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)
Vincent M. Marra
Senior Vice President & Chief Operating Officer
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) 324-6464
-----------------------------
Date of fiscal year end: March 31
--------------------------
Date of reporting period: March 31, 2005
-------------------------
Item 1. Reports to Stockholders
SunAmerica Income Funds, Annual Report at March 31, 2005.
[GRAPHIC]
SunAmerica
Income Funds
2005 ANNUAL REPORT
[LOGO] AIG Sun America
Mutual Funds
March 31, 2005 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
EXPENSE EXAMPLE................................... 3
STATEMENT OF ASSETS AND LIABILITIES............... 5
STATEMENT OF OPERATIONS........................... 7
STATEMENT OF CHANGES IN NET ASSETS................ 9
FINANCIAL HIGHLIGHTS.............................. 12
PORTFOLIO OF INVESTMENTS.......................... 18
NOTES TO FINANCIAL STATEMENTS..................... 60
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM................................... 77
TRUSTEE AND OFFICER INFORMATION................... 78
COMPARISONS: PORTFOLIO VS. INDEXES................ 80
Shareholder Letter
Dear Shareholder:
We are pleased to present the annual performance summary of the SunAmerica
Income Funds for the 12-month period from March 31, 2004 to March 31, 2005. As
always, we look forward to this opportunity to share with you the economic and
market conditions that have shaped the Funds' investments during this time.
The past 12 months encompassed a period in which fixed income markets performed
well, despite seven separate increases by the Federal Reserve Bank of its
target federal funds rate. An improving economy, continued low inflation and
the measured approach taken by the Fed bolstered bond prices into the first
quarter of 2005. Fixed income investors were particularly rewarded for risk,
with higher yielding credits exhibiting the best performance.
In March 2005, however, momentum turned negative. The Federal Reserve Chairman
raised the possibility that inflation might not be fully tamed and stoked
speculation that monetary policy might be tightened at a faster pace. In
addition, General Motors, the largest issuer in the investment grade arena,
announced a significant earnings revision, and its debt was downgraded. This
rattled investors and the market turned risk averse.
The Funds' fiscal year opened on a weak note, with the yield on the bellwether
10-year U.S. Treasury rising from below 4% to as high as 4.87% in anticipation
of an impending tightening of the money supply. In June 2004, the Federal
Reserve Bank raised its target Federal Funds rate 25 basis points to 1.25%, and
it continued to raise the rate in 25 basis point increments throughout the
reporting period. By the close of the Fund's fiscal year, the Fed Funds' rate
has risen from 1.00% to 2.75%.
Initially the credit markets faltered as investors reacted to the change in
monetary policy. But evidence of a cooling of the economy surfaced in the late
summer and fall, and by the end of the third quarter, the yield on the 10-year
U.S. Treasury had eased off sharply to approach 4%. The Treasury market rallied
and remained in a trading range until March, when sentiment sent rates higher.
In the first half of the year Treasuries, GNMAs and mortgage-backed securities
(MBS) performed well, with current coupon GNMAs trading at about 100 basis
points over the 10-year Treasury. In the second half, the yield spread between
the 10-year U.S. Treasury and GNMAs widened. GNMA securities outperformed as
investors reached to yield and GNMA prices rose. But, this trend quickly
reversed in mid-March and GNMAs traded down. The yield on the 10-year Treasury
rose before closing the month just below 4.50%.
The high yield market benefited the most throughout the reporting period, with
the lower rated sectors exhibiting the best performance. Emerging market debt
kept pace, buoyed by the uptick in oil and commodity prices. The U.S. dollar
continued to weaken against other currencies and non-U.S. dollar- denominated
government bonds turned in strong results.
The municipal market continued to provide an attractive after-tax return. For
the period covered in this report, the municipal bonds outperformed the
Treasuries, with the Lehman Municipal Bond Index returning 2.67% versus 0.04%
for the Lehman U.S. Treasury Index.
Thank you for your continued investment in our Funds. A more detailed
commentary on the performance of each fund is included at the end of the
report. We also encourage you to visit our website www.sunamericafunds.com for
more 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 Wiese Hutch Bryan Rob Vanden Assem
- --------
Past performance is no guarantee of future results.
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2005 -- (unaudited)
Disclosure of Portfolio Expenses in Shareholder Reports
As a shareholder of a Fund in the SunAmerica Income Funds (the "Trust"), you
may incur two types of costs: (1) transaction costs, including sales charges on
purchase payments, contingent deferred sales charges and (2) ongoing costs,
including management fees; distribution and service fees; and other Fund
expenses. This Example is intended to help you understand your ongoing costs
(in dollars) of investing in the Funds and to compare these costs with the
ongoing costs of investing in other mutual funds. The Example is based on an
investment of $1,000 invested at October 1, 2004 and held until March 31, 2005.
Actual Expenses
The "Actual" section of the table provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the column under the heading entitled "Expenses Paid During the Six
Months Ended March 31, 2005" to estimate the expenses you paid on your account
during this period. For shareholder accounts in classes other than Class I,
Class X, and Class Z the "Expenses Paid During the Six Months Ended March 31,
2005" column does not include small account fees that may be charged if your
account balance is below $500 ($250 for retirement plan accounts). In addition,
the "Expenses Paid During the Six Months Ended March 31, 2005" column does not
include administrative fees that may apply to qualified retirement plan
accounts. See the Fund's prospectus and/or the retirement plan document for a
full description of these fees. Had these fees been included, the "Expenses
Paid During the Six Months Ended March 31, 2005" column would have been higher
and the "Ending Account Value" would have been lower.
Hypothetical Example for Comparison Purposes
The "Hypothetical" section of the table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in these Funds and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds. For shareholder accounts in classes other
than Class I, Class X, and Class Z the "Expenses Paid During the Six Months
Ended March 31, 2005" column does not include small account fees that may be
charged if your account balance is below $500 ($250 for retirement plan
accounts). In addition, the "Expenses Paid During the Six Months Ended March
31, 2005" column does not include administrative fees that may apply to
qualified retirement plan accounts. See the Fund's prospectus and/or the
retirement plan document for a full description of these fees. Had these fees
been included, the "Expenses Paid During the Six Months Ended March 31, 2005"
column would have been higher and the "Ending Account Value" would have been
lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, including sales
charges on purchase payments, contingent deferred sales charges; small account
fees and administrative fees, if applicable to your account. Please refer to
your prospectus and/or qualified retirement plan document for more information.
Therefore, the "Hypothetical" example is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs and other fees were
included, your costs would have been higher.
3
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2005 -- (unaudited) (continued)
Actual Hypothetical
------------------------------------------------ ----------------------------------
Ending Account
Ending Account Expenses Paid Value Using a
Value Using During the Six Hypothetical 5%
Beginning Actual Return Months Ended Beginning Assumed Return
Account Value at March 31, March 31, Account Value at March 31,
at October 1, 2004 2005 2005* at October 1, 2004 2005
------------------ -------------- -------------- ------------------ ---------------
Core Bond Fund
Class A #.................... $1,000.00 $1,012.09 $ 5.52 $1,000.00 $1,019.45
Class B #.................... $1,000.00 $1,009.78 $ 8.77 $1,000.00 $1,016.21
Class C #.................... $1,000.00 $1,008.81 $ 8.76 $1,000.00 $1,016.21
Class I #.................... $1,000.00 $1,013.60 $ 5.02 $1,000.00 $1,019.95
Class Z #.................... $1,000.00 $1,014.98 $ 2.66 $1,000.00 $1,022.29
U.S. Government Securities Fund
Class A #.................... $1,000.00 $1,007.03 $ 4.95 $1,000.00 $1,020.00
Class B #.................... $1,000.00 $1,002.72 $ 8.19 $1,000.00 $1,016.75
Class C #.................... $1,000.00 $1,003.77 $ 8.19 $1,000.00 $1,016.75
GNMA Fund
Class A #.................... $1,000.00 $1,008.42 $ 4.96 $1,020.00 $1,020.00
Class B #.................... $1,000.00 $1,004.28 $ 8.20 $1,016.75 $1,016.75
Class C #.................... $1,000.00 $1,004.29 $ 8.20 $1,016.75 $1,016.75
Class X...................... $1,000.00 $1,008.62 $ 3.91 $1,021.04 $1,021.04
Strategic Bond Fund
Class A #.................... $1,000.00 $1,061.26 $ 7.09 $1,000.00 $1,018.05
Class B #.................... $1,000.00 $1,057.90 $10.42 $1,000.00 $1,014.81
Class C #.................... $1,000.00 $1,057.72 $10.41 $1,000.00 $1,014.81
High Yield Bond Fund
Class A #.................... $1,000.00 $1,083.58 $ 7.06 $1,000.00 $1,018.15
Class B #.................... $1,000.00 $1,079.97 $10.42 $1,000.00 $1,014.91
Class C #.................... $1,000.00 $1,082.31 $10.43 $1,000.00 $1,014.91
Class Z #.................... $1,000.00 $1,086.54 $ 4.11 $1,000.00 $1,020.99
Tax Exempt Insured Fund
Class A...................... $1,000.00 $1,009.35 $ 6.31 $1,000.00 $1,018.65
Class B...................... $1,000.00 $1,005.89 $ 9.75 $1,000.00 $1,015.21
Class C #.................... $1,000.00 $1,005.08 $ 9.75 $1,000.00 $1,015.21
---------------
Expenses Paid
During the Six Expense Ratio
Months Ended as of
March 31, March 31,
2005* 2005*
-------------- -------------
Core Bond Fund
Class A #.................... $ 5.54 1.10%
Class B #.................... $ 8.80 1.75%
Class C #.................... $ 8.80 1.75%
Class I #.................... $ 5.04 1.00%
Class Z #.................... $ 2.67 0.53%
U.S. Government Securities Fund
Class A #.................... $ 4.99 0.99%
Class B #.................... $ 8.25 1.64%
Class C #.................... $ 8.25 1.64%
GNMA Fund
Class A #.................... $ 4.99 0.99%
Class B #.................... $ 8.25 1.64%
Class C #.................... $ 8.25 1.64%
Class X...................... $ 3.93 0.78%
Strategic Bond Fund
Class A #.................... $ 6.94 1.38%
Class B #.................... $10.20 2.03%
Class C #.................... $10.20 2.03%
High Yield Bond Fund
Class A #.................... $ 6.84 1.36%
Class B #.................... $10.10 2.01%
Class C #.................... $10.10 2.01%
Class Z #.................... $ 3.98 0.79%
Tax Exempt Insured Fund
Class A...................... $ 6.34 1.26%
Class B...................... $ 9.80 1.95%
Class C #.................... $ 9.80 1.95%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 182 days divided by 365
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges, small account fees
and administrative fees, if applicable to your account. Please refer to your
Prospectus and/or qualified retirement plan document for more information.
# During the stated period, the investment adviser either waived a portion of
or all fees and assumed a portion of or all expenses for the Funds. As a
result, if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended March 31,
2005" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2005
U.S. Government Strategic
Core Bond Securities GNMA Bond
Fund Fund Fund Fund
------------ --------------- ------------ ------------
ASSETS:
Long-term investment securities, at value* (unaffiliated)...... $185,641,925 $211,723,388 $493,453,462 $118,243,283
Short-term investment securities, at value*.................... 10,000,000 -- 79,966,200 7,634,000
Repurchase agreements (cost equals market)..................... 10,166,000 36,147,000 105,783,000 2,465,000
------------ ------------ ------------ ------------
Total investments............................................ 205,807,925 247,870,388 679,202,662 128,342,283
------------ ------------ ------------ ------------
Cash........................................................... 284,700 653 73 5,872,876
Foreign cash*.................................................. -- -- -- 295,535
Deposit with broker for securities sold short.................. -- -- -- --
Receivable for:
Shares of beneficial interest sold........................... 107,067 29,379 428,039 1,874,054
Dividends and interest....................................... 1,662,553 1,125,421 1,914,987 1,669,290
Investments sold............................................. 5,890,886 7,231,620 12,397,062 3,356,421
Prepaid expenses and other assets.............................. 5,047 3,801 9,673 2,566
Due from investment adviser for expense reimbursements/fee
waivers....................................................... 25,987 72,360 70,857 --
------------ ------------ ------------ ------------
Total assets................................................... 213,784,165 256,333,622 694,023,353 141,413,025
------------ ------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed....................... 116,175 204,332 1,102,228 147,006
Investments purchased........................................ 6,203,710 14,232,592 145,853,799 5,361,197
Interest on securities sold short............................ 4,167 -- -- 3,500
Investment advisory and management fees...................... 103,935 117,480 194,399 70,538
Distribution and service maintenance fees.................... 58,401 84,041 237,149 77,422
Transfer agent fees and expenses............................. 53,662 58,732 143,242 33,606
Trustees' fees and expenses.................................. 31,385 105,745 48,669 25,948
Other accrued expenses....................................... 183,675 109,802 119,228 46,354
Line of credit............................................... -- -- -- --
Dividends payable.............................................. 9,724 157,395 249,139 183,706
Collateral upon return of securities loaned.................... -- 29,400,000 49,600,000 --
Due to custodian............................................... -- -- -- --
Securities sold short, at value#............................... 2,445,312 -- -- 2,054,062
Unrealized depreciation on forward foreign currency contracts.. -- -- -- 13,574
------------ ------------ ------------ ------------
Total liabilities.............................................. 9,210,146 44,470,119 197,547,853 8,016,913
------------ ------------ ------------ ------------
Net Assets..................................................... $204,574,019 $211,863,503 $496,475,500 $133,396,112
------------ ------------ ------------ ------------
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value................. $ 201,882 $ 226,161 $ 442,917 $ 382,402
Paid-in capital................................................ 206,863,873 223,038,532 497,621,745 161,169,241
------------ ------------ ------------ ------------
207,065,755 223,264,693 498,064,662 161,551,643
Accumulated undistributed net investment income (loss)......... 110,959 (137,838) (12,374) 387,799
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short, and
foreign exchange transactions................................. (1,358,786) (9,162,866) 1,574,683 (31,938,957)
Unrealized appreciation (depreciation) on investments.......... (1,231,800) (2,100,486) (3,151,471) 3,424,744
Unrealized appreciation (depreciation) on securities sold short (12,109) -- -- (10,172)
Unrealized appreciation (depreciation) on foreign exchange
transactions.................................................. -- -- -- (18,945)
------------ ------------ ------------ ------------
Net Assets..................................................... $204,574,019 $211,863,503 $496,475,500 $133,396,112
------------ ------------ ------------ ------------
*Cost
Long-term investment securities (unaffiliated)............... $186,873,725 $213,823,874 $496,604,933 $114,818,539
============ ============ ============ ============
Short-term investment securities............................. $ 10,000,000 $ -- $ 79,966,200 $ 7,634,000
============ ============ ============ ============
Foreign currency............................................. $ -- $ -- $ -- $ 298,491
============ ============ ============ ============
# Proceeds from securities sold short.......................... $ 2,433,203 -- -- 2,043,890
============ ============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------- -----------
ASSETS:
Long-term investment securities, at value* (unaffiliated)...... $ 316,171,090 $69,234,188
Short-term investment securities, at value*.................... -- 6,795,119
Repurchase agreements (cost equals market)..................... -- --
------------- -----------
Total investments............................................ 316,171,090 76,029,307
------------- -----------
Cash........................................................... -- --
Foreign cash*.................................................. 153,409 --
Deposit with broker for securities sold short.................. 1,192,271 --
Receivable for:
Shares of beneficial interest sold........................... 402,393 6,178
Dividends and interest....................................... 6,027,953 989,383
Investments sold............................................. 10,879,380 --
Prepaid expenses and other assets.............................. 8,073 1,945
Due from investment adviser for expense reimbursements/fee
waivers....................................................... 76,860 690
------------- -----------
Total assets................................................... 334,911,429 77,027,503
------------- -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed....................... 1,597,576 53,653
Investments purchased........................................ 1,191,885 --
Interest on securities sold short............................ 20,902 --
Investment advisory and management fees...................... 227,790 32,800
Distribution and service maintenance fees.................... 155,604 31,156
Transfer agent fees and expenses............................. 66,890 14,886
Trustees' fees and expenses.................................. 47,409 33,001
Other accrued expenses....................................... 99,076 57,254
Line of credit............................................... 10,676,048 --
Dividends payable.............................................. 501,527 71,709
Collateral upon return of securities loaned.................... -- --
Due to custodian............................................... 1,269,440 --
Securities sold short, at value#............................... 1,163,750 --
Unrealized depreciation on forward foreign currency contracts.. -- --
------------- -----------
Total liabilities.............................................. 17,017,897 294,459
------------- -----------
Net Assets..................................................... $ 317,893,532 $76,733,044
------------- -----------
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value................. $ 715,980 $ 59,900
Paid-in capital................................................ 414,382,100 72,997,524
------------- -----------
415,098,080 73,057,424
Accumulated undistributed net investment income (loss)......... (1,879,694) (34,061)
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short, and
foreign exchange transactions................................. (109,276,321) 307,432
Unrealized appreciation (depreciation) on investments.......... 13,930,212 3,402,249
Unrealized appreciation (depreciation) on securities sold short 21,438 --
Unrealized appreciation (depreciation) on foreign exchange
transactions.................................................. (183) --
------------- -----------
Net Assets..................................................... $ 317,893,532 $76,733,044
------------- -----------
*Cost
Long-term investment securities (unaffiliated)............... $ 302,240,878 $65,831,939
============= ===========
Short-term investment securities............................. $ -- $ 6,795,119
============= ===========
Foreign currency............................................. $ 153,592 $ --
============= ===========
# Proceeds from securities sold short.......................... $ 1,185,188 --
============= ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2005 -- (continued)
U.S. Government Strategic
Core Bond Securities GNMA Bond
Fund Fund Fund Fund
------------ --------------- ------------ -----------
Class A (unlimited shares authorized):
Net assets......................................................... $167,786,789 $174,905,167 $338,031,201 $59,278,592
Shares of beneficial interest issued and outstanding............... 16,559,794 18,671,171 30,185,326 17,007,981
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)...................... $ 10.13 $ 9.37 $ 11.20 $ 3.49
Maximum sales charge (4.75% of offering price)..................... 0.51 0.47 0.56 0.17
------------ ------------ ------------ -----------
Maximum offering price to public................................... $ 10.64 $ 9.84 $ 11.76 $ 3.66
============ ============ ============ ===========
Class B (unlimited shares authorized):
Net assets......................................................... $ 4,977,376 $ 27,012,856 $102,497,052 $37,250,358
Shares of beneficial interest issued and outstanding............... 492,472 2,882,251 9,128,512 10,692,778
Net asset value, offering and redemption price per share (excluding
any applicable contingent deferred sales charge).................. $ 10.11 $ 9.37 $ 11.23 $ 3.48
============ ============ ============ ===========
Class C (unlimited shares authorized):
Net assets......................................................... $ 4,779,681 $ 9,945,480 $ 54,935,553 $36,867,162
Shares of beneficial interest issued and outstanding............... 472,241 1,062,712 4,887,570 10,539,432
Net asset value, offering and redemption price per share (excluding
any applicable contingent deferred sales charge).................. $ 10.12 $ 9.36 $ 11.24 $ 3.50
============ ============ ============ ===========
Class I (unlimited shares authorized):
Net assets......................................................... $ 1,404,511 $ -- $ -- $ --
Shares of beneficial interest issued and outstanding............... 138,428 -- -- --
Net asset value, offering and redemption price per share........... $ 10.15 $ -- $ -- $ --
============ ============ ============ ===========
Class Z (unlimited shares authorized):
Net assets......................................................... $ 25,625,662 $ -- $ -- $ --
Shares of beneficial interest issued and outstanding............... 2,525,279 -- -- --
Net asset value, offering and redemption price per share........... $ 10.15 $ -- $ -- $ --
============ ============ ============ ===========
Class X (unlimited shares authorized):
Net assets......................................................... $ -- $ -- $ 1,011,694 $ --
Shares of beneficial interest issued and outstanding............... -- -- 90,287 --
Net asset value, offering and redemption price per share........... $ -- $ -- $ 11.21 $ --
============ ============ ============ ===========
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
Class A (unlimited shares authorized):
Net assets......................................................... $101,660,552 $62,032,261
Shares of beneficial interest issued and outstanding............... 22,943,365 4,842,968
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)...................... $ 4.43 $ 12.81
Maximum sales charge (4.75% of offering price)..................... 0.22 0.64
------------ -----------
Maximum offering price to public................................... $ 4.65 $ 13.45
============ ===========
Class B (unlimited shares authorized):
Net assets......................................................... $ 61,961,458 $ 8,999,651
Shares of beneficial interest issued and outstanding............... 13,957,646 702,174
Net asset value, offering and redemption price per share (excluding
any applicable contingent deferred sales charge).................. $ 4.44 $ 12.82
============ ===========
Class C (unlimited shares authorized):
Net assets......................................................... $ 65,384,668 $ 5,701,132
Shares of beneficial interest issued and outstanding............... 14,671,041 444,896
Net asset value, offering and redemption price per share (excluding
any applicable contingent deferred sales charge).................. $ 4.46 $ 12.81
============ ===========
Class I (unlimited shares authorized):
Net assets......................................................... $ -- $ --
Shares of beneficial interest issued and outstanding............... -- --
Net asset value, offering and redemption price per share........... $ -- $ --
============ ===========
Class Z (unlimited shares authorized):
Net assets......................................................... $ 88,886,854 $ --
Shares of beneficial interest issued and outstanding............... 20,025,984 --
Net asset value, offering and redemption price per share........... $ 4.44 $ --
============ ===========
Class X (unlimited shares authorized):
Net assets......................................................... $ -- $ --
Shares of beneficial interest issued and outstanding............... -- --
Net asset value, offering and redemption price per share........... $ -- $ --
============ ===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2005
Core U.S. Government
Bond Fund Securities Fund
----------- ---------------
INVESTMENT INCOME:
Dividends* (unaffiliated)................................................................ $ 10 $ --
Interest (unaffiliated).................................................................. 10,552,114 9,761,307
----------- -----------
Total investment income................................................................ 10,552,124 9,761,307
----------- -----------
EXPENSES:
Investment advisory and management fees.................................................. 1,245,364 1,484,291
Distribution and service maintenance fees:
Class A................................................................................ 540,520 654,699
Class B................................................................................ 51,043 306,113
Class C................................................................................ 48,265 120,561
Service fees--Class I@................................................................... 5,245 --
Transfer agent fees:
Class A................................................................................ 339,756 456,215
Class B................................................................................ 16,448 84,846
Class C................................................................................ 13,903 35,248
Class I@............................................................................... 4,616 --
Class Z................................................................................ -- --
Class X................................................................................ -- --
Registration fees:.......................................................................
Class A................................................................................ 51,717 26,125
Class B................................................................................ 7,305 8,760
Class C................................................................................ 11,953 7,158
Class I@............................................................................... -- --
Class Z................................................................................ -- --
Class X................................................................................ -- --
Custodian fees........................................................................... 60,603 87,709
Reports to shareholders.................................................................. -- 127,053
Audit and tax fees....................................................................... 31,384 35,610
Legal fees............................................................................... 6,570 6,205
Trustees' fees and expenses.............................................................. 16,712 13,937
Interest expense......................................................................... -- 1,489
Interest expense on securities sold short................................................ -- --
Other expenses........................................................................... 12,810 15,180
----------- -----------
Total expenses before fee waivers, expense reimbursements and custody credits.......... 2,464,214 3,471,199
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (219,634) (915,381)
Custody credits earned on cash balances................................................ (1,470) (2,721)
----------- -----------
Net expenses........................................................................... 2,243,110 2,553,097
----------- -----------
Net investment income (loss).............................................................. 8,309,014 7,208,210
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... (309,327) 498,065
Net realized gain (loss) on securities sold short......................................... -- --
Net realized foreign exchange gain (loss) on other assets and liabilities................. -- --
----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ (309,327) 498,065
----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (4,270,180) (7,299,356)
Change in unrealized appreciation (depreciation) on forward currency contracts............ -- --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... -- --
Change in unrealized appreciation (depreciation) on securities sold short................. (12,109) --
----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (4,282,289) (7,299,356)
----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (4,591,616) (6,801,291)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 3,717,398 $ 406,919
=========== ===========
* Net of foreign withholding taxes on interest and dividends of........................... $ 83 $ --
=========== ===========
GNMA Fund
------------
INVESTMENT INCOME:
Dividends* (unaffiliated)................................................................ $ --
Interest (unaffiliated).................................................................. 19,790,101
------------
Total investment income................................................................ 19,790,101
------------
EXPENSES:
Investment advisory and management fees.................................................. 2,424,795
Distribution and service maintenance fees:
Class A................................................................................ 1,182,805
Class B................................................................................ 1,170,011
Class C................................................................................ 672,154
Service fees--Class I@................................................................... --
Transfer agent fees:
Class A................................................................................ 790,503
Class B................................................................................ 294,735
Class C................................................................................ 161,090
Class I@............................................................................... --
Class Z................................................................................ --
Class X................................................................................ 18,717
Registration fees:.......................................................................
Class A................................................................................ 79,415
Class B................................................................................ 20,786
Class C................................................................................ 22,641
Class I@............................................................................... --
Class Z................................................................................ --
Class X................................................................................ --
Custodian fees........................................................................... 185,085
Reports to shareholders.................................................................. 197,077
Audit and tax fees....................................................................... 38,384
Legal fees............................................................................... 12,076
Trustees' fees and expenses.............................................................. 39,316
Interest expense......................................................................... 172
Interest expense on securities sold short................................................ --
Other expenses........................................................................... 26,904
------------
Total expenses before fee waivers, expense reimbursements and custody credits.......... 7,336,666
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (905,003)
Custody credits earned on cash balances................................................ (15)
------------
Net expenses........................................................................... 6,431,648
------------
Net investment income (loss).............................................................. 13,358,453
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 3,461,416
Net realized gain (loss) on securities sold short......................................... --
Net realized foreign exchange gain (loss) on other assets and liabilities................. --
------------
Net realized gain (loss) on investments and foreign currencies............................ 3,461,416
------------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (11,084,127)
Change in unrealized appreciation (depreciation) on forward currency contracts............ --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... --
Change in unrealized appreciation (depreciation) on securities sold short................. --
------------
Net unrealized gain (loss) on investments and foreign currencies.......................... (11,084,127)
------------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (7,622,711)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 5,735,742
============
* Net of foreign withholding taxes on interest and dividends of........................... $ --
============
- --------
@ See Note 1
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2005 --
(continued)
Strategic High Yield Tax Exempt
Bond Fund Bond Fund Insured Fund
----------- ----------- ------------
INVESTMENT INCOME:
EXPENSES:
Dividends* (unaffiliated)................................................................ $ 42,679 $ 276,814 $ 27
Interest (unaffiliated).................................................................. 8,010,066 29,479,238 3,618,802
----------- ----------- -----------
Total investment income................................................................ 8,052,745 29,756,052 3,618,829
----------- ----------- -----------
EXPENSES:
Investment advisory and management fees.................................................. 707,356 2,434,703 412,187
Distribution and service maintenance fees:
Class A................................................................................ 163,087 428,047 226,047
Class B................................................................................ 358,559 673,872 119,819
Class C................................................................................ 245,975 569,973 58,709
Service fees--Class I@................................................................... 4,436 -- --
Transfer agent fees:
Class A................................................................................ 117,645 285,420 150,196
Class B................................................................................ 87,007 156,637 28,468
Class C................................................................................ 58,722 135,583 13,759
Class I@............................................................................... 3,974 -- --
Class Z................................................................................ -- -- --
Class X................................................................................ -- -- --
Registration fees:
Class A................................................................................ 14,565 25,388 11,181
Class B................................................................................ 11,347 12,855 6,014
Class C................................................................................ 10,613 17,490 9,213
Class I@............................................................................... 3,740 -- --
Class Z................................................................................ -- -- --
Class X................................................................................ -- -- --
Custodian fees........................................................................... 72,051 127,288 54,469
Reports to shareholders.................................................................. 51,236 57,330 20,676
Audit and tax fees....................................................................... 34,256 51,558 32,297
Legal fees............................................................................... 9,249 10,610 4,437
Trustees' fees and expenses.............................................................. 6,232 18,543 4,762
Interest expense......................................................................... -- 24,003 5
Dividend and interest expense on securities sold short................................... -- 97,466 --
Other expenses........................................................................... 11,582 14,470 9,821
----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements and custody credits.......... 1,971,632 5,141,236 1,162,060
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (31,223) (240,077) (5,550)
Custody credits earned on cash balances................................................ (23,901) (14,323) (359)
----------- ----------- -----------
Net expenses........................................................................... 1,916,508 4,886,836 1,156,151
----------- ----------- -----------
Net investment income (loss).............................................................. 6,136,237 24,869,216 2,462,678
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 5,201,037 10,506,237 314,275
Net realized gain (loss) on securities sold short......................................... -- (107,378) --
Net realized foreign exchange gain (loss) on other assets and liabilities................. 103,451 21,495 --
----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ 5,304,488 10,420,354 314,275
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (2,735,089) 6,049,742 (1,499,351)
Change in unrealized appreciation (depreciation) on forward currency contracts............ -- -- --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... 25,641 2,129 --
Change in unrealized appreciation (depreciation) on securities sold short................. (10,172) 15,253 --
----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (2,719,620) 6,067,124 (1,499,351)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 2,584,868 16,487,478 (1,185,076)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 8,721,105 $41,356,694 $ 1,277,602
=========== =========== ===========
* Net of foreign withholding taxes on interest and dividends of........................... $ 3,757 $ 451 $ --
=========== =========== ===========
- --------
@ See Note 1
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
Core Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2005 2004
------------ ------------
Operations:
Net investment income (loss)................................................. $ 8,309,014 $ 8,609,219
Net realized gain (loss) on investments and foreign currencies............... (309,327) 7,228,394
Net unrealized appreciation (depreciation) on investments and foreign
currencies.................................................................. (4,282,289) (2,724,903)
------------ ------------
Net increase (decrease) in net assets resulting from operations................ 3,717,398 13,112,710
------------ ------------
Distributions to shareholders from:
Net investment income (Class A).............................................. (6,506,042) (1,752,869)
Net investment income (Class B).............................................. (181,405) (128,070)
Net investment income (Class C).............................................. (171,529) (100,070)
Net investment income (Class I)@............................................. (90,049) (539,121)
Net investment income (Class Z).............................................. (1,999,235) (6,618,532)
Net investment income (Class X).............................................. -- --
Net realized gain on securities (Class A).................................... (1,959,055) --
Net realized gain on securities (Class B).................................... (60,672) --
Net realized gain on securities (Class C).................................... (57,101) --
Net realized gain on securities (Class I)@................................... (23,429) --
Net realized gain on securities (Class Z).................................... (308,101) --
Net realized gain on securities (Class X).................................... -- --
------------ ------------
Total distributions to shareholders............................................ (11,356,618) (9,138,662)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... (14,834,404) (99,825,778)
------------ ------------
Total increase (decrease) in net assets........................................ (22,473,624) (95,851,730)
NET ASSETS:
Beginning of period............................................................ 227,047,643 322,899,373
------------ ------------
End of period+................................................................. $204,574,019 $227,047,643
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ 110,959 $ 198,080
============ ============
U.S. Government
Securities Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2005 2004
------------ ------------
Operations:
Net investment income (loss)................................................. $ 7,208,210 $ 8,037,454
Net realized gain (loss) on investments and foreign currencies............... 498,065 2,311,744
Net unrealized appreciation (depreciation) on investments and foreign
currencies.................................................................. (7,299,365) (2,984,953)
------------ ------------
Net increase (decrease) in net assets resulting from operations................ 406,919 7,364,245
------------ ------------
Distributions to shareholders from:
Net investment income (Class A).............................................. (6,470,275) (6,367,993)
Net investment income (Class B).............................................. (861,625) (1,202,312)
Net investment income (Class C).............................................. (338,902) (488,725)
Net investment income (Class I)@............................................. -- --
Net investment income (Class Z).............................................. -- --
Net investment income (Class X).............................................. -- --
Net realized gain on securities (Class A).................................... -- --
Net realized gain on securities (Class B).................................... -- --
Net realized gain on securities (Class C).................................... -- --
Net realized gain on securities (Class I)@................................... -- --
Net realized gain on securities (Class Z).................................... -- --
Net realized gain on securities (Class X).................................... -- --
------------ ------------
Total distributions to shareholders............................................ (7,670,802) (8,059,030)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... (37,234,269) (40,708,822)
------------ ------------
Total increase (decrease) in net assets........................................ (44,498,152) (41,403,607)
NET ASSETS:
Beginning of period............................................................ 256,361,655 297,765,262
------------ ------------
End of period+................................................................. $211,863,503 $256,361,655
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ (137,838) $ (138,253)
============ ============
- --------
@ See Note 1
See Notes to Financial Statements
9
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2005 2004
------------ ------------
Operations:
Net investment income (loss)................................................. $ 13,358,453 $ 12,805,080
Net realized gain (loss) on investments and foreign currencies............... 3,461,416 1,476,272
Net unrealized appreciation (depreciation) on investments and foreign
currencies.................................................................. (11,084,127) (1,054,237)
------------ ------------
Net increase (decrease) in net assets resulting from operations................ 5,735,742 13,227,115
------------ ------------
Distributions to shareholders from:
Net investment income (Class A).............................................. (10,096,979) (8,229,827)
Net investment income (Class B).............................................. (2,758,584) (3,268,894)
Net investment income (Class C).............................................. (1,598,731) (2,301,935)
Net investment income (Class I)@............................................. -- (586)
Net investment income (Class Z).............................................. -- --
Net investment income (Class X).............................................. (262,529) (187,234)
Net realized gain on securities (Class A).................................... -- (5,268,652)
Net realized gain on securities (Class B).................................... -- (2,564,269)
Net realized gain on securities (Class C).................................... -- (1,788,770)
Net realized gain on securities (Class I)@................................... -- (487)
Net realized gain on securities (Class Z).................................... -- --
Net realized gain on securities (Class X).................................... -- (115,741)
------------ ------------
Total distributions to shareholders............................................ (14,716,823) (23,726,395)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... (65,557,982) (4,226,113)
------------ ------------
Total increase (decrease) in net assets........................................ (74,539,063) (14,725,393)
NET ASSETS:
Beginning of period............................................................ 571,014,563 585,739,956
------------ ------------
End of period+................................................................. $496,475,500 $571,014,563
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ (12,374) $ 4,199
============ ============
Strategic Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2005 2004
------------ ------------
Operations:
Net investment income (loss)................................................. $ 6,136,237 $ 5,727,055
Net realized gain (loss) on investments and foreign currencies............... 5,304,488 4,382,421
Net unrealized appreciation (depreciation) on investments and foreign
currencies.................................................................. (2,719,620) 4,765,239
------------ ------------
Net increase (decrease) in net assets resulting from operations................ 8,721,105 14,874,715
------------ ------------
Distributions to shareholders from:
Net investment income (Class A).............................................. (3,082,007) (2,573,307)
Net investment income (Class B).............................................. (2,151,861) (1,914,488)
Net investment income (Class C).............................................. (1,452,318) (1,049,774)
Net investment income (Class I)@............................................. (116,760) (233,825)
Net investment income (Class Z).............................................. -- --
Net investment income (Class X).............................................. -- --
Net realized gain on securities (Class A).................................... -- --
Net realized gain on securities (Class B).................................... -- --
Net realized gain on securities (Class C).................................... -- --
Net realized gain on securities (Class I)@................................... -- --
Net realized gain on securities (Class Z).................................... -- --
Net realized gain on securities (Class X).................................... -- --
------------ ------------
Total distributions to shareholders............................................ (6,802,946) (5,771,394)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... 25,739,107 14,052,523
------------ ------------
Total increase (decrease) in net assets........................................ 27,657,266 23,155,844
NET ASSETS:
Beginning of period............................................................ 105,738,846 82,583,002
------------ ------------
End of period+................................................................. $133,396,112 $105,738,846
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ 387,799 $ 160,688
============ ============
- --------
@ See Note 1
See Notes to Financial Statements
10
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2005 2004
------------ ------------
Operations:
Net investment income (loss)..................................................... $ 24,869,216 $ 22,245,096
Net realized gain (loss) on investments and foreign currencies................... 10,420,354 16,147,344
Net unrealized appreciation (depreciation) on investments and foreign currencies. 6,067,124 22,647,739
------------ ------------
Net increase (decrease) in net assets resulting from operations.................... 41,356,694 61,040,179
------------ ------------
Distributions to shareholders from:
Net investment income (Class A).................................................. (9,494,138) (7,714,823)
Net investment income (Class B).................................................. (4,894,387) (5,797,385)
Net investment income (Class C).................................................. (4,060,550) (3,614,674)
Net investment income (Class I)@................................................. -- (1,687)
Net investment income (Class Z).................................................. (6,995,720) (6,692,901)
Net investment income (Class X).................................................. -- --
Net realized gain on securities (Class A)........................................ -- --
Net realized gain on securities (Class B)........................................ -- --
Net realized gain on securities (Class C)........................................ -- --
Net realized gain on securities (Class I)@....................................... -- --
Net realized gain on securities (Class Z)........................................ -- --
Net realized gain on securities (Class X)........................................ -- --
------------ ------------
Total distributions to shareholders................................................ (25,444,795) (23,821,470)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6).......................................................................... 3,593,907 47,785,931
------------ ------------
Total increase (decrease) in net assets............................................ 19,505,806 85,004,640
NET ASSETS:
Beginning of period................................................................ 298,387,726 213,383,086
------------ ------------
End of period+..................................................................... $317,893,532 $298,387,726
============ ============
+Includes accumulated undistributed net investment income (loss)................... $ (1,879,694) $ (1,327,919)
============ ============
Tax Exempt Insured Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2005 2004
------------ ------------
Operations:
Net investment income (loss)..................................................... $ 2,462,678 $ 2,635,731
Net realized gain (loss) on investments and foreign currencies................... 314,275 1,897,409
Net unrealized appreciation (depreciation) on investments and foreign currencies. (1,499,351) (129,136)
------------ ------------
Net increase (decrease) in net assets resulting from operations.................... 1,277,602 4,404,004
------------ ------------
Distributions to shareholders from:
Net investment income (Class A).................................................. (2,053,393) (2,009,916)
Net investment income (Class B).................................................. (297,218) (366,880)
Net investment income (Class C).................................................. (145,957) (122,956)
Net investment income (Class I)@................................................. -- --
Net investment income (Class Z).................................................. -- --
Net investment income (Class X).................................................. -- --
Net realized gain on securities (Class A)........................................ (842,208) (2,345,579)
Net realized gain on securities (Class B)........................................ (135,607) (558,969)
Net realized gain on securities (Class C)........................................ (82,894) (187,274)
Net realized gain on securities (Class I)@....................................... -- --
Net realized gain on securities (Class Z)........................................ -- --
Net realized gain on securities (Class X)........................................ -- --
------------ ------------
Total distributions to shareholders................................................ (3,557,277) (5,591,574)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6).......................................................................... (12,519,717) (11,118,979)
------------ ------------
Total increase (decrease) in net assets............................................ (14,799,392) (12,306,549)
NET ASSETS:
Beginning of period................................................................ 91,532,436 103,838,985
------------ ------------
End of period+..................................................................... $ 76,733,044 $ 91,532,436
============ ============
+Includes accumulated undistributed net investment income (loss)................... $ (34,061) $ (6,949)
============ ============
- --------
@ See Note 1
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS
CORE BOND FUND
--------------
Net gain
(loss) on
Net investments Dividend Net Net
Asset (both Dividends from net Asset Assets,
Value, Net realized Total from from net realized Total Value, end of
beginning investment and investment investment Return of gain on Distri- end of Total period
Period Ended of period income(1) unrealized) operations income capital investments butions period Return(2) (000's)
- ----------------- --------- ---------- ----------- ---------- ---------- --------- ----------- ------- ------ --------- --------
Class A
- -
11/01/99-10/31/00 $ 9.85 $0.62 $(0.21) $ 0.41 $(0.60) $(0.06) $ -- $(0.66) $ 9.60 4.35% $ 3,858
11/01/00-10/31/01 9.60 0.55 0.65 1.20 (0.51) -- -- (0.51) 10.29 12.85 5,901
11/01/01-3/31/02# 10.29 0.20 (0.48) (0.28) (0.19) -- -- (0.19) 9.82 (2.77) 5,312
4/01/02-3/31/03 9.82 0.34 0.58 0.92 (0.42) -- -- (0.42) 10.32 9.58 21,260
4/01/03-3/31/04 10.32 0.24 0.20 0.44 (0.27) -- -- (0.27) 10.49 4.30 140,877
4/01/04-3/31/05 10.49 0.40 (0.20) 0.20 (0.43) -- (0.13) (0.56) 10.13 1.94 167,787
Class B
- -
11/01/99-10/31/00 $ 9.85 $0.58 $(0.24) $ 0.34 $(0.55) $(0.05) $ -- $(0.60) $ 9.59 3.70% $ 4,937
11/01/00-10/31/01 9.59 0.48 0.64 1.12 (0.45) -- -- (0.45) 10.26 11.93 6,444
11/01/01-3/31/02# 10.26 0.17 (0.49) (0.32) (0.16) -- -- (0.16) 9.78 (3.14) 3,220
4/01/02-3/31/03 9.78 0.31 0.55 0.86 (0.36) -- -- (0.36) 10.28 8.90 7,198
4/01/03-3/31/04 10.28 0.18 0.19 0.37 (0.19) -- -- (0.19) 10.46 3.68 5,683
4/01/04-3/31/05 10.46 0.33 (0.19) 0.14 (0.36) -- (0.13) (0.49) 10.11 1.37 4,977
Class C*
- -
11/01/99-10/31/00 $ 9.85 $0.57 $(0.23) $ 0.34 $(0.55) $(0.05) $ -- $(0.60) $ 9.59 3.70% $ 2,778
11/01/00-10/31/01 9.59 0.48 0.64 1.12 (0.45) -- -- (0.45) 10.26 11.93 4,541
11/01/01-3/31/02# 10.26 0.18 (0.49) (0.31) (0.16) -- -- (0.16) 9.79 (3.04) 3,772
4/01/02-3/31/03 9.79 0.31 0.56 0.87 (0.36) -- -- (0.36) 10.30 9.00 5,598
4/01/03-3/31/04 10.30 0.18 0.19 0.37 (0.19) -- -- (0.19) 10.48 3.68 5,352
4/01/04-3/31/05 10.48 0.33 (0.20) 0.13 (0.36) -- (0.13) (0.49) 10.12 1.27 4,780
Class I
- -
7/10/00-10/31/00@ $ 9.65 $0.19 $(0.02) $ 0.17 $(0.18) $(0.02) $ -- $(0.20) $ 9.62 1.85% $ 19,971
11/01/00-10/31/01 9.62 0.57 0.65 1.22 (0.52) -- -- (0.52) 10.32 13.01 22,782
11/01/01-3/31/02# 10.32 0.21 (0.52) (0.31) (0.19) -- -- (0.19) 9.82 (3.01) 21,707
2/01/02-3/31/03 9.82 0.40 0.55 0.95 (0.44) -- -- (0.44) 10.33 9.80 20,617
4/01/03-3/31/04 10.33 0.20 0.24 0.44 (0.27) -- -- (0.27) 10.50 4.35 3,092
4/01/04-3/31/05 10.50 0.42 (0.20) 0.22 (0.44) -- (0.13) (0.57) 10.15 2.14 1,405
Class Z*
- -
7/10/00-10/31/00@ $ 9.64 $0.19 $(0.03) $ 0.16 $(0.18) $(0.02) $ -- $(0.20) $ 9.60 1.81% $317,842
11/01/00-10/31/01 9.60 0.59 0.65 1.24 (0.55) -- -- (0.55) 10.29 13.37 323,570
11/01/01-3/31/02# 10.29 0.21 (0.47) (0.26) (0.21) -- -- (0.21) 9.82 (2.57) 297,081
4/01/02-3/31/03 9.82 0.47 0.53 1.00 (0.49) -- -- (0.49) 10.33 10.38 268,226
4/01/03-3/31/04 10.33 0.32 0.18 0.50 (0.33) -- -- (0.33) 10.50 4.92 72,043
4/01/04-3/31/05 10.50 0.50 (0.23) 0.27 (0.49) -- (0.13) (0.62) 10.15 2.62 25,626
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.29%(4) 6.45%(4) 94%
1.31(4) 5.51(4) 215
1.33(3)(4) 5.03(3)(4) 94
1.33(4) 3.72(4) 179
1.25(4) 2.50(4) 229
1.15(4) 3.91(4) 203
1.95%(4) 5.95%(4) 94%
1.97(4) 4.88(4) 215
1.98(3)(4) 4.36(3)(4) 94
1.98(4) 3.15(4) 179
1.92(4) 1.75(4) 229
1.81(4) 3.25(4) 203
1.95%(4) 5.84%(4) 94%
1.97(4) 4.79(4) 215
1.98(3)(4) 4.39(3)(4) 94
1.98(4) 3.13(4) 179
1.93(4) 1.77(4) 229
1.81(4) 3.25(4) 203
1.16%(3)(4) 6.18%(3)(4) 94%
1.22(4) 5.68(4) 215
1.23(3)(4) 5.12(3)(4) 94
1.24(4) 3.98(4) 179
1.23(4) 2.39(4) 229
1.07(4) 3.98(4) 203
0.95%(3)(4) 6.39%(3)(4) 94%
0.97(4) 5.97(4) 215
0.74(3)(4) 5.62(3)(4) 94
0.67 4.56 179
0.66(4) 2.97(4) 229
0.61(4) 4.41(4) 203
- --------
* 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):
10/31/00 10/31/01 3/31/02(3) 3/31/03 3/31/04 3/31/05
-------- -------- ---------- ------- ------- -------
Core Bond Fund Class A.................. 0.49% 0.04% 0.19% 0.11% 0.10% 0.11%
Core Bond Fund Class B.................. 0.50 0.03 0.32 0.23 0.15 0.31
Core Bond Fund Class C.................. 0.54 0.04 0.32 0.18 0.14 0.38
Core Bond Fund Class I.................. -- 0.03 0.13 0.05 0.05 0.06
Core Bond Fund Class Z.................. 0.01(3) 0.03 0.02 -- 0.02 0.05
See Notes to Financial Statements
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Net gain
(loss) on
Net investments Net Net
Asset (both Dividends Dividend Asset Assets, Ratio of
Value, Net realized Total from from net from net Total Value, end of expenses
beginning investment and investment investment realized Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income gains butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- -------- ------- ------ --------- -------- ----------
Class A
-------
3/31/01 $8.31 $0.45 $ 0.60 $ 1.05 $(0.45) $-- $(0.45) $8.91 13.06% $169,524 1.49%
3/31/02 8.91 0.37(4) (0.08) 0.29 (0.40) -- (0.40) 8.80 3.25 187,615 1.42
3/31/03 8.80 0.37 0.86 1.23 (0.40) -- (0.40) 9.63 14.14 210,848 1.12(3)
3/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 0.99(3)
3/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 0.99(3)
Class B
-------
3/31/01 $8.31 $0.39 $ 0.61 $ 1.00 $(0.40) $-- $(0.40) $8.91 12.29% $ 32,085 2.17%
3/31/02 8.91 0.31(4) (0.08) 0.23 (0.34) -- (0.34) 8.80 2.55 38,878 2.09(3)
3/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595 1.76(3)
3/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 1.64(3)
3/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 1.64(3)
Class C*
--------
3/31/01 $8.32 $0.37 $ 0.61 $ 0.98 $(0.39) $-- $(0.39) $8.91 12.10% $ 3,303 2.20%(3)
3/31/02 8.91 0.29(4) (0.09) 0.20 (0.32) -- (0.32) 8.79 2.40 12,209 2.10(3)
3/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322 1.75(3)
3/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 1.64(3)
3/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 1.64(3)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
5.27% 1,561%
4.12(4) 570
3.88(3) 614
3.14(3) 256
3.26(3) 246
4.59% 1,561%
3.42(3)(4) 570
3.20(3) 614
2.45(3) 256
2.61(3) 246
4.48%(3) 1,561%
3.33(3)(4) 570
3.18(3) 614
2.45(3) 256
2.61(3) 246
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(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)Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
3/31/01 3/31/02 3/31/03 3/31/04 3/31/05
------- ------- ------- ------- -------
U.S. Government Securities Fund Class A. -- % -- % 0.21% 0.37% 0.39%
U.S. Government Securities Fund Class B. -- 0.01 0.23 0.37 0.43
U.S. Government Securities Fund Class C. 1.18 0.16 0.27 0.38 0.48
(4)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
13
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
(loss) on
Net investments Net Net
Asset (both Dividends Dividends Asset Assets,
Value, Net realized Total from from net from net Total Value, end of
beginning investment and investment investment realized Distri- end of Total period
Period Ended of period income(1) unrealized) operations income gains butions period Return(2) (000's)
- ---------------- --------- ---------- ----------- ---------- ---------- --------- ------- ------ --------- --------
Class A
- -
3/31/01 $10.42 $0.61 $ 0.72 $1.33 $(0.62) $(0.01) $(0.63) $11.12 13.10% $ 72,092
3/31/02 11.12 0.51(6) (0.03) 0.48 (0.51) (0.32) (0.83) 10.77 4.45 118,440
3/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096
3/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467
3/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031
Class B
- -
3/31/01 $10.44 $0.53 $ 0.74 $1.27 $(0.55) $(0.01) $(0.56) $11.15 12.45% $ 38,190
3/31/02 11.15 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.80 3.78 90,011
3/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323
3/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923
3/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497
Class C*
- -
3/31/01 $10.46 $0.49 $ 0.77 $1.26 $(0.55) $(0.01) $(0.56) $11.16 12.33% $ 15,851
3/31/02 11.16 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.81 3.78 36,258
3/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173
3/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184
3/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936
Class X
- -
3/19/02-3/31/02@ $10.80 $0.02(6) $(0.01) $0.01 $(0.02) $ -- $(0.02) $10.79 0.08% $ 106
3/31/03 10.79 0.36 0.95 1.31 (0.44) (0.11) (0.55) 11.55 12.36 4,107
3/31/04 11.55 0.32 0.06 0.38 (0.34) (0.20) (0.54) 11.39 3.31 8,441
3/31/05 11.39 0.33 (0.15) 0.18 (0.36) -- (0.36) 11.21 1.63 1,012
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
0.99%(5) 5.78%(5) 833%
0.99(4)(5) 4.61(4)(5)(6) 537
0.99(5) 3.36(5) 421
0.99(5) 2.51(5) 213
0.99(5) 2.73(5) 204
1.64%(5) 5.11%(5) 833%
1.64(4)(5) 3.96(4)(5)(6) 537
1.64(5) 2.71(5) 421
1.64(5) 1.77(5) 213
1.64(5) 2.10(5) 204
1.64%(5) 4.99%(5) 833%
1.64(4)(5) 3.96(4)(5)(6) 537
1.64(5) 2.59(5) 421
1.64(5) 1.74(5) 213
1.64(5) 2.11(5) 204
0.89%(3)(4)(5) 3.84%(3)(4)(5)(6) 537%
0.78(5) 3.31(5) 421
0.75(5) 2.88(5) 213
0.78 2.88 204
- --------
* 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):
3/31/01 3/31/02 3/31/03 3/31/04 3/31/05
------- ------- ------- ------- -------
GNMA Fund Class A............. 0.30% 0.19% 0.13% 0.18% 0.17%
GNMA Fund Class B............. 0.33 0.19 0.14 0.16 0.18
GNMA Fund Class C............. 0.62 0.21 0.13 0.16 0.18
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
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND**
---------------------
Net gain
(loss) on
Net investments Dividends Net
Asset (both Dividends from net Asset
Value, Net realized Total from from net realized Total Value,
beginning investment and investment investment gain on Return of Distri- end of Total
Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investments+ capital+ butions period+ Return(2)
- ----------------- ---------- ---------- ------------ ----------- ---------- ------------ --------- ------- ------- ---------
Class A
- -
11/01/99-10/31/00 $3.29 $0.28 $(0.14) $0.14 $(0.26) $-- $(0.04) $(0.30) $3.13 4.09%
11/01/00-10/31/01 3.13 0.28 (0.09) 0.19 (0.28) -- -- (0.28) 3.04 6.48
11/01/01-3/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- -- (0.12) 3.00 2.46
4/01/02-3/31/03 3.00 0.20 0.06 0.26 (0.18) -- -- (0.18) 3.08 9.07(7)
4/01/03-3/31/04 3.08 0.21 0.33 0.54 (0.21) -- -- (0.21) 3.41 18.04
4/01/04-3/31/05 3.41 0.20 0.11 0.31 (0.23) -- -- (0.23) 3.49 9.36
Class B
- -
11/01/99-10/31/00 $3.30 $0.26 $(0.14) $0.12 $(0.24) $-- $(0.04) $(0.28) $3.14 3.33%
11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- -- (0.26) 3.05 5.65
11/01/01-3/31/02 3.05 0.10(6) (0.04) 0.06 (0.11) -- -- (0.11) 3.00 2.05
4/01/02-3/31/03 3.00 0.18 0.06 0.24 (0.16) -- -- (0.16) 3.08 8.36(7)
4/01/03-3/31/04 3.08 0.19 0.33 0.52 (0.19) -- -- (0.19) 3.41 17.29
4/01/04-3/31/05 3.41 0.18 0.10 0.28 (0.21) -- -- (0.21) 3.48 8.35
Class C*
- -
11/01/99-10/31/00 $3.31 $0.26 $(0.16) $0.10 $(0.24) $-- $(0.03) $(0.27) $3.14 3.32%
11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- -- (0.26) 3.05 5.65
11/01/01-3/31/02 3.05 0.10(6) (0.03) 0.07 (0.11) -- -- (0.11) 3.01 2.25
4/01/02-3/31/03 3.01 0.19 0.05 0.24 (0.16) -- -- (0.16) 3.09 8.47(7)
4/01/03-3/31/04 3.09 0.19 0.34 0.53 (0.20) -- -- (0.20) 3.42 17.43
4/01/04-3/31/05 3.42 0.18 0.11 0.29 (0.21) -- -- (0.21) 3.50 8.65
Ratio
Net of net
Assets, Ratio of investment
end of expense income to
period to average average Portfolio
(000's) net assets net assets Turnover
- ------- ---------- ---------- ---------
$ 6,439 1.55%(5) 8.70%(5) 46%
8,478 1.57(5) 9.07(5) 49
35,365 1.52(3)(4)(5) 8.09(3)(4)(5)(6) 99
37,136 1.62(8) 6.93(8) 65
43,840 1.55(5)(9) 6.41(9) 69
59,279 1.40(5)(8) 5.94(5)(8) 188
$15,131 2.20%(5) 8.00%(5) 46%
9,964 2.21(5) 8.41(5) 49
26,892 2.19(3)(4)(5) 7.48(3)(4)(5)(6) 99
27,879 2.28(8) 6.26(8) 65
36,110 2.19(5)(9) 5.76(5)(9) 69
37,250 2.05(5)(8) 5.32(5)(8) 188
$13,056 2.20%(5) 8.04%(5) 46%
11,461 2.22(5) 8.41(5) 49
14,289 2.22(3)(4)(5) 7.34(3)(4)(5)(6) 99
14,423 2.17(5)(8) 6.37(5)(8) 65
22,064 2.16(5)(9) 5.78(5)(9) 69
36,867 2.05(5)(8) 5.29(5)(8) 188
- --------
* 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.
(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%, for Class C, which is net of
custody credits of 0.02% for Class C. 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):
10/31/00 10/31/01 03/31/02(4) 3/31/03 3/31/04 3/31/05
-------- -------- ----------- ------- ------- -------
Strategic Bond Fund Class A............. 0.32% 0.17% 0.01% -- % 0.02% 0.03%
Strategic Bond Fund Class B............. 0.32 0.18 0.01 -- 0.02 0.02
Strategic Bond Fund Class C............. 0.32 0.17 0.08 0.11 0.02 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 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.
(8)Net of custody credits of 0.01%.
(9)Gross of custody credits of 0.02%.
(10)Net of custody credits of 0.02%.
See Notes to Financial Statements
15
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND**
----------------------
Net gain
(loss) on
Net investments Dividends Net
Asset (both Dividends from net Asset Net Assets,
Value, Net realized Total from from net realized Total Value, end of
beginning investment and investment investment gain on Distri- end of Total period
Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investment butions+ period+ Return(2) (000's)
- ----------------- ---------- ---------- ------------ ----------- ---------- ---------- -------- ------- --------- -----------
Class A
- -
11/01/99-10/31/00 $5.31 $0.50 $(0.49) $ 0.01 $(0.50) -- $(0.50) $4.82 0.04% $ 286
11/01/00-10/31/01 4.82 0.44 (0.55) (0.11) (0.46) -- (0.46) 4.25 (2.23) 722
11/01/01-3/31/02 4.25 0.18(6) (0.11) 0.07 (0.19) -- (0.19) 4.13 1.67 59,075
4/01/02-3/31/03 4.13 0.37 (0.49) (0.12) (0.35) -- (0.35) 3.66 (2.45) 66,521
4/01/03-3/31/04 3.66 0.33 0.60 0.93 (0.36) -- (0.36) 4.23 26.05 93,818
4/01/04-3/31/05 4.23 0.33 0.21 0.54 (0.34) -- (0.34) 4.43 13.26 101,661
Class B
- -
11/01/99-10/31/00 $5.32 $0.46 $(0.50) $(0.04) $(0.46) -- $(0.46) $4.82 (0.83)% $ 1,594
11/01/00-10/31/01 4.82 0.41 (0.54) (0.13) (0.43) -- (0.43) 4.26 (2.84) 2,911
11/01/01-3/31/02 4.26 0.16(6) (0.11) 0.05 (0.18) -- (0.18) 4.13 1.23 67,599
4/01/02-3/31/03 4.13 0.35 (0.49) (0.14) (0.33) -- (0.33) 3.66 (3.06) 57,596
4/01/03-3/31/04 3.66 0.31 0.60 0.91 (0.33) -- (0.33) 4.24 25.55 73,751
4/01/04-3/31/05 4.24 0.31 0.20 0.51 (0.31) -- (0.31) 4.44 12.57 61,961
Class C*
- -
8/21/00-10/31/00@ $5.09 $0.11 $(0.28) $(0.17) $(0.09) -- $(0.09) $4.83 (3.29)% $ 545
11/01/00-10/31/01 4.83 0.40 (0.52) (0.12) (0.44) -- (0.44) 4.27 (2.84) 2,274
11/01/01-3/31/02 4.27 0.17(6) (0.11) 0.06 (0.18) -- (0.18) 4.15 1.43 20,670
4/01/02-3/31/03 4.15 0.34 (0.48) (0.14) (0.33) -- (0.33) 3.68 (2.97) 27,814
4/01/03-3/31/04 3.68 0.30 0.60 0.90 (0.33) -- (0.33) 4.25 25.14 52,868
4/01/04-3/31/05 4.25 0.30 0.22 0.52 (0.31) -- (0.31) 4.46 12.77 65,385
Class Z*
- -
11/01/99-10/31/00 $5.32 $0.54 $(0.51) $ 0.03 $(0.52) -- $(0.52) $4.83 0.30% $ 62,702
11/01/00-10/31/01 4.83 0.47 (0.57) (0.10) (0.48) -- (0.48) 4.25 (2.07) 61,451
11/01/01-3/31/02 4.25 0.19(6) (0.11) 0.08 (0.20) -- (0.20) 4.13 1.98 62,245
4/01/02-3/31/03 4.13 0.39 (0.49) (0.10) (0.37) -- (0.37) 3.66 (1.84) 61,439
4/01/03-3/31/04 3.66 0.36 0.59 0.95 (0.38) -- (0.38) 4.23 26.83 77,951
4/01/04-3/31/05 4.23 0.35 0.23 0.58 (0.37) -- (0.37) 4.44 14.18 88,887
Ratio
of net
Ratio of investment
expense income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.38%(5) 10.13%(5) 57%
1.57(5) 9.73(5) 83
1.48(3)(4) 9.56(3)(4)(6) 61
1.56 10.26 117
1.49 8.15 126
1.38(5) 7.59(5) 85
2.10%(5) 9.41%(5) 57%
2.21(5) 9.17(5) 83
2.12(3)(4) 8.91(3)(4)(6) 61
2.18 9.63 117
2.14 7.52 126
2.03(5) 7.04(5) 85
2.07%(4) 9.10%(4) 57%
2.21(5) 9.02(5) 83
2.17(3)(4)(5) 8.86(3)(4)(5)(6) 61
2.15(5) 9.67(5) 117
2.11(5) 7.53(5) 126
2.03(5) 6.97(5) 85
0.96%(5) 10.41%(5) 57%
1.15(5) 10.45(5) 83
0.93(3)(4)(5) 10.04(3)(4)(5)(6) 61
0.92(5) 10.90(5) 117
0.88(5) 8.80(5) 126
0.81(5) 8.23(5) 85
- --------
* 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):
10/31/00 10/31/01 3/31/02(4) 3/31/03 3/31/04 3/31/05
-------- -------- ---------- ------- ------- -------
High Yield Bond Fund Class A............ 0.43% 0.18% -- % -- % -- % 0.08%
High Yield Bond Fund Class B............ 0.42 0.18 -- -- -- 0.07
High Yield Bond Fund Class C............ -- 0.18 0.01 0.10 0.01 0.09
High Yield Bond Fund Class Z............ 0.60 0.18 0.03 0.03 0.00 0.05
(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
16
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
(loss) on
Net investments Net Net
Asset (both Dividends Asset Assets, Ratio of
Value, Net realized Total from from net Distributions Total Value, end of expenses
beginning investment and investment investment from net Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income realized gains butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- -------------- ------- ------ --------- ------- ----------
Class A
- -
3/31/01 $12.37 $0.56 $ 0.66 $1.22 $(0.57) $ -- $(0.57) $13.02 10.08% $72,394 1.26%
3/31/02 13.02 0.52(5) (0.30) 0.22 (0.52) -- (0.52) 12.72 1.70 75,071 1.29(3)
3/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358 1.24
3/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 1.26
3/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 1.25
Class B
- -
3/31/01 $12.37 $0.47 $ 0.66 $1.13 $(0.48) $ -- $(0.48) $13.02 9.31% $16,302 1.97%
3/31/02 13.02 0.41(5) (0.28) 0.13 (0.43) -- (0.43) 12.72 0.95 18,090 2.04(3)
3/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031 1.97
3/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 1.96
3/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 1.94
Class C*
- -
3/31/01 $12.37 $0.47 $ 0.66 $1.13 $(0.48) $ -- $(0.48) $13.02 9.32% $ 721 1.95%(4)
3/31/02 13.02 0.41(5) (0.28) 0.13 (0.43) -- (0.43) 12.72 0.99 4,095 1.95(3)(4)
3/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451 1.95(4)
3/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 1.95(4)
3/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 1.95(4)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
4.41% 24%
3.99(3)(5) 140
3.12 195
2.90 131
3.14 153
3.71% 24%
3.22(3)(5) 140
2.39 195
2.20 131
2.44 153
3.73%(4) 24%
3.21(3)(4)(5) 140
2.40(4) 195
2.21(4) 131
2.44(4) 153
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(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) Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
3/31/01 3/31/02 3/31/03 3/31/04 3/31/05
------- ------- ------- ------- -------
Tax Exempt Insured Fund Class C......... 1.59% 0.56% 0.00% 0.12% 0.09%
(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 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
17
SunAmerica Core Bond Fund
PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited)
Industry Allocation*
Federal National Mortgage Association....................... 19.1%
Federal Home Loan Mortgage Corporation...................... 17.5%
Financial Services.......................................... 17.1%
U.S Treasury Bonds.......................................... 5.7%
Repurchase Agreement........................................ 5.0%
U.S. Treasury Notes......................................... 4.8%
Foreign Government Agency................................... 4.2%
Banks....................................................... 3.7%
Telecommunications.......................................... 3.3%
Utilities................................................... 3.2%
Energy Sources.............................................. 2.5%
Broadcasting & Media........................................ 1.7%
Leisure & Tourism........................................... 1.7%
Automotive.................................................. 1.6%
Insurance................................................... 1.6%
Transportation.............................................. 1.3%
Metals & Mining............................................. 1.0%
Pharmaceuticals............................................. 1.0%
Business Services........................................... 0.6%
Health Services............................................. 0.6%
Food, Beverage & Tobacco.................................... 0.5%
Forest Products............................................. 0.5%
Conglomerate................................................ 0.4%
Housing & Household Durables................................ 0.4%
Aerospace & Military Technology............................. 0.3%
Chemicals................................................... 0.3%
Real Estate Companies....................................... 0.3%
Retail...................................................... 0.2%
Retail Stores............................................... 0.2%
Energy Services............................................. 0.1%
Machinery................................................... 0.1%
Government National Mortgage Association.................... 0.1%
-----
100.6%
=====
Credit Quality+#
Government -- Treasury.................. 11.6%
Government -- Agency.................... 39.1%
AAA..................................... 7.2%
AA...................................... 1.6%
A....................................... 10.5%
BBB..................................... 19.3%
BB...................................... 3.2%
B....................................... 2.1%
CCC..................................... 1.4%
CC...................................... 0.3%
C....................................... 0.1%
Not Rated@.............................. 3.6%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or, the rating is
unavailable from the data source.
+ Source: Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
18
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 5.0%
Financial Services -- 5.0%
Bear Stearns Commercial Mtg. Securities, Inc.
Commercial Mtg. Certificates, Series
1999-C1, Class A2
6.02% due 2/14/31(1)......................... $ 525,000 $ 550,643
Bear Stearns Commercial Mtg.
Securities, Inc.
Commercial Mtg. Certificates,
Series 2001-Top4, Class A3
5.61% due 11/15/33(1)........................ 100,000 103,981
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates, Series
1999-CG3, Class A1B
7.34% due 10/10/32(1)........................ 1,000,000 1,105,125
Honda Auto Receivables Owner Trust Asset
Backed Notes, Series 2002-4, Class A4
2.70% due 3/17/08............................ 2,000,000 1,979,350
Honda Auto Receivables Owner Trust Asset
Backed Notes, Series 2003-3, Class A4
2.77% due 11/21/08........................... 1,000,000 976,079
Morgan Stanley Dean Witter Capital I
Commercial Mtg. Certificates,
Series 2002-Top1, Class A4
6.66% due 4/01/05(1)......................... 1,850,600 2,006,939
Morgan Stanley Dean Witter Capital I
Commercial Mtg. Certificates,
Series 2000-LIF2, Class A2
7.20% due 4/01/05(1)......................... 2,125,000 2,351,709
Residential Funding Mtg.
Securities II, Series 2004 HI1,
Class A3
Series 2004 HI1, Class A3
3.05% due 7/25/16............................ 1,100,000 1,074,629
-----------
Total Asset-Backed Securities
(cost $2,999,790)............................ 10,148,455
-----------
BONDS & NOTES -- 29.6%
Aerospace & Military Technology -- 0.3%
Raytheon Co.
Debenture
6.40% due 12/15/18........................... 562,000 606,875
-----------
Automotive -- 1.6%
Dana Corp.
Notes
7.00% due 3/01/29............................ 297,000 260,820
General Motors Corp.
Notes
7.20% due 1/15/11............................ 905,000 817,009
General Motors Corp.
Sr. Debentures
8.38% due 7/15/33............................ 616,000 527,131
General Motors Corp.
Debentures
8.80% due 3/01/21............................ 755,000 679,183
Hertz Corp. Sr.
Notes
4.70% due 10/02/06........................... 517,000 509,907
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Automotive (continued)
Hertz Corp.
Notes
6.90% due 8/15/14......................... $190,000 $ 181,059
Hertz Corp.
Notes
7.63% due 6/01/12......................... 337,000 341,682
----------
3,316,791
----------
Banks -- 3.1%
American Express Centurion Bank
Notes
2.98% due 4/18/05(2)...................... 337,000 337,140
BankBoston Capital Trust IV
Guaranteed Capital Securities
3.56% due 6/08/05(2)...................... 622,000 607,581
Chemical Bank
Sub. Notes
6.13% due 11/01/08........................ 359,000 377,055
Credit Suisse First Boston New York
Sub. Notes
6.50% due 5/01/08*........................ 337,000 354,916
First Maryland Capital II
Guaranteed Sub. Capital Income Securities
3.59% due 5/02/05(2)...................... 508,000 495,460
HSBC Bank USA
Sub. Notes
5.88% due 11/01/34........................ 671,000 675,418
Key Bank NA
Sr. Notes
4.10% due 6/30/05......................... 232,000 232,625
Key Bank NA
Sub. Notes
7.00% due 2/01/11......................... 249,000 276,438
National City Bank
Notes
3.38% due 10/15/07........................ 617,000 605,070
PNC Funding Corp.
Guaranteed Sr. Notes
5.75% due 8/01/06......................... 565,000 577,495
Popular North America, Inc.
Notes
4.25% due 4/01/08......................... 614,000 609,882
Sovereign Bank
Certificate Of Deposit
4.00% due 2/01/08......................... 562,000 555,286
Suntrust Bank
Bonds
5.40% due 4/01/20......................... 409,000 408,544
Wells Fargo & Co.
Notes
3.11% due 6/15/05(2)...................... 205,000 205,059
----------
6,317,969
----------
Broadcasting & Media -- 1.5%
Charter Communications Holdings, LLC
Sr. Notes
11.13% due 1/15/11........................ 500,000 403,750
19
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Broadcasting & Media (continued)
Cox Communications, Inc.
Debentures
6.80% due 8/01/28............... $217,000 $ 223,940
Cox Communications, Inc.
Debentures
7.63% due 6/15/25............... 232,000 258,010
Cox Communications, Inc.
Notes
7.75% due 11/01/10.............. 917,000 1,018,473
Liberty Media Corp.
Sr. Notes
4.51% due 6/15/05(2)............ 579,000 586,689
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 3/15/23............... 499,000 611,412
----------
3,102,274
----------
Business Services -- 0.5%
American Standard, Inc.
Bonds
5.50% due 4/01/15*.............. 246,000 246,936
PHH Corp.
Notes
6.00% due 3/01/08............... 562,000 580,350
Seitel, Inc.
Sr. Notes
11.75% due 7/15/11.............. 250,000 281,250
----------
1,108,536
----------
Chemicals -- 0.3%
ICI North America, Inc.
Debentures
8.88% due 11/15/06.............. 42,000 44,869
Rohm & Haas Co.
Sr. Debentures
7.85% due 7/15/29............... 394,000 509,576
----------
554,445
----------
Conglomerate -- 0.3%
Tyco International Group SA
Participation Certificates
4.44% due 6/15/07*.............. 544,000 544,180
----------
Energy Services -- 0.1%
Hanover Compressor Co.
Guaranteed Senior Note
9.00% due 6/01/14............... 250,000 267,500
----------
Energy Sources -- 2.4%
ConocoPhillips
Sr. Notes
7.00% due 3/30/29............... 854,000 1,006,936
Enterprise Products Operating LP
Guaranteed Sr. Notes
5.00% due 3/01/15*.............. 219,000 205,299
Enterprise Products Operating LP
Notes
6.65% due 10/15/34.............. 297,000 302,808
FirstEnergy Corp., Series C
Notes
7.38% due 11/15/31.............. 297,000 336,412
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Energy Sources (continued)
FPL Group Capital, Inc.
Notes
4.09% due 2/16/07........................ $1,002,000 $ 999,538
Indiantown Cogeneration LP,
Series A-9
9.26% due 12/15/10....................... 216,085 237,065
Kerr Mcgee Corp.
Guaranteed Notes
7.88% due 9/15/31........................ 594,000 670,251
Nexen, Inc
Notes
5.88% due 3/10/35........................ 242,000 231,468
Nexen, Inc.
Notes
7.88% due 3/15/32........................ 251,000 306,244
Pemex Project Funding Master Trust
Guaranteed Notes
8.63% due 2/01/22........................ 363,000 412,459
Pennzoil Co.
Debentures
10.25% due 11/01/05...................... 132,000 136,442
----------
4,844,922
----------
Financial Services -- 5.9%
Capital One Financial Corp.
Sr. Notes
4.74% due 5/17/07........................ 343,000 344,869
Caterpillar Financial Services
Notes
4.70% due 3/15/12........................ 409,000 402,973
Chase Manhattan Corp.
Subordinated Note
7.88% due 6/15/10........................ 327,000 371,995
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 6/15/09*...................... 500,000 615,000
Citigroup, Inc.
Subordinated Note
5.00% due 9/15/14........................ 351,000 344,603
Consolidated Communications Holdings
Sr. Notes
9.75% due 4/01/12*....................... 375,000 397,500
Countrywide Home Loans, Inc.
Tranche Trust 00255
5.50% due 8/01/06........................ 843,000 857,076
Ford Motor Credit Co.
Sr. Notes
4.95% due 1/15/08........................ 562,000 539,003
Ford Motor Credit Co.
Notes
7.88% due 6/15/10........................ 440,000 447,956
General Electric Capital Corp.
Notes
2.80% due 1/15/07........................ 579,000 566,005
General Electric Capital Corp.
Notes
5.38% due 3/15/07........................ 562,000 574,152
20
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14................................ $264,000 $ 228,044
Household Finance Corp.
Notes
6.38% due 10/15/11................................ 562,000 607,129
J.P. Morgan Chase & Co.
Global Sub. Notes
6.63% due 3/15/12................................. 428,000 467,933
J.P. Morgan Chase Capital XV
Notes
5.88% due 3/15/35................................. 242,000 233,702
John Deere Capital Corp.
Notes
3.88% due 3/07/07................................. 931,000 925,661
Merrill Lynch & Co., Inc.
Notes
4.25% due 2/08/10................................. 440,000 428,301
Morgan Stanley Dean Witter & Co.
Bonds
6.75% due 4/15/11................................. 321,000 349,865
National Rural Utilities Cooperative Finance Corp.
Secured Collateral Trust Bonds
3.88% due 2/15/08................................. 448,000 441,120
NGC Corp. Capital Trust I
Guaranteed Sub. Notes, Series B
8.32% due 6/01/27................................. 750,000 592,500
Pricoa Global Funding I
Secured Notes
4.35% due 6/15/08*................................ 289,000 288,439
Principal Life Global Funding
Secured Notes
5.13% due 6/28/07*................................ 482,000 488,818
Px Escrow Corp.
Sr. Sub. Disc. Notes
9.63% due 2/01/06(4).............................. 150,000 145,500
Sprint Capital Corp.
Guaranteed Sr. Notes
6.88% due 11/15/28................................ 396,000 423,954
TIAA Global Markets
Notes
4.13% due 11/15/07*............................... 684,000 680,213
Transamerica Finance Corp.
Sr. Notes
6.40% due 9/15/08................................. 205,000 219,080
-----------
11,981,391
-----------
Food, Beverage & Tobacco -- 0.5%
American Stores Co.
Debentures
7.90% due 5/01/17................................. 161,000 183,714
Coca-Cola Enterprises, Inc.
Debentures
8.50% due 2/01/22................................. 480,000 632,228
SABMiller, PLC Guaranteed
Notes 144A
6.63% due 8/15/33*................................ 268,000 293,788
-----------
1,109,730
-----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Forest Products -- 0.5%
Packaging Corp. of America
Sr. Notes
5.75% due 8/01/13...................... $481,000 $ 476,263
Sealed Air Corp.
Bonds
6.88% due 7/15/33*..................... 319,000 345,709
Weyerhaeuser Co.
Notes
6.13% due 3/15/07...................... 235,000 243,153
----------
1,065,125
----------
Health Services -- 0.6%
Community Health Systems, Inc.
Sr. Sub. Notes
6.50% due 12/15/12*.................... 225,000 219,375
Coventry Health Care, Inc.
Sr. Notes
6.13% due 1/15/15*..................... 478,000 477,402
HCA, Inc.
Sr. Notes
6.95% due 5/01/12...................... 125,000 129,744
Tenet Healthcare Corp.
Sr. Notes
6.50% due 6/01/12...................... 350,000 322,000
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13..................... 25,000 24,563
----------
1,173,084
----------
Household & Personal Products -- 0.0%
Revlon Consumer Products Corp.
Sr. Sub. Notes
8.63% due 2/01/08...................... 25,000 23,063
----------
Housing & Household Durables -- 0.4%
Maytag Corp.
Notes
5.00% due 5/15/15...................... 830,000 724,731
----------
Insurance -- 1.5%
Americo Life, Inc.
Notes
7.88% due 5/01/13*..................... 318,000 333,815
Fidelity National Financial, Inc.
Notes
7.30% due 8/15/11...................... 854,000 916,870
ING Security Life Institutional Funding
Notes
2.70% due 2/15/07*..................... 578,000 561,526
Kingsway America Inc.
Guaranteed Senior Notes
7.50% due 2/01/14...................... 319,000 327,213
Liberty Mutual Group
Notes
6.50% due 3/15/35*..................... 189,000 181,784
MIC Financing Trust I
Pass-Thru Certificates
8.38% due 2/01/27*..................... 176,000 184,297
Ohio Casualty Corp.
Notes
7.30% due 6/15/14...................... 521,000 556,875
----------
3,062,380
----------
21
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism -- 1.7%
American Airlines, Inc.
Pass-Thru Certificates, Series
2001-1, Class A2
6.82% due 5/23/11.................... $525,000 $ 488,006
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-1
7.20% due 1/02/19.................... 124,877 123,977
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class B
7.63% due 1/02/15.................... 950,432 770,223
Atlas Air, Inc.
Pass-Thru Certificates, Series
2000-1
8.71% due 1/02/19.................... 144,217 147,987
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1998-1, Class A
6.65% due 9/15/17.................... 58,017 55,063
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1997-4, Class A
6.90% due 1/02/18.................... 81,106 79,583
Delta Airlines, Inc.
Sr. Notes
10.00% due 8/15/08................... 225,000 99,000
Hilton Hotels Corp.
Sr. Notes
7.50% due 12/15/17................... 412,000 472,262
Hilton Hotels Corp.
Sr. Notes
7.95% due 4/15/07.................... 680,000 725,823
MGM Mirage, Inc.
Sr. Notes
5.88% due 2/27/14.................... 325,000 306,719
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10................... 125,000 138,125
United Airlines, Inc.
Pass-Thru Certificates, Series
2000-2, Class A1
7.03% due 10/01/10(5)................ 7,840 7,279
----------
3,414,047
----------
Medical Products -- 0.0%
MEDIQ/PRN Life Support Services, Inc.
Sr. Notes
11.00% due 6/01/08(3)................ 10,000 0
----------
Metals & Mining -- 0.4%
Barrick Gold Corp.
Bonds
5.80% due 11/15/34................... 254,000 256,285
Newmont Mining Corp.
Notes
5.88% due 4/01/35.................... 533,000 522,299
----------
778,584
----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Pharmaceuticals -- 1.0%
Merck & Co., Inc.
Notes
2.50% due 3/30/07...................... $337,000 $ 326,574
Pfizer, Inc.
Global Notes
2.50% due 3/15/07...................... 578,000 562,185
Pfizer, Inc.
Notes
4.65% due 3/01/18...................... 485,000 459,253
Schering-Plough Co.
Sr. Notes
6.50% due 12/01/33..................... 367,000 410,613
Wyeth
Notes
6.95% due 3/15/11...................... 320,000 350,930
----------
2,109,555
----------
Real Estate Companies -- 0.3%
EOP Operating LP
Notes
8.38% due 3/15/06...................... 583,000 606,159
----------
Retail -- 0.2%
Wal-Mart Stores, Inc.
Notes
4.00% due 1/15/10...................... 435,000 423,367
----------
Retail Stores -- 0.2%
Federated Department Stores, Inc.
Debentures
6.90% due 4/01/29...................... 295,000 315,984
----------
Telecommunications -- 2.5%
Alltel Corp.
Notes
4.66% due 5/17/07...................... 440,000 442,675
American Cellular Corp.,
Series B Sr. Notes
10.00% due 8/01/11..................... 740,000 680,800
AT&T Wireless Services, Inc.
Sr. Notes
7.35% due 3/01/06...................... 787,000 811,435
GTE Corp.
Debentures
6.94% due 4/15/28...................... 230,000 248,758
iPCS, Inc.
Senior Note
11.50% due 5/01/12..................... 450,000 506,250
Iridium, LLC
Guaranteed Sr. Notes, Series C
11.25% due 7/15/05+(6)................. 25,000 4,250
LCI International, Inc.
Sr. Notes
7.25% due 6/15/07...................... 905,000 852,963
Qwest Corp.
Debentures
7.13% due 11/15/43..................... 750,000 633,750
Telecomunicaciones de Puerto Rico, Inc.
Guaranteed Notes
6.80% due 5/15/09...................... 409,000 430,966
Verizon New York, Inc., Series B
Sr. Debentures, Series B
7.38% due 4/01/32...................... 481,000 539,813
----------
5,151,660
----------
22
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
BONDS & NOTES (continued)
Transportation -- 1.3%
Burlington Northern Santa Fe Corp.
Debentures
8.13% due 4/15/20...................... $937,000 $ 1,182,824
Norfolk Southern Corp.
Debentures
6.00% due 3/15/15...................... 477,000 464,610
Norfolk Southern Corp.
Bonds
9.00% due 3/01/21...................... 461,000 620,955
Ryder Systems, Inc.
Notes
4.63% due 4/01/10...................... 409,000 405,286
-----------
2,673,675
-----------
Utilities -- 2.5%
AES Corp.
Sr. Notes
7.75% due 3/01/14...................... 550,000 567,875
Carolina Power & Light Co.
1st Mtg.
5.15% due 4/01/15...................... 205,000 203,956
Duke Capital Corp., LLC
Sr. Notes
8.00% due 10/01/19..................... 562,000 666,738
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 6/01/13...................... 650,000 658,125
Georgia Power Co.
Sr. Notes, Series G
6.20% due 2/01/06...................... 318,000 324,367
Indianapolis Power & Light Co.
1st Mtg. Bonds
6.60% due 1/01/34*..................... 228,000 246,076
Old Dominion Electric Cooperative
1st Mtg. Bonds, Series A
5.68% due 12/01/28..................... 289,000 292,815
Reliant Energy, Inc.
Sr. Sec. Notes
6.75% due 12/15/14..................... 125,000 116,563
Reliant Resources, Inc.
Notes
9.50% due 7/15/13...................... 275,000 299,062
Sempra Energy
Sr. Notes
4.62% due 5/17/07...................... 440,000 441,744
Southern California Edison Co.
Series 2004 G
5.75% due 4/01/35...................... 535,000 536,825
TECO Energy, Inc.
Sr. Notes
7.50% due 6/15/10...................... 48,000 51,120
Virginia Electric & Power Co.
Notes
4.10% due 12/15/08..................... 381,000 373,568
Virginia Electric & Power Co., Series A
Sr. Notes, Series A
5.75% due 3/31/06...................... 416,000 422,972
-----------
5,201,806
-----------
Total Bonds & Notes
(cost $68,033,012)..................... 60,477,833
-----------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
CONVERTIBLE BONDS -- 0.2%
Leisure & Tourism -- 0.0%
Six Flags, Inc.
4.50% due 5/15/15........................ $ 75,000 $ 69,469
----------
Utilities -- 0.2%
Calpine Corp.
4.75% due 11/15/23....................... 475,000 321,812
----------
Total Convertible Bonds
(cost $416,252).......................... 391,281
----------
FOREIGN BONDS & NOTES -- 8.0%
Banks -- 0.6%
HBOS Treasury Services, PLC
Notes
3.50% due 11/30/07*...................... 731,000 715,954
Skandinaviska Enskilda Banken
Sub. Notes
5.47% due 3/23/15*(7).................... 409,000 409,140
----------
1,125,094
----------
Broadcasting & Media -- 0.2%
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 6/15/14*(4)................... 575,000 434,844
----------
Business Services -- 0.1%
SCL Terminal Aereo Santiago SA
Sr. Secured Notes
6.95% due 7/01/12*....................... 76,789 80,006
----------
Conglomerate -- 0.1%
Tyco International Group SA
Guaranteed Notes
7.00% due 6/15/28........................ 246,000 279,251
----------
Energy Sources -- 0.1%
Gazprom International SA
Guaranteed Sr. Notes
7.20% due 2/01/20*....................... 275,000 280,500
----------
Financial Services -- 0.6%
Deutsche Telekom International Finance BV
Guaranteed Bonds
8.75% due 6/15/30........................ 502,000 656,541
Nationwide Building Society
Sr. Notes
2.63% due 1/30/07*....................... 578,000 562,954
----------
1,219,495
----------
Government Agency -- 4.2%
Argentina Bonos
Bonds
3.01% due 8/03/05........................ 620,000 521,420
Aries Vermogensverwaltungs Gm
9.60% due 10/25/14....................... 1,000,000 1,200,700
----------
1,722,120
----------
Federal Republic of Brazil
Notes
8.00% due 4/15/14........................ 635,055 628,704
23
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agency (continued)
Federal Republic of Brazil
Bonds
11.00% due 8/17/40.............. $ 600,000 $ 667,800
Government of Canada
Debentures
7.50% due 9/15/29............... 625,000 805,406
Ministry Finance Russia
Debentures
3.00% due 5/14/08............... 560,000 514,808
Republic of Panama
Global Bond
7.25% due 3/15/15............... 100,000 99,250
Republic of Turkey
Notes
9.00% due 6/30/11............... 480,000 525,600
Republic of Venezuela
Bonds
8.50% due 10/08/14.............. 260,000 256,100
Russian Federation
Bonds
5.00% due 3/31/07(4)............ 1,250,000 1,280,625
Russian Federation
Bonds
5.00% due 3/31/07*(4)........... 325,000 333,938
United Kingdom
Notes
2.25% due 7/08/08*.............. 749,000 707,815
United Mexican States
Tranche 00017
6.75% due 9/27/34............... 264,000 257,664
United Mexican States
Notes
7.50% due 4/08/33............... 700,000 742,000
----------
6,819,710
----------
Insurance -- 0.1%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 175,000 169,750
----------
Machinery -- 0.1%
Atlas Copco AB
Notes
6.50% due 4/01/08*.............. 232,000 242,347
----------
Metals & Mining -- 0.6%
Noranda, Inc.
Notes
6.00% due 10/15/15.............. 987,000 1,012,064
Noranda, Inc.
Debentures
7.00% due 7/15/05............... 285,000 288,008
----------
1,300,072
----------
Telecommunications -- 0.8%
Koninklijke (Royal) KPN NV
Sr. Notes
7.50% due 10/01/05.............. 339,000 345,365
Telecom Italia Capital SA
Guaranteed Sr. Notes
4.00% due 1/15/10*.............. 619,000 591,776
Principal
Amount/ Value
Security Description Shares (Note 2)
-----------------------------------------------------------
Telecommunications (continued)
Telus Corp.
Notes
7.50% due 6/01/07................. $ 544,000 $ 579,047
Telus Corp.
Notes
8.00% due 6/01/11................. 161,000 186,444
-----------
1,702,632
-----------
Utilities -- 0.5%
Calpine Canada Energy Finance, ULC
Guaranteed Sr. Notes
8.50% due 5/01/08................. 150,000 106,500
Scottish Power, PLC
Notes
5.38% due 3/15/15................. 409,000 408,020
Scottish Power, PLC
Bonds
5.81% due 3/15/25................. 484,000 479,695
-----------
994,215
-----------
Total Foreign Bonds & Notes
(cost $16,485,716)................ 16,370,036
-----------
U.S. GOVERNMENT OBLIGATIONS -- 10.5%
U.S Treasury Bonds -- 5.7%
5.38% due 2/15/31................. 9,684,000 10,554,427
6.88% due 8/15/25................. 134,000 168,165
7.25% due 8/15/22................. 726,000 928,060
-----------
11,650,652
-----------
U.S. Treasury Notes -- 4.8%
0.88% due 4/15/10 TIPS............ $1,023,600 1,001,270
2.00% due 8/31/05................. 3,860,000 3,843,714
2.00% due 1/15/14 TIPS............ 758,469 776,341
2.50% due 10/31/06................ 85,000 83,446
3.00% due 12/31/06................ 680,000 671,367
3.13% due 1/31/07................. 562,000 555,634
3.50% due 2/15/10................. 1,631,000 1,583,026
3.63% due 1/15/10................. 440,000 429,464
4.00% due 2/15/15................. 1,070,000 1,028,036
4.25% due 8/15/13................. 2,000 1,972
-----------
9,974,270
-----------
Total U.S. Government Obligations
(cost $21,880,637)................ 21,624,922
-----------
U.S. GOVERNMENT AGENCIES -- 36.7%
Federal Home Loan Mortgage Corporation -- 17.5%
3.38% due 8/23/07................. 633,000 622,271
3.75% due 3/03/08................. 1,740,000 1,724,467
4.50% due 11/01/18................ 2,864,654 2,810,171
4.50% due 2/01/19................. 2,127,414 2,084,769
5.00% due 10/01/33................ 59,816 58,692
5.00% due 3/01/34................. 1,392,661 1,363,512
5.00% due 5/01/34................. 5,315,809 5,204,547
5.00% due 6/01/34................. 4,644,983 4,547,762
5.50% due 2/01/18................. 1,933,335 1,975,260
5.50% due 10/01/18................ 1,555,055 1,588,776
5.50% due 10/01/33................ 1,598,099 1,605,187
5.50% due 1/01/35................. 2,964,369 2,974,189
6.00% due 2/01/32................. 52,753 54,063
24
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal Home Loan Mortgage Corporation (continued)
6.00% due 11/01/33......................... $3,277,775 $ 3,355,751
6.50% due 8/01/16.......................... 16,390 17,145
6.50% due 6/01/32.......................... 976,762 1,015,407
6.50% due 8/01/32.......................... 1,883,175 1,957,182
6.50% due 2/01/33.......................... 191,699 199,232
6.50% due 9/01/33.......................... 534,593 554,840
7.00% due 3/01/12(9)....................... 12,422 13,057
7.00% due 11/01/16(9)...................... 77,229 81,151
7.50% due 4/01/31(9)....................... 462,001 494,670
7.50% due 12/01/31(9)...................... 1,109,491 1,187,943
8.00% due 10/01/29(9)...................... 19,127 20,591
8.00% due 7/01/30(9)....................... 6,271 6,749
8.00% due 8/01/30(9)....................... 19,038 20,489
8.00% due 10/01/30(9)...................... 30,433 32,753
8.00% due 11/01/30(9)...................... 52,697 56,713
8.00% due 12/01/30(9)...................... 103,914 111,834
8.00% due 1/01/31(9)....................... 89,352 96,163
-----------
35,835,336
-----------
Federal National Mortgage Association -- 19.1%
4.50% due 6/01/18.......................... 811,994 795,383
4.50% due 2/01/35.......................... 1,497,616 1,421,945
5.00% due 6/01/18.......................... 2,227,314 2,228,528
5.00% due 9/01/18.......................... 712,612 713,001
5.00% due 10/01/18......................... 1,500,805 1,501,623
5.00% due 11/01/18......................... 1,203,092 1,203,748
5.00% due 11/01/33......................... 56,238 55,142
5.00% due 3/01/34.......................... 3,833,481 3,750,395
5.50% due 12/01/19......................... 1,200,000 1,223,749
5.50% due 12/01/33......................... 7,615,180 7,640,395
5.50% due 3/01/34.......................... 965,646 967,708
5.50% due 7/01/34.......................... 2,773,329 2,779,251
5.50% due 9/01/34.......................... 977,880 979,968
6.00% due 12/01/16......................... 1,023,109 1,057,145
6.00% due 5/01/17.......................... 190,743 197,098
6.00% due 12/01/33......................... 3,962,349 4,051,173
6.00% due 8/01/34.......................... 3,014,995 3,083,657
6.00% due 10/01/34......................... 1,067,685 1,091,604
6.00% due TBA due Apr...................... 1,200,000 1,226,250
6.18% due 7/01/08.......................... 18,280 19,021
6.98% due 6/01/07(9)....................... 6,349 6,554
7.00% due 9/01/10(9)....................... 2,591 2,706
7.00% due 7/01/11.......................... 254 266
7.00% due 11/01/11(9)...................... 1,843 1,931
7.00% due 5/01/12(9)....................... 2,225 2,331
7.00% due 5/01/12.......................... 782 821
7.00% due 6/01/12(9)....................... 4,851 5,095
7.00% due 9/01/12(9)....................... 2,657 2,790
7.00% due 10/01/12(9)...................... 570 599
7.00% due 7/01/13(9)....................... 2,865 3,013
6.27% due 11/01/07......................... 50,142 51,874
7.00% due 4/01/28(9)....................... 14,662 15,482
7.00% due 10/01/28(9)...................... 1,720 1,816
7.00% due 9/01/31(10)...................... 1,039,893 1,097,140
7.04% due 3/01/07(9)....................... 10,195 10,580
6.31% due 2/01/08.......................... 155,882 161,218
6.34% due 1/01/08.......................... 17,299 17,954
6.43% due 1/01/08.......................... 18,199 18,931
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Federal National Mortgage Association (continued)
6.50% due 3/01/17....................... $ 525,098 $ 548,484
6.50% due 4/01/29....................... 79,798 83,085
6.50% due 2/01/32....................... 534,151 555,354
6.50% due 7/01/32....................... 252,305 262,320
7.50% due 10/01/10(9)................... 128,886 134,912
7.50% due 11/01/14(10).................. 7,693 8,053
7.50% due 5/01/15....................... 5,049 5,327
7.50% due 6/01/15....................... 82,848 87,407
7.50% due 7/01/15(10)................... 36,844 38,872
7.50% due 8/01/15(10)................... 12,602 13,295
------------
39,124,994
------------
Government National Mortgage Association -- 0.1%
6.50% due 6/15/29....................... 110,056 115,138
7.00% due 12/15/22(10).................. 72,652 77,236
7.00% due 8/15/29(10)................... 75,388 79,804
8.00% due 4/15/30(10)................... 17,398 18,758
------------
290,936
------------
Total U.S. Government Agencies
(cost $75,576,765)...................... 75,251,266
------------
COMMON STOCK -- 0.0%
Machinery -- 0.0%
Manitowoc Co., Inc.
(cost $261)............................. 28 1,131
------------
PREFERRED STOCK -- 0.7%
Financial Services -- 0.7%
General Electric Capital Corp. 4.50%(12). 34,000 765,000
Merrill Lynch & Co., Inc. 3.65%(2)+...... 24,608 612,001
------------
1,377,001
------------
Machinery -- 0.0%
Fairfield Manufacturing Co., Inc.
11.25%(3)(8)(11)+....................... 28 0
------------
Total Preferred Stock
(cost $1,481,292)....................... 1,377,001
------------
WARRANTS -- 0.0%
Communication Equipment -- 0.0%
Concentric Network Corp.
Expires 12/15/17(3)
(strike price $5.43)(11)+............... 5 0
------------
Telecommunications -- 0.0%
KMC Telecom Holdings, Inc.
Expires 01/31/08(3)
(strike price $0.01)(11)+............... 50 0
------------
Total Warrants
(cost $0)............................... 0
------------
Total Long-Term Investment Securities
(cost $186,873,725)..................... 185,641,925
------------
SHORT-TERM INVESTMENT SECURITIES -- 4.9%
Financial Services -- 4.9%
San Paolo Us Financial
2.85% due 04/01/05
(cost $10,000,000)(10).................. 10,000,000 10,000,000
------------
25
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.0%
Agreement with State Street Bank & Trust.,
bearing interest at 2.65% dated 03/31/05
to be repurchased 04/01/05 in the amount
of $10,166,748 and collateralized by
$10,530,000 of Federal Home Loan Bank,
bearing interest at 3.625% due 01/15/08
having an approximate value of
$10,470,990
(cost $10,166,000)(10).................... $10,166,000 $ 10,166,000
------------
TOTAL INVESTMENTS --
(cost $207,039,725)@...................... 100.6% 205,807,925
Other assets less liabilities................ (0.6) (1,233,906)
----------- ------------
NET ASSETS -- 100.0% $204,574,019
=========== ============
U.S. GOVERNMENT AGENCY SOLD SHORT -- (1.2%)
Federal Home Loan Mortgage Corporation -- (1.2%)
5.00% TBA due Dec.
(proceeds $2,433,203)..................... (2,500,000) (2,445,312)
------------
- --------
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. The Portfolio has no rights to demand registration of these
securities. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31, 2005,
the aggregate value of these securities was $11,024,348 representing 5.4% of
net assets. Unless otherwise indicated, these securities are not considered
to be illiquid.
@ See Note 5 for cost of investments on a tax basis.
TBA- Securities purchased on a forward commitment basis with an appropriate
principal amount and no definitive maturity date. The actual principal and
maturity date will be determined upon settlement date.
TIPS- Treasury Inflation Protected Securities
(1) Commercial mortgaged backed security.
(2) "Floating rate" security 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, 2005.
(3) Fair valued security.
(4) Security is a "step-up" bond where the coupon rate increases or steps up at
a predetermined rate. Rate shown reflects the increased rate.
(5) Company has filed Chapter 11 bankruptcy.
(6) Bond in default.
(7) Variable rate security -- the rate reflected is as of March 31, 2005;
maturity date reflects next reset date.
(8) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(9) The security or a portion thereof represents collateral for securities sold
short.
(10) The security or a portion thereof represents collateral for TBAs.
(11) Illiquid security.
(12) Security is a "step-up" preferred stock where the dividend rate increases
or steps up at a predetermined rate. Rate reflected is as of March 31,
2005.
See Notes to Financial Statements
26
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited)
Industry Allocation*
Government National Mortgage Association.......... 52.8%
U.S Treasury Bonds................................ 17.5%
U.S. Treasury Notes............................... 17.2%
Repurchase Agreements............................. 17.1%
Private Export Funding............................ 4.9%
Federal Farm Credit Bank.......................... 2.9%
Federal Home Loan Bank............................ 1.9%
Small Business Administration..................... 1.5%
Federal National Mortgage Association............. 1.0%
International Bank for Reconstruction and
Development...................................... 0.2%
-----
117.0%
=====
Credit Quality+#
Government -- Treasury............................ 34.8%
Government -- Agency.............................. 64.2%
Not Rated@........................................ 1.0%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
27
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 34.7%
U.S Treasury Bonds -- 17.5%
5.38% due 2/15/31(1)............. $34,000,000 $ 37,056,022
------------
U.S. Treasury Notes -- 17.2%
4.00% due 2/15/15(4)............. 38,000,000 36,509,678
------------
Total U.S. Government Obligations
(cost $75,753,452).............. 73,565,700
------------
U.S. GOVERNMENT AGENCIES -- 65.2%
Federal Farm Credit Bank -- 2.9%
2.50% due 3/15/06................ 5,000,000 4,943,085
5.64% due 4/04/11................ 500,000 526,737
6.00% due 3/07/11................ 200,000 213,924
6.30% due 12/03/13............... 500,000 552,389
------------
6,236,135
------------
Federal Home Loan Bank -- 1.9%
4.38% due 3/17/10................ 4,000,000 3,982,392
------------
Federal Home Loan Mortgage Corporation -- 0.0%
8.00% due 6/01/08................ 17,086 17,374
8.25% due 7/01/06................ 2,183 2,197
8.50% due 5/01/08................ 3,581 3,663
94.97% due 4/01/05(2)............ 9,573 9,529
------------
32,763
------------
Federal National Mortgage Association -- 1.0%
6.53% due 5/25/30................ 2,033,613 2,130,635
8.00% due 1/01/23................ 36,580 39,530
11.00% due 2/01/15............... 36 39
11.50% due 9/01/19............... 24,095 26,675
------------
2,196,879
------------
Government National Mortgage Association -- 52.8%
4.50% due 5/15/18................. 1,564,090 1,544,368
4.50% due 8/15/18................. 798,886 788,812
4.50% due 8/15/18................. 1,563,775 1,544,057
4.50% due 9/15/18................. 1,629,044 1,608,503
4.50% due 9/15/18................. 4,852,559 4,791,371
4.50% due 10/15/18................ 5,989,930 5,914,400
4.50% due 9/15/33................. 6,322,336 6,061,555
5.00% due 4/15/18................. 7,073,788 7,153,131
5.00% due 8/15/33................. 3,072,393 3,036,209
5.00% due 9/15/33................. 1,322,109 1,306,538
5.00% due 10/15/33................ 914,082 903,317
5.00% due 11/15/34................ 294,058 290,411
5.00% TBA due Dec................. 7,000,000 6,901,566
5.50% due 11/15/32................ 23,683 23,934
5.50% due 3/15/33................. 801,001 809,220
5.50% due 4/15/33................. 1,152,735 1,164,563
5.50% due 5/15/33................. 2,280,330 2,303,729
5.50% due 6/15/33................. 10,492,459 10,600,124
5.50% due 7/15/33................. 2,921,844 2,951,825
5.50% due 10/15/33................ 2,913,150 2,943,043
5.50% due 12/15/33................ 594,818 600,922
5.50% due 1/15/34................. 4,711,523 4,758,615
5.50% due 2/15/34................. 3,198,880 3,230,853
6.00% due 1/15/28................. 6,008 6,191
6.00% due 4/15/28................. 2,165,921 2,232,428
6.00% due 5/15/28................. 6,124 6,310
6.00% due 10/15/28................ 21,272 21,918
6.00% due 1/15/29................. 3,285 3,384
6.00% due 3/15/29................. 107,126 110,363
6.00% due 4/15/29................. 68,518 70,588
6.00% due 5/15/29................. 130,323 134,261
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Government National Mortgage Association (continued)
6.00% due 5/15/31............ $ 99,889 $ 102,865
6.00% due 11/15/31........... 291,358 300,036
6.00% due 11/15/31........... 90,893 93,600
6.00% due 12/15/31........... 536,510 552,491
6.00% due 1/15/32............ 332,265 342,046
6.00% due 2/15/32............ 55,871 57,516
6.00% due 3/15/32............ 14,316 14,738
6.00% due 8/15/32............ 468,046 481,825
6.00% due 11/15/32........... 104,317 107,388
6.00% due 12/15/32........... 14,615 15,045
6.00% due 1/15/33............ 35,409 36,412
6.00% due 2/15/33............ 201,470 207,176
6.00% due 3/15/33............ 192,530 197,982
6.00% due 4/15/33............ 579,715 596,132
6.00% due 7/15/33............ 467,864 481,114
6.00% due 8/15/33............ 4,612,226 4,748,528
6.00% due 9/15/33............ 656,472 675,063
6.00% due 10/15/33........... 1,996,660 2,053,228
6.00% due 11/15/33........... 264,807 272,306
6.00% due 12/15/33........... 467,960 481,213
6.00% due 2/15/34............ 689,424 708,806
6.00% due 5/15/34............ 111,707 114,847
6.00% due 7/15/34............ 4,758,487 4,892,264
6.00% due 8/15/34............ 339,105 348,638
6.00% due 9/15/34............ 2,191,227 2,252,829
6.00% due 9/15/34............ 853,867 877,872
6.00% due 10/15/34........... 9,415,006 9,679,694
6.00% due 11/15/34........... 1,038,702 1,067,904
6.50% due 2/15/29............ 32,802 34,317
6.50% due 5/15/31............ 64,130 67,062
6.50% due 6/15/31............ 101,157 105,781
6.50% due 7/15/31............ 132,565 138,626
6.50% due 8/15/31............ 156,543 163,700
6.50% due 9/15/31............ 243,066 254,178
6.50% due 10/15/31........... 634,720 663,737
6.50% due 11/15/31........... 26,122 27,316
6.50% due 12/15/31........... 52,021 54,399
6.50% due 1/15/32............ 67,586 70,676
6.50% due 2/15/32............ 768,033 803,157
6.50% due 2/15/32............ 691,590 723,218
6.50% due 6/15/32............ 349,574 365,561
7.00% due 7/15/23............ 59,748 63,497
7.00% due 10/15/23........... 172,036 182,829
7.00% due 9/15/25............ 402,425 427,200
7.00% due 3/20/29............ 34,741 36,646
7.00% due 6/20/29............ 5,964 6,291
7.00% due 11/20/30........... 155,489 163,883
7.50% due 4/15/17............ 17,489 18,821
7.50% due 8/15/23............ 342,879 370,174
7.50% due 9/15/23............ 1,031,415 1,113,520
7.50% due 10/15/23........... 26,530 28,642
8.00% due 11/15/06........... 1,229 1,254
8.00% due 2/15/08............ 1,780 1,850
9.00% due 12/15/16........... 110,450 120,391
11.00% due 8/20/15........... 326 359
11.00% due 9/20/15........... 753 830
11.50% due 3/15/13........... 25,474 28,410
11.50% due 6/15/13........... 17,331 19,264
11.50% due 5/20/15........... 4,180 4,651
12.50% due 9/15/14........... 8,210 9,247
13.00% due 1/15/11........... 3,779 4,250
13.00% due 2/15/11........... 5,600 6,297
28
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage Association (continued)
13.00% due 3/15/11..................... $ 299 $ 337
13.00% due 4/15/11..................... 635 715
13.00% due 9/15/13..................... 5,622 6,354
13.00% due 10/20/14.................... 4,323 4,860
13.00% due 11/15/14.................... 890 1,008
13.00% due 2/20/15..................... 1,560 1,750
13.50% due 2/15/13..................... 12,891 14,679
15.00% due 1/15/12..................... 540 624
15.00% due 2/15/12..................... 1,267 1,466
15.00% due 6/15/12..................... 13,648 15,793
15.00% due 9/15/12..................... 742 859
15.50% due 8/15/11..................... 5,453 6,306
15.50% due 9/15/11..................... 41,022 47,446
------------
111,758,298
------------
International Bank for Reconstruction and
Development -- 0.2%
5.00% due 3/28/06...................... 350,000 354,722
------------
Private Export Funding -- 4.9%
5.87% due 7/31/08...................... 10,000,000 10,484,790
------------
Small Business Administration -- 1.5%
6.30% due 6/01/18...................... 2,982,429 3,111,709
------------
Total U.S. Government Agencies
(cost $138,070,422)................... 138,157,688
------------
Total Long-Term Investment Securities -- 99.9%
(cost $213,823,874)................... 211,723,388
------------
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
REPURCHASE AGREEMENTS -- 17.1%
State Street Joint Repurchase
Agreement (3)..................... $ 147,000 $ 147,000
UBS Warburg, Inc. Joint Repurchase
Agreement Account (3)............. 36,000,000 36,000,000
------------
Total Repurchase Agreements
(cost $36,147,000)................ 36,147,000
------------
TOTAL INVESTMENTS --
(cost $249,970,874) @............. 117.0% 247,870,388
Liabilities in excess of other assets (17.0) (36,006,885)
----------- ------------
NET ASSETS -- 100.0% $211,863,503
=========== ============
- --------
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.
@ See Note 5 for cost of investments on a tax basis.
(1) The security or a portion thereof represents collateral for TBA securities.
(2) Variable rate security -- the rate reflected is as of March 31, 2005;
maturity date reflects next reset date.
(3) See Note 2 for details of Joint Repurchase Agreement.
(4) The security or a portion thereof is out on loan (See Note 2).
See Notes to Financial Statements
29
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited)
Industry Allocation*
Government National Mortgage Association.......... 81.4%
Repurchase Agreement.............................. 21.3%
United States Treasury Bills...................... 16.1%
U.S. Treasury Notes............................... 9.8%
Federal Home Loan Bank............................ 3.0%
Federal Farm Credit Bank.......................... 3.0%
Federal National Mortgage Association............. 2.0%
Small Business Administration..................... 0.2%
-----
136.8%
=====
Credit Quality+#
Government -- Treasury............................ 9.9%
Government -- Agency.............................. 90.1%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
30
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 9.8%
U.S. Treasury Notes -- 9.8%
4.00% due 3/15/10(3)............ $ 20,000,000 $ 19,843,760
4.00% due 2/15/15(3)............ 30,000,000 28,823,430
------------
48,667,190
------------
Total U.S. Government Obligations
(cost $49,523,107).............. 48,667,190
------------
U.S. GOVERNMENT AGENCY -- 89.6%
Federal Home Loan Bank -- 3.0%
4.38% due 3/17/10............... 15,000,000 14,933,970
------------
Federal National Mortgage Association -- 2.0%
5.00% due 1/25/18............... 10,000,000 10,094,166
------------
Government National Mortgage Association -- 81.4%
4.50% due 5/15/18................ 3,128,180 3,088,735
4.50% due 8/15/18................ 1,563,775 1,544,057
4.50% due 9/15/18................ 4,994,281 4,931,307
4.50% due 10/15/18............... 6,886,255 6,799,424
4.50% due 8/15/33................ 4,416,312 4,234,150
4.50% due 9/15/33................ 5,003,722 4,797,330
5.00% due 3/15/18................ 1,068,669 1,080,655
5.00% due 4/15/18................ 11,873,579 12,006,759
5.00% due 5/15/18................ 16,325,999 16,509,120
5.00% due 1/15/33................ 23,851 23,570
5.00% due 5/15/33................ 19,276 19,051
5.00% due 8/15/33................ 4,422,832 4,370,744
5.00% due 9/15/33................ 3,645,544 3,602,610
5.00% due 10/15/33............... 9,188,332 9,080,120
5.00% due 4/15/34................ 92,655 91,506
5.00% due 5/15/34................ 222,947 220,182
5.00% due 11/15/34............... 1,006,101 993,623
5.00% due 12/15/34............... 977,815 965,687
5.00% TBA due Apr................ 22,000,000 21,690,636
5.50% due 6/15/29................ 9,640 9,762
5.50% due 12/15/32............... 1,315,669 1,329,620
5.50% due 1/15/33................ 727,025 734,485
5.50% due 2/15/33................ 3,361,967 3,396,464
5.50% due 3/15/33................ 1,951,794 1,971,822
5.50% due 4/15/33................ 10,489,182 10,596,814
5.50% due 5/15/33................ 12,679,160 12,809,264
5.50% due 6/15/33................ 11,844,373 11,965,910
5.50% due 6/15/33................ 1,501,814 1,517,714
5.50% due 7/15/33................ 713,372 720,692
5.50% due 8/15/33................ 4,581,888 4,628,904
5.50% due 9/15/33................ 644,764 651,379
5.50% due 10/15/33............... 11,349,718 11,466,180
5.50% due 12/15/33............... 12,887,009 13,019,245
5.50% due 1/15/34................ 18,158,915 18,340,416
5.50% due 2/15/34................ 1,132,401 1,143,720
5.50% due 2/15/34................ 1,126,473 1,137,732
5.50% TBA due Apr................ 110,000,000 110,962,500
6.00% due 11/15/23............... 9,807 10,146
6.00% due 1/15/24................ 9,326 9,636
6.00% due 7/15/28................ 6,481 6,678
6.00% due 12/15/28............... 349,744 360,373
6.00% due 1/15/29................ 1,235,546 1,272,877
6.00% due 2/15/29................ 1,253,975 1,291,864
6.00% due 3/15/29................ 909,040 936,506
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Government National Mortgage Association (continued)
6.00% due 4/15/29............ $ 2,342,131 $ 2,412,955
6.00% due 5/15/29............ 241,401 248,695
6.00% due 6/15/29............ 714,997 736,601
6.00% due 7/15/29............ 382,548 394,106
6.00% due 8/15/29............ 42,531 43,816
6.00% due 10/15/29........... 241,157 248,444
6.00% due 4/15/31............ 29,754 30,641
6.00% due 7/15/31............ 43,086 44,369
6.00% due 10/15/31........... 135,276 139,305
6.00% due 11/15/31........... 2,376,693 2,447,487
6.00% due 12/15/31........... 1,178,512 1,213,616
6.00% due 1/15/32............ 1,149,122 1,182,952
6.00% due 2/15/32............ 109,929 113,166
6.00% due 3/15/32............ 695,297 715,766
6.00% due 7/15/32............ 194,246 199,965
6.00% due 8/15/32............ 2,929,501 3,016,500
6.00% due 9/15/32............ 1,953,338 2,010,843
6.00% due 10/15/32........... 361,846 372,499
6.00% due 11/15/32........... 13,387 13,781
6.00% due 12/15/32........... 225,627 232,269
6.00% due 1/15/33............ 2,746,152 2,823,923
6.00% due 2/15/33............ 5,309,125 5,459,479
6.00% due 3/15/33............ 2,355,619 2,422,331
6.00% due 4/15/33............ 2,701,508 2,778,015
6.00% due 5/15/33............ 2,052,722 2,110,855
6.00% due 6/15/33............ 2,132,957 2,193,362
6.00% due 8/15/33............ 3,510,497 3,609,915
6.00% due 10/15/33........... 770,636 792,460
6.00% due 11/15/33........... 1,568,680 1,613,105
6.00% due 12/15/33........... 5,499,097 5,654,831
6.00% due 1/15/34............ 3,995,843 4,108,179
6.00% due 2/15/34............ 20,315,753 20,886,898
6.00% due 3/15/34............ 850,335 874,241
6.00% due 4/15/34............ 8,412,991 8,649,508
6.00% due 5/15/34............ 122,582 126,028
6.00% due 6/15/34............ 890,338 915,368
6.00% due 7/15/34............ 6,399,733 6,579,651
6.00% due 8/15/34............ 416,331 428,036
6.00% due 11/15/34........... 861,154 885,364
6.00% due 1/15/35............ 104,566 107,489
6.50% due 3/15/28............ 46,120 48,293
6.50% due 8/15/28............ 93,887 98,286
6.50% due 12/15/28........... 2,634 2,757
6.50% due 1/15/29............ 10,006 10,468
6.50% due 2/15/29............ 3,343 3,498
6.50% due 3/15/29............ 182,918 191,365
6.50% due 4/15/29............ 2,885 3,019
6.50% due 5/15/29............ 24,978 26,143
6.50% due 6/15/29............ 74,493 77,933
6.50% due 7/15/29............ 10,173 10,643
6.50% due 10/15/29........... 10,227 10,699
6.50% due 8/15/31............ 539,023 563,665
6.50% due 9/15/31............ 34,477 36,053
6.50% due 10/15/31........... 583,740 610,427
6.50% due 11/15/31........... 431,669 451,403
6.50% due 12/15/31........... 418,276 437,399
6.50% due 2/15/32............ 578,142 604,582
31
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCY (continued)
Government National Mortgage Association (continued)
6.50% due 5/15/32.................. $2,947,392 $ 3,082,184
6.50% due 6/15/32.................. 225,881 236,211
7.00% due 3/15/23.................. 171,828 182,608
7.00% due 1/20/24.................. 1,297 1,372
7.00% due 3/20/24.................. 1,337 1,415
7.00% due 7/20/25.................. 7,259 7,679
7.00% due 9/15/25.................. 174,765 185,524
7.00% due 1/20/29.................. 80,529 84,944
7.00% due 2/20/29.................. 16,493 17,397
7.00% due 6/20/29.................. 29,573 31,194
7.00% due 7/20/29.................. 113,893 120,138
7.00% due 9/20/29.................. 11,108 11,717
7.00% due 10/20/29................. 21,850 23,048
7.00% due 11/20/29................. 7,818 8,247
7.00% due 3/20/30.................. 9,636 10,156
7.00% due 6/20/30.................. 21,386 22,541
7.00% due 8/20/30.................. 62,127 65,481
7.00% due 9/20/30.................. 49,654 52,335
7.00% due 10/20/30................. 68,585 72,287
8.00% due 1/15/30.................. 991 1,068
8.00% due 4/15/30.................. 55,085 59,392
8.00% due 5/15/30.................. 8,404 9,061
8.00% due 8/15/30.................. 96,019 103,526
8.00% due 11/15/26................. 391,409 422,227
8.00% due 12/15/29................. 33,844 36,493
8.50% due 3/15/17.................. 44,162 48,167
8.50% due 5/15/21.................. 89,978 98,812
8.50% due 12/15/22................. 152,220 167,340
8.50% due 1/15/23.................. 153,603 169,058
8.50% due 9/15/24.................. 65,686 72,357
9.00% due 7/15/16.................. 92,423 100,742
9.00% due 10/15/16................. 21,567 23,508
------------
403,891,645
------------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Small Business Administration -- 0.2%
6.30% due 6/01/18................. $ 994,143 $ 1,037,236
-------------
Federal Farm Credit Bank -- 3.0%
2.50% due 3/15/06(1).............. 15,000,000 14,829,255
-------------
Total U.S. Government Agency
(cost $447,081,826)............... 444,786,272
-------------
Total Long-Term Investment Securities -- 99.4%
(cost $496,604,933)............... 493,453,462
-------------
SHORT-TERM INVESTMENT SECURITIES -- 16.1%
United States Treasury Bills
2.54% due 04/07/05(1)
(cost $79,966,200)................ 80,000,000 79,966,200
-------------
REPURCHASE AGREEMENTS -- 21.3%
State Street Joint Repurchase
Agreement(1)(2)................... 5,783,000 5,783,000
UBS Securities, LLC Joint
Repurchase Agreement(1)(2)........ 100,000,000 100,000,000
-------------
Total Repurchase Agreements
(cost $105,783,000)............... 105,783,000
-------------
TOTAL INVESTMENTS --
(cost $682,354,133)@.............. 136.8% 679,202,662
Liabilities in excess of other assets (36.8) (182,727,162)
------------ -------------
NET ASSETS -- 100.0% $ 496,475,500
============ =============
- --------
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.
@ See Note 5 for cost of investments on a tax basis.
(1) The security or a portion thereof represents collateral for TBA securities.
(2) See Note 2 for details of Joint Repurchase Agreement.
(3) The security or a portion thereof is out on loan (See Note 2).
See Notes to Financial Statements
32
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited)
Industry Allocation*
Foreign Government Agency......................... 28.2%
Federal National Mortgage Association............. 7.6%
Financial Services................................ 6.6%
U.S. Treasury Notes............................... 5.9%
Time Deposit...................................... 5.7%
Telecommunications................................ 5.2%
Federal Home Loan Mortgage Corporation............ 4.2%
Leisure & Tourism................................. 4.1%
Broadcasting & Media.............................. 4.0%
Utilities......................................... 3.7%
Energy Sources.................................... 3.0%
U.S Treasury Bonds................................ 2.0%
Repurchase Agreement.............................. 1.9%
Forest Products................................... 1.5%
Pharmaceuticals................................... 1.2%
Chemicals......................................... 1.1%
Insurance......................................... 1.1%
Energy Services................................... 0.9%
Real Estate Investment Trusts..................... 0.7%
Food, Beverage & Tobacco.......................... 0.7%
Health Services................................... 0.7%
Metals & Mining................................... 0.7%
Retail Stores..................................... 0.7%
Transportation.................................... 0.7%
Automotive........................................ 0.6%
Banks............................................. 0.6%
Business Services................................. 0.6%
Household & Personal Products..................... 0.4%
Communication Equipment .......................... 0.3%
Medical Products.................................. 0.3%
Restaurants....................................... 0.3%
Electronics....................................... 0.2%
Machinery......................................... 0.2%
Retail............................................ 0.2%
Aerospace & Military Technology................... 0.1%
Government National Mortgage Association.......... 0.1%
Housing & Household Durables...................... 0.1%
Real Estate Companies............................. 0.1%
----
96.2%
====
Credit Quality+#
Government -- Treasury........ 9.1%
Government -- Agency.......... 11.8%
AAA........................... 12.7%
AA............................ 5.4%
A............................. 3.1%
BBB........................... 13.4%
BB............................ 12.4%
B............................. 12.9%
CCC........................... 8.5%
CC............................ 1.1%
C............................. 0.2%
Below C....................... 0.1%
Not Rated@.................... 9.3%
------
100.00%
======
Country Allocation*
United States................... 62.9%
Brazil.......................... 4.3%
Russia.......................... 3.6%
Mexico.......................... 3.0%
Canada.......................... 2.7%
United Kingdom.................. 2.1%
Australia....................... 1.6%
Italy........................... 1.6%
Japan........................... 1.3%
Sweden.......................... 1.3%
Argentina....................... 1.1%
Spain........................... 1.0%
Turkey.......................... 0.9%
Belgium......................... 0.8%
Venezuela....................... 0.8%
Columbia........................ 0.7%
Denmark......................... 0.7%
Germany......................... 0.7%
Greece.......................... 0.6%
France.......................... 0.5%
Netherlands..................... 0.5%
Cayman Island................... 0.4%
Peru............................ 0.4%
South Africa.................... 0.4%
Austria......................... 0.3%
Finland......................... 0.3%
Ireland......................... 0.3%
Poland.......................... 0.3%
Ukraine......................... 0.3%
Hungary......................... 0.2%
Luxembourg...................... 0.2%
Uruguay......................... 0.2%
Bermuda......................... 0.1%
Czech Republic.................. 0.1%
----
96.2%
====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
ASSET-BACKED SECURITIES -- 2.2%
Financial Services -- 2.2%
Commercial Mtg. Asset Trust
Commercial Mtg. Certificates,
Series 1999-C1, Class C
7.35% due 4/17/05(1)............ $1,200,000 $1,384,109
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates,
Series 1998-CG1, Class S
0.83% due 4/01/05(1)(2)(3)...... 7,746,958 160,142
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates,
Series 1998-CF2, Class S
0.99% due 3/01/05(1)(2)(3)...... 6,537,459 177,758
Mid-State Trust Asset Backed
Notes, Series 6, Class A1
7.34% due 7/01/35............... 783,914 828,506
PNC Mtg. Securities Corp. Mtg.
Certificates, Series 1992-2,
Class DB3
6.91% due 4/01/05(2)(4)......... 326,949 328,855
----------
2,879,370
----------
Total Asset Backed Securities
(cost $2,653,754)............... 2,879,370
----------
BONDS & NOTES -- 28.4%
Aerospace & Military Technology -- 0.1%
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes,
Series B
12.00% due 9/30/08.............. 175,000 110,250
Raytheon Co.
Debenture
6.40% due 12/15/18.............. 67,000 72,350
----------
182,600
----------
Apparel & Textiles -- 0.0%
Warnaco, Inc.
Sr. Notes
8.88% due 6/15/13............... 50,000 53,625
----------
Automotive -- 0.5%
BREED Technologies, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 4/15/08+(5)(6)(9)..... 500,000 0
Dana Corp.
Notes
7.00% due 3/01/29............... 143,000 125,580
Diamond Triumph Auto Glass, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 4/01/08(6)(9)......... 100,000 70,000
Exide Corp.
Term Loan
10.00% due 3/15/25+(6)(9)....... 225,000 0
General Motors Corp.
Notes
7.20% due 1/15/11............... 190,000 171,526
General Motors Corp.
Sr. Debentures
8.38% due 7/15/33............... 56,000 47,921
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
Automotive (continued)
General Motors Corp.
Debentures
8.80% due 3/01/21.................. $275,000 $247,385
Hertz Corp.
Notes
7.63% due 6/01/12.................. 40,000 40,556
Stanadyne Corp.
Sr. Sub. Notes
10.00% due 8/15/14................. 25,000 25,750
--------
728,718
--------
Banks -- 0.5%
American Express Centurion Bank
Notes
2.98% due 4/18/05(6)(7)............ 40,000 40,017
Chemical Bank
Sub. Notes
6.13% due 11/01/08................. 63,000 66,168
Credit Suisse First Boston New York
Sub. Notes
6.50% due 5/01/08*................. 40,000 42,127
HSBC Bank USA
Sub. Notes
5.88% due 11/01/34................. 171,000 172,126
Popular North America, Inc.
Notes
4.25% due 4/01/08.................. 108,000 107,276
Sovereign Bank
Certificate Of Deposit
4.00% due 2/01/08.................. 67,000 66,199
Suntrust Bank
Bonds
5.40% due 4/01/20.................. 72,000 71,920
Wells Fargo & Co.
Notes
3.11% due 6/15/05(7)............... 36,000 36,010
--------
601,843
--------
Broadcasting & Media -- 3.2%
Adelphia Communications Corp.
Sr. Notes
10.25% due 6/15/11+(5)............. 250,000 230,625
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 2/15/12.................. 150,000 157,500
Charter Communications
Holdings, LLC
Sr. Notes
9.63% due 11/15/09................. 925,000 723,812
Charter Communications
Holdings, LLC
Sr. Disc. Notes
9.92% due 4/01/11(8)............... 125,000 95,937
Charter Communications
Holdings, LLC
Sr. Notes
10.00% due 5/15/11................. 75,000 57,563
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
BONDS & NOTES (continued)
Broadcasting & Media (continued)
Charter Communications
Holdings, LLC
Sr. Notes
10.25% due 1/15/10................ $ 25,000 $ 20,063
Charter Communications
Holdings, LLC
Sr. Notes
10.75% due 10/01/09............... 450,000 369,000
Charter Communications
Holdings, LLC
Sr. Notes
11.13% due 1/15/11................ 300,000 242,250
Coleman Cable, Inc.
Sr. Notes
9.88% due 10/01/12*............... 75,000 76,500
Cox Communications, Inc.
Debentures
6.80% due 8/01/28................. 153,000 157,894
Cox Communications, Inc.
Debentures
7.63% due 6/15/25................. 163,000 181,274
Cox Communications, Inc.
Notes
7.75% due 11/01/10................ 110,000 122,172
Fisher Communications, Inc.
Sr. Notes
8.63% due 9/15/14................. 150,000 161,625
Haights Cross Operating Co.
Guaranteed Sr. Notes
11.75% due 8/15/11................ 100,000 112,250
Insight Communications Co., Inc.
Sr. Sub. Disc. Notes
12.25% due 2/15/11(8)............. 275,000 273,625
Liberty Media Corp.
Notes
5.70% due 5/15/13................. 275,000 259,196
Paxson Communications Corp.
Guaranteed Sr. Sub. Notes
12.25% due 1/15/09(8)............. 350,000 325,500
Salem Communications Holding Corp.
Guaranteed Sr. Sub. Notes
7.75% due 12/15/10................ 50,000 51,813
Telex Communications, Inc.
Sr. Sec. Notes
11.50% due 10/15/08............... 50,000 54,750
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 3/15/23................. 198,000 242,604
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 1/15/14................. 125,000 118,437
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 3/01/11................ 250,000 255,625
----------
4,290,015
----------
Business Services -- 0.6%
American Standard, Inc.
Bonds
5.50% due 4/01/15*................ 43,000 43,163
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------
Business Services (continued)
Davita, Inc.
Sr. Sub. Notes
7.25% due 3/15/15*............. $100,000 $ 98,000
Mobile Mini, Inc.
Sr. Notes
9.50% due 7/01/13.............. 100,000 112,500
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 9/01/10............. 275,000 292,875
PHH Corp.
Notes
6.00% due 3/01/08.............. 67,000 69,188
Seitel, Inc.
Sr. Notes
11.75% due 7/15/11............. 200,000 225,000
--------
840,726
--------
Chemicals -- 0.6%
Equistar Chemicals LP
Sr. Notes
10.63% due 5/01/11............. 175,000 196,437
Foamex LP/Foamex Capital Corp.
Guaranteed Sr. Sec. Notes
10.75% due 4/01/09............. 50,000 44,000
Huntsman International, LLC
Sr. Sub. Notes
7.38% due 1/01/15*............. 169,000 168,155
Lyondell Chemical Co.
Guaranteed Sr. Sec. Notes
9.50% due 12/15/08............. 50,000 53,500
Phosphate Resource Partners LP
Sr. Notes
7.00% due 2/15/08.............. 125,000 128,750
Rockwood Specialties Group
Sr. Sub. Notes
7.50% due 11/15/14*............ 75,000 75,000
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 5/15/11............. 75,000 83,250
--------
749,092
--------
Communication Equipment -- 0.3%
Rural Cellular Corp.
Sr. Sub. Notes
9.63% due 5/15/08.............. 150,000 143,250
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 1/15/10.............. 250,000 228,750
--------
372,000
--------
Computers & Business Equipment -- 0.0%
Activant Solutions, Inc.
Sr. Notes
9.09% due 6/30/05*(7).......... 25,000 25,500
--------
Electronics -- 0.1%
Freescale Semiconductor, Inc.
Sr. Notes
7.13% due 7/15/14.............. 100,000 104,500
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------
BONDS & NOTES (continued)
Electronics (continued)
Sanmina-SCI Corp.
Sr. Sub. Notes
6.75% due 3/01/13*.............. $ 75,000 $ 70,313
--------
174,813
--------
Energy Services -- 0.3%
Frontier Oil Corp.
Sr. Notes
6.63% due 10/01/11.............. 50,000 49,750
Hanover Compressor Co.
Sub. Notes
Zero coupon due 3/31/07......... 25,000 22,000
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 6/01/11............... 208,944 220,593
Pride International, Inc.
Sr. Notes
7.38% due 7/15/14............... 50,000 53,000
--------
345,343
--------
Energy Sources -- 3.0%
Belden & Blake Corp.
Sec. Notes
8.75% due 7/15/12............... 75,000 74,437
Calpine Corp.
Sec. Notes
8.75% due 7/15/13*.............. 780,000 588,900
Chesapeake Energy Corp.
Sr. Notes
6.88% due 1/15/16............... 50,000 50,500
Chesapeake Energy Corp.
Guaranteed Sr. Notes
7.75% due 1/15/15............... 25,000 26,437
Chesapeake Energy Corp.
Guaranteed Sr. Notes
9.00% due 8/15/12............... 25,000 27,594
Citgo Petroleum Corp.
Sr. Notes
6.00% due 10/15/11.............. 75,000 74,062
Colorado Interstate Gas Co.
Debentures
6.85% due 6/15/37............... 150,000 152,211
ConocoPhillips
Sr. Notes
7.00% due 3/30/29............... 125,000 147,385
Costilla Energy, Inc.
Sr. Notes
10.25% due 10/01/06+(5)(6)(9)... 500,000 0
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 4/15/14............... 50,000 50,000
Encore Acquisition Co.
Guaranteed Sr. Notes
8.38% due 6/15/12............... 75,000 81,000
Enterprise Products Operating LP
Guaranteed Sr. Notes
5.00% due 3/01/15*.............. 42,000 39,373
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Energy Sources (continued)
Enterprise Products Operating LP
Notes
6.65% due 10/15/34....................... $ 143,000 $ 145,796
EXCO Resources, Inc.
Guaranteed Notes
7.25% due 1/15/11........................ 50,000 50,750
FirstEnergy Corp., Series C
Notes
7.38% due 11/15/31....................... 143,000 161,976
FPL Group Capital, Inc.
Notes
4.09% due 2/16/07........................ 120,000 119,705
Kerr Mcgee Corp.
Guaranteed Notes
7.88% due 9/15/31........................ 286,000 322,714
Mission Energy Holding Co.
Sr. Sec. Notes
13.50% due 7/15/08....................... 1,125,000 1,350,000
Nexen, Inc.
Notes
5.88% due 3/10/35........................ 170,000 162,602
Nexen, Inc.
Notes
7.88% due 3/15/32........................ 176,000 214,737
Roseton Danskammer Guaranteed
Pass-Thru Certificates, Series B
7.67% due 11/08/16....................... 150,000 138,000
----------
3,978,179
----------
Financial Services -- 3.7%
Affinity Group, Inc.
Sr. Sub. Notes
10.00% due 2/15/15*...................... 125,000 130,000
Arch Western Finance LLC
Sr. Notes
6.75% due 7/01/13........................ 125,000 125,625
Bear Island Paper Co., LLC
Sr. Notes
10.00% due 12/01/07...................... 250,000 252,812
Borden United States Finance Corp.
Sr. Sec. Notes
9.00% due 7/15/14*....................... 75,000 81,000
Capital One Financial Corp.
Sr. Notes
4.74% due 5/17/07........................ 41,000 41,223
Caterpillar Financial Services
Notes
4.70% due 3/15/12........................ 72,000 70,939
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 6/15/09*...................... 500,000 615,000
Consolidated Communications Holdings
Sr. Notes
9.75% due 4/01/12*....................... 200,000 212,000
Countrywide Home Loans, Inc.
Tranche Trust 00255
5.50% due 8/01/06........................ 101,000 102,686
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
ESI Tractebel Acquisition Corp.
Guaranteed Bonds
7.99% due 12/30/11.............. $ 228,000 $241,850
Ford Motor Credit Co.
Sr. Notes
4.95% due 1/15/08............... 67,000 64,259
Ford Motor Credit Co.
Notes
7.88% due 6/15/10............... 53,000 53,958
General Electric Capital Corp.
Notes
5.38% due 3/15/07............... 67,000 68,449
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14.............. 20,000 17,276
H & E Equipment Services, LLC
Guaranteed Sr. Sec. Notes
11.13% due 6/15/12.............. 125,000 140,625
Hilcorp Finance Co.
Sr. Notes
10.50% due 9/01/10*............. 250,000 277,500
Household Finance Corp.
Notes
6.38% due 10/15/11.............. 67,000 72,380
Huntsman Advanced Materials, LLC
Sr. Sec. Notes
11.00% due 7/15/10*............. 175,000 200,813
iPCS, Inc.
Escrow
14.00% due 7/15/10(6)(9)........ 2,075,000 0
J.P. Morgan Chase Capital XV
Notes
5.88% due 3/15/35............... 170,000 164,171
John Deere Capital Corp.
Notes
3.88% due 3/07/07............... 164,000 163,059
MedCath Holdings Corp.
Sr. Notes
9.88% due 7/15/12............... 125,000 134,375
Merrill Lynch & Co., Inc.
Notes
4.25% due 2/08/10............... 53,000 51,591
Muzak, LLC/ Muzak Finance Corp.
Guaranteed Sr. Sub. Notes
9.88% due 3/15/09............... 75,000 33,750
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
11.38% due 4/01/13(8)........... 300,000 235,500
NGC Corp. Capital Trust I
Guaranteed Sub. Notes, Series B
8.32% due 6/01/27............... 800,000 632,000
PCA, LLC
Sr. Notes
11.88% due 8/01/09.............. 225,000 189,000
Px Escrow Corp.
Sr. Sub. Disc. Notes
9.63% due 2/01/06(8)............ 125,000 121,250
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
Financial Services (continued)
Sprint Capital Corp.
Guaranteed Sr. Notes
6.88% due 11/15/28.............. $ 62,000 $ 66,377
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 6/01/10.............. 162,000 186,300
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
12.88% due 10/15/08............. 75,000 88,875
TIAA Global Markets
Notes
4.13% due 11/15/07*............. 44,000 43,756
Transamerica Finance Corp.
Sr. Notes
6.40% due 9/15/08............... 36,000 38,473
----------
4,916,872
----------
Food, Beverage & Tobacco -- 0.7%
American Stores Co.
Debentures
7.90% due 5/01/17............... 77,000 87,863
Coca-Cola Enterprises, Inc.
Debentures
8.50% due 2/01/22............... 78,000 102,737
North Atlantic Holding Co., Inc.
Sr. Disc. Notes
12.25% due 3/01/14(8)........... 250,000 47,500
North Atlantic Trading, Inc.
Sr. Notes
9.25% due 3/01/12............... 150,000 112,500
SABMiller, PLC
Guaranteed Notes
6.63% due 8/15/33*.............. 128,000 140,317
Stater Brothers Holdings, Inc.
Sr. Notes
8.13% due 6/15/12............... 200,000 193,000
Wornick Co.
Sr. Sec. Notes
10.88% due 7/15/11.............. 250,000 261,250
----------
945,167
----------
Forest Products -- 1.0%
Boise Cascade LLC
Sr. Notes
5.54% due 4/15/05*(7)........... 125,000 127,500
Caraustar Industries, Inc.
Notes
7.38% due 6/01/09............... 25,000 24,813
Constar International, Inc.
Sr. Notes
6.17% due 4/15/05*(7)........... 50,000 50,000
Constar International, Inc.
Sr. Sub. Notes
11.00% due 12/01/12............. 125,000 125,000
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 4/15/23............... 100,000 96,500
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
BONDS & NOTES (continued)
Forest Products (continued)
FiberMark, Inc.
Sr. Notes
10.75% due 4/15/11+(5)............. $125,000 $ 91,250
Packaging Corp. of America
Sr. Notes
5.75% due 8/01/13.................. 58,000 57,429
Pliant Corp.
Sr. Sub. Notes
13.00% due 6/01/10................. 225,000 190,125
Sealed Air Corp.
Bonds
6.88% due 7/15/33*................. 116,000 125,712
Speciality Paperboard, Inc.
Sr. Notes
9.38% due 10/15/06+(5)............. 550,000 394,625
----------
1,282,954
----------
Health Services -- 0.7%
Community Health Systems, Inc.
Sr. Sub. Notes
6.50% due 12/15/12*................ 100,000 97,500
Concentra Operating Corp.
Sr. Sub. Notes
9.13% due 6/01/12.................. 50,000 53,000
Coventry Health Care, Inc.
Sr. Notes
6.13% due 1/15/15*................. 57,000 56,929
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13................. 50,000 54,500
HCA, Inc.
Notes
6.38% due 1/15/15.................. 150,000 148,896
HCA, Inc.
Sr. Notes
6.95% due 5/01/12.................. 25,000 25,949
Pediatric Services Of America, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 4/15/08(6).............. 25,000 25,250
Psychiatric Solutions, Inc.
Guaranteed Sr. Sub. Notes
10.63% due 6/15/13................. 67,000 74,370
Team Health, Inc.
Sr. Sub. Notes
9.00% due 4/01/12.................. 150,000 146,625
Tenet Healthcare Corp.
Sr. Notes
6.50% due 6/01/12.................. 125,000 115,000
Tenet Healthcare Corp.
Sr. Notes
9.25% due 2/01/15*................. 100,000 99,750
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13................. 75,000 73,687
----------
971,456
----------
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Household & Personal Products -- 0.3%
Procter & Gamble Co.
2.00% due 6/21/10................. JPY 39,000,000 $ 387,354
Revlon Consumer Products Corp.
Sr. Sub. Notes
8.63% due 2/01/08................. 75,000 69,188
----------
456,542
----------
Housing & Household Durables -- 0.1%
Maytag Corp.
Notes
5.00% due 5/15/15................. 100,000 87,317
----------
Insurance -- 1.0%
Americo Life, Inc.
Notes
7.88% due 5/01/13*................ 38,000 39,890
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 6/15/13................ 125,000 140,000
Fidelity National Financial, Inc.
Notes
7.30% due 8/15/11................. 91,000 97,699
Liberty Mutual Group
Notes
6.50% due 3/15/35*................ 263,000 252,959
MIC Financing Trust I
Pass-Thru Certificates
8.38% due 2/01/27*................ 123,000 128,799
Ohio Casualty Corp.
Notes
7.30% due 6/15/14................. 590,000 630,626
----------
1,289,973
----------
Internet Content -- 0.0%
Spheris, Inc.
Sr. Sub. Notes
11.00% due 12/15/12*.............. 50,000 51,000
----------
Leisure & Tourism -- 3.4%
American Airlines, Inc.
Pass-Thru Certificates, Series
2001-1, Class A2
6.82% due 5/23/11................. 225,000 209,145
American Airlines, Inc.
Pass-Thru Certificate Series
1991 B 1
9.71% due 1/30/07*(9)............. 67,618 62,209
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-2
6.88% due 7/02/09................. 280,875 269,855
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-1
7.20% due 1/02/19................. 83,251 82,652
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class B
7.63% due 1/02/15................. 751,504 609,013
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
Atlas Air, Inc.
Pass-Thru Certificates, Series
2000-1
8.71% due 1/02/19........................ $329,639 $338,256
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
8.77% due 1/02/11+(5).................... 62,428 32,995
Atlas Air, Inc.
Pass-Thru Certificates Series
2000-1, Class B
9.06% due 7/02/17........................ 157,740 144,586
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
6.95% due 8/02/09........................ 128,295 105,387
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-2, Class C1
7.73% due 3/15/11........................ 45,376 33,353
Continental Airlines, Inc.
Secured Pass-Thru Certificates, Series
2000-2, Class B
8.31% due 10/02/19....................... 121,819 104,647
Delta Airlines, Inc.
Pass-Thru Certificates, Series 2000 1
Class 2A
7.57% due 5/18/12........................ 350,000 326,239
Delta Airlines, Inc.
Notes
7.90% due 12/15/09....................... 125,000 48,125
Delta Airlines, Inc.
Sr. Notes
9.50% due 11/18/08*...................... 100,000 82,000
Delta Airlines, Inc.
Sr. Notes
10.00% due 8/15/08....................... 300,000 132,000
Eldorado Resorts, LLC
Sr. Notes
9.00% due 4/15/14(6)..................... 425,000 425,000
Hilton Hotels Corp.
Sr. Notes
7.50% due 12/15/17....................... 36,000 41,265
Hilton Hotels Corp.
Sr. Notes
7.95% due 4/15/07........................ 82,000 87,526
Hollywood Casino Shreveport Capital Corp.
Guaranteed Sr. Sec. Notes
13.00% due 8/01/06+(5)................... 400,000 330,000
Host Marriott LP
Sr. Notes
6.38% due 3/15/15*....................... 150,000 143,250
Leslie's Poolmart, Inc.
Sr. Notes
7.75% due 2/01/13*....................... 50,000 50,500
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10....................... 135,000 149,175
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
Leisure & Tourism (continued)
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 9/15/11.................. $200,000 $ 186,000
Turning Stone Casino Resort
Sr. Notes
9.13% due 12/15/10*................ 75,000 77,906
Waterford Gaming, LLC
Sr. Notes
8.63% due 9/15/12*................. 199,000 208,950
Worldspan LP
Sr. 2nd Lien Sec. Notes
9.02% due 2/15/11*(7).............. 275,000 266,750
----------
4,546,784
----------
Machinery -- 0.1%
Dresser Rand Group, Inc.
Sr. Sub. Notes
7.38% due 11/01/14*................ 100,000 100,000
Park Ohio Industries, Inc.
Sr. Sub. Notes
8.38% due 11/15/14*................ 75,000 72,375
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 6/01/07+(5)............. 100,000 625
----------
173,000
----------
Medical Products -- 0.3%
CDRV Investors, Inc.
Sr. Disc. Notes
9.63% due 1/01/15*(8).............. 125,000 75,313
Encore Medical IHC, Inc.
Sr. Sub. Notes
9.75% due 10/01/12*................ 75,000 73,125
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 2/15/12.................. 125,000 126,875
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11................ 125,000 128,125
----------
403,438
----------
Metals & Mining -- 0.6%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 75,000 80,250
Associated Materials, Inc.
Sr. Disc. Notes
11.25% due 3/01/14(8).............. 275,000 191,125
Barrick Gold Corp.
Bonds
5.80% due 11/15/34................. 45,000 45,405
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*................ 200,000 206,000
Eagle-Picher, Inc.
Sr. Notes
9.75% due 9/01/13+(10)............. 50,000 32,000
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Metals & Mining (continued)
Newmont Mining Corp.
Notes
5.88% due 4/01/35................. $255,000 $249,880
Renco Metals, Inc.
Guaranteed Sr. Notes
11.50% due 07/01/03+(5)(6)(9)(12). 500,000 0
--------
804,660
--------
Pharmaceuticals -- 0.4%
Curative Health Services, Inc.
Sr. Notes
10.75% due 5/01/11................ 150,000 123,375
Merck & Co., Inc.
Notes
2.50% due 3/30/07................. 40,000 38,762
NeighborCare, Inc.
Guaranteed Sr. Sub. Notes
6.88% due 11/15/13................ 225,000 236,250
Pfizer, Inc.
Notes
4.65% due 3/01/18................. 58,000 54,921
Schering-Plough Co.
Sr. Notes
6.50% due 12/01/33................ 58,000 64,893
Wyeth
Notes
6.95% due 3/15/11................. 58,000 63,606
--------
581,807
--------
Real Estate Companies -- 0.1%
EOP Operating LP
Notes
8.38% due 3/15/06................. 70,000 72,781
--------
Real Estate Investment Trusts -- 0.5%
National Health Investors, Inc.
Notes
7.30% due 7/16/07................. 100,000 103,786
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 4/01/14................. 75,000 75,000
Senior Housing Properties Trust
Sr. Notes
8.63% due 1/15/12................. 202,000 223,210
Trustreet Properties, Inc.
Sr. Notes
7.50% due 4/01/15*................ 225,000 223,875
--------
625,871
--------
Restaurants -- 0.3%
Denny's Holdings, Inc.
Sr. Notes
10.00% due 10/01/12*.............. 250,000 263,750
Sbarro, Inc.
Sr. Notes
11.00% due 9/15/09................ 144,000 138,960
--------
402,710
--------
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Retail -- 0.2%
Federated Department Stores, Inc.
Debentures
6.90% due 4/01/29................... $ 52,000 $ 55,699
Rent-Way, Inc.
Sr. Notes
11.88% due 6/15/10.................. 175,000 193,813
Wal Mart Stores, Inc.
Notes
4.00% due 1/15/10................... 29,000 28,224
--------
277,736
--------
Retail Stores -- 0.4%
Alderwoods Group, Inc.
Sr. Notes
7.75% due 9/15/12*.................. 50,000 51,125
Carriage Services, Inc.
Notes
7.88% due 1/15/15*.................. 137,000 137,685
Collins & Aikman Floor Cover
Guaranteed Sr. Notes
9.75% due 2/15/10................... 75,000 79,875
General Nutrition Centers, Inc.
Sr. Sub. Notes
8.50% due 12/01/10.................. 50,000 42,500
Saks, Inc.
Guaranteed Notes
7.00% due 12/01/13.................. 75,000 67,875
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11.................. 100,000 108,000
--------
487,060
--------
Telecommunications -- 2.0%
AirGate PCS, Inc.
Sr. Sec. Notes
9.38% due 9/01/09*.................. 198,300 210,198
Alaska Communications Holdings, Inc.
Guaranteed Sr. Notes
9.88% due 8/15/11................... 82,000 86,510
Alltel Corp.
Notes
4.66% due 5/17/07................... 53,000 53,322
American Cellular Corp., Series B
Sr. Notes
10.00% due 8/01/11.................. 375,000 345,000
AT&T Wireless Services, Inc.
Sr. Notes
7.35% due 3/01/06................... 94,000 96,919
Cincinnati Bell, Inc.
Notes
7.25% due 6/15/23................... 25,000 24,000
Cincinnati Bell, Inc.
Sr. Sub. Notes
8.38% due 1/15/14................... 25,000 24,625
Citizens Communications Co.
Debentures
7.45% due 7/01/35................... 153,000 141,448
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
BONDS & NOTES (continued)
Telecommunications (continued)
GTE Corp.
Debentures
6.94% due 4/15/28...................... $ 56,000 $ 60,567
Intelsat, Ltd
Sr. Disc. Notes
9.25% due 2/01/15*(8).................. 150,000 94,875
LCI International, Inc.
Sr. Notes
7.25% due 6/15/07...................... 1,100,000 1,036,750
Qwest Corp.
Debentures
7.13% due 11/15/43..................... 125,000 105,625
Qwest Corp.
Debentures
7.25% due 10/15/35..................... 100,000 89,750
Telecomunicaciones de Puerto Rico, Inc.
Guaranteed Notes
6.80% due 5/15/09...................... 72,000 75,867
Triton PCS, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 2/01/11...................... 30,000 21,225
TSI Telecommunications Services, Inc.
Guaranteed Sr. Sub. Notes
12.75% due 2/01/09..................... 50,000 55,750
US West Communications, Inc.
Debentures
7.50% due 6/15/23...................... 25,000 23,125
Valor Telecommunications
Sr. Notes
7.75% due 2/15/15*..................... 100,000 99,500
----------
2,645,056
----------
Transportation -- 0.7%
Burlington Northern Santa Fe Corp.
Debentures
8.13% due 4/15/20...................... 162,000 204,501
Norfolk Southern Corp.
Debentures
6.00% due 3/15/15...................... 335,000 326,298
Norfolk Southern Corp.
Bonds
9.00% due 3/01/21...................... 168,000 226,292
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 5/01/09...................... 50,000 53,125
Progress Rail Services Corp.
Sr. Notes
7.75% due 4/01/12*..................... 100,000 100,000
Ryder Systems, Inc.
Notes
4.63% due 4/01/10...................... 72,000 71,346
----------
981,562
----------
Utilities -- 2.7%
AES Corp.
Sr. Sub. Debentures
8.88% due 11/01/27..................... 150,000 159,000
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Utilities (continued)
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 8/30/10+(5).............. $725,000 $ 3,625
Carolina Power & Light Co.
1st Mtg.
5.15% due 4/01/15................... 36,000 35,817
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.18% due 12/15/23.................. 50,000 50,000
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23.................. 225,000 225,000
Duke Capital Corp., LLC
Sr. Notes
8.00% due 10/01/19.................. 67,000 79,487
Dynegy Holdings, Inc.
Sr. Notes
8.75% due 2/15/12................... 100,000 95,750
El Paso Natural Gas Co.
Sr. Notes
7.63% due 8/01/10................... 100,000 104,861
El Paso Natural Gas Co.
Debentures
8.63% due 1/15/22................... 325,000 369,080
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 6/01/13................... 325,000 329,062
Ferrellgas L. P.
Sr. Notes
6.75% due 5/01/14................... 225,000 219,375
Mirant Corp.
Sr. Notes
7.90% due 7/15/09+*(5).............. 975,000 777,562
Pacific Energy Partners LP
Sr. Notes
7.13% due 6/15/14................... 125,000 129,375
Reliant Energy, Inc.
Sr. Sec. Notes
6.75% due 12/15/14.................. 50,000 46,625
Reliant Resources, Inc.
Notes
9.50% due 7/15/13................... 50,000 54,375
Sempra Energy
Sr. Notes
4.62% due 5/17/07................... 53,000 53,210
Southern California Edison Co.
Series 2004 G
5.75% due 4/01/35................... 257,000 257,877
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 7/15/18*.................. 124,172 93,129
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 7/15/12................... 25,000 29,313
Williams Cos, Inc.
Notes
7.88% due 9/01/21................... 400,000 436,000
-----------
3,548,523
-----------
Total Bonds & Notes
(cost $38,027,127).................. 37,894,723
-----------
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------
CONVERTIBLE BONDS -- 0.8%
Energy Services -- 0.0%
Unisource Energy Corp.
Sr. Notes
4.50% due 3/01/35*........... $ 25,000 $ 26,250
--------
Health Services -- 0.1%
Genesis Healthcare Corp.
Sr. Sub. Debentures
2.50% due 3/15/25*........... 75,000 77,437
--------
Leisure & Tourism -- 0.3%
Six Flags, Inc.
Sr. Notes
4.50% due 5/15/15............ 375,000 347,344
--------
Pharmaceuticals -- 0.0%
Elan Capital Corp.
Bonds
6.50% due 11/10/08........... 50,000 35,500
--------
Utilities -- 0.4%
Calpine Corp.
Sr. Notes
4.75% due 11/15/23........... 750,000 508,125
--------
Total Convertible Bonds
(cost $1,125,216)............ 994,656
--------
FOREIGN BONDS & NOTES -- 32.7%
Banks -- 0.1%
HBOS Treasury Services, PLC
Notes
3.50% due 11/30/07*.......... 88,000 86,189
Skandinaviska Enskilda Banken
Sub. Notes
5.47% due 3/23/15*(2)........ 72,000 72,024
--------
158,213
--------
Broadcasting & Media -- 0.6%
CF Cable TV, Inc.
Sr. Notes
9.13% due 7/15/07............ 50,000 50,736
Rogers Cable, Inc.
Sr. Sec. Priority Notes
6.25% due 6/15/13............ 50,000 48,500
Rogers Cable, Inc.
Bonds
8.75% due 5/01/32............ 50,000 58,000
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 6/15/14*(8)....... 850,000 642,812
--------
800,048
--------
Chemicals -- 0.5%
Rhodia SA
Sr. Sub. Notes
8.88% due 6/01/11............ 625,000 607,813
--------
Conglomerate -- 0.0%
Tyco International Group SA
Guaranteed Notes
7.00% due 6/15/28............ 43,000 48,812
--------
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Electronics -- 0.1%
Magnachip Semiconductor SA
Sr. Sec. Notes
6.88% due 12/15/11*...................... $ 50,000 $ 50,500
Magnachip Semiconductor SA
Sr. Sub. Notes
8.00% due 12/15/14*...................... 50,000 51,125
Stats ChipPAC, Ltd.
Sr. Notes
6.75% due 11/15/11*...................... 75,000 70,875
----------
172,500
----------
Energy Services -- 0.3%
ENI Coordination Center
Guaranteed Notes
5.25% due 12/27/07....................... GBP 205,000 388,319
----------
Financial Services -- 0.3%
AAC Group Holding Corp.
Sr. Notes
10.25% due 10/01/12*(8).................. 100,000 72,000
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 2/15/12....................... 175,000 189,875
Deutsche Telekom International Finance BV
Guaranteed Bonds
8.75% due 6/14/30........................ 132,000 172,636
----------
434,511
----------
Forest Products -- 0.5%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 8/01/10........................ 150,000 152,250
Abitibi-Consolidated, Inc.
Debentures
8.85% due 8/01/30........................ 50,000 46,875
Stora Enso Oyj
Notes
3.88% due 12/15/09....................... SEK 3,000,000 427,016
----------
626,141
----------
Government Agency -- 28.1%
Argentina Republic
Bonds
3.01% due 8/03/05........................ 1,590,000 1,337,189
Argentina Republic
Unsub. Notes
12.00% due 6/19/31(5).................... 413,400 124,020
Aries Vermogensverwaltungs GmbH
Bonds
9.60% due 10/25/14....................... 500,000 600,350
Australia Commonwealth
Bonds
6.75% due 11/15/06....................... AUD 1,365,000 1,072,715
Australia Commonwealth
Bonds
7.50% due 9/15/09........................ AUD 1,240,000 1,025,703
Austria Republic
Sr. Notes
5.38% due 12/01/34*(6)................... CAD 475,000 393,641
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agency (continued)
Canadian Government
Bonds
4.25% due 9/01/08......... CAD 1,405,000 $1,186,904
Canadian Government
Bonds
5.75% due 9/01/06......... CAD 1,110,000 951,139
Colombia Republic
Bonds
12.00% due 10/22/15(6).... COP 912,000,000 366,404
Deutsche Bundesrepublik
Bonds
5.63% due 1/04/28......... EUR 200,000 318,397
Dutch Government
Bonds
5.25% due 7/15/08......... EUR 355,000 495,881
Federal Republic of Brazil
Notes
3.13% due 4/15/05(7)...... 1,301,481 1,221,830
Federal Republic of Brazil
Notes
8.00% due 4/15/14......... 705,238 698,185
Federal Republic of Brazil
Notes
8.00% due 4/15/14......... 807,744 799,667
Federal Republic of Brazil
Bonds
8.88% due 4/15/24......... 145,000 137,533
Federal Republic of Brazil
Bonds
10.13% due 5/15/27........ 245,000 257,250
Federal Republic of Brazil
Notes
10.25% due 6/17/13........ 580,000 630,750
Federal Republic of Brazil
Bonds
11.00% due 8/17/40........ 915,000 1,018,395
Federal Republic of Brazil
Notes
12.00% due 4/15/10........ 150,000 175,500
Federal Republic of Brazil
Notes
11.00% due 1/11/12........ 600,000 678,000
Government of Hungary
Bonds
9.25% due 10/12/07........ HUF 40,000,000 218,319
Japan
Bonds
3.00% due 9/20/05......... JPY 105,000,000 992,574
Kingdom of Denmark
Bonds
7.00% due 11/15/07........ DKK 5,170,000 997,682
Kingdom of Sweden
Bonds
5.00% due 1/28/09......... SEK 3,200,000 485,596
Kingdom of Sweden
Bonds
5.50% due 10/08/12........ SEK 4,245,000 678,633
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
Government Agency (continued)
Kingdom of Sweden
Bonds
6.75% due 5/05/14......... SEK 3,000,000 525,591
Poland Republic
Bonds
6.00% due 5/24/09......... PLN 1,390,000 449,110
Republic of Colombia
Notes
10.75% due 1/15/13........ $ 470,000 $ 525,225
Republic of Greece
Sr. Notes
4.65% due 4/19/07......... EUR 300,000 404,896
Republic of Greece
Bonds
5.25% due 5/18/12......... EUR 310,000 445,334
Republic of Italy
Bonds
5.25% due 12/15/05........ EUR 695,000 919,249
Republic of Italy
Bonds
5.25% due 11/01/29........ EUR 778,000 1,160,756
Republic of Peru
Bonds
5.00% due 3/07/07(2)...... 170,000 158,950
Republic of Peru
Guaranteed Global Bonds
9.13% due 2/21/12......... 305,000 343,125
Republic of Peru
Notes
9.88% due 2/06/15......... 75,000 86,625
Republic of South Africa
Notes
6.50% due 6/02/14......... 230,000 241,500
Republic of South Africa
Bonds
13.00% due 8/31/10........ ZAR 1,230,000 237,535
Republic of Turkey
Notes
8.00% due 2/14/34......... 70,000 68,687
Republic of Turkey
Notes
9.50% due 1/15/14......... 130,000 146,250
Republic of Turkey
Notes
11.00% due 1/14/13........ 280,000 338,800
Republic of Turkey
Bonds
11.75% due 6/15/10........ 170,000 205,062
Republic of Turkey
Sr. Bonds
11.88% due 1/15/30........ 380,000 504,450
Republic of Uruguay
Bonds
7.50% due 3/15/15......... 225,000 205,875
Republic of Venezuela
Debentures
3.63% due 6/20/05(7)...... 142,850 142,136
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agency (continued)
Republic of Venezuela
Bonds
8.50% due 10/08/14........ $ 650,000 $ 640,250
Republic of Venezuela
Bonds
9.25% due 9/15/27......... 295,000 292,935
Russia Federation
Debentures
3.00% due 5/14/11......... 400,000 334,760
Russian Federation
Debentures
3.00% due 5/14/08......... 615,000 565,369
Russian Federation
Bonds
7.50% due 3/31/07*(8)..... 650,000 667,875
Russian Federation
Bonds
7.50% due 3/31/07(8)...... 2,650,000 2,714,925
Russian Federation
Bonds
8.25% due 3/31/10......... 475,000 511,623
Spanish Government
Bonds
5.15% due 7/30/09......... EUR 238,000 335,661
Spanish Government
Bonds
6.15% due 1/31/13......... EUR 694,000 1,065,382
Ukraine Republic
Sr. Notes
7.65% due 6/11/13......... 250,000 267,500
Ukraine Republic
Sr. Notes
11.00% due 3/15/07........ 186,675 200,302
United Kingdom
Bonds
7.50% due 12/07/06........ GBP 510,000 1,007,527
United Kingdom Treasury
Bonds
5.00% due 3/07/12......... GBP 690,000 1,328,179
United Mexican States
Notes
5.88% due 1/15/14......... 200,000 198,500
United Mexican States
Notes
6.38% due 1/16/13......... 185,000 191,937
United Mexican States
Notes
6.63% due 3/03/15......... 560,000 583,520
United Mexican States
Notes
7.50% due 1/14/12......... 220,000 242,880
United Mexican States
Notes
7.50% due 4/08/33......... 400,000 424,000
United Mexican States
Bonds
8.00% due 12/24/08........ MXN 8,851,000 740,644
United Mexican States
Bonds
8.13% due 12/30/19........ 445,000 509,970
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Government Agency (continued)
United Mexican States
Bonds
8.30% due 8/15/31............... $ 325,000 $ 372,125
United Mexican States
Bonds
9.00% due 12/24/09.............. MXN 4,350,000 372,610
-----------
37,539,887
-----------
Household & Personal Products -- 0.1%
Vitro Envases Norteamerica SA
Sr. Sec. Notes
10.75% due 7/23/11*............. 150,000 153,000
-----------
Insurance -- 0.1%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 175,000 169,750
-----------
Leisure & Tourism -- 0.1%
Grupo Posadas SA De CV
Sr. Notes
8.75% due 10/04/11*............. 175,000 186,375
-----------
Metals & Mining -- 0.1%
Noranda, Inc.
Notes
6.00% due 10/15/15.............. 91,000 93,311
-----------
Pharmaceuticals -- 0.8%
Abbott Japan Co. Ltd.
Guaranteed Bonds
1.05% due 11/06/08.............. JPY 76,000,000 721,055
Elan Finance, PLC
Sr. Notes
6.49% due 5/15/05*(7)........... 150,000 112,500
Elan Finance, PLC
Sr. Notes
7.75% due 11/15/11*............. 250,000 186,875
-----------
1,020,430
-----------
Retail Stores -- 0.2%
Jean Coutu Group PJC, Inc.
Sr. Sub. Notes
8.50% due 8/01/14............... 150,000 145,688
Jostens Holding Corp.
Sr. Disc. Notes
10.25% due 12/01/13(8).......... 190,000 138,700
-----------
284,388
-----------
Telecommunications -- 0.2%
Empresa Brasileira De Telcom
Guaranteed Sr. Notes, Series B
11.00% due 12/15/08............. 25,000 27,625
Intelsat, Bermuda Ltd
Sr. Notes
8.63% due 1/15/15*.............. 175,000 178,500
Telecom Italia Capital SA
Guaranteed Sr. Notes
4.00% due 1/15/10*.............. 74,000 70,745
-----------
276,870
-----------
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Utilities -- 0.6%
Calpine Canada Energy Finance, ULC
Guaranteed Sr. Notes
8.50% due 5/01/08................. $ 350,000 $ 248,500
Chivor SA
Notes
9.75% due 12/30/14*............... 100,000 102,000
Cia de Saneamento Basico do
Estado de Sao Paulo
Notes
12.00% due 6/20/08*............... 75,000 82,875
Scottish Power, PLC
Notes
5.38% due 3/15/15................. 72,000 71,828
Scottish Power, PLC
Bonds
5.81% due 3/15/25................. 340,000 336,976
-----------
842,179
-----------
Total Foreign Bonds & Notes
(cost $42,340,442)................ 43,802,547
-----------
U.S. GOVERNMENT OBLIGATIONS -- 7.9%
U.S Treasury Bonds -- 2.0%
5.38% due 2/15/31.................. 2,399,000 2,614,629
-----------
U.S. Treasury Notes -- 5.9%
2.00% due 8/31/05.................. 7,478,000 7,446,450
3.13% due 1/31/07.................. 67,000 66,241
3.50% due 2/15/10.................. 196,000 190,235
3.63% due 1/15/10.................. 53,000 51,731
4.00% due 2/15/15.................. 98,000 94,157
-----------
7,848,814
-----------
Total U.S. Government Obligations
(cost $10,428,417)................ 10,463,443
-----------
U.S. GOVERNMENT AGENCY -- 11.9%
Federal Home Loan Mortgage Corporation -- 4.2%
3.75% due 3/03/08.................. 310,000 307,233
4.50% due 2/01/20.................. 298,786 292,752
5.00% due 9/01/18.................. 796,322 797,615
5.00% due 5/01/34.................. 1,123,173 1,099,665
5.00% due 2/01/35.................. 2,691,188 2,634,861
6.00% due 12/01/31................. 393,575 403,346
6.50% due 5/01/29.................. 15,918 16,569
7.00% due 6/01/29.................. 25,794 27,198
8.50% due 5/01/08.................. 35,507 37,147
10.00% due 5/15/20(4).............. 33,111 33,099
11.57% due 6/15/21(3)(4)........... 21,614 417
-----------
5,649,902
-----------
Federal National Mortgage Association -- 7.6%
0.45% due 10/17/36(2)(3)(4)........ 3,518,596 47,458
0.54% due 3/17/20(2)(3)(4)......... 1,222,306 10,173
0.84% due 6/25/38(2)(3)(4)......... 3,312,351 144,511
1.32% due 2/25/35(2)(3)(4)......... 1,782,376 63,491
4.50% due 6/01/19.................. 727,056 711,488
4.50% due 2/01/35.................. 349,197 331,584
5.00% due 6/01/19.................. 691,942 691,920
5.50% due 3/01/18.................. 1,020,000 1,040,483
5.50% due 7/01/19.................. 664,888 678,047
Principal
Amount** Value
Security Description /Shares (Note 2)
------------------------------------------------------------
Federal National Mortgage Association (continued)
5.50% due 1/01/29................. $ 13,238 $ 13,331
5.50% due 6/01/29................. 200,525 201,693
5.50% due 6/01/34................. 1,838,490 1,842,416
5.50% due 3/01/35................. 793,851 795,596
6.00% due 2/01/32................. 189,382 193,825
6.00% due 5/01/34................. 38,433 39,294
6.00% due 10/01/34................ 970,623 992,367
6.00% TBA due Dec................. 1,020,000 1,042,312
6.50% due 4/01/34................. 624,977 648,872
6.50% due 2/01/35................. 399,662 414,920
7.50% due 1/01/30................. 20,683 22,145
7.50% due 9/01/30................. 5,064 5,419
8.00% due 11/01/28................ 45,638 49,177
8.80% due 1/25/19(4).............. 63,805 68,622
10.40% due 4/25/19(4)............. 11,938 13,171
13.00% due 11/15/15............... 12,943 14,515
-----------
10,076,830
-----------
Government National Mortgage Association -- 0.1%
7.50% due 7/15/27................. 31,761 34,127
7.50% due 10/15/27................ 130,172 139,867
-----------
173,994
-----------
Total U.S. Government Agency
(cost $16,303,151)............... 15,900,726
-----------
COMMON STOCK -- 3.9%
Broadcasting & Media -- 0.0%
Ono Finance, PLC*(6).............. 100 0
-----------
Energy Services -- 0.3%
Trico Marine Services, Inc.+...... 20,000 425,000
-----------
Entertainment Products -- 0.0%
Magna Entertainment Corp.+........ 7,300 44,822
-----------
Leisure & Tourism -- 0.3%
Aztar Corp.+...................... 2,200 62,832
Boyd Gaming Corp.................. 2,900 151,235
Isle Capri Casinos, Inc.+......... 2,300 61,042
MGM Mirage, Inc.+................. 2,075 146,952
-----------
422,061
-----------
Machinery -- 0.1%
NES Rentals Holding, Inc.+........ 19,435 193,961
-----------
Real Estate Investment Trusts -- 0.2%
Meristar Hospitality Corp.+....... 31,820 222,740
National Health Investors, Inc.... 4,100 106,518
-----------
329,258
-----------
Telecommunications -- 3.0%
Alamosa Holdings, Inc.+........... 24,721 288,494
Dobson Communications Corp.+...... 270 545
IMPSAT Fiber Networks, Inc.+...... 4,019 25,722
iPCS, Inc.+....................... 59,130 1,957,203
IWO Holdings, Inc.+............... 50,781 1,574,211
Telewest Global, Inc.+............ 6,202 110,334
-----------
3,956,509
-----------
Total Common Stock
(cost $2,974,729)................ 5,371,611
-----------
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
PREFERRED STOCK -- 0.7%
Broadcasting & Media -- 0.2%
Paxson Communications Corp. 14.25%(11)........ 35 238,875
-----------
Financial Services -- 0.4%
Merrill Lynch & Co., Inc. 3.65%............... 4,321 107,463
General Electric Capital Corp. 4.50%(14)...... 16,000 360,000
TCR Holdings, Class B(6)...................... 570 6
TCR Holdings, Class C(6)...................... 314 3
TCR Holdings, Class D(6)...................... 827 8
TCR Holdings, Class E(6)...................... 1,711 17
-----------
467,497
-----------
Retail Stores -- 0.1%
GNC Corp. 12.00%(11).......................... 100 80,000
Rent-Way, Inc.(6)(13)......................... 4 48,658
-----------
128,658
-----------
Telecommunications -- 0.0%
Dobson Communications Corp. 13.00%............ 25 17,500
-----------
Total Preferred Stock
(cost $955,672).............................. 852,530
-----------
RIGHTS -- 0.1%
Government Agency -- 0.1%
United Mexico States VRR -- Class C(6)........ 1,400,000 18,900
United Mexico States VRR -- Class D(6)........ 1,400,000 34,300
United Mexico States VRR -- Class E(6)........ 1,400,000 30,100
-----------
83,300
-----------
Total Rights
(cost $0).................................... 83,300
-----------
WARRANTS+ -- 0.0%
Broadcasting & Media -- 0.0%
Knology Holdings, Inc. Expires
10/22/07* (strike price $0.10)(6)(9)......... 1,500 375
-----------
Telecommunications -- 0.0%
GT Group Telecom, Inc. Expires
02/01/10* (strike price $0.00)(6)(9)......... 150 2
Leap Wireless International, Inc. Expires
04/15/10* (strike price $96.80)(6)(9)........ 500 0
Leap Wireless, Inc. Expires 04/15/10* (strike
price $96.80)(6)(9).......................... 350 0
-----------
2
-----------
Total Warrants
(cost $10,031)............................... 377
-----------
Total Long-Term Investment Securities
(cost $114,818,539).......................... 118,243,283
-----------
SHORT-TERM INVESTMENT SECURITIES -- 5.7%
Time Deposit with State Street Bank &
Trust Co. 1.30% due 04/01/05(16)............. 1,538,000 1,538,000
Time Deposit with State Street Bank &
Trust Co. 2.25% due 04/01/05(16)............. 6,096,000 6,096,000
-----------
Total Short-term Securities
(cost $7,634,000)............................ 7,634,000
-----------
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.9%
State Street Bank & Trust Co. Joint
Repurchase Agreement(15)(16)....... $ 2,465,000 $ 2,465,000
------------
TOTAL INVESTMENTS --
(cost $124,917,539)@............... 96.2% 128,342,283
Other assets less liabilities......... 3.8% 5,053,829
----------- ------------
NET ASSETS -- 100.0% $133,396,112
=========== ============
U.S. GOVERNMENT AGENCIES SOLD SHORT -- (1.5%)
Federal Home Loan Mortgage Corporation -- (1.5%)
5.00% TBA due Dec.
(proceeds $2,043,891).............. (2,100,000) (2,054,062)
------------
- --------
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. The Portfolio has no rights to demand registration of these
securities. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
2005, the aggregate value of these securities was $10,711,133 representing
8.0% of net assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
** In United States dollars unless otherwise indicated
AUD --Australian Dollar HUF --Hungarian Forint
CAD --Canadian Dollar JPY --Japanese Yen
COP --Columbian Peso MXN --Mexican Peso
DKK --Danish Krone PLN --Polish Zloty
EUR --Euro SEK --Swedish Krona
GBP --Pound Sterling ZAR --South African Rand
@ See Note 5 for cost of investments on a tax basis.
(1) Commercial Mortgage-Backed Security
(2) Variable rate security -- the rate reflected is as of March 31, 2005;
maturity date reflects next reset date.
(3) Interest only
(4) Collateralized Mortgage Obligation
(5) Bond in default.
(6) Fair valued security; see Note 1.
(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, 2005.
(8) Security is a "step-up" bond where the coupon rate increases or steps up
at a predetermined rate. Rate shown reflects the increased rate.
(9) Illiquid Security.
(10) Bond in default and company has filed Chapter 11 subsequent to March 31,
2005.
(11) PIK ("Payment in Kind") Security. Payment made with additional securities
in lieu of cash.
(12) Security is subject to litigation, the outcome of which is still to be
determined.
(13) To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are
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
46
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
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, 2005, the
Strategic Bond Fund held the following restricted securities:
Acquisition Acquisition Market % of
Name Date Shares Cost Value Net Assets
- ---- ----------- ------ ----------- ------- ----------
Rent-Way Preferred Stock...... 05/29/2003 3 $25,000 $34,756 0.03%
Rent-Way Preferred Stock...... 05/19/2004 1 $10,000 $13,902 0.01%
------- ----
$48,658 0.04%
======= ====
(14) Security is a "step-up" preferred stock where the dividend rate increases
or steps up at a predetermined rate. The rate reflected is as of March 31,
2005.
(15) See Note 2 for details of Joint Repurchase Agreement.
(16) The security or a portion thereof represents collateral for TBAs.
TBA -- Securities purchased on a forward commitment basis with an appropriate
principal amount and no definitive maturity date. The actual principal
and maturity date will be determined upon settlement date.
VRR -- Value Recovery Right
Open Forward Foreign Currency Contracts
Gross
Unrealized
Contract In Delivery Appreciation
to Deliver Exchange For Date (Depreciation)
----------------------------
CAD* 2,710,000 USD 2,186,101 05/04/2005 $(54,733)
USD 2,199,675 CAD 2,710,000 05/04/2005 41,159
--------
Net Unrealized Appreciation (Depreciation)... $(13,574)
========
- --------
* Represents open forward currency contracts and offsetting or partially
offsetting open forward foreign currency contracts that do not have
additional market risk but have continued counterparty settlement risk.
CAD -- CanadianDollar
USD -- UnitedStates Dollar
See Notes to Financial Statements
47
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited)
Industry Allocation*
Telecommunications...................... 15.7%
Broadcasting & Media.................... 12.1%
Leisure & Tourism....................... 11.8%
Utilities............................... 10.9%
Financial Services...................... 10.4%
Energy Sources.......................... 7.3%
Chemicals............................... 3.9%
Forest Products......................... 3.5%
Real Estate Investment Trusts........... 2.4%
Retail Stores........................... 2.3%
Energy Services......................... 2.2%
Business Services....................... 2.1%
Food, Beverage & Tobacco................ 1.9%
Health Services......................... 1.9%
Pharmaceuticals......................... 1.8%
Metals & Mining......................... 1.6%
Machinery............................... 1.1%
Communication Equipment................. 1.0%
Medical Products........................ 1.0%
Insurance............................... 0.9%
Electronics............................. 0.8%
Household & Personal Products........... 0.7%
Retail.................................. 0.5%
Restaurants............................. 0.4%
Aerospace & Military Technology......... 0.3%
Automotive.............................. 0.3%
Transportation.......................... 0.3%
Internet Content........................ 0.2%
Apparel & Textiles...................... 0.1%
Computers & Business Equipment.......... 0.1%
Entertainment Products.................. 0.1%
----
99.5%
====
Credit Quality+#
BBB..................................... 1.7%
BB...................................... 12.3%
B....................................... 39.1%
CCC..................................... 26.4%
CC...................................... 0.7%
C....................................... 0.6%
Not Rated@.............................. 19.2%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
BONDS & NOTES -- 74.4%
Aerospace & Military Technology -- 0.3%
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes, Series B
12.00% due 9/30/08.................. $1,700,000 $1,071,000
----------
Apparel & Textiles -- 0.1%
Warnaco, Inc.
Sr. Notes
8.88% due 6/15/13................... 350,000 375,375
----------
Automotive -- 0.3%
Diamond Triumph Auto Glass, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 4/01/08(1)(9)............. 820,000 574,000
Exide Corp.
Term Loan
10.00% due 4/15/05+(1)(9)........... 1,650,000 0
Stanadyne Corp.
Sr. Sub. Notes
10.00% due 8/15/14.................. 250,000 257,500
----------
831,500
----------
Broadcasting & Media -- 9.6%
Adelphia Communications Corp.
Sr. Notes
10.25% due 6/15/11+(2)(3)........... 2,100,000 1,937,250
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 2/15/12................... 975,000 1,023,750
AMC Entertainment, Inc.
Sr. Sub. Notes
8.00% due 3/01/14................... 50,000 47,750
Charter Communications Holdings, LLC
Sr. Notes
9.63% due 11/15/09.................. 2,525,000 1,975,813
Charter Communications Holdings, LLC
Sr. Disc. Notes
9.92% due 4/01/11(4)................ 3,375,000 2,590,312
Charter Communications Holdings, LLC
Sr. Notes
10.00% due 5/15/11.................. 450,000 345,375
Charter Communications Holdings, LLC
Sr. Notes
10.25% due 1/15/10.................. 375,000 300,938
Charter Communications Holdings, LLC
Sr. Notes
10.75% due 10/01/09................. 2,075,000 1,701,500
Charter Communications Holdings, LLC
Sr. Notes
11.13% due 1/15/11.................. 4,875,000 3,936,562
Coleman Cable, Inc.
Sr. Notes
9.88% due 10/01/12*................. 450,000 459,000
Fisher Communications, Inc.
Sr. Notes
8.63% due 9/15/14................... 1,150,000 1,239,125
Haights Cross Operating Co.
Guaranteed Sr. Notes
11.75% due 8/15/11.................. 775,000 869,938
Insight Communications Co., Inc.
Sr. Disc. Notes
12.25% due 2/15/11(4)............... 3,875,000 3,855,625
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Broadcasting & Media (continued)
Liberty Media Corp.
Sr. Notes
5.70% due 5/15/13............................ $2,800,000 $ 2,639,084
Ono Finance, PLC
Sub. Debenture
zero coupon due 5/31/09*(1)(9)(12)........... 500 0
Paxson Communications Corp.
Guaranteed Sr. Sub. Notes
12.25% due 1/15/09(4)........................ 3,350,000 3,115,500
Sinclair Broadcast Group, Inc.
Sr. Sub. Notes
8.00% due 3/15/12............................ 650,000 663,000
Telex Communications, Inc.
Sec. Notes
11.50% due 10/15/08.......................... 300,000 328,500
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 1/15/14............................ 1,050,000 994,875
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 3/01/11(5)........................ 2,300,000 2,351,750
-----------
30,375,647
-----------
Business Services -- 2.1%
Davita, Inc.
Sr. Sub. Notes
7.25% due 3/15/15*........................... 825,000 808,500
Di Finance Subordinated, LLC Division Capital
Corp.
Sr. Sub. Notes
9.50% due 2/15/13*........................... 825,000 801,281
Mobile Mini, Inc.
Sr. Notes
9.50% due 7/01/13............................ 575,000 646,875
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 9/01/10........................... 1,950,000 2,076,750
Seitel, Inc.
Sr. Notes
11.75% due 7/15/11........................... 1,750,000 1,968,750
Service Corp. International
Sr. Notes
6.75% due 4/01/16............................ 400,000 384,000
-----------
6,686,156
-----------
Chemicals -- 2.3%
Equistar Chemicals LP
Sr. Notes
10.63% due 5/01/11........................... 1,225,000 1,375,063
Foamex LP/Foamex Capital Corp.
Guaranteed Sr. Sec. Notes
10.75% due 4/01/09........................... 350,000 308,000
Huntsman International, LLC
Sr. Sub. Notes
7.38% due 1/01/15*........................... 685,000 681,575
Huntsman, LLC
Sr. Note
11.50% due 7/15/12*.......................... 82,000 95,940
49
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Chemicals (continued)
Lyondell Chemical Co.
Guaranteed Sr. Sec. Notes
9.50% due 12/15/08................. $2,175,000 $2,327,250
Phosphate Resource Partners LP
Sr. Notes
7.00% due 2/15/08.................. 725,000 746,750
Rockwood Specialties Group
Sub. Notes
7.50% due 11/15/14*................ 925,000 925,000
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 5/15/11................. 400,000 444,000
Westlake Chemical Corp.
Sr. Notes
8.75% due 7/15/11.................. 471,000 515,156
----------
7,418,734
----------
Communication Equipment -- 1.0%
Rural Cellular Corp.
Sr. Sub. Notes
9.63% due 5/15/08.................. 1,550,000 1,480,250
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 1/15/10.................. 1,875,000 1,715,625
----------
3,195,875
----------
Computers & Business Equipment -- 0.1%
Activant Solutions, Inc.
Sr. Notes
9.09% due 6/30/05*(6).............. 225,000 229,500
----------
Electronics -- 0.5%
Freescale Semiconductor, Inc.
Sr. Notes
7.13% due 7/15/14.................. 875,000 914,375
Sanmina-SCI Corp.
Sub. Notes
6.75% due 3/01/13*................. 625,000 585,938
----------
1,500,313
----------
Energy Services -- 1.0%
Frontier Oil Corp.
Sr. Notes
6.63% due 10/01/11................. 400,000 398,000
Hanover Compressor Co.
Sub. Notes
zero coupon due 3/31/07(12)........ 300,000 264,000
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 6/01/11.................. 1,910,344 2,016,848
Pride International, Inc.
Sr. Notes
7.38% due 7/15/14.................. 350,000 371,000
----------
3,049,848
----------
Energy Sources -- 7.2%
Belden & Blake Corp.
Sr. Sec. Notes
8.75% due 7/15/12.................. 450,000 446,625
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Energy Sources (continued)
Calpine Corp. 2nd Priority
Sr. Sec. Notes
8.75% due 7/15/13*.......................... $7,055,000 $ 5,326,525
Chesapeake Energy Corp.
Sr. Notes
6.88% due 1/15/16........................... 275,000 277,750
Chesapeake Energy Corp.
Guaranteed Sr. Notes
7.75% due 1/15/15........................... 150,000 158,625
Chesapeake Energy Corp.
Guaranteed Sr. Notes
9.00% due 8/15/12........................... 175,000 193,156
Citgo Petroleum Corp.
Sr. Notes
6.00% due 10/15/11.......................... 550,000 543,125
Colorado Interstate Gas Co.
Debentures
6.85% due 6/15/37........................... 1,000,000 1,014,739
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 4/15/14........................... 300,000 300,000
Encore Acquisition Co.
Guaranteed Sr. Notes
8.38% due 6/15/12........................... 550,000 594,000
EXCO Resources, Inc.
Guaranteed Notes
7.25% due 1/15/11........................... 475,000 482,125
KCS Energy, Inc.
Sr. Notes
7.13% due 4/01/12........................... 375,000 378,750
Mission Energy Holding Co.
Sr. Sec. Notes
13.50% due 7/15/08.......................... 9,100,000 10,920,000
Roseton Danskammer
Guaranteed Pass-Thru Certificates, Series B
7.67% due 11/08/16.......................... 2,575,000 2,369,000
-----------
23,004,420
-----------
Financial Services -- 9.8%
Affinity Group, Inc.
Sr. Sub. Notes
10.00% due 2/15/15*......................... 950,000 988,000
Arch Western Finance LLC
Sr. Notes
6.75% due 7/01/13........................... 900,000 904,500
Bear Island Paper Co., LLC
Sr. Notes, Series B
10.00% due 12/01/07......................... 1,950,000 1,971,937
Borden United States Finance Corp.
Sr. Sec. Notes
9.00% due 7/15/14*.......................... 800,000 864,000
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 6/15/09*......................... 3,225,000 3,966,750
Consolidated Communications Holdings
Sr. Notes
9.75% due 4/01/12*.......................... 1,400,000 1,484,000
50
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
ESI Tractebel Acquisition Corp.
Guaranteed Bonds
7.99% due 12/30/11.............. $ 781,000 $ 828,443
H & E Equipment Services, LLC
Guaranteed Sr. Sec. Notes
11.13% due 6/15/12.............. 950,000 1,068,750
Hilcorp Finance Co.
Sr. Notes
10.50% due 9/01/10*............. 2,000,000 2,220,000
Huntsman Advanced Materials, LLC
Sr. Sec. Notes
11.00% due 7/15/10*............. 1,175,000 1,348,313
iPCS, Inc.
14.00% due 7/15/10*+(1)(2)(9)... 11,825,000 0
MedCath Holdings Corp.
Sr. Notes
9.88% due 7/15/12............... 950,000 1,021,250
Muzak, LLC/ Muzak Finance Corp.
Guaranteed Sr. Sub. Notes
9.88% due 3/15/09............... 525,000 236,250
Nexstar Finance Holdings, LLC
Sr. Disc. Notes
11.38% due 4/01/13(4)........... 2,675,000 2,099,875
NGC Corp. Capital Trust I
Guaranteed Sub. Notes, Series B
8.32% due 6/01/27............... 7,325,000 5,786,750
PCA, LLC
Sr. Notes
11.88% due 8/01/09.............. 2,000,000 1,680,000
Px Escrow Corp.
Sr. Disc. Notes
9.63% due 2/01/06(4)............ 2,175,000 2,109,750
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 6/01/10.............. 1,121,000 1,289,150
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
12.88% due 10/15/08............. 1,125,000 1,333,125
-----------
31,200,843
-----------
Food, Beverage & Tobacco -- 1.9%
North Atlantic Holding Co., Inc.
Sr. Disc. Notes
12.25% due 3/01/14(4)........... 2,050,000 389,500
North Atlantic Trading, Inc.
Sr. Notes
9.25% due 3/01/12............... 1,400,000 1,050,000
Stater Brothers Holdings, Inc.
Sr. Notes
8.13% due 6/15/12............... 1,425,000 1,375,125
Wornick Co.
Sr. Sec. Notes
10.88% due 7/15/11.............. 3,025,000 3,161,125
-----------
5,975,750
-----------
Forest Products -- 2.9%
Boise Cascade LLC
Sr. Notes
5.54% due 4/15/05*(6)........... 2,450,000 2,499,000
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
Forest Products (continued)
Constar International, Inc.
Notes
6.17% due 5/16/05*(6).............. $ 425,000 $ 425,000
Constar International, Inc.
Sr. Sub. Notes
11.00% due 12/01/12................ 321,000 321,000
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 4/15/23.................. 1,750,000 1,688,750
FiberMark, Inc.
Sr. Notes
10.75% due 4/15/11+(2)............. 750,000 547,500
Pliant Corp.
Sr. Sub. Notes
13.00% due 6/01/10................. 1,675,000 1,415,375
Speciality Paperboard, Inc.
Sr. Notes
9.38% due 10/15/06+(2)............. 3,275,000 2,349,812
----------
9,246,437
----------
Health Services -- 1.7%
Community Health Systems, Inc.
Sr. Sub. Notes
6.50% due 12/15/12*................ 750,000 731,250
Concentra Operating Corp.
Sr. Sub. Notes
9.13% due 6/01/12.................. 375,000 397,500
Pediatric Services Of America, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 4/15/08(1).............. 200,000 202,000
Psychiatric Solutions, Inc.
Sr. Sub. Notes
10.63% due 6/15/13................. 433,000 480,630
Team Health, Inc.
Sr. Sub. Notes
9.00% due 4/01/12.................. 1,500,000 1,466,250
Tenet Healthcare Corp.
Sr. Notes
6.50% due 6/01/12.................. 1,025,000 943,000
Tenet Healthcare Corp.
Sr. Notes
9.25% due 2/01/15*................. 750,000 748,125
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13................. 575,000 564,937
----------
5,533,692
----------
Household & Personal Products -- 0.1%
Revlon Consumer Products Corp.
Sr. Sub. Notes
8.63% due 2/01/08.................. 475,000 438,188
----------
Insurance -- 0.3%
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 6/15/13................. 775,000 868,000
----------
Internet Content -- 0.2%
Spheris, Inc.
Sr. Sub. Notes
11.00% due 12/15/12*............... 475,000 484,500
----------
51
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism -- 8.7%
American Airlines, Inc.
Pass-Thru Certificates, Series
2001-1, Class A2
6.82% due 5/23/11............................. $2,150,000 $1,998,499
American Airlines, Inc.
Pass Through Certificate Series 1991 Class B1
9.71% due 1/30/07*(9)......................... 533,434 490,760
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-2
6.88% due 7/02/09............................. 2,761,936 2,653,576
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class A-1
7.20% due 1/02/19............................. 645,195 640,550
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class B
7.63% due 1/02/15............................. 5,437,354 4,406,389
Atlas Air, Inc.
Pass-Thru Certificates, Series 2000-1
8.71% due 1/02/19............................. 2,781,331 2,854,035
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
8.77% due 1/02/11(2).......................... 574,341 303,551
Atlas Air, Inc.
Pass-Thru Certificates Series
2000-1, Class B
9.06% due 7/02/17............................. 1,084,465 994,031
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
6.95% due 8/02/09............................. 664,660 545,981
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-2, Class C1
7.73% due 3/15/11............................. 340,319 250,147
Delta Airlines, Inc.
Pass-Thru Certificate Series
2000 1 Class 2A
7.57% due 5/18/12............................. 2,350,000 2,190,461
Delta Airlines, Inc.
Notes
7.90% due 12/15/09............................ 1,100,000 423,500
Delta Airlines, Inc.
Sr. Notes
9.50% due 11/18/08*........................... 900,000 738,000
Delta Airlines, Inc.
Sr. Notes
10.00% due 8/15/08............................ 3,175,000 1,397,000
Hollywood Casino Shreveport Capital Corp.
Guaranteed Sr. Sec. Notes
13.00% due 8/01/06+(2)........................ 2,311,000 1,906,575
Leslie's Poolmart, Inc.
Sr. Notes
7.75% due 2/01/13*............................ 300,000 303,000
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 6/15/10............................ 800,000 884,000
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Leisure & Tourism (continued)
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 9/15/11.................. $1,400,000 $ 1,302,000
Turning Stone Casino Resort
Sr. Notes
9.13% due 12/15/10*................ 600,000 623,250
Waterford Gaming, LLC
Sr. Notes
8.63% due 9/15/12*................. 1,169,000 1,227,450
Worldspan LP
Sr. Notes
9.02% due 5/16/05*(6).............. 1,550,000 1,503,500
-----------
27,636,255
-----------
Machinery -- 0.6%
Briggs & Stratton Corp.
Guaranteed Sr. Notes
8.88% due 3/15/11.................. 475,000 541,500
Dresser Rand Group, Inc.
Sr. Sub. Notes
7.38% due 11/01/14*................ 775,000 775,000
Park Ohio Industries, Inc.
Sr. Sub. Notes
8.38% due 11/15/14*................ 700,000 675,500
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 6/01/07+(2)(3).......... 550,000 3,438
-----------
1,995,438
-----------
Medical Products -- 1.0%
CDRV Investors, Inc.
Sr. Disc. Notes
9.63% due 1/01/15*(4).............. 925,000 557,312
Encore Medical IHC, Inc.
Sr. Sub. Notes
9.75% due 10/01/12*................ 625,000 609,375
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 2/15/12.................. 875,000 888,125
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11................ 1,000,000 1,025,000
-----------
3,079,812
-----------
Metals & Mining -- 1.5%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 600,000 642,000
Associated Materials, Inc.
Sr. Disc. Notes
11.25% due 3/01/14(4).............. 1,550,000 1,077,250
CSN Islands IX Corp.
Sr. Notes
10.00% due 1/15/15*................ 100,000 103,000
CSN Islands VII Corp.
Guaranteed Notes
10.75% due 9/12/08*................ 225,000 246,937
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*................ 1,500,000 1,545,000
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
BONDS & NOTES (continued)
Metals & Mining (continued)
Eagle-Picher, Inc.
Sr. Notes
9.75% due 9/01/13+(2)(7)............... $ 475,000 $ 304,000
Renco Metals, Inc.
Guaranteed Sr. Notes
11.50% due 7/01/03+(1)(2)(3)(8)(9)(12). 2,150,000 0
Ryerson Tull, Inc.
Sr. Notes
8.25% due 12/15/11..................... 275,000 261,250
Ryerson Tull, Inc.
Notes
9.13% due 7/15/06...................... 500,000 515,000
----------
4,694,437
----------
Pharmaceuticals -- 0.8%
Curative Health Services, Inc.
Sr. Notes
10.75% due 5/01/11..................... 1,125,000 925,313
NeighborCare, Inc.
Sr. Sub. Notes
6.88% due 11/15/13..................... 1,600,000 1,680,000
----------
2,605,313
----------
Real Estate Investment Trusts -- 1.6%
National Health Investors, Inc.
Notes
7.30% due 7/16/07...................... 1,120,000 1,162,403
Omega Healthcare Investors, Inc.
Notes
6.95% due 8/01/07...................... 225,000 231,750
Senior Housing Properties Trust
Sr. Notes
8.63% due 1/15/12(5)................... 1,675,000 1,850,875
Trustreet Properties, Inc.
Sr. Notes
7.50% due 4/01/15*..................... 1,925,000 1,915,375
----------
5,160,403
----------
Restaurants -- 0.4%
Sbarro, Inc.
Sr. Notes
11.00% due 9/15/09..................... 1,225,000 1,182,125
----------
Retail -- 0.5%
Rent-Way, Inc.
Sr. Sec. Notes
11.88% due 6/15/10..................... 1,500,000 1,661,250
----------
Retail Stores -- 1.3%
Alderwoods Group, Inc.
Sr. Notes
7.75% due 9/15/12*..................... 425,000 434,562
Carriage Services, Inc.
Notes
7.88% due 1/15/15*..................... 1,034,000 1,039,170
Collins & Aikman Floor Cover
Guaranteed Sr. Notes
9.75% due 2/15/10...................... 480,000 511,200
Rite Aid Corp.
Debentures
6.88% due 8/15/13...................... 400,000 372,000
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Retail Stores (continued)
Saks, Inc.
Guaranteed Notes
7.00% due 12/01/13................... $ 950,000 $ 859,750
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11................... 725,000 783,000
-----------
3,999,682
-----------
Telecommunications -- 7.2%
AirGate PCS, Inc.
Sr. Sec. Notes
9.38% due 9/01/09*................... 1,258,300 1,333,798
Alaska Communications Holdings, Inc.
Guaranteed Sr. Notes
9.88% due 8/15/11.................... 147,000 155,085
American Cellular Corp.,
Series B Sr. Notes
10.00% due 8/01/11................... 3,775,000 3,473,000
Cincinnati Bell, Inc.
Sr. Notes
7.00% due 2/15/15*................... 275,000 261,250
Cincinnati Bell, Inc.
Unsub. Notes
7.25% due 6/15/23.................... 225,000 216,000
Cincinnati Bell, Inc.
Sr. Sub. Notes
8.375% due 1/15/14................... 300,000 295,500
Cincinnati Bell, Inc.
Sr. Sub. Notes
8.38% due 1/15/14*................... 75,000 73,875
Dobson Communications Corp.
Sr. Notes
10.88% due 7/01/10................... 25,000 22,125
Intelsat, Ltd
Sr. Disc. Notes
9.25% due 2/01/15*(4)................ 1,325,000 838,063
LCI International, Inc.
Sr. Notes
7.25% due 6/15/07.................... 10,425,000 9,825,562
Qwest Corp.
Debentures
7.13% due 11/15/43................... 2,150,000 1,816,750
Qwest Corp.
Debentures
7.25% due 10/15/35................... 1,375,000 1,234,062
Triton PCS, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 11/15/11................... 1,150,000 802,125
Triton PCS, Inc.
Guaranteed Sr. Sub. Notes
9.38% due 2/01/11.................... 1,325,000 937,438
TSI Telecommunications Services, Inc.
Guaranteed Sr. Sub. Notes
12.75% due 2/01/09................... 300,000 334,500
US West Communications, Inc.
Debentures
7.50% due 6/15/23.................... 250,000 231,250
Valor Telecommunications
Sr. Notes
7.75% due 2/15/15*................... 900,000 895,500
-----------
22,745,883
-----------
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Transportation -- 0.3%
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 5/01/09................... $ 275,000 $ 292,188
Progress Rail Services Corp.
Sr. Notes
7.75% due 4/01/12*.................. 825,000 825,000
----------
1,117,188
----------
Utilities -- 9.1%
AES Corp.
Sr. Sub. Debentures
8.88% due 11/01/27.................. 1,350,000 1,431,000
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 8/30/10+(2).............. 4,460,000 22,300
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.18% due 12/15/23.................. 375,000 375,000
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23.................. 1,525,000 1,525,000
Dynegy Holdings, Inc.
Sr. Notes
8.75% due 2/15/12................... 875,000 837,813
Edison Mission Energy
Sr. Notes
9.88% due 4/15/11................... 1,400,000 1,617,000
El Paso Natural Gas Co.
Sr. Notes
7.63% due 8/01/10................... 725,000 760,244
El Paso Natural Gas Co.
Debentures
8.63% due 1/15/22................... 2,125,000 2,413,216
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 6/01/13................... 3,025,000 3,062,812
Ferrellgas L. P.
Sr. Notes
6.75% due 5/01/14................... 1,800,000 1,755,000
Mirant Corp.
Sr. Notes
7.90% due 7/15/09*+(2).............. 9,525,000 7,596,187
Pacific Energy Partners LP
Sr. Notes
7.13% due 6/15/14................... 850,000 879,750
Reliant Energy, Inc.
Sr. Sec. Notes
6.75% due 12/15/14.................. 2,025,000 1,888,312
Reliant Resources, Inc.
Sr. Sec. Notes
9.50% due 7/15/13................... 500,000 543,750
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 7/15/18*.................. 1,092,712 819,534
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 7/15/12................... 725,000 850,063
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Utilities (continued)
Williams Cos, Inc.
Notes
7.88% due 9/01/21................. $2,425,000 $ 2,643,250
------------
29,020,231
------------
Total Bonds & Notes
(cost $232,273,521)............... 236,383,795
------------
CONVERTIBLE BONDS -- 3.3%
Energy Services -- 0.1%
Unisource Energy Corp.
4.50% due 3/01/35*................ 200,000 210,000
------------
Health Services -- 0.2%
Genesis Healthcare Corp.
2.50% due 3/15/25*................ 675,000 696,938
------------
Leisure & Tourism -- 1.6%
Eldorado Resorts, LLC
9.00% due 4/15/14(1).............. 2,675,000 2,675,000
Six Flags, Inc.
4.50% due 5/15/15................. 2,625,000 2,431,406
------------
5,106,406
------------
Pharmaceuticals -- 0.1%
Elan Capital Corp.
6.50% due 11/10/08(9)............. 425,000 301,750
------------
Utilities -- 1.3%
Calpine Corp.
4.75% due 11/15/23................ 6,025,000 4,081,937
------------
Total Convertible Bonds
(cost $11,442,880)................ 10,397,031
------------
FOREIGN BONDS & NOTES -- 9.1%
Broadcasting & Media -- 1.8%
CF Cable TV, Inc.
Sr. Notes
9.13% due 7/15/07................. 400,000 405,885
Rogers Cable, Inc.
Sr. Sec. Notes
5.50% due 3/15/14................. 525,000 481,688
Rogers Cable, Inc.
Sr. Sec. Priority Notes
6.25% due 6/15/13................. 75,000 72,750
Rogers Cable, Inc.
Bonds
8.75% due 5/01/32................. 450,000 522,000
Telenet Group Holding NV Sr. Disc.
Notes
11.50% due 6/15/14*(4)............ 5,625,000 4,253,906
------------
5,736,229
------------
Chemicals -- 1.6%
Rhodia SA
Sr. Sub. Notes
8.88% due 6/01/11................. 5,175,000 5,032,687
------------
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Electronics -- 0.3%
Magnachip Semiconductor SA
Sr. Sub. Notes
8.00% due 12/15/14*................... $ 525,000 $ 536,813
Stats Chippac, Ltd.
Sr. Notes
6.75% due 11/15/11*................... 325,000 307,125
----------
843,938
----------
Energy Sources -- 0.1%
North America Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11.................... 525,000 472,500
----------
Financial Services -- 0.6%
AAC Group Holding Corp.
Sr. Disc. Notes
10.25% due 10/01/12*(4)............... 925,000 666,000
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 2/15/12.................... 1,075,000 1,166,375
----------
1,832,375
----------
Forest Products -- 0.6%
Abitibi-Consolidated, Inc.
Notes
8.55% due 8/01/10..................... 1,475,000 1,497,125
Abitibi-Consolidated, Inc.
Debentures
8.85% due 8/01/30..................... 575,000 539,063
----------
2,036,188
----------
Household & Personal Products -- 0.3%
Vitro Envases Norteamerica SA
Sr. Sec. Notes
10.75% due 7/23/11*................... 950,000 969,000
----------
Insurance -- 0.6%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.................... 1,850,000 1,794,500
----------
Leisure & Tourism -- 0.4%
Grupo Posadas SA De CV
Sr. Notes
8.75% due 10/04/11*................... 1,075,000 1,144,875
----------
Metals & Mining -- 0.1%
International Utility Structures, Inc.
Sr. Sub. Notes
10.75% due 2/01/08+(1)(2)(9)(10)...... 2,150,000 279,500
Vitro SA de CV
Notes
11.75% due 11/01/13*.................. 175,000 166,250
----------
445,750
----------
Pharmaceuticals -- 0.9%
Elan Finance, PLC
Sr. Notes
6.49% due 5/15/05*(5)(6).............. 1,225,000 918,750
Elan Finance, PLC
Sr. Notes
7.75% due 11/15/11*................... 2,450,000 1,831,375
----------
2,750,125
----------
Principal Value
Security Description Amount/Shares (Note 2)
---------------------------------------------------------------------
Retail Stores -- 0.8%
Jean Coutu Group PJC, Inc.
Sr. Sub. Notes
8.50% due 8/01/14........................ $1,725,000 $ 1,675,406
Jostens Holding Corp.
Sr. Disc. Notes
10.25% due 12/01/13(4)................... 1,275,000 930,750
-----------
2,606,156
-----------
Telecommunications -- 0.5%
Empresa Brasileira De Telcom
Guaranteed Sr. Notes, Series B
11.00% due 12/15/08...................... 150,000 165,750
Intelsat, Bermuda Ltd
Sr. Notes
8.63% due 1/15/15*....................... 1,500,000 1,530,000
-----------
1,695,750
-----------
Utilities -- 0.5%
AES Chivor
Notes
9.75% due 12/30/14*...................... 875,000 892,500
Cia de Saneamento Basico do Estado de Sao
Paulo
Notes
12.00% due 6/20/08*...................... 550,000 607,750
-----------
1,500,250
-----------
Total Foreign Bonds & Notes
(cost $31,077,775)....................... 28,860,323
-----------
LOAN AGREEMENTS -- 0.3%
Household & Personal Products -- 0.3%
Vitro Envases Norteamerica SA
10.25% due 2/26/10(9)
(Cost $998,182).......................... 998,182 1,005,668
-----------
COMMON STOCK -- 11.4%
Energy Services -- 1.1%
Trico Marine Services, Inc.+.............. 168,000 3,570,000
-----------
Energy Sources -- 0.0%
Tri-Union Development Corp.(1)(9)......... 1,061 11
Tribo Petroleum Corp.+(1)(9).............. 1,800 18
-----------
29
-----------
Entertainment Products -- 0.1%
Magna Entertainment Corp.+................ 58,300 357,962
-----------
Leisure & Tourism -- 1.1%
Aztar Corp.+.............................. 18,500 528,360
Boyd Gaming Corp.......................... 22,600 1,178,590
Capital Gaming International, Inc.+(1)(9). 77 0
Isle Capri Casinos, Inc.+................. 18,700 496,298
MGM Mirage, Inc.+......................... 17,225 1,219,874
-----------
3,423,122
-----------
Machinery -- 0.5%
NES Rentals Holding, Inc.+................ 150,124 1,498,238
-----------
Real Estate Investment Trusts -- 0.8%
Meristar Hospitality Corp.+............... 209,550 1,466,850
National Health Investors, Inc............ 36,300 943,074
-----------
2,409,924
-----------
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
COMMON STOCK (continued)
Telecommunications -- 7.8%
Alamosa Holdings, Inc.+...................... $141,290 $ 1,648,854
Dobson Communications Corp.+................. 147,082 297,106
iPCS, Inc.+.................................. 336,972 11,153,773
IWO Holdings, Inc.+.......................... 346,093 10,728,883
Telewest Global, Inc.+....................... 56,210 999,976
------------
24,828,592
------------
Total Common Stock
(cost $20,975,567).......................... 36,087,867
------------
PREFERRED STOCK -- 1.0%
Broadcasting & Media -- 0.6%
Paxson Communications Corp. 14.25%(11)....... 297 2,027,025
------------
Retail Stores -- 0.2%
GNC Corp. 12.00%(11)......................... 725 580,000
Rent-Way, Inc.(1)(9)(13)..................... 13 180,729
------------
760,729
------------
Telecommunications -- 0.2%
Dobson Communications Corp. 13.00%........... 925 647,500
------------
Total Preferred Stock
(cost $4,139,448)........................... 3,435,254
------------
WARRANTS+ -- 0.0%
Broadcasting & Media -- 0.0%
Knology Holdings, Inc.*
Expires 10/22/07 (strike price $0.10)(9).... 4,500 1,125
------------
Business Services -- 0.0%
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $30.05)(9)... 1,587 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $33.04)(9)... 1,619 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $31.58)(9)... 1,182 0
------------
0
------------
Telecommunications -- 0.0%
GT Group Telecom, Inc.*
Expires 02/01/10 (strike price $0.00)(1)(9). 2,650 27
KMC Telecom Holdings, Inc.
Expires 01/31/08 (strike price $0.01)(1)(9). 3,650 0
Leap Wireless International, Inc.*
Expires 04/15/10
(strike price $96.80)(1)(9)................. 2,250 0
Leap Wireless, Inc.*
Expires 04/15/10
(strike price $96.80)(1)(9)................. 1,950 0
------------
27
------------
Total Warrants
(cost $1,333,505)........................... 1,152
------------
Total Long-Term Investment Securities -- 99.3%
(cost $302,240,878)......................... 316,171,090
------------
TOTAL INVESTMENTS --
(cost $302,240,878)@........................ 99.5% 316,171,090
Other assets less liabilities.................. 0.5 1,722,442
-------- ------------
NET ASSETS -- 100.0% $317,893,532
======== ============
Shares/
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES SOLD SHORT -- (0.4%)
Forest Products -- (0.4%)
Ainsworth Lumber Co- Ltd.
6.75% 3/15/14
(proceeds $1,185,188).......... $(1,225,000) $(1,163,750)
-----------
- --------
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. The Portfolio has no rights to demand registration of these
securities. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
2005, the aggregate value of these securities was $65,835,028 representing
20.7% of net assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
@ See Note 5 for cost of investments on a tax basis.
(1) Fair valued security.
(2) Bond in default.
(3) Company has filed Chapter 11 bankruptcy.
(4) Security is a "step-up" bond where the coupon rate increases or steps up
at a predetermined rate. Rate shown reflects the increased rate.
(5) The security or a portion thereof represents collateral for securities
sold short.
(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, 2005.
(7) Bond in default and company has filed Chapter 11 bankruptcy subsequent to
3/31/05.
(8) Security is subject to litigation, the outcome of which is still to be
determined.
(9) Illiquid security.
(10) Company has filed foreign bankruptcy.
(11) PIK ("Payment-in-Kind") Security. Payment made with additional securities
in lieu of cash.
(12) Security is subject to litigation, the outcome of which is still to be
determined.
(13) To the extent permitted by the Statement of Additional Information, the
High Yield Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are
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, 2005, the High Yield Bond Fund held the following restricted
securities:
Acquisition Acquisition Market % of
Name Date Shares Cost Value Net Assets
---- ----------- ------ ----------- -------- ----------
Rent-Way
Preferred Stock 5/29/2003 10 $100,000 $139,022 0.04%
Rent-Way
Preferred Stock 5/19/2004 3 $ 30,000 $ 41,707 0.01%
-------- ----
$180,729 0.05%
======== ====
See Notes to Financial Statements
56
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- March 31, 2005 -- (unaudited)
Industry Allocation*
Ohio.................................... 21.1%
Massachusetts........................... 12.2%
Indiana................................. 9.0%
New York................................ 7.9%
Missouri................................ 7.7%
Alabama................................. 6.5%
California.............................. 5.8%
New Jersey.............................. 5.6%
New Mexico.............................. 4.9%
South Carolina.......................... 4.3%
Washington.............................. 4.1%
Texas................................... 3.9%
South Dakota............................ 3.1%
Arizona................................. 2.7%
Georgia................................. 0.2%
Registered Investment Companies......... 0.1%
----
99.1%
====
Credit Quality+#
AAA..................................... 80.8%
AA...................................... 4.6%
A....................................... 10.7%
BBB..................................... 3.9%
-----
100.0%
=====
- --------
* Calculated as a percentage on net assets.
+ Source Standard & Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
57
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
MUNICIPAL BONDS -- 90.2%
Alabama -- 6.5%
Jefferson County, Alabama Sewer, Capital
Improvement, Series D,
5.25% due 02/01/26(1)......................... $4,500,000 $ 4,961,790
-----------
Arizona -- 2.7%
Phoenix, Arizona Civic Improvement Corp.
Wastewater Systems Revenue, Junior Lien,
5.00% due 07/01/28(1)......................... 2,000,000 2,073,240
-----------
California -- 3.5%
California State, Variable Purpose,
5.50% due 04/01/28............................ 2,500,000 2,694,650
-----------
Georgia -- 0.2%
Georgia Municipal Electric Authority, Power
Revenue, Series Y,
6.40% due 01/01/09(1)......................... 60,000 66,936
Georgia Municipal Electric Authority, Power
Revenue, Series Y,
6.40% due 01/01/13(1)......................... 85,000 98,781
-----------
165,717
-----------
Indiana -- 9.0%
Indiana Health Facility Financing Authority
Revenue, Ascension Health Subordinated
Credit A,
5.00% due 11/01/10............................ 3,000,000 3,186,900
Indiana Transportation Finance Authority
Highway Revenue, Series A,
5.25% due 06/01/26(1)......................... 3,500,000 3,730,160
-----------
6,917,060
-----------
Massachusetts -- 12.2%
Commonwealth of Massachusetts, Consolidated
Loan Series B,
5.75% due 06/01/15(1)......................... 2,000,000 2,090,600
Massachusetts State Water Resources Authority,
Series A,
5.00% due 08/01/24(1)......................... 3,910,000 4,099,791
University Massachusetts Building Authority
Project Revenue, Series 4,
5.25% due 11/01/27(1)......................... 3,000,000 3,190,140
-----------
9,380,531
-----------
Missouri -- 7.4%
Sikeston, Missouri, Electric Revenue,
6.20% due 06/01/10(1)......................... 5,000,000 5,651,650
-----------
New Jersey -- 5.6%
New Jersey Economic Development Authority,
School Facilities Construction, Series C,
5.00% due 06/15/12(1)......................... 4,000,000 4,341,400
-----------
New Mexico -- 4.9%
New Mexico Finance Authority Transportation,
Sr. Lien Series A,
5.25% due 06/15/21(1)......................... 3,500,000 3,766,630
-----------
New York -- 7.9%
New York State Thruway Authority Second
General Highway And Bridge Trust Fund,
Series A,
5.25% due 04/01/15(1)......................... 2,500,000 2,759,575
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------------
New York (continued)
New York, New York, Series D,
5.00% due 11/01/28.............................. $2,000,000 $ 2,048,860
Niagara Falls, New York, Public Improvement,
General Obligation,
7.50% due 03/01/13(1)........................... 445,000 554,781
Niagara Falls, New York, Public Improvement,
General Obligation,
7.50% due 03/01/14(1)........................... 555,000 704,079
-----------
6,067,295
-----------
Ohio -- 21.1%
Cincinnati, Ohio City School District, Classroom
Facilities Construction & Improvement,
5.00% due 12/01/24(1)........................... 3,000,000 3,132,630
Cuyahoga County, Ohio Revenue, Cleveland
Clinic Health Systems, Series A,
5.75% due 01/01/24.............................. 2,000,000 2,170,360
Franklin County, Ohio Hospital Revenue,
OhioHealth Corp., Series C,
5.25% due 05/15/23.............................. 3,000,000 3,163,860
Ohio State Special Obligation, Elementary And
Secondary Education Capital Facilities A,
5.00% due 06/01/06(1)........................... 3,000,000 3,079,950
Olentangy Local School District Ohio, School
Facilities Construction & Improvement,
Series A,
5.25% due 12/01/27(1)........................... 3,250,000 3,453,613
Woodridge, Ohio Local School District, General
Obligation,
6.80% due 12/01/14(1)........................... 1,000,000 1,177,770
-----------
16,178,183
-----------
South Dakota -- 3.1%
South Dakota State Health & Educational
Facilities Revenue, McKennan Hospital,
6.25% due 07/01/10(1)........................... 2,120,000 2,383,770
-----------
Texas -- 2.0%
San Antonio Texas Hotel Occupancy Texas,
Unrefunded Capital Appreciation Gonzalez,
zero coupon due 08/15/17(1)..................... 2,700,000 1,536,712
-----------
1,536,712
-----------
Washington -- 4.1%
Washington State Public Power Supply,
Refunding Series A,
6.00% due 07/01/06(1)........................... 3,000,000 3,115,560
-----------
Total Long-Term Investment Securities -- 90.2%
(cost $65,831,939).............................. 69,234,188
-----------
SHORT-TERM INVESTMENT SECURITIES -- 8.9%
California -- 2.3%
California Housing Finance Agency Revenue,
Amt Home Mortgage Series U,
2.35% due 04/06/05(1)(2)........................ 1,800,000 1,800,000
-----------
Missouri -- 0.3%
Missouri Higher Education Loan, Student Loan
Revenue, Series B,
2.35% due 04/06/05(1)(2)........................ 200,000 200,000
-----------
58
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2005 -- (continued)
Principal Value
Security Description Amount/Shares (Note 2)
----------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES (continued)
South Carolina -- 4.3%
Piedmont Municipal Power Agency South
Carolina Electric Revenue, Refunding
Subseries B6,
2.30% due 04/06/05(1)(2).................. $2,800,000 $ 2,800,000
South Carolina, Jobs Economic
Development Authority Economic
Development Revenue, Adjustable Zeuna
Staeker U.S.A. Inc.,
2.35% due 04/06/05(2)..................... 485,000 485,000
-----------
3,285,000
-----------
Texas -- 1.9%
Brownsville, Texas Utility System Revenue,
Series A,
2.27% due 04/06/05(1)(2).................. 125,000 125,000
San Antonio Texas Water Revenue,
Refunding Subordinated Series A,
2.27% due 04/06/05(1)(2).................. 1,300,000 1,300,000
-----------
1,425,000
-----------
Registered Investment Companies -- 0.1%
SSGA Municipal Money Market Fund, Tax
Free Money Market Fund.................... 85,119 85,119
-----------
Total Short-Term Investment Securities
(cost $6,795,119)......................... 6,795,119
-----------
TOTAL INVESTMENTS --
(cost $72,627,058)........................ 99.1% 76,029,307
Other assets less liabilities................ 0.9 703,737
---------- -----------
NET ASSETS -- 100.0% $76,733,044
========== ===========
- --------
@ See Note 3 for cost of investments on a tax basis.
(1) 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 $62,194,558 or 81.1% of
Net Assets.
(2) Variable rate security -- the rate reflected is as of March 31, 2005;
maturity date reflects next reset date.
See Notes to Financial Statements
59
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005
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.
60
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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 as 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. Effective September 24, 2004, Class I shares of the Strategic Bond
Fund are no longer being offered for sale.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions. Class A, Class B and Class C shares each 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. There are no distribution payments applicable
to Class I, Class X and Class Z.
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 U.S. generally
accepted accounting principles 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 or, for listed securities
having no sales reported and for unlisted securities, upon last-reported bid
prices. Securities listed on the NASDAQ stock market 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. 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. Senior Secured Floating Rate Loans ("Loans") for which an active
secondary market exists to a reliable degree, will be valued at the mean of
the last available bid and ask prices in the market for such Loans, as
provided by a third party pricing service. 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. If a security's price
is available from more than one foreign exchange, a fund uses the exchange
that is the primary market for the security. However, depending on the
foreign market, closing prices may be up to 15 hours old when they are used
to price the Fund's shares, and the Fund may determine that certain closing
prices 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
of Trustees 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.
For foreign equity securities, the Fund uses an outside pricing service to
provide it with closing market prices and information used for adjusting
those prices Short-term securities with 60 days or less to maturity are
amortized to maturity based on their cost to the Fund if acquired within 60
days of maturity or, if already held by the Fund on the 60th day, are
amortized to maturity based on the value determined on the 61st day.
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.
61
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
Repurchase Agreements: The Funds, along with other affiliated registered
investment companies, pursuant to exemptive relief granted by the Securities
and Exchange Commission, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. For repurchase agreements and joint repurchase agreements, the
Funds' custodian takes possession of the collateral pledged for investments
in such repurchase agreements. The underlying collateral is valued daily on
a mark to market basis to ensure that the value, at the time the agreement
is entered into, is equal to at least 102% of the repurchase price,
including accrued interest. In the event of default of the obligation to
repurchase, a Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by
the Fund may be delayed or limited.
As of March 31, 2005, the following Funds held a percentage of an undivided
interest in a joint repurchase agreement with State Street Bank & Trust Co.:
Fund Percentage Interest Principal Amount
- ---- ------------------- ----------------
U.S. Government Securities 0.20% $ 147,000
GNMA...................... 7.77 5,783,000
Strategic Bond............ 3.31 2,465,000
As of such date, the repurchase agreement in that joint account and the
collateral thereof were as follows:
State Street Bank & Trust Co., dated March 31, 2005, bearing interest at a
rate of 2.40% per annum, with a principal amount of $74,416,000, a
repurchase price of $74,420,961 and a maturity date of April 1, 2005. The
repurchase agreement is collateralized by the following:
Interest Rate/
Type of collateral Discount Yield Maturity Date Principal Amount Market Value
- ------------------ -------------- ------------- ---------------- ------------
U.S. Treasury Bills 2.57% 04/28/05 $65,040,000 $64,909,920
U.S. Treasury Bills 2.77 06/30/05 8,725,000 8,663,925
U.S. Treasury Notes 1.25 05/31/05 2,330,000 2,333,856
In addition, at March 31, 2005, the following Funds held a percentage of an
undivided interest in a joint repurchase agreement with UBS Warburg, LLC:
Fund Percentage Interest Principal Amount
- ---- ------------------- ----------------
U.S. Government Securities 14.40% $ 36,000,000
GNMA...................... 40.00 100,000,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Warburg, LLC, dated March 31, 2005, bearing interest at a rate of 2.60%
per annum, with a principal amount of $250,000,000, a repurchase price of
$250,018,056 and a maturity date of April 1, 2005. The repurchase agreement
is collateralized by the following:
Interest Rate/
Type of collateral Discount Yield Maturity Date Principal Amount Market Value
- ------------------ -------------- ------------- ---------------- ------------
U.S Treasury Inflation Index Note 3.50% 01/15/11 $150,000,000 $184,312,500
U.S Treasury Inflation Index Note 3.38 01/15/12 58,481,000 70,688,909
Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders: Security 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, is accrued daily except when
collection is not expected. Dividend income is recorded on the ex-dividend
date except for certain dividends from foreign securities, which are
recorded as soon as the Fund is informed after the ex-dividend date. For
financial statement purposes, the Funds amortize all premiums and accrete
all discounts on fixed income securities.
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
Funds which earn foreign income and capital gains may be subject to foreign
withholding taxes at various rates. Under applicable foreign law, a
withholding tax may be imposed on interest, dividends, and capital gains at
various rates.
Expenses common to all Funds, not directly related to individual Funds are
allocated among the Funds based on relative net assets or other appropriate
methods. In all other respects, expenses are charged to each Fund as
incurred on a specific identification basis. Interest earned on cash
balances held at the custodian are shown as custody credits on the Statement
of Operations.
Net investment income, other than class specific expenses, and realized and
unrealized gains and losses are allocated daily to each class of shares
based upon the relative net asset value of outstanding shares (or the value
of dividend-eligible shares, as appropriate) of each class of shares at the
beginning of the day (after adjusting for the current capital share activity
of the respective class).
Dividends from net investment income are accrued daily and paid monthly.
Capital gain distributions, if any, are paid annually. The Funds record
dividends and distributions to their shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from 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 by these
reclassifications.
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 year ended March 31, 2005, 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,
2005, $1,489 and $172 of broker rebates were reclassified to interest
expense for the U.S. Government Securities Fund and the GNMA Fund,
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, 2005 the U.S. Government Securities Fund and the GNMA Fund had
$29,400,000 and $49,600,000, in securities on loan, respectively.
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.
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
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: Each Fund may engage in "short sales against the box." A short
sale is against the box to the extent that the Fund contemporaneously owns,
or has the right to obtain without payment, securities identical to those
sold short. In addition, 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.
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 year ended March 31, 2005, 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.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
The Funds pay SAAMCo a monthly investment advisory and management fee
calculated daily at the following annual percentages of each Fund's average
daily net assets:
Management
Assets Fees
--------------------------- ----------
Core Bond Fund................. $0 - $200 million 0.600%
(greater than) $300 million 0.525
(greater than) $500 million 0.475
U.S. Government Securities Fund 0 - $200 million 0.650
(greater than) $200 million 0.620
(greater than) $400 million 0.550
GNMA Fund...................... 0 - $25 million 0.550
(greater than) $25 million 0.500
(greater than) $50 million 0.450
Strategic Bond Fund............ 0 - $350 million 0.650
(greater than) $350 million 0.600
High Yield Bond Fund........... 0 - $200 million 0.750
(greater than) $200 million 0.720
(greater than) $400 million 0.550
Tax Exempt Insured Fund........ 0 - $350 million 0.500
(greater than) $350 million 0.450
The Core Bond Fund, Strategic Bond Fund, High Yield Bond Fund and Tax Exempt
Insured Fund are subadvised by AIG Global Investment Corp. ("AIGGIC")
pursuant to a subadvisory agreement with SAAMCo. AIGGIC is an indirect
wholly-owned subsidiary of AIG and an affiliate of SAAMCo. AIGGIC receives
the following fees from SAAMCo., based upon each Fund's average daily net
assets:
Sub-advisory Fees
-----------------------------------------------
Core Bond Strategic Bond High Yield Tax Exempt
Assets Fund Fund Bond Fund Insured Fund
- ------ --------- -------------- ---------- ------------
$0 - $200 million............ 0.25% 0.35% 0.45% 0.25%
(greater than) $200 million 0.20 0.25 0.35 0.22
(greater than) $500 million 0.15 0.20 0.30 0.15
Effective September 1, 2004, SAAMCo has contractually agreed to waive fees
and/or reimburse expenses, if necessary, so that the total net expense
ratios for the following classes do not exceed the amounts set forth below.
Fund Percentage
---- ----------
Core Bond Class A...... 1.10%
Core Bond Class B...... 1.75
Core Bond Class C...... 1.75
Core Bond Class I...... 1.00
Core Bond Class Z...... 0.53
Strategic Bond Class A. 1.40
Strategic Bond Class B. 2.05
Strategic Bond Class C. 2.05
Strategic Bond Class I@ 1.30
High Yield Bond Class A 1.36
High Yield Bond Class B 2.01
High Yield Bond Class C 2.01
High Yield Bond Class Z 0.79
Prior to September 1, 2004 the contractual expense caps were as follows:
Fund Percentage
---- ----------
Core Bond Class A...... 1.24%
Core Bond Class B...... 1.89
Core Bond Class C...... 1.89
Core Bond Class I...... 1.14
Core Bond Class Z...... 0.67
Strategic Bond Class A. N/A
Strategic Bond Class B. N/A
Strategic Bond Class I@ 1.44
High Yield Bond Class A N/A
High Yield Bond Class B N/A
- --------
@ See Note 1
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
Effective September 1, 2004, SAAMCo is voluntarily waiving fees and/or
reimbursing expenses, if necessary, so that the total net expense ratios for
the following classes do not exceed the amounts set forth below.
Fund Percentage
---- ----------
U.S. Government Securities Fund Class A 0.99%
U.S. Government Securities Fund Class B 1.64
U.S. Government Securities Fund Class C 1.64
GNMA Fund Class A...................... 0.99
GNMA Fund Class B...................... 1.64
GNMA Fund Class C...................... 1.64
GNMA Fund Class X...................... 0.89
Tax Exempt Insured Fund Class C........ 1.95
Prior to September 1, 2004 the voluntarily expense caps were as follows:
Fund Percentage
---- ----------
GNMA Class A........... 0.99%
GNMA Class B........... 1.64
GNMA Class C........... 1.64
GNMA Class X........... 0.89
Strategic Bond Class C. 2.22
High Yield Bond Class C 2.18
High Yield Bond Class Z 0.95
For the year ended March 31, 2005, SAAMCo has agreed to reimburse expenses
as follows:
Fund Amount
---- --------
Core Bond Class A................. $162,631
Core Bond Class B................. 15,983
Core Bond Class C................. 18,512
Core Bond Class I................. 1,278
Core Bond Class Z................. 21,230
U.S. Government Securities Class A 724,432
U.S. Government Securities Class B 133,022
U.S. Government Securities Class C 57,927
GNMA Class A...................... 569,423
GNMA Class B...................... 211,538
GNMA Class C...................... 124,042
GNMA Class X...................... --
Strategic Bond Class A............ 15,085
Strategic Bond Class B............ 8,091
Strategic Bond Class C............ 6,585
Strategic Bond Class I@........... 1,462
High Yield Bond Class A........... 95,022
High Yield Bond Class B........... 47,068
High Yield Bond Class C........... 53,695
High Yield Bond Class Z........... 44,292
Tax Exempt Insured Class A........ --
Tax Exempt Insured Class B........ --
Tax Exempt Insured Class C........ 5,550
- --------
@ See Note 1
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
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
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 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 year ended March 31, 2005, 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. For the period
ended March 31, 2005, SACS earned fees (see Statement of Operations) based
upon the aforementioned rates.
SACS receives sales charges on each Fund's Class A shares, portions of which
are reallowed to affiliated broker-dealers and non-affiliated
broker-dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of Class A,
Class B and Class C shares. SACS has advised the Funds that for the year
ended March 31, 2005, the proceeds received from Class A 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
Fund Charges Broker-dealers Broker-dealers Charges
- ---- -------- -------------- -------------- --------------
U.S. Government Securities $ 35,725 $ 14,996 $ 14,895 $128,015
GNMA...................... 228,277 106,024 82,110 639,657
Strategic Bond............ 381,761 83,274 234,661 161,670
High Yield Bond........... 509,725 74,120 351,689 267,507
Core Bond................. 28,079 9,467 13,940 12,481
Tax Exempt Insured........ 55,260 25,972 19,521 37,515
Class C
--------------
Contingent
Deferred Sales
Fund Charges
- ---- --------------
U.S. Government Securities $12,333
GNMA...................... 78,716
Strategic Bond............ 16,063
High Yield Bond........... 64,722
Core Bond................. 2,359
Tax Exempt Insured........ 4,146
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
The Trust has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent in connection with the services that it offers to
the shareholders of the Funds. Except for Class Z shares 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 year ended March 31, 2005 the Funds
incurred the following expenses which are included in transfer agent fees
and expenses in the Statement of Operations to compensate SAFS pursuant to
the terms of the Service Agreement:
Payable at
Expenses March 31, 2005
-------- --------------
Core Bond Class A................. $339,756 $31,310
Core Bond Class B................. 11,229 920
Core Bond Class C................. 10,618 899
Core Bond Class I................. 4,616 291
U.S. Government Securities Class A 411,525 32,906
U.S. Government Securities Class B 67,345 5,081
U.S. Government Securities Class C 26,523 1,891
GNMA Class A...................... 743,465 63,235
GNMA Class B...................... 257,403 19,586
GNMA Class C...................... 147,874 10,456
GNMA Class X...................... 18,371 196
Strategic Bond Class A............ 102,512 10,526
Strategic Bond Class B............ 78,883 7,037
Strategic Bond Class C............ 54,115 6,311
High Yield Bond Class A........... 269,058 25,908
High Yield Bond Class B........... 148,252 12,331
High Yield Bond Class C........... 125,394 12,835
Tax Exempt Insured Class A........ 142,086 11,658
Tax Exempt Insured Class B........ 26,360 1,706
Tax Exempt Insured Class C........ 12,916 1,068
At March 31, 2005, affiliate funds of the SunAmerica Focused Funds, Inc.
owned 93%, 8%, 49% and 7% of the outstanding Class A Shares of Core Bond
Fund, U.S. Government Securities Fund, GNMA Fund, and High Yield Bond Fund,
respectively. At March 31, 2005, AIGGIC, an indirect wholly owned subsidiary
of AIG, owned 100% of the outstanding Class Z shares of the Core Bond Fund
and the High Yield Bond Fund. SAAMCO, an indirect wholly owned subsidiary of
AIG, owned 11% of the outstanding Class X shares of the GNMA Fund.
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 year ended March 31, 2005 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).. $276,650,842 $ -- $ 1,858,122 $172,310,359 $295,332,028 $110,757,510
Sales (excluding U.S.
government securities).. 286,708,823 -- -- 159,136,425 262,178,354 118,425,526
Purchases of U.S.
government securities... 138,064,981 559,995,161 990,064,481 48,473,369 -- 2,206,820
Sales of U.S. government
securities.............. 138,850,928 545,798,883 1,032,826,977 35,747,107 -- 2,248,680
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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, Fund mergers, treatment of defaulted securities and
derivative transactions.
Distributable Earnings Tax Distributions
For the year ended March 31, 2005 For the year ended March 31, 2005
------------------------------------------ ------------------------------------
Long-term Unrealized
Ordinary Gains/Capital Appreciation Ordinary Long-term
Fund Income Loss Carryforward (Depreciation) Income Capital Gains Tax Exempt
- ---- ---------- ----------------- -------------- ----------- ------------- ----------
Core Bond................. $ 142,616 $ (829,951) $(1,772,744) $ 8,948,407 $2,408,211 $ --
U.S. Government Securities 204,257 (8,261,085) (3,082,198) 7,670,802 -- --
GNMA...................... 1,981,521 175,792 (3,451,608) 14,716,823 -- --
Strategic Bond............ 898,394 (31,658,823) 3,121,797 6,802,946 -- --
High Yield Bond........... 584,405 (108,983,290) 13,407,456 25,444,795 -- --
Tax Exempt Insured........ 67,635 307,430 3,404,127 543,743 516,966 2,496,568
Tax Distributions
For the year ended March 31, 2004
-----------------------------------
Ordinary Long-Term
Fund Income Capital Gain Tax Exempt
---- ----------- ------------ ----------
Core Bond................. $ 9,138,662 $ -- $ --
U.S. Government Securities 8,059,030 -- --
GNMA...................... 21,435,452 2,290,943 --
Strategic Bond............ 5,771,394 -- --
High Yield Bond........... 23,821,470 -- --
Tax Exempt Insured........ 1,670,225 1,421,597 2,499,752
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......................................... $207,568,560 $250,952,586 $682,654,270 $125,204,944 $302,784,889 $72,625,180
============ ============ ============ ============ ============ ===========
Appreciation................................. 1,401,523 1,231,933 1,211,062 6,954,340 29,855,750 3,532,992
Depreciation................................. (3,162,158) (4,314,131) (4,662,670) (3,817,000) (16,469,549) (128,865)
------------ ------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ (1,760,635) $ (3,082,198) $ (3,451,608) $ 3,137,340 $ 13,386,201 $ 3,404,127
============ ============ ============ ============ ============ ===========
As of March 31, 2005, for Federal income tax purposes, the Fund's indicated
below have capital loss carryforwards, which expire in the year indicated,
which are available to offset future capital gains, if any:
Capital Loss Carryforward
------------------------------------------------------------------------
Fund 2007 2008 2009 2010 2011 2012 2013
- ---- ---------- ----------- ----------- ----------- ----------- ---- --------
Core Bond................. $ -- $ -- $ -- $ -- $ -- $-- $829,951
U.S. Government Securities 997,836 7,263,249 -- -- -- -- --
Strategic Bond............ 4,743,799 4,808,434 5,601,470 6,464,175 10,040,945 -- --
High Yield Bond........... -- 16,495,916 11,242,842 32,249,552 48,994,980 -- --
Included in the capital loss carryforward amounts at March 31, 2005 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.......... 4,735,632
North American High Yield Bond Fund........... 8,284,211
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.
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
The Fund's indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended March 31, 2005:
Capital Loss
Fund Utilized
- ---- ------------
U.S. Government Securities Fund $ 380,510
GNMA Fund...................... 333,039
Strategic Bond Fund............ 4,611,883
High Yield Bond Fund........... 10,252,262
As of March 31, 2005, U.S. Government Securities Fund had $832,102 of
capital loss carryforwards that expired.
For the period ended March 31, 2005, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to net paydown adjustments, expiration of capital loss carry forward
amounts and treatment of foreign currency to the components of net assets as
follows:
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain
(Loss) (Loss) Capital Paid-in
----------------- ----------------- ---------------
Core Bond Fund................. $ 552,125 $ (552,125) $ --
U.S. Government Securities Fund 463,007 369,095 (832,102)
GNMA Fund...................... 1,341,797 (1,341,797) --
Strategic Bond Fund............ 893,820 (893,820) --
High Yield Bond Fund........... 23,804 (23,804) --
Tax Exempt Insured Fund........ 6,778 (6,778) --
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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ ------------------------- ---------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold......... 4,080,810* $ 41,782,506* 12,157,837** $126,019,538** 75,896 $ 777,468 230,410 $ 2,390,630
Reinvested shares... 820,201 8,427,158 166,183 1,724,538 16,776 171,948 9,326 96,502
Shares redeemed..... (1,771,439) (18,067,712) (954,192) (9,874,674) (143,212)* (1,463,512)* (396,722)** (4,094,764)**
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase
(decrease)......... 3,129,572 $ 32,141,952 11,369,828 $117,869,402 (50,540) $ (514,096) (156,986) $ (1,607,632)
========== ============ ========== ============ ======== =========== ========== ============
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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ ------------------------- ---------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold......... 92,653 $ 949,365 311,782 $ 3,235,617 51,056 $ 524,372 794,446 $ 8,247,779
Reinvested shares... 19,166 196,692 8,152 84,453 10,987 112,886 48,795 505,629
Shares redeemed..... (150,429) (1,541,314) (352,835) (3,659,430) (217,983) (2,213,708) (2,544,683) (26,520,623)
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase
(decrease)......... (38,610) $ (395,257) (32,901) $ (339,360) (155,940) $(1,576,450) (1,701,442) $(17,767,215)
========== ============ ========== ============ ======== =========== ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of $8,993 shares of Class B shares in the
amount of $91,677 to 8,970 shares of Class A shares in the amount of $91,677.
** 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.
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
Core Bond Fund
-----------------------------------------------------
Class Z
-----------------------------------------------------
For the For the
year ended year ended
March 31, 2005 March 31, 2004
------------------------ ---------------------------
Shares Amount Shares Amount
---------- ------------ ----------- -------------
Shares sold.... -- $ -- -- $ --
Reinvested
shares........ 225,039 2,309,447 638,407 6,619,027
Shares redeemed (4,558,155) (46,800,000) (19,744,617) (204,600,000)
---------- ------------ ----------- -------------
Net increase
(decrease).... (4,333,116) $(44,490,553) (19,106,210) $(197,980,973)
========== ============ =========== =============
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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ --------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Shares sold.... 1,851,870* $ 17,318,940* 8,249,574** $ 79,163,236** 270,431 $ 2,539,712 604,504 $ 5,811,186
Reinvested
shares........ 517,015 4,852,956 485,614 4,631,195 68,488 642,865 95,405 911,700
Shares redeemed (4,914,341) (46,091,272) (9,407,755) (89,858,298) (1,250,517)* (11,737,869)* (3,402,329)** (32,359,944)**
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease).... (2,545,456) $(23,919,376) (672,567) $ (6,063,867) (911,568) $ (8,555,292) (2,702,420) $(25,637,058)
========== ============ =========== ============= ========== ============ ========== ============
U.S. Government Securities Fund
-----------------------------------------------------
Class C+
-----------------------------------------------------
For the For the
year ended year ended
March 31, 2005 March 31, 2004
------------------------ ---------------------------
Shares Amount Shares Amount
---------- ------------ ----------- -------------
Shares sold.... 225,967 $ 2,132,586 769,814 $ 7,424,108
Reinvested
shares........ 27,763 260,245 40,198 383,624
Shares redeemed (762,001) (7,152,432) (1,765,228) (16,815,629)
---------- ------------ ----------- -------------
Net increase
(decrease).... (508,271) $ (4,759,601) (955,216) $ (9,007,897)
========== ============ =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 181,948 shares of Class B shares in the
amount of $1,713,174 to 182,020 shares of Class A shares in the amount of
$1,713,174.
** 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.
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ --------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Shares sold. 6,894,773* $ 77,011,294* 20,547,588** $ 235,257,794** 508,758 $ 5,716,800 2,951,236 $ 34,058,784
Reinvested
shares..... 796,791 8,909,301 1,035,426 11,718,293 173,434 1,942,448 377,158 4,280,751
Shares
redeemed... (7,168,924) (80,162,014) (14,030,583) (159,555,489) (3,556,936)* (39,827,017)* (7,691,285)** (87,771,353)**
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Net
increase
(decrease). 522,640 $ 5,758,581 7,552,431 $ 87,420,598 (2,874,744) $(32,167,769) (4,362,891) $(49,431,818)
========== ============ =========== ============= ========== ============ ========== ============
GNMA Fund
--------------------------------------------------------------------------------------------------------------
Class C+ Class I
----------------------------------------------------- ------------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ --------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Shares sold. 853,099 $ 9,604,217 3,729,057 $ 43,094,583 -- $ -- (126) $ (1,423)
Reinvested
shares..... 101,604 1,138,268 274,348 3,116,823 -- -- 78 877
Shares
redeemed... (3,789,770) (42,453,144) (8,127,227) (92,785,359) -- -- (3,502) (39,640)
---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------
Net
increase
(decrease). (2,835,067) $(31,710,659) (4,123,822) $ (46,573,953) -- $ -- (3,550) $ (40,186)
========== ============ =========== ============= ========== ============ ========== ============
GNMA Fund
-----------------------------------------------------
Class X
-----------------------------------------------------
For the For the
year ended year ended
March 31, 2005 March 31, 2004
------------------------ ---------------------------
Shares Amount Shares Amount
---------- ------------ ----------- -------------
Shares sold. 273,192 $ 3,065,920 407,941 $ 4,654,916
Reinvested
shares..... 22,436 251,259 26,729 302,771
Shares
redeemed... (946,348) (10,755,314) (49,150) (558,441)
---------- ------------ ----------- -------------
Net
increase
(decrease). (650,720) $ (7,438,135) 385,520 $ 4,399,246
========== ============ =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 130,250 shares of Class B shares in the
amount of $1,464,891 to 130,598 shares of Class A shares in the amount of
$1,464,891.
** 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.
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ ------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares
sold.......... 6,957,950* $ 24,096,113* 4,819,218** $ 15,918,204** 3,302,013 $ 11,307,598 4,759,644 $ 15,630,339
Reinvested
shares........ 532,965 1,826,684 467,498 1,542,884 359,941 1,230,161 333,984 1,103,198
Shares redeemed (3,331,876) (11,327,054) (4,479,867) (14,659,821) (3,556,677)* (12,132,722)* (3,552,293)** (11,726,594)**
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).... 4,159,039 $ 14,595,743 806,849 $ 2,801,267 105,277 405,037 1,541,335 $ 5,006,943
========== ============ ========== ============ ========== ============ ========== ============
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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
------------------------ ------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares
sold.......... 5,570,700 $ 19,497,879 3,749,967 $ 12,469,971 -- $ -- -- $ --
Reinvested
shares........ 243,819 839,417 188,761 626,355 29,881 99,113 70,772 233,826
Shares
redeemed...... (1,723,947) (5,880,680) (2,151,437) (7,085,839) (1,122,765) (3,817,402) -- --
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).... 4,090,572 $ 14,456,616 1,787,291 $ (6,010,487) (1,092,884) $ (3,718,289) 70,772 $ 233,826
========== ============ ========== ============ ========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 457,044 shares of Class B shares in the
amount of $1,587,294 to 456,684 shares of Class A shares in the amount of
$1,587,294.
** 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.
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
-------------------------- -------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------
Shares sold.. 33,645,561* $ 144,289,277* 24,186,781** $ 97,119,896** 2,940,030 $ 12,724,157 8,482,068 $ 34,228,906
Reinvested
shares...... 1,222,912 5,293,782 1,176,656 4,828,068 485,730 2,096,352 657,839 2,698,352
Shares
redeemed.... (34,116,411) (147,909,905) (21,361,447) (86,944,156) (6,876,355)* (29,724,616)* (7,449,571)** (30,359,369)**
----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).. 752,062 $ 1,673,154 4,001,990 $ 15,003,808 (3,450,595) $(14,904,107) 1,690,336 $ 6,567,889
=========== ============= =========== ============ ========== ============ ========== ============
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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
-------------------------- -------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------
Shares sold.. 7,504,054 $ 32,828,182 10,265,844 $ 41,606,962 -- $ -- 50,125 $ 199,923
Reinvested
shares...... 475,915 2,070,792 460,883 1,902,362 -- -- 227 905
Shares
redeemed.... (5,742,182) (25,067,974) (5,858,398) (23,969,331) -- -- (54,097) (219,345)
----------- ------------- ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).. 2,237,787 $ 9,831,000 4,868,329 $ 19,539,993 -- $ -- (3,745) $ (18,517)
=========== ============= =========== ============ ========== ============ ========== ============
High Yield Bond Fund
------------------------------------------------------
Class Z
------------------------------------------------------
For the For the
year ended year ended
March 31, 2005 March 31, 2004
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- ------------
Shares sold.. -- $ -- -- $ --
Reinvested
shares...... 1,616,351 6,993,860 1,634,144 6,692,758
Shares
redeemed.... -- -- -- --
----------- ------------- ----------- ------------
Net increase
(decrease).. 1,616,351 $ 6,993,860 1,634,144 $ 6,692,758
=========== ============= =========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 949,983 shares of Class B shares in the
amount of $4,158,286 to 951,789 of shares of Class A shares in the amount of
$4,158,286.
** 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.
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (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, 2005 March 31, 2004 March 31, 2005 March 31, 2004
---------------------- ------------------------- ---------------------- -----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold.... 224,481* $ 2,913,673* 682,967** $ 9,118,210** 31,978 $ 416,668 114,501 $ 1,538,768
Reinvested
shares........ 143,521 1,856,004 223,173 2,932,244 19,131 247,355 43,442 569,970
Shares redeemed (777,009) (10,040,254) (1,529,607) (20,408,255) (612,542)* (7,956,706)* (321,289)** (4,281,374)**
-------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase
(decrease).... (409,007) $ (5,270,577) (623,467) $ (8,357,801) (561,433) $(7,292,683) (163,346) $(2,172,636)
======== ============ ========== ============ ======== =========== ======== ===========
Tax Exempt Insured Fund
-------------------------------------------------
Class C+
-------------------------------------------------
For the For the
year ended year ended
March 31, 2005 March 31, 2004
---------------------- -------------------------
Shares Amount Shares Amount
-------- ------------ ---------- ------------
Shares sold.... 104,291 $ 1,344,350 138,250 $ 1,836,415
Reinvested
shares........ 9,966 128,971, 15,551 204,119
Shares redeemed (110,179) (1,429,778) (196,573) (2,629,076)
-------- ------------ ---------- ------------
Net increase
(decrease).... 4,078 $ 43,543 (42,772) $ (588,542)
======== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 104,915 shares of Class B shares in the
amount of $1,365,087 to 104,980 shares of Class A shares in the amount of
$1,365,087.
** 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. Lines of Credit
The AIG 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
other expenses on the Statement of Operations. Borrowings under the line of
credit will commence when the Fund's cash shortfall exceeds $100,000. For
the year ended March 31, 2005, the following Funds had borrowings:
Weighted
Days Interest Average Debt Average
Fund Outstanding Charges Utilized Interest
- ---- ----------- -------- ------------ --------
High Yield Bond 22 $24,003 $12,825,223 2.45%
Tax Exempt Insured 1 5 83,777 2.31
Note 8. Interfund Lending Agreement
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 year
ended March 31, 2005 none of the Funds participated in this program.
Note 9. Trustees Retirement Plan
The Trustees 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 AIG 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
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2005 -- (continued)
retirement or death benefit from each AIG 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 AIG SunAmerica mutual fund for the calendar
year in which such birthday occurs. In addition, an amount equal to 8.5% of
any amounts credited under the preceding clause during prior years is added
to each Eligible Trustee's Account until such Eligible Trustee reaches his
or her 70th birthday. An Eligible Trustee may receive any benefits payable
under the Retirement Plan, at his or her election, either in one lump sum or
in up to fifteen annual installments. Any undistributed amounts shall
continue to accrue interest at 8.50%.
The following amounts of the Retirement Plan liability are included in the
Trustees fees and expenses line on the Statement of Assets and Liabilities
and the amount for the Retirement Plan expenses are included in the
Trustees' fees and expenses line on the Statement of Operations.
Retirement Retirement Retirement
Plan Plan Plan
Liability Expense Payments
---------- ---------- ----------
Fund As of March 31, 2005
- ---- --------------------------------
Core Bond................. $ 21,933 $3,022 $ 883
U.S. Government Securities 104,769 3,342 10,707
GNMA...................... 45,728 7,386 2,390
Strategic Bond............ 25,486 1,351 2,445
High Yield Bond........... 46,406 4,199 3,698
Tax Exempt Insured........ 31,863 1,215 3,002
76
SunAmerica Income Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of SunAmerica Income Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of 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 six portfolios of the SunAmerica
Income Funds hereafter referred to as the "Funds") at March 31, 2005, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Houston, Texas
May 23, 2005
77
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2005 -- (unaudited)
The following table contains basic information regarding the Trustees and
Officers that oversee operations of the Funds and other investment companies
within the Fund complex.
Number of
Position Term of Funds in
Name, Held With Office and Fund Complex
Address and SunAmerica Length of Principal Occupations Overseen by
Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1)
- ---------------------- ---------- -------------- ------------------------------------ ------------
TRUSTEE
Jeffrey S. Burum Trustee 2004-present Founder and CEO of National 36
DOB: February 27, 1963 Housing Development Corp.
Dr. Judith L. Craven Trustee 2001-present Retired. 76
DOB: October 6, 1945
William F. Devin Trustee 2001-present Retired. 76
DOB: December 30, 1938
Samuel M. Eisenstat Chairman 1986-present Attorney, solo practitioner. 46
DOB: March 7, 1940 of the
Board
Stephen J. Gutman Trustee 1986-present Partner and Member of Managing 46
DOB: May 10, 1943 Directors, Beau Brummell-Soho,
LLC (licensing of menswear
specialty retailing and other
activities) (June 1988 to present).
Peter A. Harbeck(3) Trustee 1995-present President, CEO and Director, AIG 85
DOB: January 23, 1954 SunAmerica Asset Management
Corp. ("SAAMCo") (August 1995 to
present); Director, AIG SunAmerica
Capital Services, Inc. ("SACS")
(August 1993 to present).
William J. Shea(5) Trustee 2004-present President and CEO, Conseco, Inc. 46
DOB: February 9, 1948 (Financial Services) (2001 to 2004);
Chairman of the Board of Centennial
Technologies, Inc. (1998 to 2001);
Vice Chairman, Bank Boston
Corporation (1993 to 1998)
OFFICERS
Vincent M. Marra President 2004-present Senior Vice President and Chief N/A
DOB: May 28, 1950 Operating Officer, SAAMCo
(February 2003-present); Chief
Administrative Officer and Chief
Financial Officer, Carret & Co.,
LLC (June 2002 to February 2003);
President, Bowne Digital Solutions
(1999 to May 2002)
Donna M. Handel Treasurer 2002-present Assistant Treasurer (1993 to 2002); N/A
DOB: June 25, 1966 Senior Vice President, SAAMCo
(December 2004 to present); Vice
President, SAAMCo (1997 to
December 2004)
Name,
Address and Other Directorships
Date of Birth* Held by Trustee(2)
- ---------------------- ----------------------------------
TRUSTEE
Jeffrey S. Burum None
DOB: February 27, 1963
Dr. Judith L. Craven Director, A.G. Belo Corporation
DOB: October 6, 1945 (1992 to present); Director, Sysco
Corporation (1996 to present);
Director, Luby's Inc. (1998 to
present); Director, University of
Texas Board of Regents
(2001-Present).
William F. Devin Member of the Board of Governors,
DOB: December 30, 1938 Boston Stock Exchange (1985-
Present).
Samuel M. Eisenstat Director, North European Oil
DOB: March 7, 1940 Royalty Trust.
Stephen J. Gutman None
DOB: May 10, 1943
Peter A. Harbeck(3) None
DOB: January 23, 1954
William J. Shea(5) None
DOB: February 9, 1948
OFFICERS
Vincent M. Marra N/A
DOB: May 28, 1950
Donna M. Handel N/A
DOB: June 25, 1966
- --------
* 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 (24 portfolios),
VALIC Company II (15 funds), Seasons Series Trust (24 portfolios) and AIG
Series Trust (4 funds).
(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 because he is an officer and director of the advisor
and a director of the principal underwriter of the Trust.
(3) Interested trustee, as defined within the Investment Company Act of 1940.
(4) Trustees serve until their successors are duly elected and qualified,
subject to the Trustee's retirement plan discussed in Note 9 of the
financial statements.
(5) Effective November 30, 2004, William J. Shea began serving as a Trustee.
Additional information concerning the Trustees is contained in the Statement of
Additional Information and is available without charge by calling (800)
858-8850.
78
SunAmerica Income Funds
SHAREHOLDER TAX INFORMATION -- March 31, 2005 -- (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, 2005. The information and distributions
reported herein may differ from the information and distributions taxable to
the shareholders for the calendar year ending December 31, 2005. 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 2006.
During the year ended March 31, 2005 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...................... $0.56 $0.43 $ -- $0.13 -- %
Core Bond Class B...................... 0.49 0.36 -- 0.13 --
Core Bond Class C...................... 0.49 0.36 -- 0.13 --
Core Bond Class I...................... 0.57 0.44 -- 0.13 --
Core Bond Class Z...................... 0.62 0.49 -- 0.13 --
U.S. Government Securities Fund Class A 0.32 0.32 -- -- --
U.S. Government Securities Fund Class B 0.26 0.26 -- -- --
U.S. Government Securities Fund Class C 0.26 0.26 -- -- --
GNMA Fund Class A...................... 0.33 0.33 -- -- --
GNMA Fund Class B...................... 0.26 0.26 -- -- --
GNMA Fund Class C...................... 0.26 0.26 -- -- --
GNMA Fund Class X...................... 0.36 0.36 -- -- --
Strategic Bond Fund Class A............ 0.23 0.23 -- -- 0.57
Strategic Bond Fund Class B............ 0.21 0.21 -- -- 0.57
Strategic Bond Fund Class C............ 0.21 0.21 -- -- 0.57
High Yield Bond Fund Class A........... 0.34 0.34 -- -- 0.97
High Yield Bond Fund Class B........... 0.31 0.31 -- -- 0.97
High Yield Bond Fund Class C........... 0.31 0.31 -- -- 0.97
High Yield Bond Fund Class Z........... 0.37 0.37 -- -- 0.97
Tax Exempt Insured Class A............. 0.58 0.41* 0.09 0.08 --
Tax Exempt Insured Class B............. 0.49 0.32* 0.09 0.08 --
Tax Exempt Insured Class C............. 0.49 0.32* 0.09 0.08 --
- --------
* Tax exempt interest dividends
For the year ended March 31, 2005, 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
amount that may be considered qualified dividend income:
Portfolio Amount
--------- --------
Strategic Bond Fund. $ 42,679
High Yield Bond Fund 276,814
79
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited)
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.
80
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
Core Bond Fund
For the annual period ended March 31, 2005, the SunAmerica Core Bond Fund Class
A returned 1.94% at NAV. The Fund's benchmark, the Lehman Brothers U.S.
Aggregate Bond Index, returned 1.15% in the same period.
The fixed income markets delivered positive returns in the 12-month annual
period covered in this report, despite seven consecutive increases in the
federal funds rate by the Federal Reserve Bank.
An improving economy, continued low inflation and the measured approach taken
by the Fed bolstered bond prices into the first quarter of 2005. Fixed income
investors were particularly rewarded for risk, with higher yielding credits
exhibiting the best performance. In March 2005, however, momentum turned
negative. The Federal Reserve Chairman raised the possibility that inflation
might not be fully tamed, and stoked speculation that monetary policy might be
tightened at a faster pace. In addition, General Motors, the largest issuer in
the investment grade arena, announced a significant earnings revision, and its
debt was downgraded. This rattled investors and the market turned risk averse.
The Fund's outperformance for the period was driven by overweight positions in
higher risk credits. In the first three quarters of the reporting period, the
Fund had exposure to high-yield and emerging markets. In the last quarter of
the period, the portfolio was adjusted to reduce exposure to High-Yield and
Emerging Markets given the potential for a more challenging 2005.
From a sector selection perspective, an overweight in the top performing
Industrial sectors benefited the fund, as did specific security selections in
the high-yield segments of both these sectors. For example, long-term positions
in TeleNet Goup and Insight Communications, both higher risk Telecom credits,
appreciated along with the high-yield markets. Among industrials, the fund's
position in the air cargo service company Atlas Air added to its bottom line,
and in the Utility sector, a position in Mission Energy provided additional
lift.
A focus on longer duration credit assets also boosted returns. Duration as a
whole, however, was a mild detractor to returns as the U.S. Treasury market
showed surprising strength in the face of an active Federal Reserve. An
underweight in GNMA issues also created some performance drag.
81
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Lehman Brothers
Core Bond Fund Class A/#/ U.S. Aggregate Bond Index
------------------------ --------------------
3/95 9,522 10,000.00
3/96 10,534 11,077.52
3/97 10,933 11,621.49
3/98 12,283 13,015.92
3/99 12,850 13,859.16
3/00 12,916 14,119.24
3/01 14,058 15,887.76
3/02 14,487 16,736.32
3/03 15,875 18,692.10
3/04 16,557 19,702.43
3/05 16,878 19,928.62
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 -2.88% 1.94% -2.49% 1.37% 0.31% 1.27% 2.14% 2.14% 2.62% 2.62%
- ---------------------------------------------------------------------------------------------------------------
5 Year Return 4.47% 30.68% 4.44% 26.25% 4.79% 26.38% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
10 Year Return 5.37% 77.25% 5.36% 68.48% 5.23% 66.55% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Since Inception* 5.88% 132.71% 5.21% 74.90% 5.05% 71.89% 5.80% 30.51% 6.28% 33.30%
- ---------------------------------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges:
Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC),
Class C: 1.00% CDSC.
++ 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, 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, 2005, the SunAmerica Core Bond Class A
returned (2.88%), compared to 1.15% 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. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. 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.
82
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
U.S. Government Securities Fund
For the annual period ended March 31, 2005, the SunAmerica U.S. Government
Securities Fund Class B returned -0.14% at NAV. The Fund's benchmark, the
Lehman Brothers Government Bond Index returned 0.11%. The primary reason for
the under-performance was an over-weight position in longer-duration bonds,
which weaken in a rising interest rate environment.
The Fund's fiscal year opened on a weak note, with the yield on the bellwether
10-year U.S. Treasury rising from below 4% to as high as 4.88% in anticipation
of an impending tightening of monetary policy. In June 2004 the Federal Reserve
Bank raised its target Federal Funds rate 25 basis points to 1.25 %, and it
continued to raise the rate in 25 basis point increments throughout the
reporting period. By the close of the fund's fiscal year, the Fed Funds' rate
had risen to 2.75%.
Initially the credit markets faltered as investors reacted to the change in
monetary policy. But evidence of a cooling of the economy surfaced in the late
summer and fall, and by late September, the yield on the 10-year U.S. Treasury
had eased off sharply to 4.12%. The U. S. Treasury market began the year on a
positive note, as the yield on the 10-year Treasury note decreased 25 basis
points, piercing the 4.00% level by early February. Momentum proved
short-lived, however, as sentiment shifted when the Federal Reserve Chairman
suggested that inflation remained a threat. These comments stoked speculation
that monetary policy might be tightened at a faster pace than the generally
assumed "measured pace." As a result, the market closed the quarter on a weak
note, with the yield on the 10-year Treasury note rising to 4.48%.
While sector selection had little impact on the Fund's performance, the Fund
continued to benefit from a strategy of not owning securities issued by Freddie
Mac and the Federal National Mortgage Association (Fannie Mae). This became
more acute as concern grew for the potential for credit downgrades in these
markets.
[CHART]
U.S. Government Lehman Brothers
Securities Fund Class B Government Bond Index
----------------------- ----------------
3/95 10,000 10,000.00
3/96 10,887 11,043.78
3/97 11,248 11,520.92
3/98 12,238 12,920.94
3/99 12,757 13,783.60
3/00 12,787 14,128.36
3/01 14,360 15,870.65
3/02 14,750 16,496.20
3/03 16,742 18,707.54
3/04 17,293 19,501.61
3/05 17,399 19,522.81
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 -4.16% 0.61% -4.02% -0.14% -1.11% -0.14%
- -------------------------------------------------------------------------------------
5 Year Return 5.74% 38.73% 5.74% 34.18% 5.99% 33.77%
- -------------------------------------------------------------------------------------
10 Year Return 5.74% 83.46% 5.69% 73.99% N/A N/A
- -------------------------------------------------------------------------------------
Since Inception* 5.26% 89.29% 6.17% 213.30% 5.35% 35.51%
- -------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges:
Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class
C: 1.00% CDSC.
++ 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, 2005, the SunAmerica U.S. Government
Securities Class B returned -4.02%, compared to 0.11% 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. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. 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.
83
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
GNMA Fund
For the annual period ended March 31, 2005, the SunAmerica GNMA Fund Class B
returned 0.75% at NAV. The Fund's benchmark, the Citigroup Mortgage GNMA Index,
returned 2.96%. The primary reason for the under-performance was an over-weight
position in longer-duration bonds, which weaken in a rising interest rate
environment.
The Fund's fiscal year opened on a weak note, with the yield on the bellwether
10-year U.S. Treasury rising from below 4% to as high as 4.88% in anticipation
of an impending tightening of the monetary policy. In June 2004, the Federal
Reserve Bank raised its target Federal Funds rate 25 basis points to 1.25%, and
it continued to raise the rate in 25 basis point increments throughout the
reporting period. By the close of the fund's fiscal year, the Fed Funds' rate
has risen to 2.75%.
In the first half of the year Treasuries, GNMAs and mortgage-backed securities
(MBS) performed well, with current coupon GNMAs trading at about 100 basis
points over the 10-year Treasury. In the second half, the yield spread between
the 10-year U.S. Treasury and GNMAs widened. Then GNMA securities outperformed
as investors reached for yield and GNMA prices rose. But, this trend quickly
reversed in mid-March and GNMAs traded down. The yield on the 10-year Treasury
rose before closing the month just below 4.50%.
While sector selection had little impact on the Fund's performance, the Fund
continued to benefit from a strategy of not owning securities issued by Freddie
Mac and the Federal National Mortgage Association (Fannie Mae). This became
more acute as concern grew for the potential for credit downgrades in these
markets.
[CHART]
Citigroup Mortgage
GNMA Fund Class B GNMA Index
----------------- ------------------
3/95 10,000 10,000.00
3/96 11,013 11,086.34
3/97 11,543 11,748.28
3/98 12,864 13,024.94
3/99 13,600 13,843.39
3/00 13,810 14,252.42
3/01 15,532 15,953.26
3/02 16,144 17,001.69
3/03 18,007 18,433.87
3/04 18,438 19,131.92
3/05 18,577 19,698.40
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 -3.43% 1.41% -3.18% 0.75% -0.23% 0.75% 1.63% 1.63%
- --------------------------------------------------------------------------------------------
5 Year Return 5.76% 38.90% 5.79% 34.51% 6.09% 34.36% N/A N/A
- --------------------------------------------------------------------------------------------
10 Year Return 6.56% 98.32% 6.39% 85.77% N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Since Inception* 5.97% 104.26% 7.68% 407.24% 5.68% 38.02% 5.62% 18.06%
- --------------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges:
Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC),
Class C: 1.00% CDSC.
++ 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, 2005, the SunAmerica GNMA Class B
returned -3.18%, compared to 2.96% 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. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. 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.
84
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
Strategic Bond Fund
For the annual period ended March 31, 2005, the SunAmerica Strategic Bond Fund
Class A returned 9.36% at NAV. The Fund's benchmark, the Lehman Brothers U.S.
Aggregate Bond Index, returned 1.15% in the same period.
The fixed income markets performed well in the 12-month annual period covered
in this report, despite seven consecutive increases in the federal funds rate
by the Federal Reserve Bank.
An improving economy, continued low inflation and the measured approach taken
by the Fed bolstered bond prices into the first quarter of 2005. Strong demand
for product and a limited supply added to the market's strength. Investment
grade issuance declined across the board as companies turned to stock buybacks
and demand overseas grew for U.S. credit. Fixed income investors were
particularly rewarded for risk, with higher yielding credits exhibiting the
best performance. In March 2005, however, momentum turned negative. The Federal
Reserve Chairman raised the possibility that inflation might not be fully
tamed, and stoked speculation that monetary policy might be tightened at a
faster pace. In addition, General Motors, the largest issuer in the investment
grade arena, announced a significant earnings revision, and its debt was
downgraded. This rattled investors and the market turned risk averse.
Throughout much of the period, the U.S. dollar continued to weaken against
other currencies, and emerging markets debt gained strength with the uptick in
oil and commodity prices.
The Fund's positions in higher risk credits drove its strong performance in the
12-month period covered by this report. These also account for its significant
outperformance of its benchmark, the Lehman Brothers Aggregate Bond Index.
From a sector selection perspective, overweights in the top performing Telecom
and Industrials sectors benefited the fund, as did specific security selections
in the high-yield segments of both these sectors. For example, two of the
portfolio's distressed Telecom credits, defaulted bonds of Sprint affiliates
IPCS and IWO, were converted into equity upon reorganization and have
appreciated significantly on a bond equivalent basis. In the Utility sector, a
position in Mission Energy provided additional lift.
The Fund also saw its position in Russian government debt appreciate, sparked
by an upgrade to investment grade. Holdings in Brazil government debt further
added to performance as that nation's fiscal condition continued to strengthen
and liquidity improved.
While a focus on longer duration credit assets boosted returns, duration as a
whole was a mild detractor to returns. This is because the U.S. Treasury market
showed surprising strength in the face of an active Federal Reserve.
85
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Strategic Bond Lehman Brothers
Fund Class A/#/ U.S. Aggregate Bond Index
--------------- --------------------
3/95 9,530 10,000.00
3/96 11,428 11,077.52
3/97 12,843 11,621.49
3/98 14,472 13,015.92
3/99 14,311 13,859.16
3/00 14,620 14,119.24
3/01 15,376 15,887.76
3/02 16,058 16,736.32
3/03 17,514 18,692.10
3/04 20,674 19,702.43
3/05 22,545 19,928.62
Class A Class B Class C
------------------ ------------------ ------------------
SEC SEC SEC
Average Average Average
Strategic Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return+ Return++ Return+ Return++ Return+ Return++
- ------------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 4.17% 9.36% 4.35% 8.35% 7.65% 8.65%
- ----------------------------------------------------------------------------------------
5 Year Return 7.98% 54.20% 8.00% 48.94% 8.44% 49.98%
- ----------------------------------------------------------------------------------------
10 Year Return 8.47% 136.56% 8.40% 124.11% 8.34% 122.77%
- ----------------------------------------------------------------------------------------
Since Inception* 6.99% 126.92% 7.66% 125.21% 7.54% 122.47%
- ----------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges:
Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class
C: 1.00% CDSC.
++ 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, 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, 2005, the SunAmerica Strategic Bond
Class A returned 4.17%, compared to 1.15% 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. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. 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.
86
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
High Yield Bond Fund
For the annual period ended March 31, 2005, the SunAmerica High Yield Bond Fund
Class A returned 13.26% at NAV. The Fund's benchmark, the Citigroup High Yield
Market Index, returned 7.21% for the same period.
In the 12-month period covered in this report the fixed income markets
performed well, despite seven successive increases in the federal funds rate by
the Federal Reserve Bank. In June 2004 the Fed raised the federal funds rate 25
basis points and has done so steadily throughout the period resulting in an
increase of 1.75% to 2.75%.
Throughout the reporting period fixed income investors were rewarded for risk.
The high yield market benefited most, with the lower rated sectors exhibiting
the best performance. Default rates remained at historic lows. This was due in
large part to an improving economy and the ability of lower quality credits to
continue to access the capital markets and strengthen balance sheets. As
company fundamentals improved, the spread between high yield bonds and the
bellwether 10-year U.S. Treasury tightened, and the prices of high yield bonds
appreciated.
The Fund benefited from a combination of security selection and from being
overweight higher risk credits. The higher risk credits outperformed the
overall index over the 12-month reporting period.
The biggest contributor to fund performance was the wireless sector,
representing close to two-thirds of the fund's total outperformance versus the
index. This performance came primarily from distressed credit plays in that
sector. Two of these distressed credits, defaulted bonds of Sprint affiliates
IPCS and IWO, converted into equity holdings upon reorganization. Since then
these positions have appreciated significantly on a bond equivalent basis. The
next largest contributor was the utility sector, where the fund benefited from
its holdings in Mirant Corporation. Mirant is an independent power producer and
another distressed credit. Its holding company defaulted bonds will also turn
into equity upon reorganization.
While gaming, transportation services, and oil field services were positive,
sector selection contributed little to fund performance overall. Positive
contribution from an underweight in the automotive and home construction
sectors was offset by negative performance from cash and an overweight in
pharmaceuticals. Holdings in pharmaceutical company Elan, which has recently
pulled its multiple sclerosis drug Tysabri from the market, created a drag on
performance.
87
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
High Yield Bond Citigroup
Fund Class A/#/ High Yield Market Index
--------------- -----------------------
11/98 9,524 10,000.00
3/99 9,999 10,651.21
3/00 9,710 10,396.98
3/01 9,877 10,679.18
3/02 9,692 10,828.00
3/03 9,454 11,360.56
3/04 11,917 13,904.34
3/05 13,497 14,906.18
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 7.91% 13.26% 8.57% 12.57% 11.77% 12.77% 14.18% 14.18%
- --------------------------------------------------------------------------------------------
5 Year Return 5.78% 39.01% 5.83% 34.48% N/A N/A 7.36% 42.63%
- --------------------------------------------------------------------------------------------
10 Year Return N/A N/A N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------
Since Inception* 4.79% 41.72% 4.88% 35.68% 5.95% 30.50% 6.12% 46.28%
- --------------------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges:
Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class
C: 1.00% CDSC.
++ 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, 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, 2005, the SunAmerica High Yield Bond
Class A returned 7.91%, compared to 7.21% 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. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. 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.
88
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
Tax Exempt Insured Fund
For the annual period ended March 31, 2005, the SunAmerica Tax Exempt Insured
Fund Class A returned 1.83% at NAV. The Fund's benchmark, the Lehman Brothers
Municipal Bond Index, returned 2.67%.
The 12-month annual period covered in this report opened on a weak note, with
the yield on the bellwether 10-year U.S. Treasury rising in anticipation of an
impending tightening of the money supply. In June 2004, the Federal Reserve
Bank raised its target Federal Funds rate 25 basis point to 1.25%, and it
continued to raise the rate in 25 basis point increments throughout the
reporting period. By the close of the Fund's fiscal year, the rate has risen
from 1.75% to 2.75%.
Initially the credit markets faltered as investors reacted to the change in
policy. But evidence of a cooling of the economy surfaced early in the fall of
2004. In the third quarter, the credit markets rallied and remained in a
trading range through early 2005. In March 2005, however, momentum turned
negative. The Federal Reserve Chairman raised the possibility that inflation
might not be fully tamed and stoked speculation that monetary policy might be
tightened at a faster pace.
Throughout this period the market continued to float near record numbers of new
municipal issues. Municipal new issuance totaled $359 billion in 2004, the
third highest issuance on record. In the first quarter of 2005 alone, new
issuance approached $100 billion, spurred in large part by historically low
rates and a rejuvenation of advance refundings. While the municipal yield curve
continued to flatten as short-term rates ticked upwards, it remained steeper
than the U.S. Treasury curve. Over the period, municipals outperformed
Treasuries as the Lehman Municipal Bond Index returned 2.67% versus 0.04% for
the Lehman U.S. Treasury Index.
The Fund's performance was helped by its being overweight the hospital sector,
which outperformed the Lehman Municipal Bond Index for the twelve-month period.
Hospital bonds are higher yielding than General Obligation or Water and Sewer
bonds, and traditionally outperform in a rising rate environment. The fund also
benefited from several credit upgrades on securities it holds in the hospital
sector. These included bonds issued by Cuyahoga County, OH bonds for the
Cleveland Clinic and bonds issued by Franklin County, OH for Ohio Health. As a
result of the upgrades, the prices of these bonds appreciated.
In addition, the Fund benefited from a credit upgrade of its State of
California General Obligation bonds. These bonds had been purchased without any
credit enhancements, and were upgraded from BBB to A by both Moody's and S&P. A
position in New York City General Obligation bonds, which have appreciated in
line with the City's positive credit fundamentals, also added to the fund's
performance. The Fund continued to hold both positions at the end of the year.
As of the close of the period, 80% of the fund's portfolio was invested in
essential service and general obligation bonds that are insured with AAA bond
insurers.
89
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Tax Exempt Lehman Brothers
Insured Fund Class A/#/ Municipal Bond Index
----------------------- --------------------
3/95 9,529 10,000.00
3/96 10,231 10,838.25
3/97 10,665 11,428.78
3/98 11,761 12,653.24
3/99 12,295 13,437.89
3/00 12,148 13,427.16
3/01 13,373 14,893.53
3/02 13,624 15,461.47
3/03 14,861 16,989.91
3\04 15,594 17,986.18
3\05 15,867 18,465.82
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 -3.03% 1.83% -2.69% 1.21% 0.15% 1.12%
- --------------------------------------------------------------------------------
5 Year Return 4.46% 30.62% 4.41% 26.09% 4.75% 26.12%
- --------------------------------------------------------------------------------
10 Year Return 4.73% 66.52% 4.65% 57.57% N/A N/A
- --------------------------------------------------------------------------------
Since Inception* 5.71% 207.31% 4.22% 60.75% 3.92% 25.12%
- --------------------------------------------------------------------------------
+ SEC Average Annual Total Returns reflect the following maximum sales charges:
Class A: 4.75%, Class B: 4.00% Contingent Deferred Sales Charge (CDSC), Class
C: 1.00% CDSC.
++ 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, 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, 2005, SunAmerica Tax Exempt Insured
Class A returned -3.03%, compared to 2.67% 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. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. 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.
90
[LOGO] AIG Sun America
Mutual Funds
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Directors/Trustees Investment Adviser DISCLOSURE OF QUARTERLY
Samuel M. Eisenstat PORTFOLIO HOLDINGS
Peter A. Harbeck AIG SunAmerica Asset Management Corp. The Trust is required to
Dr. Judith L. Craven Harborside Financial file its com-plete
William F. Devin Center schedule of portfolio
Stephen J. Gutman 3200 Plaza 5 holdings with the U.S.
Jeffrey S. Burum Jersey City, NJ Securities and Exchange
William J. Shea 07311-4992 Commission for its first
and third fiscal quarters
Officers Distributor on Form N-Q for fiscal
Vincent M. Marra, AIG SunAmerica Capital quar-ters ending after
President Services, Inc. July 9, 2004. Once filed,
Donna M. Handel, Harborside Financial the Trust's Form N-Q will
Treasurer Center be available without
Michael Cheah, Vice 3200 Plaza 5 charge on the
President Jersey City, NJ U.S. Securities and
J. Steven Neamtz, Vice 07311-4992 Exchange Commis-sion
President website at www.sec.gov.
Thomas Lynch, Assistant Shareholder Servicing You can also obtain
Secretary Agent copies of Form N-Q by
Gregory R. Kingston, AIG SunAmerica Fund (i) visiting the U.S.
Vice President and Services, Inc. Securities and Ex-change
Assistant Treasurer Harborside Financial Commission Public
Robert A. Chopyak, Center Reference Room in
Assistant Treasurer 3200 Plaza 5 Washington DC
Jersey City, NJ (information on the
07311-4992 operation of the Public
Reference Room may be
Custodian and Transfer obtained by calling
Agent 1-800-SEC-0330); (ii)
State Street Bank and sending your request and
Trust Company a duplicating fee to the
P.O. Box 419572 U.S. Securities and
Kansas City, MO Exchange Commission
64141-6572 Public Reference Room,
Washington, DC 20549-0102
VOTING PROXIES ON TRUST or (iii) sending your
PORTFOLIO SECURITIES request electronically to
A description of the publicinfo.sec.gov.
policies and proce-dures
that the Trust uses to PROXY VOTING RECORD ON
determine how to vote SUNAMERICA INCOME FUNDS
proxies relating to Information regarding how
secu-rities held in the the Trust voted proxies
Fund's portfolio which is related to securities
available in the Trust's held in the SunAmerica
State-ment of Additional Income Funds' dur-ing the
Information, may be twelve month period ended
obtained without charge June 30, 2004 is
upon re-quest, by calling available without charge,
(800) 858-8850. The upon request, by calling
information is also (800) 858-8850 or on the
available from the EDGAR U.S. Secu-rities and
database on the U.S. Exchange Commission
Secu-rities and Exchange web-site at
Commission's website at http://www.sec.gov.
http://www.sec.gov.
This report is submitted
solely for the general
information of
shareholders of the Fund.
Distribution of this
report to persons other
than shareholders of the
Fund is authorized only
in connection with a
currently effective
prospectus, setting forth
details of the Fund,
which must precede or
accompany this report.
91
[LOGO] AIG Sun America
Mutual Funds
Distributed by:
AIG SunAmerica Capital Services, Inc.
Investors should carefully consider the investment objectives, risks, charges
and expenses of any mutual fund distributed by AIG SunAmerica Capital Services,
Inc. before investing. This and other important information is contained in the
prospectus, which can be obtained from your financial adviser or from the AIG
SunAmerica Sales Desk at 800-858-8850, ext. 6003. Read the prospectus carefully
before you invest.
www.sunamericafunds.com
INANN - 3/05
Item 2. Code of Ethics
SunAmerica Income Funds (the "registrant") has adopted a Code of Ethics
applicable to its Principal Executive and Principal Accounting Officers pursuant
to Section 406 of the Sarbanes-Oxley Act of 2002. Effective December 2, 2004,
the Code of Ethics was amended to reflect Vincent M. Marra as President,
replacing Robert M. Zakem.
Item 3. Audit Committee Financial Expert.
Currently, the registrant does not have an Audit Committee member who possesses
all of the attributes required to be an "audit committee financial expert" as
defined in instruction 2(b) of Item 3 of Form N-CSR. However, the Board of
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 registrant's financial statements, supervise the registrant's
preparation of its financial statements, and oversee the work of the
registrant's independent auditors.
Item 4. Principal Accountant Fees and Services.
(a)-(d) Aggregate fees billed to the registrant for the last two fiscal
years for professional services rendered by the registrant's principal
accountant were as follows:
2004 2005
Audit Fees $135,006 $151,621
Audit-Related Fees $ 61,820 $ 48,006
Tax Fees $ 58,721 $ 57,188
All Other Fees $ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
principal accountant in connection with statutory and regulatory
filings. Audit-Related Fees principally include a SAS No. 100 review
of the registrant's Semiannual Shareholder Report. Tax Fees
principally include tax compliance, tax advice, tax planning and
preparation of tax returns.
(e)
(1) The registrant's audit committee pre-approves all audit
services provided by the registrant's principal accountant
for the registrant and all non-audit services provided by
the registrant's principal accountant for the registrant,
its investment adviser and any entity controlling,
controlled by, or under common control with the investment
adviser ("Adviser Affiliate") that provides ongoing services
to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the
operations and financial reporting of the registrant.
(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 registrant's principal accountant
for non-audit services rendered to the registrant, its investment
adviser, and Adviser Affiliate that provides ongoing services to
the registrant for 2005 and 2004 were $1,754,930 and $1,091,789,
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 registrant'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. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures. Based on that evaluation, the
registrant's management, including the President and Treasurer,
concluded that the registrant's disclosure controls and procedures are
effective.
(b) There was no change in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d)) under the Investment
Company Act of 1940 (17 CFR 270.30a-3(d)) that occurred during the
second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting. However,
internal controls with respect to monitoring proof of claims filings
have been enhanced.
Item 12. 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(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to 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/ Vincent M. Marra
-------------------
Vincent M. Marra
President
Date: June 9, 2005
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/ Vincent M. Marra
-------------------
Vincent M. Marra
President
Date: June 9, 2005
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: June 9, 2005