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 811-04708
---------------------------------------------
SunAmerica Income Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Robert M. Zakem, Esq.
Senior Vice President & General Counsel
AIG SunAmerica Asset Management Corp.
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6363
-----------------------------
Date of fiscal year end: March 31
--------------------------
Date of reporting period: September 30, 2003
-------------------------
Item 1. Reports to Shareholders
SunAmerica Income Funds, Semiannual Report at September 30, 2003.
[GRAPHIC]
SunAmerica
THE RETIREMENT SPECIALIST
Income Funds
2003 SEMIANNUAL REPORT
[LOGO] AIG Sun America
Mutual Funds
September 30, 2003 SEMIANNUAL REPORT
SUNAMERICA INCOME FUNDS
SunAmerica Core Bond Fund (NAIBX)
SunAmerica U.S. Government Securities Fund (SGTAX)
SunAmerica GNMA Fund (GNMAX)
SunAmerica Strategic Bond Fund (SDIAX)
SunAmerica High Yield Bond Fund (SHNAX)
SunAmerica Tax Exempt Insured Fund (STEAX)
Table of Contents
STATEMENT OF ASSETS AND LIABILITIES 1
STATEMENT OF OPERATIONS............ 3
STATEMENT OF CHANGES IN NET ASSETS. 5
FINANCIAL HIGHLIGHTS............... 8
PORTFOLIO OF INVESTMENTS........... 14
NOTES TO FINANCIAL STATEMENTS...... 53
TRUSTEE INFORMATION................ 74
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2003 -- (unaudited)
Core U.S. Government GNMA Strategic High Yield Tax Exempt
Bond Fund Securities Fund Fund Bond Fund Bond Fund Insured Fund
------------ --------------- ------------ ------------ ------------- ------------
ASSETS:
Investment securities, at value*... $345,486,997 $253,640,150 $556,478,617 $ 87,214,022 $ 250,593,372 $88,249,330
Short-term securities*............. 59,986,311 14,950,000 134,859,152 1,497,000 -- 6,543,651
Repurchase agreements (cost equals
market)........................... 29,232,000 47,352,000 174,392,000 1,665,000 19,505,000 --
Deposit with brokers for
securities sold short............. -- -- -- -- 2,954,101 --
Cash............................... 846 384 799 1,443,571 324,735 73
Foreign cash*...................... -- -- -- 10,112 -- --
Receivable for shares of
beneficial interest sold.......... 435,916 141,781 2,834,348 602,756 3,229,575 6,658
Interest and dividends receivable.. 2,732,182 1,381,417 1,961,251 1,671,679 6,127,189 1,420,999
Receivable due from adviser........ 19,937 170,051 142,378 9,477 5,128 1,776
Receivable for investments sold.... 22,544,885 9,845,804 10,304,280 390,614 14,518,074 1,183,901
Prepaid expenses................... 4,664 4,330 8,018 1,316 2,767 1,490
------------ ------------ ------------ ------------ ------------- -----------
Total assets...................... 460,443,738 327,485,917 880,980,843 94,505,547 297,259,941 97,407,878
------------ ------------ ------------ ------------ ------------- -----------
LIABILITIES:
Payable for investments purchased.. 110,679,404 60,808,333 285,000,933 529,966 10,608,593 --
Payable for shares of beneficial
interest redeemed................. 5,214,300 420,161 3,026,809 233,087 1,971,603 27,102
Interest payable on securities
sold short........................ -- -- -- -- 73,666 --
Collateral due upon return of
securities loaned................. -- -- -- 625,000 -- --
Dividends payable.................. 4,827 121,065 170,852 173,340 553,987 77,840
Investment advisory and management
fees payable...................... 157,959 138,451 219,128 48,262 165,040 39,163
Distribution and service
maintenance fees payable.......... 31,571 111,138 317,695 51,939 118,402 40,219
Accrued expenses................... 228,638 249,835 39,351 230,180 194,216 132,712
Securities sold short, at value#... -- -- -- -- 1,879,000 --
Unrealized depreciation on forward
foreign currency contracts........ -- -- -- 58,492 -- --
------------ ------------ ------------ ------------ ------------- -----------
Total liabilities................. 116,316,699 61,848,983 288,774,768 1,950,266 15,564,507 317,036
------------ ------------ ------------ ------------ ------------- -----------
Net assets....................... $344,127,039 $265,636,934 $592,206,075 $ 92,555,281 $ 281,695,434 $97,090,842
============ ============ ============ ============ ============= ===========
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest,
$.01 par value.................... $ 330,796 $ 277,246 $ 513,486 $ 280,583 $ 691,320 $ 71,845
Paid-in capital.................... 340,187,484 271,828,352 577,044,957 140,488,254 405,758,598 88,591,352
------------ ------------ ------------ ------------ ------------- -----------
340,518,280 272,105,598 577,558,443 140,768,837 406,449,918 88,663,197
Accumulated undistributed net
investment income (loss).......... (681,543) (1,069,513) (1,269,532) (188,476) (151,386) 130,558
Accumulated net realized gain
(loss) on investments and foreign
currency.......................... (764,019) (11,045,054) 7,380,644 (52,359,548) (130,084,653) 2,873,266
Net unrealized appreciation
(depreciation) on investments..... 5,054,321 5,645,903 8,536,520 4,390,443 5,562,055 5,423,821
Net unrealized foreign exchange
gain (loss) on other assets and
liabilities....................... -- -- -- (55,975) -- --
Net unrealized appreciation
(depreciation) on securities sold
short............................. -- -- -- -- (80,500) --
------------ ------------ ------------ ------------ ------------- -----------
Net assets....................... $344,127,039 $265,636,934 $592,206,075 $ 92,555,281 $ 281,695,434 $97,090,842
============ ============ ============ ============ ============= ===========
*Identified cost
Investment securities............. $340,432,676 $247,994,247 $547,942,097 $ 82,823,579 $ 245,031,317 $82,825,509
============ ============ ============ ============ ============= ===========
Short-term securities............. $ 59,986,311 $ 14,950,000 $134,859,152 $ 1,497,000 $ -- $ 6,543,651
============ ============ ============ ============ ============= ===========
Foreign cash...................... $ -- $ -- $ -- $ 10,017 $ -- $ --
============ ============ ============ ============ ============= ===========
#Proceeds from securities sold
short............................. $ -- $ -- $ -- $ -- $ 1,798,500 $ --
============ ============ ============ ============ ============= ===========
See Notes to Financial Statements
1
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2003 --
(unaudited) (continued)
Core U.S. Government GNMA Strategic High Yield Tax Exempt
Bond Fund Securities Fund Fund Bond Fund Bond Fund Insured Fund
------------ --------------- ------------ ----------- ----------- ------------
Class A (unlimited shares authorized):
Net assets................................... $ 65,179,307 $199,212,221 $301,816,040 $38,486,394 $91,720,279 $72,735,926
Shares of beneficial interest issued and
outstanding................................. 6,269,416 20,792,423 26,210,038 11,673,777 22,549,017 5,382,322
Net asset value and redemption price per
share....................................... $ 10.40 $ 9.58 $ 11.52 $ 3.30 $ 4.07 $ 13.51
Maximum sales charge (4.75% of offering
price)...................................... 0.52 0.48 0.57 0.16 0.20 0.67
------------ ------------ ------------ ----------- ----------- -----------
Maximum offering price to public............. $ 10.92 $ 10.06 $ 12.09 $ 3.46 $ 4.27 $ 14.18
============ ============ ============ =========== =========== ===========
Class B (unlimited shares authorized):
Net assets................................... $ 6,867,510 $ 47,275,924 $166,347,091 $33,235,963 $72,273,661 $18,451,222
Shares of beneficial interest issued and
outstanding................................. 662,511 4,932,168 14,405,519 10,086,165 17,733,099 1,365,335
Net asset value, offering and redemption
price per share (excluding any applicable
contingent deferred sales charge)........... $ 10.37 $ 9.59 $ 11.55 $ 3.30 $ 4.08 $ 13.51
============ ============ ============ =========== =========== ===========
Class II (unlimited shares authorized):
Net assets................................... $ 5,220,636 $ 19,148,789 $118,178,510 $17,343,376 $46,070,144 $ 5,903,694
Shares of beneficial interest issued and
outstanding................................. 502,924 1,999,986 10,224,489 5,240,503 11,266,040 436,803
Net asset value and redemption price per
share (excluding any applicable contingent
deferred sales charge)...................... $ 10.38 $ 9.57 $ 11.56 $ 3.31 $ 4.09 $ 13.52
Maximum sales charge (1.00% of offering
price)...................................... 0.10 0.10 0.12 0.03 0.04 0.14
------------ ------------ ------------ ----------- ----------- -----------
Maximum offering price to public............. $ 10.48 $ 9.67 $ 11.68 $ 3.34 $ 4.13 $ 13.66
============ ============ ============ =========== =========== ===========
Class I (unlimited shares authorized):
Net assets................................... $ 23,541,216 $ -- $ 30,226 $ 3,489,548 $ 15,915 $ --
Shares of beneficial interest issued and
outstanding................................. 2,261,696 -- 2,625 1,057,882 3,914 --
Net asset value, offering and redemption
price per share............................. $ 10.41 $ -- $ 11.51 $ 3.30 $ 4.07 $ --
============ ============ ============ =========== =========== ===========
Class Z (unlimited shares authorized):
Net assets................................... $243,318,370 $ -- $ -- $ -- $71,615,435 $ --
Shares of beneficial interest issued and
outstanding................................. 23,383,059 -- -- -- 17,579,943 --
Net asset value, offering and redemption
price per share............................. $ 10.41 $ -- $ -- $ -- $ 4.07 $ --
============ ============ ============ =========== =========== ===========
Class X (unlimited shares authorized):
Net assets................................... $ -- $ -- $ 5,834,208 $ -- $ -- $ --
Shares of beneficial interest issued and
outstanding................................. -- -- 505,933 -- -- --
Net asset value, offering and redemption
price per share............................. $ -- $ -- $ 11.53 $ -- $ -- $ --
============ ============ ============ =========== =========== ===========
See Notes to Financial Statements
2
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30, 2003
-- (unaudited)
Core U.S. Government GNMA
Bond Fund Securities Fund Fund
---------- --------------- -----------
INVESTMENT INCOME:
Income:
Interest.......................................... $5,919,179 $ 5,491,442 $ 8,334,533
Dividends......................................... -- -- --
---------- ----------- -----------
Total investment income......................... 5,919,179 5,491,442 8,334,533
---------- ----------- -----------
Expenses:
Investment advisory and management fees........... 951,212 914,609 1,406,792
Distribution and service maintenance
fees -- Class A................................. 71,057 360,982 515,959
Distribution and service maintenance
fees -- Class B................................. 36,948 282,099 915,308
Distribution and service maintenance
fees -- Class II................................ 26,957 113,316 669,904
Service fees -- Class I........................... 27,803 -- 40
Transfer agent fees and expenses -- Class A....... 47,592 271,738 355,061
Transfer agent fees and expenses -- Class B....... 11,606 77,800 228,452
Transfer agent fees and expenses -- Class II...... 7,029 29,687 157,993
Transfer agent fees and expenses -- Class I....... 28,126 -- 123
Transfer agent fees and expenses -- Class Z....... 48,678 -- --
Transfer agent fees and expenses -- Class X....... -- -- 5,500
Custodian fees and expenses....................... 59,544 50,625 78,907
Printing expense.................................. 23,607 29,097 52,155
Audit and tax fees................................ 37,881 18,483 20,324
Trustees' fees and expenses....................... 17,699 14,836 27,277
Legal fees and expenses........................... 7,869 4,026 7,869
Registration fees -- Class A...................... 9,333 9,516 15,189
Registration fees -- Class B...................... 9,150 4,026 13,359
Registration fees -- Class II..................... 5,124 7,503 11,895
Registration fees -- Class I...................... 23,424 -- 10,065
Registration fees -- Class Z...................... -- -- --
Registration fees -- Class X...................... -- -- --
Interest expense.................................. -- -- --
Interest expense on securities sold short......... -- -- --
Miscellaneous expenses............................ 8,541 8,017 9,700
---------- ----------- -----------
Total expenses before reimbursements and
custody credits................................ 1,459,180 2,196,360 4,501,872
Expenses reimbursed by investment adviser....... (28,978) (525,797) (424,027)
Custody credits earned on cash balances......... (801) (1,032) (34)
---------- ----------- -----------
Net expenses.................................... 1,429,401 1,669,531 4,077,811
---------- ----------- -----------
Net investment income.............................. 4,489,778 3,821,911 4,256,722
---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments............ 3,846,460 520,331 (1,817,615)
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... -- -- --
Net realized gain (loss) on securities sold short.. -- -- --
Net change in unrealized appreciation
(depreciation) on investments..................... (708,962) (2,537,920) (450,373)
Net change in unrealized foreign exchange gain
(loss) on other assets and liabilities............ -- -- --
Net change in unrealized appreciation
(depreciation) on securities sold short........... -- -- --
---------- ----------- -----------
Net realized and unrealized gain (loss) on
investments....................................... 3,137,498 (2,017,589) (2,267,988)
---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................... $7,627,276 $ 1,804,322 $ 1,988,734
========== =========== ===========
- --------
See Notes to Financial Statements
3
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30,
2003 -- (unaudited) (continued)
Strategic High Yield Tax Exempt
Bond Fund Bond Fund Insured Fund
---------- ----------- ------------
INVESTMENT INCOME:
Income:
Interest.......................................... $3,552,562 $12,888,061 $2,026,445
Dividends......................................... 29,555 116,799 255
---------- ----------- ----------
Total investment income......................... 3,582,117 13,004,860 2,026,700
---------- ----------- ----------
Expenses:
Investment advisory and management fees........... 290,322 934,238 247,952
Distribution and service maintenance
fees -- Class A................................. 67,781 137,889 129,876
Distribution and service maintenance
fees -- Class B................................. 156,009 333,012 94,341
Distribution and service maintenance
fees -- Class II................................ 80,284 192,776 30,481
Service fees -- Class I........................... 4,174 37 --
Transfer agent fees and expenses -- Class A....... 56,879 105,156 88,956
Transfer agent fees and expenses -- Class B....... 44,021 86,255 24,232
Transfer agent fees and expenses -- Class II...... 27,545 58,149 7,987
Transfer agent fees and expenses -- Class I....... 3,673 947 --
Transfer agent fees and expenses -- Class Z....... -- 6,405 --
Transfer agent fees and expenses -- Class X....... -- -- --
Custodian fees and expenses....................... 147,088 28,063 26,944
Printing expense.................................. 23,424 42,273 5,307
Audit and tax fees................................ 17,934 17,202 18,200
Trustees' fees and expenses....................... 2,683 11,975 6,379
Legal fees and expenses........................... 915 15,006 4,941
Registration fees -- Class A...................... 9,516 8,601 12,078
Registration fees -- Class B...................... 8,784 6,954 9,516
Registration fees -- Class II..................... -- 2,196 6,771
Registration fees -- Class I...................... 10,065 10,248 --
Registration fees -- Class Z...................... -- -- --
Registration fees -- Class X...................... -- -- --
Interest expenses................................. -- 6,051 --
Interest expense on securities sold short......... -- 63,455 --
Miscellaneous expenses............................ 7,731 4,059 3,051
---------- ----------- ----------
Total expenses before reimbursements and
custody credits................................ 958,828 2,070,947 717,012
Expenses reimbursed by investment adviser....... (28,136) (14,263) (4,997)
Custody credits earned on cash balances......... (8,008) (2,443) (43)
---------- ----------- ----------
Net expenses.................................... 922,684 2,054,241 711,972
---------- ----------- ----------
Net investment income.............................. 2,659,433 10,950,619 1,314,728
---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments............ 2,511,818 5,165,612 835,289
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... 91,876 -- --
Net realized gain (loss) on securities sold short.. -- 181,735 --
Net change in unrealized appreciation
(depreciation) on investments..................... 3,408,930 20,314,951 393,085
Net change in unrealized foreign exchange gain
(loss) on other assets and liabilities............ (58,682) -- --
Net change in unrealized appreciation
(depreciation) on securities sold short........... -- (70,000) --
---------- ----------- ----------
Net realized and unrealized gain (loss) on
investments....................................... 5,953,942 25,592,298 1,228,374
---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................... $8,613,375 $36,542,917 $2,543,102
========== =========== ==========
See Notes to Financial Statements
4
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
Core Bond Fund U.S. Government Securities Fund
-------------------------- ------------------------------
For the For the
six months six months
ended For the year ended For the year
September 30, ended September 30, ended
2003 March 31, 2003 March 31,
(unaudited) 2003 (unaudited) 2003
------------- ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................ $ 4,489,778 $ 14,216,026 $ 3,821,911 $ 10,214,465
Net realized gain (loss) on investments.............. 3,846,460 5,090,925 520,331 13,675,462
Net realized foreign exchange gain (loss) on other
assets and liabilities............................. -- -- -- --
Net realized gain (loss) on securities sold short.... -- -- --
Net increase from payment by affiliates (Note 4)..... -- -- -- --
Net change in unrealized appreciation (depreciation)
on investments..................................... (708,962) 12,127,059 (2,537,920) 10,528,243
Net change in unrealized foreign exchange gain
(loss) on other assets and liabilities............. -- -- -- --
Net change in unrealized appreciation (depreciation)
on securities sold short........................... -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations........................................... 7,627,276 31,434,010 1,804,322 34,418,170
------------ ------------ ------------ ------------
Dividends and distributions to shareholders from:
Net investment income (Class A)...................... (521,641) (320,620) (3,069,480) (8,637,623)
Net investment income (Class B)...................... (74,011) (171,529) (658,198) (1,881,087)
Net investment income (Class II)..................... (54,137) (145,853) (270,684) (652,207)
Net investment income (Class I)...................... (304,922) (899,952) -- --
Net investment income (Class Z)...................... (4,246,487) (13,648,311) -- --
Net investment income (Class X)...................... -- -- -- --
Net realized gain on investments (Class A)........... -- -- -- --
Net realized gain on investments (Class B)........... -- -- -- --
Net realized gain on investments (Class II).......... -- -- -- --
Net realized gain on investments (Class I)........... -- -- -- --
Net realized gain on investments (Class Z)........... -- -- -- --
Net realized gain on investments (Class X)........... -- -- -- --
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders..... (5,201,198) (15,186,265) (3,998,362) (11,170,917)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 7).................. 18,801,588 (24,440,061) (29,934,288) 35,816,062
------------ ------------ ------------ ------------
Total increase (decrease) in net assets............... 21,227,666 (8,192,316) (32,128,328) 59,063,315
NET ASSETS:
Beginning of period................................... 322,899,373 331,091,689 297,765,262 238,701,947
------------ ------------ ------------ ------------
End of period......................................... $344,127,039 $322,899,373 $265,636,934 $297,765,262
============ ============ ============ ============
Accumulated undistributed net investment income (loss) $ (681,543) $ 29,877 $ (1,069,513) $ (893,062)
============ ============ ============ ============
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund Strategic Bond Fund
-------------------------- -------------------------
For the For the
six months six months
ended For the year ended For the year
September 30, ended September 30, ended
2003 March 31, 2003 March 31,
(unaudited) 2003 (unaudited) 2003
------------- ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income....................... $ 4,256,722 $ 12,837,322 $ 2,659,433 $ 5,132,006
Net realized gain (loss) on investments..... (1,817,615) 16,538,167 2,511,818 (5,545,727)
Net realized foreign exchange gain (loss)
on other assets and liabilities........... -- -- 91,876 137,052
Net realized gain (loss) on securities sold
short..................................... -- -- --
Net increase from payment by affiliates
(Note 4).................................. -- -- -- 12,000
Net change in unrealized appreciation
(depreciation) on investments............. (450,373) 12,469,714 3,408,930 6,796,966
Net change in unrealized foreign exchange
gain (loss) on other assets and
liabilities............................... -- -- (58,682) 2,526
Net change in unrealized appreciation
(depreciation) on securities sold short... -- -- -- --
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations................... 1,988,734 41,845,203 8,613,375 6,534,823
------------ ------------ ----------- -----------
Dividends and distributions to shareholders
from:
Net investment income (Class A)............. (2,972,072) (7,006,789) (1,275,569) (2,134,446)
Net investment income (Class B)............. (1,272,280) (4,139,556) (925,805) (1,417,388)
Net investment income (Class II)............ (931,342) (2,377,356) (492,449) (771,300)
Net investment income (Class I)............. (338) (1,520) (115,505) (184,184)
Net investment income (Class Z)............. -- -- -- --
Net investment income (Class X)............. (56,273) (72,532) -- --
Net realized gain on investments (Class A).. -- (2,283,804) -- --
Net realized gain on investments (Class B).. -- (1,663,779) -- --
Net realized gain on investments (Class II). -- (1,112,326) -- --
Net realized gain on investments (Class I).. -- (394) -- --
Net realized gain on investments (Class Z).. -- -- -- --
Net realized gain on investments (Class X).. -- (27,923) -- --
------------ ------------ ----------- -----------
Total dividends and distributions to
shareholders................................ (5,232,305) (18,685,979) (2,809,328) (4,507,318)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from capital share transactions
(Note 7).................................... 9,709,690 317,715,065 4,168,232 1,137,195
------------ ------------ ----------- -----------
Total increase (decrease) in net assets...... 6,466,119 340,874,289 9,972,279 3,164,700
NET ASSETS:
Beginning of period.......................... 585,739,956 244,865,667 82,583,002 79,418,302
------------ ------------ ----------- -----------
End of period................................ $592,206,075 $585,739,956 $92,555,281 $82,583,002
============ ============ =========== ===========
Accumulated undistributed net investment
income (loss)............................... $ (1,269,532) $ (293,949) $ (188,476) $ (38,581)
============ ============ =========== ===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Tax Exempt Insured Fund
-------------------------- --------------------------
For the six For the six
months ended For the year months ended For the year
September 30, ended September 30, ended
2003 March 31, 2003 March 31,
(unaudited) 2003 (unaudited) 2003
------------- ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................. $ 10,950,619 $ 18,665,069 $ 1,314,728 $ 2,975,322
Net realized gain (loss) on investments................ 5,165,612 (25,417,328) 835,289 3,277,158
Net realized foreign exchange gain (loss) on other
assets and liabilities............................... -- -- -- --
Net realized gain (loss) on securities sold short...... 181,735 (320,650) -- --
Net increase from payment by affiliates (Note 4)....... -- -- -- --
Net change in unrealized appreciation (depreciation)
on investments....................................... 20,314,951 3,758,281 393,085 2,350,133
Net change in foreign exchange gain (loss) on other
assets and liabilities............................... -- -- -- --
Net change in unrealized appreciation (depreciation)
on securities sold short............................. (70,000) (10,500) -- --
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................. 36,542,917 (3,325,128) 2,543,102 8,602,613
------------ ------------ ------------ ------------
Dividends and distributions to shareholders from:
Net investment income (Class A)........................ (3,477,768) (4,718,507) (1,009,142) (2,517,853)
Net investment income (Class B)........................ (2,729,581) (4,944,952) (187,189) (492,738)
Net investment income (Class II)....................... (1,575,184) (1,795,180) (61,991) (136,989)
Net investment income (Class I)........................ (1,308) (1,256) -- --
Net investment income (Class Z)........................ (3,178,404) (5,928,841) -- --
Net investment income (Class X)........................ -- -- -- --
Net realized gain on investments (Class A)............. -- -- -- (500,751)
Net realized gain on investments (Class B)............. -- -- -- (130,729)
Net realized gain on investments (Class II)............ -- -- -- (35,541)
Net realized gain on investments (Class I)............. -- -- -- --
Net realized gain on investments (Class Z)............. -- -- -- --
Net realized gain on investments (Class X).............
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders....... (10,962,245) (17,388,736) (1,258,322) (3,814,601)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 7).................... 42,731,676 24,494,021 (8,032,923) 1,795,166
------------ ------------ ------------ ------------
Total increase (decrease) in net assets................. 68,312,348 3,780,157 (6,748,143) 6,583,178
NET ASSETS:
Beginning of period..................................... 213,383,086 209,602,929 103,838,985 97,255,807
------------ ------------ ------------ ------------
End of period........................................... $281,695,434 $213,383,086 $ 97,090,842 $103,838,985
============ ============ ============ ============
Accumulated undistributed net investment income (loss).. $ (151,386) $ (139,760) $ 130,558 $ 74,152
============ ============ ============ ============
See Notes to Financial Statements
7
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS
CORE BOND FUND
Net gain
Net Asset (loss) on
Value, investments Dividends
beginning Net (both Total from from net Net Asset
of investment realized and investment investment Return of Total Value, end
Period Ended period income(1) unrealized) operations income capital Distributions of period
- ---------------------------------- --------- ---------- ------------ ---------- ---------- --------- ------------- ----------
Class A
- -------
11/01/97-10/31/98.................. $10.52 $0.68 $ 0.10 $ 0.78 $(0.67) $ -- $(0.67) $10.63
11/01/98-10/31/99.................. 10.63 0.66 (0.77) (0.11) (0.67) -- (0.67) 9.85
11/01/99-10/31/00.................. 9.85 0.62 (0.21) 0.41 (0.60) (0.06) (0.66) 9.60
11/01/00-10/31/01.................. 9.60 0.55 0.65 1.20 (0.51) -- (0.51) 10.29
11/01/01-3/31/02#.................. 10.29 0.20 (0.48) (0.28) (0.19) -- (0.19) 9.82
4/01/02-3/31/03.................... 9.82 0.34 0.58 0.92 (0.42) -- (0.42) 10.32
4/01/03-9/30/03++.................. 10.32 0.10 0.12 0.22 (0.14) -- (0.14) 10.40
Class B
- -------
11/01/97-10/31/98.................. $10.52 $0.61 $ 0.10 $ 0.71 $(0.61) $ -- $(0.61) $10.62
11/01/98-10/31/99.................. 10.62 0.59 (0.75) (0.16) (0.61) -- (0.61) 9.85
11/01/99-10/31/00.................. 9.85 0.58 (0.24) 0.34 (0.55) (0.05) (0.60) 9.59
11/01/00-10/31/01.................. 9.59 0.48 0.64 1.12 (0.45) -- (0.45) 10.26
11/01/01-3/31/02#.................. 10.26 0.17 (0.49) (0.32) (0.16) -- (0.16) 9.78
4/01/02-3/31/03.................... 9.78 0.31 0.55 0.86 (0.36) -- (0.36) 10.28
4/01/03-9/30/03++.................. 10.28 0.08 0.11 0.19 (0.10) -- (0.10) 10.37
Class II*
- ---------
11/01/97-10/31/98.................. $10.52 $0.61 $ 0.10 $ 0.71 $(0.61) $ -- $(0.61) $10.62
11/01/98-10/31/99.................. 10.62 0.59 (0.75) (0.16) (0.61) -- (0.61) 9.85
11/01/99-10/31/00.................. 9.85 0.57 (0.23) 0.34 (0.55) (0.05) (0.60) 9.59
11/01/00-10/31/01.................. 9.59 0.48 0.64 1.12 (0.45) -- (0.45) 10.26
11/01/01-3/31/02#.................. 10.26 0.18 (0.49) (0.31) (0.16) -- (0.16) 9.79
4/01/02-3/31/03.................... 9.79 0.31 0.56 0.87 (0.36) -- (0.36) 10.30
4/01/03-9/30/03++.................. 10.30 0.08 0.10 0.18 (0.10) -- (0.10) 10.38
Class I
- -------
7/10/00-10/31/00@.................. $ 9.65 $0.19 $(0.02) $ 0.17 $(0.18) $(0.02) $(0.20) $ 9.62
11/01/00-10/31/01.................. 9.62 0.57 0.65 1.22 (0.52) -- (0.52) 10.32
11/01/01-3/31/02#.................. 10.32 0.21 (0.52) (0.31) (0.19) -- (0.19) 9.82
2/01/02-3/31/03.................... 9.82 0.40 0.55 0.95 (0.44) -- (0.44) 10.33
4/01/03-9/30/03++.................. 10.33 0.11 0.11 0.22 (0.14) -- (0.14) 10.41
Class Z*
- --------
7/10/00-10/31/00@.................. $ 9.64 $0.19 $(0.03) $ 0.16 $(0.18) $(0.02) $(0.20) $ 9.60
11/01/00-10/31/01.................. 9.60 0.59 0.65 1.24 (0.55) -- (0.55) 10.29
11/01/01-3/31/02#.................. 10.29 0.21 (0.47) (0.26) (0.21) -- (0.21) 9.82
4/01/02-3/31/03.................... 9.82 0.47 0.53 1.00 (0.49) -- (0.49) 10.33
4/01/03-9/30/03++.................. 10.33 0.15 0.10 0.25 (0.17) -- (0.17) 10.41
Ratio of
Net net
Assets, Ratio of investment
end of expenses to income to
Total period average average Portfolio
Period Ended Return(2) (000's) net assets net assets Turnover
- ---------------------------------- --------- -------- ----------- ---------- ---------
11/01/97-10/31/98.................. 7.63% $ 6,730 1.25%(4) 6.45%(4) 48%
11/01/98-10/31/99.................. (1.08) 3,507 1.25(4) 4.77(4) 43
11/01/99-10/31/00.................. 4.35 3,858 1.29(4) 6.45(4) 94
11/01/00-10/31/01.................. 12.85 5,901 1.31(4) 5.51(4) 215
11/01/01-3/31/02#.................. (2.77) 5,312 1.33(3)(4) 5.03(3)(4) 94
4/01/02-3/31/03.................... 9.58 21,260 1.33(4) 3.72(4) 179
4/01/03-9/30/03++.................. 2.13 65,179 1.29(3) 2.16(3) 92
11/01/97-10/31/98.................. 6.93% $ 4,845 1.90%(4) 5.81%(4) 48%
11/01/98-10/31/99.................. (1.56) 4,295 1.90(4) 5.71(4) 43
11/01/99-10/31/00.................. 3.70 4,937 1.95(4) 5.95(4) 94
11/01/00-10/31/01.................. 11.93 6,444 1.97(4) 4.88(4) 215
11/01/01-3/31/02#.................. (3.14) 3,220 1.98(3)(4) 4.36(3)(4) 94
4/01/02-3/31/03.................... 8.90 7,198 1.98(4) 3.15(4) 179
4/01/03-9/30/03++.................. 1.89 6,868 1.97(3)(4) 1.57(3)(4) 92
11/01/97-10/31/98.................. 6.93% $ 5,532 1.90%(4) 5.81%(4) 48%
11/01/98-10/31/99.................. (1.56) 4,593 1.90(4) 5.70(4) 43
11/01/99-10/31/00.................. 3.70 2,778 1.95(4) 5.84(4) 94
11/01/00-10/31/01.................. 11.93 4,541 1.97(4) 4.79(4) 215
11/01/01-3/31/02#.................. (3.04) 3,772 1.98(3)(4) 4.39(3)(4) 94
4/01/02-3/31/03.................... 9.00 5,598 1.98(4) 3.13(4) 179
4/01/03-9/30/03++.................. 1.79 5,221 1.97(3)(4) 1.57(3)(4) 92
7/10/00-10/31/00@.................. 1.85% $ 19,971 1.16%(3) 6.18%(3) 94%
11/01/00-10/31/01.................. 13.01 22,782 1.22(4) 5.68(4) 215
11/01/01-3/31/02#.................. (3.01) 21,707 1.23(3)(4) 5.12(3)(4) 94
2/01/02-3/31/03.................... 9.80 20,617 1.24(4) 3.98(4) 179
4/01/03-9/30/03++.................. 2.17 23,541 1.23(3)(4) 2.31(3)(4) 92
7/10/00-10/31/00@.................. 1.81% $317,842 0.95%(3)(4) 6.39%(3)(4) 94%
11/01/00-10/31/01.................. 13.37 323,570 0.97(4) 5.97(4) 215
11/01/01-3/31/02#.................. (2.57) 297,081 0.74(3)(4) 5.62(3)(4) 94
4/01/02-3/31/03.................... 10.38 268,226 0.67 4.56 179
4/01/03-9/30/03++.................. 2.44 243,318 0.70(3) 2.85(3) 92
-------------------------------
- --------
* In conjunction with the reorganization, Class C was redesignated as Class
II and Class II was redesignated as Class Z. See Note 2 for further
discussion.
@ Inception date of class.
# See Note 2
++ Unaudited
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load.
(3) Annualized
(4) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
10/31/98 10/31/99 10/31/00 10/31/01 3/31/02(3) 3/31/03 9/30/03(3)++
-------- -------- -------- -------- ---------- ------- ------------
Core Bond Fund
Class A............ 0.29% 0.45% 0.49% 0.04% 0.19% 0.11% -- %
Core Bond Fund
Class B............ 0.30 0.49 0.50 0.03 0.32 0.23 0.24
Core Bond Fund
Class II........... 0.30 0.48 0.54 0.04 0.32 0.18 0.13
Core Bond Fund
Class I............ -- -- -- 0.03 0.13 0.05 0.15
Core Bond Fund
Class Z............ -- -- 0.01(3) 0.03 0.02 -- --
See Notes to Financial Statements
8
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Net gain
Net Asset (loss) on Net
Value, investments Dividends Assets,
beginning Net (both Total from from net Net Asset end of
of investment realized and investment investment Total Value, end Total period
Period Ended period income(1) unrealized) operations income Distributions of period Return(2) (000's)
- ----------------- --------- ---------- ------------ ---------- ---------- ------------- ---------- --------- --------
Class A
- -------
3/31/99........... $8.66 $0.49 $(0.07) $0.42 $(0.43) $(0.43) $8.65 4.91% $135,734
3/31/00........... 8.65 0.44 (0.37) 0.07 (0.41) (0.41) 8.31 0.89 150,975
3/31/01........... 8.31 0.45 0.60 1.05 (0.45) (0.45) 8.91 13.06 169,524
3/31/02........... 8.91 0.37(5) (0.08) 0.29 (0.40) (0.40) 8.80 3.25 187,615
3/31/03........... 8.80 0.37 0.86 1.23 (0.40) (0.40) 9.63 14.14 210,848
4/01/03-9/30/03++. 9.63 0.14 (0.05) 0.09 (0.14) (0.14) 9.58 0.97 199,212
Class B
- -------
3/31/99........... $8.66 $0.45 $(0.09) $0.36 $(0.37) $(0.37) $8.65 4.25% $113,521
3/31/00........... 8.65 0.40 (0.38) 0.02 (0.36) (0.36) 8.31 0.23 42,273
3/31/01........... 8.31 0.39 0.61 1.00 (0.40) (0.40) 8.91 12.29 32,085
3/31/02........... 8.91 0.31(5) (0.08) 0.23 (0.34) (0.34) 8.80 2.55 38,878
3/31/03........... 8.80 0.30 0.87 1.17 (0.33) (0.33) 9.64 13.51 62,595
4/01/03-9/30/03++. 9.64 0.11 (0.05) 0.06 (0.11) (0.11) 9.59 0.64 47,276
Class II
- --------
6/01/99-3/31/00@.. $8.49 $0.31 $(0.20) $0.11 $(0.28) $(0.28) $8.32 1.30% $ 907
3/31/01........... 8.32 0.37 0.61 0.98 (0.39) (0.39) 8.91 12.10 3,303
3/31/02........... 8.91 0.29(5) (0.09) 0.20 (0.32) (0.32) 8.79 2.40 12,209
3/31/03........... 8.79 0.30 0.87 1.17 (0.33) (0.33) 9.63 13.52 24,322
4/01/03-9/30/03++. 9.63 0.11 (0.06) 0.05 (0.11) (0.11) 9.57 0.53 19,149
Ratio of
net
Ratio of investment
expenses to income to
average average Portfolio
Period Ended net assets net assets Turnover
- ----------------- ----------- ---------- ---------
3/31/99........... 1.50% 5.72% 291%
3/31/00........... 1.51 5.33 717
3/31/01........... 1.49 5.27 1,561
3/31/02........... 1.42 4.12(5) 570
3/31/03........... 1.12(4) 3.88(4) 614
4/01/03-9/30/03++. 0.99(3)(4) 2.85(3)(4) 137
3/31/99........... 2.15% 5.10% 291%
3/31/00........... 2.18 4.69 717
3/31/01........... 2.17 4.59 1,561
3/31/02........... 2.09(4) 3.42(4)(5) 570
3/31/03........... 1.76(4) 3.20(4) 614
4/01/03-9/30/03++. 1.64(3)(4) 2.22(3)(4) 137
6/01/99-3/31/00@.. 2.20%(3)(4) 4.50%(3)(4) 717%
3/31/01........... 2.20(4) 4.48(4) 1,561
3/31/02........... 2.10(4) 3.33(4)(5) 570
3/31/03........... 1.75(4) 3.18(4) 614
4/01/03-9/30/03++. 1.64(3)(4) 2.21(3)(4) 137
- --------
@ Inception date of class.
++ Unaudited
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) Annualized
(4) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
3/31/00 3/31/01 3/31/02 3/31/03 9/30/03(3)++
------- ------- ------- ------- ------------
U.S. Government Securities Fund Class A...... -- % -- % -- % 0.21% 0.36%
U.S. Government Securities Fund Class B...... -- -- 0.01 0.23 0.38
U.S. Government Securities Fund Class II..... 0.86(3) 1.18 0.16 0.27 0.41
(5)As disclosed in the Notes to the Financial Statements, the Trust has adopted
the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began accreting discount and amortizing premium on debt
securities. The per share effect of this change for the year ended March 31,
2002 on investment income and realized and unrealized gains and losses was
less than $0.01 per share for all classes of shares. The effect of this
change was to decrease the ratio of net investment income to average net
assets by 0.11% for all classes of shares. Per share data and ratios for
periods prior to March 31, 2002 have not been restated to reflect this
change in accounting policy.
See Notes to Financial Statements
9
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
Net Asset (loss) on
Value, investments Dividends Distributions
beginning Net (both Total from from net from net Net Asset
of investment realized and investment investment realized Total Value, end Total
Period Ended period income(1) unrealized) operations income gains distributions of period Return(2)
- ----------------- --------- ---------- ------------ ---------- ---------- ------------- ------------- ---------- ---------
Class A
-------
3/31/99.......... $11.03 $0.57 $ 0.11 $0.68 $(0.53) $(0.50) $(1.03) $10.68 6.21%
3/31/00.......... 10.68 0.53 (0.29) 0.24 (0.50) -- (0.50) 10.42 2.40
3/31/01.......... 10.42 0.61 0.72 1.33 (0.62) (0.01) (0.63) 11.12 13.10
3/31/02.......... 11.12 0.51(6) (0.03) 0.48 (0.51) (0.32) (0.83) 10.77 4.45
3/31/03.......... 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29
4/01/03-9/30/03++ 11.54 0.09 0.01 0.10 (0.12) -- (0.12) 11.52 0.84
Class B
-------
3/31/99.......... $11.06 $0.50 $ 0.12 $0.62 $(0.46) $(0.50) $(0.96) $10.72 5.63%
3/31/00.......... 10.72 0.46 (0.30) 0.16 (0.44) -- (0.44) 10.44 1.55
3/31/01.......... 10.44 0.53 0.74 1.27 (0.55) (0.01) (0.56) 11.15 12.45
3/31/02.......... 11.15 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.80 3.78
3/31/03.......... 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54
4/01/03-9/30/03++ 11.57 0.06 0.00 0.06 (0.08) -- (0.08) 11.55 0.52
Class II
--------
6/01/99-3/31/00@. $10.52 $0.37 $(0.09) $0.28 $(0.34) $ -- $(0.34) $10.46 2.72%
3/31/01.......... 10.46 0.49 0.77 1.26 (0.55) (0.01) (0.56) 11.16 12.33
3/31/02.......... 11.16 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.81 3.78
3/31/03.......... 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53
4/01/03-9/30/03++ 11.58 0.06 0.00 0.06 (0.08) -- (0.08) 11.56 0.52
Class I
-------
11/16/01-3/31/02@ $11.27 $1.18(6) $(1.15) $0.03 $(0.19) $(0.32) $(0.51) $10.79 0.31%
3/31/03.......... 10.79 0.43 0.86 1.29 (0.43) (0.11) (0.54) 11.54 12.19
4/01/03-9/30/03++ 11.54 0.11 (0.02) 0.09 (0.12) -- (0.12) 11.51 0.81
Class X
-------
3/19/02-3/31/02@. $10.80 $0.02(6) $(0.01) $0.01 $(0.02) $ -- $(0.02) $10.79 0.08%
3/31/03.......... 10.79 0.36 0.95 1.31 (0.44) (0.11) (0.55) 11.55 12.36
4/01/03-9/30/03++ 11.55 0.11 -- 0.11 (0.13) -- (0.13) 11.53 0.97
Ratio of
Net net
Assets, Ratio of investment
end of expenses to income to
period average average Portfolio
Period Ended (000's) net assets net assets Turnover
- ----------------- -------- ----------- ---------- ---------
3/31/99.......... $ 35,809 1.41% 5.19% 456%
3/31/00.......... 44,155 1.37 5.06 910
3/31/01.......... 72,092 0.99(5) 5.78(5) 833
3/31/02.......... 118,440 0.99(4)(5) 4.61(4)(5)(6) 537
3/31/03.......... 255,096 0.99(5) 3.36(5) 421
4/01/03-9/30/03++ 301,816 0.99(3)(5) 1.69(3)(5) 112
3/31/99.......... $ 26,061 2.07% 4.53% 456%
3/31/00.......... 22,376 2.03 4.41 910
3/31/01.......... 38,190 1.64(5) 5.11(5) 833
3/31/02.......... 90,011 1.64(4)(5) 3.96(4)(5)(6) 537
3/31/03.......... 189,323 1.64(5) 2.71(5) 421
4/01/03-9/30/03++ 166,347 1.64(3)(5) 1.08(3)(5) 112
6/01/99-3/31/00@. $ 1,406 2.10%(3)(5) 4.34%(3)(5) 910%
3/31/01.......... 15,851 1.64(5) 4.99(5) 833
3/31/02.......... 36,258 1.64(4)(5) 3.96(4)(5)(6) 537
3/31/03.......... 137,173 1.64(5) 2.59(5) 421
4/01/03-9/30/03++ 118,179 1.64(3)(5) 1.08(3)(5) 112
11/16/01-3/31/02@ $ 51 0.89%(3)(4)(5) 4.81%(3)(4)(5)(6) 537%
3/31/03.......... 41 0.89(5) 3.64(5) 421
4/01/03-9/30/03++ 30 0.88(3)(5) 1.84(3)(5) 112
3/19/02-3/31/02@. $ 106 0.89%(3)(4)(5) 3.84%(3)(4)(5)(6) 537%
3/31/03.......... 4,107 0.78(5) 3.31(5) 421
4/01/03-9/30/03++ 5,834 0.74(3)(5) 1.92(3)(5) 112
- --------
@ Inception date of class.
++ Unaudited
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load.
(3) Annualized
(4) The ratios reflect an expense cap of 0.99%, 1.64% and 1.64% for Class A,
Class B and Class II, respectively, which are net of custody credits of
0.01% for Class A, Class B, and Class II or waivers/reimbursements if
applicable. Custody credits for Class I and X are less than 0.01%.
(5) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
3/31/00 3/31/01 3/31/02 3/31/03 9/30/03(3)++
------- ------- ------- ------- ------------
GNMA Fund Class A... -- % 0.30% 0.19% 0.13% 0.13%
GNMA Fund Class B... -- 0.33 0.19 0.14 0.14
GNMA Fund Class II.. 1.98(3) 0.62 0.21 0.13 0.13
GNMA Fund Class I... -- -- 2.00(3) 24.41 64.29
GNMA Fund Class X... -- -- 56.17(3) 0.37 --
(6) As disclosed in the Notes to the Financial Statements, the Trust has
adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting discount and amortizing premium on
debt securities. The per share effect of this change for the year ended
March 31, 2002 on investment income and realized and unrealized gains and
losses was less than $0.01 per share on all classes of shares. The effect
of this change was to decrease the ratio of net investment income to
average net assets by 0.03% for all classes of shares. Per share data and
ratios for periods prior to March 31, 2002 have not been restated to
reflect this change in accounting policy.
See Notes to Financial Statements
10
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND**
---------------------
Net gain
Net Asset (loss) on Dividends
Value, investments Dividends from net Net Asset
beginning Net (both Total from from net realized Value,
of investment realized and investment investment gain on Return of Total end of
Period Ended period+ income(1)+ unrealized)+ operations+ income+ investments+ capital+ Distributions period+
- ----------------- --------- ---------- ------------ ----------- ---------- ------------ --------- ------------- ---------
Class A
-------
11/01/97-10/31/98 $3.82 $0.26 $(0.25) $ 0.01 $(0.26) $(0.05) $ -- $(0.31) $3.52
11/01/98-10/31/99 3.52 0.28 (0.20) 0.08 (0.29) (0.02) -- (0.31) 3.29
11/01/99-10/31/00 3.29 0.28 (0.14) 0.14 (0.26) -- (0.04) (0.30) 3.13
11/01/00-10/31/01 3.13 0.28 (0.09) 0.19 (0.28) -- -- (0.28) 3.04
11/01/01-3/31/02# 3.04 0.11(6) (0.03) 0.08 (0.12) -- -- (0.12) 3.00
4/01/02-3/31/03.. 3.00 0.20 0.06 0.26 (0.18) -- -- (0.18) 3.08
4/01/03-9/30/03++ 3.08 0.10 0.23 0.33 (0.11) -- -- (0.11) 3.30
Class B
-------
11/01/97-10/31/98 $3.83 $0.24 $(0.25) $(0.01) $(0.24) $(0.05) $ -- $(0.29) $3.53
11/01/98-10/31/99 3.53 0.26 (0.21) 0.05 (0.26) (0.02) -- (0.28) 3.30
11/01/99-10/31/00 3.30 0.26 (0.14) 0.12 (0.24) -- (0.04) (0.28) 3.14
11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- -- (0.26) 3.05
11/01/01-3/31/02# 3.05 0.10(6) (0.04) 0.06 (0.11) -- -- (0.11) 3.00
4/01/02-3/31/03.. 3.00 0.18 0.06 0.24 (0.16) -- -- (0.16) 3.08
4/01/03-9/30/03++ 3.08 0.09 0.23 0.32 (0.10) -- -- (0.10) 3.30
Class II*
---------
11/01/97-10/31/98 $3.84 $0.24 $(0.25) $(0.01) $(0.24) $(0.06) $ -- $(0.30) $3.53
11/01/98-10/31/99 3.53 0.26 (0.20) 0.06 (0.26) (0.02) -- (0.28) 3.31
11/01/99-10/31/00 3.31 0.26 (0.16) 0.10 (0.24) -- (0.03) (0.27) 3.14
11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- -- (0.26) 3.05
11/01/01-3/31/02# 3.05 0.10(6) (0.03) 0.07 (0.11) -- -- (0.11) 3.01
4/01/02-3/31/03.. 3.01 0.19 0.05 0.24 (0.16) -- -- (0.16) 3.09
4/01/03-9/30/03++ 3.09 0.09 0.23 0.32 (0.10) -- -- (0.10) 3.31
Class I
-------
7/10/00-10/31/00@ $3.21 $0.08 $(0.08) $(0.00) $(0.07) $ -- $(0.01) $(0.08) $3.13
11/01/00-10/31/01 3.13 0.29 (0.09) 0.20 (0.29) -- -- (0.29) 3.04
11/01/01-3/31/02# 3.04 0.11(6) (0.03) 0.08 (0.12) -- -- (0.12) 3.00
4/01/02-3/31/03.. 3.00 0.21 0.06 0.27 (0.19) -- -- (0.19) 3.08
4/01/03-9/30/03++ 3.08 0.11 0.22 0.33 (0.11) -- -- (0.11) 3.30
Ratio of
Net Ratio of net
Assets, expense investment
end of to income to
Total period average average Portfolio
Period Ended Return(2) (000's) net assets net assets Turnover
- ----------------- --------- ------- ---------- ---------- ---------
11/01/97-10/31/98 0.22% $15,296 1.50%(5) 7.02%(5) 162%
11/01/98-10/31/99 2.10 8,997 1.50(5) 8.21(5) 119
11/01/99-10/31/00 4.09 6,439 1.55(5) 8.70(5) 46
11/01/00-10/31/01 6.48 8,478 1.57(5) 9.07(5) 49
11/01/01-3/31/02# 2.46 35,365 1.52(3)(4)(5) 8.09(3)(4)(5)(6) 99
4/01/02-3/31/03.. 9.07(7) 37,136 1.62(8) 6.93(8) 65
4/01/03-9/30/03++ 10.71 38,486 1.77(3)(4)(9) 6.23(4)(9) 37
11/01/97-10/31/98 (0.43)% $29,210 2.15%(5) 6.39%(5) 162%
11/01/98-10/31/99 1.56 21,340 2.15(5) 7.58(5) 119
11/01/99-10/31/00 3.33 15,131 2.20(5) 8.00(5) 46
11/01/00-10/31/01 5.65 9,964 2.21(5) 8.41(5) 49
11/01/01-3/31/02# 2.05 26,892 2.19(3)(4)(5) 7.48(3)(4)(5)(6) 99
4/01/02-3/31/03.. 8.36(7) 27,879 2.28(8) 6.26(8) 65
4/01/03-9/30/03++ 10.35 33,236 2.41(3)(4)(9) 5.59(4)(9) 37
11/01/97-10/31/98 (0.43)% $33,537 2.15%(5) 6.37%(5) 162%
11/01/98-10/31/99 1.56 20,749 2.15(5) 7.57(5) 119
11/01/99-10/31/00 3.32 13,056 2.20(5) 8.04(5) 46
11/01/00-10/31/01 5.65 11,461 2.22(5) 8.41(5) 49
11/01/01-3/31/02# 2.25 14,289 2.22(3)(4)(5) 7.34(3)(4)(5)(6) 99
4/01/02-3/31/03.. 8.47(7) 14,423 2.17(8)(5) 6.37(8)(5) 65
4/01/03-9/30/03++ 10.44 17,343 2.21(3)(4)(5)(9) 5.78(4)(5)(9) 37
7/10/00-10/31/00@ (0.10)% $ 2,636 1.45%(4)(5) 7.87%(4)(5) 46%
11/01/00-10/31/01 6.63 2,811 1.46(5) 9.17(5) 49
11/01/01-3/31/02# 2.59 2,872 1.44(3)(4)(5) 8.13(3)(4)(5)(6) 99
4/01/02-3/31/03.. 9.29(7) 3,145 1.42(8)(5) 7.13(8)(5) 65
4/01/03-9/30/03++ 10.89 3,490 1.43(3)(4)(5)(9) 6.56(4)(5)(9) 37
- --------
* In conjunction with Fund merger, Class C was redesignated as Class II. See
Note 2 for further discussion.
** The financial information for the fiscal periods prior to November 16, 2001
reflect the financial information of the North American Strategic Income
Fund, which was reorganized in SunAmerica Strategic Bond Fund on that date.
+ Prior to the fund merger, the North American Strategic Income Fund issued a
stock split. The per share information for all periods prior to the stock
split have been restated. For amounts reflecting activity subsequent to
November 16, 2001, no restatement was necessary. See Note 2 for further
discussion.
++ Unaudited
@ Inception date of the class.
# See Note 2
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load.
(3)The ratios reflect an expense cap of 2.22%, and 1.44% for Class II and Class
I, respectively, which is net of custody credits of 0.03% for these classes.
Class A and Class B are gross of custody credits of 0.03% for the period
ended March 31, 2003.
(4) Annualized
(5) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
10/31/98 10/31/99 10/31/00 10/31/01 03/31/02(4) 3/31/03 9/30/03(4)++
-------- -------- -------- -------- ----------- ------- ------------
Strategic Bond Fund Class A............. 0.06% 0.17% 0.32% 0.17% 0.01% -- % -- %
Strategic Bond Fund Class B............. 0.06 0.17 0.32 0.18 0.01 -- --
Strategic Bond Fund Class II............ 0.06 0.17 0.32 0.17 0.08 0.11 0.20
Strategic Bond Fund Class I............. -- -- 0.26(4) 0.18 0.24 0.48 0.71
(6) As disclosed in the Notes to the Financial Statements, the Trust has
adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting discount and amortizing premium on
debt securities. The effect of this change for the year ended March 31,
2002 on net investment income and realized and unrealized gains and losses
was less than $0.01 per share for all classes. The effect of this change on
the ratio of net investment income to average net asset was less than 0.01%
for all classes. Per share data and ratios for the periods prior to March
31, 2002 have not been restated to reflect this change in accounting policy.
(7)Total return for each class was increased by less than 0.01% from
reimbursements for losses realized on the disposal of investments in
violation of investment restrictions (See Note 4).
(8)Gross of custody credits of 0.01%
(9)The ratio reflects an expense cap of 2.22% for Class II, which is net of
custody credits of 0.02%. Class A, Class B and Class I are gross of custody
credits of 0.02% for the six months ended September 30, 2003.
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND**
----------------------
Net gain
Net Asset (loss) on Net
Value, investments Dividends Assets,
beginning Net (both Total from from net Net Asset end of
Period of investment realized and investment investment Total Value, end Total period
Ended period+ income(1)+ unrealized)+ operations+ income+ Distributions of period+ Return(2) (000's)
- ----------------- --------- ---------- ------------ ----------- ---------- ------------- ---------- --------- -------
Class A
-------
11/01/98-10/31/99 $5.63 $0.46 $(0.32) $ 0.14 $(0.46) $(0.46) $5.31 2.28% $ 34
11/01/99-10/31/00 5.31 0.50 (0.49) 0.01 (0.50) (0.50) 4.82 0.04 286
11/01/00-10/31/01 4.82 0.44 (0.55) (0.11) (0.46) (0.46) 4.25 (2.23) 722
11/01/01-3/31/02# 4.25 0.18(6) (0.11) 0.07 (0.19) (0.19) 4.13 1.67 59,075
4/01/02-3/31/03.. 4.13 0.37 (0.49) (0.12) (0.35) (0.35) 3.66 (2.45) 66,521
4/01/03-9/30/03++ 3.66 0.17 0.41 0.58 (0.17) (0.17) 4.07 16.17 91,720
Class B
-------
11/01/98-10/31/99 $5.64 $0.42 $(0.32) $ 0.10 $(0.42) $(0.42) $5.32 1.53% $ 652
11/01/99-10/31/00 5.32 0.46 (0.50) (0.04) (0.46) (0.46) 4.82 (0.83) 1,594
11/01/00-10/31/01 4.82 0.41 (0.54) (0.13) (0.43) (0.43) 4.26 (2.84) 2,911
11/01/01-3/31/02# 4.26 0.16(6) (0.11) 0.05 (0.18) (0.18) 4.13 1.23 67,599
4/01/02-3/31/03.. 4.13 0.35 (0.49) (0.14) (0.33) (0.33) 3.66 (3.06) 57,596
4/01/03-9/30/03++ 3.66 0.16 0.42 0.58 (0.16) (0.16) 4.08 16.09 72,274
Class II*
---------
8/21/00-10/31/00@ $5.09 $0.11 $(0.28) $(0.17) $(0.09) $(0.09) $4.83 (3.29)% $ 545
11/01/00-10/31/01 4.83 0.40 (0.52) (0.12) (0.44) (0.44) 4.27 (2.84) 2,274
11/01/01-3/31/02# 4.27 0.17(6) (0.11) 0.06 (0.18) (0.18) 4.15 1.43 20,670
4/01/02-3/31/03.. 4.15 0.34 (0.48) (0.14) (0.33) (0.33) 3.68 (2.97) 27,814
4/01/03-9/30/03++ 3.68 0.15 0.42 0.57 (0.16) (0.16) 4.09 15.73 46,070
Class I
-------
11/01/98-10/31/99 $5.63 $0.47 $(0.32) $ 0.15 $(0.47) $(0.47) $5.31 2.44% $ 14
11/01/99-10/31/00 5.31 0.52 (0.50) 0.02 (0.51) (0.51) 4.82 0.04 14
11/01/00-10/31/01 4.82 0.44 (0.54) (0.10) (0.47) (0.47) 4.25 (2.30) 3,062
11/01/01-3/31/02# 4.25 0.21(6) (0.15) 0.06 (0.19) (0.19) 4.12 1.56 14
4/01/02-3/31/03.. 4.12 0.37 (0.48) (0.11) (0.35) (0.35) 3.66 (2.12) 14
4/01/03-9/30/03++ 3.66 0.34 0.24 0.58 (0.17) (0.17) 4.07 16.21 16
Class Z*
--------
11/01/98-10/31/99 $5.64 $0.49 $(0.32) $ 0.17 $(0.49) $(0.49) $5.32 2.74% $62,506
11/01/99-10/31/00 5.32 0.54 (0.51) 0.03 (0.52) (0.52) 4.83 0.30 62,702
11/01/00-10/31/01 4.83 0.47 (0.57) (0.10) (0.48) (0.48) 4.25 (2.07) 61,451
11/01/01-3/31/02# 4.25 0.19(6) (0.11) 0.08 (0.20) (0.20) 4.13 1.98 62,245
4/01/02-3/31/03.. 4.13 0.39 (0.49) (0.10) (0.37) (0.37) 3.66 (1.84) 61,439
4/01/03-9/30/03++ 3.66 0.18 0.42 0.60 (0.19) (0.19) 4.07 16.53 71,615
Ratio of
net
Ratio of investment
expense to income to
Period average average Portfolio
Ended net assets net assets Turnover
- ----------------- ---------- ---------- ---------
11/01/98-10/31/99 1.25%(5) 5.69%(5) 72%
11/01/99-10/31/00 1.38(5) 10.13(5) 57
11/01/00-10/31/01 1.57(5) 9.73(5) 83
11/01/01-3/31/02# 1.48(3)(4) 9.56(3)(4)(6) 61
4/01/02-3/31/03.. 1.56 10.26 117
4/01/03-9/30/03++ 1.52(4) 8.80(4) 72
11/01/98-10/31/99 2.00%(5) 7.30%(5) 72%
11/01/99-10/31/00 2.10(5) 9.41(5) 57
11/01/00-10/31/01 2.21(5) 9.17(5) 83
11/01/01-3/31/02# 2.12(3)(4) 8.91(3)(4)(6) 61
4/01/02-3/31/03.. 2.18 9.63 117
4/01/03-9/30/03++ 2.16(4) 8.17(4) 72
8/21/00-10/31/00@ 2.07%(4) 9.10%(4) 57%
11/01/00-10/31/01 2.21(5) 9.02(5) 83
11/01/01-3/31/02# 2.17(3)(4)(5) 8.86(3)(4)(5)(6) 61
4/01/02-3/31/03.. 2.15(5) 9.67(5) 117
4/01/03-9/30/03++ 2.18(4)(5) 8.16(4)(5) 72
11/01/98-10/31/99 1.13%(5) 5.57%(5) 72%
11/01/99-10/31/00 1.22(5) 10.14(5) 57
11/01/00-10/31/01 1.51(5) 9.80(5) 83
11/01/01-3/31/02# 1.49(3)(4)(5) 9.33(3)(4)(5)(6) 61
4/01/02-3/31/03.. 1.45(5) 10.37(5) 117
4/01/03-9/30/03++ 1.45(4)(5) 9.00(4)(5) 72
11/01/98-10/31/99 0.88%(5) 8.84%(5) 72%
11/01/99-10/31/00 0.96(5) 10.41(5) 57
11/01/00-10/31/01 1.15(5) 10.45(5) 83
11/01/01-3/31/02# 0.93(3)(4)(5) 10.04(3)(4)(5)(6) 61
4/01/02-3/31/03.. 0.92(5) 10.90(5) 117
4/01/03-9/30/03++ 0.90(4) 9.44(4) 72
- --------
* In conjunction with fund merger, Class C was redesignated as Class II and
Class II was redesignated as Class Z.
** The financial information for the fiscal periods prior to November 16, 2001
reflect the financial information of the North American High Yield Bond
Fund, which was reorganized in SunAmerica High Yield Bond Fund on that date.
+ Prior to the fund merger, the North American High Yield Bond Fund issued a
stock split. The per share information for all periods prior to the stock
split have been restated. For amounts subsequent to November 16, 2001, no
restatement was necessary. See Note 2 for further discussion.
++ Unaudited
@ Inception date of class.
# See Note 2
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load.
(3) Gross of custody credits of 0.01%.
(4) Annualized.
(5) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
10/31/99 10/31/00 10/31/01 3/31/02(4) 3/31/03 9/30/03(4)++
-------- -------- -------- ---------- ------- ------------
High Yield Bond Fund Class A.... 0.76% 0.43% 0.18% -- % -- % -- %
High Yield Bond Fund Class B.... 0.37 0.42 0.18 -- -- --
High Yield Bond Fund Class II... -- -- 0.18 0.01 0.10 0.02
High Yield Bond Fund Class I.... 0.92 0.57 0.18 3.00 84.57 75.78
High Yield Bond Fund Class Z.... 0.47 0.60 0.18 0.03 0.03 --
(6) As disclosed in the Notes to the Financial Statements, the Trust has
adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting discount and amortizing premium on
debt securities. The effect of this change for the year ended March 31,
2002 on net investment income and realized and unrealized gains and losses
was less than $0.01 per share for all classes. The effect of this change on
the ratio of net investment income to average net assets was less than
0.01%. Per share data and ratios for the years prior to March 31, 2002 have
not been restated to reflect this change in accounting policy.
See Notes to Financial Statements
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
Net Asset (loss) on
Value, investments Dividends Distributions
beginning Net (both Total from from net from net Net Asset
of investment realized and investment investment realized Total Value, end
Period Ended period income(1) unrealized) operations income gains Distributions of period
- ----------------------------- --------- ---------- ------------ ---------- ---------- ------------- ------------- ----------
Class A
-------
3/31/99....................... $13.03 $0.56 $ 0.02 $ 0.58 $(0.54) -- (0.54) $13.07
3/31/00....................... 13.07 0.55 (0.71) (0.16) (0.54) -- (0.54) 12.37
3/31/01....................... 12.37 0.56 0.66 1.22 (0.57) -- (0.57) 13.02
3/31/02....................... 13.02 0.52(6) (0.30) 0.22 (0.52) -- (0.52) 12.72
3/31/03....................... 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34
4/01/03-9/30/03++............. 13.34 0.19 0.16 0.35 (0.18) -- (0.18) 13.51
Class B
-------
3/31/99....................... $13.04 $0.47 $ 0.02 $ 0.49 $(0.46) -- (0.46) $13.07
3/31/00....................... 13.07 0.47 (0.71) (0.24) (0.46) -- (0.46) 12.37
3/31/01....................... 12.37 0.47 0.66 1.13 (0.48) -- (0.48) 13.02
3/31/02....................... 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43) 12.72
3/31/03....................... 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34
4/01/03-9/30/03++............. 13.34 0.14 0.16 0.30 (0.13) -- (0.13) 13.51
Class II
--------
6/01/99-3/31/00@.............. $12.83 $0.37 $(0.47) $(0.10) $(0.36) -- (0.36) $12.37
3/31/01....................... 12.37 0.47 0.66 1.13 (0.48) -- (0.48) 13.02
3/31/02....................... 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43) 12.72
3/31/03....................... 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34
4/01/03-9/30/03++............. 13.34 0.14 0.18 0.32 (0.14) -- (0.14) 13.52
Ratio of
Net net
Assets, Ratio of investment
end of expenses to income to
Total period average average Portfolio
Period Ended Return(2) (000's) net assets net assets Turnover
- ----------------------------- --------- ------- ----------- ---------- ---------
3/31/99....................... 4.55% $80,716 1.24% 4.23% 34%
3/31/00....................... (1.20) 68,650 1.28 4.41 33
3/31/01....................... 10.08 72,394 1.26 4.41 24
3/31/02....................... 1.70 75,071 1.29(3) 3.99(3)(6) 140
3/31/03....................... 9.08 78,358 1.24 3.12 195
4/01/03-9/30/03++............. 2.66 72,736 1.25(4) 2.83(4) 74
3/31/99....................... 3.78% $21,651 1.91% 3.57% 34%
3/31/00....................... (1.83) 16,269 1.92 3.77 33
3/31/01....................... 9.31 16,302 1.97 3.71 24
3/31/02....................... 0.95 18,090 2.04(3) 3.22(3)(6) 140
3/31/03....................... 8.30 19,031 1.97 2.39 195
4/01/03-9/30/03++............. 2.28 18,451 1.98(4) 2.09(4) 74
6/01/99-3/31/00@.............. (0.76)% $ 577 1.95%(4)(5) 3.82%(4)(5) 33%
3/31/01....................... 9.32 721 1.95(5) 3.73(5) 24
3/31/02....................... 0.99 4,095 1.95(3)(5) 3.21(3)(5)(6) 140
3/31/03....................... 8.32 6,451 1.95 2.40 195
4/01/03-9/30/03++............. 2.38 5,904 1.95(4)(5) 2.13(4)(5) 74
- --------
@ Inception date of class.
++ Unaudited
(1) Calculated based upon average shares outstanding
(2) Total return is not annualized and does not reflect sales load
(3) The ratios for Class II reflects an expense cap of 1.95% which is net of
custody credits of 0.01%. Ratios for Class A and Class B are gross of
custody credits of 0.01%
(4) Annualized
(5) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
3/31/00(4) 3/31/01 3/31/02 3/31/03 9/30/03(4)++
---------- ------- ------- ------- ------------
Tax Exempt Insured Fund Class II........ 5.20% 1.59% 0.56% -- % 0.16%
(6)As disclosed in the Notes to the Financial Statements, the Trust has adopted
the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began accreting discount and amortizing premium on debt
securities. The effect of this change for the year ended March 31, 2002 on
net investment income and net realized and unrealized gains and losses was
less than $0.01 per share for all classes. The effect of this change on the
ratio of net investment income to average net assets was less than 0.01%.
Per share date and ratios for the years prior to March 31, 2002 have not
been restated to reflect this change in accounting policy.
See Notes to Financial Statements
13
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- -----------------------------------------------------------------------
BONDS & NOTES -- 25.7%
Automotive -- 0.7%
Ford Motor Co. Bonds 6.63% due 10/01/28..... $ 481 $ 405,444
General Motors Corp. Notes 7.20% due 1/15/11 581 612,221
General Motors Corp. Sr. Debentures 8.38%
due 7/15/33............................... 505 528,027
Hertz Corp. Sr. Notes 4.70% due 10/02/06.... 842 845,898
----------
2,391,590
----------
Banks -- 2.7%
Bank One Corp. Notes 2.63% due 6/30/08...... 590 571,873
BankAmerica Corp. Sr. Global Notes 3.25%
due 8/15/08............................... 416 414,744
BankAmerica Corp. Sub. Notes 7.13% due
3/01/09................................... 806 940,747
Fifth Third Bancorp. Notes 3.38% due 8/15/08 806 810,701
FleetBoston Financial Corp. Sub.
Debentures 6.88% due 1/15/28.............. 412 458,134
J.P. Morgan Chase & Co. Notes 5.25% due
5/30/07................................... 842 911,297
Key Bank NA Sr. Notes 4.10% due 6/30/05..... 750 781,207
Midland Bank, PLC Sub. Notes 7.65% due
5/01/25................................... 512 625,039
National City Bank Notes 2.50% due 4/17/06.. 831 836,692
PNC Funding Corp. Guaranteed Sub.
Notes 7.50% due 11/01/09.................. 1,010 1,208,897
Wachovia Corp. Sub. Notes 6.15% due 3/15/09. 842 947,338
Zions Bancorporation Sub. Notes 6.00% due
9/15/15................................... 590 632,143
----------
9,138,812
----------
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ----------------------------------------------------------------------
Broadcasting & Media -- 1.6%
AOL Time Warner, Inc. Guaranteed Sr.
Notes 6.13% due 4/15/06................... $500 $ 542,091
Lenfest Communications, Inc. Sr.
Notes 7.63% due 2/15/08................... 831 950,111
Liberty Media Corp. Sr. Notes 3.50% due
9/25/06................................... 842 839,260
Liberty Media Corp. Sr. Debentures 8.25%
due 2/01/30............................... 482 558,004
News America, Inc. Guaranteed Sr.
Debentures 7.30% due 4/30/28.............. 350 393,907
TCI Communications, Inc. Sr.
Debentures 8.75% due 8/01/15.............. 643 831,389
Time Warner Entertainment Co. LP Sr.
Debentures 8.38% due 3/15/23.............. 482 595,906
Time Warner, Inc. Guaranteed Sr.
Notes 6.88% due 6/15/18................... 256 284,019
Time Warner, Inc. Debentures 9.15% due
2/01/23................................... 286 362,115
----------
5,356,802
----------
Business Services -- 0.2%
Waste Management, Inc. Sr. Notes 7.38% due
8/01/10................................... 610 713,068
----------
Chemicals -- 0.1%
ICI North America, Inc. Debentures 8.88%
due 11/15/06.............................. 65 75,670
ICI Wilmington, Inc. Guaranteed Notes 7.05%
due 9/15/07............................... 322 355,545
----------
431,215
----------
Computer Software -- 0.2%
Computer Sciences Corp. Notes 6.75% due
6/15/06................................... 500 558,127
----------
14
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ----------------------------------------------------------------------
BONDS & NOTES (continued)
Energy Sources -- 0.6%
Amerada Hess Corp. Notes 5.90% due 8/15/06.. $ 410 $ 441,973
Amerada Hess Corp. Notes 7.13% due 3/15/33.. 505 531,063
Occidental Petroleum Corp. Sr. Notes 6.50%
due 4/01/05............................... 825 881,521
Pennzoil Co. Debentures 10.25% due 11/01/05. 205 237,298
----------
2,091,855
----------
Financial Services -- 10.9%
Bear Stearns Commercial Mtg. Securities,
Inc. Commercial Mtg. Certificates, Series
2001-Top4, Class A3 5.61% due 11/15/33.... 100 108,725
Bear Stearns Commercial Mtg. Securities,
Inc. Commercial Mtg. Certificates, Series
1999-C1, Class A2 6.02% due 2/14/31....... 525 584,482
Bear Stearns Commercial Mtg. Securities,
Inc. Commercial Mtg. Certificates, Series
2000-Top6, Class A2 6.46% due 10/15/36.... 165 187,454
Bear Stearns Cos., Inc. Sr. Notes 7.63% due
12/07/09.................................. 1,000 1,198,155
Berkshire Hathaway Finance Corp. Sr.
Notes 4.63% due 10/15/13*................. 842 837,849
Capital One Bank Notes 4.88% due 5/15/08.... 401 415,366
Chase Commercial Mtg. Securities
Corp. Commercial Mtg.
Certificates, Series 1999-2, Class
A2 7.20% due 01/15/32..................... 2,250 2,627,484
Citigroup, Inc. Bonds 5.88% due 2/22/33..... 586 592,951
Citigroup, Inc. Global Sr. Notes 6.50% due
1/18/11................................... 842 962,125
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ------------------------------------------------------------------------
Financial Services (continued)
Credit Suisse First Boston USA, Inc.
Notes 6.13% due 11/15/11.................. $ 831 $ 910,306
CS First Boston Mtg. Securities
Corp. Commercial Mtg.
Certificates, Series 1999-C1, Class
A2 7.29% due 9/15/41...................... 545 635,654
DLJ Commercial Mtg. Corp. Commercial Mtg.
Certificates, Series 1999-CG3, Class
A1B 7.34% due 10/10/32.................... 1,000 1,175,428
Duke Capital Corp. Sr. Notes, Series
A 6.25% due 7/15/05....................... 410 430,118
Ford Motor Credit Co. Sr. Notes 5.80% due
1/12/09................................... 1,337 1,348,159
Ford Motor Credit Co. Global Notes 7.00%
due 10/01/13.............................. 421 423,673
FPL Group Capital, Inc. Notes 3.25% due
4/11/06................................... 821 836,785
GE Capital Commercial Mtg. Corp. Series
2002-1A, Class A3 6.27% due 12/10/35...... 1,500 1,684,837
General Electric Capital Corp. Notes,
Series A 3.67% due 12/04/06............... 831 834,336
General Motors Acceptance Corp. Notes 4.50%
due 7/15/06............................... 718 733,283
General Motors Acceptance Corp. Notes 7.75%
due 1/19/10............................... 831 914,520
Goldman Sachs Group, Inc. Sr. Notes 6.65%
due 5/15/09............................... 830 954,907
Honda Auto Receivables Owner Trust Asset
Backed Notes, Series 2002-4, Class
A4 2.70% due 04/15/08..................... 3,500 3,552,139
Honda Auto Receivables Owner Trust Asset
Backed Notes, Series 2003-3, Class
A4 2.77% due 11/21/08..................... 1,000 1,012,493
15
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- -------------------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
Household Finance Corp. Notes 3.38% due
2/21/06................................... $ 645 $ 662,406
Household Finance Corp. Global Sr.
Notes 4.75% due 7/15/13................... 410 403,772
IOS Capital, LLC Sr. Notes 7.25% due 6/30/08 453 439,410
John Deere Capital Corp. Notes 3.90% due
1/15/08................................... 830 853,892
LB - UBS Commercial Mtg. Trust Commercial
Mtg. Certificates, Series 2000-C5, Class
A2
6.51% due 12/15/26........................ 285 324,015
Lehman Brothers Holdings, Inc. Sr.
Notes 8.25% due 6/15/07................... 800 945,991
Merrill Lynch & Co., Inc. Notes,
Series B 3.13% due 7/15/08................ 830 821,663
Morgan Stanley Dean Witter & Co.
Notes 4.25% due 5/15/10................... 1,010 1,019,656
Morgan Stanley Dean Witter & Co.
Bonds 6.75% due 4/15/11................... 500 571,259
Morgan Stanley Dean
Witter Capital I Commercial Mtg.
Certificates, Series 2002-Top1, Class
A4 6.66% due 2/15/33...................... 200 229,888
Morgan Stanley Dean Witter Capital
I Commercial Mtg. Certificates, Series
2000-LIF2, Class A2 7.20% due 10/15/33.... 125 146,417
National Rural Utilities Cooperative
Finance Corp. Global Notes 5.75% due
8/28/09................................... 799 879,637
NiSource Finance Corp. Guaranteed Sr.
Notes 7.63% due 11/15/05.................. 925 1,022,910
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ------------------------------------------------------------------------
Financial Services (continued)
Pemex Project Funding Master
Trust Guaranteed Notes 8.63% due 2/01/22.. $ 481 $ 536,315
Phillips 66 Capital II Guaranteed
Notes 8.00% due 1/15/37................... 746 859,232
Principal Life Global Funding Secured
Notes 5.13% due 6/28/07*.................. 750 805,340
SLM Corp. Notes 5.63% due 8/01/33........... 482 460,509
Sprint Capital Corp. Guaranteed Notes 6.38%
due 5/01/09............................... 403 438,132
Sprint Capital Corp. Guaranteed Notes 6.90%
due 5/01/19............................... 458 469,552
Textron Financial Corp. Notes,
Series E 2.75% due 6/01/06................ 831 831,757
TIAA Global Markets, Inc. Notes 4.13% due
11/15/07*................................. 500 520,706
Unilever Capital Corp. Guaranteed
Bonds 5.90% due 11/15/32.................. 482 491,643
Washington Mutual Finance Corp. Sr.
Notes 6.25% due 5/15/06................... 800 877,004
------------
37,572,335
------------
Food, Beverage & Tobacco -- 1.1%
Anheuser-Busch Cos., Inc. Sr.
Debentures 5.95% due 1/15/33.............. 482 506,816
Coca Cola HBC Finance BV Notes 5.50% due
9/17/15*.................................. 421 442,472
Coors Brewing Co. Sr. Notes 6.38% due
5/15/12................................... 421 469,203
Pepsi Bottling Group, Inc. Guaranteed Sr.
Notes, Series B 7.00% due 3/01/29......... 963 1,124,139
Tyson Foods, Inc. Sr. Sub. Notes 7.25% due
10/01/06.................................. 1,011 1,126,046
------------
3,668,676
------------
16
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ----------------------------------------------------------------------
BONDS & NOTES (continued)
Forest Products -- 0.7%
International Paper Co. Notes 7.50% due
5/15/04................................... $ 750 $ 775,605
Packaging Corp. of America Notes 5.75% due
8/01/13*.................................. 674 684,537
Sealed Air Corp. Notes 6.95% due 5/15/09*... 615 687,446
Weyerhaeuser Co. Notes 5.50% due 3/15/05.... 401 421,145
----------
2,568,733
----------
Insurance -- 0.7%
Metlife, Inc. Sr. Notes 6.13% due 12/01/11.. 421 460,547
Pacific Life Corp. Sr. Notes 6.60% due
9/15/33*.................................. 1,010 1,073,335
Provident Cos., Inc. Sr. Notes 6.38% due
7/15/05................................... 483 507,150
Western & Southern Financial
Group, Inc. Bonds 5.75% due 7/15/33*...... 481 462,173
----------
2,503,205
----------
Leisure & Tourism -- 0.2%
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1998-1, Class
A 6.65% due 9/15/17....................... 61 57,877
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1997-4, Class
A 6.90% due 1/02/18....................... 84 81,369
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1998-3, Class
C1 7.08% due 11/01/04..................... 74 71,717
MGM Mirage, Inc. Refunding Series B 6.00%
due 10/01/09.............................. 502 504,510
Principal
Amount Value
Security Description (in thousands) (Note 3)
- -----------------------------------------------------------------------
Leisure & Tourism (continued)
United Airlines, Inc. Pass-Thru
Certificates, Series 2000-2, Class
A1 7.03% due 10/01/10(1).................. $ 8 $ 6,448
----------
721,921
----------
Machinery -- 0.2%
Textron, Inc. Sr. Notes 4.50% due 8/01/10... 722 735,852
----------
Medical Products -- 0.3%
Johnson & Johnson Debentures 4.95% due
5/15/33................................... 963 892,571
----------
Metals & Mining -- 0.3%
CRH America, Inc. Notes 6.40% due 10/15/33.. 1,010 1,045,757
----------
Real Estate Companies -- 0.3%
EOP Operating LP Sr. Notes 7.00% due 7/15/11 1,050 1,195,769
----------
Real Estate Investment Trusts -- 0.2%
Duke Reality LP Sr. Notes 5.25% due 1/15/10. 830 870,190
----------
Retail Stores -- 0.4%
Safeway, Inc. Sr. Notes 6.15% due 3/01/06... 1,241 1,345,897
----------
Telecommunications -- 1.0%
Citizens Communications Co. Sr. Notes 8.50%
due 5/15/06............................... 425 487,712
GTE California, Inc. Debentures 5.50% due
1/15/09................................... 590 643,332
GTE Corp. Debentures 6.94% due 4/15/28...... 842 904,752
Iridium, LLC Guaranteed Sr. Notes, Series
C 11.25% due 7/15/05(1)................... 25 1,875
Verizon Maryland, Inc. Bonds 5.13% due
6/15/33................................... 479 424,970
17
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ----------------------------------------------------------------------
BONDS & NOTES (continued)
Telecommunications (continued)
Verizon New York, Inc. Sr. Debentures,
Series B 7.38% due 4/01/32................ $ 412 $ 480,263
Verizon Pennsylvania, Inc. Notes 5.65% due
11/15/11.................................. 421 450,933
----------
3,393,837
----------
Transportation -- 0.5%
Burlington Northern Santa Fe
Corp. Debentures 8.13% due 4/15/20........ 766 930,624
Norfolk Southern Corp. Sr. Bonds 7.80% due
5/15/27................................... 513 622,339
Southern Railway Co. Equipment Trust
Bonds, Series 1988-1 8.75% due 10/15/03... 30 30,076
----------
1,583,039
----------
Utilities -- 2.8%
Appalachian Power Co. Sr. Notes, Series
E 4.80% due 6/15/05....................... 1,000 1,043,631
Carolina Power & Light Co. 1st Mtg.
Bond 6.13% due 9/15/33.................... 505 521,636
Centerpoint Energy, Inc. Sr. Notes 7.25%
due 9/01/10*.............................. 465 486,834
Consolidated Edison Co. New
York Debentures, Series 2003-C 5.10% due
6/15/33................................... 484 441,963
Consumers Energy Co. 1st Mtg. Bonds, Series
E 4.00% due 5/15/10*...................... 416 400,980
Dominion Resources, Inc. Sr. Notes, Series
F 5.25% due 8/01/33....................... 758 758,604
Dominion Resources, Inc.
Sr. Notes, Series B 7.63% due 7/15/05..... 825 905,497
Duke Energy Corp. 1st Mtg. Notes 4.50% due
4/01/10................................... 315 322,287
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ----------------------------------------------------------------------
Utilities (continued)
FirstEnegy Corp. Sr. Notes, Series A 5.50%
due 11/15/06.............................. $ 378 $ 392,803
Florida Power Corp. 1st Mtg. Bonds 5.90%
due 3/01/33............................... 766 775,794
Georgia Power Co. Sr. Notes, Series G 6.20%
due 2/01/06............................... 1,000 1,095,279
Old Dominion Electric Cooperative 1st Mtg.
Bonds, Series A 5.68% due 12/01/28........ 289 292,615
Progress Energy, Inc. Sr. Notes 7.75% due
3/01/31................................... 482 552,656
Reliant Energy Resources Corp. Notes,
Series B 8.13% due 7/15/05................ 440 471,880
TECO Energy, Inc. Sr. Notes 7.50% due
6/15/10................................... 75 76,031
Westar Energy, Inc. 1st Mtg. Bonds 7.88%
due 5/01/07............................... 416 464,360
Xcel Energy, Inc. Sr. Notes 7.00% due
12/01/10.................................. 548 620,072
----------
9,622,922
----------
Total Bonds & Notes
(cost $85,751,717)........................ 88,402,173
----------
FOREIGN BONDS & NOTES -- 4.2%
Banks -- 0.3%
European Investment Bank Bonds 4.00% due
3/15/05................................... 1,000 1,035,807
----------
Business Services -- 0.0%
SCL Terminal Aereo Santiago SA Sr. Secured
Notes 6.95% due 7/01/12*.................. 88 97,836
----------
Energy Sources -- 0.1%
Petro Canada Sr. Bonds 5.35% due 7/15/33.... 479 436,784
----------
18
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- -----------------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Financial Services -- 1.1%
Deutsche Telekom International Finance
BV Guaranteed Bonds 8.75% due 6/15/30..... $ 693 $ 879,073
Deutsche Telekom International Finance
BV Guaranteed Notes 8.25% due 6/15/05..... 842 927,335
Diageo Capital, PLC Global Notes 3.38% due
3/20/08................................... 1,010 1,018,222
Rio Tinto Finance USA, Ltd. Notes 2.63% due
9/30/08................................... 832 805,526
-----------
3,630,156
-----------
Forest Products -- 0.1%
Norske Skogindustrier ASA Notes 7.13% due
10/15/33*................................. 202 201,445
-----------
Government Agency -- 1.1%
Quebec Province Canada Notes 5.00% due
7/17/09................................... 1,000 1,070,251
Quebec Province Canada Debentures 7.50% due
7/15/23................................... 963 1,197,790
United Kingdom Notes 2.25% due 7/08/08*..... 749 730,339
United Mexican States Notes 4.63% due
10/08/08.................................. 443 451,860
United Mexican States Notes 8.00% due
9/24/22................................... 412 454,230
-----------
3,904,470
-----------
Metals & Mining -- 0.6%
Noranda, Inc. Notes 6.00% due 10/15/15...... 842 859,346
Noranda, Inc. Debentures 6.88% due 11/15/05. 590 635,590
Noranda, Inc. Debentures 7.00% due 7/15/05.. 444 471,607
-----------
1,966,543
-----------
Principal
Amount Value
Security Description (in thousands) (Note 3)
- -------------------------------------------------------------------------
Telecommunications -- 0.8%
France Telecom SA Sr. Notes 10.00% due
2/28/31................................... $ 842 $ 1,124,185
Telus Corp. Notes 8.00% due 6/01/11......... 250 291,852
Vodafone Group, PLC Bonds 6.25% due 11/30/32 400 412,699
Vodafone Group, PLC Notes 7.75% due 2/15/10. 800 965,398
------------
2,794,134
------------
Utilities -- 0.1%
Great Lakes Power, Inc. Sr. Notes 8.30% due
3/01/05................................... 416 443,618
------------
Total Foreign Bonds & Notes (cost
$14,140,291) 14,510,793
------------
MUNICIPALS -- 0.9%
Municipal Bonds -- 0.9%
Illinois State Pension General
Obligation, 5.10% due 6/01/33
(cost $3,365,000)......................... 3,365 3,131,738
------------
U.S. GOVERNMENT OBLIGATIONS -- 18.3%
U.S Treasury Bonds -- 5.4%
5.25% due 2/15/29........................... 1,300 1,347,937
5.38% due 2/15/31........................... 992 1,064,540
6.25% due 8/15/23........................... 5,770 6,745,263
6.88% due 8/15/25........................... 932 1,170,825
7.13% due 2/15/23........................... 5,773 7,393,048
9.38% due 2/15/06........................... 624 736,076
------------
18,457,689
------------
U.S. Treasury Notes -- 12.9%
1.50% due 2/28/05........................... 5,931 5,958,336
2.00% due 8/31/05 - 5/15/06................. 1,003 1,011,493
2.38% due 8/15/06........................... 409 414,672
2.63% due 5/15/08........................... 54 53,859
3.00% due 1/31/04 - 2/15/08................. 3,559 3,598,603
3.13% due 9/15/08........................... 421 426,854
3.38% due 4/30/04........................... 2,513 2,547,260
3.50% due 11/15/06.......................... 9,418 9,840,708
3.63% due 5/15/13........................... 52 51,039
3.88% due 2/15/13........................... 262 261,877
4.25% due 8/15/13........................... 1,609 1,649,413
5.75% due 8/15/10........................... 465 532,371
19
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (continued)
U.S. Treasury Notes (continued)
6.00% due 8/15/09........................... $ 4,888 $ 5,647,742
6.88% due 5/15/06........................... 5,943 6,717,444
7.00% due 7/15/06........................... 5,040 5,741,664
------------
44,453,335
------------
Total U.S. Government Obligations (cost
$62,941,630) 62,911,024
------------
U.S. GOVERNMENT AGENCIES -- 51.3%
Federal Home Loan Bank -- 2.5%
1.88% due 6/15/06........................... 2,510 2,498,645
2.75% due 3/14/08........................... 2,510 2,485,322
4.50% due 9/16/13........................... 1,060 1,057,624
5.25% due 8/15/06........................... 2,510 2,718,430
------------
8,760,021
------------
Federal Home Loan Mortgage Corporation -- 11.2%
2.00% due 1/21/05........................... 2,549 2,554,735
2.70% due 10/02/06.......................... 2,513 2,529,206
4.50% due October TBA....................... 3,300 3,328,875
5.00% due October TBA....................... 3,271 3,298,970
5.00% due 2/01/18........................... 3,205 3,316,947
5.50% due October TBA....................... 6,010 6,118,128
5.88% due 3/21/11........................... 1,188 1,306,647
6.00% due 2/01/32........................... 2,799 2,892,532
6.00% due October TBA....................... 1,000 1,033,125
6.25% due 7/15/32........................... 2,847 3,184,694
6.50% due 8/01/16........................... 35 37,073
7.00% due 3/01/12 - 11/01/16................ 193 204,520
7.00% due October TBA....................... 1,000 1,054,688
7.50% due 12/01/30.......................... 77 81,987
7.50% due October TBA....................... 5,000 5,343,750
8.00% due 10/01/29 - 1/01/31................ 997 1,073,251
2.38% due 10/02/06.......................... 1,257 1,263,682
------------
38,622,810
------------
Federal National Mortgage Association -- 34.4%
1.75% due 6/16/06........................... 2,513 2,485,870
2.38% due 3/17/06 - 4/13/06................. 5,026 5,039,005
2.50% due 5/12/06........................... 2,513 2,531,795
3.25% due 8/15/08........................... 2,560 2,576,504
4.50% due October TBA....................... 1,000 1,008,125
4.63% due 10/15/13.......................... 1,376 1,390,830
5.00% due October TBA....................... 20,700 21,102,187
5.25% due 8/01/12........................... 2,514 2,630,308
5.50% due October TBA....................... 25,700 26,242,750
6.00% due 12/01/16 - 3/01/33................ 7,176 7,429,449
6.00% due October TBA....................... 15,500 16,032,342
6.18% due 7/01/08........................... 19 20,773
6.27% due 11/01/07.......................... 51 56,869
6.30% due 1/01/08........................... 19 20,698
6.31% due 2/01/08........................... 186 204,118
Principal
Amount
(in thousands)/ Value
Security Description Shares (Note 3)
- -------------------------------------------------------------------------
Federal National Mortgage Association (continued)
6.34% due 1/01/08........................... $ 18 $ 19,958
6.43% due 1/01/08........................... 19 20,778
6.50% due 3/01/17 - 7/01/32................. 10,381 10,836,563
6.50% due October TBA....................... 2,500 2,605,470
6.63% due 11/15/30.......................... 2,845 3,333,504
6.98 due 6/01/07............................ 16 17,475
7.00% due 9/01/10 - 9/01/31................. 8,307 8,798,809
7.04% due 3/01/07........................... 19 20,796
7.25% due 1/15/10........................... 2,513 3,020,020
7.50% due 10/01/10 - 10/01/15............... 718 767,758
------------
118,212,754
------------
Government National Mortgage Association -- 1.2%
6.50% due 6/15/29 - 7/15/32................. 3,509 3,686,696
7.00% due 12/15/22 - 8/15/29................ 352 375,730
8.00% due 4/15/30........................... 86 92,867
------------
4,155,293
------------
Federal Farm Credit Bank -- 2.0%
2.50% due 3/15/06........................... 2,557 2,595,820
4.38% due 4/15/05........................... 4,000 4,181,672
------------
6,777,492
------------
Total U.S. Government Agencies
(cost $174,184,572)....................... 176,528,370
------------
COMMON STOCK -- 0.0%
Forest Products -- 0.0%
SF Holdings Group, Inc.+*................... 7 32
------------
Health Services -- 0.0%
Mediq, Inc. (2)(4).......................... 18 0
------------
Machinery -- 0.0%
Manitowoc Co., Inc.......................... 28 607
------------
Total Common Stock
(cost $8,642)............................. 639
------------
PREFERRED STOCK -- 0.0%
Forest Products -- 0.0%
SF Holdings Group, Inc. 13.75%(4)........... 2 1,980
------------
Machinery -- 0.0%
Fairfield Manufacturing Co., 11.25%
Inc.(3)(4)................................ 28 280
------------
Total Preferred Stock
(cost $40,824)............................ 2,260
------------
WARRANTS -- 0.0%+
Communication Equipment -- 0.0%
Concentric Network Corp. Expires
12/15/07(2)(4)............................ 5 0
------------
20
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Warrants/
Principal
Amount Value
Security Description (in thousands) (Note 3)
- ------------------------------------------------------------------------
WARRANTS (continued)
Telecommunications -- 0.0%
KMC Telecom Holdings, Inc. Expires
1/31/08(2)(4)............................. 50 $ 0
------------
Total Warrants
(cost $0)................................. 0
------------
Total Investment Securities -- 100.4%
(cost $340,432,676)....................... 345,486,997
------------
SHORT-TERM SECURITIES -- 17.4%
Bristol Myers Squibb Co.
1.07% due 10/01/03@....................... $10,000 10,000,000
Dexia Delaware, LLC
1.06% due 10/23/03@....................... 15,000 14,990,283
Eksportfinans AS
1.02% due 10/14/03@....................... 10,000 9,996,317
UBS Finance, Inc.
1.10% due 10/01/03@....................... 15,000 15,000,000
Wal Mart Stores, Inc.
1.04% due 10/02/03@....................... 10,000 9,999,711
------------
Total Short-term Securities
(cost $59,986,311)........................ 59,986,311
------------
REPURCHASE AGREEMENT -- 8.5%
Agreement with State Street Bank & Trust
Co., bearing interest at 1.00%, dated
09/30/03 to be repurchased 10/01/03 in
the amount of $29,232,812 and
collateralized by $29,395,000 of Federal
Home Loan Banks Notes, bearing interest
at 3.63% due 09/30/04 having an
approximate value of $30,113,825@ (cost
$29,232,000).............................. 29,232 29,232,000
------------
Value
Security Description (Note 3)
- ------------------------------------------------------------------
TOTAL INVESTMENTS --
(cost $429,650,987#)...................... 126.3% $434,705,308
Liabilities in excess of other assets........ (26.3) (90,578,269)
------ ------------
NET ASSETS -- 100.00% $344,127,039
====== ============
- --------
* Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. The aggregate
value is $7,431,321 representing 2.2% of net assets.
+ Non-income producing security
# See Note 6
TBA --Securities purchased on a forward commitments basis with an appropriate
principal amount and no definitive maturity date. The actual principal
and maturity date will be determined upon settlement date.
(1) Bond in default
(2) Fair valued security
(3) PIK ("Payment-in-kind") payment made with additional securities in lieu of
cash.
(4) Illiquid security
@ The security or a portion thereof represents collateral for TBA
See Notes to Financial Statements
21
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
Principal
Amount Value
Security Description (in thousands) (Note 3)
------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 30.5%
U.S Treasury Bonds -- 7.4%
5.38% due 2/15/31........................... $18,250 $ 19,584,531
------------
U.S. Treasury Notes -- 23.1%
4.25% due 8/15/13........................... 60,000 61,507,020
------------
Total U.S. Government Obligations
(cost $80,473,783)........................ 81,091,551
------------
U.S. GOVERNMENT AGENCIES -- 65.0%
Federal Farm Credit Bank -- 10.4%
2.50% due 3/15/06........................... 5,000 5,075,910
3.13% due 10/01/03.......................... 500 500,000
3.88% due 12/15/04@......................... 20,000 20,601,580
5.64% due 4/04/11........................... 500 552,301
6.00% due 3/07/11........................... 200 225,733
6.30% due 12/03/13.......................... 500 578,712
------------
27,534,236
------------
Federal Home Loan Mortgage Corporation -- 2.4%
6.00% due 11/01/13 - 10/01/16............... 2,545 2,653,664
6.50% due 9/01/16........................... 810 852,602
7.00% due 11/01/31.......................... 795 839,243
7.50% due 6/01/25........................... 114 122,691
8.00% due 6/01/08........................... 37 39,305
8.25% due 7/01/06........................... 18 18,703
8.50% due 5/01/08........................... 18 18,891
9.50% due 4/01/20........................... 292 326,481
10.00% due 8/01/21.......................... 1,368 1,526,790
------------
6,398,370
------------
Federal National Mortgage Association -- 1.7%
6.53% due 5/25/30........................... 2,750 3,048,711
7.50% due 7/01/26........................... 361 387,010
8.00% due 12/01/22 - 1/01/23................ 608 662,782
8.75% due 10/01/03(1)....................... 300 329,344
11.00% due 2/01/15.......................... 20 43
11.50% due 9/01/19.......................... 37 41,925
------------
4,469,815
------------
Government National Mortgage Association -- 44.3%
4.50% due October TBA....................... 20,000 20,300,000
5.00% due October TBA....................... 41,000 41,076,875
4.50% due 9/15/18 - 9/15/33................. 23,102 22,386,727
5.00% due 4/15/18 - 9/15/33................. 17,707 18,052,678
6.00% due 3/15/29 - 12/15/31................ 1,618 1,683,712
6.50% due 2/15/29 - 6/15/32................. 8,303 8,723,843
7.00% due 7/15/23 - 11/20/30................ 1,942 2,071,615
7.50% due 4/15/17 - 10/15/23................ 2,578 2,778,457
7.75% due 4/15/04........................... 1 1,358
8.00% due 11/15/06 - 2/15/08................ 7 7,699
9.00% due 12/15/16.......................... 144 158,235
11.00% due 8/20/15 - 9/20/15................ 2 2,141
11.50% due 3/15/13 - 5/20/15................ 131 149,722
Principal
Amount Value
Security Description (in thousands) (Note 3)
-------------------------------------------------------------------------
Government National Mortgage Association (continued)
12.50% due 9/15/14.......................... $ 9 $ 10,857
13.00% due 1/15/11 - 6/15/15................ 51 59,820
13.50% due 2/15/13.......................... 14 16,843
15.00% due 11/15/11 - 9/15/12............... 22 26,331
15.50% due 8/15/11 - 9/15/11................ 81 96,280
16.00% due 11/15/11......................... 8 9,398
------------
117,612,591
------------
Small Business Administration -- 1.6%
6.30% due 6/01/18........................... 4,001 4,366,008
------------
International Bank For Reconstruction & Development -- 0.2%
5.00% due 3/28/06........................... 350 376,497
Student Loan Marketing Association -- 0.2%
5.25% due 3/15/06........................... 500 540,442
Private Export Funding Corp. -- 4.2%
5.87% due 7/31/08........................... 10,000 11,250,640
------------
Total U.S. Government Agencies
(cost $167,520,464)....................... 172,548,599
------------
Total Investment Securities -- 95.5%
(cost $247,994,247)....................... 253,640,150
------------
SHORT-TERM SECURITIES -- 5.7%
United States Treasury Bills 1.00% due
1/29/04 (cost $14,950,000)................ 15,000 14,950,000
------------
REPURCHASE AGREEMENTS -- 17.8%
State Street Bank & Trust Co. Joint
Repurchase Agreement Account@ (Note 3).... 352 352,000
UBS Warburg, LLC Joint Repurchase Agreement
Account@ (Note 3)......................... 47,000 47,000,000
------------
Total Repurchase Agreements
(cost $47,352,000)........................ 47,352,000
------------
TOTAL INVESTMENTS --
(cost $310,296,247#)...................... 119.0% 315,942,150
Liabilities in excess of other assets........ (19.0) (50,305,216)
------- ------------
NET ASSETS -- 100.00% $265,636,934
======= ============
- --------
# See Note 6
TBA --Securities purchased on a forward commitment basis with an appropriate
principal amount and no definitive maturity date. The actual principal
and maturity date will be determined upon settlement date.
@ The security or a portion thereof represents collateral for TBA.
(1) Variable rate security--the rate reflected is as of September 30, 2003;
maturity date reflects next reset date.
See Notes to Financial Statements
22
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
Principal
Amount Value
Security Description (in thousands) (Note 3)
----------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 2.8%
U.S. Treasury Notes -- 2.8%
4.25% due 8/15/13................. $ 16,000 $ 16,401,872
(cost $16,266,180)
------------
U.S. GOVERNMENT AGENCIES -- 91.2%
Federal Farm Credit Bank -- 2.6%
2.50% due 3/15/06................. 15,000 15,227,730
------------
Federal Home Loan Mortgage Corporation -- 0.1%
7.50% due 5/01/24 - 6/01/25....... 165 177,753
10.00% due 1/01/17................ 383 425,314
------------
603,067
------------
Federal National Mortgage Association -- 0.1%
7.00% due 9/01/10................. 270 287,839
------------
Government National Mortgage Association -- 88.2%
1.00% due 8/15/33................. 744 746,589
4.50% due 8/15/33 - 9/15/33....... 71,894 69,667,969
4.50% due October TBA............. 20,000 20,300,000
5.00% due 3/15/18 - 9/15/33@...... 112,974 114,187,535
5.00% due October TBA............. 266,000 266,498,750
6.00% due 11/15/23 - 2/15/33...... 28,674 29,841,172
6.50% due 3/15/28 - 6/15/32....... 15,268 16,042,286
7.00% due 3/15/23 - 10/20/30...... 2,231 2,374,019
8.00% due 11/15/26 - 8/15/30...... 1,468 1,591,196
8.50% due 3/15/17 - 9/15/24....... 879 966,329
9.00% due 7/15/16 - 10/15/16...... 259 286,928
------------
522,502,773
------------
Small Business Administration -- 0.2%
6.30% due 6/01/18................. 1,334 1,455,336
------------
Total U.S. Government Agencies
(cost $531,675,917) 540,076,745
------------
Total Investment Securities -- 94.0%
(cost $547,942,097) 556,478,617
------------
Principal
Amount Value
Security Description (in thousands) (Note 3)
-------------------------------------------------------------------
SHORT-TERM SECURITIES -- 22.8%
United States Treasury Bills
0.77% due 10/09/03................. $ 15,000 $ 14,997,433
0.86% due 10/09/03................. 15,000 14,997,150
0.87% due 10/02/03................. 15,000 14,999,637
0.87% due 10/16/03................. 15,000 14,994,594
0.89% due 10/23/03................. 15,000 14,991,842
0.92% due 11/06/03................. 15,000 14,986,275
0.92% due 11/13/03................. 15,000 14,983,517
0.94% due 11/15/04................. 15,000 14,958,704
1.00% due 1/29/04.................. 15,000 14,950,000
-------------
Total Short-term Securities
(cost $134,859,152) 134,859,152
-------------
REPURCHASE AGREEMENTS -- 29.4%
State Street Bank & Trust Co.
Joint Repurchase Agreement
Account@ (Note 3)................. 53,392 53,392,000
UBS Warburg, LLC
Joint Repurchase Agreement@
(Note 3).......................... 121,000 121,000,000
-------------
Total Repurchase Agreements
(cost $174,392,000) 174,392,000
-------------
TOTAL INVESTMENTS --
(cost $857,193,249#) 146.2% 865,729,769
Liabilities in excess of other assets (46.2) (273,523,694)
-------- -------------
NET ASSETS -- 100.00% $ 592,206,075
======== =============
- --------
# See Note 6
TBA -- Securities purchased on a forward commitment basis with an appropriate
principal amount and no definitive maturity date. The actual principal and
maturity date will be determined upon settlement date.
@ The security or a portion thereof represents collateral for TBA.
See Notes to Financial Statements
23
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
BONDS & NOTES -- 44.6%
Aerospace & Military Technology -- 0.0%
Condor Systems, Inc. Guaranteed Sr. Sub.
Notes, Series B 11.88% due 5/01/09(1)..... $ 25 $ 6,750
--------
Apparel & Textiles -- 0.1%
Warnaco, Inc. Sr. Notes 8.88% due 6/15/13*.. 50 53,625
--------
Automotive -- 0.6%
BREED Technologies, Inc. Guaranteed Sr.
Sub. Notes 9.25% due 4/15/08(1)(2)(8)..... 500 0
Dana Corp. Notes 9.00% due 8/15/11.......... 180 197,100
Diamond Triumph Auto Glass, Inc. Guaranteed
Sr. Sub. Notes 9.25% due 4/01/08.......... 100 89,000
Eagle-Picher, Inc. Sr. Notes 9.75% due
9/01/13*.................................. 125 131,250
Pep Boys Manny Moe & Jack Notes 6.92% due
7/07/06................................... 125 126,875
--------
544,225
--------
Banks -- 0.3%
J.P. Morgan Chase & Co. Notes 5.35% due
3/01/07................................... 250 270,722
--------
Broadcasting & Media -- 3.6%
Adelphia Communications Corp. Sr. Notes,
Series B 9.50% due 2/15/04(1)............. 47 32,429
American Lawyer Media, Inc. Sr. Sub. Notes
Series B 9.75% due 12/15/07............... 75 70,125
Charter Communications Holdings, LLC Sr.
Sub. Notes 9.63% due 11/15/09............. 925 714,562
Charter Communications Holdings, LLC Sr.
Sub. Disc. Notes 9.92% due 4/01/11(3)..... 125 88,438
Charter Communications Holdings, LLC Sr.
Notes 10.00% due 5/15/11.................. 75 57,188
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
Broadcasting & Media (continued)
Charter Communications Holdings, LLC Sr.
Sub. Notes 10.25% due 1/15/10............. $ 25 $ 19,500
Charter Communications Holdings, LLC Sr.
Sub. Notes 10.75% due 10/01/09............ 450 367,875
Charter Communications Holdings, LLC Sr.
Sub. Notes 11.13% due 1/15/11............. 425 347,437
Charter Communications Holdings, LLC Sr.
Sub. Disc. Notes 11.75% due 1/15/10(3).... 225 158,625
CSC Holdings, Inc. Sr. Debentures 7.63% due
7/15/18................................... 275 264,000
CSC Holdings, Inc. Sr. Debentures 7.88% due
2/15/18................................... 50 48,750
CSC Holdings, Inc. Guaranteed Sr. Sub.
Debentures 10.50% due 5/15/16............. 50 55,000
Emmis Communications Corp. Sr. Disc.
Notes 12.50% due 3/15/11(3)............... 175 155,750
Granite Broadcasting Corp. Sr. Sub.
Notes 8.88% due 5/15/08................... 150 144,187
Granite Broadcasting Corp. Sr. Sub.
Notes 10.38% due 5/15/05.................. 100 98,500
Haights Cross Operating Co. Sr.
Notes 11.75% due 8/15/11*................. 50 51,250
Paxson Communications Corp. Guaranteed Sr.
Sub. Disc. Notes 12.25% due 1/15/09(3).... 25 19,813
Pegasus Satellite Communications, Inc. Sr.
Sub. Disc. Notes 13.50% due 3/01/07(3).... 175 112,000
Rogers Cable, Inc. Bonds 8.75% due 5/01/32.. 50 55,000
Rogers Cablesystems, Ltd. Guaranteed Sr.
Sub. Notes 11.00% due 12/01/15............ 200 226,500
24
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
--------------------------------------------
BONDS & NOTES (continued)
Broadcasting & Media (continued)
Salem Communications Holding
Corp. Guaranteed Sr. Sub. Notes, Series
B 9.00% due 7/01/11....................... $ 50 $ 53,812
Susquehanna Media Co. Sr. Sub. Notes 7.38%
due 4/15/13............................... 75 77,625
Young Broadcasting, Inc. Guaranteed Sr.
Sub. Notes, Series B 9.00% due 1/15/06.... 150 150,750
----------
3,369,116
----------
Business Services -- 0.9%
Allied Waste North America, Inc. Sr.
Notes 7.88% due 4/15/13................... 275 288,062
Allied Waste North America, Inc. Guaranteed
Sr. Notes 9.25% due 9/01/12............... 100 110,500
Mobile Mini, Inc. Sr. Notes 9.50% due
7/01/13*.................................. 100 107,000
Monitronics International, Inc. Sr. Sub.
Notes 11.75% due 9/01/10*................. 175 175,438
National Equipment Services, Inc.
Guaranteed Sr. Sub. Notes,
Series D 10.00% due 11/30/04(1)........... 290 116,000
----------
797,000
----------
Chemicals -- 1.2%
Equistar Chemicals, LP Sr. Notes 10.63% due
5/01/11*.................................. 175 173,250
Freeport McMoRan Resources Sr. Notes 7.00%
due 2/15/08............................... 125 86,250
Huntsman International, LLC Guaranteed Sr.
Notes 9.88% due 3/01/09................... 225 236,250
Huntsman, LLC Sr. Secured Notes 11.63% due
10/15/10*................................. 100 97,500
IMC Global, Inc. Guaranteed Sr. Notes,
Series B 11.25% due 6/01/11............... 125 130,000
Principal
Amount Value
Security Description (in thousands)** (Note 3)
------------------------------------------------------------------------
Chemicals (continued)
Methanex Corp. Sr. Notes 8.75% due 8/15/12.. $150 $ 161,250
Rockwood Specialties Group, Inc. Sr. Sub.
Notes 10.63% due 5/15/11*................. 125 133,125
Westlake Chemical Corp. Sr. Notes 8.75% due
7/15/11*.................................. 125 129,687
----------
1,147,312
----------
Communication Equipment -- 0.6%
American Tower Escrow Corp. Disc.
Notes Zero Coupon due 8/01/08(4).......... 300 199,500
Nortel Networks, Ltd. Sr. Notes 6.13% due
2/15/06................................... 175 175,875
Rural Cellular Corp. Sr. Sub. Notes 9.63%
due 5/15/08............................... 150 136,500
Rural Cellular Corp. Sr. Sub. Notes 9.75%
due 1/15/10............................... 100 91,000
----------
602,875
----------
Computer Software -- 0.1%
Pioneer-Standard Electronics, Inc. Sr.
Notes 9.50% due 8/01/06................... 75 77,813
----------
Computers & Business Equipment -- 0.4%
Seagate Technology HDD Holdings Guaranteed
Sr. Notes 8.00% due 5/15/09............... 75 82,688
Xerox Capital Trust I 8.00% due 2/01/27..... 75 63,375
Xerox Corp. Sr. Notes 7.13% due 6/15/10..... 50 49,625
Xerox Corp. Notes 7.20% due 4/01/16......... 100 93,500
Xerox Corp. Sr. Notes 7.63% due 6/15/13..... 125 123,281
----------
412,469
----------
25
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
BONDS & NOTES (continued)
Conglomerate -- 0.7%
Jacuzzi Brands, Inc. Sr. Secured
Notes 9.63% due 7/01/10*.................. $ 75 $ 77,812
Park-Ohio Industries, Inc. Sr. Sub.
Notes 9.25% due 12/01/07.................. 75 70,875
Prestolite Electric, Inc. Guaranteed Sr.
Notes 9.63% due 2/01/08................... 125 122,500
Tyco International Group SA Guaranteed Sr.
Notes 6.75% due 2/15/11 250 263,750
Tyco International Group SA Guaranteed
Notes 6.88% due 1/15/29................... 125 123,750
--------
658,687
--------
Education -- 0.1%
KinderCare Learning Centers, Inc. Sr. Sub.
Notes, Series B 9.50% due 2/15/09......... 75 75,375
--------
Electronics -- 0.3%
Amkor Technology, Inc. Sr. Notes 7.75% due
5/15/13*.................................. 150 150,750
ON Semiconductor Corp. Guaranteed Sr.
Secured Notes 12.00% due 3/15/10.......... 75 87,938
--------
238,688
--------
Energy Services -- 0.5%
Grant Prideco, Inc. Sr. Notes 9.00% due
12/15/09.................................. 50 53,875
Hanover Equipment Trust Sr. Sec.
Notes 8.50% due 9/01/08................... 125 128,750
Oslo Seismic Services, Inc. 1st Mtg.
Notes 8.28% due 6/01/11................... 189 165,031
Universal Compression, Inc. Sr. Notes 7.25%
due 5/15/10............................... 100 103,000
--------
450,656
--------
Energy Sources -- 2.6%
Chesapeake Energy Corp. Sr. Notes 7.50% due
9/15/13*.................................. 50 52,500
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
Energy Sources (continued)
Chesapeake Energy Corp. Guaranteed Sr.
Notes 7.75% due 1/15/15................... $ 25 $ 26,375
Chesapeake Energy Corp. Guaranteed Sr.
Notes 9.00% due 8/15/12................... 25 28,125
CITGO Petroleum Corp. Sr. Notes 11.38% due
2/01/11*.................................. 250 282,500
Colorado Interstate Gas Co. Sr.
Debentures 6.85% due 6/15/37.............. 150 149,250
Costilla Energy, Inc. Sr. Notes 10.25% due
10/01/06(2)(8)............................ 500 0
El Paso Production Holding Co. Sr.
Notes 7.75% due 6/01/13*.................. 250 237,500
Encore Acquisition Co. Guaranteed Sr.
Notes 8.38% due 6/15/12................... 100 105,000
Frontier Oil Corp. Sr. Notes 9.13% due
2/15/06................................... 50 51,500
Frontier Oil Corp. Sr. Sub. Notes 11.75%
due 11/15/09.............................. 155 175,150
KCS Energy, Inc. Guaranteed Sr. Sub.
Notes 8.88% due 1/15/06................... 150 147,750
Leviathan Gas Pipeline Partner LP/Leviathan
Finance Corp. Guaranteed Sr. Sub.
Notes, Series B 10.38% due 6/01/09........ 100 113,500
Mission Energy Holding Co. Sr. Sec.
Notes 13.50% due 7/15/08.................. 100 66,000
Roseton Danskammer Pass-Thru
Certificates, Series A 7.27% due 11/08/10. 450 420,750
Roseton Danskammer 2001 Series B Pass-Thru
Certificates 7.67% due 11/08/16........... 150 127,500
Southern Natural Gas Co. Sr. Notes 8.88%
due 3/15/10............................... 125 133,750
26
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
------------------------------------------------------------------------
BONDS & NOTES (continued)
Energy Sources (continued)
Tesoro Petroleum Corp. Sr. Secured
Notes 8.00% due 4/15/08................... $ 75 $ 76,875
Westport Resources Corp. Guaranteed Sr.
Sub. Notes 8.25% due 11/01/11*............ 200 218,500
----------
2,412,525
----------
Entertainment Products -- 0.2%
Steinway Musical Instruments, Inc.
Guaranteed Sr. Notes 8.75% due 4/15/11.... 175 179,375
----------
Financial Services -- 12.6%
AmeriCredit Corp. Guaranteed Sr.
Notes 9.88% due 4/15/06................... 50 49,500
Athena Neurosciences Finance, LLC
Guaranteed Sr. Notes 7.25% due 2/21/08.... 550 445,500
Bear Island Paper Co., LLC Sr. Secured
Notes, Series B 10.00% due 12/01/07....... 245 203,350
Bluewater Finance, Ltd. Guaranteed Sr.
Notes 10.25% due 2/15/12.................. 175 177,625
Boeing Capital Corp. Sr. Notes 5.75% due
2/15/07................................... 250 270,626
ChipPac International Co., Ltd. Guaranteed
Sr. Sub. Notes, Series B 12.75% due
8/01/09................................... 25 27,875
Chukchansi Economic Development
Authority Sr. Notes 14.50% due 6/15/09*... 300 368,250
Commercial Mtg. Asset Trust Commercial Mtg.
Certificates, Series 1999-C1, Class
C 7.35% due 1/17/32....................... 1,200 1,430,237
Credit Suisse First Boston USA, Inc. Global
Sr. Notes 4.63% due 1/15/08............... 250 263,393
DLJ Commercial Mtg. Corp. Commercial Mtg.
Certificates, Series 1998-CG1 IO, Class
S 0.67% due 6/10/31(5).................... 8,450 237,980
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-----------------------------------------------------------------------
Financial Services (continued)
DLJ Commercial Mtg. Corp. Commercial Mtg.
Certificates, Series 1998-CF2 IO, Class
S 1.04% due 11/12/31(5)................... $7,040 $259,423
Eircom Funding Sr. Sub. Notes 8.25% due
8/15/13*.................................. 150 161,250
ESI Tractebel Acquisition Corp. Guaranteed
Secured Bonds, Series B 7.99% due 12/30/11 243 241,481
First Union Residential Securitization
Trans, Inc. Mtg. Certificates, Series
1998-A, Class B2 7.00% due 8/25/28........ 183 185,090
Ford Motor Credit Co. Notes 6.50% due
1/25/07................................... 250 264,202
General Electric Capital Corp. Notes 5.00%
due 6/15/07............................... 250 268,806
General Motors Acceptance Corp. Notes 6.85%
due 6/17/04............................... 250 258,396
Hilcorp Energy I LP/Hilcorp Finance Co. Sr.
Notes 10.50% due 9/01/10*................. 125 132,813
Household Finance Corp. Notes 5.75% due
1/30/07................................... 250 272,910
Huntsman Advanced Materials, LLC Sr.
Secured Notes 11.00% due 7/15/10*......... 75 78,000
IOS Capital, LLC Sr. Notes 7.25% due 6/30/08 100 97,000
Jet Equipment Trust Sr. Notes, Series 1995,
Class A 8.24% due 11/01/12*............... 136 59,304
LaBranche & Co., Inc. Sr. Sub. Notes 12.00%
due 3/02/07............................... 75 84,750
Madison River Capital, LLC/ Madison River
Finance Corp. Sr. Notes, Series B 13.25%
due 3/01/10............................... 425 446,250
27
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-------------------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
Mid-State Trust Asset Backed Notes, Series
6, Class A1 7.34% due 7/01/35............. $964 $1,044,331
Nexstar Finance Holdings, LLC Guaranteed
Sr. Disc. Notes 11.38% due 4/01/13(3)..... 250 175,000
Nexstar Finance Holdings, LLC Guaranteed
Sr. Disc. Notes 16.00% due 5/15/09(3)..... 123 110,854
PCA, LLC Guaranteed Sr. Notes 11.88% due
8/01/09................................... 125 136,250
PDVSA Finance, Ltd. Bonds 6.80% due 11/15/08 275 246,125
PDVSA Finance, Ltd. Notes 8.50% due 11/16/12 100 88,500
PNC Mtg. Securities Corp. Commercial Mtg.
Certificates, Series 1998-5, Class
CB3 6.74% due 7/25/28(5).................. 359 366,517
PNC Mtg. Securities Corp. Commercial Mtg.
Certificates, Series 1998-4, Class
3B3 6.75% due 5/25/28..................... 285 291,179
PNC Mtg. Securities Corp. Commercial Mtg.
Certificates, Series 1999-1, Class
CB2 6.77% due 3/25/29(5).................. 470 493,697
PNC Mtg. Securities Corp. Commercial Mtg.
Certificates, Series 1998-4, Class
CB3 6.85% due 5/25/28(5).................. 393 410,126
PNC Mtg. Securities Corp. Commercial Mtg.
Certificates, Series 1992-2, Class
DB3 6.91% due 4/25/29(5).................. 414 418,668
Px Escrow Corp. Sr. Sub. Disc. Notes 9.63%
due 2/01/06(3)............................ 125 92,656
Qwest Capital Funding, Inc. Guaranteed
Notes 7.00% due 8/03/09................... 50 44,625
Qwest Capital Funding, Inc. Guaranteed
Notes 7.25% due 2/15/11................... 175 155,750
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-------------------------------------------------------------------------
Financial Services (continued)
Qwest Capital Funding, Inc. Guaranteed
Notes 7.63% due 8/03/21................... $475 $ 408,500
Qwest Capital Funding, Inc. Notes 7.75% due
2/15/31................................... 50 42,500
Qwest Capital Funding, Inc. Guaranteed
Notes 7.90% due 8/15/10................... 350 318,500
Terra Capital, Inc. Guaranteed Sr. Secured
Notes 11.50% due 6/01/10.................. 200 184,000
Terra Capital, Inc. Guaranteed Sr. Secured
Notes 12.88% due 10/15/08................. 150 165,750
US West Capital Funding, Inc. Guaranteed
Notes 6.88% due 7/15/28................... 75 59,250
Worldspan LP/ WS Financing Corp. Sr.
Notes 9.63% due 6/15/11*.................. 100 104,750
-----------
11,641,539
-----------
Food, Beverage & Tobacco -- 0.5%
Cott Beverages, Inc. Guaranteed Sr. Sub.
Notes 8.00% due 12/15/11.................. 75 80,719
Del Monte Corp. Sr. Sub. Notes 8.63% due
12/15/12*................................. 75 81,937
Doane Pet Care Co. Sr. Sub. Notes 9.75% due
5/15/07................................... 75 71,250
Doane Pet Care Co. Guaranteed Sr.
Notes 10.75% due 3/01/10.................. 50 55,000
Fleming Cos., Inc. Guaranteed Sr. Sub.
Notes, Series D 10.63% due 7/31/07(1)..... 150 15
Seminis, Inc. Sr. Sub. Notes 10.25% due
10/01/13* 25 26,688
Smithfield Foods, Inc. Sr. Notes 7.75% due
5/15/13*.................................. 125 134,062
Smithfield Foods, Inc. Sr. Notes, Series
B 8.00% due 10/15/09...................... 50 54,500
-----------
504,171
-----------
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-------------------------------------------------------------------------
BONDS & NOTES (continued)
Forest Products -- 1.6%
Constar International, Inc. Sr. Sub.
Notes 11.00% due 12/01/12................. $ 50 $ 42,000
Crown Cork & Seal Co., Inc. Notes 8.00% due
4/15/23................................... 80 65,200
Crown Cork & Seal Co., Inc. Notes 8.38% due
1/15/05................................... 575 586,500
Fibermark, Inc. Sr. Notes 9.38% due 10/15/06 100 67,000
Georgia Pacific Corp. Sr. Notes 7.38% due
7/15/08*.................................. 340 350,625
Georgia Pacific Corp. Debenture 7.75% due
11/15/29.................................. 250 226,562
Georgia Pacific Corp. 9.13% due 7/01/22..... 125 123,750
----------
1,461,637
----------
Health Services -- 1.4%
HCA, Inc. Sr. Notes 6.95% due 5/01/12....... 225 238,691
HEALTHSOUTH Corp. Notes 7.63% due 6/01/12(1) 125 107,500
HEALTHSOUTH Corp. Sr. Notes 8.38% due
10/01/11(1)............................... 275 236,500
HEALTHSOUTH Corp. Sr. Sub. Notes 10.75% due
10/01/08(1)............................... 100 87,500
IASIS Healthcare Corp. Guaranteed Sr. Sub.
Notes 13.00% due 10/15/09................. 150 168,375
Psychiatric Solutions, Inc. Sr. Sub.
Notes 10.63% due 6/15/13*................. 125 136,562
Tenet Healthcare Corp. Sr. Notes 6.50% due
6/01/12................................... 75 71,625
Tenet Healthcare Corp. Notes 7.38% due
2/01/13................................... 50 50,375
Universal Hospital Services, Inc. Sr.
Notes 10.25% due 3/01/08.................. 200 208,000
----------
1,305,128
----------
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
Insurance -- 0.4%
Crum & Forster Holdings Corp.
Sr. Notes 10.38% due 6/15/13*............. $250 $271,875
LNR Property Corp. Sr. Sub. Notes 7.63% due
7/15/13*.................................. 75 77,250
--------
349,125
--------
Internet Content -- 0.1%
Globix Corp. Guaranteed Sr. Sec.
Notes 11.00% due 5/01/08(6)............... 87 66,490
--------
Leisure & Tourism -- 3.0%
American Airlines, Inc. Pass-Thru
Certificates, Series 2001-2,
Class C 7.80% due 10/01/06................ 100 73,700
Atlas Air, Inc. Pass-Thru Series 1999-1
Class A-2 6.88% due 1/02/11............... 125 115,701
Atlas Air, Inc. Pass-Thru Certificates
Series 1999-1 Class A-1 7.20% due 1/02/19. 133 124,569
Atlas Air, Inc. Pass-Thru
Certificates, Series 1998, Class C 8.01%
due 1/02/10(2)............................ 159 25,238
Atlas Air, Inc. Pass-Thru
Certificates, Series 1999-1,
Class C 8.77% due 1/02/11(2).............. 12 1,955
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1999-1,
Class C 6.95% due 8/02/09................. 170 130,407
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1999-2, Class
C1 7.73% due 3/15/11...................... 47 33,042
Courtyard by Marriott II Sr. Secured Notes,
Series B 10.75% due 2/01/08............... 150 149,062
Delta Air Lines, Inc. Pass-Thru
Certificates, Series 2002-1,
Class C 7.78% due 1/02/12................. 184 151,466
Hard Rock Hotel, Inc. Notes 8.88% due
6/01/13*.................................. 100 105,375
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
------------------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
Hollywood Casino Shreveport/ Shreveport
Capital Corp. 1st Mtg. Notes 13.00% due
8/01/06(1)................................ $400 $ 292,500
John Q Hammons Hotels LP 1st Sr. Mtg.
Notes, Series B 8.88% due 5/15/12......... 75 81,188
Mandalay Resort Group Sr. Sub. Notes,
Series B 10.25% due 8/01/07............... 170 195,500
MGM Mirage, Inc. Guaranteed Sr. Notes 8.50%
due 9/15/10............................... 225 253,125
Northwest Airlines, Inc. Guaranteed
Sr. Notes 7.63% due 3/15/05............... 110 96,525
Park Place Entertainment Corp. Sr. Sub.
Notes 9.38% due 2/15/07................... 100 110,500
Prime Hospitality Corp. Sr. Sub. Notes,
Series B 8.38% due 5/01/12................ 50 49,250
Riviera Holdings Corp. Guaranteed
Sr. Notes 11.00% due 6/15/10.............. 185 183,381
United AirLines, Inc. 2000-1 Pass-Thru
Certificates Class A-2 7.73% due
7/01/10(1)................................ 75 58,541
United AirLines, Inc. Series 2000-1
Pass-Thru Certificates Class A-1 7.78%
due 1/01/14(1)............................ 63 49,210
Vail Resorts, Inc. Guaranteed Sr.
Sub. Notes 8.75% due 5/15/09.............. 100 105,125
Waterford Gaming, LLC Sr. Notes 8.63% due
9/15/12*.................................. 198 206,910
Wynn Las Vegas, LLC 2nd Mtg. Notes 12.00%
due 11/01/10.............................. 200 228,000
----------
2,820,270
----------
Machinery -- 0.3%
Briggs & Stratton Corp. Guaranteed Sr.
Notes 8.88% due 3/15/11................... 75 84,000
Dresser, Inc. Guaranteed Sr. Sub.
Notes 9.38% due 4/15/11................... 75 78,750
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
Machinery (continued)
Terex Corp. Guaranteed Sr. Sub. Notes 9.25%
due 7/15/11............................... $ 25 $ 27,375
Terex Corp. Guaranteed Sr. Sub.
Notes, Series B 10.38% due 4/01/11........ 50 56,000
Venture Holdings Co., LLC Guaranteed Sr.
Sub. Notes 11.00% due 6/01/07(1).......... 100 19,000
--------
265,125
--------
Metals & Mining -- 0.4%
CSN Islands VII Corp. Guaranteed
Notes 10.75% due 9/12/08*................. 75 75,750
MMI Products, Inc. Sr. Sub. Notes, Series
B 11.25% due 4/15/07...................... 100 58,000
Owens Brockway Glass Container Guaranteed
Sr. Secured Notes 7.75% due 5/15/11....... 150 155,250
Owens Brockway Glass Container Sr. Secured
Notes 8.75% due 11/15/12.................. 25 26,813
Renco Metals, Inc. Guaranteed Sr.
Notes 11.50% due 7/01/49(1)(2)............ 500 0
Ryerson Tull, Inc. Notes 9.13% due 7/15/06.. 75 73,875
WCI Steel, Inc. Sr. Secured Notes, Series
B 10.00% due 12/01/04(1).................. 100 30,000
--------
419,688
--------
Real Estate Investment Trusts -- 0.5%
National Health Investors, Inc. Notes 7.30%
due 7/16/07............................... 200 198,000
RFS Partnership LP Guaranteed Sr.
Notes 9.75% due 3/01/12................... 50 52,000
Senior Housing Properties Trust Sr.
Notes 7.88% due 4/15/15................... 25 26,250
Senior Housing Properties Trust Sr.
Notes 8.63% due 1/15/12................... 202 219,170
--------
495,420
--------
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
BONDS & NOTES (continued)
Restaurants -- 0.2%
Tricon Global Restaurants, Inc. Sr.
Notes 8.88% due 4/15/11................... $125 $145,625
--------
Retail Stores -- 1.6%
Armstrong World Industries, Inc. Sr.
Notes 6.35% due 8/15/49(1)................ 25 12,500
Armstrong World Industries, Inc. Sr.
Notes 6.50% due 8/15/05(1)................ 150 78,750
Armstrong World Industries,
Inc. Debentures 9.75% due 4/15/08(1)...... 75 39,375
Big 5 Corp. Sr. Notes, Series B 10.88% due
11/15/07.................................. 76 79,895
Collins & Aikman Floor Cover Guaranteed Sr.
Sub. Notes 9.75% due 2/15/10.............. 75 79,125
J.C. Penney Co., Inc. Notes 6.88% due
10/15/15 250 246,250
Oakwood Homes Corp. Sr. Notes 8.13% due
3/01/09(1)................................ 175 62,125
Rent-A-Center, Inc. Guaranteed Sr. Sub.
Notes, Series B 7.50% due 5/01/10......... 140 147,175
Rent-Way, Inc. Sr. Sec. Notes 11.88% due
6/15/10*.................................. 150 156,375
Rite Aid Corp. Sr. Debentures 7.70% due
2/15/27................................... 175 151,375
Rite Aid Corp. Guaranteed Sr. Notes 8.13%
due 5/01/10*.............................. 50 53,250
Rite Aid Corp. Sr. 2nd Notes 9.50% due
2/15/11................................... 25 28,250
Saks, Inc. Guaranteed Notes 9.88% due
10/01/11.................................. 100 118,000
Salton, Inc. Sr. Sub. Notes 10.75% due
12/15/05.................................. 35 34,388
Principal
Amount Value
Security Description (in thousands)** (Note 3)
------------------------------------------------------------------------
Retail Stores (continued)
Salton, Inc. Sr. Sub. Notes 12.25% due
4/15/08................................... $ 65 $ 63,537
Service Corp. International Notes 7.70% due
4/15/09................................... 150 153,375
----------
1,503,745
----------
Telecommunications -- 5.3%
AirGate PCS, Inc. Sr. Sub. Disc.
Notes 13.50% due 10/01/09(3).............. 650 497,250
Alamosa PCS Holdings, Inc. Guaranteed Sr.
Disc. Notes 12.88% due 2/15/10(3)......... 800 632,000
Alaska Communications
Holdings, Inc. Guaranteed Sr. Sub.
Notes 9.38% due 5/15/09................... 250 235,000
FairPoint Communications Inc. Sr. Sub.
Notes 12.50% due 5/01/10.................. 250 266,250
GCI, Inc. Sr. Notes 9.75% due 8/01/07....... 50 50,625
Horizon PCS, Inc. Guaranteed Sr.
Notes 13.75% due 6/15/11(1)............... 425 106,250
iPCS, Inc. Sr. Disc. Notes 14.00% due
7/15/10(1)................................ 550 60,500
LCI International, Inc. Sr. Notes 7.25% due
6/15/07................................... 325 260,000
MJD Communications, Inc. Sr. Sub. Notes,
Series B 9.50% due 5/01/08................ 300 291,000
Nextel Communications, Inc. Sr. Notes 7.38%
due 8/01/15............................... 300 303,000
Nextel Communications, Inc. Sr. Notes 9.38%
due 11/15/09.............................. 50 54,250
Nextel Communications, Inc. Sr. Notes 9.95%
due 2/15/08............................... 400 420,500
PanAmSat Corp. Notes 6.38% due 1/15/08...... 125 129,062
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
------------------------------------------------------------------------
BONDS & NOTES (continued)
Telecommunications (continued)
PanAmSat Corp. Guaranteed Sr. Notes 8.50%
due 2/01/12............................... $ 50 $ 52,375
Pegasus Satellite Communications, Inc. Sr.
Notes 11.25% due 1/15/10*................. 280 221,200
Qwest Corp. Notes 8.88% due 3/15/12*........ 375 416,250
Rogers Wireless Communications, Inc. Sr.
Secured Notes 9.63% due 5/01/11........... 50 57,500
US Unwired, Inc. Guaranteed Sr. Sub.
Disc. Notes, Series B 13.38% due
11/01/09(3)............................... 550 401,500
US West Communications, Inc.
Debentures 6.88% due 9/15/33.............. 200 176,000
US West Communications, Inc. Secured
Debentures 7.50% due 6/15/23.............. 25 23,375
Western Wireless Corp. Sr. Notes 9.25% due
7/15/13*.................................. 200 204,000
----------
4,857,887
----------
Transportation -- 0.1%
Petroleum Helicopters, Inc. Guaranteed Sr.
Notes, Series B 9.38% due 5/01/09......... 50 54,500
----------
Utilities -- 4.4%
AES Corp. Sr. Secured Notes 8.75% due
5/15/13*.................................. 405 425,250
AES Drax Energy, Ltd. Guaranteed Sr. Sub.
Secured Notes, Series B 11.50% due
8/30/10(1)................................ 725 5,438
Cincinnati Bell Telephone Company Medium
Term Notes 7.18% due 12/15/23............. 50 45,625
Dynegy Holdings, Inc. Sr. Notes 8.75% due
2/15/12................................... 100 91,500
Principal
Amount Value
Security Description (in thousands)** (Note 3)
----------------------------------------------------------------------
Utilities (continued)
Edison Mission Energy Sr. Notes 7.73% due
6/15/09................................... $100 $ 81,500
Edison Mission Energy Sr. Notes 9.88% due
4/15/11................................... 250 213,750
Edison Mission Energy Sr. Notes 10.00% due
8/15/08................................... 350 308,000
Mirant Americas Generation, LLC Sr.
Notes 7.20% due 10/01/08(1)............... 225 178,312
Mirant Americas Generation, LLC Sr.
Notes 7.63% due 5/01/06(1)................ 75 59,438
Mirant Americas Generation, LLC Sr.
Notes 8.30% due 5/01/11(1)................ 400 316,000
Mirant Americas Generation, LLC Sr.
Notes 8.50% due 10/01/21(1)............... 300 237,000
Mirant Mid Atlantic, LLC Pass-Thru
Certificates, Series A 8.63% due
6/30/12(7)................................ 67 66,500
Mirant Mid Atlantic, LLC Secured Pass-Thru
Certificates 9.13% due 6/30/17(7)......... 67 65,748
Pacific Gas & Electric Co. Sr. Notes 10.00%
due 11/01/05*............................. 125 128,125
PG& E Corp. Sr. Secured Notes 6.88% due
7/15/08*.................................. 100 105,000
Reliant Resources, Inc. Sr. Secured
Notes 9.25% due 7/15/10*.................. 200 181,000
Reliant Resources, Inc. Sr. Secured
Notes 9.50% due 7/15/13*.................. 300 270,000
Tiverton/Rumford Power
Assoc., Ltd. Guaranteed Notes 9.00% due
7/15/18*.................................. 125 105,000
Transcontinental Gas Pipe Line Corp. Sr.
Notes 8.88% due 7/15/12................... 350 395,938
Williams Cos., Inc. Notes 7.13% due 9/01/11. 500 493,750
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-------------------------------------------------------------------------
BONDS & NOTES (continued)
Utilities (continued)
Williams Cos., Inc. Sr. Notes 8.63% due
6/01/10.................................... $275 $ 292,187
-----------
4,065,061
-----------
Total Bonds & Notes
(cost $40,506,593)......................... 41,252,624
-----------
CONVERTIBLE BONDS -- 0.1%
Utilities -- 0.1%
Calpine Corp
4.00% due 12/26/06
(cost $42,553)............................. 50 45,813
-----------
FOREIGN BONDS & NOTES -- 30.0%
Broadcasting & Media -- 0.5%
CF Cable TV, Inc. Guaranteed Secured Sr.
Notes 9.13% due 7/15/07.................... 50 52,250
Shaw Communications, Inc. Sr. Notes 7.25%
due 4/06/11................................ 125 132,813
Shaw Communications, Inc. Sr. Notes 8.25%
due 4/11/10................................ 225 248,062
-----------
433,125
-----------
Forest Products -- 0.1%
Kappa Beheer BV Guaranteed Sr. Sub.
Notes 10.63% due 7/15/09................... 75 80,625
-----------
Government Agency -- 27.8%
Australia Commonwealth Bonds 7.50% due
7/15/05.................................... AUD 620 439,737
Canadian Government Bonds 5.75% due 6/01/29.. CAD 420 336,809
Canadian Government Bonds 5.75% due 9/01/06.. CAD 615 486,763
Colombia Government International
Bond Bonds 11.75% due 2/25/20.............. 300 351,750
Deutsche Bundesrepublik Bonds 4.00% due
7/04/09.................................... EUR 110 132,282
Deutsche Bundesrepublik Bonds 5.63% due
1/04/28.................................... EUR 120 156,000
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-------------------------------------------------------------------------
Government Agency (continued)
Federal Republic of Brazil Bonds 2.19% due
10/15/03.................................. $1,000 $ 803,000
Federal Republic of Brazil Bonds 8.00% due
4/15/14................................... 1,371 1,251,321
Federal Republic of Brazil Global
Notes 10.25% due 6/17/13.................. 850 830,875
Federal Republic of Brazil Bonds 11.00% due
8/17/40................................... 1,190 1,124,550
Federal Republic of Brazil Notes 14.50% due
10/15/09.................................. 250 300,250
Federal Republic of Brazil Notes 11.00% due
1/11/12................................... 600 615,000
Federal Republic Of Germany Bonds 4.50% due
8/18/06................................... EUR 415 509,173
Kingdom of Sweden Bonds 5.00% due 1/28/09... SEK 3,000 406,740
Republic of Bulgaria Bonds, Series A 2.69%
due 7/28/12............................... 343 331,714
Republic of Bulgaria Bonds 8.25% due 1/15/15 100 114,000
Republic of Chile Notes 6.88% due 4/28/09... 200 230,000
Republic of Colombia Notes 10.75% due
1/15/13................................... 400 448,000
Republic of Ecuador Bonds 7.00% due 8/15/04. 725 453,125
Republic of Greece Sr. Notes 4.65% due
4/19/07................................... EUR 300 370,583
Republic of Italy Bonds 5.25%
due 12/15/05 - 11/01/29................... EUR 235 288,735
Republic of Panama Bonds 9.63% due 2/08/11.. $ 400 $ 457,000
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-----------------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agency (continued)
Republic of Peru Bonds 4.50% due 3/07/04.... 100 87,750
Republic of Peru Bonds 4.00% due 3/07/17(3). 188 173,195
Republic of Peru Guaranteed Global
Bonds 9.13% due 2/21/12................... 305 339,312
Republic of Philippines Bonds 9.00% due
2/15/13................................... 700 752,500
Republic of Philippines Bonds 9.88% due
1/15/19................................... 250 271,562
Republic of South Africa Notes 7.38% due
4/25/12................................... 275 312,125
Republic of Turkey Notes 9.50% due 1/15/14.. 243 247,253
Republic of Turkey Notes 10.50% due 1/13/08. 67 73,868
Republic of Turkey Notes 11.00% due 1/14/13. 250 275,625
Republic of Turkey Bonds 11.75% due 6/15/10. 625 714,062
Republic of Venezuela Debentures 1.88% due
12/18/03.................................. 750 686,250
Republic of Venezuela Bonds 9.25% due
9/15/27................................... 150 115,950
Russian Federation Bonds 5.00% due 3/31/07.. 3,650 3,450,500
Russian Federation Bonds 8.25% due 3/31/10.. 1,250 1,412,500
Russian Government Debentures 3.00% due
5/14/08................................... 250 222,500
Spanish Government Bonds 5.15% due 7/30/09.. EUR 468 594,608
Principal
Amount Value
Security Description (in thousands)** (Note 3)
-------------------------------------------------------------------------
Government Agency (continued)
Spanish Government Bonds 6.15% due 1/31/13.. EUR 293 $ 399,064
United Kingdom Bonds 6.25% due 11/25/10..... GBP 70 129,200
United Mexican States Notes 6.63% due
3/03/15................................... $1,250 1,313,125
United Mexican States Notes 7.50% due
1/14/12................................... 1,700 1,922,700
United Mexican States Bonds 8.13% due
12/30/19.................................. 1,570 1,774,100
-----------
25,705,156
-----------
Insurance -- 0.1%
Fairfax Financial Holdings,
Ltd. Notes 8.25% due 10/01/15............. 125 117,500
-----------
Metals & Mining -- 0.2%
Crown European Holdings SA Sr. Secured
Notes 10.88% due 3/01/13*................. 140 154,350
Russel Metals, Inc. Sr. Notes 10.00% due
6/01/09................................... 25 26,625
-----------
180,975
-----------
Telecommunications -- 0.3%
Telus Corp. Notes 8.00% due 6/01/11......... 250 291,852
-----------
Utilities -- 1.0%
Calpine Canada Energy
Finance, ULC Guaranteed Sr. Notes 8.50%
due 5/01/08............................... 1,175 846,000
Companhia De Saneamento Basico do Estado de
Sao Paulo Notes 12.00% due 6/20/08*....... 75 75,750
-----------
921,750
-----------
Total Foreign Bonds & Notes
(cost $24,196,156)........................ 27,730,983
-----------
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands)** (Note 3)
------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 14.3%
U.S. Treasury Bonds -- 4.8%
5.38% due 2/15/31........................... 3,000 3,219,375
6.13% due 11/15/27.......................... 500 579,121
6.25% due 5/15/30........................... 500 593,301
----------
4,391,797
----------
U.S. Treasury Notes -- 9.5%
3.00% due 1/31/04........................... 100 100,656
3.50% due 11/15/06.......................... 1,000 1,044,883
4.75% due 2/15/04........................... 1,000 1,013,789
5.00% due 2/15/11 - 8/15/11................. 2,585 2,833,013
5.88% due 11/15/04.......................... 3,000 3,158,790
6.88% due 5/15/06........................... 557 629,584
----------
8,780,715
----------
Total U.S. Government Obligations
(cost $12,539,612)........................ 13,172,512
----------
U.S. GOVERNMENT AGENCIES -- 4.1%
Federal Home Loan Mortgage Corporation -- 0.3%
6.50% due 5/01/29........................... 38 39,432
7.00% due 6/01/29........................... 51 54,216
8.50% due 5/01/08........................... 78 83,333
10.00% due 5/15/20.......................... 65 64,717
11.57% due 6/15/21.......................... 41 1,188
----------
242,886
----------
Federal National Mortgage Association -- 3.0%
0.50% due 10/17/36(5)....................... 4,508 72,988
0.50% due 3/17/20(5)........................ 2,468 30,977
0.90% due 6/25/38(5)........................ 5,040 216,018
1.58% due 2/25/35(5)........................ 3,121 126,052
5.50% due 1/01/29 - 6/01/29................. 360 368,721
6.00% due 2/01/32........................... 404 416,476
6.63% due 9/15/09........................... 1,000 1,164,647
7.50% due 1/01/30 - 9/01/30................. 101 107,551
8.00% due 11/01/28.......................... 100 108,644
8.80% due 1/25/19........................... 112 123,816
10.40% due 4/25/19.......................... 20 21,830
13.00% due 11/15/15......................... 18 20,925
----------
2,778,645
----------
Government National Mortgage Association -- 0.2%
7.50% due 7/15/27 - 10/15/27................ 187 201,270
----------
Principal
Amount
(in thousands)**/ Value
Security Description Shares (Note 3)
-------------------------------------------------------------------------
Federal Farm Credit Bank -- 0.6%
5.45% due 12/11/13.......................... $ 500 $ 544,098
----------
Total U.S. Government Agencies
(cost $3,739,892)......................... 3,766,899
----------
COMMON STOCK -- 0.0%
Financial Services -- 0.0%
Ono Finance, PLC............................ 100 1
----------
Internet Content -- 0.0%
Globix Corp.+............................... 9,174 22,935
----------
Telecommunications -- 0.0%
Dobson Communications Corp.+................ 270 2,192
IMPSAT Fiber Networks, Inc.+................ 17,360 128,464
----------
130,656
----------
Total Common Stock
(cost $1,002,511)......................... 153,592
----------
PREFERRED STOCK -- 1.2%
Broadcasting & Media -- 0.6%
CSC Holdings, Inc. 11.13%................... 4,750 498,157
Granite Broadcasting Corp. 12.75%........... 50 35,500
Paxson Communications Corp. 14.25%(6)....... 5 44,250
----------
577,907
----------
Communication Equipment -- 0.4%
Rural Cellular Corp. 11.38%(6).............. 325 264,875
Rural Cellular Corp. 12.25%(6).............. 198 126,720
----------
391,595
----------
Financial Services -- 0.0%
TCR Holdings, Class B(2)(6)(8).............. 570 6
TCR Holdings, Class C(2)(6)(8).............. 314 3
TCR Holdings, Class D(2)(6)(8).............. 827 8
TCR Holdings, Class E(2)(6)(8).............. 1,711 17
----------
34
----------
Retail Stores -- 0.1%
Rent-Way, Inc.(2)(9)........................ 3 25,000
----------
Telecommunications -- 0.1%
Dobson Communications Corp.*(2) 6.00%....... 450 90,731
----------
Total Preferred Stock
(cost $786,232)........................... 1,085,267
----------
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Rights/
Warrants/
Principal
Amount Value
Security Description (in thousands) (Note 3)
-----------------------------------------------------------------------
RIGHTS -- 0.0%
Government Agency -- 0.0%
United Mexican States, A(2)................. 1,400,000 $ 700
United Mexican States, C(2)................. 1,400,000 3,500
United Mexican States, D(2)................. 1,400,000 1,400
-----------
5,600
-----------
Total Rights
(cost $0)................................. 5,600
-----------
WARRANTS -- 0.0%+
Broadcasting & Media -- 0.0%
Knology Holdings, Inc. Expires 10/22/07(2).. 1,500 375
UIH Australia Pacific, Inc.*
Expires 5/15/06(2)........................ 1,000 0
-----------
375
-----------
Forest Products -- 0.0%
Berry Plastics Corp. Expires 4/15/04(2)(8).. 500 0
-----------
Telecommunications -- 0.0%
GT Group Telecom, Inc.* Expires 2/1/10(2)... 150 2
Leap Wireless International, Inc. Expires
4/15/10................................... 500 5
Leap Wireless International, Inc. Expires
4/15/10................................... 350 350
Occidente Y Caribe Expires 3/15/04(2)....... 7,250 0
-----------
357
-----------
Total Warrants
(cost $10,030)............................ 732
-----------
Total Investment Securities -- 94.2%
(cost $82,823,579)........................ 87,214,022
-----------
SHORT-TERM SECURITIES -- 1.7%
Time Deposits -- 1.0%
Euro Time Deposit with State Street Bank &
Trust Co. 0.50% due 10/01/03
(cost $872,000)........................... 872 872,000
-----------
Registered Investment Companies --0.7%
State Street Navigator Securities Lending
Prime Portfolio........................... 625 625,000
-----------
Total Short-Term Investments
(cost $1,497,000)......................... 1,497,000
-----------
REPURCHASE AGREEMENT -- 1.8%
State Street Repurchase Agreement
(Note 3) (cost $1,665,000)................ 1,665 1,665,000
-----------
Value
Security Description (Note 3)
---------------------------------------------------------------
TOTAL INVESTMENTS
(cost $85,985,579#)....................... 97.7% 90,376,022
Other assets less liabilities................ 2.3 2,179,259
----- -----------
NET ASSETS -- 100.0% $92,555,281
===== ===========
- --------
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. The aggregate
value is $7,029,371 which represents 7.60% of net assets.
** In United States dollars unless otherwise indicated
AUD -- Australian Dollar
CAD -- Canadian Dollar
EUR -- Euro
GBP -- United Kingdom Pound
SEK -- Swedish Krona
IO Interest only securities
+ Non-income producing security
# See Note 6
(1) Bond in default.
(2) Fair valued security; see Note 3.
(3) Security is a "step-up" bond where the coupon rate increases or steps up
at a predetermined rate. Rate shown reflects the increased rate.
(4) Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(5) Variable rate security -- the rate reflected is as of September 30, 2003;
maturity date reflects next reset date.
(6) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(7) Company has filed Ch. 11 Bankruptcy, but is continuing to make interest
payments.
(8) Illiquid security
(9) To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. This restricted
security is valued pursuant to Note 3. Restricted securities held by a
Fund may not be sold except in exempt transactions or in a public offering
registered under the Securities Act of 1933. The risk of investing in such
securities is generally greater than the risk of investing in the
securities of widely held, publicly traded companies. Lack of a secondary
market and resale restrictions may result in the inability of a Fund to
sell a security at a fair price and may substantially delay the sale of
the security. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist. As of
September 30, 2003, the Strategic Bond Fund held the following restricted
securities:
Value
as a
% of
Acquisition Acquisition Market Net
Name Date Share/Par Cost Value Assets
---- ----------- --------- ----------- ------ ------
Rent-Way, Inc.,
Preferred Stock 05/29/2003 3 25,000 25,000 0.02%
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Allocation of investment by country as a percentage of net assets as of
September 30, 2003
United States 69.2%
Brazil....... 5.4
Russia....... 5.3
Mexico....... 3.5
Canada....... 3.0
Mexico....... 1.9
Spain........ 1.1
Colombia..... 0.9
Germany...... 0.9
Turkey....... 0.9
Venezuela.... 0.9
Peru......... 0.7
Australia.... 0.5
Panama....... 0.5
Ecuador...... 0.5
Greece....... 0.4
Sweden....... 0.4
Bulgaria..... 0.4
Italy........ 0.3
Philippines.. 0.3
----
97.0%
====
Open Forward Foreign Currency Contracts
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Appreciation
--------------------------------
*** USD 426,984 AUD 670,000 11/07/2003 $26,971
-------
Net Unrealized Appreciation........ $26,971
=======
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Depreciation
--------------------------------------
*** AUD 670,000 USD 429,604 11/07/2003 $(24,352)
CAD 1,100,000 USD 778,128 11/07/2003 (34,957)
SEK 3,210,000 USD 387,368 11/07/2003 (26,154)
--------
Net Unrealized Depreciation............... $(85,463)
========
Net Unrealized Appreciation (Depreciation) $(58,492)
========
- --------
*** Represents open forward foreign currency contracts and offsetting or
partially offsetting open forward foreign currency contracts that do not
have additional market risk but have continued counterparty settlement
risk.
AUD -- Australian Dollar
CAD -- Canadian Dollar
SEK -- Swedish Krona
USD -- United States Dollar
See Notes to Financial Statements
37
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
Principal
Amount Value
Security Description (in thousands) (Note 3)
------------------------------------------------------------
BONDS & NOTES -- 82.4%
Aerospace & Military Technology -- 0.1%
Condor Systems, Inc.
Guaranteed Sr. Sub. Notes,
Series B
11.88% due 5/01/09(1)........... $ 500 $ 135,000
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes,
Series B
12.00% due 9/30/08.............. 500 235,000
----------
370,000
----------
Apparel & Textiles -- 0.1%
Warnaco, Inc.
Sr. Notes
8.88% due 6/15/13*.............. 350 375,375
----------
Automotive -- 1.5%
Dana Corp.
Notes
9.00% due 8/15/11............... 1,200 1,314,000
Diamond Triumph Auto Glass, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 4/01/08............... 695 618,550
Eagle-Picher, Inc.
Sr. Notes
9.75% due 9/01/13*.............. 850 892,500
Goodyear Tire & Rubber Co.
Notes
7.86% due 8/15/11............... 775 651,000
Pep Boys Manny Moe & Jack
Notes
6.92% due 7/07/06............... 850 862,750
----------
4,338,800
----------
Broadcasting & Media -- 8.3%
AMC Entertainment, Inc.
Sr. Sub. Notes
9.88% due 2/01/12............... 1,025 1,117,250
American Lawyer Media, Inc.
Sr. Sub. Notes Series B
9.75% due 12/15/07.............. 525 490,875
Charter Communications
Holdings, LLC
Sr. Sub. Notes
9.63% due 11/15/09.............. 4,850 3,746,625
Charter Communications
Holdings, LLC
Sr. Sub. Disc. Notes
9.92% due 4/01/11(2)............ 2,550 1,804,125
Principal
Amount Value
Security Description (in thousands) (Note 3)
-----------------------------------------------------------
Broadcasting & Media (continued)
Charter Communications
Holdings, LLC
Sr. Notes
10.00% due 5/15/11............. $ 450 $ 343,125
Charter Communications
Holdings, LLC
Sr. Sub. Notes
10.25% due 1/15/10............. 375 292,500
Charter Communications
Holdings, LLC
Sr. Sub. Notes
10.75% due 10/01/09............ 2,075 1,696,313
Charter Communications
Holdings, LLC
Sr. Sub. Notes
11.13% due 1/15/11............. 2,775 2,268,562
Charter Communications
Holdings, LLC
Sr. Sub. Disc. Notes
11.75% due 1/15/10(2).......... 300 211,500
Charter Communications
Holdings, LLC
Sr. Sub. Disc. Notes
12.13% due 1/15/12(2).......... 50 25,750
CSC Holdings, Inc.
Sr. Debentures
7.63% due 7/15/18.............. 150 144,000
CSC Holdings, Inc.
Sr. Debentures
7.88% due 2/15/18.............. 1,650 1,608,750
CSC Holdings, Inc.
Guaranteed Sr. Sub. Debentures
10.50% due 5/15/16............. 2,250 2,475,000
Emmis Communications Corp.
Sr. Disc. Notes
12.50% due 3/15/11(2).......... 1,050 934,500
Granite Broadcasting Corp.
Sr. Sub. Notes
8.88% due 5/15/08.............. 865 831,481
Granite Broadcasting Corp.
Sr. Sub. Notes
9.38% due 12/01/05............. 20 19,425
Granite Broadcasting Corp.
Sr. Sub. Notes
10.38% due 5/15/05............. 750 738,750
Haights Cross Operating Co.
Sr. Notes
11.75% due 8/15/11*............ 400 410,000
38
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
- ---------------------------------------
-----------------------------------------
Principal
Amount Value
Security Description (in thousands) (Note 3)
--------------------------------------------------------------
BONDS & NOTES (continued)
Broadcasting & Media (continued)
Paxson Communications Corp.
Guaranteed Sr. Sub. Disc. Notes
12.25% due 1/15/09(2)............ $ 100 $ 79,250
Rogers Cable, Inc.
Bonds
8.75% due 5/01/32................ 450 495,000
Rogers Cablesystems, Ltd.
Guaranteed Sr. Sub. Notes
11.00% due 12/01/15.............. 1,250 1,415,625
Salem Communications
Holding Corp.
Guaranteed Sr. Sub. Notes,
Series B
9.00% due 7/01/11................ 375 403,594
Susquehanna Media Co.
Sr. Sub. Notes
7.38% due 4/15/13................ 525 543,375
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes,
Series B
9.00% due 1/15/06................ 1,200 1,206,000
-----------
23,301,375
-----------
Business Services -- 1.9%
Allied Waste North America, Inc.
Sr. Notes
7.88% due 4/15/13................ 2,625 2,749,688
Mobile Mini, Inc.
Sr. Notes
9.50% due 7/01/13*............... 575 615,250
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 9/01/10*.............. 1,200 1,203,000
National Equipment Services, Inc.
Guaranteed Sr. Sub. Notes,
Series D
10.00% due 11/30/04(1)........... 2,240 896,000
-----------
5,463,938
-----------
Chemicals -- 2.3%
Equistar Chemicals, LP
Sr. Notes
10.63% due 5/01/11*.............. 1,225 1,212,750
Freeport McMoRan Resources
Sr. Notes
7.00% due 2/15/08................ 725 500,250
Huntsman International, LLC
Guaranteed Sr. Notes
9.88% due 3/01/09................ 1,405 1,475,250
Principal
Amount Value
Security Description (in thousands) (Note 3)
--------------------------------------------------------------
Chemicals (continued)
Huntsman, LLC
Sr. Secured Notes
11.63% due 10/15/10*.............. $ 725 $ 706,875
IMC Global, Inc.
Guaranteed Sr. Notes, Series B
11.25% due 6/01/11(6)............. 450 468,000
Methanex Corp.
Sr. Notes
8.75% due 8/15/12................. 450 483,750
Rockwood Specialties Group, Inc.
Sr. Sub. Notes
10.63% due 5/15/11*............... 725 772,125
Royster Clark, Inc.
1st Mtg. Notes
10.25% due 4/01/09................ 300 239,250
Westlake Chemical Corp.
Sr. Notes
8.75% due 7/15/11*................ 725 752,187
----------
6,610,437
----------
Communication Equipment -- 1.4%
American Tower Escrow Corp.
Disc. Notes
zero coupon due 8/01/08(3)........ 2,175 1,446,375
Nortel Networks, Ltd.
Sr. Notes
6.13% due 2/15/06................. 1,000 1,005,000
Rural Cellular Corp.
Sr. Sub. Notes
9.63% due 5/15/08................. 925 841,750
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 1/15/10................. 700 637,000
----------
3,930,125
----------
Computer Software -- 0.2%
DigitalNet, Inc.
Sr. Notes
9.00% due 7/15/10*................ 75 79,500
Pioneer-Standard Electronics, Inc.
Sr. Notes
9.50% due 8/01/06................. 425 440,938
----------
520,438
----------
Computers & Business Equipment -- 0.9%
Seagate Technology HDD
Holdings
Guaranteed Sr. Notes
8.00% due 5/15/09................. 300 330,750
39
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
- ---------------------------------------
-----------------------------------------
Principal
Amount Value
Security Description (in thousands) (Note 3)
-------------------------------------------------------------
BONDS & NOTES (continued)
Computers & Business Equipment (continued)
Xerox Capital Trust I
Guaranteed Capital
8.00% due 2/01/27................ $ 550 $ 464,750
Xerox Corp.
Sr. Notes
7.13% due 6/15/10................ 375 372,188
Xerox Corp.
Notes
7.20% due 4/01/16................ 375 350,625
Xerox Corp.
Sr. Notes
7.63% due 6/15/13................ 925 912,281
----------
2,430,594
----------
Conglomerate -- 1.6%
Jacuzzi Brands, Inc.
Sr. Secured Notes
9.63% due 7/01/10*............... 500 518,750
Park-Ohio Industries, Inc.
Sr. Sub. Notes
9.25% due 12/01/07............... 585 552,825
Prestolite Electric, Inc.
Guaranteed Sr. Notes
9.63% due 2/01/08................ 825 808,500
Tyco International Group SA
Guaranteed Sr. Notes
6.75% due 2/15/11(6)............. 1,675 1,767,125
Tyco International Group SA
Guaranteed Notes
6.88% due 1/15/29................ 800 792,000
----------
4,439,200
----------
Education -- 0.2%
KinderCare Learning Centers, Inc.
Sr. Sub. Notes, Series B
9.50% due 2/15/09................ 475 477,375
----------
Electronics -- 0.6%
Amkor Technology, Inc.
Sr. Notes
7.75% due 5/15/13*............... 125 125,625
Amkor Technology, Inc.
Sr. Sub. Notes
9.25% due 2/15/08................ 800 864,000
ON Semiconductor Corp.
Guaranteed Sr. Secured Notes
12.00% due 3/15/10............... 650 762,125
----------
1,751,750
----------
Principal
Amount Value
Security Description (in thousands) (Note 3)
----------------------------------------------------------
Energy Services -- 1.0%
Hanover Equipment Trust
Sr. Sec. Notes
8.50% due 9/01/08............. $1,000 $1,030,000
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 6/01/11............. 1,135 990,187
Universal Compression, Inc.
Sr. Notes
7.25% due 5/15/10............. 700 721,000
----------
2,741,187
----------
Energy Sources -- 5.9%
Chesapeake Energy Corp.
Sr. Notes
7.50% due 9/15/13*............ 325 341,250
Chesapeake Energy Corp.
Guaranteed Sr. Notes
7.75% due 1/15/15............. 350 369,250
Chesapeake Energy Corp.
Guaranteed Sr. Notes
9.00% due 8/15/12............. 175 196,875
CITGO Petroleum Corp.
Sr. Notes
11.38% due 2/01/11*........... 1,475 1,666,750
Colorado Interstate Gas Co.
Sr. Debentures
6.85% due 6/15/37............. 1,000 995,000
El Paso Production Holding Co.
Sr. Notes
7.75% due 6/01/13*............ 1,675 1,591,250
Encore Acquisition Co.
Guaranteed Sr. Notes
8.38% due 6/15/12............. 1,050 1,102,500
Forest Oil Corp.
Guaranteed Sr. Notes
7.75% due 5/01/14............. 775 806,000
Frontier Escrow Corp.
Sr. Notes
8.00% due 4/15/13*............ 725 735,875
Frontier Oil Corp.
Sr. Notes
9.13% due 2/15/06............. 60 61,800
Frontier Oil Corp.
Sr. Sub. Notes
11.75% due 11/15/09........... 545 615,850
KCS Energy, Inc.
Guaranteed Sr. Sub. Notes
8.88% due 1/15/06............. 1,200 1,182,000
40
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
---------------------------------------------------------------
BONDS & NOTES (continued)
Energy Sources (continued)
Leviathan Gas Pipeline Partner LP/
Leviathan Finance Corp.
Guaranteed Sr. Sub. Notes,
Series B
10.38% due 6/01/09................ $ 660 $ 749,100
Mission Energy Holding Co.
Sr. Secured Notes
13.50% due 7/15/08................ 1,000 660,000
Roseton Danskammer
Pass-Thru Certificates, Series A
7.27% due 11/08/10................ 2,700 2,524,500
Roseton Danskammer
2001 Series B
Pass-Thru Certificates
7.67% due 11/08/16................ 1,125 956,250
Southern Natural Gas Co.
Sr. Notes
8.88% due 3/15/10................. 725 775,750
Tesoro Petroleum Corp.
Sr. Secured Notes
8.00% due 4/15/08................. 275 281,875
Westport Resources Corp.
Guaranteed Sr. Sub. Notes
8.25% due 11/01/11*............... 1,050 1,147,125
-----------
16,759,000
-----------
Entertainment Products -- 0.4%
Steinway Musical Instruments, Inc.
Guaranteed Sr. Notes
8.75% due 4/15/11................. 1,150 1,178,750
-----------
Financial Services -- 14.7%
AmeriCredit Corp.
Guaranteed Sr. Notes
9.88% due 4/15/06................. 275 272,250
Athena Neurosciences Finance, LLC
Guaranteed Sr. Notes
7.25% due 2/21/08................. 3,550 2,875,500
Bear Island Paper Co., LLC
Sr. Secured Notes, Series B
10.00% due 12/01/07............... 1,600 1,328,000
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 2/15/12................ 1,075 1,091,125
ChipPac International Co., Ltd.
Guaranteed Sr. Sub. Notes,
Series B
12.75% due 8/01/09................ 200 223,000
Principal
Amount Value
Security Description (in thousands) (Note 3)
---------------------------------------------------------------
Financial Services (continued)
Chukchansi Economic
Development Authority
Sr. Notes
14.50% due 6/15/09*................ $2,200 $2,700,500
Eircom Funding
Sr. Sub. Notes
8.25% due 8/15/13*................. 1,025 1,101,875
ESI Tractebel Acquisition Corp.
Guaranteed Secured Bonds,
Series B
7.99% due 12/30/11................. 835 829,781
Hilcorp Energy I LP/Hilcorp
Finance Co.
Sr. Notes
10.50% due 9/01/10*................ 825 876,562
Huntsman Advanced Materials, LLC
Sr. Secured Notes
11.00% due 7/15/10*................ 600 624,000
IOS Capital, LLC
Sr. Notes
7.25% due 6/30/08.................. 675 654,750
Jet Equipment Trust
Sr. Notes, Series 1995, Class A
8.24% due 11/01/12*................ 1,344 584,566
JP Morgan High Yield Debt Index 100
Notes
8.00% due 6/20/08*................. 9,826 9,973,136
LaBranche & Co., Inc.
Sr. Sub. Notes
12.00% due 3/02/07................. 425 480,250
Madison River Capital, LLC/ Madison
River Finance Corp.
Sr. Notes, Series B
13.25% due 3/01/10................. 2,375 2,493,750
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
11.38% due 4/01/13(2).............. 1,725 1,207,500
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
16.00% due 5/15/09(2).............. 775 698,469
Nexstar Finance, LLC
Guaranteed Sr. Sub. Notes
12.00% due 4/01/08................. 100 112,000
PCA, LLC
Guaranteed Sr. Notes
11.88% due 8/01/09................. 800 872,000
PDVSA Finance, Ltd.
Bonds
6.80% due 11/15/08................. 1,425 1,275,375
41
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
-------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
PDVSA Finance, Ltd.
Notes
8.50% due 11/16/12.............. $ 825 $ 730,125
PX Escrow Corp.
Sr. Sub. Disc. Notes
9.63% due 2/01/06(2)............ 725 537,406
Qwest Capital Funding, Inc.
Guaranteed Notes
7.00% due 8/03/09............... 400 357,000
Qwest Capital Funding, Inc.
Guaranteed Notes
7.25% due 2/15/11............... 1,700 1,513,000
Qwest Capital Funding, Inc.
Guaranteed Notes
7.63% due 8/03/21............... 1,450 1,247,000
Qwest Capital Funding, Inc.
Notes
7.75% due 2/15/31............... 625 531,250
Qwest Capital Funding, Inc.
Guaranteed Notes
7.90% due 8/15/10............... 2,800 2,548,000
Terra Capital, Inc.
Guaranteed Sr. Secured Notes
11.50% due 6/01/10.............. 1,050 966,000
Terra Capital, Inc.
Guaranteed Sr. Secured Notes
12.88% due 10/15/08............. 1,125 1,243,125
US West Capital Funding, Inc.
Guaranteed Notes
6.88% due 7/15/28............... 900 711,000
Worldspan LP/ WS Financing Corp.
Sr. Notes
9.63% due 6/15/11*.............. 625 654,688
-----------
41,312,983
-----------
Food, Beverage & Tobacco -- 1.0%
Del Monte Corp.
Sr. Sub. Notes
8.63% due 12/15/12*............. 450 491,625
Doane Pet Care Co.
Sr. Sub. Notes
9.75% due 5/15/07............... 525 498,750
Doane Pet Care Co.
Guaranteed Sr. Notes
10.75% due 3/01/10.............. 500 550,000
Fleming Cos., Inc.
Guaranteed Sr. Sub. Notes,
Series D
10.63% due 7/31/07(1)........... 1,050 105
Principal
Amount Value
Security Description (in thousands) (Note 3)
--------------------------------------------------------------
Food, Beverage & Tobacco (continued)
Seminis, Inc.
Sr. Sub. Notes
10.25% due 10/01/13*............. $ 225 $ 240,188
Smithfield Foods, Inc.
Sr. Notes
7.75% due 5/15/13*............... 725 777,562
Smithfield Foods, Inc.
Sr. Notes, Series B
8.00% due 10/15/09............... 275 299,750
----------
2,857,980
----------
Forest Products -- 3.4%
Constar International, Inc.
Sr. Sub. Notes
11.00% due 12/01/12.............. 475 399,000
Crown Cork & Seal Co., Inc.
Notes
8.00% due 4/15/23................ 650 529,750
Crown Cork & Seal Co., Inc.
Notes
8.38% due 1/15/05................ 3,375 3,442,500
Georgia Pacific Corp.
Sr. Notes
7.38% due 7/15/08*............... 2,175 2,242,969
Georgia Pacific Corp.
Debenture
7.75% due 11/15/29............... 1,800 1,631,250
Georgia Pacific Corp.
9.13% due 7/01/22................ 825 816,750
Speciality Paperboard, Inc.
Sr. Notes
9.38% due 10/15/06............... 775 519,250
----------
9,581,469
----------
Health Services -- 3.0%
HCA, Inc.
Sr. Notes
6.95% due 5/01/12................ 1,250 1,326,060
HEALTHSOUTH Corp.
Notes
7.63% due 6/01/12................ 925 795,500
HEALTHSOUTH Corp.
Sr. Notes
8.38% due 10/01/11............... 1,625 1,397,500
HEALTHSOUTH Corp.
Sr. Sub. Notes
10.75% due 10/01/08.............. 650 568,750
42
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
--------------------------------------------------------------
BONDS & NOTES (continued)
Health Services (continued)
IASIS Healthcare Corp.
Guaranteed Sr. Sub. Notes
13.00% due 10/15/09............... $1,070 $1,201,075
Psychiatric Solutions, Inc.
Sr. Sub. Notes
10.63% due 6/15/13*............... 875 955,937
Tenet Healthcare Corp.
Sr. Notes
6.50% due 6/01/12................. 300 286,500
Tenet Healthcare Corp.
Notes
7.38% due 2/01/13................. 575 579,313
Universal Hospital Services, Inc.
Sr. Notes
10.25% due 3/01/08................ 1,250 1,300,000
----------
8,410,635
----------
Insurance -- 0.8%
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 6/15/13*............... 1,525 1,658,438
LNR Property Corp.
Sr. Sub. Notes
7.63% due 7/15/13*................ 500 515,000
----------
2,173,438
----------
Leisure & Tourism -- 6.1%
American Airlines, Inc.
Pass-Thru Certificates,
Series 2001-2, Class C
7.80% due 10/01/06................ 950 700,146
Atlas Air, Inc.
Pass-Thru Series 1999 1 Class A 2
6.88% due 1/02/11................. 800 740,487
Atlas Air, Inc.
Pass-Thru Certificates
Series 1999 Class A 1
7.20% due 1/02/19................. 887 830,462
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1998, Class C
8.01% due 1/02/10(4).............. 796 126,189
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class C
8.77% due 1/02/11(4).............. 462 72,335
Principal
Amount Value
Security Description (in thousands) (Note 3)
----------------------------------------------------------
Leisure & Tourism (continued)
Atlas Air, Inc.
Pass-Thru Certificates,
Series 2000-1, Class C
9.70% due 1/02/08(4).......... $ 101 $ 16,297
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1999-1, Class C
6.95% due 8/02/09............. 886 675,606
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1999-2, Class C1
7.73% due 3/15/11............. 351 247,813
Courtyard by Marriott II
Sr. Secured Notes, Series B
10.75% due 2/01/08............ 1,000 993,750
Delta Air Lines, Inc.
Pass-Thru Certificates,
Series 2002-1, Class C
7.78% due 1/02/12............. 1,083 889,861
Hard Rock Hotel, Inc.
Notes
8.88% due 6/01/13*............ 575 605,906
Hollywood Casino Shreveport/
Shreveport Capital Corp.
1st Mtg. Notes
13.00% due 8/01/06(1)......... 2,311 1,689,919
John Q Hammons Hotels LP
1st Sr. Mtg. Notes, Series B
8.88% due 5/15/12............. 500 541,250
Mandalay Resort Group
Sr. Sub. Notes, Series B
10.25% due 8/01/07............ 1,125 1,293,750
MGM Mirage, Inc.
Guaranteed Sr. Notes
8.50% due 9/15/10............. 1,525 1,715,625
Northwest Airlines, Inc.
Guaranteed Sr. Notes
7.63% due 3/15/05............. 630 552,825
Park Place Entertainment Corp.
Sr. Sub. Notes
9.38% due 2/15/07............. 700 773,500
Prime Hospitality Corp.
Sr. Sub. Notes, Series B
8.38% due 5/01/12............. 350 344,750
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10............ 1,000 991,250
43
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
-----------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
Six Flags, Inc.
Sr. Notes
8.88% due 2/01/10............. $ 200 $ 183,500
United AirLines, Inc.
2000 1 Pass-Thru Certificates
Class A 2
7.73% due 7/01/10(1).......... 500 390,275
United AirLines, Inc.
Series 2000 1 Certificates
Class A 1
7.78% due 1/01/14(1).......... 465 360,869
Vail Resorts, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 5/15/09............. 450 473,062
Waterford Gaming, LLC
Sr. Notes
8.63% due 9/15/12*............ 1,160 1,212,200
Wynn Las Vegas, LLC
2nd Mtg. Notes
12.00% due 11/01/10........... 750 855,000
-----------
17,276,627
-----------
Machinery -- 0.6%
Anthony Crane Rental LP
Guaranteed Sr. Secured Notes
9.38% due 2/01/08(4)(5)....... 1,187 28,185
Briggs & Stratton Corp.
Guaranteed Sr. Notes
8.88% due 3/15/11............. 550 616,000
Dresser, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 4/15/11............. 500 525,000
Terex Corp.
Guaranteed Sr. Sub. Notes
9.25% due 7/15/11............. 100 109,500
Terex Corp.
Guaranteed Sr. Sub. Notes,
Series B
10.38% due 4/01/11............ 180 201,600
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 6/01/07(1)......... 550 104,500
-----------
1,584,785
-----------
Metals & Mining -- 1.0%
CSN Islands VII Corp.
Guaranteed Notes
10.75% due 9/12/08*........... 475 479,750
MMI Products, Inc.
Sr. Sub. Notes, Series B
11.25% due 4/15/07............ 775 449,500
Principal
Amount Value
Security Description (in thousands) (Note 3)
---------------------------------------------------------------
Metals & Mining (continued)
National Steel Corp.
1st Mtg., Series D
9.88% due 3/01/09(1).............. $ 46 $ 3,214
Owens Brockway Glass Container
Guaranteed Sr. Secured Notes
7.75% due 5/15/11................. 1,025 1,060,875
Owens Brockway Glass Container
Sr. Secured Notes
8.75% due 11/15/12................ 225 241,313
Renco Metals, Inc.
Guaranteed Sr. Notes
11.50% due 7/01/49(1)(4).......... 2,150 0
Ryerson Tull, Inc.
Notes
9.13% due 7/15/06................. 525 517,125
WCI Steel, Inc.
Sr. Secured Notes, Series B
10.00% due 12/01/04(1)............ 330 99,000
----------
2,850,777
----------
Real Estate Investment Trusts -- 1.1%
National Health Investors, Inc.
Notes
7.30% due 7/16/07................. 1,120 1,108,800
RFS Partnership LP
Guaranteed Sr. Notes
9.75% due 3/01/12................. 350 364,000
Senior Housing Properties Trust
Sr. Notes
7.88% due 4/15/15................. 225 236,250
Senior Housing Properties Trust
Sr. Notes
8.63% due 1/15/12................. 1,300 1,410,500
----------
3,119,550
----------
Restaurants -- 0.3%
Tricon Global Restaurants, Inc.
Sr. Notes
8.88% due 4/15/11(6).............. 800 932,000
----------
Retail Stores -- 3.5%
Armstrong World Industries, Inc.
Sr. Notes
6.35% due 8/15/49(1).............. 200 100,000
Armstrong World Industries, Inc.
Sr. Notes
6.50% due 8/15/05(1).............. 825 433,125
Armstrong World Industries, Inc.
Debentures
9.75% due 4/15/08(1).............. 670 351,750
44
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
----------------------------------------------------------------
BONDS & NOTES (continued)
Retail Stores (continued)
Big 5 Corp.
Sr. Notes, Series B
10.88% due 11/15/07................. $ 490 $ 515,113
Collins & Aikman Floor Cover
Guaranteed Sr. Sub. Notes
9.75% due 2/15/10................... 450 474,750
J.C. Penney Co., Inc.
Notes
6.88% due 10/15/15.................. 1,800 1,773,000
Oakwood Homes Corp.
Sr. Notes
7.88% due 3/01/04(1)................ 925 333,000
Rent-A-Center, Inc.
Guaranteed Sr. Sub. Notes, Series B
7.50% due 5/01/10................... 975 1,024,969
Rent-Way, Inc.
Sr. Sec. Notes
11.88% due 6/15/10*................. 875 912,187
Rite Aid Corp.
Sr. Debentures
7.70% due 2/15/27................... 1,125 973,125
Rite Aid Corp.
Guaranteed Sr. Notes
8.13% due 5/01/10*.................. 450 479,250
Rite Aid Corp.
Sr. 2nd Notes
9.50% due 2/15/11................... 100 113,000
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11.................. 725 855,500
Salton, Inc.
Sr. Sub. Notes
10.75% due 12/15/05................. 185 181,763
Salton, Inc.
Sr. Sub. Notes
12.25% due 4/15/08.................. 280 273,700
Service Corp. International
Notes
7.70% due 4/15/09................... 975 996,937
----------
9,791,169
----------
Telecommunications -- 10.8%
AirGate PCS, Inc.
Sr. Sub. Disc. Notes
13.50% due 10/01/09(2).............. 4,550 3,480,750
Alamosa PCS Holdings, Inc.
Guaranteed Sr. Disc. Notes
12.88% due 2/15/10(2)............... 4,800 3,792,000
Principal
Amount Value
Security Description (in thousands) (Note 3)
-------------------------------------------------------------
Telecommunications (continued)
Alaska Communications
Holdings, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 5/15/09................ $ 975 $ 916,500
Centennial Cellular Operating Co.
Sr. Sub. Notes
10.75% due 12/15/08.............. 175 173,688
Centennial Communications
Cellular Operating Co.
Sr. Notes
10.13% due 6/15/13*.............. 250 257,500
FairPoint Communications Inc.
Sr. Sub. Notes
12.50% due 5/01/10............... 175 186,375
GCI, Inc.
Sr. Notes
9.75% due 8/01/07................ 450 455,625
Horizon PCS, Inc.
Guaranteed Sr. Notes
13.75% due 6/15/11(1)............ 2,775 693,750
iPCS, Inc.
Sr. Disc. Notes
14.00% due 7/15/10(1)............ 1,400 154,000
LCI International, Inc.
Sr. Notes
7.25% due 6/15/07................ 2,300 1,840,000
MJD Communications, Inc.
Sr. Sub. Notes, Series B
9.50% due 5/01/08................ 3,025 2,934,250
Nextel Communications, Inc.
Sr. Notes
7.38% due 8/01/15................ 2,300 2,323,000
Nextel Communications, Inc.
Sr. Notes
9.38% due 11/15/09............... 600 651,000
Nextel Communications, Inc.
Sr. Notes
9.95% due 8/15/08................ 1,450 1,524,312
PanAmSat Corp.
Notes
6.38% due 1/15/08................ 575 593,687
PanAmSat Corp.
Guaranteed Sr. Notes
8.50% due 2/01/12................ 450 471,375
Pegasus Satellite
Communications, Inc.
Sr. Notes
11.25% due 1/15/10*.............. 2,750 2,172,500
45
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
--------------------------------------------------------------
BONDS & NOTES (continued)
Telecommunications (continued)
Qwest Corp.
Notes
8.88% due 3/15/12*............... $ 175 $ 194,250
Rogers Wireless
Communications, Inc.
Sr. Secured Notes
9.63% due 5/01/11................ 400 460,000
US Unwired, Inc.
Guaranteed Sr. Sub. Disc.
Notes, Series B
zero coupon due 11/01/09(2)...... 3,475 2,536,750
US West Communications, Inc.
Debentures
6.88% due 9/15/33................ 3,575 3,146,000
US West Communications, Inc.
Secured Debentures
7.50% due 6/15/23................ 100 93,500
Western Wireless Corp.
Sr. Notes
9.25% due 7/15/13*............... 1,300 1,326,000
-----------
30,376,812
-----------
Transportation -- 0.1%
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 5/01/09................ 275 299,750
-----------
Utilities -- 9.6%
AES Corp.
Sr. Secured Notes
8.75% due 5/15/13*............... 2,395 2,514,750
AES Drax Energy, Ltd.
Guaranteed Sr. Sub. Secured
Notes, Series B
11.50% due 8/30/10(1)............ 4,460 33,450
Calpine Corp.
Sr. Notes
7.75% due 4/15/09................ 200 138,000
Calpine Corp.
Sr. Notes
8.75% due 7/15/07................ 700 521,500
Cincinnati Bell Telephone Company
Medium Term Notes
7.18% due 12/15/23............... 375 342,188
Dynegy Holdings, Inc.
Sr. Notes
8.75% due 2/15/12................ 775 709,125
Edison Mission Energy
Sr. Notes
7.73% due 6/15/09................ 275 224,125
Principal
Amount Value
Security Description (in thousands) (Note 3)
---------------------------------------------------------------
Utilities (continued)
Edison Mission Energy
Sr. Notes
9.88% due 4/15/11.................. $1,225 $1,047,375
Edison Mission Energy
Sr. Notes
10.00% due 8/15/08................. 2,750 2,420,000
Mirant Americas Generation, LLC
Sr. Notes
7.20% due 10/01/08(1).............. 1,525 1,208,562
Mirant Americas Generation, LLC
Sr. Notes
7.63% due 5/01/06(1)............... 525 416,063
Mirant Americas Generation, LLC
Sr. Notes
8.30% due 5/01/11(1)............... 2,525 1,994,750
Mirant Americas Generation, LLC
Sr. Notes
8.50% due 10/01/21(1).............. 1,975 1,560,250
Mirant Mid Atlantic, LLC
Pass-Thru Certificates, Series A
8.63% due 6/30/12(1)............... 819 814,632
Mirant Mid Atlantic, LLC
Secured Pass-Thru Certificates
9.13% due 6/30/17(1)............... 693 679,394
Pacific Gas & Electric Co.
Sr. Notes
10.00% due 11/01/05*............... 500 512,500
PG& E Corp.
Sr. Secured Notes
6.88% due 7/15/08*................. 725 761,250
Reliant Resources, Inc.
Sr. Secured Notes
9.25% due 7/15/10*................. 800 724,000
Reliant Resources, Inc.
Sr. Secured Notes
9.50% due 7/15/13*................. 2,175 1,957,500
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 7/15/18*................. 1,100 924,000
Transcontinental Gas
Pipe Line Corp.
Sr. Notes
8.88% due 7/15/12.................. 2,225 2,517,031
Williams Cos., Inc.
Notes
7.13% due 9/01/11.................. 2,925 2,888,437
46
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (in thousands) (Note 3)
--------------------------------------------------------------------
BONDS & NOTES (continued)
Utilities (continued)
Williams Cos., Inc.
Sr. Notes
8.63% due 6/01/10..................... $1,900 $ 2,018,750
------------
26,927,632
------------
Total Bonds & Notes
(cost $225,903,610)..................... 232,183,951
------------
CONVERTIBLE BONDS -- 0.1%
Utilities -- 0.1%
Calpine Corp
4.00% due 12/26/06
(cost $255,309)....................... 300 274,875
------------
FOREIGN BONDS & NOTES -- 4.4%
Broadcasting & Media -- 0.7%
CF Cable TV, Inc.
Guaranteed Secured Sr. Notes
9.13% due 7/15/07..................... 400 418,000
Shaw Communications, Inc.
Sr. Notes
7.25% due 4/06/11..................... 475 504,688
Shaw Communications, Inc.
Sr. Notes
8.25% due 4/11/10..................... 1,050 1,157,625
------------
2,080,313
------------
Forest Products -- 0.2%
Kappa Beheer BV
Guaranteed Sr. Sub. Notes
10.63% due 7/15/09.................... 400 430,000
------------
Insurance -- 0.3%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.................... 900 846,000
------------
Metals & Mining -- 0.5%
Crown European Holdings SA
Sr. Secured Notes
10.88% due 3/01/13*................... 800 882,000
International Utility Structures, Inc.
Sr. Sub. Notes
10.75% due 2/01/08(1)................. 2,150 473,000
Russel Metals, Inc.
Sr. Notes
10.00% due 6/01/09.................... 100 106,500
------------
1,461,500
------------
Telecommunications -- 0.7%
Telus Corp.
Notes 8.00% due 6/01/11............... 1,625 1,897,036
------------
Principal
Amount
(in thousands)/ Value
Security Description Shares (Note 3)
------------------------------------------------------------
Utilities -- 2.0%
Calpine Canada Energy Finance,
ULC Guaranteed Sr. Notes
8.50% due 5/01/08............. $ 7,225 $ 5,202,000
Companhia De Saneamento Basico
do Estado de Sao Paulo
Notes
12.00% due 6/20/08*........... 550 555,500
-----------
5,757,500
-----------
Total Foreign Bonds & Notes
(cost $13,884,349).............. 12,472,349
-----------
COMMON STOCK -- 0.5%
Energy Sources -- 0.0%
Tri-Union Development
Corp.(4)(8)................... 1,061 10
Tribo Petroleum Corp.(4)(8).... 1,800 18
-----------
28
-----------
Financial Services -- 0.0%
Ono Finance, PLC(8)............ 500 5
-----------
Leisure & Tourism -- 0.0%
Capital Gaming International,
Inc.+(4)(8)................... 77 0
-----------
Telecommunications -- 0.5%
Dobson Communications Corp.+... 156,082 1,267,386
-----------
Total Common Stock
(cost $1,307,267)............... 1,267,419
-----------
PREFERRED STOCK -- 1.6%
Broadcasting & Media -- 0.7%
CSC Holdings, Inc.
11.13%........................ 13,925 1,460,384
Granite Broadcasting Corp.
12.75%........................ 375 266,250
Paxson Communications Corp.
14.25%(5)..................... 30 265,500
-----------
1,992,134
-----------
Communication Equipment -- 0.7%
Rural Cellular Corp., Series B
11.38%(5)..................... 1,600 1,304,000
Rural Cellular Corp.
12.25%(5)..................... 772 494,080
-----------
1,798,080
-----------
Retail Stores -- 0.0%
Rent-Way, Inc.(4)(8)(9)........ 10 100,000
-----------
47
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Shares/Warrants/
Principal
Amount Value
Security Description (in thousands) (Note 3)
------------------------------------------------------------------
PREFERRED STOCK (continued)
Telecommunications -- 0.2%
Dobson Communications Corp.
6.00%*(4)(8)..................... 2,425 $ 488,941
------------
Total Preferred Stock
(cost $3,358,921).................. 4,379,155
------------
WARRANTS -- 0.0%+
Broadcasting & Media -- 0.0%
Knology Holdings, Inc.
Expires 10/22/07(4).............. 4,500 1,125
UIH Australia Pacific, Inc.
Expires 5/15/06*(4)(8)........... 1,000 0
XM Satellite Radio, Inc.
Expires 3/15/10*(8).............. 1,000 12,500
------------
13,625
------------
Telecommunications -- 0.0%
GT Group Telecom, Inc.
Expires 2/1/10*(4)............... 2,650 27
KMC Telecom Holdings, Inc.
Expires 1/31/08(4)(8)............ 3,650 0
Leap Wireless International, Inc.
Expires 4/15/10(8)............... 2,250 21
Leap Wireless International, Inc.
Expires 4/15/10(8)............... 1,950 1,950
Occidente Y Caribe
Expires 3/15/04(4)(8)............ 7,750 0
------------
1,998
------------
Total Warrants
(cost $321,861).................... 15,623
------------
Total Investment Securities -- 89.0%
(cost $245,031,317)................ 250,593,372
------------
REPURCHASE AGREEMENTS -- 6.9%
State Street Bank & Trust Co.
Joint Repurchase Agreement
Account (see Note 3)............. 505 505,000
UBS Warburg, LLC Joint
Repurchase Agreement Account
(see Note 3)..................... 19,000 19,000,000
------------
Total Repurchase Agreement
(cost $19,505,000)................ 19,505,000
------------
Principal
Amount Value
Security Description (in thousands) (Note 3)
-----------------------------------------------------------
TOTAL INVESTMENTS --
(cost $264,536,317#)......... 95.9% 270,098,372
------------
BOND-SHORT POSITION -- (0.7)%
Automotive -- (0.2)%
Goodyear Tire & Rubber Co.
8.50% 3/15/07.............. (700) $ (658,000)
Broadcasting & Media -- (0.5)%
Regal Cinemas Corporation
9.38% 2/01/12.............. (1,000) (1,221,000)
------------
(Proceeds $1,798,500)....... (1,879,000)
------------
Other assets less liabilities. 4.8% 13,476,062
------ ------------
NET ASSETS -- 100.0% $281,695,434
====== ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The aggregate value is
$52,944,154 which represents 18.79% of net assets.
+ Non-income producing security
# See Note 6
(1)Bond in default.
(2)Security is a "step-up" bond where the coupon rate increases or steps up at
a predetermined rate. Rate shown reflects the increased rate.
(3)Represents a zero coupon bond which will convert to an interest-bearing
security at a later date
(4)Fair valued security; see Note 3.
(5)PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(6)The security or a portion thereof represents collateral for securities short
sale.
(7)Company has filed Ch. 11 bankruptcy, but is continuing to make interest
payments.
(8)Illiquid security
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
(9)To the extent permitted by the Statement of Additional Information, the High
Yield Bond Fund may invest in restricted securities. This restricted
security is valued pursuant to Note 3. Restricted securities held by a Fund
may not be sold except in exempt transactions or in a public offering
registered under the Securities Act of 1933. The risk of investing in such
securities is generally greater than the risk of investing in the securities
of widely held, publicly traded companies. Lack of a secondary market and
resale restrictions may result in the inability of a Fund to sell a security
at a fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of September 30, 2003, the
High Yield Bond Fund held the following restricted securities:
Value
as a
% of
Acquisition Acquisition Market Net
Name Date Share/Par Cost Value Assets
---- ----------- --------- ----------- ------- ------
Rent-Way, Inc.,
Preferred
Stock......... 05/29/2003 10 100,000 100,000 0.04%
Allocation of investment by country as a percentage of net assets as of
September 30, 2003.
United States 90.4%
Canada....... 4.4
Brazil....... 0.2
Netherlands.. 0.2
----
95.2%
====
See Notes to Financial Statements
49
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
Principal
Amount Value
Security Description (In thousands) (Note 3)
------------------------------------------------------------------
MUNICIPAL BONDS -- 90.9%
Alabama -- 5.3%
Jefferson County, Alabama Sewer
Revenue, Capital Improvement,
Series D
5.25% due 2/01/26+.................... $4,500 $5,174,505
----------
California -- 7.4%
California State Department Water
Resources, Central Valley Project
Revenue, Series X,
5.13% due 12/01/22+................... 3,000 3,130,980
San Ramon Valley, California Unified
School District, General Obligation,
5.00% due 8/01/23+.................... 4,000 4,097,840
----------
7,228,820
----------
Colorado -- 3.7%
El Paso County, Colorado, Single
Family Mortgage Revenue,
zero coupon due 9/01/15(1)............ 2,000 1,229,040
Highlands Ranch Metropolitan District
No. 2, General Obligation,
6.50% due 6/15/09+.................... 1,960 2,359,997
----------
3,589,037
----------
Connecticut -- 4.9%
Connecticut State, General Obligation,
Refunding, Series C,
5.25% due 12/15/09+................... 4,100 4,730,908
----------
Florida -- 7.8%
Lee County, Florida, Airport Revenue,
Series A,
5.75% due 10/01/22+................... 5,000 5,474,350
Orange County, Florida Sales Tax
Revenue, Refunding, Series A,
5.13% due 1/01/23+.................... 2,000 2,083,360
----------
7,557,710
----------
Georgia -- 3.3%
Georgia Municipal Electric Authority,
Power Revenue, Prerefunded,
Series Y,
6.40% due 1/01/09+.................... 60 71,660
Georgia Municipal Electric Authority,
Power Revenue, Prerefunded,
Series Y
6.40% due 1/01/13+.................... 85 103,756
Metropolitan Atlanta Rapid Transit
Authority Refunding Second
Indenture Series A
5.00% due 7/01/09+.................... 2,650 2,991,479
----------
3,166,895
----------
Principal
Amount Value
Security Description (In thousands) (Note 3)
------------------------------------------------------------------
Illinois -- 4.0%
Illinois Health Facilities Authority
Revenue, Lutheran General Health
Systems, Series C,
7.00% due 4/01/08+................... $3,400 $ 3,886,302
-----------
Massachusetts -- 0.9%
Massachusetts State Housing
Finance Agency, Insured Rental,
Series A,
6.60% due 7/01/14+................... 875 905,747
-----------
Missouri -- 6.1%
Sikeston, Missouri, Electric Revenue,
Refunding,
6.20% due 6/01/10+................... 5,000 5,969,700
-----------
New Jersey -- 13.1%
Garden State Preservation Trust,
New Jersey, Series A,
5.25% due 11/01/19+.................. 3,400 3,721,640
New Jersey Economic Development
Authority, School Facilities
Construction, Series C,
5.00% due 6/15/12+................... 4,000 4,463,720
Passaic Valley, New Jersey Sewer
Systems, Series F,
5.00% due 12/01/09+.................. 2,000 2,273,960
Passaic Valley, New Jersey Sewer
Systems, Series F,
5.00% due 12/01/12+.................. 2,000 2,242,480
-----------
12,701,800
-----------
New Mexico -- 0.0%
New Mexico Mtg. Finance Authority,
Single Family Mtg., Series C,
8.63% due 7/01/17+................... 20 20,146
-----------
New York -- 11.4%
New York State Authority, Highway &
Bridge Trust Fund, Series B,
5.00% due 4/01/12+................... 5,000 5,564,050
Niagara Falls, New York, Public
Improvement, General Obligation,
7.50% due 3/01/13.................... 450 582,341
Niagara Falls, New York, Public
Improvement, General Obligation,
7.50% due 3/01/14+................... 550 735,136
Triborough Bridge And Tunnel
Authority New York Sub. Series A
5.25% due 11/15/30+.................. 4,000 4,163,760
-----------
11,045,287
-----------
50
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount Value
Security Description (In thousands) (Note 3)
------------------------------------------------------------------
MUNICIPAL BONDS (continued)
Ohio -- 3.5%
Cuyahoga County, Ohio Revenue,
Cleveland Clinic Health Systems,
Series A,
5.75% due 1/01/24.................... $2,000 $ 2,101,520
Woodridge, Ohio Local School
District, General Obligation,
6.80% due 12/01/14+.................. 1,000 1,275,810
-----------
3,377,330
-----------
Oklahoma -- 0.3%
Oklahoma Development Finance
Authority, Public Service of
Oklahoma Project, Refunding,
4.88% due 6/01/04.................... 250 252,905
-----------
Pennsylvania -- 10.3%
Exeter Township, Pennsylvania
School District, General Obligation,
5.00% due 5/15/22+................... 4,555 4,728,773
Pennsylvania State Turnpike
Commission, Oil Franchise Tax
Revenue, Series A
5.25% due 12/01/23+.................. 5,000 5,288,200
-----------
10,016,973
-----------
South Dakota -- 2.6%
South Dakota State Health &
Educational Facilities Authority
Revenue, McKennan Hospital,
6.25% due 7/01/10+................... 2,120 2,509,508
-----------
Texas -- 6.3%
Harris County, Texas Hospital
District, Mtg. Revenue,
7.40% due 2/15/10+................... 1,450 1,696,195
Houston, Texas Water And Sewer
Systems Revenue, Refunding
Junior Lien Series A
6.20% due 12/01/25+.................. 2,635 2,921,161
San Antonio, Texas, Hotel Occupancy
Revenue, Henry B. Gonzalez
Project,
zero coupon due 8/15/17+(1).......... 2,700 1,431,756
Texas State Veterans Housing
Assistance, General Obligation,
6.80% due 12/01/23................... 65 66,645
-----------
6,115,757
-----------
Total Investment Securities -- 90.9%
(cost $82,825,509)................... 88,249,330
-----------
Principal
Amount Value
Security Description (In thousands) (Note 3)
------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.7%
Arizona -- 1.3%
Maricopa County, Arizona Industrial
Development Authority Revenue,
JIA Corp. Project,
1.25% due 10/01/2003(2)............... $ 300 $ 300,000
Tempe, Arizona Industrial
Development Authority Revenue,
Centers For Habilitation,
1.25% due 10/01/2003(2)............... 945 945,032
----------
1,245,032
----------
Colorado -- 0.4%
Colorado Springs, Colorado Revenue,
National Strength & Condition,
1.25% due 10/01/2003(2)............... 400 400,000
----------
Iowa -- 1.6%
Iowa Finance Authority Children's Care
Facilities Revenue, Childserve
Project, Series B,
1.25% due 10/01/2003(2)............... 450 450,000
Linn County, Iowa Revenue, Goodwill
Industries, Southwest Project,
1.25% due 10/01/2003(2)............... 1,115 1,115,000
----------
1,565,000
----------
Missouri -- 0.2%
St. Louis, Missouri Planned Industrial
Expansion Authority, Industrial
Development Revenue, Chemical
Building Project,
1.20% due 10/01/2003(2)............... 100 100,000
Wright City, Missouri Industrial
Revenue, Watlow Process Systems,
Inc., 1.20% due 10/01/2003(2)......... 100 100,000
----------
200,000
----------
New York -- 3.0%
New York City, New York, General
Obligation, Series B,
1.15% due 10/01/2003(2)............... 1,200 1,200,000
New York, New York Municipal Water
Finance Authority, Water & Sewer
Systems Revenue,
Series C,
1.15% due 10/01/2003(2)............... 1,700 1,700,000
----------
2,900,000
----------
51
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2003 -- (unaudited)
(continued)
Principal
Amount
(In thousands)/ Value
Security Description Shares (Note 3)
-----------------------------------------------------------------
SHORT-TERM INVESTMENTS (continued)
North Carolina -- 0.2%
Mecklenburg County, North Carolina,
Certificates Participation
1.15% due 10/02/2003(2)............ $ 200 $ 200,000
-----------
Registered Investment
Companies -- 0.0%
SSgA Tax Free Money
Market Fund........................ 33,619 33,619
Total Short-Term Investments
(cost $6,543,651).................. 6,543,651
-----------
TOTAL INVESTMENTS --
(cost $89,369,160#)................ 97.6% 94,792,981
Other assets less liabilities......... 2.4 2,297,861
------- -----------
NET ASSETS -- 100.0% $97,090,842
======= ===========
- --------
# See Note 6
+ All or part of this security is insured by the Financial Security Assurance
("FSA"), Financial Guaranteed Insurance Corp. ("FGIC"), Municipal Bond
Insurance Association ("MBIA"), or American Municipal Bond Assurance Corp.
("AMBAC") ($84,599,220 or 87.1% of Net Assets).
(1)Represents a zero coupon bond which will convert to an interest-bearing
security at a later date.
(2)Variable rate security -- the rate reflected as of September 30, 2003;
maturity date reflects next reset date.
See Notes to Financial Statements
52
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
Note 1. Organization
SunAmerica Income Funds is an open-end diversified management investment
company organized as a Massachusetts business trust (the "Trust"). It
currently consists of six different investment series (each, a "Fund" and
collectively, the "Funds"). Each Fund is a separate series of the Trust with
distinct investment objectives and/or strategies. Each Fund is managed by
AIG SunAmerica Asset Management Corp. (the "Adviser" or "SAAMCo"), an
indirect wholly-owned subsidiary of American International Group, Inc.
("AIG"). An investor may invest in one or more of the following Funds:
SunAmerica Core Bond Fund, SunAmerica U.S. Government Securities Fund,
SunAmerica GNMA Fund, SunAmerica Strategic Bond Fund (formerly, Diversified
Income Fund), SunAmerica High Yield Bond Fund (formerly, High Income Fund)
and SunAmerica Tax Exempt Insured Fund. The Funds are considered to be
separate entities for financial and tax reporting purposes. The investment
objectives for each of the Funds are as follows:
Core Bond Fund seeks a high level of current income consistent with relative
safety of capital by the active trading of investment-grade fixed-income
securities, or in securities issued or guaranteed by the U.S. Government and
mortgage-backed or asset-backed securities without regard to the maturities
of such securities. Under normal market conditions, at least 80% of the
Fund's assets plus borrowing for investment purposes will be invested in
bonds.
U.S. Government Securities Fund seeks high current income consistent with
relative safety of capital by the active trading of securities of high
credit quality, issued or guaranteed by the U.S. government, or any agency
or instrumentality thereof without regard to the maturities of such
securities. Under normal market conditions, at least 80% of the Fund's
assets plus borrowing for investment purposes will be invested in such
securities.
GNMA Fund seeks current income, with capital appreciation as a secondary
objective by the active trading of mortgage-backed securities of high credit
quality issued or guaranteed by the Government National Mortgage Association
(GNMA) without regard to the maturities of such securities. Under normal
market conditions, at least 80% of the Fund's assets plus borrowing for
investment purposes will be invested in such securities.
Strategic Bond Fund seeks a high level of total return by the active trading
of a broad range of bonds, including both investment grade and
non-investment grade bonds (which may include "junk bonds"), U.S. Government
and agency obligations, and mortgage-backed securities, without regard to
the maturities of such securities. Under normal market conditions, at least
80% of the Fund's assets plus borrowing for investment purposes will be
invested in bonds.
High Yield Bond Fund seeks a high level of total return by the active
trading of below-investment grade U.S. and foreign junk bonds (rated below
Baa by Moody's and below BBB by S&P) without regard to the maturities of
such securities and bank debt. For purposes of this policy, bonds include
fixed-income securities other than short-term commercial paper and preferred
stock. Under normal market conditions, at least 80% of the Funds assets plus
borrowing for investment purposes will be invested in such securities.
53
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Tax Exempt Insured Fund seeks as high a level of current income exempt from
federal income taxes as is consistent with preservation of capital by
investing, under normal market conditions, at least 80% of its assets in
municipal bonds, the income of which is exempt from federal income taxes,
and that are insured as to the scheduled payment of principal and interest
for as long as such bonds are held by the Fund, without regard to the
maturities of such securities.
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, any purchases of Class A shares in excess of
$1,000,000 will be purchased at net asset value but will be subject to a
contingent deferred sales charge on redemptions made within two years of
purchase.
Class B shares are offered without an initial sales charge, although a
declining contingent deferred sales charge may be imposed on redemptions
made within six years of purchase. Class B shares of each Fund convert
automatically to Class A shares on the first business day of the month
following the eighth anniversary of the issuance of such Class B shares and
at such time will be subject to the lower distribution fee applicable to
Class A shares.
Class II shares are offered at net asset value per share plus an initial
sales charge and may be subject to a contingent deferred sales charge on
redemptions made within 18 months of purchase.
Class I, Class Z, and Class X are offered at net asset value per share.
These classes are offered exclusively to participants in certain employee
retirement plans and other programs.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions and each (other than Class I, Class X and Class Z)
makes distribution and account maintenance and service fee payments under a
distribution plan pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act") except that Class B and Class II shares are subject to
higher distribution fee rates.
Indemnifications: Under the Funds' organizational documents, its officers
and trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. In addition, in the normal course
of business the Funds enter into contracts that contain a variety of
representations and warranties which provide general indemnifications. The
Funds' maximum exposure under these arrangements are unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds expect the risk of loss to be remote.
Note 2. Fund Mergers
Pursuant to a plan of reorganization approved by shareholders of the North
American Funds ("NA Funds") on November 7, 2001, all the assets and
liabilities of the determined NA Funds were transferred in a tax-free
exchange
54
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
to a determined SunAmerica Mutual Fund ("SA Funds"). The details of the
reorganization transactions, which were consummated on November 16, 2001,
are set forth below.
The SunAmerica Core Bond Fund, a newly created portfolio of the SunAmerica
Income Funds, acquired all of the assets and liabilities of the North
American Core Bond Fund. In conjunction with this reorganization, Class C
was redesignated as Class II and Class II was redesignated as Class Z.
The SunAmerica U.S. Government Securities Fund ("U.S. Government Securities
Fund") and the SunAmerica Tax Exempt Insured Fund ("Tax Exempt Insured
Fund"), respectively, acquired all of the assets and liabilities of the
North American U.S. Government Securities Fund ("NA U.S. Government
Securities Fund") and the North American Municipal Bond Fund ("NA Municipal
Bond Fund"), respectively. In conjunction with the reorganizations, the SA
Funds are the surviving entities. All shares of the NA U.S. Government
Securities Fund and the NA Municipal Bond Fund Class A, Class B, and Class C
were exchanged, tax free, for U.S. Government Securities Fund and Tax Exempt
Insured Fund Class A, Class B, and Class II shares, respectively.
The North American Strategic Income Fund ("NA Strategic Income Fund") was
reorganized into the SunAmerica Diversified Income Fund ("SA Diversified
Income Fund") and renamed the SunAmerica Strategic Bond Fund ("Strategic
Bond Fund"). The North American High Yield Bond Fund ("NA High Yield Bond
Fund") was reorganized into the SunAmerica High Income Fund ("SA High Income
Fund") and was renamed the SunAmerica High Yield Bond Fund ("High Yield Bond
Fund"). However, based on accounting principles generally accepted in the
United States of America, from a financial reporting standpoint, the NA
Strategic Income Fund and the NA High Yield Bond Fund are the surviving
entities in this reorganization. Not withstanding this financial accounting
treatment, the SA Diversified Income Fund and the SA High Income Fund are
the surviving entities for legal and tax reporting purposes. On November
16th, prior to the reorganization, the NA Strategic Income Fund and the NA
High Yield Bond Fund declared a stock split and issued the following
additional shares of stock for each share of stock owned:
Class A Class B Class C* Class I Class II@
------- ------- -------- ------- ---------
NA Strategic Income Fund...... 1.5526 1.5465 1.5436 1.5579 1.5482
NA High Yield Bond Fund....... 0.7750 0.7735 0.7689 0.7749 0.7720
-----
* Class C was redesignated Class II
@ Class II was redesignated Class Z
The financial highlights included in these financial statements have been
adjusted to reflect the stock split as if it had taken place as of the
commencement of operations.
55
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Net assets and unrealized appreciation (depreciation) as of the merger date
were as follows:
Net assets of U.S. Government Securities Fund prior to merger.................... $208,965,218
Net assets of NA U.S. Government Securities Fund prior to merger................. 48,781,692
------------
Aggregate net assets of U.S. Government Securities Fund following the acquisition $257,746,910
------------
Unrealized depreciation in NA U.S. Government Securities Fund.................... $ (250,422)
Net assets of Tax Exempt Insured Fund prior to merger............................ $ 88,549,335
Net assets of NA Municipal Bond Fund prior to merger............................. 16,028,648
------------
Aggregate net assets of Tax Exempt Insured Fund following the acquisition........ $104,577,983
------------
Unrealized appreciation in NA Municipal Bond Fund................................ $ 617,075
Net assets of NA Strategic Income Fund prior to merger........................... $ 31,973,607
Net assets of SA Diversified Income Fund prior to merger......................... 50,355,280
------------
Aggregate net assets of Strategic Bond Fund following the acquisition............ $ 82,328,887
------------
Unrealized depreciation in SA Diversified Income Fund............................ $ (8,463,371)
Net assets of NA High Yield Bond Fund prior to merger............................ $ 70,292,776
Net assets of SA High Income Fund prior to merger................................ 142,643,362
------------
Aggregate net assets of High Yield Bond Fund following the acquisition........... $212,936,138
------------
Unrealized depreciation in SA High Income Fund................................... $(28,926,444)
Note 3. Significant Accounting Policies
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from these estimates. The following is a summary of the significant
accounting policies followed by the Funds in the preparation of their
financial statements:
Security Valuations: Securities that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed by the Adviser to be over-the-counter, are valued at the
quoted bid price provided by principal market makers. Securities listed on
the New York Stock Exchange ("NYSE") or other national securities exchanges,
are valued on the basis of the last sale price on the exchange on which they
are primarily traded. If there is no sale on that day, then securities are
valued at the closing bid price on the NYSE or other primary exchange for
that day. However, if the last sale price on the NYSE is different than the
last sale price on any other exchange, the NYSE price is used. Securities
listed on the NASDAQ exchange are valued using the NASDAQ Official Closing
Price ("NOCP"). Generally, the NOCP is the last sale price unless the
reported
56
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
trade for the security is outside the range of the bid/ask price. In such
cases, the NOCP is normalized to the nearer of the bid or ask price.
Securities that are traded on foreign exchanges are ordinarily valued at the
last quoted sales price available before the time when the assets are
valued. If a securities price is available from more than one foreign
exchange, a Fund uses the exchange that is the primary market for the
security. Future contracts and options traded on national securities
exchanges are valued as of the close of the exchange on which they are
traded. The Funds may make use of a pricing service in the determination of
their net asset values. The preceding procedures need not be used to
determine the value of debt securities owned by a Fund if, in the opinion of
the Trustees, some other method would more accurately reflect the fair
market value of such debt securities in quantities owned by such Fund.
Senior Secured Floating Rate Loans ("Loans") for which an active secondary
market exists to a reliable degree, will be valued at the mean of the last
available bid and asked prices in the market for such Loans, as provided by
a third party pricing service. Securities for which market quotations are
not readily available or if a development/event occurs that may
significantly impact the value of a security, then these securities may be
fair valued as determined pursuant to procedures adopted in good faith by
the Trustees. Short-term investments which mature in less than 60 days are
valued at amortized cost, if their original maturity was 60 days or less, or
by amortizing their value on the 61st day prior to maturity, if their
original term to maturity exceeded 60 days.
Repurchase Agreements: Pursuant to exemptive relief granted by the
Securities and Exchange Commission, the Funds are permitted to participate
in joint repurchase agreement transactions with other affiliated investment
companies. The Funds, along with other affiliated registered investment
companies, transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which is invested in one or more repurchase
agreements collateralized by U.S. Treasury or federal agency obligations.
The Funds' custodian takes possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued
daily on a mark to market basis to ensure that the value, including accrued
interest, is at least equal to the repurchase price. In the event of default
of the obligation to repurchase, a Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
As of September 30, 2003, U.S. Government Securities Fund, GNMA Fund,
Strategic Bond Fund and High Yield Bond Fund has a 0.3%, 49.3% 1.5% and 0.5%
undivided interest, respectively, which represented $352,000, $53,392,000,
$1,665,000 and $505,000, respectively, in principal amount in a joint
repurchase agreement with State Street Bank & Trust Co. As of such date, the
repurchase agreement in the joint account and collateral therefore were as
follows:
State Street Bank & Trust Co. Repurchase Agreement 0.85% dated 9/30/03, in
the principal amount of $108,359,000, repurchase price $108,361,558 due
10/01/03, collateralized by the following:
Type of Collateral Interest Rate Maturity Date Principal Amount Market Value
------------------ ------------- ------------- ---------------- ------------
U.S. Treasury Notes 3.25% 12/31/03 $80,400,000 $81,606,000
U.S. Treasury Notes 7.25% 8/15/04 19,200,000 20,400,000
U.S. Treasury Bonds 8.13% 8/15/19 6,125,000 8,529,063
U.S. Government Securities Fund, GNMA Fund and High Yield Bond Fund has a
15.7%, 40.3% and 6.3% undivided interest, respectively, which represented
$47,000,000, $121,000,000, and $19,000,000, respectively, in
57
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
principal amount in a joint repurchase agreement with UBS Warburg, LLC. As
of such date, the repurchase agreement in the joint account and collateral
therefore were as follows:
UBS Warburg, LLC, Repurchase Agreement 0.85% dated 9/30/03, in the principal
amount of $300,000,000 repurchase price $300,008,000 due 10/01/03
collateralized by the following:
Type of Collateral Interest Rate Maturity Date Principal Amount Market Value
------------------ ------------- ------------- ---------------- ------------
U.S. Treasury Bonds 3.63% 4/15/28 $ 21,276,000 $ 21,852,633
U.S. Treasury Bonds 3.88% 4/15/29 278,724,000 285,896,000
Securities Transactions, Investment Income, Dividends and Distributions to
Shareholders: Securities transactions are recorded on a trade date basis.
Senior Secured Floating Rate Loans are recorded on a settlement date basis.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Interest income, including adjustments for
amortization of premiums and accretion of discounts, is recorded on the
accrual basis; dividend income is recorded on the ex-dividend date. For
financial statement purposes, the Funds amortize all premiums and accrete
all discounts on fixed income securities. Funds which earn foreign income
and capital gains may be subject to foreign withholding taxes at various
rates.
Common expenses incurred by the Trust are allocated among the Funds based on
relative net assets or other appropriate methods. In all other respects,
expenses are charged to each Fund as incurred on a specific identification
basis. Interest earned on cash balances held at the custodian are shown as
custody credits on the Statement of Operations.
Net investment income, 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 (or the value
of dividend-eligible shares, as appropriate) of each class of shares at the
beginning of the day (after adjusting for the current capital share activity
of the respective class).
Dividends from net investment income are accrued daily and paid monthly.
Capital gain distributions, if any, are paid annually. 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 accounting principles generally accepted
in the United States of America. 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 investment
income/loss, net realized gain/loss and net assets are not affected. Each
Fund intends to comply with the requirements of the Internal Revenue Code,
as amended, applicable to regulated investment companies and to distribute
all of their net income (taxable and tax exempt) to their shareholders.
Therefore, no federal tax provision is required. Each Fund is considered a
separate entity for tax purposes.
Investment Securities Loaned: During the six months ended September 30,
2003, U.S. Government Securities Fund participated in securities lending
with qualified brokers. In lending portfolio securities to brokers the Funds
receive cash as collateral against the loaned securities, which must be
maintained at not less than 102% of the market value of the loaned
securities during the period of the loan. The Funds may use the cash
collateral received to invest in short-term investments which earn interest
income or to cover bank overdrafts. Any interest earned from the investment
of the collateral is recorded by the Funds net of the portion of interest
that is rebated to the borrowing broker. If the amounts are used to cover
bank overdrafts, the broker rebates incurred are reflected as
58
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
interest expense on the Statement of Operations. As with other extensions of
credit, should the borrower of the securities fail financially, the Funds
may bear the risk of delay in recovery or may be subject to replacing the
loaned securities by purchasing them with the cash collateral held, which
may be less than 100% of the market value of such securities at the time of
replacement.
At September 30, 2003 there were no loaned securities outstanding in the
U.S. Government Securities Fund. For the six months ended September 30,
2003, U.S. Government Securities Fund paid fees of $74,442, net of rebates,
relating to Security lending transactions.
Forward Foreign Currency Contracts: Certain Portfolios may enter into
forward foreign currency contracts ("forward contracts") to attempt to
protect securities and related receivables and payables against changes in
future foreign exchange rates or to enhance return. A forward contract is an
agreement between two parties to buy or sell currency at a set price on a
future date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market daily using the
forward rate and the change in market value is recorded by the Portfolio as
unrealized gain or loss. On the settlement date, the Portfolio records
either realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. Forward contracts involve
elements of risk in excess of the amount reflected in the Statement of
Assets and Liabilities. The Trust bears the risk of an unfavorable change in
the foreign exchange rate underlying the forward contract.
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 Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at fiscal year-end. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
changes in the market prices of portfolio securities sold during the year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of
securities transactions, the difference between the amounts of interest,
dividends and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
Short Sales: The High Yield Bond Fund ("Fund") may sell a security it does
not own in anticipation of a decline in the market value of that security
(short sales). To complete such a transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund then is obligated to
replace the security borrowed by purchasing
59
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
it at market price at the time of replacement. The price at such time may be
more or less than the price at which the security was sold by the Fund.
Until the security is replaced, the Fund is required to pay to the lender
any dividends or interest that accrue during the period of the loan. To
borrow the security, the Fund also may be required to pay a premium, which
would increase the cost of the security sold. The proceeds of the short sale
will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out. Until the Fund
replaces a borrowed security, the Fund will maintain daily a segregated
account, containing cash or liquid securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and (ii)
the amount deposited in the segregated account plus the amount deposited
with the broker as collateral will not be less than the market value of the
security at the time it was sold short. Liabilities for securities sold
short are reported at market value in the financial statements. Such
liabilities are subject to off balance sheet risk to the extent of any
future increases in market value of the securities sold short. The ultimate
liability for securities sold short could exceed the liabilities recorded in
the Statement of Assets and Liabilities. The Fund bears the risk of
potential inability of the broker to meet their obligation to perform.
Mortgage-Backed Dollar Rolls: During the six months ended September 30,
2003, the U.S. Government Securities Fund and the GNMA Fund entered into
dollar rolls using "to be announced" ("TBA") mortgage-backed securities
("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as
purchase/sale transactions. Any difference between the purchase and sale
price is recorded as a realized gain or loss on the date the transaction is
entered into. The U.S. Government Securities Fund and the GNMA Fund had TBA
Rolls outstanding at period-end, which are included in receivable for
investments sold and payable for investments purchased in the Statement of
Assets and Liabilities.
Dollar roll transactions involve the risk that the market value of the
securities held by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement.
In the event that the buyer of securities in a dollar roll transaction files
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the
sale of the securities may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. The return earned by the Fund with
the proceeds of the dollar roll transaction may not exceed transaction costs.
Note 4. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and Management
Agreement (the "Agreement") with SAAMCo. Under the Agreement, SAAMCo
provides continuous supervision of a Fund's portfolio and administers its
corporate affairs, subject to general review by the Trustees. In connection
therewith, SAAMCo furnishes the Funds with office facilities, maintains
certain of the Funds' books and records, and pays the salaries and expenses
of all personnel, including officers of the Funds, who are employees of
SAAMCo and its affiliates.
60
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
The Funds pay SAAMCo a monthly investment advisory and management fee
calculated daily at the following annual percentages of each Fund's average
daily net assets:
Management
Assets Fees
--------------------------- ----------
Core Bond Fund.......................... $0 - $200 million 0.600%
(greater than) $200 million 0.525
(greater than) $500 million 0.475
U.S. Government Securities Fund......... $0 - $200 million 0.650
(greater than) $200 million 0.620
(greater than) $400 million 0.550
GNMA Fund............................... $0 - $25 million 0.550
(greater than) $25 million 0.500
(greater than) $50 million 0.450
Strategic Bond Fund..................... $0 - $350 million 0.650
(greater than) $350 million 0.600
High Yield Bond Fund.................... $0 - $200 million 0.750
(greater than) $200 million 0.720
(greater than) $400 million 0.550
Tax Exempt Insured Fund................. $0 - $350 million 0.500
(greater than) $350 million 0.450
The Core Bond Fund, Strategic Bond Fund, High Yield Bond Fund and Tax Exempt
Insured Fund are subadvised by AIG Global Investment Corp. ("AIGGIC")
pursuant to a subadvisory agreement with SAAMCo. AIGGIC is an indirect
wholly-owned subsidiary of AIG and an affiliate of SAAMCo. AIGGIC receives
the following fees from SAAMCo., based upon each Fund's average daily net
assets:
Sub-advisory Fees
- -----------------------------------------------
Core Bond Strategic Bond High Yield Tax Exempt
Assets Fund Fund Bond Fund Insured Fund
- ------ --------- -------------- ---------- ------------
$0 - $200 million............ 0.25% 0.35% 0.45% 0.25%
(greater than) $200 million 0.20 0.25 0.35 0.22
(greater than) $500 million 0.15 0.20 0.30 0.15
For the six months ended September 30, 2003, expenses were reimbursed to the
Funds as follows:
SAAMCO
--------
Core Bond Class A............................ $ 139
Core Bond Class B............................ 9,020
Core Bond Class II........................... 3,590
Core Bond Class I............................ 16,229
Core Bond Class Z............................ --
U.S. Government Securities Fund Class A...... 372,133
U.S. Government Securities Fund Class B...... 106,537
U.S. Government Securities Fund Class II..... 47,127
61
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
SAAMCO
--------
GNMA Fund Class A............................ $193,080
GNMA Fund Class B............................ 131,581
GNMA Fund Class II........................... 89,198
GNMA Fund Class I............................ 10,168
GNMA Fund Class X............................ --
Strategic Bond Class A....................... --
Strategic Bond Class B....................... --
Strategic Bond Class II...................... 16,244
Strategic Bond Class I....................... 11,892
High Yield Bond Class A...................... --
High Yield Bond Class B...................... --
High Yield Bond Class II..................... 2,979
High Yield Bond Class I...................... 11,149
High Yield Bond Class Z...................... 135
Tax Exempt Insured Fund Class A.............. --
Tax Exempt Insured Fund Class B.............. --
Tax Exempt Insured Fund Class II............. 4,997
The Trust, on behalf of each Fund, has a Distribution Agreement with AIG
SunAmerica Capital Services, Inc. ("SACS" or "Distributor"), an affiliate of
the Adviser. Each Fund, has adopted a Distribution Plan (the "Plan") in
accordance with the provisions of Rule 12b-1 under the 1940 Act. Rule 12b-1
under the 1940 Act permits an investment company directly or indirectly to
pay expenses associated with the distribution of its shares ("distribution
expenses") in accordance with a plan adopted by the investment company's
board of trustees and approved by its shareholders. Pursuant to such rule,
the Trustees and the shareholders of each class of shares of each Fund have
adopted Distribution Plans, hereinafter referred to as the "Class A Plan,"
the "Class B Plan" and the "Class II Plan." In adopting the Class A Plan,
the Class B Plan and the Class II Plan, the Trustees determined that there
was a reasonable likelihood that each Plan would benefit the Trust and the
shareholders of the respective class. The sales charge and distribution fees
of a particular class will not be used to subsidize the sale of shares of
any other class.
Under the Class A Plan, Class B Plan and Class II Plan, the Distributor
receives payments from the Funds at an annual rate of up to 0.10%, 0.75% and
0.75%, respectively, of average daily net assets of such Fund's Class A,
Class B and Class II 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 for, include fees paid to broker-dealers that
have sold Fund shares, commissions, and other expenses such as those
incurred for sales literature, prospectus printing and distribution and
compensation to wholesalers. It is possible that in any given year the
amount paid to the Distributor under the Class A Plan, Class B Plan or Class
II Plan may exceed the Distributor's distribution costs as described above.
The Distribution Plans provide that each class of shares of each Fund may
also pay the Distributor an account maintenance and service fee at the
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
annual rate of up to 0.25% of the aggregate average daily net assets of such
class of shares for payments to broker-dealers for providing continuing
account maintenance. Accordingly, for the six months ended September 30,
2003, SACS received fees (see the Statement of Operations) based upon the
aforementioned rates.
In addition, AIG SunAmerica Capital Services, Inc. is paid a fee of 0.25% of
average daily net assets of Class I shares in compensation for providing
additional shareholder services to Class I shareholders.
SACS receives sales charges on each Fund's Class A and Class II shares,
portions of which are reallowed to affiliated broker-dealers and
non-affiliated broker-dealers. SACS also receives the proceeds of contingent
deferred sales charges paid by investors in connection with certain
redemptions of Class A, Class B and Class II shares. SACS has advised the
Funds that for the six months ended September 30, 2003, the proceeds
received from Class A and Class II sales (and paid out to affiliated and
non-affiliated broker-dealers) and Class A, Class B and Class II redemptions
were as follows:
Class A Class B
------------------------------------- --------------
Contingent
Sales Affiliated Non-affiliated Deferred Sales
Charges Broker-dealers Broker-dealers Charges
------- -------------- -------------- --------------
U.S. Government Securities Fund 127,089 55,745 49,819 151,610
GNMA Fund...................... 649,307 266,318 267,136 479,382
Strategic Bond Fund............ 53,321 27,000 16,824 53,576
High Yield Bond Fund........... 247,940 34,112 171,465 120,527
Core Bond Fund................. 14,308 5,523 6,386 10,718
Tax Exempt Insured Fund........ 27,304 13,740 8,541 20,802
Class II Class II
------------------------------------- --------------
Contingent
Sales Affiliated Non-affiliated Deferred Sales
Charges Broker-dealers Broker-dealers Charges
------- -------------- -------------- --------------
U.S. Government Securities Fund 25,345 5,102 20,243 13,979
GNMA Fund...................... 177,203 64,783 112,420 119,283
Strategic Bond Fund............ 20,502 6,075 14,427 4,573
High Yield Bond Fund........... 104,040 12,405 91,635 6,743
Core Bond Fund................. 4,210 658 3,552 231
Tax Exempt Insured Fund........ 4,550 1,543 3,007 5,564
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
The Trust has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent in connection with the services that it offers to
the shareholders of the Funds. The Service Agreement permits the Funds to
compensate SAFS for services rendered, based upon an annual rate of 0.22% of
average daily net assets, which is approved annually by the Trustees. For
the six months ended September 30, 2003 the Funds incurred the following
expenses which are included in transfer agent fees and expenses in the
Statement of Operations to compensate SAFS pursuant to the terms of the
Service Agreement:
Payable at
Expenses September 30, 2003
-------- ------------------
Core Bond Fund Class A.................. $ 44,664 $10,702
Core Bond Fund Class B.................. 8,129 1,252
Core Bond Fund Class II................. 5,931 919
Core Bond Fund Class I.................. 24,466 4,118
Core Bond Fund Class Z.................. -- --
U.S. Government Securities Fund Class A. 226,896 35,274
U.S. Government Securities Fund Class B. 62,060 8,588
U.S. Government Securities Fund Class II 24,929 3,512
GNMA Fund Class A....................... 324,317 53,419
GNMA Fund Class B....................... 201,368 29,777
GNMA Fund Class II...................... 147,379 21,418
GNMA Fund Class I....................... 35 5
GNMA Fund Class X....................... 5,500 1,007
Strategic Bond Class A.................. 42,605 6,839
Strategic Bond Class B.................. 34,322 5,881
Strategic Bond Class II................. 17,663 2,998
Strategic Bond Class I.................. 3,673 617
High Yield Bond Class A................. 86,673 15,674
High Yield Bond Class B................. 73,263 12,656
High Yield Bond Class II................ 42,411 7,906
High Yield Bond Class I................. 32 3
High Yield Bond Class Z................. -- --
Tax Exempt Insured Fund Class A......... 81,634 12,893
Tax Exempt Insured Fund Class B......... 20,754 3,277
Tax Exempt Insured Fund Class II........ 6,706 1,057
At September 30, 2003, AIGGIC, an indirect wholly owned subsidiary of AIG,
owned 100% of the outstanding Class Z shares of Core Bond Fund and High
Yield Bond Fund. The Variable Annuity Life Insurance Company ("VALIC"), an
indirect wholly owned subsidiary of AIG, owned 90%, 100%, 99% and 15% of the
outstanding shares of Core Bond Fund Class I, Strategic Bond Fund Class I,
High Yield Bond Fund Class I and Tax Exempt Insured Class B, respectively.
SAAMCo owned 14% and 94% of the outstanding shares of GNMA Fund Class A and
Class I and 86% and 9% of the outstanding shares of Core Bond Class A and
Class II Fund, respectively.
On April 18, 2002, AIGGIC, the subadviser for the Strategic Bond Fund,
reimbursed the Fund for $12,000 due to a violation of the investment
restrictions prohibiting the Fund from investing in short sales. The $12,000
reimbursement increased the total return of each class of shares by less
than 0.01%.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Note 5. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments during the period ended September 30, 2003 were as
follows:
U.S. Government High Tax Exempt
Core Bond Securities GNMA Strategic Yield Bond Insured
Fund Fund Fund Bond Fund Fund Fund
------------ --------------- ------------ ----------- ------------ -----------
Purchases (excluding U.S. government
securities)........................... $149,647,397 $ -- $ -- $39,590,297 $213,384,243 $65,037,628
Sales (excluding U.S. government
securities)........................... 139,102,150 -- -- 29,932,662 169,920,964 65,718,691
Purchases of U.S. government securities 148,501,645 396,318,055 761,648,036 166,066 -- --
Sales of U.S. government securities.... 174,088,884 427,613,278 715,983,543 1,089,422 -- --
Note 6. 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, Fund mergers, treatment of defaulted
securities and derivative transactions.
Tax Distributions
Distributable Earnings For the year ended
For the year ended March 31, 2003 March 31, 2003
----------------------------------------- -------------------------------
Long-
Long-term Unrealized term
Ordinary Gains/ Capital Appreciation Ordinary Capital Tax
Income Loss Carryover (Depreciation) Income Gains Exempt
---------- -------------- -------------- ----------- -------- ----------
Core Bond Fund...................... $ 39,061 $ (4,465,152) $ 5,617,957 $15,186,265 $ -- $ --
U.S. Government Securities Fund..... 177,782 (11,121,143) 7,000,963 11,170,917 -- --
GNMA Fund........................... 8,240,779 2,290,943 8,112,844 18,685,979 -- --
Strategic Bond Fund................. 394,308 (49,916,576) 526,235 4,507,318 -- --
High Yield Bond Fund................ 924,201 (133,258,897) (15,849,224) 17,388,736 -- --
Tax Exempt Insured Fund............. 1,859,407 406,154 5,083,843 125,409 667,022 3,022,170
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for federal tax purposes, including short-term securities and
repurchase agreements, were as follows:
U.S.
Core Government Tax Exempt
Bond Securities GNMA Strategic High Yield Insured
Fund Fund Fund Bond Fund Bond Fund Fund
------------ ------------ ------------ ----------- ------------ -----------
Cost......................................... $429,796,313 $311,292,646 $857,825,749 $86,316,824 $263,501,814 $89,369,160
============ ============ ============ =========== ============ ===========
Appreciation................................. $ 6,697,999 $ 6,832,895 $ 9,898,834 $ 8,780,465 $ 20,896,849 $ 5,451,047
Depreciation................................. (1,789,004) (2,183,391) (1,994,814) (4,721,267) (16,179,292) (27,226)
------------ ------------ ------------ ----------- ------------ -----------
Unrealized appreciation (depreciation) -- net $ 4,908,995 $ 4,649,504 $ 7,904,020 $ 4,059,198 $ 4,717,558 $ 5,423,821
============ ============ ============ =========== ============ ===========
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
At March 31, 2003, Core Bond Fund, U.S. Government Securities Fund,
Strategic Bond Fund and High Yield Bond Fund had capital loss carry forwards
of $4,465,152, $11,121,143, $49,916,576, and $133,258,897 respectively,
which were available to the extent provided in regulations and which will
expire between 2004-2011. To the extent that these carryover losses are used
to offset future capital gains, it is probable that the gains so offset will
not be distributed.
Included in the capital loss carryover amounts at March 31, 2003 are the
amounts of losses acquired from the following acquired Funds as a result of
the reorganizations as discussed in Note 2:
North American U.S. Government Securities Fund $ 997,836
North American Strategic Income Fund.......... 9,372,684
North American High Yield Bond Fund........... 13,911,085
North American Municipal Bond Fund............ --
As of March 31, 2003, Strategic Bond Fund and High Yield Bond Fund had post
October 31, 2002 capital loss deferrals of $4,851,088 and $1,614,991,
respectively.
Core Bond Fund, U.S. Government Securities Fund and Tax Exempt Insured Fund
utilized capital loss carry forwards of $4,502,088, $11,503,796 and
$331,315, respectively, to offset the Fund's net taxable gains realized and
recognized in the year ended March 31, 2003.
As of March 31, 2003, Strategic Bond Fund and High Yield Bond Fund had
$6,509,969 and $7,442,050 of capital loss carry forwards that expired.
As a result of reorganizations into some of these portfolios during the
period ended March 31, 2002, as discussed in Note 2, certain capital loss
carryforwards may be subject to limitations on use pursuant to applicable
U.S. Federal Income Tax Law. Therefore, it is possible not all of these
capital losses will be available for use.
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Note 7. Capital Share Transactions
Transactions in capital shares of each class of each series were as follows:
Core Bond Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------- ----------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------- ------------------------ ----------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold......... 4,502,928** $ 46,610,712** 1,911,203* $ 19,558,165* 163,820 $ 1,703,281 529,865 $ 5,366,262
Reinvested shares... 48,883 505,486 28,114 286,234 5,506 56,984 14,634 147,929
Shares redeemed..... (342,789) (3,523,342) (420,056) (4,235,193) (206,813)** (2,134,641)** (173,661)* (1,758,943)*
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase
(decrease)......... 4,209,022 $ 43,592,856 1,519,261 $ 15,609,206 (37,487) $ (374,376) 370,838 $ 3,755,248
========== ============ ========== ============ ======== =========== ========== ============
Core Bond Fund
----------------------------------------------------------------------------------------------------------
Class II Class I
---------------------------------------------------- ----------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------- ------------------------ ----------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold......... 215,508 $ 2,240,129 561,314 $ 5,690,211 494,805 $ 5,145,116 1,738,602 $ 17,572,086
Reinvested shares... 4,409 45,678 12,948 131,275 29,374 304,886 94,315 954,643
Shares redeemed..... (260,745) (2,707,807) (415,830) (4,169,367) (258,293) (2,691,380) (2,046,585) (20,720,266)
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase
(decrease)......... (40,828) $ (422,000) 158,432 $ 1,652,119 265,886 $ 2,758,622 (213,668) $ (2,193,537)
========== ============ ========== ============ ======== =========== ========== ============
Core Bond Fund
----------------------------------------------------
Class Z
----------------------------------------------------
For the six months ended For the year ended
September 30, 2003 March 31, 2003
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold......... -- $ -- -- $ --
Reinvested shares... 409,133 4,246,486 1,430,838 14,476,065
Shares redeemed..... (2,990,679) (31,000,000) (5,717,731) (57,739,162)
---------- ------------ ---------- ------------
Net increase
(decrease)......... (2,581,546) $(26,753,514) (4,286,893) $(43,263,097)
========== ============ ========== ============
* Includes automatic conversion of 22,026 shares of Class B shares in the
amount of $222,847 to 21,961 shares of Class A shares in the amount of
$222,847.
** Includes automatic conversion of 11,496 shares of Class B shares in the
amount of $119,123 to 11,463 shares of Class A shares in the amount of
$119,123.
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
U.S. Government Securities Fund
---------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ -------------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------- -------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Shares sold.... 5,209,431** $ 50,191,175** 16,172,319* $ 152,218,301* 419,690 $ 4,044,775 4,495,676 $ 42,228,815
Reinvested
shares........ 229,981 2,201,060 667,786 6,191,337 52,629 505,186 157,230 1,481,363
Shares redeemed (6,536,183) (62,547,303) (16,276,413) (152,748,051) (2,036,420)** (19,366,468)** (2,574,910)* (24,236,111)*
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease).... (1,096,771) $(10,155,068) 563,692 $ 5,661,587 (1,564,101) $(14,816,507) 2,077,996 $ 19,474,067
========== ============ =========== ============= ========== ============ ========== ============
U.S. Government Securities Fund
------------------------------------------------------
Class II
------------------------------------------------------
For the six months ended For the year ended
September 30, 2003 March 31, 2003
------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ----------- -------------
Shares sold.... 524,400 $ 5,082,144 2,365,163 $ 22,258,658
Reinvested
shares........ 22,717 217,665 61,152 576,229
Shares redeemed (1,073,330) (10,262,522) (1,288,558) (12,154,479)
---------- ------------ ----------- -------------
Net increase
(decrease).... (526,213) $ (4,962,713) 1,137,757 $ 10,680,408
========== ============ =========== =============
* Includes automatic conversion of 534,577 shares of Class B shares in the
amount of $4,991,021 to 534,765 shares of Class A shares in the amount of
$4,991,021.
** Includes automatic conversion of 148,024 shares of Class B shares in the
amount of $1,417,018 to 148,044 shares of Class A shares in the amount of
$1,417,018.
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
GNMA Fund
------------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------- -----------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------ -------------------------- ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Shares sold.... 12,345,572 $142,206,539** 20,986,110* $ 237,799,506* 2,361,177 $ 27,356,772 12,763,664 $145,111,925
Reinvested
shares........ 211,144 2,366,396 667,003 7,573,715 79,067 911,261 385,948 4,393,569
Shares redeemed (8,456,933) (96,376,115) (10,535,852) (119,630,103) (4,400,872) (50,346,221)** (5,116,327)* (58,203,016)*
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease).... 4,099,783 $ 48,196,820 11,117,261 $ 125,743,118 (1,960,628) $(22,078,188) 8,033,285 $ 91,302,478
========== ============ =========== ============= ========== ============ ========== ============
GNMA Fund
------------------------------------------------------------------------------------------------------------
Class II Class I
----------------------------------------------------- -----------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------ -------------------------- ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Shares sold.... 2,754,048 $ 31,971,441 11,565,832 $ 131,890,842 -- $ -- -- $ --
Reinvested
shares........ 58,564 675,475 245,826 2,806,505 28 317 170 1,919
Shares redeemed (4,434,582) (50,774,871) (3,318,648) (37,928,650) (953) (11,026) (1,350) (14,552)
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease).... (1,621,970) $(18,127,955) 8,493,010 $ 96,768,697 (925) $ (10,709) (1,180) $ (12,633)
========== ============ =========== ============= ========== ============ ========== ============
GNMA Fund
-----------------------------------------------------
Class X
-----------------------------------------------------
For the six months ended For the year ended
September 30, 2003 March 31, 2003
------------------------ --------------------------
Shares Amount Shares Amount
---------- ------------ ----------- -------------
Shares sold.... 163,371 $ 1,876,204 374,832 $ 4,250,363
Reinvested
shares........ 4,905 56,272 8,750 100,073
Shares redeemed (17,830) (202,754) (37,889) (437,031)
---------- ------------ ----------- -------------
Net increase
(decrease).... 150,446 $ 1,729,722 345,693 3,913,405
========== ============ =========== =============
* Includes automatic conversion of 195,681 shares of Class B shares in the
amount of $2,233,137 to 196,215 shares of Class A shares in the amount of
$2,233,137.
** Includes automatic conversion of 79,751 shares of Class B in the amount of
$916,264 to 79,960 shares of Class A shares in the amount of $916,264.
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Strategic Bond Fund
-----------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------- ------------------------------------------------------
For the For the
six months ended For the year ended six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------ ------------------------ ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Shares sold.... 2,140,694** $ 6,870,145** 5,749,864* $ 17,063,277* 2,766,795 $ 8,899,725 3,650,173 $ 10,909,683
Reinvested
shares........ 236,075 761,862 442,757 1,316,774 160,383 517,342 261,564 777,454
Shares redeemed (2,745,084) (8,787,356) (5,933,899) (17,581,335) (1,887,178)** (6,095,336)** (3,827,323)* (11,336,035)*
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Net increase
(decrease).... (368,315) $(1,155,349) 258,722 $ 798,716 1,040,000 $ 3,321,731 84,414 $ 351,102
========== =========== ========== ============ ========== =========== ========== ============
Strategic Bond Fund
-----------------------------------------------------------------------------------------------------------
Class II Class I
--------------------------------------------------- ------------------------------------------------------
For the For the
six months ended For the year ended six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------ ------------------------ ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Shares sold.... 1,812,919 $ 5,879,817 2,361,199 $ 7,058,032 -- -- -- $ --
Reinvested
shares........ 93,302 302,344 162,201 483,955 35,770 115,506 65,251 194,149
Shares redeemed (1,327,287) (4,295,817) (2,604,349) (7,748,759) -- -- -- --
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Net increase
(decrease).... 578,934 $ 1,886,344 (80,949) $ (206,772) 35,770 $ 115,506 65,251 $ 194,149
========== =========== ========== ============ ========== =========== ========== ============
* Includes automatic conversion of 860,996 shares of Class B shares in the
amount of $2,545,720 to 860,854 shares of Class A shares in the amount of
$2,545,720.
** Includes automatic conversion of 295,692 shares of Class B shares in the
amount of $956,263 to 295,692 shares of Class A shares in the amount of
$956,263.
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
High Yield Bond Fund
---------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ -------------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
-------------------------- ------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Shares sold.... 17,422,857** $ 68,481,288** 15,410,944* $ 54,586,537* 5,544,482 $ 21,826,623 5,717,346 $ 20,569,651
Reinvested
shares........ 529,372 2,101,609 783,484 2,876,224 322,113 1,274,632 600,801 2,209,929
Shares redeemed (13,592,525) (53,644,677) (12,321,331) (45,700,839) (3,851,401)** (15,092,178)** (6,957,270)* (25,671,684)*
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).... 4,359,704 $ 16,938,220 3,873,097 $ 11,761,922 2,015,194 $ 8,009,077 (639,123) $ (2,892,104)
=========== ============ =========== ============ ========== ============ ========== ============
High Yield Bond Fund
---------------------------------------------------------------------------------------------------------------
Class II Class I
------------------------------------------------------ -------------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
-------------------------- ------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Shares sold.... 6,639,292 $ 26,151,398 5,002,813 $ 18,337,823 50,125 $ 200,000 -- $ --
Reinvested
shares........ 207,238 824,009 263,054 965,355 169 666 361 1,319
Shares redeemed (3,145,416) (12,367,532) (2,686,939) (9,901,331) (50,125) (202,584) -- --
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).... 3,701,114 $ 14,607,875 2,578,928 $ 9,401,847 169 $ (1,918) 361 $ 1,319
=========== ============ =========== ============ ========== ============ ========== ============
High Yield Bond Fund
------------------------------------------------------
Class Z
------------------------------------------------------
For the six months ended For the year ended
September 30, 2003 March 31, 2003
-------------------------- -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares sold.... -- $ -- 8 $ 30
Reinvested
shares........ 804,454 3,178,422 1,700,227 6,221,007
Shares redeemed -- -- -- --
----------- ------------ ----------- ------------
Net increase
(decrease).... 804,454 $ 3,178,422 1,700,235 $ 6,221,037
=========== ============ =========== ============
* Includes automatic conversion of 483,813 shares of Class B shares in the
amount of $1,813,086 to 484,737 of shares of Class A shares in the amount of
$1,813,086.
** Includes automatic conversion of 206,730 shares of Class B shares in the
amount of $810,317 to 207,151 shares of Class A shares in the amount of
$810,317.
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Tax Exempt Insured Fund
-------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------- -------------------------------------------------
For the six months ended For the year ended For the six months ended For the year ended
September 30, 2003 March 31, 2003 September 30, 2003 March 31, 2003
------------------------- ------------------------ ----------------------- ----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold......... 465,786** $ 6,234,348** 1,796,170* $ 23,825,662* 86,651 $ 1,169,332 453,361 $ 6,022,337
Reinvested shares... 45,314 607,040 145,158 1,916,793 7,487 100,292 27,036 357,478
Shares redeemed..... (1,004,220) (13,435,018) (1,969,797) (26,214,114) (155,757)** (2,075,005)** (475,903)* (6,259,772)*
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase
(decrease)......... (493,120) $ (6,593,630) (28,469) $ (471,659) (61,617) $ (805,381) 4,494 $ 120,043
========== ============ ========== ============ ======== =========== ======== ===========
Tax Exempt Insured Fund
----------------------------------------------------
Class II
----------------------------------------------------
For the six months ended For the year ended
September 30, 2003 March 31, 2003
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold......... 43,710 $ 579,473 345,981 $ 4,588,301
Reinvested shares... 2,837 38,020 9,084 120,117
Shares redeemed..... (93,334) (1,251,405) (193,507) (2,561,636)
---------- ------------ ---------- ------------
Net increase
(decrease)......... (46,787) $ (633,912) 161,558 $ 2,146,782
========== ============ ========== ============
* Includes automatic conversion of 97,811 shares of Class B shares in the
amount of $1,288,353 to 97,827 shares of Class A shares in the amount of
$1,288,353.
** Includes automatic conversion of 24,722 shares of Class B shares in the
amount of $332,892 to 24,722 shares of Class A shares in the amount of
$332,892.
Note 8. Commitments and Contingencies
The SunAmerica Family of Mutual Funds has established $75 million committed
and $50 million uncommitted lines of credit with State Street Bank and Trust
Company, the Funds' custodian. Interest is currently payable at the Federal
Funds rate plus 50 basis points on the committed line and State Street's
discretionary bid rate on the uncommitted line of credit. There is also a
commitment fee of 10 basis points per annum on the daily unused portion of
the $75 million committed line of credit, which is included in interest
expense of the Statement of Operations. Borrowings under the line of credit
will commence when the Fund's cash shortfall exceeds $100,000. During the
six months ended September 30, 2003, the High Yield Bond Fund had borrowings
outstanding for 25 days under the line of credit and incurred $6,051 in
interest charges related to these borrowings. The High Yield Bond Fund's
average amount of debt under the line of credit for the days utilized was
$5,583,384 at a weighted average interest of 1.58%.
The Funds, pursuant to exemptive relief granted by the Securities and
Exchange Commission are permitted to participate in an interfund lending
program among investment companies advised by SAAMCo or an affiliate. The
interfund lending program allows the participating Funds to borrow money
from and loan 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 period
ended September 30, 2003 none of the Funds participated in this program.
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2003 -- (unaudited)
(continued)
Note 9. Trustees Retirement Plan
The Trustees (and Directors) of the SunAmerica Income Funds have adopted the
SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the
"Retirement Plan") effective January 1, 1993 for the unaffiliated Trustees.
The Retirement Plan provides generally that if an unaffiliated Trustee who
has at least 10 years of consecutive service as a Disinterested Trustee of
any of the SunAmerica mutual funds (an "Eligible Trustee") retires after
reaching age 60 but before age 70 or dies while a Trustee, such person will
be eligible to receive a retirement or death benefit from each SunAmerica
mutual fund with respect to which he or she is an Eligible Trustee. As of
each birthday, prior to the 70th birthday, but in no event for a period
greater than 10 years, each Eligible Trustee will be credited with an amount
equal to 50% of his or her regular fees (excluding committee fees) for
services as a Disinterested Trustee of each SunAmerica mutual fund for the
calendar year in which such birthday occurs. In addition, an amount equal to
8.5% of any amounts credited under the preceding clause during prior years
is added to each Eligible Trustee's Account until such Eligible Trustee
reaches his or her 70th birthday. An Eligible Trustee may receive any
benefits payable under the Retirement Plan, at his or her election, either
in one lump sum or in up to fifteen annual installments. Any undistributed
amounts shall continue to accrue interest at 8.5%. As of September 30, 2003,
Core Bond Fund, U.S. Government Securities Fund, GNMA Fund, Strategic Bond
Fund, High Yield Bond Fund and Tax Exempt Insured Fund had accrued $14,873,
$109,961, $32,122, $25,711, $43,231 and $32,698, respectively, for the
Retirement Plan, which is included in accrued expenses on the Statement of
Assets and Liabilities and for the period ended September 30, 2003 expensed
$7,268, $6,784, $12,272, $1,768, $4,289 and $2,352, respectively, for the
Retirement Plan, which is included in Trustees' fees and expenses on the
Statement of Operations.
73
SunAmerica Income Funds
TRUSTEE INFORMATION -- September 30, 2003 -- (unaudited)
The following table contains basic information regarding the Trustees that
oversee operations of the Funds and other investment companies within the Fund
complex.
Number of
Term of Funds in
Position Office and Fund Other
Name, Held With Length of Complex Directorships
Address and SunAmerica Time Principal Occupations Overseen by Held by
Date of Birth* Complex Served(4) During Past 5 Years Trustee(1) Trustee(2)
- -------------- ---------- ---------- ------------------------------- ----------- ---------------------
S. James Coppersmith Trustee 1987 - Retired. 45 Director of BJ's
DOB: February 21, 1933 present Wholesale Club,
Inc.; Director,
Boston Stock
Exchange.
Dr. Judith L. Craven Trustee 2001 - Retired. 75 Director, A.G. Belo
DOB: October 6, 1945 present Corporation (1992 to
present); Director,
Sysco Corporation
(1996 to present);
Director, Luby's Inc.
(1998 to present).
William F. Devin Trustee 2001 - Retired. 75 Member of the
DOB: December 30, 1938 present Board of Governors,
Boston Stock
Exchange (1985-
Present);
Samuel M. Eisenstat Chairman 1986 - Attorney, solo practitioner. 46 Director, North
DOB: March 7, 1940 of the present European Oil
Board Royalty Trust.
Stephen J. Gutman Trustee 1986 - Partner and Managing 46 None
DOB: May 10, 1943 present Member of B.B. Associates
LLC (menswear specialty
retailing and other activities)
(June 1988 to present).
74
SunAmerica Income Funds
TRUSTEE INFORMATION -- September 30, 2003 -- (unaudited) (continued)
Number of
Term of Funds in
Position Office and Fund Other
Name, Held With Length of Complex Directorships
Address and SunAmerica Time Principal Occupations Overseen by Held by
Date of Birth* Complex Served(4) During Past 5 Years Trustee(1) Trustee(2)
- -------------- ---------- ---------- ---------------------------- ----------- ---------------------
Peter A. Harbeck(3) Trustee 1995 - President, CEO and Director, 83 None
DOB: January 23, 1954 present AIG SunAmerica Asset
Management Corp.
("SAAMCo") (August 1995
to present); Director, AIG
SunAmerica Capital
Services, Inc ("SACS")
(August 1993 to present)
Sebastiano Sterpa Trustee 1993 - Founder and Chairman of the 37 Director, Real Estate
DOB: July 18, 1929 present Board of the Sterpa Group Business Service
(real estate investment and and Countrywide
management) (1962 to Financial.
present)
- --------
* The business address for each Trustee is the Harborside Financial Center,
3200 Plaza 5, Jersey City, NJ 07311.
(1) The "Fund Complex" consists of all registered investment company portfolios
for which SAAMCo serves as investment adviser or business manager. The
"Fund Complex" includes the SunAmerica Money Market Funds (2 funds),
SunAmerica Equity Funds (7 funds), SunAmerica Income Funds (6 funds),
SunAmerica Style Select Series, Inc. (15 portfolios), SunAmerica Strategic
Investment Series, Inc. (7 funds), Anchor Series Trust (8 portfolios),
SunAmerica Senior Floating Rate Fund, Inc. (1 fund), SunAmerica Series
Trust (33 portfolios), VALIC Company I (22 portfolios), VALIC Company II
(15 funds), Anchor Pathway Funds (7 Series) and Seasons Series Trust (19
portfolios).
(2) Directorships of companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e. "public
companies") or other investment companies registered under the Investment
Company Act of 1940.
(3) Interested trustee, as defined within the Investment Company Act of 1940.
(4) Trustees serve until their successors are duly elected and qualified,
subject to the Trustee's retirement plan discussed in Note 9 of the
financial statements.
Additional information concerning the Directors is contained in the Statement
of Additional Information and is available without charge by calling (800)
858-8850.
75
If you would like additional information:
[_] Call FastFacts--Call our 24 hour automated account and
fund information hotline at 800-654-4760.
[_] Visit SunAmerica on the World Wide Web. Visit our site at
www.sunamericafunds.com for more up-to-date information.
AIG SunAmerica Mutual Funds
thanks you for your continued support.
76
[LOGO] AIG Sun America
Mutual Funds
AIG SunAmerica Asset Management Corp.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Trustees Investment Adviser This report is submitted
S. James Coppersmith AIG SunAmerica solely for the general
Dr. Judith L. Craven Asset Management Corp. information of
William F. Devin Harborside Financial shareholders of the Fund.
Peter A. Harbeck Center Distribution of this
Samuel M. Eisenstat 3200 Plaza 5 report to persons other
Stephen J. Gutman Jersey City, NJ 07311 than shareholders of the
Sebastiano Sterpa Fund is authorized only
Distributor in connection with a
Officers AIG SunAmerica Capital currently effective
Robert M. Zakem, Services, Inc. prospectus, setting forth
President and Secretary Harborside Financial details of the Fund,
Donna M. Handel, Center which must precede or
Treasurer 3200 Plaza 5 accompany this report.
J. Steven Neamtz, Vice Jersey City, NJ 07311
President The accompanying report
Michael Cheah, Vice Shareholder Servicing has not been examined by
President Agent independent accountants
Abbe P. Stein, Vice AIG SunAmerica Fund and accordingly no
President and Services, Inc. opinion has been
Assistant Secretary Harborside Financial expressed thereon.
Joseph P. Kelly, Center
Assistant Secretary 3200 Plaza 5
Thomas Lynch, Assistant Jersey City, NJ 07311
Secretary
Stacey V. Morrison, Custodian and Transfer
Assistant Secretary Agent
Gregory R. Kingston, State Street Bank and
Vice President and Trust Company
Assistant Treasurer P.O. Box 419572
Robert A. Chopyak, Kansas City, MO
Assistant Treasurer 64141-6572
Laura E. Filippone,
Assistant Treasurer
Distributed by:
AIG SunAmerica Capital Services, Inc.
INSAN-9/03
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Reserved.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Reserved.
Item 9. 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. 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)
that occurred during the Registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting. However, a
situation was discovered at the registrant's transfer agent which
circumvented internal controls related to abandoned property procedures.
The registrant has worked with the transfer agent to develop actions to
enhance the internal controls.
Item 10. Exhibits.
(a) Not applicable.
(b) (1) Certification pursuant to Rule 30a-2 under the Investment Company Act
of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT.
(2) Certification pursuant to 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 Income Funds
By: /s/ Robert M. Zakem
Robert M. Zakem President
Date: December 8, 2003
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/ Robert M. Zakem
Robert M. Zakem President
Date: December 8, 2003
By: /s/ Donna M. Handel
Donna M. Handel
Treasurer
Date: December 8, 2003