2.2%
Advanced Info Service PCL...................... 350,500 2,007,361
-----------
Turkey -- 3.1%
Tupras Turkiye Petrol Rafinerileri AS.......... 83,296 2,842,811
-----------
United Kingdom -- 20.3%
AstraZeneca PLC................................ 24,514 1,627,655
BAE Systems PLC................................ 241,640 2,044,781
Berkeley Group Holdings PLC.................... 21,739 1,082,771
BT Group PLC................................... 505,672 1,923,707
easyJet PLC.................................... 142,835 2,329,324
ITV PLC........................................ 678,841 1,589,152
Marks & Spencer Group PLC...................... 395,197 1,871,478
Next PLC....................................... 26,286 1,852,742
Persimmon PLC.................................. 68,956 2,385,794
Unilever PLC................................... 34,901 2,019,880
-----------
18,727,284
-----------
Total Long-Term Investment Securities
(cost $80,771,711)............................ 90,923,512
-----------
REPURCHASE AGREEMENTS -- 1.6%
Agreement with Fixed Income Clearing Corp.,
bearing interest at 0.12%, dated 09/29/2017,
to be repurchased 10/02/2017 in the amount
$1,495,015 collateralized by $1,530,000 of
United States Treasury Bonds, bearing
interest at 2.25% due 02/15/2027 and having
an approximate value of $1,527,352
(cost $1,495,000)............................. $1,495,000 1,495,000
-----------
TOTAL INVESTMENTS --
(cost $82,266,711)(3)......................... 100.3% 92,418,512
Liabilities in excess of other assets............ (0.3) (232,351)
---------- -----------
NET ASSETS -- 100.0% $92,186,161
========== ===========
--------
# See Note 1
+ Non-income producing security
(1)Security classified as Level 3 (see Note 2).
(2)Illiquid security. At September 30, 2017, the aggregate value of these
securities was $0 representing 0.0% of net assets.
(3)See Note 5 for cost of investments on a tax basis.
ADR --American Depositary Receipt
14
AIG International Dividend Strategy Fund#
PORTFOLIO OF INVESTMENTS -- September 30, 2017 -- (continued)
The following is a summary of the inputs used to value the Fund's net assets as
of September 30, 2017 (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.................. $ -- $ -- $ 0 $ 0
Other Countries.......... 90,923,512 -- -- 90,923,512
Repurchase Agreements...... -- 1,495,000 -- 1,495,000
----------- ---------- --- -----------
Total Investments at Value. $90,923,512 $1,495,000 $ 0 $92,418,512
=========== ========== === ===========
--------
* 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 $71,868,963 were transferred
from Level 2 to Level 1 due to foreign equity securities whose values were
previously adjusted for fair value pricing procedures for foreign equity
securities. There were no additional transfers between Levels during the
reporting period.
At the beginning and end of the reporting period, Level 3 investments in
securities were not considered a material portion of the Fund.
--------
# See Note 1
See Notes to Financial Statements
15
AIG Japan Fund#
PORTFOLIO PROFILE -- September 30, 2017 -- (unaudited)
Industry Allocation*
Auto/Truck Parts & Equipment-Original. 13.6%
Electronic Components-Misc............ 8.7
Chemicals-Specialty................... 7.3
Rubber-Tires.......................... 6.4
Telephone-Integrated.................. 6.0
Chemicals-Diversified................. 5.6
Computers-Integrated Systems.......... 4.5
Diversified Banking Institutions...... 3.6
Food-Confectionery.................... 3.3
Auto-Heavy Duty Trucks................ 3.3
Steel-Producers....................... 3.0
Entertainment Software................ 2.9
Web Portals/ISP....................... 2.7
Building-Residential/Commercial....... 2.6
Insurance-Property/Casualty........... 2.4
Television............................ 2.0
Medical Products...................... 1.9
Building-Maintenance & Services....... 1.9
Photo Equipment & Supplies............ 1.9
Repurchase Agreements................. 1.7
Retail-Drug Store..................... 1.7
Transport-Marine...................... 1.6
E-Commerce/Services................... 1.6
Import/Export......................... 1.5
Computer Services..................... 1.5
Computers-Memory Devices.............. 1.5
Engineering/R&D Services.............. 1.4
Finance-Credit Card................... 1.1
Medical-Drugs......................... 1.1
Internet Content-Information/News..... 0.5
Audio/Video Products.................. 0.5
----
99.3%
====
Country Allocation*
Japan......... 97.6%
United States. 1.7
----
99.3%
====
--------
*Calculated as a percentage of net assets
#See Note 1
16
AIG Japan Fund#
PORTFOLIO OF INVESTMENTS -- September 30, 2017
Value
Security Description Shares (Note 2)
COMMON STOCKS -- 97.6%
Audio/Video Products -- 0.5%
Pioneer Corp.+....................... 69,200 $ 128,530
----------
Auto-Heavy Duty Trucks -- 3.3%
Hino Motors, Ltd..................... 76,902 940,388
----------
Auto/Truck Parts & Equipment-Original -- 13.6%
Denso Corp........................... 14,300 723,483
NGK Insulators, Ltd.................. 53,599 1,004,103
NGK Spark Plug Co., Ltd.............. 41,591 885,229
Sumitomo Electric Industries, Ltd.... 36,000 588,029
Toyota Industries Corp............... 12,792 735,519
----------
3,936,363
----------
Building-Maintenance & Services -- 1.9%
Kyoritsu Maintenance Co., Ltd........ 18,506 552,590
----------
Building-Residential/Commercial -- 2.6%
Daiwa House Industry Co., Ltd........ 8,026 277,103
Sekisui House, Ltd................... 28,600 482,025
----------
759,128
----------
Chemicals-Diversified -- 5.6%
DIC Corp............................. 15,985 578,883
Sumitomo Chemical Co., Ltd........... 166,928 1,042,883
----------
1,621,766
----------
Chemicals-Specialty -- 7.3%
Daicel Corp.......................... 51,010 614,704
Shin-Etsu Chemical Co., Ltd.......... 9,400 840,382
Tokyo Ohka Kogyo Co., Ltd............ 7,700 273,717
Toray Industries, Inc................ 39,700 385,093
----------
2,113,896
----------
Computer Services -- 1.5%
SCSK Corp.+.......................... 10,127 429,740
----------
Computers-Integrated Systems -- 4.5%
Fujitsu, Ltd......................... 148,188 1,100,825
Otsuka Corp.......................... 3,110 199,272
----------
1,300,097
----------
Computers-Memory Devices -- 1.5%
TDK Corp............................. 6,250 424,350
----------
Diversified Banking Institutions -- 3.6%
Mitsubishi UFJ Financial Group, Inc.. 160,171 1,040,097
----------
E-Commerce/Services -- 1.6%
Dip Corp............................. 20,000 456,965
----------
Electronic Components-Misc. -- 8.7%
Alps Electric Co., Ltd............... 33,508 884,117
Hitachi High-Technologies Corp....... 23,300 844,825
MinebeaMitsumi, Inc.................. 25,096 392,526
Murata Manufacturing Co., Ltd........ 2,680 393,932
----------
2,515,400
----------
Engineering/R&D Services -- 1.4%
Kyudenko Corp........................ 10,700 414,592
----------
Entertainment Software -- 2.9%
Capcom Co., Ltd...................... 22,300 548,161
DeNA Co., Ltd........................ 13,375 299,771
----------
847,932
----------
Finance-Credit Card -- 1.1%
AEON Financial Service Co., Ltd...... 15,700 328,022
----------
Shares/
Principal Value
Security Description Amount (Note 2)
Food-Confectionery -- 3.3%
Ezaki Glico Co., Ltd.+............................ 18,177 $ 959,533
-----------
Import/Export -- 1.5%
ITOCHU Corp....................................... 26,625 436,080
-----------
Insurance-Property/Casualty -- 2.4%
Tokio Marine Holdings, Inc........................ 17,647 690,354
-----------
Internet Content-Information/News -- 0.5%
LIFULL Co., Ltd................................... 16,300 141,670
-----------
Medical Products -- 1.9%
Nipro Corp........................................ 40,200 553,744
-----------
Medical-Drugs -- 1.1%
Ono Pharmaceutical Co., Ltd....................... 14,200 321,732
-----------
Miscellaneous Manufacturing -- 0.0%
Peace Mark Holdings, Ltd.+(1)(2).................. 8,000 0
-----------
Photo Equipment & Supplies -- 1.9%
FUJIFILM Holdings Corp............................ 13,917 540,107
-----------
Retail-Drug Store -- 1.7%
Matsumotokiyoshi Holdings Co., Ltd................ 7,420 496,535
-----------
Rubber-Tires -- 6.4%
Toyo Tire & Rubber Co., Ltd....................... 82,890 1,862,953
-----------
Steel-Producers -- 3.0%
JFE Holdings, Inc................................. 43,647 852,382
-----------
Telephone-Integrated -- 6.0%
Nippon Telegraph & Telephone Corp................. 28,603 1,310,871
SoftBank Group Corp............................... 5,400 435,935
-----------
1,746,806
-----------
Television -- 2.0%
Nippon Television Holdings, Inc................... 32,453 569,892
-----------
Transport-Marine -- 1.6%
Nippon Yusen KK+.................................. 22,622 470,236
-----------
Web Portals/ISP -- 2.7%
Yahoo Japan Corp.................................. 164,800 782,077
-----------
Total Long-Term Investment Securities
(cost $25,038,276)............................... 28,233,957
-----------
REPURCHASE AGREEMENTS -- 1.7%
Agreement with Fixed Income Clearing Corp.,
bearing interest at 0.12%, dated 09/29/2017, to
be repurchased 10/02/2017 in the amount of
$503,005 collateralized by $515,000 of United
States Treasury Bonds, bearing interest at
2.25% due 02/15/2027 and having an
approximate value of $514,109
(cost $503,000).................................. $503,000 503,000
-----------
TOTAL INVESTMENTS
(cost $25,541,276)(3)............................ 99.3% 28,736,957
Other assets less liabilities....................... 0.7 200,452
-------- -----------
NET ASSETS 100.0% $28,937,409
======== ===========
--------
# See Note 1
+ Non-income producing security
(1)Security classified as Level 3 (see Note 2).
(2)Illiquid security. At September 30, 2017, the aggregate value of these
securities was $0 representing 0.0% of net assets.
(3)See Note 5 for cost of investments on a tax basis.
17
AIG Japan Fund#
PORTFOLIO OF INVESTMENTS -- September 30, 2017 -- (continued)
The following is a summary of the inputs used to value the Fund's net assets as
of September 30, 2017 (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............ 28,233,957 -- -- 28,233,957
Repurchase Agreements......... -- 503,000 -- 503,000
----------- -------- --- -----------
Total Investments at Value.... $28,233,957 $503,000 $ 0 $28,736,957
=========== ======== === ===========
--------
* 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 $17,282,592 were transferred
from Level 2 to Level 1 due to foreign equity securities whose values were
previously adjusted for fair value pricing procedures for foreign equity
securities. There were no additional transfers between Levels during the
reporting period.
At the beginning and end of the reporting period, Level 3 investments in
securities were not considered a material portion of the Fund.
--------
# See Note 1
See Notes to Financial Statements
18
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017
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: AIG International Dividend Strategy Fund ("International
Dividend Strategy Fund"), or AIG Japan Fund ("Japan Fund"). The Funds are
considered to be separate entities for financial and tax reporting purposes.
On November 18, 2016, the Board of Directors approved a change in the name
of the SunAmerica International Dividend Strategy Fund and SunAmerica Japan
Fund to the AIG International Dividend Strategy Fund and AIG Japan Fund,
respectively, effective February 28, 2017. SunAmerica Asset Management, LLC,
the investment adviser to each Fund, continues to serve as investment
adviser of the Funds and retains its current name. In addition, there was no
change in the Funds' investment goals or strategies, portfolio managers or
ticker symbols in connection with the rebranding.
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 of
$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 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 Japan
Fund commenced operations effective April 20, 2017.
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.
19
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (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, 2017, 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
20
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
Official Closing Price ("NOCP"). Generally, the NOCP will be the last sale
price unless the reported trade for the stock is outside the range of the
bid/ask price. In such cases, the NOCP will be normalized to the nearer of
the bid or ask price. For listed securities having no sales reported and for
unlisted securities, such securities will be valued based upon the last
reported bid price.
As of the close of regular trading on the New York Stock Exchange ("NYSE"),
securities traded primarily on security exchanges outside the United States
are valued at the last sale price on such exchanges on the day of valuation,
or if there is no sale on the 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 the 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 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. Investment in 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
21
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
all repurchase agreement transactions outstanding pursuant to a particular
Master Agreement, including the payment of any losses and costs resulting
from such early termination, as reasonably determined by the terminating
party. Any decision by one or more of the Funds' counterparties to elect
early termination could cause the Funds to accelerate the payment of
liabilities. Typically, the Master Agreement will permit a single net
payment in the event of default. Note, however, that bankruptcy or
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, 2017, 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.
Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders: Security transactions are recorded on a trade
date basis. Realized gains and losses on the sale of investments are
calculated on the identified cost basis. For financial statement purposes,
the Funds amortize all premiums and accrete all discounts on fixed income
securities.
Interest income is accrued daily from settlement date except when collection
is not expected. Dividend income is recorded on the ex-dividend date except
for certain dividends from foreign securities, which are recorded as soon as
the Trust is informed after the ex-dividend date.
Funds which earn foreign income and capital gains may be subject to foreign
withholding taxes and capital gains taxes at various rates. Under applicable
foreign law, a withholding of tax may be imposed on interest, dividends, and
capital gains from the sale of foreign securities at various rates.
Net investment income, expenses other than class specific expenses, and
realized and unrealized gains and losses are allocated daily to each class
of shares based upon the relative net asset value of outstanding shares of
each class of shares at the beginning of the day (after adjusting for
current capital 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
22
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
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
2014 -- 2016 or expected to be taken in each Fund's 2017 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 2014.
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 Statement of Operations include realized
foreign exchange gains and losses from currency gains or losses between the
trade and the settlement dates of securities transactions, the difference
between the amounts of interest, dividends and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent amounts actually
received or paid and changes in the unrealized foreign exchange gains and
losses relating to the other assets and liabilities arising as a result of
changes in the exchange rates.
New Accounting Pronouncement: In October 2016, the SEC adopted amendments to
rules under the 1940 Act ("final rules") intended to modernize the reporting
and disclosure of information by registered investment companies. The final
rules amend Regulation S-X and require funds to provide standardized,
enhanced derivative disclosure in fund financial statements in a format
designed for individual investors. The amendments to Regulation S-X also
update the disclosures for other investments and investments in and advances
to affiliates and amend the rules regarding the general form and content of
fund financial statements. The compliance date for the amendments to
Regulation S-X is August 1, 2017. All required changes have been made in
accordance with Regulation S-X.
Note 3. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and Management
Agreement (the "Agreement") with SunAmerica. Under the Agreement, SunAmerica
provides continuous supervision of a Fund's portfolio and administers its
corporate affairs, subject to general review by the Trustees. In connection
therewith, SunAmerica furnishes the Funds with office facilities, maintains
certain of the Funds' books and records, and pays the salaries and expenses
of all personnel, including officers of the Funds who are employees of
SunAmerica and its affiliates.
The Funds pay SunAmerica a monthly investment advisory and management fee
calculated daily at the following annual percentages of each Fund's average
daily net assets:
Management
Fees
----------
International Dividend Strategy Fund.... 1.00%
Japan Fund.............................. 1.15
For the year ended September 30, 2017, SunAmerica earned fees in the amounts
stated in the Statement of Operations.
23
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
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 fees and/or reimbursed expense calculations, annual fund
operating expenses shall not include extraordinary expenses (i.e., expenses
that are unusual in nature and/or infrequent in occurrence, 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 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 C............................. 2.55
Japan Fund Class W............................. 1.70
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, 2017, pursuant to the contractual expense
limitations referred to above, SunAmerica has waived or reimbursed expenses
as follows:
Other Expense
Reimbursed
-------------
Japan Fund.......... $98,361
Amount
-------
International Dividend Strategy Fund Class A.... $29,880
International Dividend Strategy Fund Class C.... 16,366
International Dividend Strategy Fund Class I.... 4,719
International Dividend Strategy Fund Class W.... 11,959
Japan Fund Class A.............................. 78,562
Japan Fund Class C.............................. 28,032
Japan Fund Class W.............................. 17,157
For the year ended September 30, 2017, the amounts recouped by SunAmerica
are as follows:
Amount
-------
International Dividend Strategy Fund Class A.... $40,494
International Dividend Strategy Fund Class C.... 5,363
International Dividend Strategy Fund Class I.... 2,967
International Dividend Strategy Fund Class W.... 2,257
Japan Fund Class A.............................. 23,110
Japan Fund Class C.............................. 7,188
Japan Fund Class W.............................. 8,245
24
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
At September 30, 2017, expenses previously waived and/or reimbursed by
SunAmerica during the prior two years that remain subject to recoupment and
expire during the time periods indicated are as follows:
Other Expenses Reimbursed
-------------------------------------
September 30, 2018 September 30, 2019
- ------------------ ------------------
Japan Fund...................................... $61,057 $98,361
Class Specific Expenses Reimbursed
-------------------------------------
September 30, 2018 September 30, 2019
- ------------------ ------------------
International Dividend Strategy Fund Class A.... $ -- $ 7,802
International Dividend Strategy Fund Class C.... 17,699 16,366
International Dividend Strategy Fund Class I.... 2,197 4,719
International Dividend Strategy Fund Class W.... 19,458 11,959
Japan Fund Class A.............................. 56,958 78,562
Japan Fund Class C.............................. 22,523 28,032
Japan Fund Class W.............................. -- 8,912
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 each 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 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, 2017, 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, 2017, 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 September 30, 2017, 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
Charges Broker-dealers Broker-dealers Sales Charges Sales Charges
------- -------------- -------------- ------------- -------------
International Dividend Strategy Fund.... $67,812 $13,319 $43,623 $-- $ 696
Japan Fund.............................. 37,828 1,185 31,760 -- 1,269
The Trust has entered into a Service Agreement with AIG Fund Services, Inc.
("AFS"), an affiliate of the Adviser. Under the Service Agreement, AFS
performs certain shareholder account functions by assisting the Funds'
transfer agent, State Street Bank
25
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
and Trust Company ("State Street"), 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 AFS for services rendered based upon an annual rate
of 0.22% of average daily net assets of such Fund. For the year ended
September 30, 2017, 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 AFS pursuant to the terms of the Service Agreement.
Expense Payable at September 30, 2017
-------------------------------- -------------------------------
Class A Class C Class I Class W Class A Class C Class I Class W
-------- ------- ------- ------- ------- ------- ------- -------
International Dividend Strategy Fund.... $148,444 $30,230 $556 $12,645 $10,793 $2,015 $48 $1,113
Japan Fund.............................. 53,606 11,306 -- 115 3,766 938 -- 29
At September 30, 2017, the following affiliates owned a percentage of the
outstanding shares of the following funds: AIG Multi-Asset Allocation
Portfolio and AIG Active Allocation Portfolio owned 19% and 12%,
respectively, of the International Dividend Strategy Fund and AIG
Multi-Asset Allocation Portfolio and AIG Active Allocation Portfolio owned
34% and 16%, 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, 2017 were as follows:
International
Dividend Strategy
Fund Japan Fund
----------------- -----------
Purchases (excluding U.S. government securities)...... $19,349,122 $33,848,984
Sales (excluding U.S. government securities).......... 28,238,495 47,334,548
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, 2017
------------------------------------------------------------------
Distributable Earnings Tax Distributions
- ----------------------------------------- ------------------------
Long-term Unrealized
Ordinary Gains/Capital Appreciation Ordinary Long-Term
Income Loss Carryover (Depreciation)* Income Capital Gains
- ---------- -------------- --------------- ---------- -------------
International Dividend Strategy Fund....... $ 155,134 $(80,030,875) $9,921,842 $2,928,782 $--
Japan Fund................................. 1,578,427 -- 2,602,919 135,227 --
--------
* Unrealized appreciation (depreciation) includes amounts for derivatives and
other assets and liabilities denominated in foreign currency.
Tax Distributions
For the year ended September 30, 2016
-------------------------------------
Ordinary Long-Term
Income Capital Gains
---------- -------------
International Dividend Strategy Fund....... $1,806,126 $ --
Japan Fund................................. 727,465 632,720
26
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
As of September 30, 2017, for Federal income tax purposes, the Funds
indicated below have capital loss carryforwards, which expire in the year
indicated, which are available to offset future capital gains, if any:
Capital Loss
Carryforward+ Unlimited+
------------- -----------------------
2018 ST LT
- ------------- ----------- -----------
International Dividend Strategy Fund*........ $19,381,525 $34,226,655 $26,422,695
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, a 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, 2017, 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 or utilized capital loss carryforwards
in the year ended September 30, 2017.
Capital Loss Capital Loss
Carryforward Carryforward
Expired Utilized
- ------------ ------------
International Dividend Strategy Fund.... $16,578,456 $ --
Japan Fund.............................. -- 1,687,151
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, 2017, the
Funds elected to defer late year ordinary losses and post October capital
losses as follows:
Deferred Deferred
Deferred Post-October Post-October
Late Year Short-Term Long-Term
Ordinary Loss Capital Loss Capital Loss
- ------------- ------------ ------------
International Dividend Strategy Fund.... $30,054 $1,326,922 $(565,452)
Japan Fund.............................. -- -- --
For the year ended September 30, 2017, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to disposition of passive foreign investment companies' securities,
litigation payments, capital gains tax, expired capital loss carryforwards
and foreign currency transactions to the components of net assets as follows:
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain
(Loss) (Loss) Capital Paid-in
- ----------------- ----------------- ---------------
International Dividend Strategy Fund.... $ 23,067 $16,555,389 $(16,578,456)
Japan Fund.............................. 435,802 (435,802) --
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, 2017:
International
Dividend
Strategy Fund Japan Fund
------------- -----------
Cost (tax basis)............................. $82,443,147 $26,134,001
=========== ===========
Appreciation................................. 13,836,811 2,673,551
Depreciation................................. (3,861,446) (70,636)
----------- -----------
Net unrealized appreciation (depreciation)... $ 9,975,365 $ 2,602,915
=========== ===========
27
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each Fund were as follows:
International Dividend Strategy Fund
--------------------------------------------------
Class A
--------------------------------------------------
For the For the
year ended year ended
September 30, 2017 September 30, 2016
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold.............. 1,256,158 $ 11,745,810 1,699,575 $ 13,897,531
Reinvested dividends..... 241,092 2,227,089 164,428 1,335,978
Shares redeemed.......... (1,841,297) (16,609,583) (2,838,285) (23,060,441)
---------- ------------ ---------- ------------
Net increase (decrease).. (344,047) $ (2,636,684) (974,282) $ (7,826,932)
========== ============ ========== ============
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, 2017 September 30, 2016 September 30, 2017 September 30, 2016
------------------------ ------------------------ ---------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ --------- ----------- -------- -----------
Shares sold.............. 115,788 $ 944,316 250,950 $ 1,868,884 -- $ -- -- $ --
Reinvested dividends..... 39,818 332,504 26,215 194,988 914 8,541 656 5,394
Shares redeemed.......... (570,527) (4,650,398) (1,403,335) (10,378,770) (3,303) (28,608) (5,604) (44,621)
---------- ------------ ---------- ------------ --------- ----------- -------- -----------
Net increase (decrease).. (414,921) $ (3,373,578) (1,126,170) $ (8,314,898) (2,389) $ (20,067) (4,948) $ (39,227)
========== ============ ========== ============ ========= =========== ======== ===========
International Dividend Strategy Fund
--------------------------------------------------
Class W
--------------------------------------------------
For the For the
year ended year ended
September 30, 2017 September 30, 2016
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold.............. 268,665 $ 2,409,779 125,838 $ 1,026,277
Reinvested dividends..... 8,258 76,254 6,288 50,905
Shares redeemed.......... (274,420) (2,462,897) (817,838) (6,680,844)
---------- ------------ ---------- ------------
Net increase (decrease).. 2,503 $ 23,136 (685,712) $ (5,603,662)
========== ============ ========== ============
Japan Fund
-------------------------------------------------------------------------------------------------
Class A Class C
-------------------------------------------------- ---------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
------------------------ ------------------------ ---------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ --------- ----------- -------- -----------
Shares sold.............. 387,039 $ 3,097,090 916,013 $ 6,349,699 113,256 $ 877,588 353,794 $ 2,316,573
Reinvested dividends..... 15,982 118,111 123,097 864,144 181 1,271 31,106 208,408
Shares redeemed.......... (1,954,658) (14,922,789) (1,576,662) (10,562,614) (309,948) (2,263,843) (686,597) (4,338,772)
---------- ------------ ---------- ------------ --------- ----------- -------- -----------
Net increase (decrease).. (1,551,637) $(11,707,588) (537,552) $ (3,348,771) (196,511) $(1,384,984) (301,697) $(1,813,791)
========== ============ ========== ============ ========= =========== ======== ===========
28
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
Japan Fund
----------------------
Class W+
----------------------
For the
period April 20, 2017*
through
September 30, 2017
----------------------
Shares Amount
------ --------
Shares sold.............. 27,941 $226,197
Reinvested dividends..... -- --
Shares redeemed.......... -- --
------ --------
Net increase (decrease).. 27,941 $226,197
====== ========
Note 7. Line of Credit
The Trust, along with certain other funds managed by the Adviser, has access
to a $75 million committed unsecured line of credit and a $50 million
uncommitted unsecured 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 25 basis points per annum on the
daily unused portion of the committed line of credit and a one-time closing
fee of $25,000 on the uncommitted line of credit. Borrowings under the line
of credit will commence when the respective Fund's cash shortfall exceeds
$100,000. For the year ended September 30, 2017, the following Fund had
borrowings:
Days Interest Average Debt Weighted Average
Outstanding Charges Utilized Interest
----------- -------- ------------ ----------------
International Dividend Strategy Fund.... 55 $1,253 $ 407,284 2.11%
Japan Fund.............................. 6 387 1,308,468 1.79
At September 30, 2017, 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, 2017, the Funds did not participate in this
program.
Note 9. 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.
--------
+ See Note 1
* Commencement of operations
29
SunAmerica Equity Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2017 -- (continued)
Note 10. Security Transactions with Affiliated Portfolios
The Funds are permitted to transfer securities by purchasing from and/or
selling to other affiliated funds under certain conditions approved by the
Board. The affiliated funds involved in such transactions must have a common
investment adviser or investment advisers which are affiliated persons of
each other, common trustees, and/or common officers in compliance with Rule
17a-7 of the 1940 Act. Pursuant to the 1940 Act, such a transaction must be
either a purchase or a sale, for no consideration other than cash payment
against prompt delivery of the security at the current market price. No
brokerage commission or fee (except for customary transfer fees), or other
remuneration is paid in connection with such transactions.
For the year ended September 30, 2017, the following Fund engaged in
security transactions with affiliated funds:
Cost of Proceeds Realized
Fund Purchases from Sales Gain/(Loss)
---- --------- ---------- -----------
Japan Fund. $90,758 $-- $--
30
SunAmerica Equity Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of the SunAmerica Equity Funds and Shareholders of the
AIG International Dividend Strategy Fund and AIG Japan Fund:
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 AIG
International Dividend Strategy Fund (formerly SunAmerica International
Dividend Strategy Fund) and AIG Japan Fund (formerly SunAmerica Japan Fund)
(two funds constituting the SunAmerica Equity Funds, hereafter referred to as
the "Trust") as of September 30, 2017, the results of each of their operations
for the year then ended, the changes in each of their net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities as of September 30, 2017 by correspondence with the
custodian, 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 28, 2017
31
SunAmerica Equity Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2017 -- (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, 2018 at an in-person meeting held on June 6-7, 2017 (the
"Meeting"). The Trust currently consists of the following two separate Funds:
AIG International Dividend Strategy Fund ("International Dividend Strategy
Fund") and the AIG 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, 2018 (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 Broadridge Financial
Solutions, Inc. ("Broadridge"), 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 concluded, based on its 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.
32
SunAmerica Equity Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2017 -- (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,
2017, SunAmerica managed, advised and/or administered approximately $83.9
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 in effectively
serving as the investment adviser to the Funds.
The Board also considered the nature, extent and quality 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 prospectuses. The Board also reviewed the
Subadviser's compliance and regulatory history and noted that there were no
material legal, regulatory or compliance issues that would potentially impact
the Subadviser from effectively serving as a subadviser to the Fund. The Board
concluded that the nature and extent of services provided by the Subadviser
under the Subadvisory Agreement were reasonable and appropriate in relation to
the subadvisory 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 Broadridge 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 Broadridge
to select the funds in the Peer Groups and Peer Universes.
The Board noted that performance information was for the periods ended March
31, 2017. 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 above the medians of its Peer Group and Peer Universe for the
one-year period, and below the medians of its Peer Group and Peer Universe
three- and five-year periods and that the Fund outperformed its Broadridge
Index for the one-year period and underperformed its Broadridge Index for the
three-year period (Broadridge returns were not available for the five-year
period). The Board noted management's discussion of the Fund's performance,
noting the improvement of the Fund's performance over the latest one-year
period. The Board concluded that the Fund's overall performance was
satisfactory.
Japan Fund. The Board considered that the Fund's performance was above the
median of its Peer Group for the one-, three- and five-year periods and above
the median of its Peer Universe for the one-year period and below the median of
its Peer Universe for the three- and five-year periods. The Board also
considered that the Fund outperformed its Broadridge Index for the one-year
period and underperformed its Broadridge Index for the three- and five-year
periods. The Board noted management's discussion of the Fund's performance,
noting the improvement of the Fund's performance over the latest one-year
period. The Board concluded that the Fund's overall performance was
satisfactory.
33
SunAmerica Equity Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2017 -- (unaudited)
(continued)
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 Broadridge. The
reports showed comparative fee information for each Fund's Peer Group and/or
Peer Universe as determined by Broadridge, 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
Broadridge reports, rather than also being reflected as specific management fee
waivers in the actual management fees category of the Broadridge reports. As a
result, the Board took into account that the actual management fees presented
by Broadridge 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 Broadridge 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 Broadridge. 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.
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.
34
SunAmerica Equity Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2017 -- (unaudited)
(continued)
International Dividend Strategy Fund. The Board considered that the Fund's
actual management fees were above the medians of its Peer Group and Peer
Universe. The Board also considered that the Fund's total expenses were above
the medians 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 medians of its Peer Group and Peer Universe. The Board also
considered that the Fund's total expenses were above the medians of its Peer
Group and Peer Universe. The Board took into account management's discussion of
the Fund's expenses.
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, the Subadviser and their affiliates received any indirect benefits
from the relationship with the Funds. 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.
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.
35
SunAmerica Equity Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2017 -- (unaudited)
(continued)
Conclusion. After a full and complete discussion, the Board approved the
Agreements, each for a one-year period ending June 30, 2018. 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.
36
SunAmerica Equity Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 2017 -- (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
Term of Portfolios in
Name, Position Office and Fund Complex
Address and Held With Length of Principal Occupations Overseen by Other Directorships
Age* Trust Time Served(1) During Past 5 Years Trustee(2) Held by Trustee(3)
----------------------- --------- -------------- ------------------------------ ------------- -------------------------------
Disinterested Trustees
Dr. Judith L. Craven Trustee 2001-present Retired. 78 Director, Sysco Corp. (1996
Age: 71 to present); Director, Luby's,
Inc. (1998 to present).
William F. Devin Trustee 2001-present Retired. 78 None
Age: 78
Richard W. Grant Trustee 2011-present Retired. Prior to that, 29 None
Age: 71 Chairman Attorney and partner at
of the Morgan Lewis & Bockius
Board LLP (1989 to 2011).
Stephen J. Gutman Trustee 1985-present Vice President and Associate 29 None
Age: 74 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(4) Trustee 1995-present President, CEO and Director, 148 None
Age: 63 SunAmerica. (1995 to
present); Director, AIG
Capital Services, Inc.
("ACS") (1993 to present).
37
SunAmerica Equity Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 2017 -- (unaudited)
(continued)
Number of
Term of Portfolios in
Name, Position Office and Fund Complex
Address and Held With Length of Principal Occupations Overseen by Other Directorships
Age* Trust Time Served(1) During Past 5 Years Officer(2) Held by Officer(3)
-------------------- ---------- -------------- ----------------------------- ------------- -------------------
Officers
John T. Genoy President 2007-present Chief Financial Officer, N/A N/A
Age: 49 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: 51 General Counsel,
SunAmerica (2005 to
present).
Kathleen Fuentes Chief 2013-present Vice President and Deputy N/A N/A
Age: 48 Legal General Counsel,
Officer SunAmerica (2006 to
and present).
Assistant
Secretary
James Nichols Vice 2006-present Director, President and CEO, N/A N/A
Age: 51 President ACS (2006 to present);
Senior Vice President,
SunAmerica (2002 to
present).
Kara Murphy Vice 2014-present Chief Investment Officer, N/A N/A
Age: 44 President SunAmerica (2013 to
present).
Gregory R. Kingston Treasurer 2014-present Vice President and Head of N/A N/A
Age: 51 Mutual Fund Administration,
SunAmerica (2014 to
present).
Shawn Parry Vice 2005-present Vice President (2014 to N/A N/A
Age: 45 President present) and Assistant Vice
and President, SunAmerica (2005
Assistant to 2014).
Treasurer
Donna McManus Vice 2014-present Vice President, SunAmerica N/A N/A
Age: 56 President (2014 to present); Managing
and Director, BNY Mellon (2009
Assistant to 2014).
Treasurer
38
SunAmerica Equity Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 2017 -- (unaudited)
(continued)
Number of
Term of Portfolios in
Name, Position Office and Fund Complex
Address and Held With Length of Principal Occupations Overseen by Other Directorships
Age* Trust Time Served(1) During Past 5 Years Officer(2) Held by Officer(3)
--------------------- ----------- -------------- ------------------------------ ------------- -------------------
Christopher C. Joe Chief 2017 to Chief Compliance Officer, N/A N/A
Age: 47 Compliance Present AIG Funds, Anchor Series
Officer Trust, Seasons Series Trust,
SunAmerica Series Trust,
VALIC Company I and
VALIC Company II (2017-
Present); Chief Compliance
Officer, VALIC Retirement
Services Company (2017-
Present); Chief Compliance
Officer, Invesco PowerShares
(2012-2017); Chief
Compliance Officer, Invesco
Investment Advisers, LLC
(2010-2013); U.S.
Compliance Director,
Invesco Ltd. (2006-2014);
Deputy Chief Compliance
Officer, Invesco Advisers,
LLC (2014-2015).
Matthew J. Hackethal Anti- 2006-present Acting Chief Compliance N/A N/A
Age: 45 Money Officer (2016 to 2017); Chief
Laundering Compliance Officer (2006 to
Compliance present) and Vice President,
Officer SunAmerica (2011 to
present).
--------
* The business address for each Trustee is Harborside 5,185 Hudson Street,
Suite 3300 Jersey City, NJ 07311.
(1)Trustees serve until their successors are duly elected and qualified. 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.
(2)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 (50 portfolios), VALIC Company I
(34 portfolios), VALIC Company II (15 funds), Seasons Series Trust (20
portfolios) and SunAmerica Specialty Series (8 portfolios).
(3)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.
(4)Mr. Harbeck is considered to be an 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.
Additional information concerning the Trustees is contained in the Statement of
Additional Information which is available, without charge, by calling (800)
858-8850.
39
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, 2017. 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, 2017. The information necessary to complete your tax returns will
be included with your Form 1099-DIV to be received under separate cover in
early 2018.
During the year ended September 30, 2017, 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 C. -- --
International Dividend Strategy Class I. -- --
International Dividend Strategy Class W. -- --
Japan Class A........................... -- --
Japan Class C........................... -- --
Japan Class W........................... -- --
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, 2017 was
$287,900 and $66,306, respectively. The gross foreign source income for the
information reporting is $5,000,501 and $541,167, respectively.
For the year ended September 30, 2017, 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. $2,928,782
Japan........................... 135,227
40
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)
AIG International Dividend Strategy Fund
The AIG International Dividend Strategy Fund Class A shares returned 14.11%
(before maximum sales charge) for the 12-month period ended September 30, 2017.
While posting double-digit absolute returns, the Fund underperformed its
benchmark, the MSCI ACWI ex-U.S. (Net),/*/ which returned 19.61% during the
same period./**/ The Fund's holdings had an average dividend yield as of
September 30, 2017 of 4.17% compared to a 2.82% average dividend yield for the
constituents of the MSCI ACWI ex-U.S. (Net).
In terms of regional factors, the Fund's relative results were dampened by
stock selection among South Korean, Brazilian, and Australian companies.
Positioning in Israel, which was the weakest component of the MSCI ACWI ex-U.S.
(Net) during the annual period, also detracted. These detractors were partially
offset by positioning in the U.K., Turkey and Japan, which contributed
positively.
From a sector perspective, the primary driver of underperformance during the
annual period was having an underweight selection to and stock selection in the
strongly performing Financials sector. Having an overweight to Information
Technology was beneficial but was more than offset by security selection within
the sector, which detracted. Stock selection among Consumer Staples, Consumer
Discretionary and Utilities companies further hindered the Fund's relative
results as did an overweight to the relatively weak Telecommunication Services
sector. Such detractors were only partially offset by the positive contribution
made by having an underweight to the lagging Health Care sector and by
effective stock selection in Industrials, Energy, Telecommunication Services
and Materials.
The top individual detractors from Fund performance during the annual period
were Brazilian meat processor JBS S.A., South Korean utilities company Korea
Electric Power Corp., Australian telecommunications provider Telstra Corp.
Ltd., Israel-based global pharmaceuticals company Teva Pharmaceutical
Industries Ltd. and French consumer staples retailer Carrefour SA. Individual
stock holdings that contributed the most to the Fund's relative performance
during the annual period were Turkish petroleum refiner Tupras Turkiye Petrol
Rafinerileri A.S., U.K. residential housing unit developer and builder
Persimmon PLC, U.K. low-cost passenger airline easyJet PLC, German specialty
fertilizer and salts manufacturer K+S AG and German mail and parcel delivery
provider Deutsche Post AG.
--------
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 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.
42
SunAmerica Equity Funds
COMPARISONS: FUNDS vs. INDICES -- (unaudited) (continued)
Over the past ten years, $10,000 invested in AIG International Dividend
Strategy Fund Class A shares would be valued at $6,103. The same amount
invested in securities mirroring the performance of the MSCI ACWI ex-U.S. (Net)
would be valued at $11,351.
Date AIG International Dividend MSCI ACWI ex-U.S. (Net)**
Strategy Class A#
---------- -------------------------- -------------------------
9/30/2007 10000 9424
10/31/2007 10556.99 10029
11/30/2007 10080.2 9467
12/31/2007 9933.59 9414
1/31/2008 8970.88 8369
2/29/2008 9227.9 8551
3/31/2008 9025.14 8483
4/30/2008 9571.42 9071
5/31/2008 9723.04 9243
6/30/2008 8923.91 8561
7/31/2008 8602.56 8135
8/31/2008 8199.97 7646
9/30/2008 6968.24 6470
10/31/2008 5433.91 4931
11/30/2008 5119.61 4619
12/31/2008 5411.3 4776
1/31/2009 4933.07 4290
2/28/2009 4472.69 3937
3/31/2009 4831.69 4167
4/30/2009 5490.11 4648
5/31/2009 6233.39 5354
6/30/2009 6164.75 5274
7/31/2009 6767.52 5723
8/31/2009 7017.99 5835
9/30/2009 7378.42 6194
10/31/2009 7287.01 6049
11/30/2009 7495.87 6333
12/31/2009 7654.19 6528
1/31/2010 7280.12 6066
2/28/2010 7280.17 6119
3/31/2010 7775.41 6576
4/30/2010 7707.01 6410
5/31/2010 6895.93 5668
6/30/2010 6807.44 5474
7/31/2010 7422.17 5942
8/31/2010 7218.27 5748
9/30/2010 7936.31 6367
10/31/2010 8206.67 6662
11/30/2010 7889.98 6334
12/31/2010 8507.83 6819
1/31/2011 8591.55 6894
2/28/2011 8817.87 7045
3/31/2011 8797.58 7077
4/30/2011 9227.4 7405
5/31/2011 8961.26 7217
6/30/2011 8831.26 7088
7/31/2011 8710.74 6991
8/31/2011 7964.28 6281
9/30/2011 7078.25 5528
10/31/2011 7823.87 6034
11/30/2011 7424.6 5846
12/31/2011 7341.62 5690
1/31/2012 7839.69 6132
2/29/2012 8280.12 6405
3/31/2012 8166.24 6361
4/30/2012 8037.49 6323
5/31/2012 7124.77 5608
6/30/2012 7544.97 5821
7/31/2012 7651.56 5668
8/31/2012 7811.57 5821
9/30/2012 8103.4 6013
10/31/2012 8134.9 5919
11/30/2012 8289.94 5936
12/31/2012 8577.22 6321
1/31/2013 8925.94 6517
2/28/2013 8831.51 6394
3/31/2013 8849.17 6186
4/30/2013 9174.43 6349
5/31/2013 8962.2 6058
6/30/2013 8573.55 5770
7/31/2013 8949.01 6066
8/31/2013 8825.56 6083
9/30/2013 9438.69 6568
10/31/2013 9785.29 6707
11/30/2013 9802.05 6620
12/31/2013 9888.5 6653
1/31/2014 9439.09 6310
2/28/2014 9913.25 6594
3/31/2014 9938.7 6827
4/30/2014 10069.93 7053
5/31/2014 10265.7 7123
6/30/2014 10438.45 7392
7/31/2014 10334.59 7156
8/31/2014 10391.88 7362
9/30/2014 9888.8 6713
10/31/2014 9790.89 6458
11/30/2014 9861.72 6328
12/31/2014 9506.15 5851
1/31/2015 9492.06 5720
2/28/2015 9999.55 5958
3/31/2015 9837.91 5792
4/30/2015 10334.89 6232
5/31/2015 10173.55 5982
6/30/2015 9889.69 5825
7/31/2015 9862.22 5584
8/31/2015 9108.42 5156
9/30/2015 8686.09 4884
10/31/2015 9332.7 5200
11/30/2015 9140.06 5024
12/31/2015 8967.9 4871
1/31/2016 8357.89 4555
2/29/2016 8262.37 4561
3/31/2016 8934.18 5023
4/30/2016 9169.27 5114
5/31/2016 9014.53 4859
6/30/2016 8876.59 4960
7/31/2016 9315.59 5273
8/31/2016 9374.51 5298
9/30/2016 9490.08 5348
10/31/2016 9353.63 5261
11/30/2016 9137.28 5088
12/31/2016 9371.04 5243
1/31/2017 9703 5387
2/28/2017 9857.7 5480
3/31/2017 10107.63 5680
4/30/2017 10323.98 5849
5/31/2017 10659.02 6036
6/30/2017 10692.1 5982
7/31/2017 11086.21 6101
8/31/2017 11144.19 6057
9/30/2017 11351.06 6103
Class A Class C++ Class I Class W
------------------ ------------------ ------------------ ------------------
AIG 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 7.51% 14.11% 12.40% 13.40% 14.28% 14.28% 14.33% 14.33%
----------------------------------------------------------------------------------------------
5 Year Return -0.89% 1.49% -0.34% -1.71% 0.46% 2.31% N/A N/A
----------------------------------------------------------------------------------------------
10 Year Return -4.82% -35.24% -4.88% -39.38% -4.15% -34.52% N/A N/A
----------------------------------------------------------------------------------------------
Since Inception* 0.35% 14.04% -0.06% -1.18% 2.32% 43.97% 1.92% 5.20%
----------------------------------------------------------------------------------------------
+ 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, 2017, the AIG International
Dividend Strategy Class A returned 7.51% compared to 19.61% 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.
43
SunAmerica Equity Funds
COMPARISONS: FUNDS vs. INDICES -- (unaudited) (continued)
AIG Japan Fund
The AIG Japan Fund Class A shares returned 19.69% (before maximum sales charge)
for the 12-month period ended September 30, 2017. The Fund outperformed its
benchmark, the MSCI Japan Index (Net),/*/ which returned 14.09% during the same
period.
On an absolute level, overall economic growth in Japan and improvement in its
manufacturing sector helped fuel a corporate earnings recovery and positive
earnings revisions at the market level. In turn, these improving fundamentals
reignited positive interest in Japanese equities after weakening sentiment as a
result of the economic slowdown in 2016. As a result, this has been a strong
environment for companies with attractive valuations and has helped lift
expectations for further corporate earnings growth, multiple expansions, and
re-ratings for Japanese equities.
The Fund's relative outperformance during the annual period was driven
primarily by security selection. Effective stock selection in the Consumer
Discretionary sector contributed most positively, followed by Industrials,
Materials, Consumer Staples and Health Care. Individual security selection was
weakest in the Information Technology sector, followed by Energy and
Telecommunication Services.
Sector allocation, a residual of our bottom-up stock selection process, also
contributed positively to the Fund's relative results. Overweighted allocations
to Information Technology and Materials and an underweighted allocation to
Health Care boosted relative results, only partially offset by underweighted
exposures to Financials and Industrials, which detracted. Having an allocation
to cash, albeit modest, during a rally in when the Japanese equity markets also
detracted from relative results.
The top individual contributors to Fund performance during the annual period
were Toyo Tire & Rubber Co. Ltd., the fourth-largest tire maker in Japan;
Minebea Mitsumi Inc., a ball bearings manufacturer; Fujitsu Ltd., a
semiconductor, computer and communications equipment manufacturer; Kyudenko
Corp., an engineering and construction services company; and Sumitomo Chemical
Co. Ltd., a chemical products manufacturer. The individual stocks that
detracted from Fund performance most during the annual period were Nippon
Telegraph & Telephone Corp., a telecommunications company; Leopalace21 Corp., a
diversified leasing and construction business; NGK Insulators Ltd., an
automotive parts manufacturer; and Nippon Television Holdings, Inc., a media
company. Not owning a position in electrical equipment manufacturer Keyence
Corp., which significantly outperformed the MSCI Japan Index (Net) during the
annual period, also hurt.
--------
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 the 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.
44
SunAmerica Equity Funds
COMPARISONS: FUNDS vs. INDICES -- (unaudited) (continued)
Over the past ten years, $10,000 invested in AIG Japan Fund Class A shares
would be valued at $9,766. The same amount invested in securities mirroring the
performance of the MSCI Japan Index (Net) would be valued at $11,825.
Date AIG Japan Class A# MSCI Japan Index (Net)
------- ------------------ ----------------------
9/30/2007 10000 9428
10/31/2007 9962 9811
11/30/2007 9779 9030
12/31/2007 9392 8672
1/31/2008 8963 7746
2/29/2008 9025 7943
3/31/2008 8659 8018
4/30/2008 9288 8182
5/31/2008 9521 8413
6/30/2008 8872 7807
7/31/2008 8570 7317
8/31/2008 8229 6759
9/30/2008 7307 5677
10/31/2008 6227 4207
11/30/2008 6149 4030
12/31/2008 6649 4296
1/31/2009 6197 4071
2/28/2009 5429 3731
3/31/2009 5543 3847
4/30/2009 6077 4133
5/31/2009 6703 4691
6/30/2009 6821 4752
7/31/2009 7113 5201
8/31/2009 7393 5344
9/30/2009 7265 5678
10/31/2009 7083 5610
11/30/2009 7010 5746
12/31/2009 7064 5810
1/31/2010 7199 5669
2/28/2010 7279 5648
3/31/2010 7643 5937
4/30/2010 7631 6057
5/31/2010 7014 5387
6/30/2010 6873 5401
7/31/2010 7118 5937
8/31/2010 6955 5768
9/30/2010 7273 6417
10/31/2010 7422 6664
11/30/2010 7578 6480
12/31/2010 8155 7031
1/31/2011 8165 6966
2/28/2011 8538 7067
3/31/2011 7753 7118
4/30/2011 7782 7437
5/31/2011 7655 7263
6/30/2011 7767 7176
7/31/2011 8042 7075
8/31/2011 7388 6343
9/30/2011 7267 5603
10/31/2011 7249 5980
11/30/2011 6929 5821
12/31/2011 6986 5681
1/31/2012 7302 5938
2/29/2012 7671 6106
3/31/2012 7773 6177
4/30/2012 7525 6124
5/31/2012 6853 5388
6/30/2012 7206 5707
7/31/2012 7034 5627
8/31/2012 6982 5690
9/30/2012 7145 5681
10/31/2012 7011 5619
11/30/2012 7178 5734
12/31/2012 7558 5896
1/31/2013 7835 6114
2/28/2013 8044 6214
3/31/2013 8437 6477
4/30/2013 9177 7059
5/31/2013 8657 6605
6/30/2013 8808 6923
7/31/2013 8862 6968
8/31/2013 8671 6804
9/30/2013 9395 7359
10/31/2013 9395 7422
11/30/2013 9535 7513
12/31/2013 9611 7543
1/31/2014 9240 7283
2/28/2014 9190 7453
3/31/2014 9072 7393
4/30/2014 8838 7293
5/31/2014 9195 7523
6/30/2014 9676 7962
7/31/2014 9732 7862
8/31/2014 9521 7732
9/30/2014 9453 7712
10/31/2014 9330 7732
11/30/2014 9358 7483
12/31/2014 9224 7334
1/31/2015 9440 7498
2/28/2015 10012 7967
3/31/2015 10166 8088
4/30/2015 10526 8514
5/31/2015 10663 8569
6/30/2015 10480 8427
7/31/2015 10530 8448
8/31/2015 9918 7902
9/30/2015 9243 7334
10/31/2015 10176 8066
11/30/2015 10074 8153
12/31/2015 10107 7878
1/31/2016 9275 7461
2/29/2016 9021 6897
3/31/2016 9448 7145
4/30/2016 9887 7156
5/31/2016 9784 7461
6/30/2016 9543 7202
7/31/2016 10162 7697
8/31/2016 10201 7934
9/30/2016 10364 8159
10/31/2016 10501 8295
11/30/2016 10247 7945
12/31/2016 10347 8089
1/31/2017 10732 8384
2/28/2017 10852 8746
3/31/2017 10812 8848
4/30/2017 10925 8905
5/31/2017 11254 9177
6/30/2017 11373 9336
7/31/2017 11604 9619
8/31/2017 11598 9573
9/30/2017 11825 9766
Class A Class C Class W
------------------ ------------------ ------------------
AIG Average Average Average
Japan Annual Cumulative Annual Cumulative Annual Cumulative
Fund# Return Return+ Return Return+ Return Return+
----------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 12.83% 19.69% 17.96% 18.96% N/A N/A
--------------------------------------------------------------------------
5 Year Return 10.14% 71.92% 10.70% 66.20% N/A N/A
--------------------------------------------------------------------------
10 Year Return -0.24% 3.59% -0.30% -3.01% N/A N/A
--------------------------------------------------------------------------
Since Inception* 0 .79% 16.02% 0.65% 7.62% N/A 11.79%
--------------------------------------------------------------------------
+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; Class W: 04/20/17.
#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, 2017, the AIG Japan Class A
returned 12.83% compared to 14.09% 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 the 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.
45
AIG Funds
Harborside 5
185 Hudson Street, Suite 3300
Jersey City, NJ 07311
Trustees VOTING PROXIES ON TRUST DELIVERY OF SHAREHOLDER
Richard W. Grant PORTFOLIO SECURITIES DOCUMENTS
Peter A. Harbeck A description of the The Funds have adopted a
Dr. Judith L. Craven policies and proce-dures policy that allows them
William F. Devin that the Trust uses to to send only one copy of
Stephen J. Gutman determine how to vote a Fund's prospectus,
Officers proxies relating to proxy material, annual
John T. Genoy, President secu-rities held in a report and semi-annual
and Chief Executive Fund's portfolio which is report (the "shareholder
Officer available in the Trust's documents") to
Kara Murphy, Vice Statement of Additional shareholders with
President Information, may be multiple accounts
James Nichols, Vice ob-tained without charge residing at the same
President upon request, by calling "household." This
Gregory N. Bressler, (800) 858-8850. This practice is called
Secretary in-formation is also householding and reduces
Christopher C. Joe, available from the EDGAR Fund expenses, which
Chief Compliance database on the U.S. benefits you and other
Officer Secu-rities and Exchange shareholders. Unless the
Gregory R. Kingston, Commission's website at Funds receive
Treasurer http://www.sec.gov. instructions to the
Shawn Parry, Vice PROXY VOTING RECORD ON con-trary, you will only
President and SUNAMERICA EQUITY FUNDS receive one copy of the
Assistant Treasurer Information regarding how shareholder documents.
Donna McManus, Vice SunAmer-ica Equity Funds The Funds will continue
President and voted proxies relating to to household the
Assistant Treasurer securities held in share-holder documents
Kathleen Fuentes, Chief SunAmerica Equity Funds indefinitely, until we
Legal Officer and during the most recent are instructed otherwise.
Assistant Secretary twelve month period ended If you do not wish to
Matthew J. Hackethal, June 30 is avail-able, participate in
Anti-Money Laundering once filed with the U.S. householding, please
Compliance Officer Securities and Exchange contact Shareholder
Investment Adviser Commission, without Services at (800)
SunAmerica Asset charge, upon request, by 858-8850 ext. 6010 or
Management, LLC calling (800) 858-8850 or send a written request
Harborside 5 on the U.S. Securities with your name, the name
185 Hudson Street, Suite and Exchange Commission's of your fund(s) and your
3300 website at account number(s) to
Jersey City, NJ 07311 http://www.sec.gov. SunAmerica Mutual Funds
Distributor DISCLOSURE OF QUARTERLY c/o BFDS, P.O. Box
AIG Capital Services, PORTFOLIO HOLDINGS 219186, Kansas City MO,
Inc. The Trust is required to 64121-9186. We will
Harborside 5 file its com-plete resume individual
185 Hudson Street, Suite schedule of portfolio mailings for your account
3300 holdings with the U.S. within thirty (30) days
Jersey City, NJ 07311 Securities and Exchange of receipt of your
Shareholder Servicing Commission for its first request.
Agent and third fiscal quarters This report is submitted
AIG Fund Services, Inc. on Form N-Q. The Trust's solely for the general
Harborside 5 Forms N-Q are available information of
185 Hudson Street, Suite on the U.S. Securities shareholders of the
3300 and Exchange Commission's Funds. Distribution of
Jersey City, NJ 07311 website at this report to persons
Custodian and Transfer http://www.sec.gov. You other than shareholders
Agent can also review and of the Funds is
State Street Bank and obtain copies of the authorized only in
Trust Company Forms N-Q at the U.S. con-nection with a
P.O. Box 5607 Securities and Exchange currently effective
Boston, MA 02110 Commission's Public pro-spectus, setting
Refer-ence Room in forth details of the
Washington, DC Funds, which must precede
(information on the or accom-pany this report.
operation of Pub-lic
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.aig.com/funds
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.aig.com/funds 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.
AIG Funds are advised by SunAmerica Asset Management, LLC (SAAMCo) and
distributed by AIG Capital Services, Inc. (ACS), Member FINRA. Harborside 5,
185 Hudson Street, Suite 3300, Jersey City, NJ 07311, 800-858-8850. SAAMCo and
ACS are members of American International Group, Inc. (AIG).
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 adviser, the
AIG Funds Sales Desk at 800-858-8850, ext. 6003, or at aig.com/funds. Read the
prospectus carefully before investing.
aig.com/funds
EQANN - 9/17
[LOGO]
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 (the
Code"). During the fiscal year ended September 30, 2017, there were no
reportable waivers or implicit waivers to a provision of the Code that
applies to the registrant's Principal Executive and Principal
Accounting Officers (the "Covered Officers"). During the fiscal year
ended September 30, 2017, however, there were reportable amendments to
the Code that apply to the Covered Officers, and that relate to one or
more of the items set forth in paragraph (b) of Item 2 of Form N-CSR.
In particular, the Code has been amended to provide an enhanced
description of the Covered Officers' responsibilities, which include a
responsibility to observe the ethical principles contained in the Code.
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:
2016 2017
(a) Audit Fees ....................$ 109,185 $ 112,460
(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:
2016 2017
(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 2016 and 2017 were $0 and $0, respectively.
(h) Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders
may recommend nominees to the registrant's Board of Trustees that were
implemented after the registrant last provided disclosure in response
to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a-
101), or this Item 10.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures (as defined under Rule 30a-3(c)
under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))). Based
on that evaluation, the registrant's management, including the
President and Treasurer, concluded that the registrant's disclosure
controls and procedures are effective.
(b) There was no change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act
of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant's
last fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal contro1 over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management
Investment Companies.
Not applicable.
Item 13. 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 7, 2017
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 7, 2017
By: /s/ Gregory R. Kingston
-----------------------
Gregory R. Kingston
Treasurer
Date: December 7, 2017
Exhibit 99.406.Code of Ethics
ANCHOR SERIES TRUST
SUNAMERICA EQUITY FUNDS
SUNAMERICA INCOME FUNDS
SUNAMERICA MONEY MARKET FUNDS, INC.
SUNAMERICA SENIOR FLOATING RATE FUND, INC.
SUNAMERICA SERIES, INC.
SUNAMERICA SPECIALTY SERIES
(collectively, the "Funds")
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE
AND PRINCIPAL ACCOUNTING OFFICERS
I. Introduction
The Boards of Directors/Trustees of the Funds (the "Boards") have
adopted this Code of Ethics (this "Code") pursuant to Section 406 of the
Sarbanes-Oxley Act applicable to the Funds' Principal Executive Officer and
Principal Accounting Officer (the "Covered Officers" as set forth in Exhibit A)
for the purpose of deterring wrongdoing and promoting:
. Honest and ethical conduct, including the ethical handling of conflicts
of interest between personal and professional relationships;
. Full, fair, accurate, timely and understandable disclosure;
. Compliance with applicable laws and governmental rules and regulations;
. The prompt internal reporting of violations of the Code to an
appropriate person or persons identified in the Code; and
. Accountability for adherence to the Code.
Each Covered Officer must comply with applicable law. Each Covered
Officer also has a responsibility to conduct himself or herself in an honest
and ethical manner and to adhere to a high standard of business ethics. Each
Covered Officer has leadership responsibilities that include promoting a
culture of high ethical standards and a commitment to compliance, maintaining a
work environment that encourages the internal reporting of compliance concerns
and promptly addressing compliance concerns. Each Covered Officer should also
be sensitive to situations that may give rise to conflicts of interest.
II. Honest and Ethical Conduct
a. Honesty, Diligence, and Professional Responsibility
Covered Officers are expected to observe both the form and the spirit of
the ethical principles contained in this Code. In particular, Covered Officers
must perform their duties and responsibilities for the Funds:
. with honesty, diligence, and a commitment to professional and ethical
responsibility;
. carefully, thoroughly and in a timely manner; and
. in conformity with applicable professional and technical standards.
b. Ethical Handling of Actual and Apparent Conflicts of Interest
A "conflict of interest" occurs when a Covered Officer's private
interest improperly interferes with the interests of, or his or her service to,
a Fund. For example, a conflict of interest would arise if a Covered Officer,
or a member of his or her immediate family, receives improper personal benefits
as a result of his or her position with the Fund.
Certain conflicts of interest arise out of the relationships between
Covered Officers and the Funds and already are subject to conflict of interest
provisions in the Investment Company Act of 1940, as amended (the "Investment
Company Act") and the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"). For example, Covered Officers may not individually
engage in certain transactions (such as the purchase or sale of securities or
other property) with the Funds because of their status as "affiliated persons"
of the Funds. The compliance programs and procedures of the Funds and the
Funds' investment adviser, SunAmerica Asset Management, LLC ("SAAMCo"), are
designed to prevent, or identify and correct, violations of these provisions.
This Code does not, and is not intended to, repeat or replace these programs
and procedures, and such conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts may arise from, or as a result of, the contractual
relationship between, the Funds and SAAMCo, of which the Covered Officers may
also be officers or employees. As a result, this Code recognizes that the
Covered Officers will, in the normal course of their duties (whether formally
for the Funds or for SAAMCo, or for both), be involved in establishing policies
and implementing decisions that will have different effects on the Funds and
SAAMCo. The participation of the Covered Officers in such activities is
inherent in the contractual relationship between the Funds and SAAMCo, and is
consistent with the performance by the Covered Officers of their duties as
officers of the Funds. Thus, if performed in conformity with the provisions of
the Investment Company Act and the Investment Advisers Act, such activities
will be deemed to have been handled ethically. In addition, it is recognized by
the Boards that the Covered Officers may also be officers or employees of other
investment companies advised by SAAMCo.
2
In particular, each Covered Officer must:
. Not use his or her personal influence or personal relationships to
influence investment decisions or financial reporting by a Fund whereby
the Covered Officer would benefit personally to the detriment of the
Fund;
. Not cause a Fund to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit of the Fund; and
. Report at least annually to the Funds' Ethics Committee any material
transaction or relationship that could reasonably be expected to give
rise to a conflict of interest.
There are certain potential conflict of interest situations that should
be discussed with the Ethics Committee if material. Examples of these include:
. Service as a director on the board of any company;
. The receipt of any non-nominal gifts;
. The receipt of any entertainment from any company with which a Fund has
current or prospective business dealings unless such entertainment is
business-related, reasonable in cost, appropriate as to time and place,
and not so frequent as to raise any question of impropriety;
. Any ownership interest in, or any consulting or employment relationship
with, any of the Funds' service providers, other than SAAMCo, the Funds'
principal underwriter or any affiliated person thereof;
. A direct or indirect financial interest in commissions, transaction
charges or spreads paid by a Fund for effecting portfolio transactions
or for selling or redeeming shares other than an interest arising from
the Covered Officer's employment, such as compensation or equity
ownership.
c. Conduct in the Preparation of Financial Statements
Covered Officers must not knowingly make any misrepresentations
regarding the Funds' financial statements or any facts used in the preparation
of the Funds' financial statements. This section is intended to prohibit:
. making, or permitting or directing another to make, materially false or
misleading entries in the Funds' financial statements or records;
. failing to correct the Funds' financial statements or records that are
materially false or misleading; and
. signing, or permitting or directing another to sign, a document
containing materially false or misleading financial information.
3
d. Obligations to the Independent Auditor of the Funds
In dealing with the Funds' independent auditor, Covered Officers must be
candid and not knowingly misrepresent facts or knowingly fail to disclose
material facts, and must respond to specific inquiries and requests by the
Funds' independent auditor.
Covered Officers must not take any action, or direct any person to take
any action, to fraudulently influence, coerce, manipulate or mislead the Funds'
independent auditor in the performance of an audit of the Funds' financial
statements for the purpose of rendering such financial statements materially
misleading.
III. Disclosure and Compliance
. Each Covered Officer will familiarize himself or herself with the
disclosure requirements generally applicable to the Funds;
. Each Covered Officer will not knowingly misrepresent, or cause others to
misrepresent, facts about the Funds to others, whether within or outside
the Funds, including to the Boards and auditors, or to governmental
regulators and self-regulatory organizations;
. Each Covered Officer will, to the extent appropriate within his or her
area of responsibility, consult with other officers and employees of the
Funds and SAAMCo with the goal of promoting full, fair, accurate, timely
and understandable disclosure in the reports and documents that the
Funds file with, or submit to, the SEC and in other public
communications made by the Funds; and
. It is the responsibility of each Covered Officer to promote compliance
with the standards and restrictions imposed by applicable laws, rules
and regulations.
IV. Reporting and Accountability
Each Covered Officer must:
. Upon adoption of the Code (or thereafter as applicable, upon becoming a
Covered Officer), affirm in writing to the Boards that he or she has
received, read and understands the Code;
. Annually thereafter affirm to the Boards that he or she has complied
with the requirements of the Code;
. Not retaliate against any other Covered Officer or affiliated person of
the Funds for reports of potential violations of this Code, provided the
reports are made in good faith; and
4
. Notify the Ethics Committee promptly if he or she knows of any violation
of this Code. Failure to do so is itself a violation of this Code.
The Ethics Committee is responsible for applying this Code to specific
situations in which questions are presented to it and has the authority to
interpret this Code in any particular situation. The Ethics Committee will also
consider waivers sought by the Covered Officers.
The Funds will act according to the following procedures in
investigating and enforcing this Code:
. The Ethics Committee will take all appropriate action to investigate any
potential violations reported to it;
. If, after such investigation, the Ethics Committee believes that no
violation has occurred, the Ethics Committee is not required to take any
further action;
. If the Ethics Committee determines that a violation has occurred, it
will consider appropriate action, which may include review of, and
appropriate modifications to, applicable policies and procedures;
notification to appropriate personnel of SAAMCo or its board; or a
recommendation to dismiss the Covered Officer;
. The Ethics Committee will be responsible for granting waivers, as
appropriate;
. The Ethics Committee will inform the Boards of violations or waivers of
this Code; and
. Any changes to or waivers of this Code will, to the extent required, be
disclosed as provided by SEC rules.
V. Other Policies and Procedures
This Code shall be the sole Code of Ethics adopted by the Funds for
purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms
applicable to investment companies thereunder. Insofar as other policies or
procedures of the Funds, SAAMCo, the Funds' principal underwriter or other
service providers govern or purport to govern the behavior or activities of the
Covered Officers who are subject to this Code, they are superseded by this Code
to the extent that they overlap or conflict with the provisions of this Code.
The Code of Ethics of the Funds, SAAMCo and the Funds' principal underwriter,
under Rule 17j-1 of the Investment Company Act, and SAAMCo's more detailed
policies and procedures set forth in the SAAMCo Compliance Procedures Manual
are separate requirements applying to Covered Officers and others, and are not
part of this Code.
5
VI. Amendments
Any amendments to this Code, other than amendments to Exhibit A, must be
approved or ratified by a majority vote of the Boards.
VII. Confidentiality
All reports and records prepared or maintained pursuant to this Code
shall be considered confidential and shall be maintained and protected
accordingly. Except as otherwise required by law or this Code, such matters
shall not be disclosed to anyone other than the Funds, the Ethics Committee,
SAAMCo and the Boards and their independent counsel.
VIII. Internal Use
The Code is intended solely for internal use by the Funds and does not
constitute an admission, by or on behalf of the Funds, as to any fact,
circumstance or legal conclusion.
Date: January 1, 2017
6
Exhibit A
John T. Genoy, Principal Executive Officer
Gregory R. Kingston, Principal Accounting Officer
7
Exhibit 99.CERT
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, John T. Genoy, certify that:
1. I have reviewed this report on Form N-CSR of SunAmerica Equity Funds;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations, changes in net assets, and cash
flows (if the financial statements are required to include a statement of cash
flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of a date within 90 days prior to
the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: December 6, 2017
/s/ John T. Genoy
-----------------
John T. Genoy
President
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT
I, Gregory R. Kingston, certify that:
1. I have reviewed this report on Form N-CSR of SunAmerica Equity Funds;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations, changes in net assets, and cash
flows (if the financial statements are required to include a statement of cash
flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of a date within 90 days prior to
the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: December 6, 2017
/s/ Gregory R. Kingston
-----------------------
Gregory R. Kingston
Treasurer
Exhibit 99.906.CERT
CERTIFICATIONS PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT
John T. Genoy, President, and Gregory R. Kingston, Treasurer of SunAmerica
Equity Funds (the "registrant"), each certify to the best of his knowledge
that:
1. The attached Form N-CSR report of the registrant fully complies with the
requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in such N-CSR report fairly represents, in all
material respects, the financial conditions and results of operations of
the registrant as of, and for, the periods presented in the report.
Dated: December 6, 2017
/s/ John T. Genoy
-------------
John T. Genoy
President
/s/ Gregory R. Kingston
-------------------
Gregory R. Kingston
Treasurer