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: March 31, 2004
-------------------------
Item 1. Reports to Shareholders
SunAmerica Income Funds, Annual Report at March 31, 2004.
[GRAPHIC]
SunAmerica
THE RETIREMENT SPECIALIST
Income Funds
2004 ANNUAL REPORT
[LOGO] AIG Sun America
Mutual Funds
March 31, 2004 ANNUAL 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
SHAREHOLDER LETTER................................ 2
STATEMENT OF ASSETS AND LIABILITIES............... 3
STATEMENT OF OPERATIONS........................... 5
STATEMENT OF CHANGES IN NET ASSETS................ 7
FINANCIAL HIGHLIGHTS.............................. 10
PORTFOLIO OF INVESTMENTS.......................... 16
NOTES TO FINANCIAL STATEMENTS..................... 52
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM............................................. 68
TRUSTEE INFORMATION............................... 69
SHAREHOLDER TAX INFORMATION....................... 72
COMPARISONS: PORTFOLIOS VS. INDEXES............... 73
Shareholder Letter
Dear Shareholders:
Over the past twelve months the fixed income markets have posted solid
performance during a fairly volatile period. The bell weather ten-year U.S.
Treasury experienced a sharp rally during the Spring of 2003 in anticipation of
a possible 13th reduction of the Federal Funds rate by the Federal Reserve.
Nevertheless, the 25 basis point reduction to 1% disappointed markets that had
been expecting 50 basis points and left participants with the distinct
impression that this was quite possibly the final easing move in the current
cycle. Hence, a sharp sell-off ensued as 10-year bond yields increased by over
100 basis points, or 1%. Expectations of job growth failed to materialize,
while inflation remained at bay, and yields subsequently retraced their summer
spike. The 10-year note ended March at 3.85%, nearly the same level at which it
began this reporting period.
Economic growth improved as the year progressed. The monetary and fiscal
stimulus took hold with third quarter 2003 GDP growing at 8.2% followed by over
4% growth in both the 4th quarter of 2003 and the first quarter of 2003. While
productivity growth was strong, there were few signs of consistent job growth
or inflation. Core inflation--the Consumer Price Index (CPI) minus food and
energy prices--fell from 1.7% to 1.1% by the end of the period. This was a
level we have not seen since February 1966. Low inflation and stagnant job
creation kept any interest rate tightening by the Federal Reserve on hold
throughout the period.
Another important driver in the Treasury market over the past 12 months was the
buying of U.S. Government securities by Foreign Central Banks. This group is
estimated to have purchased a total of $217 billion in 2003 and $93 billion in
the first quarter of 2004. The volatility in the Treasury market over the
summer impacted GNMA and other mortgage securities, as they underperformed
dramatically over this period. Nevertheless, these securities rebounded in the
later half of 2003 as a relatively stable trading range was established in the
U.S. Treasury market.
The improvements in the economy and corresponding strengthening of
corporation's balance sheets clearly benefited the corporate credit sector,
particularly high yield. Investors were attracted to the high yield market's
double-digit average yields in a low interest rate environment. Emerging market
debt was another higher risk fixed income asset class that benefited from a
strengthening global economy and a low interest rate environment.
The municipal market continued to present an attractive after-tax alternative.
Many municipalities, California clearly being the most notable, have faced
budget pressure that has led to a record supply of municipal bonds during the
period.
Thank you for your continued investment in our Funds and we encourage you to
visit our website, www.sunamericafunds.com, for current information.
Sincerely,
The AIG SunAmerica Income Funds Investment Professionals
AIG SunAmerica Asset Management Corp. AIG Global Investment Corp.
------------------------------------- -
Michael Cheah Greg Braun Steven Guterman
Brian Tesseyman Hutch Bryan Rob Vandem Assem
Brian Wiese
- --------
Past performance is no guarantee of future results.
2
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2004
U.S. Government
Core Bond Securities GNMA Strategic
Fund Fund Fund Bond Fund
------------ --------------- ------------ ------------
ASSETS:
Investment securities, at value*............................... $227,933,519 $255,855,859 $510,095,911 $ 95,039,093
Short-term securities*......................................... -- -- -- 860,000
Repurchase agreements (cost equals market)..................... 7,071,000 8,986,000 69,767,000 3,365,000
Deposit with brokers for securities sold short................. -- -- -- --
Cash........................................................... 329 -- 1,240 5,420,310
Foreign cash*.................................................. -- -- -- 27,431
Receivables for:
Shares of beneficial interest sold........................... 572,710 130,738 1,297,990 669,433
Dividends and interest....................................... 1,962,413 1,384,577 2,045,941 1,790,680
Investments sold............................................. 6,764,908 472,593 -- 1,336,288
Prepaid expenses and other assets.............................. 1,329 1,222 2,293 335
Due from investment adviser.................................... 65,074 61,068 205,360 --
------------ ------------ ------------ ------------
Total assets................................................. 244,371,282 266,892,057 583,415,735 108,508,570
------------ ------------ ------------ ------------
LIABILITIES:
Payables for:
Shares of beneficial interest redeemed....................... 5,650,640 291,768 1,354,594 303,170
Investments purchased........................................ 11,212,665 9,135,938 10,151,042 1,910,555
Investment advisory and management fees...................... 120,981 139,246 219,765 102,171
Distribution and service maintenance fees.................... 50,307 104,537 291,451 62,554
Other accrued expenses....................................... 280,968 247,186 195,205 139,244
Interest payable on securities sold short...................... -- -- -- --
Dividends payable.............................................. 8,078 139,933 189,115 205,987
Due to custodian............................................... 471,794
Securities sold short, at value#............................... -- -- -- --
Unrealized depreciation on forward foreign currency contracts.. -- -- -- 46,043
------------ ------------ ------------ ------------
Total liabilities............................................ 17,323,639 10,530,402 12,401,172 2,769,724
------------ ------------ ------------ ------------
Net assets.................................................. $227,047,643 $256,361,655 $571,014,563 $105,738,846
============ ============ ============ ============
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value.................. $ 216,368 $ 265,815 $ 501,296 $ 309,782
Paid-in capital................................................ 221,683,791 261,065,249 563,121,348 135,502,754
------------ ------------ ------------ ------------
221,900,159 261,331,064 563,622,644 135,812,536
Accumulated undistributed net investment income (loss)......... 198,080 (138,253) 4,199 160,688
Accumulated net realized gain (loss) on investments, futures
contracts, options contracts and foreign exchange
transaction................................................... 1,911,024 (10,030,026) (544,936) (36,349,625)
Unrealized appreciation (depreciation) on investments.......... 3,038,380 5,198,870 7,932,656 6,159,833
Unrealized foreign exchange gain (loss) on other assets and
liabilities................................................... -- -- -- (44,586)
Unrealized appreciation (depreciation) on securities sold short -- -- -- --
------------ ------------ ------------ ------------
Net assets.................................................. $227,047,643 $256,361,655 $571,014,563 $105,738,846
============ ============ ============ ============
*Identified cost
Investment securities........................................ $224,895,139 $250,656,989 $502,163,255 $ 88,879,260
============ ============ ============ ============
Short-term securities........................................ $ -- $ -- $ -- $ 860,000
============ ============ ============ ============
Foreign cash................................................. $ -- $ -- $ -- $ 27,376
============ ============ ============ ============
#Proceeds from securities sold short........................... $ -- $ -- $ -- $ --
============ ============ ============ ============
High Yield
Bond Tax Exempt
Fund Insured Fund
------------- ------------
ASSETS:
Investment securities, at value*............................... $ 286,419,758 $ 84,513,304
Short-term securities*......................................... -- 15,908,754
Repurchase agreements (cost equals market)..................... 6,025,000 --
Deposit with brokers for securities sold short................. 715,005 --
Cash........................................................... 331 --
Foreign cash*.................................................. 70,010 --
Receivables for:
Shares of beneficial interest sold........................... 3,122,111 128,881
Dividends and interest....................................... 6,369,586 1,232,251
Investments sold............................................. 8,130,835 --
Prepaid expenses and other assets.............................. 839 427
Due from investment adviser.................................... 3,212 --
------------- ------------
Total assets................................................. 310,856,687 101,783,617
------------- ------------
LIABILITIES:
Payables for:
Shares of beneficial interest redeemed....................... 318,117 109,430
Investments purchased........................................ 10,496,879 9,841,058
Investment advisory and management fees...................... 187,818 41,488
Distribution and service maintenance fees.................... 136,821 40,057
Other accrued expenses....................................... 180,017 137,597
Interest payable on securities sold short...................... 8,850 --
Dividends payable.............................................. 529,904 81,551
Due to custodian...............................................
Securities sold short, at value#............................... 610,555 --
Unrealized depreciation on forward foreign currency contracts.. -- --
------------- ------------
Total liabilities............................................ 12,468,961 10,251,181
------------- ------------
Net assets.................................................. $ 298,387,726 $ 91,532,436
============= ============
NET ASSETS WERE COMPOSED OF:
Shares of beneficial interest, $.01 par value.................. $ 704,425 $ 69,564
Paid-in capital................................................ 410,799,748 85,507,577
------------- ------------
411,504,173 85,577,141
Accumulated undistributed net investment income (loss)......... (1,327,919) (6,949)
Accumulated net realized gain (loss) on investments, futures
contracts, options contracts and foreign exchange
transaction................................................... (119,672,871) 1,060,644
Unrealized appreciation (depreciation) on investments.......... 7,880,470 4,901,600
Unrealized foreign exchange gain (loss) on other assets and
liabilities................................................... (2,312) --
Unrealized appreciation (depreciation) on securities sold short 6,185 --
------------- ------------
Net assets.................................................. $ 298,387,726 $ 91,532,436
============= ============
*Identified cost
Investment securities........................................ $ 278,539,288 $ 79,611,704
============= ============
Short-term securities........................................ $ -- $ 15,908,754
============= ============
Foreign cash................................................. $ 71,727 $ --
============= ============
#Proceeds from securities sold short........................... $ 616,740 $ --
============= ============
See Notes to Financial Statements
3
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2004 -- (continued)
U.S. Government Strategic High Yield Tax Exempt
Core Bond Securities GNMA Bond Bond Insured
Fund Fund Fund Fund Fund Fund
------------ --------------- ------------ ----------- ----------- -----------
Class A (unlimited shares authorized):
Net assets........................................ $140,877,441 $204,617,729 $337,467,225 $43,840,234 $93,817,728 $69,097,572
Shares of beneficial interest issued and
outstanding...................................... 13,430,222 21,216,627 29,662,686 12,848,942 22,191,303 5,251,975
Net asset value and redemption price per share.... $ 10.49 $ 9.64 $ 11.38 $ 3.41 $ 4.23 $ 13.16
Maximum sales charge (4.75% of offering price).... 0.52 0.48 0.57 0.17 0.21 0.66
------------ ------------ ------------ ----------- ----------- -----------
Maximum offering price to public.................. $ 11.01 $ 10.12 $ 11.95 $ 3.58 $ 4.44 $ 13.82
============ ============ ============ =========== =========== ===========
Class B (unlimited shares authorized):
Net assets........................................ $ 5,682,585 $ 36,604,863 $136,922,792 $36,109,541 $73,751,279 $16,632,346
Shares of beneficial interest issued and
outstanding...................................... 543,012 3,793,849 12,003,256 10,587,501 17,408,241 1,263,607
Net asset value, offering and redemption price
per share........................................ $ 10.46 $ 9.65 $ 11.41 $ 3.41 $ 4.24 $ 13.16
============ ============ ============ =========== =========== ===========
Class C (unlimited shares authorized)+:
Net assets........................................ $ 5,352,356 $ 15,139,063 $ 88,183,693 $22,063,998 $52,867,919 $ 5,802,518
Shares of beneficial interest issued and
outstanding...................................... 510,851 1,570,983 7,722,637 6,448,860 12,433,254 440,818
Net asset value, offering and redemption price
per share........................................ $ 10.48 $ 9.64 $ 11.42 $ 3.42 $ 4.25 $ 13.16
============ ============ ============ =========== =========== ===========
Class I (unlimited shares authorized):
Net assets........................................ $ 3,092,037 $ -- $ -- $ 3,725,073 $ -- $ --
Shares of beneficial interest issued and
outstanding...................................... 294,368 -- -- 1,092,884 -- --
Net asset value, offering and redemption price
per share........................................ $ 10.50 $ -- $ -- $ 3.41 $ -- $ --
============ ============ ============ =========== =========== ===========
Class Z (unlimited shares authorized):
Net assets........................................ $ 72,043,224 $ -- $ -- $ -- $77,950,800 $ --
Shares of beneficial interest issued and
outstanding...................................... 6,858,395 -- -- -- 18,409,633 --
Net asset value, offering and redemption price
per share........................................ $ 10.50 $ -- $ -- $ -- $ 4.23 $ --
============ ============ ============ =========== =========== ===========
Class X (unlimited shares authorized):
Net assets........................................ $ -- $ -- $ 8,440,853 $ -- $ -- $ --
Shares of beneficial interest issued and
outstanding...................................... -- -- 741,007 -- -- --
Net asset value, offering and redemption price
per share........................................ $ -- $ -- $ 11.39 $ -- $ -- $ --
============ ============ ============ =========== =========== ===========
- --------
+Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
See Notes to Financial Statements
4
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2004
Core U.S. Government
Bond Fund Securities Fund GNMA Fund
----------- --------------- -----------
INVESTMENT INCOME:
Income:
Interest.......................................... $11,331,834 $11,171,090 $20,508,963
Dividends......................................... 558 -- --
----------- ----------- -----------
Total investment income......................... 11,332,392 11,171,090 20,508,963
----------- ----------- -----------
Expenses:
Investment advisory and management fees........... 1,776,079 1,741,755 2,707,596
Distribution and service maintenance fees:
Class A......................................... 240,853 709,846 1,062,751
Class B......................................... 67,798 488,148 1,656,499
Class C+........................................ 52,978 196,231 1,179,045
Service fees--Class I............................. 51,775 -- 58
Transfer agent fees:
Class A......................................... 172,949 501,936 748,503
Class B......................................... 19,070 121,746 408,598
Class C+........................................ 12,851 48,403 290,618
Class I......................................... 52,882 -- 182
Class Z......................................... -- -- --
Class X......................................... -- -- 14,039
Registration fees:
Class A......................................... 53,666 29,032 91,556
Class B......................................... 8,300 8,052 18,018
Class C+........................................ 8,248 6,006 12,790
Class I......................................... 46,848 -- 15,015
Class Z......................................... -- -- --
Class X......................................... -- -- --
Custodian fees and expenses....................... 108,234 100,338 201,114
Reports to shareholders........................... 78,856 65,388 155,310
Audit and tax fees................................ 50,624 53,966 55,162
Legal fees and expenses........................... 4,876 8,052 15,738
Trustees' fees.................................... 33,222 27,782 56,480
Interest expense.................................. -- 4,441 1,308
Interest expense on securities sold short......... -- -- --
Miscellaneous expenses............................ 16,366 20,564 32,637
----------- ----------- -----------
Total expenses before reimbursements and
custody credits................................ 2,856,475 4,131,686 8,723,017
Expenses reimbursed by investment adviser....... (131,640) (996,898) (1,018,112)
Custody credits earned on cash balances......... (1,662) (1,152) (1,022)
----------- ----------- -----------
Net expenses.................................... 2,723,173 3,133,636 7,703,883
----------- ----------- -----------
Net investment income (loss)....................... 8,609,219 8,037,454 12,805,080
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments............ 7,228,394 2,311,744 1,476,272
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... -- -- --
Net realized gain (loss) on securities sold short.. -- -- --
Change in unrealized appreciation (depreciation)
on investments.................................... (2,724,903) (2,984,953) (1,054,237)
Change in unrealized foreign exchange gain (loss)
on transactions and other assets and liabilities.. -- -- --
Change in unrealized appreciation (depreciation)
on securities sold short.......................... -- -- --
----------- ----------- -----------
Net realized and unrealized gain (loss) on
investments, securities sold short and foreign
exchange gain (loss) on other assets and
liabilities....................................... 4,503,491 (673,209) 422,035
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................... $13,112,710 $ 7,364,245 $13,227,115
=========== =========== ===========
- --------
+Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2004 --
(continued)
Strategic High Yield Tax Exempt
Bond Fund Bond Fund Insured Fund
----------- ----------- ------------
INVESTMENT INCOME:
Income:
Interest.......................................... $ 7,464,570 $26,467,552 $4,020,680
Dividends......................................... 43,147 198,506 460
----------- ----------- ----------
Total investment income......................... 7,507,717 26,666,058 4,021,140
----------- ----------- ----------
Expenses:
Investment advisory and management fees........... 613,549 2,048,638 483,168
Distribution and service maintenance fees:
Class A......................................... 140,141 308,325 254,209
Class B......................................... 331,476 716,075 180,783
Class C+........................................ 177,220 449,010 59,240
Service fees--Class I............................. 8,705 47 --
Transfer agent:
Class A......................................... 104,485 222,270 172,931
Class B......................................... 83,521 183,523 46,081
Class C+........................................ 41,417 105,558 19,295
Class I......................................... 7,910 1,406 --
Class Z......................................... -- 14,025 --
Class X......................................... -- -- --
Registration fees:
Class A......................................... 9,864 17,202 12,912
Class B......................................... 8,836 13,908 8,264
Class C+........................................ 4,500 8,392 5,284
Class I......................................... 5,060 15,288 --
Class Z......................................... -- -- --
Class X......................................... -- -- --
Custodian fees and expenses....................... 148,742 96,866 58,892
Reports to shareholders........................... 37,996 59,692 14,014
Audit and tax fees................................ 53,868 30,368 50,500
Legal fees and expenses........................... 6,680 8,060 3,682
Trustees' fees and expenses....................... 8,390 21,865 10,518
Interest expense.................................. -- 10,687 --
Interest expense on securities sold short......... -- 100,473 --
Miscellaneous expenses............................ 10,754 17,968 12,955
----------- ----------- ----------
Total expenses before reimbursements and
custody credits................................ 1,803,114 4,449,646 1,392,728
Expenses reimbursed by investment adviser....... (3,530) (25,138) (7,229)
Custody credits earned on cash balances......... (18,922) (3,546) (90)
----------- ----------- ----------
Net expenses.................................... 1,780,662 4,420,962 1,385,409
----------- ----------- ----------
Net investment income (loss)....................... 5,727,055 22,245,096 2,635,731
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments............ 4,435,448 16,516,375 1,897,409
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... (53,027) (8,548) --
Net realized gain (loss) on securities sold short.. -- (360,483) --
Change in unrealized appreciation (depreciation)
on investments.................................... 4,812,532 22,633,366 (129,136)
Change in unrealized foreign exchange gain (loss)
on transactions and other assets and liabilities.. (47,293) (2,312) --
Change in unrealized appreciation (depreciation)
on securities sold short.......................... -- 16,685 --
----------- ----------- ----------
Net realized and unrealized gain (loss) on
investments, securities sold short and foreign
exchange gain (loss) on other assets and
liabilities....................................... 9,147,660 38,795,083 1,768,273
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................... $14,874,715 $61,040,179 $4,404,004
=========== =========== ==========
- --------
+Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
U.S. Government
Core Bond Fund Securities Fund
-------------------------- --------------------------
For the year For the year For the year For the year
ended ended ended ended
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)............................... $ 8,609,219 $ 14,216,026 $ 8,037,454 $ 10,214,465
Net realized gain (loss) on investments.................... 7,228,394 5,090,925 2,311,744 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 3)........... -- -- -- --
Net change in unrealized appreciation (depreciation) on
investments.............................................. (2,724,903) 12,127,059 (2,984,953) 10,528,243
Net change in unrealized foreign exchange gain (loss) on
transactions and other assets and liabilities............ -- -- -- --
Net change in unrealized appreciation (depreciation) on
securities sold short.................................... -- -- -- --
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments...... 13,112,710 31,434,010 7,364,245 34,418,170
------------ ------------ ------------ ------------
Dividends and distributions to shareholders from:
Net investment income (Class A)............................ (1,752,869) (320,620) (6,367,993) (8,637,623)
Net investment income (Class B)............................ (128,070) (171,529) (1,202,312) (1,881,087)
Net investment income (Class C)+........................... (100,070) (145,853) (488,725) (652,207)
Net investment income (Class I)............................ (539,121) (899,952) -- --
Net investment income (Class Z)............................ (6,618,532) (13,648,311) -- --
Net realized gain on investments (Class A)................. -- -- -- --
Net realized gain on investments (Class B)................. -- -- -- --
Net realized gain on investments (Class C)+................ -- -- -- --
Net realized gain on investments (Class I)................. -- -- -- --
Net realized gain on investments (Class Z)................. -- -- -- --
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders........... (9,138,662) (15,186,265) (8,059,030) (11,170,917)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)........................ (99,825,778) (24,440,061) (40,708,822) 35,816,062
------------ ------------ ------------ ------------
Total increase (decrease) in net assets..................... (95,851,730) (8,192,316) (41,403,607) 59,063,315
NET ASSETS:
Beginning of period......................................... 322,899,373 331,091,689 297,765,262 238,701,947
------------ ------------ ------------ ------------
End of period*.............................................. $227,047,643 $322,899,373 $256,361,655 $297,765,262
============ ============ ============ ============
*Includes accumulated undistributed net investment income
(loss)..................................................... $ 198,080 $ 29,877 $ (138,253) $ (893,062)
============ ============ ============ ============
- --------
+Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund Strategic Bond Fund
-------------------------- -------------------------
For the year For the year For the year For the year
ended ended ended ended
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)............................... $ 12,805,080 $ 12,837,322 $ 5,727,055 $ 5,132,006
Net realized gain (loss) on investments.................... 1,476,272 16,538,167 4,435,448 (5,545,727)
Net realized foreign exchange gain (loss) on other assets
and liabilities.......................................... -- -- (53,027) 137,052
Net realized gain (loss) on securities sold short.......... -- -- -- --
Net increase from payment by affiliates (Note 3)........... -- -- -- 12,000
Net change in unrealized appreciation (depreciation) on
investments.............................................. (1,054,237) 12,469,714 4,812,532 6,796,966
Net change in unrealized foreign exchange gain (loss) on
transactions and other assets and liabilities............ -- -- (47,293) 2,526
Net change in unrealized appreciation (depreciation) on
securities sold short.................................... -- -- -- --
------------ ------------ ------------ -----------
Net realized and unrealized gain (loss) on investments...... 13,227,115 41,845,203 14,874,715 6,534,823
------------ ------------ ------------ -----------
Dividends and distributions to shareholders from:
Net investment income (Class A)............................ (8,229,827) (7,006,789) (2,573,307) (2,134,446)
Net investment income (Class B)............................ (3,268,894) (4,139,556) (1,914,488) (1,417,388)
Net investment income (Class C)+........................... (2,301,935) (2,377,356) (1,049,774) (771,300)
Net investment income (Class I)............................ (586) (1,520) (233,825) (184,184)
Net investment income (Class Z)............................ (187,234) (72,532) -- --
Net realized gain on investments (Class A)................. (5,268,652) (2,283,804) -- --
Net realized gain on investments (Class B)................. (2,564,269) (1,663,779) -- --
Net realized gain on investments (Class C)+................ (1,788,770) (1,112,326) -- --
Net realized gain on investments (Class I)................. (487) (394) -- --
Net realized gain on investments (Class Z)................. (115,741) (27,923) -- --
------------ ------------ ------------ -----------
Total dividends and distributions to shareholders........... (23,726,395) (18,685,979) (5,771,394) (4,507,318)
------------ ------------ ------------ -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)........................ (4,226,113) 317,715,065 14,052,523 1,137,195
------------ ------------ ------------ -----------
Total increase (decrease) in net assets..................... (14,725,393) 340,874,289 23,155,844 3,164,700
NET ASSETS:
Beginning of period......................................... 585,739,956 244,865,667 82,583,002 79,418,302
------------ ------------ ------------ -----------
End of period*.............................................. $571,014,563 $585,739,956 $105,738,846 $82,583,002
============ ============ ============ ===========
*Includes accumulated undistributed net investment income
(loss)..................................................... $ 4,199 $ (293,949) $ 160,688 $ (38,581)
============ ============ ============ ===========
- --------
+Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Tax Exempt Insured Fund
-------------------------- --------------------------
For the year For the year For the year For the year
ended ended ended ended
March 31, March 31, March 31, March 31,
2004 2003 2004 2003
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)......................................... $ 22,245,096 $ 18,665,069 $ 2,635,731 $ 2,975,322
Net realized gain (loss) on investments.............................. 16,516,375 (25,417,328) 1,897,409 3,277,158
Net realized foreign exchange gain (loss) on other assets and
liabilities........................................................ (8,548) -- -- --
Net realized gain (loss) on securities sold short.................... (360,483) (320,650) -- --
Net increase from payment by affiliates (Note 3)..................... -- -- -- --
Net change in unrealized appreciation (depreciation) on investments.. 22,633,366 3,758,281 (129,136) 2,350,133
Net change in unrealized foreign exchange gain (loss) on
transactions and other assets and liabilities...................... (2,312) -- -- --
Net change in unrealized appreciation (depreciation) on securities
sold short......................................................... 16,685 (10,500) -- --
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments................ 61,040,179 (3,325,128) 4,404,004 8,602,613
------------ ------------ ------------ ------------
Dividends and distributions to shareholders from:
Net investment income (Class A)...................................... (7,714,823) (4,718,507) (2,009,916) (2,517,853)
Net investment income (Class B)...................................... (5,797,385) (4,944,952) (366,880) (492,738)
Net investment income (Class C)+..................................... (3,614,674) (1,795,180) (122,956) (136,989)
Net investment income (Class I)...................................... (1,687) (1,256) -- --
Net investment income (Class Z)...................................... (6,692,901) (5,928,841) -- --
Net realized gain on investments (Class A)........................... -- -- (2,345,579) (500,751)
Net realized gain on investments (Class B)........................... -- -- (558,969) (130,729)
Net realized gain on investments (Class C)+.......................... -- -- (187,274) (35,541)
Net realized gain on investments (Class I)........................... -- -- -- --
Net realized gain on investments (Class Z)........................... -- -- -- --
------------ ------------ ------------ ------------
Total dividends and distributions to shareholders..................... (23,821,470) (17,388,736) (5,591,574) (3,814,601)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from capital share
transactions (Note 6)................................................ 47,785,931 24,494,021 (11,118,979) 1,795,166
------------ ------------ ------------ ------------
Total increase (decrease) in net assets............................... 85,004,640 3,780,157 (12,306,549) 6,583,178
NET ASSETS:
Beginning of period................................................... 213,383,086 209,602,929 103,838,985 97,255,807
------------ ------------ ------------ ------------
End of period*........................................................ $298,387,726 $213,383,086 $ 91,532,436 $103,838,985
============ ============ ============ ============
*Includes accumulated undistributed net investment income (loss)...... $ (1,327,919) $ (139,760) $ (6,949) $ 74,152
============ ============ ============ ============
- --------
+Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
See Notes to Financial Statements
9
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS
CORE BOND FUND
--------------
Net gain
(loss) on
investments
Net Asset (both Dividends
Value, Net realized Total from from net Total
beginning investment and investment investment Return of Distri-
Period Ended of period income(1) unrealized) operations income capital butions
- ------------------------------------------------- --------- ---------- ----------- ---------- ---------- --------- -------
Class A
-------
11/01/98-10/31/99 $10.63 $0.66 $(0.77) $(0.11) $(0.67) $ -- $(0.67)
11/01/99-10/31/00 9.85 0.62 (0.21) 0.41 (0.60) (0.06) (0.66)
11/01/00-10/31/01 9.60 0.55 0.65 1.20 (0.51) -- (0.51)
11/01/01-3/31/02# 10.29 0.20 (0.48) (0.28) (0.19) -- (0.19)
4/01/02-3/31/03 9.82 0.34 0.58 0.92 (0.42) -- (0.42)
4/01/03-3/31/04 10.32 0.24 0.20 0.44 (0.27) -- (0.27)
Class B
-------
11/01/98-10/31/99 $10.62 $0.59 $(0.75) $(0.16) $(0.61) $ -- $(0.61)
11/01/99-10/31/00 9.85 0.58 (0.24) 0.34 (0.55) (0.05) (0.60)
11/01/00-10/31/01 9.59 0.48 0.64 1.12 (0.45) -- (0.45)
11/01/01-3/31/02# 10.26 0.17 (0.49) (0.32) (0.16) -- (0.16)
4/01/02-3/31/03 9.78 0.31 0.55 0.86 (0.36) -- (0.36)
4/01/03-3/31/04 10.28 0.18 0.19 0.37 (0.19) -- (0.19)
Class C*
--------
11/01/98-10/31/99 $10.62 $0.59 $(0.75) $(0.16) $(0.61) $ -- $(0.61)
11/01/99-10/31/00 9.85 0.57 (0.23) 0.34 (0.55) (0.05) (0.60)
11/01/00-10/31/01 9.59 0.48 0.64 1.12 (0.45) -- (0.45)
11/01/01-3/31/02# 10.26 0.18 (0.49) (0.31) (0.16) -- (0.16)
4/01/02-3/31/03 9.79 0.31 0.56 0.87 (0.36) -- (0.36)
4/01/03-3/31/04 10.30 0.18 0.19 0.37 (0.19) -- (0.19)
Class I
-------
7/10/00-10/31/00@ $ 9.65 $0.19 $(0.02) $ 0.17 $(0.18) $(0.02) $(0.20)
11/01/00-10/31/01 9.62 0.57 0.65 1.22 (0.52) -- (0.52)
11/01/01-3/31/02# 10.32 0.21 (0.52) (0.31) (0.19) -- (0.19)
2/01/02-3/31/03 9.82 0.40 0.55 0.95 (0.44) -- (0.44)
4/01/03-3/31/04 10.33 0.20 0.24 0.44 (0.27) -- (0.27)
Class Z*
--------
7/10/00-10/31/00@ $ 9.64 $0.19 $(0.03) $ 0.16 $(0.18) $(0.02) $(0.20)
11/01/00-10/31/01 9.60 0.59 0.65 1.24 (0.55) -- (0.55)
11/01/01-3/31/02# 10.29 0.21 (0.47) (0.26) (0.21) -- (0.21)
4/01/02-3/31/03 9.82 0.47 0.53 1.00 (0.49) -- (0.49)
4/01/03-3/31/04 10.33 0.32 0.18 0.50 (0.33) -- (0.33)
Ratio
Net Net of net
Asset Assets, Ratio of investment
Value, end of expenses income to
end of Total period to average average Portfolio
Period Ended period Return(2) (000's) net assets net assets Turnover
- ------------------------------------------------- ------ --------- -------- ---------- ---------- ---------
11/01/98-10/31/99 $ 9.85 (1.08)% $ 3,507 1.25%(4) 4.775%(4) 43%
11/01/99-10/31/00 9.60 4.35 3,858 1.29(4) 6.45(4) 94
11/01/00-10/31/01 10.29 12.85 5,901 1.31(4) 5.51(4) 215
11/01/01-3/31/02# 9.82 (2.77) 5,312 1.33(3)(4) 5.03(3)(4) 94
4/01/02-3/31/03 10.32 9.58 21,260 1.33(4) 3.72(4) 179
4/01/03-3/31/04 10.49 4.30 140,877 1.25(4) 2.50(4) 229
11/01/98-10/31/99 $ 9.85 (1.56)% $ 4,295 1.90%(4) 5.71%(4) 43%
11/01/99-10/31/00 9.59 3.70 4,937 1.95(4) 5.95(4) 94
11/01/00-10/31/01 10.26 11.93 6,444 1.97(4) 4.88(4) 215
11/01/01-3/31/02# 9.78 (3.14) 3,220 1.98(3)(4) 4.36(3)(4) 94
4/01/02-3/31/03 10.28 8.90 7,198 1.98(4) 3.15(4) 179
4/01/03-3/31/04 10.46 3.68 5,683 1.92(4) 1.75(4) 229
11/01/98-10/31/99 $ 9.85 (1.56)% $ 4,593 1.90%(4) 5.70%(4) 43%
11/01/99-10/31/00 9.59 3.70 2,778 1.95(4) 5.84(4) 94
11/01/00-10/31/01 10.26 11.93 4,541 1.97(4) 4.79(4) 215
11/01/01-3/31/02# 9.79 (3.04) 3,772 1.98(3)(4) 4.39(3)(4) 94
4/01/02-3/31/03 10.30 9.00 5,598 1.98(4) 3.13(4) 179
4/01/03-3/31/04 10.48 3.68 5,352 1.93(4) 1.77(4) 229
7/10/00-10/31/00@ $ 9.62 1.85% $ 19,971 1.16%(3) 6.18%(3) 94%
11/01/00-10/31/01 10.32 13.01 22,782 1.22(4) 5.68(4) 215
11/01/01-3/31/02# 9.82 (3.01) 21,707 1.23(3)(4) 5.12(3)(4) 94
2/01/02-3/31/03 10.33 9.80 20,617 1.24(4) 3.98(4) 179
4/01/03-3/31/04 10.50 4.35 3,092 1.23(4) 2.39(4) 229
7/10/00-10/31/00@ $ 9.60 1.81% $317,842 0.95%(3)(4) 6.39%(3)(4) 94%
11/01/00-10/31/01 10.29 13.37 323,570 0.97(4) 5.97(4) 215
11/01/01-3/31/02# 9.82 (2.57) 297,081 0.74(3)(4) 5.62(3)(4) 94
4/01/02-3/31/03 10.33 10.38 268,226 0.67 4.56 179
4/01/03-3/31/04 10.50 4.92 72,043 0.66(4) 2.97(4) 229
-------------------------------
- --------
* In conjunction with the reorganization on November 16, 2001, Class C was
redesignated as Class II and Class II was redesignated as Class Z. Effective
February 23, 2004, Class II was redesignated to Class C.
@ Inception date of class.
# Effective November 16, 2001, the SunAmerica Core Bond, a newly created
portfolio of the SunAmerica Income Funds, acquired all the assets and
liabilities of the North American Core Bond Fund.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Annualized
(4)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(3) 3/31/03 3/31/04
-------- -------- -------- ---------- ------- -------
Core Bond Fund Class A.................. 0.45% 0.49% 0.04% 0.19% 0.11% 0.10%
Core Bond Fund Class B.................. 0.49 0.50 0.03 0.32 0.23 0.15
Core Bond Fund Class C.................. 0.48 0.54 0.04 0.32 0.18 0.14
Core Bond Fund Class I.................. -- -- 0.03 0.13 0.05 0.05
Core Bond Fund Class Z.................. -- 0.01(3) 0.03 0.02 -- 0.02
See Notes to Financial Statements
10
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Net gain
(loss) on
investments Net
Net Asset (both Dividends Asset
Value, Net realized Total from from net Total Value,
beginning investment and investment investment Distri- end of Total
Period Ended of period income(1) unrealized) operations income butions period Return(2)
- -------------------------------------------- --------- ---------- ----------- ---------- ---------- ------- ------ ---------
Class A
-------
3/31/00 $8.65 $0.44 $(0.37) $0.07 $(0.41) $(0.41) $8.31 0.89%
3/31/01 8.31 0.45 0.60 1.05 (0.45) (0.45) 8.91 13.06
3/31/02 8.91 0.37(5) (0.08) 0.29 (0.40) (0.40) 8.80 3.25
3/31/03 8.80 0.37 0.86 1.23 (0.40) (0.40) 9.63 14.14
3/31/04 9.63 0.30 0.01 0.31 (0.30) (0.30) 9.64 3.29
Class B
-------
3/31/00 $8.65 $0.40 $(0.38) $0.02 $(0.36) $(0.36) $8.31 0.23%
3/31/01 8.31 0.39 0.61 1.00 (0.40) (0.40) 8.91 12.29
3/31/02 8.91 0.31(5) (0.08) 0.23 (0.34) (0.34) 8.80 2.55
3/31/03 8.80 0.30 0.87 1.17 (0.33) (0.33) 9.64 13.51
3/31/04 9.64 0.24 0.01 0.25 (0.24) (0.24) 9.65 2.62
Class C*
--------
6/01/99-3/31/00@ $8.49 $0.31 $(0.20) $0.11 $(0.28) $(0.28) $8.32 1.30%
3/31/01 8.32 0.37 0.61 0.98 (0.39) (0.39) 8.91 12.10
3/31/02 8.91 0.29(5) (0.09) 0.20 (0.32) (0.32) 8.79 2.40
3/31/03 8.79 0.30 0.87 1.17 (0.33) (0.33) 9.63 13.52
3/31/04 9.63 0.24 0.01 0.25 (0.24) (0.24) 9.64 2.62
Ratio
Net of net
Assets, Ratio of investment
end of expenses income to
period to average average Portfolio
Period Ended (000's) net assets net assets Turnover
- -------------------------------------------- -------- ---------- ---------- ---------
3/31/00 $150,975 1.51% 5.33% 717%
3/31/01 169,524 1.49 5.27 1,561
3/31/02 187,615 1.42 4.12(5) 570
3/31/03 210,848 1.12(4) 3.88(4) 614
3/31/04 204,618 0.99(4) 3.14(4) 256
3/31/00 $ 42,273 2.18% 4.69% 717%
3/31/01 32,085 2.17 4.59 1,561
3/31/02 38,878 2.09(4) 3.42(4)(5) 570
3/31/03 62,595 1.76(4) 3.20(4) 614
3/31/04 36,605 1.64(4) 2.45(4) 256
6/01/99-3/31/00@ $ 907 2.20%(3)(4) 4.50%(3)(4) 717%
3/31/01 3,303 2.20(4) 4.48(4) 1,561
3/31/02 12,209 2.10(4) 3.33(4)(5) 570
3/31/03 24,322 1.75(4) 3.18(4) 614
3/31/04 15,139 1.64(4) 2.45(4) 256
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
@ Inception date of class.
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(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 3/31/04
------- ------- ------- ------- -------
U.S. Government Securities Fund Class A. -- % -- % -- % 0.21% 0.37%
U.S. Government Securities Fund Class B. -- -- 0.01 0.23 0.37
U.S. Government Securities Fund Class C. 0.86(3) 1.18 0.16 0.27 0.38
(5)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
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
(loss) on
investments
Net Asset (both Dividends Distributions
Value, Net realized Total from from net from net Total
beginning investment and investment investment realized distri
Period Ended of period income(1) unrealized) operations income gains butions
- ------------------------------------------------- --------- ---------- ----------- ---------- ---------- ------------- -------
Class A
-------
3/31/00 $10.68 $0.53 $(0.29) $0.24 $(0.50) $ -- $(0.50)
3/31/01 10.42 0.61 0.72 1.33 (0.62) (0.01) (0.63)
3/31/02 11.12 0.51(6) (0.03) 0.48 (0.51) (0.32) (0.83)
3/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53)
3/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51)
Class B
-------
3/31/00 $10.72 $0.46 $(0.30) $0.16 $(0.44) $ -- $(0.44)
3/31/01 10.44 0.53 0.74 1.27 (0.55) (0.01) (0.56)
3/31/02 11.15 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76)
3/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46)
3/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43)
Class C*
--------
6/01/99-3/31/00@ $10.52 $0.37 $(0.09) $0.28 $(0.34) $ -- $(0.34)
3/31/01 10.46 0.49 0.77 1.26 (0.55) (0.01) (0.56)
3/31/02 11.16 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76)
3/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46)
3/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43)
Class X
-------
3/19/02-3/31/02@ $10.80 $0.02(6) $(0.01) $0.01 $(0.02) $ -- $(0.02)
3/31/03 10.79 0.36 0.95 1.31 (0.44) (0.11) (0.55)
3/31/04 11.55 0.32 0.06 0.38 (0.34) (0.20) (0.54)
Ratio
Net Net of net
Asset Assets, Ratio of investment
Value, end of expenses income to
end of Total period to average average Portfolio
Period Ended period Return(2) (000's) net assets net assets Turnover
- ------------------------------------------------- ------ --------- -------- ---------- ---------- ---------
3/31/00 $10.42 2.40% $ 44,155 1.37% 5.06% 910%
3/31/01 11.12 13.10 72,092 0.99(5) 5.78(5) 833
3/31/02 10.77 4.45 118,440 0.99(4)(5) 4.61(4)(5)(6) 537
3/31/03 11.54 12.29 255,096 0.99(5) 3.36(5) 421
3/31/04 11.38 3.06 337,467 0.99(5) 2.51(5) 213
3/31/00 $10.44 1.55% $ 22,376 2.03% 4.41% 910%
3/31/01 11.15 12.45 38,190 1.64(5) 5.11(5) 833
3/31/02 10.80 3.78 90,011 1.64(4)(5) 3.96(4)(5)(6) 537
3/31/03 11.57 11.54 189,323 1.64(5) 2.71(5) 421
3/31/04 11.41 2.39 136,923 1.64(5) 1.77(5) 213
6/01/99-3/31/00@ $10.46 2.72% $ 1,406 2.10%(3)(5) 4.34%(3)(5) 910%
3/31/01 11.16 12.33 15,851 1.64(5) 4.99(5) 833
3/31/02 10.81 3.78 36,258 1.64(4)(5) 3.96(4)(5)(6) 537
3/31/03 11.58 11.53 137,173 1.64(5) 2.59(5) 421
3/31/04 11.42 2.39 88,184 1.64(5) 1.74(5) 213
3/19/02-3/31/02@ $10.79 0.08% $ 106 0.89%(3)(4)(5) 3.84%(3)(4)(5)(6) 537%
3/31/03 11.55 12.36 4,107 0.78(5) 3.31(5) 421
3/31/04 11.39 3.31 8,441 0.75 2.88(5) 213
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
@ Inception date of class.
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3) Annualized
(4) The ratios reflect an expense cap of 0.99%, 1.64% and 1.64% for Class A,
Class B and Class C, respectively, which are net of custody credits of
0.01% for Class A, Class B, and Class C or waivers/reimbursements if
applicable. Custody credits for Class 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 3/31/04
------- ------- ------- ------- -------
GNMA Fund Class A....................... -- % 0.30% 0.19% 0.13% 0.18%
GNMA Fund Class B....................... -- 0.33 0.19 0.14 0.16
GNMA Fund Class C....................... 1.98(3) 0.62 0.21 0.13 0.16
GNMA Fund Class X....................... -- -- 56.17(3) 0.37 0.03
(6) 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
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND**
---------------------
Net gain
(loss) on
investments Dividends
Net Asset (both Dividends from net
Value, Net realized Total from from net realized
beginning investment and investment investment gain on Return of
Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investments+ capital+
- -------------------------------------------- ---------- ---------- ------------ ----------- ---------- ------------ ---------
Class A
-------
11/01/98-10/31/99 $3.52 $0.28 $(0.20) $ 0.08 $(0.29) $(0.02) $ --
11/01/99-10/31/00 3.29 0.28 (0.14) 0.14 (0.26) -- (0.04)
11/01/00-10/31/01 3.13 0.28 (0.09) 0.19 (0.28) -- --
11/01/01-3/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- --
4/01/02-3/31/03 3.00 0.20 0.06 0.26 (0.18) -- --
4/01/03-3/31/04 3.08 0.21 0.33 0.54 (0.21) -- --
Class B
-------
11/01/98-10/31/99 $3.53 $0.26 $(0.21) $ 0.05 $(0.26) $(0.02) $ --
11/01/99-10/31/00 3.30 0.26 (0.14) 0.12 (0.24) -- (0.04)
11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- --
11/01/01-3/31/02 3.05 0.10(6) (0.04) 0.06 (0.11) -- --
4/01/02-3/31/03 3.00 0.18 0.06 0.24 (0.16) -- --
4/01/03-3/31/04 3.08 0.19 0.33 0.52 (0.19) -- --
Class C*
--------
11/01/98-10/31/99 $3.53 $0.26 $(0.20) $ 0.06 $(0.26) $(0.02) $ --
11/01/99-10/31/00 3.31 0.26 (0.16) 0.10 (0.24) -- (0.03)
11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- --
11/01/01-3/31/02 3.05 0.10(6) (0.03) 0.07 (0.11) -- --
4/01/02-3/31/03 3.01 0.19 0.05 0.24 (0.16) -- --
4/01/03-3/31/04 3.09 0.19 0.34 0.53 (0.20) -- --
Class I
-------
7/10/00-10/31/00@ $3.21 $0.08 $(0.08) $(0.00) $(0.07) $ -- $(0.01)
11/01/00-10/31/01 3.13 0.29 (0.09) 0.20 (0.29) -- --
11/01/01-3/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- --
4/01/02-3/31/03 3.00 0.21 0.06 0.27 (0.19) -- --
4/01/03-3/31/04 3.08 0.21 0.34 0.55 (0.22) -- --
Ratio
Net Net of net
Asset Assets, Ratio of investment
Total Value, end of expense income to
Distri- end of Total period to average average Portfolio
Period Ended butions period+ Return(2) (000's) net assets net assets Turnover
- -------------------------------------------- ------- ------- --------- ------- ---------- ---------- ---------
11/01/98-10/31/99 $(0.31) $3.29 2.10% $ 8,997 1.50%(5) 8.21%(5) 119%
11/01/99-10/31/00 (0.30) 3.13 4.09 6,439 1.55(5) 8.70(5) 46
11/01/00-10/31/01 (0.28) 3.04 6.48 8,478 1.57(5) 9.07(5) 49
11/01/01-3/31/02 (0.12) 3.00 2.46 35,365 1.52(3)(4)(5) 8.09(3)(4)(5)(6) 99
4/01/02-3/31/03 (0.18) 3.08 9.07(7) 37,136 1.62(8) 6.93(8) 65
4/01/03-3/31/04 (0.21) 3.41 18.04 43,840 1.55(5)(9) 6.41(9) 69
11/01/98-10/31/99 $(0.28) $3.30 1.56% $21,340 2.15%(5) 7.58%(5) 119%
11/01/99-10/31/00 (0.28) 3.14 3.33 15,131 2.20(5) 8.00(5) 46
11/01/00-10/31/01 (0.26) 3.05 5.65 9,964 2.21(5) 8.41(5) 49
11/01/01-3/31/02 (0.11) 3.00 2.05 26,892 2.19(3)(4)(5) 7.48(3)(4)(5)(6) 99
4/01/02-3/31/03 (0.16) 3.08 8.36(7) 27,879 2.28(8) 6.26(8) 65
4/01/03-3/31/04 (0.19) 3.41 17.29 36,110 2.19(5)(9) 5.76(9) 69
11/01/98-10/31/99 $(0.28) $3.31 $ 1.56 $20,749 2.15%(5) 7.57%(5) 119%
11/01/99-10/31/00 (0.27) 3.14 3.32 13,056 2.20(5) 8.04(5) 46
11/01/00-10/31/01 (0.26) 3.05 5.65 11,461 2.22(5) 8.41(5) 49
11/01/01-3/31/02 (0.11) 3.01 2.25 14,289 2.22(3)(4)(5) 7.34(3)(4)(5)(6) 99
4/01/02-3/31/03 (0.16) 3.09 8.47(7) 14,423 2.17(5)(8) 6.37(5)(8) 65
4/01/03-3/31/04 (0.20) 3.42 17.43 22,064 2.16(5)(9) 5.78(5)(9) 69
7/10/00-10/31/00@ $(0.08) $3.13 (0.10)% $ 2,636 1.45%(4)(5) 7.87%(4)(5) 46%
11/01/00-10/31/01 (0.29) 3.04 6.63 2,811 1.46(5) 9.17(5) 49
11/01/01-3/31/02 (0.12) 3.00 2.59 2,872 1.44(3)(4)(5) 8.13(3)(4)(5)(6) 99
4/01/02-3/31/03 (0.19) 3.08 9.29(7) 3,145 1.42(5)(8) 7.13(8)(5) 65
4/01/03-3/31/04 (0.22) 3.41 18.38 3,725 1.44(5)(9) 6.52(5)(9) 69
- --------
* In conjunction with the reorganization on November 16, 2001, Class C was
redesignated as Class II. Effective February 23, 2004, Class II was
redesignated to Class C.
** 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.
@ Inception date of the class.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)The ratios reflect an expense cap of 2.22%, and 1.44% for Class C and Class
I, respectively, which is net of custody credits of 0.02% for these classes.
Class A and Class B are gross of custody credits of 0.03% for the period
ended March 31, 2002.
(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 03/31/02(4) 3/31/03 3/31/04
-------- -------- -------- ----------- ------- -------
Strategic Bond Fund Class A............. 0.17% 0.32% 0.17% 0.01% -- % 0.02%
Strategic Bond Fund Class B............. 0.17 0.32 0.18 0.01 -- 0.02
Strategic Bond Fund Class C............. 0.17 0.32 0.17 0.08 0.11 0.02
Strategic Bond Fund Class I............. -- 0.26(4) 0.18 0.24 0.48 0.12
(6)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)Gross of custody credits of 0.02%.
See Notes to Financial Statements
13
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND**
----------------------
Net gain
(loss) on
investments Net
Net Asset (both Dividends Asset
Value, Net realized Total from from net Total Value,
beginning investment and investment investment Distri- end of
Period Ended of period+ income(1)+ unrealized)+ operations+ income+ butions period+
- ------------------------------------------------- ---------- ---------- ------------ ----------- ---------- ------- -------
Class A
-------
11/01/98-10/31/99 $5.63 $0.46 $(0.32) $ 0.14 $(0.46) $(0.46) $5.31
11/01/99-10/31/00 5.31 0.50 (0.49) 0.01 (0.50) (0.50) 4.82
11/01/00-10/31/01 4.82 0.44 (0.55) (0.11) (0.46) (0.46) 4.25
11/01/01-3/31/02 4.25 0.18(6) (0.11) 0.07 (0.19) (0.19) 4.13
4/01/02-3/31/03 4.13 0.37 (0.49) (0.12) (0.35) (0.35) 3.66
4/01/03-3/31/04 3.66 0.33 0.60 0.93 (0.36) (0.36) 4.23
Class B
-------
11/01/98-10/31/99 $5.64 $0.42 $(0.32) $ 0.10 $(0.42) $(0.42) $5.32
11/01/99-10/31/00 5.32 0.46 (0.50) (0.04) (0.46) (0.46) 4.82
11/01/00-10/31/01 4.82 0.41 (0.54) (0.13) (0.43) (0.43) 4.26
11/01/01-3/31/02 4.26 0.16(6) (0.11) 0.05 (0.18) (0.18) 4.13
4/01/02-3/31/03 4.13 0.35 (0.49) (0.14) (0.33) (0.33) 3.66
4/01/03-3/31/04 3.66 0.31 0.60 0.91 (0.33) (0.33) 4.24
Class C*
--------
8/21/00-10/31/00@ $5.09 $0.11 $(0.28) $(0.17) $(0.09) $(0.09) $4.83
11/01/00-10/31/01 4.83 0.40 (0.52) (0.12) (0.44) (0.44) 4.27
11/01/01-3/31/02 4.27 0.17(6) (0.11) 0.06 (0.18) (0.18) 4.15
4/01/02-3/31/03 4.15 0.34 (0.48) (0.14) (0.33) (0.33) 3.68
4/01/03-3/31/04 3.68 0.30 0.60 0.90 (0.33) (0.33) 4.25
Class Z*
--------
11/01/98-10/31/99 $5.64 $0.49 $(0.32) $ 0.17 $(0.49) $(0.49) $5.32
11/01/99-10/31/00 5.32 0.54 (0.51) 0.03 (0.52) (0.52) 4.83
11/01/00-10/31/01 4.83 0.47 (0.57) (0.10) (0.48) (0.48) 4.25
11/01/01-3/31/02 4.25 0.19(6) (0.11) 0.08 (0.20) (0.20) 4.13
4/01/02-3/31/03 4.13 0.39 (0.49) (0.10) (0.37) (0.37) 3.66
4/01/03-3/31/04 3.66 0.36 0.59 0.95 (0.38) (0.38) 4.23
Ratio
Net of net
Assets, Ratio of investment
end of expense income to
Total period to average average Portfolio
Period Ended Return(2) (000's) net assets net assets Turnover
- ------------------------------------------------- --------- ------- ---------- ---------- ---------
11/01/98-10/31/99 2.28% $ 34 1.25%(5) 5.69%(5) 72%
11/01/99-10/31/00 0.04 286 1.38(5) 10.13(5) 57
11/01/00-10/31/01 (2.23) 722 1.57(5) 9.73(5) 83
11/01/01-3/31/02 1.67 59,075 1.48(3)(4) 9.56(3)(4)(6) 61
4/01/02-3/31/03 (2.45) 66,521 1.56 10.26 117
4/01/03-3/31/04 26.05 93,818 1.49 8.15 126
11/01/98-10/31/99 1.53% $ 652 2.00%(5) 7.30%(5) 72%
11/01/99-10/31/00 (0.83) 1,594 2.10(5) 9.41(5) 57
11/01/00-10/31/01 (2.84) 2,911 2.21(5) 9.17(5) 83
11/01/01-3/31/02 1.23 67,599 2.12(3)(4) 8.91(3)(4)(6) 61
4/01/02-3/31/03 (3.06) 57,596 2.18 9.63 117
4/01/03-3/31/04 25.55 73,751 2.14 7.52 126
8/21/00-10/31/00@ (3.29)% $ 545 2.07%(4) 9.10%(4) 57%
11/01/00-10/31/01 (2.84) 2,274 2.21(5) 9.02(5) 83
11/01/01-3/31/02 1.43 20,670 2.17(3)(4)(5) 8.86(3)(4)(5)(6) 61
4/01/02-3/31/03 (2.97) 27,814 2.15(5) 9.67(5) 117
4/01/03-3/31/04 25.14 52,868 2.11(5) 7.53(5) 126
11/01/98-10/31/99 2.74% $62,506 0.88%(5) 8.84%(5) 72%
11/01/99-10/31/00 0.30 62,702 0.96(5) 10.41(5) 57
11/01/00-10/31/01 (2.07) 61,451 1.15(5) 10.45(5) 83
11/01/01-3/31/02 1.98 62,245 0.93(3)(4)(5) 10.04(3)(4)(5)(6) 61
4/01/02-3/31/03 (1.84) 61,439 0.92(5) 10.90(5) 117
4/01/03-3/31/04 26.83 77,951 0.88 8.80(5) 126
- --------
* In conjunction with the reorganization on November 16, 2001, Class C was
redesignated as Class II and Class II was redesignated as Class Z. Effective
February 23, 2004, Class II was redesignated to Class C.
** 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.
@ Inception date of class.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(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 3/31/04
-------- -------- -------- ---------- ------- -------
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 C............ -- -- 0.18 0.01 0.10 0.01
High Yield Bond Fund Class Z............ 0.47 0.60 0.18 0.03 0.03 0.00
(6)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
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
(loss) on
investments
Net Asset (both Dividends
Value, Net realized Total from from net Distributions Total
beginning investment and investment investment from net Distri-
Period Ended of period income(1) unrealized) operations income realized gains butions
- ------------------------------------------------- --------- ---------- ----------- ---------- ---------- -------------- -------
Class A
-------
3/31/00 $13.07 $0.55 $(0.71) $(0.16) $(0.54) $ -- $(0.54)
3/31/01 12.37 0.56 0.66 1.22 (0.57) -- (0.57)
3/31/02 13.02 0.52(6) (0.30) 0.22 (0.52) -- (0.52)
3/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52)
3/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81)
Class B
-------
3/31/00 $13.07 $0.47 $(0.71) $(0.24) $(0.46) $ -- $(0.46)
3/31/01 12.37 0.47 0.66 1.13 (0.48) -- (0.48)
3/31/02 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43)
3/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43)
3/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71)
Class C*
--------
6/01/99-3/31/00@ $12.83 $0.37 $(0.47) $(0.10) $(0.36) $ -- $(0.36)
3/31/01 12.37 0.47 0.66 1.13 (0.48) -- (0.48)
3/31/02 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43)
3/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43)
3/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72)
Ratio
Net Net of net
Asset Assets, Ratio of investment
Value, end of expenses income to
end of Total period to average average Portfolio
Period Ended period Return(2) (000's) net assets net assets Turnover
- ------------------------------------------------- ------ --------- ------- ---------- ---------- ---------
3/31/00 $12.37 (1.20)% $68,650 1.28% 4.41% 33%
3/31/01 13.02 10.08 72,394 1.26 4.41 24
3/31/02 12.72 1.70 75,071 1.29(3) 3.99(3)(6) 140
3/31/03 13.34 9.08 78,358 1.24 3.12 195
3/31/04 13.16 4.86 69,098 1.26 2.90 131
3/31/00 $12.37 (1.83)% $16,269 1.92% 3.77% 33%
3/31/01 13.02 9.31 16,302 1.97 3.71 24
3/31/02 12.72 0.95 18,090 2.04(3) 3.22(3)(6) 140
3/31/03 13.34 8.30 19,031 1.97 2.39 195
3/31/04 13.16 4.10 16,632 1.96 2.20 131
6/01/99-3/31/00@ $12.37 (0.76)% $ 577 1.95%(4)(5) 3.82%(4)(5) 33%
3/31/01 13.02 9.32 721 1.95(5) 3.73(5) 24
3/31/02 12.72 0.99 4,095 1.95(3)(5) 3.21(3)(5)(6) 140
3/31/03 13.34 8.32 6,451 1.95 2.40 195
3/31/04 13.16 4.14 5,803 1.95(5) 2.21(5) 131
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
@ Inception date of class.
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3) The ratios for Class C 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 3/31/04
---------- ------- ------- ------- -------
Tax Exempt Insured Fund Class C......... 5.20% 1.59% 0.56% -- % 0.12%
(6)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
15
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------
BONDS & NOTES -- 40.1%
Aerospace & Military Technology -- 0.5%
Goodrich Corp.
Sr. Notes
6.45% due 12/15/07...... $289 $ 323,534
Northrop Grumman Corp.
Guaranteed Sr. Notes
7.13% due 2/15/11....... 297 351,057
Raytheon Co.
Notes
4.85% due 1/15/11....... 480 495,610
----------
1,170,201
----------
Automotive -- 0.8%
Ford Motor Co.
Bonds
6.63% due 10/01/28...... 309 284,047
General Motors Corp.
Notes
7.20% due 1/15/11....... 373 408,784
General Motors Corp.
Sr. Debentures
8.25% due 7/15/23....... 616 687,583
Hertz Corp.
Sr. Notes
4.70% due 10/02/06...... 541 554,514
----------
1,934,928
----------
Banks -- 2.4%
Banc One Corp.
Sub. Debentures
7.63% due 10/15/26...... 346 427,862
Bank of America Corp.
Sr. Notes, Series J
1.27% due 2/17/09(6).... 622 622,402
Bank of America Corp.
Guaranteed Capital
2.11% due 6/18/04(6).... 592 596,569
Huntington National Bank
Notes
2.75% due 10/16/06...... 541 554,227
Key Bank NA
Sr. Notes
4.10% due 6/30/05....... 482 497,888
Key Bank NA
Sub. Notes
7.00% due 2/01/11....... 249 291,320
KeyCorp
Notes
2.75% due 2/27/07....... 579 586,876
National City Bank
Notes
2.50% due 4/17/06....... 534 541,693
PNC Funding Corp.
Guaranteed Sr. Notes
5.75% due 8/01/06....... 565 609,998
Westpac Capital Trust IV
Notes
5.26% due 12/29/49*..... 718 718,000
----------
5,446,835
----------
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------------------
Broadcasting & Media -- 2.6%
AOL Time Warner
Guaranteed Sr. Notes
6.13% due 4/15/06................... $ 321 $ 345,851
Charter Communications Holdings, LLC
Sr. Sub. Notes
11.13% due 1/15/11.................. 525 459,375
Comcast Cable Commerce, Inc.
Sr. Notes
6.88% due 6/15/09................... 159 181,349
CSC Holdings, Inc.
Sr. Debentures
7.88% due 2/15/18................... 1,050 1,126,125
Insight Communications Co., Inc.
Sr. Sub. Disc. Notes
12.25% due 2/15/06(5)............... 375 316,875
Liberty Media Corp.
Sr. Notes
3.50% due 9/25/06................... 541 550,903
News America Holdings, Inc.
Guaranteed Sr. Notes
7.75% due 12/01/45.................. 226 274,846
News America, Inc.
Guaranteed Sr. Debentures
7.63% due 11/30/28.................. 346 411,295
TCI Communications, Inc.
Notes
6.88% due 2/15/06................... 271 293,555
TCI Communications, Inc.
Debentures
7.88% due 8/01/13................... 578 696,879
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 3/15/23................... 310 386,656
Time Warner, Inc.
Guaranteed Sr. Notes
6.63% due 5/15/29................... 346 361,538
Time Warner, Inc.
Guaranteed Sr. Notes
6.88% due 6/15/18................... 165 185,240
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 3/01/11.................. 275 294,250
----------
5,884,737
----------
Business Services -- 0.4%
Allied Waste North America, Inc.
Secured Sr. Notes
5.75% due 2/15/11*.................. 344 332,820
USA Waste Services, Inc.
Sr. Notes
7.00% due 7/15/28................... 331 367,987
Waste Management, Inc.
Guaranteed Sr. Notes
7.38% due 5/15/29................... 170 196,930
----------
897,737
----------
16
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
-----------------------------------------------------------------
BONDS & NOTES (continued)
Chemicals -- 0.4%
Dow Chemical Co.
Debentures
8.55% due 10/15/09................... $299 $ 367,944
Huntsman International, LLC
Sr. Secured Notes
11.63% due 10/15/10.................. 450 472,500
ICI North America, Inc.
Debentures
8.88% due 11/15/06................... 42 48,436
----------
888,880
----------
Communication Equipment -- 0.2%
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 1/15/10.................... 625 559,375
----------
Computer Software -- 0.2%
Computer Sciences Corp.
Notes
6.75% due 6/15/06.................... 321 351,817
----------
Computers & Business Equipment -- 0.4%
International Business Machines Corp.
Sr. Debentures
6.22% due 8/01/27.................... 675 730,708
Xerox Corp.
Sr. Notes
7.63% due 6/15/13.................... 225 239,625
----------
970,333
----------
Conglomerate -- 0.6%
Brascan Corp.
Bonds
7.38% due 3/01/33.................... 663 764,405
Tyco International Group SA
Guaranteed Sr. Notes
6.38% due 2/15/06.................... 319 339,638
Tyco International Group SA
Guaranteed Notes
6.88% due 1/15/29.................... 359 376,784
----------
1,480,827
----------
Electronics -- 0.1%
Amkor Technology, Inc.
Sr. Notes
7.13% due 3/15/11*................... 300 300,000
----------
Energy Services -- 0.1%
Hanover Compressor Co.
Sub. Notes
zero coupon due 3/31/07.............. 375 288,750
----------
Energy Sources -- 1.6%
Amerada Hess Corp.
Notes
6.65% due 8/15/11.................... 638 704,950
Amerada Hess Corp.
Notes
7.30% due 8/15/31.................... 325 347,135
Chesapeake Energy Corp.
Guaranteed Sr. Notes
7.75% due 1/15/15.................... 275 304,563
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------------------
Energy Sources (continued)
Conoco, Inc.
Sr. Notes
6.95% due 4/15/29............................ $ 348 $ 405,612
Occidental Petroleum Corp.
Sr. Notes
6.50% due 4/01/05............................ 530 555,851
Pennzoil Co.
Debentures
10.25% due 11/01/05.......................... 132 148,104
Plains All American Pipeline LP
Sr. Notes
5.63% due 12/15/13*.......................... 638 664,317
XTO Energy, Inc.
Senior Notes
7.50% due 4/15/12............................ 338 401,920
----------
3,532,452
----------
Financial Services -- 13.9%
Alamosa Delaware, Inc.
Guaranteed Sr. Disc. Notes
12.00% due 7/31/05(5)........................ 900 819,000
Athena Neurosciences Finance, LLC
Guaranteed Sr. Notes
7.25% due 2/21/08............................ 400 401,500
Bear Stearns Commercial Mtg. Securities, Inc.
Commercial Mtg. Certificates,
Series 2004 PWR4, Class A4
4.72% due 2/11/41............................ 1,900 1,939,672
Bear Stearns Commercial Mtg. Securities, Inc.
Commercial Mtg. Certificates,
Series 2001-Top4, Class A3
5.61% due 11/15/33........................... 100 109,847
Bear Stearns Commercial Mtg. Securities, Inc.
Commercial Mtg. Certificates,
Series 1999-C1, Class A2
6.02% due 2/14/31............................ 525 586,676
Bear Stearns Cos., Inc.
Notes
3.25% due 3/25/09............................ 622 616,562
Boeing Capital Corp.
Sr. Notes
6.10% due 3/01/11............................ 288 319,891
Bunge Ltd. Finance Corp.
Notes
4.38% due 12/15/08*.......................... 237 245,326
Capital One Bank
Notes
4.25% due 12/01/08........................... 351 361,067
Capital One Bank
Sr. Notes
5.13% due 2/15/14............................ 289 293,820
Capital One Financial Corp.
Notes
6.25% due 11/15/13........................... 319 340,513
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 6/15/09*.......................... 500 586,250
17
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
CIT Group, Inc.
Sr. Notes
4.75% due 12/15/10................. $ 190 $ 197,186
Conoco Funding Co.
Guaranteed Notes
6.35% due 10/15/11................. 303 347,792
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates,
Series 1999-CG3, Class A1B
7.34% due 10/10/32................. 1,000 1,183,021
Duke Capital Corp.
Sr. Notes
5.50% due 3/01/14.................. 533 538,800
Duke Capital Corp.
Sr. Notes, Series A
6.25% due 7/15/05.................. 264 277,184
Ford Motor Credit Co.
Global Notes
5.63% due 10/01/08................. 503 519,159
Ford Motor Credit Co.
Sr. Notes
5.80% due 1/12/09.................. 859 885,614
FPL Group Capital, Inc.
Notes
3.25% due 4/11/06.................. 528 540,348
General Electric Capital Corp.
Notes
6.13% due 2/22/11.................. 541 610,481
General Electric Capital Corp.
Bonds
6.75% due 3/15/32.................. 324 374,274
General Motors Acceptance Corp.
Notes
2.00% due 5/18/04(6)............... 568 566,830
General Motors Acceptance Corp.
Notes
4.50% due 7/15/06.................. 462 477,409
General Motors Acceptance Corp.
Notes
7.75% due 1/19/10.................. 534 605,374
Glencore Funding, LLC
Guaranteed Notes
6.00% due 4/15/14*................. 526 522,239
Goldman Sachs Group, Inc.
Sr. Notes
6.13% due 2/15/33.................. 383 394,910
Honda Auto Receivables Owner Trust
Asset Backed Notes, Series 2002-4,
Class A4
2.70% due 4/01/04.................. 2,000 2,031,578
Honda Auto Receivables Owner Trust
Asset Backed Notes, Series 2003-3,
Class A4
2.77% due 11/21/08................. 1,000 1,016,071
Household Finance Corp.
Notes
3.38% due 2/21/06.................. 415 425,655
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------------------
Financial Services (continued)
J.P. Morgan Chase & Co.
Notes
4.50% due 11/15/10.......................... $ 578 $ 596,213
J.P. Morgan Chase & Co.
Notes
5.25% due 5/30/07........................... 541 584,205
Lehman Brothers Holdings, Inc.
Notes
4.80% due 3/13/14........................... 533 536,369
MassMutual Global Funding II
Notes
3.25% due 6/15/07*.......................... 381 392,020
Morgan Stanley Global
Sub. Notes
4.75% due 4/01/14........................... 678 664,867
Morgan Stanley Dean Witter & Co.
Bonds
6.75% due 4/15/11........................... 321 370,791
Morgan Stanley Dean Witter Capital I
Commercial Mtg. Certificates,
Series 2002-Top1, Class A4
6.66% due 2/15/33........................... 200 231,535
Morgan Stanley Dean Witter Capital I
Commercial Mtg. Certificates,
Series 2000-LIF2, Class A2
7.20% due 4/01/04........................... 2,125 2,510,702
National Rural Utilities Cooperative Finance
Corp.
Secured Collateral Trust Bonds
3.88% due 2/15/08........................... 578 597,125
NiSource Finance Corp.
Guaranteed Sr. Notes
7.63% due 11/15/05.......................... 311 338,357
Pemex Project Funding Master Trust
Guaranteed Notes
8.63% due 2/01/22........................... 627 724,185
PPL Capital Funding, Inc.
Guaranteed Notes
4.33% due 3/01/09*.......................... 532 537,129
Pricoa Global Funding
Notes
3.90% due 12/15/08*......................... 85 86,955
Principal Life Global Funding
Secured Notes
5.13% due 6/28/07*.......................... 482 517,968
Qwest Capital Funding, Inc.
Guaranteed Notes
7.90% due 8/15/10........................... 675 607,500
Residential Funding Mtg. Securities II
Series 2004 HI1, Class A3
3.05% due 7/25/16........................... 1,100 1,104,975
Textron Financial Corp.
Notes, Series E
2.75% due 6/01/06........................... 534 539,342
TIAA Global Markets, Inc.
Notes
4.13% due 11/15/07*......................... 321 337,904
18
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
Unilever Capital Corp.
Guaranteed Bonds
5.90% due 11/15/32............. $310 $ 322,848
Verizon Global Funding Corp.
Sr. Notes
7.75% due 12/01/30............. 361 438,537
Washington Mutual Finance Corp.
Sr. Notes
6.25% due 5/15/06.............. 529 575,193
Washington Mutual, Inc.
Sub. Notes
4.63% due 4/01/14.............. 283 277,340
Washington Mutual, Inc.
Notes
4.00% due 1/15/09.............. 258 263,486
Wells Fargo & Co.
Sub. Notes
5.13% due 9/01/12.............. 306 322,731
-----------
31,612,326
-----------
Food, Beverage & Tobacco -- 0.6%
Anheuser-Busch Cos., Inc.
Sr. Debentures
5.95% due 1/15/33.............. 310 330,946
Cargill, Inc.
Notes
3.63% due 3/04/09*............. 265 266,716
Pepsi Bottling Group, Inc.
Guaranteed Sr. Notes, Series B
7.00% due 3/01/29.............. 619 732,727
-----------
1,330,389
-----------
Forest Products -- 0.9%
Domtar, Inc.
Notes
5.38% due 12/01/13............. 108 109,094
Georgia-Pacific Corp.
Debentures
7.75% due 11/15/29............. 300 304,500
Georgia-Pacific Corp.
Debentures
8.63% due 4/30/25.............. 425 447,312
Weyerhaeuser Co.
Notes
5.50% due 3/15/05.............. 528 547,683
Weyerhaeuser Co.
Notes
6.13% due 3/15/07.............. 532 582,012
-----------
1,990,601
-----------
Health Services -- 0.5%
HCA, Inc.
Sr. Notes
6.95% due 5/01/12.............. 425 463,557
Highmark, Inc.
Notes
6.80% due 8/15/13*............. 263 294,735
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------------
Health Services (continued)
Tenet Healthcare Corp.
Sr. Notes
5.00% due 7/01/07...................... $325 $ 296,563
----------
1,054,855
----------
Household Products -- 0.2%
Procter & Gamble Co.
Bonds
5.50% due 2/01/34...................... 347 349,510
----------
Insurance -- 1.1%
ING Security Life Institutional Funding
Notes
2.70% due 2/15/07*..................... 578 585,074
Kingsway America, Inc.
Sr. Notes
7.50% due 2/01/14*..................... 319 323,061
Markel Capital Trust I
Guaranteed Capital, Series B
8.71% due 1/01/46...................... 599 644,092
Nationwide Mutual Insurance Co.
Bonds
6.60% due 4/15/34*..................... 643 641,560
Prudential Financial, Inc.
Notes
4.75% due 4/01/14...................... 263 263,352
----------
2,457,139
----------
Leisure & Tourism -- 0.7%
American Airlines, Inc.
Pass-Thru Certificates, Series 2001-1,
Class A2
6.82% due 5/23/11...................... 550 508,054
Atlas Air, Inc.
Pass-Thru Certificates, Series 1999-1,
Class A-2
6.88% due 1/02/11...................... 400 368,979
Atlas Air, Inc.
Pass-Thru Certificates, Series 1999-1,
Class B
7.63% due 1/02/15...................... 221 128,114
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1998-1,
Class A
6.65% due 9/15/17...................... 60 58,334
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1997-4,
Class A
6.90% due 1/02/18...................... 83 83,048
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1999-1,
Class C
6.95% due 8/02/09...................... 327 283,124
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1998-3,
Class C1
7.08% due 11/01/04..................... 13 12,701
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10..................... 75 78,844
19
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
United Airlines, Inc.
Pass-Thru Certificates, Series 2000-2,
Class A1
7.03% due 10/01/10..................... $ 8 $ 7,097
----------
1,528,295
----------
Machinery -- 0.2%
Dana Corp.
Notes
9.00% due 8/15/11...................... 300 360,750
----------
Medical Products -- 0.3%
Johnson & Johnson
Debentures
4.95% due 5/15/33...................... 619 587,003
----------
Metals & Mining -- 0.1%
Alcan, Inc.
Bonds
6.13% due 12/15/33..................... 87 91,738
Owens-Brockway Glass Container, Inc.
Guaranteed Sr. Secured Notes
8.88% due 2/15/09...................... 225 243,000
----------
334,738
----------
Pharmaceuticals -- 0.5%
GlaxoSmithKline Capital, Inc.
Bonds
5.38% due 4/15/34...................... 635 629,001
Pfizer, Inc.
Global Notes
2.50% due 3/15/07...................... 578 583,695
----------
1,212,696
----------
Real Estate Companies -- 0.2%
EOP Operating LP
Guaranteed Notes
4.75% due 3/15/14...................... 565 557,582
----------
Real Estate Investment Trusts -- 0.2%
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 4/01/14*..................... 425 435,625
----------
Retail Stores -- 1.8%
Fortune Brands, Inc
Notes
2.88% due 12/01/06..................... 541 549,288
Fred Meyer, Inc.
Notes
7.38% due 3/01/05...................... 541 568,712
J.C. Penney Co., Inc.
Debentures
7.13% due 11/15/23..................... 475 536,750
Rent-Way, Inc.
Sr. Secured Notes
11.88% due 6/15/10..................... 150 168,000
Safeway, Inc.
Notes
2.50% due 11/01/05..................... 541 543,805
Principal
Amount Value
Security Description (in thousands) (Note 2)
--------------------------------------------------------------
Retail Stores (continued)
Safeway, Inc.
Sr. Notes
7.00% due 9/15/07................. $635 $ 718,103
Wal-Mart Stores, Inc.
Sr. Notes
6.88% due 8/10/09................. 809 949,425
----------
4,034,083
----------
Telecommunications -- 2.3%
AT&T Corp.
Notes
6.00% due 3/15/09................. 370 399,087
AT&T Corp.
Sr. Notes
8.75% due 11/15/31................ 331 390,437
AT&T Wireless Services, Inc.
Sr. Notes
7.88% due 3/01/11................. 20 23,851
AT&T Wireless Services, Inc.
Sr. Notes
8.75% due 3/01/31................. 674 874,180
GTE Corp.
Debentures
5.50% due 1/15/09................. 379 410,893
Iridium, LLC
Guaranteed Sr. Notes, Series C
11.25% due 7/15/05+(1)............ 25 2,375
MJD Communications, Inc.
Sr. Sub. Notes, Series B
9.50% due 5/01/08................. 700 707,000
Nextel Communications, Inc.
Sr. Notes
7.38% due 8/01/15................. 875 947,188
Sprint Capital Corp.
Guaranteed Sr. Notes
6.13% due 11/15/08................ 396 436,507
US West Communications, Inc.
Debentures
7.13% due 11/15/43................ 750 675,000
Verizon Pennsylvania, Inc.
Notes, Series A
5.65% due 11/15/11................ 271 291,624
----------
5,158,142
----------
Transportation -- 1.2%
Burlington Northern Santa Fe Corp.
Debentures
8.13% due 4/15/20................. 492 612,101
CSX Corp.
Notes
2.75% due 2/15/06................. 257 259,225
FedEx Corp.
Notes
2.65% due 4/01/07*................ 610 609,294
Norfolk Southern Corp.
Sr. Notes
7.05% due 5/01/37................. 693 795,181
20
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------------------------
BONDS & NOTES (continued)
Transportation (continued)
Union Pacific Corp.
Sr. Notes
7.38% due 9/15/09......................... $441 $ 521,469
----------
2,797,270
----------
Utilities -- 5.1%
AES Corp.
Sr. Notes
7.75% due 3/01/14......................... 600 600,750
Alabama Power Co.
Sr. Notes
2.80% due 12/01/06........................ 541 547,200
Appalachian Power Co.
Sr. Notes, Series E
4.80% due 6/15/05......................... 643 666,091
Carolina Power & Light Co.
1st Mtg. Bonds
6.13% due 9/15/33......................... 325 343,289
Constellation Energy Group, Inc.
Notes, Series A
7.88% due 4/01/05......................... 541 573,913
Consumers Energy Co.
1st Mtg. Bonds, Series F
4.00% due 5/15/10......................... 267 264,039
Dominion Resources, Inc.
Sr. Notes, Series B
7.63% due 7/15/05......................... 530 568,684
Dynegy Holdings, Inc.
Sr. Notes
8.75% due 2/15/12......................... 700 661,500
Edison Mission Energy
Sr. Notes
9.88% due 4/15/11......................... 875 920,937
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 6/01/13......................... 375 347,813
FirstEnegy Corp.
Sr. Notes, Series A
5.50% due 11/15/06........................ 319 339,189
Georgia Power Co.
Sr. Notes, Series G
6.20% due 2/01/06......................... 643 691,163
Indianapolis Power & Light Co.
1st Mtg. Bonds
6.60% due 1/01/34*........................ 228 242,319
NRG Energy, Inc.
Guaranteed Sr. Secured Notes
8.00% due 12/15/13*....................... 600 619,500
Old Dominion Electric Cooperative 1st Mtg.
Bonds, Series A
5.68% due 12/01/28........................ 289 307,415
Panhandle Eastern Pipe Line Co.
Notes
2.75% due 3/15/07*........................ 339 340,464
Progress Energy, Inc.
Sr. Notes
6.75% due 3/01/06......................... 533 577,687
Principal
Amount Value
Security Description (in thousands) (Note 2)
-----------------------------------------------------------
Utilities (continued)
Reliant Energy Resources Corp.
Notes, Series B
8.13% due 7/15/05............. $ 283 $ 302,630
Reliant Resources, Inc.
Secured Notes
9.50% due 7/15/13............. 650 716,625
Southern California Edison Co.
1st Mtg. Bonds
8.00% due 2/15/07............. 381 437,084
TECO Energy, Inc.
Sr. Notes
7.50% due 6/15/10............. 48 51,720
Virginia Electric & Power Co.
Notes
4.10% due 12/15/08............ 381 393,746
Westar Energy, Inc.
1st Mtg. Bonds
7.88% due 5/01/07............. 267 304,380
Williams Cos., Inc.
Notes
8.75% due 3/15/32............. 700 742,000
-----------
11,560,138
-----------
Total Bonds & Notes
(cost $90,028,930)............ 91,068,014
-----------
FOREIGN BONDS & NOTES -- 4.8%
Banks -- 0.3%
European Investment Bank
Bonds
4.00% due 3/15/05............. 643 660,180
-----------
Broadcasting & Media -- 0.3%
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 12/15/08*(5)....... 1,000 610,000
-----------
Business Services -- 0.0%
SCL Terminal Aereo Santiago SA
Sr. Secured Notes
6.95% due 7/01/12*............ 85 94,595
-----------
Financial Services -- 0.6%
Coca Cola HBC Finance BV
Notes
5.13% due 9/17/13............. 271 282,009
Nationwide Building Society
Sr. Notes
2.63% due 1/30/07*............ 578 581,609
Rio Tinto Finance USA, Ltd.
Notes
2.63% due 9/30/08............. 535 523,970
-----------
1,387,588
-----------
Food, Beverage & Tobacco -- 0.2%
Cia Brasileira de Bebida
Notes
8.75% due 9/15/13*............ 390 428,025
-----------
21
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Forest Products -- 0.1%
Norske Skogindustrier ASA
Bonds
7.13% due 10/15/33*............. $202 $ 216,334
----------
Government Agency -- 1.2%
Korea Highway Corp.
Notes
4.88% due 4/17/14*.............. 234 231,702
Quebec Province Canada
Notes
5.00% due 7/17/09............... 643 696,185
Quebec Province Canada
Debentures
7.50% due 7/15/23............... 619 797,461
United Kingdom
Notes
2.25% due 7/08/08*.............. 749 733,413
United Mexican States
Notes
8.00% due 9/24/22............... 265 306,075
----------
2,764,836
----------
Insurance -- 0.2%
Fairfax Financial Holdings, Ltd.
Notes
7.75% due 7/15/37............... 100 90,000
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 300 309,000
----------
399,000
----------
Metals & Mining -- 0.6%
Crown European Holdings SA
Sr. Secured Notes
10.88% due 3/01/13.............. 375 436,875
Noranda, Inc.
Debentures
7.00% due 7/15/05............... 285 299,916
Noranda, Inc.
Sr. Notes
7.25% due 7/15/12............... 264 306,965
Placer Dome, Inc.
Bonds
6.45% due 10/15/35*............. 341 366,310
----------
1,410,066
----------
Telecommunications -- 0.9%
France Telecom SA
Sr. Notes
8.75% due 9/01/04............... 585 714,465
Koninklijke KPN NV
Sr. Notes
7.50% due 10/01/05.............. 439 475,259
Koninklijke KPN NV
Notes
8.00% due 10/01/10.............. 541 658,938
Telus Corp.
Notes
8.00% due 6/01/11............... 161 193,942
----------
2,042,604
----------
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------------
Utilities -- 0.4%
Calpine Canada Energy Finance, ULC
Guaranteed Sr. Notes
8.50% due 5/01/08................. $ 800 $ 592,000
Great Lakes Power, Inc.
Sr. Notes
8.30% due 3/01/05................. 267 281,646
-----------
873,646
-----------
Total Foreign Bonds & Notes
(cost $10,774,883)................. 10,886,874
-----------
U.S. GOVERNMENT OBLIGATIONS -- 6.5%
U.S. Treasury Bonds -- 5.8%
5.25% due 2/15/29.................. 1,091 1,153,392
5.38% due 2/15/31.................. 4,649 5,067,410
6.25% due 8/15/23.................. 2,868 3,410,118
6.88% due 8/15/25.................. 599 765,199
7.13% due 2/15/23.................. 711 924,328
7.25% due 8/15/22.................. 1,461 1,919,389
-----------
13,239,836
-----------
U.S. Treasury Notes -- 0.7%
4.00% due 2/15/14.................. 296 299,885
4.25% due 8/15/13.................. 885 917,081
5.00% due 2/15/11.................. 283 312,405
-----------
1,529,371
-----------
Total U.S. Government Obligations
(cost $14,491,163)................ 14,769,207
-----------
U.S. GOVERNMENT AGENCIES -- 49.0%
Federal Farm Credit Bank -- 1.7%
2.38% due 10/02/06................. 1,257 1,266,212
2.50% due 3/15/06.................. 1,394 1,413,980
4.38% due 4/15/05.................. 1,021 1,054,526
-----------
3,734,718
-----------
Federal Home Loan Bank -- 1.7%
1.88% due 6/15/06.................. 1,365 1,365,550
4.50% due 9/16/13.................. 985 1,007,609
5.25% due 8/15/06.................. 1,365 1,466,942
-----------
3,840,101
-----------
Federal Home Loan Mortgage Corporation -- 20.4%
2.00% due 2/23/06.................. 1,812 1,820,429
2.50% due 12/04/06................. 1,450 1,452,847
2.63% due 9/17/07.................. 856 859,649
2.85% due 2/23/07.................. 2,465 2,479,907
3.00% due 10/27/06................. 1,103 1,113,504
4.50% due 1/15/14.................. 1,120 1,137,431
4.50% due 11/01/18................. 3,337 3,384,134
4.50% due 2/01/19.................. 2,400 2,433,637
5.00% due 10/01/33................. 66 66,381
5.00% due 3/01/34.................. 3,400 3,419,536
5.00% due 3/01/34.................. 1,650 1,659,481
5.00% TBA due Apr.................. 3,900 3,918,283
5.50% due 2/01/18.................. 2,612 2,724,387
5.50% due 10/01/33................. 1,932 1,981,068
5.63% due 3/15/11.................. 764 852,576
6.00% due 2/01/32.................. 85 88,040
6.00% due 10/01/33................. 1,000 1,039,558
22
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands)/ (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal Home Loan Mortgage Corporation (continued)
6.00% due 11/01/33................ $ 2,000 $ 2,079,314
6.50% due 8/01/16................. 27 28,411
6.50% due 6/01/32................. 2,000 2,101,599
6.50% due 8/01/32................. 4,000 4,203,253
6.50% due 2/01/33................. 600 630,548
6.63% due 9/15/09................. 2,515 2,931,338
7.00% due 3/01/12................. 20 20,906
7.00% due 11/01/16................ 127 135,534
7.50% due 4/01/31................. 1,016 1,093,538
7.50% due 12/01/31................ 1,843 1,983,380
8.00% due 10/01/29................ 34 36,657
8.00% due 7/01/30................. 12 12,904
8.00% due 8/01/30................. 44 47,707
8.00% due 10/01/30................ 71 76,301
8.00% due 11/01/30................ 97 104,780
8.00% due 12/01/30................ 186 201,170
8.00% due 1/01/31................. 164 176,964
-----------
46,295,152
-----------
Federal National Mortgage Association -- 24.0%
2.20% due 12/30/05................ 1,203 1,208,274
2.50% due 5/12/06................. 1,368 1,369,964
4.38% due 9/15/12................. 2,228 2,278,057
4.50% due 6/01/18................. 979 992,390
5.00% due 6/01/18................. 2,794 2,874,731
5.00% due 9/01/18................. 945 972,929
5.00% due 10/01/18................ 943 970,640
5.00% due 10/01/18................ 949 976,325
5.00% due 11/01/18................ 1,600 1,646,433
5.00% due 11/01/33................ 66 65,862
5.00% due 3/01/34................. 4,100 4,122,277
5.50% due 12/01/33................ 11,877 12,175,799
5.50% due 12/01/33................ 3,162 3,241,915
5.50% due 3/01/34................. 1,200 1,230,157
6.00% due 12/01/16................ 1,559 1,642,796
6.00% due 5/01/17................. 289 304,413
6.00% due 3/01/33................. 4,355 4,534,070
6.00% due 8/01/33................. 3,300 3,436,014
6.18% due 7/01/08................. 19 20,607
6.27% due 11/01/07................ 51 56,178
6.30% due 1/01/08................. 19 20,464
6.31% due 2/01/08................. 185 200,796
6.34% due 1/01/08................. 18 19,639
6.43% due 1/01/08................. 19 20,533
6.50% due 3/01/17................. 800 851,069
6.50% due 4/01/29................. 103 108,289
6.50% due 2/01/32................. 1,105 1,160,846
6.50% due 7/01/32................. 427 448,677
6.63% due 11/15/30................ 1,629 1,942,848
6.85% due 6/01/07................. 10 11,105
7.00% due 9/01/10................. 3 3,173
7.00% due 7/01/11................. 1 1,116
7.00% due 11/01/11................ 3 2,843
7.00% due 5/01/12................. 3 3,584
Principal
Amount
(in thousands)/ Value
Security Description shares/warrants (Note 2)
----------------------------------------------------------------
Federal National Mortgage Association (continued)
7.00% due 5/01/12................. $ 1 $ 1,241
7.00% due 6/01/12................. 4 3,760
7.00% due 6/01/12................. 3 2,916
7.00% due 9/01/12................. 3 3,629
7.00% due 10/01/12................ 2 2,343
7.00% due 7/01/13................. 3 3,700
7.00% due 4/01/28................. 29 31,313
7.00% due 10/01/28................ 5 5,267
7.00% due 9/01/31................. 2,328 2,470,115
7.04% due 3/01/07................. 18 20,438
7.25% due 1/15/10................. 2,213 2,660,508
7.50% due 10/01/10................ 205 220,229
7.50% due 11/01/14................ 11 11,355
7.50% due 5/01/15................. 6 6,845
7.50% due 6/01/15................. 137 146,688
7.50% due 7/01/15................. 41 43,582
7.50% due 8/01/15................. 33 35,632
7.50% due 10/01/15................ 7 7406
------------
54,591,780
------------
Government National Mortgage Association -- 1.2%
6.50% due 6/15/29................. 201 212,069
6.50% due 7/15/32................. 2,074 2,189,597
7.00% due 12/15/22................ 124 133,074
7.00% due 8/15/29................. 141 150,604
8.00% due 4/15/30................. 56 61,501
------------
2,746,845
------------
Total U.S. Government Agencies
(cost $109,591,547).............. 111,208,596
------------
COMMON STOCK -- 0.0%
Health Services -- 0.0%
MEDIQ, Inc.(2)(4)................. 18 0
------------
Machinery -- 0.0%
Manitowoc Co., Inc................ 28 828
------------
Total Common Stock
(cost $8,616)..................... 828
------------
PREFERRED STOCK -- 0.0%
Machinery -- 0.0%
Fairfield Manufacturing Co., Inc.
11.75%(2)(3)(4).................. 28 0
------------
WARRANTS -- 0.0%
Communication Equipment -- 0.0%
Concentric Network Corp.
Expires 12/15/07(2)(4)........... 5 0
------------
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 $224,895,139).............. 227,933,519
------------
23
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.1%
Agreement with State Street Bank & Trust
Co., bearing interest at 0.93%, dated
3/31/04 to be repurchased 4/01/04 in the
amount of $7,071,183 and collateralized
by $6,790,000 of Federal National
Mortgage Association Notes, bearing
interest at 5.25% due 1/15/06 having
an approximate value of
$7,286,444@ (cost $7,071,000)............ $7,071 $ 7,071,000
------------
TOTAL INVESTMENTS --
(cost $231,966,139) (Note 5)............. 103.5% 235,004,519
Liabilities in excess of other assets....... (3.5) (7,956,876)
------ ------------
NET ASSETS -- 100.0% $227,047,643
====== ============
- --------
* 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 $12,861,264 representing 5.7%of net assets.
+ Non-income producing security
TBA --Securities purchased on a forward commitments basis with an approximate
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
(5) Security is a "step-up" bond where the coupon rate increases or steps up
at a predetermined rate. Rate shown reflects the increased rate.
(6) Security is a "floating rate" bond where the coupon rate fluctuates. The
rate steps up or down for each rate downgrade or upgrade. The rate
reflected is as of March 31, 2004.
@ The security or a portion thereof represents collateral for TBA.
See Notes to Financial Statements
24
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 37.3%
U.S. Treasury Bonds -- 7.8%
5.38% due 2/15/31.............. $18,250 $19,892,500
-----------
U.S. Treasury Notes -- 29.5%
2.63% due 3/15/09.............. 15,000 14,892,180
4.00% due 2/15/14.............. 60,000 60,787,500
-----------
75,679,680
-----------
Total U.S. Government Obligations
(cost $94,665,296)............ 95,572,180
-----------
U.S. GOVERNMENT AGENCIES -- 62.5%
Federal Farm Credit Bank -- 10.5%
2.50% due 3/15/06.............. 5,000 5,071,665
3.88% due 12/15/04............. 20,000 20,383,020
5.64% due 4/04/11.............. 500 558,355
6.00% due 3/07/11.............. 200 227,213
6.30% due 12/03/13............. 500 579,471
-----------
26,819,724
-----------
Federal Home Loan Mortgage Corporation -- 1.9%
6.00% due 11/01/13@............ 1,220 1,287,573
6.00% due 10/01/16............. 547 576,917
6.50% due 9/01/16.............. 486 516,735
7.00% due 11/01/31............. 547 580,246
7.50% due 6/01/25.............. 90 96,683
8.00% due 6/01/08.............. 29 30,430
8.25% due 7/01/06.............. 10 10,477
8.50% due 5/01/08.............. 10 10,149
9.50% due 4/01/20.............. 234 262,047
10.00% due 8/01/21............. 1,124 1,256,293
11.26% due 4/01/04(1).......... 136 155,303
-----------
4,782,853
-----------
Federal National Mortgage Association -- 1.5%
6.53% due 5/25/30.............. 2,750 2,978,722
7.50% due 7/01/26.............. 215 231,235
8.00% due 12/01/22............. 263 287,675
8.00% due 1/01/23.............. 23 25,360
8.00% due 1/01/23.............. 15 15,870
8.00% due 1/01/23.............. 155 169,497
11.00% due 2/01/15............. 0 43
11.50% due 9/01/19............. 35 40,011
-----------
3,748,413
-----------
Government National Mortgage Association -- 42.4%
4.50% due 5/15/18.............. 1,925 1,958,212
4.50% due 8/15/18.............. 2,882 2,932,242
4.50% due 9/15/18.............. 7,715 7,849,792
4.50% due 10/15/18............. 6,810 6,928,986
4.50% due 9/15/33.............. 4,857 4,761,951
4.50% due 9/15/33.............. 1,980 1,941,480
5.00% TBA due Apr.............. 9,000 9,061,875
5.00% due 4/15/18.............. 8,995 9,311,195
5.00% due 8/15/33.............. 1,000 1,008,239
5.00% due 8/15/33.............. 10,391 10,477,974
5.00% due 9/15/33.............. 1,578 1,590,769
5.00% due 10/15/33............. 618 623,558
5.50% due 11/15/32............. 29 30,204
5.50% due 3/15/33.............. 1,104 1,137,023
5.50% due 4/15/33.............. 1,080 1,111,677
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------
Government National Mortgage Association (continued)
5.50% due 4/15/33.... $ 432 $ 444,251
5.50% due 5/15/33.... 2,315 2,382,880
5.50% due 5/15/33.... 994 1,023,552
5.50% due 6/15/33.... 8,000 8,236,098
5.50% due 6/15/33.... 4,000 4,117,637
5.50% due 6/15/33.... 3,856 3,970,157
5.50% due 7/15/33.... 2,629 2,706,723
5.50% due 7/15/33.... 1,472 1,515,286
5.50% due 10/15/33... 3,954 4,070,733
5.50% due 12/15/33... 852 877,269
5.50% due 1/15/34.... 2,997 3,085,634
5.50% due 2/15/34.... 3,994 4,112,198
6.00% due 3/15/29.... 138 144,057
6.00% due 4/15/29.... 143 150,061
6.00% due 5/15/29.... 228 238,791
6.00% due 12/15/31... 855 894,095
6.50% due 2/15/29.... 52 55,337
6.50% due 5/15/31.... 143 150,589
6.50% due 6/15/31.... 186 196,127
6.50% due 7/15/31.... 302 318,853
6.50% due 8/15/31.... 326 344,247
6.50% due 9/15/31.... 367 387,076
6.50% due 10/15/31... 107 112,786
6.50% due 10/15/31... 936 987,854
6.50% due 11/15/31... 57 59,833
6.50% due 12/15/31... 84 88,639
6.50% due 1/15/32.... 116 122,125
6.50% due 2/15/32.... 1,444 1,524,927
6.50% due 2/15/32.... 1,224 1,292,199
6.50% due 6/15/32.... 570 602,289
7.00% due 7/15/23.... 117 125,976
7.00% due 10/15/23... 235 251,818
7.00% due 9/15/25.... 650 695,676
7.00% due 3/20/29.... 64 67,707
7.00% due 6/20/29.... 11 12,128
7.00% due 11/20/30... 299 317,480
7.50% due 4/15/17.... 29 31,558
7.50% due 8/15/23.... 49 52,619
7.50% due 8/15/23.... 132 142,924
7.50% due 8/15/23.... 164 177,680
7.50% due 8/15/23.... 135 146,180
7.50% due 9/15/23.... 337 364,504
7.50% due 9/15/23.... 1,044 1,129,964
7.50% due 10/15/23... 37 40,481
8.00% due 11/15/06... 2 2,206
8.00% due 2/15/08.... 3 3,023
9.00% due 12/15/16... 141 156,833
11.00% due 8/20/15... 1 690
11.00% due 9/20/15... 1 1,040
11.50% due 3/15/13... 27 31,342
11.50% due 6/15/13... 30 33,952
11.50% due 5/20/15... 4 5,010
12.50% due 9/15/14... 9 10,450
13.00% due 1/15/11... 5 5,265
13.00% due 2/15/11... 9 10,031
13.00% due 3/15/11... 0 399
13.00% due 4/15/11... 1 829
13.00% due 4/15/11... 4 4,875
25
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage Association (continued)
13.00% due 9/15/13........... $ 6 $ 6,977
13.00% due 10/20/14.......... 5 5,284
13.00% due 11/15/14.......... 1 1,131
13.00% due 2/20/15........... 3 3,209
13.50% due 2/15/13........... 14 16,331
15.00% due 1/15/12........... 1 709
15.00% due 2/15/12........... 1 1,640
15.00% due 6/15/12........... 15 17,712
15.00% due 9/15/12........... 1 954
15.50% due 8/15/11........... 6 7,088
15.50% due 9/15/11........... 44 53,046
16.00% due 11/15/11.......... 8 9,069
------------
108,883,270
------------
International Bank for Reconstruction and Development -- 0.1%
5.00% due 3/28/26.............. 350 372,766
------------
Private Export Funding Corp. -- 4.4%
5.87% due 7/31/08.............. 10,000 11,207,140
------------
Small Business Administration -- 1.5%
6.30% due 6/01/18.............. 3,595 3,936,029
------------
Student Loan Marketing Association -- 0.2%
5.25% due 3/15/06.............. 500 533,484
------------
Total U.S. Government Agencies
(cost $155,991,693)........... 160,283,679
------------
Total Investment Securities -- 99.8%
(cost $250,656,989)........... 255,855,859
------------
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.5%
State Street Bank & Trust Co. Joint
Repurchase Agreement@ (Note 2)..... $ 986 $ 986,000
UBS Warburg, LLC. Joint Repurchase
Agreement@ (Note 2)................ 8,000 8,000,000
------------
Total Repurchase Agreements
(cost $8,986,000).................. 8,986,000
------------
TOTAL INVESTMENTS --
(cost $259,642,989) (Note 5)....... 103.3% 264,841,859
Liabilities in excess of other assets. (3.3) (8,480,204)
------- ------------
NET ASSETS -- 100.00% $256,361,655
======= ============
- --------
TBA --Securities purchased on a forward commitment basis with an approximate
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 March 31, 2004;
maturity date reflects next reset date.
See Notes to Financial Statements
26
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004
Principal
Amount Value
Security Description (in thousands) (Note 2)
U.S. GOVERNMENT OBLIGATIONS -- 5.2%
U.S. Treasury Notes -- 5.2%
2.63% due 3/15/09 (cost $29,867,578). $30,000 $29,784,360
-----------
U.S. GOVERNMENT AGENCIES -- 84.1%
Federal Farm Credit Bank -- 2.7%
2.50% due 3/15/06@................... 15,000 15,214,995
-----------
Federal Home Loan Mortgage Corporation -- 0.1%
7.50% due 5/01/24.................... 24 25,677
7.50% due 6/01/25.................... 69 75,055
10.00% due 1/01/17................... 324 359,420
-----------
460,152
-----------
Federal National Mortgage Association -- 0.0%
7.00% due 9/01/10.................... 196 210,146
-----------
Government National Mortgage Association -- 81.1%
4.50% due 5/15/18.................... 3,849 3,916,425
4.50% due 6/15/18.................... 1,920 1,953,353
4.50% due 9/15/18.................... 5,781 5,881,362
4.50% due 10/15/18................... 7,788 7,923,495
4.50% due 8/15/33.................... 5,248 5,145,721
4.50% due 9/15/33.................... 5,591 5,481,747
5.00% due 3/15/18.................... 1,433 1,483,367
5.00% due 4/15/18.................... 13,940 14,429,975
5.00% due 5/15/18.................... 20,876 21,610,479
5.00% due 11/15/32................... 72 72,755
5.00% due 1/15/33.................... 25 24,811
5.00% due 5/15/33.................... 23 23,646
5.00% due 7/15/33.................... 1,413 1,424,676
5.00% due 8/15/33@................... 29,879 30,129,297
5.00% due 8/15/33.................... 4,023 4,056,832
5.00% due 8/15/33.................... 11,819 11,917,748
5.00% due 8/15/33@................... 16,775 16,914,966
5.00% due 8/15/33.................... 509 513,635
5.00% due 9/15/33.................... 993 1,001,095
5.00% due 9/15/33.................... 1,127 1,136,332
5.00% due 9/15/33@................... 993 1,001,061
5.00% due 9/15/33.................... 16,865 17,005,796
5.00% due 9/15/33.................... 30,102 30,353,646
5.00% due 10/15/33................... 11,497 11,593,410
5.00% due 10/15/33@.................. 63,489 64,020,259
5.00% due 10/15/33@.................. 21,732 21,914,165
5.00% TBA due Apr.................... 10,000 10,068,750
5.50% due 6/15/29.................... 14 13,998
5.50% due 12/15/32................... 1,788 1,840,474
5.50% due 1/15/33.................... 937 965,164
5.50% due 2/15/33.................... 630 649,684
5.50% due 2/15/33.................... 4,003 4,121,182
5.50% due 3/15/33.................... 31 32,280
5.50% due 3/15/33.................... 2,707 2,786,688
5.50% due 4/15/33.................... 1,056 1,087,428
5.50% due 4/15/33.................... 7,981 8,216,253
5.50% due 4/15/33.................... 5,860 6,025,235
5.50% due 5/15/33.................... 8,000 8,236,100
5.50% due 5/15/33.................... 7,347 7,563,690
5.50% due 5/15/33.................... 3,101 3,192,288
5.50% due 6/15/33.................... 18,822 19,377,354
5.50% due 7/15/33.................... 1,031 1,061,586
5.50% due 8/15/33.................... 504 518,642
5.50% due 8/15/33.................... 5,908 6,082,679
Principal
Amount Value
Security Description (in thousands) (Note 2)
Government National Mortgage Association (continued)
5.50% due 9/15/33.... $ 1,009 $ 1,038,948
5.50% due 10/15/33... 15,405 15,859,692
5.50% due 12/15/33... 12,871 13,250,661
5.50% due 12/15/33... 2,644 2,721,691
5.50% due 1/15/34.... 14,871 15,311,374
5.50% due 1/15/34.... 1,395 1,435,859
5.50% due 1/15/34.... 8,289 8,534,356
5.50% due 2/15/34.... 181 186,706
5.50% due 2/15/34.... 2,878 2,962,716
6.00% due 11/15/23... 11 11,893
6.00% due 1/15/24.... 14 14,534
6.00% due 12/15/28... 586 614,200
6.00% due 1/15/29.... 494 517,465
6.00% due 1/15/29.... 1,178 1,233,768
6.00% due 1/15/29.... 134 139,932
6.00% due 2/15/29.... 119 124,971
6.00% due 2/15/29.... 1,569 1,643,209
6.00% due 2/15/29.... 64 67,058
6.00% due 3/15/29.... 159 166,656
6.00% due 3/15/29.... 1,159 1,213,766
6.00% due 3/15/29.... 102 106,423
6.00% due 4/15/29.... 1,510 1,581,556
6.00% due 4/15/29.... 1,075 1,125,998
6.00% due 4/15/29.... 152 159,633
6.00% due 4/15/29.... 578 605,178
6.00% due 5/15/29.... 423 442,902
6.00% due 5/15/29.... 186 194,329
6.00% due 6/15/29.... 657 687,685
6.00% due 6/15/29.... 30 30,980
6.00% due 7/15/29.... 459 480,743
6.00% due 7/15/29.... 134 140,407
6.00% due 8/15/29.... 70 73,730
6.00% due 10/15/29... 288 302,097
6.00% due 4/15/31.... 46 48,512
6.00% due 7/15/31.... 81 84,369
6.00% due 10/15/31... 212 221,467
6.00% due 11/15/31... 2,067 2,161,299
6.00% due 11/15/31... 427 446,772
6.00% due 11/15/31... 972 1,016,025
6.00% due 12/15/31... 587 613,841
6.00% due 7/15/32.... 307 320,713
6.00% due 2/15/33.... 6,716 7,016,230
6.50% due 3/15/28.... 75 79,821
6.50% due 8/15/28.... 184 194,289
6.50% due 12/15/28... 4 4,386
6.50% due 1/15/29.... 15 15,348
6.50% due 2/15/29.... 6 6,463
6.50% due 3/15/29.... 320 338,192
6.50% due 4/15/29.... 6 5,814
6.50% due 5/15/29.... 37 39,307
6.50% due 5/15/29.... 5 5,695
6.50% due 6/15/29.... 124 131,333
6.50% due 7/15/29.... 17 17,959
6.50% due 10/15/29... 10 10,981
6.50% due 8/15/31.... 715 755,314
6.50% due 9/15/31.... 63 66,936
6.50% due 10/15/31... 936 987,855
6.50% due 11/15/31... 493 520,627
6.50% due 11/15/31... 274 289,756
27
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage Association (continued)
6.50% due 12/15/31... $ 924 $ 975,943
6.50% due 2/15/32.... 1,541 1,626,891
6.50% due 5/15/32.... 227 240,027
6.50% due 5/15/32.... 2,717 2,868,708
6.50% due 5/15/32.... 1,369 1,445,346
6.50% due 5/15/32.... 622 657,005
6.50% due 6/15/32.... 68 71,602
6.50% due 6/15/32.... 328 345,804
7.00% due 3/15/23.... 224 240,694
7.00% due 1/15/24.... 2 2,548
7.00% due 3/15/24.... 2 2,443
7.00% due 7/15/25.... 12 12,939
7.00% due 9/15/25.... 282 302,118
7.00% due 1/20/29.... 147 156,183
7.00% due 2/20/29.... 29 30,192
7.00% due 6/20/29.... 57 60,140
7.00% due 7/20/29.... 208 221,152
7.00% due 9/20/29.... 19 20,411
7.00% due 10/20/29... 40 42,466
7.00% due 11/20/29... 15 16,367
7.00% due 3/20/30.... 17 17,865
7.00% due 6/20/30.... 36 38,438
7.00% due 8/20/30.... 120 127,188
7.00% due 9/20/30.... 89 93,990
7.00% due 10/20/30... 132 140,695
8.00% due 11/15/26... 802 879,611
8.00% due 12/15/29... 55 60,064
8.00% due 1/15/30.... 3 3,645
8.00% due 4/15/30.... 71 77,949
8.00% due 5/15/30.... 15 16,076
8.00% due 8/15/30.... 157 171,664
8.50% due 3/15/17.... 72 80,049
8.50% due 5/15/21.... 95 104,849
8.50% due 12/15/22... 188 208,990
Principal
Amount Value
Security Description (in thousands) (Note 2)
Government National Mortgage Association (continued)
8.50% due 1/15/23................... $ 228 $ 252,603
8.50% due 9/15/24................... 132 146,244
9.00% due 7/15/16................... 142 159,172
9.00% due 10/15/16.................. 41 46,228
------------
463,114,248
------------
Small Business Administration -- 0.2%
6.30% due 6/01/18................... 1,198 1,312,010
------------
Total U.S. Government Agencies
(cost $472,295,677)................ 480,311,551
------------
Total Investment Securities -- 89.3%
(cost $502,163,255)................ 510,095,911
------------
REPURCHASE AGREEMENTS -- 12.2%
State Street Bank & Trust Co. Joint
Repurchase Agreement@ (Note 2)..... 767 767,000
UBS Warburg, LLC. Joint Repurchase
Agreement@ (Note 2)................ 69,000 69,000,000
------------
Total Repurchase Agreements
(cost $69,767,000)................. 69,767,000
------------
TOTAL INVESTMENTS --
(cost $571,930,255) (Note 5)....... 101.5% 579,862,911
Liabilities in excess of other assets. (1.5) (8,848,348)
------- ------------
NET ASSETS -- 100.0% $571,014,563
======= ============
- --------
TBA --Securities purchased on a forward commitment basis with an approximate
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
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004
Principal
Amount Value
Security Description (in thousands) (Note 2)
BONDS & NOTES -- 42.8%
Aerospace & Military Technology -- 0.0%
Condor Systems, Inc.
Guaranteed Sr. Sub. Notes, Series B
11.88% due 5/01/09+(1)(2).................. $ 25 $ 1,750
--------
Apparel & Textiles -- 0.1%
Warnaco, Inc.
Sr. Notes
8.88% due 6/15/13.......................... 50 53,875
--------
Automotive -- 0.2%
BREED Technologies, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 4/15/08+(1)(2)................... 500 0
Diamond Triumph Auto Glass, Inc. Guaranteed
Sr. Sub. Notes
9.25% due 4/01/08.......................... 100 94,000
General Motors Corp.
Sr. Notes
7.13% due 7/15/13.......................... 125 136,552
--------
230,552
--------
Banks -- 0.3%
J.P. Morgan Chase & Co.
Notes
5.35% due 3/01/07.......................... 250 270,615
LaBranche & Co., Inc.
Sr. Notes
9.50% due 8/15/04.......................... 50 50,625
--------
321,240
--------
Broadcasting & Media -- 5.1%
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 2/15/12.......................... 150 159,750
American Lawyer Media, Inc.
Guaranteed Sr. Notes, Series B
9.75% due 12/15/07......................... 150 146,250
Cablevision Systems Corp.
Sr. Notes
8.00% due 4/15/12*......................... 250 249,375
Charter Communications Holdings, LLC
Sr. Sub. Disc. Notes
9.92% due 4/01/11(3)....................... 125 103,437
Charter Communications Holdings, LLC
Sr. Sub. Notes
9.63% due 11/15/09......................... 925 781,625
Charter Communications Holdings, LLC
Sr. Notes
10.00% due 5/15/11......................... 75 62,250
Charter Communications Holdings, LLC
Sr. Sub. Notes
10.25% due 1/15/10......................... 25 21,188
Charter Communications Holdings, LLC
Sr. Sub. Notes
10.75% due 10/01/09........................ 450 393,750
Charter Communications Holdings, LLC
Sr. Sub. Notes
11.13% due 1/15/11......................... 425 371,875
Principal
Amount Value
Security Description (in thousands) (Note 2)
Broadcasting & Media (continued)
Cinemark, Inc.
Sr. Disc. Notes
9.75% due 3/15/14*(3)................. $250 $ 155,000
CSC Holdings, Inc.
Sr. Notes
6.75% due 4/15/12*.................... 75 75,750
CSC Holdings, Inc.
Sr. Debentures
7.63% due 7/15/18..................... 700 738,500
CSC Holdings, Inc.
Sr. Debentures
7.88% due 2/15/18..................... 175 187,687
Haights Cross Operating Co.
Guaranteed Sr. Notes
11.75% due 8/15/11.................... 100 108,125
Insight Communications Co., Inc.
Sr. Sub. Disc. Notes
12.25% due 2/15/11(3)................. 575 485,875
Paxson Communications Corp.
Guaranteed Sr. Sub. Disc. Notes
12.25% due 1/15/09(3)................. 275 233,750
Pegasus Satellite Communications, Inc.
Sr. Sub. Disc. Notes
13.50% due 3/01/07(3)................. 175 129,500
Rogers Cable, Inc.
Bonds
8.75% due 5/01/32..................... 50 59,375
Rogers Cablesystems, Ltd.
Guaranteed Sr. Sub. Notes
11.00% due 12/01/15................... 200 232,000
Salem Communications Holding Corp.
Guaranteed Sr. Sub. Notes
7.75% due 12/15/10.................... 125 132,031
Salem Communications Holding Corp.
Guaranteed Sr. Sub. Notes, Series B
9.00% due 7/01/11..................... 50 54,563
Susquehanna Media Co.
Sr. Sub. Notes
7.38% due 4/15/13..................... 100 106,125
Young Broadcasting, Inc.
Sr. Sub. Notes
8.75% due 1/15/14*.................... 125 128,750
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 3/01/11.................... 250 267,500
----------
5,384,031
----------
Business Services -- 0.7%
Allied Waste North America, Inc.
Sr. Notes
7.88% due 4/15/13..................... 75 81,937
Allied Waste North America, Inc.
Guaranteed Sr. Notes
9.25% due 9/01/12..................... 100 113,750
ERICO International Corp.
Sr. Sub. Notes
8.88% due 3/01/12*.................... 50 52,375
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
BONDS & NOTES (continued)
Business Services (continued)
HydroChem Industrial Services, Inc.
Guaranteed Sr. Sub. Notes, Series B
10.38% due 8/01/07.................. $150 $ 150,000
Mobile Mini, Inc.
Sr. Notes
9.50% due 7/01/13................... 100 109,000
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 9/01/10*................. 200 212,000
----------
719,062
----------
Chemicals -- 1.4%
Associated Materials, Inc.
Sr. Disc. Notes
11.25% due 3/01/14*(3).............. 225 136,688
Equistar Chemicals LP
Sr. Notes
10.63% due 5/01/11.................. 175 188,562
Freeport McMoRan Resources
Sr. Notes
7.00% due 2/15/08................... 125 131,250
Huntsman International, LLC
Guaranteed Sr. Notes
9.88% due 3/01/09................... 225 247,500
Huntsman International, LLC
Sr. Sub. Notes
10.13% due 7/01/09.................. 150 175,629
Huntsman International, LLC
Sr. Secured Notes
11.63% due 10/15/10................. 125 131,250
IMC Global, Inc.
Sr. Notes
10.88% due 8/01/13.................. 75 93,938
KCS Energy, Inc.
Sr. Notes
7.13% due 4/01/12*.................. 50 50,875
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 5/15/11.................. 150 165,750
Westlake Chemical Corp.
Sr. Notes
8.75% due 7/15/11................... 125 138,125
----------
1,459,567
----------
Communication Equipment -- 0.4%
American Tower Escrow Corp.
Disc. Notes
zero coupon due 8/01/08............. 150 105,375
Rural Cellular Corp.
Sr. Sub. Notes
9.63% due 5/15/08................... 125 114,062
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 1/15/10................... 225 201,375
----------
420,812
----------
Computers & Business Equipment -- 0.2%
Xerox Corp.
Sr. Notes
7.13% due 6/15/10................... 50 53,000
Xerox Corp.
Notes
7.20% due 4/01/16................... 25 26,000
Principal
Amount Value
Security Description (in thousands) (Note 2)
Computers & Business Equipment (continued)
Xerox Corp.
Sr. Notes
7.63% due 6/15/13................ $125 $133,125
--------
212,125
--------
Education -- 0.1%
KinderCare Learning Centers, Inc.
Sr. Sub. Notes, Series B
9.50% due 2/15/09................ 57 57,902
--------
Electronics -- 0.4%
Amkor Technology, Inc.
Sr. Notes
7.13% due 3/15/11*............... 100 99,750
Amkor Technology, Inc.
Sr. Notes
7.75% due 5/15/13................ 50 51,000
Amkor Technology, Inc.
Sr. Sub. Notes
9.25% due 2/15/08................ 100 110,250
ON Semiconductor Corp.
Guaranteed Sr. Secured Notes
12.00% due 3/15/10............... 49 60,515
Sanmina-SCI Corp.
Guaranteed Sr. Secured Notes
10.38% due 1/15/10............... 75 88,500
--------
410,015
--------
Energy Services -- 0.7%
Hanover Compressor Co.
Sub. Notes
zero coupon due 3/31/07.......... 375 288,750
Hanover Compressor Co.
Sr. Notes
8.63% due 12/15/10............... 50 53,750
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 6/01/11................ 181 181,098
Trico Marine Services, Inc.
Sr. Notes
8.88% due 5/15/12(6)............. 300 156,000
Universal Compression, Inc.
Sr. Notes
7.25% due 5/15/10................ 100 107,250
--------
786,848
--------
Energy Sources -- 2.0%
Chesapeake Energy Corp.
Sr. Notes
6.88% due 1/15/16................ 50 52,500
Chesapeake Energy Corp.
Sr. Notes
7.50% due 9/15/13................ 50 55,250
Chesapeake Energy Corp.
Guaranteed Sr. Notes
7.75% due 1/15/15................ 25 27,688
Chesapeake Energy Corp.
Guaranteed Sr. Notes
9.00% due 8/15/12................ 25 28,906
CITGO Petroleum Corp.
Sr. Notes
11.38% due 2/01/11............... 100 116,750
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
------------------------------------------------------------------------
BONDS & NOTES (continued)
Energy Sources (continued)
Colorado Interstate Gas Co.
Sr. Debentures
6.85% due 6/15/37........................... $ 150 $ 153,750
Costilla Energy, Inc.
Sr. Notes
10.25% due 10/01/06+(1)(2).................. 500 0
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 4/15/14*.......................... 50 50,734
Encore Acquisition Co.
Guaranteed Sr. Notes
8.38% due 6/15/12........................... 100 110,000
Exco Resources, Inc.
Guaranteed Sr. Notes
7.25% due 1/15/11*.......................... 75 77,438
Mission Energy Holding Co.
Sr. Secured Notes
13.50% due 7/15/08.......................... 975 1,004,250
North American Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11*......................... 75 75,750
Roseton Danskammer
Guaranteed Pass-Thru Certificates, Series B
7.67% due 11/08/16.......................... 150 135,750
Southern Natural Gas Co.
Sr. Notes
8.88% due 3/15/10........................... 125 138,750
Westport Resources Corp.
Guaranteed Sr. Sub. Notes
8.25% due 11/01/11.......................... 100 111,250
----------
2,138,766
----------
Entertainment Products -- 0.2%
Steinway Musical Instruments, Inc.
Guaranteed Sr. Notes
8.75% due 4/15/11........................... 175 189,438
----------
Financial Services -- 11.4%
Alamosa Delaware, Inc.
Guaranteed Sr. Disc. Notes
12.00% due 7/31/09(3)....................... 493 448,630
Athena Neurosciences Finance, LLC
Guaranteed Sr. Notes
7.25% due 2/21/08........................... 600 602,250
Bear Island Paper Co., LLC
Sr. Secured Notes, Series B
10.00% due 12/01/07......................... 250 226,250
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 2/15/12.......................... 175 182,000
Boeing Capital Corp.
Sr. Notes
5.75% due 2/15/07........................... 250 271,547
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 6/15/09*......................... 500 586,250
Commercial Mtg. Asset Trust Commercial Mtg.
Certificates, Series 1999-C1, Class C
7.35% due 4/01/04........................... 1,200 1,443,194
Principal
Amount Value
Security Description (in thousands) (Note 2)
Financial Services (continued)
Couche-Tard U.S. LP
Sr. Sub. Notes
7.50% due 12/15/13*............................... $ 25 $ 26,750
Credit Suisse First Boston USA, Inc.
Global Sr. Notes
4.63% due 1/15/08................................. 250 264,839
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates, Series
1998-CG1, Class S
0.85% due 4/01/04(4)IO............................ 8,299 215,518
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates, Series
1998-CF2, Class S
1.01% due 4/01/04(4)IO............................ 6,833 231,776
EIRCOM Funding
Sr. Sub. Notes
8.25% due 8/15/13................................. 150 167,250
ESI Tractebel Acquisition Corp.
Guaranteed Secured Bonds, Series B
7.99% due 12/30/11................................ 238 246,330
First Union Residential Securitization Trans, Inc.
Mtg. Certificates, Series
1998-A, Class B2
7.00% due 8/25/28................................. 164 163,724
Ford Motor Credit Co.
Notes
6.50% due 1/25/07................................. 250 267,051
General Electric Capital Corp.
Notes
5.00% due 6/15/07................................. 250 269,018
General Motors Acceptance Corp.
Notes
6.85% due 6/17/04................................. 250 252,795
Hilcorp Energy I LP/Hilcorp Finance Co.
Sr. Notes
10.50% due 9/01/10*............................... 200 222,000
Household Finance Corp.
Notes
5.75% due 1/30/07................................. 250 272,283
Huntsman Advanced Materials, LLC
Sr. Secured Notes
11.00% due 7/15/10*............................... 75 84,750
Jet Equipment Trust
Sr. Notes, Series 1995, Class A
8.24% due 5/01/15*+(1)............................ 136 113,325
LaBranche & Co., Inc.
Sr. Sub. Notes
12.00% due 3/02/07................................ 150 157,875
Madison River Capital, LLC/
Madison River Finance Corp.
Sr. Notes, Series B
13.25% due 3/01/10................................ 500 545,000
Mid-State Trust
Asset Backed Notes, Series 6,
Class A1
7.34% due 7/01/35................................. 897 977,982
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
11.38% due 4/01/13(3)............................. 300 220,500
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
-----------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
PCA, LLC
Guaranteed Sr. Notes
11.88% due 8/01/09............ $175 $ 193,375
PDVSA Finance, Ltd.
Bonds
6.80% due 11/15/08............ 275 269,500
PDVSA Finance, Ltd.
Notes
8.50% due 11/16/12............ 100 97,000
PNC Mtg. Securities Corp.
Commercial Mtg. Certificates,
Series 1998-5, Class CB3
6.74% due 4/01/04(4).......... 300 299,498
PNC Mtg. Securities Corp.
Commercial Mtg. Certificates,
Series 1998-4, Class 3B3
6.75% due 5/25/28............. 236 237,181
PNC Mtg. Securities Corp.
Commercial Mtg. Certificates,
Series 1999-1, Class CB2
6.79% due 4/01/04(4).......... 396 407,623
PNC Mtg. Securities Corp.
Commercial Mtg. Certificates,
Series 1998-4, Class CB3
6.85% due 4/01/04(4).......... 335 337,340
PNC Mtg. Securities Corp.
Commercial Mtg. Certificates,
Series 1992-2, Class DB3
6.91% due 4/01/04(4).......... 402 417,039
Px Escrow Corp.
Sr. Sub. Disc. Notes
9.63% due 2/01/06(3).......... 125 102,188
Qwest Capital Funding, Inc.
Guaranteed Notes
7.25% due 2/15/11............. 225 193,500
Qwest Capital Funding, Inc.
Guaranteed Notes
7.63% due 8/03/21............. 475 399,000
Qwest Capital Funding, Inc.
Notes
7.75% due 2/15/31............. 50 41,000
Qwest Capital Funding, Inc.
Guaranteed Notes
7.90% due 8/15/10............. 350 315,000
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 6/01/10............ 175 190,750
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
12.88% due 10/15/08........... 75 88,500
US West Capital Funding, Inc.
Guaranteed Notes
6.88% due 7/15/28............. 75 58,125
-----------
12,105,506
-----------
Food, Beverage & Tobacco -- 0.3%
Del Monte Corp.
Sr. Sub. Notes
8.63% due 12/15/12............ 75 84,375
Doane Pet Care Co.
Sr. Sub. Notes
9.75% due 5/15/07............. 50 44,125
Principal
Amount Value
Security Description (in thousands) (Note 2)
Food, Beverage & Tobacco (continued)
Doane Pet Care Co.
Guaranteed Sr. Notes
10.75% due 3/01/10.................. $ 50 $ 52,125
Fleming Cos., Inc.
Guaranteed Sr. Sub. Notes, Series D
10.63% due 7/31/07+(1).............. 150 187
Smithfield Foods, Inc.
Sr. Notes, Series B
7.75% due 5/15/13................... 100 110,000
Smithfield Foods, Inc.
Sr. Notes, Series B
8.00% due 10/15/09.................. 50 55,875
----------
346,687
----------
Forest Products -- 1.3%
Constar International, Inc.
Sr. Sub. Notes
11.00% due 12/01/12................. 50 42,750
Crown Cork & Seal Co., Inc.
Notes
8.00% due 4/15/23................... 250 241,250
FiberMark, Inc.
Sr. Notes
10.75% due 4/15/11(6)............... 125 70,625
Georgia-Pacific Corp.
Debentures
7.75% due 11/15/29.................. 350 355,250
Georgia-Pacific Corp.
Debentures
8.63% due 4/30/25................... 150 157,875
Georgia-Pacific Corp.
Debentures
9.13% due 7/01/22................... 125 129,219
Pliant Corp.
Sr. Secured Disc. Notes
11.13% due 6/15/09*(3).............. 100 80,000
Speciality Paperboard, Inc.
Sr. Notes
9.38% due 10/15/06(6)............... 550 306,625
----------
1,383,594
----------
Health Services -- 1.1%
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13*................. 50 53,250
HCA, Inc.
Sr. Notes
6.95% due 5/01/12................... 200 218,144
IASIS Healthcare Corp.
Guaranteed Sr. Sub. Notes
8.50% due 10/15/09.................. 75 80,250
National Nephrology Associates, Inc.
Sr. Sub. Notes
9.00% due 11/01/11*................. 25 29,000
Pediatric Services of America, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 4/15/08(2)............... 25 25,000
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
BONDS & NOTES (continued)
Health Services (continued)
Psychiatric Solutions, Inc.
Guaranteed Sr. Sub. Notes
10.63% due 6/15/13..................... $100 $ 114,250
Team Health, Inc.
Sr. Sub. Notes
9.00% due 4/01/12*..................... 100 97,250
Tenet Healthcare Corp.
Sr. Notes
5.00% due 7/01/07...................... 200 182,500
Tenet Healthcare Corp.
Sr. Notes
6.50% due 6/01/12...................... 75 64,688
Tenet Healthcare Corp.
Notes
7.38% due 2/01/13...................... 50 45,125
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13*.................... 75 76,875
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11*................... 125 135,000
----------
1,121,332
----------
Insurance -- 0.3%
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 6/15/13*.................... 250 282,500
LNR Property Corp.
Sr. Sub. Notes
7.63% due 7/15/13...................... 75 79,500
----------
362,000
----------
Leisure & Tourism -- 3.2%
American Airlines, Inc.
Pass-Thru Certificates, Series 2001-1,
Class A2
6.82% due 5/23/11...................... 200 184,747
American Airlines, Inc.
Pass-Thru Certificates, Series 2001-2,
Class C
7.80% due 10/01/06..................... 300 282,180
Atlas Air, Inc.
Pass-Thru Certificates, Series 1999-1,
Class A-2
6.88% due 1/02/11...................... 125 115,306
Atlas Air, Inc.
Pass-Thru Certificates, Series 1999-1,
Class A-1
7.20% due 1/02/19...................... 133 124,873
Atlas Air, Inc.
Pass-Thru Certificates, Series 1999-1,
Class B
7.63% due 1/02/15...................... 663 384,341
Atlas Air, Inc.
Pass-Thru Certificates, Series 2000-1
Class A
8.71% due 1/02/20...................... 87 82,860
Principal
Amount Value
Security Description (in thousands) (Note 2)
Leisure & Tourism (continued)
Bally Total Fitness Holding Corp.
Sr. Notes
10.50% due 7/15/11..................... $ 50 $ 47,000
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1997-4,
Class A
6.90% due 1/02/18...................... 167 166,096
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1999-1,
Class C
6.95% due 8/02/09...................... 147 127,023
Continental Airlines, Inc.
Pass-Thru Certificates, Series 1999-2,
Class C1
7.73% due 3/15/11...................... 47 38,587
Continental Airlines, Inc.
Secured Pass-Thru Certificates, Series
2000-2, Class B
8.31% due 10/02/19..................... 140 123,678
Courtyard by Marriott II
Sr. Secured Notes, Series B
10.75% due 2/01/08..................... 150 150,375
Delta Air Lines, Inc.
Pass-Thru Certificates, Series 2002-1,
Class C
7.78% due 1/02/12...................... 167 135,432
Hollywood Casino Shreveport/Shreveport
Capital Corp.
Guaranteed Sr. Secured Notes
13.00% due 8/01/06+(1)................. 400 284,000
John Q Hammons Hotels LP
1st Sr. Mtg. Notes, Series B
8.88% due 5/15/12...................... 75 83,437
Mandalay Resort Group
Sr. Notes
6.38% due 12/15/11*.................... 75 79,125
Prime Hospitality Corp.
Sr. Sub. Notes, Series B
8.38% due 5/01/12...................... 50 52,750
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10..................... 185 194,481
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 9/15/11*..................... 150 153,000
United Air Lines, Inc.
Pass-Thru Certificates, Series 2000,
Class A-2
7.73% due 7/01/10...................... 75 67,688
United Air Lines, Inc.
Pass-Thru Certificates, Series 2000-1,
Class A-1
7.78% due 1/01/14...................... 63 57,078
Waterford Gaming, LLC
Sr. Notes
8.63% due 9/15/12*..................... 188 201,160
Worldspan LP
Sr. Notes
9.63% due 6/15/11...................... 200 206,500
----------
3,341,717
----------
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
BONDS & NOTES (continued)
Machinery -- 0.4%
Briggs & Stratton Corp.
Guaranteed Sr. Notes
8.88% due 3/15/11.................. $100 $ 123,500
Dana Corp.
Notes
9.00% due 8/15/11.................. 180 216,450
Dresser, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 4/15/11.................. 75 81,750
Exide Corp.
Sr. Notes
10.00% due 4/15/05+(1)............. 225 46,125
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 6/01/07+(1)............. 100 4,000
----------
471,825
----------
Medical Products -- 0.1%
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 2/15/12*................. 100 101,500
----------
Metals & Mining -- 1.2%
CSN Islands VII Corp.
Guaranteed Notes
10.75% due 9/12/08*................ 150 159,750
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*................ 175 171,500
Eagle-Picher, Inc.
Sr. Notes
9.75% due 9/01/13.................. 125 136,875
MMI Products, Inc.
Sr. Sub. Notes, Series B
11.25% due 4/15/07................. 100 83,500
NGC Corp. Capital Trust I
Guaranteed Sub. Notes, Series B
8.32% due 6/01/27.................. 800 636,000
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 77,250
----------
1,264,875
----------
Real Estate Investment Trusts -- 0.6%
National Health Investors, Inc.
Notes
7.30% due 7/16/07.................. 200 207,000
Omega Healthcare Investors, Inc.
Sr. Notes
6.95% due 8/01/07.................. 50 52,500
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 4/01/14*................. 75 76,875
RFS Partnership LP
Guaranteed Sr. Notes
9.75% due 3/01/12.................. 50 54,250
Principal
Amount Value
Security Description (in thousands) (Note 2)
Real Estate Investment Trusts (continued)
Senior Housing Properties Trust
Sr. Notes
8.63% due 1/15/12..................... $252 $ 286,020
----------
676,645
----------
Restaurants -- 0.2%
Tricon Global Restaurants, Inc.
Sr. Notes
8.88% due 4/15/11..................... 125 156,094
----------
Retail Stores -- 1.5%
Collins & Aikman Floor Cover
Guaranteed Sr. Sub. Notes
9.75% due 2/15/10..................... 75 80,250
Host Marriott LP
Sr. Notes
7.13% due 11/01/13.................... 50 51,875
J.C. Penney Co., Inc.
Notes
6.88% due 10/15/15.................... 250 275,625
J.C. Penney Co., Inc.
Debentures
7.13% due 11/15/23.................... 200 226,000
Jostens Holding Corp.
Sr. Disc. Notes
10.25% due 12/01/13(3)................ 190 124,450
Rent-Way, Inc.
Sr. Secured Notes
11.88% due 6/15/10.................... 175 196,000
Rite Aid Corp.
Sr. Debentures
7.70% due 2/15/27..................... 175 160,125
Rite Aid Corp.
Guaranteed Sr. Secured Notes
8.13% due 5/01/10..................... 50 53,500
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11.................... 100 123,000
Sealy Mattress Co.
Sr. Sub. Notes
8.25% due 6/15/14*.................... 25 25,158
Service Corp. International
Sr. Notes
6.75% due 4/01/16*.................... 100 100,500
Suburban Propane Partners LP
Sr. Notes
6.88% due 12/15/13*................... 125 130,000
----------
1,546,483
----------
Telecommunications -- 4.4%
AirGate PCS, Inc.
Sr. Sub. Secured Notes
9.38% due 9/01/09..................... 373 352,798
Alaska Communications Holdings, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 5/15/09..................... 275 269,500
American Cellular Corp.
Sr. Notes, Series B
10.00% due 8/01/11.................... 100 96,000
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
BONDS & NOTES (continued)
Telecommunications (continued)
Cincinnati Bell, Inc.
Notes
7.25% due 6/15/23......................... $ 25 $ 24,750
Cincinnati Bell, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 1/15/14......................... 25 24,500
Dobson Communications Corp.
Sr. Notes
10.88% due 7/01/10........................ 200 177,000
FairPoint Communications, Inc.
Sr. Sub. Notes
12.50% due 5/01/10........................ 250 280,000
Insight Midwest LP/ Insight Capital, Inc.
Sr. Notes
10.50% due 11/01/10....................... 25 26,875
Insight Midwest LP/Insight Capital, Inc.
Sr. Sub. Notes
9.75% due 10/01/09........................ 25 26,063
iPCS, Inc.
Sr. Disc. Notes
14.00% due 7/15/10+(1).................... 550 148,500
IWO Holdings, Inc.
Guaranteed Sr. Notes
14.00% due 1/15/11........................ 1,300 312,000
LCI International, Inc.
Sr. Notes
7.25% due 6/15/07......................... 400 366,000
MJD Communications, Inc.
Sr. Sub. Notes, Series B
9.50% due 5/01/08......................... 325 328,250
Nextel Communications, Inc.
Sr. Notes
7.38% due 8/01/15......................... 375 405,937
PanAmSat Corp.
Notes
6.38% due 1/15/08......................... 125 129,844
PanAmSat Corp.
Guaranteed Sr. Notes
8.50% due 2/01/12......................... 50 52,250
Telewest Communications, PLC
Sr. Disc. Notes
9.25% due 4/15/09(3)...................... 150 77,250
TSI Telecommunications Services, Inc.
Guaranteed Sr. Sub. Notes
12.75% due 2/01/09........................ 50 54,750
Ubiquitel Operating Co.
Sr. Notes
9.88% due 3/01/11*........................ 75 73,125
United States West Communications, Inc.
Debentures
7.25% due 10/15/35........................ 450 416,250
US Unwired, Inc.
Guaranteed Sr. Sub. Disc. Notes, Series B
13.38% due 11/01/09(3).................... 825 771,375
US West Communications, Inc.
Debentures
7.13% due 11/15/43........................ 300 270,000
----------
4,683,017
----------
Principal
Amount Value
Security Description (in thousands) (Note 2)
Transportation -- 0.1%
Overseas Shipholding Group, Inc.
Sr. Notes
7.50% due 2/15/24.................. $ 75 $ 75,937
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 5/01/09.................. 50 54,938
--------
130,875
--------
Utilities -- 4.9%
AES Corp.
Sr. Secured Notes
8.75% due 5/15/13*................. 155 170,500
AES Corp.
Sr. Sub. Debentures
8.88% due 11/01/27................. 550 533,500
AES Drax Energy, Ltd.
Guaranteed Sr. Sub. Secured Notes,
Series B
11.50% due 8/30/10+(1)............. 725 3,625
Cincinnati Bell Telephone Co.
Notes
7.18% due 12/15/23................. 50 47,500
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23................. 225 213,750
Dynegy Holdings, Inc.
Sr. Notes
8.75% due 2/15/12.................. 100 94,500
Edison Mission Energy
Sr. Notes
7.73% due 6/15/09.................. 100 96,500
Edison Mission Energy
Sr. Notes
9.88% due 4/15/11.................. 150 157,875
Edison Mission Energy
Sr. Notes
10.00% due 8/15/08................. 175 184,188
El Paso Natural Gas Co.
Debentures
8.63% due 1/15/22.................. 450 468,000
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 6/01/13.................. 475 440,562
Mirant Americas Generation, LLC
Sr. Notes
7.20% due 10/01/08+(1)(8).......... 225 166,500
Mirant Americas Generation, LLC
Sr. Notes
7.63% due 5/01/06+(1)(8)........... 75 55,500
Mirant Americas Generation, LLC
Sr. Notes
8.30% due 5/01/11+(1)(8)........... 625 460,937
Mirant Americas Generation, LLC
Sr. Notes
8.50% due 10/01/21+(1)(8).......... 450 333,000
NRG Energy, Inc.
Guaranteed Sr. Secured Notes
8.00% due 12/15/13*................ 175 180,688
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands)** (Note 2)
BONDS & NOTES (continued)
Utilities (continued)
Reliant Resources, Inc.
Sr. Secured Notes
9.25% due 7/15/10................... $ 200 $ 217,000
Reliant Resources, Inc.
Secured Notes
9.50% due 7/15/13................... 300 330,750
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 7/15/18*.................. 125 106,875
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 7/15/12................... 100 118,500
Williams Cos., Inc.
Notes
8.75% due 3/15/32................... 725 768,500
-----------
5,148,750
-----------
Total Bonds & Notes
(cost $43,986,435).................. 45,226,883
-----------
FOREIGN BONDS & NOTES -- 31.5%
Broadcasting & Media -- 0.2%
CF Cable TV, Inc.
Guaranteed Secured Sr. Notes
9.13% due 7/15/07................... 50 52,505
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 6/15/14*(3).............. 300 183,000
-----------
235,505
-----------
Government Agency -- 28.2%
Australia Commonwealth
Bonds
7.50% due 7/15/05................... AUD 620 486,163
Canadian Government
Bonds
5.75% due 6/01/29................... CAD 420 352,535
Canadian Government
Bonds
5.75% due 9/01/06................... CAD 615 504,022
Deutsche Bundesrepublik
Bonds
4.00% due 7/04/09................... EUR 110 140,749
Deutsche Bundesrepublik
Bonds
5.63% due 1/04/28................... EUR 120 166,180
Federal Republic of Brazil
Bonds
2.06% due 4/15/04................... 1,025 896,875
Federal Republic of Brazil
Bonds
8.00% due 4/15/14................... 1,648 1,606,436
Federal Republic of Brazil
Bonds
8.25% due 1/20/34................... 180 153,000
Federal Republic of Brazil
Bonds
8.88% due 4/15/24................... 275 251,625
Principal
Amount Value
Security Description (in thousands)** (Note 2)
Government Agency (continued)
Federal Republic of Brazil
Bonds
10.13% due 5/15/27......... $ 125 $ 126,500
Federal Republic of Brazil
Global Notes
10.25% due 6/17/13......... 900 965,250
Federal Republic of Brazil
Bonds
11.00% due 8/17/40......... 1,215 1,297,620
Federal Republic of Brazil
Global Bonds
12.00% due 4/15/10......... 150 174,375
Federal Republic of Brazil
Notes
14.50% due 10/15/09........ 250 318,875
Federal Republic of Brazil
Notes
11.00% due 1/11/12......... 600 668,100
Federal Republic Of Germany
Bonds
4.50% due 8/18/06.......... EUR 255 329,351
Kingdom of Sweden
Bonds
5.00% due 1/28/09.......... SEK 3,000 424,762
Republic of Bulgaria
Bonds, Series A
2.00% due 7/28/04.......... 324 319,276
Republic of Bulgaria
Bonds
8.25% due 1/15/15.......... 100 122,500
Republic of Chile
Notes
1.52% due 1/28/08(7)....... 150 150,187
Republic of Chile
Notes
6.88% due 4/28/09.......... 200 229,860
Republic of Colombia
Bonds
10.38% due 1/28/33......... 125 142,937
Republic of Colombia
Notes
10.75% due 1/15/13......... 450 540,675
Republic of Colombia
Bonds
11.75% due 2/25/20......... 300 384,000
Republic of Ecuador
Bonds
7.00% due 8/15/04.......... 725 645,250
Republic of El Salvador
Bonds
7.75% due 1/24/23.......... 200 224,000
Republic of Greece
Sr. Notes
4.65% due 4/19/07.......... EUR 300 390,836
Republic of Italy
Bonds
5.25% due 12/15/05......... EUR 100 129,213
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands)** (Note 2)
FOREIGN BONDS & NOTES (continued)
Government Agency (continued)
Republic of Italy
Bonds
5.25% due 11/01/29............ EUR 110 $ 142,849
Republic of Panama
Global Bonds
9.38% due 1/16/23............. 25 28,187
Republic of Panama
Bonds
9.63% due 2/08/11............. 400 476,000
Republic of Peru
Bonds
5.00% due 3/01/07............. 182 168,350
Republic of Peru
Guaranteed Global Bonds
9.13% due 2/21/12............. 305 345,412
Republic of Peru
Notes
9.88% due 2/06/15............. 75 88,088
Republic of Peru
Bonds
4.50% due 3/07/05............. 100 88,000
Republic of Turkey
Notes
8.00% due 2/14/34............. 270 284,850
Republic of Turkey
Notes
9.50% due 1/15/14............. 130 153,400
Republic of Turkey
Notes
11.00% due 1/14/13............ 590 748,194
Republic of Turkey
Bonds
11.75% due 6/15/10............ 625 798,437
Republic of Uruguay
Bonds
7.50% due 3/15/15............. 75 64,688
Republic of Venezuela
Debentures
2.13% due 6/18/04............. 762 718,529
Republic of Venezuela
Bonds
9.25% due 9/15/27............. 550 489,225
Republic of Venezuela
Bonds
9.38% due 1/13/34............. 100 88,250
Russian Federation
Debentures
3.00% due 5/14/08............. 975 899,437
Russian Federation
Bonds
7.50% due 3/31/07*(3)......... 875 876,094
Russian Federation
Bonds
8.25% due 3/31/10............. 1,400 1,589,000
Russian Federation
Bonds
5.00% due 3/31/07............. 2,600 2,603,900
Principal
Amount Value
Security Description (in thousands)** (Note 2)
Government Agency (continued)
Spanish Government
Bonds
5.15% due 7/30/09............... EUR 468 $ 630,639
Spanish Government
Bonds
6.15% due 1/31/13............... EUR 196 281,742
Ukraine Government
Notes
6.88% due 3/04/11*.............. 250 256,250
United Kingdom
Notes
5.00% due 3/07/08............... 100 186,603
United Kingdom
Bonds
6.25% due 11/25/10.............. GBP 70 140,345
United Kingdom
Bonds
7.50% due 12/07/06.............. 152 300,450
United Mexican States
Notes
1.84% due 4/13/04............... 143 143,858
United Mexican States
Notes
5.88% due 1/15/14............... 200 207,700
United Mexican States
Notes
6.38% due 1/16/13............... 600 649,800
United Mexican States
Notes
6.63% due 3/03/15............... 825 898,425
United Mexican States
Notes
7.50% due 1/14/12............... 1,175 1,365,937
United Mexican States
Bonds
8.13% due 12/30/19.............. 445 528,438
United Mexican States
Bonds
8.30% due 8/15/31............... 425 499,375
United Mexican States
Notes
8.38% due 1/14/11............... 525 638,137
United Mexican States
Notes
9.88% due 2/01/10............... 275 353,650
-----------
29,873,391
-----------
Insurance -- 0.3%
Fairfax Financial Holdings, Ltd.
Notes
7.75% due 7/15/37............... 50 45,000
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 250 257,500
-----------
302,500
-----------
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Metals & Mining -- 0.2%
Crown European Holdings SA
Sr. Secured Notes
10.88% due 3/01/13................ $ 90 $ 104,850
Vitro SA de CV
Notes
11.75% due 11/01/13*.............. 75 71,250
-----------
176,100
-----------
Pharmaceuticals -- 0.6%
Abbott Japan Co. Ltd
Guaranteed Bonds
1.05% due 11/06/08................ 65,000 631,271
-----------
Telecommunications -- 0.0%
Empresa Brasielera de Telecom SA
Guaranteed Notes
11.00% due 12/15/08*.............. 25 27,000
-----------
Utilities -- 2.0%
Calpine Canada Energy Finance, ULC
Guaranteed Sr. Notes
8.50% due 5/01/08................. 2,750 2,035,000
Companhia De Saneamento Basico do
Estado de Sao Paulo
Notes
12.00% due 6/20/08*............... 75 78,000
-----------
2,113,000
-----------
Total Foreign Bonds & Notes
(cost $29,089,406)................ 33,358,767
-----------
U.S. GOVERNMENT OBLIGATIONS -- 11.0%
U.S. Treasury Bonds -- 4.2%
5.38% due 2/15/31.................. 3,000 3,270,000
6.13% due 11/15/27................. 500 589,883
6.25% due 5/15/30.................. 500 603,652
-----------
4,463,535
-----------
U.S. Treasury Notes -- 6.8%
3.50% due 11/15/06................. 1,000 1,042,305
5.00% due 2/15/11.................. 2,000 2,207,812
5.00% due 8/15/11.................. 585 644,620
5.88% due 11/15/04................. 3,000 3,089,064
6.88% due 5/15/06.................. 177 196,325
-----------
7,180,126
-----------
Total U.S. Government Obligations
(cost $11,029,882)................ 11,643,661
-----------
U.S. GOVERNMENT AGENCIES -- 3.1%
Federal Farm Credit Bank -- 0.5%
5.45% due 12/11/13................ 500 545,971
-----------
Federal Home Loan Mortgage
Corporation -- 0.2%
6.50% due 5/01/29................. 28 29,638
7.00% due 6/01/29................. 31 32,725
8.50% due 5/01/08................. 58 62,690
10.00% due 5/15/20................ 46 45,840
11.57% due 4/01/04 IO............. 32 548
-----------
171,441
-----------
Principal
Amount
(in thousands)/ Value
Security Description Shares (Note 2)
Federal National Mortgage
Association -- 2.2%
0.44% due 4/01/04 IO.............. $ 4,480 $ 68,411
0.53% due 4/01/04 IO.............. 1,920 21,549
0.85% due 4/01/04 IO.............. 4,320 176,968
1.37% due 4/01/04 IO.............. 2,314 30,042
5.50% due 1/01/29................. 21 21,657
5.50% due 6/01/29................. 255 261,848
6.00% due 2/01/32................. 315 327,907
6.63% due 9/15/09................. 1,000 1,166,540
7.50% due 1/01/30................. 46 49,059
7.50% due 9/01/30................. 23 24,712
8.00% due 11/01/28................ 74 80,304
8.80% due 1/25/19................. 96 105,435
10.40% due 4/25/19................ 16 17,668
13.00% due 11/15/15............... 16 18,558
----------
2,370,658
----------
Government National Mortgage Association -- 0.2%
7.50% due 7/15/27................. 41 43,730
7.50% due 10/15/27................ 137 147,237
----------
190,967
----------
Total U.S. Government Agencies
(cost $3,059,992)................. 3,279,037
----------
COMMON STOCK -- 0.4%
Financial Services -- 0.0%
Ono Finance, PLC(2)................ 100 0
----------
Machinery -- 0.1%
NES Rentals Holding, Inc........... 19,435 174,915
----------
Telecommunications -- 0.3%
AirGate PCS, Inc................... 15,419 231,270
Dobson Communications Corp......... 270 780
IMPSAT Fiber Networks, Inc.+....... 9,294 64,407
----------
296,457
----------
Total Common Stock
(cost $887,971)................... 471,372
----------
PREFERRED STOCK -- 1.0%
Broadcasting & Media -- 0.3%
Paxson Communications Corp.
14.25%(5)......................... 26 234,000
Pegasus Communications Corp. 6.50%. 2,300 99,188
----------
333,188
----------
Communication Equipment -- 0.4%
Rural Cellular Corp. 11.38%(5)..... 325 289,250
Rural Cellular Corp. 12.25%(5)..... 210 156,450
----------
445,700
----------
Financial Services -- 0.0%
TCR Holdings, Class B(2)........... 570 6
TCR Holdings, Class C(2)........... 314 3
TCR Holdings, Class D(2)........... 827 8
TCR Holdings, Class E(2)........... 1,711 17
----------
34
----------
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Shares/Warrants/
Principal
Amount Value
Security Description (in thousands)** (Note 2)
PREFERRED STOCK (continued)
Retail Stores -- 0.2%
General Nutrition Centers
Series 12.00%*(2)(9)................. $ 100 $ 105,500
Rent-Way, Inc.(2)(9).................. 3 25,000
-----------
130,500
-----------
Telecommunications -- 0.1%
Alamosa Holdings, Inc. 7.50%.......... 208 97,074
-----------
Total Preferred Stock
(cost $815,542)...................... 1,006,496
-----------
RIGHTS -- 0.0%
Government Agency -- 0.0%
United Mexico States - C(2)........... 1,400,000 24,500
United Mexico States - E(2)........... 1,400,000 10,500
United Mexico States - D(2)........... 1,400,000 17,500
-----------
52,500
-----------
Total Rights
(cost $0)............................ 52,500
-----------
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...................... 1,000 0
-----------
Forest Products -- 0.0%
Berry Plastics Corp.
Expires 4/15/04(2)................... 500 0
-----------
Telecommunications -- 0.0%
GT Group Telecom, Inc.
Expires 2/1/10+(2)................... 150 2
Leap Wireless International, Inc.
Expires 4/15/10+(2).................. 500 0
Leap Wireless International, Inc.
Expires 4/15/10+(2).................. 350 0
-----------
2
-----------
Total Warrants
(cost $10,032)....................... 377
-----------
Total Investment Securities -- 89.8%
(cost $88,879,260)................... 95,039,093
-----------
SHORT-TERM SECURITIES -- 0.8%
Time Deposit with State Street Bank &
Trust Co.
(cost $860,000)...................... 860 860,000
-----------
Principal
Amount Value
Security Description (in thousands)** (Note 2)
REPURCHASE AGREEMENTS -- 3.2%
State Street Bank & Trust Co. Joint
Repurchase Agreement (Note 2)...... $ 365 $ 365,000
UBS Warburg, LLC. Joint Repurchase
Agreement (Note 2)................. 3,000 3,000,000
------------
Total Repurchase Agreements
(cost $3,365,000).................. 3,365,000
------------
TOTAL INVESTMENTS --
(cost $93,104,260)(Note 5)......... 93.9% 99,264,093
Other assets less liabilities......... 6.1 6,474,753
------ ------------
NET ASSETS -- 100.0% $105,738,846
====== ============
- --------
* 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 $6,478,285 which represents 6.1% of net assets.
** In United States dollars unless otherwise indicated
AUD --Australian Dollar
CAD --Canadian Dollar
EUR --Euro
GBP --Pound Sterling
SEK --Swedish Krona
IO Interest only securities.
+ Non-income producing security.
(1) Bond in default.
(2) Fair valued security; see Note 2.
(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) Variable rate security -- the rate reflected is as of March 31, 2004;
maturity date reflects next reset date.
(5) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(6) Subsequent to March 31, 2004, bond is in default.
(7) Security is a "floating rate" bond where the coupon rate fluctuates. The
rate steps up or down for each rate downgrade or upgrade. The rate
reflected is as of March 31, 2004.
(8) Company has filed Chapter 11 bankruptcy.
(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 2. 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 March
31, 2004, the Strategic Bond Fund held the following restricted securities:
Value as a
Acquisition Acquisition Market % of
Name Date Share/Par Cost Value Net Assets
---- ----------- --------- ----------- ------- ----------
Rent-Way, Inc.,
Preferred Stock. 05/29/2003 3 25,000 25,000 0.02%
General Nutrition
Centers
Series 12.00%
Preferred Stock. 12/18/2003 100 100,600 105,500 0.01
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Allocation of investment by country as a percentage of net assets as of March
31, 2004.
United States. 61.9%
Brazil........ 6.2
Russia........ 5.6
Mexico........ 5.1
Canada........ 3.2
Turkey........ 1.8
Venezuela..... 1.2
Columbia...... 1.0
Spain......... 0.9
Germany....... 0.6
Japan......... 0.6
Peru.......... 0.6
United Kingdom 0.6
Ecuador....... 0.6
Australia..... 0.5
Panama........ 0.5
Chile......... 0.4
Greece........ 0.4
Sweden........ 0.4
Bulgaria...... 0.4
Cayman Islands 0.2
Ireland....... 0.2
Belgium....... 0.2
El Salvador... 0.2
Italy......... 0.2
Ukraine....... 0.2
France........ 0.1
Uruguay....... 0.1
----
93.9%
====
Open Forward Foreign Currency Contracts
Unrealized/
Contract In Delivery Appreciation/
to Deliver Exchange For Date (Depreciation)
------------------------------
EUR 1,800,000 USD...... 2,182,410 05/06/2004 $(28,087)
CAD 1,120,000 USD...... 835,946 05/06/2004 (17,956)
--------
Net Unrealized Appreciation (Depreciation) $(46,043)
========
- --------
CAD -- Canadian Dollar
EUR -- Euro
USD -- United States Dollar
See Notes to Financial Statements
40
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004
Principal
Amount Value
Security Description (in thousands) (Note 2)
--------------------------------------------------------------------
BONDS & NOTES -- 86.4%
Aerospace & Military Technology -- 0.1%
Condor Systems, Inc.
Guaranteed Sr. Sub. Notes, Series B
11.88% due 5/01/09+(1)(3)............... $ 500 $ 35,000
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes, Series B
12.00% due 9/30/08...................... 500 330,625
----------
365,625
----------
Apparel & Textiles -- 0.1%
Warnaco, Inc.
Sr. Notes
8.88% due 6/15/13....................... 350 377,125
----------
Automotive -- 0.5%
Diamond Triumph Auto Glass, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 4/01/08....................... 695 653,300
General Motors Corp.
Sr. Notes
7.13% due 7/15/13....................... 750 819,314
----------
1,472,614
----------
Banks -- 0.1%
LaBranche & Co., Inc.
Sr. Notes
9.50% due 8/15/04....................... 375 379,688
----------
Broadcasting & Media -- 12.1%
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 2/15/12*...................... 975 1,038,375
American Lawyer Media, Inc.
Guaranteed Sr. Notes, Series B
9.75% due 12/15/07...................... 1,050 1,023,750
Cablevision Systems Corp.
Sr. Notes
8.00% due 4/15/12*...................... 1,650 1,645,875
Charter Communications Holdings, LLC
Sr. Sub. Disc. Notes
9.92% due 4/01/11(2).................... 3,375 2,792,812
Charter Communications Holdings, LLC
Sr. Sub. Notes
9.63% due 11/15/09...................... 4,850 4,098,250
Charter Communications Holdings, LLC
Sr. Notes
10.00% due 5/15/11...................... 450 373,500
Charter Communications Holdings, LLC
Sr. Sub. Notes
10.25% due 1/15/10...................... 375 317,813
Charter Communications Holdings, LLC
Sr. Sub. Notes
10.75% due 10/01/09..................... 2,075 1,815,625
Charter Communications Holdings, LLC Sr.
Sub. Notes
11.13% due 1/15/11...................... 2,775 2,428,125
Cinemark, Inc.
Sr. Disc. Notes
9.75% due 3/15/14*(2)................... 1,625 1,007,500
Principal
Amount Value
Security Description (in thousands) (Note 2)
-----------------------------------------------------------------
Broadcasting & Media (continued)
CSC Holdings, Inc.
Sr. Notes
6.75% due 4/15/12................... $ 450 $ 454,500
CSC Holdings, Inc.
Sr. Debentures
7.63% due 7/15/18................... 1,100 1,160,500
CSC Holdings, Inc.
Sr. Debentures
7.88% due 2/15/18................... 4,975 5,335,687
Haights Cross Operating Co.
Guaranteed Sr. Notes
11.75% due 8/15/11.................. 775 837,969
Insight Communications Co., Inc.
Sr. Sub. Disc. Notes
12.25% due 2/15/11(2)............... 3,575 3,020,875
Paxson Communications Corp.
Guaranteed Sr. Sub. Disc. Notes
12.25% due 1/15/09(2)............... 1,725 1,466,250
Rogers Cable, Inc.
Bonds
8.75% due 5/01/32................... 450 534,375
Rogers Cablesystems, Ltd.
Guaranteed Sr. Sub. Notes
11.00% due 12/01/15................. 1,250 1,450,000
Salem Communications Holding Corp.
Guaranteed Sr. Sub. Notes
7.75% due 12/15/10.................. 825 871,406
Salem Communications Holding Corp.
Guaranteed Sr. Sub. Notes, Series B
9.00% due 7/01/11................... 375 409,219
Susquehanna Media Co.
Sr. Sub. Notes
7.38% due 4/15/13................... 825 875,531
Young Broadcasting, Inc.
Sr. Sub. Notes
8.75% due 1/15/14*.................. 950 978,500
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 3/01/11.................. 1,900 2,033,000
-----------
35,969,437
-----------
Business Services -- 1.8%
Allied Waste North America, Inc.
Sr. Notes
7.88% due 4/15/13................... 1,625 1,775,312
ERICO International Corp.
Sr. Sub. Notes
8.88% due 3/01/12*.................. 325 340,438
HydroChem Industrial Services, Inc.
Guaranteed Sr. Sub. Notes, Series B
10.38% due 8/01/07.................. 950 950,000
Mobile Mini, Inc.
Sr. Notes
9.50% due 7/01/13................... 575 626,750
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 9/01/10*................. 1,525 1,616,500
-----------
5,309,000
-----------
41
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------
BONDS & NOTES (continued)
Chemicals -- 3.3%
Associated Materials, Inc.
Sr. Disc. Notes
11.2590 due 3/01/14*(2)..... $1,425 $ 865,687
Equistar Chemicals LP
Sr. Notes
10.63% due 5/01/11.......... 1,225 1,319,937
Freeport McMoRan Resources
Sr. Notes
7.00% due 2/15/08........... 725 761,250
Huntsman International, LLC
Guaranteed Sr. Notes
9.88% due 3/01/09........... 1,405 1,545,500
Huntsman International, LLC
Sr. Sub. Notes
10.13% due 7/01/09.......... 1,125 1,317,218
Huntsman International, LLC
Sr. Secured Notes
11.63% due 10/15/10......... 850 892,500
IMC Global, Inc.
Sr. Notes
10.88% due 8/01/13.......... 575 720,188
KCS Energy, Inc.
Sr. Notes
7.13% due 4/01/12*.......... 325 330,688
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 5/15/11.......... 750 828,750
Royster Clark, Inc.
1st Mtg. Notes
10.25% due 4/01/09.......... 300 292,500
Westlake Chemical Corp.
Sr. Notes
8.75% due 7/15/11........... 725 801,125
----------
9,675,343
----------
Communication Equipment -- 1.0%
American Tower Escrow Corp.
Disc. Notes
zero coupon due 8/01/08..... 1,025 720,062
Rural Cellular Corp.
Sr. Sub. Notes
9.63% due 5/15/08........... 900 821,250
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 1/15/10........... 1,425 1,275,375
----------
2,816,687
----------
Computers & Business Equipment -- 0.5%
Xerox Corp.
Sr. Notes
7.13% due 6/15/10........... 375 397,500
Xerox Corp.
Notes
7.20% due 4/01/16........... 25 26,000
Xerox Corp.
Sr. Notes
7.63% due 6/15/13........... 925 985,125
----------
1,408,625
----------
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------
Education -- 0.1%
KinderCare Learning Centers, Inc.
Sr. Sub. Notes, Series B
9.50% due 2/15/09................ $ 365 $ 370,778
----------
Electronics -- 0.9%
Amkor Technology, Inc.
Sr. Notes
7.13% due 3/15/11*............... 550 548,625
Amkor Technology, Inc.
Sr. Notes
7.75% due 5/15/13................ 125 127,500
Amkor Technology, Inc.
Sr. Sub. Notes
9.25% due 2/15/08................ 800 882,000
ON Semiconductor Corp.
Guaranteed Sr. Secured Notes
12.00% due 3/15/10............... 423 522,405
Sanmina-SCI Corp.
Guaranteed Sr. Secured Notes
10.38% due 1/15/10............... 550 649,000
----------
2,729,530
----------
Energy Services -- 1.7%
Hanover Compressor Co.
Sub. Notes
zero coupon due 3/31/07.......... 2,550 1,963,500
Hanover Compressor Co.
Sr. Notes
8.63% due 12/15/10............... 300 322,500
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 6/01/11................ 1,087 1,086,590
Trico Marine Services, Inc.
Sr. Notes
8.88% due 5/15/12(7)............. 1,975 1,027,000
Universal Compression, Inc.
Sr. Notes
7.25% due 5/15/10................ 700 750,750
----------
5,150,340
----------
Energy Sources -- 5.1%
Chesapeake Energy Corp.
Sr. Notes
6.88% due 1/15/16................ 275 288,750
Chesapeake Energy Corp.
Sr. Notes
7.50% due 9/15/13................ 325 359,125
Chesapeake Energy Corp.
Guaranteed Sr. Notes
7.75% due 1/15/15................ 350 387,625
Chesapeake Energy Corp.
Guaranteed Sr. Notes
9.00% due 8/15/12................ 175 202,344
CITGO Petroleum Corp.
Sr. Notes
11.38% due 2/01/11............... 775 904,812
Colorado Interstate Gas Co.
Sr. Debentures
6.85% due 6/15/37................ 1,000 1,025,000
42
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
-----------------------------------------------------------------------
BONDS & NOTES (continued)
Energy Sources (continued)
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 4/15/14*........................ $ 300 $ 304,407
Encore Acquisition Co.
Guaranteed Sr. Notes
8.38% due 6/15/12......................... 1,050 1,155,000
Exco Resources, Inc.
Guaranteed Sr. Notes
7.25% due 1/15/11*........................ 525 542,063
Mission Energy Holding Co.
Sr. Secured Notes
13.50% due 7/15/08........................ 6,850 7,055,500
North American Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11*....................... 475 479,750
Roseton Danskammer
Guaranteed Pass-Thru Certificates, Series
B
7.67% due 11/08/16........................ 1,125 1,018,125
Southern Natural Gas Co.
Sr. Notes
8.88% due 3/15/10......................... 725 804,750
Westport Resources Corp.
Guaranteed Sr. Sub. Notes
8.25% due 11/01/11........................ 525 584,062
-----------
15,111,313
-----------
Entertainment Products -- 0.4%
Steinway Musical Instruments, Inc.
Guaranteed Sr. Notes
8.75% due 4/15/11......................... 1,150 1,244,875
-----------
Financial Services -- 12.6%
Alamosa Delaware, Inc.
Guaranteed Sr. Disc. Notes
12.00% due 7/31/09(2)..................... 3,659 3,329,690
Athena Neurosciences Finance, LLC
Guaranteed Sr. Notes
7.25% due 2/21/08......................... 3,575 3,588,406
Bear Island Paper Co., LLC
Sr. Secured Notes, Series B
10.00% due 12/01/07....................... 1,850 1,674,250
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 2/15/12........................ 1,075 1,118,000
Chukchansi Economic Development
Authority
Sr. Notes
14.50% due 6/15/09*....................... 2,850 3,341,625
Couche-Tard U.S. LP
Sr. Sub. Notes
7.50% due 12/15/13*....................... 325 347,750
EIRCOM Funding
Sr. Sub. Notes
8.25% due 8/15/13......................... 1,025 1,142,875
ESI Tractebel Acquisition Corp.
Guaranteed Secured Bonds, Series B
7.99% due 12/30/11........................ 817 845,595
Hilcorp Energy I LP/Hilcorp
Finance Co. Sr. Notes
10.50% due 9/01/10*....................... 1,200 1,332,000
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------------------------
Financial Services (continued)
Huntsman Advanced Materials, LLC
Sr. Secured Notes
11.00% due 7/15/10*...................... $ 600 $ 678,000
Jet Equipment Trust
Sr. Notes, Series 1995, Class A
8.24% due 5/01/15*+(1)................... 1,344 1,117,058
LaBranche & Co., Inc.
Sr. Sub. Notes
12.00% due 3/02/07....................... 1,125 1,184,063
Madison River Capital, LLC/ Madison River
Finance Corp.
Sr. Notes, Series B
13.25% due 3/01/10....................... 2,925 3,188,250
Nexstar Finance Holdings, LLC Guaranteed
Sr. Disc. Notes
11.38% due 4/01/13(2).................... 2,100 1,543,500
PCA, LLC
Guaranteed Sr. Notes
11.88% due 8/01/09....................... 1,075 1,187,875
PDVSA Finance, Ltd.
Bonds
6.80% due 11/15/08....................... 1,425 1,396,500
PDVSA Finance, Ltd.
Notes
8.50% due 11/16/12....................... 825 800,250
Px Escrow Corp.
Sr. Sub. Disc. Notes
9.63% due 2/01/06(2)..................... 725 592,688
Qwest Capital Funding, Inc.
Guaranteed Notes
7.25% due 2/15/11........................ 2,100 1,806,000
Qwest Capital Funding, Inc.
Guaranteed Notes
7.63% due 8/03/21........................ 1,450 1,218,000
Qwest Capital Funding, Inc.
Notes
7.75% due 2/15/31........................ 625 512,500
Qwest Capital Funding, Inc.
Guaranteed Notes
7.90% due 8/15/10........................ 2,800 2,520,000
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 6/01/10....................... 1,125 1,226,250
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
12.88% due 10/15/08...................... 1,125 1,327,500
US West Capital Funding, Inc.
Guaranteed Notes
6.88% due 7/15/28........................ 900 697,500
-----------
37,716,125
-----------
Food, Beverage & Tobacco -- 0.7%
Del Monte Corp.
Sr. Sub. Notes
8.63% due 12/15/12....................... 450 506,250
Doane Pet Care Co.
Sr. Sub. Notes
9.75% due 5/15/07........................ 200 176,500
43
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------------------
BONDS & NOTES (continued)
Food, Beverage & Tobacco (continued)
Doane Pet Care Co.
Guaranteed Sr. Notes
10.75% due 3/01/10.................. $ 500 $ 521,250
Fleming Cos., Inc.
Guaranteed Sr. Sub. Notes, Series D
10.63% due 7/31/07+(1).............. 1,050 1,313
Smithfield Foods, Inc.
Sr. Notes, Series B
7.75% due 5/15/13................... 550 605,000
Smithfield Foods, Inc.
Sr. Notes, Series B
8.00% due 10/15/09.................. 250 279,375
----------
2,089,688
----------
Forest Products -- 3.2%
Constar International, Inc.
Sr. Sub. Notes
11.00% due 12/01/12................. 475 406,125
Crown Cork & Seal Co., Inc.
Notes
8.00% due 4/15/23................... 1,500 1,447,500
FiberMark, Inc.
Sr. Notes
10.75% due 4/15/11(7)............... 750 423,750
Georgia-Pacific Corp.
Debentures
7.70% due 6/15/15................... 75 82,125
Georgia-Pacific Corp.
Debentures
7.75% due 11/15/29.................. 2,200 2,233,000
Georgia-Pacific Corp.
Debentures
8.63% due 4/30/25................... 1,725 1,815,562
Georgia-Pacific Corp.
Debentures
9.13% due 7/01/22................... 825 852,844
Pliant Corp.
Sr. Secured Disc. Notes
11.13% due 6/15/09(2)............... 675 540,000
Specialty Paperboard, Inc.
Sr. Notes
9.38% due 10/15/06(7)............... 3,275 1,825,813
----------
9,626,719
----------
Health Services -- 2.5%
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13*................. 350 372,750
HCA, Inc.
Sr. Notes
6.95% due 5/01/12................... 1,100 1,199,794
IASIS Healthcare Corp.
Guaranteed Sr. Sub. Notes
8.50% due 10/15/09.................. 200 214,000
National Nephrology Associates, Inc.
Sr. Sub. Notes
9.00% due 11/01/11*................. 275 319,000
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------------
Health Services (continued)
Pediatric Services Of America, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 4/15/08(3).............. $ 200 $ 200,000
Psychiatric Solutions, Inc.
Guaranteed Sr. Sub. Notes
10.63% due 6/15/13................. 625 714,063
Team Health, Inc.
Sr. Sub. Notes
9.00% due 4/01/12*................. 600 583,500
Tenet Healthcare Corp.
Sr. Notes
5.00% due 7/01/07.................. 1,425 1,300,312
Tenet Healthcare Corp.
Sr. Notes
6.50% due 6/01/12.................. 300 258,750
Tenet Healthcare Corp.
Notes
7.38% due 2/01/13.................. 575 518,938
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13*................ 575 589,375
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11*............... 1,000 1,080,000
----------
7,350,482
----------
Insurance -- 0.8%
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 6/15/13*................ 1,625 1,836,250
LNR Property Corp.
Sr. Sub. Notes
7.63% due 7/15/13.................. 500 530,000
----------
2,366,250
----------
Leisure & Tourism -- 7.2%
American Airlines, Inc.
Pass-Thru Certificates, Series
2001-1, Class A2
6.82% due 5/23/11.................. 1,200 1,108,481
American Airlines, Inc.
Pass-Thru Certificates, Series
2001-2, Class C
7.80% due 10/01/06................. 1,925 1,810,655
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-2
6.88% due 1/02/11.................. 800 737,958
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-1
7.20% due 1/02/19.................. 887 832,484
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class B
7.63% due 1/02/15.................. 4,089 2,370,103
44
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
Atlas Air, Inc.
Pass-Thru Certificates, Series
2000-1 Class A
8.71% due 1/02/20...................... $ 628 $ 600,736
Bally Total Fitness Holding Corp.
Sr. Notes
10.50% due 7/15/11..................... 325 305,500
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1997-4, Class A
6.90% due 1/02/18...................... 999 996,576
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
6.95% due 8/02/09...................... 761 658,073
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-2, Class C1
7.73% due 3/15/11...................... 351 289,399
Continental Airlines, Inc.
Secured Pass-Thru Certificates, Series
2000-2, Class B
8.31% due 10/02/19..................... 1,000 886,359
Courtyard by Marriott II
Sr. Secured Notes, Series B
10.75% due 2/01/08..................... 1,000 1,002,500
Delta Air Lines, Inc.
Pass-Thru Certificates,
Series 2002-1, Class C
7.78% due 1/02/12...................... 981 795,662
Hollywood Casino Shreveport/Shreveport
Capital Corp.
Guaranteed Sr. Secured Notes
12.00% due 8/01/06+(1)................. 2,311 1,640,810
John Q Hammons Hotels LP
1st Sr. Mtg. Notes, Series B
8.88% due 5/15/12...................... 500 556,250
Mandalay Resort Group
Sr. Notes
6.38% due 12/15/11*.................... 1,025 1,081,375
Prime Hospitality Corp.
Sr. Sub. Notes, Series B
8.38% due 5/01/12...................... 350 369,250
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10..................... 1,075 1,130,094
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 9/15/11*..................... 950 969,000
United Air Lines, Inc.
Pass-Thru Certificates,
Series 2000, Class A-2
7.73% due 7/01/10...................... 500 451,251
United Air Lines, Inc.
Pass-Thru Certificates ,
Series 2000-1, Class A-1
7.78% due 1/01/14...................... 465 418,573
Principal
Amount Value
Security Description (in thousands) (Note 2)
----------------------------------------------------------------
Leisure & Tourism (continued)
Waterford Gaming, LLC
Sr. Notes
8.63% due 9/15/12*................. $1,105 $ 1,182,350
Worldspan LP
Sr. Notes
9.63% due 6/15/11.................. 1,250 1,290,625
-----------
21,484,064
-----------
Machinery -- 1.2%
Anthony Crane Rental LP
Guaranteed Sr. Secured Notes
9.38% due 2/01/08(3)(4)(6)......... 1,262 126
Briggs & Stratton Corp.
Guaranteed Sr. Notes
8.88% due 3/15/11.................. 775 957,125
Dana Corp.
Notes
9.00% due 8/15/11.................. 1,325 1,593,313
Dresser, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 4/15/11.................. 500 545,000
Exide Corp.
Sr. Notes
10.00% due 4/15/05+(1)............. 1,650 338,250
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 6/01/07+(1)............. 550 22,000
-----------
3,455,814
-----------
Medical Products -- 0.2%
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 2/15/12*................. 675 685,125
-----------
Metals & Mining -- 3.1%
CSN Islands VII Corp.
Guaranteed Notes
10.75% due 9/12/08*................ 925 985,125
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*................ 1,500 1,470,000
Eagle-Picher, Inc.
Sr. Notes
9.75% due 9/01/13.................. 850 930,750
MMI Products, Inc.
Sr. Sub. Notes, Series B
11.25% due 4/15/07................. 775 647,125
NGC Corp. Capital Trust I
Guaranteed Sub. Notes, Series B
8.32% due 6/01/27.................. 5,850 4,650,750
Renco Metals, Inc.
Guaranteed Sr. Notes
11.50% due 7/01/49+(1)(3).......... 2,150 0
Ryerson Tull, Inc.
Notes
9.13% due 7/15/06.................. 525 540,750
-----------
9,224,500
-----------
45
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------------
BONDS & NOTES (continued)
Real Estate Investment Trusts -- 1.4%
National Health Investors, Inc.
Notes
7.30% due 7/16/07................. $ 1,120 $1,159,200
Omega Healthcare Investors, Inc.
Sr. Notes
6.95% due 8/01/07................. 300 315,000
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 4/01/14*................ 600 615,000
RFS Partnership LP
Guaranteed Sr. Notes
9.75% due 3/01/12................. 350 379,750
Senior Housing Properties Trust
Sr. Notes
8.63% due 1/15/12................. 1,625 1,844,375
----------
4,313,325
----------
Restaurants -- 0.3%
Tricon Global Restaurants, Inc.
Sr. Notes
8.88% due 4/15/11(5).............. 800 999,000
----------
Retail Stores -- 3.5%
Collins & Aikman Floor Cover
Guaranteed Sr. Sub. Notes
9.75% due 2/15/10................. 480 513,600
Host Marriott LP
Sr. Notes
7.13% due 11/01/13................ 450 466,875
J.C. Penney Co., Inc.
Notes
6.88% due 10/15/15................ 1,800 1,984,500
J.C. Penney Co., Inc.
Debentures
7.13% due 11/15/23................ 1,050 1,186,500
Jostens Holding Corp.
Sr. Disc. Notes
10.25% due 12/01/13(2)............ 1,275 835,125
Rent-Way, Inc.
Sr. Secured Notes
11.88% due 6/15/10................ 1,175 1,316,000
Rite Aid Corp.
Sr. Debentures
7.70% due 2/15/27................. 1,125 1,029,375
Rite Aid Corp.
Guaranteed Sr. Secured Notes
8.13% due 5/01/10................. 450 481,500
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11................ 725 891,750
Sealy Mattress Co.
Sr. Sub. Notes
8.25% due 6/15/14*................ 175 176,104
Service Corp. International
Sr. Notes
6.75% due 4/01/16*................ 575 577,875
Principal
Amount Value
Security Description (in thousands) (Note 2)
---------------------------------------------------------------------
Retail Stores (continued)
Suburban Propane Partners LP
Sr. Notes
6.88% due 12/15/13*..................... $ 825 $ 858,000
-----------
10,317,204
-----------
Telecommunications -- 10.6%
AirGate PCS, Inc.
Sr. Sub. Secured Notes
9.38% due 9/01/09....................... 2,533 2,393,985
Alaska Communications Holdings, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 5/15/09....................... 1,125 1,102,500
American Cellular Corp.
Sr. Notes, Series B
10.00% due 8/01/11...................... 800 768,000
Cincinnati Bell, Inc.
Notes
7.25% due 6/15/23....................... 225 222,750
Cincinnati Bell, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 1/15/14....................... 300 294,000
Dobson Communications Corp.
Sr. Notes
10.88% due 7/01/10...................... 1,100 973,500
Excelcomindo Finance Co.
Sr. Notes
8.00% due 1/27/09*...................... 175 173,250
FairPoint Communications, Inc.
Sr. Sub. Notes
12.50% due 5/01/10...................... 175 196,000
Insight Midwest LP/Insight Capital, Inc.
Sr. Notes
10.50% due 11/01/10..................... 400 430,000
Insight Midwest LP/Insight Capital, Inc.
Sr. Sub. Notes
9.75% due 10/01/09...................... 200 208,500
iPCS, Inc.
Sr. Disc. Notes
14.00% due 7/15/10+(1).................. 1,400 378,000
IWO Holdings, Inc.
Guaranteed Sr. Notes
14.00% due 1/15/11...................... 8,400 2,016,000
LCI International, Inc.
Sr. Notes
7.25% due 6/15/07....................... 3,725 3,408,375
MJD Communications, Inc.
Sr. Sub. Notes, Series B
9.50% due 5/01/08....................... 4,175 4,216,750
Nextel Communications, Inc.
Sr. Notes
7.38% due 8/01/15....................... 2,600 2,814,500
PanAmSat Corp.
Notes
6.38% due 1/15/08....................... 575 597,281
PanAmSat Corp.
Guaranteed Sr. Notes
8.50% due 2/01/12....................... 450 470,250
46
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
BONDS & NOTES (continued)
Telecommunications (continued)
Telewest Communications, PLC
Sr. Disc. Notes
9.25% due 4/15/09(2)................. $1,150 $ 592,250
TSI Telecommunications Services, Inc.
Guaranteed Sr. Sub. Notes
12.75% due 2/01/09................... 400 438,000
Ubiquitel Operating Co.
Sr. Notes
9.88% due 3/01/11*................... 750 731,250
United States West
Communications, Inc.
Debentures
7.25% due 10/15/35................... 2,275 2,104,375
US Unwired, Inc.
Guaranteed Sr. Sub. Disc.
Notes, Series B
13.38% due 11/01/09(2)............... 5,575 5,212,625
US West Communications, Inc.
Secured Debentures
7.50% due 6/15/23.................... 50 46,750
US West Communications, Inc.
Debentures
7.13% due 11/15/43................... 2,150 1,935,000
-----------
31,723,891
-----------
Transportation -- 0.2%
Overseas Shipholding Group, Inc.
Sr. Notes
7.50% due 2/15/24.................... 425 430,313
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 5/01/09.................... 275 302,156
-----------
732,469
-----------
Utilities -- 11.2%
AES Corp.
Sr. Sub. Debentures
8.88% due 11/01/27................... 3,600 3,492,000
AES Drax Energy, Ltd.
Guaranteed Sr. Sub. Secured
Notes, Series B
11.50% due 8/30/10+(1)............... 4,460 22,300
Cincinnati Bell Telephone Co.
Notes
7.18% due 12/15/23................... 375 356,250
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23................... 1,525 1,448,750
Dynegy Holdings, Inc.
Sr. Notes
8.75% due 2/15/12.................... 775 732,375
Edison Mission Energy
Sr. Notes
7.73% due 6/15/09.................... 275 265,375
Edison Mission Energy
Sr. Notes
9.88% due 4/15/11.................... 1,225 1,289,312
Principal
Amount Value
Security Description (in thousands) (Note 2)
Utilities (continued)
Edison Mission Energy
Sr. Notes
10.00% due 8/15/08.................. $1,300 $ 1,368,250
El Paso Natural Gas Co.
Debentures
8.63% due 1/15/22................... 2,900 3,016,000
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 6/01/13................... 3,150 2,921,625
Mirant Americas Generation, LLC
Sr. Notes
7.20% due 10/01/08+(1)(8)........... 1,525 1,128,500
Mirant Americas Generation, LLC
Sr. Notes
7.63% due 5/01/06+(1)(8)............ 525 388,500
Mirant Americas Generation, LLC
Sr. Notes
8.30% due 5/01/11+(1)(8)............ 4,650 3,429,375
Mirant Americas Generation, LLC
Sr. Notes
8.50% due 10/01/21+(1)(8)........... 3,075 2,275,500
NRG Energy, Inc.
Guaranteed Sr. Secured Notes
8.00% due 12/15/13*................. 1,175 1,213,188
Reliant Resources, Inc.
Sr. Secured Notes
9.25% due 7/15/10................... 800 868,000
Reliant Resources, Inc.
Secured Notes
9.50% due 7/15/13................... 2,175 2,397,937
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 7/15/18*.................. 1,100 940,500
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 7/15/12................... 625 740,625
Williams Cos., Inc.
Notes
8.75% due 3/15/32................... 4,700 4,982,000
------------
33,276,362
------------
Total Bonds & Notes
(cost $247,224,616)................. 257,741,998
------------
FOREIGN BONDS & NOTES -- 6.5%
Broadcasting & Media -- 0.6%
CF Cable TV, Inc.
Guaranteed Secured Sr. Notes
9.13% due 7/15/07................... 400 420,039
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 6/15/14*(2).............. 2,125 1,296,250
------------
1,716,289
------------
Insurance -- 0.7%
Fairfax Financial Holdings, Ltd.
Notes
7.75% due 7/15/37................... 350 315,000
47
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount
(in thousands)/ Value
Security Description Shares (Note 2)
FOREIGN BONDS & NOTES (continued)
Insurance (continued)
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15....................... $ 1,600 $ 1,648,000
-----------
1,963,000
-----------
Metals & Mining -- 0.6%
Crown European Holdings SA
Sr. Secured Notes
10.88% due 3/01/13....................... 800 932,000
International Utility Structures, Inc.
Sr. Sub. Notes
10.75% due 2/01/08+(1)................... 2,150 430,000
Vitro SA de CV
Notes
11.75% due 11/01/13*..................... 575 546,250
-----------
1,908,250
-----------
Telecommunications -- 0.0%
Empresa Brasielera de Telecom SA
Guaranteed Notes
11.00% due 12/15/08*..................... 150 162,000
-----------
Utilities -- 4.6%
Calpine Canada Energy Finance, ULC
Guaranteed Sr. Notes
8.50% due 5/01/08........................ 17,600 13,024,000
Companhia De Saneamento Basico do
Estado de Sao Paulo
Notes
12.00% due 6/20/08*...................... 550 572,000
-----------
13,596,000
-----------
Total Foreign Bonds & Notes
(cost $21,512,160)....................... 19,345,539
-----------
COMMON STOCK -- 1.1%
Energy Sources -- 0.0%
Tri-Union Development Corp.+(3)(6)........ 1,061 11
Tribo Petroleum Corp.+(3)(6).............. 1,800 18
-----------
29
-----------
Financial Services -- 0.0%
Ono Finance, PLC+(3)(6)................... 500 0
-----------
Leisure & Tourism -- 0.0%
Capital Gaming International, Inc.+(3)(6). 77 0
-----------
Machinery -- 0.5%
NES Rentals Holding, Inc.................. 150,124 1,351,116
-----------
Telecommunications -- 0.7%
AirGate PCS, Inc.......................... 104,631 1,569,360
Dobson Communications Corp................ 147,082 425,067
-----------
1,994,427
-----------
Total Common Stock
(cost $4,312,789)........................ 3,345,572
-----------
Shares /
Warrants /
Principal
Amount Value
Security Description (in thousands) (Note 2)
PREFERRED STOCK -- 2.0%
Broadcasting & Media -- 0.7%
Paxson Communications Corp.
14.25%(4).......................... 159 $ 1,431,000
Pegasus Communications Corp. 6.50%.. 15,000 646,875
UIH Australia Pacific, Inc.
Expires 5/15/06.................... 1,000 0
------------
2,077,875
------------
Communication Equipment -- 0.8%
Rural Cellular Corp. 11.38%(4)...... 2,075 1,846,750
Rural Cellular Corp. 12.25%(4)...... 819 610,155
------------
2,456,905
------------
Retail Stores -- 0.3%
General Nutrition Centers,
Series 12.00%*(3)(9)............... 725 764,875
Rent-Way, Inc. (3)(9)............... 10 100,000
------------
864,875
------------
Telecommunications -- 0.2%
Alamosa Holdings, Inc. 7.50%........ 1,176 548,843
------------
Total Preferred Stock
(cost $5,167,862).................. 5,948,498
------------
WARRANTS -- 0.0%
Broadcasting & Media -- 0.0%
Knology Holdings, Inc.
Expires 10/22/07+(3)............... 4,500 1,125
XM Satellite Radio, Inc.
Expires 3/15/10+................... 1,000 37,000
------------
38,125
------------
Telecommunications -- 0.0%
GT Group Telecom, Inc.
Expires 2/1/10+(3)(4)(6)........... 2,650 26
KMC Telecom Holdings, Inc.
Expires 1/31/08(+)(3)(4)(6)........ 3,650 0
Leap Wireless International, Inc.
4/15/10+(3)(4)(6).................. 2,250 0
Leap Wireless International, Inc.
4/15/10+(3)(4)(6).................. 1,950 0
------------
26
------------
Total Warrants
(cost $321,861).................... 38,151
------------
Total Investment Securities -- 96.0%
(cost $278,539,288)................ 286,419,758
------------
REPURCHASE AGREEMENT -- 2.0%
State Street Bank & Trust Co. Joint
Repurchase Agreement (Note 2)...... $ 25 25,000
UBS Warburg, LLC. Joint Repurchase
Agreement (Note 2)................. 6,000 6,000,000
------------
Total Repurchase Agreements
(cost $6,025,000).................. 6,025,000
------------
TOTAL INVESTMENTS --
(cost $284,564,288) (Note 5)....... 98.0% 292,444,758
Other assets less liabilities......... 2.0 5,942,968
------- ------------
NET ASSETS -- 100.00% $298,387,726
======= ============
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
BOND & NOTES SOLD SHORT -- (0.2%)
Forest Products -- (0.2%)
Abitibi-Consolidated, Inc.
Debentures
8.85% due 8/01/2030
(Proceeds $616,740)........ $(600) $(610,555)
----- ---------
- --------
* 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
$36,295,233 which represents 12.1% of net assets.
+ Non-income producing securities.
** In United State dollars unless otherwise indicated.
(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)Fair valued security; see Note 2.
(4)PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(5)The security or a portion thereof represents collateral for securities sold
short.
(6)Illiquid security.
(7)Subsequent to March 31, 2004, bond is in default.
(8)Company has filed Chapter 11 bankruptcy.
See Notes to Financial Statements
(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 2. 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 March 31, 2004, the High
Yield Bond Fund held the following restricted securities:
Value as
Acquisition Acquisition Market a % of
Name Date Share/Par Cost Value Net Assets
---- ----------- --------- ----------- ------- ----------
Rent-Way, Inc.
Preferred Stock. 05/29/2003 10 100,000 100,000 0.03%
General Nutrition
Centers
Series 12.00%
Preferred Stock. 12/18/2003 725 729,350 764,875 0.26
Allocation of investment by country as a percentage of net assets as of
March 31, 2004
United States. 90.0%
Canada........ 5.6
Cayman Islands 0.5
Belgium....... 0.4
Ireland....... 0.4
Brazil........ 0.3
France........ 0.3
Mexico........ 0.2
Netherlands... 0.1
----
97.8%
====
49
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004
Principal
Amount Value
Security Description (in thousands) (Note 2)
MUNICIPAL BONDS -- 92.3%
Alabama -- 5.6%
Jefferson County, Alabama Sewer Revenue,
Capital Improvement, Series D
5.25% due 2/01/26+........................... $4,500 $ 5,165,595
-----------
California -- 13.7%
California State Department Water
Resources, Central Valley Project
Revenue, Series X,
5.13% due 12/01/22+.......................... 3,000 3,193,470
California State, Revenue Anticipation
Warrants, Series A,
2.00% due 6/16/04............................ 2,500 2,504,800
Sacramento, California Municipal Utility
District Electric Revenue, Sacramento
MUD, Series R,
5.00% due 8/15/20+........................... 2,500 2,670,200
San Ramon Valley, California Unified
School District, General Obligation,
5.00% due 8/01/23+........................... 4,000 4,198,520
-----------
12,566,990
-----------
Colorado -- 2.5%
Highlands Ranch Metropolitan District No. 2,
General Obligation,
6.50% due 6/15/09+........................... 1,960 2,328,735
-----------
Connecticut -- 3.7%
Connecticut State, General Obligation,
Series B,
5.00% due 6/01/11+........................... 3,000 3,390,240
-----------
Florida -- 8.4%
Lee County, Florida, Airport Revenue,
Series A,
5.75% due 10/01/22+.......................... 5,000 5,549,350
Orange County, Florida Sales Tax Revenue,
Series A,
5.13% due 1/01/23+........................... 2,000 2,122,500
-----------
7,671,850
-----------
Georgia -- 0.2%
Georgia Municipal Electric Authority, Power
Revenue, Series Y,
6.40% due 1/01/09+........................... 60 70,835
Georgia Municipal Electric Authority, Power
Revenue, Series Y,
6.40% due 1/01/13+........................... 85 103,582
-----------
174,417
-----------
Illinois -- 4.2%
Illinois Health Facilities Authority Revenue,
Lutheran General Health Systems, Series
C,
7.00% due 4/01/08+........................... 3,400 3,786,886
-----------
Massachusetts -- 1.0%
Massachusetts State Housing Finance
Agency, Insured Rental, Series A,
6.60% due 7/01/14+........................... 875 896,866
-----------
Missouri -- 6.5%
Sikeston, Missouri, Electric Revenue,
6.20% due 6/01/10+........................... 5,000 5,942,400
-----------
Principal
Amount Value
Security Description (in thousands) (Note 2)
New Jersey -- 8.3%
New Jersey Economic Development
Authority, School Facilities Construction,
Series C,
5.00% due 6/15/12+......................... $4,000 $ 4,491,800
New Jersey State Transportation Trust Fund
Authority, Transportation Systems,
Series B,
6.00% due 6/15/05+......................... 2,000 2,115,440
Passaic Valley, New Jersey Sewer Systems,
Series F,
5.00% due 12/01/12+........................ 850 956,250
-----------
7,563,490
-----------
New York -- 13.9%
New York State Thruway Authority,
Highway & Bridge Trust Fund,
Series C,
5.25% due 4/01/11+......................... 4,000 4,550,520
New York, New York, General Obligation,
Series I,
5.00% due 8/01/20.......................... 2,500 2,594,825
Niagara Falls, New York, Public
Improvement, General Obligation,
7.50% due 3/01/14+......................... 555 736,019
Niagara Falls, New York, Public
Improvement, General Obligation,
7.50% due 3/01/13+......................... 445 581,602
Triborough Bridge & Tunnel Authority
New York, Series A, MBIA
5.25% due 11/15/30+........................ 4,000 4,278,400
-----------
12,741,366
-----------
Ohio -- 12.2%
Cuyahoga County, Ohio Revenue,
Cleveland Clinic Health Systems, Series
A,
5.75% due 1/01/24.......................... 2,000 2,138,360
Franklin County, Ohio Hospital Revenue,
OhioHealth Corp.,
Series C,
5.25% due 5/15/23.......................... 4,000 4,121,360
Summit County, Ohio, Refunding, Series A,
5.00% due 12/01/13+........................ 3,285 3,698,745
Woodridge, Ohio Local School District,
General Obligation,
6.80% due 12/01/14+........................ 1,000 1,226,090
-----------
11,184.555
-----------
Oklahoma -- 0.3%
Oklahoma Development Finance Authority,
Public Service of Oklahoma Project,
4.88% due 6/01/14.......................... 250 250,655
-----------
Pennsylvania -- 5.9%
Pennsylvania State Turnpike Commission,
Oil Franchise Tax Revenue, Series A
5.25% due 12/01/23+........................ 5,000 5,373,750
-----------
South Dakota -- 2.7%
South Dakota State Health & Educational
Facilities Revenue, McKennan Hospital,
6.25% due 7/01/10+......................... 2,120 2,511,903
-----------
50
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2004 -- (continued)
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------------------
MUNICIPAL BONDS (continued)
Texas -- 3.2%
Harris County, Texas Hospital District, Mtg.
Revenue,
7.40% due 2/15/10+.......................... $1,290 $ 1,481,036
San Antonio, Texas, Hotel Occupancy
Revenue, Henry B. Gonzalez Project,
zero coupon due 8/15/17+(1)................. 2,700 1,482,570
-----------
2,963,606
-----------
Total Investment Securities --
(cost $79,611,704).......................... 84,513,304
-----------
SHORT-TERM INVESTMENTS -- 17.4%
Arizona -- 1.1%
Maricopa County, Arizona Industrial
Development Revenue, JIA Corp. Project,
1.20% due 04/08/04(2)....................... 145 145,000
Tempe, Arizona Industrial Development
Revenue, Centers For Habilitation,
1.13% due 04/08/04(2)....................... 840 840,029
-----------
985,029
-----------
Illinois -- 1.3%
Illinois Development Finance Authority
Revenue, Jewish Federal Metropolitan
Chicago Projects,
0.98% due 04/08/04+(2)...................... 1,200 1,200,000
-----------
Iowa -- 1.6%
Iowa Finance Authority Children's
Care Facilities Revenue, Childserve
Project, Series B,
1.13% due 04/08/04(2)....................... 350 350,000
Linn County, Iowa Revenue,
Goodwill Industries, Southwest Project,
1.13% due 04/08/04(2)....................... 1,115 1,115,000
-----------
1,465,000
-----------
Louisiana -- 2.8%
East Baton Rouge Parish, Louisiana
Pollution Control Revenue, Exxon Project,
0.91% due 04/07/04(2)....................... 2,600 2,600,000
-----------
Missouri -- 0.2%
Missouri Higher Education Loan,
Student Loan Revenue,
Series B,
1.10% due 04/07/04+(2)...................... 100 100,000
Wright City, Missouri Industrial Revenue,
Watlow Process Systems, Inc.,
1.15% due 04/08/04(2)....................... 95 95,000
-----------
195,000
-----------
Principal
Amount Value
Security Description (in thousands) (Note 2)
-------------------------------------------------------------------------
New York -- 5.1%
New York City, New York, Series B,
0.94% due 04/08/04+(2).................... $ 700 $ 700,000
New York, New York City Transitional
Finance Revenue, NYC Recovery, Series
1, Sub 1D,
0.93% due 04/07/04(2)..................... 4,000 4,000,000
------------
4,700,000
------------
Pennsylvania -- 0.9%
Pennsylvania State Higher Educational
Facilities Revenue, Carnegie Mellon
University, Series B,
0.95% due 04/07/04(2)..................... 800 800,000
------------
South Carolina -- 0.9%
Piedmont Municipal Power Agency South
Carolina Electric Revenue, Series B,
1.05% due 04/07/04+(2).................... 800 800,000
------------
Texas -- 3.4%
Brownsville, Texas Utility System Revenue,
Series A,
1.00% due 04/07/04+(2).................... 2,100 2,100,000
Harris County Texas Health Facilities
Development, Methodist Hospital,
0.97% due 04/08/04(2)..................... 1,000 1,000,000
------------
3,100,000
------------
Registered Investment Companies -- 0.1%
SSGA Municipal Money Market Fund
Tax Free Money Market Fund................ 64 63,725
------------
Total Short-Term Investments
(cost $15,908,754)........................ 15,908,754
------------
TOTAL INVESTMENTS --
(cost $95,520,458) (Note 5)............... 109.7% 100,422,058
Liabilities in excess of other assets........ (9.7) (8,889,622)
------- ------------
NET ASSETS -- 100.00% $ 91,532,436
======= ============
- --------
+ 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") The aggregate value is $77,803,304 which represents 85.0% 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 is as of March 31, 2004;
maturity date reflects next reset date.
See Notes to Financial Statements
51
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004
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, SunAmerica High Yield
Bond 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.
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.
52
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Class C shares are offered at net asset value per share without an initial
sales charge and may be subject to a contingent deferred sales charge on
redemptions made within 12 months of purchase. Effective February 23, 2004,
Class II shares were redesignated to Class C shares.
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. Effective December 29, 2003, Class I
shares of the GNMA Fund and High Yield Bond Fund are no longer being offered
for sale.
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 C 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. 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: Stocks are generally valued based upon closing sales
prices reported on recognized securities exchanges. Securities listed on the
NASDAQ exchange are valued using the NASDAQ Official Closing Price ("NOCP").
Generally, the NOCP will be the last sale price unless the reported trade
for the securities is outside the range of the bid/ask price. In such cases,
the NOCP will be normalized to the nearer of the bid or ask price. For
listed securities having no sales reported and for unlisted securities, such
securities will be valued based upon the last reported bid price.
Nonconvertible bonds, debentures, other long-term debt securities, and
short-term securities with original or remaining maturities in excess of 60
days are valued at prices obtained for the day of valuation from a bond
pricing service of a major dealer in bonds when such prices are available;
however, in circumstances where the investment adviser deems it appropriate
to do so, an over-the-counter or exchange quotation at the mean of
representative bid or asked prices may be used. As of the close of regular
trading on the New York Stock Exchange, securities traded primarily on
securities exchanges outside the United States are valued at the last sale
price on such exchanges on the day of valuation, or if there is no sale on
the day of valuation, at the last-reported bid price. However, depending on
the foreign market, closing prices may be up to 15 hours old when they are
used to price the Fund's shares, and the Fund may determine that certain
closing prices are unreliable. This determination will be based on review of
a number of factors, including developments in foreign markets, the
performance of U.S. securities markets, and the performance of instruments
trading in U.S. markets that represent foreign securities and baskets of
foreign securities. If the Fund determines that closing prices do not
reflect the fair value of the securities, the Fund will adjust the previous
closing prices in accordance with pricing procedures approved by the Board
to reflect what it believes to be the fair value of the securities as of the
close of regular trading on the New York Stock Exchange. A Fund may also
fair value securities in other situations, for example, when a particular
foreign market is closed but the Fund is open. Short-term securities with 60
days or less to maturity are amortized to maturity based on their cost to
the Trust if acquired within 60 days of maturity or, if already held by the
Trust on the 60th day, are amortized to maturity based on the value
determined on the 61st day. Securities for which quotations are not readily
available or if a development/event occurs that may significantly impact the
value of the securities, then these securities may be fair valued as
determined pursuant to procedures adopted in good faith under the direction
of the Trust's Trustees.
53
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
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 March 31, 2004, the U.S. Government Securities Fund, GNMA Fund,
Strategic Bond Fund and High Yield Bond Fund have a 1.4%, 1.1%, 0.5% and
0.0% undivided interest, respectively, which represented $986,000, $767,000,
$365,000 and $25,000, 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 0.92% dated 3/31/04, in
the principal amount of $72,011,000, repurchase price $72,012,840 due
4/01/04, collateralized by the following:
Type of Collateral Interest Rate Maturity Date Principal Amount Market Value
- ------------------ ------------- ------------- ---------------- ------------
U.S. Treasury Bills 0.93% 5/06/2004 $20,430,000 $20,404,463
U.S. Treasury Bills 0.86 6/10/2004 12,280,000 12,255,440
U.S. Treasury Notes 4.63 5/15/2006 18,920,000 20,405,239
U.S. Treasury Notes 6.88 5/15/2006 17,995,000 20,403,523
As of March 31, 2004, the U.S. Government Securities Fund, GNMA Fund,
Strategic Bond Fund and High Yield Bond Fund have a 5.3%, 46.0%, 2.0% and
4.0% undivided interest, respectively, which represented $8,000,000,
$69,000,000, $3,000,000 and $6,000,000, respectively, in 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 0.99% dated 3/31/04, in the principal
amount of $150,000,000 repurchase price $150,004,125 due 4/01/04
collateralized by the following:
Type of Collateral Interest Rate Maturity Date Principal Amount Market Value
- ------------------ ------------- ------------- ---------------- ------------
U.S. Treasury Inflation Index Note 3.00% 7/15/2012 $130,075,000 $153,003,320
Securities Transactions, Investment Income, Dividends and Distributions to
Shareholders: Securities transactions are recorded on a trade date basis.
Realized gains and losses on sales of investments are calculated on the
identified cost basis. Interest income, 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 except
for certain dividends from foreign securities, which are recorded as soon as
the Trust is informed after 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).
54
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
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 period ended March 31, 2004, U.S.
Government Securities Fund and GNMA 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 interest
expense on the Statement of Operations. During the year ended March 31,
2004, $3,117 and $1,225 of broker rebates were reclassified to interest
expense for the U.S. Government and GNMA funds, respectively. 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 March 31, 2004 there were no loaned securities outstanding in the U.S.
Government Securities Fund or the GNMA Fund.
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 the end of the period. 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 it at market price at the time
of replacement.
55
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
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 period ended March 31, 2004, the
Core Bond Fund, 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 Core Bond Fund, 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 3. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and Management
Agreement (the "Agreement") with SAAMCo. Under the Agreement, SAAMCo
provides continuous supervision of a Fund's portfolio and administers its
corporate affairs, subject to general review by the Trustees. In connection
therewith, SAAMCo furnishes the Funds with office facilities, maintains
certain of the Funds' books and records, and pays the salaries and expenses
of all personnel, including officers of the Funds, who are employees of
SAAMCo and its affiliates.
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
56
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
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 period ended March 31, 2004, expenses were reimbursed to the Funds
as follows:
SAAMCO
--------
Core Bond Class A...................... $ 68,026
Core Bond Class B...................... 10,294
Core Bond Class C...................... 7,508
Core Bond Class I...................... 36,239
Core Bond Class Z...................... 9,573
U.S. Government Securities Fund Class A 743,747
U.S. Government Securities Fund Class B 179,111
U.S. Government Securities Fund Class C 74,040
GNMA Fund Class A...................... 556,056
GNMA Fund Class B...................... 261,327
GNMA Fund Class C...................... 183,738
GNMA Fund Class I...................... 15,169
GNMA Fund Class X...................... 1,822
Strategic Bond Class A................. --
Strategic Bond Class B................. --
Strategic Bond Class C................. --
Strategic Bond Class I................. 3,530
High Yield Bond Class A................ --
High Yield Bond Class B................ --
High Yield Bond Class C................ 5,158
High Yield Bond Class I................ 16,634
High Yield Bond Class Z................ 3,346
Tax Exempt Insured Fund Class A........ --
Tax Exempt Insured Fund Class B........ --
Tax Exempt Insured Fund Class C........ 7,229
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 C Plan." In adopting the Class A Plan, the
Class B Plan and the Class C 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 C 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 C shares to compensate the Distributor and certain
securities firms for providing sales and promotional activities for
distributing that class of shares. The distribution costs for which the
Distributor may be compensated for, include fees paid to broker-dealers that
have
57
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
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 C 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 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 period ended March 31, 2004, 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 C shares,
portions of which are reallowed to affiliated broker-dealers and
non-affiliated broker-dealers. Effective February 23, 2004, the front-end
sales charge for Class C is no longer in effect. 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 C shares.
SACS has advised the Funds that for the period ended March 31, 2004, the
proceeds received from Class A and Class C sales (and paid out to affiliated
and non-affiliated broker-dealers) and Class A, Class B and Class C
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 $165,901 $ 68,506 $ 69,566 $233,981
GNMA Fund...................... 855,015 356,102 347,492 872,683
Strategic Bond Fund............ 189,271 62,924 92,087 99,531
High Yield Bond Fund........... 539,327 67,930 374,591 259,076
Core Bond Fund................. 31,698 11,227 14,623 22,958
Tax Exempt Insured Fund........ 80,343 26,696 38,693 35,277
Class C Class C
-------------------------------------- --------------
Contingent
Sales Affiliated Non-affiliated Deferred Sales
Charges Broker-dealers Broker-dealers Charges
-------- -------------- -------------- --------------
U.S. Government Securities Fund $ 33,440 $ 5,418 $ 28,022 $ 28,260
GNMA Fund...................... 206,354 69,937 136,417 211,226
Strategic Bond Fund............ 37,205 6,441 30,764 7,406
High Yield Bond Fund........... 189,184 12,820 176,364 47,022
Core Bond Fund................. 9,976 910 9,066 892
Tax Exempt Insured Fund........ 13,926 1,546 12,380 8,084
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 period ended March 31, 2004 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:
58
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Payable at
Expenses March 31, 2004
-------- --------------
Core Bond Fund Class A................. 151,400 $25,357
Core Bond Fund Class B................. 14,916 1,066
Core Bond Fund Class C................. 11,655 986
Core Bond Fund Class I................. 45,560 567
Core Bond Fund Class Z................. -- --
U.S. Government Securities Fund Class A 446,189 37,859
U.S. Government Securities Fund Class B 107,392 6,966
U.S. Government Securities Fund Class C 43,171 2,782
GNMA Fund Class A...................... 668,027 61,874
GNMA Fund Class B...................... 364,430 25,786
GNMA Fund Class C...................... 259,390 16,682
GNMA Fund Class I...................... 68 --
GNMA Fund Class X...................... 13,481 1,543
Strategic Bond Class A................. 88,089 8,110
Strategic Bond Class B................. 72,925 6,720
Strategic Bond Class C................. 38,989 4,031
Strategic Bond Class I................. 7,660 692
High Yield Bond Class A................ 193,804 17,282
High Yield Bond Class B................ 157,537 14,166
High Yield Bond Class C................ 98,783 9,887
High Yield Bond Class I................ 55 --
High Yield Bond Class Z................ -- --
Tax Exempt Insured Fund Class A........ 159,789 13,047
Tax Exempt Insured Fund Class B........ 39,772 3,159
Tax Exempt Insured Fund Class C........ 13,031 1,087
At March 31, 2004, 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 85%, 100% and 17% of the outstanding
shares of Core Bond Fund Class I, Strategic Bond Fund Class I and Tax Exempt
Insured Class B, respectively. SAAMCo owned 37%, 7% and 6% of the
outstanding shares of GNMA Fund Class A, U.S. Government Securities Fund
Class A and High Yield Bond Fund Class A and 94% of the outstanding shares
of Core Bond Class A.
On November 20, 2003, AIGGIC, the subadvisor for the Tax Exempt Insured Fund
purchased a security that caused the fund to exceed 25% of fund assets in
issuers representing more than 5% of gross assets. Upon discovery of the
investment restriction violation, AIGGIC sold the position at no gain or
loss to the fund.
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%.
Note 4. 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 March 31, 2004 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)........................ $326,661,517 $ -- $ -- $76,548,339 $402,394,255 $114,933,038
Sales (excluding U.S. government
securities)........................ 318,898,335 -- -- 59,287,038 326,251,440 119,534,094
Purchases of U.S. government
securities......................... 354,428,717 719,382,472 1,532,641,297 354,693 -- --
Sales of U.S. government securities. 394,947,303 688,236,987 1,236,920,981 1,700,781 -- --
59
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Note 5. Federal Income Taxes
The following details the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of
distributable earnings differ from the amounts reflected in the Statement of
Assets and Liabilities by temporary book/tax differences primarily arising
from wash sales, post October losses, Fund mergers, treatment of defaulted
securities and derivative transactions.
Tax Distributions
Distributable Earnings For the year ended
For the year ended March 31, 2004 March 31, 2004
-------------------------------------- ---------------------------------
Long-term Unrealized Long-term
Ordinary Gains/Capital Appreciation Ordinary Capital
Income Loss Carryover (Depreciation) Income Gains Tax Exempt
-------- -------------- -------------- ----------- ---------- ----------
Core Bond Fund................. $225,952 $ 2,408,211 $2,541,194 $ 9,138,662 $ -- $ --
U.S. Government Securities Fund 188,740 (9,473,697) 4,567,615 8,059,030 -- --
GNMA Fund...................... 195,646 (333,039) 7,809,721 21,435,452 2,290,943 --
Strategic Bond Fund............ 527,492 (36,270,706) 6,068,759 5,771,394 -- --
High Yield Bond Fund........... 290,774 (119,235,552) 7,471,117 23,821,470 -- --
Tax Exempt Insured Fund........ 644,786 516,899 4,908,813 4,169,977 1,421,597 2,499,752
Tax Distributions
For the year ended March 31, 2003
------------------------------------
Ordinary Long-term
Income Capital Gains Tax Exempt
----------- ------------- ----------
Core Bond Fund................. $15,186,265 $ -- $ --
U.S. Government Securities Fund 11,170,917 -- --
GNMA Fund...................... 18,685,979 -- --
Strategic Bond Fund............ 4,507,318 -- --
High Yield Bond Fund........... 17,388,739 -- --
Tax Exempt Insured Fund........ 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......................................... $232,463,325 $260,274,244 $572,053,190 $93,196,791 $284,977,514 $95,513,245
============ ============ ============ =========== ============ ===========
Appreciation................................. 3,225,185 5,235,657 8,087,094 9,608,087 21,268,187 5,015,250
Depreciation................................. (683,991) (668,042) (277,373) (3,540,785) (13,800,943) (106,437)
------------ ------------ ------------ ----------- ------------ -----------
Unrealized appreciation (depreciation) -- net $ 2,541,194 $ 4,567,615 $ 7,809,721 $ 6,067,302 $ 7,467,244 $ 4,908,813
============ ============ ============ =========== ============ ===========
At March 31, 2004, U.S. Government Securities Fund, GNMA Fund, Strategic
Bond Fund and High Yield Bond Fund had capital loss carry forwards of
$9,473,697, $333,039, $36,270,706 and $119,235,552, respectively, which were
available to the extent provided in regulations and which will expire
between 2005-2012. 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, 2004 are the
amounts of losses acquired from the following acquired Funds as a result of
the reorganizations of the North American Funds ("NA Funds") on November 7,
2001.
North American U.S. Government Securities Fund $ 997,836
North American Strategic Income Fund.......... 9,347,515
North American High Yield Bond Fund........... 13,574,972
North American Municipal Bond Fund............ --
As of March 31, 2004, GNMA Fund had post October 31, 2003 capital loss
deferrals of $50,562. The High Yield Bond Fund had post October 31, 2003
currency loss deferrals of $8,548.
60
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Core Bond Fund, U.S. Government Securities Fund and Strategic Bond Fund and
High Yield Bond Fund utilized capital loss carry forwards of $4,465,152,
$1,647,446, $3,757,332 and $14,023,345, respectively, to offset the Fund's
net taxable gains realized and recognized in the year ended March 31, 2004.
As of March 31, 2004, Strategic Bond Fund had $14,474,804 of capital loss
carry forwards that expired.
As a result of reorganizations into some of these portfolios during the
period ended March 31, 2002, 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.
For the period ended March 31, 2004, the reclassification arising from
book/tax differences primarily due to net paydown adjustments, expiration of
capital loss carry forward amounts and treatment of foreign currency
resulted in increases (decreases) to the components of net assets as follows:
Accumulated Accumulated
Undistributed Undistributed
Net Realized Net Investment Paid in
Gain/(Loss) Income/(Loss) Capital
------------- -------------- ------------
Core Bond Fund................. $ (706,891) $ 697,646 $ 9,245
U.S. Government Securities Fund (776,385) 776,385 --
GNMA Fund...................... (1,481,548) 1,481,544 4
Strategic Bond Fund............ 13,839,737 1,000,855 (14,840,592)
High Yield Bond Fund........... (388,215) 388,215 --
Tax Exempt Insured Fund........ 217,080 (217,080) --
Note 6. 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 For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
------------------------- ---------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ --------- ----------- ---------- ------------ ---------- ------------
Shares
sold...... 12,157,837** $126,019,538** 1,911,203* $19,558,165* 230,410 $ 2,390,630 529,865 $ 5,366,262
Reinvested
shares.... 166,183 1,724,538 28,114 286,234 9,326 96,502 14,634 147,929
Shares
redeemed.. (954,192) (9,874,674) (420,056) (4,235,193) (396,722)** (4,094,764)** (173,661)* (1,758,943)*
---------- ------------ --------- ----------- ---------- ------------ ---------- ------------
Net
increase
(decrease) 11,369,828 $117,869,402 1,519,261 $15,609,206 (156,986) $ (1,607,632) 370,838 $ 3,755,248
========== ============ ========= =========== ========== ============ ========== ============
Core Bond Fund
-----------------------------------------------------------------------------------------------------------
Class C+ Class I
-------------------------------------------------- -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
------------------------- ---------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ --------- ----------- ---------- ------------ ---------- ------------
Shares
sold...... 311,782 $ 3,235,617 561,314 $ 5,690,211 794,446 $ 8,247,779 1,738,602 $ 17,572,086
Reinvested
shares.... 8,152 84,453 12,948 131,275 48,795 505,629 94,315 954,643
Shares
redeemed.. (352,835) (3,659,430) (415,830) (4,169,367) (2,544,683) (26,520,623) (2,046,585) (20,720,266)
---------- ------------ --------- ----------- ---------- ------------ ---------- ------------
Net
increase
(decrease) (32,901) $ (339,360) 158,432 $ 1,652,119 (1,701,442) $(17,767,215) (213,668) $ (2,193,537)
========== ============ ========= =========== ========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* 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 11,101 shares of Class B shares in the
amount of $115,303 to 11,069 shares of Class A shares in the amount of
$115,303.
61
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Core Bond Fund
--------------------------------------------------------
Class Z
--------------------------------------------------------
For the For the
year ended year ended
March 31, 2004 March 31, 2003
--------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares
sold...... -- $ -- -- $ --
Reinvested
shares.... 638,407 6,619,027 1,430,838 14,476,065
Shares
redeemed.. (19,744,617) (204,600,000) (5,717,731) (57,739,162)
----------- ------------- ----------- -------------
Net
increase
(decrease) (19,106,210) $(197,980,973) (4,286,893) $ (43,263,097)
=========== ============= =========== =============
U.S. Government Securities Fund
-----------------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------------- -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
--------------------------- -------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares
sold...... 8,249,574** $ 79,163,236** 16,172,319* $ 152,218,301* 604,504 $ 5,811,186 4,495,676 $ 42,228,815
Reinvested
shares.... 485,614 4,631,195 667,786 6,191,337 95,405 911,700 157,230 1,481,363
Shares
redeemed.. (9,407,755) (89,858,298) (16,276,413) (152,748,051) (3,402,329)** (32,359,944)** (2,574,910)* (24,236,111)*
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net
increase
(decrease) (672,567) $ (6,063,867) 563,692 $ 5,661,587 (2,702,420) $(25,637,058) 2,077,996 $ 19,474,067
=========== ============= =========== ============= ========== ============ ========== ============
U.S. Government Securities Fund
--------------------------------------------------------
Class C+
--------------------------------------------------------
For the For the
year ended year ended
March 31, 2004 March 31, 2003
--------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares
sold...... 769,814 $ 7,424,108 2,365,163 $ 22,258,658
Reinvested
shares.... 40,198 383,624 61,152 576,229
Shares
redeemed.. (1,765,228) (16,815,629) (1,288,558) (12,154,479)
----------- ------------- ----------- -------------
Net
increase
(decrease) (955,216) $ (9,007,897) 1,137,757 $ 10,680,408
=========== ============= =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* 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 246,879 shares of Class B shares in the
amount of $2,357,940 to 246,951 shares of Class A shares in the amount of
$2,357,940.
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2003 -- (continued)
GNMA Fund
-----------------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------------- -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
--------------------------- -------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares sold. 20,547,588** $ 235,257,794** 20,986,110* $ 237,799,506* 2,951,236 $ 34,058,784 12,763,664 $145,111,925
Reinvested
shares..... 1,035,426 11,718,293 667,003 7,573,715 377,158 4,280,751 385,948 4,393,569
Shares
redeemed... (14,030,583) (159,555,489) (10,535,852) (119,630,103) (7,691,285)** (87,771,353)** (5,116,327)* (58,203,016)*
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease). 7,552,431 $ 87,420,598 11,117,261 $ 125,743,118 (4,362,891) $(49,431,818) 8,033,285 $ 91,302,478
=========== ============= =========== ============= ========== ============ ========== ============
GNMA Fund
-----------------------------------------------------------------------------------------------------------------
Class C+ Class I
-------------------------------------------------------- -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
--------------------------- -------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares sold. 3,729,057 $ 43,094,583 11,565,832 $ 131,890,842 (126) $ (1,423) -- $ --
Reinvested
shares..... 274,348 3,116,823 245,826 2,806,505 78 877 170 1,919
Shares
redeemed... (8,127,227) (92,785,359) (3,318,648) (37,928,650) (3,502) (39,640) (1,350) (14,552)
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease). (4,123,822) $ (46,573,953) 8,493,010 $ 96,768,697 (3,550) $ (40,186) (1,180) $ (12,633)
=========== ============= =========== ============= ========== ============ ========== ============
GNMA Fund
--------------------------------------------------------
Class X
--------------------------------------------------------
For the For the
year ended year ended
March 31, 2004 March 31, 2003
--------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares sold. 407,941 $ 4,654,916 374,832 $ 4,250,363
Reinvested
shares..... 26,729 302,771 8,750 100,073
Shares
redeemed... (49,150) (558,441) (37,889) (437,031)
----------- ------------- ----------- -------------
Net increase
(decrease). 385,520 $ 4,399,246 345,693 $ 3,913,405
=========== ============= =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* 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 149,977 shares of Class B in the amount of
$1,707,937 to 149,914 shares of Class A shares in the amount of $1,707,937.
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Strategic Bond Fund
-------------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------- -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
------------------------- ------------------------ -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold...... 4,819,218** $ 15,918,204** 5,749,864* $ 17,063,277* 4,759,644 $ 15,630,339 3,650,173 $ 10,909,683
Reinvested shares 467,498 1,542,884 442,757 1,316,774 333,984 1,103,198 261,564 777,454
Shares redeemed.. (4,479,867) (14,659,821) (5,933,899) (17,581,335) (3,552,293)** (11,726,594)** (3,827,323)* (11,336,035)*
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)...... 806,849 $ 2,801,267 258,722 $ 798,716 1,541,335 $ 5,006,943 84,414 $ 351,102
========== ============ ========== ============ ========== ============ ========== ============
Strategic Bond Fund
-------------------------------------------------------------------------------------------------------------
Class C+ Class I
---------------------------------------------------- -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
------------------------- ------------------------ -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold...... 3,749,967 $ 12,469,971 2,361,199 $ 7,058,032 -- $ -- -- $ --
Reinvested shares 188,761 626,355 162,201 483,955 70,772 233,826 65,251 194,149
Shares redeemed.. (2,151,437) (7,085,839) (2,604,349) (7,748,759) -- -- -- --
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)...... 1,787,291 $ 6,010,487 (80,949) $ (206,772) 70,772 $ 233,826 65,251 $ 194,149
========== ============ ========== ============ ========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* 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 426,671 shares of Class B shares in the
amount of $1,417,374 to 424,151 shares of Class A shares in the amount of
$1,417,374.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
High Yield Bond Fund
---------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
-------------------------- ------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Shares
sold...... 24,186,781** $ 97,119,896** 15,410,944* $ 54,586,537* 8,482,068 $ 34,228,906 5,717,346 $ 20,569,651
Reinvested
shares.... 1,176,656 4,828,068 783,484 2,876,224 657,839 2,698,352 600,801 2,209,929
Shares
redeemed.. (21,361,447) (86,944,156) (12,321,331) (45,700,839) (7,449,571)** (30,359,369)** (6,957,270)* (25,671,684)*
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net
increase
(decrease) 4,001,990 $ 15,003,808 3,873,097 $ 11,761,922 1,690,336 $ 6,567,889 (639,123) $ (2,892,104)
=========== ============ =========== ============ ========== ============ ========== ============
High Yield Bond Fund
---------------------------------------------------------------------------------------------------------------
Class C+ Class I
------------------------------------------------------ -------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
-------------------------- ------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Shares
sold...... 10,265,844 $ 41,606,962 5,002,813 $ 18,337,823 50,125 $ 199,923 -- $ --
Reinvested
shares.... 460,883 1,902,362 263,054 965,355 227 905 361 1,319
Shares
redeemed.. (5,858,398) (23,969,331) (2,686,939) (9,901,331) (54,097) (219,345) -- --
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net
increase
(decrease) 4,868,329 $ 19,539,993 2,578,928 $ 9,401,847 (3,745) $ (18,517) 361 $ 1,319
=========== ============ =========== ============ ========== ============ ========== ============
High Yield Bond Fund
------------------------------------------------------
Class Z
------------------------------------------------------
For the For the
year ended year ended
March 31, 2004 March 31, 2003
-------------------------- -------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
Shares
sold...... -- $ -- 8 $ 30
Reinvested
shares.... 1,634,144 6,692,758 1,700,227 6,221,007
Shares
redeemed.. -- -- -- --
----------- ------------ ----------- ------------
Net
increase
(decrease) 1,634,144 $ 6,692,758 1,700,235 $ 6,221,037
=========== ============ =========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* 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 702,453 shares of Class B shares in the
amount of $2,892,417 to 704,002 shares of Class A shares in the amount of
$2,892,417.
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Tax Exempt Insured Fund
-------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------- -------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2004 March 31, 2003 March 31, 2004 March 31, 2003
------------------------- ------------------------ ----------------------- ----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold............ 682,967** $ 9,118,210** 1,796,170* $ 23,825,662* 114,501 $ 1,538,768 453,361 $ 6,022,337
Reinvested shares...... 223,173 2,932,244 145,158 1,916,793 43,442 569,970 27,036 357,478
Shares redeemed........ (1,529,607) (20,408,255) (1,969,797) (26,214,114) (321,289)** (4,281,374)** (475,903)* (6,259,772)*
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) (623,467) $ (8,357,801) (28,469) $ (471,659) (163,346) $(2,172,636) 4,494 $ 120,043
========== ============ ========== ============ ======== =========== ======== ===========
Tax Exempt Insured Fund
----------------------------------------------------
Class C+
----------------------------------------------------
For the For the
year ended year ended
March 31, 2004 March 31, 2003
------------------------- ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 138,250 $ 1,836,415 345,981 $ 4,588,301
Reinvested shares...... 15,551 204,119 9,084 120,117
Shares redeemed........ (196,573) (2,629,076) (193,507) (2,561,636)
---------- ------------ ---------- ------------
Net increase (decrease) (42,772) $ (588,542) 161,558 $ 2,146,782
========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* 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 85,689 shares of Class B shares in the
amount of $1,140,500 to 85,710 shares of Class A shares in the amount of
$1,140,500.
Note 7. 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
period ended March 31, 2004, the U.S. Government Securities Fund, GNMA Fund
and High Yield Bond Fund had borrowings outstanding for 7, 4 and 40 days,
respectively, under the line of credit and incurred $1,324, $83, and
$10,687, respectively, in interest charges related to these borrowings. The
U.S. Government Securities Fund, GNMA Fund, and High Yield Bond Fund's
average amount of debt under the line of credit for the days utilized was
$4,534,456, $484,668 and $6,232,103, respectively, at a weighted average
interest rate of 1.51%, 1.55% and 1.57%, respectively.
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 March 31, 2004 none of the Funds participated in this program.
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2004 -- (continued)
Note 8. Trustees Retirement Plan
The Trustees (and Directors) of the SunAmerica Income Funds have adopted the
AIG 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 who has at least 5 years of
consecutive service after reaching age 65 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.
The following amounts of the Retirement Plan liability are included in the
accrued expense on the Statement of Assets and Liabilities and the amount
for the Retirement Plan expenses are included in the Trustees' fees on the
Statement of Operations.
Retirement Retirement Retirement
Plan Plan Plan
Liability Expense Payments
---------- ---------- ----------
As of March 31, 2004
--------------------------------
Core Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ 19,794 $12,360 $ 216
U.S. Government Securities Fund . . . . . . . . . . . . . . . . . . . . . ........... 112,134 11,678 2,721
GNMA Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,732 21,468 587
Strategic Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 26,580 3,159 618
High Yield Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 45,905 7,894 930
Tax Exempt Insured Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 33,650 4,066 762
67
SunAmerica Income Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of the SunAmerica Income Funds
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the SunAmerica Core
Bond Fund, SunAmerica U.S. Government Securities Fund, SunAmerica GNMA Fund,
SunAmerica Strategic Bond Fund, SunAmerica High Yield Bond Fund and SunAmerica
Tax Exempt Insured Fund (constituting the SunAmerica Income Funds, hereafter
referred to as the "Funds") at March 31, 2004, the results of each of their
operations for the year then ended, and the changes in each of their net assets
and the financial highlights for each of the periods presented, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States of America), which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
May 18, 2004
New York, New York
68
SunAmerica Income Funds
TRUSTEE INFORMATION -- March 31, 2004 -- (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
Funds in
Position Term of Fund Other
Name, Held With Office and Complex Directorships
Address and SunAmerica Length of Time Principal Occupations Overseen by Held by
Date of Birth* Complex Served(4) During Past 5 Years Trustee(1) Trustee(2)
- -------------- ---------- -------------- ----------------------------- ----------- ----------------------------
Jeffrey S. Burum(5) Trustee 2004 - present Founder and CEO of 32 None
DOB: February 27, 1963 National Housing
Development Corp.
S. James Coppersmith(5) Trustee 1986 - 2004 Retired. 41 Director of BJ's Wholesale
DOB: February 21, 1933 Club, Inc.; Director, Boston
Stock Exchange.
Dr. Judith L. Craven Trustee 2001 - present Retired. 70 Director, A.G. Belo
DOB: October 6, 1945 Corporation (1992 to
present); Director, Sysco
Corporation (1996 to
present); Director, Luby's
Inc. (1998 to present).
William F. Devin Trustee 2001 - present Retired. 70 Member of the Board of
DOB: December 30, 1938 Governors, Boston Stock
Exchange (1985-Present).
Samuel M. Eisenstat Chairman 1986 - present Attorney, solo practitioner. 42 Director, North European
DOB: March 7, 1940 of the Oil Royalty Trust.
Board
Stephen J. Gutman Trustee 1986 - present Partner and Member of 42 None
DOB: May 10, 1943 Managing Directors, Beau
Brummell-Soho, LLC
(licensing of menswear
specialty retailing and other
activities) (June 1988 to
present).
69
SunAmerica Income Funds
TRUSTEE INFORMATION -- March 31, 2004 -- (unaudited) (continued)
Number of
Funds in
Position Term of Fund Other
Name, Held With Office and Complex Directorships
Address and SunAmerica Length of Time Principal Occupations Overseen by Held by
Date of Birth* Complex Served(4) During Past 5 Years Trustee(1) Trustee(2)
- -------------- ---------- -------------- ---------------------------- ----------- ----------------------
PeterA. Harbeck(3) Trustee 1995 - present President, CEO and Director, 79 None
DOB: January 23, 1954 AIG SunAmerica Asset
Management Corp.
("SAAMCo") (August 1995
to present); Director, AIG
SunAmerica Capital
Services, Inc. ("SACS")
(August 1993 to present).
Sebastiano Sterpa(5) Trustee 1993 - 2004 Founder and Chairman of the 32 Director, Real Estate
DOB: July 18, 1929 Board of the Sterpa Group Business Service and
(real estate investment and Countrywide Financial.
management) (1962 to
present).
- --------
* The business address for each Trustee is the Harborside Financial Center,
3200 Plaza 5, Jersey City, NJ 07311-4992.
(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 (9 funds), SunAmerica Income Funds (6 funds),
SunAmerica Focused Series, Inc. (15 portfolios), Anchor Series Trust (9
portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1 fund),
SunAmerica Series Trust (32 portfolios), VALIC Company I (22 portfolios),
VALIC Company II (15 funds), 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 8 of the
financial statements.
(5) Effective on February 23, 2004, S. James Coppersmith and Sebastian Sterpa
retired as Trustees and Jeffrey S. Burum began serving as Trustee.
Additional information concerning the Trustees is contained in the Statement of
Additional Information and is available without charge by calling (800)
858-8850.
70
SunAmerica Income Funds
SPECIAL MEETING OF SHAREHOLDERS -- Proxy Voting Results -- March 31,
2004 (unaudited)
A Special Meeting of the Shareholders of SunAmerica Income Funds was held on
January 30, 2004. The Funds voted in favor the following proposal.
1. To elect as Directors/Trustees the following nominees:
Jeffery S. Burum Dr. Judith L. Cravin William F. Devin Samuel M. Eisenstat
----------------- -------------------- ---------------- -------------------
Votes Affirmative 175,372,150 175,329,688 175,395,834 175,352,242
Votes Withhold... 1,509,288 1,551,750 1,485,604 1,529,196
Stephen J. Gutman Peter A. Harbeck William J. Shea*
----------------- -------------------- ----------------
Votes Affirmative 175,371,883 175,383,962 175,350,888
Votes Withhold... 1,509,555 1,497,476 1,530,550
* Mr Shea never assumed his position on the Board of Trustees'.
71
SunAmerica Income Funds
SHAREHOLDER TAX INFORMATION -- March 31, 2004 -- (unaudited)
Certain tax information regarding the SunAmerica Income Funds is required to be
provided to shareholders based upon each Fund's income and distributions for
the taxable periods ended March 31, 2004. The information and distributions
reported herein may differ from the information and distributions taxable to
the shareholders for the calendar year ending December 31, 2004. The
information necessary to complete your income tax returns will be included with
your Form 1099-DIV to be received under separate cover in January 2005.
During the year ended March 31, 2004 the Funds paid the following dividends per
share along with the percentage of ordinary income dividends that qualified for
the 70% dividends received deductions for corporations.
Net Net Net Long- Qualifying % for the
Total Investment Short-Term Term 70% Dividends
Dividends Income Capital Gains Capital Gains Received Deduction
--------- ---------- ------------- ------------- --------------------
Core Bond Class A...................... 0.27 0.27 -- -- -- %
Core Bond Class B...................... 0.19 0.19 -- -- --
Core Bond Class C...................... 0.19 0.19 -- -- --
Core Bond Class I...................... 0.27 0.27 -- -- --
Core Bond Class Z...................... 0.33 0.33 -- -- --
U.S. Government Securities Fund Class A 0.30 0.30 -- -- --
U.S. Government Securities Fund Class B 0.24 0.24 -- -- --
U.S. Government Securities Fund Class C 0.24 0.24 -- -- --
GNMA Fund Class A...................... 0.51 0.31 0.15 0.05 --
GNMA Fund Class B...................... 0.43 0.23 0.15 0.05 --
GNMA Fund Class C...................... 0.43 0.23 0.15 0.05 --
GNMA Fund Class I...................... 0.42 0.22 0.15 0.05 --
GNMA Fund Class X...................... 0.54 0.34 0.15 0.05 --
Strategic Bond Fund Class A............ 0.21 0.21 -- -- 0.86
Strategic Bond Fund Class B............ 0.19 0.19 -- -- 0.86
Strategic Bond Fund Class C............ 0.20 0.20 -- -- 0.86
Strategic Bond Fund Class I............ 0.22 0.22 -- -- 0.86
High Yield Bond Fund Class A........... 0.36 0.36 -- -- 0.96
High Yield Bond Fund Class B........... 0.33 0.33 -- -- 0.96
High Yield Bond Fund Class C........... 0.33 0.33 -- -- 0.96
High Yield Bond Fund Class I........... 0.27 0.27 -- -- 0.96
High Yield Bond Fund Class Z........... 0.38 0.38 -- -- 0.96
Tax Exempt Insured Class A*............ 0.81 0.37 0.24 0.20 --
Tax Exempt Insured Class B*............ 0.71 0.27 0.24 0.20 --
Tax Exempt Insured Class C*............ 0.72 0.28 0.24 0.20 --
- --------
* Tax exempt interest dividends
For the year ended March 31, 2004, certain dividends paid by the Strategic Bond
Fund and High Yield Bond Fund may be subject to a maximum tax rate of 15%, as
provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the
distributions paid during the fiscal year, the following represents the maximum
percentage that may be considered qualified dividend income:
Qualified Dividend
Portfolio Income Percentage
--------- ------------------
Strategic Bond Fund. 0.72%
High Yield Bond Fund 0.85%
72
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in the SunAmerica Income Funds'
portfolios to a similar investment in an index. Please note that "inception" as
used herein reflects the date on which a specific class of shares commenced
operations. It is important to note that the SunAmerica Income Funds are
professionally managed mutual funds while the indices are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only. The graphs present the performance of the class of that particular Fund
which has been in existence the longest. The performance of the other classes
will vary based upon the difference in sales charges and fees assessed to
shareholders of that class.
73
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (continued)
Core Bond Fund
For the annual period ended March 31, 2004, the SunAmerica Core Bond Fund Class
A returned 4.30% at NAV. The Fund's peer group, the Lipper Corporate Debt Funds
A Rated Category, returned 6.11% during the same time frame. The Fund's
benchmark, the Lehman Brothers U.S. Aggregate Bond Index returned 5.41% for the
twelve-month period.
The corporate credit sector was the primary driver of the fund's performance.
The Fund entered the period overweight in this asset class and benefited from
the sector's positive momentum. In contrast, the fund's performance suffered as
a result of being overweight in the Agency sector at inopportune times. An
overweight position in U.S. Agencies detracted from performance over the
June/July time frame, as this sector was especially hurt by the dramatic
technical sell-off in the U.S. Treasury market. Positions in collateralized
mortgage-backed securities and asset-backed securities performed well in the
first quarter of 2004.
In the government sector the portfolio was structured to best take advantage of
an anticipated flattening of the yield curve. This failed to materialize as
quickly as anticipated and a slightly long position in duration during the
June/July period contributed to the fund's performance drag. A dramatic
sell-off in the fixed income last summer led to underperformance in the Agency
and mortgage-backed securities markets.
The Fund benefited from being overweight in the Telecom, Cable and Utilities
sectors, all of which outperformed. To boost yield, the Fund purchased
generally higher yielding Treasury securities. In the Agency sector, short
maturity, and one-time call bonds were purchased which offered good yield
enhancement. The Fund also garnered additional yield by purchasing Freddie Mac
and Fannie Mae subordinated notes.
[CHART]
Lehman Brothers
Core Bond Fund Class A/#/ U.S. Aggregate Bond Index
------------------------ --------------------
3/94 $ 9,524 $10,000
3/95 9,882 10,500
3/96 10,932 11,631
3/97 11,346 12,202
3/98 12,747 13,666
3/99 13,335 14,551
3/00 13,404 14,825
3/01 14,589 16,681
3/02 15,035 17,572
3/03 16,475 19,626
3/04 17,183 20,687
Class A Class B Class C Class I Class Z
------------------ ------------------ ------------------ ------------------ ------------------
SEC SEC SEC SEC SEC
Core Average Average Average Average Average
Bond Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -0.61% 4.30% -0.32% 3.68% 2.68% 3.68% 4.35% 4.35% 4.92% 4.92%
- ---------------------------------------------------------------------------------------------------------------
5 Year Return 4.18% 28.86% 4.17% 24.68% 4.51% 24.68% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
10 Year Return 5.56% 80.41% N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Since Inception* 6.20% 128.29% 5.55% 71.58% 5.43% 69.73% 6.81% 27.78% 7.28% 29.90%
- ---------------------------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 5/1/91; Class B: 4/1/94; Class C: 4/1/94; Class I:
7/10/00; Class Z: 7/10/00
# For the purposes of the graph and the accompanying table, it has been assumed
that the maximum sales charge, of 4.75% of offering price, was deducted from
the initial $10,000 investment in the Fund.
For the 12 month period ending March 31, 2004, the SunAmerica Core Bond Class A
returned -0.61%, compared to 5.41% for the Lehman Brothers Aggregate Bond
Index. (The performance data and graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com.
74
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (continued)
U.S. Government Securities Fund
For the annual period ended March 31, 2004, the SunAmerica U.S. Government
Securities Fund Class A and Class B returned 3.29% and 2.62% at NAV,
respectively. The Fund's peer class, the Lipper General U.S. Government Funds
Category, returned 2.96% in the same period. The Fund's benchmark, the Lehman
Brothers Government Bond Index returned 4.24%.
The past twelve months have witnessed one of the most volatile periods in the
Government Securities markets in years. The 10-Year Treasury note rallied
sharply in June as its yield hit levels not seen since the late 1950s. This was
quickly reversed, however, over the summer as inflation worries sent the
10-year Treasury note into its largest one-month decline in 15 years. By the
close of the third quarter, the 10-year note had recovered and yields trended
steadily downward throughout the rest of the reporting period.
The U.S. Government Securities Fund maintained an underweight position in U.S.
Treasuries and an overweight position in GNMA Securities relative to its
benchmark. While a longer duration posture caused the fund to underperform over
the summer, the fund profited from the drop in yields when the market
recovered. The Fund benefited by being overweight GNMAs as spreads narrowed
from 120 to 100 basis points and from being longer in duration than the
benchmark in the later part of the reporting period. For the year ended
3/31/04, the duration of the Fund was longer than the Fund's Lehman Brothers
Government Bond Index benchmark.
[CHART]
U.S. Government Lehman Brothers
Securities Fund Class B Government Bond Index
----------------------- ----------------
3/94 $10,000 $10,000
3/95 10,329 10,431
3/96 11,245 11,523
3/97 11,618 12,018
3/98 12,640 13,478
3/99 13,177 14,378
3/00 13,207 14,737
3/01 14,833 16,555
3/02 15,235 17,207
3/03 17,388 19,514
3/04 17,960 20,342
Class A Class B Class C
U.S. ---------------------- ---------------------- ----------------------
Government SEC Average SEC Average SEC Average
Securities Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ----------- ---------- ----------- ---------- ----------- ----------
1 Year Return -1.61% 3.29% -1.38% 2.62% 1.62% 2.62%
- -------------------------------------------------------------------------------------
5 Year Return 5.79% 39.11% 5.82% 34.67% N/A N/A
- -------------------------------------------------------------------------------------
10 Year Return 6.08% 89.43% 6.03% 79.60% N/A N/A
- -------------------------------------------------------------------------------------
Since Inception* 5.72% 88.14% 6.49% 211.39% 6.52% 35.70%
- -------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/1/93; Class B: 3/3/86; Class C: 6/1/99.
For the 12 month period ending March 31, 2004, the SunAmerica U.S. Government
Securities Class B returned -1.38%, compared to 4.24% for the Lehman Brothers
Government Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com.
75
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (continued)
GNMA Fund
For the annual period ended March 31, 2004, the SunAmerica GNMA Fund Class A
and Class B returned 3.06% and 2.39% at NAV, respectively. The Fund's peer
class, the Lipper GNMA Funds Category, returned 2.72% in the same period. The
Fund's benchmark, the Citigroup Mortgage GNMA Index, returned 3.79%.
The mortgage-backed securities markets were strongly impacted early in the
reporting period by wide swings in the Treasury markets. The 10-year Treasury
note rallied sharply in June on strong mortgage prepayment activity as more
homeowners refinanced their loans. While the Fund's overweight position in low
coupons cushioned it from significant underperformance during the rally, it
hurt performance over the summer as the Treasury markets reversed course.
However, by September, the markets had reversed once again. The fund recouped
much of its losses and GNMA securities went on to outperform Treasuries
throughout the remainder of the reporting period.
The GNMA Fund remained long in duration through the summer, creating some
performance setbacks as the Treasury and mortgage-backed securities markets
whipsawed up and down. The Fund recouped losses, however, when yields dropped
and spreads narrowed in the third quarter of 2003. Given the media focus on
Freddie Mac and the Federal National Mortgage Association (Fannie Mae) and
potential for credit downgrades, the fund benefited from a commitment to invest
solely in securities with explicit guarantees by the Federal Government.
[CHART]
Citigroup Mortgage
GNMA Fund Class B GNMA Index
----------------- ------------------
3/94 $10,000 $10,000
3/95 10,381 10,619
3/96 11,433 11,773
3/97 11,983 12,476
3/98 13,354 13,832
3/99 14,118 14,701
3/00 14,337 15,135
3/01 16,124 16,941
3/02 16,760 18,055
3/03 18,693 19,576
3/04 19,141 20,317
Class A Class B Class C Class X
------------------ ------------------ ------------------ ------------------
SEC SEC SEC SEC
Average Average Average Average
GNMA Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -1.87% 3.06% -1.55% 2.39% 1.41% 2.39% 3.31% 3.31%
- --------------------------------------------------------------------------------------------
5 Year Return 5.97% 40.25% 5.96% 35.58% N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
10 Year Return 6.86% 103.75% 6.71% 91.41% N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Since Inception* 6.42% 101.43% 7.99% 400.21% 6.73% 36.99% 7.64% 16.17%
- --------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/11/93; Class B: 4/25/83; Class C: 6/1/99; Class
X: 3/19/02.
For the 12 month period ending March 31, 2004, the SunAmerica GNMA Class B
returned -1.55%, compared to 3.79% for the Citigroup Mortgage GNMA Index. (The
performance data and graph do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com.
76
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (continued)
Strategic Bond Fund
For the annual period ended March 31, 2004, the SunAmerica Strategic Bond Fund
Class A returned 18.04% at NAV. The Fund outperformed both its peer group, the
Lipper Multi-Sector Income Funds Category, which returned 14.03%, and its
benchmark, the Lehman Brothers U.S. Aggregate Bond Index, which returned 5.41%
for the twelve-month period.
The high yield bond rally that had begun in late 2002 continued, spurred by
declining default rates and continuing balance sheet improvements. Investors
were attracted to the sector's double-digit average yields in a historically
low interest rate environment. At the same time, emerging market debt benefited
as investors grew more confident that signs of strength in the United States
and Asia will be enough to keep the world in a mode of positive economic
growth. Both sectors enjoyed credit market improvements, but not enough to spur
an interest rate hike from the Federal Reserve.
The U.S. investment grade bond sector, however, experienced one of its most
volatile periods in years. The bell weather 10-Year U.S. Treasury rallied
sharply in June, only to turn around and sell-off dramatically in July and
August. This hurt the performance of mortgage-backed securities, which suffered
as extension risk haunted the market. Meanwhile the corporate debt market
languished as investors sought higher returns elsewhere.
As of March 31, 2004, the fund's assets were allocated in the following
percentage ranges: 40% high yield bonds; 30% U.S. investment-grade bonds; 20%
emerging market debt; and approximately a 10% investment in non-U.S. dollar
bonds issued by large, developed countries.
The Fund's positions in the high yield and emerging markets sectors drove its
strong performance in the twelve-month period covered by this report and
accounted for its significant outperformance of its benchmark, the Lehman
Brothers U.S. Aggregate Bond Index. The Fund also benefited from its non-U.S.
dollar allocation to Euro denominated government bonds. As the Euro appreciated
versus the U.S. dollar, this segment turned in strong results. In addition,
emerging market debt holdings in Brazil rallied as the country moved towards
operating in a fiscally conservative manner. An underweight in high-grade
corporate bonds buffered the fund from declining prices spurred by historically
low interest rates.
[CHART]
Strategic Bond Lehman Brothers
Fund Class A/#/ U.S. Aggregate Bond Index
--------------- --------------------
3/94 $ 9,529 $10,000
3/95 9,582 10,500
3/96 11,490 11,631
3/97 12,913 12,202
3/98 14,551 13,666
3/99 14,388 14,551
3/00 14,700 14,825
3/01 15,460 16,681
3/02 16,145 17,572
3/03 17,610 19,626
3/04 20,786 20,687
Class A Class B Class C Class I
------------------ ------------------ ------------------ ------------------
SEC SEC SEC SEC
Average Average Average Average
Strategic Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return Return+ Return Return+ Return Return+ Return Return+
- ------------------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 12.56% 18.04% 13.29% 17.29% 16.43% 17.43% 18.38% 18.38%
- -----------------------------------------------------------------------------------------------------------
5 Year Return 6.58% 44.47% 6.57% 39.38% 7.02% 40.37% N/A N/A
- -----------------------------------------------------------------------------------------------------------
10 Year Return 7.59% 118.13% N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------
Since Inception* 6.79% 108.08% 7.52% 106.52% 7.46% 105.36% 9.92% 42.22%
- -----------------------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/1/93; Class B: 4/1/94; Class C: 4/1/94; Class I:
7/10/00
# For the purposes of the graph and the accompanying table, it has been assumed
that the maximum sales charge, of 4.75% of offering price, was deducted from
the initial $10,000 investment in the Fund.
For the 12 month period ending March 31, 2004, the SunAmerica Strategic Bond
Class A returned 12.56%, compared to 5.41% for the Lehman Brothers U.S.
Aggregate Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com.
77
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (continued)
High Yield Bond Fund
For the twelve-month period ended March 31, 2004, the SunAmerica High Yield
Bond Fund Class A returned 26.05% at NAV. The Fund outperformed both its peer
group, the Lipper High Current Yield Funds Category, which returned 19.71%, and
its benchmark, the Citigroup High Yield Market Index, which returned 22.39% for
the same period.
In the last twelve months the high yield market provided very strong
performance. The sector was buoyed by improvements in the economy, improvements
in company balance sheets and a declining default rate. Yields remained very
attractive relative to other asset classes and heightened demand for high yield
bonds led to increased liquidity in the market. This contributes to a declining
default rate as some companies that were at the margin primarily due to a debt
profile that featured too much short-term debt were able to take advantage of
the existing market to refinance short-term debt with longer-term bonds.
The Fund benefited from security selection and overall market performance.
Positions in Wireless, Healthcare and Media Cable drove Fund returns and
accounted for the bulk of Fund's outperformance versus the benchmark.
In the latter part of the reporting period, the Fund began to rotate out of
Wireless positions that had become fully valued and took on new positions that
were still trading at cheap levels. It added IWO Wireless and Rural Cellular,
for example, and continued to benefit from an existing position in American
Cellular. The fund also increased its weightings in Utilities, including Edison
Mission, which rallied strongly in the first quarter of 2004. The performance
in the Healthcare segment was heavily influenced by the resolution of
securities fraud issues and accompanying rebound in Healthsouth.
[CHART]
High Yield Bond Citigroup
Fund Class A/#/ High Yield Market Index
--------------- -----------------------
11/98 $ 9,524 $10,000
3/99 9,999 10,651
3/00 9,710 10,397
3/01 9,877 10,679
3/02 9,692 10,828
3/03 9,454 11,361
3/04 11,917 13,904
Class A Class B Class C Class Z
------------------ ------------------ ------------------ ------------------
SEC SEC SEC SEC
Average Average Average Average
High Yield Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return Return+ Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 20.14% 26.05% 21.55% 25.55% 24.14% 25.14% 26.83% 26.83%
- --------------------------------------------------------------------------------------------
5 Year Return 2.56% 19.18% 2.59% 15.12% N/A N/A 4.08% 22.15%
- --------------------------------------------------------------------------------------------
10 Year Return N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Since Inception* 3.30% 25.12% 3.39% 20.53% 4.13% 15.72% 4.73% 28.42%
- --------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/1/98; Class B: 11/1/98; Class C: 8/21/00; Class
Z: 11/1/98
# For the purposes of the graph and the accompanying table, it has been assumed
that the maximum sales charge, of 4.75% of offering price, was deducted from
the initial $10,000 investment in the Fund.
For the 12 month period ending March 31, 2004, the SunAmerica High Yield Bond
Class A returned 20.14%, compared to 22.39% for the Citigroup High Yield Market
Index. (The performance data and graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com.
78
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (continued)
Tax Exempt Insured Fund
For the twelve months ended March 31, 2004, the SunAmerica Tax Exempt Insured
Fund Class A returned 4.86% at NAV, outperforming its peer group, the Lipper
Insured Municipal Debt Funds Category, which returned 4.75% in the same period.
The Fund's benchmark, the Lehman Brothers Municipal Bond Index, returned 5.86%
Over the reporting period the fund was positioned to take advantage of a
flattening yield curve. While the yield curve has failed to flatten as quickly
as anticipated, the fund benefited from being overweight the 8-12 year and
17-22 year maturity ranges. Both segments outperformed the Lehman Municipal
Bond Index.
In addition, the fund benefited from a combination of sector selections. The
Fund continued to favor the high yields available in the hospital and
transportation sectors. The Fund remained overweight in these sectors, and both
sectors outperformed the Index. The Fund also continued to remain overweight
essential revenue issues. This is at the expense of general obligation issues,
which have weakened in the face of rising state deficits.
Within the transportation sector, the Fund took advantages of price weakness in
the market to purchase Pennsylvania Turnpike Commission Revenue 5.25% 12/1/23
and Triborough Bridge and Tunnel Authority Revenue, New York 5.25% 11/15/30
bonds. The Fund also added Franklin County, Ohio Hospital Revenue (OhioHealth
Corp.) 5.25% 5/15/23 to its hospital holdings. This bond was purchased at new
issue, and its price rose after the bonds were distributed. An additional
purchase that has benefited the fund was New York City, New York General
Obligation 5.0% 8/1/20.
[CHART]
Tax Exempt Lehman Brothers
Insured Fund Class A/#/ Municipal Bond Index
----------------------- --------------------
3/94 $ 9,522 $10,000
3/95 10,186 10,743
3/96 10,936 11,643
3/97 11,400 12,278
3/98 12,572 13,593
3/99 13,143 14,436
3/00 12,985 14,425
3/01 14,295 16,000
3/02 14,564 16,610
3/03 15,886 18,252
3/04 16,670 19,322
Class A Class B Class C
------------------ ------------------ ------------------
SEC SEC SEC
Average Average Average
Annual Cumulative Annual Cumulative Annual Cumulative
Tax Exempt Insured Fund Return Return+ Return Return+ Return Return+
- ----------------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -0.16% 4.86% 0.15% 4.10% 3.14% 4.14%
- --------------------------------------------------------------------------------
5 Year Return 3.86% 26.83% 3.78% 22.40% N/A N/A
- --------------------------------------------------------------------------------
10 Year Return 5.24% 75.07% 5.19% 65.78% N/A N/A
- --------------------------------------------------------------------------------
Since Inception* 5.93% 202.02% 4.46% 57.98% 4.54% 23.92%
- --------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, return would be lower.
* Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 6/1/99.
# For the purposes of the graph and the accompanying table, it has been assumed
that the maximum sales charge, of 4.75% of offering price, was deducted from
the initial $10,000 investment in the Fund.
For the 12 month period ending March 31, 2004, SunAmerica Tax Exempt Insured
Class A returned -0.16%, compared to 5.86% for the Lehman Brothers Municipal
Bond Index. (The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. The fund's daily net asset
values are not guaranteed and shares are not insured by the FDIC, the Federal
Reserve Board or any other agency. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be higher or lower than the original cost. Current performance may be higher or
lower than that shown. Performance as of the most recent month end is available
at www.sunamericafunds.com.
79
[LOGO] AIG Sun America
Mutual Funds
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Directors/Trustees Investment Adviser This report is submitted
Samuel M. Eisenstat solely for the general
Peter A. Harbeck AIG SunAmerica Asset Management Corp. information of
Dr. Judith L. Craven Harborside Financial shareholders of the Fund.
William F. Devin Center Distribution of this
Stephen J. Gutman 3200 Plaza 5 report to persons other
Jeffrey S. Burum Jersey City, NJ than shareholders of
07311-4992 the Fund is authorized
Officers only in connection with a
Robert M. Zakem, Distributor currently effective
President AIG SunAmerica Capital prospectus, setting forth
Donna M. Handel, Services, Inc. details of the Fund,
Treasurer Harborside Financial which must precede or
Michael Cheah, Vice Center accompany this report.
President 3200 Plaza 5
J. Steven Neamtz, Vice Jersey City, NJ VOTING PROXIES ON FUND
President 07311-4992 PORTFOLIO SECURITIES.
Abbe P. Stein, Vice A description of the
President and Shareholder Servicing policies and procedures
Assistant Secretary Agent that the Trust uses to
Joseph P. Kelly, AIG SunAmerica Fund determine how to vote
Secretary Services, Inc. proxies relating to
Stacey V. Morrison, Harborside Financial securities held in the
Assistant Secretary Center Fund's portfolio which is
Gregory R. Kingston, 3200 Plaza 5 available in the Trust's
Vice President and Jersey City, NJ Statement of Additional
Assistant Treasurer 07311-4992 Information, may be
Robert A. Chopyak, obtained without charge
Assistant Treasurer Custodian and Transfer upon request, by calling
Agent (800) 858-8850. This
State Street Bank and information is also
Trust Company available from the EDGAR
P.O. Box 419572 database on the
Kansas City, MO Securities and Exchange
64141-6572 Commission's Internet
site at
http://www.sec.gov.
Distributed by:
AIG SunAmerica Capital Services, Inc.
INANN-3/04
Item 2. Code of Ethics
The SunAmerica Income Funds ("the Trust") has adopted a Code of Ethics
applicable to its Principal Executive and Principal Accounting Officers pursuant
to Section 406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
Currently, the SunAmerica Income Funds does not have an Audit Committee member
who possesses all of the attributes required to be an "audit committee financial
expert" as defined in instruction 2(b) of Item 3 of Form N-CSR. However, the
Board of Directors believes that each member of the Audit Committee has
substantial experience relating to the review of financial statements and the
operations of audit committees. Accordingly, the Board believes that the members
are qualified to evaluate the Trust's financial statements, supervise the
Trust's preparation of its financial statements, and oversee the work of the
Trust's independent auditors.
Item 4. Principal Accountant Fees and Services.
(a)-(d) Aggregate fees billed to the Trust for the last two fiscal years
for professional services rendered by the Trust's principal accountant
were as follows:
2003 2004
Audit Fees $122,375 $152,460
Audit-Related Fees $ 62,400 $ 61,820
Tax Fees $ 56,599 $ 58,871
All Other Fees $ 0 $ 0
Audit Fees include amounts related to the audit of the Trust's annual
financial statements and services normally provided by the principal
accountant in connection with statutory and regulatory filings.
Audit-Related Fees principally include a SAS No. 100 review of the
Trust's Semiannual Shareholder Report. Tax Fees principally include
tax compliance, tax advice, tax planning and preparation of tax
returns.
(e)
(1) The Fund's audit committee pre-approves all audit services
provided by the Fund's principal accountant for the Fund and
all non-audit services provided by the Fund's principal
accountant for the Fund, its investment adviser and any
entity controlling, controlled by, or under common control
with the investment adviser ("Adviser Affiliate") that
provides ongoing services to the Fund, if the engagement by
the investment adviser or Adviser Affiliate relates directly
to the operations and financial reporting of the Fund.
(2) No services included in (b)-(d) above were approved pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the Trust's principal accountant for
non-audit services rendered to the Registrant, its investment
adviser, and Adviser Affiliate that provides ongoing services to
the Fund for 2004 and 2003 were $1,493,934 and $783,854,
respectively.
(h) Non-audit services rendered to the Registrant's investment
adviser and any Adviser Affiliate that were not pre-approved
pursuant to Paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
were considered by the Trust's audit committee as to whether they
were compatible with maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of equity securities by Closed-End Management Investment
Company and affiliated purchasers.
Not applicable.
Item 9. Submission of matters to a vote of security holders.
Not applicable.
Item 10. 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 second fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal contro1 over financial
reporting.
Item 11. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and Principal
Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act
of 2002 attached hereto as Exhibit 99.406.Code of Ethics.
(2) Certification pursuant to Rule 30a-2 under the Investment Company
Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT.
(3) Not applicable.
(b) 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: June 9, 2004
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: June 9, 2004
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: June 9, 2004