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
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(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
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(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
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(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: September 30, 2005
Item 1. Reports to Stockholders
SunAmerica Income Funds, Semiannual Report at September 30, 2005.
[GRAPHIC]
SunAmerica
Income Funds
2005 SEMIANNUAL REPORT
[LOGO] AIG Sun America
Mutual Funds
September 30, 2005 SEMIANNUAL REPORT
SUNAMERICA INCOME FUNDS
SunAmerica Core Bond Fund (NAIBX)
SunAmerica U.S. Government Securities Fund (SGTAX)
SunAmerica GNMA Fund (GNMAX)
SunAmerica Strategic Bond Fund (SDIAX)
SunAmerica High Yield Bond Fund (SHNAX)
SunAmerica Tax Exempt Insured Fund (STEAX)
Table of Contents
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.......................... 19
NOTES TO FINANCIAL STATEMENTS..................... 64
APPROVAL OF THE ADVISORY AGREEMENT AND SUBADVISORY
AGREEMENTS........................................ 82
TRUSTEE AND OFFICER INFORMATION................... 86
Shareholder Letter
Dear Shareholder:
We are pleased to present this semiannual update for the SunAmerica Income
Funds for the period ended September 30, 2005.
The six-month period began hopefully--amid favorable inflation data and a rally
in 10-year Treasuries as there was speculation that the Federal Reserve would
finish its tightening cycle earlier than expected. The period concluded with
great uncertainty over the direction of the fixed income markets. The impact of
Hurricanes Katrina and Rita, rising energy prices, and continued Federal
tightening have fostered the crosscurrents of higher inflation and slower
economic growth.
The Federal Reserve has raised the Federal Funds rate (its overnight lending
rate) 11 times since it began its tightening policy in June 2004, ending
September at 3.75%. The effect of this tightening has been to flatten the yield
curve. The compression of yields between two- and ten-year Treasuries, which
had been 2.50% in early 2004, narrowed to as low as 0.11% in September.
Despite the fact that most major bond indices delivered negative returns during
the last three months of the period; six-month returns for major indices were
positive. The Lehman Aggregate Bond Index returned 2.31%; the Lehman Government
Bond Index rose 2.39%, and the Lehman Municipal Bond Index returned 2.80%
The high yield market continued its run of solid performance, with the CSFB
High Yield Index delivering a 2.82% return for the period. The high-yield
market had been improving nicely until Delta Airlines and Northwest Airlines
both filed for bankruptcy in mid-September. From that point on, the risks of
higher energy prices began to weigh on the markets, particularly the airlines,
automotive and packaging sectors.
Despite this challenging backdrop, the SunAmerica Income Funds' portfolio
managers were able to add value for our investors. Five of the six SunAmerica
Income Funds were in the top quartile of their respective Lipper peer group for
the six-month period. Of particular note are the SunAmerica High Yield Bond
Fund and the SunAmerica Strategic Bond Fund, both of which were in the top 10%
of their Lipper peer groups during the period.
We continue to recommend investors to construct a diversified portfolio with an
asset allocation appropriate to their individual circumstances and risk
profile. We urge you to sit down with your financial advisor to review your
portfolio.
We thank you for including AIG SunAmerica Mutual Funds in your investment plan.
We value your ongoing confidence in us and look forward to serving your
investment needs in the future.
Sincerely,
The SunAmerica Income Funds Investment Professionals
AIG SunAmerica Asset Management Corp. AIG Global Investment Corp.
------------------------------------- -
Michael Cheah Rich Mercante Hutch Bryan
Andrew Doulos Greg Braun Geoffrey Cornell
Brian Wiese
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- September 30, 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 April 1, 2005 and held until September 30,
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 September 30, 2005" to estimate the expenses you paid on your
account during this period. For shareholder accounts in classes other than
Class I and Class Z the "Expenses Paid During the Six Months Ended September
30, 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 September 30, 2005"
column does not include administrative fees that may apply to qualified
retirement plan accounts. See the Funds' prospectus and/or the retirement plan
document for full description of these fees. Had these fees been included, the
"Expenses Paid During the Six Months Ended September 30, 2005" column would
have been higher and the "Ending Account Value" column 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 the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds. For shareholder accounts in classes other than Class I
and Class Z the "Expenses Paid During the Six Months Ended September 30, 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 September 30, 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
full description of these fees. Had these fees been included, the "Expenses
Paid During the Six Months Ended September 30, 2005" column would have been
higher and the "Ending Account Value" column 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 -- September 30, 2005 -- (unaudited) (continued)
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending Account
Ending Account Value Using
Value Using Expenses Paid a Hypothetical Expenses Paid
Beginning Actual During the Beginning 5% Assumed During the
Account Value Return at Period Ended Account Value Return at Period Ended
at April 1, September 30, September 30, at April 1, September 30, September 30,
2005 2005 2005* 2005 2005 2005*
------------- -------------- ------------- ------------- -------------- -------------
Core Bond Fund
Class A #.................... $1,000.00 $1,023.86 $ 5.58 $1,000.00 $1,019.55 $ 5.57
Class B #.................... $1,000.00 $1,020.55 $ 8.86 $1,000.00 $1,016.29 $ 8.85
Class C #.................... $1,000.00 $1,020.55 $ 8.86 $1,000.00 $1,016.29 $ 8.85
Class I #.................... $1,000.00 $1,023.36 $ 5.07 $1,000.00 $1,020.05 $ 5.06
Class Z #.................... $1,000.00 $1,026.78 $ 2.69 $1,000.00 $1,022.41 $ 2.69
U.S. Government Securities Fund
Class A #.................... $1,000.00 $1,020.73 $ 5.02 $1,000.00 $1,020.10 $ 5.01
Class B #.................... $1,000.00 $1,018.52 $ 8.30 $1,000.00 $1,016.85 $ 8.29
Class C #.................... $1,000.00 $1,017.43 $ 8.29 $1,000.00 $1,016.85 $ 8.29
GNMA Fund
Class A #.................... $1,000.00 $1,017.85 $ 5.01 $1,000.00 $1,020.10 $ 5.01
Class B #.................... $1,000.00 $1,014.54 $ 8.28 $1,000.00 $1,016.85 $ 8.29
Class C #.................... $1,000.00 $1,014.54 $ 8.28 $1,000.00 $1,016.85 $ 8.29
Strategic Bond Fund
Class A #.................... $1,000.00 $1,043.49 $ 6.92 $1,000.00 $1,018.30 $ 6.83
Class B #.................... $1,000.00 $1,042.95 $10.40 $1,000.00 $1,014.89 $10.25
Class C #.................... $1,000.00 $1,039.93 $10.38 $1,000.00 $1,014.89 $10.25
High Yield Bond Fund
Class A #.................... $1,000.00 $1,069.13 $ 7.05 $1,000.00 $1,018.25 $ 6.88
Class B #.................... $1,000.00 $1,065.59 $10.41 $1,000.00 $1,014.99 $10.15
Class C #.................... $1,000.00 $1,065.44 $10.41 $1,000.00 $1,014.99 $10.15
Class Z #.................... $1,000.00 $1,072.09 $ 4.10 $1,000.00 $1,021.11 $ 4.00
Tax Exempt Insured Fund
Class A...................... $1,000.00 $1,022.30 $ 6.64 $1,000.00 $1,018.50 $ 6.63
Class B...................... $1,000.00 $1,018.21 $ 9.92 $1,000.00 $1,015.24 $ 9.90
Class C #.................... $1,000.00 $1,019.04 $ 9.87 $1,000.00 $1,015.29 $ 9.85
Expense
Ratio
as of
September 30,
2005*
-------------
Core Bond Fund
Class A #.................... 1.10%
Class B #.................... 1.75%
Class C #.................... 1.75%
Class I #.................... 1.00%
Class Z #.................... 0.53%
U.S. Government Securities Fund
Class A #.................... 0.99%
Class B #.................... 1.64%
Class C #.................... 1.64%
GNMA Fund
Class A #.................... 0.99%
Class B #.................... 1.64%
Class C #.................... 1.64%
Strategic Bond Fund
Class A #.................... 1.35%
Class B #.................... 2.03%
Class C #.................... 2.03%
High Yield Bond Fund
Class A #.................... 1.36%
Class B #.................... 2.01%
Class C #.................... 2.01%
Class Z #.................... 0.79%
Tax Exempt Insured Fund
Class A...................... 1.31%
Class B...................... 1.96%
Class C #.................... 1.95%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 183 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, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the six months ended September 30,
2005" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2005 -- (unaudited)
U.S. Government Strategic
Core Bond Securities GNMA Bond
Fund Fund Fund Fund
------------ --------------- ------------ ------------
ASSETS:
Long-term Investment securities, at value* (unaffiliated). $188,731,208 $206,871,087 $457,303,591 $192,410,501
Long-term Investment securities, at value* (affiliated)... 135,000 -- -- 145,800
Short term investment securities, at value*............... -- -- 69,987,672 2,093,000
Repurchase agreements (cost equals market)................ 7,408,000 -- 100,604,000 5,544,000
------------ ------------ ------------ ------------
Total investments....................................... 196,274,208 206,871,087 627,895,263 200,193,301
------------ ------------ ------------ ------------
Cash...................................................... -- 3,537 543 3,042,868
Foreign cash*............................................. -- -- -- 1,157,335
Deposit with broker for securities sold short............. -- -- --
Receivable for:
Shares of beneficial interest sold...................... 84,564 15,004 183,728 2,763,841
Dividends and interest.................................. 1,875,583 1,344,814 1,852,692 2,669,216
Investments sold........................................ 4,416,766 -- -- 1,574,725
Prepaid expenses and other assets......................... 2,061 2,193 5,108 1,080
Due from investment adviser for expense reimbursements/fee
waivers.................................................. 20,011 64,065 43,810 --
Unrealized appreciation on forward currency contracts..... -- -- -- 242,831
------------ ------------ ------------ ------------
Total assets.............................................. 202,673,193 208,300,700 629,981,144 211,645,197
------------ ------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.................. 29,719 345,181 562,781 263,983
Investments purchased................................... 6,307,656 -- 152,448,889 3,536,279
Investment advisory and management fees................. 96,946 108,830 180,819 106,493
Distribution and service maintenance fees............... 57,327 77,111 215,363 113,750
Trustees' fees and expenses............................. 29,597 101,911 50,032 23,836
Other accrued expenses.................................. 219,485 203,639 289,214 121,432
Line of credit.......................................... -- 2,544,274 -- --
Dividends payable......................................... 11,919 104,492 165,867 299,275
Due to custodian.......................................... 504,442 -- -- --
Unrealized depreciation on forward currency contracts..... -- -- -- 164,485
------------ ------------ ------------ ------------
Total liabilities......................................... 7,257,091 3,485,438 153,912,965 4,629,533
------------ ------------ ------------ ------------
Net assets................................................ $195,416,102 $204,815,262 $476,068,179 $207,015,664
============ ============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value............ $ 192,301 $ 218,025 $ 424,194 $ 582,579
Paid-in capital........................................... 197,104,514 215,338,367 476,477,226 231,497,928
------------ ------------ ------------ ------------
197,296,815 215,556,392 476,901,420 232,080,507
Accumulated undistributed net investment income (loss).... 71,622 (401,453) (1,164,409) 380,444
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short and
foreign exchange transactions............................ (1,136,976) (8,416,370) 3,916,606 (30,243,169)
Unrealized appreciation (depreciation) on investments..... (815,359) (1,923,307) (3,585,438) 4,744,239
Unrealized appreciation (depreciation) on foreign exchange
transactions............................................. -- -- -- 53,643
------------ ------------ ------------ ------------
Net assets............................................. $195,416,102 $204,815,262 $476,068,179 $207,015,664
============ ============ ============ ============
*Cost
Long-term investment securities (unaffiliated).......... $189,551,299 $208,794,394 $460,889,029 $187,683,059
============ ============ ============ ============
Long-term investment securities (affiliated)............ $ 130,268 $ -- $ -- $ 129,003
============ ============ ============ ============
Short-term investment securities........................ $ -- $ -- $ 69,987,672 $ 2,093,000
============ ============ ============ ============
Foreign Cash............................................ $ -- $ -- $ -- $ 1,174,952
============ ============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------- -----------
ASSETS:
Long-term Investment securities, at value* (unaffiliated). $ 268,822,114 $64,879,687
Long-term Investment securities, at value* (affiliated)... 864,000 --
Short term investment securities, at value*............... -- 6,153,836
Repurchase agreements (cost equals market)................ -- --
------------- -----------
Total investments....................................... 269,686,114 71,033,523
------------- -----------
Cash...................................................... -- 958
Foreign cash*............................................. 142,231 --
Deposit with broker for securities sold short............. 129,710 --
Receivable for:
Shares of beneficial interest sold...................... 829,281 5,351
Dividends and interest.................................. 5,292,873 953,715
Investments sold........................................ 24,578,848 3,365,520
Prepaid expenses and other assets......................... 3,365 799
Due from investment adviser for expense reimbursements/fee
waivers.................................................. 69,748 1,313
Unrealized appreciation on forward currency contracts..... -- --
------------- -----------
Total assets.............................................. 300,732,170 75,361,179
------------- -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.................. 7,306,556 21,919
Investments purchased................................... 2,009,495 3,320,610
Investment advisory and management fees................. 195,381 29,877
Distribution and service maintenance fees............... 156,436 28,023
Trustees' fees and expenses............................. 47,010 31,481
Other accrued expenses.................................. 216,551 94,496
Line of credit.......................................... 40,303,004 --
Dividends payable......................................... 560,431 54,876
Due to custodian.......................................... 5,717,449 --
Unrealized depreciation on forward currency contracts..... -- --
------------- -----------
Total liabilities......................................... 56,512,313 3,581,282
------------- -----------
Net assets................................................ $ 244,219,857 $71,779,897
============= ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value............ $ 533,335 $ 55,654
Paid-in capital........................................... 330,868,508 67,496,084
------------- -----------
331,401,843 67,551,738
Accumulated undistributed net investment income (loss).... (841,067) (36,286)
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short and
foreign exchange transactions............................ (101,347,464) 752,519
Unrealized appreciation (depreciation) on investments..... 15,017,906 3,511,926
Unrealized appreciation (depreciation) on foreign exchange
transactions............................................. (11,361) --
------------- -----------
Net assets............................................. $ 244,219,857 $71,779,897
============= ===========
*Cost
Long-term investment securities (unaffiliated).......... $ 253,922,062 $61,367,761
============= ===========
Long-term investment securities (affiliated)............ $ 746,146 $ --
============= ===========
Short-term investment securities........................ $ -- $ 6,153,836
============= ===========
Foreign Cash............................................ $ 153,592 $ --
============= ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30,
2005 -- (unaudited) (continued)
U.S. Government Strategic High Yield
Core Bond Securities GNMA Bond Bond
Fund Fund Fund Fund Fund
------------ --------------- ------------ ----------- ------------
Class A (unlimited shares authorized):
Net assets................................................... $171,252,162 $170,703,374 $333,940,582 $99,070,730 $116,155,704
Shares of beneficial interest issued and outstanding......... 16,852,801 18,171,427 29,782,137 27,906,664 25,413,395
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)................ $ 10.16 $ 9.39 $ 11.21 $ 3.55 $ 4.57
Maximum sales charge (4.75% of offering price)............... 0.51 0.47 0.56 0.18 0.23
------------ ------------ ------------ ----------- ------------
Maximum offering price to public............................. $ 10.67 $ 9.86 $ 11.77 $ 3.73 $ 4.80
============ ============ ============ =========== ============
Class B (unlimited shares authorized):
Net assets................................................... $ 4,911,753 $ 24,832,116 $ 92,269,657 $42,682,200 $ 56,436,241
Shares of beneficial interest issued and outstanding......... 484,578 2,642,284 8,207,116 12,028,991 12,328,559
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)................ $ 10.14 $ 9.40 $ 11.24 $ 3.55 $ 4.58
============ ============ ============ =========== ============
Class C (unlimited shares authorized):
Net assets................................................... $ 4,091,947 $ 9,279,772 $ 49,857,940 $65,262,734 $ 63,244,159
Shares of beneficial interest issued and outstanding......... 403,132 988,812 4,430,168 18,322,277 13,760,657
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)................ $ 10.15 $ 9.38 $ 11.25 $ 3.56 $ 4.60
============ ============ ============ =========== ============
Class I (unlimited shares authorized):
Net assets................................................... $ 1,388,269 $ -- $ -- $ -- $ --
Shares of beneficial interest issued and outstanding......... 136,443 -- -- -- $ --
Net asset value, offering and redemption price per share..... $ 10.17 $ -- $ -- $ -- $ --
============ ============ ============ =========== ============
Class Z (unlimited shares authorized):
Net assets................................................... $ 13,771,971 $ -- $ -- $ -- $ 8,383,753
Shares of beneficial interest issued and outstanding......... 1,353,123 -- -- -- 1,830,886
Net asset value, offering and redemption price per share..... $ 10.18 $ -- $ -- $ -- $ 4.58
============ ============ ============ =========== ============
Tax Exempt
Insured
Fund
-----------
Class A (unlimited shares authorized):
Net assets................................................... $58,604,941
Shares of beneficial interest issued and outstanding......... 4,544,409
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)................ $ 12.90
Maximum sales charge (4.75% of offering price)............... 0.64
-----------
Maximum offering price to public............................. $ 13.54
===========
Class B (unlimited shares authorized):
Net assets................................................... $ 7,788,337
Shares of beneficial interest issued and outstanding......... 603,551
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)................ $ 12.90
===========
Class C (unlimited shares authorized):
Net assets................................................... $ 5,386,619
Shares of beneficial interest issued and outstanding......... 417,471
Net asset value and redemption price per share (excluding any
applicable contingent deferred sales charge)................ $ 12.90
===========
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................................................... $ --
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 six months ended September 30, 2005
-- (unaudited)
Core
Bond U.S. Government
Fund Securities Fund GNMA Fund
---------- --------------- ----------
INCOME:
Dividends* (unaffiliated)....................................................... $ 39,627 $ -- $ --
Interest (unaffiliated)......................................................... 5,068,259 4,646,140 9,542,123
Interest (affiliated)........................................................... 6,875 -- --
---------- ---------- ----------
Total investment income........................................................ 5,114,761 4,646,140 9,542,123
---------- ---------- ----------
EXPENSES:
Investment advisory and management fees......................................... 591,585 681,355 1,125,992
Distribution and service maintenance fees:
Class A........................................................................ 300,516 304,263 593,316
Class B........................................................................ 24,891 131,744 492,702
Class C........................................................................ 21,723 49,373 269,655
Service fees -- Class I......................................................... 1,743 -- --
Transfer agent fees:
Class A........................................................................ 188,896 216,429 379,409
Class B........................................................................ 7,161 36,962 124,887
Class C........................................................................ 7,592 13,551 71,115
Class I........................................................................ 1,534 -- --
Class Z........................................................................ -- -- --
Class X........................................................................ -- -- 665
Registration fees:
Class A........................................................................ 10,549 13,359 29,125
Class B........................................................................ 4,575 8,235 10,614
Class C........................................................................ 8,235 11,895 9,150
Class I........................................................................ -- -- --
Class Z........................................................................ -- -- --
Custodian fees.................................................................. 16,388 24,264 55,660
Reports to shareholders......................................................... -- 45,707 54,645
Audit and tax fees.............................................................. 14,640 15,043 17,344
Legal fees...................................................................... 1,916 4,489 6,954
Trustees' fees and expenses..................................................... 3,344 6,277 14,330
Interest expense................................................................ -- 1,061 --
Interest expense on securities sold short....................................... -- -- --
Other expenses.................................................................. 5,549 7,551 13,950
---------- ---------- ----------
Total expenses before fee waivers, expense reimbursements and custody credits.. 1,210,837 1,571,558 3,269,513
Fees waived and expenses reimbursed by investment advisor...................... (136,007) (413,142) (338,789)
Custody credits earned on cash balances........................................ (2,663) (7) --
---------- ---------- ----------
Net expenses................................................................... 1,072,167 1,158,409 2,930,724
---------- ---------- ----------
Net investment income (loss)...................................................... 4,042,594 3,487,731 6,611,399
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)............................ 221,810 746,496 2,341,923
Net realized foreign exchange gain (loss) on other assets and liabilities......... -- -- --
---------- ---------- ----------
Net realized gain (loss) on investments and foreign currencies.................... 221,810 746,496 2,341,923
---------- ---------- ----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).... 419,566 177,179 (433,967)
Change in unrealized appreciation (depreciation) on investments (affiliated)...... (3,125) -- --
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.................. 428,550 177,179 (433,967)
---------- ---------- ----------
Net realized and unrealized gain (loss) on investments and foreign currencies..... 650,360 923,675 1,907,956
---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....................... $4,692,954 $4,411,406 $8,519,355
========== ========== ==========
*Net of foreign withholding taxes on interest and dividends of.................... $ 1,106 $ -- $ --
========== ========== ==========
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30,
2005 -- (unaudited) (continued)
Strategic High Yield Tax Exempt
Bond Fund Bond Fund Insured Fund
---------- ----------- ------------
INCOME:
Dividends* (unaffiliated)....................................................... $ 44,172 $ 183,068 $ --
Interest (unaffiliated)......................................................... 5,355,467 14,532,351 1,624,975
Interest (affiliated)........................................................... 7,425 44,000 --
---------- ----------- ----------
Total investment income........................................................ 5,407,064 14,759,419 1,624,975
---------- ----------- ----------
EXPENSES:
Investment advisory and management fees......................................... 545,986 1,189,285 188,224
Distribution and service maintenance fees:
Class A........................................................................ 134,089 273,196 106,602
Class B........................................................................ 201,829 293,897 42,738
Class C........................................................................ 255,038 329,883 29,135
Service fees -- Class I......................................................... -- -- --
Transfer agent fees:
Class A........................................................................ 95,228 190,318 87,332
Class B........................................................................ 49,806 69,781 10,134
Class C........................................................................ 61,273 76,909 6,487
Class I........................................................................ -- -- --
Class Z........................................................................ -- -- --
Class X........................................................................ -- -- --
Registration fees:
Class A........................................................................ 5,490 12,040 5,490
Class B........................................................................ 9,150 5,789 2,745
Class C........................................................................ 12,810 4,758 10,065
Class I........................................................................ -- -- --
Class Z........................................................................ -- -- --
Custodian fees.................................................................. 88,320 47,535 20,830
Reports to shareholders......................................................... 13,725 25,860 12,316
Audit and tax fees.............................................................. 19,763 22,100 15,912
Legal fees...................................................................... 2,196 2,562 3,651
Trustees' fees and expenses..................................................... 2,404 9,159 1,712
Interest expense................................................................ -- 74,160 --
Interest expense on securities sold short....................................... -- 47,345 --
Other expenses.................................................................. 5,492 8,550 4,861
---------- ----------- ----------
Total expenses before fee waivers, expense reimbursements and custody credits.. 1,502,599 2,683,127 548,234
Fees waived and expenses reimbursed by investment advisor...................... (707) (201,613) (8,000)
Custody credits earned on cash balances........................................ (54,831) (3,761) (371)
---------- ----------- ----------
Net expenses................................................................... 1,447,061 2,477,753 539,863
---------- ----------- ----------
Net investment income (loss)...................................................... 3,960,003 12,281,666 1,085,112
---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)............................ 1,634,655 7,928,857 445,087
Net realized foreign exchange gain (loss) on other assets and liabilities......... 61,133 -- --
---------- ----------- ----------
Net realized gain (loss) on investments and foreign currencies.................... 1,695,788 7,928,857 445,087
---------- ----------- ----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).... 1,322,870 1,107,694 109,677
Change in unrealized appreciation (depreciation) on investments (affiliated)...... (3,375) (20,000) --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities. 72,588 (11,178) --
Change in unrealized appreciation (depreciation) on securities sold short......... 10,172 (21,438) --
---------- ----------- ----------
Net unrealized gain (loss) on investments and foreign currencies.................. 1,402,255 1,055,078 109,677
---------- ----------- ----------
Net realized and unrealized gain (loss) on investments and foreign currencies..... 3,098,043 8,983,935 554,764
---------- ----------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....................... $7,058,046 $21,265,601 $1,639,876
========== =========== ==========
*Net of foreign withholding taxes on interest and dividends of.................... $ 1,770 $ -- $ --
========== =========== ==========
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
Core Bond Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2005 March 31,
(unaudited) 2005
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 4,042,594 $ 8,309,014
Net realized gain (loss) on investments and foreign currencies........................ 221,810 (309,327)
Net unrealized appreciation (depreciation) on investments and foreign currencies...... 428,550 (4,282,289)
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 4,692,954 3,717,398
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (3,542,842) (6,506,042)
Net investment income (Class B)....................................................... (86,538) (181,405)
Net investment income (Class C)....................................................... (75,534) (171,529)
Net investment income (Class I)....................................................... (29,464) (90,049)
Net investment income (Class Z)....................................................... (347,553) (1,999,235)
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..................................................... (4,081,931) (11,356,618)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (9,768,940) (14,834,404)
------------ ------------
Total increase (decrease) in net assets................................................. (9,157,917) (22,473,624)
NET ASSETS:
Beginning of period..................................................................... 204,574,019 227,047,643
------------ ------------
End of period+.......................................................................... $195,416,102 $204,574,019
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ 71,622 $ 110,959
============ ============
U.S. Government
Securities Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2005 March 31,
(unaudited) 2005
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 3,487,731 $ 7,208,210
Net realized gain (loss) on investments and foreign currencies........................ 746,496 498,065
Net unrealized appreciation (depreciation) on investments and foreign currencies...... 177,179 (7,299,365)
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 4,411,406 406,919
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (3,201,917) (6,470,275)
Net investment income (Class B)....................................................... (399,585) (861,625)
Net investment income (Class C)....................................................... (149,844) (338,902)
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..................................................... (3,751,346) (7,670,802)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (7,708,301) (37,234,269)
------------ ------------
Total increase (decrease) in net assets................................................. (7,048,241) (44,498,152)
NET ASSETS:
Beginning of period..................................................................... 211,863,503 256,361,655
------------ ------------
End of period+.......................................................................... $204,815,262 $211,863,503
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ (401,453) $ (137,838)
============ ============
See Notes to Financial Statements
9
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2005 March 31,
(unaudited) 2005
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 6,611,399 $ 13,358,453
Net realized gain (loss) on investments and foreign currencies........................ 2,341,923 3,461,416
Net unrealized appreciation (depreciation) on investments and foreign currencies...... (433,967) (11,084,127)
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 8,519,355 5,735,742
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (5,690,228) (10,096,979)
Net investment income (Class B)....................................................... (1,333,513) (2,758,584)
Net investment income (Class C)....................................................... (729,388) (1,598,731)
Net investment income (Class I)....................................................... -- --
Net investment income (Class Z)....................................................... -- --
Net investment income (Class X)....................................................... (10,305) (262,529)
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..................................................... (7,763,434) (14,716,823)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (21,163,242) (65,557,982)
------------ ------------
Total increase (decrease) in net assets................................................. (20,407,321) (74,539,063)
NET ASSETS:
Beginning of period..................................................................... 496,475,500 571,014,563
------------ ------------
End of period+.......................................................................... $476,068,179 $496,475,500
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ (1,164,409) $ (12,374)
============ ============
Strategic Bond Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2005 March 31,
(unaudited) 2005
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 3,960,003 $ 6,136,237
Net realized gain (loss) on investments and foreign currencies........................ 1,695,788 5,304,488
Net unrealized appreciation (depreciation) on investments and foreign currencies...... 1,402,255 (2,719,620)
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 7,058,046 8,721,105
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (1,949,455) (3,082,007)
Net investment income (Class B)....................................................... (893,478) (2,151,861)
Net investment income (Class C)....................................................... (1,124,425) (1,452,318)
Net investment income (Class I)....................................................... -- (116,760)
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..................................................... (3,967,358) (6,802,946)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 70,528,864 25,739,107
------------ ------------
Total increase (decrease) in net assets................................................. 73,619,552 27,657,266
NET ASSETS:
Beginning of period..................................................................... 133,396,112 105,738,846
------------ ------------
End of period+.......................................................................... $207,015,664 $133,396,112
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ 380,444 $ 387,799
============ ============
See Notes to Financial Statements
10
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2005 March 31,
(unaudited) 2005
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 12,281,666 $ 24,869,216
Net realized gain (loss) on investments and foreign currencies........................ 7,928,857 10,420,354
Net unrealized appreciation (depreciation) on investments and foreign currencies...... 1,055,078 6,067,124
------------ ------------
Increase (decrease) in net assets resulting from operations............................. 21,265,601 41,356,694
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (5,570,535) (9,494,138)
Net investment income (Class B)....................................................... (1,913,809) (4,894,387)
Net investment income (Class C)....................................................... (2,145,493) (4,060,550)
Net investment income (Class I)....................................................... -- --
Net investment income (Class Z)....................................................... (1,613,202) (6,995,720)
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..................................................... (11,243,039) (25,444,795)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (83,696,237) 3,593,907
------------ ------------
Total increase (decrease) in net assets................................................. (73,673,675) 19,505,806
NET ASSETS:
Beginning of period..................................................................... 317,893,532 298,387,726
------------ ------------
End of period+.......................................................................... $244,219,857 $317,893,532
============ ============
+Includes accumulated undistributed net investment income (loss)........................ $ (841,067) $ (1,879,694)
============ ============
Tax Exempt Insured Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2005 March 31,
(unaudited) 2005
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 1,085,112 $ 2,462,678
Net realized gain (loss) on investments and foreign currencies........................ 445,087 314,275
Net unrealized appreciation (depreciation) on investments and foreign currencies...... 109,677 (1,499,351)
----------- ------------
Increase (decrease) in net assets resulting from operations............................. 1,639,876 1,277,602
----------- ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (917,129) (2,053,393)
Net investment income (Class B)....................................................... (101,097) (297,218)
Net investment income (Class C)....................................................... (69,111) (145,957)
Net investment income (Class I)....................................................... -- --
Net investment income (Class Z)....................................................... -- --
Net investment income (Class X)....................................................... -- --
Net realized gain on securities (Class A)............................................. -- (842,208)
Net realized gain on securities (Class B)............................................. -- (135,607)
Net realized gain on securities (Class C)............................................. -- (82,894)
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..................................................... (1,087,337) (3,557,277)
----------- ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (5,505,686) (12,519,717)
----------- ------------
Total increase (decrease) in net assets................................................. (4,953,147) (14,799,392)
NET ASSETS:
Beginning of period..................................................................... 76,733,044 91,532,436
----------- ------------
End of period+.......................................................................... $71,779,897 $ 76,733,044
=========== ============
+Includes accumulated undistributed net investment income (loss)........................ $ (36,286) $ (34,061)
=========== ============
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) $ 960 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
11/01/01-03/31/02# 10.29 0.20 (0.48) (0.28) (0.19) -- -- (0.19) 9.82 (2.77) 5,312
04/01/02-03/31/03 9.82 0.34 0.58 0.92 (0.42) -- -- (0.42) 10.32 9.58 21,260
04/01/03-03/31/04 10.32 0.24 0.20 0.44 (0.27) -- -- (0.27) 10.49 4.30 140,877
04/01/04-03/31/05 10.49 0.40 (0.20) 0.20 (0.43) -- (0.13) (0.56) 10.13 1.94 167,787
04/01/05-09/30/05+ 10.13 0.21 0.03 0.24 (0.21) -- -- (0.21) 10.16 2.39 171,252
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
11/01/01-03/31/02# 10.26 0.17 (0.49) (0.32) (0.16) -- -- (0.16) 9.78 (3.14) 3,220
04/01/02-03/31/03 9.78 0.31 0.55 0.86 (0.36) -- -- (0.36) 10.28 8.90 7,198
04/01/03-03/31/04 10.28 0.18 0.19 0.37 (0.19) -- -- (0.19) 10.46 3.68 5,683
04/01/04-03/31/05 10.46 0.33 (0.19) 0.14 (0.36) -- (0.13) (0.49) 10.11 1.37 4,977
04/01/05-09/30/05+ 10.11 0.18 0.03 0.21 (0.18) -- -- (0.18) 10.14 2.06 4,912
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
11/01/01-03/31/02# 10.26 0.18 (0.49) (0.31) (0.16) -- -- (0.16) 9.79 (3.04) 3,772
04/01/02-03/31/03 9.79 0.31 0.56 0.87 (0.36) -- -- (0.36) 10.30 9.00 5,598
04/01/03-03/31/04 10.30 0.18 0.19 0.37 (0.19) -- -- (0.19) 10.48 3.88 5,352
04/01/04-03/31/05 10.48 0.33 (0.20) 0.13 (0.36) -- (0.13) (0.49) 10.12 1.27 4,780
04/01/05-09/30/05+ 10.12 0.18 0.03 0.21 (0.18) -- -- (0.18) 10.15 2.05 4,092
Class I
- -
07/10/00-10/31/00@ $ 9.85 $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
11/01/01-03/31/02# 10.32 0.21 (0.52) (0.31) (0.19) -- -- (0.19) 9.82 (3.01) 21,707
02/01/02-03/31/03 9.82 0.40 0.55 0.95 (0.44) -- -- (0.44) 10.33 9.80 20,617
04/01/03-03/31/04 10.33 0.20 0.24 0.44 (0.27) -- -- (0.27) 10.50 4.35 3,092
04/01/04-03/31/05 10.50 0.42 (0.20) 0.22 (0.44) -- (0.13) (0.57) 10.15 2.14 1,405
04/01/05-09/30/05+ 10.15 0.21 0.03 0.24 (0.22) -- -- (0.22) 10.17 2.34 1,388
Class Z*
- -
07/10/00-10/31/00@ $ 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
11/01/01-03/31/02# 10.29 0.21 (0.47) (0.26) (0.21) -- -- (0.21) 9.82 (2.57) 297,081
04/01/02-03/31/03 9.82 0.47 0.53 1.00 (0.49) -- -- (0.49) 10.33 10.38 268,226
04/01/03-03/31/04 10.33 0.32 0.18 0.50 (0.33) -- -- (0.33) 10.50 4.92 72,043
04/01/04-03/31/05 10.50 0.50 (0.23) 0.27 (0.49) -- (0.13) (0.62) 10.15 2.62 25,626
04/01/05-09/30/05+ 10.15 0.26 0.01 0.27 (0.24) -- -- (0.24) 10.18 2.68 13,772
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
1.10(3)(4) 4.09(3)(4) 103
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
1.75(3)(4) 3.44(3)(4) 103
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
1.75(3)(4) 3.43(3)(4) 103
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
1.00(3)(4) 4.19(3)(4) 103
0.95%(3)(4) 6.39%(3)(4) 94%
0.97(4) 5.97(4) 215
0.74(3)(4) 5.82(3)(4) 94
0.67 4.56 179
0.66(4) 2.97(4) 229
0.61(4) 4.41(4) 203
0.53(3)(4) 4.65(3)(4) 103
- --------
* 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.
+ Unaudited
(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 03/31/02(3) 03/31/03 03/31/04 03/31/05 09/30/05(3)+
-------- -------- ----------- -------- -------- -------- ------------
Core Bond Fund Class A 0.49% 0.04% 0.19% 0.11% 0.10% 0.11% 0.12%
Core Bond Fund Class B 0.50 0.03 0.32 0.23 0.15 0.31 0.36
Core Bond Fund Class C 0.54 0.04 0.32 0.18 0.14 0.38 0.62
Core Bond Fund Class I -- 0.03 0.13 0.05 0.05 0.06 0.11
Core Bond Fund Class Z 0.01(3) 0.03 0.02 -- 0.02 0.05 0.11
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
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
- -
03/31/01 $8.31 $0.45 $ 0.60 $ 1.05 $(0.45) $ -- $(0.45) $8.91 13.06% $169,524
03/31/02 8.91 0.37(5) (0.08) 0.29 (0.40) -- (0.40) 8.80 3.25 187,615
03/31/03 8.80 0.37 0.86 1.23 (0.40) -- (0.40) 9.63 14.14 210,848
03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618
03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905
04/01/05-09/30/05+ 9.37 0.16 0.03 0.19 (0.17) -- (0.17) 9.39 2.07 170,703
Class B
- -
03/31/01 $8.31 $0.39 $ 0.61 $ 1.00 $(0.40) $ -- $(0.40) $8.91 12.29% $ 32,085
03/31/02 8.91 0.31(5) (0.08) 0.23 (0.34) -- (0.34) 8.80 2.55 38,878
03/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595
03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36.605
03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013
04/01/05-09/30/05+ 9.37 0.13 0.04 0.17 (0.14) -- (0.14) 9.40 1.85 24,832
Class C*
- -
03/31/01 $8.32 $0.37 $ 0.61 $ 0.98 $(0.39) $ -- $(0.39) $8.91 12.10% $ 3,303
03/31/02 8.91 0.29(5) (0.09) 0.20 (0.32) -- (0.32) 8.79 2.40 12,209
03/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322
03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139
03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945
04/01/05-09/30/05+ 9.36 0.13 0.03 0.16 (0.14) -- (0.14) 9.38 1.74 9,280
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.49% 5.27% 1,561%
1.42 4.12(5) 570
1.12(3) 3.88(3) 614
0.99(3) 3.14(3) 256
0.99(3) 3.26(3) 246
0.99(3)(4) 3.43(3)(4) 187
2.17% 4.59% 1,561%
2.09(3) 3.42(3)(5) 570
1.76(3) 3.20(3) 614
1.64(3) 2.45(3) 256
1.64(3) 2.61(3) 246
1.64(3)(4) 2.78(3)(4) 187
2.20%(3) 4.48(3)% 1,561%
2.10(3) 3.33(3)(5) 570
1.75(3) 3.18(3) 614
1.64(3) 2.45(3) 256
1.64(3) 2.61(3) 246
1.64(3)(4) 2.78(3)(4) 187
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(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):
03/31/01 03/31/02 03/31/03 03/31/04 03/31/05 09/30/05(3)+
-------- -------- -------- -------- -------- ------------
U.S. Government Securities Fund Class A -- % -- % 0.21% 0.37% 0.39% 0.37%
U.S. Government Securities Fund Class B -- 0.01 0.23 0.37 0.43 0.45
U.S. Government Securities Fund Class C 1.18 0.16 0.27 0.38 0.48 0.62
(5)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began accreting discount and amortizing premium
on debt securities. The per share effect of this change for the year ended
March 31, 2002 on investment income and realized and unrealized gains and
losses was less than $0.01 per share for all classes of shares. The effect
of this change was to decrease the ratio of net investment income to average
net assets by 0.11% for all classes of shares. Per share data and ratios for
periods prior to March 31, 2002 have not been restated to reflect this
change in accounting policy.
See Notes to Financial Statements
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- and of Total period
Period Ended of period income(1) unrealized) operations income gains butions period Return(2) (000's)
- ------------------ --------- ---------- ----------- ---------- ---------- --------- ------- ------ --------- --------
Class A
- -
03/31/01 $10.42 $0.61 $ 0.72 $1.33 $(0.62) $(0.01) $(0.63) $11.12 13.10% $ 72,092
03/31/02 11.12 0.51(6) (0.03) 0.48 (0.51) (0.32) (0.83) 10.77 4.45 118,440
03/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096
03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467
03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031
04/01/05-09/30/05+ 11.20 0.19 0.01 0.20 (0.19) -- (0.19) 11.21 1.78 333,940
Class B
- -
03/31/01 $10.44 $0.53 $ 0.74 $1.27 $(0.55) $(0.01) $(0.56) $11.15 12.45% $ 38,190
03/31/02 11.15 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.80 3.78 90,011
03/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323
03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923
03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497
04/01/05-09/30/05+ 11.23 0.13 0.03 0.16 (0.15) -- (0.15) 11.24 1.45 92,270
Class C*
- -
03/31/01 $10.46 $0.49 $ 0.77 $1.26 $(0.55) $(0.01) $(0.56) $11.16 12.33% $ 15,851
03/31/02 11.16 0.44(6) (0.33) 0.41 (0.44) (0.32) (0.76) 10.81 3.78 38,258
03/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173
03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184
03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936
04/01/05-09/30/05+ 11.24 0.13 0.03 0.16 (0.15) -- (0.15) 11.25 1.45 49,858
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolios
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
0.99(3)(5) 2.89(3)(5) 72
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(3)(5) 2.24(3)(5) 72
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
1.64(3)(5) 2.24(3)(5) 72
- --------
* Effective February 23, 2004, Class ll was redesignated to Class C.
@ Inception date of class.
+ Unaudited
(1)Calculated based upon average 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.
(5)Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
03/31/01 03/31/02 03/31/03 03/31/04 03/31/05 09/30/05(3)+
-------- -------- -------- -------- -------- ------------
GNMA Fund Class A 0.30% 0.19% 0.13% 0.18% 0.17% 0.12%
GNMA Fund Class B 0.33 0.19 0.14 0.16 0.18 0.16
GNMA Fund Class C 0.62 0.21 0.13 0.16 0.18 0.18
(6)The Trust adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began accreting discount an 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 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
11/01/01-03/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- -- (0.12) 3.00 2.48
04/01/02-03/31/03 3.00 0.20 0.06 0.26 (0.18) -- -- (0.18) 3.08 9.07(7)
04/01/03-03/31/04 3.08 0.21 0.33 0.54 (0.21) -- -- (0.21) 3.41 18.04
04/01/04-03/31/05 3.41 0.20 0.11 0.31 (0.23) -- -- (0.23) 3.49 9.36
04/01/05-09/30/05++ 3.49 0.08 0.07 0.15 (0.09) -- -- (0.09) 3.55 4.35
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
11/01/01-03/31/02 3.05 0.10(6) (0.04) 0.06 (0.11) -- -- (0.11) 3.00 2.05
04/01/02-03/31/03 3.00 0.18 0.06 0.24 (0.16) -- -- (0.16) 3.08 8.36(7)
04/01/03-03/31/04 3.08 0.19 0.33 0.52 (0.19) -- -- (0.19) 3.41 17.29
04/01/04-03/31/05 3.41 0.18 0.10 0.28 (0.21) -- -- (0.21) 3.48 8.35
04/01/05-09/30/05++ 3.48 0.08 0.07 0.15 (0.08) -- -- (0.08) 3.55 4.29
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
11/01/01-03/31/02 3.05 0.10(6) (0.03) 0.07 (0.11) -- -- (0.11) 3.01 2.25
04/01/02-03/31/03 3.01 0.19 0.05 0.24 (0.16) -- -- (0.16) 3.09 8.47(7)
04/01/03-03/31/04 3.09 0.19 0.34 0.53 (0.20) -- -- (0.20) 3.42 17.43
04/01/04-03/31/05 3.42 0.18 0.11 0.29 (0.21) -- -- (0.21) 3.50 8.65
04/01/05-09/30/05++ 3.50 0.07 0.07 0.14 (0.08) -- -- (0.08) 3.56 3.99
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
99,071 1.35(4)(11) 5.08(4)(11) 71
$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) 8.26(8) 65
36,110 2.19(5)(9) 5.76(5)(9) 69
37,250 2.05(5)(8) 5.32(5)(8) 188
42,682 2.03(4)(11) 4.40(4)(11) 71
$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 2.18(5)(9) 5.78(5)(9) 69
36,867 2.05(5)(8) 5.29(5)(8) 188
65,263 2.03(4)(11) 4.41(4)(11) 71
- --------
* 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.
++ Unaudited
(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) 03/31/03 03/31/04 03/31/05 09/30/05++
-------- -------- ----------- -------- -------- -------- ----------
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 0.00
Strategic Bond Fund Class C 0.32 0.17 0.08 0.11 0.02 0.03 0.00
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began accreting discount and amortizing premium
on debt securities. The effect of this change for the year ended March 31,
2002 on net investment income and realized and unrealized gains and losses
was less than $0.01 per share for all classes. The effect of this change on
the ratio of net investment income to average net 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%.
(11)Net of custody credits of 0.07%.
See Notes to Financial Statements
15
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND**
----------------------
Net gain
(loss) on
Net investments Dividends 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 gain an Distri- and 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
11/01/01-03/31/02 4.25 0.18(6) (0.11) 0.07 (0.19) -- (0.19) 4.13 1.67 59,075
04/01/02-03/31/03 4.13 0.37 (0.49) (0.12) (0.35) -- (0.35) 3.66 (2.45) 66,521
04/01/03-03/31/04 3.66 0.33 0.60 0.93 (0.36) -- (0.36) 4.23 26.05 93,818
04/01/04-03/31/05 4.23 0.33 0.21 0.54 (0.34) -- (0.34) 4.43 13.26 101,661
04/01/05-09/30/05++ 4.43 0.17 0.13 0.30 (0.16) -- (0.16) 4.57 6.91 116,156
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
11/01/01-03/31/02 4.26 0.16(6) (0.11) 0.05 (0.18) -- (0.18) 4.13 1.23 67,599
04/01/02-03/31/03 4.13 0.35 (0.49) (0.14) (0.33) -- (0.33) 3.66 (3.06) 57,596
04/01/03-03/31/04 3.66 0.31 0.60 0.91 (0.33) -- (0.33) 4.24 25.55 73,751
04/01/04-03/31/05 4.24 0.31 0.20 0.51 (0.31) -- (0.31) 4.44 12.57 61,961
04/01/05-09/30/05++ 4.44 0.16 0.13 0.29 (0.15) -- (0.15) 4.58 6.56 56,436
CLASS C*
- -
08/21/00-10/31/00@ $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
11/01/01-03/31/02 4.27 0.17(6) (0.11) 0.06 (0.18) -- (0.18) 4.15 1.43 20,670
04/01/02-03/31/03 4.15 0.34 (0.48) (0.14) (0.33) -- (0.33) 3.68 (2.97) 27,814
04/01/03-03/31/04 3.68 0.30 0.60 0.90 (0.33) -- (0.33) 4.25 25.14 52,868
04/01/04-03/31/05 4.25 0.30 0.22 0.52 (0.31) -- (0.31) 4.46 12.77 65,385
04/01/05-09/30/05++ 4.46 0.16 0.13 0.29 (0.15) -- (0.15) 4.60 6.54 63,244
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
11/01/01-03/31/02 4.25 0.19(6) (0.11) 0.08 (0.20) -- (0.20) 4.13 1.98 62,245
04/01/02-03/31/03 4.13 0.39 (0.49) (0.10) (0.37) -- (0.37) 3.66 (1.84) 61,439
04/01/03-03/31/04 3.66 0.36 0.59 0.95 (0.38) -- (0.38) 4.23 26.83 77,951
04/01/04-03/31/05 4.23 0.35 0.23 0.58 (0.37) -- (0.37) 4.44 14.18 88,887
04/01/05-09/30/05++ 4.44 0.26 0.05 0.31 (0.17) -- (0.17) 4.58 7.21 8,384
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
1.36(4)(5) 7.76(4)(5) 33
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
2.01(4)(5) 7.18(4)(5) 33
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
2.01(4)(5) 7.18(4)(5) 33
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
0.79(4)(5) 8.48(4)(5) 33
- --------
* In conjunction with the reorganization on November 16, 2001, Class C was
redesigned 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.
++ Unaudited
@ 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 reimbursement and custody credits, if
applicable (based on average net assets):
10/31/00 10/31/01 03/31/02(4) 03/31/03 03/31/04 03/31/05 09/30/05(4)++
-------- -------- ----------- -------- -------- -------- -------------
High Yield Bond Fund Class A 0.43% 0.18% -- % -- % -- % 0.08% 0.13%
High Yield Bond Fund Class B 0.42 0.18 -- -- -- 0.07 0.14
High Yield Bond Fund Class C -- 0.18 0.01 0.10 0.01 0.09 0.13
High Yield Bond Fund Class Z 0.60 0.18 0.03 0.03 0.00 0.05 0.10
(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 Distributions 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
- -
03/31/01 $12.37 $0.56 $ 0.66 $1.22 $(0.57) $ -- $(0.57) $13.02 10.08% $72,394
03/31/02 13.02 0.52(6) (0.30) 0.22 (0.52) -- (0.52) 12.72 1.70 75,071
03/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358
03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098
03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032
04/01/05-09/30/05+ 12.81 0.20 0.09 0.29 (0.20) -- (0.20) 12.90 2.23 58,605
Class B
- -
03/31/01 $12.37 $0.47 $ 0.66 $1.13 $(0.48) $ -- $(0.48) $13.02 9.31% $16,302
03/31/02 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43) 12.72 0.95 18,090
03/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031
03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632
03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000
04/01/05-09/30/05+ 12.82 0.16 0.07 0.23 (0.15) -- (0.15) 12.90 1.82 7,788
Class C*
- -
03/31/01 $12.37 $0.47 $ 0.66 $1.13 $(0.48) $ -- $(0.48) $13.02 9.32% $ 721
03/31/02 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43) 12.72 0.99 4,095
03/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451
03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803
03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701
04/01/05-09/30/05+ 12.81 0.15 0.09 0.24 (0.15) -- (0.15) 12.90 1.90 5,387
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.26% 4.41% 24%
1.29(3) 3.99(3)(6) 140
1.24 3.12 195
1.26 2.90 131
1.25 3.14 153
1.31(4) 2.99(4) 43
1.97% 3.71% 24%
2.04(3) 3.22(3)(6) 140
1.97 2.39 195
1.96 2.20 131
1.94 2.44 153
1.96(4) 2.35(4) 43
1.95%(5) 3.73%(5) 24%
1.95(3)(5) 3.21(3)(5)(6) 140
1.95(5) 2.40(5) 195
1.95(5) 2.21(5) 131
1.95(5) 2.44(5) 153
1.95(4)(5) 2.35(4)(5) 43
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)The ratios for Class C reflects an expense cap of 1.95%, which is net of
custody credits of 0.01% . Ratios for Class A and Class B are gross of
custody credits of 0.01%.
(4)Annualized
(5)Net of the following expense reimbursements and custody credits, if
applicable (based on average net assets):
03/31/01 03/31/02 03/31/03 03/31/04 03/31/05 09/30/05(4)+
-------- -------- -------- -------- -------- ------------
Tax Exempt Insured Fund Class C 1.59% 0.56% 0.00% 0.12% 0.09% 0.27%
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began accreting discount and amortizing premium
on debt securities. The effect of this change for the year ended March 31,
2002 on net investment income and net realized and unrealized gains and
losses was less than $0.01 per share for all classes. The effect of this
change on the ratio of net investment income to average net assets was less
than 0.01%. Per share 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
17
SunAmerica Core Bond Fund
PORTFOLIO PROFILE -- September 30, 2005 -- (unaudited)
Industry Allocation*
Federal National Mortgage Association... 23.2%
Financial Services...................... 17.4
Federal Home Loan Mortgage Corporation.. 12.3
Banks................................... 5.5
Government Agency....................... 5.2
Utilities............................... 5.1
Repurchase Agreement.................... 3.8
Telecommunications...................... 3.6
Broadcasting & Media.................... 3.2
U.S. Treasury Bonds..................... 2.1
Food, Beverage & Tobacco................ 1.9
Insurance............................... 1.9
U.S. Treasury Notes..................... 1.9
Leisure & Tourism....................... 1.6
Automative.............................. 1.5
Energy Sources.......................... 1.4
Chemicals............................... 1.3
Transportation.......................... 0.9
Medical Products........................ 0.7
Business Services....................... 0.6
Metals & Mining......................... 0.6
Pharmaceuticals......................... 0.6
Retail.................................. 0.6
Forest Products......................... 0.5
Health Services......................... 0.5
Real Estate Companies................... 0.5
Conglomerate............................ 0.5
Communication Equipment................. 0.4
Aerospace & Military Technology......... 0.3
Building Materials...................... 0.3
Computer Software....................... 0.2
Energy Services......................... 0.1
Machinery............................... 0.1
Government National Mortgage Association 0.1
-----
100.4%
=====
Credit Quality+#
Government -- Treasury 4.2%
Government -- Agency.. 37.1
AAA................... 5.9
AA.................... 2.7
A..................... 12.9
BBB................... 18.0
BB.................... 5.9
B..................... 6.2
CCC................... 2.6
CC.................... 0.1
C..................... 0.1
Not Rated@............ 4.3
-----
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 -- September 30, 2005 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 7.4%
Banks -- 1.1%
Banc of America Commercial Mtg., Inc.
2005-3 Commercial Mtg.
Certificate AJ
4.77% due 10/01/05(1)(3)..................... $ 500,000 $ 486,189
Banc of America Commercial Mtg., Inc.
2005-5 Commercial Mtg.
Certificate AJ
5.33% due 10/10/45(1)........................ 800,000 804,031
Wachovia Bank Commercial Mtg. Trust
2005-WL5A Commercial Mtg.
Class B
4.00% due 01/15/18*(1)(4).................... 850,000 849,159
----------
2,139,379
----------
Financial Services -- 6.3%
American Express Credit Account Master Trust
2005-7 Asset-Backed Certificate
Class B
4.04% due 03/16/15(4)........................ 600,000 599,833
Bear Stearns Asset-Backed Securities
2005-HE3, Class 1A1
3.72% due 03/25/35(4)........................ 156,410 156,432
Bear Stearns Commercial Mtg. Inc.
2005-PWR8 Mtg., Class B
4.82% due 06/11/41(1)........................ 1,000,000 969,579
Bear Stearns Commercial Mtg. Securities, Inc.
Commercial Mtg. Certificates,
Series 2001-Top4, Class A3
5.61% due 11/15/33(1)........................ 100,000 103,556
Bear Stearns Commercial Mtg. Securities, Inc.
Commercial Mtg. Certificates,
Series 1999-C1, Class A2
6.02% due 02/14/31(1)........................ 525,000 544,307
Capital One Multi Asset Execution Trust
2003-B2 Note Class B2
3.50% due 02/17/09........................... 120,000 119,312
Chase Funding Mtg. Loan
2003-6 Asset-Backed Certificate
Class 1A6
4.59% due 05/25/15........................... 550,000 541,482
Citigroup Mtg. Loan Trust, Inc.
2005-WF2 Mtg., Class AF6B
5.55% due 08/25/35(2)(5)..................... 450,000 450,540
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates,
Series 1999-CG3, Class A1B
7.34% due 10/10/32(1)........................ 1,000,000 1,086,205
Equity One ABS, Inc.
2004-1 Mtg. Pass-thru Certificate
Class AF6
4.21% due 04/25/34........................... 1,100,000 1,061,544
Granite Mtg., PLC
Series 1 Note Class Al3
3.82% due 01/20/44(2)(4)..................... 200,000 200,458
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Financial Services (continued)
GS Mtg. Securities Corp. II
Series 2005-GG4, Class AJ
4.78% due 07/10/39(1)........................ $ 500,000 $ 487,665
Interstar Millennium Trust
Series 2003 5G Mtg. Backed
Note Class A2
3.87% due 01/20/36(2)(4)..................... 99,167 99,316
Interstar Millennium Trust
Series 2003 Class A2
4.13% due 05/27/35(2)(4)..................... 253,120 253,960
Lehman Brothers Floating Rate Commercial Mtg.
Trust 2005 Llf C4 Commercial Mtg. Class A2
3.93% due 07/15/18*(1)(4).................... 250,000 249,675
Lehman Brothers Floating Rate Commercial Mtg.
Trust 2005 Llf C4 Mtg. Pass-thru
3.98% due 07/15/18*(1)(4).................... 250,000 249,678
MBNA Corp.
2004-A10, Class A
3.85% due 03/15/12(4)........................ 100,000 100,208
Morgan Stanley Capital I
2005-T19, Class AJ
4.99% due 10/01/05(1)(3)..................... 300,000 296,960
Morgan Stanley Capital I
2005-T19, Class B
5.06% due 10/01/05(1)(3)..................... 100,000 98,743
Morgan Stanley Capital I
2005-T19, Class C
5.16% due 10/01/05(1)(3)..................... 100,000 98,489
Morgan Stanley Capital I
2005-T19, Class D
5.29% due 10/01/05(1)(3)..................... 150,000 148,423
Morgan Stanley Dean Witter Capital I
Commercial Mtg. Certificates,
Series 2002-Top1, Class A4
6.66% due 02/15/33(1)........................ 1,850,600 1,993,062
Morgan Stanley Dean Witter Capital I
Commercial Mtg. Certificates,
Series 2000-LIF2, Class A2
7.20% due 10/15/33(1)........................ 2,125,000 2,321,578
-----------
12,231,005
-----------
Total Asset-Backed Securities
(cost $14,581,501)........................... 14,370,384
-----------
BONDS & NOTES -- 37.6%
Aerospace & Military Technology -- 0.3%
Raytheon Co.
Notes
6.75% due 08/15/07........................... 596,000 615,866
-----------
Automotive -- 1.5%
Cooper-Standard Automotive, Inc.
Sr. Sub. Notes
8.38% due 12/15/14........................... 60,000 50,400
DaimlerChrysler North America Holding Corp.
Sr. Notes
4.88% due 06/15/10........................... 200,000 196,004
19
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
BONDS & NOTES (continued)
Automotive (continued)
Dana Corp.
Sr. Notes
5.85% due 01/15/15........................ $ 200,000 $ 156,876
Dominion Resources, Inc.
Sr. Notes, Series B
5.95% due 06/15/35........................ 220,000 214,915
Dura Operating Corp.
Sr. Notes
8.63% due 04/15/12........................ 137,000 121,930
Ford Motor Co.
Bonds
6.38% due 02/01/29........................ 232,000 166,460
Ford Motor Co.
Notes
7.45% due 07/16/31........................ 275,000 214,500
Hertz Corp.
Sr. Notes
4.70% due 10/02/06........................ 517,000 511,409
Hertz Corp.
Notes
6.90% due 08/15/14........................ 358,000 331,582
Hertz Corp.
Sr. Notes
7.40% due 03/01/11........................ 722,000 699,638
Hertz Corp.
Notes
7.63% due 06/01/12........................ 355,000 340,837
Navistar International Corp.
Sr. Notes, Series B
6.25% due 03/01/12........................ 9,000 8,550
----------
3,013,101
----------
Banks -- 3.8%
American Express Centurion Bank
Notes
3.93% due 11/16/09(4)..................... 337,000 335,195
Bank of America Corp.
Sub. Notes
7.80% due 09/15/16........................ 394,000 479,621
BankBoston Capital Trust IV
Guaranteed Capital Securities
4.39% due 06/08/28(4)..................... 622,000 602,167
Charter One Bank FSB
Sub. Notes
6.38% due 05/15/12........................ 1,024,000 1,110,858
China Development Bank
Notes
5.00% due 10/15/15(5)..................... 400,000 395,440
Credit Suisse First Boston New York
Sub. Notes
6.50% due 05/01/08*....................... 337,000 351,383
First Maryland Capital II
Guaranteed Sub. Capital Income Securities
4.54% due 02/01/27(4)..................... 508,000 496,649
HSBC Bank USA
Sub. Notes
5.63% due 08/15/35........................ 220,000 216,699
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
Banks (continued)
Independence Community Bank Corp.
Sr. Notes
4.90% due 09/23/10.................. $190,000 $ 188,397
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08.................. 359,000 373,627
Key Bank USA National Assoc.
Sub. Notes
7.00% due 02/01/11.................. 249,000 273,702
PNC Funding Corp.
Guaranteed Sr. Notes
5.75% due 08/01/06.................. 565,000 570,502
Popular North America, Inc.
Notes
4.25% due 04/01/08.................. 614,000 606,025
Sovereign Bancorp, Inc.
Sr. Notes
4.80% due 09/01/10*................. 380,000 377,299
Wachovia Corp.
Sub. Debentures
5.50% due 08/01/35.................. 440,000 429,259
Washington Mutual Bank
Notes
4.50% due 08/25/08.................. 438,000 435,426
Wells Fargo & Co.
Notes
3.97% due 09/15/09(4)............... 205,000 205,308
----------
7,447,557
----------
Broadcasting & Media -- 2.8%
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 02/15/12.................. 155,000 155,000
AMFM, Inc.
Sr. Notes
8.00% due 11/01/08.................. 494,000 531,923
Charter Communications Holdings, LLC
Sr. Notes
11.13% due 01/15/11................. 500,000 385,000
Clear Channel Communications, Inc.
Sr. Debentures
6.88% due 06/15/18.................. 420,000 430,569
Cox Communications, Inc.
Debentures
7.63% due 06/15/25.................. 232,000 267,241
Cox Communications, Inc.
Notes
7.75% due 11/01/10.................. 917,000 1,014,723
Historic TW, Inc.
Guaranteed Sr. Notes
6.63% due 05/15/29.................. 470,000 491,624
News America, Inc.
Guaranteed Sr. Debentures
7.30% due 04/30/28.................. 220,000 244,226
Nexstar Finance, Inc.
Sr. Sub. Notes
7.00% due 01/15/14.................. 360,000 324,000
20
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Broadcasting & Media (continued)
Paxson Communications Corp.
Guaranteed Sr. Sub. Notes
12.25% due 01/15/09(6).......... $630,000 $ 611,100
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 03/15/23.............. 499,000 605,281
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 03/01/11............. 375,000 354,375
----------
5,415,062
----------
Building Materials -- 0.3%
American Standard, Inc.
Sr. Notes
7.63% due 02/15/10.............. 516,000 566,114
----------
Business Services -- 0.6%
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 09/01/10............. 230,000 232,300
PHH Corp.
Notes
6.00% due 03/01/08.............. 562,000 571,643
Seitel, Inc.
Sr. Notes
11.75% due 07/15/11............. 250,000 277,500
Service Corp. International
Sr. Notes
6.75% due 04/01/16.............. 165,000 165,825
----------
1,247,268
----------
Chemicals -- 1.3%
BCI US Finance Corp.
Sr. Sec. Notes
9.10% due 07/15/10*(4).......... 475,000 479,750
Cytec Industries, Inc.
Notes
5.50% due 10/01/10.............. 185,000 184,204
Cytec Industries, Inc.
Notes
6.00% due 10/01/15.............. 555,000 552,945
Dow Chemical Co.
Debentures
7.38% due 03/01/23.............. 432,000 513,315
ICI North America
Debentures
8.88% due 11/15/06.............. 425,000 443,438
Lubrizol Corp.
Sr. Notes
5.88% due 12/01/08.............. 210,000 215,550
Lubrizol Corp.
Sr. Debentures
6.50% due 10/01/34.............. 220,000 230,663
----------
2,619,865
----------
Communication Equipment -- 0.4%
Motorola, Inc.
Debentures
6.50% due 09/01/25.............. 718,000 782,288
----------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
Computer Software -- 0.2%
Sungard Data Systems, Inc.
Sr. Sub. Notes
10.25% due 08/15/15*............... $230,000 $ 232,875
Unisys Corp.
Sr. Notes
8.00% due 10/15/12................. 120,000 117,900
----------
350,775
----------
Computers & Business Equipment -- 0.0%
Activant Solutions, Inc.
Sr. Notes
9.50% due 04/01/10*(4)............. 80,000 81,600
----------
Energy Services -- 0.1%
Hanover Compressor Co.
Guaranteed Sr. Notes
9.00% due 06/01/14................. 250,000 277,812
----------
Energy Sources -- 1.0%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*................ 150,000 106,125
Encore Acquisition Co.
Sr. Sub. Notes
6.00% due 07/15/15*................ 117,000 114,075
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 04/15/14................. 68,000 67,660
Enterprise Products Operating LP
Sr. Notes
4.95% due 06/01/10................. 420,000 412,788
Enterprise Products Operating LP,
Series B Guaranteed Sr. Notes
5.00% due 03/01/15................. 185,000 175,533
Hilcorp Finance Co.
Sr. Notes
10.50% due 09/01/10*............... 350,000 385,000
Indiantown Cogeneration LP,
Series A-9
9.26% due 12/15/10................. 202,814 220,640
Pennzoil Co.
Debentures
10.25% due 11/01/05................ 132,000 132,534
PTT Public Co., Ltd
Bonds
5.88% due 08/03/35*................ 261,000 250,566
----------
1,864,921
----------
Financial Services -- 9.0%
Associates Corp. of North America
Sr. Debentures
6.95% due 11/01/18................. 190,000 221,822
BAE Systems Holdings, Inc.
Guaranteed Notes
4.75% due 08/15/10*................ 788,000 778,172
BAE Systems Holdings, Inc.
Guaranteed Notes
5.20% due 08/15/15*................ 562,000 554,267
21
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
BAE Systems Holdings, Inc.
Guaranteed Notes
6.40% due 12/15/11*....................... $ 789,000 $ 841,172
Caterpillar Financial Services Corp.
Sr. Notes
4.30% due 06/01/10........................ 380,000 374,318
Caterpillar Financial Services Corp.
Notes
4.70% due 03/15/12........................ 409,000 406,314
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 06/15/09*...................... 500,000 602,500
Consolidated Communications Holdings, Inc.
Sr. Notes
9.75% due 04/01/12........................ 253,000 269,445
FBG Finance, Ltd.
Notes
5.88% due 06/15/35*....................... 220,000 215,618
Ford Motor Credit Co.
Notes
5.70% due 01/15/10........................ 258,000 234,370
Ford Motor Credit Co.
Sr. Notes
5.80% due 01/12/09........................ 378,000 352,705
Ford Motor Credit Co.
Notes
6.38% due 11/05/08........................ 471,000 452,732
Ford Motor Credit Co.
Notes
7.00% due 10/01/13........................ 150,000 139,103
General Electric Capital Corp.
Notes
2.80% due 01/15/07........................ 579,000 567,396
General Electric Capital Corp.
Notes
5.38% due 03/15/07........................ 562,000 569,122
General Electric Capital Corp.
Bonds
6.75% due 03/15/32........................ 657,000 772,782
General Motors Acceptance Corp.
Notes
6.07% due 12/01/14(4)..................... 235,000 197,568
General Motors Acceptance Corp.
Bonds
8.00% due 11/01/31........................ 1,250,000 1,091,461
HSBC Finance Corp.
Global Sr. Notes
4.75% due 07/15/13........................ 789,000 770,089
ING USA Global Funding Trust
Notes
4.50% due 10/01/10........................ 380,000 374,826
John Deere Capital Corp.
Sr. Notes
4.50% due 08/25/08........................ 940,000 936,335
JPMorgan Chase & Co.
Global Sub. Note
5.15% due 10/01/15........................ 456,000 453,192
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------------
Financial Services (continued)
Lehman Brothers Holdings, Inc.
Notes
6.63% due 01/18/12............................... $380,000 $ 413,370
MBNA Corp.
Tranche Sr. 00058
4.63% due 09/15/08............................... 632,000 631,539
Merrill Lynch & Co., Inc.
Tranche Trust 00476
4.79% due 08/04/10............................... 304,000 302,950
National Rural Utilites Cooperative Finance Corp.
Sec. Collateral Trust Bonds
3.88% due 02/15/08............................... 448,000 440,997
NGC Corp. Capital Trust
Guaranteed Sub. Notes, Series B
8.32% due 06/01/27............................... 375,000 336,563
Nisource Finance Corp.
Guaranteed Notes
5.45% due 09/15/20............................... 190,000 185,856
PNC Bank, National Assoc.
Notes
4.88% due 09/21/17............................... 380,000 368,765
Pricoa Global Funding I
Notes
4.63% due 06/25/12*.............................. 190,000 186,285
Principal Life Global Funding
Sec. Notes
5.13% due 06/28/07*.............................. 482,000 484,212
PX Escrow Corp.
Sr. Sub. Disc. Notes
9.63% due 02/01/06(6)............................ 150,000 146,438
Residential Capital Corp.
Notes
6.38% due 06/30/10*.............................. 795,000 805,398
Residential Capital Corp.
Notes
6.88% due 06/30/15*.............................. 259,000 271,020
Resona Preferred Global Securities Cayman, Ltd.
Bonds
7.19% due 12/29/05*(3)........................... 190,000 196,700
SLM Corp., Series A
Tranche Trust 00087
3.81% due 07/27/09(4)............................ 190,000 189,848
Sprint Capital Corp.
Guaranteed Sr. Notes
6.88% due 11/15/28............................... 403,000 445,184
Transamerica Finance Corp.
Sr. Notes
6.40% due 09/15/08............................... 205,000 214,940
Washington Mutual, Inc.
Sr. Notes
5.25% due 09/15/17............................... 190,000 187,187
Xlliac Global Funding
Tranche Trust 00024
4.80% due 08/10/10*.............................. 570,000 566,320
-----------
17,548,881
-----------
22
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------
BONDS & NOTES (continued)
Food, Beverage & Tobacco -- 1.8%
Alliance One International, Inc.
Sr. Sub. Notes
12.75% due 11/15/12*............. $625,000 $ 571,875
American Stores Co.
Debentures
8.00% due 06/01/26............... 535,000 496,864
Archer-Daniels-Midland Co.
Notes
5.38% due 09/15/35............... 220,000 213,159
Coca-Cola Enterprises, Inc.
Debentures
8.50% due 02/01/22............... 480,000 631,904
ConAgra Foods, Inc.
Notes
6.00% due 09/15/06............... 338,000 342,236
ConAgra, Inc.
Sr. Notes
7.13% due 10/01/26............... 215,000 239,274
Monsanto Co.
Sr. Notes
5.50% due 08/15/25............... 941,000 916,571
----------
3,411,883
----------
Forest Products -- 0.4%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23............... 160,000 157,400
Georgia-Pacific Corp.
Sr. Notes
8.00% due 01/15/14............... 175,000 191,625
Packaging Corp. of America
Sr. Notes
5.75% due 08/01/13............... 262,000 253,466
Pliant Corp.
Sr. Sec. Notes
11.13% due 09/01/09.............. 249,000 214,140
----------
816,631
----------
Health Services -- 0.5%
HCA, Inc.
Sr. Notes
6.95% due 05/01/12............... 390,000 401,168
Psychiatric Solutions, Inc.
Sr. Sub. Notes
7.75% due 07/15/15*.............. 250,000 258,125
Tenet Healthcare Corp.
Sr. Notes
6.50% due 06/01/12............... 50,000 46,625
Tenet Healthcare Corp.
Notes
7.38% due 02/01/13............... 300,000 284,250
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13............... 25,000 25,312
----------
1,015,480
----------
Insurance -- 1.7%
Allstate Financial Global Funding
Notes
5.25% due 02/01/07*.............. 190,000 191,179
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
Insurance (continued)
Americo Life, Inc.
Notes
7.88% due 05/01/13*.......................... $318,000 $ 330,429
Chubb Corp.
Notes
6.00% due 11/15/11........................... 267,000 282,046
ING Security Life Institutional Funding
Notes
2.70% due 02/15/07*.......................... 578,000 560,416
Kingsway America Inc.
Guaranteed Sr. Notes
7.50% due 02/01/14........................... 319,000 330,308
Liberty Mutual Group
Notes
6.50% due 03/15/35*.......................... 220,000 204,034
Metropolitan Life Global Funding I
Tranche Trust 00011
4.25% due 07/30/09*.......................... 407,000 400,923
Metropolitan Life Global Funding I
Tranche Trust 00019
4.63% due 08/19/10*.......................... 185,000 183,742
MIC Financing Trust I
Pass-Thru Certificates
8.38% due 02/01/27*.......................... 176,000 181,935
Ohio Casualty Corp.
Notes
7.30% due 06/15/14........................... 521,000 561,546
----------
3,226,558
----------
Leisure & Tourism -- 1.5%
American Airlines, Inc.
Pass-Thru Certificates,
Series 2001-1, Class A2
6.82% due 05/23/11........................... 525,000 481,747
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class A-1
7.20% due 01/02/19+.......................... 152,924 151,975
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class B
7.63% due 01/02/15(7)+....................... 950,432 790,399
Atlas Air, Inc.
Pass-Thru Certificates,
Series 2000-1
8.71% due 01/02/19+.......................... 137,360 142,271
Circus & Eldorado Silver Legacy Capital Corp.
Mtg. Notes
10.13% due 03/01/12.......................... 300,000 313,500
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1998-1, Class A
6.65% due 09/15/17........................... 57,487 55,566
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1997-4, Class A
6.90% due 01/02/18........................... 80,297 78,481
Delta Airlines, Inc.
Notes
8.30% due 12/15/29(7)(8)+.................... 175,000 31,500
23
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
Delta Airlines, Inc.
Sr. Notes
10.00% due 08/15/08(7)(8)+........... $225,000 $ 40,500
Harrahs Operating Co., Inc.
Guaranteed Sr. Notes
5.75% due 10/01/17*.................. 192,000 187,934
MGM Mirage, Inc.
Sr. Notes
5.88% due 02/27/14................... 325,000 308,750
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 06/15/10#................. 125,000 135,000
United Airlines, Inc.
Pass-Thru Certificates,
Series 2000-2, Class A1
7.03% due 10/01/10(7)(8)+............ 7,801 7,637
Worldspan LP
Sr. Notes
10.04% due 02/15/11*(4).............. 275,000 242,000
----------
2,967,260
----------
Medical Products -- 0.7%
CDRV Investors, Inc.
Sr. Notes
9.63% due 01/01/15(6)................ 225,000 128,250
Genetech, Inc.
Sr. Notes
5.25% due 07/15/35*.................. 939,000 904,726
MEDIQ/PRN Life Support Services, Inc.
Sr. Notes
11.00% due 06/01/08+(5)(11).......... 10,000 0
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11.................. 390,000 399,750
----------
1,432,726
----------
Metals & Mining -- 0.2%
Barrick Gold Finance Co.
Guaranteed Notes
5.80% due 11/15/34................... 220,000 216,265
Newmont Mining Corp.
Notes
8.63% due 05/15/11................... 190,000 223,486
----------
439,751
----------
Pharmaceuticals -- 0.4%
American Home Products
Notes
6.95% due 03/15/11................... 320,000 351,515
Merck & Co., Inc.
Notes
2.50% due 03/30/07................... 337,000 326,839
----------
678,354
----------
Real Estate Companies -- 0.3%
EOP Operating LP
Notes
8.38% due 03/15/06................... 583,000 593,100
----------
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
Retail -- 0.5%
Rent-Way, Inc.
Sr. Notes
11.88% due 06/15/10............... $ 415,000 $ 456,500
Wal-Mart Stores, Inc.
Notes
5.25% due 09/01/35................ 528,000 510,964
----------
967,464
----------
Telecommunications -- 3.1%
Alltel Corp.
Notes
4.66% due 05/17/07................ 440,000 439,591
American Cellular Corp., Series B
Sr. Notes
10.00% due 08/01/11............... 470,000 512,300
AT&T Wireless Services, Inc.
Sr. Notes
7.88% due 03/01/11................ 1,218,000 1,386,689
Corning, Inc.
Notes
5.90% due 03/15/14................ 260,000 263,784
Corning, Inc.
Notes
6.85% due 03/01/29................ 206,000 207,904
GTE Corp.
Debentures
6.94% due 04/15/28................ 220,000 240,494
GTE Northwest, Inc.
Debenture Series D
5.55% due 10/15/08................ 190,000 192,825
ICO North America, Inc.
Sr. Sec. Notes
7.50% due 08/15/09(5)(11)......... 65,000 69,875
Iridium, LLC
Guaranteed Sr. Notes, Series C
11.25% due 07/15/05+(7)(12)....... 25,000 5,313
LCI International, Inc.
Sr. Notes
7.25% due 06/15/07................ 905,000 882,375
Qwest Corp.
Debentures
7.13% due 11/15/43................ 750,000 634,687
Triton PCS, Inc.
Guaranteed Sr. Notes
8.50% due 06/01/13................ 75,000 71,437
Verizon New York, Inc.
Debentures, Series A
6.88% due 04/01/12................ 190,000 203,262
Verizon New York, Inc.
Sr. Debentures, Series B
7.38% due 04/01/32................ 804,000 884,833
----------
5,995,369
----------
Transportation -- 0.9%
Burlington Northern Santa Fe Corp.
Debentures
7.29% due 06/01/36................ 232,000 285,502
Burlington Northern Santa Fe Corp.
Debentures
8.13% due 04/15/20................ 747,000 947,491
24
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
BONDS & NOTES (continued)
Transportation (continued)
Norfolk Southern Corp.
Notes
5.59% due 05/17/25................ $461,000 $ 460,827
----------
1,693,820
----------
Utilities -- 4.3%
AES Corp.
Sr. Notes
7.75% due 03/01/14................ 550,000 583,000
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11................ 370,000 415,564
Consolidated Edison, Inc.
Debenture Series 2003A
3.63% due 08/01/08................ 395,000 384,601
Consolidated Natural Gas Co.
Sr. Notes
5.38% due 11/01/06................ 400,000 403,046
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 06/01/13................ 890,000 930,050
FirstEnergy Corp.,
Sr. Notes, Series B
6.45% due 11/15/11................ 215,000 228,925
Florida Power & Light Co.
1st Mtg. Bonds
5.40% due 09/01/35................ 440,000 435,530
Florida Power Corp.
1st Mtg. Bonds
4.50% due 06/01/10................ 200,000 197,151
Georgia Power Co.
Sr. Notes, Series G
6.20% due 02/01/06................ 318,000 320,048
Indianapolis Power & Light Co.
1st Mtg. Bonds
6.60% due 01/01/34*............... 228,000 254,225
KeySpan Corp.
Sr. Notes
4.90% due 05/16/08................ 955,000 958,977
Mirant Corp.
Sr. Notes
7.90% due 07/15/09*+(7)(8)........ 425,000 517,438
Old Dominion Electric Cooperative
1st Mtg. Bonds, Series A
5.68% due 12/01/28................ 289,000 301,008
Pepco Holdings, Inc.
Notes
5.50% due 08/15/07................ 385,000 389,821
PSEG Power, LLC
Sr. Note
7.75% due 04/15/11................ 380,000 425,488
PSI Energy, Inc.
Debentures
7.85% due 10/15/07................ 593,000 627,716
Reliant Energy, Inc.
Notes
9.50% due 07/15/13................ 275,000 303,875
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Utilities (continued)
Virginia Electric & Power Co.
Notes
4.10% due 12/15/08..................... $ 381,000 $ 373,189
Virginia Electric & Power Co., Series A
Sr. Notes, Series A
5.75% due 03/31/06..................... 416,000 418,556
-----------
8,468,208
-----------
Total Bonds & Notes
(cost $74,001,958)..................... 73,537,714
-----------
CONVERTIBLE BONDS -- 0.9%
Leisure & Tourism -- 0.1%
Six Flags, Inc.
4.50% due 05/15/15..................... 60,000 75,675
-----------
Utilities -- 0.8%
Calpine Corp.
4.75% due 11/15/23..................... 2,925,000 1,594,125
-----------
Total Convertible Bonds
(cost $2,114,450)...................... 1,669,800
-----------
FOREIGN BONDS & NOTES -- 10.2%
Banks -- 0.6%
HBOS Treasury Services, PLC
Notes
3.50% due 11/30/07*.................... 731,000 714,710
NIB Capital Bank NV
Bonds
5.82% due 12/11/13*(3)................. 380,000 392,205
-----------
1,106,915
-----------
Broadcasting & Media -- 0.4%
Grupo Televisa SA
Sr. Notes
6.63% due 03/18/25..................... 380,000 381,429
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 06/15/14*(6)................ 575,000 470,063
-----------
851,492
-----------
Business Services -- 0.0%
SCL Terminal Aereo Santiago SA
Sr. Sec. Notes
6.95% due 07/01/12*.................... 71,737 74,435
-----------
Conglomerate -- 0.5%
Tyco International Group SA
Guaranteed Notes
6.38% due 10/15/11..................... 190,000 202,518
Tyco International Group SA
Guaranteed Sr. Notes
6.75% due 02/15/11..................... 794,000 857,605
-----------
1,060,123
-----------
Energy Sources -- 0.4%
Gazprom International SA
Guaranteed Sr. Notes
7.20% due 02/01/20*.................... 275,000 301,125
Nexen, Inc
Notes
5.88% due 03/10/35..................... 242,000 237,209
25
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Energy Sources (continued)
Petro-Canada
Sr. Notes
5.95% due 05/15/35.............. $ 232,000 $ 232,014
----------
770,348
----------
Financial Services -- 1.7%
Aries Vermogensverwaltungs GmbH
Bonds
9.60% due 10/25/14.............. 1,000,000 1,319,900
HBOS Capital Funding
Guaranteed Notes
6.85% due 03/29/49.............. 550,000 565,840
Nationwide Building Society
Sr. Notes
2.63% due 01/30/07*............. 578,000 563,815
Nell F Sarl
Sr. Notes
8.38% due 08/15/15*............. 375,000 366,562
UFJ Finance Aruba AEC
Guaranteed Notes
6.75% due 07/15/13.............. 380,000 417,261
----------
3,233,378
----------
Food, Beverage & Tobacco -- 0.1%
Molson Coors Capital Finance ULC
Sr. Notes
4.85% due 09/22/10*............. 190,000 188,510
----------
Forest Products -- 0.1%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 08/01/10.............. 175,000 178,063
----------
Government Agency -- 4.7%
Federal Republic of Brazil
Notes
8.00% due 01/15/18.............. 550,000 582,450
Federal Republic of Brazil
Bonds
10.50% due 07/14/14............. 530,000 641,565
Republic of Argentina
Bonds
4.01% due 08/03/12(4)........... 620,000 496,930
Republic of Turkey
Notes
9.00% due 06/30/11.............. 480,000 552,600
Republic of Turkey
Sr. Bonds
11.88% due 01/15/30............. 1,150,000 1,687,625
Republic of Venezuela
Bonds
8.50% due 10/08/14.............. 260,000 288,600
Republic of Venezuela
Bonds
9.25% due 09/15/27.............. 1,500,000 1,774,500
Russian Federation
Bonds
5.00% due 03/31/07*(6).......... 1,175,000 1,349,587
United Kingdom
Notes
2.25% due 07/08/08*............. 749,000 710,766
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
Government Agency (continued)
United Mexican States, Series A
Tranche 00017
6.75% due 09/27/34.............. $ 264,000 $ 281,160
United Mexican States, Series A
Notes
7.50% due 04/08/33.............. 700,000 812,000
-----------
9,177,783
-----------
Insurance -- 0.2%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 315,000 299,250
-----------
Machinery -- 0.1%
Atlas Copco AB
Notes
6.50% due 04/01/08*............. 232,000 239,572
-----------
Metals & Mining -- 0.4%
Falconbridge, Ltd.
Notes
8.38% due 02/15/11.............. 303,000 344,777
Teck Cominco, Ltd.
Sr. Notes
6.13% due 10/01/35.............. 430,000 421,670
-----------
766,447
-----------
Pharmaceuticals -- 0.2%
Elan Finance, PLC
Sr. Notes
7.75% due 11/15/11*............. 455,000 400,400
-----------
Real Estate Companies -- 0.2%
Brascan Corp.
Sr. Notes
8.13% due 12/15/08.............. 430,000 471,164
-----------
Retail -- 0.1%
Jean Coutu Group, Inc.
Sr. Sub. Notes
8.50% due 08/01/14.............. 250,000 248,750
-----------
Telecommunications -- 0.5%
Telus Corp.
Notes
7.50% due 06/01/07.............. 743,000 775,879
Telus Corp.
Notes
8.00% due 06/01/11.............. 161,000 184,191
-----------
960,070
-----------
Total Foreign Bonds & Notes
(cost $19,187,211).............. 20,026,700
-----------
U.S. GOVERNMENT OBLIGATIONS -- 4.0%
U.S Treasury Bonds -- 2.1%
5.38% due 02/15/31.............. 1,372,000 1,537,068
6.25% due 08/15/23.............. 1,233,000 1,474,350
6.88% due 08/15/25.............. 134,000 172,745
7.25% due 08/15/22.............. 726,000 948,564
-----------
4,132,727
-----------
26
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (continued)
U.S. Treasury Notes -- 1.9%
0.88% due 04/15/10 TIPS............. $1,048,486 $ 1,021,701
2.00% due 01/15/14 TIPS............. 776,910 793,085
3.88% due 09/15/10.................. 409,000 403,216
4.25% due 08/15/13.................. 2,000 1,993
4.25% due 08/15/15.................. 572,000 568,425
5.75% due 11/15/05.................. 1,000,000 1,002,617
-----------
3,791,037
-----------
Total U.S. Government Obligations
(cost $7,926,568)................... 7,923,764
-----------
U.S. GOVERNMENT AGENCIES -- 35.8%
Federal Home Loan Mortgage
Corporation -- 12.3%
3.63% due 02/15/08.................. 1,000,000 983,269
4.45% due 03/06/08.................. 500,000 499,207
4.50% due 11/01/18.................. 2,655,747 2,605,173
4.50% due 02/01/19.................. 1,943,716 1,904,718
5.00% due 10/01/33.................. 55,385 54,334
5.00% due 03/01/34.................. 1,303,628 1,277,757
5.00% due 05/01/34.................. 983,462 963,945
5.00% due 06/01/34.................. 3,206,721 3,143,083
5.50% due 02/01/18.................. 656,304 666,074
5.50% due 10/01/33.................. 1,466,599 1,468,131
5.50% due 01/01/35.................. 2,944,281 2,945,753
6.00% due 11/01/33.................. 1,478,948 1,504,911
6.00% due 07/01/35.................. 1,297,190 1,319,972
6.50% due 08/01/16.................. 12,903 13,323
6.50% due 06/01/32.................. 209,389 215,677
6.50% due 08/01/32.................. 1,447,713 1,490,205
6.50% due 02/01/33.................. 190,521 196,113
6.88% due 09/15/10.................. 925,000 1,021,074
7.00% due 03/01/12.................. 10,393 10,851
7.00% due 11/01/16.................. 64,516 67,372
7.50% due 04/01/31.................. 364,771 386,752
7.50% due 12/01/31.................. 908,824 963,589
8.00% due 10/01/29.................. 16,281 17,372
8.00% due 07/01/30.................. 5,102 5,443
8.00% due 08/01/30.................. 14,649 15,628
8.00% due 10/01/30.................. 25,461 27,161
8.00% due 11/01/30.................. 41,907 44,707
8.00% due 12/01/30.................. 83,736 89,330
8.00% due 01/01/31.................. 84,646 90,300
-----------
23,991,224
-----------
Federal National Mortgage Association -- 23.2%
1.75% due 06/16/06.................. 1,000,000 982,508
3.88% due 05/15/07.................. 1,000,000 991,972
4.50% due 06/01/18.................. 749,479 735,214
4.50% due 02/01/35.................. 1,447,247 1,381,278
4.68% due 04/01/35(4)............... 3,777,561 3,756,757
5.00% due 06/01/18.................. 1,994,448 1,990,573
5.00% due 09/01/18.................. 637,765 636,526
5.00% due 10/01/18.................. 1,368,819 1,366,159
5.00% due 11/01/18.................. 1,073,989 1,071,902
5.00% due 11/01/33.................. 52,465 51,481
5.00% due 03/01/34.................. 5,999,399 5,881,291
5.50% due 06/01/20.................. 1,087,608 1,103,805
5.50% due 12/01/33.................. 6,512,242 6,515,261
5.50% due 03/01/34.................. 769,491 769,547
5.50% due 07/01/34.................. 2,332,626 2,332,795
5.50% due 09/01/34.................. 891,816 891,880
Principal
Amount/ Value
Security Description Shares (Note 2)
--------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal National Mortgage Association (continued)
6.00% due 12/01/16................... $ 850,902 $ 875,424
6.00% due 05/01/17................... 158,156 162,712
6.00% due 12/01/33................... 3,213,363 3,267,593
6.00% due 08/01/34................... 2,495,869 2,538,376
6.00% due 10/01/34................... 2,019,826 2,054,028
6.00% due 06/01/35................... 3,428,361 3,486,429
6.27% due 11/01/07................... 49,693 50,776
6.31% due 02/01/08................... 93,715 95,682
6.34% due 01/01/08................... 17,054 17,473
6.43% due 01/01/08................... 18,036 18,511
6.50% due 03/01/17................... 431,997 446,872
6.50% due 04/01/29................... 65,493 67,624
6.50% due 02/01/32................... 390,013 401,856
6.50% due 07/01/32................... 202,411 208,557
7.00% due 09/01/10................... 2,393 2,501
7.00% due 07/01/11................... 99 104
7.00% due 11/01/11................... 1,475 1,542
7.00% due 05/01/12................... 2,405 2,513
7.00% due 06/01/12................... 4,063 4,246
7.00% due 09/01/12................... 1,756 1,836
7.00% due 10/01/12................... 542 566
7.00% due 07/01/13................... 2,691 2,814
7.00% due 04/01/28................... 11,599 12,160
7.00% due 10/01/28................... 1,002 1,050
7.00% due 09/01/31................... 806,092 843,820
7.05% due 06/01/07................... 4,082 4,142
7.50% due 10/01/10................... 91,468 95,793
7.50% due 11/01/14................... 6,621 6,934
7.50% due 05/01/15................... 4,605 4,870
7.50% due 06/01/15................... 73,096 77,309
7.50% due 07/01/15................... 34,822 36,829
7.50% due 08/01/15................... 12,027 12,720
-----------
45,262,611
-----------
Government National Mortgage Association -- 0.1%
6.50% due 06/15/29................... 76,977 80,222
7.00% due 12/15/22................... 57,087 60,350
7.00% due 08/15/29................... 59,218 62,310
8.00% due 04/15/30................... 7,323 7,842
-----------
210,724
-----------
Tennessee Valley Authority -- 0.2%
4.65% due 06/15/35................... 468,000 445,616
-----------
Total U.S. Government Agencies
(cost $70,384,050)................... 69,910,175
-----------
COMMON STOCK -- 0.0%
Machinery -- 0.0%
Manitowoc Co., Inc.
(cost $261).......................... 28 1,407
-----------
PREFERRED STOCK -- 0.7%
Financial Services -- 0.4%
General Electric Capital Corp.
4.50%(9)............................. 34,000 810,900
-----------
Government Agency -- 0.3%
Federal Home Loan Mtg. Corp. 5.70%.... 5,721 275,466
Federal National Mtg. Assoc. 7.00%(4). 6,152 339,898
-----------
615,364
-----------
27
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal
Amount/ Value
Security Description Shares (Note 2)
----------------------------------------------------------------------
PREFERRED STOCK (continued)
Machinery -- 0.0%
Fairfield Manufacturing Co., Inc.
11.25%+(5)(10)(11)........................... $28 $ 0
------------
Total Preferred Stock
(cost $1,485,568)............................ 1,426,264
------------
WARRANTS+ -- 0.0%
Communication Equipment -- 0.0%
Concentric Network Corp.
Expires 12/15/07 (strike price $5.43)(5)(11). 5 0
------------
Telecommunications -- 0.0%
KMC Telecom Holdings, Inc.
Expires 01/31/08 (strike price $0.01)(5)(11). 50 0
------------
Total Warrants
(cost $0).................................... 0
------------
Total Long-Term Investment Securities
(cost $189,681,567).......................... 188,866,208
------------
Value
Security Description Shares (Note 2)
-----------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.8%
Agreement with State Street Bank & Trust.,
bearing interest at 3.45% dated 09/30/05 to
be repurchased 10/03/05 in the amount of
$7,410,130 and collateralized by $7,535,000
of Federal Home Loan Bank, bearing interest
at 3.63% due 02/15/07 having an
approximate value of $7,630,363
(cost $7,408,000)........................... 7,408,000 $ 7,408,000
------------
TOTAL INVESTMENTS --
(cost $197,089,567)@........................ 100.4% 196,274,208
Liabilities in excess of other assets.......... (0.4) (858,106)
--------- ------------
NET ASSETS -- 100.0% $195,416,102
========= ============
- --------
+ Non-income producing security
# Security represents an investment in an affiliated company; see Note 7.
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. The Fund 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 September 30,
2005, the aggregate value of these securities was $19,989,579 representing
10.2% 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.
TIPS --Treasury Inflation Protected Security
(1) Commercial mortgaged backed security.
(2) Collateralized mortgage obligation.
(3) Variable rate security -- the rate reflected is as of September 30, 2005;
maturity date reflects next reset date.
(4) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of September 30, 2005.
(5) Fair valued security; See Note 2.
(6) Security is a "step-up" bond where the coupon rate increases or steps up
at a predetermined rate. Rate shown reflects the increased rate.
(7) Bond in default.
(8) Company has filed for Chapter 11 bankruptcy protection.
(9) Security is a "step-up" preferred stock where the dividend rate increases
or steps up at a predetermined rate. Rate reflected is as of September 30,
2005
(10) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(11) Illiquid security.
(12) Bond in default of interest and principal
See Notes to Financial Statements
28
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- September 30, 2005 -- (unaudited)
Industry Allocation*
Government National Mortgage Association.................... 46.6%
U.S. Treasury Notes......................................... 26.6
U.S. Treasury Bonds......................................... 17.2
Private Export Funding...................................... 5.1
Federal Farm Credit Bank.................................... 3.1
Small Business Administration............................... 1.4
Federal National Mortgage Association....................... 0.9
International Bank for Reconstruction and Development....... 0.1
-----
101.0%
=====
Credit Quality+#
Government -- Treasury............................ 43.5%
Government -- Agency.............................. 55.7
Not Rated@........................................ 0.8
-----
100.0%
=====
- --------
* Calculated as a percentage on net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Sources Standard & Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
29
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 43.8%
U.S Treasury Bonds -- 17.2%
3.38% due 04/15/32 TIPS......... $16,505,100 $21,821,541
5.38% due 02/15/31.............. 12,000,000 13,443,744
-----------
35,265,285
-----------
U.S. Treasury Notes -- 26.6%
3.88% due 09/15/10.............. 12,000,000 11,830,308
4.13% due 05/15/15.............. 12,000,000 11,793,276
4.25% due 08/15/15.............. 31,000,000 30,806,250
-----------
54,429,834
-----------
Total U.S. Government Obligations
(cost $91,597,003).............. 89,695,119
-----------
U.S. GOVERNMENT AGENCIES -- 57.2%
Federal Farm Credit Bank -- 3.1%
2.50% due 03/15/06.............. 5,000,000 4,964,505
5.64% due 04/04/11.............. 500,000 527,009
6.00% due 03/07/11.............. 200,000 213,716
6.30% due 12/03/13.............. 500,000 556,208
-----------
6,261,438
-----------
Federal Home Loan Mortgage Corporation -- 0.0%
8.00% due 06/01/08.............. 12,560 12,723
8.25% due 07/01/06.............. 582 584
8.50% due 05/01/08.............. 1,151 1,175
100.00% due 10/01/05(1)......... 77 77
-----------
14,559
-----------
Federal National Mortgage Association -- 0.9%
8.00% due 01/01/23.............. 22,406 24,017
6.53% due 05/25/30.............. 1,705,985 1,771,557
8.00% due 01/01/23.............. 13,570 14,555
11.00% due 02/01/15............. 35 39
11.50% due 09/01/19............. 19,133 21,039
-----------
1,831,207
-----------
Government National Mortgage Association -- 46.6%
4.50% due 05/15/18............... 1,378,169 1,361,025
4.50% due 08/15/18............... 2,139,792 2,113,175
4.50% due 09/15/18............... 5,831,650 5,759,109
4.50% due 10/15/18............... 5,638,052 5,567,919
4.50% due 09/15/33............... 5,857,197 5,640,130
5.00% due 04/15/18............... 6,123,877 6,158,068
5.00% due 08/15/33............... 2,626,836 2,603,573
5.00% due 09/15/33............... 1,173,960 1,163,564
5.00% due 10/15/33............... 809,288 802,121
5.00% due 11/15/34............... 268,375 265,748
5.50% due 11/15/32............... 20,331 20,543
5.50% due 03/15/33............... 706,159 713,318
5.50% due 04/15/33............... 839,721 848,234
5.50% due 05/15/33............... 1,877,882 1,896,920
5.50% due 06/15/33............... 8,654,650 8,742,393
5.50% due 07/15/33............... 2,456,352 2,481,255
5.50% due 10/15/33............... 2,438,008 2,462,725
5.50% due 12/15/33............... 488,992 493,949
5.50% due 01/15/34............... 4,452,763 4,496,306
5.50% due 02/15/34............... 2,916,257 2,944,774
6.00% due 01/15/28............... 5,163 5,296
6.00% due 04/15/28............... 1,853,116 1,901,933
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Government National Mortgage Association (continued)
6.00% due 05/15/28............ $ 4,046 $ 4,150
6.00% due 10/15/28............ 20,472 20,999
6.00% due 01/15/29............ 1,797 1,843
6.00% due 03/15/29............ 105,706 108,394
6.00% due 04/15/29............ 61,496 63,060
6.00% due 05/15/29............ 115,330 118,263
6.00% due 06/15/29............ 38,255 39,228
6.00% due 04/15/31............ 45,288 46,402
6.00% due 05/15/31............ 78,431 80,359
6.00% due 11/15/31............ 355,934 364,685
6.00% due 12/15/31............ 798,820 818,458
6.00% due 01/15/32............ 288,981 296,060
6.00% due 02/15/32............ 59,064 60,511
6.00% due 03/15/32............ 13,108 13,429
6.00% due 08/15/32............ 397,471 407,207
6.00% due 11/15/32............ 71,976 73,739
6.00% due 12/15/32............ 11,911 12,203
6.00% due 01/15/33............ 27,129 27,793
6.00% due 02/15/33............ 171,452 175,650
6.00% due 03/15/33............ 159,164 163,060
6.00% due 04/15/33............ 524,080 536,909
6.00% due 07/15/33............ 391,409 400,991
6.00% due 08/15/33............ 3,806,081 3,899,423
6.00% due 09/15/33............ 528,165 541,094
6.00% due 10/15/33............ 2,366,869 2,424,810
6.00% due 11/15/33............ 241,081 246,982
6.00% due 12/15/33............ 1,311,520 1,343,626
6.00% due 02/15/34............ 490,421 502,445
6.00% due 05/15/34............ 80,505 82,478
6.00% due 06/15/34............ 59,419 60,876
6.00% due 07/15/34............ 3,917,869 4,013,930
6.00% due 08/15/34............ 265,555 272,066
6.00% due 09/15/34............ 1,659,695 1,700,388
6.00% due 12/15/34............ 634,890 650,456
6.00% due 09/15/34............ 665,393 681,707
6.00% due 10/15/34............ 7,309,652 7,488,875
6.00% due 11/15/34............ 802,863 822,548
6.00% due 01/15/35............ 1,665,762 1,706,490
6.00% due 06/15/35............ 437,550 448,248
6.00% due 08/15/35............ 1,672,869 1,713,771
6.50% due 02/15/29............ 25,572 26,650
6.50% due 05/15/31............ 48,571 50,551
6.50% due 06/15/31............ 78,211 81,400
6.50% due 07/15/31............ 111,742 116,299
6.50% due 08/15/31............ 107,601 111,989
6.50% due 09/15/31............ 226,832 236,081
6.50% due 10/15/31............ 542,972 565,112
6.50% due 11/15/31............ 20,151 20,972
6.50% due 12/15/31............ 38,351 39,915
6.50% due 01/15/32............ 48,383 50,341
6.50% due 02/15/32............ 935,433 973,293
6.50% due 06/15/32............ 157,348 163,716
7.00% due 07/15/23............ 50,722 53,602
7.00% due 10/15/23............ 156,889 165,797
7.00% due 09/15/25............ 359,494 379,541
7.00% due 03/20/29............ 28,871 30,234
7.00% due 06/20/29............ 4,651 4,871
7.00% due 11/20/30............ 123,172 128,944
30
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage Association (continued)
7.50% due 04/15/17............. $ 17,009 $ 18,105
7.50% due 08/15/23............. 270,200 288,761
7.50% due 09/15/23............. 805,947 861,312
7.50% due 10/15/23............. 26,206 28,006
8.00% due 11/15/06............. 741 753
8.00% due 02/15/08............. 1,199 1,238
9.00% due 12/15/16............. 107,792 117,156
11.00% due 08/20/15............ 304 332
11.00% due 09/20/15............ 730 800
11.50% due 03/15/13............ 24,422 27,052
11.50% due 06/15/13............ 10,297 11,369
11.50% due 05/20/15............ 4,073 4,502
12.50% due 09/15/14............ 7,780 8,706
13.00% due 01/15/11............ 3,352 3,745
13.00% due 02/15/11............ 5,003 5,588
13.00% due 03/15/11............ 275 307
13.00% due 04/15/11............ 592 661
13.00% due 09/15/13............ 5,432 6,097
13.00% due 10/20/14............ 4,199 4,689
13.00% due 11/15/14............ 848 954
13.00% due 02/20/15............ 1,380 1,538
13.50% due 02/15/13............ 12,350 13,968
15.00% due 01/15/12............ 510 587
15.00% due 02/15/12............ 1,209 1,390
15.00% due 06/15/12............ 13,008 14,953
15.00% due 09/15/12............ 712 818
15.50% due 09/15/11............ 39,147 44,979
-----------
95,543,358
-----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
International Bank for Reconstruction and
Development -- 0.1%
5.00% due 03/28/06.................... $ 350,000 $ 351,435
------------
Private Export Funding -- 5.1%
5.87% due 07/31/08.................... 10,000,000 10,373,240
------------
Small Business Administration -- 1.4%
6.30% due 06/01/18.................... 2,690,730 2,800,731
------------
Total U.S. Government Agencies
(cost $117,197,391)................... 117,175,968
------------
TOTAL INVESTMENTS --
(cost $208,794,394)@.................. 101.0% 206,871,087
Liabilities in excess of other assets.... (1.0) (2,055,825)
----------- ------------
NET ASSETS -- 100.0% $204,815,262
=========== ============
- --------
@ See Notes 5 for cost of investment on a tax basis.
TIPS --Treasury Inflation Protected Security
(1) Variable rate security--the rate reflected is as of September 30, 2005;
maturity date reflects the next reset date.
See Notes to Financial Statements
31
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- September 30, 2005 -- (unaudited)
Industry Allocation*
Government National Mortgage Association 83.4%
Repurchase Agreements................... 21.1
Federal Home Loan Bank.................. 14.7
United States Treasury Notes............ 5.6
Federal Farm Credit Bank................ 3.1
Federal National Mortgage Association... 2.1
United States Treasury Bonds............ 1.7
Small Business Administration........... 0.2
-----
131.9%
=====
Credit Quality+#
Government -- Treasury 7.6%
Government -- Agency.. 92.4
-----
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.
32
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 7.3%
U.S Treasury Bonds -- 1.7%
5.38% due 02/15/31.............. $ 7,000,000 $ 7,842,184
------------
U.S. Treasury Notes -- 5.6%
3.88% due 09/15/10.............. 3,000,000 2,957,577
4.13% due 05/15/15.............. 3,000,000 2,948,319
4.25% due 08/15/15.............. 21,000,000 20,868,750
------------
26,774,646
------------
Total U.S. Government Obligations
(cost $35,118,886).............. 34,616,830
------------
U.S. GOVERNMENT AGENCIES -- 88.8%
Federal National Mortgage Association -- 2.1%
5.00% due 01/25/18(1)........... 10,000,000 10,035,888
------------
Government National Mortgage Association -- 83.4%
4.50% due 05/15/18............... 2,756,337 2,722,051
4.50% due 08/15/18............... 1,433,170 1,415,343
4.50% due 09/15/18............... 4,523,357 4,467,090
4.50% due 10/15/18............... 6,445,771 6,365,591
4.50% due 08/15/33............... 3,810,715 3,669,491
4.50% due 09/15/33............... 4,398,008 4,235,018
5.00% due 04/15/34............... 84,898 84,067
5.00% due 05/15/34............... 204,636 202,633
5.00% due 11/15/34............... 918,230 909,242
5.00% due 12/15/34............... 906,503 897,630
5.00% TBA due Oct................ 20,000,000 19,787,500
5.00% due 03/15/18............... 878,059 882,961
5.00% due 04/15/18............... 9,976,964 10,032,667
5.00% due 05/15/18............... 14,196,083 14,275,343
5.00% due 01/15/33............... 18,997 18,829
5.00% due 05/15/33............... 17,134 16,982
5.00% due 08/15/33............... 3,830,264 3,796,344
5.00% due 09/15/33............... 3,381,454 3,351,508
5.00% due 10/15/33............... 8,175,580 8,103,178
5.50% due 06/15/29............... 8,338 8,439
5.50% due 08/15/33............... 3,751,743 3,789,779
5.50% due 09/15/33............... 562,696 568,401
5.50% due 10/15/33............... 9,498,551 9,594,850
5.50% due 12/15/33............... 10,294,029 10,398,392
5.50% due 01/15/34............... 15,096,744 15,244,373
5.50% due 02/15/34............... 1,915,099 1,933,826
5.50% TBA due Oct................ 130,000,000 131,178,060
5.50% due 12/15/32............... 1,093,149 1,104,543
5.50% due 01/15/33............... 659,948 666,638
5.50% due 02/15/33............... 2,881,890 2,911,107
5.50% due 03/15/33............... 1,651,385 1,668,127
5.50% due 04/15/33............... 8,688,053 8,776,134
5.50% due 05/15/33............... 10,103,082 10,205,509
5.50% due 06/15/33............... 11,168,171 11,281,664
5.50% due 07/15/33............... 571,324 577,116
6.00% due 11/15/23............... 7,133 7,329
6.00% due 01/15/24............... 9,186 9,434
6.00% due 07/15/28............... 6,403 6,568
6.00% due 11/15/28............... 474,250 486,462
6.00% due 12/15/28............... 459,272 471,097
6.00% due 01/15/29............... 1,057,279 1,084,167
6.00% due 02/15/29............... 1,084,583 1,112,166
6.00% due 03/15/29............... 750,402 769,487
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Government National Mortgage Association (continued)
6.00% due 04/15/29........... $ 1,703,758 $ 1,747,088
6.00% due 04/15/29........... 323,612 331,927
6.00% due 05/15/29........... 228,532 234,344
6.00% due 06/15/29........... 706,572 724,583
6.00% due 07/15/29........... 346,869 355,690
6.00% due 08/15/29........... 31,960 32,773
6.00% due 10/15/29........... 173,657 178,074
6.00% due 04/15/31........... 24,703 25,310
6.00% due 07/15/31........... 42,771 43,823
6.00% due 10/15/31........... 133,999 137,293
6.00% due 11/15/31........... 2,106,038 2,157,813
6.00% due 12/15/31........... 974,952 998,921
6.00% due 01/15/32........... 928,061 950,795
6.00% due 02/15/32........... 89,631 91,827
6.00% due 03/15/32........... 620,464 635,663
6.00% due 07/15/32........... 161,664 165,625
6.00% due 08/15/32........... 2,457,958 2,518,328
6.00% due 09/15/32........... 1,814,297 1,858,740
6.00% due 10/15/32........... 275,243 281,985
6.00% due 11/15/32........... 10,901 11,168
6.00% due 12/15/32........... 223,705 229,185
6.00% due 01/15/33........... 2,183,383 2,236,832
6.00% due 02/15/33........... 3,701,220 3,791,824
6.00% due 03/15/33........... 1,894,922 1,941,309
6.00% due 04/15/33........... 2,286,913 2,342,895
6.00% due 05/15/33........... 2,415,055 2,474,174
6.00% due 06/15/33........... 1,661,264 1,701,932
6.00% due 08/15/33........... 2,722,512 2,789,179
6.00% due 10/15/33........... 794,193 813,635
6.00% due 11/15/33........... 3,047,028 3,121,619
6.00% due 12/15/33........... 4,837,407 4,955,825
6.00% due 01/15/34........... 2,862,385 2,932,567
6.00% due 02/15/34........... 16,988,450 17,404,984
6.00% due 03/15/34........... 665,680 682,002
6.00% due 04/15/34........... 6,578,272 6,739,562
6.00% due 05/15/34........... 435,636 446,317
6.00% due 06/15/34........... 942,563 965,673
6.00% due 07/15/34........... 5,728,573 5,869,030
6.00% due 08/15/34........... 8,333,728 8,538,267
6.00% due 09/15/34........... 431,181 441,762
6.00% due 10/15/34........... 1,364,560 1,398,018
6.00% due 11/15/34........... 2,553,783 2,616,398
6.00% due 12/15/34........... 127,866 131,001
6.00% due 01/15/35........... 103,983 106,526
6.00% due 02/15/35........... 1,770,020 1,813,298
6.00% due 04/15/35........... 91,432 93,667
6.00% due 05/15/35........... 154,045 157,811
6.00% due 06/15/35........... 607,130 621,975
6.50% due 03/15/28........... 37,650 39,268
6.50% due 08/15/28........... 77,944 81,281
6.50% due 12/15/28........... 1,757 1,832
6.50% due 01/15/29........... 7,265 7,572
6.50% due 02/15/29........... 2,561 2,669
6.50% due 03/15/29........... 167,519 174,581
6.50% due 04/15/29........... 2,618 2,729
6.50% due 05/15/29........... 19,806 20,650
6.50% due 06/15/29........... 59,141 61,634
6.50% due 07/15/29........... 7,772 8,100
33
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage Association (continued)
6.50% due 10/15/29.................. $ 10,143 $ 10,571
6.50% due 08/15/31.................. 454,269 472,792
6.50% due 09/15/31.................. 34,243 35,639
6.50% due 10/15/31.................. 492,341 512,416
6.50% due 11/15/31.................. 316,956 329,880
6.50% due 12/15/31.................. 382,558 398,156
6.50% due 02/15/32.................. 317,241 330,080
6.50% due 05/15/32.................. 2,336,329 2,430,885
6.50% due 06/15/32.................. 174,126 181,174
7.00% due 03/15/23.................. 141,687 149,732
7.00% due 01/20/24.................. 1,087 1,143
7.00% due 03/20/24.................. 1,075 1,130
7.00% due 07/20/25.................. 6,511 6,841
7.00% due 09/15/25.................. 156,121 164,827
7.00% due 01/20/29.................. 65,724 68,826
7.00% due 02/20/29.................. 12,837 13,443
7.00% due 06/20/29.................. 23,063 24,152
7.00% due 07/20/29.................. 87,693 91,833
7.00% due 09/20/29.................. 8,544 8,947
7.00% due 10/20/29.................. 16,508 17,287
7.00% due 11/20/29.................. 6,174 6,465
7.00% due 03/20/30.................. 8,257 8,644
7.00% due 06/20/30.................. 15,743 16,481
7.00% due 08/20/30.................. 46,212 48,377
7.00% due 09/20/30.................. 39,788 41,653
7.00% due 10/20/30.................. 54,895 57,468
8.00% due 11/15/26.................. 281,337 301,632
8.00% due 12/15/29.................. 33,356 35,732
8.00% due 01/15/30.................. 983 1,052
8.00% due 04/15/30.................. 50,668 54,261
8.00% due 05/15/30.................. 8,335 8,927
8.00% due 08/15/30.................. 55,164 59,076
8.50% due 03/15/17.................. 34,115 37,108
8.50% due 05/15/21.................. 87,786 96,194
8.50% due 12/15/22.................. 147,182 161,455
8.50% due 01/15/23.................. 123,995 136,185
8.50% due 09/15/24.................. 53,244 58,527
9.00% due 07/15/16.................. 89,111 96,851
9.00% due 10/15/16.................. 19,735 21,449
------------
396,823,780
------------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Small Business Administration -- 0.2%
6.30% due 06/01/18.................. $ 896,910 $ 933,577
-------------
Federal Farm Credit Bank -- 3.1%
2.50% due 03/15/06(2)............... 15,000,000 14,893,515
-------------
Total U.S. Government Agencies
(cost $425,770,143)................. 422,686,760
-------------
Total Long-Term Investment Securities -- 96.1%
(cost $460,889,029)................. 457,303,590
-------------
SHORT-TERM INVESTMENT SECURITIES -- 14.7%
Federal Home Loan Bank
3.17% due 10/03/05(2)
(cost $69,987,672).................. 70,000,000 69,987,672
-------------
REPURCHASE AGREEMENTS -- 21.1%
State Street Bank & Trust Co. Joint
Repurchase Agreement(2)(3).......... 10,604,000 10,604,000
UBS Securities, LLC Joint Repurchase
Agreement(2)(3)..................... 90,000,000 90,000,000
-------------
Total Repurchase Agreements
(cost $100,604,000)................. 100,604,000
-------------
TOTAL INVESTMENTS --
(cost $631,480,701)@................ 131.9% 627,895,262
Liabilities in excess of other assets.. (31.9) (151,827,083)
----------- -------------
NET ASSETS -- 100.0% $ 476,068,179
=========== =============
- --------
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) Collateralized mortgage obligation.
(2) The security or a portion thereof represents collateral for TBA securities.
(3) See Note 2 for details of Joint Repurchase Agreement.
See Notes to Financial Statements
34
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- September 30, 2005 -- (unaudited)
Industry Allocation*
Foreign Government Agencies......... 31.0%
Financial Services.................. 8.8
Federal National Mtg. Association... 6.6
Federal Home Loan Mtg. Corp......... 6.5
Telecommunications.................. 4.8
Broadcasting & Media................ 3.9
U.S.Treasury Notes.................. 3.9
Utilities........................... 3.7
Leisure & Tourism................... 3.1
Repurchase Agreements............... 2.7
U.S Treasury Bonds.................. 2.4
Energy Sources...................... 2.1
Financial Services.................. 1.7
Food, Beverage & Tobacco............ 1.2
Forest Products..................... 1.1
Chemicals........................... 1.0
Health Services..................... 1.0
Time Deposit........................ 1.0
Automotive.......................... 0.9
Business Services................... 0.8
Energy Services..................... 0.8
Banks............................... 0.7
Medical Products.................... 0.7
Pharmaceuticals..................... 0.7
Insurance........................... 0.6
Metals & Mining..................... 0.6
Retail Stores....................... 0.6
Real Estate Investment Trusts....... 0.5
Household & Personal Products....... 0.4
Computer Software................... 0.3
Conglomerate........................ 0.3
Electronics......................... 0.3
Machinery........................... 0.3
Restaurants......................... 0.3
Retail.............................. 0.3
Transportation...................... 0.3
Building Materials.................. 0.2
Communication Equipment............. 0.2
Aerospace & Military Technology..... 0.1
Computers & Business Equipment...... 0.1
Government National Mtg. Association 0.1
Internet Content.................... 0.1
----
96.7%
====
Credit Quality+#
Government -- Treasury 7.1%
Government -- Agency.. 14.2
AAA................... 10.6
AA.................... 4.0
A..................... 6.0
BBB................... 12.2
BB.................... 17.5
B..................... 14.9
CCC................... 8.1
CC.................... 0.1
C..................... 0.2
Below C............... 0.1
Not Rated@............ 5.0
-----
100.0%
=====
Country Allocation*
United States. 60.5%
Brazil........ 6.1
Russia........ 4.1
Mexico........ 3.3
Canada........ 3.0
Sweden........ 2.3
Argentina..... 2.2
Turkey........ 2.0
Spain......... 1.7
Venezuela..... 1.6
Germany....... 1.4
Australia..... 0.9
Italy......... 0.8
South Africa.. 0.8
United Kingdom 0.7
Japan......... 0.6
Belgium....... 0.5
Czech Republic 0.5
Luxembourg.... 0.5
Greece........ 0.4
Ireland....... 0.4
Poland........ 0.4
Ukraine....... 0.4
France........ 0.3
Netherlands... 0.3
Uruguay....... 0.3
Cayman Island. 0.2
Finland....... 0.2
Peru.......... 0.2
Mexico........ 0.1
----
96.7%
====
- --------
* 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.
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 3.3%
Asset-Backed Securities -- 3.3%
Banc of America Commercial Mtg., Inc.
2005 5 Commercial Mtg. Certificate A J
5.33% due 09/10/15(1)......................... $ 400,000 $ 402,015
Commercial Mtg. Asset Trust
Commercial Mtg. Certificates, Series 1999-C1,
Class C
7.35% due 10/11/05(1)......................... 1,200,000 1,375,378
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates,
Series 1998-CG1, Class S
0.83% due 10/01/05(1)(2)(4)................... 7,426,651 139,307
DLJ Commercial Mtg. Corp.
Commercial Mtg. Certificates,
Series 1998-CF2, Class S
0.98% due 10/01/05(1)(2)(4)................... 6,412,767 150,945
Lehman Brothers Floating Rate Commercial Mtg.
Trust 2005, Class A2
3.93% due 07/15/18*(1)(3)..................... 1,000,000 998,700
Lehman Brothers Floating Rate Commercial Mtg.
Trust 2005 Pass-thru
3.98% due 07/15/18*(1)(3)..................... 1,000,000 998,710
Mid-State Trust Asset Backed Notes,
Series 6, Class A1
7.34% due 07/01/35(1)......................... 730,531 769,492
Morgan Stanley Capital I,
Class B 2005-T19 Class B
5.06% due 10/01/05(1)(2)...................... 300,000 296,228
Morgan Stanley Capital I,
Class C 2005-T19 Class C
5.16% due 10/01/05(1)(2)...................... 200,000 196,977
PNC Mtg. Securities Corp.
Certificates, Series 1992-2, Class DB3
6.91% due 10/01/05(1)(2)(5)................... 295,086 294,281
Wachovia Bank Commercial Mtg.
Trust 2005 Commercial Mtg. Class B
4.00% due 01/15/18*(1)(3)..................... 1,200,000 1,198,812
----------
Total Asset-Backed Securities
(cost $6,867,958)............................. 6,820,845
----------
BONDS & NOTES -- 29.1%
Aerospace & Military Technology -- 0.1%
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes, Series B
12.00% due 09/30/08........................... 175,000 105,000
Raytheon Co.
Notes
6.75% due 08/15/07............................ 113,000 116,766
----------
221,766
----------
Apparel & Textiles -- 0.0%
Warnaco, Inc.
Sr. Notes
8.88% due 06/15/13............................ 50,000 54,000
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Automotive -- 0.9%
BREED Technologies, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 04/15/08(6)(7)+.................. $500,000 $ 0
Cooper-Standard Automotive, Inc.
Sr. Sub. Notes
8.38% due 12/15/14......................... 155,000 130,200
DaimlerChrysler North America Holding Corp.
Sr. Notes
4.88% due 06/15/10......................... 38,000 37,240
Dana Corp.
Sr. Notes
5.85% due 01/15/15......................... 450,000 352,972
Diamond Triumph Auto Glass, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 04/01/08(7)(12).................. 100,000 70,000
Dominion Resources, Inc.
Sr. Notes, Series B
5.95% due 06/15/35......................... 55,000 53,729
Dura Operating Corp.
Sr. Notes
8.63% due 04/15/12......................... 179,000 159,310
Exide Corp.
Term Loan
10.00% due 03/15/25(7)(12)................. 225,000 0
Ford Motor Co.
Bonds
6.38% due 02/01/29......................... 44,000 31,570
Ford Motor Co.
Notes
7.45% due 07/16/31......................... 850,000 663,000
Hertz Corp.
Notes
6.90% due 08/15/14......................... 44,000 40,753
Hertz Corp.
Sr. Notes
7.40% due 03/01/11......................... 226,000 219,000
Hertz Corp.
Notes
7.63% due 06/01/12......................... 82,000 78,729
Navistar International Corp.
Sr. Notes, Series B
6.25% due 03/01/12......................... 29,000 27,550
Stanadyne Corp.
Sr. Sub. Notes
10.00% due 08/15/14........................ 50,000 49,500
----------
1,913,553
----------
Banks -- 0.6%
American Express Centurion Bank
Notes
3.93% due 11/16/09(3)...................... 40,000 39,786
Bank of America Corp.
Sub. Notes
7.80% due 09/15/16......................... 123,000 149,729
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
BONDS & NOTES (continued)
Banks (continued)
Charter One Bank FSB
Sub. Notes
6.38% due 05/15/12.................. $318,000 $ 344,973
Credit Suisse First Boston New York
Sub. Notes
6.50% due 05/01/08*................. 40,000 41,707
HSBC Bank USA
Sub. Notes
5.63% due 08/15/35.................. 65,000 64,025
Independence Community Bank Corp.
Sr. Notes
4.90% due 09/23/10.................. 60,000 59,494
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08.................. 63,000 65,567
PNC Funding Corp.
Guaranteed Sr. Notes
5.75% due 08/01/06.................. 85,000 85,828
Popular North America, Inc.
Notes
4.25% due 04/01/08.................. 108,000 106,597
Sovereign Bancorp, Inc.
Sr. Notes
4.80% due 09/01/10*................. 110,000 109,218
US Bank NA
Notes
3.90% due 08/15/08.................. 85,000 83,418
Wachovia Corp.
Sub. Debentures
5.50% due 08/01/35.................. 140,000 136,582
Wells Fargo & Co.
Notes
3.97% due 09/15/09(3)............... 36,000 36,054
----------
1,322,978
----------
Broadcasting & Media -- 3.0%
Adelphia Communications Corp.
Sr. Notes
10.25% due 06/15/11(6)+............. 50,000 38,000
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 02/15/12.................. 364,000 364,000
AMFM, Inc.
Sr. Notes
8.00% due 11/01/08.................. 148,000 159,362
CCO Holdings, LLC
Sr. Notes
8.75% due 11/15/13.................. 175,000 172,813
Charter Communications Holdings, LLC
Sr. Notes
9.63% due 11/15/09.................. 925,000 786,250
Charter Communications Holdings, LLC
Sr. Notes
9.92% due 04/01/11(8)............... 200,000 144,500
Charter Communications Holdings, LLC
Sr. Notes
10.25% due 01/15/10................. 25,000 20,750
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Broadcasting & Media (continued)
Charter Communications Holdings, LLC
Sr. Notes
10.75% due 10/01/09................. $ 450,000 $ 396,000
Charter Communications Holdings, LLC
Sr. Notes
11.13% due 01/15/11................. 1,500,000 1,155,000
Clear Channel Communications, Inc.
Sr. Debentures
6.88% due 06/15/18.................. 130,000 133,271
COX Communications, Inc.
Debentures
7.63% due 06/15/25.................. 163,000 187,760
COX Communications, Inc.
Notes
7.75% due 11/01/10.................. 110,000 121,723
Fisher Communications, Inc.
Sr. Notes
8.63% due 09/15/14.................. 300,000 320,250
Haights Cross Operating Co.
Guaranteed Sr. Notes
11.75% due 08/15/11................. 150,000 164,250
Historic TW, Inc.
Guaranteed Sr. Notes
6.63% due 05/15/29.................. 144,000 150,625
Insight Communications Co., Inc.
Sr. Sub. Notes
12.25% due 02/15/11(8).............. 100,000 102,000
News America, Inc.
Guaranteed Sr. Debentures
7.30% due 04/30/28.................. 65,000 72,158
Paxson Communications Corp.
Guaranteed Sr. Sub. Notes
12.25% due 01/15/09(8).............. 700,000 679,000
Telex Communications, Inc.
Sr. Sec. Notes
11.50% due 10/15/08................. 50,000 53,375
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 03/15/23.................. 198,000 240,171
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 01/15/14.................. 125,000 110,937
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 03/01/11................. 675,000 637,875
----------
6,210,070
----------
Building Materials -- 0.2%
American Standard, Inc.
Sr. Notes
7.63% due 02/15/10.................. 163,000 178,831
Dayton Superior Corp.
Sr. Sec. Notes
10.75% due 09/15/08................. 175,000 176,750
----------
355,581
----------
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
BONDS & NOTES (continued)
Business Services -- 0.8%
Alderwoods Group, Inc.
Sr. Notes
7.75% due 09/15/12............. $ 50,000 $ 52,500
Associated Materials, Inc.
Sr. Sub. Notes
9.75% due 04/15/12............. 175,000 169,312
Di Finance Subordinated, LLC
Division Capital Corp.
Sr. Sub. Notes
9.50% due 02/15/13*............ 225,000 235,125
FTI Consulting, Inc.
Sr. Notes
7.63% due 06/15/13*............ 75,000 76,500
Mobile Mini, Inc.
Sr. Notes
9.50% due 07/01/13............. 100,000 110,500
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 09/01/10............ 275,000 277,750
PHH Corp.
Notes
6.00% due 03/01/08............. 67,000 68,150
Seitel, Inc.
Sr. Notes
11.75% due 07/15/11............ 375,000 416,250
Service Corp. International
Sr. Notes
6.75% due 04/01/16............. 75,000 75,375
Service Corp. International
Sr. Notes
7.00% due 06/15/17*............ 200,000 202,000
----------
1,683,462
----------
Chemicals -- 0.6%
BCI US Finance Corp.
Sr. Sec. Notes
9.10% due 07/15/10*(3)......... 100,000 101,000
Cytec Industries, Inc.
Notes
5.50% due 10/01/10............. 60,000 59,742
Cytec Industries, Inc.
Notes
6.00% due 10/01/15............. 180,000 179,333
Dow Chemical Co.
Debentures
7.38% due 03/01/23............. 97,000 115,258
Equistar Chemicals LP
Notes
8.75% due 02/15/09............. 75,000 78,000
Equistar Chemicals LP
Sr. Notes
10.63% due 05/01/11............ 175,000 190,750
ICI North America
Debentures
8.88% due 11/15/06............. 111,000 115,816
Lubrizol Corp.
Sr. Notes
5.88% due 12/01/08............. 55,000 56,454
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
Chemicals (continued)
Lubrizol Corp.
Sr. Debentures
6.50% due 10/01/34................. $ 65,000 $ 68,150
Lyondell Chemical Co.
Guaranteed Sr. Sec. Notes
9.50% due 12/15/08................. 50,000 52,375
Phosphate Resource Partners LP
Sr. Notes
7.00% due 02/15/08................. 125,000 127,813
Rockwood Specialties Group
Sr. Sub. Notes
7.50% due 11/15/14*................ 75,000 72,750
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 05/15/11................ 55,000 59,950
----------
1,277,391
----------
Communication Equipment -- 0.2%
Motorola, Inc.
Debentures
6.50% due 09/01/25................. 222,000 241,877
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 01/15/10................. 250,000 252,500
----------
494,377
----------
Computer Software -- 0.3%
Solar Capital Corp.
Sr. Notes
9.13% due 08/15/13*................ 175,000 181,344
Sungard Data Systems, Inc.
Sr. Sub. Notes
10.25% due 08/15/15*............... 150,000 151,875
Unisys Corp.
Sr. Notes
8.00% due 10/15/12................. 225,000 221,062
----------
554,281
----------
Computers & Business Equipment -- 0.1%
Activant Solutions, Inc.
Sr. Notes
9.50% due 04/01/10*(3)............. 100,000 102,000
----------
Conglomerate -- 0.2%
Carriage Services, Inc.
Sr. Notes
7.88% due 01/15/15................. 287,000 297,045
Park-Ohio Industries, Inc.
Sr. Sub. Notes
8.38% due 11/15/14................. 75,000 65,062
----------
362,107
----------
Electronics -- 0.2%
Advanced Micro Devices, Inc.
Sr. Notes
7.75% due 11/01/12................. 225,000 230,625
Sanmina-Sci Corp.
Sr. Sub. Notes
6.75% due 03/01/13................. 75,000 71,250
----------
301,875
----------
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
BONDS & NOTES (continued)
Energy Services -- 0.1%
Hanover Compressor Co.
Sub. Notes
11.00% due 03/31/07.............. $ 25,000 $ 22,500
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 06/01/11............... 197,728 206,514
Pride International, Inc.
Sr. Notes
7.38% due 07/15/14............... 50,000 54,312
--------
283,326
--------
Energy Sources -- 1.9%
Belden & Blake Corp.
Sec. Notes
8.75% due 07/15/12............... 75,000 78,375
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*.............. 680,000 481,100
Chesapeake Energy Corp.
Sr. Notes
6.25% due 01/15/18............... 350,000 343,000
Chesapeake Energy Corp.
Sr. Notes
6.63% due 01/15/16............... 25,000 25,312
Citgo Petroleum Corp.
Sr. Notes
6.00% due 10/15/11............... 75,000 75,000
Colorado Interstate Gas Co.
Debentures
6.85% due 06/15/37............... 150,000 151,557
ConocoPhillips
Sr. Notes
7.00% due 03/30/29............... 125,000 150,494
Costilla Energy, Inc.
Sr. Notes
10.25% due 10/01/49(6)(7)+....... 500,000 0
Encore Acquisition Co.
Sr. Sub. Notes
6.00% due 07/15/15*.............. 75,000 73,125
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 04/15/14............... 50,000 49,750
Enterprise Products Operating LP
Sr. Notes
4.95% due 06/01/10............... 130,000 127,768
Enterprise Products Operating LP,
Series B Guaranteed Sr. Notes
5.00% due 03/01/15............... 60,000 56,930
EXCO Resources, Inc.
Guaranteed Notes
7.25% due 01/15/11............... 125,000 129,375
FPL Group Capital, Inc.
Notes
4.09% due 02/16/07............... 120,000 119,211
Grant Prideco, Inc.
Sr. Notes
6.13% due 08/15/15*.............. 50,000 50,500
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Energy Sources (continued)
Hilcorp Finance Co.
Sr. Notes
10.50% due 09/01/10*........................ $ 350,000 $ 385,000
Mission Energy Holding Co.
Sr. Sec. Notes
13.50% due 07/15/08......................... 1,075,000 1,265,812
Newfield Exploration Co.
Sr. Sub. Notes
6.63% due 09/01/14.......................... 150,000 156,000
Roseton Danskammer
Guaranteed Pass-Thru Certificates, Series B
7.67% due 11/08/16.......................... 150,000 149,250
Whiting Petroleum Corp.
Sr. Sub. Notes
7.00% due 02/01/14*......................... 100,000 101,375
----------
3,968,934
----------
Financial Services -- 5.5%
AAC Group Holding Corp.
Sr. Notes
10.25% due 10/01/12*(8)..................... 125,000 90,000
Affinity Group, Inc.
Sr. Sub. Notes
10.00% due 02/15/15*........................ 125,000 135,000
Associates Corp. of North America
Sr. Debentures
6.95% due 11/01/18.......................... 60,000 70,049
BAE Systems Holdings, Inc.
Guaranteed Notes
4.75% due 08/15/10*......................... 245,000 241,944
BAE Systems Holdings, Inc.
Guaranteed Notes
5.20% due 08/15/15*......................... 67,000 66,078
BAE Systems Holdings, Inc.
Guaranteed Notes
6.40% due 12/15/11*......................... 237,000 252,672
Borden United States Finance Corp.
Sr. Sec. Notes
9.00% due 07/15/14*......................... 75,000 76,125
Caterpillar Financial Services Corp.
Sr. Notes
4.30% due 06/01/10.......................... 100,000 98,505
Caterpillar Financial Services Corp.
Notes
4.70% due 03/15/12.......................... 72,000 71,527
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 06/15/09*........................ 500,000 602,500
Citigroup Global Markets Holdings, Inc.
Sr. Notes
5.88% due 03/15/06.......................... 85,000 85,604
Consolidated Communications Holdings, Inc.
Sr. Notes
9.75% due 04/01/12.......................... 135,000 143,775
Countrywide Home Loans, Inc.
Tranche Trust 00255
5.50% due 08/01/06.......................... 101,000 101,815
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(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............. $ 223,000 $ 233,883
FBG Finance, Ltd.
Notes
5.88% due 06/15/35*............ 60,000 58,805
Ford Motor Credit Co.
Notes
5.70% due 01/15/10............. 58,000 52,688
Ford Motor Credit Co.
Sr. Notes
5.80% due 01/12/09............. 117,000 109,171
Ford Motor Credit Co.
Notes
6.38% due 11/05/08............. 123,000 118,229
Ford Motor Credit Co.
Notes
7.00% due 10/01/13............. 250,000 231,839
General Electric Capital Corp.
Notes
5.38% due 03/15/07............. 67,000 67,849
General Electric Capital Corp.
Bonds
6.75% due 03/15/32............. 201,000 236,422
General Motors Acceptance Corp.
Notes
6.07% due 12/01/14(3).......... 625,000 525,447
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14............. 225,000 195,715
General Motors Acceptance Corp.
Sr. Notes
7.00% due 02/01/12............. 145,000 130,946
General Motors Acceptance Corp.
Bonds
8.00% due 11/01/31............. 3,050,000 2,663,166
H & E Equipment Services, LLC
Guaranteed Sr. Sec. Notes
11.13% due 06/15/12............ 125,000 140,000
HSBC Finance Corp. Global
Sr. Notes
4.75% due 07/15/13............. 237,000 231,320
ING USA Global Funding Trust
Tranche Trust 00001
4.50% due 10/01/10............. 120,000 118,366
John Deere Capital Corp.
Tranche Trust 00332
4.50% due 08/25/08............. 166,000 165,353
JPMorgan Chase & Co.
Global Sub. Notes
5.15% due 10/01/15............. 144,000 143,113
Lehman Brothers Holdings, Inc.
Notes
6.63% due 01/18/12............. 120,000 130,538
MBNA Corp.
Tranche Sr. 00058
4.63% due 09/15/08............. 190,000 189,862
MedCath Holdings Corp.
Sr. Notes
9.88% due 07/15/12............. 175,000 190,750
Merrill Lynch & Co., Inc.
Tranche Trust 00476
4.79% due 08/04/10............. 96,000 95,668
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------------
Financial Services (continued)
Muzak, LLC/ Muzak Finance Corp.
Guaranteed Sr. Sub. Notes
9.88% due 03/15/09............................... $ 75,000 $ 37,594
National Rural Utilites Cooperative Finance Corp.
Sec. Collateral Trust Bonds
3.88% due 02/15/08............................... 85,000 83,671
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
11.38% due 04/01/13(8)........................... 575,000 425,500
NGC Corp. Capital Trust,
Series B Guaranteed Sub. Notes
8.32% due 06/01/27............................... 1,225,000 1,099,438
Nisource Finance Corp.
Guaranteed Notes
5.45% due 09/15/20............................... 60,000 58,691
PCA, LLC
Sr. Notes
11.88% due 08/01/09.............................. 325,000 85,313
PNC Bank, National Assoc.
Notes
4.88% due 09/21/17............................... 130,000 126,156
Pricoa Global Funding I
Notes
4.63% due 06/25/12*.............................. 50,000 49,022
Principal Life Global Funding
Sec. Notes
5.13% due 06/28/07*.............................. 85,000 85,390
PX Escrow Corp.
Sr. Sub. Notes
9.63% due 02/01/06(8)............................ 125,000 122,031
Residential Capital Corp.
Notes
6.38% due 06/30/10*.............................. 234,000 237,060
Residential Capital Corp.
Notes
6.88% due 06/30/15*.............................. 84,000 87,899
Resona Preferred Global Securities Cayman, Ltd.
Bonds
7.19% due 07/30/15*(2)........................... 60,000 62,116
SLM Corp.,
Series A Tranche Trust 00087
3.81% due 07/27/09(3)............................ 60,000 59,952
Sprint Capital Corp.
Guaranteed Sr. Notes
6.88% due 11/15/28............................... 48,000 53,024
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 06/01/10.............................. 162,000 185,490
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
12.88% due 10/15/08.............................. 75,000 88,500
Transamerica Finance Corp.
Sr. Notes
6.40% due 09/15/08............................... 36,000 37,745
Washington Mutual, Inc.
Sr. Notes
5.25% due 09/15/17............................... 60,000 59,112
Xlliac Global Funding
Tranche Trust 00024
4.80% due 08/10/10*.............................. 180,000 178,838
-----------
11,287,266
-----------
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Food, Beverage & Tobacco -- 1.1%
Alliance One International, Inc.
Sr. Sub. Notes
12.75% due 11/15/12*............ $200,000 $ 183,000
American Stores Co.
Debentures
8.00% due 06/01/26.............. 164,000 152,310
Archer-Daniels-Midland Co.
Debentures
5.38% due 09/15/35.............. 70,000 67,823
Coca-Cola Enterprises, Inc.
Debentures
8.50% due 02/01/22.............. 78,000 102,684
ConAgra Foods, Inc.
Notes
6.00% due 09/15/06.............. 107,000 108,341
ConAgra, Inc.
Sr. Notes
7.13% due 10/01/26.............. 70,000 77,903
Le Natures, Inc.
Sr. Sub. Notes
10.00% due 06/15/13*............ 75,000 81,000
Monsanto Co.
Sr. Notes
5.50% due 08/15/25.............. 285,000 277,601
North Atlantic Holding Co., Inc.
Sr. Notes
12.25% due 03/01/14(8).......... 250,000 50,000
North Atlantic Trading Co., Inc.
Sr. Notes
9.25% due 03/01/12.............. 150,000 112,500
Stater Brothers Holdings, Inc.
Sr. Notes
8.13% due 06/15/12.............. 450,000 444,375
Wornick Co.
Sr. Sec. Notes
10.88% due 07/15/11............. 525,000 539,438
----------
2,196,975
----------
Forest Products -- 0.7%
Boise Cascade, LLC
Sr. Notes
6.47% due 10/17/12(3)........... 125,000 124,687
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09.............. 25,000 24,250
Caraustar Industries, Inc.
Guaranteed Sr. Sub. Notes
9.88% due 04/01/11.............. 50,000 49,500
Constar International, Inc.
Sr. Notes
7.17% due 11/15/05*............. 75,000 69,563
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23.............. 400,000 393,500
FiberMark, Inc.
Sr. Notes
9.38% due 10/15/06(6)+.......... 550,000 391,875
FiberMark, Inc.
Sr. Notes
10.75% due 04/15/11(6)+......... 125,000 95,312
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Forest Products (continued)
Georgia-Pacific Corp.
Sr. Notes
8.00% due 01/15/14................. $ 125,000 $ 136,875
Packaging Corp. of America
Sr. Notes
5.75% due 08/01/13................. 16,000 15,479
Pliant Corp.
Sr. Sec. Notes
11.13% due 09/01/09................ 120,000 103,200
Pliant Corp.
Sr. Sub. Notes
13.00% due 06/01/10(16)............ 250,000 118,750
----------
1,522,991
----------
Health Services -- 1.0%
Concentra Operating Corp.
Sr. Sub. Notes
9.13% due 06/01/12................. 180,000 187,200
Concentra Operating Corp.
Sr. Sub. Notes
9.50% due 08/15/10................. 30,000 31,425
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13................. 75,000 80,812
HCA, Inc.
Notes
6.38% due 01/15/15................. 450,000 445,208
HCA, Inc.
Notes
6.75% due 07/15/13................. 600,000 610,502
Pediatric Services Of America, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 04/15/08(7)............. 25,000 25,250
Psychiatric Solutions, Inc.
Sr. Sub. Notes
7.75% due 07/15/15*................ 67,000 69,178
Team Health, Inc.
Sr. Sub. Notes
9.00% due 04/01/12................. 225,000 238,500
Tenet Healthcare Corp.
Notes
7.38% due 02/01/13................. 125,000 118,437
Tenet Healthcare Corp.
Sr. Notes
9.25% due 02/01/15*................ 100,000 101,000
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13................. 75,000 75,938
US Oncology, Inc.
Sr. Sub. Notes
10.75% due 08/15/14................ 125,000 140,000
----------
2,123,450
----------
Household & Personal Products -- 0.2%
Procter & Gamble Co.
Bonds
2.00% due 06/21/10................. JPY 39,000,000 361,386
----------
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Insurance -- 0.4%
Allstate Financial Global Funding
Notes
5.25% due 02/01/07*............... $ 60,000 $ 60,372
Americo Life, Inc.
Notes
7.88% due 05/01/13*............... 38,000 39,485
Chubb Corp.
Notes
6.00% due 11/15/11................ 84,000 88,734
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 06/15/13............... 125,000 136,563
Liberty Mutual Group
Notes
6.50% due 03/15/35*............... 75,000 69,557
Metropolitan Life Global Funding I
Tranche Trust 00011
4.25% due 07/30/09*............... 132,000 130,029
Metropolitan Life Global Funding I
Tranche Trust 00019
4.63% due 08/19/10*............... 60,000 59,592
MIC Financing Trust I
Pass-Thru Certificates
8.38% due 02/01/27*............... 123,000 127,148
Ohio Casualty Corp.
Notes
7.30% due 06/15/14................ 100,000 107,782
--------
819,262
--------
Internet Content -- 0.1%
Spheris, Inc.
Sr. Sub. Notes
11.00% due 12/15/12*.............. 150,000 144,750
--------
Leisure & Tourism -- 2.7%
American Airlines, Inc.
Pass-Thru Certificates,
Series 2001-1, Class A2
6.82% due 05/23/11................ 500,000 458,806
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class A-2
6.88% due 07/02/09................ 264,176 254,081
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class A-1
7.20% due 01/02/19................ 78,422 77,936
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class B
7.63% due 01/02/15(6)+............ 751,504 624,967
Atlas Air, Inc.
Pass-Thru Certificates,
Series 2000-1
8.71% due 01/02/19................ 313,966 325,190
Atlas Air, Inc.
Pass-Thru Certificates,
Series 1999-1, Class C
8.77% due 01/02/11(6)+............ 62,428 34,067
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Leisure & Tourism (continued)
Atlas Air, Inc.
Pass-Thru Certificates
Series 2000-1, Class B
9.06% due 07/02/17........................... $552,091 $ 509,768
Circus & Eldorado Silver Legacy Capital Corp.
Mtg. Notes
10.13% due 03/01/12.......................... 575,000 600,875
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1999 1, Class A
6.55% due 02/02/19........................... 411,530 403,513
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1999-1, Class C
6.95% due 08/02/09........................... 127,510 111,735
Continental Airlines, Inc.
Pass-Thru Certificates,
Series 1999-2, Class C1
7.73% due 03/15/11........................... 45,376 37,639
Continental Airlines, Inc.
Sec. Pass-Thru Certificates,
Series 2000-2, Class B
8.31% due 10/02/19........................... 68,966 60,907
Delta Airlines, Inc.
Notes
8.30% due 12/15/29(6)(9)+.................... 500,000 90,000
Delta Airlines, Inc.
Sr. Notes
9.50% due 11/18/08*(6)(9)+................... 175,000 131,250
Delta Airlines, Inc.
Sr. Notes
10.00% due 08/15/08(6)(9)+................... 525,000 94,500
Eldorado Casino Shreveport Joint
1st Mtg. Notes
10.00% due 08/01/12.......................... 303,051 287,520
Eldorado Resorts, LLC
Sr. Notes
9.00% due 04/15/14(7)........................ 425,000 425,000
Harrahs Operating Co., Inc.
Guaranteed Sr. Notes
5.75% due 10/01/17*.......................... 60,000 58,729
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 06/15/10#......................... 135,000 145,800
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 09/15/11........................... 300,000 279,000
Turning Stone Casino Resort
Sr. Notes
9.13% due 12/15/10*.......................... 75,000 78,000
Waterford Gaming, LLC
Sr. Notes
8.63% due 09/15/12*.......................... 191,000 203,415
Worldspan LP
Sr. 2nd Lien Sec. Notes
10.04% due 02/15/11*......................... 450,000 396,000
----------
5,688,698
----------
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
BONDS & NOTES (continued)
Machinery -- 0.2%
Dresser Rand Group, Inc.
Sr. Sub. Notes
7.38% due 11/01/14*................ $188,000 $ 195,050
Huntsman Advanced Materials, LLC
Sr. Sec. Notes
11.00% due 07/15/10................ 175,000 196,000
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 06/01/07(6)(9)+......... 100,000 250
----------
391,300
----------
Medical Products -- 0.7%
AmerisourceBergen Corp.
Sr. Notes
5.88% due 09/15/15*................ 275,000 271,563
CDRV Investors, Inc.
Sr. Notes
9.63% due 01/01/15(8).............. 325,000 185,250
Encore Med IHC, Inc.
Sr. Sub. Notes
9.75% due 10/01/12................. 75,000 74,625
Genetech, Inc.
Sr. Notes
5.25% due 07/15/35*................ 287,000 276,524
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 02/15/12................. 425,000 431,375
Mylan Labs, Inc.
Sr. Notes
5.75% due 08/15/10*................ 25,000 25,031
Mylan Labs, Inc.
Sr. Notes
6.38% due 08/15/15*................ 75,000 75,094
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11................ 175,000 179,375
----------
1,518,837
----------
Metals & Mining -- 0.5%
AK Steel Corp.
Guaranteed Notes
7.88% due 02/15/09................. 50,000 48,500
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 75,000 80,625
Associated Materials, Inc.
Sr. Notes
11.25% due 03/01/14(8)............. 275,000 137,500
Barrick Gold Finance Co.
Guaranteed Notes
5.80% due 11/15/34................. 70,000 68,812
Chaparrel Steel Co.
Sr. Notes
10.00% due 07/15/13*............... 75,000 79,125
CSN Islands IX Corp.
Guaranteed Notes
10.00% due 01/15/15*............... 175,000 194,687
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
Metals & Mining (continued)
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*................ $175,000 $194,250
Newmont Mining Corp.
Notes
8.63% due 05/15/11................. 60,000 70,575
Renco Metals, Inc.
Guaranteed Sr. Notes
11.50% due 07/01/49(6)(7)(12)(15)+. 500,000 0
Ryerson Tull, Inc.
Sr. Notes
8.25% due 12/15/11................. 100,000 97,250
--------
971,324
--------
Pharmaceuticals -- 0.1%
American Home Products
Notes
6.95% due 03/15/11................. 58,000 63,712
Curative Health Services, Inc.
Sr. Notes
10.75% due 05/01/11................ 150,000 96,000
Merck & Co., Inc.
Notes
2.50% due 03/30/07................. 40,000 38,794
--------
198,506
--------
Real Estate Companies -- 0.0%
EOP Operating LP
Notes
8.38% due 03/15/06................. 70,000 71,213
--------
Real Estate Investment Trusts -- 0.4%
National Health Investors, Inc.
Notes
7.30% due 07/16/07................. 100,000 102,528
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 04/01/14................. 25,000 25,250
Senior Housing Properties Trust
Sr. Notes
8.63% due 01/15/12................. 352,000 391,600
Trustreet Properties, Inc.
Sr. Notes
7.50% due 04/01/15................. 225,000 230,062
--------
749,440
--------
Restaurants -- 0.3%
Denny's Holdings, Inc.
Sr. Notes
10.00% due 10/01/12................ 200,000 200,000
Restaurant Co.
Sr. Notes
10.00% due 10/01/13*............... 50,000 48,000
Sbarro, Inc.
Sr. Notes
11.00% due 09/15/09................ 394,000 392,030
--------
640,030
--------
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
BONDS & NOTES (continued)
Retail Stores -- 0.7%
Acco Brands Corp.
Sr. Sub. Notes
7.63% due 08/15/15*............ $ 75,000 $ 74,250
Collins & Aikman Floor Cover
Guaranteed Sr. Notes
9.75% due 02/15/10............. 148,000 142,820
General Nutrition Centers, Inc.
Sr. Sub. Notes
8.50% due 12/01/10............. 50,000 42,625
Jostens Holding Corp.
Sr. Notes
10.25% due 12/01/13(8)......... 255,000 183,600
Neiman Marcus Group, Inc.
Sr. Sub. Notes
10.38% due 10/15/15*........... 100,000 99,500
Prestige Brands, Inc.
Sr. Sub. Notes, Series B
9.25% due 04/15/12............. 50,000 51,250
Rent-Way, Inc.
Sr. Notes
11.88% due 06/15/10(7)......... 283,000 311,300
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11............. 375,000 414,375
Wal-Mart Stores, Inc.
Notes
5.25% due 09/01/35............. 156,000 150,967
----------
1,470,687
----------
Telecommunications -- 2.2%
Alltel Corp.
Notes
4.66% due 05/17/07............. 53,000 52,951
American Cellular Corp.,
Series B Sr. Notes
10.00% due 08/01/11............ 450,000 490,500
AT&T Wireless Services, Inc.
Sr. Notes
7.88% due 03/01/11............. 371,000 422,382
Cincinnati Bell, Inc.
Notes
7.25% due 06/15/23............. 25,000 23,375
Cincinnati Bell, Inc.
Sr. Sub. Notes
8.38% due 01/15/14............. 25,000 24,625
Corning, Inc.
Notes
5.90% due 03/15/14............. 71,000 72,034
Corning, Inc.
Notes
6.85% due 03/01/29............. 63,000 63,582
GTE Corp.
Debentures
6.94% due 04/15/28............. 70,000 76,521
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Telecommunications (continued)
GTE Northwest, Inc.
Debentures Series D
5.55% due 10/15/08.................. $ 55,000 $ 55,818
ICO North America, Inc.
Notes
7.50% due 08/15/09(7)............... 200,000 215,000
Intelsat, Ltd
Sr. Notes
9.25% due 02/01/15*(8).............. 125,000 82,500
LCI International, Inc.
Sr. Notes
7.25% due 06/15/07.................. 2,000,000 1,950,000
Qwest Corp.
Debentures
7.13% due 11/15/43.................. 125,000 105,781
Qwest Corp.
Debentures
7.25% due 10/15/35.................. 100,000 88,750
Triton PCS, Inc.
Guaranteed Sr. Notes
8.50% due 06/01/13.................. 400,000 381,000
US West Communications, Inc.
Debentures
7.50% due 06/15/23.................. 25,000 22,812
Valor Telecommunications Enterprises
Sr. Notes
7.75% due 02/15/15.................. 100,000 97,000
Verizon New York, Inc.,
Debentures, Series A
6.88% due 04/01/12.................. 60,000 64,188
Verizon New York, Inc.,
Sr. Debentures, Series B
7.38% due 04/01/32.................. 202,000 222,309
----------
4,511,128
----------
Transportation -- 0.3%
Burlington Northern Santa Fe Corp.
Debentures
7.29% due 06/01/36.................. 44,000 54,147
Burlington Northern Santa Fe Corp.
Debentures
8.13% due 04/15/20.................. 102,000 129,376
Norfolk Southern Corp.
Notes
5.59% due 05/17/25.................. 168,000 167,937
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 05/01/09.................. 50,000 53,125
Progress Rail Services Corp.
Sr. Notes
7.75% due 04/01/12*................. 100,000 101,750
Ultrapetrol Bahamas, Ltd.
1st Mtg. Notes
9.00% due 11/24/14.................. 200,000 184,250
----------
690,585
----------
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
BONDS & NOTES (continued)
Utilities -- 2.8%
AES Corp. Sr. Sub.
Debentures
8.88% due 11/01/27................ $ 300,000 $ 327,000
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11................ 120,000 134,778
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.18% due 12/15/23................ 50,000 50,125
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23................ 225,000 220,781
Consolidated Edison, Inc.
Debenture Series 2003A
3.63% due 08/01/08................ 120,000 116,841
Consolidated Natural Gas Co.
Sr. Notes
5.38% due 11/01/06................ 105,000 105,800
El Paso Natural Gas Co.
Sr. Notes
7.63% due 08/01/10................ 250,000 259,943
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22................ 325,000 371,675
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 06/01/13................ 975,000 1,018,875
Ferrellgas L. P.
Sr. Notes
6.75% due 05/01/14................ 225,000 214,875
FirstEnergy Corp., Series B
Sr. Notes, Series B
6.45% due 11/15/11................ 48,000 51,109
Florida Power & Light Co.
1st Mtg. Bonds
5.40% due 09/01/35................ 140,000 138,578
Florida Power Corp.
1st Mtg. Bonds
4.50% due 06/01/10................ 38,000 37,459
KeySpan Corp.
Sr. Notes
4.90% due 05/16/08................ 239,000 239,995
Mirant Corp.
Sr. Notes
7.90% due 07/15/09*+(6)(9)........ 1,125,000 1,369,687
Pacific Energy Partners LP
Sr. Notes
6.25% due 09/15/15*............... 75,000 75,188
Pacific Energy Partners LP
Sr. Notes
7.13% due 06/15/14................ 155,000 160,812
Pepco Holdings, Inc.
Notes
5.50% due 08/15/07................ 111,000 112,390
PSEG Power, LLC
Sr. Notes
7.75% due 04/15/11................ 120,000 134,364
PSI Energy, Inc.
Debentures
7.85% due 10/15/07................ 179,000 189,479
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Utilities (continued)
Reliant Energy, Inc.
Sr. Sec. Notes
6.75% due 12/15/14.................. $ 50,000 $ 49,125
Reliant Energy, Inc.
Notes
9.50% due 07/15/13.................. 50,000 55,250
Sempra Energy
Sr. Notes
4.62% due 05/17/07.................. 53,000 52,889
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 07/15/12.................. 25,000 29,156
Williams Cos, Inc.
Notes
7.88% due 09/01/21.................. 300,000 330,000
-----------
5,846,174
-----------
Total Bonds & Notes
(cost $60,955,117).................. 60,309,703
-----------
CONVERTIBLE BONDS -- 1.2%
Broadcasting & Media -- 0.1%
Citadel Broadcasting Corp.
Sub. Notes
1.88% due 02/15/11.................. 150,000 116,812
-----------
Energy Services -- 0.0%
Unisource Energy Corp.
Sr. Notes
4.50% due 03/01/35*................. 25,000 26,188
-----------
Health Services -- 0.0%
Genesis Healthcare Corp.
Sr. Sub. Debentures
2.50% due 03/15/25*................. 75,000 73,313
-----------
Leisure & Tourism -- 0.2%
Six Flags, Inc.
Sr. Notes
4.50% due 05/15/15.................. 310,000 390,987
-----------
Pharmaceuticals -- 0.0%
Elan Capital Corp.
Bonds
6.50% due 11/10/08.................. 50,000 67,815
-----------
Utilities -- 0.9%
Calpine Corp.
Sr. Notes
4.75% due 11/15/23.................. 3,025,000 1,648,625
Calpine Corp.
Notes
7.75% due 06/01/15.................. 200,000 169,000
-----------
1,817,625
-----------
Total Convertible Bonds
(cost $2,965,562)................... 2,492,740
-----------
FOREIGN BONDS & NOTES -- 36.0%
Banks -- 0.1%
HBOS Treasury Services,
PLC Notes
3.50% due 11/30/07*................. 88,000 86,039
NIB Capital Bank NV
Bonds
5.82% due 12/11/13*(2).............. 110,000 113,533
-----------
199,572
-----------
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Broadcasting & Media -- 0.5%
Corp. Interamericana De Entretenimiento SA
Sr. Notes
8.88% due 06/14/15*....................... $ 100,000 $ 98,250
Grupo Televisa SA
Sr. Notes
6.63% due 03/18/25........................ 181,000 181,681
Telenet Group Holding NV
Sr. Notes
11.50% due 06/15/14*(8)................... 850,000 694,875
----------
974,806
----------
Chemicals -- 0.4%
Nova Chemicals Corp.
Sr. Notes
6.50% due 01/15/12........................ 150,000 145,687
Rhodia SA
Sr. Sub. Notes
8.88% due 06/01/11........................ 625,000 590,625
----------
736,312
----------
Conglomerate -- 0.1%
Tyco International Group SA
Guaranteed Notes
6.38% due 10/15/11........................ 60,000 63,953
Tyco International Group SA
Guaranteed Sr. Notes
6.75% due 02/15/11........................ 186,000 200,900
----------
264,853
----------
Electronics -- 0.1%
Celestica, Inc.
Sr. Sub. Notes
7.63% due 07/01/13........................ 50,000 49,875
STATS ChipPAC Ltd.
Sr. Notes
6.75% due 11/15/11........................ 75,000 72,750
----------
122,625
----------
Energy Services -- 0.2%
ENI Coordination Center
Guaranteed Notes
5.25% due 12/27/07........................ GBP 205,000 366,614
----------
Energy Sources -- 0.2%
North America Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11........................ 175,000 166,250
North America Energy Partners, Inc.
Sr. Notes
9.00% due 06/01/10........................ 175,000 180,250
Petro-Canada
Sr. Notes
5.95% due 05/15/35........................ 44,000 44,003
----------
390,503
----------
Financial Services -- 1.5%
Aries Vermogensverwaltungs GmbH
Bonds
9.60% due 10/25/14........................ 1,500,000 1,979,850
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Financial Services (continued)
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 02/15/12.............. $ 175,000 $ 189,875
HBOS Capital Funding
Guaranteed Notes
6.85% due 03/29/49............... 175,000 180,040
Nationwide Building Society
Sr. Notes
2.63% due 01/30/07*.............. 85,000 82,914
Nell AF SARL
Sr. Notes
8.38% due 08/15/15*.............. 600,000 586,500
UFJ Finance Aruba AEC
Guaranteed Notes
6.75% due 07/15/13............... 120,000 131,766
----------
3,150,945
----------
Food, Beverage & Tobacco -- 0.1%
Diageo Capital, PLC
Guaranteed Notes
4.38% due 05/03/10............... 88,000 86,570
Molson Coors Capital Finance, ULC
Sr. Notes
4.85% due 09/22/10*.............. 60,000 59,529
----------
146,099
----------
Forest Products -- 0.4%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 08/01/10............... 375,000 381,563
Stora Enso Oyj
Notes
3.88% due 12/15/09............... SEK 3,000,000 395,870
----------
777,433
----------
Government Agencies -- 31.0%
Australia Commonwealth
Bonds
7.50% due 09/15/09............... AUD 2,360,000 1,937,434
Canadian Government
Bonds
5.00% due 06/01/14............... CAD 430,000 399,029
Canadian Government
Bonds
4.25% due 09/01/08............... CAD 2,555,000 2,247,829
Canadian Government
Bonds
5.75% due 09/01/06............... CAD 1,705,000 1,499,417
Deutsche Bundesrepublik
Bonds
5.63% due 01/04/28............... EUR 405,000 640,670
Dutch Government
Bonds
5.25% due 07/15/08............... EUR 355,000 458,113
Federal Republic of Brazil
Notes
4.31% due 04/12/15(3)............ 1,511,196 1,486,715
Federal Republic of Brazil
Notes
11.00% due 01/11/12.............. 240,000 294,120
46
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agencies (continued)
Federal Republic of Brazil
Notes
10.25% due 06/17/13........... $ 580,000 $ 690,200
Federal Republic of Brazil
Notes
8.00% due 04/15/14............ 765,230 766,378
Federal Republic of Brazil
Bonds
10.50% due 07/14/14........... 1,395,000 1,688,648
Federal Republic of Brazil
Notes
7.88% due 03/07/15............ 110,000 114,125
Federal Republic of Brazil
Bonds
12.50% due 01/05/16(7)........ BRL 1,074,000 464,235
Federal Republic of Brazil
Bonds
8.00% due 01/15/18............ 1,120,000 1,186,080
Federal Republic of Brazil
Bonds
8.88% due 10/14/19............ 110,000 119,460
Federal Republic of Brazil
Bonds
8.88% due 04/15/24............ 145,000 154,715
Federal Republic of Brazil
Bonds
8.75% due 02/04/25............ 880,000 929,720
Federal Republic of Brazil
Bonds
8.25% due 01/20/34............ 180,000 180,900
Federal Republic of Brazil
Bonds
11.00% due 08/17/40........... 3,665,000 4,493,290
Government of Germany
Notes
3.50% due 10/09/09............ EUR 245,000 304,276
Government of Japan
Bonds
0.50% due 06/20/06............ JPY 68,000,000 600,989
Kingdom of Spain
Bonds
5.35% due 10/31/11............ EUR 1,215,000 1,662,101
Kingdom of Sweden
Bonds
4.50% due 08/12/15............ SEK 15,480,000 2,240,105
Kingdom of Sweden
Bonds
5.00% due 01/28/09............ SEK 17,800,000 2,475,975
Poland Government
Bonds
5.75% due 03/24/10............ PLN 2,650,000 846,838
Republic of Argentina
Bonds
4.00% due 08/03/12(3)......... 1,560,000 1,250,340
Republic of Argentina
Notes
5.25% due 03/31/09............ 2,739,761 1,082,206
Republic of Argentina
Notes
8.28% due 12/31/33............ 2,076,430 2,141,838
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Government Agencies (continued)
Republic of Colombia
Notes
8.25% due 12/22/14.......... $ 200,000 $ 224,100
Republic of Colombia
Notes
10.75% due 01/15/13......... 470,000 590,555
Republic of Greece
Sr. Notes
4.65% due 04/19/07.......... EUR 300,000 372,919
Republic of Greece
Bonds
5.25% due 05/18/12.......... EUR 310,000 422,244
Republic of Italy
Bonds
5.25% due 12/15/05.......... EUR 695,000 840,330
Republic of Italy
Bonds
5.25% due 11/01/29.......... EUR 538,000 792,141
Republic of Peru
Bonds
5.00% due 03/07/07(2)....... 164,000 161,950
Republic of Peru
Notes
7.35% due 07/21/25.......... 320,000 339,200
Republic of South Africa
Bonds
13.00% due 08/31/10......... ZAR 6,225,000 1,179,282
Republic of South Africa
Notes
13.50% due 09/15/15......... ZAR 1,925,000 412,535
Republic of Turkey
Notes
8.00% due 02/14/34.......... 255,000 269,025
Republic of Turkey
Notes
9.50% due 01/15/14.......... 130,000 157,137
Republic of Turkey
Notes
11.00% due 01/14/13......... 280,000 358,050
Republic of Turkey
Sr. Bonds
11.88% due 01/15/30......... 2,330,000 3,419,275
Republic of Ukraine
Sr. Notes
7.65% due 06/11/13.......... 780,000 858,468
Republic of Uruguay
Bonds
7.50% due 03/15/15.......... 225,000 230,625
Republic of Venezuela
Bonds
8.50% due 10/08/14.......... 300,000 333,000
Republic of Venezuela
Bonds
9.25% due 09/15/27.......... 2,575,000 3,046,225
Republic of Uruguay
Bonds
9.25% due 05/17/17.......... 400,000 448,500
Russian Federation
Debentures
3.00% due 05/14/11.......... 760,000 676,476
47
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agencies (continued)
Russian Federation
Bonds
7.50% due 03/31/07*(8)............ $ 4,730,000 $ 5,433,795
Russian Federation
Bonds
8.25% due 03/31/10................ 1,885,000 2,041,455
Russian Federation
Bonds
12.75% due 06/24/28............... 200,000 376,960
Spanish Government
Bonds
6.15% due 01/31/13................ EUR 1,199,000 1,740,106
United Kingdom
Notes
5.00% due 03/07/08................ GBP 535,000 961,184
United Mexican States
Notes
5.88% due 01/15/14................ 200,000 206,800
United Mexican States
Notes
6.38% due 01/16/13................ 185,000 196,840
United Mexican States
Notes
7.50% due 01/14/12................ 220,000 246,840
United Mexican States
Bonds
8.13% due 12/30/19................ 445,000 539,563
United Mexican States
Bonds
8.30% due 08/15/31................ 325,000 406,250
United Mexican States
Bonds
9.50% due 12/18/14................ MXN 14,775,000 1,454,150
United Mexican States,
Series A Notes
6.63% due 03/03/15................ 2,095,000 2,276,217
United Mexican States,
Series A Notes
6.75% due 09/27/34................ 310,000 330,150
United Mexican States,
Series A Notes
7.50% due 04/08/33................ 400,000 464,000
-----------
64,162,093
-----------
Household & Personal Products -- 0.2%
Vitro Envases Norteamerica SA
Sr. Sec. Notes
10.75% due 07/23/11*.............. 350,000 357,000
-----------
Insurance -- 0.2%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15................ 400,000 380,000
-----------
Leisure & Tourism -- 0.1%
Grupo Posadas SA de CV
Sr. Notes
8.75% due 10/04/11*............... 175,000 187,250
-----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Machinery -- 0.0%
Magnachip Semiconductor SA
2nd Priority Sr. Sec. Notes
6.88% due 12/15/11.............. $ 50,000 $ 48,000
Magnachip Semiconductor SA
Sr. Sub. Notes
8.00% due 12/15/14.............. 50,000 46,000
----------
94,000
----------
Metals & Minerals -- 0.0%
Falconbridge, Ltd.
Notes
8.38% due 02/15/11.............. 28,000 31,861
----------
Metals & Mining -- 0.1%
Teck Cominco, Ltd.
Sr. Notes
6.13% due 10/01/35.............. 140,000 137,288
----------
Pharmaceuticals -- 0.6%
Abbott Japan Co. Ltd.
Guaranteed Bonds
1.05% due 11/06/08.............. JPY 76,000,000 677,464
Elan Finance, PLC
Sr. Notes
7.75% due 11/15/11*............. 600,000 528,000
Elan Finance, PLC
Sr. Notes
7.79% due 11/15/11*(3).......... 150,000 132,375
----------
1,337,839
----------
Real Estate Companies -- 0.0%
Brascan Corp.
Sr. Notes
8.13% due 12/15/08.............. 76,000 83,275
----------
Retail -- 0.1%
Jean Coutu Group, Inc.
Sr. Sub. Notes
8.50% due 08/01/14.............. 250,000 248,750
----------
Telecommunications -- 0.1%
British Telecommunications, PLC
Notes
7.88% due 12/15/05.............. 85,000 85,577
Telecom Italia Capital SA
Guaranteed Sr. Notes
4.00% due 01/15/10*............. 14,000 13,443
Telecom Italia Capital SA
Guaranteed Sr. Notes
6.00% due 09/30/34*............. 111,000 108,774
TELUS Corp.
Notes
7.50% due 06/01/07.............. 38,000 39,682
----------
247,476
----------
Transportation -- 0.0%
Grupo Transportacion Ferroviaria
Mexicana SA De CV
Sr. Notes
9.38% due 05/01/12*............. 100,000 108,000
----------
48
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Utilities -- 0.0%
AES Chivor
Notes
9.75% due 12/30/14*....................... $ 100,000 $ 112,050
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10(6)+................... 725,000 725
-----------
112,775
-----------
Total Foreign Bonds & Notes
(cost $71,984,444)........................ 74,617,369
-----------
U.S. GOVERNMENT OBLIGATIONS -- 6.3%
U.S Treasury Bonds -- 2.4%
5.38% due 02/15/31........................ 3,560,000 3,988,311
6.25% due 08/15/23........................ 740,000 884,849
-----------
4,873,160
-----------
U.S. Treasury Notes -- 3.9%
3.63% due 01/15/10........................ 803,000 784,462
3.87% due 05/15/10........................ 175,000 172,464
3.88% due 09/15/10........................ 72,000 70,982
4.00% due 02/15/15........................ 1,501,000 1,461,130
4.25% due 08/15/15........................ 2,162,000 2,148,487
5.75% due 11/15/05........................ 3,525,000 3,534,225
-----------
8,171,750
-----------
Total U.S. Government Obligations
(cost $13,186,021)........................ 13,044,910
-----------
U.S. GOVERNMENT AGENCIES -- 13.2%
Federal Home Loan Mortgage Corporation -- 6.5%
3.50% due 05/15/07........................ 600,000 591,549
3.63% due 02/15/07........................ 624,000 617,284
3.88% due 03/03/08........................ 310,000 306,314
3.88% due 12/20/06........................ 600,000 596,433
4.13% due 07/12/10........................ 300,000 295,090
4.35% due 06/02/08........................ 600,000 595,541
4.45% due 03/06/08........................ 600,000 599,048
4.50% due 02/01/20........................ 282,928 277,150
4.50% due 08/01/20........................ 498,021 487,851
5.00% due 02/01/34........................ 550,713 540,263
5.00% due 02/01/35........................ 798,604 782,756
5.00% due 05/01/34........................ 340,314 333,560
5.00% due 07/01/20........................ 966,717 964,498
5.00% due 08/01/35........................ 1,098,593 1,075,453
5.00% due 09/01/18........................ 699,583 698,237
5.50% due 07/01/35........................ 2,976,586 2,978,074
6.00% due 07/01/35........................ 299,352 304,609
6.50% due 05/01/29........................ 12,693 13,094
6.88% due 09/15/10........................ 1,156,000 1,276,067
7.00% due 06/01/29........................ 25,550 26,706
8.50% due 05/01/08........................ 26,750 27,902
10.00% due 05/15/20(5).................... 30,357 30,334
11.57% due 10/01/05(4).................... 16,902 331
-----------
13,418,144
-----------
Federal National Mortgage Association -- 6.6%
0.45% due 10/01/05(4)(5).................. 3,361,012 40,647
0.57% due 10/01/05(4)(5).................. 935,048 6,299
0.84% due 10/01/05(4)(5).................. 2,804,760 117,560
Principal
Amount** Value
Security Description /Shares (Note 2)
--------------------------------------------------------------------
Federal National Mortgage Association (continued)
1.31% due 10/01/05(4)(5)................... $1,585,391 $ 55,180
3.00% due 03/02/07......................... 600,000 588,513
3.38% due 05/15/07......................... 600,000 590,542
4.25% due 08/15/10......................... 324,000 319,849
4.50% due 02/01/35......................... 339,034 323,269
4.50% due 06/01/19......................... 681,292 667,621
4.68% due 10/01/05......................... 661,073 657,432
5.00% due 03/01/34......................... 421,449 413,152
5.00% due 06/01/19......................... 400,885 399,972
5.00% due 11/01/34......................... 687,242 673,713
5.25% due 08/01/12......................... 576,000 591,746
5.50% due 01/01/29......................... 12,580 12,606
5.50% due 03/01/35......................... 736,405 736,313
5.50% due 06/01/29......................... 197,466 197,736
5.50% due 06/01/34......................... 1,688,079 1,688,201
5.50% due 07/01/19......................... 493,534 500,858
5.50% due 09/01/20......................... 496,703 504,100
6.00% due 02/01/32......................... 170,007 172,953
6.00% due 04/01/35......................... 1,053,904 1,071,750
6.00% due 05/01/34......................... 31,011 31,536
6.00% due 06/01/35......................... 747,555 760,217
6.00% due 10/01/34......................... 878,614 893,492
6.00% due 10/01/34......................... 895,347 910,507
6.50% due 02/01/35......................... 106,555 109,679
6.50% due 04/01/34......................... 478,055 492,074
7.50% due 01/01/30......................... 20,362 21,566
7.50% due 09/01/30......................... 4,208 4,454
8.00% due 11/01/28......................... 38,794 41,567
8.80% due 01/25/19(5)...................... 55,759 59,500
10.40% due 04/25/19(5)..................... 10,511 11,240
13.00% due 11/15/15........................ 11,616 12,937
-----------
13,678,781
-----------
Government National Mortgage Association -- 0.1%
7.50% due 07/15/27......................... 31,499 33,503
7.50% due 10/15/27......................... 89,501 95,194
7.50% due 10/15/27......................... 9,194 9,779
-----------
138,476
-----------
Tennessee Valley Authority -- 0.0%
4.65% due 06/15/35......................... 105,000 99,978
-----------
Total U.S. Government Agencies
(cost $27,835,834)......................... 27,335,379
-----------
COMMON STOCK -- 3.3%
Broadcasting & Media -- 0.1%
Charter Communications, Inc................. 150,000 225,000
-----------
Energy Services -- 0.5%
Trico Marine Services, Inc.................. 39,200 1,048,600
-----------
Leisure & Tourism -- 0.0%
Shreveport Gaming Holdings, Inc.(7)(12)(14). 2,441 56,199
-----------
Machinery -- 0.1%
NES Rentals Holding, Inc.+.................. 19,435 213,785
-----------
Real Estate Investment Trusts -- 0.1%
Meristar Hospitality Corp.+................. 19,820 180,957
-----------
49
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal
Amount** Value
Security Description /Shares (Note 2)
---------------------------------------------------------------------
COMMON STOCK (continued)
Telecommunications -- 2.5%
Alamosa Holdings, Inc.+.................... $ 24,721 $ 422,976
iPCS, Inc.+................................ 60,413 2,513,181
IWO Holdings, Inc.(7)+..................... 50,781 2,132,802
------------
5,068,959
------------
Total Common Stock
(cost $2,839,578)......................... 6,793,500
------------
PREFERRED STOCK -- 0.5%
Broadcasting & Media -- 0.2%
Ono Finance, PLC zero coupon+(7)(12)....... 100 0
Paxson Communications Corp. 14.25%(10)..... 70 476,000
------------
476,000
------------
Federal Home Loan Mortgage Corporation -- 0.0%
Federal Home Loan Mtg. Corp. 5.70%......... 1,005 48,391
------------
Federal National Mortgage Association -- 0.0%
Federal National Mtg. Assoc. 7.00%(3)...... 1,080 59,670
------------
Financial Services -- 0.2%
General Electric Capital Corp. 4.50%(13)... 16,000 381,600
TCR Holdings, Class B(7)................... 570 6
TCR Holdings, Class C(7)................... 314 3
TCR Holdings, Class D(7)................... 827 8
TCR Holdings, Class E(7)................... 1,711 17
------------
381,634
------------
Retail Stores -- 0.1%
GNC Corp. 12.00%(10)....................... 100 74,000
Rent-Way, Inc. 8.00%(7)(12)(14)............ 4 40,883
------------
114,883
------------
Total Preferred Stock
(cost $1,167,517)......................... 1,080,578
------------
RIGHTS -- 0.0%
Government Agency -- 0.0%
United Mexican States VRR(7)............... 1,400,000 26,600
United Mexican States VRR- A(2)(7)......... 1,400,000 34,300
------------
60,900
------------
Total Rights
(cost $0)................................. 60,900
------------
WARRANTS+ -- 0.0%
Broadcasting & Media -- 0.0%
Knology Holdings, Inc.(7)*................. 1,500 375
------------
Telecommunications -- 0.0%
GT Group Telecom, Inc.(7)*................. 150 2
Leap Wireless International, Inc.(7)(12)*.. 500 0
Leap Wireless International, Inc.(7)(12)*.. 350 0
------------
2
------------
Total Warrants
(cost $10,031)............................ 377
------------
Total Long-Term Investment Securities -- 93.0%
(cost $187,812,062)....................... 192,556,301
------------
SHORT-TERM INVESTMENT SECURITIES -- 1.0%
Time Deposit with State Street Bank &
Trust Co. 1.35% due 10/03/05.............. $ 554,000 554,000
Time Deposit with State Street Bank &
Trust Co. 1.95% due 10/03/05.............. 1,539,000 1,539,000
------------
Total Short-Term Investment Securities
(cost $2,093,000)......................... 2,093,000
------------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.7%
State Street Bank & Trust Co. Joint Repurchase
Agreement(11)................................. 544,000 $ 544,000
UBS Securities LLC Joint Repurchase
Agreement(11)................................. 5,000,000 5,000,000
------------
5,544,000
------------
Total Repurchase Agreements
(cost $5,544,000)............................. 5,544,000
------------
TOTAL INVESTMENTS --
(cost $195,449,062)@.......................... 96.7% 200,193,301
Other assets less liabilities.................... 3.3 6,822,363
--------- ------------
NET ASSETS -- 100.0% $207,015,664
========= ============
- --------
# Security represents an investment in an affiliated company; see Note 7.
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. The Fund 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 September 30,
2005, the aggregate value of these securities was $17,062,841 representing
8.2% of net assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
** Denominated in United States dollars unless otherwise indicated
VRR --Value Recovery Right
AUD --Australian Dollar
BRL --Brazilian Real
CAD --Canadian Dollar
EUR --Euro
GBP --Pound Sterling
JPY --Japanese Yen
MXN --Mexican Peso
PLN --Polish Zloty
SEK --Swedish Krona
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 September 30, 2005;
maturity date reflects next reset date.
(3) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of September 30, 2005.
(4) Interest only
(5) Collateralized Mortgage Obligation
(6) Bond in default.
(7) Fair valued security; see Note 2.
(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) Company has filed for chapter 11 bankruptcy protection.
(10) PIK ("Payment-in-Kind") Security. Payment made with additional securities
in lieu of cash.
(11) See Note 2 for details of Joint Repurchase Agreement.
(12) Illiquid Security
(13) 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
September 30, 2005.
50
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
(14) 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 1. Restricted securities held by a Fund may not be
sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of
widely held, publicly traded companies. Lack of a secondary market and
resale restrictions may result in the inability of a Fund to sell a
security at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist. As of
September 30, 2005, the Strategic Bond Fund held the following restricted
securities:
Acquisition Acquisition Market % of
Name Date Shares Cost Value Net Assets
---- ----------- ------ ----------- ------- ----------
Rent-Way, Inc. 8.00%
Preferred Stock.... 05/29/2003 3 $25,000 $29,202 0.02%
Rent-Way, Inc. 8.00%
Preferred Stock.... 05/19/2003 1 10,000 11,681 0.01
Shreveport Gaming
Holdings, Inc...... 07/29/2005 2,047 47,128 47,128 0.02
Shreveport Gaming
Holdings, Inc...... 07/21/2005 394 9,073 9,071 0.00
------- ----
$97,082 0.05%
======= ====
(15) Security is subject to litigation, the outcome of which is still to be
determined.
(16) Subsequent to 09/30/05 bond in default.
Open Forward Foreign Currency Contracts
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Appreciation
------------------
*AUD 3,500,000 USD 2,664,630 11/04/2005 $ 19,730
*USD 2,664,630 AUD 3,500,000 11/04/2005 25,840
*EUR 7,700,000 USD 9,269,956 11/04/2005 197,261
--------
$242,831
--------
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Depreciation
----------------------
*USD 5,658,285 EUR 4,700,000 11/04/2005 $(164,485)
---------
Net Unrealized Appreciation (Depreciation) $ 78,346
=========
- --------
* 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.
AUD --Australian Dollar
EUR --Euro
USD --United States Dollar
See Notes to Financial Statements
51
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- September 30, 2005 -- (unaudited)
Industry Allocation*
Telecommunications............. 18.3%
Financial Services............. 12.5
Broadcasting & Media........... 11.2
Utilities...................... 11.2
Leisure & Tourism.............. 10.1
Energy Sources................. 6.6
Forest Products................ 4.0
Automative..................... 3.7
Chemicals...................... 3.3
Energy Services................ 3.2
Business Services.............. 2.7
Food, Beverage & Tobacco....... 2.4
Health Services................ 2.4
Medical Products............... 2.4
Real Estate Investment Trusts.. 2.1
Pharmaceuticals................ 1.6
Machinery...................... 1.4
Retail......................... 1.4
Metals & Mining................ 1.2
Retail Stores.................. 1.2
Transportation................. 1.2
Computer Software.............. 1.1
Electronics.................... 1.0
Communication Equipment........ 0.8
Insurance...................... 0.7
Restaurants.................... 0.6
Household & Personal Products.. 0.5
Aerospace & Military Technology 0.4
Internet Content............... 0.4
Building Materials............. 0.3
Conglomerate................... 0.3
Computers & Business Equipment. 0.2
-----
110.4%
=====
Credit Quality+#
BB........ 19.7%
B......... 38.5
CCC....... 25.4
CC........ 0.9
C......... 1.0
Below C... 0.4
Not Rated@ 14.1
-----
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.
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
BONDS & NOTES -- 81.3%
Aerospace & Military Technology -- 0.4%
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes, Series B
12.00% due 09/30/08................. $1,700,000 $1,020,000
----------
Automotive -- 3.0%
Cooper-Standard Automotive, Inc.
Sr. Sub. Notes
8.38% due 12/15/14.................. 830,000 697,200
Dana Corp.
Sr. Notes
5.85% due 01/15/15.................. 1,825,000 1,431,497
Diamond Triumph Auto Glass, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 04/01/08(1)(7)............ 820,000 574,000
Dura Operating Corp.
Sr. Notes
8.63% due 04/15/12.................. 961,000 855,290
Exide Corp.
Term Loan
10.00% due 03/15/25+(1)(7).......... 1,650,000 0
Ford Motor Co.
Notes
7.45% due 07/16/31.................. 2,725,000 2,125,500
Nationsrent, Inc.
Sr. Unsec. Notes
9.50% due 05/01/15.................. 900,000 936,000
Navistar International Corp.
Sr. Notes, Series B
6.25% due 03/01/12.................. 145,000 137,750
Stanadyne Corp.
Sr. Sub. Notes
10.00% due 08/15/14................. 475,000 470,250
----------
7,227,487
----------
Broadcasting & Media -- 8.9%
Adelphia Communications Corp.
Sr. Notes
10.25% due 06/15/11+(2)(3).......... 825,000 627,000
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 02/15/12.................. 1,400,000 1,400,000
CCO Holdings, LLC
Sr. Notes
8.75% due 11/15/13.................. 675,000 666,563
Charter Communications Holdings, LLC
Sr. Notes
9.63% due 11/15/09.................. 2,525,000 2,146,250
Charter Communications Holdings, LLC
Sr. Disc. Notes
9.92% due 04/01/11(4)............... 3,825,000 2,763,562
Charter Communications Holdings, LLC
Sr. Notes
10.25% due 01/15/10................. 375,000 311,250
Charter Communications Holdings, LLC
Sr. Notes
10.75% due 10/01/09................. 2,075,000 1,826,000
Charter Communications Holdings, LLC
Sr. Notes
11.13% due 01/15/11................. 2,375,000 1,828,750
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
Broadcasting & Media (continued)
Fisher Communications, Inc.
Sr. Notes
8.63% due 09/15/14.............. $1,550,000 $ 1,654,625
Haights Cross Operating Co.
Guaranteed Sr. Notes
11.75% due 08/15/11............. 1,075,000 1,177,125
Insight Communications Co., Inc.
Sr. Sub. Disc. Notes
12.25% due 02/15/11(4).......... 1,300,000 1,326,000
Paxson Communications Corp.
Guaranteed Sr. Sub. Notes
12.25% due 01/15/09(4).......... 2,650,000 2,570,500
Telex Communications, Inc.
Sr. Sec. Notes
11.50% due 10/15/08............. 300,000 320,250
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 01/15/14.............. 1,050,000 931,875
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 03/01/11............. 2,300,000 2,173,500
-----------
21,723,250
-----------
Building Materials -- 0.3%
Dayton Superior Corp.
Sr. Sec. Notes
10.75% due 09/15/08............. 800,000 808,000
-----------
Business Services -- 2.7%
Alderwoods Group, Inc.
Sr. Notes
7.75% due 09/15/12.............. 425,000 446,250
Associated Materials, Inc.
Sr. Sub. Notes
9.75% due 04/15/12.............. 575,000 556,312
Di Finance Subordinated, LLC
Sr. Sub. Notes
9.50% due 02/15/13*............. 675,000 705,375
FTI Consulting, Inc.
Sr. Notes
7.63% due 06/15/13*............. 425,000 433,500
Mobile Mini, Inc.
Sr. Notes
9.50% due 07/01/13.............. 575,000 635,375
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 09/01/10............. 950,000 959,500
Seitel, Inc.
Sr. Notes
11.75% due 07/15/11............. 1,450,000 1,609,500
Service Corp. International
Sr. Notes
6.75% due 04/01/16.............. 400,000 402,000
Service Corp. International
Sr. Notes
7.00% due 06/15/17*............. 850,000 858,500
-----------
6,606,312
-----------
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Chemicals -- 2.0%
BCI US Finance Corp.
Sr. Sec. Notes
9.10% due 07/15/10*(5)............. $ 700,000 $ 707,000
Equistar Chemicals LP
Notes
8.75% due 02/15/09................. 375,000 390,000
Equistar Chemicals LP
Sr. Notes
10.63% due 05/01/11................ 1,225,000 1,335,250
Phosphate Resource Partners LP
Sr. Notes
7.00% due 20/15/08................. 725,000 741,312
Rockwood Specialties Group
Sr. Sub. Notes
7.50% due 11/15/14*................ 925,000 897,250
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 05/15/11................ 292,000 318,280
Westlake Chemical Corp.
Sr. Notes
8.75% due 07/15/11................. 471,000 507,503
----------
4,896,595
----------
Communication Equipment -- 0.8%
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 01/15/10................. 1,875,000 1,893,750
----------
Computer Software -- 1.1%
Solar Capital Corp.
Sr. Notes
9.13% due 08/15/13*................ 825,000 854,906
Sungard Data Systems, Inc.
Sr. Sub. Notes
10.25% due 08/15/15*............... 925,000 936,563
Unisys Corp.
Sr. Notes
8.00% due 10/15/12................. 1,000,000 982,500
----------
2,773,969
----------
Computers & Business Equipment -- 0.2%
Activant Solutions, Inc.
Sr. Notes
9.50% due 04/01/10*(5)............. 550,000 561,000
----------
Conglomerate -- 0.3%
Carriage Services, Inc.
Sr. Notes
7.88% due 01/15/15................. 684,000 707,940
----------
Electronics -- 0.7%
Advanced Micro Devices, Inc.
Sr. Notes
7.75% due 11/01/12................. 975,000 999,375
Sanmina-Sci Corp.
Sr. Sub. Notes
6.75% due 03/01/13................. 625,000 593,750
----------
1,593,125
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Energy Services -- 1.0%
Hanover Compressor Co.
Sub. Notes
zero coupon due 03/31/07.................... $ 125,000 $ 112,500
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 06/01/11.......................... 1,807,797 1,888,127
Pride International, Inc.
Sr. Notes
7.38% due 07/15/14.......................... 350,000 380,187
-----------
2,380,814
-----------
Energy Sources -- 5.8%
Belden & Blake Corp.
Sec. Notes
8.75% due 07/15/12.......................... 450,000 470,250
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*......................... 2,910,000 2,058,825
Chesapeake Energy Corp.
Sr. Notes
6.25% due 01/15/18.......................... 1,150,000 1,127,000
Chesapeake Energy Corp.
Sr. Notes
6.63% due 01/15/16.......................... 175,000 177,188
Citgo Petroleum Corp.
Sr. Notes
6.00% due 10/15/11.......................... 550,000 550,000
Colorado Interstate Gas Co.
Debentures
6.85% due 06/15/37.......................... 1,000,000 1,010,380
Encore Acquisition Co.
Sr. Sub. Notes
6.00% due 07/15/15*......................... 550,000 536,250
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 04/15/14.......................... 300,000 298,500
EXCO Resources, Inc.
Guaranteed Notes
7.25% due 01/15/11.......................... 650,000 672,750
Grant Prideco, Inc.
Sr. Notes
6.13% due 08/15/15*......................... 275,000 277,750
Hilcorp Finance Co.
Sr. Notes
10.50% due 09/01/10*........................ 1,625,000 1,787,500
Mission Energy Holding Co.
Sr. Sec. Notes
13.50% due 07/15/08......................... 2,925,000 3,444,187
Newfield Exploration Co.
Sr. Sub. Notes
6.63% due 09/01/14.......................... 675,000 702,000
Roseton Danskammer
Guaranteed Pass-Thru Certificates, Series B
7.67% due 11/08/16.......................... 1,075,000 1,069,625
-----------
14,182,205
-----------
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
BONDS & NOTES (continued)
Financial Services -- 12.5%
AAC Group Holding Corp.
Sr. Notes
10.25% due 10/01/12*...................... $ 1,025,000 $ 738,000
Affinity Group, Inc.
Sr. Sub. Notes
10.00% due 02/15/15*...................... 950,000 1,026,000
Borden U.S. Finance Corp.
Sr. Sec. Notes
9.00% due 07/15/14*....................... 800,000 812,000
Chukchansi Economic Development Authority
Sr. Notes
14.50% due 06/15/09*...................... 3,225,000 3,886,125
Consolidated Communications Holdings, Inc.
Sr. Notes
9.75% due 04/01/12........................ 945,000 1,006,425
ESI Tractebel Acquisition Corp.
Guaranteed Bonds
7.99% due 12/30/11........................ 763,000 800,238
General Motors Acceptance Corp.
Notes
6.07% due 12/01/14(5)..................... 2,475,000 2,080,769
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14........................ 295,000 256,604
General Motors Acceptance Corp.
Bonds
8.00% due 11/01/31........................ 10,430,000 9,107,153
MedCath Holdings Corp.
Sr. Notes
9.88% due 07/15/12........................ 875,000 953,750
Muzak, LLC/Muzak Finance Corp.
Guaranteed Sr. Sub. Notes
9.88% due 03/15/09........................ 525,000 263,156
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
11.38% due 04/01/13(4).................... 1,925,000 1,424,500
NGC Corp. Capital Trust,
Series B Guaranteed Sub. Notes, Series B
8.32% due 06/01/27........................ 5,400,000 4,846,500
PCA, LLC
Sr. Notes
11.88% due 08/01/09....................... 2,000,000 525,000
PX Escrow Corp.
Sr. Disc. Notes
9.63% due 02/01/06(4)..................... 2,175,000 2,123,344
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 06/01/10....................... 671,000 768,295
-----------
30,617,859
-----------
Food, Beverage & Tobacco -- 2.4%
Alliance One International, Inc.
Sr. Sub. Notes
12.75% due 11/15/12*...................... 1,100,000 1,006,500
Le Natures, Inc.
Sr. Sub. Notes
10.00% due 06/15/13*...................... 475,000 513,000
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
Food, Beverage & Tobacco (continued)
North Atlantic Holding Co., Inc.
Sr. Disc. Notes
12.25% due 03/01/14(4)............. $2,050,000 $ 410,000
North Atlantic Trading Co., Inc.
Sr. Notes
9.25% due 03/01/12................. 650,000 487,500
Stater Brothers Holdings, Inc.
Sr. Notes
8.13% due 06/15/12................. 1,075,000 1,061,563
Wornick Co.
Sr. Sec. Notes
10.88% due 07/15/11................ 2,325,000 2,388,937
----------
5,867,500
----------
Forest Products -- 3.4%
Boise Cascade, LLC
Sr. Notes
6.47% due 10/15/12(5).............. 1,225,000 1,221,937
Caraustar Industries, Inc.
Guaranteed Sr. Sub. Notes
9.88% due 04/01/11................. 300,000 297,000
Constar International, Inc.
Sr. Notes
7.17% due 11/15/05*................ 625,000 579,688
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23................. 1,900,000 1,869,125
FiberMark, Inc.
Sr. Notes
9.38% due 10/15/06+(2)............. 3,275,000 2,333,437
FiberMark, Inc.
Sr. Notes
10.75% due 04/15/11+(2)............ 750,000 571,875
Pliant Corp.
Sr. Sec. Notes
11.13% due 09/01/09................ 590,000 507,400
Pliant Corp.
Sr. Sub. Notes
13.00% due 06/01/10(10)............ 1,725,000 819,375
----------
8,199,837
----------
Health Services -- 2.4%
Concentra Operating Corp.
Sr. Sub. Notes
9.13% due 06/01/12................. 675,000 702,000
Concentra Operating Corp.
Sr. Sub. Notes
9.50% due 08/15/10................. 250,000 261,875
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13................. 475,000 511,813
Pediatric Services Of America, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 04/15/08(1)............. 200,000 202,000
Psychiatric Solutions, Inc.
Sr. Sub. Notes
7.75% due 07/15/15*................ 433,000 447,073
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Health Services (continued)
Team Health, Inc.
Sr. Sub. Notes
9.00% due 04/01/12............. $1,300,000 $1,378,000
Tenet Healthcare Corp.
Sr. Notes
6.50% due 06/01/12............. 25,000 23,312
Tenet Healthcare Corp.
Notes
7.38% due 02/01/13............. 500,000 473,750
Tenet Healthcare Corp.
Sr. Notes
9.25% due 02/01/15*............ 750,000 757,500
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13............. 575,000 582,187
US Oncology, Inc.
Sr. Sub. Notes
10.75% due 08/15/14............ 475,000 532,000
----------
5,871,510
----------
Insurance -- 0.3%
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 06/15/13............ 775,000 846,688
----------
Internet Content -- 0.4%
Spheris, Inc.
Sr. Sub. Notes
11.00% due 12/15/12*........... 975,000 940,875
----------
Leisure & Tourism -- 8.4%
American Airlines, Inc.
Pass-Thru Certificates, Series
2001-1, Class A2
6.82% due 05/23/11............. 2,350,000 2,156,390
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class B
7.63% due 01/02/15+(2)......... 5,437,354 4,521,819
Atlas Air, Inc.
Pass-Thru Certificates, Series
2000-1
8.71% due 01/02/19............. 1,079,258 1,117,841
Atlas Air, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
8.77% due 01/02/11+(2)......... 574,341 313,412
Atlas Air, Inc.
Pass-Thru Certificates Series
2000-1, Class B
9.06% due 07/02/17............. 1,301,358 1,201,596
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-1, Class C
6.95% due 08/02/09............. 660,591 578,868
Continental Airlines, Inc.
Pass-Thru Certificates, Series
1999-2, Class C1
7.73% due 03/15/11............. 340,319 282,293
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
Leisure & Tourism (continued)
Delta Airlines, Inc.
Notes
8.30% due 12/15/29(2)(3)+....... $2,450,000 $ 441,000
Delta Airlines, Inc.
Sr. Notes
9.50% due 11/18/08*(2)(3)+...... 500,000 375,000
Delta Airlines, Inc.
Sr. Notes
10.00% due 08/15/08(2)(3)+...... 3,000,000 540,000
Eldorado Casino Shreveport Joint
1st Mtg. Notes
10.00% due 08/01/12............. 1,750,881 1,661,148
Eldorado Resorts, LLC
Sr. Notes
9.00% due 04/15/14(1)........... 2,675,000 2,675,000
Riviera Holdings Corp.
Guaranteed Sr. Notes
11.00% due 06/15/10#............ 800,000 864,000
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 09/15/11.............. 1,000,000 930,000
Turning Stone Casino Resort
Sr. Notes
9.13% due 12/15/10*............. 600,000 624,000
Waterford Gaming, LLC
Sr. Notes
8.63% due 09/15/12*............. 1,120,000 1,192,800
Worldspan LP
Sr. Notes
10.04% due 02/15/11*(5)......... 1,175,000 1,034,000
-----------
20,509,167
-----------
Machinery -- 0.7%
Dresser Rand Group, Inc.
Sr. Sub. Notes
7.38% due 11/01/14*............. 683,000 708,613
Huntsman Advanced Materials, LLC
Sr. Sec. Notes
11.00% due 07/15/10............. 525,000 588,000
Magnachip Semiconductor SA
Sr. Sub. Notes
8.00% due 12/15/14.............. 525,000 483,000
Venture Holdings Co., LLC
Guaranteed Sr. Sub. Notes
11.00% due 06/01/07+(2)(3)...... 550,000 1,375
-----------
1,780,988
-----------
Medical Products -- 2.4%
Amerisourcebergen Corp.
Sr. Notes
5.88% due 09/15/15*............. 1,375,000 1,357,813
CDRV Investors, Inc.
Sr. Notes
9.63% due 01/01/15(4)........... 1,975,000 1,125,750
Encore Med IHC, Inc.
Sr. Sub. Notes
9.75% due 10/01/12.............. 625,000 621,875
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Medical Products (continued)
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 02/15/12.................. $1,400,000 $1,421,000
Mylan Labs, Inc.
Sr. Notes
5.75% due 08/15/10*................. 200,000 200,250
Mylan Labs, Inc.
Sr. Notes
6.38% due 08/15/15*................. 500,000 500,625
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11................. 700,000 717,500
----------
5,944,813
----------
Metals & Mining -- 1.2%
AK Steel Corp.
Guaranteed Notes
7.88% due 02/15/09.................. 300,000 291,000
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11.................. 600,000 645,000
Chaparrel Steel Co.
Sr. Notes
10.00% due 07/15/13*................ 500,000 527,500
CSN Islands IX Corp.
Guaranteed Notes
10.00% due 01/15/15*................ 500,000 556,250
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*................. 675,000 749,250
Renco Metals, Inc.
Guaranteed Sr. Notes
11.50% due 07/01/49+(1)(2)(3)(7)(8). 2,150,000 0
Ryerson Tull, Inc.
Sr. Notes
8.25% due 12/15/11.................. 275,000 267,438
----------
3,036,438
----------
Pharmaceuticals -- 0.3%
Curative Health Services, Inc.
Sr. Notes
10.75% due 05/01/11................. 1,125,000 720,000
----------
Real Estate Investment Trusts -- 1.8%
National Health Investors, Inc.
Notes
7.30% due 07/16/07.................. 1,120,000 1,148,311
Senior Housing Properties Trust
Sr. Notes
8.63% due 01/15/12.................. 1,075,000 1,195,938
Trustreet Properties, Inc.
Sr. Notes
7.50% due 04/01/15.................. 1,925,000 1,968,312
----------
4,312,561
----------
Restaurants -- 0.6%
Restaurant Co.
Sr. Notes
10.00% due 10/01/13*................ 250,000 240,000
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Restaurants (continued)
Sbarro, Inc.
Sr. Notes
11.00% due 09/15/09................. $1,225,000 $ 1,218,875
-----------
1,458,875
-----------
Retail -- 0.7%
Rent-Way, Inc.
Sr. Notes
11.88% due 06/15/10(7).............. 1,500,000 1,650,000
-----------
Retail Stores -- 0.9%
Acco Brands Corp.
Sr. Sub. Notes
7.63% due 08/15/15*................. 425,000 420,750
Collins & Aikman Floor Cover
Guaranteed Sr. Notes
9.75% due 02/15/10.................. 730,000 704,450
Prestige Brands, Inc.
Sr. Sub. Notes, Series B
9.25% due 04/15/12.................. 250,000 256,250
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11.................. 725,000 801,125
-----------
2,182,575
-----------
Telecommunications -- 6.5%
American Cellular Corp.,
Series B Sr. Notes
10.00% due 08/01/11................. 3,100,000 3,379,000
Cincinnati Bell, Inc.
Sr. Notes
7.00% due 02/15/15.................. 275,000 265,375
Cincinnati Bell, Inc.
Notes
7.25% due 06/15/23.................. 225,000 210,375
Cincinnati Bell, Inc.
Sr. Sub. Notes
8.38% due 01/15/14.................. 375,000 369,375
ICO North America, Inc.
Sr. Sec. Notes
7.50% due 08/15/09(1)(7)............ 1,075,000 1,155,625
LCI International, Inc.
Sr. Notes
7.25% due 06/15/07.................. 7,725,000 7,531,875
Qwest Corp.
Debentures
7.25% due 10/15/35.................. 1,375,000 1,220,312
Triton PCS, Inc.
Guaranteed Sr. Notes
8.50% due 06/01/13.................. 650,000 619,125
US West Communications, Inc.
Debentures
7.50% due 06/15/23.................. 250,000 228,125
Valor Telecommunications Enterprises
Sr. Notes
7.75% due 02/15/15.................. 900,000 873,000
-----------
15,852,187
-----------
57
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
BONDS & NOTES (continued)
Transportation -- 0.9%
Petroleum Helicopters, Inc.
Guaranteed Sr. Notes, Series B
9.38% due 05/01/09.................. $ 275,000 $ 292,188
Progress Rail Services Corp.
Sr. Notes
7.75% due 04/01/12*................. 825,000 839,437
Ultrapetrol Bahamas, Ltd.
1st Preferred Ship Mtg. Notes
9.00% due 11/24/14.................. 1,100,000 1,013,375
------------
2,145,000
------------
Utilities -- 8.3%
AES Corp.
Sr. Sub. Debentures
8.88% due 11/01/27.................. 1,525,000 1,662,250
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.18% due 12/15/23.................. 375,000 375,938
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23.................. 1,525,000 1,496,406
El Paso Natural Gas Co.
Sr. Notes
7.63% due 08/01/10.................. 725,000 753,836
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22.................. 2,125,000 2,430,180
El Paso Production Holding Co.
Guaranteed Sr. Notes
7.75% due 06/01/13.................. 3,325,000 3,474,625
Ferrellgas L. P.
Sr. Notes
6.75% due 05/01/14.................. 1,300,000 1,241,500
Mirant Corp.
Sr. Notes
7.90% due 07/15/09*+(2)(3).......... 3,525,000 4,291,687
Pacific Energy Partners LP
Sr. Notes
6.25% due 09/15/15*................. 350,000 350,875
Pacific Energy Partners LP
Sr. Notes
7.13% due 06/15/14.................. 850,000 881,875
Reliant Energy, Inc.
Notes
9.50% due 07/15/13.................. 500,000 552,500
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 07/15/12.................. 725,000 845,531
Williams Cos, Inc.
Notes
7.88% due 09/01/21.................. 1,675,000 1,842,500
------------
20,199,703
------------
Total Bonds & Notes
(cost $199,116,247)................. 198,511,023
------------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
CONVERTIBLE BONDS -- 3.9%
Energy Services -- 0.1%
Unisource Energy Corp.
4.50% due 03/01/35*....................... $ 200,000 $ 209,500
----------
Leisure & Tourism -- 1.1%
Six Flags, Inc.
4.50% due 05/15/15........................ 2,135,000 2,692,769
----------
Pharmaceuticals -- 0.2%
Elan Capital Corp.
6.50% due 11/10/08(7)..................... 425,000 576,427
----------
Utilities -- 2.5%
Calpine Corp.
4.75% due 11/15/23........................ 10,550,000 5,749,750
Calpine Corp.
7.75% due 06/01/15........................ 400,000 338,000
----------
6,087,750
----------
Total Convertible Bonds
(cost $11,088,784)........................ 9,566,446
----------
FOREIGN BONDS & NOTES -- 8.2%
Broadcasting & Media -- 1.7%
Corp. Interamericana De Entretenimiento SA
Sr. Notes
8.88% due 06/14/15*....................... 825,000 810,563
Telenet Group Holding NV
Sr. Disc. Notes
11.50% due 06/15/14*(4)................... 4,225,000 3,453,937
----------
4,264,500
----------
Chemicals -- 1.3%
Nova Chemicals Corp.
Sr. Notes
6.50% due 01/15/12........................ 850,000 825,562
Rhodia SA
Sr. Sub. Notes
8.88% due 06/01/11........................ 2,475,000 2,338,875
----------
3,164,437
----------
Electronics -- 0.3%
Celestica, Inc.
Sr. Sub. Notes
7.63% due 07/01/13........................ 350,000 349,125
STATS ChipPAC Ltd.
Sr. Notes
6.75% due 11/15/11........................ 325,000 315,250
----------
664,375
----------
Energy Sources -- 0.8%
North America Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11........................ 525,000 498,750
North America Energy Partners, Inc.
Sr. Notes
9.00% due 06/01/10........................ 1,300,000 1,339,000
----------
1,837,750
----------
58
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Forest Products -- 0.6%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 08/01/10.................... $1,475,000 $ 1,500,813
-----------
Household & Personal Products -- 0.1%
Vitro Envases Norteamerica SA
Sr. Sec. Notes
10.75% due 07/23/11*.................. 225,000 229,500
-----------
Insurance -- 0.4%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.................... 950,000 902,500
-----------
Leisure & Tourism -- 0.5%
Grupo Posadas SA de CV
Sr. Notes
8.75% due 10/04/11*................... 1,075,000 1,150,250
-----------
Metals & Mining -- 0.0%
International Utility Structures, Inc.
Sr. Sub. Notes
10.75% due 02/01/08+(1)(2)(7)......... 2,150,000 43,000
Vitro SA de CV
Notes
11.75% due 11/01/13*.................. 75,000 69,750
-----------
112,750
-----------
Pharmaceuticals -- 1.1%
Elan Finance, PLC
Sr. Notes
7.75% due 11/15/11*................... 1,700,000 1,496,000
Elan Finance, PLC
Sr. Notes
7.79% due 11/15/11*(5)................ 1,225,000 1,081,062
-----------
2,577,062
-----------
Retail -- 0.7%
Jean Coutu Group, Inc.
Sr. Sub. Notes
8.50% due 08/01/14.................... 1,725,000 1,716,375
-----------
Transportation -- 0.3%
TFM SA de CV
Sr. Notes
9.38% due 05/01/12*................... 775,000 837,000
-----------
Utilities -- 0.4%
AES Chivor
Notes
9.75% due 12/30/14*................... 875,000 980,438
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(2)............... 4,460,000 4,460
-----------
984,898
-----------
Total Foreign Bonds & Notes
(cost $23,797,921).................... 19,942,210
-----------
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
LOAN AGREEMENTS -- 1.1%
Automotive -- 0.7%
Delphi Corp.
10.70% due 06/14/11.......................... 1,745,625 $ 1,782,583
-----------
Household & Personal Products -- 0.4%
Vitro Envases Norteamerica SA
10.08% due 11/24/05(7)....................... 1,000,000 1,007,500
-----------
Total Loan Agreements
(cost $2,787,083)............................ 2,790,083
-----------
COMMON STOCK -- 15.6%
Broadcasting & Media -- 0.6%
Charter Communications, Inc.+................. 1,000,000 1,500,000
-----------
Energy Services -- 2.1%
Trico Marine Services, Inc.+.................. 187,500 5,015,625
-----------
Energy Sources -- 0.0%
Tri-Union Development Corp.+(1)(7)............ 1,061 11
Tribo Petroleum Corp.+*(1)(7)................. 1,800 18
-----------
29
-----------
Leisure & Tourism -- 0.1%
Capital Gaming International, Inc.+(1)(7)..... 77 0
Shreveport Gaming Holdings, Inc.+(1)(7)(9).... 14,150 325,775
-----------
325,775
-----------
Machinery -- 0.7%
NES Rentals Holding, Inc.+.................... 150,124 1,651,364
-----------
Real Estate Investment Trusts -- 0.3%
Meristar Hospitality Corp.+................... 91,550 835,852
-----------
Telecommunications -- 11.8%
iPCS, Inc.+................................... 344,285 14,322,256
IWO Holdings, Inc.+(1)........................ 346,094 14,535,948
-----------
28,858,204
-----------
Total Common Stock
(cost $15,685,318)........................... 38,186,849
-----------
PREFERRED STOCK -- 0.3%
Broadcasting & Media -- 0.0%
Ono Finance, PLC zero coupon+(1)(7)........... 500 0
-----------
Retail Stores -- 0.3%
GNC Corp.12.00%(6)............................ 725 536,500
Rent-Way, Inc. 8.00%(1)(7)(9)................. 13 151,851
-----------
688,351
-----------
Total Preferred Stock
(cost $859,350).............................. 688,351
-----------
WARRANTS+ -- 0.0%
Broadcasting & Media -- 0.0%
Knology Holdings, Inc.
Expires 10/15/07 (strike price $0.10)*(1).... 4,500 1,125
-----------
Business Services -- 0.0%
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $30.05)(1)(7). 1,587 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $33.04)(1)(7). 1,619 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $31.58)(1)(7). 1,182 0
-----------
0
-----------
59
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
WARRANTS (continued)
Telecommunications -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10 (strike price $0.00)*(1)(7).. 2,650 27
KMC Telecom Holdings, Inc.
Expires 01/31/08 (strike price $0.01)(1)(7)... 3,650 0
Leap Wireless International, Inc.
Expires 04/15/10 (strike price $96.80)*(1)(7). 2,250 0
Leap Wireless International, Inc.
Expires 04/15/10 (strike price $96.80)*(1)(7). 1,950 0
------------
27
------------
Total Warrants
(cost $1,333,505)............................. 1,152
------------
Total Investment Securities --
(cost $254,668,208)........................... 269,686,114
------------
TOTAL INVESTMENTS --
(cost $254,668,208)@.......................... 110.4% 269,686,114
Liabilities in excess of other assets............ (10.4) (25,466,257)
----- ------------
NET ASSETS -- 100.0% $244,219,857
===== ============
- --------
+ Non-income producing security
# Security represents an investment in an affiliated company; see Note 7.
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. The Fund 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 September 30, 2005, the
aggregate value of these securities was $45,609,200 representing 18.7% 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; see Note 2.
(2)Bond in default.
(3)Company has filed for Chapter 11 bankruptcy protection.
(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)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of September 30, 2005.
(6)PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(7)Illiquid security.
(8)Security is subject to litigation, the outcome of which is still to be
determined.
(9)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 1. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of September 30, 2005, the
High Yield Bond Fund held the following restricted securities:
% of
Acquisition Acquisition Market Net
Name Date Shares Cost Value Assets
---- ----------- ------ ----------- -------- ------
Rent-Way, Inc. 8.00%
Preferred Stock.... 05/29/2003 10 $100,000 $116,808 0.05%
Rent-Way, Inc. 8.00%
Preferred Stock.... 05/14/2004 3 $ 30,000 $ 35,043 0.01%
Shreveport Gaming
Holdings, Inc...... 07/29/2005 11,829 272,336 272,339 0.11
Shreveport Gaming
Holdings, Inc...... 07/21/2005 2,321 53,448 53,436 0.02
-------- ----
$477,626 0.19%
======== ====
(10) Subsequent to 09/30/05 bond in default.
See Notes to Financial Statements
60
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- September 30, 2005 -- (unaudited)
Industry Allocation*
Ohio.......... 18.4%
California.... 11.3
Massachusetts. 10.3
Michigan...... 10.3
New York...... 8.4
Missouri...... 8.1
Alabama....... 6.9
Indiana....... 5.3
New Mexico.... 5.3
South Dakota.. 3.3
Michigan...... 3.2
Arizona....... 2.9
Washington.... 2.2
South Carolina 2.0
Connecticut... 0.6
North Carolina 0.3
Georgia....... 0.2
----
99.0%
====
Credit Quality+#
AAA 80.9%
AA. 3.3
A.. 11.5
BBB 4.3
-----
100.0%
=====
- --------
* Calculated as a percentage on net assets.
+ Sources Standard & Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
61
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
MUNICIPAL BONDS -- 90.4%
Alabama -- 6.9%
Jefferson County, Alabama Sewer,
Capital Improvement, Series D,
5.25% due 02/01/26(1).......................... $4,500,000 $ 4,968,270
-----------
Arizona -- 2.9%
Phoenix, Arizona Civic Improvement Corp.
Wastewater Systems Revenue, Junior Lien,
5.00% due 07/01/28(1).......................... 2,000,000 2,105,420
-----------
California -- 11.3%
California State, Variable Purpose,
5.50% due 04/01/28............................. 2,500,000 2,745,025
East Bay California Municipal Utility District,
Water Systems Revenue, Sub. Series A,
5.00% due 06/01/29(1).......................... 2,000,000 2,104,720
San Francisco California Bay Area Rapid Transit
District Sales Tax Revenue,
Series A,
5.00% due 07/01/18(1).......................... 3,000,000 3,239,850
-----------
8,089,595
-----------
Georgia -- 0.2%
Georgia Municipal Electric Authority,
Power Revenue, Series Y,
6.40% due 01/01/13(1).......................... 85,000 98,117
Georgia Municipal Electric Authority,
Power Revenue, Series Y,
6.40% due 01/01/09(1).......................... 60,000 66,015
-----------
164,132
-----------
Indiana -- 5.3%
Indiana Transportation Finance Authority
Highway Revenue, Series A,
5.25% due 06/01/26(1).......................... 3,500,000 3,766,805
-----------
Massachusetts -- 10.3%
Massachusetts State Water Resources Authority,
Series A,
5.00% due 08/01/24(1).......................... 3,910,000 4,150,230
University Massachusetts Building Authority
Project Revenue, Series 4,
5.25% due 11/01/27(1).......................... 3,000,000 3,235,500
-----------
7,385,730
-----------
Michigan -- 10.3%
Detroit Michigan Sewage Disposal Revenue
Series A
6.00% due 07/01/07(1).......................... 3,000,000 3,150,690
Kent Hospital Finance Authority Michigan
Revenue Refunding Spectrum Health
Series B
5.00% due 07/15/11............................. 2,000,000 2,134,020
Michigan State Building Authority Revenue,
Refunding Facilities Program, Series I,
5.00% due 10/15/07(1).......................... 2,000,000 2,077,300
-----------
7,362,010
-----------
Missouri -- 7.8%
Sikeston, Missouri, Electric Revenue,
6.20% due 06/01/10(1).......................... 5,000,000 5,611,600
-----------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------------
New Mexico -- 5.3%
New Mexico Finance Authority Transportation,
Sr. Lien Series A,
5.25% due 06/15/21(1)........................... 3,500,000 3,799,670
-----------
New York -- 8.4%
New York State Thruway Authority Highway &
Bridge, Series B,
5.00% due 04/01/18(1)........................... $2,500,000 $ 2,697,775
New York, New York, Series D,
5.00% due 11/01/28.............................. 2,000,000 2,070,740
Niagara Falls, New York Public Improvement,
General Obligation,
7.50% due 03/01/13(1)........................... 445,000 552,013
Niagara Falls, New York, Public Improvement,
General Obligation,
7.50% due 03/01/14(1)........................... 555,000 702,003
-----------
6,022,531
-----------
Ohio -- 18.4%
Cincinnati, Ohio City School District, Classroom
Facilities Construction & Improvement,
5.00% due 12/01/24(1)........................... 3,000,000 3,162,000
Cuyahoga County, Ohio Revenue, Cleveland
Clinic Health Systems, Series A,
5.75% due 01/01/24.............................. 2,000,000 2,198,720
Franklin County, Ohio Hospital Revenue,
OhioHealth Corp., Series C,
5.25% due 05/15/23.............................. 3,000,000 3,203,250
Olentangy Local School District Ohio, School
Facilities Construction & Improvement,
Series A,
5.25% due 12/01/27(1)........................... 3,250,000 3,495,310
Woodridge, Ohio Local School District,
General Obligation,
6.80% due 12/01/14(1)........................... 1,000,000 1,171,240
-----------
13,230,520
-----------
South Dakota -- 3.3%
South Dakota State Health & Educational
Facilities Revenue, McKennan Hospital,
6.25% due 07/01/10(1)........................... 2,120,000 2,373,404
-----------
Total Long-Term Investment Securities
(cost $61,363,765).............................. 64,879,687
-----------
SHORT-TERM INVESTMENT SECURITIES -- 8.6%
Connecticut -- 0.6%
Connecticut State Housing Finance Authority,
Mortgage Housing Finance, Subseries B-2,
2.78% due 10/06/05(1)(2)........................ 400,000 400,000
-----------
Michigan -- 3.2%
Michigan State Housing Development Authority,
Rental Housing Revenue, Series A,
2.78% due 10/05/05(1)(2)........................ 2,295,000 2,295,000
-----------
Missouri -- 0.3%
Missouri Higher Education Loan Authority,
Student Loan Revenue, Series B,
2.79% due 10/05/05(1)(2)........................ 200,000 200,000
-----------
62
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2005 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES (continued)
North Carolina -- 0.3%
Charlotte North Carolina Certificates
Participation, Governmental Facilities,
Series F,
2.75% due 10/06/05(2)..................... 200,000 200,000
-----------
South Carolina -- 2.0%
Piedmont Municipal Power Agency South
Carolina Electric Revenue, Refunding
Subseries B6,
2.72% due 10/05/05(1)(2).................. $1,450,000 $ 1,450,000
-----------
Washington -- 2.2%
Washington State Health Care Facilities
Authority Revenue, Virginia Mason Medical
Center, Series B,
2.93% due 10/03/05(1)(2).................. 1,600,000 1,600,000
-----------
Registered Investment Companies -- 0.0%
SSGA Tax Free Money Market Fund............ 8,836 8,836
-----------
Total Short-Term Investment Securities
(cost $6,153,836)......................... 6,153,836
-----------
TOTAL INVESTMENTS --
(cost $67,517,601)@....................... 99.0% 71,033,523
Other assets less liabilities................ 1.0 746,374
---------- -----------
NET ASSETS -- 100.0% $71,779,897
========== ===========
- --------
@ See Note 5 for cost of investment 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 $58,472,932 or 81.5% of Net Assets.
(2)Variable rate security -- the rate reflected is as of September 30, 2005;
maturity date reflects next reset date.
See Notes to Financial Statements
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
Note 1. Organization
SunAmerica Income Funds is an open-end diversified management investment
company organized as a Massachusetts business trust (the "Trust"). It
currently consists of six different investment series (each, a "Fund" and
collectively, the "Funds"). Each Fund is a separate series of the Trust with
distinct investment objectives and/or strategies. Each Fund is managed by
AIG SunAmerica Asset Management Corp. (the "Adviser" or "SAAMCo"), an
indirect wholly-owned subsidiary of American International Group, Inc.
("AIG"). An investor may invest in one or more of the following Funds:
SunAmerica Core Bond Fund, SunAmerica U.S. Government Securities Fund,
SunAmerica GNMA Fund, SunAmerica Strategic Bond Fund, 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.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(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. Effective July 11, 2005, Class X
shares of the GNMA 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: Shares of the Fund are valued at least daily as of the
close of regular trading on the New York Stock Exchange (generally, 4:00
p.m. Eastern time). The Fund calculates the net asset value of its shares by
dividing the total value of its net assets by the number of shares
outstanding. The days and times of such computation may, in the future, be
changed by the Trustees in the event that the portfolio securities are
traded in significant amounts in markets other than the New York Stock
Exchange, or on days or at times other than those during which the New York
Stock Exchange is open for trading.
Stocks are generally valued based upon closing sales prices reported on
recognized securities exchanges. Stocks listed on the NASDAQ are valued
using the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will
be the last sale price unless the reported trade for the stock is outside
the range of the bid/ask price. In such cases, the NOCP will be normalized
to the nearer of the bid or ask price. For listed securities having no sales
reported and for unlisted securities, such securities will be valued based
upon the last reported bid price.
As of the close of regular trading on the New York Stock Exchange,
securities traded primarily on security exchanges outside the United States
are valued at the last sale price on such exchanges on the day of valuation,
or if there is no sale on the day of valuation, at the last-reported bid
price. If a security's price is available from more than one exchange, 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 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. The 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.
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
Non-convertible bonds and debentures, other long-term debt securities, and
short term debt securities with maturities in excess of 60 days, are valued
at bid prices obtained for the day of valuation from a bond pricing service,
when such prices are available. If a vendor quote is unavailable the
securities may be priced at the mean of two independent quotes obtained from
brokers. Securities for which market quotations are not readily available
are valued as determined pursuant to procedures adopted in good faith by the
Board of Trustees.
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 market quotations are not readily available or if a
development/significant event occurs that may significantly impact the value
of the security, then these securities are valued, as determined pursuant to
procedures adopted in good faith by the Board of Trustees.
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.
At September 30, 2005, the following Funds held an undivided interest in a
joint repurchase agreement with State Street Bank & Trust Co.:
Fund Percentage Interest Principal Amount
- ---- ------------------- ----------------
GNMA Fund.......... 12.46% $10,604,000
Strategic Bond Fund 0.64 544,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
State Street Bank & Trust Co., dated September 30, 2005, bearing interest at
a rate of 3.05% per annum, with a principal amount of $85,086,000, a
repurchase price of $85,107,626 and a maturity date of October 3, 2005. The
repurchase agreement is collateralized by the following:
Type of Collateral Interest Rate Maturity Date Principal Amount Market Value
- ------------------ ------------- ------------- ---------------- ------------
U.S. Treasury Notes 3.13% 10/15/08 $ 3,460,000 $ 3,412,425
U.S. Treasury Notes 3.25 08/15/07 14,060,000 13,901,825
U.S. Treasury Notes 3.38 12/15/08 5,760,000 5,673,600
U.S. Treasury Notes 4.00 09/30/07 62,140,000 61,984,650
U.S. Treasury Bonds 10.38 11/15/12 1,565,000 1,819,313
In addition, at September 30, 2005, the following Funds held a percentage of
an undivided interest in a joint repurchase agreement with UBS Securities,
LLC:
Fund Percentage Interest Principal Amount
- ---- ------------------- ----------------
GNMA Fund.......... 45.00% $90,000,000
Strategic Bond Fund 2.50 5,000,000
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Securities, LLC, dated September 30, 2005, bearing interest at a rate of
3.30% per annum, with a principal amount of $200,000,000, a repurchase price
of $200,055,000, and a maturity date of October 3, 2005. The repurchase
agreement is collateralized by the following:
Type of Collateral Interest Rate Maturity Date Principal Amount Market Value
- ------------------ ------------- ------------- ---------------- ------------
U.S. Treasury Inflation Index Bonds 3.63% 04/15/28 $ 23,933,000 $ 38,502,214
U.S. Treasury Inflation Index Bonds 3.88 04/15/29 100,000,000 165,500,000
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. 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 six months ended September 30,
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 six months ended
September 30, 2005, $747 of broker rebates were reclassified to interest
expense for the U.S. Government Securities Fund. As with other extensions of
credit, should the borrower of the securities fail financially, the Funds
may bear the risk of delay in recovery or may be subject to replacing the
loaned securities by purchasing them with the cash collateral held, which
may be less than 100% of the market value of such securities at the time of
replacement.
At September 30, 2005 there were no loaned securities outstanding in the
U.S. Government Securities Fund or the GNMA Fund.
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
Forward Foreign Currency Contracts: Certain Funds 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 Fund as
unrealized gain or loss. On the settlement date, the Fund records either
realized gains or losses when the contract is closed equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. Forward contracts involve elements of
risk in excess of the amount reflected in the Statement of Assets and
Liabilities. The Trust bears the risk of an unfavorable change in the
foreign exchange rate underlying the forward contract.
Foreign Currency Translation: The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars based on the exchange rate of such currencies
against U.S. dollars on the date of valuation.
The Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at the end of the period. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of
securities transactions, the difference between the amounts of interest,
dividends and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
Short Sales: 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 six months ended September 30,
2005, the Core Bond Fund, U.S. Government Securities Fund and 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. 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.
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
Dollar roll transactions involve the risk that the market value of the
securities held by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement.
In the event that the buyer of securities in a dollar roll transaction files
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the
sale of the securities may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. The return earned by the Fund with
the proceeds of the dollar roll transaction may not exceed transaction costs.
Note 3. Investment Advisory and Management Agreement, Distribution Agreement
and Service Agreement
The Trust, on behalf of each Fund, has an Investment Advisory and Management
Agreement (the "Agreement") with SAAMCo. Under the Agreement, SAAMCo
provides continuous supervision of a Fund's portfolio and administers its
corporate affairs, subject to general review by the Trustees. In connection
therewith, SAAMCo furnishes the Funds with office facilities, maintains
certain of the Funds' books and records, and pays the salaries and expenses
of all personnel, including officers of the Funds, who are employees of
SAAMCo and its affiliates.
The Funds pay SAAMCo a monthly investment advisory and management fee
calculated daily at the following annual percentages of each Fund's average
daily net assets:
Management
Assets Fees
--------------------------- ----------
Core Bond Fund................. $0 - $200 million 0.600%
(greater than) $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
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
Fund Percentage
- ---- ----------
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
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
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
Tax Exempt Insured Fund Class C........ 1.95
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
For the six months ended September 30, 2005, SAAMCo has agreed to reimburse
expenses as follows:
Fund Amount
- ---- --------
Core Bond Class A................. $104,705
Core Bond Class B................. 8,990
Core Bond Class C................. 13,432
Core Bond Class I................. 765
Core Bond Class Z................. 8,115
U.S. Government Securities Class A 323,016
U.S. Government Securities Class B 59,337
U.S. Government Securities Class C 30,789
GNMA Class A...................... 211,318
GNMA Class B...................... 78,457
GNMA Class C...................... 49,014
GNMA Class X...................... --
Strategic Bond Class A............ --
Strategic Bond Class B............ 179
Strategic Bond Class C............ 528
High Yield Bond Class A........... 98,255
High Yield Bond Class B........... 40,953
High Yield Bond Class C........... 41,601
High Yield Bond Class Z........... 20,804
Tax Exempt Insured Class A........ --
Tax Exempt Insured Class B........ --
Tax Exempt Insured Class C........ 8,000
- --------
The Trust, on behalf of each Fund, has a Distribution Agreement with AIG
SunAmerica Capital Services, Inc. ("SACS" or "Distributor"), an affiliate of
the Adviser. Each Fund, has adopted a Distribution Plan (the "Plan") in
accordance with the provisions of Rule 12b-1 under the 1940 Act. Rule 12b-1
under the 1940 Act permits an investment company directly or indirectly to
pay expenses associated with the distribution of its shares ("distribution
expenses") in accordance with a plan adopted by the investment company's
board of trustees and approved by its shareholders. Pursuant to such rule,
the Trustees and the shareholders of each class of shares of each Fund have
adopted Distribution Plans, hereinafter referred to as the "Class A Plan,"
the "Class B Plan" and the "Class C Plan." In adopting the Class A Plan, the
Class B Plan and the Class C Plan, the Trustees determined that there was a
reasonable likelihood that each Plan would benefit the Trust and the
shareholders of the respective class. The sales charge and distribution fees
of a particular class will not be used to subsidize the sale of shares of
any other class.
Under the Class A Plan, Class B Plan and Class C Plan, the Distributor
receives payments from the Funds at an annual rate of up to 0.10%, 0.75% and
0.75%, respectively, of average daily net assets of such Fund's Class A,
Class B and Class C shares to compensate the Distributor and certain
securities firms for providing sales and promotional activities for
distributing that class of shares. The distribution costs for which the
Distributor may be compensated for, include fees paid to broker-dealers that
have 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 six months ended September 30,
2005, SACS received fees (see the Statement of Operations) based upon the
aforementioned rates.
In addition, SACS 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 six months ended September 30, 2005, SACS
earned fees (see Statement of Operations) based upon the aforementioned
rates.
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
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 six
months ended September 30, 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.... $ 24,341 $ 5,400 $ 15,317 $ 36,799
GNMA.......................... 88,392 30,495 43,230 215,476
Strategic Bond................ 431,798 74,484 283,249 51,998
High Yield Bond............... 226,116 30,204 157,660 129,408
Core Bond..................... 10,569 3,925 4,681 4,932
Tax Exempt Insured............ 18,216 7,070 7,861 20,890
Class C
--------------
Contingent
Deferred Sales
Fund Charges
- ---- --------------
U.S. Government Securities.... $ 811
GNMA.......................... 7,179
Strategic Bond................ 6,016
High Yield Bond............... 16,506
Core Bond..................... 46
Tax Exempt Insured............ 152
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 six months ended September 30, 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 September 30, 2005
-------- ------------------
Core Bond Class A................. $188,896 $31,147
Core Bond Class B................. 5,476 898
Core Bond Class C................. 4,779 751
Core Bond Class I................. 1,534 251
U.S. Government Securities Class A 191,251 30,618
U.S. Government Securities Class B 28,984 4,565
U.S. Government Securities Class C 10,862 1,683
GNMA Fund Class A................. 372,941 60,773
GNMA Fund Class B................. 108,394 16,909
GNMA Fund Class C................. 59,324 9,201
GNMA Fund Class X................. 766 --
Strategic Bond Class A............ 84,284 16,952
Strategic Bond Class B............ 44,402 7,683
Strategic Bond Class C............ 56,108 11,409
High Yield Bond Class A........... 171,723 32,446
High Yield Bond Class B........... 64,657 10,501
High Yield Bond Class C........... 72,574 12,560
Tax Exempt Insured Class A........ 67,007 10,740
Tax Exempt Insured Class B........ 9,402 1,427
Tax Exempt Insured Class C........ 6,410 978
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
At September 30, 2005, affiliate funds of the SunAmerica Focused Funds, Inc.
owned 93%, 7%, 49% and 5% of the outstanding Class A shares of Core Bond
Fund, U.S. Government Securities Fund, GNMA Fund, and High Yield Bond Fund,
respectively. At September 30, 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.
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 six months ended September 30, 2005 were as
follows:
U.S.
Core Government Tax Exempt
Bond Securities GNMA Strategic High Yield Insured
Fund Fund Fund Bond Fund Bond Fund Fund
------------ ------------ ------------ ------------ ------------ -----------
Purchases (excluding U.S. government
securities)........................ $135,208,429 $ -- $ -- $131,624,800 $100,736,920 $29,051,259
Sales (excluding U.S. government
securities)........................ 116,290,015 -- -- 73,234,316 157,401,987 33,880,526
Purchases of U.S. government
securities......................... 69,429,049 377,607,595 328,554,755 57,198,826 -- --
Sales of U.S. government securities. 80,432,657 359,444,191 336,303,318 36,933,082 -- --
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
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......................................... $196,560,732 $208,198,089 $631,660,897 $195,185,341 $252,572,133 $67,521,596
============ ============ ============ ============ ============ ===========
Appreciation................................. 2,161,462 1,658,012 827,053 9,956,858 33,483,262 3,531,856
Depreciation................................. (2,447,986) (2,985,014) (4,592,687) (4,948,898) (17,726,865) (19,929)
------------ ------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ (286,524) $ (1,327,002) $ (3,765,634) $ 5,007,960 $ 15,756,397 $ 3,511,927
============ ============ ============ ============ ============ ===========
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
As of March 31, 2005, for Federal income tax purposes, the Funds indicated
below have capital loss carryforwards, which expire in the year indicated,
which are available to offset future capital gains, if any:
Capital Loss Carryforward
------------------------------------------------------------------------
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 Funds 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.
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.
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
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
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
------------------------ ------------------------- ------------------- -----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ------- --------- -------- -----------
Shares sold....... 847,123* $ 8,663,729* 4,080,810** $ 41,782,506** 59,025 $ 602,697 75,896 $ 777,468
Reinvested shares. 348,246 3,569,119 820,201 8,427,158 5,794 59,233 16,776 171,948
Shares redeemed... (902,362) (9,246,152) (1,771,439) (18,067,712) (72,713)* (742,890)* (143,212)** (1,463,512)**
---------- ------------ ---------- ------------ ------- --------- -------- -----------
Net increase
(decrease)....... 293,007 $ 2,986,696 3,129,572 $ 32,141,952 (7,894) $ (80,960) (50,540) $ (514,096)
========== ============ ========== ============ ======= ========= ======== ===========
Core Bond Fund
---------------------------------------------------------------------------------------------------
Class C+ Class I
--------------------------------------------------- ---------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
------------------------ ------------------------- ------------------- -----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ------- --------- -------- -----------
Shares sold....... 33,521 $ 342,822 92,653 $ 949,365 14,501 $ 148,471 51,056 $ 524,372
Reinvested shares. 5,580 57,114 19,166 196,692 2,905 29,802 10,987 112,886
Shares redeemed... (108,209) (1,105,617) (150,429) (1,541,314) (19,392) (198,649) (217,983) (2,213,708)
---------- ------------ ---------- ------------ ------- --------- -------- -----------
Net increase
(decrease)....... (69,108) $ (705,681) (38,610) $ (395,257) (1,986) $ (20,376) (155,940) $(1,576,450)
========== ============ ========== ============ ======= ========= ======== ===========
Core Bond Fund
---------------------------------------------------
Class Z
---------------------------------------------------
For the
six months ended For the
September 30, 2005 year ended
(unaudited) March 31, 2005
------------------------ -------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold....... -- $ -- -- $ --
Reinvested shares. 34,253 351,381 225,039 2,309,447
Shares redeemed... (1,206,409) (12,300,000) (4,558,155) (46,800,000)
---------- ------------ ---------- ------------
Net increase
(decrease)....... (1,172,156) $(11,948,619) (4,333,116) $(44,490,553)
========== ============ ========== ============
- --------
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 3,817 shares of Class B shares in the
amount of $37,865 to 3,808 shares of Class A shares in the amount of $37,865.
** 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.
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
U.S. Government Securities Fund
---------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------- ---------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
------------------------ ------------------------- ---------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold.... 1,658,080* $ 15,739,767* 1,851,870** $ 17,318,940** 205,471 $ 1,950,325 270,431 $ 2,539,712
Reinvested
shares........ 258,493 2,455,243 517,015 4,852,956 31,752 301,666 68,488 642,865
Shares redeemed (2,416,317) (22,937,635) (4,914,341) (46,091,272) (477,190)* (4,524,180)* (1,250,517)** (11,737,869)**
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase
(decrease).... (499,744) $ (4,742,625) (2,545,456) $(23,919,376) (239,967) $(2,272,189) (911,568) $ (8,555,292)
========== ============ ========== ============ ======== =========== ========== ============
U.S. Government Securities Fund
---------------------------------------------------
Class C+
---------------------------------------------------
For the
six months ended For the
September 30, 2005 year ended
(unaudited) March 31, 2005
------------------------ -------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold.... 203,128 $ 1,928,492 225,967 $ 2,132,586
Reinvested
shares........ 12,178 115,566 27,763 260,245
Shares redeemed (289,206) (2,737,546) (762,001) (7,152,432)
---------- ------------ ---------- ------------
Net increase
(decrease).... (73,900) $ (693,488) (508,271) $ (4,759,601)
========== ============ ========== ============
- --------
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 97,546 shares of Class B shares in the
amount of $813,416 to 97,606 shares of Class A shares in the amount of
$813,416.
** 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.
76
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
GNMA Fund
------------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------- ------------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
------------------------ ------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold.... 2,064,587* $ 23,305,123* 6,894,773** $ 77,011,294** 293,123 $ 3,317,577 508,758 $ 5,716,800
Reinvested
shares........ 433,163 4,888,805 796,791 8,909,301 85,359 965,980 173,434 1,942,448
Shares redeemed (2,900,939) (32,745,897) (7,168,924) (80,162,014) (1,299,878)* (14,702,073)* (3,556,936)** (39,827,017)**
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).... (403,189) $ (4,551,969) 522,640 $ 5,758,581 (921,396) $(10,418,516) (2,874,744) $(32,167,769)
========== ============ ========== ============ ========== ============ ========== ============
GNMA Fund
------------------------------------------------------------------------------------------------------------
Class C+ Class X
--------------------------------------------------- ------------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
------------------------ ------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold.... 440,339 $ 4,989,778 853,099 $ 9,604,217 2,510 $ 28,279 273,192 $ 3,065,920
Reinvested
shares........ 46,759 529,803 101,604 1,138,268 821 9,297 22,436 251,259
Shares redeemed (944,500) (10,692,015) (3,789,770) (42,453,144) (93,618) (1,057,899) (946,348) (10,755,314)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease).... (457,402) $ (5,172,434) (2,835,067) $(31,710,659) (90,287) $ (1,020,323) (650,720) $ (7,438,135)
========== ============ ========== ============ ========== ============ ========== ============
- --------
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 106,996 shares of Class B shares in the
amount of $1,129,651 to 107,281 shares of Class A shares in the amount of
$1,129,651.
** 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.
77
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
Strategic Bond Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- -----------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
----------------------- ------------------------- ------------------------ --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Shares sold.... 12,812,905* $45,135,547* 6,957,950** $ 24,096,113** 2,813,052 $ 9,877,067 3,302,013 $ 11,307,598
Reinvested
shares........ 355,624 1,255,576 532,965 1,826,684 137,829 485,740 359,941 1,230,161
Shares redeemed (2,269,846) (7,988,971) (3,331,876) (11,327,054) (1,614,668)* (5,674,367)* (3,556,677)** (12,132,722)**
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Net increase
(decrease).... 10,898,683 $38,402,152 4,159,039 $ 14,595,743 1,336,213 $ 4,688,440 105,277 $ 405,037
========== =========== ========== ============ ========== =========== ========== ============
Strategic Bond Fund
----------------------------------------------------------------------------------------------------------
Class C+ Class I
-------------------------------------------------- -----------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
----------------------- ------------------------- ------------------------ --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Shares sold.... 9,151,373 $32,276,623 5,570,700 $ 19,497,879 -- $ -- -- $ --
Reinvested
shares........ 155,027 548,638 243,819 839,417 -- -- 29,881 99,113
Shares redeemed (1,523,555) (5,386,989) (1,723,947) (5,880,680) -- -- (1,122,765) (3,817,402)
---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------
Net increase
(decrease).... 7,782,845 $27,438,272 4,090,572 $ 14,456,616 -- $ -- (1,092,884) $ (3,718,289)
========== =========== ========== ============ ========== =========== ========== ============
- --------
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 444,916 shares of Class B shares in the
amount of $1,553,449 to 444,798 shares of Class A shares in the amount of
$1,553,449.
** 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.
78
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
High Yield Bond Fund
-----------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------- -------------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
-------------------------- --------------------------- -------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Shares sold. 27,542,912* $ 121,874,566* 33,645,561** $ 144,289,277** 1,321,943 $ 5,938,989 2,940,030 $ 12,724,157
Reinvested
shares..... 606,463 2,730,156 1,222,912 5,293,782 181,736 817,277 485,730 2,096,352
Shares
redeemed... (25,679,345) (116,599,326) (34,116,411) (147,909,905) (3,132,766)* (14,009,946)* (6,876,355)** (29,724,616)**
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Net
increase
(decrease). 2,470,030 $ 8,005,396 752,062 $ 1,673,154 (1,629,087) $ (7,253,680) (3,450,595) $(14,904,107)
=========== ============= =========== ============= =========== ============ ========== ============
High Yield Bond Fund
-----------------------------------------------------------------------------------------------------------------
Class C+ Class Z
------------------------------------------------------- -------------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
-------------------------- --------------------------- -------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Shares sold. 3,634,962 $ 16,389,291 7,504,054 $ 32,828,182 -- $ -- -- $ --
Reinvested
shares..... 218,299 986,425 475,915 2,070,792 365,067 1,619,179 1,616,351 6,993,860
Shares
redeemed... (4,763,645) (21,542,848) (5,742,182) (25,067,974) (18,560,165) (81,900,000) -- --
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Net
increase
(decrease). (910,384) $ (4,167,132) 2,237,787 $ 9,831,000 (18,195,098) $(80,280,821) 1,616,351 $ 6,993,860
=========== ============= =========== ============= =========== ============ ========== ============
- --------
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 760,994 shares of Class B shares in the
amount of $3,222,926 to 762,312 shares of Class A shares in the amount of
$3,222,926.
** Includes automatic conversion of 949,983 shares of Class B shares in the
amount of $4,158,286 to 951,789 shares of Class A shares in the amount of
$4,158,286.
79
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
Tax Exempt Insured Fund
-------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------- ------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2005 year ended September 30, 2005 year ended
(unaudited) March 31, 2005 (unaudited) March 31, 2005
--------------------- ----------------------- ---------------------- -----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------- ----------- -------- ------------ -------- ----------- -------- -----------
Shares sold............ 59,092* $ 767,182* 224,481** $ 2,913,673** 4,823 $ 62,707 31,978 $ 416,668
Reinvested shares...... 42,710 554,912 143,521 1,856,004 4,450 57,855 19,131 247,355
Shares redeemed........ (400,361) (5,197,029) (777,009) (10,040,254) (107,896)* (1,398,908)* (612,542)** (7,956,706)**
-------- ----------- -------- ------------ -------- ----------- -------- -----------
Net increase (decrease) (298,559) $(3,874,935) (409,007) $ (5,270,577) (98,623) $(1,278,346) (561,433) $(7,292,683)
======== =========== ======== ============ ======== =========== ======== ===========
Tax Exempt Insured Fund
----------------------------------------------
Class C+
----------------------------------------------
For the
six months ended For the
September 30, 2005 year ended
(unaudited) March 31, 2005
--------------------- -----------------------
Shares Amount Shares Amount
-------- ----------- -------- ------------
Shares sold............ 39,918 $ 517,160 104,291 $ 1,344,350
Reinvested shares...... 2,885 37,502 9,966 128,971,
Shares redeemed........ (70,228) (907,067) (110,179) (1,429,778)
-------- ----------- -------- ------------
Net increase (decrease) (27,425) $ (352,405) 4,078 $ 43,543
======== =========== ======== ============
- --------
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
* Includes automatic conversion of 16,091 shares of Class B shares in the
amount of $191,440 to 16,103 shares of Class A shares in the amount of
$191,440.
** 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.
Note 7. Transactions with Affiliates
As disclosed in the Portfolio of Investments, certain Funds own securities
issued by American International Group, Inc. ("AIG") or an affiliate
thereof. During the six months ended September 30, 2005, the following Funds
recorded realized gains (losses) and income on security transactions of
affiliates of AIG as follows:
Market Change in Market
Value at Realized Unrealized Value at
March 31, Cost of Proceeds Gain/ Gain/ September 30,
Fund Security Income 2005 Purchases of Sales (Loss) (Loss) 2005
- ---- ---------------------- ------- --------- --------- -------- -------- ---------- -------------
Core Bond...... Riviera Holdings Corp. $ 6,875 $138,125 $-- $-- $-- $ (3,125) $135,000
Strategic Bond. Riviera Holdings Corp. 7,425 149,175 -- -- -- (3,375) 145,800
High Yield Bond Riviera Holdings Corp. 44,000 884,000 -- -- -- (20,000) 864,000
Note 8. 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 six months ended September 30, 2005, the following Funds had borrowings:
Weighted
Days Interest Average Average
Fund Outstanding Charges Debt Utilized Interest
- ---- ----------- -------- ------------- --------
U.S. Government Securities 1 $ 314 $ 2,544,274 4.44%
High Yield Bond........... 38 74,160 17,636,316 3.64
At September 30, 2005, the U.S. Government Securities and High Yield Bond
Funds had balances open under the line of credit agreement of $2,544,274 and
$40,303,004, respectively.
Note 9. 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
80
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2005 -- (unaudited)
(continued)
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 six months ended September 30, 2005 none of
the Funds participated in this program.
Note 10. 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 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 8.50% 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 September 30, 2005
- ---- --------------------------------
Core Bond................. $ 22,495 $1,033 $ 471
U.S. Government Securities 100,824 1,152 5,097
GNMA...................... 47,190 2,715 1,253
Strategic Bond............ 24,881 573 1,178
High Yield Bond........... 46,436 1,840 1,810
Tax Exempt Insured........ 30,843 412 1,432
Note 11. Other Information
On May 26, 2005, the New York Attorney General and the New York
Superintendent of Insurance filed a civil complaint against American
International Group, Inc. ("AIG") as well as its former Chairman and Chief
Executive Officer and former Vice Chairman and Chief Financial Officer, in
the Supreme Court of the State of New York. The complaint asserts claims
under New York's Martin Act and Insurance Law, among others, and makes
allegations concerning certain transactions entered into by AIG and certain
of its subsidiaries, but in no case involving any subsidiary engaged in
providing management or administrative services to the Funds. The complaint
seeks disgorgement, injunctive relief, punitive damages and costs, among
other things.
AIG is the indirect parent company and an affiliated person of the AIG
SunAmerica Asset Management Corp. ("Adviser") and AIG SunAmerica Capital
Services, Inc. (the "Distributor") and AIG Global Investment Corp. (the
"Subadviser"). Neither the Adviser, the Distributor, the Subadviser or their
respective officers and directors nor the Funds have been named in the
complaint, and the complaint does not seek any penalties against them.
In the Adviser's view, the matters alleged in the lawsuit are not material
in relation to the financial position of the Adviser, the Distributor or the
Subadviser or to their ability to provide their respective services to the
Funds. Due to a provision in law governing the operation of mutual funds,
however, if the lawsuit results in an injunction being entered against AIG,
then the Adviser, the Distributor and the Subadviser will need to obtain
permission from the Securities and Exchange Commission to continue to
service the Funds. While the Securities and Exchange Commission has granted
this type of relief to others in the past in similar circumstances, there is
no assurance that this permission would be granted.
81
SunAmerica Income Funds
APPROVAL OF THE ADVISORY AGREEMENT AND SUBADVISORY AGREEMENTS --
September 30, 2005 -- (unaudited)
Approval of the Advisory Agreement and Subadvisory Agreements:
The Board of Trustees (the "Board"), including the Trustees that are not
interested persons of SunAmerica Income Funds (the "Funds") (the "Disinterested
Trustees"), last approved the Investment Advisory and Management Agreement
between the Funds and AIG SunAmerica Asset Management Corp. ("SAAMCo") (the
"Advisory Agreement") for a period of one year, at a meeting held on August 31,
2005. At this same meeting, the Board also approved the renewal of subadvisory
agreements between SAAMCo and AIG Global Investment Company ("AIGGIC") with
respect to the SunAmerica Core Bond Fund, SunAmerica Strategic Bond Fund,
SunAmerica High Yield Bond Fund, and the SunAmerica Tax Exempt Insured Fund
(each a "Subadvisory Agreement" and collectively the "Subadvisory Agreements").
The Board noted that the discussion and approval of the Advisory Agreement and
Subadvisory Agreements at the August 31, 2005 meeting was the culmination of
numerous discussions and meetings that had taken place in recent months. The
Board further noted that certain members of the Board had met with senior
management on numerous occasions and had in-depth discussions regarding the
Funds' performance, advisory expenses and other fees.
In accordance with Section 15(c) of the Investment Company Act of 1940, as
amended (the "1940 Act"), the Board was provided with materials relating to its
consideration of the Advisory Agreement. These materials assisted the Board in
analyzing: (1) the nature, extent and quality of services to be provided by
SAAMCo and AIGGIC, including administrative and shareholder services to be
provided by SAAMCo and certain other affiliated companies; (2) the costs of
services to be provided and benefits realized by SAAMCo and AIGGIC, including a
comparison of fees and expense ratios of other similar funds, as well as
SAAMCo's profitability and financial condition; (3) the terms of the Advisory
Agreement and Subadvisory Agreements; (4) economies of scale and whether the
fee levels reflect these economies of scale; (5) SAAMCo's overall organization,
compliance policies and history, as well as AIGGIC's compliance policies and
history; and (6) the investment performance of the Funds in their peer groups
("Peer Groups") as determined by Lipper, Inc. ("Lipper") and as compared to
their relevant benchmarks and indices. Experienced counsel that is independent
of SAAMCo provided advice to the Disinterested Trustees ("Independent
Counsel"). In considering these factors, as described in more detail below, the
Board did not identify any single factor or group of factors as being more
important than the others, but considered all factors together.
Nature, Extent and Quality of Services
The Board, including the Disinterested Trustees, considered the nature, quality
and extent of services to be provided by SAAMCo. In making its evaluation, the
Board considered that SAAMCo acts as investment manager and adviser to the
Funds, manages the daily business affairs of the Funds, and obtains and
evaluates economic, statistical and financial information to formulate and
implement investment policies. Additionally, SAAMCo provides office space,
accounting, legal, compliance, clerical and administrative services (exclusive
of, and in addition to, overseeing of any such service provided by any others
retained by the Funds), and has authorized its officers and employees, if
elected, to serve as officers or trustees of the Funds without compensation.
Finally, SAAMCo is responsible for monitoring and reviewing the activities of
third-party service providers.
In making their determination regarding the nature and quality of SAAMCo's
services, the Trustees considered SAAMCo's responsibility to provide and
supervise the activities of all administrative and clerical personnel required
to provide effective administration of the Funds. With respect to the Funds for
which SAAMCo retains the daily investment management responsibility, the Board
also reviewed the experience of the portfolio managers and research staff and
SAAMCo's investment style and process. With respect to the Funds for which
SAAMCo has delegated daily investment management responsibilities to the
Subadviser, the Board reviewed SAAMCo's level and process of monitoring the
Subadviser. The Board also reviewed the performance of the Funds, the details
of which are described below.
The Board also reviewed the compliance and administrative services of SAAMCo.
The Board noted that SAAMCo provides and compensates a Chief Compliance Officer
for the Funds, and that SAAMCo maintains a compliance staff of nine people. The
Board analyzed the structure and duties of SAAMCo's accounting, legal and
compliance departments and concluded that they were adequate to meet the needs
of the Funds.
The Board also considered the nature, quality and extent of services to be
provided by AIGGIC. The Board considered that AIGGIC, as Subadviser is
responsible for providing investment management services, including investment
research, advice and supervision, and determining which securities will be
purchased or sold by each Fund which it manages. The Board reviewed AIGGIC's
history, structure, size, visibility and resources which are needed to attract
and retain highly qualified investment professionals. The Board
82
SunAmerica Income Funds
APPROVAL OF THE ADVISORY AGREEMENT AND SUBADVISORY AGREEMENTS --
September 30, 2005 -- (unaudited) (continued)
noted that AIGGIC is an affiliate of SAAMCo and is an indirect wholly owned
subsidiary of American International Group ("AIG"). As such, the Board
considered SAAMCo's relationship and familiarity with AIGGIC and whether this
relationship could benefit the Funds and the shareholders. The Board also
considered the expertise and experience of AIGGIC's portfolio managers and
research staff, and their investment style and process. With respect to
administrative services to be provided by the AIGGIC, the board considered that
AIGGIC provides assistance in general marketing assistance and has developed
internal procedures for monitoring compliance with investment objectives,
policies and restrictions of the Fund as set forth in the prospectus.
The Board concluded that it was satisfied with the nature, quality and extent
of the services provided by or to be provided by SAAMCo and AIGGIC and that
there was a reasonable basis on which to conclude that SAAMCo and AIGGIC would
continue to provide a high quality of investment management services.
Fees and Expenses
The Board, including the Disinterested Trustees, reviewed information regarding
the fees paid by the Funds to SAAMCo for investment advisory and management
services. The Board examined this information in order to determine the
reasonableness of the fees in light of the nature and quality of SAAMCo's
services and any additional benefits received by SAAMCo or its affiliates in
connection with providing such services to the Funds.
To assist in analyzing the reasonableness of the fees, the Board received
reports prepared independently by Lipper detailing comparative advisory fee and
other information of the Funds' peer groups as determined objectively by
Lipper, and rankings within the relevant Lipper categories. The Board also
received reports prepared by SAAMCo, including reports on investment management
fees charged by SAAMCo to other funds it manages, and by the Board's
independent counsel. In considering the reasonableness of the advisory fee, the
Board reviewed a number of expense comparisons, including: (i) contractual
management fees; (ii) actual total expenses; and (iii) actual and allowable
12b-1 and non-12b-1 fees. The Board also took into account that certain fee
arrangements included breakpoints that will adjust the fee downward as the size
of Funds increase, thereby allowing the shareholders to participate in
economies of scale. The Board also reviewed the reports from the past year on
soft dollar commissions, if any. These reports included information on brokers
and total commissions paid for each Fund which had any soft dollar commissions.
For those Funds which had commissions to report, the reports also detailed the
types of research and services obtained in connection with soft dollar
commissions.
Additionally, the Board reviewed the Funds' expense ratios and analyzed the
expense reimbursements and net expense ratio caps contractually agreed upon by
SAAMCo. The Board noted that the Core Bond Fund, Strategic Bond Fund and the
High Yield Bond Fund have implemented contractual expense ratio caps. The Board
compared the Funds' net expense ratios to those of other funds within their
respective Peer Groups. Based upon the reports prepared by Lipper and other
information provided by SAAMCo and by counsel to the Disinterested Trustees,
the Board was satisfied that the fee and expense ratios of the Funds were
acceptable given the quality of services expected to be provided and were
comparable to the fee and expense ratios of similar funds within the same Peer
Groups.
In considering the subadvisory fees, the Board, including the Disinterested
Trustees, considered that the Funds pay a fee to SAAMCo pursuant to the
Advisory Agreement, and that, in turn, SAAMCo rather than the Funds pay a fee
to the Subadviser. Therefore, the Board considered the amount retained by
SAAMCo and the fee paid to the Subadviser with respect to the different
services provided. The Board also considered that the Subadvisory Agreements
contain break points in the fee schedules. Therefore, the Board considered that
if the Funds grew to certain asset levels, that SAAMCo would benefit by
retaining a greater percentage of the fee it received from the Fund.
On the basis of the information considered, the Board was satisfied that the
advisory and subadvisory fee rates were fair in light of the usual and
customary charges made for services of the same nature and quality.
Costs of Services and Benefits Derived, as well as the Adviser's Profitability
and Financial Condition.
The Board, including the Disinterested Trustees, considered the direct and
indirect costs and benefits of SAMMCo's providing services to the Funds. The
Board reviewed financial statements relating to SAAMCo's profitability and
financial condition with respect to the services it provided the Funds, and
considered how profit margins could affect SAAMCo's ability to attract and
retain qualified investment personnel. The Board concluded that SAAMCo had a
satisfactory financial condition, and that their profitability was not
excessive as compared to standards set forth in applicable Court cases and
other available industry information.
83
SunAmerica Income Funds
APPROVAL OF THE ADVISORY AGREEMENT AND SUBADVISORY AGREEMENTS --
September 30, 2005 -- (unaudited) (continued)
With respect to indirect costs and benefits, the Board was informed, based on
management's judgment, that (1) any indirect costs incurred by SAAMCo in
connection with rendering investment advisory services to the Funds are
inconsequential to the analysis of the adequacy of the advisory fees, and
(2) any collateral benefits derived as a result of providing advisory services
to the Funds are de minimis and do not impact upon the reasonableness of the
advisory fee. The Board also considered the reputational value to SAAMCo from
serving as investment adviser.
The Board also considered fees and profits , where applicable, earned by
affiliates for providing other services to the Funds. The Board concluded that
any benefits that SAAMCo and its affiliates could be expected to receive with
regard to providing investment advisory and other services to the Funds were
not excessive.
Terms of the Advisory Agreement and Subadvisory Agreements
The Board, including the Disinterested Trustees, received a draft of the
proposed Advisory Agreement and Subadvisory Agreements. The Board considered
that they may be renewed from year to year, so long as their continuance is
specifically approved at least annually in accordance with the requirements of
the 1940 Act and that the Agreements provide that they will terminate in the
event of an assignment (as defined in the 1940 Act) or upon termination of the
agreement.
In reviewing the terms of the Advisory Agreement, the Board considered that
SAAMCo pays all of its own expenses in connection with the performance of its
duties, as well as the salaries, fees and expenses of the Trustees and Officers
who are employees of SAAMCo. The Board noted, however, that the Funds bear
certain proxy-related expenses, where applicable. The Board also considered the
termination and liability provisions of the Advisory Agreement.
With respect to the Subadvisory Agreements, the Board further considered, that
under the terms of the Subadvisory Agreements, the Subadviser is not liable to
the Fund, or its shareholders, for any act or omission by the Subadviser or for
any losses sustained by the Fund, or its shareholders, except in the case of
willful misfeasance, bad faith, gross negligence and reckless disregard of
obligations or duties. The Board also considered that the Subadvisory
Agreements provide that the Subadviser will pay all of its own expenses in
connection with the performance of its duties as well as the cost of
maintaining the staff and personnel as necessary for it to perform its
obligations.
Economies of Scale
The Board, including the Disinterested Trustees, considered whether the Funds
have benefited from economies of scale and whether there is potential for
future realization of economies with respect to the Funds. The Board concluded
that any potential economies of scale are being shared between shareholders and
SAAMCo in an appropriate manner. The Board considered that the Funds in the AIG
SunAmerica complex share common resources and as a result, an increase in the
overall size of the complex could permit each fund to incur lower expenses than
they otherwise would achieve as stand-alone entities. The Board also considered
the anticipated efficiencies in the processes of SAAMCo as it adds labor and
capital to expand the scale of operations.
The Board concluded that the advisory fee structure was reasonable and that no
changes were currently necessary to further reflect economies of scale. The
Board noted that it will continue to review fees, including breakpoints and
expense caps in connection with contract renewals.
The Overall Organization of SAAMCo
The Trustees considered the benefit to shareholders of investing in a Fund that
is part of a family of funds offering a variety of types of mutual funds and
shareholder services. The Trustees also considered SAAMCo's experience in
providing management and investment advisory services to advisory clients,
including approximately 130 mutual funds (not including the Funds), and the
fact that SAAMCo currently managed, advised and/or administered approximately
$42 billion of assets. The Trustees also considered SAAMCo's record of
compliance with each Funds' objectives, strategies and restrictions and its
positive regulatory and compliance history. The Trustees also considered
SAAMCo's relationships with its affiliates and the resources available to them.
Compliance
The Board considered SAAMCo's and the Subadviser's compliance and regulatory
history, and inquired whether SAAMCo or the Subadviser had been the target of
any regulatory actions or investigations. In addition, the Board reviewed
information concerning
84
SunAmerica Income Funds
APPROVAL OF THE ADVISORY AGREEMENT AND SUBADVISORY AGREEMENTS --
September 30, 2005 -- (unaudited) (continued)
SAAMCo's compliance staff that would be responsible for providing compliance
functions on behalf of the Funds. Finally, the Board reviewed the Code of
Ethics of SAAMCo and the Subadviser, and determined that they contain
provisions reasonably necessary to prevent fraudulent, deceptive or
manipulative acts by personnel in connection with their personal transactions
in securities held or to be acquired by the Funds.
Investment Performance
The Board noted that Fund performance is regularly reviewed at various periods
of time throughout the year. At the Board meeting held on August 31, 2005, in
connection with the approval of the continuation of the Advisory Agreement and
the Subadvisory Agreements, the Board reviewed the Funds' annualized total
return for the one-, two- , three-, four- , five- and ten-year periods (for
those Funds that do not have ten years of performance history, the Board
reviewed performance history since the Fund's inception). The Board, including
the Disinterested Trustees, reviewed reports independently prepared by Lipper
which showed comparative performance of the Funds against their respective
benchmarks, other funds in their respective peer groups, and to appropriate
indices or combination of indices.
Conclusion
After a full and complete discussion, the Board renewed the Advisory Agreement
and Subadvisory Agreements with respect to the Funds for a period of one year.
Based on their evaluation of all material factors and assisted by the advice of
independent counsel, the Board, including the Disinterested Trustees, were
satisfied that the terms of the Advisory Agreement and Subadvisory Agreements
were fair, and in the best interest of the Funds and its shareholders, and that
the advisory fee rates provided in the Advisory Agreement are acceptable in
light of the usual and customary charges made for services of similar nature
and quality. In arriving at a decision to approve the continuation of the
Advisory Agreement and Subadvisory Agreements, the Board did not single out any
one factor or group of factors as being more important than other factors, but
considered all factors together.
85
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 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 Other Directorships
Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) Held by Trustee(2)
- ---------------------- ---------- -------------- ------------------------------------ ------------ ------------------------------
Trustee
Jeffrey S. Burum Trustee 2004-present Founder and CEO of National 40 None
DOB: February 27, 1963 Housing Development Corporation
(January 2000 to present); Founder,
Owner and Partner of Colonies
Crossroads, Inc. (January 2000 to
present; Owner and Managing
Member of Diversified Pacific
Development Group LLC (June
1990 to present)
Dr. Judith L. Craven Trustee 2001-present Retired. 80 Director, A.G. Belo
DOB: October 6, 1945 Corporation (1992 to present);
Director, Sysco Corporation
(1996 to present); Director,
Luby's Inc. (1998 to present);
Director, University of Texas
Board of Regents
(2001-Present).
William F. Devin Trustee 2001-present Retired. 80 Member of the Board of
DOB: December 30, 1938 Governors, Boston Stock
Exchange (1985-Present).
Samuel M. Eisenstat Chairman 1986-present Attorney, solo practitioner. 50 Director, North European Oil
DOB: March 7, 1940 of the Royalty Trust.
Board
Stephen J. Gutman Trustee 1986-present Associate Corcoran Group (Real 50 None
DOB: May 10, 1943 Estate) (2003 to present); Partner
and Member of Managing
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, 89 None
DOB: January 23, 1954 SAAMCo. (August 1995 to
present); Director, AIG SunAmerica
Capital Services, Inc. ("SACS")
(August 1993 to present); President
and CEO AIG Advisor Group, Inc.
(June 2004 to present).
William J. Shea Trustee 2004-present President and CEO, Conseco, Inc. 50 Chairman of the Board, Royal
DOB: February 9, 1948 (Financial Services) (2001 to 2004); and SunAlliance, U.S.A., Inc.
Chairman of the Board of (March 2005 to present);
Centennial Technologies, Inc. (1998 Director, Boston Private
to 2001); Vice Chairman, Bank Holdings (October 2004 to
Boston Corporation (1993 to 1998) present).
86
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 2005 -- (unaudited)
(continued)
Number of
Position Term of Funds in
Name, Held With Office and Fund Complex
Address and SunAmerica Length of Principal Occupations Overseen by Other Directorships
Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) Held by Trustee(2)
- ------------------ ---------- -------------- -------------------------------- ------------ -------------------
Officers
Vincent M. Marra President 2003- Senior Vice President and Chief N/A N/A
DOB: May 28, 1950 present Operating Officer, SAAMCo
(February 2003-present); Chief
Administrative Officer, Chief
Operating Officer and Chief
Financial Officer, Carret & Co.,
LLC (June 2002 to February
2003); President and Chief
Operating Officer, Bowne
Digital Solutions (1999 to May
2002)
Donna M. Handel Treasurer 2002- Senior Vice President, SAAMCo N/A N/A
DOB: June 25, 1966 present (December 2004 to present);
Vice President, SAAMCo (1997
to December 2004); Assistant
Treasurer (1993 to 2002)
- --------
* 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. (17 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), AIG
Series Trust (4 funds), SunAmerica Focused Alpha Growth Fund (1 fund) and
SunAmerica Focused Large-Cap Fund, Inc. (1 fund).
(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.
Additional information concerning the Trustees is contained in the Statement of
Additional Information and is available without charge by calling (800)
858-8850.
87
[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. Once filed,
Vincent M. Marra, AIG SunAmerica Capital the Trust's Form N-Q will
President Services, Inc. be available without
Donna M. Handel, Harborside Financial charge on the
Treasurer Center U.S. Securities and
Michael Cheah, Vice 3200 Plaza 5 Exchange Commission
President Jersey City, NJ website at www.sec.gov.
Timothy P. Pettee, Vice 07311-4992 You can also obtain
President cop-ies of Form N-Q by
Cynthia Gibbons, Vice Shareholder Servicing (i) visiting the U.S.
President and Chief Agent Securities and Exchange
Compliance Officer AIG SunAmerica Fund Commis-sion Public
J. Steven Neamtz, Vice Services, Inc. Reference Room in
President Harborside Financial Wash-ington DC
Gregory N. Bressler, Center (information on the
Chief Legal Officer 3200 Plaza 5 operation of the Public
and Secretary Jersey City, NJ Reference Room may be
Nori L. Gabert, Vice 07311-4992 obtained by calling
President and 1-800-SEC-0330); (ii)
Assistant Secretary Custodian and Transfer sending your re-quest and
Thomas Lynch, Assistant Agent a duplicating fee to the
Secretary State Street Bank and U.S. Securities and
Corey A. Issing, Trust Company Exchange Commission
Assistant Secretary P.O. Box 419572 Public Reference Room,
Gregory R. Kingston, Kansas City, MO Washington, DC 20549-0102
Vice President and 64141-6572 or (iii) sending your
Assistant Treasurer request electronically to
Robert A. Chopyak, VOTING PROXIES ON TRUST publicinfo.sec.gov.
Assistant Treasurer PORTFOLIO SECURITIES
A description of the PROXY VOTING RECORD ON
policies and proce-dures SUNAMERICA INCOME FUNDS
that the Trust uses to Information regarding how
determine how to vote the Trust voted proxies
proxies relating to related to securities
secu-rities held in the held in the SunAmerica
Fund's portfolio which is Income Funds' dur-ing the
available in the Trust's twelve month period ended
State-ment of Additional June 30, 2005 is
Information, may be available without charge,
obtained without charge upon request, by calling
upon re-quest, by calling (800) 858-8850 or on the
(800) 858-8850. The U.S. Secu-rities and
information is also Exchange Commission
available from the EDGAR web-site at
database on the U.S. http://www.sec.gov.
Secu-rities and Exchange
Commission's website at This report is submitted
http://www.sec.gov. 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.
The accompanying report
has not been audited by
independent accountants
and accordingly no
opinion has been
expressed thereon.
88
[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 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 investing.
www.sunamericafunds.com
INSAN - 9/05
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
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.
Item 12. Exhibits.
(a) (1) Not applicable.
(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: December 8, 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: December 8, 2005
By: /s/ Donna M. Handel
- --------------------------------
Donna M. Handel
Treasurer
Date: December 8, 2005