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 811-4708
SunAmerica Income Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Vincent M. Marra
Senior Vice President & Chief Operating Officer
AIG SunAmerica Asset Management Corp.
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6464
Date of fiscal year end: March 31
Date of reporting period: March 31, 2006
Item 1. Reports to Stockholders
SunAmerica Income Funds, Annual Report at March 31, 2006.
2006
Annual
SunAmerica Report
- ---------------------
[PHOTO]
[GRAPHIC]
Income Funds
March 31, 2006 ANNUAL REPORT
SUNAMERICA INCOME FUNDS
SunAmerica Core Bond Fund (NAIBX)
SunAmerica U.S. Government Securities Fund (SGTAX)
SunAmerica GNMA Fund (GNMAX)
SunAmerica Strategic Bond Fund (SDIAX)
SunAmerica High Yield Bond Fund (SHNAX)
SunAmerica Tax Exempt Insured Fund (STEAX)
Table of Contents
SHAREHOLDER LETTER................................ 2
EXPENSE EXAMPLE................................... 3
STATEMENT OF ASSETS AND LIABILITIES............... 5
STATEMENT OF OPERATIONS........................... 7
STATEMENT OF CHANGES IN NET ASSETS................ 9
FINANCIAL HIGHLIGHTS.............................. 12
PORTFOLIO OF INVESTMENTS.......................... 18
NOTES TO FINANCIAL STATEMENTS..................... 68
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM................................... 84
TRUSTEE AND OFFICER INFORMATION................... 85
COMPARISONS: PORTFOLIO VS. INDEXES................ 88
Shareholder Letter
Dear Shareholder:
We are pleased to present the annual performance summary of the SunAmerica
Income Funds for the 12-month period ended March 31, 2006. As always, we
appreciate this opportunity to share with you the economic and market
conditions that have shaped the Funds' investment performance during this time
period.
The past 12 months marked a continuation of the Federal Reserve Bank's
tightening policy. Over the course of the period, the Federal Funds rate
increased by two full percentage points, rising to 4.75% as of March 31, 2006.
In addition to this headwind, fixed income investors were challenged by rising
oil prices, inflation concerns, and the economic impact of an active hurricane
season.
Despite these challenges, our Funds provided positive returns for the period.
Moreover, five of the six Funds covered in this annual report finished in the
top half of their respective Lipper and Morningstar categories for the 12-month
period.
During the last three quarters of 2005, the Treasury market experienced a
flattening yield curve as short-term yields rose more than longer yields in
response to the Federal Reserve's series of increases in the Federal Funds rate
benchmark. Since mid-January, fixed income yields have risen substantially in
response to solid first quarter growth, higher oil prices and renewed inflation
concerns. However, housing demand is weakened and supply increased as mortgage
rates rose.
In this environment, riskier asset classes outperformed as exemplified by the
performance of both high-yield and emerging market bonds. High-yield bonds
performed well as fundamentals remained solid. Emerging market bonds posted
strong results as the economic backdrop of emerging economies improved and
commodity prices increased.
Within the mortgage-backed securities market, the period began with rates
dropping sharply for both mortgage-backed and Treasury securities. After this
initial decline, however, rates rose steadily, with occasional pullbacks, to
end the period higher.
The municipal market continued to provide an attractive after-tax return. For
the period covered in this report, municipal bonds outperformed Treasuries,
with the Lehman Brothers Municipal Bond Index* returning 3.81% versus 1.95% for
the Lehman Brothers U.S. Treasury Index**.
Thank you for your continued investment in our Funds. A more detailed
commentary on the performance of each Fund is included at the end of the
report. We also encourage you to visit our website www.sunamericafunds.com for
more information.
Sincerely,
The SunAmerica Income Funds Investment Professionals
AIG SunAmerica Asset Management Corp. AIG Global Investment Corp.
------------------------------------- -
Michael Cheah Rich Mercante J. Hutchinson Bryan
Andrew Doulous Gregory Braun Geoffrey Cornell
- --------
Past performance is no guarantee of future results.
* The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax exempt bond market. It is currently derived from
approximately 40,000 issues.
** The Lehman Brothers U.S. Treasury Index is comprised of public obligations
of the U.S. Treasury with a remaining maturity of one year or more.
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2006 -- (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. The example set forth below is intended to help you understand your
ongoing costs (in dollars) of investing in the Funds and to compare these costs
with the ongoing costs of investing in other mutual funds. The Example is based
on an investment of $1,000 invested at October 1, 2005 and held until March 31,
2006.
Actual Expenses
The "Actual" section of the table provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the column under the heading entitled "Expenses Paid During the Six
Months Ended March 31, 2006" 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 March 31, 2006" column
does not include small account fees that may be charged if your account balance
is below $500 ($250 for retirement plan accounts). In addition, the "Expenses
Paid During the Six Months Ended March 31, 2006" column does not include
administrative fees that may apply to qualified retirement plan accounts. See
the Fund's prospectus and/or your retirement plan document for a full
description of these fees. Had these fees been included, the "Expenses Paid
During the Six Months Ended March 31, 2006" column would have been higher and
the "Ending Account Value" would have been lower.
Hypothetical Example for Comparison Purposes
The "Hypothetical" section of the table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in these Funds and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds. For shareholder accounts in classes other
than Class I and Class Z the "Expenses Paid During the Six Months Ended March
31, 2006" column does not include small account fees that may be charged if
your account balance is below $500 ($250 for retirement plan accounts). In
addition, the "Expenses Paid During the Six Months Ended March 31, 2006" column
does not include administrative fees that may apply to qualified retirement
plan accounts. See the Fund's prospectus and/or your retirement plan document
for a full description of these fees. Had these fees been included, the
"Expenses Paid During the Six Months Ended March 31, 2006" column would have
been higher and the "Ending Account Value" would have been lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, including sales
charges on purchase payments, contingent deferred sales charges; small account
fees and administrative fees, if applicable to your account. Please refer to
your prospectus and/or qualified retirement plan document for more information.
Therefore, the "Hypothetical" example is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs and other fees were
included, your costs would have been higher.
3
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2006 -- (unaudited) (continued)
Actual Hypothetical
----------------------------------------------- ------------------------------------------------
Ending Account
Ending Account Expenses Paid Value Using a Expenses Paid
Value Using During the Hypothetical 5% During the
Beginning Actual Return Period Ended Beginning Assumed Return Period Ended
Account Value at March 31, March 31, Account Value at March 31, March 31,
at October 1, 2005 2006 2006* at October 1, 2005 2006 2006*
------------------ -------------- ------------- ------------------ --------------- -------------
Core Bond Fund
Class A #.................... $1,000.00 $1,005.59 $ 5.50 $1,000.00 $1,019.45 $ 5.54
Class B #.................... $1,000.00 $1,001.31 $ 8.73 $1,000.00 $1,016.21 $ 8.80
Class C #.................... $1,000.00 $1,002.33 $ 8.74 $1,000.00 $1,016.21 $ 8.80
Class I #.................... $1,000.00 $1,006.11 $ 5.00 $1,000.00 $1,019.95 $ 5.04
Class Z #.................... $1,000.00 $1,007.47 $ 2.65 $1,000.00 $1,022.29 $ 2.67
U.S. Government Securities Fund
Class A #.................... $1,000.00 $ 996.11 $ 4.93 $1,000.00 $1,020.00 $ 4.99
Class B #.................... $1,000.00 $ 991.84 $ 8.14 $1,000.00 $1,016.75 $ 8.25
Class C #.................... $1,000.00 $ 992.86 $ 8.15 $1,000.00 $1,016.75 $ 8.25
GNMA Fund
Class A #.................... $1,000.00 $1,003.90 $ 4.95 $1,000.00 $1,020.00 $ 4.99
Class B #.................... $1,000.00 $ 999.79 $ 8.18 $1,000.00 $1,016.75 $ 8.25
Class C #.................... $1,000.00 $1,000.71 $ 8.18 $1,000.00 $1,016.75 $ 8.25
Strategic Bond Fund
Class A #.................... $1,000.00 $1,020.96 $ 6.70 $1,000.00 $1,018.30 $ 6.69
Class B #.................... $1,000.00 $1,017.67 $ 9.91 $1,000.00 $1,015.11 $ 9.90
Class C #.................... $1,000.00 $1,017.75 $ 9.86 $1,000.00 $1,015.16 $ 9.85
High Yield Bond Fund
Class A #.................... $1,000.00 $1,043.93 $ 6.93 $1,000.00 $1,018.15 $ 6.84
Class B #.................... $1,000.00 $1,040.56 $10.23 $1,000.00 $1,014.91 $10.10
Class C #.................... $1,000.00 $1,040.54 $10.23 $1,000.00 $1,014.91 $10.10
Tax Exempt Insured Fund
Class A...................... $1,000.00 $1,001.93 $ 6.39 $1,000.00 $1,018.55 $ 6.44
Class B...................... $1,000.00 $ 999.47 $ 9.67 $1,000.00 $1,015.26 $ 9.75
Class C #.................... $1,000.00 $ 999.12 $ 9.72 $1,000.00 $1,015.21 $ 9.80
Expense Ratio
as of
March 31,
2006*
-------------
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 #.................... 1.33%
Class B #.................... 1.97%
Class C #.................... 1.96%
High Yield Bond Fund
Class A #.................... 1.36%
Class B #.................... 2.01%
Class C #.................... 2.01%
Tax Exempt Insured Fund
Class A...................... 1.28%
Class B...................... 1.94%
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 182 days divided by 365
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges, small account fees
and administrative fees, if applicable to your account. Please refer to your
Prospectus and/or qualified retirement plan document for more information.
# During the stated period, the investment adviser either waived a portion of
or all fees and assumed a portion of or all expenses for the Funds. As a
result, if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended March 31,
2006" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2006
U.S. Government Strategic
Core Bond Securities GNMA Bond
Fund Fund Fund Fund
------------ --------------- ------------ ------------
ASSETS:
Long-term Investment securities, at value* (unaffiliated)......... $172,441,341 $160,705,616 $419,066,425 $288,699,046
Long-term Investment securities, at value* (affiliated)........... 132,813 -- -- 143,437
Short term investment securities, at value*....................... -- -- -- 5,393,000
Repurchase agreements (cost equals market)........................ 1,935,000 17,487,000 149,767,000 10,034,000
------------ ------------ ------------ ------------
Total Investments............................................... 174,509,154 178,192,616 568,833,425 304,269,483
------------ ------------ ------------ ------------
Cash.............................................................. 41,536 823 186 3,011,614
Foreign cash*..................................................... -- -- -- 641,311
Receivable for:
Shares of beneficial interest sold.............................. 19,039 172,134 161,710 3,388,409
Dividends and interest.......................................... 1,744,033 1,170,109 1,800,554 4,606,894
Investments sold................................................ -- 5,852,240 11,704,479 1,153,476
Prepaid Expenses and other assets................................. 3,770 4,183 9,969 4,994
Due from investment adviser for expense reimbursements/fee
waivers.......................................................... 68,868 48,713 78,076 --
Unrealized appreciation on forward currency contracts............. -- -- -- 81,770
------------ ------------ ------------ ------------
Total assets...................................................... 176,386,400 185,440,818 582,588,399 317,157,951
------------ ------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.......................... 36,921 254,780 706,153 842,935
Investments purchased........................................... 952,892 5,841,458 161,289,236 4,441,351
Investment advisory and management fees......................... 89,267 98,713 166,286 166,136
Distribution and service maintenance fees....................... 53,602 68,687 192,780 166,387
Transfer agent fees and expenses................................ 48,539 42,088 101,341 57,479
Trustees' fees and expenses..................................... 24,820 97,670 49,861 25,836
Other accrued expenses.......................................... 100,337 89,944 76,216 58,591
Dividends Payable................................................. -- 106,001 171,873 361,787
Due to custodian.................................................. -- -- -- --
Unrealized depreciation on forward currency contracts............. -- -- -- 20,479
------------ ------------ ------------ ------------
Total liabilities................................................. 1,306,378 6,599,341 162,753,746 6,140,981
------------ ------------ ------------ ------------
Net assets........................................................ $175,080,022 $178,841,477 $419,834,653 $311,016,970
============ ============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value.................... $ 175,313 $ 195,259 $ 381,512 $ 880,420
Paid-in capital................................................... 180,037,588 194,065,939 429,088,700 336,471,823
------------ ------------ ------------ ------------
180,212,901 194,261,198 429,470,212 337,318,092
Accumulated undistributed net investment income (loss)............ 409,784 57,877 20,580 (225)
Accumulated undistributed net realized gain (loss) on investments,
futures contracts, securities sold short and foreign exchange
transactions..................................................... (3,763,876) (12,238,161) (3,571,949) (28,098,808)
Unrealized appreciation (depreciation) on investments............. (1,778,787) (3,239,437) (6,084,190) 1,721,428
Unrealized appreciation (depreciation) on foreign exchange
transactions..................................................... -- -- -- 76,483
------------ ------------ ------------ ------------
Net Assets..................................................... $175,080,022 $178,841,477 $419,834,653 $311,016,970
============ ============ ============ ============
*Cost
Long-term Investment securities (unaffiliated).................. $174,223,126 $163,945,053 $425,150,615 $286,991,569
============ ============ ============ ============
Long-term Investment securities (affiliated).................... $ 129,815 $ -- $ -- $ 129,486
============ ============ ============ ============
Short-term investment securities................................ $ -- $ -- $ -- $ 5,393,000
============ ============ ============ ============
Foreign Currency................................................ $ -- $ -- $ -- $ 625,456
============ ============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
ASSETS:
Long-term Investment securities, at value* (unaffiliated)......... $324,432,093 $58,322,437
Long-term Investment securities, at value* (affiliated)........... 850,000 --
Short term investment securities, at value*....................... -- 9,559,427
Repurchase agreements (cost equals market)........................ 6,779,000 --
------------ -----------
Total Investments............................................... 332,061,093 67,881,864
------------ -----------
Cash.............................................................. 314,498 --
Foreign cash*..................................................... 143,414 --
Receivable for:
Shares of beneficial interest sold.............................. 908,524 4,324
Dividends and interest.......................................... 6,141,331 846,464
Investments sold................................................ 612,967 --
Prepaid Expenses and other assets................................. 47,310 1,522
Due from investment adviser for expense reimbursements/fee
waivers.......................................................... 28,534 --
Unrealized appreciation on forward currency contracts............. -- --
------------ -----------
Total assets...................................................... 340,257,671 68,734,174
------------ -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.......................... 669,587 436,394
Investments purchased........................................... 1,654,338 --
Investment advisory and management fees......................... 211,318 29,332
Distribution and service maintenance fees....................... 168,524 26,916
Transfer agent fees and expenses................................ 76,580 25,680
Trustees' fees and expenses..................................... 47,896 30,188
Other accrued expenses.......................................... 57,894 57,811
Dividends Payable................................................. 844,457 62,598
Due to custodian.................................................. -- --
Unrealized depreciation on forward currency contracts............. -- --
------------ -----------
Total liabilities................................................. 3,730,594 668,919
------------ -----------
Net assets........................................................ $336,527,077 $68,065,255
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value.................... $ 730,409 $ 54,042
Paid-in capital................................................... 419,675,162 65,438,663
------------ -----------
420,405,571 65,492,705
Accumulated undistributed net investment income (loss)............ (2,050,534) (6,151)
Accumulated undistributed net realized gain (loss) on investments,
futures contracts, securities sold short and foreign exchange
transactions..................................................... (92,479,057) 418,579
Unrealized appreciation (depreciation) on investments............. 10,661,275 2,160,122
Unrealized appreciation (depreciation) on foreign exchange
transactions..................................................... (10,178) --
------------ -----------
Net Assets..................................................... $336,527,077 $68,065,255
============ ===========
*Cost
Long-term Investment securities (unaffiliated).................. $313,870,282 $56,162,315
============ ===========
Long-term Investment securities (affiliated).................... $ 750,536 $ --
============ ===========
Short-term investment securities................................ $ -- $ 9,559,427
============ ===========
Foreign Currency................................................ $ 153,592 $ --
============ ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2006 -- (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.................................................. $157,086,579 $151,284,209 $303,342,586 $167,071,786 $214,040,906
Shares of beneficial interest issued and outstanding........ 15,729,558 16,517,290 27,587,904 47,346,229 46,518,637
Net asset value and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 9.99 $ 9.16 $ 11.00 $ 3.53 $ 4.60
Maximum sales charge (4.75% of offering price).............. 0.50 0.46 0.55 0.18 0.23
------------ ------------ ------------ ------------ ------------
Maximum offering price to public............................ $ 10.49 $ 9.62 $ 11.55 $ 3.71 $ 4.83
============ ============ ============ ============ ============
Class B (unlimited shares authorized):
Net assets.................................................. $ 4,377,225 $ 19,276,278 $ 76,303,715 $ 46,293,784 $ 52,346,212
Shares of beneficial interest issued and outstanding........ 439,390 2,103,657 6,921,692 13,121,791 11,360,693
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 9.96 $ 9.16 $ 11.02 $ 3.53 $ 4.61
============ ============ ============ ============ ============
Class C (unlimited shares authorized):
Net assets.................................................. $ 3,304,796 $ 8,280,990 $ 40,188,352 $ 97,651,400 $ 70,139,959
Shares of beneficial interest issued and outstanding........ 331,263 904,987 3,641,576 27,573,957 15,161,522
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 9.98 $ 9.15 $ 11.04 $ 3.54 $ 4.63
============ ============ ============ ============ ============
Class I (unlimited shares authorized):
Net assets.................................................. $ 1,296,320 $ -- $ -- $ -- $ --
Shares of beneficial interest issued and outstanding........ 129,633 -- -- -- --
Net asset value, offering and redemption price per share.... $ 10.00 $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
Class Z (unlimited shares authorized):
Net assets.................................................. $ 9,015,102 $ -- $ -- $ -- $ --
Shares of beneficial interest issued and outstanding........ 901,469 -- -- -- --
Net asset value, offering and redemption price per share.... $ 10.00 $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
Tax Exempt
Insured
Fund
-----------
Class A (unlimited shares authorized):
Net assets.................................................. $56,874,593
Shares of beneficial interest issued and outstanding........ 4,515,978
Net asset value and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 12.59
Maximum sales charge (4.75% of offering price).............. 0.63
-----------
Maximum offering price to public............................ $ 13.22
===========
Class B (unlimited shares authorized):
Net assets.................................................. $ 6,693,968
Shares of beneficial interest issued and outstanding........ 531,170
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 12.60
===========
Class C (unlimited shares authorized):
Net assets.................................................. $ 4,496,694
Shares of beneficial interest issued and outstanding........ 357,041
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 12.59
===========
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 year ended March 31, 2006
Core U.S. Government
Bond Fund Securities Fund
----------- ---------------
INCOME:
Dividends* (unaffiliated)................................................................ $ 95,857 $ --
Interest (unaffiliated).................................................................. 10,131,315 9,567,198
Interest (affiliated).................................................................... 13,750 --
----------- -----------
Total investment income................................................................ 10,240,922 9,567,198
----------- -----------
EXPENSES:
Investment advisory and management fees.................................................. 1,130,807 1,294,823
Distribution and service maintenance fees:
Class A................................................................................ 579,736 580,613
Class B................................................................................ 47,946 241,436
Class C................................................................................ 40,350 94,005
Service fees -- Class I.................................................................. 3,398 --
Transfer agent fees:
Class A................................................................................ 364,207 413,735
Class B................................................................................ 14,454 67,929
Class C................................................................................ 15,210 25,354
Class I................................................................................ 2,991 --
Class Z................................................................................ -- --
Class X................................................................................ -- --
Registration fees:
Class A................................................................................ 10,549 20,951
Class B................................................................................ 9,125 12,915
Class C................................................................................ 12,915 18,655
Class I................................................................................ -- --
Class Z................................................................................ -- --
Custodian and accounting fees............................................................ 82,405 83,251
Reports to shareholders.................................................................. -- 19,307
Audit and tax fees....................................................................... 29,200 33,783
Legal fees............................................................................... 2,826 11,949
Trustees' fees and expenses.............................................................. 4,438 12,591
Interest expense......................................................................... 425 29,155
Interest expense on securities sold short................................................ -- --
Other expenses........................................................................... 10,625 14,269
----------- -----------
Total expenses before fee waivers, expense reimbursements and custody credits.......... 2,361,607 2,974,721
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (299,402) (753,137)
Custody credits earned on cash balances................................................ (5,030) (3,294)
----------- -----------
Net expenses........................................................................... 2,057,175 2,218,290
----------- -----------
Net investment income (loss).............................................................. 8,183,747 7,348,908
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... (2,156,726) (2,629,101)
Net realized foreign exchange gain (loss) on other assets and liabilities................. -- --
Net increase from payments by affiliates (Note 3)......................................... -- --
----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ (2,156,726) (2,629,101)
----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (541,675) (1,138,951)
Change in unrealized appreciation (depreciation) on investments (affiliated).............. (5,312) --
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts................................................................................ -- --
Change in unrealized appreciation (depreciation) on forward currency contracts............ -- --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... -- --
Change in unrealized appreciation (depreciation) on securities sold short................. 12,109 --
----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (534,878) (1,138,951)
----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (2,691,604) (3,768,052)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 5,492,143 $ 3,580,856
=========== ===========
*Net of foreign withholding taxes on interest and dividends of........................... $ 9,130 $ --
=========== ===========
GNMA Fund
-----------
INCOME:
Dividends* (unaffiliated)................................................................ $ --
Interest (unaffiliated).................................................................. 19,638,114
Interest (affiliated).................................................................... --
-----------
Total investment income................................................................ 19,638,114
-----------
EXPENSES:
Investment advisory and management fees.................................................. 2,166,733
Distribution and service maintenance fees:
Class A................................................................................ 1,162,687
Class B................................................................................ 915,278
Class C................................................................................ 491,510
Service fees -- Class I.................................................................. --
Transfer agent fees:
Class A................................................................................ 740,289
Class B................................................................................ 229,628
Class C................................................................................ 127,935
Class I................................................................................ --
Class Z................................................................................ --
Class X................................................................................ 665
Registration fees:
Class A................................................................................ 15,925
Class B................................................................................ 10,796
Class C................................................................................ 14,350
Class I................................................................................ --
Class Z................................................................................ --
Custodian and accounting fees............................................................ 234,744
Reports to shareholders.................................................................. 74,665
Audit and tax fees....................................................................... 32,494
Legal fees............................................................................... 12,370
Trustees' fees and expenses.............................................................. 28,655
Interest expense......................................................................... --
Interest expense on securities sold short................................................ --
Other expenses........................................................................... 26,860
-----------
Total expenses before fee waivers, expense reimbursements and custody credits.......... 6,285,584
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (686,775)
Custody credits earned on cash balances................................................ (712)
-----------
Net expenses........................................................................... 5,598,097
-----------
Net investment income (loss).............................................................. 14,040,017
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... (1,409,187)
Net realized foreign exchange gain (loss) on other assets and liabilities................. --
Net increase from payments by affiliates (Note 3)......................................... --
-----------
Net realized gain (loss) on investments and foreign currencies............................ (1,409,187)
-----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (2,932,719)
Change in unrealized appreciation (depreciation) on investments (affiliated).............. --
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts................................................................................ --
Change in unrealized appreciation (depreciation) on forward currency contracts............ --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... --
Change in unrealized appreciation (depreciation) on securities sold short................. --
-----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (2,932,719)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (4,341,906)
-----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 9,698,111
===========
*Net of foreign withholding taxes on interest and dividends of........................... $ --
===========
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2006 --
(continued)
Strategic High Yield Tax Exempt
Bond Fund Bond Fund Insured Fund
----------- ----------- ------------
INCOME:
Dividends* (unaffiliated)................................................................ $ 129,179 $ 188,311 $ --
Interest (unaffiliated).................................................................. 13,524,955 26,562,692 3,219,458
Interest (affiliated).................................................................... 14,850 88,000 --
----------- ----------- -----------
Total investment income................................................................ 13,668,984 26,839,003 3,219,458
----------- ----------- -----------
EXPENSES:
Investment advisory and management fees.................................................. 1,362,193 2,295,706 362,721
Distribution and service maintenance fees:
Class A................................................................................ 359,559 581,258 207,486
Class B................................................................................ 426,691 561,024 79,326
Class C................................................................................ 641,679 669,076 53,298
Service fees -- Class I.................................................................. -- -- --
Transfer agent fees:
Class A................................................................................ 244,498 398,672 163,790
Class B................................................................................ 102,622 133,354 18,864
Class C................................................................................ 150,288 156,900 11,802
Class I................................................................................ -- -- --
Class Z................................................................................ -- -- --
Class X................................................................................ -- -- --
Registration fees:
Class A................................................................................ 24,210 21,270 8,676
Class B................................................................................ 14,350 10,599 4,305
Class C................................................................................ 20,090 9,490 14,255
Class I................................................................................ -- -- --
Class Z................................................................................ -- -- --
Custodian and accounting fees............................................................ 192,431 114,238 40,246
Reports to shareholders.................................................................. 42,875 58,500 14,450
Audit and tax fees....................................................................... 37,963 41,215 36,792
Legal fees............................................................................... 4,380 11,038 8,201
Trustees' fees and expenses.............................................................. 11,632 20,156 3,906
Interest expense......................................................................... -- 147,788 --
Interest expense on securities sold short................................................ -- 47,345 --
Other expenses........................................................................... 11,862 19,651 10,128
----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements and custody credits.......... 3,647,323 5,297,280 1,038,246
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (707) (370,814) (10,386)
Custody credits earned on cash balances................................................ (143,137) (26,124) (677)
----------- ----------- -----------
Net expenses........................................................................... 3,503,479 4,900,342 1,027,183
----------- ----------- -----------
Net investment income (loss).............................................................. 10,165,505 21,938,661 2,192,275
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 3,453,121 16,177,474 828,946
Net realized foreign exchange gain (loss) on other assets and liabilities................. 38,458 -- --
Net increase from payments by affiliates (Note 3)......................................... 34,151 203,640 --
----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ 3,525,730 16,381,114 828,946
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (1,697,578) (3,234,937) (1,242,127)
Change in unrealized appreciation (depreciation) on investments (affiliated).............. (5,738) (34,000) --
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts................................................................................ -- -- --
Change in unrealized appreciation (depreciation) on forward currency contracts............ -- -- --
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... 95,428 (9,995) --
Change in unrealized appreciation (depreciation) on securities sold short................. 10,172 (21,438) --
----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (1,597,716) (3,300,370) (1,242,127)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 1,928,014 13,080,744 (413,181)
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $12,093,519 $35,019,405 $ 1,779,094
=========== =========== ===========
*Net of foreign withholding taxes on interest and dividends of........................... $ 16,073 $ 3,942 $ --
=========== =========== ===========
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
Core Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2006 2005
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 8,183,747 $ 8,309,014
Net realized gain (loss) on investments and foreign currencies........................ (2,156,726) (309,327)
Net unrealized gain (loss) on investments and foreign currencies...................... (534,878) (4,282,289)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 5,492,143 3,717,398
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (7,135,577) (6,506,042)
Net investment income (Class B)....................................................... (175,423) (181,405)
Net investment income (Class C)....................................................... (147,433) (171,529)
Net investment income (Class I)....................................................... (59,983) (90,049)
Net investment income (Class Z)....................................................... (614,870) (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..................................................... (8,133,286) (11,356,618)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (26,852,854) (14,834,404)
------------ ------------
Total increase (decrease) in net assets................................................. (29,493,997) (22,473,624)
NET ASSETS:
Beginning of period..................................................................... 204,574,019 227,047,643
------------ ------------
End of period+.......................................................................... $175,080,022 $204,574,019
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 409,784 $ 110,959
============ ============
U.S. Government
Securities Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2006 2005
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 7,348,908 $ 7,208,210
Net realized gain (loss) on investments and foreign currencies........................ (2,629,101) 498,065
Net unrealized gain (loss) on investments and foreign currencies...................... (1,138,951) (7,299,365)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 3,580,856 406,919
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (6,505,119) (6,470,275)
Net investment income (Class B)....................................................... (786,554) (861,625)
Net investment income (Class C)....................................................... (307,714) (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..................................................... (7,599,387) (7,670,802)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (29,003,495) (37,234,269)
------------ ------------
Total increase (decrease) in net assets................................................. (33,022,026) (44,498,152)
NET ASSETS:
Beginning of period..................................................................... 211,863,503 256,361,655
------------ ------------
End of period+.......................................................................... $178,841,477 $211,863,503
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 57,877 $ (137,838)
============ ============
See Notes to Financial Statements
9
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2006 2005
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 14,040,017 $ 13,358,453
Net realized gain (loss) on investments and foreign currencies........................ (1,409,187) 3,461,416
Net unrealized gain (loss) on investments and foreign currencies...................... (2,932,719) (11,084,127)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 9,698,111 5,735,742
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (11,887,262) (10,096,979)
Net investment income (Class B)....................................................... (2,666,840) (2,758,584)
Net investment income (Class C)....................................................... (1,429,033) (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)............................................. (1,253,478) --
Net realized gain on securities (Class B)............................................. (327,987) --
Net realized gain on securities (Class C)............................................. (169,603) --
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..................................................... (17,744,508) (14,716,823)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (68,594,450) (65,557,982)
------------ ------------
Total increase (decrease) in net assets................................................. (76,640,847) (74,539,063)
NET ASSETS:
Beginning of period..................................................................... 496,475,500 571,014,563
------------ ------------
End of period+.......................................................................... $419,834,653 $496,475,500
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 20,580 $ (12,374)
============ ============
Strategic Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2006 2005
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 10,165,505 $ 6,136,237
Net realized gain (loss) on investments and foreign currencies........................ 3,525,730 5,304,488
Net unrealized gain (loss) on investments and foreign currencies...................... (1,597,716) (2,719,620)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 12,093,519 8,721,105
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (5,369,145) (3,082,007)
Net investment income (Class B)....................................................... (1,942,089) (2,151,861)
Net investment income (Class C)....................................................... (2,927,876) (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..................................................... (10,239,110) (6,802,946)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 175,766,449 25,739,107
------------ ------------
Total increase (decrease) in net assets................................................. 177,620,858 27,657,266
NET ASSETS:
Beginning of period..................................................................... 133,396,112 105,738,846
------------ ------------
End of period+.......................................................................... $311,016,970 $133,396,112
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ (225) $ 387,799
============ ============
See Notes to Financial Statements
10
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2006 2005
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 21,938,661 $ 24,869,216
Net realized gain (loss) on investments and foreign currencies........................ 16,381,114 10,420,354
Net unrealized gain (loss) on investments and foreign currencies...................... (3,300,370) 6,067,124
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 35,019,405 41,356,694
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (11,905,182) (9,494,138)
Net investment income (Class B)....................................................... (3,703,477) (4,894,387)
Net investment income (Class C)....................................................... (4,398,206) (4,060,550)
Net investment income (Class I)....................................................... -- --
Net investment income (Class Z)....................................................... (1,686,486) (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..................................................... (21,693,351) (25,444,795)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 5,307,491 3,593,907
------------ ------------
Total increase (decrease) in net assets................................................. 18,633,545 19,505,806
NET ASSETS:
Beginning of period..................................................................... 317,893,532 298,387,726
------------ ------------
End of period+.......................................................................... $336,527,077 $317,893,532
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ (2,050,534) $ (1,879,694)
============ ============
Tax Exempt Insured Fund
-------------------------
For the year For the year
ended ended
March 31, March 31,
2006 2005
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 2,192,275 $ 2,462,678
Net realized gain (loss) on investments and foreign currencies........................ 828,946 314,275
Net unrealized gain (loss) on investments and foreign currencies...................... (1,242,127) (1,499,351)
----------- ------------
Net increase (decrease) in net assets resulting from operations......................... 1,779,094 1,277,602
----------- ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (1,839,250) (2,053,393)
Net investment income (Class B)....................................................... (194,099) (297,218)
Net investment income (Class C)....................................................... (132,474) (145,957)
Net investment income (Class I)....................................................... -- --
Net investment income (Class Z)....................................................... -- --
Net investment income (Class X)....................................................... -- --
Net realized gain on securities (Class A)............................................. (587,815) (842,208)
Net realized gain on securities (Class B)............................................. (75,670) (135,607)
Net realized gain on securities (Class C)............................................. (52,856) (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..................................................... (2,882,164) (3,557,277)
----------- ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (7,564,719) (12,519,717)
----------- ------------
Total increase (decrease) in net assets................................................. (8,667,789) (14,799,392)
NET ASSETS:
Beginning of period..................................................................... 76,733,044 91,532,436
----------- ------------
End of period+.......................................................................... $68,065,255 $ 76,733,044
=========== ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ (6,151) $ (34,061)
=========== ============
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS
CORE BOND FUND
--------------
Net gain
(loss) on
Net investments Distributions 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 gains on Distri- end of Total period
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's)
- ------------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- --------
Class A
- -
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
04/01/05-03/31/06 10.13 0.44 (0.14) 0.30 (0.44) -- (0.44) 9.99 2.96 157,087
Class B
- -
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
04/01/05-03/31/06 10.11 0.38 (0.16) 0.22 (0.37) -- (0.37) 9.96 2.19 4,377
Class C*
- -
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 3.68 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
04/01/05-03/31/06 10.12 0.38 (0.15) 0.23 (0.37) -- (0.37) 9.98 2.29 3,305
Class I
- -
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
04/01/05-03/31/06 10.15 0.45 (0.15) 0.30 (0.45) -- (0.45) 10.00 2.96 1,296
Class Z*
- -
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
04/01/05-03/31/06 10.15 0.53 (0.18) 0.35 (0.50) -- (0.50) 10.00 3.44 9,015
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
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(4) 4.34(4) 199
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(4) 3.69(4) 199
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(4) 3.68(4) 199
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(4) 4.44(4) 199
0.97%(4) 5.97%(4) 215%
0.74(3)(4) 5.62(3)(4) 94
0.67 4.56 179
0.66(4) 2.97(4) 229
0.61(4) 4.41(4) 203
0.53(4) 4.87(4) 199
- --------
* 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.
# Effective November 16, 2001, the SunAmerica Core Bond, a newly created
portfolio of the SunAmerica Income Funds, acquired all the assets and
liabilities of the North American Core Bond Fund.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Annualized
(4)Net of the following expense reimbursements, if applicable (based on average
net assets):
10/31/01 03/31/02(3) 03/31/03 03/31/04 03/31/05 03/31/06
-------- ----------- -------- -------- -------- --------
Core Bond Fund Class A.................. 0.04% 0.19% 0.11% 0.10% 0.11% 0.14%
Core Bond Fund Class B.................. 0.03 0.32 0.23 0.15 0.31 0.41
Core Bond Fund Class C.................. 0.04 0.32 0.18 0.14 0.38 0.61
Core Bond Fund Class I.................. 0.03 0.13 0.05 0.05 0.06 0.14
Core Bond Fund Class Z.................. 0.03 0.02 -- 0.02 0.05 0.14
See Notes to Financial Statements
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
U.S. GOVERNMENT SECURITIES FUND
-------------------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
beginning investment and investment investment gains on Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- ----------
Class A
-------
03/31/02 $8.91 $0.37(4) $(0.08) $ 0.29 $(0.40) $-- $(0.40) $8.80 3.25% $187,615 1.42%
03/31/03 8.80 0.37 0.86 1.23 (0.40) -- (0.40) 9.63 14.14 210,848 1.12(3)
03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 0.99(3)
03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 0.99(3)
03/31/06 9.37 0.36 (0.20) 0.16 (0.37) -- (0.37) 9.16 1.68 151,284 0.99(3)
Class B
-------
03/31/02 $8.91 $0.31(4) $(0.08) $ 0.23 $(0.34) $-- $(0.34) $8.80 2.55% $ 38,878 2.09%(3)
03/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595 1.76(3)
03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 1.64(3)
03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 1.64(3)
03/31/06 9.37 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.16 1.02 19,276 1.64(3)
Class C*
--------
03/31/02 $8.91 $0.29(4) $(0.09) $ 0.20 $(0.32) $-- $(0.32) $8.79 2.40% $ 12,209 2.10%(3)
03/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322 1.75(3)
03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 1.64(3)
03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 1.64(3)
03/31/06 9.36 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.15 1.02 8,281 1.64(3)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
4.12%(4) 579%(5)
3.88(3) 630(5)
3.14(3) 267(5)
3.26(3) 253(5)
3.80(3) 357
3.42%(3)(4) 579%(5)
3.20(3) 630(5)
2.45(3) 267(5)
2.61(3) 253(5)
3.14(3) 357
3.33%(3)(4) 579%(5)
3.18(3) 630(5)
2.45(3) 267(5)
2.61(3) 253(5)
3.14(3) 357
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06
-------- -------- -------- -------- --------
U.S. Government Securities Fund Class A. -- % 0.21% 0.37% 0.39% 0.36%
U.S. Government Securities Fund Class B. 0.01 0.23 0.37 0.43 0.43
U.S. Government Securities Fund Class C. 0.16 0.27 0.38 0.48 0.57
(4)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began accreting discount and amortizing premium
on debt securities. The per share effect of this change for the year ended
March 31, 2002 on investment income and realized and unrealized gains and
losses was less than $0.01 per share for all classes of shares. The effect
of this change was to decrease the ratio of net investment income to average
net assets by 0.11% for all classes of shares. Per share data and ratios for
periods prior to March 31, 2002 have not been restated to reflect this
change in accounting policy.
(5)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2002 2003 2004 2005
---- ---- ---- ----
U.S. Government Securities Fund......... 570% 614% 256% 246%
See Notes to Financial Statements
13
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets
- -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- ----------
Class A
- -
03/31/02 $11.12 $0.51(5) $(0.03) $0.48 $(0.51) $(0.32) $(0.83) $10.77 4.45% $118,440 0.99%(3)(4)
03/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096 0.99(4)
03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467 0.99(4)
03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031 0.99(4)
03/31/06 11.20 0.35 (0.07) 0.28 (0.40) (0.08) (0.48) 11.00 2.18 303,343 0.99(4)
Class B
- -
03/31/02 $11.15 $0.44(5) $(0.03) $0.41 $(0.44) $(0.32) $(0.76) $10.80 3.78% $ 90,011 1.64%(3)(4)
03/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323 1.64(4)
03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923 1.64(4)
03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497 1.64(4)
03/31/06 11.23 0.28 (0.08) 0.20 (0.33) (0.08) (0.41) 11.02 1.43 76,304 1.64(4)
Class C*
- -
03/31/02 $11.16 $0.44(5) $(0.03) $0.41 $(0.44) $(0.32) $(0.76) $10.81 3.78% $ 36,258 1.64%(3)(4)
03/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173 1.64(4)
03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184 1.64(4)
03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936 1.64(4)
03/31/06 11.24 0.28 (0.07) 0.21 (0.33) (0.08) (0.41) 11.04 1.53 40,188 1.64(4)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
4.61%(3)(4)(5) 544%(6)
3.36(4) 436(6)
2.51(4) 225(6)
2.73(4) 204(6)
3.17(4) 138
3.96%(3)(4)(5) 544%(6)
2.71(4) 436(6)
1.77(4) 225(6)
2.10(4) 204(6)
2.50(4) 138
3.96%(3)(4)(5) 544%(6)
2.59(4) 436(6)
1.74(4) 225(6)
2.11(4) 204(6)
2.49(4) 138
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)The ratios 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.
(4)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06
-------- -------- -------- -------- --------
GNMA Fund Class A............. 0.19% 0.13% 0.18% 0.17% 0.13%
GNMA Fund Class B............. 0.19 0.14 0.16 0.18 0.17
GNMA Fund Class C............. 0.21 0.13 0.16 0.18 0.19
(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 on all classes of shares. The effect of
this change was to decrease the ratio of net investment income to average
net assets by 0.03% for all classes of shares. Per share data and ratios for
periods prior to March 31, 2002 have not been restated to reflect this
change in accounting policy.
(6)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2002 2003 2004 2005
---- ---- ---- ----
GNMA Fund............................... 537% 421% 213% 204%
See Notes to Financial Statements
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND**
---------------------
Net gain
(loss) on
Net investments Distributions 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 gains on Distri- end of Total period
Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investments+ butions+ period+ Return(2) (000's)
- ----------------- ---------- ---------- ------------ ----------- ---------- ------------- -------- ------- --------- --------
Class A
- -
11/01/00-10/31/01 $3.13 $0.28 $(0.09) $0.19 $(0.28) $-- $(0.28) $3.04 6.48% $ 8,478
11/01/01-03/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- (0.12) 3.00 2.46 35,365
04/01/02-03/31/03 3.00 0.20 0.06 0.26 (0.18) -- (0.18) 3.08 9.07(7) 37,136
04/01/03-03/31/04 3.08 0.21 0.33 0.54 (0.21) -- (0.21) 3.41 18.04 43,840
04/01/04-03/31/05 3.41 0.20 0.11 0.31 (0.23) -- (0.23) 3.49 9.36 59,279
04/01/05-03/31/06 3.49 0.17 0.05 0.22 (0.18) -- (0.18) 3.53 6.54 167,072
Class B
- -
11/01/00-10/31/01 $3.14 $0.26 $(0.09) $0.17 $(0.26) $-- $(0.26) $3.05 5.65% $ 9,964
11/01/01-03/31/02 3.05 0.10(6) (0.04) 0.06 (0.11) -- (0.11) 3.00 2.05 26,892
04/01/02-03/31/03 3.00 0.18 0.06 0.24 (0.16) -- (0.16) 3.08 8.36(7) 27,879
04/01/03-03/31/04 3.08 0.19 0.33 0.52 (0.19) -- (0.19) 3.41 17.29 36,110
04/01/04-03/31/05 3.41 0.18 0.10 0.28 (0.21) -- (0.21) 3.48 8.35 37,250
04/01/05-03/31/06 3.48 0.16 0.05 0.21 (0.16) -- (0.16) 3.53 6.14 46,294
Class C*
- -
11/01/00-10/31/01 $3.14 $0.26 $(0.09) $0.17 $(0.26) $-- $(0.26) $3.05 5.65% $ 11,461
11/01/01-03/31/02 3.05 0.10(6) (0.03) 0.07 (0.11) -- (0.11) 3.01 2.25 14,289
04/01/02-03/31/03 3.01 0.19 0.05 0.24 (0.16) -- (0.16) 3.09 8.47(7) 14,423
04/01/03-03/31/04 3.09 0.19 0.34 0.53 (0.20) -- (0.20) 3.42 17.43 22,064
04/01/04-03/31/05 3.42 0.18 0.11 0.29 (0.21) -- (0.21) 3.50 8.65 36,867
04/01/05-03/31/06 3.50 0.15 0.05 0.20 (0.16) -- (0.16) 3.54 5.84 97,651
Ratio
of net
Ratio of investment
expense income to
to average average Portfolio
net assets net assets Turnover
---------- ---------- ---------
1.57%(5) 9.07%(5) 49%(10)
1.52(3)(4)(5) 8.09(3)(4)(5)(6) 100(10)
1.62(8) 6.93(8) 67(10)
1.55(5)(9) 6.41(9) 71(10)
1.40(5)(8) 5.94(5)(8) 190(10)
1.34(5)(11) 5.19(5)(11) 119
2.21%(5) 8.41%(5) 49%(10)
2.19(3)(4)(5) 7.48(3)(4)(5)(6) 100(10)
2.28(8) 6.26(8) 67(10)
2.19(5)(9) 5.76(5)(9) 71(10)
2.05(5)(8) 5.32(5)(8) 190(10)
2.00(5)(11) 4.51(5)(11) 119
2.22%(5) 8.41%(5) 49%(10)
2.22(3)(4)(5) 7.34(3)(4)(5)(6) 100(10)
2.17(5)(8) 6.37(5)(8) 67(10)
2.16(5)(9) 5.78(5)(9) 71(10)
2.05(5)(8) 5.29(5)(8) 190(10)
1.99(5)(11) 4.54(5)(11) 119
- --------
* 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
reflects the financial information of the North American Strategic Income
Fund, which was reorganized in SunAmerica Strategic Bond Fund on that date.
+ Prior to the fund merger, the North American Strategic Income Fund issued a
stock split. The per share information for all periods prior to the stock
split have been restated. For amounts reflecting activity subsequent to
November 16, 2001, no restatement was necessary.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)The ratios reflect an expense cap of 2.22%, for Class C, which is net of
custody credits of 0.02% for Class C. Class A and Class B are gross of
custody credits of 0.03% for the period ended March 31, 2002.
(4)Annualized
(5)Net of the following expense reimbursements, if applicable (based on average
net assets):
10/31/01 03/31/02(4) 03/31/03 03/31/04 03/31/05 03/31/06
-------- ----------- -------- -------- -------- --------
Strategic Bond Fund Class A............. 0.17% 0.01% -- % 0.02% 0.03% -- %
Strategic Bond Fund Class B............. 0.18 0.01 -- 0.02 0.02 0.00
Strategic Bond Fund Class C............. 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)Net custody credits of 0.02%.
(10)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
2001 2002 2003 2004 2005
- ---- ---- ---- ---- ----
Strategic Bond Fund 49% 99% 65% 69% 188%
(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 Distributions Net
Asset (both Dividends from net Asset Net Assets,
Value, Net realized Total from from net realized Total Value, end of
beginning investment and investment investment gains on Distri- end of Total period
Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investment+ butions+ period+ Return(2) (000's)
- ----------------- ---------- ---------- ------------ ----------- ---------- ------------- -------- ------- --------- -----------
Class A
- -
11/01/00-10/31/01 $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
04/01/05-03/31/06 4.43 0.31 0.19 0.50 (0.33) -- (0.33) 4.60 11.61 214,041
Class B
- -
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
04/01/05-03/31/06 4.44 0.31 0.16 0.47 (0.30) -- (0.30) 4.61 10.88 52,346
Class C*
- -
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
04/01/05-03/31/06 4.46 0.30 0.17 0.47 (0.30) -- (0.30) 4.63 10.86 70,140
Ratio
of net
Ratio of investment
expense income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.57%(5) 9.73%(5) 83%(7)
1.48(3)(4) 9.56(3)(4)(6) 61(7)
1.56 10.26 117(7)
1.49 8.15 126(7)
1.38(5) 7.59(5) 85(7)
1.36(5)(8) 7.20(5)(8) 91
2.21%(5) 9.17%(5) 83%(7)
2.12(3)(4) 8.91(3)(4)(6) 61(7)
2.18 9.63 117(7)
2.14 7.52 126(7)
2.03(5) 7.04(5) 85(7)
2.01(5)(8) 6.71(5)(8) 91
2.21%(5) 9.02%(5) 83%(7)
2.17(3)(4)(5) 8.86(3)(4)(5)(6) 61(7)
2.15(5) 9.67(5) 117(7)
2.11(5) 7.53(5) 126(7)
2.03(5) 6.97(5) 85(7)
2.01(5)(8) 6.67(5)(8) 91
- --------
* In conjunction with the reorganization on November 16, 2001, Class C was
redesignated as Class II and Class II was redesignated as Class Z. Effective
February 23, 2004, Class II was redesignated to Class C.
** The financial information for the fiscal periods prior to November 16, 2001
reflects 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.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of custody credits of 0.01%.
(4)Annualized
(5)Net of the following expense reimbursements, if applicable (based on average
net assets):
10/31/01 03/31/02(4) 03/31/03 03/31/04 03/31/05 03/31/06
-------- ----------- -------- -------- -------- --------
High Yield Bond Fund Class A............ 0.18% -- % -- % -- % 0.08% 0.11%
High Yield Bond Fund Class B............ 0.18 -- -- -- 0.07 0.14
High Yield Bond Fund Class C............ 0.18 0.01 0.10 0.01 0.09 0.12
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began accreting discount and amortizing premium
on debt securities. The effect of this change for the year ended March 31,
2002 on net investment income and realized and unrealized gains and losses
was less than $0.01 per share for all classes. The effect of this change on
the ratio of net investment income to average net 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.
(7)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydown on securities and was as
follows:
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
High Yield Bond Fund 83% 61% 117% 126% 85%
(8)Net of custody credits of 0.01%.
See Notes to Financial Statements
16
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
beginning investment and investment investment gains on Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ------- ----------
Class A
- -
03/31/02 $13.02 $0.52(5) $(0.30) $0.22 $(0.52) $ -- $(0.52) $12.72 1.70% $75,071 1.29%(3)
03/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358 1.24
03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 1.26
03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 1.25
03/31/06 12.81 0.41 (0.10) 0.31 (0.40) (0.13) (0.53) 12.59 2.43 56,875 1.30
Class B
- -
03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.95% $18,090 2.04%(3)
03/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031 1.97
03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 1.96
03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 1.94
03/31/06 12.82 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.60 1.77 6,694 1.95
Class C*
- -
03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.99% $ 4,095 1.95%(3)(4)
03/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451 1.95(4)
03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 1.95(4)
03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 1.95(4)
03/31/06 12.81 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.59 1.81 4,497 1.95(4)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
3.99%(3)(5) 140%
3.12 195
2.90 131
3.14 153
3.14 81
3.22%(3)(5) 140%
2.39 195
2.20 131
2.44 153
2.48 81
3.21%(3)(4)(5) 140%
2.40(4) 195
2.21(4) 131
2.44(4) 153
2.48(4) 81
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3) The ratios for Class C reflects an expense cap of 1.95%, which is net of
custody credits of 0.01%. Ratios for Class A and Class B are gross of
custody credits of 0.01%.
(4) Net of the following expense reimbursements, if applicable (based on
average net assets):
03/31/02 03/31/03 03/31/04 03/31/05 03/31/06
-------- -------- -------- -------- --------
Tax Exempt Insured Fund Class C......... 0.56% 0.00% 0.12% 0.09% 0.20%
(5)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies and began accreting discount and amortizing premium
on debt securities. The effect of this change for the year ended March 31,
2002 on net investment income and net realized and unrealized gains and
losses was less than $0.01 per share for all classes. The effect of this
change on the ratio of net investment income to average net assets was less
than 0.01%. Per share date and ratios for the years prior to March 31, 2002
have not been restated to reflect this change in accounting policy.
See Notes to Financial Statements
17
SunAmerica Core Bond Fund
PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited)
Industry Allocation*
Federal Home Loan Mortgage Corp......... 19.7%
Federal National Mortgage Assoc......... 18.0%
Financial Services...................... 15.7%
Banks................................... 6.3%
Utilities............................... 6.1%
Foreign Government Agencies............. 5.3%
Insurance............................... 3.6%
Telecommunications...................... 3.1%
Broadcasting & Media.................... 2.9%
U.S. Treasury Notes..................... 2.3%
Energy Sources.......................... 2.2%
Leisure & Tourism....................... 1.8%
Pharmaceuticals......................... 1.3%
Repurchase Agreement.................... 1.1%
Transportation.......................... 1.1%
Business Services....................... 1.0%
Chemicals............................... 0.9%
Metals & Mining......................... 0.8%
U.S. Treasury Bonds..................... 0.8%
Conglomerate............................ 0.7%
Real Estate Investment Trusts........... 0.7%
Real Estate Companies................... 0.6%
Aerospace & Military Technology......... 0.5%
Health Services......................... 0.4%
Medical Products........................ 0.4%
Electronics............................. 0.3%
Energy Services......................... 0.3%
Forest Products......................... 0.3%
Retail.................................. 0.3%
Automotive.............................. 0.2%
Computer Software....................... 0.2%
Food, Beverage & Tobacco................ 0.2%
Housing & Household Durables............ 0.2%
Computers & Business Equipment.......... 0.1%
Gas & Pipeline Utilities................ 0.1%
Government National Mortgage Association 0.1%
Machinery............................... 0.1%
----
99.7%
====
Credit Quality+#
Government -- Treasury 3.3%
Government -- Agency.. 38.1%
AAA................... 6.6%
AA.................... 1.8%
A..................... 14.9%
BBB................... 19.3%
BB.................... 6.5%
B..................... 4.7%
CCC................... 1.4%
BELOW C............... 0.5%
Not Rated@............ 2.9%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or, the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
18
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 8.6%
Banks -- 1.0%
Banc America Commercial Mtg., Inc.
Series 2005-6, Class D
5.35% due 09/10/47(1)(12).................... $ 580,000 $ 555,962
Banc America Commercial Mtg., Inc.
Series 2005-6, Class F
5.35% due 09/10/47(1)(12).................... 1,165,000 1,110,209
----------
1,666,171
----------
Financial Services -- 7.6%
Ameriquest Mtg. Securities, Inc.
Series 2005-R3, Class A3A
4.91% due 05/25/35(2)........................ 211,130 211,140
Bear Stearns Asset-Backed Securities
Series 2005-HE3, Class 1A1
4.90% due 03/25/35(2)........................ 61,475 61,483
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2005-PW10, Class F
5.63% due 12/11/40(1)(12).................... 1,080,000 1,057,281
Capital One Multi Asset Execution Trust,
Series 2003-B2, Class B2
3.50% due 02/17/09........................... 120,000 119,897
Centex Home Equity Loan Trust
Asset-Backed Certs.,
Series 2004-D, Class AV2
5.16% due 09/25/34(2)........................ 58,091 58,191
Chase Funding Mtg.
Loan Asset-Backed Certs.,
Series 2003-6, Class 2A6
4.59% due 05/25/15........................... 550,000 528,108
Citigroup Mtg. Loan Trust, Inc.
Series 2005-OPT1, Class A1B
5.03% due 02/25/35(2)........................ 189,279 189,427
Citigroup Mtg. Loan Trust, Inc.
Series 2005-WF2, Class AF6B
5.55% due 08/25/35(1)........................ 450,000 423,148
Commerical Mtg. Pass-Through Certs.,
Series 2004-LB2A, Class A-3
4.22% due 03/10/39(1)........................ 4,510,000 4,295,469
CS First Boston Mtg. Securities Corp.
Series 2005-TF3A, Class A-2
5.03% due 04/15/06*(1)(2).................... 1,548,000 1,549,914
Merrill Lynch Mtg. Investors, Inc.
Series 2006-RM1W, Class A2D
5.51% due 02/25/37(3)........................ 1,500,000 1,476,585
Metris Master Trust
Series 2004-2, Class A
4.93% due 10/20/10(2)........................ 250,000 250,084
Morgan Stanley Capital I
Series 2005-HQ7, Class G
5.38% due 11/14/42*(1)(12)................... 700,000 667,059
Providian Master Note Trust
Series 2006-C1A, Class C1
5.25% due 03/15/15*(2)(3).................... 1,350,000 1,350,000
Residential Funding Mtg. Securities II, Inc.
Home Equity Loan
Series 2005-HS2, Class AI4
5.66% due 12/25/35........................... 700,000 686,845
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Financial Services (continued)
Residential Funding Mtg. Securities II, Inc.
Home Equity Loan
Note, Series 2005-HS2 Class AI5
5.47% due 12/25/35(12)...................... $ 200,000 $ 196,281
Structured Asset Investment Loan Trust
Mtg. Pass-Through Certs.,
Series 2005-HE3 Class A3
4.94% due 09/25/35(2)....................... 195,968 195,980
-----------
13,316,892
-----------
Total Asset-Backed Securities
(cost $15,171,018).......................... 14,983,063
-----------
BONDS & NOTES -- 35.9%
Aerospace & Military Technology -- 0.5%
Raytheon Co.
Notes
4.85% due 01/15/11.......................... 330,000 320,640
Raytheon Co.
Notes
6.75% due 08/15/07.......................... 596,000 605,329
-----------
925,969
-----------
Automotive -- 0.2%
Cooper-Standard Automotive, Inc.
Sr. Sub. Notes
8.38% due 12/15/14.......................... 60,000 46,800
DaimlerChrysler NA Holding Corp.
Guaranteed Notes
7.30% due 01/15/12.......................... 165,000 174,351
Dura Operating Corp.
Sr. Notes
8.63% due 04/15/12.......................... 137,000 112,683
Ford Motor Co.
Bonds
6.63% due 10/01/28.......................... 100,000 67,000
-----------
400,834
-----------
Banks -- 4.7%
ABN Amro North America Holding Co.
Bonds
6.52% due 11/08/12*(7)...................... 340,000 351,937
Bank One Corp.
Sub. Notes
8.00% due 04/29/27.......................... 234,000 284,409
BankBoston Capital Trust IV
Guaranteed Capital Securities
5.46% due 06/08/28(2)....................... 622,000 601,088
Charter One Bank NA
Sub. Notes
6.38% due 05/15/12.......................... 1,024,000 1,073,687
Comerica Bank
Sub. Notes
5.20% due 08/22/17.......................... 120,000 113,847
Compass Bank
Sub. Notes
5.90% due 04/01/26.......................... 939,000 918,454
Downey Financial Corp.
Notes
6.50% due 07/01/14.......................... 380,000 378,865
19
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
BONDS & NOTES (continued)
Banks (continued)
First Maryland Capital II
Guaranteed Sub. Capital Income Securities
5.53% due 02/01/27(2)..................... $508,000 $ 497,648
HSBC Bank USA
Sub. Notes
5.63% due 08/15/35........................ 250,000 232,242
Huntington National Bank
Notes
5.50% due 02/15/16........................ 340,000 331,672
Independence Community Bank Corp.
Sub. Notes
3.50% due 06/20/08(7)..................... 177,000 169,347
JPMorgan Chase Bank
Sub. Notes
6.13% due 11/01/08........................ 359,000 364,522
National Westminster Bank
Sub. Notes
7.75% due 10/16/07........................ 143,000 147,577
PNC Funding Corp.
Guaranteed Notes
5.13% due 12/14/10........................ 330,000 325,909
PNC Funding Corp.
Guaranteed Notes
5.75% due 08/01/06........................ 565,000 565,886
Popular North America, Inc.
Guaranteed Notes
4.70% due 06/30/09........................ 248,000 241,528
Sovereign Bancorp, Inc.
Sr. Notes
4.80% due 09/01/10*....................... 550,000 531,215
Wachovia Bank NA
Sub. Notes
5.60% due 03/15/16........................ 300,000 297,065
Wachovia Corp.
Sr. Unsec. Notes
5.35% due 03/15/11........................ 180,000 179,289
Wells Fargo & Co.
Sub. Global Notes
6.38% due 08/01/11........................ 170,000 177,263
World Savings Bank FSB
Notes
4.13% due 12/15/09........................ 440,000 422,081
----------
8,205,531
----------
Broadcasting & Media -- 2.5%
AMFM, Inc.
Sr. Notes
8.00% due 11/01/08........................ 494,000 518,571
CBS Corp.
Sr. Notes
6.63% due 05/15/11........................ 409,000 422,187
Charter Communications Holdings LLC
Sr. Notes
11.13% due 01/15/11....................... 340,000 180,200
Comcast Corp.
Guaranteed Notes
6.45% due 03/15/37........................ 266,000 255,946
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
Broadcasting & Media (continued)
COX Communications, Inc.
Notes
7.13% due 10/01/12.............. $330,000 $ 346,191
COX Communications, Inc.
Debentures
7.63% due 06/15/25.............. 232,000 247,402
Knight-Ridder, Inc.
Debentures
6.88% due 03/15/29.............. 190,000 178,062
News America, Inc.
Guaranteed Sr. Debentures
7.30% due 04/30/28.............. 220,000 228,674
Nexstar Finance, Inc.
Sr. Sub. Notes
7.00% due 01/15/14.............. 115,000 108,675
Omnicom Group, Inc.
Guaranteed Notes
5.90% due 04/15/16.............. 165,000 162,434
Paxson Communications Corp.
2nd Priority Sr. Sec. Notes
10.78% due 01/15/13*(2)......... 625,000 618,750
Time Warner Cos., Inc.
Debentures
7.25% due 10/15/17.............. 157,000 167,998
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 03/15/23.............. 499,000 564,184
Univision Communications, Inc.
Sr. Notes
3.50% due 10/15/07.............. 165,000 159,690
Young Broadcasting, Inc.
Guaranteed Sr. Sec. Notes
10.00% due 03/01/11............. 275,000 253,687
----------
4,412,651
----------
Business Services -- 1.0%
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 02/15/12.............. 155,000 155,775
Aramark Services, Inc.
Notes
7.00% due 05/01/07.............. 402,000 407,041
Dun & Bradstreet Corp.
Sr. Notes
5.50% due 03/15/11.............. 150,000 149,099
Erac USA Finance Co.
Notes
7.95% due 12/15/09*............. 248,000 267,094
First Data Corp.
Notes
3.38% due 08/01/08.............. 198,000 189,227
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 09/01/10............. 205,000 205,512
Pitney Bowes, Inc.
Sr. Notes,
Series MTN
4.75% due 01/15/16.............. 289,000 269,023
20
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
BONDS & NOTES (continued)
Business Services (continued)
Service Corp. International
Sr. Notes
6.75% due 04/01/16................. $165,000 $ 163,350
----------
1,806,121
----------
Chemicals -- 0.7%
BCI US Finance Corp.
Sr. Sec. Notes
10.10% due 07/15/10*(2)............ 475,000 484,500
ICI Wilmington, Inc.
Guaranteed Notes
7.05% due 09/15/07................. 511,000 519,822
Lubrizol Corp.
Sr. Notes
4.63% due 10/01/09................. 185,000 179,240
----------
1,183,562
----------
Computer Software -- 0.2%
Oracle Corp.
Sr. Notes
5.00% due 01/15/11*................ 347,000 338,913
----------
Computers & Business Equipment -- 0.1%
Activant Solutions, Inc.
Sr. Notes
10.99% due 04/01/10*(2)............ 80,000 81,600
Computer Sciences Corp.
Notes
3.50% due 04/15/08................. 190,000 182,967
----------
264,567
----------
Conglomerate -- 0.2%
Honeywell International, Inc.
Sr. Notes
5.40% due 03/15/16................. 150,000 148,067
Tyco International Group SA
Unsec. Notes
4.44% due 06/15/07*................ 250,000 245,931
----------
393,998
----------
Electronics -- 0.3%
Arrow Electronics, Inc.
Sr. Debentures
6.88% due 06/01/18................. 297,000 302,476
Corning, Inc.
Notes
6.20% due 03/15/16................. 198,000 197,991
----------
500,467
----------
Energy Services -- 0.3%
Hanover Compressor Co.
Guaranteed Sr. Notes
9.00% due 06/01/14................. 250,000 268,750
Seitel, Inc.
Sr. Notes
11.75% due 07/15/11................ 250,000 284,375
----------
553,125
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Energy Sources -- 1.4%
Amerada Hess Corp.
Notes
7.13% due 03/15/33........................ $ 215,000 $ 234,589
Amerada Hess Corp.
Notes
7.88% due 10/01/29........................ 210,000 244,533
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(5)(6)................. 950,000 871,625
Encore Acquisition Co.
Sr. Sub. Notes
6.00% due 07/15/15........................ 117,000 109,102
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 04/15/14........................ 68,000 65,110
Enterprise Products Operating LP
Guaranteed Notes
6.88% due 03/01/33........................ 245,000 250,292
Hilcorp Energy Finance Co.
Sr. Notes
10.50% due 09/01/10*...................... 170,000 187,212
Indiantown Cogeneration LP
1st Mtg., Series A-9
9.26% due 12/15/10........................ 189,543 199,483
The Premcor Refining Group, Inc.
Sr. Notes
6.75% due 02/01/11........................ 347,000 361,598
----------
2,523,544
----------
Financial Services -- 6.0%
AMBAC Financial Group, Inc.
Debentures
5.95% due 12/05/35........................ 205,000 197,795
Ameriprise Financial, Inc.
Sr. Notes
5.35% due 11/15/10........................ 279,000 276,182
Ameriprise Financial, Inc.
Sr. Notes
5.65% due 11/15/15........................ 330,000 325,297
BAE Systems Holdings, Inc.
Guaranteed Notes
4.75% due 08/15/10*....................... 1,118,000 1,077,838
Capital One Bank
Sr. Notes
5.13% due 02/15/14........................ 200,000 192,462
Consolidated Communications Holdings, Inc.
Sr. Notes
9.75% due 04/01/12........................ 244,000 258,640
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09........................ 170,000 162,490
Ford Motor Credit Co.
Sr. Notes
5.80% due 01/12/09........................ 378,000 345,211
Ford Motor Credit Co.
Notes
7.00% due 10/01/13........................ 300,000 268,322
21
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
General Electric Capital Corp.
Notes
2.80% due 01/15/07............... $579,000 $ 568,786
General Electric Capital Corp.
Notes
4.38% due 03/03/12............... 330,000 312,383
General Electric Capital Corp.
Notes
6.75% due 03/15/32............... 657,000 731,621
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14............... 50,000 45,010
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11............... 787,607 777,475
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12............... 29,520 29,840
General Motors Acceptance Corp.
Notes
7.25% due 03/02/11............... 150,000 142,147
General Motors Acceptance Corp.
Notes
7.75% due 01/19/10............... 400,000 390,004
Jefferies Group, Inc.
Sr. Unsec. Notes
6.25% due 01/15/36............... 454,000 426,088
Lehman Brothers Holdings, Inc.
Notes
5.50% due 04/04/16............... 582,000 570,564
Lehman Brothers Holdings, Inc.,
Notes
4.50% due 07/26/10............... 380,000 366,229
NGC Corp. Capital Trust, Series B
Guaranteed Sub. Notes
8.32% due 06/01/27............... 375,000 330,000
Pricoa Global Funding I
Notes
3.90% due 12/15/08*.............. 100,000 96,279
Pricoa Global Funding I
Notes
4.63% due 06/25/12*.............. 190,000 180,437
Principal Life Global Funding I
Sec. Notes
6.25% due 02/15/12*.............. 200,000 206,968
Residential Capital Corp.
Notes
6.38% due 06/30/10............... 795,000 800,899
Residential Capital Corp.
Notes
6.88% due 06/30/15............... 300,000 312,754
Sprint Capital Corp.
Guaranteed Notes
6.88% due 11/15/28............... 403,000 415,789
Transamerica Finance Corp.
Sr. Notes
6.40% due 09/15/08............... 205,000 209,313
Xlliac Global Funding
Notes
4.80% due 08/10/10*.............. 400,000 387,733
-----------
10,414,368
-----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Food, Beverage & Tobacco -- 0.2%
Dole Food Co., Inc.
Sr. Notes
8.88% due 03/15/11..................... $ 80,000 $ 79,200
Foster's Finance Corp.
Notes
6.88% due 06/15/11*.................... 185,000 194,278
--------
273,478
--------
Forest Products -- 0.2%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23..................... 160,000 154,000
Pliant Corp.
Sr. Sec. Notes
11.13% due 09/01/09(5)(6).............. 249,000 262,073
--------
416,073
--------
Health Services -- 0.4%
HCA, Inc.
Sr. Notes
6.95% due 05/01/12..................... 390,000 393,767
Psychiatric Solutions, Inc.
Guaranteed Notes
7.75% due 07/15/15..................... 250,000 254,375
--------
648,142
--------
Household & Personal Products -- 0.0%
AEP Industries, Inc.
Sr. Notes
7.88% due 03/15/13..................... 32,000 32,160
--------
Housing & Household Durables -- 0.2%
Stanley Works Capital Trust I
Bonds
5.90% due 06/01/06*(7)................. 330,000 304,807
--------
Insurance -- 2.7%
Aegon NV
Sub. Notes
5.59% due 07/29/49..................... 425,000 374,000
Americo Life, Inc.
Notes
7.88% due 05/01/13*.................... 318,000 320,532
Chubb Corp.
Notes
6.00% due 11/15/11..................... 267,000 272,272
Genworth Financial, Inc.
Notes
4.75% due 06/15/09..................... 340,000 333,641
ING Security Life Institutional Funding
Notes
2.70% due 02/15/07*.................... 578,000 563,367
Kingsway America, Inc.
Guaranteed Sr. Notes
7.50% due 02/01/14..................... 319,000 321,353
Markel Corp.
Sr. Notes
7.35% due 08/15/34..................... 95,000 97,965
22
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
BONDS & NOTES (continued)
Insurance (continued)
Metropolitan Life Global Funding I
Notes
4.25% due 07/30/09*............... $407,000 $ 396,267
Metropolitan Life Global Funding I
Sr. Notes
4.63% due 08/19/10*............... 185,000 178,917
MIC Financing Trust I
Pass-Through Certs.,
8.38% due 02/01/27*............... 176,000 178,740
Ohio Casualty Corp.
Notes
7.30% due 06/15/14................ 521,000 543,059
Selective Insurance Group
Sr. Notes
6.70% due 11/01/35................ 220,000 211,789
Allstate Corp.
Sr. Notes
5.95% due 04/01/36................ 867,000 844,503
----------
4,636,405
----------
Leisure & Tourism -- 1.8%
American Airlines, Inc.
Series 2001-1, Class A-2
6.82% due 05/23/11................ 525,000 515,812
Atlas Air, Inc.
Pass-Through Certs.,
Series 1999-1, Class A-1
7.20% due 01/02/19................ 139,949 141,348
Atlas Air, Inc.
Series 1999-1, Class B
7.63% due 01/02/15................ 950,432 855,389
Atlas Air, Inc.
Pass-Through Certs.,
Series 2000-1
8.71% due 01/02/19................ 127,982 132,781
Brunswick Corp.
Notes
5.00% due 06/01/11................ 292,000 278,052
Continental Airlines, Inc.
Pass-Through Certs.,
Series 1998-1, Class A
6.65% due 03/15/19................ 54,927 55,338
Continental Airlines, Inc.
Pass-Through Certs.,
Series 1997-4, Class A
6.90% due 01/02/18................ 78,028 79,489
Continental Airlines, Inc.
Series 1999-2, Class C-1
7.73% due 03/15/11................ 26,334 22,754
Delta Airlines, Inc.
Notes
8.30% due 12/15/29(5)............. 175,000 46,813
Delta Airlines, Inc.
Sr. Notes
10.00% due 08/15/08(5)............ 225,000 57,375
Hilton Hotels Corp.
Sr. Notes
7.20% due 12/15/09................ 198,000 205,722
MGM Mirage, Inc.
Sr. Notes
5.88% due 02/27/14................ 325,000 306,312
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Leisure & Tourism (continued)
Riviera Holdings Corp.
Guaranteed Notes
11.00% due 06/15/10#................. $125,000 $ 132,813
Royal Caribbean Cruises, Ltd.
Sr. Notes
6.88% due 12/01/13................... 228,000 234,420
----------
3,064,418
----------
Medical Products -- 0.4%
Boston Scientific Corp.
Bonds
6.25% due 11/15/35................... 418,000 427,090
MEDIQ/PRN Life Support Services, Inc.
Sr. Notes
11.00% due 06/01/08+(3)(9)........... 10,000 0
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11.................. 185,000 191,938
----------
619,028
----------
Metals & Mining -- 0.4%
Barrick Gold Finance Co.
Guaranteed Debentures
7.50% due 05/01/07................... 254,000 259,579
Newmont Mining Corp.
Notes
8.63% due 05/15/11................... 190,000 214,458
Phelps Dodge Corp.
Sr. Notes
6.13% due 03/15/34................... 267,000 249,296
----------
723,333
----------
Pharmaceuticals -- 1.1%
American Home Products
Notes
6.95% due 03/15/11................... 320,000 339,269
AmerisourceBergen Corp.
Sr. Notes
5.63% due 09/15/12*(13).............. 150,000 147,525
Genentech, Inc.
Sr. Notes
5.25% due 07/15/35................... 939,000 844,704
Merck & Co., Inc.
Notes
2.50% due 03/30/07................... 337,000 327,870
Teva Pharmaceutical Finance LLC
Guaranteed Sr. Notes
6.15% due 02/01/36................... 228,000 214,896
----------
1,874,264
----------
Real Estate Companies -- 0.3%
EOP Operating LP
Sr. Notes
7.00% due 07/15/11................... 330,000 347,217
ERP Operating LP
Sr. Notes
5.38% due 08/01/16................... 196,000 189,366
----------
536,583
----------
23
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
BONDS & NOTES (continued)
Real Estate Investment Trusts -- 0.7%
Brandywine Operating Partnership LP
Guaranteed Notes
6.00% due 04/01/16...................... $182,000 $ 180,111
Commercial Net Lease Realty, Inc.
Notes
6.15% due 12/15/15...................... 200,000 197,250
Duke Realty Corp.
Sr. Notes
5.50% due 03/01/16...................... 165,000 160,098
Heritage Property Investment Trust, Inc.
Notes
4.50% due 10/15/09...................... 165,000 158,214
Mack-Cali Realty LP
Notes
5.80% due 01/15/16...................... 165,000 161,120
Reckson Operating Partnership LP
Sr. Unsec. Notes
6.00% due 03/31/16...................... 165,000 163,677
Vornado Realty LP
Sr. Notes
4.75% due 12/01/10...................... 165,000 157,900
----------
1,178,370
----------
Retail -- 0.2%
Rent-Way, Inc.
Sr. Notes
11.88% due 06/15/10..................... 325,000 339,625
----------
Telecommunications -- 2.4%
Alltel Corp.
Notes
4.66% due 05/17/07...................... 440,000 437,052
American Cellular Corp.
Sr. Notes, Series B
10.00% due 08/01/11..................... 470,000 509,950
Dobson Communications Corp.
Sr. Notes
8.85% due 10/15/12(2)................... 150,000 148,875
GTE Corp.
Debentures
6.94% due 04/15/28...................... 304,000 305,289
GTE Northwest, Inc.
Series D
5.55% due 10/15/08...................... 190,000 188,784
LCI International, Inc.
Sr. Notes
7.25% due 06/15/07...................... 780,000 787,800
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29...................... 220,000 232,778
Suncom Wireless, Inc.
Sr. Notes
8.50% due 06/01/13...................... 75,000 71,250
U.S. West Communications, Inc.
Guaranteed Notes
7.25% due 09/15/25...................... 225,000 230,625
Verizon New England, Inc.
Debentures
6.50% due 09/15/11...................... 170,000 172,584
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Telecommunications (continued)
Verizon New York, Inc.,
Debentures, Series A
6.88% due 04/01/12...................... $349,000 $ 358,495
Verizon New York, Inc.,
Debentures, Series B
7.38% due 04/01/32...................... 804,000 815,484
----------
4,258,966
----------
Transportation -- 1.1%
Burlington Northern Santa Fe Corp.
Debentures
7.29% due 06/01/36...................... 422,000 489,285
Canadian National Railway Co.
Notes
6.38% due 10/15/11...................... 330,000 344,618
CNF, Inc.
Sr. Debentures
6.70% due 05/01/34...................... 317,000 311,084
Norfolk Southern Corp.
Notes
5.59% due 05/17/25...................... 461,000 439,508
Ryder Systems, Inc.
Notes
5.00% due 06/15/12...................... 391,000 370,119
----------
1,954,614
----------
Utilities -- 5.7%
American Electric Power Co., Inc.
Sr. Notes
4.71% due 08/16/07(4)................... 198,000 196,090
CenterPoint Energy Houston Electric, LLC
Series L-2
5.60% due 07/01/23...................... 252,000 238,598
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11...................... 370,000 400,697
Centerpoint Energy, Inc.
Sr. Notes
5.88% due 06/01/08...................... 410,000 412,092
Cleco Power LLC
Sr. Notes
6.50% due 12/01/35...................... 245,000 238,797
Commonwealth Edison Co.
1st Mtg
5.90% due 03/15/36...................... 281,000 267,670
Consolidated Natural Gas Co.
Sr. Notes
5.38% due 11/01/06...................... 215,000 214,965
Consumers Energy Co.
Series C
4.25% due 04/15/08...................... 380,000 370,599
Dominion Resources, Inc.
Sr. Unsec. Notes, Series A
5.69% due 05/15/08(4)................... 363,000 363,645
Duke Energy Corp.
Sr. Notes
4.20% due 10/01/08...................... 330,000 320,175
24
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------
BONDS & NOTES (continued)
Utilities (continued)
Duquesne Light Holdings, Inc.
Sr. Notes
6.25% due 08/15/35............... $ 99,000 $ 92,083
El Paso Production Holding Co.
Guaranteed Notes
7.75% due 06/01/13............... 455,000 471,494
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10............... 555,000 548,221
Florida Power & Light Co.
Notes
5.95% due 10/01/33............... 205,000 203,845
Indianapolis Power & Light Co.
1st Mtg. Bonds
6.60% due 01/01/34*.............. 228,000 235,301
KeySpan Corp.
Sr. Notes
4.90% due 05/16/08............... 955,000 944,635
NRG Energy, Inc.
Sr. Notes
7.25% due 02/01/14............... 100,000 101,625
NRG Energy, Inc.
Sr. Notes
7.38% due 02/01/16............... 400,000 408,500
Old Dominion Electric Cooperative
1st Mtg. Bonds, Series A
5.68% due 12/01/28............... 276,958 273,593
Pepco Holdings, Inc.
Notes
5.50% due 08/15/07............... 385,000 385,041
PSEG Power LLC
Sr. Notes
7.75% due 04/15/11............... 190,000 206,419
PSI Energy, Inc.
Debentures
6.12% due 10/15/35............... 215,000 208,660
PSI Energy, Inc.
Debentures
7.85% due 10/15/07............... 593,000 612,735
Public Service Electric & Gas Co.
Sec. Notes
5.00% due 08/15/14............... 180,000 172,716
Puget Sound Energy, Inc.
Sr. Notes
5.20% due 10/01/15............... 591,000 565,184
Reliant Energy, Inc.
Notes
9.50% due 07/15/13............... 275,000 275,344
Sempra Energy
Sr. Notes
4.62% due 05/17/07............... 165,000 163,532
Southern California Edison Co.
Series 2006-A
5.63% due 02/01/36............... 228,000 213,419
Southern California Gas Co.
1st Mtg. Bonds
5.75% due 11/15/35............... 235,000 228,412
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Utilities (continued)
Southern Energy, Inc.
Sr. Notes
7.90% due 07/15/09+(3)(9)............ $425,000 $ 0
The AES Corp.
Sr. Notes
7.75% due 03/01/14................... 300,000 315,000
Virginia Electric & Power Co.
Notes
4.10% due 12/15/08................... 381,000 366,315
-----------
10,015,402
-----------
Total Bonds & Notes
(cost $63,865,342)................... 62,799,318
-----------
CONVERTIBLE BONDS -- 0.1%
Telecommunications -- 0.1%
ICO North America, Inc.
Sr. Notes
7.50% due 08/15/09(3)(9)(13)
(cost $65,000)....................... 65,000 82,550
-----------
FOREIGN BONDS & NOTES -- 12.1%
Banks -- 0.6%
Banco Continental de Panama SA
Notes
6.63% due 12/01/10*.................. 226,000 224,125
Caisse Nationale
Notes
6.52% due 11/08/12................... 298,000 263,358
Mizuho Finance
Guaranteed Notes
8.38% due 12/29/49................... 375,000 399,375
UOB Cayman, Ltd.
Guaranteed Notes
5.80% due 03/15/16*(11).............. 330,000 323,043
-----------
1,209,901
-----------
Broadcasting & Media -- 0.4%
Grupo Televisa SA
Sr. Notes
6.63% due 03/18/25................... 380,000 372,877
Telenet Group Holding NV
Disc. Notes
11.50% due 06/15/14*(4).............. 376,000 314,430
-----------
687,307
-----------
Business Services -- 0.0%
SCL Terminal Aereo Santiago SA
Sr. Secured Notes
6.95% due 07/01/12*.................. 68,535 69,399
-----------
Chemicals -- 0.2%
Sociedad Quimica y Minera de Chile SA
Notes
6.13% due 04/15/16*(3)............... 370,000 369,826
-----------
Conglomerate -- 0.5%
Tyco International Group SA
Sr. Notes
6.75% due 02/15/11................... 756,000 786,298
-----------
Energy Sources -- 0.8%
BHP Billiton Finance USA, Ltd.
Guaranteed Notes
5.00% due 12/15/10................... 330,000 324,434
25
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Energy Sources (continued)
Gazprom International SA
Guaranteed Sr. Notes
7.20% due 02/01/20*............ $ 275,000 $ 287,787
Nexen, Inc
Notes
5.88% due 03/10/35............. 457,000 425,999
PTT Public Co., Ltd
Bonds
5.88% due 08/03/35*............ 261,000 236,197
Talisman Energy, Inc.
Sr. Notes
5.85% due 02/01/37............. 190,000 178,611
----------
1,453,028
----------
Financial Services -- 1.7%
Aries Vermogensverwaltungs GmbH
Bonds
9.60% due 10/25/14............. 1,000,000 1,249,400
Basell AF SCA
Guaranteed Notes
8.38% due 08/15/15*............ 375,000 372,187
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*............ 198,000 197,609
FBG Finance, Ltd.
Notes
5.88% due 06/15/35*............ 220,000 200,175
HBOS Capital Funding LP
Notes
6.85% due 03/29/49............. 550,000 551,375
SovRisc BV
Notes
4.63% due 10/31/08*............ 389,000 383,992
----------
2,954,738
----------
Forest Products -- 0.1%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 08/01/10............. 175,000 175,875
----------
Gas & Pipeline Utilities -- 0.1%
Kinder Morgan Finance
Guaranteed Notes
5.70% due 01/05/16............. 198,000 192,902
----------
Government Agencies -- 5.1%
Federal Republic of Brazil
Bonds
8.00% due 01/15/18............. 550,000 595,925
Federal Republic of Brazil
Bonds
10.50% due 07/14/14............ 530,000 659,850
Republic of Argentina
Bonds
4.89% due 08/03/12(2).......... 620,000 506,850
Republic of Argentina
Bonds
8.28% due 12/31/33............. 980,123 962,971
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------
Government Agency (continued)
Republic of Turkey
Notes
9.00% due 06/30/11.............. $ 480,000 $ 537,000
Republic of Turkey
Sr. Bonds
11.88% due 01/15/30............. 1,150,000 1,775,313
Republic of Venezuela
Bonds
8.50% due 10/08/14.............. 260,000 291,200
Republic of Venezuela
Bonds
9.25% due 09/15/27.............. 1,500,000 1,905,750
Russian Federation
Bonds
5.00% due 03/31/30(4)........... 850,000 932,620
United Kingdom
Notes
2.25% due 07/08/08*............. 749,000 708,279
United Mexican States, Series A
Notes
7.50% due 04/08/33.............. 19,000 21,185
----------
8,896,943
----------
Insurance -- 0.5%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 315,000 277,200
ING Groep NV
Notes
5.78% due 12/08/15(11).......... 340,000 330,729
Montpelier Re Holdings, Ltd.
Sr. Notes
6.13% due 08/15/13.............. 271,000 258,052
----------
865,981
----------
Machinery -- 0.1%
Atlas Copco AB
Notes
6.50% due 04/01/08*............. 232,000 236,548
----------
Metals & Mining -- 0.4%
Falconbridge, Ltd.
Notes
8.38% due 02/15/11.............. 198,000 217,674
Inco, Ltd.
Debentures
7.20% due 09/15/32.............. 267,000 276,662
Teck Cominco, Ltd.
Sr. Notes
6.13% due 10/01/35.............. 215,000 202,281
----------
696,617
----------
Pharmaceuticals -- 0.2%
Elan Finance PLC
Guaranteed Notes
7.75% due 11/15/11.............. 288,000 272,880
----------
26
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Real Estate Companies -- 0.3%
Brookfield Asset Management, Inc.
Sr. Notes
8.13% due 12/15/08............... $ 430,000 $ 457,016
------------
Retail -- 0.1%
Jean Coutu Group PJC, Inc.
Sr. Sub. Notes
8.50% due 08/01/14............... 250,000 229,375
------------
Telecommunications -- 0.6%
America Movil SA de CV
Sr. Notes
6.38% due 03/01/35............... 264,000 248,222
British Telecommunications PLC
Bonds
8.63% due 12/15/30............... 190,000 243,063
TELUS Corp.
Notes
7.50% due 06/01/07............... 383,000 391,655
TELUS Corp.
Notes
8.00% due 06/01/11............... 161,000 177,579
------------
1,060,519
------------
Utilities -- 0.4%
Enersis SA
Notes
7.40% due 12/01/16............... 600,000 631,454
------------
Total Foreign Bonds & Notes
(cost $20,232,185)............... 21,246,607
------------
U.S. GOVERNMENT OBLIGATIONS -- 3.1%
U.S Treasury Bonds -- 0.8%
5.38% due 02/15/31................ 1,173,000 1,234,766
6.88% due 08/15/25................ 134,000 163,574
------------
1,398,340
------------
U.S. Treasury Notes -- 2.3%
2.00% due 01/15/14 TIPS........... 252,141 246,084
3.25% due 08/15/07................ 1,000,000 978,750
4.25% due 08/15/13................ 2,000 1,924
4.25% due 10/15/10................ 370,000 361,357
4.25% due 08/15/15................ 286,000 272,448
4.50% due 02/28/11................ 192,000 189,202
4.50% due 02/15/16................ 420,000 408,483
4.63% due 02/29/08................ 156,000 155,372
6.88% due 05/15/06................ 1,481,000 1,484,587
------------
4,098,207
------------
Total U.S. Government Obligations
(cost $5,596,345)................ 5,496,547
------------
U.S. GOVERNMENT AGENCIES -- 37.8%
Federal Home Loan Mortgage
Corporation -- 19.7%
3.63% due 02/15/08............... 1,000,000 974,226
4.45% due 03/06/08............... 500,000 493,789
4.50% due 11/01/18............... 2,495,045 2,386,432
4.50% due 02/01/19............... 1,778,467 1,698,847
5.00% due 06/15/31............... 1,165,457 1,143,116
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------
Federal Home Loan Mortgage
Corporation (continued)
5.00% due 03/01/34..... $1,170,659 $ 1,115,905
5.00% due 05/01/34..... 82,075 78,236
5.00% due 06/01/34..... 3,061,312 2,918,128
5.00% due 04/01/36..... 2,025,000 1,926,703
5.13% due 12/15/13..... 2,386,396 2,366,156
5.50% due 02/01/18..... 617,518 613,730
5.50% due 12/15/18..... 992,459 984,132
5.50% due 10/01/33..... 1,371,706 1,341,936
5.50% due 01/01/35..... 2,924,332 2,856,093
6.00% due 11/01/33..... 8,021 8,030
6.00% due 12/01/35..... 1,828,466 1,829,661
6.00% due 01/01/36..... 3,136,701 3,138,750
6.50% due 08/01/16..... 10,473 10,698
6.50% due 06/01/32..... 177,058 180,979
6.50% due 08/01/32..... 1,157,946 1,182,892
6.50% due 02/01/33..... 114,307 116,770
6.50% due 02/01/36..... 3,500,002 3,568,023
6.50% due 03/01/36..... 1,175,117 1,197,885
6.88% due 09/15/10..... 925,000 987,734
7.00% due 03/01/12..... 8,680 8,936
7.00% due 11/01/16..... 55,618 57,195
7.50% due 04/01/31..... 297,550 310,894
7.50% due 12/01/31..... 750,547 784,205
8.00% due 10/01/29..... 13,342 14,216
8.00% due 07/01/30..... 4,638 4,937
8.00% due 08/01/30..... 13,112 13,959
8.00% due 10/01/30..... 15,928 16,957
8.00% due 11/01/30..... 34,601 36,835
8.00% due 12/01/30..... 81,032 86,263
8.00% due 01/01/31..... 81,854 87,139
------------
34,540,387
------------
Federal National Mortgage
Association -- 18.0%
3.88% due 05/15/07..... 1,000,000 986,474
4.50% due 06/01/18..... 694,819 665,715
5.00% due 06/01/18..... 1,814,452 1,772,547
5.00% due 09/01/18..... 606,836 592,821
5.00% due 10/01/18..... 1,223,899 1,195,633
5.00% due 11/01/18..... 971,939 949,492
5.00% due 11/01/20..... 492,308 480,167
5.00% due 11/01/33..... 46,591 44,481
5.00% due 03/01/34..... 5,636,734 5,375,798
5.50% due 06/01/20..... 1,062,396 1,056,272
5.50% due 12/01/33..... 2,639,405 2,581,520
5.50% due 03/01/34..... 697,266 681,617
5.50% due 07/01/34..... 1,955,402 1,911,516
5.50% due 09/01/34..... 835,363 816,614
5.50% due 12/01/35..... 2,350,000 2,294,545
5.50% due 02/01/36(2).. 1,173,704 1,173,438
6.00% due 12/01/16..... 743,620 754,025
6.00% due 05/01/17..... 140,856 142,816
6.00% due 12/01/33..... 2,766,274 2,767,755
6.00% due 08/01/34..... 2,187,950 2,189,573
6.00% due 10/01/34..... 972,380 972,789
6.31% due 02/01/08..... 84,311 84,782
27
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal National Mortgage
Association (continued)
6.34% due 01/01/08...................... $ 16,800 $ 16,936
6.43% due 01/01/08...................... 17,867 18,034
6.50% due 03/01/17...................... 374,477 383,451
6.50% due 04/01/29...................... 52,217 53,533
6.50% due 02/01/32...................... 354,153 362,089
6.50% due 07/01/32...................... 174,130 178,032
6.98% due 06/01/07...................... 2,762 2,783
7.00% due 09/01/10...................... 1,631 1,672
7.00% due 11/01/11...................... 1,239 1,273
7.00% due 05/01/12...................... 1,993 2,048
7.00% due 06/01/12...................... 2,865 2,944
7.00% due 10/01/12...................... 512 526
7.00% due 07/01/13...................... 2,506 2,577
7.00% due 04/01/28...................... 10,362 10,691
7.00% due 10/01/28...................... 982 1,014
7.00% due 09/01/31...................... 738,247 761,100
7.50% due 10/01/10...................... 71,048 72,937
7.50% due 11/01/14...................... 5,505 5,651
7.50% due 05/01/15...................... 4,344 4,545
7.50% due 06/01/15...................... 63,224 66,149
7.50% due 07/01/15...................... 32,725 34,239
7.50% due 08/01/15...................... 11,494 12,026
7.00% due 09/01/12...................... 1,391 1,429
------------
31,486,069
------------
Government National Mortgage
Association -- 0.1%
6.50% due 06/15/29...................... 67,144 69,720
7.00% due 12/15/22...................... 51,686 53,824
7.00% due 08/15/29...................... 47,065 49,093
------------
172,637
------------
Total U.S. Government Agencies
(cost $67,540,262)...................... 66,199,093
------------
COMMON STOCK -- 0.0%
Machinery -- 0.0%
Manitowoc Co., Inc.
(cost $261)............................. 28 2,552
------------
PREFERRED STOCK -- 1.0%
Government Agencies -- 0.2%
Federal National Mtg. Assoc. 7.00%(2).... 6,152 335,284
------------
Financial Services -- 0.4%
General Electric Capital Corp. 4.50%(10). 34,000 775,200
------------
Insurance -- 0.4%
Endurance Specialty Holdings, Ltd. 7.75%. 27,000 653,940
------------
Machinery -- 0.0%
Fairfield Manufacturing Co., Inc.
11.25%(3)(8)(9)......................... 28 0
------------
Total Preferred Stock
(cost $1,882,528)....................... 1,764,424
------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
WARRANTS -- 0.0%+
Communication Equipment -- 0.0%
Concentric Network Corp.(3)(9)
Expires 12/15/07 (strike price $5.43)....... $ 5 $ 0
------------
Telecommunications -- 0.0%
KMC Telecom Holdings, Inc.(3)(9)
Expires 01/31/08 (strike price $0.01)....... 50 0
------------
Total Warrants
(cost $0)................................... 0
------------
Total Long-Term Investment
Securities -- 98.6%
(cost $174,352,941)......................... 172,574,154
------------
REPURCHASE AGREEMENT -- 1.1%
Agreement with State Street Bank & Trust.,
bearing interest at 4.45% dated 03/31/06 to
be repurchased 04/03/06 in the amount of
$1,935,718 and collateralized by $2,070,000
of Federal National Mtg. Assoc., bearing
interest at 3.25% due 08/15/08 having an
approximate value of $1,994,180
(cost $1,935,000)........................... 1,935,000 1,935,000
------------
TOTAL INVESTMENTS --
(cost $176,287,941)@........................ 99.7% 174,509,154
Other assets less liabilities.................. 0.3 570,868
---------- ------------
NET ASSETS -- 100.0% $175,080,022
========== ============
- --------
+ 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 Portfolio has no rights to demand registration of these
securities. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
2006, the aggregate value of these securities was $15,938,336 representing
9.1% 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) Collateralized Mortgage Obligation
(2) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of March 31, 2006.
(3) Fair valued security; see Note 1.
(4) "Step-up" security where the rate increases ("steps up") at a
predetermined rate. Rate shown reflects the interest rate.
(5) Company has filed Chapter 11 bankruptcy protection.
(6) Bond in default.
(7) Variable rate security -- the rate reflected is as of March 31, 2006;
maturity date reflects next reset date.
(8) PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(9) Illiquid security.
(10) Security is a "step-up" preferred stock where the dividend rate increases
or steps up at a predetermined rate. Rate reflected is as of March 31,
2006.
(11) Security has a perpetual maturity date. The maturity date shown reflects
the next call date.
(12) Variable rate security -- the rate reflected is as of March 31, 2006;
maturity date reflects stated maturity date.
28
SunAmerica Core Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
(13) To the extent permitted by the Statement of Additional Information, the
Core Bond Fund may invest in restricted securities. The Fund has no right
to demand registration of these securities. The securities are valued
pursuant to Note 2. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of March 31, 2006, the
Core Bond Fund held the following restricted securities:
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- -------- ------ ------
ICO North America,
Inc.............. 08/11/2005 $ 65,000 $ 65,000 $ 82,550 $127 0.05%
AmerisourceBergen
Corp............. 01/06/2006 $150,000 153,696 147,525 98 0.08%
-------- ----
$230,075 0.13%
======== ====
See Notes to Financial Statements
29
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited)
Industry Allocation*
Government National Mortgage Association 46.4%
U.S. Treasury Notes..................... 26.1%
Repurchase Agreements................... 9.8%
U.S. Treasury Bonds..................... 8.8%
U.S. Government Agencies................ 7.1%
Federal Farm Credit Bank................ 0.7%
Federal National Mortgage Association... 0.7%
----
99.6%
====
Credit Quality+#
Government -- Agency.. 61.0%
Government -- Treasury 39.0%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
30
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value
Security Description Amount (Note 2)
---------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 34.9%
U.S Treasury Bonds -- 8.8%
5.38% due 02/15/31......................... $15,000,000 $15,789,840
-----------
U.S. Treasury Notes -- 26.1%
4.50% due 02/28/11......................... 9,000,000 8,868,870
4.50% due 11/15/15......................... 22,000,000 21,348,602
4.50% due 02/15/16......................... 17,000,000 16,533,826
-----------
46,751,298
-----------
Total U.S. Government Obligations
(cost $64,031,828)........................ 62,541,138
-----------
U.S. GOVERNMENT AGENCIES -- 54.9%
Federal Farm Credit Bank -- 0.7%
5.64% due 04/04/11........................ 500,000 511,131
6.00% due 03/07/11........................ 200,000 207,149
6.30% due 12/03/13........................ 500,000 534,874
-----------
1,253,154
-----------
Federal Home Loan Mortgage
Corporation -- 0.0%
8.00% due 06/01/08......................... 8,875 8,892
8.25% due 07/01/06......................... 189 189
8.50% due 05/01/08......................... 623 626
5,830.49% due 12/28/28(1).................. 77 77
-----------
9,784
-----------
Federal National Mortgage Association -- 0.7%
6.53% due 05/25/30......................... 1,218,675 1,227,526
8.00% due 01/01/23......................... 22,116 23,507
8.00% due 01/01/23......................... 13,230 14,051
11.00% due 02/01/15........................ 34 38
11.50% due 09/01/19........................ 14,479 15,776
-----------
1,280,898
-----------
Government National Mortgage
Association -- 46.4%
4.50% due 05/15/18........................ 1,196,583 1,156,297
4.50% due 08/15/18........................ 1,912,992 1,848,587
4.50% due 09/15/18........................ 5,356,944 5,176,591
4.50% due 10/15/18........................ 5,194,610 5,019,723
4.50% due 09/15/33........................ 5,439,968 5,125,236
5.00% due 04/15/18........................ 5,557,781 5,468,560
5.00% due 08/15/33........................ 2,341,598 2,271,513
5.00% due 09/15/33........................ 1,055,193 1,023,611
5.00% due 10/15/33........................ 742,073 719,862
5.00% due 11/15/34........................ 249,617 242,054
5.50% due 11/15/32........................ 16,202 16,056
5.50% due 03/15/33........................ 561,876 556,751
5.50% due 04/15/33........................ 692,441 686,125
5.50% due 05/15/33........................ 1,630,065 1,615,196
5.50% due 06/15/33........................ 7,688,780 7,618,646
5.50% due 07/15/33........................ 2,136,997 2,117,504
5.50% due 10/15/33........................ 2,135,189 2,115,713
5.50% due 12/15/33........................ 427,228 423,331
5.50% due 01/15/34........................ 4,221,040 4,182,528
5.50% due 02/15/34........................ 2,571,241 2,547,782
6.00% due 01/15/28........................ 4,264 4,321
6.00% due 04/15/28........................ 1,643,363 1,666,151
6.00% due 05/15/28........................ 3,982 4,035
6.00% due 10/15/28........................ 18,477 18,726
Principal Value
Security Description Amount (Note 2)
-------------------------------------------
Government National Mortgage
Association (continued)
6.00% due 03/15/29.. $ 104,239 $ 105,605
6.00% due 04/15/29.. 53,518 54,219
6.00% due 05/15/29.. 103,204 104,557
6.00% due 06/15/29.. 30,298 30,696
6.00% due 04/15/31.. 36,627 37,085
6.00% due 05/15/31.. 64,489 65,295
6.00% due 11/15/31.. 290,395 294,023
6.00% due 12/15/31.. 765,392 774,955
6.00% due 01/15/32.. 248,031 251,154
6.00% due 02/15/32.. 54,580 55,268
6.00% due 03/15/32.. 13,011 13,174
6.00% due 08/15/32.. 348,428 352,814
6.00% due 11/15/32.. 55,025 55,718
6.00% due 12/15/32.. 9,715 9,837
6.00% due 01/15/33.. 23,491 23,783
6.00% due 02/15/33.. 149,670 151,531
6.00% due 03/15/33.. 120,726 122,227
6.00% due 04/15/33.. 450,034 455,630
6.00% due 07/15/33.. 318,059 322,013
6.00% due 08/15/33.. 3,240,701 3,281,394
6.00% due 09/15/33.. 449,885 455,479
6.00% due 10/15/33.. 2,013,993 2,039,037
6.00% due 11/15/33.. 212,874 215,521
6.00% due 12/15/33.. 1,090,132 1,103,687
6.00% due 02/15/34.. 482,019 487,751
6.00% due 05/15/34.. 75,285 76,180
6.00% due 06/15/34.. 50,771 51,375
6.00% due 07/15/34.. 3,371,177 3,411,268
6.00% due 08/15/34.. 235,414 238,213
6.00% due 09/15/34.. 2,156,864 2,182,514
6.00% due 12/15/34.. 526,373 532,633
6.00% due 10/15/34.. 6,230,755 6,304,853
6.00% due 11/15/34.. 751,090 760,022
6.00% due 01/15/35.. 1,129,931 1,143,268
6.00% due 06/15/35.. 434,596 439,726
6.00% due 08/15/35.. 1,593,485 1,612,295
6.50% due 02/15/29.. 20,354 21,134
6.50% due 05/15/31.. 21,411 22,205
6.50% due 06/15/31.. 65,878 68,321
6.50% due 07/15/31.. 56,693 58,795
6.50% due 08/15/31.. 86,583 89,793
6.50% due 09/15/31.. 224,588 232,914
6.50% due 10/15/31.. 404,404 419,397
6.50% due 11/15/31.. 15,339 15,907
6.50% due 12/15/31.. 32,872 34,090
6.50% due 01/15/32.. 45,956 47,654
6.50% due 02/15/32.. 745,914 773,483
6.50% due 06/15/32.. 116,190 120,485
7.00% due 07/15/23.. 43,751 45,589
7.00% due 10/15/23.. 121,019 126,104
7.00% due 09/15/25.. 305,965 319,162
7.00% due 03/20/29.. 24,703 25,567
7.00% due 06/20/29.. 3,980 4,119
7.00% due 11/20/30.. 98,322 101,766
7.50% due 04/15/17.. 11,368 11,897
7.50% due 08/15/23.. 254,379 267,760
31
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage
Association (continued)
7.50% due 09/15/23................ $ 697,777 $ 734,483
7.50% due 10/15/23................ 17,106 18,006
8.00% due 11/15/06................ 348 349
8.00% due 02/15/08................ 872 891
9.00% due 12/15/16................ 105,005 112,721
11.00% due 08/20/15............... 295 322
11.00% due 09/20/15............... 644 705
11.50% due 06/15/13............... 5,174 5,681
11.50% due 05/20/15............... 3,960 4,397
12.50% due 09/15/14............... 7,323 8,097
13.00% due 01/15/11............... 2,898 3,206
13.00% due 02/15/11............... 4,488 4,965
13.00% due 03/15/11............... 249 276
13.00% due 04/15/11............... 546 604
13.00% due 09/15/13............... 5,227 5,803
13.00% due 10/20/14............... 1,160 1,270
13.00% due 11/15/14............... 804 894
13.00% due 02/20/15............... 706 777
13.50% due 02/15/13............... 11,770 13,164
15.00% due 01/15/12............... 479 545
15.00% due 02/15/12............... 1,147 1,305
15.00% due 06/15/12............... 12,316 14,011
15.00% due 09/15/12............... 678 772
15.50% due 09/15/11............... 37,117 42,241
------------
83,021,326
------------
Private Export Funding -- 5.7%
5.87% due 07/31/08................ 10,000,000 10,174,750
------------
Small Business Administration -- 1.4%
6.30% due 06/01/18................ 2,370,266 2,424,566
------------
Total U.S. Government Agencies
(cost $99,913,225)................ 98,164,478
------------
Total Long-Term Investment
Securities -- 89.8%
(cost $163,945,053)............... 160,705,616
------------
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
REPURCHASE AGREEMENTS -- 9.8%
State Street Bank & Trust Co., Joint
Repurchase Agreement(2)............. $ 487,000 $ 487,000
UBS Securities, LLC Joint Repurchase
Agreement(2)........................ 17,000,000 17,000,000
------------
Total Repurchase Agreements
(cost $17,487,000).................. 17,487,000
------------
TOTAL INVESTMENTS --
(cost $181,432,053)@................ 99.6% 178,192,616
Other assets less liabilities.......... 0.4 648,861
----------- ------------
NET ASSETS -- 100.0% $178,841,477
=========== ============
- --------
@ See Note 5 for cost of investment on a tax basis.
(1)Variable rate security -- the rate reflected is as of March 31, 2006;
maturity date reflects stated maturity date.
(2)See Note 2 for details of Joint Repurchase Agreement.
See Notes to Financial Statements
32
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited)
Industry Allocation*
Government National Mortgage Association 85.2%
Repurchase Agreements................... 35.7%
United States Treasury Notes............ 12.1%
Federal National Mortgage Association... 2.3%
Small Business Administration........... 0.2%
-----
135.5%
=====
Credit Quality+#
Government -- Agency.. 87.9%
Government -- Treasury 12.1%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
33
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 87.7%
Federal National Mortgage
Association -- 2.3%
5.00% due 01/25/18(2)......... $ 9,627,828 $ 9,575,640
------------
Government National Mortgage
Association -- 85.2%
4.50% due 05/15/18............ 2,393,166 2,312,595
4.50% due 08/15/18............ 1,275,151 1,232,220
4.50% due 09/15/18............ 4,141,753 4,002,313
4.50% due 10/15/18............ 5,925,020 5,725,543
4.50% due 08/15/33............ 3,624,254 3,414,571
4.50% due 09/15/33............ 4,003,635 3,772,003
5.00% due 03/15/18............ 683,064 672,099
5.00% due 04/15/18............ 8,836,190 8,694,339
5.00% due 05/15/18............ 12,682,581 12,478,983
5.00% due 01/15/33............ 18,754 18,193
5.00% due 05/15/33............ 15,602 15,136
5.00% due 08/15/33............ 3,433,594 3,330,824
5.00% due 09/15/33............ 3,134,026 3,040,223
5.00% due 10/15/33............ 7,416,383 7,194,405
5.00% due 04/15/34............ 75,798 73,502
5.00% due 05/15/34............ 190,648 184,872
5.00% due 11/15/34............ 854,049 828,174
5.00% due 12/15/34............ 847,659 821,977
5.50% due 06/15/29............ 7,239 7,177
5.50% due 12/15/32............ 962,005 953,333
5.50% due 01/15/33............ 633,680 627,899
5.50% due 02/15/33............ 2,540,075 2,516,906
5.50% due 03/15/33............ 1,424,640 1,411,645
5.50% due 04/15/33............ 7,590,142 7,520,908
5.50% due 05/15/33............ 8,914,633 8,833,318
5.50% due 06/15/33............ 10,126,000 10,033,723
5.50% due 07/15/33............ 502,158 497,577
5.50% due 08/15/33............ 3,301,755 3,271,638
5.50% due 09/15/33............ 533,417 528,552
5.50% due 10/15/33............ 8,318,760 8,242,879
5.50% due 12/15/33............ 9,019,615 8,937,342
5.50% due 01/15/34............ 13,667,899 13,543,197
5.50% due 02/15/34............ 1,729,654 1,713,873
5.50% TBA due April........... 130,000,000 128,700,000
6.00% due 11/15/23............ 6,992 7,083
6.00% due 01/15/24............ 9,031 9,151
6.00% due 07/15/28............ 5,358 5,430
6.00% due 11/15/28............ 376,945 382,033
6.00% due 12/15/28............ 411,447 417,000
6.00% due 01/15/29............ 876,629 888,123
6.00% due 02/15/29............ 894,866 906,599
6.00% due 03/15/29............ 683,921 692,888
6.00% due 04/15/29............ 1,878,050 1,902,765
6.00% due 05/15/29............ 106,521 107,917
6.00% due 06/15/29............ 686,542 695,583
6.00% due 07/15/29............ 280,988 284,672
6.00% due 08/15/29............ 27,870 28,235
6.00% due 10/15/29............ 108,183 109,602
6.00% due 04/15/31............ 24,461 24,767
6.00% due 07/15/31............ 15,567 15,761
6.00% due 10/15/31............ 87,020 88,107
6.00% due 11/15/31............ 1,776,415 1,798,609
6.00% due 12/15/31............ 725,941 735,011
Principal Value
Security Description Amount (Note 2)
----------------------------------------------
Government National Mortgage
Association (continued)
6.00% due 01/15/32... $ 834,388 $ 844,893
6.00% due 02/15/32... 73,676 74,604
6.00% due 03/15/32... 569,151 576,316
6.00% due 07/15/32... 137,133 138,859
6.00% due 08/15/32... 2,134,487 2,161,208
6.00% due 09/15/32... 1,540,530 1,559,926
6.00% due 10/15/32... 247,722 250,841
6.00% due 11/15/32... 9,919 10,044
6.00% due 12/15/32... 221,719 224,511
6.00% due 01/15/33... 1,865,009 1,888,199
6.00% due 02/15/33... 2,628,654 2,661,339
6.00% due 03/15/33... 1,793,460 1,815,760
6.00% due 04/15/33... 1,864,503 1,887,686
6.00% due 05/15/33... 1,889,510 1,913,005
6.00% due 06/15/33... 1,426,071 1,443,803
6.00% due 08/15/33... 2,120,701 2,147,129
6.00% due 10/15/33... 681,526 690,000
6.00% due 11/15/33... 2,261,971 2,290,100
6.00% due 12/15/33... 3,946,942 3,996,019
6.00% due 01/15/34... 2,335,558 2,363,332
6.00% due 02/15/34... 13,809,292 13,973,514
6.00% due 03/15/34... 524,350 530,585
6.00% due 04/15/34... 5,050,347 5,110,407
6.00% due 05/15/34... 393,768 398,451
6.00% due 06/15/34... 526,421 532,682
6.00% due 07/15/34... 4,996,832 5,056,255
6.00% due 08/15/34... 7,031,010 7,116,147
6.00% due 09/15/34... 337,411 341,488
6.00% due 10/15/34... 1,085,020 1,097,923
6.00% due 11/15/34... 2,170,744 2,196,559
6.00% due 12/15/34... 115,559 116,933
6.00% due 01/15/35... 103,245 104,464
6.00% due 02/15/35... 1,405,651 1,422,243
6.00% due 04/15/35... 75,011 75,896
6.00% due 05/15/35... 137,981 139,609
6.00% due 06/15/35... 575,708 582,504
6.00% TBA due April.. 20,000,000 20,225,000
6.50% due 03/15/28... 32,566 33,791
6.50% due 08/15/28... 62,735 65,116
6.50% due 12/15/28... 1,739 1,805
6.50% due 01/15/29... 6,182 6,419
6.50% due 02/15/29... 2,055 2,134
6.50% due 03/15/29... 133,180 138,290
6.50% due 04/15/29... 2,244 2,330
6.50% due 05/15/29... 16,957 17,603
6.50% due 06/15/29... 49,633 51,537
6.50% due 07/15/29... 6,257 6,497
6.50% due 10/15/29... 6,525 6,776
6.50% due 08/15/31... 300,338 311,473
6.50% due 09/15/31... 34,002 35,263
6.50% due 10/15/31... 404,405 419,398
6.50% due 11/15/31... 249,903 259,168
6.50% due 12/15/31... 265,441 275,282
6.50% due 02/15/32... 313,655 325,248
6.50% due 05/15/32... 1,907,709 1,978,221
6.50% due 06/15/32... 144,426 149,764
7.00% due 03/15/23... 137,965 143,762
34
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mortgage
Association (continued)
7.00% due 01/20/24................ $ 832 $ 861
7.00% due 03/20/24................ 895 926
7.00% due 07/20/25................ 6,097 6,311
7.00% due 09/15/25................ 132,874 138,605
7.00% due 01/20/29................ 54,606 56,515
7.00% due 02/20/29................ 10,832 11,211
7.00% due 06/20/29................ 19,734 20,424
7.00% due 07/20/29................ 69,634 72,069
7.00% due 09/20/29................ 6,971 7,215
7.00% due 10/20/29................ 14,095 14,588
7.00% due 11/20/29................ 4,910 5,081
7.00% due 03/20/30................ 7,251 7,505
7.00% due 06/20/30................ 13,164 13,626
7.00% due 08/20/30................ 41,098 42,538
7.00% due 09/20/30................ 34,260 35,460
7.00% due 10/20/30................ 45,138 46,719
8.00% due 11/15/26................ 239,063 256,314
8.00% due 12/15/29................ 32,820 35,137
8.00% due 01/15/30................ 975 1,042
8.00% due 04/15/30................ 50,279 53,767
8.00% due 05/15/30................ 6,765 7,235
8.00% due 08/15/30................ 54,667 58,460
8.50% due 03/15/17................ 27,013 28,985
8.50% due 05/15/21................ 85,494 92,390
8.50% due 12/15/22................ 128,883 139,455
8.50% due 01/15/23................ 121,424 131,529
8.50% due 09/15/24................ 50,924 55,217
9.00% due 07/15/16................ 85,840 92,147
9.00% due 10/15/16................ 16,229 17,421
------------
357,888,139
------------
Small Business Administration -- 0.2%
6.30% due 06/01/18................ 790,089 808,189
------------
Total U.S. Government Agencies
(cost $373,786,640)............... 368,271,968
------------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 12.1%
U.S. Treasury Notes -- 12.1%
4.50% due 02/28/11.................... $18,000,000 $ 17,737,740
4.50% due 11/15/15.................... 5,000,000 4,851,955
4.50% due 02/15/16.................... 29,000,000 28,204,762
-------------
Total U.S. Government Obligations
(cost $51,363,975).................... 50,794,457
-------------
Total Long-Term Investment
Securities -- 99.8%
(cost $425,150,615)................... 419,066,425
-------------
REPURCHASE AGREEMENTS -- 35.7%
State Street Bank & Trust Co. Joint
Repurchase Agreement(1).............. 57,767,000 57,767,000
UBS Securities, LLC Joint Repurchase
Agreement(1)......................... 92,000,000 92,000,000
-------------
Total Repurchase Agreements
(cost $149,767,000)................... 149,767,000
-------------
TOTAL INVESTMENTS --
(cost $574,917,615)@.................. 135.5% 568,833,425
Liabilities in excess of other assets.... (35.5) (148,998,772)
----------- -------------
NET ASSETS -- 100.0% $ 419,834,653
=========== =============
- --------
TBA --Securities purchased on a forward commitment basis with an approximate
principle amount and no definitive maturity date. The mutual principal
and maturity date will be determined upon settlement date.
@ See Note 5 for cost of investments on a tax basis.
(1) See Note 2 for details of Joint Repurchase Agreement.
(2) Collateralized Mortgage Obligation.
See Notes to Financial Statements
35
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited)
Industry Allocation*
Foreign Government Agencies..... 29.7%
U.S. Treasury Notes............. 9.2%
Financial Services.............. 8.0%
Federal Home Loan Mortgage Corp. 5.5%
Energy Services................. 4.9%
Leisure & Tourism............... 4.3%
Federal National Mortgage Assoc. 3.5%
Telecommunications.............. 3.5%
Utilities....................... 3.5%
Broadcasting & Media............ 3.4%
Repurchase Agreements........... 3.2%
U.S Treasury Bonds.............. 2.8%
Time Deposit.................... 1.7%
Business Services............... 1.5%
Banks........................... 1.2%
Health Services................. 1.2%
Forest Products................. 1.0%
Insurance....................... 1.0%
Metals & Mining................. 0.8%
Pharmaceuticals................. 0.8%
Retail Stores................... 0.8%
Chemicals....................... 0.7%
Federal Home Loan Bank.......... 0.6%
Food, Beverage & Tobacco........ 0.6%
Medical Products................ 0.6%
Real Estate Investment Trusts... 0.6%
Electronics..................... 0.5%
Automotive...................... 0.4%
Transportation.................. 0.4%
Household & Personal Products... 0.3%
Machinery....................... 0.3%
Communication Equipment ........ 0.2%
Computer Software............... 0.2%
Conglomerate.................... 0.2%
Restaurants..................... 0.2%
Aerospace & Military Technology. 0.1%
Building Materials.............. 0.1%
Computers & Business Equipment.. 0.1%
Real Estate Companies........... 0.1%
Retail.......................... 0.1%
----
97.8%
====
Country Allocation*
United States. 63.4%
Brazil........ 6.5%
Canada........ 2.4%
Venezuela..... 2.2%
Argentina..... 2.1%
Sweden........ 2.0%
Russia........ 1.9%
Turkey........ 1.8%
United Kingdom 1.4%
South Africa.. 1.4%
Philippines... 1.2%
Mexico........ 1.2%
Peru.......... 1.0%
Spain......... 0.8%
Hungary....... 0.7%
Germany....... 0.7%
Colombia...... 0.7%
Uruguay....... 0.6%
Indonesia..... 0.6%
Australia..... 0.6%
Ukraine....... 0.5%
Norway........ 0.5%
New Zealand... 0.4%
Netherlands... 0.4%
Luxembourg.... 0.4%
Japan......... 0.4%
Ireland....... 0.4%
Cayman Island. 0.4%
Belgium....... 0.4%
Poland........ 0.2%
Italy......... 0.2%
France........ 0.2%
Greece........ 0.1%
Bermuda....... 0.1%
----
97.8%
====
Credit Quality+#
Government -- Treasury 13.2%
Government -- Agency.. 10.1%
AAA................... 8.9%
AA.................... 1.7%
A..................... 5.7%
BBB................... 7.1%
BB.................... 24.3%
B..................... 15.9%
CCC................... 6.4%
C..................... 0.1%
Below C............... 1.0%
Not Rated@............ 5.6%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 1.5%
Financial Services -- 1.5%
Argent Securities, Inc.
2006 W2 Certs., Class A 2B
5.01% due 03/25/36(1)........................ $ 290,000 $ 289,997
Banc America Commercial Mtg., Inc.
Series 2005-6, Class F
5.35% due 09/10/47(2)(3)..................... 615,000 587,221
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2005-PW10, Class F
5.63% due 12/11/40(2)........................ 381,000 372,985
Commerical Mtg. Asset Trust
Series 2004-LB2A, Class A-3
4.22% due 03/10/39........................... 1,586,000 1,510,558
CS First Boston Mtg. Securities Corp.
Series 2005-TF3A, Class A-2
5.18% due 04/17/06*(1)....................... 547,000 547,676
Merrill Lynch Mtg. Investors, Inc.
2005 Ar1 Mtg. Pass-Through Certs., Class B2
5.51% due 02/25/37(4)(5)..................... 290,000 285,473
Mid-State Trust Asset Backed Notes,
Series 6, Class A1
7.34% due 07/01/35........................... 683,342 705,897
Morgan Stanley Capital I
Series 2005-HQ7, Class G
5.21% due 11/14/42*(2)....................... 250,000 238,235
----------
4,538,042
----------
Total Asset-Backed Securities
(cost $4,852,340)............................ 4,538,042
----------
BONDS & NOTES -- 32.7%
Aerospace & Military Technology -- 0.1%
DeCrane Aircraft Holdings
Guaranteed Sr. Sub. Notes, Series B
12.00% due 09/30/08.......................... 175,000 125,125
Raytheon Co.
Notes
4.85% due 01/15/11........................... 160,000 155,461
Raytheon Co.
Notes
6.75% due 08/15/07........................... 113,000 114,769
----------
395,355
----------
Automotive -- 0.4%
BREED Technologies, Inc.
Guaranteed Sr. Sub. Notes
9.25% due 04/15/08(4)(6)(7)(8)+.............. 500,000 0
Cooper-Standard Automotive, Inc.
Sr. Sub. Notes
8.38% due 12/15/14........................... 155,000 120,900
DaimlerChrysler NA Holding Corp.
Guaranteed Bonds
7.30% due 01/15/12........................... 80,000 84,534
Dura Operating Corp.
Sr. Notes
8.63% due 04/15/12........................... 379,000 311,727
Exide Corp.
Notes
10.00% due 03/15/25(4)(7)+................... 225,000 0
Ford Motor Co.
Bonds
6.38% due 02/01/29........................... 44,000 29,260
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Automotive (continued)
Ford Motor Co.
Bonds
6.63% due 10/01/28................ $725,000 $ 485,750
Nationsrent, Inc.
Sr. Notes
9.50% due 05/01/15................ 275,000 297,000
Stanadyne Corp.
Sr. Sub. Notes
10.00% due 08/15/14............... 50,000 47,875
----------
1,377,046
----------
Banks -- 1.0%
AAC Group Holding Corp.
Sr. Notes
10.25% due 10/01/12(5)............ 325,000 251,875
ABN Amro North America Holding Co.
Bonds
6.52% due 11/08/12*(2)............ 160,000 165,618
Bank One Corp.
Sub. Notes
8.00% due 04/29/27................ 114,000 138,558
Charter One Bank NA
Sub. Notes
6.38% due 05/15/12................ 318,000 333,430
Compass Bank
Sub. Notes
5.90% due 04/01/26................ 509,000 497,863
Downey Financial Corp.
Notes
6.50% due 07/01/14................ 180,000 179,462
HSBC Bank USA NA
Sub. Notes
5.63% due 08/15/35................ 60,000 55,738
Huntington National Bank
Notes
5.50% due 02/15/16................ 280,000 273,141
Independence Community Bank Corp.
Sub. Notes
3.50% due 06/20/08(2)............. 86,000 82,282
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08................ 63,000 63,969
PNC Funding Corp.
Guaranteed Sr. Notes
5.13% due 12/14/10................ 150,000 148,140
PNC Funding Corp.
Guaranteed Notes
5.75% due 08/01/06................ 85,000 85,134
Popular North America, Inc.
Guaranteed Notes
4.70% due 06/30/09................ 135,000 131,477
Sovereign Bancorp, Inc.
Sr. Notes
4.80% due 09/01/10*............... 186,000 179,647
US Bank NA
Notes
3.90% due 08/15/08................ 85,000 82,514
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
BONDS & NOTES (continued)
Banks (continued)
Wachovia Bank NA
Sub. Notes
5.60% due 03/15/16................. $ 150,000 $ 148,533
Wachovia Corp.
Sr. Notes
5.35% due 03/15/11................. 90,000 89,644
Wells Fargo & Co.
Sub. Global Notes
6.38% due 08/01/11................. 80,000 83,418
World Savings Bank FSB
Notes
4.13% due 12/15/09................. 166,000 159,240
----------
3,149,683
----------
Broadcasting & Media -- 2.7%
Adelphia Communications Corp.
Sr. Notes
10.25% due 06/15/11(6)(8)+......... 50,000 31,500
AMFM, Inc.
Sr. Notes
8.00% due 11/01/08................. 148,000 155,361
Cablevision Systems Corp.
Sr. Notes
9.62% due 04/01/09(1).............. 200,000 209,750
CBS Corp.
Sr. Notes
6.63% due 05/15/11................. 72,000 74,321
CCH II LLC
Sr. Notes, Series B
10.25% due 09/15/10*............... 375,000 367,500
Charter Communications Holdings LLC
Sr. Notes
11.13% due 01/15/11................ 1,500,000 795,000
Charter Communications Holdings LLC
Sr. Notes
9.63% due 11/15/09................. 1,200,000 804,000
Charter Communications Holdings LLC
Sr. Notes
9.92% due 04/01/11(5).............. 200,000 103,000
Charter Communications Holdings LLC
Sr. Notes
10.25% due 01/15/10................ 25,000 14,938
Charter Communications Holdings LLC
Sr. Notes
10.75% due 10/01/09................ 450,000 306,000
Comcast Corp.
Guaranteed Notes
6.45% due 03/15/37................. 126,000 121,237
COX Communications, Inc.
Notes
7.13% due 10/01/12................. 150,000 157,359
COX Communications, Inc.
Debentures
7.63% due 06/15/25................. 163,000 173,822
CSC Holdings, Inc.
Sr. Debentures, Series B
8.13% due 08/15/09................. 250,000 258,125
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
Broadcasting & Media (continued)
Fisher Communications, Inc.
Sr. Notes
8.63% due 09/15/14.............. $ 450,000 $ 475,875
Haights Cross Operating Co.
Sr. Notes
11.75% due 08/15/11............. 150,000 156,563
Insight Communications Co., Inc.
Sr. Sub. Notes
12.25% due 02/15/11(5).......... 500,000 531,250
Knight-Ridder, Inc.
Debentures
6.88% due 03/15/29.............. 90,000 84,345
Network Communications, Inc.
Sr. Notes
10.75% due 12/01/13*............ 75,000 76,313
News America, Inc.
Guaranteed Sr. Debentures
7.30% due 04/30/28.............. 65,000 67,563
Nexstar Finance, Inc.
Sr. Sub. Notes
7.00% due 01/15/14.............. 450,000 425,250
Omnicom Group, Inc.
Guaranteed Notes
5.90% due 04/15/16.............. 90,000 88,600
Paxson Communications Corp.
2nd Priority Sr. Sec. Notes
11.32% due 01/15/13*(1)......... 1,100,000 1,089,000
Time Warner Cos., Inc.
Debentures
7.25% due 10/15/17.............. 76,000 81,324
Time Warner Entertainment Co. LP
Sr. Debentures
8.38% due 03/15/23.............. 198,000 223,865
Univision Communications, Inc.
Sr. Notes
3.50% due 10/15/07.............. 80,000 77,425
Vertis, Inc.
Sr. Notes
10.88% due 06/15/09............. 150,000 147,375
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 01/15/14.............. 125,000 106,875
Young Broadcasting, Inc.
Guaranteed Sr. Sub. Notes
10.00% due 03/01/11............. 1,225,000 1,130,062
----------
8,333,598
----------
Building Materials -- 0.1%
Dayton Superior Corp.
Sr. Sec. Notes
10.75% due 09/15/08............. 367,000 373,881
----------
Business Services -- 1.5%
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 02/15/12.............. 364,000 365,820
Alderwoods Group, Inc.
Sr. Notes
7.75% due 09/15/12.............. 50,000 51,375
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
BONDS & NOTES (continued)
Business Services (continued)
Allied Waste North America, Inc.
Sr. Notes
8.50% due 12/01/08.............. $650,000 $ 683,312
AMR Holdco, Inc.
Sr. Sub. Notes
10.00% due 02/15/15............. 125,000 133,438
Aramark Services, Inc.
Notes
7.00% due 05/01/07.............. 195,000 197,445
Associated Materials, Inc.
Sr. Sub. Notes
9.75% due 04/15/12.............. 625,000 648,438
Carriage Services, Inc.
Sr. Notes
7.88% due 01/15/15.............. 287,000 292,023
Corrections Corp. America
Sr. Notes
6.25% due 03/15/13.............. 200,000 196,750
Dun & Bradstreet Corp.
Sr. Notes
5.50% due 03/15/11.............. 75,000 74,549
Erac USA Finance Co.
Notes
7.95% due 12/15/09*............. 120,000 129,239
First Data Corp.
Notes
3.38% due 08/01/08.............. 96,000 91,746
Mobile Mini, Inc.
Sr. Notes
9.50% due 07/01/13.............. 150,000 164,250
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 09/01/10............. 360,000 360,900
Pitney Bowes, Inc.
Sr. Notes
4.75% due 01/15/16.............. 136,000 126,599
Service Corp. International
Notes
6.50% due 03/15/08.............. 325,000 326,625
Service Corp. International
Sr. Notes
6.75% due 04/01/16.............. 75,000 74,250
Service Corp. International
Sr. Notes
7.25% due 06/15/17*............. 400,000 407,000
Stewart Enterprises, Inc.
Sr. Notes
7.25% due 02/15/13*............. 325,000 312,000
----------
4,635,759
----------
Chemicals -- 0.5%
BCI US Finance Corp.
Sr. Sec. Notes
10.58% due 07/15/10*(1)......... 100,000 102,000
Equistar Chemicals LP
Notes
8.75% due 02/15/09.............. 75,000 77,625
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
Chemicals (continued)
Equistar Chemicals LP
Sr. Notes
10.63% due 05/01/11................ $275,000 $ 297,688
ICI Wilmington, Inc.
Guaranteed Notes
7.05% due 09/15/07................. 134,000 136,313
Lubrizol Corp.
Sr. Notes
4.63% due 10/01/09................. 65,000 62,976
Lyondell Chemical Co.
Guaranteed Sr. Sec. Notes
9.50% due 12/15/08................. 29,000 30,160
Phosphate Resource Partners LP
Sr. Notes
7.00% due 02/15/08................. 125,000 126,563
Rockwood Specialties, Inc.
Sr. Sub. Notes
7.50% due 11/15/14................. 325,000 326,625
Rockwood Specialties, Inc.
Sr. Sub. Notes
10.63% due 05/15/11................ 55,000 60,362
Westlake Chemical Corp.
Sr. Notes
6.63% due 01/15/16................. 375,000 370,781
----------
1,591,093
----------
Communication Equipment -- 0.2%
Cisco Systems, Inc.
Sr. Notes
5.50% due 02/22/16................. 80,000 78,798
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 01/15/10................. 400,000 406,000
Rural Cellular Corp.
Sr. Sub. Notes
10.43% due 11/01/12*(1)............ 200,000 207,500
----------
692,298
----------
Computer Software -- 0.2%
Oracle Corp.
Sr. Notes
5.00% due 01/15/11*................ 158,000 154,318
Solar Capital Corp.
Sr. Notes
9.13% due 08/15/13*................ 175,000 185,062
SS&C Technologies, Inc.
Sr. Sub. Notes
11.75% due 12/01/13*............... 175,000 187,250
----------
526,630
----------
Computers & Business Equipment -- 0.1%
Activant Solutions, Inc.
Sr. Notes
10.99% due 04/01/10*(1)............ 100,000 102,000
Computer Sciences Corp.
Notes
3.50% due 04/15/08................. 65,000 62,594
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
BONDS & NOTES (continued)
Computers & Business Equipment (continued)
Xerox Corp.
Sr. Notes
7.63% due 06/15/13..................... $275,000 $289,437
--------
454,031
--------
Conglomerate -- 0.2%
Covalence Specialty Materials Corp.
Sr. Sub. Notes
10.25% due 03/01/16*................... 130,000 136,500
Di Finance LLC
Sr. Sub. Notes
9.50% due 02/15/13..................... 375,000 390,000
Honeywell International, Inc.
Sr. Notes
5.40% due 03/15/16..................... 75,000 74,033
Park-Ohio Industries, Inc.
Sr. Sub. Notes
8.38% due 11/15/14..................... 75,000 70,688
--------
671,221
--------
Electronics -- 0.3%
Advanced Micro Devices, Inc.
Sr. Notes
7.75% due 11/01/12..................... 244,000 255,285
Arrow Electronics, Inc.
Sr. Debentures
6.88% due 06/01/18..................... 144,000 146,655
Corning, Inc.
Notes
6.20% due 03/15/16..................... 96,000 95,995
L-3 Communications Corp.
Sr. Sub. Notes
6.13% due 07/15/13..................... 100,000 97,500
L-3 Communications Corp.
Sr. Sub. Notes
6.38% due 10/15/15..................... 100,000 98,500
Sanmina-Sci Corp.
Sr. Sub. Notes
6.75% due 03/01/13..................... 75,000 71,438
Telex Communications, Inc.
Sr. Sec. Notes
11.50% due 10/15/08.................... 50,000 53,375
--------
818,748
--------
Energy Services -- 0.4%
Allis-Chalmers Energy, Inc.
Sr. Notes
9.00% due 01/15/14*.................... 175,000 172,375
Grant Prideco, Inc.
Sr. Notes
6.13% due 08/15/15..................... 50,000 48,750
Hanover Compressor Co.
Sr. Notes
7.50% due 04/15/13..................... 25,000 25,000
Hanover Compressor Co.
Sr. Notes
8.63% due 12/15/10..................... 75,000 78,656
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
Energy Services (continued)
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 06/01/11............ $ 185,730 $ 188,589
Pride International, Inc.
Sr. Notes
7.38% due 07/15/14............ 50,000 52,500
Seitel, Inc.
Sr. Notes
11.75% due 07/15/11........... 475,000 540,313
----------
1,106,183
----------
Energy Sources -- 3.0%
Alpha Natural Resources LLC
Sr. Notes
10.00% due 06/01/08........... 42,000 46,200
Amerada Hess Corp.
Notes
7.13% due 03/15/33............ 99,000 108,020
Amerada Hess Corp.
Notes
7.88% due 10/01/29............ 95,000 110,622
Belden & Blake Corp.
Sec. Notes
8.75% due 07/15/12............ 200,000 206,000
Calpine Corp.
Sec. Notes
8.75% due 07/15/13(6)(8)*..... 2,698,000 2,475,415
Chaparral Energy, Inc.
Sr. Notes
8.50% due 12/01/15*........... 700,000 728,000
Chesapeake Energy Corp.
Sr. Notes
6.25% due 01/15/18............ 475,000 464,312
Chesapeake Energy Corp.
Sr. Notes
6.63% due 01/15/16............ 925,000 922,687
Chesapeake Energy Corp.
Sr. Notes
6.88% due 11/15/20*........... 125,000 125,938
Colorado Interstate Gas Co.
Debentures
6.85% due 06/15/37............ 150,000 151,715
ConocoPhillips
Sr. Notes
7.00% due 03/30/29............ 125,000 141,837
Copano Energy LLC
Sr. Notes
8.13% due 03/01/16*........... 250,000 258,750
Costilla Energy, Inc.
Sr. Notes
10.25% due 10/01/06(4)(6)(7)+. 500,000 0
Drummond Co., Inc.
Sr. Notes
7.38% due 02/15/16*........... 250,000 249,375
Encore Acquisition Co.
Sr. Sub. Notes
6.00% due 07/15/15............ 175,000 163,188
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
BONDS & NOTES (continued)
Energy Sources (continued)
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 04/15/14....................... $ 50,000 $ 47,875
Enterprise Products Operating LP
Guaranteed Notes
6.88% due 03/01/33....................... 90,000 91,944
EXCO Resources, Inc.
Guaranteed Notes
7.25% due 01/15/11....................... 125,000 124,375
Hilcorp Energy I LP
Sr. Notes
10.50% due 09/01/10*..................... 170,000 187,213
Hilcorp Energy I LP
Sr. Notes
7.75% due 11/01/15*...................... 275,000 274,312
Markwest Energy Partners LP
Sr. Notes
6.88% due 11/01/14....................... 155,000 146,475
Mission Energy Holding Co.
Sr. Sec. Notes
13.50% due 07/15/08...................... 1,075,000 1,233,562
Newfield Exploration Co.
Sr. Sub. Notes
6.63% due 09/01/14....................... 150,000 150,375
Quicksilver Resources, Inc.
Sr. Sub. Notes
7.13% due 04/01/16....................... 200,000 197,500
Roseton Danskammer
Guaranteed Pass-Through Certs., Series B
7.67% due 11/08/16....................... 425,000 434,200
The Premcor Refining Group, Inc.
Sr. Notes
6.75% due 02/01/11....................... 158,000 164,647
Transmeridian Exploration, Inc.
Sr. Notes
12.00% due 12/15/10(4)(12)*.............. 200,000 200,000
----------
9,404,537
----------
Financial Services -- 5.4%
AMBAC Financial Group, Inc.
Debentures
5.95% due 12/05/35....................... 80,000 77,188
Ameriprise Financial, Inc.
Sr. Notes
5.35% due 11/15/10....................... 93,000 92,061
Ameriprise Financial, Inc.
Sr. Notes
5.65% due 11/15/15....................... 150,000 147,862
BAE Systems Holdings, Inc.
Guaranteed Notes
4.75% due 08/15/10*...................... 405,000 390,451
BAE Systems Holdings, Inc.
Guaranteed Notes
6.40% due 12/15/11*...................... 237,000 243,821
Capital One Bank
Sr. Notes
5.13% due 02/15/14....................... 100,000 96,231
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------
Financial Services (continued)
Chukchansi Economic
Development Authority
Sr. Notes
8.06% due 05/15/06*(1)......... $ 150,000 $ 153,375
Consolidated Communications
Holdings, Inc.
Sr. Notes
9.75% due 04/01/12............. 347,000 367,820
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09............. 80,000 76,466
Countrywide Home Loans, Inc.
Guaranteed Notes
5.50% due 08/01/06............. 101,000 101,137
Eircom Funding
Sr. Sub. Notes
8.25% due 08/15/13............. 125,000 134,531
ESI Tractebel Acquisition Corp.
Guaranteed Bonds
7.99% due 12/30/11............. 218,000 225,724
Ford Motor Credit Co.
Notes
5.70% due 01/15/10............. 58,000 51,471
Ford Motor Credit Co.
Sr. Notes
5.80% due 01/12/09............. 1,317,000 1,202,759
Ford Motor Credit Co.
Notes
6.38% due 11/05/08............. 123,000 114,808
Ford Motor Credit Co.
Notes
7.00% due 10/01/13............. 1,300,000 1,162,728
Ford Motor Credit Co.
Notes
8.63% due 11/01/10............. 75,000 71,854
FTI Consulting, Inc.
Sr. Notes
7.63% due 06/15/13............. 225,000 236,812
General Electric Capital Corp.
Notes
1.00% due 03/21/12............. JPY 105,000,000 852,714
General Electric Capital Corp.
Notes, Series A
4.38% due 03/03/12............. 150,000 141,992
General Electric Capital Corp.
Bonds
6.75% due 03/15/32............. 201,000 223,830
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14............. 50,000 45,010
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11............. 2,400,000 2,236,990
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12............. 60,000 55,351
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
General Motors Acceptance Corp.
Sr. Notes
7.00% due 02/01/12.............. $ 145,000 $ 135,012
General Motors Acceptance Corp.
Notes
7.02% due 12/01/14(1)........... 925,000 842,316
General Motors Acceptance Corp.
Bonds
7.25% due 03/02/11.............. 425,000 402,749
General Motors Acceptance Corp.
Notes
7.75% due 01/19/10.............. 1,075,000 1,048,137
General Motors Acceptance Corp.
Bonds
8.00% due 11/01/31.............. 864,000 816,568
H & E Equipment Services LLC
Guaranteed Sr. Sec. Notes
11.13% due 06/15/12............. 250,000 276,875
Hexion U.S. Finance Corp.
Sr. Notes
9.00% due 07/15/14.............. 420,000 432,600
ING USA Global Funding Trust
Notes
4.50% due 10/01/10.............. 120,000 115,468
Jefferies Group, Inc.
Sr. Debentures
6.25% due 01/15/36.............. 218,000 204,598
Lehman Brothers Holdings, Inc.
Notes
5.50% due 04/04/16.............. 321,000 314,692
Lehman Brothers Holdings, Inc.
Notes, Series H
4.50% due 07/26/10.............. 120,000 115,651
MedCath Holdings Corp.
Sr. Notes
9.88% due 07/15/12.............. 175,000 182,000
Nexstar Finance Holdings LLC
Guaranteed Sr. Disc. Notes
11.38% due 04/01/13(5).......... 625,000 512,500
NGC Corp. Capital Trust,
Guaranteed Sub. Notes, Series B
8.32% due 06/01/27.............. 1,725,000 1,518,000
PCA LLC
Sr. Notes
11.88% due 08/01/09(7).......... 325,000 65,000
Pricoa Global Funding I
Notes
3.90% due 12/15/08*............. 100,000 96,279
Pricoa Global Funding I
Notes
4.63% due 06/25/12*............. 50,000 47,483
Principal Life Global Funding I
Sec. Notes
6.25% due 02/15/12*............. 100,000 103,484
Residential Capital Corp.
Notes
6.38% due 06/30/10.............. 234,000 235,736
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
Financial Services (continued)
Residential Capital Corp.
Notes
6.88% due 06/30/15.............. $219,000 $ 228,311
Solectron Global Finance Ltd.
Sr. Sub. Notes
8.00% due 03/15/16*............. 175,000 175,438
Sprint Capital Corp.
Sr. Notes
6.88% due 11/15/28.............. 48,000 49,523
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 06/01/10............. 162,000 179,010
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
12.88% due 10/15/08............. 75,000 86,531
Transamerica Finance Corp.
Sr. Notes
6.40% due 09/15/08.............. 36,000 36,757
Xlliac Global Funding
Notes
4.80% due 08/10/10*............. 100,000 96,933
-----------
16,820,637
-----------
Food, Beverage & Tobacco -- 0.6%
Doane Pet Care Co.
Sr. Sub. Notes
10.63% due 11/15/15............. 150,000 159,000
Doane Pet Care Co.
Guaranteed Sr. Notes
10.75% due 03/01/10............. 100,000 108,250
Dole Food Co., Inc.
Sr. Notes
8.88% due 03/15/11.............. 175,000 173,250
Foster's Finance Corp.
Notes
6.88% due 06/15/11*............. 65,000 68,260
Le Natures, Inc.
Sr. Sub. Notes
10.00% due 06/15/13*............ 275,000 288,750
North Atlantic Holding Co., Inc.
Sr. Notes
12.25% due 03/01/14(5)(7)....... 50,000 12,250
Smithfield Foods, Inc.
Sr. Notes, Series B
7.75% due 05/15/13.............. 250,000 257,500
Wornick Co.
Sr. Notes
10.88% due 07/15/11............. 800,000 824,000
-----------
1,891,260
-----------
Forest Products -- 0.7%
Boise Cascade LLC
Sr. Notes
7.94% due 04/15/06(1)........... 325,000 329,063
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09.............. 425,000 405,875
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------
BONDS & NOTES (continued)
Forest Products (continued)
Caraustar Industries, Inc.
Guaranteed Sr. Sub. Notes
9.88% due 04/01/11................ $ 50,000 $ 52,563
Crown Cork & Seal Co., Inc.
Debentures
7.38% due 12/15/26................ 375,000 348,750
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23................ 350,000 336,875
Pliant Corp.
Sr. Sec. Notes
11.13% due 09/01/09(6)(8)......... 545,000 573,612
----------
2,046,738
----------
Health Services -- 1.2%
Concentra Operating Corp.
Sr. Sub. Notes
9.13% due 06/01/12................ 180,000 188,550
Concentra Operating Corp.
Sr. Sub. Notes
9.50% due 08/15/10................ 30,000 31,500
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13................ 75,000 79,313
HCA, Inc.
Notes
6.38% due 01/15/15................ 1,914,000 1,862,848
HCA, Inc.
Notes
6.75% due 07/15/13................ 600,000 597,810
Psychiatric Solutions, Inc.
Sr. Sub. Notes
7.75% due 07/15/15................ 217,000 220,797
Tenet Healthcare Corp.
Notes
7.38% due 02/01/13................ 125,000 114,062
Tenet Healthcare Corp.
Sr. Notes
9.25% due 02/01/15*............... 250,000 250,625
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13................ 150,000 147,750
US Oncology, Inc.
Sr. Sub. Notes
10.75% due 08/15/14............... 125,000 136,563
----------
3,629,818
----------
Household & Personal Products -- 0.2%
AEP Industries, Inc.
Sr. Notes
7.88% due 03/15/13................ 43,000 43,215
Procter & Gamble Co.
Bonds
2.00% due 06/21/10................ JPY 79,000,000 687,506
----------
730,721
----------
Housing & Household Durables -- 0.0%
Stanley Works Capital Trust I
Bonds
5.90% due 12/01/10*(2)............ 160,000 147,786
----------
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
Insurance -- 0.5%
Americo Life, Inc.
Notes
7.88% due 05/01/13*........................... $ 38,000 $ 38,303
Chubb Corp.
Notes
6.00% due 11/15/11............................ 84,000 85,659
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 06/15/13........................... 125,000 128,125
Genworth Financial, Inc.
Notes
4.75% due 06/15/09............................ 160,000 157,007
Markel Corp.
Sr. Notes
7.35% due 08/15/34............................ 45,000 46,405
Metropolitan Life Global Funding I
Notes
4.25% due 07/30/09*........................... 132,000 128,519
Metropolitan Life Global Funding I
Sr. Notes
4.63% due 08/19/10*........................... 60,000 58,027
MIC Financing Trust I
Pass-Through Certs.
8.38% due 02/01/27*........................... 123,000 124,915
Ohio Casualty Corp.
Notes
7.30% due 06/15/14............................ 100,000 104,234
Selective Insurance Group
Sr. Notes
6.70% due 11/01/35............................ 70,000 67,387
The Allstate Corp.
Sr. Notes
5.95% due 04/01/36............................ 475,000 462,675
----------
1,401,256
----------
Internet Content -- 0.0%
Spheris, Inc.
Sr. Sub. Notes
11.00% due 12/15/12*.......................... 150,000 138,000
----------
Leisure & Tourism -- 4.2%
AMC Entertainment, Inc.
Sr. Sub. Notes
9.88% due 02/01/12............................ 225,000 221,625
American Airlines, Inc.
Series 2001-1, Class A-2
6.82% due 05/23/11............................ 1,400,000 1,375,500
Atlas Air, Inc.
Pass-Through Certs., Series 1999-1, Class A-2
6.88% due 07/02/09............................ 241,397 235,362
Atlas Air, Inc.
Pass-Through Certs., Series 1999-1, Class A-1
7.20% due 01/02/19............................ 1,707,373 1,724,447
Atlas Air, Inc.
Series 1999-1, Class B
7.63% due 01/02/15............................ 751,504 676,354
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
BONDS & NOTES (continued)
Leisure & Tourism (continued)
Atlas Air, Inc.
Pass-Through Certs., Series 2000-1
8.71% due 01/02/19........................... $292,530 $303,500
Atlas Air, Inc.
Pass-Through Certs., Series 1999-1, Class C
8.77% due 01/02/11........................... 62,428 41,827
Atlas Air, Inc.
Pass-Through Certs., Series 2000-1, Class B
9.06% due 07/02/17........................... 552,091 530,007
Brunswick Corp.
Notes
5.00% due 06/01/11........................... 103,000 98,080
Cinemark, Inc.
Sr. Disc. Notes
9.75% due 03/15/14(5)........................ 225,000 172,125
Circus & Eldorado Silver Legacy Capital Corp.
Mtg. Notes
10.13% due 03/01/12.......................... 575,000 618,125
Continental Airlines, Inc.
Pass-Through Certs.,
Series 1999 1, Class A
6.55% due 08/02/20........................... 682,452 691,472
Continental Airlines, Inc.
Pass-Through Certs.,
Series 1999-1, Class C
6.95% due 08/02/09........................... 108,267 99,844
Continental Airlines, Inc.
Pass-Through Certs.,
Series 1999-2, Class C-1
7.73% due 03/15/11........................... 186,534 161,178
Continental Airlines, Inc.
Pass-Through Certs.,
Series 2000-2, Class B
8.31% due 10/02/19........................... 66,447 63,942
Delta Airlines, Inc.
Pass-Through Certs.,
Class 2A Series 2000 1
7.57% due 05/18/12(8)........................ 425,000 425,000
Delta Airlines, Inc.
Notes
8.30% due 12/15/29(6)(8)..................... 500,000 133,750
Delta Airlines, Inc.
Sr. Notes
9.50% due 11/18/08(8)*....................... 175,000 170,187
Delta Airlines, Inc.
Sr. Notes
10.00% due 08/15/08(6)(8).................... 975,000 248,625
Eldorado Casino Shreveport
1st Mtg. Notes
10.00% due 08/01/12(7)(9).................... 620,813 495,098
Eldorado Resorts LLC
Sr. Notes
9.00% due 04/15/14(4)(7)..................... 425,000 425,000
Gaylord Entertainment Co.
Sr. Notes
6.75% due 11/15/14........................... 450,000 438,750
Hilton Hotels Corp.
Sr. Notes
7.20% due 12/15/09........................... 68,000 70,652
K2, Inc.
Sr. Notes
7.38% due 07/01/14........................... 200,000 199,500
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Leisure & Tourism (continued)
MGM Mirage, Inc.
Sr. Notes
5.88% due 02/27/14.................. $1,550,000 $ 1,460,875
Northwest Airlines, Inc.
Pass-Through Certs., Series 2001-1,
Class 1A1
7.04% due 04/01/22(8)............... 417,984 417,984
Riviera Holdings Corp.
Guaranteed Notes
11.00% due 06/15/10#................ 135,000 143,437
Royal Caribbean Cruises, Ltd.
Sr. Notes
6.88% due 12/01/13.................. 108,000 111,041
Starwood Hotels & Resorts Worldwide
Sr. Notes
7.88% due 05/01/12.................. 250,000 271,875
Station Casinos, Inc.
Sr. Sub. Notes
6.63% due 03/15/18*................. 125,000 122,188
True Temper Sports, Inc.
Guaranteed Sr. Sub. Notes
8.38% due 09/15/11.................. 350,000 320,250
United Air Lines, Inc.
Certs., Series 2001-1, Class A2
6.20% due 03/01/10.................. 157,153 155,582
Waterford Gaming LLC
Sr. Notes
8.63% due 09/15/12*................. 181,000 191,634
Worldspan LP/WS Financing Corp.
Guaranteed Notes
11.00% due 02/15/11(1).............. 450,000 389,250
-----------
13,204,066
-----------
Machinery -- 0.2%
Case New Holland, Inc.
Sr. Notes
6.00% due 06/01/09.................. 325,000 316,875
Dresser Rand Group, Inc.
Sr. Sub. Notes
7.63% due 11/01/14*................. 188,000 191,760
Indalex Holding Corp.
Sr. Notes
11.50% due 02/01/14*................ 200,000 195,500
Magnachip Semiconductor SA
2nd Priority Sr. Sec. Notes
6.88% due 12/15/11.................. 50,000 48,000
Venture Holdings Co. LLC
Guaranteed Sr. Sec. Notes
11.00% due 06/01/07(6)(7)(8)+....... 100,000 125
-----------
752,260
-----------
Medical Products -- 0.6%
AmerisourceBergen Corp.
Sr. Notes
5.88% due 09/15/15*................. 525,000 516,369
Boston Scientific Corp.
Bonds
6.25% due 11/15/35.................. 198,000 202,306
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Medical Products (continued)
CDRV Investors, Inc.
Sr. Notes
9.63% due 01/01/15(5)................ $325,000 $ 221,000
Encore Med IHC, Inc.
Sr. Sub. Notes
9.75% due 10/01/12................... 75,000 75,750
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 02/15/12................... 425,000 418,625
Mylan Labs, Inc.
Sr. Notes
5.75% due 08/15/10................... 25,000 24,687
Mylan Labs, Inc.
Sr. Notes
6.38% due 08/15/15................... 75,000 75,375
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11.................. 250,000 259,375
----------
1,793,487
----------
Metals & Mining -- 0.5%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................... 75,000 81,000
Associated Materials, Inc.
Sr. Disc. Notes
11.25% due 03/01/14.................. 250,000 143,750
Barrick Gold Finance Co.
Guaranteed Debentures
7.50% due 05/01/07................... 120,000 122,636
Chaparral Steel Co.
Sr. Notes
10.00% due 07/15/13.................. 300,000 334,500
Metals USA, Inc.
Sr. Notes
11.13% due 12/01/15*................. 150,000 165,000
Newmont Mining Corp.
Notes
8.63% due 05/15/11................... 60,000 67,723
Owens Brockway Glass Container, Inc.
Sr. Notes
8.25% due 05/15/13................... 175,000 182,875
Owens-Brockway Glass Container, Inc.
Guaranteed Sr. Sec. Notes
8.88% due 02/15/09................... 375,000 390,469
Phelps Dodge Corp.
Sr. Notes
6.13% due 03/15/34................... 59,000 55,088
Renco Metals, Inc.
Guaranteed Notes
11.50% due 07/01/03(4)(6)(7)(8)(15)+. 500,000 0
----------
1,543,041
----------
Pharmaceuticals -- 0.2%
American Home Products
Notes
6.95% due 03/15/11................... 58,000 61,492
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Pharmaceuticals (continued)
AmerisourceBergen Corp.
Sr. Notes
5.63% due 09/15/12*(12)................. $150,000 $147,525
Curative Health Services, Inc.
Sr. Notes
10.75% due 05/01/11(6)(8)............... 100,000 58,875
Genentech, Inc.
Sr. Notes
5.25% due 07/15/35...................... 287,000 258,179
Merck & Co., Inc.
Notes
2.50% due 03/30/07...................... 40,000 38,916
Teva Pharmaceutical Finance LLC
Guaranteed Sr. Notes
6.15% due 02/01/36...................... 108,000 101,793
Wyeth
Notes
6.00% due 02/15/36...................... 80,000 78,148
--------
744,928
--------
Real Estate Companies -- 0.1%
EOP Operating LP
Sr. Notes
7.00% due 07/15/11...................... 160,000 168,348
ERP Operating LP
Sr. Notes
5.38% due 08/01/16...................... 92,000 88,886
--------
257,234
--------
Real Estate Investment Trusts -- 0.6%
Brandywine Operating Partnership LP
Guaranteed Notes
6.00% due 04/01/16...................... 99,000 97,973
Commercial Net Lease Realty, Inc.
Notes
6.15% due 12/15/15...................... 55,000 54,244
Duke Realty Corp.
Sr. Notes
5.50% due 03/01/16...................... 80,000 77,623
Heritage Property Investment Trust, Inc.
Notes
4.50% due 10/15/09...................... 80,000 76,710
Mack-Cali Realty LP
Notes
5.80% due 01/15/16...................... 90,000 87,884
National Health Investors, Inc.
Notes
7.30% due 07/16/07...................... 100,000 101,236
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 04/01/14...................... 200,000 202,000
Reckson Operating Partnership LP
Notes
6.00% due 03/31/16...................... 90,000 89,278
Senior Housing Properties Trust
Sr. Notes
8.63% due 01/15/12...................... 527,000 579,700
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
BONDS & NOTES (continued)
Real Estate Investment Trusts (continued)
Trustreet Properties, Inc.
Sr. Notes
7.50% due 04/01/15.................... $325,000 $ 325,813
Vornado Realty LP
Sr. Notes
4.75% due 12/01/10.................... 80,000 76,557
----------
1,769,018
----------
Restaurants -- 0.2%
Dave & Busters, Inc.
Sr. Notes
11.25% due 03/15/14*.................. 225,000 227,813
Restaurant Co.
Sr. Notes
10.00% due 10/01/13................... 75,000 71,625
Sbarro, Inc.
Sr. Notes
11.00% due 09/15/09................... 194,000 197,395
----------
496,833
----------
Retail Stores -- 0.7%
Acco Brands Corp.
Sr. Sub. Notes
7.63% due 08/15/15.................... 75,000 71,250
Collins & Aikman Floor Cover
Guaranteed Notes
9.75% due 02/15/10.................... 273,000 257,985
Jostens Holding Corp.
Sr. Disc. Notes
10.25% due 12/01/13(5)................ 273,000 208,845
Neiman Marcus Group, Inc.
Sr. Sub. Notes
10.38% due 10/15/15*.................. 200,000 212,500
Prestige Brands, Inc.
Sr. Sub. Notes, Series B
9.25% due 04/15/12.................... 100,000 101,000
Rent-Way, Inc.
Sr. Notes
11.88% due 06/15/10................... 283,000 295,735
Rite Aid Corp.
Guaranteed Notes
8.13% due 05/01/10.................... 200,000 204,250
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11.................... 375,000 414,375
Visant Holding Corp.
Sr. Notes
8.75% due 12/01/13*................... 325,000 312,016
----------
2,077,956
----------
Telecommunications -- 2.3%
Alltel Corp.
Notes
4.66% due 05/17/07.................... 53,000 52,645
American Cellular Corp.
Sr. Notes
10.00% due 08/01/11................... 950,000 1,030,750
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Telecommunications (continued)
Centennial Communications Corp.
Sr. Notes
10.00% due 01/01/13.................. $ 61,000 $ 63,364
Centennial Communications Corp.
Guaranteed Sr. Notes
10.13% due 06/15/13.................. 200,000 218,500
Centennial Communications Corp.
Sr. Notes
10.25% due 01/01/13(1)............... 175,000 181,125
Cincinnati Bell, Inc.
Sr. Notes
7.00% due 02/15/15................... 150,000 148,500
Cincinnati Bell, Inc.
Notes
7.25% due 06/15/23................... 25,000 24,000
Cingular Wireless Services, Inc.
Sr. Notes
7.88% due 03/01/11................... 371,000 406,640
GTE Corp.
Debentures
6.94% due 04/15/28................... 144,000 144,611
GTE Northwest, Inc.
Debentures, Series D
5.55% due 10/15/08................... 55,000 54,648
Insight Midwest LP
Sr. Notes
9.75% due 10/01/09................... 100,000 103,000
LCI International, Inc.
Sr. Notes
7.25% due 06/15/07................... 2,600,000 2,626,000
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29................... 70,000 74,066
Qwest Corp.
Debentures
7.13% due 11/15/43................... 25,000 24,250
Qwest Corp.
Debentures
7.25% due 10/15/35................... 100,000 99,875
Suncom Wireless, Inc.
Guaranteed Sr. Notes
8.50% due 06/01/13................... 400,000 380,000
Suncom Wireless, Inc.
Guaranteed Sr. Sub. Notes
8.75% due 11/15/11................... 150,000 101,812
US West Communications, Inc.
Debentures
7.25% due 09/15/25................... 50,000 51,250
US West Communications, Inc.
Debentures
7.50% due 06/15/23................... 16,000 16,260
Valor Telecommunications Enterprises
Sr. Notes
7.75% due 02/15/15................... 950,000 995,125
Verizon New England, Inc.
Debentures
6.50% due 09/15/11................... 80,000 81,216
46
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
BONDS & NOTES (continued)
Telecommunications (continued)
Verizon New York, Inc.,
Debentures, Series A
6.88% due 04/01/12..................... $ 22,000 $ 22,598
Verizon New York, Inc.,
Debentures, Series B
7.38% due 04/01/32..................... 202,000 204,885
----------
7,105,120
----------
Transportation -- 0.2%
Burlington Northern Santa Fe Corp.
Debentures
7.29% due 06/01/36..................... 134,000 155,365
CNF, Inc.
Sr. Debentures
6.70% due 05/01/34..................... 150,000 147,201
Norfolk Southern Corp.
Notes
5.59% due 05/17/25..................... 168,000 160,168
Ryder Systems, Inc.
Notes
5.00% due 06/15/12..................... 131,000 124,004
----------
586,738
----------
Utilities -- 3.5%
AES Corp.
Sr. Notes
8.75% due 05/15/13*.................... 850,000 918,000
American Electric Power Co., Inc.
Sr. Notes
4.71% due 12/15/15(5).................. 180,000 178,264
Atlas Pipeline Partners LP
Sr. Notes
8.13% due 12/15/15*.................... 175,000 182,437
CenterPoint Energy Houston Electric LLC
Series L-2
5.60% due 07/01/23..................... 119,000 112,671
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11..................... 120,000 129,956
Centerpoint Energy, Inc.
Sr. Notes
5.88% due 06/01/08..................... 150,000 150,765
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.18% due 12/15/23..................... 50,000 50,000
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23..................... 225,000 217,125
Cleco Power LLC
Sr. Notes
6.50% due 12/01/35..................... 65,000 63,354
Commonwealth Edison Co.
1st Mtg. Bond, Series 103
5.90% due 03/15/36..................... 133,000 126,691
Consolidated Natural Gas Co.
Sr. Notes
5.38% due 11/01/06..................... 40,000 39,994
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
Utilities (continued)
Consumers Energy Co.
Series C
4.25% due 04/15/08............ $ 180,000 $ 175,547
Dominion Resources, Inc.
Sr. Notes
5.69% due 05/15/08(5)......... 176,000 176,313
Duke Energy Corp.
Sr. Notes
4.20% due 10/01/08............ 150,000 145,534
Duquesne Light Holdings, Inc.
Sr. Notes
6.25% due 08/15/35............ 48,000 44,646
Edison Mission Energy
Sr. Notes
9.88% due 04/15/11............ 200,000 226,000
El Paso Natural Gas Co.
Sr. Notes
7.63% due 08/01/10............ 250,000 260,625
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22............ 575,000 654,240
El Paso Production Holding Co.
Guaranteed Notes
7.75% due 06/01/13............ 1,125,000 1,165,781
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10............ 195,000 192,618
Ferrellgas LP
Sr. Notes
6.75% due 05/01/14............ 550,000 529,375
Florida Power & Light Co.
Notes
5.95% due 10/01/33............ 100,000 99,436
KeySpan Corp.
Sr. Notes
4.90% due 05/16/08............ 239,000 236,406
NRG Energy, Inc.
Sr. Notes
7.25% due 02/01/14............ 475,000 482,719
NRG Energy, Inc.
Sr. Notes
7.38% due 02/01/16............ 725,000 740,406
Pacific Energy Partners LP
Sr. Notes
6.25% due 09/15/15............ 218,000 212,550
Pacific Energy Partners LP
Sr. Notes
7.13% due 06/15/14............ 332,000 337,810
Pepco Holdings, Inc.
Notes
5.50% due 08/15/07............ 111,000 111,012
PSEG Power LLC
Sr. Notes
7.75% due 04/15/11............ 50,000 54,321
PSI Energy, Inc.
Debentures
6.12% due 10/15/35............ 75,000 72,788
47
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
BONDS & NOTES (continued)
Utilities (continued)
PSI Energy, Inc.
Debentures
7.85% due 10/15/07.................. $ 179,000 $ 184,958
Public Service Electric & Gas Co.
Sec. Notes
5.00% due 08/15/14.................. 96,000 92,115
Puget Sound Energy, Inc.
Sr. Notes
5.20% due 10/01/15.................. 197,000 188,395
Reliant Energy, Inc.
Sr. Sec. Notes
6.75% due 12/15/14.................. 50,000 44,125
Reliant Energy, Inc.
Notes
9.50% due 07/15/13.................. 50,000 50,063
Sempra Energy
Sr. Notes
4.62% due 05/17/07.................. 203,000 201,193
Southern California Edison Co.
Series 2006-A
5.63% due 02/01/36.................. 108,000 101,093
Southern California Gas Co.
1st Mtg. Bonds
5.75% due 11/15/35.................. 70,000 68,038
Southern Energy, Inc.
Notes
7.90% due 07/15/09(4)(7)+........... 1,125,000 0
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28.................. 400,000 395,435
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 07/15/18(6)(8)*........... 298,012 257,781
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 07/15/12.................. 25,000 28,500
VeraSun Energy Corp.
Sr. Notes
9.88% due 12/15/12*................. 375,000 397,500
Williams Cos., Inc.
Notes 7.88% due 09/01/21............ 700,000 752,500
------------
10,849,080
------------
Total Bonds & Notes
(cost $102,398,292)................. 101,516,040
------------
CONVERTIBLE BONDS -- 0.1%
Health Services -- 0.0%
Genesis Healthcare Corp.
Sr. Sub. Debentures
2.50% due 03/15/25*................. 75,000 75,844
------------
Telecommunications -- 0.1%
ICO North America, Inc.
Sr. Notes
7.50% due 08/15/09(4)(7)(12)........ 200,000 254,000
------------
Total Convertible Bonds
(cost $275,000)..................... 329,844
------------
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
FOREIGN BONDS & NOTES -- 34.2%
Banks -- 0.2%
Caisse Nationale des Caisses
d'Epargne et de Prevoyance
Bonds
5.09% due 12/30/49(1)..................... $141,000 $ 124,609
Mizuho Finance
Bonds
8.38% due 12/29/49........................ 175,000 186,375
National Westminster Bank PLC
Sub. Notes
7.75% due 10/16/07(2)..................... 67,000 69,145
UOB Cayman, Ltd.
Guaranteed Notes
5.80% due 03/15/16*(2)(10)................ 150,000 146,837
----------
526,966
----------
Broadcasting & Media -- 0.4%
Corp. Interamericana De Entretenimiento SA
Sr. Notes
8.88% due 06/14/15*....................... 300,000 297,000
Grupo Televisa SA
Sr. Notes
6.63% due 03/18/25........................ 181,000 177,607
Telenet Group Holding NV
Sr. Notes
11.50% due 06/15/14*(5)................... 956,000 799,455
----------
1,274,062
----------
Chemicals -- 0.2%
Rhodia SA
Sr. Sub. Notes
8.88% due 06/01/11........................ 725,000 746,750
----------
Conglomerate -- 0.0%
Tyco International Group SA
Sr. Notes
6.75% due 02/15/11........................ 150,000 156,012
----------
Electronics -- 0.2%
Avago Technologies Wireless
Sr. Notes
10.13% due 12/01/13*...................... 350,000 375,813
Celestica, Inc.
Sr. Sub. Notes
7.63% due 07/01/13........................ 50,000 50,125
STATS ChipPAC, Ltd.
Sr. Notes
6.75% due 11/15/11........................ 75,000 73,500
----------
499,438
----------
Energy Services -- 0.2%
ENI Coordination Center
Guaranteed Notes
5.25% due 12/27/07........................ GBP 205,000 358,191
Weatherford International, Inc.
Sr. Notes
5.50% due 02/15/16........................ 112,000 109,825
----------
468,016
----------
48
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Energy Sources -- 0.3%
BHP Billiton Finance, Ltd.
Guaranteed Notes
5.00% due 12/15/10................. $ 150,000 $ 147,470
Nexen, Inc
Notes
5.88% due 03/10/35................. 80,000 74,573
North America Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11................. 310,000 302,250
North America Energy Partners, Inc.
Sr. Notes
9.00% due 06/01/10................. 175,000 183,312
Talisman Energy, Inc.
Sr. Notes
5.85% due 02/01/37................. 180,000 169,210
----------
876,815
----------
Financial Services -- 1.0%
Aries Vermogensverwaltungs GmbH
Bonds
9.60% due 10/25/14................. 1,000,000 1,249,400
Basell AF SCA
Sr. Notes
8.38% due 08/15/15*................ 750,000 744,375
Bluewater Finance, Ltd.
Guaranteed Sr. Notes
10.25% due 02/15/12................ 350,000 367,500
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*................ 96,000 95,810
Compton Petroleum Finance Corp.
Sr. Notes
7.63% due 12/01/13*................ 250,000 250,000
FBG Finance, Ltd.
Notes
5.88% due 06/15/35*................ 60,000 54,593
HBOS Capital Funding LP
Notes
6.85% due 3/23/09(10).............. 175,000 175,438
Nationwide Building Society
Sr. Notes
2.63% due 01/30/07*................ 85,000 83,248
SovRisc BV
Notes
4.63% due 10/31/08*................ 133,000 131,288
----------
3,151,652
----------
Food, Beverage & Tobacco -- 0.0%
Diageo Capital PLC
Guaranteed Notes
4.38% due 05/03/10................. 88,000 84,480
----------
Forest Products -- 0.3%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 08/01/10................. 575,000 577,875
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
Forest Products (continued)
Abitibi-Consolidated, Inc.
Debentures
8.85% due 08/01/30........... $ 225,000 $ 201,938
Tembec Industries, Inc.
Sr. Notes
8.63% due 06/30/09........... 50,000 30,125
----------
809,938
----------
Gas & Pipeline Utilities -- 0.0%
Kinder Morgan Finance Co. ULC
Guaranteed Notes
5.70% due 01/05/16........... 96,000 93,528
----------
Government Agencies -- 29.4%
Canadian Government
Bonds
4.25% due 09/01/08........... CAD 1,032,000 887,811
Canadian Government
Debentures
5.00% due 06/01/14........... CAD 890,000 800,775
Canadian Government
Bonds
5.75% due 09/01/06........... CAD 2,555,000 2,203,139
Commonwealth of Australia
Bonds
7.50% due 09/15/09........... AUD 2,360,000 1,801,306
Dominican Republic
Bonds
8.63% due 04/20/27*.......... 330,000 339,075
Federal Republic of Brazil
Bonds
5.49% due 07/05/06........... BRL 7,824,000 3,633,604
Federal Republic of Brazil
Notes
7.88% due 03/07/15........... 910,000 982,345
Federal Republic of Brazil
Bonds
8.00% due 01/15/18........... 2,700,000 2,925,450
Federal Republic of Brazil
Bonds
8.25% due 01/20/34........... 2,400,000 2,644,800
Federal Republic of Brazil
Bonds
8.75% due 02/04/25........... 1,200,000 1,374,000
Federal Republic of Brazil
Bonds
8.88% due 10/14/19........... 680,000 785,400
Federal Republic of Brazil
Bonds
8.88% due 04/15/24........... 145,000 167,620
Federal Republic of Brazil
Notes
10.25% due 06/17/13.......... 580,000 704,120
Federal Republic of Brazil
Bonds
10.50% due 07/14/14.......... 485,000 603,825
Federal Republic of Brazil
Notes
11.00% due 01/11/12.......... 240,000 293,400
49
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agencies (continued)
Federal Republic of Brazil
Bonds
11.00% due 08/17/40............. $ 4,840,000 $6,209,720
Government of Germany
Notes
4.75% due 07/04/34.............. EUR 605,000 825,109
Gobierno De La Republica Bolivia
Notes
6.00% due 12/09/20.............. 690,000 634,110
Government of Hungary
Bonds
9.25% due 10/12/07.............. HUF 114,000,000 537,846
Government of Japan
Bonds
0.50% due 06/20/06.............. JPY 68,000,000 578,515
Government of Japan
Bonds
0.90% due 12/22/08.............. JPY 300,000 2,553
Kingdom of Netherlands
Bonds
5.25% due 07/15/08.............. EUR 355,000 447,831
Kingdom Of Norway
Notes
6.50% due 05/15/13.............. NOK 9,020,000 1,600,011
Kingdom of Spain
Notes
5.75% due 07/30/32.............. EUR 535,000 826,654
Kingdom of Spain
Bonds
6.15% due 01/31/13.............. EUR 1,199,000 1,663,877
Kingdom of Sweden
Bonds
4.00% due 12/01/09.............. SEK 2,900,000 381,019
Kingdom of Sweden
Bonds
4.50% due 08/12/15.............. SEK 17,310,000 2,368,749
Kingdom of Sweden
Bonds
5.00% due 01/28/09.............. SEK 17,800,000 2,397,406
Kingdom of Sweden
Bonds
5.50% due 10/08/12.............. SEK 8,200,000 1,169,699
Government of New Zealand
Bonds
6.00% due 07/15/08.............. NZD 2,100,000 1,291,256
Peru Government International
Bonds
8.75% due 11/21/33.............. 1,050,000 1,170,750
Government of Poland
Bonds
5.75% due 03/24/10.............. PLN 1,520,000 486,068
Republic of Argentina
Bonds
4.89% due 08/03/12(1)........... 4,270,000 3,490,725
Republic of Argentina
Bonds
8.28% due 12/31/38.............. 1,494,761 565,767
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Government Agencies (continued)
Republic of Argentina
Bonds
8.28% due 12/31/33.......... $ 1,500,432 $1,474,174
Republic of Colombia
Bonds
12.00% due 10/22/15(4)...... COP 3,137,000,000 1,724,477
Republic of Greece
Bonds
5.25% due 05/18/12.......... 310,000 404,683
Republic of Hungary
Notes
9.00% due 04/12/07.......... HUF 346,000,000 1,619,078
Republic of Indonesia
Notes
7.25% due 04/20/15.......... 500,000 510,349
Republic of Indonesia
Bonds
8.50% due 10/12/35*......... 1,205,000 1,343,575
Republic of Italy
Bonds
5.25% due 11/01/29.......... EUR 538,000 741,918
Republic of Peru
Bonds
5.00% due 03/07/07(2)....... 158,000 150,100
Republic of Peru
Notes
7.35% due 07/21/25.......... 1,740,000 1,709,550
Republic of Philippines
Bonds
7.75% due 01/14/31.......... 550,000 554,125
Republic of Philippines
Bonds
8.25% due 01/15/14.......... 1,460,000 1,582,275
Republic of Philippines
Bonds
9.88% due 01/15/19.......... 470,000 565,763
Republic of Philippines
Bonds
10.63% due 03/16/25......... 820,000 1,062,925
Republic of South Africa
Bonds
8.75% due 12/21/14.......... ZAR 6,830,000 1,194,317
Republic of South Africa
Bonds
13.00% due 08/31/10......... ZAR 13,820,000 2,713,566
Republic of South Africa
Bonds
13.50% due 09/15/15......... ZAR 1,925,000 436,791
Republic of Turkey
Notes
6.88% due 03/17/36.......... 280,000 270,200
Republic of Turkey
Notes
7.25% due 03/15/15.......... 2,100,000 2,186,625
Republic of Turkey
Sr. Notes
11.88% due 01/15/30......... 2,030,000 3,133,813
50
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Government Agencies (continued)
Republic of Ukraine
Sr. Notes
7.65% due 06/11/13................ $ 1,390,000 $ 1,458,666
Republic of Uruguay
Bonds
7.50% due 03/15/15................ 225,000 234,000
Republic of Uruguay
Bonds
8.00% due 11/18/22................ 1,115,000 1,165,175
Republic of Venezuela
Bonds
8.50% due 10/08/14................ 2,020,000 2,262,400
Republic of Venezuela
Bonds
9.25% due 09/15/27................ 2,105,000 2,674,402
Republic of Venezuela
Bonds
9.38% due 01/13/34................ 910,000 1,162,525
Republic of Uruguay
Bonds
9.25% due 05/17/17................ 400,000 464,000
Russian Federation
Bonds
5.00% due 03/31/07................ 4,330,000 4,750,876
Russian Federation
Bonds
7.50% due 03/31/07*(5)............ 650,000 710,938
Russian Federation
Bonds
12.75% due 06/24/28............... 200,000 356,760
United Kingdom Treasury
Notes
4.00% due 03/07/09................ GBP 660,000 1,131,673
United Kingdom Treasury
Notes
5.00% due 03/07/08................ GBP 605,000 1,061,743
United Kingdom Treasury
Bonds
5.00% due 09/07/14................ GBP 580,000 1,048,402
United Mexican States
Bonds
8.30% due 08/15/31................ 555,000 670,718
United Mexican States
Notes
9.50% due 12/18/14................ MXN 12,355,000 1,206,803
United Mexican States,
Notes, Series A
6.75% due 09/27/34................ 310,000 320,075
United Mexican States,
Notes, Series A
7.50% due 04/08/33................ 590,000 657,850
-----------
91,509,645
-----------
Household & Personal Products -- 0.1%
Vitro Envases Norteamerica SA
Sr. Sec. Notes
10.75% due 07/23/11*.............. 350,000 367,500
-----------
Insurance -- 0.4%
Aegon NV
Bonds
5.02% due 04/15/06................ 201,000 176,880
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Insurance (continued)
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15............... $ 850,000 $ 748,000
ING Groep NV
Notes
5.78% due 12/08/15(2)(10)........ 160,000 155,637
Montpelier Re Holdings, Ltd.
Sr. Notes
6.13% due 08/15/13............... 128,000 121,884
----------
1,202,401
----------
Leisure & Tourism -- 0.1%
Grupo Posadas SA de CV
Sr. Notes
8.75% due 10/04/11*.............. 175,000 181,563
----------
Machinery -- 0.0%
Magnachip Semiconductor SA
Sr. Sub. Notes
8.00% due 12/15/14............... 50,000 46,750
----------
Metals & Mining -- 0.3%
Adaro Finance BV
Notes
8.50% due 12/08/10*.............. 200,000 205,500
CSN Islands IX Corp.
Guaranteed Notes
10.00% due 01/15/15*............. 250,000 290,625
CSN Islands VIII Corp.
Guaranteed Sr. Notes
9.75% due 12/16/13*.............. 275,000 310,062
Falconbridge, Ltd.
Notes
8.38% due 02/15/11............... 96,000 105,539
Inco, Ltd.
Debentures
7.20% due 09/15/32............... 100,000 103,619
Teck Cominco, Ltd.
Sr. Notes
6.13% due 10/01/35............... 60,000 56,450
----------
1,071,795
----------
Pharmaceuticals -- 0.6%
Abbott Japan Co. Ltd.
Guaranteed Bonds
1.05% due 11/06/08............... JPY 76,000,000 644,813
Elan Corp. PLC
Sr. Notes
8.75% due 11/15/11(1)............ 350,000 344,750
Elan Finance PLC
Sr. Notes
7.75% due 11/15/11............... 800,000 758,000
----------
1,747,563
----------
Real Estate Companies -- 0.0%
Brookfield Asset Management, Inc.
Sr. Notes
8.13% due 12/15/08............... 76,000 80,775
----------
51
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Retail -- 0.1%
Jean Coutu Group, Inc.
Sr. Sub. Notes
8.50% due 08/01/14............... $ 350,000 $ 321,125
------------
Telecommunications -- 0.2%
British Telecommunications PLC
Bonds
8.63% due 12/15/30............... 180,000 230,270
Rogers Wireless, Inc.
Sr. Notes
7.25% due 12/15/12............... 125,000 131,719
Telecom Italia Capital SA
Guaranteed Sr. Notes, Series B
5.25% due 11/15/13............... 14,000 13,265
Telecom Italia Capital SA
Guaranteed Sr. Notes, Series C
6.38% due 11/15/33............... 111,000 104,596
TELUS Corp.
Notes
7.50% due 06/01/07............... 38,000 38,859
------------
518,709
------------
Transportation -- 0.2%
Canadian National Railway Co.
Notes
6.38% due 10/15/11............... 150,000 156,644
Ultrapetrol Bahamas, Ltd.
1st Mtg. Notes
9.00% due 11/24/14............... 425,000 399,500
------------
556,144
------------
Utilities -- 0.0%
AES Chivor
Notes
9.75% due 12/30/14*.............. 100,000 112,000
AES Drax Energy, Ltd.
Notes
11.50% due 08/30/10(6)(7)+....... 725,000 725
------------
112,725
------------
Total Foreign Bonds & Notes
(cost $105,729,036).............. 106,404,352
------------
U.S. GOVERNMENT OBLIGATIONS -- 11.9%
U.S Treasury Bonds -- 2.7%
5.38% due 02/15/31................ 8,005,000 8,426,511
6.25% due 08/15/23................ 166,000 188,268
------------
8,614,779
------------
U.S. Treasury Notes -- 9.2%
3.63% due 01/15/10................ 803,000 769,814
3.88% due 05/15/10................ 175,000 168,793
3.88% due 09/15/10................ 7,000 6,733
4.00% due 02/15/15................ 1,501,000 1,406,659
4.25% due 10/15/10................ 130,000 126,963
4.25% due 01/15/11................ 2,000,000 1,950,390
4.25% due 08/15/15................ 2,662,000 2,535,866
4.38% due 12/31/07................ 1,500,000 1,488,047
4.38% due 12/15/10................ 101,000 99,071
4.50% due 11/15/10................ 70,000 69,059
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
U.S. Treasury Notes (continued)
4.50% due 11/15/15......................... $ 1,970,000 $ 1,911,670
4.63% due 02/29/08......................... 63,000 62,747
6.88% due 05/15/06......................... 17,900,000 17,943,354
-----------
28,539,166
-----------
Total U.S. Government Obligations
(cost $37,719,137)........................ 37,153,945
-----------
U.S. GOVERNMENT AGENCIES -- 9.6%
Federal Home Loan Bank -- 0.6%
3.50% due 05/15/07......................... 600,000 589,475
3.88% due 12/20/06......................... 600,000 594,710
4.50% due 09/08/08......................... 600,000 592,489
-----------
1,776,674
-----------
Federal Home Loan Mortgage Corporation -- 5.5%
3.63% due 02/15/07......................... 624,000 616,058
4.13% due 07/12/10......................... 300,000 288,364
4.35% due 06/02/08......................... 600,000 589,745
4.45% due 03/06/08......................... 600,000 592,546
4.50% due 02/01/20......................... 266,917 254,840
4.50% due 08/01/20......................... 453,486 432,967
4.75% due 01/18/11......................... 310,000 304,693
5.00% due 09/01/18......................... 610,801 596,426
5.00% due 07/01/20......................... 926,344 903,082
5.00% due 06/15/31(3)...................... 421,548 413,467
5.00% due 02/01/34......................... 522,965 498,912
5.00% due 05/01/34......................... 332,378 316,832
5.00% due 02/01/35......................... 758,923 723,427
5.00% due 08/01/35......................... 1,072,936 1,021,116
5.00% due 11/01/35......................... 1,740,238 1,656,189
5.00% due 04/01/36......................... 750,000 713,594
5.13% due 12/15/13(3)...................... 381,823 378,585
5.50% due 12/15/18(3)...................... 545,853 541,273
5.50% due 07/01/35......................... 2,874,467 2,807,392
6.00% due 07/01/35......................... 279,957 280,140
6.50% due 05/01/29......................... 10,145 10,391
6.50% due 02/01/35......................... 1,500,000 1,529,190
6.50% due 03/01/36......................... 425,042 433,277
6.88% due 09/15/10......................... 1,156,000 1,234,401
7.00% due 06/01/29......................... 18,512 19,067
8.50% due 05/01/08......................... 17,972 18,398
10.00% due 05/15/20(3)..................... 23,819 23,757
11.57% due 06/15/21(3)(11)................. 14,210 264
-----------
17,198,393
-----------
Federal National Mortgage Association -- 3.5%
3.00% due 03/02/07......................... 600,000 588,662
4.50% due 06/01/19......................... 642,911 615,292
4.75% due 12/15/10......................... 375,000 368,609
5.00% due 06/01/19......................... 350,898 342,406
5.00% due 03/01/34......................... 386,023 368,153
5.00% due 11/01/34......................... 644,377 614,547
5.25% due 08/01/12......................... 576,000 570,161
5.50% due 02/01/36(1)...................... 424,531 424,435
5.50% due 07/01/19......................... 442,928 440,390
5.50% due 09/01/20......................... 465,308 462,626
5.50% due 01/01/29......................... 10,367 10,162
5.50% due 06/01/29......................... 172,448 169,016
52
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal
Amount/ Value
Security Description Shares** (Note 2)
------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal National Mortgage Association (continued)
5.50% due 06/01/34.................. $427,485 $ 417,891
5.50% due 03/01/35.................. 678,262 662,256
5.50% due 12/01/35.................. 849,999 829,941
6.00% due 02/01/32.................. 154,681 154,887
6.00% due 05/01/34.................. 27,614 27,626
6.00% due 10/01/34.................. 827,398 827,746
6.00% due 10/01/34.................. 754,268 754,586
6.00% due 04/01/35.................. 901,988 902,368
6.00% due 06/01/35.................. 657,551 657,784
6.50% due 04/01/34.................. 373,267 380,857
6.50% due 02/01/35.................. 105,970 108,124
7.50% due 01/01/30.................. 20,149 21,074
7.50% due 09/01/30.................. 3,508 3,667
8.00% due 11/01/28.................. 33,107 35,238
8.80% due 01/25/19(3)............... 50,531 53,505
10.40% due 04/25/19(3).............. 8,810 9,468
13.00% due 11/15/15................. 10,154 11,199
-----------
10,832,676
-----------
Government National Mortgage Association -- 0.0%
7.50% due 07/15/27.................. 21,423 22,511
7.50% due 10/15/27.................. 60,838 63,930
7.50% due 10/15/27.................. 7,464 7,843
-----------
94,284
-----------
U.S. Government Agencies -- 0.0%
Tennessee Valley Authority
Bonds
4.65% due 06/15/35.................. 105,000 94,024
-----------
Total U.S. Government Agencies
(cost $30,610,778)................. 29,996,051
-----------
COMMON STOCK -- 2.0%
Broadcasting & Media -- 0.0%
Charter Communications, Inc......... 41,072 44,768
Ono Finance, PLC(4)(7)+*............ 100 0
-----------
44,768
-----------
Energy Services -- 1.0%
Mirant Corp......................... 46,719 1,167,975
Trico Marine Services, Inc.+........ 54,957 1,775,111
-----------
2,943,086
-----------
Leisure & Tourism -- 0.0%
Shreveport Gaming
Holdings, Inc.(4)(7)(12)+.......... 2,441 56,199
-----------
Machinery -- 0.1%
NES Rentals Holding, Inc.(7)+....... 19,435 355,855
-----------
Telecommunications -- 0.9%
iPCS, Inc.(7)+...................... 60,413 2,839,411
-----------
Total Common Stock
(cost $3,369,087).................. 6,239,319
-----------
PREFERRED STOCK -- 0.6%
Broadcasting & Media -- 0.3%
Paxson Communications Corp.
14.25%(9).......................... 99 863,775
-----------
Government Agencies -- 0.0%
Federal National Mortgage
Association 7.00%(1)............... 1,080 58,860
-----------
Principal
Amount/ Value
Security Description Shares** (Note 2)
------------------------------------------------------------------------
Financial Services -- 0.1%
General Electric Capital Corp. 4.50%(5)........ $ 16,000 $ 364,800
TCR Holdings, Class B(4)(7).................... 570 6
TCR Holdings, Class C(4)(7).................... 314 3
TCR Holdings, Class D(4)(7).................... 827 8
TCR Holdings, Class E(4)(7).................... 1,711 17
------------
364,834
------------
Insurance -- 0.1%
Endurance Specialty Holdings, Ltd.
7.75%......................................... 13,000 314,860
------------
Retail Stores -- 0.1%
GNC Corp.
12.00%(9)(7).................................. 100 92,500
Rent-Way, Inc.
8.00%(4)(7)(12)............................... 4 42,888
------------
135,388
------------
Total Preferred Stock
(cost $1,686,745)............................. 1,737,717
------------
RIGHTS+ -- 0.3%
Government Agencies -- 0.3%
Republic of Argentina,
Expires 12/15/35(2)(14)....................... 9,142,161 845,650
United Mexican States,
Series D
Expires 06/30/06 VRR(4)....................... 1,400,000 18,900
United Mexico States,
Series E
Expires 06/30/07 VRR(4)....................... 1,400,000 35,000
------------
Total Rights
(cost $433,879)............................... 899,550
------------
WARRANTS+ -- 0.0%
Energy Sources -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (Strike Price
$4.31)(4)(12)................................. 13,811 27,622
------------
Telecommunications -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10 (Strike Price $0.00)(4)(7)*.. 150 1
Leap Wireless International, Inc.
Expires 04/15/10 (Strike Price $96.80)(4)(7)*. 500 0
Leap Wireless International, Inc.
Expires 04/15/10 (Strike Price $96.80)(4)(7)*. 350 0
------------
1
------------
Total Warrants
(cost $46,761)................................ 27,623
------------
Total Long-Term Investment
Securities -- 92.4%
(cost $287,121,055)........................... 288,842,483
------------
SHORT-TERM INVESTMENT
SECURITIES -- 1.8%
Time Deposit with State Street
Bank & Trust Co.
2.50% due 04/03/06
(cost $5,393,000)............................. 5,393,000 5,393,000
------------
53
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
REPURCHASE AGREEMENTS -- 3.2%
State Street Bank & Trust Co.
Joint Repurchase Agreement(13)... $ 34,000 $ 34,000
UBS Securities, LLC Joint
Repurchase Agreement Account(13). 10,000,000 10,000,000
------------
Total Repurchase Agreements
(cost $10,034,000)............... 10,034,000
------------
TOTAL INVESTMENTS --
(cost $302,548,055)@............. 97.8% 304,269,483
Other assets less liabilities....... 2.2 6,747,487
----------- ------------
NET ASSETS -- 100.0% $311,016,970
=========== ============
- --------
# 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 Portfolio has no rights to demand registration of these
securities. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
2006, the aggregate value of these securities was $22,931,997 representing
7.4% of net assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
** Denominated in United States dollars unless otherwise indicated.
AUD -- Australian Dollar
BRL -- Brazilian Real
CAD -- Canadian Dollar
COP -- Colombian Peso
EUR -- Euro
GBP -- Pound Sterling
HUF -- Hungarian Forint
JPY -- Japanese Yen
MXN -- Mexican Peso
NOK -- Norwegian Krone
NZD -- NewZealand Dollar
PLN -- Polish Zloty
SEK -- Swedish Krone
ZAR -- SouthAfrican Rand
@ See Note 5 for cost of investments on a tax basis.
(1) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of March 31, 2006.
(2) Variable rate security -- the rate reflected is as of March 31, 2006;
maturity date reflects next reset date.
(3) Collateralized Mortgage Obligation
(4) Fair valued security; see Note 1.
(5) "Step-up" security where the rate increases ("steps up") at a
predetermined rate. Rate shown reflects the increased rate.
(6) Bond in default.
(7) Illiquid Security
(8) Company has filed for Chapter 11 bankruptcy protection.
(9) PIK ("Payment-in-Kind") Security. Payment made with additional securities
in lieu of cash.
(10) Security has a perpetual maturity date. The maturity date shown reflects
the next call date.
(11) Interest only
(12) To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are
valued pursuant to Note 2. Restricted securities held by a Fund may not be
sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of
widely held, publicly traded companies. Lack of a secondary market and
resale restrictions may result in the inability of a Fund to sell a
security at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist. As of
March 31, 2006, the Strategic Bond Fund held the following restricted
securities:
Market
Value % of
Acquisition Principal/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- -------- ------- ------
Rent-Way
8.00%
Preferred
Stock............ 05/29/2003 3 $ 25,000 $ 32,166 $10,722 0.01%
Rent-Way
8.00%
Preferred
Stock............ 05/19/2004 1 10,000 10,722 10,722 0.00%
Shreveport
Gaming
Holdings, Inc.... 07/29/2005 2,047 47,128 47,128 23 0.02%
Shreveport
Gaming
Holdings, Inc.... 07/21/2005 394 9,073 9,071 23 0.00%
ICO North
America, Inc..... 08/11/2005 $200,000 200,000 254,000 127 0.08%
Transmeridian
Exploration, Inc. 12/08/2005 13,811 37,980 27,622 2 0.01%
Transmeridian
Exploration, Inc. 12/08/2005 $200,000 163,586 200,000 100 0.06%
AmerisourceBergen
Corp............. 01/06/2006 $150,000 150,906 147,525 98 0.05%
-------- ----
$728,234 0.23%
======== ====
(13) See Note 2 for details of Joint Repurchase Agreement.
(14) Gross Domestic Product ("GDP") linked security. Income is linked to the
growth of Argentina's GDP.
(15) Security is subject to litigation, the outcome of which is still to be
determined.
Open Forward Foreign Currency Contracts
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Appreciation
------------------
CAD* 3,090,000 USD 2,726,912 05/03/06 $78,612
USD 771,278 EUR 638,000 04/07/06 2,207
USD 1,085,000 GBP 625,000 04/07/06 951
-------
$81,770
=======
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Depreciation
------------------
USD* 2,667,311 CAD 3,090,000 05/03/06 $(19,011)
USD 355,177 CAD 413,000 04/07/06 (1,468)
--------
(20,479)
--------
Net Unrealized Appreciation..... $ 61,291
========
* Represents open forward currency contracts and offsetting or partially
offsetting open forward foreign currency contracts that do not have
additional market risk but have continued counterparty settlement risk.
- --------
CAD -- Canadian Dollar
EUR -- Euro
GBP -- Pound Sterling
USD -- United States Dollar
VRR -- Value Recovery Right
See Notes to Financial Statements
54
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited)
Industry Allocation*
Leisure & Tourism.............. 11.7%
Financial Services............. 11.5%
Telecommunications............. 9.8%
Energy Sources................. 9.2%
Broadcasting & Media........... 9.1%
Utilities...................... 7.8%
Energy Services................ 3.8%
Business Services.............. 3.6%
Health Services................ 3.4%
Forest Products................ 2.8%
Chemicals...................... 2.7%
Medical Products............... 2.7%
Automotive..................... 2.2%
Metals & Mining................ 2.0%
Repurchase Agreements.......... 2.0%
Retail Stores.................. 1.8%
Food, Beverage & Tobacco....... 1.7%
Machinery...................... 1.6%
Real Estate Investment Trusts.. 1.4%
Electronics.................... 0.9%
Retail......................... 0.9%
Conglomerate................... 0.8%
Household & Personal Products.. 0.7%
Communication Equipment........ 0.6%
Insurance...................... 0.6%
Computers & Business Equipment. 0.5%
Restaurants.................... 0.5%
Transportation................. 0.5%
Building Materials............. 0.4%
Computer Software.............. 0.4%
Aerospace & Military Technology 0.3%
Internet Content............... 0.3%
Banks.......................... 0.2%
Entertainment Products......... 0.2%
Pharmaceuticals................ 0.1%
----
98.7%
====
Credit Quality+#
BBB....... 0.5%
BB........ 27.8%
B......... 37.5%
CCC....... 19.3%
C......... 0.7%
Below C... 2.9%
Not Rated@ 11.3%
-----
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.
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
BONDS & NOTES -- 78.9%
Aerospace & Military Technology -- 0.3%
DeCrane Aircraft Holdings
Guaranteed Sr. Sec. Notes, Series B
12.00% due 09/30/08................... $1,700,000 $1,215,500
----------
Automotive -- 1.4%
Cooper-Standard Automotive, Inc.
Sr. Sub. Notes
8.38% due 12/15/14.................... 830,000 647,400
Dura Operating Corp.
Sr. Notes
8.63% due 04/15/12.................... 1,261,000 1,037,172
Exide Corp.
10.00% due 03/15/25+(1)(8)............ 1,650,000 0
Ford Motor Co.
Bonds
6.63% due 10/01/28.................... 2,525,000 1,691,750
Nationsrent, Inc.
Guaranteed Unsec. Notes
9.50% due 05/01/15.................... 900,000 972,000
Stanadyne Corp.
Sr. Sub. Notes
10.00% due 08/15/14................... 475,000 454,813
----------
4,803,135
----------
Banks -- 0.2%
AAC Group Holding Corp.
Sr. Notes
10.25% due 10/01/12(2)................ 1,025,000 794,375
----------
Broadcasting & Media -- 7.6%
Adelphia Communications Corp.
Sr. Notes
10.25% due 06/15/11+(3)(4)............ 825,000 519,750
AMC Entertainment, Inc.
Sr. Sub. Notes
9.88% due 02/01/12.................... 700,000 689,500
Cablevision Systems Corp.
Sr. Notes
8.72% due 04/01/09(5)................. 650,000 681,688
Charter Communications Holdings II LLC
Sr. Notes Series B
10.25% due 09/15/10*.................. 1,975,000 1,935,500
Charter Communications Holdings LLC
Sr. Notes
11.13% due 01/15/11................... 775,000 410,750
Charter Communications Holdings LLC
Sr. Notes
9.63% due 11/15/09.................... 2,525,000 1,691,750
Charter Communications Holdings LLC
Sr. Notes
9.92% due 04/01/11(2)................. 3,825,000 1,969,875
Charter Communications Holdings LLC
Sr. Notes
10.25% due 01/15/10................... 375,000 224,062
Charter Communications Holdings LLC
Sr. Notes
10.75% due 10/01/09................... 2,075,000 1,411,000
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
Broadcasting & Media (continued)
Cinemark, Inc.
Sr. Disc. Notes
9.75% due 03/15/14(2)........... $ 875,000 $ 669,375
CSC Holdings, Inc.
Sr. Debentures, Series B
8.13% due 08/15/09.............. 825,000 851,813
Fisher Communications, Inc.
Sr. Notes
8.63% due 09/15/14.............. 1,650,000 1,744,875
Haights Cross Operating Co.
Sr. Notes
11.75% due 08/15/11............. 475,000 495,781
Insight Communications Co., Inc.
Sr. Disc. Notes
12.25% due 02/15/11(2).......... 1,665,000 1,769,062
Network Communications, Inc.
Sr. Notes
10.75% due 12/01/13*............ 250,000 254,375
Nexstar Finance, Inc.
Sr. Sub. Notes
7.00% due 01/15/14.............. 2,100,000 1,984,500
Paxson Communications Corp.
Sec. Notes
10.78% due 01/15/13*(5)......... 3,350,000 3,316,500
Rogers Wireless, Inc.
Sr. Notes
7.25% due 12/15/12.............. 500,000 526,875
Telex Communications, Inc.
Sr. Sec. Notes
11.50% due 10/15/08............. 300,000 320,250
Vertis, Inc.
Sr. Notes
10.88% due 06/15/09............. 575,000 564,938
Young Broadcasting, Inc.
Guaranteed Sr. Sec. Notes
8.75% due 01/15/14.............. 1,050,000 897,750
Young Broadcasting, Inc.
Guaranteed Sub. Notes
10.00% due 03/01/11............. 2,900,000 2,675,250
-----------
25,605,219
-----------
Building Materials -- 0.4%
Dayton Superior Corp.
Sr. Sec. Notes
10.75% due 09/15/08............. 1,366,000 1,391,613
-----------
Business Services -- 3.6%
Affinity Group, Inc.
Sr. Sub. Notes
9.00% due 02/15/12.............. 1,325,000 1,331,625
Alderwoods Group, Inc.
Sr. Notes
7.75% due 09/15/12.............. 425,000 436,688
Allied Waste North America, Inc.
Sr. Notes
8.50% due 12/01/08.............. 1,700,000 1,787,125
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------
BONDS & NOTES (continued)
Business Services (continued)
AMR Holdco, Inc.
Sr. Sub. Notes
10.00% due 02/15/15............ $ 450,000 $ 480,375
Associated Materials, Inc.
Sr. Sub. Notes
9.75% due 04/15/12............. 1,675,000 1,737,812
Corrections Corp. America
Sr. Notes
6.25% due 03/15/13............. 725,000 713,219
Mobile Mini, Inc.
Sr. Notes
9.50% due 07/01/13............. 575,000 629,625
Monitronics International, Inc.
Sr. Sub. Notes
11.75% due 09/01/10............ 1,200,000 1,203,000
Service Corp. International
Sr. Notes
6.75% due 04/01/16............. 400,000 396,000
Service Corp. International
Sr. Notes
7.25% due 06/15/17*............ 2,250,000 2,289,375
Stewart Enterprises, Inc.
Sr. Notes
7.25% due 02/15/13*............ 1,150,000 1,104,000
-----------
12,108,844
-----------
Chemicals -- 1.9%
BCI US Finance Corp.
Sr. Sec. Notes
10.10% due 07/15/10*(5)........ 700,000 714,000
Equistar Chemicals LP
Notes
8.75% due 02/15/09............. 375,000 388,125
Equistar Chemicals LP
Sr. Notes
10.63% due 05/01/11............ 625,000 676,562
Montell Financial Co. BV
Guaranteed Notes
8.10% due 03/15/27*............ 1,875,000 1,818,750
Phosphate Resource Partners LP
Sr. Notes
7.00% due 02/15/08............. 725,000 734,063
Rockwood Specialties Group
Sr. Sub. Notes
7.50% due 11/15/14............. 925,000 929,625
Rockwood Specialties Group
Sr. Sub. Notes
10.63% due 05/15/11............ 292,000 320,470
Westlake Chemical Corp.
Sr. Notes
6.63% due 01/15/16............. 750,000 741,562
-----------
6,323,157
-----------
Communication Equipment -- 0.6%
Rural Cellular Corp.
Sr. Sub. Notes
9.75% due 01/15/10............. 1,875,000 1,903,125
-----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Computer Software -- 0.4%
Solar Capital Corp.
Sr. Notes
9.13% due 08/15/13*................ $ 825,000 $ 872,438
SS&C Technologies, Inc.
Sr. Sub. Notes
11.75% due 12/01/13*............... 550,000 588,500
----------
1,460,938
----------
Computers & Business Equipment -- 0.5%
Activant Solutions, Inc.
Sr. Notes
10.53% due 04/01/10*(5)............ 550,000 561,000
Xerox Corp. Sr.
Notes
7.63% due 06/15/13................. 975,000 1,026,188
----------
1,587,188
----------
Conglomerate -- 0.8%
Carriage Services, Inc.
Sr. Notes
7.88% due 01/15/15................. 684,000 695,970
Covalence Specialty Materials Corp.
Sr. Sub. Notes
10.25% due 03/01/16*............... 375,000 393,750
Di Finance Subordinated LLC
Sr. Sub. Notes
9.50% due 02/15/13................. 1,450,000 1,508,000
----------
2,597,720
----------
Electronics -- 0.8%
Advanced Micro Devices, Inc.
Sr. Notes
7.75% due 11/01/12................. 1,024,000 1,071,360
Avago Technologies Finance
Sr. Notes
10.13% due 12/01/13*............... 675,000 724,781
L-3 Communications Corp.
Sr. Sub. Notes
6.13% due 07/15/13................. 275,000 268,125
L-3 Communications Corp.
Sr. Sub. Notes
6.38% due 10/15/15................. 375,000 369,375
Sanmina-Sci Corp.
Sr. Sub. Notes
6.75% due 03/01/13................. 350,000 333,375
----------
2,767,016
----------
Energy Services -- 1.2%
Allis-Chalmers Energy, Inc.
Sr. Notes
9.00% due 01/15/14*................ 675,000 664,875
Grant Prideco, Inc.
Sr. Notes
6.13% due 08/15/15................. 275,000 268,125
Hanover Compressor Co.
Sr. Notes
7.50% due 04/15/13................. 75,000 75,000
57
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------
BONDS & NOTES (continued)
Energy Services (continued)
Hanover Compressor Co.
Sr. Notes
8.63% due 12/15/10......... $ 275,000 $ 288,406
Oslo Seismic Services, Inc.
1st Mtg. Notes
8.28% due 06/01/11......... 636,789 646,590
Pride International, Inc.
Sr. Notes
7.38% due 07/15/14......... 350,000 367,500
Seitel, Inc.
Sr. Notes
11.75% due 07/15/11........ 1,450,000 1,649,375
----------
3,959,871
----------
Energy Sources -- 8.7%
Alpha Natural Resources LLC
Sr. Notes
10.00% due 06/01/08........ 159,000 174,900
Belden & Blake Corp.
Sec. Notes
8.75% due 07/15/12......... 450,000 463,500
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(3)(4).. 8,685,000 7,968,487
Chaparral Energy, Inc.
Sr. Notes
8.50% due 12/01/15*........ 2,100,000 2,184,000
Chesapeake Energy Corp.
Sr. Notes
6.25% due 01/15/18......... 350,000 342,125
Chesapeake Energy Corp.
Sr. Notes
6.63% due 01/15/16......... 3,675,000 3,665,812
Colorado Interstate Gas Co.
Debentures
6.85% due 06/15/37......... 1,000,000 1,011,432
Copano Energy LLC
Sr. Notes
8.13% due 03/01/16*........ 875,000 905,625
Drummond Co., Inc.
Sr. Notes
7.38% due 02/15/16*........ 825,000 822,938
Encore Acquisition Co.
Sr. Sub. Notes
6.00% due 07/15/15......... 550,000 512,875
Encore Acquisition Co.
Sr. Sub. Notes
6.25% due 04/15/14......... 300,000 287,250
EXCO Resources, Inc.
Guaranteed Notes
7.25% due 01/15/11......... 650,000 646,750
Hilcorp Energy I LP
Sr. Notes
10.50% due 09/01/10*....... 791,000 871,089
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Energy Sources (continued)
Hilcorp Energy I LP
Sr. Notes
7.75% due 11/01/15*....................... $1,125,000 $ 1,122,188
Markwest Energy Partners LP
Sr. Notes
6.88% due 11/01/14........................ 615,000 581,175
Mission Energy Holding Co.
Sr. Sec. Notes
13.50% due 07/15/08....................... 4,125,000 4,733,437
Newfield Exploration Co.
Sr. Sub. Notes
6.63% due 09/01/14........................ 675,000 676,688
Quicksilver Resources, Inc.
Sr. Sub. Notes
7.13% due 04/01/16........................ 600,000 592,500
Roseton Danskammer
Guaranteed Pass-Through Certs.,
Series B
7.67% due 11/08/16........................ 1,075,000 1,098,270
Transmeridian Exploration, Inc.
Sr. Notes
12.00% due 12/15/10*(1)(9)................ 650,000 650,000
-----------
29,311,041
-----------
Entertainment Products -- 0.2%
K2, Inc.
Notes
7.38% due 07/01/14........................ 500,000 498,750
-----------
Financial Services -- 11.0%
Compton Petroleum Finance Corp.
Sr. Notes
7.63% due 12/01/13*....................... 800,000 800,000
Consolidated Communications Holdings, Inc.
Sr. Notes
9.75% due 04/01/12........................ 910,000 964,600
EIRCOM Funding
Sr. Sub. Notes
8.25% due 08/15/13........................ 425,000 457,406
ESI Tractebel Acquisition Corp.
Guaranteed Bonds
7.99% due 12/30/11........................ 745,000 771,395
Ford Motor Credit Co.
Sr. Notes
5.80% due 01/12/09........................ 3,975,000 3,630,196
Ford Motor Credit Co.
Notes
7.00% due 10/01/13........................ 600,000 536,644
FTI Consulting, Inc.
Sr. Notes
7.63% due 06/15/13........................ 425,000 447,313
General Motors Acceptance Corp.
Debentures
zero coupon due 06/15/15.................. 10,000 4,365
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14........................ 210,000 189,043
58
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
BONDS & NOTES (continued)
Financial Services (continued)
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11.............. $6,300,000 $ 5,872,098
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12.............. 269,000 248,155
General Motors Acceptance Corp.
Notes
7.02% due 12/01/14(5)........... 3,375,000 3,073,315
General Motors Acceptance Corp.
Notes
7.25% due 03/02/11.............. 1,900,000 1,800,524
General Motors Acceptance Corp.
Notes
7.75% due 01/19/10.............. 4,250,000 4,143,797
General Motors Acceptance Corp.
Bonds
8.00% due 11/01/31.............. 2,903,000 2,743,631
Hexion U.S. Finance Corp.
Sr. Notes
9.00% due 07/15/14.............. 2,010,000 2,070,300
MedCath Holdings Corp.
Sr. Notes
9.88% due 07/15/12.............. 875,000 910,000
Nexstar Finance Holdings, LLC
Guaranteed Sr. Disc. Notes
11.38% due 04/01/13(2).......... 2,150,000 1,763,000
NGC Corp. Capital Trust
Guaranteed Sub. Notes
8.32% due 06/01/27.............. 5,400,000 4,752,000
PCA, LLC
Sr. Notes
11.88% due 08/01/09(8).......... 2,000,000 400,000
Solectron Global Finance Ltd.
Sr. Sub. Notes
8.00% due 03/15/16*............. 650,000 651,625
Terra Capital, Inc.
Guaranteed Sr. Sec. Notes
11.50% due 06/01/10............. 671,000 741,455
-----------
36,970,862
-----------
Food, Beverage & Tobacco -- 1.7%
Doane Pet Care Co.
Sr. Sub. Notes
10.63% due 11/15/15............. 600,000 636,000
Doane Pet Care Co.
Guaranteed Sr. Notes
10.75% due 03/01/10............. 350,000 378,875
Dole Food Co., Inc.
Sr. Notes
8.88% due 03/15/11.............. 500,000 495,000
Le Natures, Inc.
Sr. Sub. Notes
10.00% due 06/15/13*............ 850,000 892,500
North Atlantic Holding Co., Inc.
Sr. Disc Notes
12.25% due 03/01/14(2)(8)....... 425,000 104,125
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
Food, Beverage & Tobacco (continued)
Smithfield Foods, Inc.
Sr. Notes, Series B
7.75% due 05/15/13............... $ 825,000 $ 849,750
Wornick Co.
Sec. Notes
10.88% due 07/15/11.............. 2,200,000 2,266,000
----------
5,622,250
----------
Forest Products -- 2.0%
Boise Cascade, LLC
Sr. Notes
7.48% due 10/15/12(5)............ 1,225,000 1,240,312
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09............... 1,250,000 1,193,750
Caraustar Industries, Inc.
Guaranteed Sr. Sec. Notes
9.88% due 04/01/11............... 300,000 315,375
Crown Cork & Seal Co., Inc.
Debentures
7.38% due 12/15/26............... 1,425,000 1,325,250
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23............... 1,150,000 1,106,875
Pliant Corp.
Sr. Sec. Notes
11.13% due 09/01/09(3)(4)........ 1,540,000 1,620,850
----------
6,802,412
----------
Health Services -- 3.4%
Concentra Operating Corp.
Sr. Sub. Notes
9.13% due 06/01/12............... 675,000 707,062
Concentra Operating Corp.
Sr. Sub. Notes
9.50% due 08/15/10............... 250,000 262,500
Genesis Healthcare Corp.
Sr. Sub. Notes
8.00% due 10/15/13............... 475,000 502,313
HCA, Inc.
Notes
6.38% due 01/15/15............... 7,545,000 7,343,360
Psychiatric Solutions, Inc.
Sr. Sub. Notes
7.75% due 07/15/15............... 433,000 440,578
Tenet Healthcare Corp.
Sr. Notes
6.50% due 06/01/12............... 25,000 22,500
Tenet Healthcare Corp.
Notes
7.38% due 02/01/13............... 500,000 456,250
Tenet Healthcare Corp.
Sr. Notes
9.25% due 02/01/15*.............. 750,000 751,875
Triad Hospitals, Inc.
Sr. Sub. Notes
7.00% due 11/15/13............... 575,000 566,375
59
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
BONDS & NOTES (continued)
Health Services (continued)
US Oncology, Inc.
Sr. Sub. Notes
10.75% due 08/15/14...................... $ 475,000 $ 518,937
-----------
11,571,750
-----------
Household & Personal Products -- 0.3%
AEP Industries, Inc.
Sr. Notes
7.88% due 03/15/13....................... 131,000 131,655
Visant Holding Corp.
Sr. Note
8.75% due 12/01/13*...................... 975,000 936,049
-----------
1,067,704
-----------
Insurance -- 0.2%
Crum & Forster Holdings Corp.
Sr. Notes
10.38% due 06/15/13...................... 775,000 794,375
-----------
Internet Content -- 0.3%
Spheris, Inc.
Sr. Sub. Notes
11.00% due 12/15/12*..................... 975,000 897,000
-----------
Leisure & Tourism -- 11.5%
American Airlines, Inc.
Series 2001-1, Class A-2
6.82% due 05/23/11....................... 5,625,000 5,526,562
Atlas Air, Inc.
Pass-Through Certs.,
Series 1999-1, Class A-1
7.20% due 01/02/19....................... 2,834,856 2,863,205
Atlas Air, Inc.
Series 1999-1, Class B
7.63% due 01/02/15....................... 5,437,354 4,893,619
Atlas Air, Inc.
Pass-Through Certs.,
Series 2000-1
8.71% due 01/02/19....................... 1,005,572 1,043,281
Atlas Air, Inc.
Pass-Through Certs.,
Series 1999-1, Class C
8.77% due 01/02/11+...................... 574,341 384,808
Atlas Air, Inc.
Pass-Through Certs.,
Series 2000-1, Class B
9.06% due 07/02/17....................... 1,301,358 1,249,303
Chukchansi Economic Development Authority
Sr. Notes
8.06% due 11/15/12*(5)................... 500,000 511,250
Continental Airlines, Inc.
Pass-Through Certs.,
Series 1999-1, Class C
6.95% due 08/02/09....................... 560,902 517,266
Continental Airlines, Inc.
Series 1999-2, Class C-1
7.73% due 03/15/11....................... 735,162 635,231
Delta Airlines, Inc.
Pass-Through Certs.,
Series 2000-1, Class 2A
7.57% due 05/18/12(4).................... 1,450,000 1,450,000
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Leisure & Tourism (continued)
Delta Airlines, Inc.
Notes
8.30% due 12/15/29(3)(4)........... $2,450,000 $ 655,375
Delta Airlines, Inc.
Sr. Notes
9.50% due 11/18/08*(4)............. 500,000 486,250
Delta Airlines, Inc.
Sr. Notes
10.00% due 08/15/08(3)(4).......... 3,000,000 765,000
Eldorado Casino Shreveport
1st Mtg. Notes
10.00% due 08/01/12(6)(8).......... 1,853,502 1,478,168
Eldorado Resorts, LLC
Sr. Notes
9.00% due 04/15/14(1)(8)........... 2,675,000 2,675,000
Gaylord Entertainment Co.
Sr. Notes
6.75% due 11/15/14................. 1,175,000 1,145,625
MGM Mirage, Inc.
Sr. Notes
5.88% due 02/27/14................. 5,250,000 4,948,125
Northwest Airlines
Pass-through Certs.,
Series 2001-1, Class 1A1
7.04% due 04/01/22(4).............. 1,462,944 1,462,944
Riviera Holdings Corp.
Guaranteed Notes
11.00% due 06/15/10#............... 800,000 850,000
Starwood Hotels & Resorts Worldwide
Sr. Notes
7.88% due 05/01/12................. 950,000 1,033,125
Station Casinos, Inc.
Sr. Sub. Notes
6.63% due 03/15/18*................ 450,000 439,875
True Temper Sports, Inc.
Guaranteed Notes
8.38% due 09/15/11................. 1,100,000 1,006,500
United Airlines, Inc.
Series 2001-1, Class A-2
6.20% due 03/01/10................. 510,748 505,641
Waterford Gaming, LLC
Sr. Notes
8.63% due 09/15/12*................ 1,064,000 1,126,510
Worldspan LP & WS Financing Corp.
Guaranteed Notes
11.00% due 02/15/11(5)............. 1,175,000 1,016,375
-----------
38,669,038
-----------
Machinery -- 0.7%
Case New Holland, Inc.
Sr. Notes
6.00% due 06/01/09................. 1,100,000 1,072,500
Dresser Rand Group, Inc.
Sr. Sub. Notes
7.38% due 11/01/14*................ 683,000 696,660
Indalex Holding Corp.
Sr. Notes
11.50% due 02/01/14*............... 700,000 684,250
60
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
BONDS & NOTES (continued)
Machinery (continued)
Venture Holdings Co., LLC
Guaranteed Sr. Sec. Notes
11.00% due 06/01/07+(3)(4)(8)....... $ 550,000 $ 687
----------
2,454,097
----------
Medical Products -- 1.7%
AmerisourceBergen Corp.
Sr. Notes
5.88% due 09/15/15*................. 1,375,000 1,352,395
CDRV Investors, Inc.
Sr. Notes
9.63% due 01/01/15(2)............... 875,000 595,000
Encore Med IHC, Inc.
Sr. Sub. Notes
9.75% due 10/01/12.................. 625,000 631,250
Inverness Medical Innovations, Inc.
Sr. Sub. Notes
8.75% due 02/15/12.................. 1,400,000 1,379,000
Mylan Labs, Inc.
Sr. Notes
5.75% due 08/15/10.................. 200,000 197,500
Mylan Labs, Inc.
Sr. Notes
6.38% due 08/15/15.................. 500,000 502,500
Universal Hospital Services, Inc.
Sr. Notes
10.13% due 11/01/11................. 1,150,000 1,193,125
----------
5,850,770
----------
Metals & Mining -- 1.4%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11.................. 600,000 648,000
Associated Materials, Inc.
Sr. Disc. Notes
11.25% due 03/01/14................. 900,000 517,500
Chaparral Steel Co.
Guaranteed Sr. Notes
10.00% due 07/15/13................. 875,000 975,625
Metals USA, Inc.
Sr. Notes
11.13% due 12/01/15*................ 500,000 550,000
Owens-Brockway Glass Container
Sr. Notes
8.25% due 05/15/13.................. 600,000 627,000
Owens-Brockway Glass Container
Guaranteed Sr. Secured Notes
8.88% due 02/15/09.................. 1,300,000 1,353,625
Renco Metals, Inc.
Guaranteed Notes
11.50% due 07/01/03+(1)(3)(4)(7)(8). 2,150,000 0
----------
4,671,750
----------
Pharmaceuticals -- 0.1%
Curative Health Services, Inc.
Sr. Notes
10.75% due 05/01/11(3)(4)........... 825,000 485,719
----------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
Real Estate Investment Trusts -- 1.4%
National Health Investors, Inc.
Notes
7.30% due 07/16/07................ $1,120,000 $1,133,844
Omega Healthcare Investors, Inc.
Sr. Notes
7.00% due 04/01/14................ 700,000 707,000
Senior Housing Properties Trust
Sr. Notes
8.63% due 01/15/12................ 1,600,000 1,760,000
Trustreet Properties, Inc.
Sr. Notes
7.50% due 04/01/15................ 925,000 927,313
----------
4,528,157
----------
Restaurants -- 0.5%
Dave & Busters, Inc.
Sr. Notes
11.25% due 03/15/14*.............. 725,000 734,062
Restaurant Co.
Sr. Unsec. Notes
10.00% due 10/01/13............... 350,000 334,250
Sbarro, Inc.
Sr. Notes
11.00% due 09/15/09............... 600,000 610,500
----------
1,678,812
----------
Retail -- 0.5%
Rent-Way, Inc.
Sr. Notes
11.88% due 06/15/10............... 1,500,000 1,567,500
----------
Retail Stores -- 1.5%
Acco Brands Corp.
Guaranteed Sub. Notes
7.63% due 08/15/15................ 425,000 403,750
Collins & Aikman Floor Cover
Guaranteed Notes
9.75% due 02/15/10................ 905,000 855,225
Jostens Holding Corp.
Sr. Disc. Notes
10.25% due 12/01/13(2)............ 800,000 612,000
Neiman Marcus Group, Inc.
Sr. Sub. Notes
10.38% due 10/15/15*.............. 1,000,000 1,062,500
Prestige Brands, Inc.
Sr. Sub. Notes, Series B
9.25% due 04/15/12*............... 475,000 479,750
Rite Aid Corp.
Guaranteed Notes
8.13% due 05/01/10................ 750,000 765,937
Saks, Inc.
Guaranteed Notes
9.88% due 10/01/11................ 725,000 801,125
----------
4,980,287
----------
61
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
BONDS & NOTES (continued)
Telecommunications -- 4.6%
American Cellular Corp.
Sr. Notes, Series B
10.00% due 08/01/11................. $3,200,000 $ 3,472,000
Centennial Communications Corp.
Sr. Notes
10.00% due 01/01/13................. 209,000 217,099
Centennial Communications Corp.
Guaranteed Sr. Notes
10.13% due 06/15/13................. 725,000 792,062
Centennial Communications Corp.
Sr. Notes
10.25% due 01/01/13(5).............. 550,000 569,250
Cincinnati Bell, Inc.
Notes
7.25% due 06/15/23.................. 225,000 216,000
LCI International, Inc.
Sr. Notes
7.25% due 06/15/07.................. 8,375,000 8,458,750
Suncom Wireless, Inc.
Guaranteed Sr. Notes
8.50% due 06/01/13.................. 650,000 617,500
US West Communications, Inc.
Debentures
7.50% due 06/15/23.................. 170,000 172,763
Valor Telecommunications Enterprises
Sr. Notes
7.75% due 02/15/15.................. 900,000 942,750
-----------
15,458,174
-----------
Utilities -- 7.5%
AES Corp.
Sr. Secured Notes
8.75% due 05/15/13*................. 2,400,000 2,592,000
Atlas Pipeline Partners LP
Sr. Notes
8.13% due 12/15/15*................. 650,000 677,625
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.18% due 12/15/23.................. 375,000 375,000
Cincinnati Bell Telephone Co.
Guaranteed Notes
7.20% due 11/29/23.................. 1,525,000 1,471,625
El Paso Natural Gas Co.
Sr. Notes
7.63% due 08/01/10.................. 725,000 755,812
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22.................. 1,725,000 1,962,719
El Paso Production Holding Co.
Guaranteed Notes
7.75% due 06/01/13.................. 3,125,000 3,238,281
Ferrellgas LP
Sr. Notes
6.75% due 05/01/14.................. 1,550,000 1,491,875
NRG Energy, Inc.
Sr. Notes
7.25% due 02/01/14.................. 675,000 685,969
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Utilities (continued)
NRG Energy, Inc.
Sr. Notes
7.38% due 02/01/16.......................... $2,725,000 $ 2,782,906
Pacific Energy Partners LP
Sr. Notes
6.25% due 09/15/15.......................... 624,000 608,400
Pacific Energy Partners LP
Sr. Notes
7.13% due 06/15/14.......................... 1,151,000 1,171,143
Reliant Energy, Inc.
Notes
9.50% due 07/15/13.......................... 500,000 500,625
Southern Energy, Inc.
7.90% due 07/15/09+(1)(8)................... 3,525,000 0
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28.......................... 1,300,000 1,285,163
Tiverton/Rumford Power Assoc., Ltd.
Guaranteed Notes
9.00% due 07/15/18*(3)(4)................... 1,067,877 923,714
Transcontinental Gas Pipe Line Corp.
Sr. Notes
8.88% due 07/15/12.......................... 725,000 826,500
VeraSun Energy Corp.
Sr. Notes
9.88% due 12/15/12*......................... 1,325,000 1,404,500
Williams Cos, Inc.
Notes
7.88% due 09/01/21.......................... 2,275,000 2,445,625
------------
25,199,482
------------
Total Bonds & Notes
(cost $266,697,611)......................... 265,597,631
------------
CONVERTIBLE BONDS -- 0.4%
Telecommunications -- 0.4%
ICO North America, Inc.
Sr. Notes
7.50% due 08/15/09(1)(8)(9)
(cost $1,075,000)........................... 1,075,000 1,365,250
------------
FOREIGN BONDS & NOTES -- 7.2%
Broadcasting & Media -- 1.0%
Corp. Interamericana De Entretenimiento S.A.
Sr. Notes
8.88% due 06/14/15*......................... 1,195,000 1,183,050
Telenet Group Holding NV
Sr. Notes
11.50% due 06/15/14*(2)..................... 2,764,000 2,311,395
------------
3,494,445
------------
Chemicals -- 0.8%
Rhodia SA
Sr. Sub. Notes
8.88% due 06/01/11.......................... 2,548,000 2,624,440
------------
Electronics -- 0.1%
STATS ChipPAC, Ltd.
Sr. Notes
6.75% due 11/15/11.......................... 325,000 318,500
------------
62
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
FOREIGN BONDS & NOTES (continued)
Energy Sources -- 0.5%
North America Energy Partners, Inc.
Sr. Notes
8.75% due 12/01/11................. $1,010,000 $ 984,750
North America Energy Partners, Inc.
Sr. Notes
9.00% due 06/01/10................. 700,000 733,250
----------
1,718,000
----------
Financial Services -- 0.5%
Basell AF SCA
Sr. Notes
8.38% due 08/15/15*................ 650,000 645,125
Bluewater Finance, Ltd.
Guaranteed Notes
10.25% due 02/15/12................ 1,125,000 1,181,250
----------
1,826,375
----------
Forest Products -- 0.8%
Abitibi-Consolidated, Inc.
Debentures
8.55% due 08/01/10................. 1,975,000 1,984,875
Abitibi-Consolidated, Inc.
Debentures
8.85% due 08/01/30................. 650,000 583,375
Tembec Industries, Inc.
Sr. Notes
8.63% due 06/30/09................. 250,000 150,625
----------
2,718,875
----------
Household & Personal Products -- 0.1%
Vitro Envases Norteamerica SA
Sr. Sec. Notes
10.75% due 07/23/11*............... 225,000 236,250
----------
Insurance -- 0.4%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15................. 1,750,000 1,540,000
----------
Leisure & Tourism -- 0.1%
Grupo Posadas SA de CV
Sr. Notes
8.75% due 10/04/11*................ 200,000 207,500
----------
Machinery -- 0.1%
Magnachip Semiconductor SA
Sr. Sub. Notes
8.00% due 12/15/14................. 525,000 490,875
----------
Medical Products -- 1.0%
Elan Corp., PLC
Sr. Notes
8.75% due 11/15/11(5).............. 3,375,000 3,324,375
----------
Metals & Mining -- 0.6%
Adaro Finance BV
Notes
8.50% due 12/08/10*................ 775,000 796,312
CSN Islands IX Corp.
Guaranteed Notes
10.00% due 01/15/15*............... 900,000 1,046,250
Principal
Amount/ Value
Security Description Shares (Note 2)
---------------------------------------------------------------
Metals & Mining (continued)
International Utility Structures, Inc.
Sr. Sub. Notes
10.75% due 02/01/08+(1)(3)(4)(8)...... $2,150,000 $ 43,000
-----------
1,885,562
-----------
Retail -- 0.4%
Jean Coutu Group PJC, Inc.
Sr. Sub. Notes
8.50% due 08/01/14.................... 1,325,000 1,215,688
-----------
Transportation -- 0.5%
TFM SA De CV
Sr. Notes
9.38% due 05/01/12.................... 475,000 522,500
Ultrapetrol Bahamas, Ltd.
1st Mtg. Notes
9.00% due 11/24/14.................... 1,100,000 1,034,000
-----------
1,556,500
-----------
Utilities -- 0.3%
AES Chivor
Notes
9.75% due 12/30/14*................... 875,000 980,000
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(3)(8)............ 4,460,000 4,460
-----------
984,460
-----------
Total Foreign Bonds & Notes
(cost $28,088,831).................... 24,141,845
-----------
LOAN AGREEMENTS -- 1.1%
Automotive -- 0.8%
AutoCam Corp.
13.05% due 01/23/12................... 1,004,129 984,046
Delphi Corp.
11.45% due 04/03/06................... 1,745,625 1,814,359
-----------
2,798,405
-----------
Household & Personal Products -- 0.3%
Vitro Envases Norteamerica SA
11.20% due 05/24/06(9)................ 966,667 937,667
-----------
Total Loan Agreements
(cost $2,755,201)..................... 3,736,072
-----------
COMMON STOCK -- 8.4%
Broadcasting & Media -- 0.1%
Charter Communications, Inc.+.......... 151,786 165,447
Ono Finance, PLC*+(1)(8)............... 500 0
-----------
165,447
-----------
Energy Services -- 2.6%
Mirant Corp.+.......................... 135,255 3,381,375
Trico Marine Services, Inc.+........... 163,442 5,279,177
-----------
8,660,552
-----------
Energy Sources -- 0.0%
Tri-Union Development Corp.+(1)(8)..... 1,061 11
-----------
63
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Shares/
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
COMMON STOCK (continued)
Leisure & Tourism -- 0.1%
Capital Gaming International, Inc.+(1)(8)..... 77 $ 0
Shreveport Gaming Holdings,
Inc.+(1)(8)(9)............................... 14,150 325,775
------------
325,775
------------
Machinery -- 0.8%
NES Rentals Holding, Inc.+(8)................. 150,124 2,748,770
------------
Telecommunications -- 4.8%
iPCS, Inc.+(8)................................ 344,285 16,181,395
------------
Total Common Stock
(cost $12,292,828)........................... 28,081,950
------------
PREFERRED STOCK -- 0.7%
Broadcasting & Media -- 0.4%
Paxson Communications Corp. 14.25%(6)......... 165 1,439,625
------------
Retail Stores -- 0.3%
GNC Corp. 12.00%(6)(8)........................ 725 670,625
Rent-Way, Inc. 8.00%(1)(8)(9)................. 13 159,298
------------
829,923
------------
Total Preferred Stock
(cost $2,256,908)............................ 2,269,548
------------
WARRANTS+ -- 0.0%
Business Services -- 0.0%
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $30.05)(1)(8). 1,587 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $33.04)(1)(8). 1,619 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10 (strike price $31.58)(1)(8). 1,182 0
------------
0
------------
Energy Sources -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/10/15 (strike price
$4.31)(1)(9)................................. 44,885 89,770
------------
Telecommunications -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10 (strike price
$0.00)*(1)(8)................................ 2,650 27
KMC Telecom Holdings, Inc.
Expires 01/31/08 (strike price $0.01)(1)(8).. 3,650 0
Leap Wireless International, Inc.
Expires 04/15/10 (strike price
$96.80)*(1)(8)............................... 2,250 0
Leap Wireless International, Inc.
Expires 04/15/10 (strike price
$96.80)*(1)(8)............................... 1,950 0
------------
27
------------
Total Warrants
(cost $1,454,439)............................ 89,797
------------
Total Long-Term Investment Securities -- 96.7%
(cost $314,620,818).......................... 325,282,093
------------
REPURCHASE AGREEMENTS -- 2.0%
State Street Bank & Trust Co. Joint
Repurchase Agreement(10)..................... $ 779,000 $ 779,000
UBS Securities, LLC Joint Repurchase
Agreement Account(10)........................ 6,000,000 6,000,000
------------
Total Repurchase Agreements
(cost $6,779,000)............................ 6,779,000
------------
TOTAL INVESTMENTS --
(cost $321,399,818)@......................... 98.7% 332,061,093
Other assets less liabilities................... 1.3 4,465,984
---------- ------------
NET ASSETS -- 100.0% $336,527,077
========== ============
+ 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 Portfolio has no rights to demand registration of these
securities. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31, 2006,
the aggregate value of these securities was $55,818,470 representing 16.6%
of net assets. Unless otherwise indicated, these securities are not
considered to be illiquid.
@ See Note 5 for cost of investments on a tax basis.
(1)Fair valued security.
(2)Security is a "step-up" bond where the coupon rate increases or steps up at
a predetermined rate. Rate shown reflects the increased rate.
(3)Bond in default.
(4)Company has filed Chapter 11 bankruptcy protection.
(5)Security is a "floating rate" bond where the coupon rate fluctuates. The
rate steps up or down for each rate downgrade or upgrade. The rate reflected
is as of March 31, 2006.
(6)PIK ("Payment-in-Kind") payment made with additional securities in lieu of
cash.
(7)Security is subject to litigation, the outcome of which is still to be
determined.
(8)Illiquid security.
(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 2. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of March 31, 2006, the High
Yield Bond Fund held the following restricted securities:
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ---------- ------- ------
Rent-Way, Inc.
8.00%
Preferred
Stock........ 05/29/2003 10 $ 100,000 $ 122,537 $12,254 0.04%
Rent-Way, Inc.
8.00%
Preferred
Stock........ 05/19/2004 3 30,000 36,761 12,254 0.01%
Shreveport
Gaming
Holdings,
Inc.......... 07/29/2005 11,829 272,336 272,339 23 0.08%
Shreveport
Gaming
Holdings,
Inc.......... 07/21/2005 2,321 53,448 53,436 23 0.02%
ICO North
America,
Inc.......... 08/11/2005 $1,075,000 1,075,000 1,365,250 127 0.41%
Transmeridian
Exploration,
Inc.......... 12/08/2005 $ 650,000 526,566 650,000 100 0.19%
Transmeridian
Exploration,
Inc.......... 12/08/2005 44,885 123,434 89,770 2 0.03%
Vitro Envases
Norteamerica
SA........... 02/24/2005 $ 316,311 314,493 306,822 97 0.09%
Vitro Envases
Norteamerica
SA........... 03/31/2005 $ 650,356 650,356 630,845 97 0.19%
---------- ----
$3,527,760 0.87%
========== ====
(10)See Note 2 for details of Joint Repurchase Agreement
See Notes to Financial Statements
64
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- March 31, 2006 -- (unaudited)
Industry Allocation*
Ohio........................... 19.2%
California..................... 13.2%
New York....................... 11.1%
Massachusetts.................. 10.7%
Indiana........................ 5.5%
Alabama........................ 4.8%
Connecticut.................... 4.7%
New Jersey..................... 4.2%
Missouri....................... 3.9%
New Mexico..................... 3.9%
South Dakota................... 3.4%
Arizona........................ 3.1%
Idaho.......................... 3.1%
Michigan....................... 2.5%
South Carolina................. 2.0%
Florida........................ 1.9%
Pennsylvania................... 1.3%
Tennessee...................... 0.9%
Georgia........................ 0.2%
Registered Investment Companies 0.1%
----
99.7%
====
Credit Quality+#
AAA 82.3%
AA. 5.5%
A.. 12.2%
-----
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.
65
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
MUNICIPAL BONDS -- 85.7%
Alabama -- 4.8%
Jefferson County, Alabama Sewer,
Capital Improvement, Series D,
5.25% due 02/01/26(1)......................... $3,000,000 $ 3,233,520
-----------
Arizona -- 3.1%
Phoenix, Arizona Civic Improvement Corp.
Wastewater Systems Revenue, Junior Lien,
5.00% due 07/01/28(1)......................... 2,000,000 2,075,040
-----------
California -- 13.2%
California State, Variable Purpose,
5.50% due 04/01/28............................ 2,500,000 2,732,825
Fremont California Unified School District
Alameda County Election 2002, Series B,
5.00% due 08/01/30(1)......................... 2,000,000 2,084,620
Los Angeles California Department Water And
Power Revenue Power Systems, Subseries A2,
4.75% due 07/01/30(1)......................... 2,000,000 2,034,300
Los Angeles California Unified School District
Refunding, Series A,
5.00% due 07/01/18(1)......................... 2,000,000 2,138,780
-----------
8,990,525
-----------
Connecticut -- 4.7%
Connecticut State, Refunding, Series D,
5.00% due 08/01/10(1)......................... 3,025,000 3,185,537
-----------
Florida -- 1.9%
Florida State Board of Education,
Refunding Capital Outlay, Series A,
5.00% due 06/01/11(1)......................... 1,250,000 1,323,775
-----------
Georgia -- 0.2%
Georgia Municipal Electric Authority,
Power Revenue, Series Y,
6.40% due 01/01/09(1)......................... 60,000 64,292
Georgia Municipal Electric Authority,
Power Revenue, Series Y,
6.40% due 01/01/13(1)......................... 85,000 95,381
-----------
159,673
-----------
Indiana -- 5.5%
Indiana Transportation Finance Authority
Highway Revenue, Series A,
5.25% due 06/01/26(1)......................... 3,500,000 3,741,395
-----------
Massachusetts -- 10.7%
Massachusetts State Water Resources Authority,
Series A,
5.00% due 08/01/24(1)......................... 3,910,000 4,096,781
University Massachusetts Building Authority
Project Revenue, Series 4,
5.25% due 11/01/27(1)......................... 3,000,000 3,204,660
-----------
7,301,441
-----------
New Jersey -- 4.2%
Garden State New Jersey Preservation Trust,
Open Space And Farmland Preservation 2005,
Series A,
5.80% due 11/01/17(1)......................... 2,500,000 2,833,600
-----------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------------
New Mexico -- 3.9%
New Mexico Finance Authority Transportation,
Sr. Lien, Series A,
5.25% due 06/15/21(1)........................... $2,500,000 $ 2,687,425
-----------
New York -- 9.6%
Metropolitan Transportation, Series B,
5.00% due 11/15/15(1)........................... 3,000,000 3,224,910
New York, New York, Series D,
5.00% due 11/01/28.............................. 2,000,000 2,057,500
Niagara Falls, New York Public Improvement,
General Obligation,
7.50% due 03/01/13(1)........................... 445,000 536,657
Niagara Falls, New York, Public Improvement,
General Obligation,
7.50% due 03/01/14(1)........................... 555,000 682,555
-----------
6,501,622
-----------
Ohio -- 19.2%
Cincinnati, Ohio City School District, Classroom
Facilities Construction & Improvement,
5.00% due 12/01/24(1)........................... 3,000,000 3,133,590
Cuyahoga County, Ohio Revenue,
Cleveland Clinic Health Systems, Series A,
5.75% due 01/01/24.............................. 2,000,000 2,169,560
Franklin County, Ohio Hospital Revenue,
OhioHealth Corp., Series C,
5.25% due 05/15/23.............................. 3,000,000 3,167,250
Olentangy Local School District Ohio, School
Facilities Construction & Improvement,
Series A,
5.25% due 12/01/27(1)........................... 3,250,000 3,474,152
Woodridge, Ohio Local School District, General
Obligation,
6.80% due 12/01/14(1)........................... 1,000,000 1,141,560
-----------
13,086,112
-----------
Pennsylvania -- 1.3%
Lehigh County Pennsylvania General Purpose
Authority Revenues, Lehigh Valley Hospital,
Series A,
3.15% due 07/01/08(1)(2)........................ 890,000 890,000
-----------
South Dakota -- 3.4%
South Dakota State Health & Educational
Facilities Revenue, McKennan Hospital,..........
6.25% due 07/01/10(1)........................... 2,120,000 2,312,772
-----------
Total Long-Term Investment Securities -- 85.7%
(cost $56,162,315).............................. 58,322,437
-----------
66
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2006 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 14.0%
Idaho -- 3.1%
Idaho Health Facilities Authority Revenue, St.
Lukes Regional Medical Center Project ,
3.15% due 04/03/06(1)(2)......................... $2,100,000 $2,100,000
----------
Michigan -- 2.5%
Detroit Michigan Water Supply Systems Revenue,
Refunding Second Lien, Series A,
3.15% due 04/06/06(1)(2)......................... 1,700,000 1,700,000
----------
Missouri -- 3.9%
Missouri State Health & Educational Facilities
Authority Revenue, Washington University,
Series C,
3.17% due 04/03/06(2)............................ 300,000 300,000
Missouri State Health & Educational Facilities
Authority, Health Facilities Revenue, Cox Health
Systems,
3.17% due 04/03/06(1)(2)......................... 2,400,000 2,400,000
----------
2,700,000
----------
New York -- 1.5%
New York City Municipal Water Finance Authority,
Water & Sewer Systems Revenue,
Subseries F-2,
3.14% due 04/03/06(2)............................ 1,000,000 1,000,000
----------
South Carolina -- 2.0%
Piedmont Municipal Power Agency South
Carolina Electric Revenue, Refunding,
Subseries B-3,
3.15% due 04/05/06(1)(2)......................... 250,000 250,000
Piedmont Municipal Power Agency South
Carolina Electric Revenue, Refunding,
Subseries B6,
3.15% due 04/05/06(1)(2)......................... 1,150,000 1,150,000
----------
1,400,000
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Tennessee -- 0.9%
Jackson Tennessee Energy Authority Wastewater
Systems Revenue,
3.18% due 04/06/06(1)(2)..................... $600,000 $ 600,000
-----------
Registered Investment Companies -- 0.1%
SSGA Tax Free Money Market Fund,.............. 59,427 59,427
-----------
Total Short-Term Investment Securities
(cost $9,559,427)............................ 9,559,427
-----------
TOTAL INVESTMENTS --
(cost $65,721,742)@.......................... 99.7% 67,881,864
Other assets less liabilities................... 0.3 183,391
-------- -----------
NET ASSETS -- 100.0% $68,065,255
======== ===========
- --------
@ See Note 5 for cost of investments on a tax basis.
(1)All or part of this security is insured by the Financial Security Assurance
("FSA"), Financial Guaranteed Insurance Corp. ("FGIC"), Municipal Bond
Insurance Association ("MBIA"), or American Municipal Bond Assurance Corp.
("AMBAC"). The aggregate value is $56,395,302 or 82.9% of Net Assets.
(2)Variable rate security -- the rate reflected is as of March 31, 2006;
maturity date reflects next reset date.
See Notes to Financial Statements
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006
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.
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (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. Certain Class C shares of
particular Funds issued in connection with particular reorganizations or
mergers will convert automatically to Class A shares approximately ten years
after purchase and at such time will be subject to the lower distribution
fee applicable to Class A shares. Effective February 23, 2004, Class II
shares were redesignated as Class C shares.
Class I and Class Z are offered at net asset value per share. These classes
are offered exclusively to participants in certain employee retirement plans
and other programs. 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.
Effective December 29, 2005, Class Z shares of the High Yield Bond Fund are
no longer being offered for sale.
Each class of shares bears the same voting, dividend, liquidation and other
rights and conditions except as may otherwise be provided in the Trust's
registration statement. 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, and no distribution or service fee payments applicable to 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 may contain the obligation
to indemnify others. The Funds' maximum exposure under these arrangements is
unknown. Currently, however, the Funds expect the risk of loss to be remote.
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates. The
following is a summary of the significant accounting policies followed by
the Funds in the preparation of their financial statements:
Security Valuations: Stocks are generally valued based upon closing sales
prices reported on recognized securities exchanges. 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
portfolio 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.
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.
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
Senior Secured Floating Rate Loans ("Loans") for which an active secondary
market exists to a reliable degree, will be valued at the mean of the last
available bid and ask prices in the market for such Loans, as provided by a
third party pricing service.
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 March 31, 2006, the following Funds held an undivided interest in a joint
repurchase agreement with State Street Bank & Trust Co.:
Percentage Principal
Fund Interest Amount
- ---- ---------- -----------
U.S. Government Securities 0.48% $ 487,000
GNMA...................... 56.94 57,767,000
Strategic Bond............ 0.03 34,000
High Yield Bond........... 0.77 779,000
As of that date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
State Street Bank & Trust Co., dated March 31, 2006, bearing interest at a
rate of 4.00% per annum, with a principal amount of $101,454,000, a
repurchase price of $101,487,818, and a maturity date of April 3, 2006. The
repurchase agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ------------------ -------- -------- ----------- -----------
U.S. Treasury Notes 2.25% 04/30/06 $89,725,000 $90,397,938
U.S. Treasury Notes 4.63 05/15/06 12,865,000 13,086,522
In addition, at March 31, 2006, the following Funds held an undivided
interest in a joint repurchase agreement with UBS Securities, LLC.
Percentage Principal
Fund Interest Amount
- ---- ---------- -----------
U.S. Government Securities 3.58% $17,000,000
GNMA...................... 19.37 92,000,000
Strategic Bond............ 2.11 10,000,000
High Yield Bond........... 1.26 6,000,000
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
As of that date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Securities, LLC, dated March 31, 2006, bearing interest at a rate of
4.53% per annum, with a principal amount of $475,000,000, a repurchase price
of $475,179,313, and a maturity date of April 3, 2005. The repurchase
agreement is collateralized by the following:
Interest Maturity Principal
Type of Collateral Rate Date Amount Market Value
- ------------------ -------- -------- ------------ ------------
U.S. Treasury Inflation Index Bonds 2.00% 01/15/28 $ 50,000,000 $ 47,500,000
U.S. Treasury Inflation Index Bonds 3.63 04/15/28 183,239,000 280,126,621
U.S. Treasury Inflation Index Bonds 3.88 04/15/29 100,000,000 156,875,000
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.
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).
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.
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 Funds reserve the right to declare and pay dividends less frequently
than disclosed above, provided that the net realized capital gains and net
investment income, if any, are paid at least annually. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations, which may differ from accounting principles generally accepted
in the United States of America. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences
are permanent in nature, such amounts are reclassified within the capital
accounts at fiscal year end based on their federal tax-basis treatment;
temporary differences do not require reclassification. Net investment
income/loss, net realized gain/loss and net assets are not affected by these
reclassifications.
Each Fund intends to comply with the requirements of the Internal Revenue
Code, as amended, applicable to regulated investment companies and to
distribute all of their net income (taxable and tax exempt) to their
shareholders. Therefore, no federal tax provision is required. Each Fund is
considered a separate entity for tax purposes.
Investment Securities Loaned: During the year ended March 31, 2006, U.S.
Government Securities Fund and GNMA Fund participated in securities lending
with qualified brokers. In lending portfolio securities to brokers the Funds
receive cash as collateral against the loaned securities, which must be
maintained at not less than 102% of the market value of the loaned
securities during the period of the loan. The Funds may use the cash
collateral received to invest in short-term investments which earn interest
income or to cover bank overdrafts. Any interest earned from the investment
of the collateral is recorded by the Funds net of the portion of interest
that is rebated to the borrowing broker. If the amounts are used to cover
bank overdrafts, the broker rebates incurred are reflected as interest
expense on the Statement of Operations. During the year ended March 31,
2006, $25,860 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
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
may be subject to replacing the loaned securities by purchasing them with
the cash collateral held, which may be less than 100% of the market value of
such securities at the time of replacement.
At March 31, 2006 there were no loaned securities outstanding in the U.S.
Government Securities Fund or the GNMA Fund.
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 Portfolio as
unrealized gain or loss. On the settlement date, the Portfolio records
either realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the
terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. Forward contracts involve
elements of risk in excess of the amount reflected in the Statement of
Assets and Liabilities. The Trust bears the risk of an unfavorable change in
the foreign exchange rate underlying the forward contract.
Foreign Currency Translation: The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars based on the exchange rate of such currencies
against U.S. dollars on the date of valuation.
The Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at the end of the period. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of
securities transactions, the difference between the amounts of interest,
dividends and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
Short Sales: 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. At March 31, 2006, none of the Funds had
short sales outstanding.
Mortgage-Backed Dollar Rolls: Certain Funds may enter into dollar roll
transactions 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. During the year ended March 31, 2006, none of the Funds
entered in dollar roll transactions.
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (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
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
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. The expense reimbursements and fee
waivers will continue indefinitely, subject to termination by the Directors,
including a majority of the Independent Directors.
Fund Percentage
- ---- ----------
Core Bond Class A...... 1.10%
Core Bond Class B...... 1.75
Core Bond Class C...... 1.75
Core Bond Class I...... 1.00
Core Bond Class Z...... 0.53
Strategic Bond Class A. 1.40
Strategic Bond Class B. 2.05
Strategic Bond Class C. 2.05
High Yield Bond Class A 1.36
High Yield Bond Class B 2.01
High Yield Bond Class C 2.01
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
For the year ended March 31, 2006, SAAMCo has agreed to reimburse expenses
as follows:
Fund Amount
---- --------
Core Bond Class A................. $235,936
Core Bond Class B................. 19,562
Core Bond Class C................. 24,756
Core Bond Class I................. 1,853
Core Bond Class Z................. 17,295
U.S. Government Securities Class A 595,573
U.S. Government Securities Class B 104,389
U.S. Government Securities Class C 53,175
GNMA Class A...................... 440,575
GNMA Class B...................... 151,836
GNMA Class C...................... 94,364
Strategic Bond Class A............ --
Strategic Bond Class B............ 179
Strategic Bond Class C............ 528
High Yield Bond Class A........... 188,065
High Yield Bond Class B........... 76,745
High Yield Bond Class C........... 82,836
High Yield Bond Class Z........... 23,168
Tax Exempt Insured Class A........ --
Tax Exempt Insured Class B........ --
Tax Exempt Insured Class C........ 10,386
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
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
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 year ended March 31, 2006, 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 period ended March 31, 2006, SACS earned
fees (see Statement of Operations) based upon the aforementioned rates.
SACS receives sales charges on each Fund's Class A shares, portions of which
are reallowed to affiliated broker-dealers and non-affiliated
broker-dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of Class A,
Class B and Class C shares. SACS has advised the Funds that for the year
ended March 31, 2006, 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 Contingent
Sales Affiliated Non-affiliated Deferred Sales Deferred Sales
Fund Charges Broker-dealers Broker-dealers Charges Charges
- ---- -------- -------------- -------------- -------------- --------------
U.S. Government Securities $ 38,080 $ 11,285 $ 21,043 $2,078 $ 84,365
GNMA...................... 146,386 41,234 80,524 4,322 395,770
Strategic Bond............ 864,484 120,066 596,077 511 102,979
High Yield Bond........... 644,473 60,955 474,883 9,066 214,471
Core Bond................. 17,390 6,036 8,357 2,002 12,733
Tax Exempt Insured........ 33,877 14,698 13,341 -- 26,034
Class C
--------------
Contingent
Deferred Sales
Fund Charges
- ---- --------------
U.S. Government Securities $ 1,057
GNMA...................... 13,247
Strategic Bond............ 20,178
High Yield Bond........... 36,537
Core Bond................. 433
Tax Exempt Insured........ 153
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
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
permits the Funds to compensate SAFS for services rendered, based upon an
annual rate of 0.22% of average daily net assets, which is approved annually
by the Trustees. For the year ended March 31, 2006, the Funds incurred the
following expenses which are included in transfer agent fees and expenses in
the Statement of Operations to compensate SAFS pursuant to the terms of the
Service Agreement:
Payable at
Expenses March 31, 2006
-------- --------------
Core Bond Class A............... $364,207 $29,339
Core Bond Class B............... 10,299 839
Core Bond Class C............... 8,757 627
Core Bond Class I............... 2,991 240
US Government Securities Class A 362,921 28,152
US Government Securities Class B 52,670 3,671
US Government Securities Class C 20,454 1,587
GNMA Fund Class A............... 729,321 57,409
GNMA Fund Class B............... 200,655 14,653
GNMA Fund Class C............... 107,824 7,666
Strategic Bond Class A.......... 225,234 30,193
Strategic Bond Class B.......... 93,578 8,736
Strategic Bond Class C.......... 140,964 17,302
High Yield Bond Fund Class A.... 364,477 39,901
High Yield Bond Fund Class B.... 123,134 9,866
High Yield Bond Fund Class C.... 147,105 13,245
Tax Exempt Insured Class A...... 129,945 10,746
Tax Exempt Insured Class B...... 17,404 1,300
Tax Exempt Insured Class C...... 11,725 861
At March 31, 2006, affiliate funds of the SunAmerica Focused Series, Inc.
owned 96%, 11%, 49% and 10% of the outstanding Class A Shares of Core Bond
Fund, U.S. Government Securities Fund, GNMA Fund, and High Yield Bond Fund,
respectively. At March 31, 2006, SAAMCo, an indirect wholly-owned subsidiary
of AIG, owned 6% of the outstanding Class C shares of the Tax Exempt Insured
Fund. At March 31, 2006, AIGGIC, an indirect wholly owned subsidiary of AIG,
owned 100% of the outstanding Class Z shares of the Core Bond Fund.
During the year ended March 31, 2006, the Strategic Bond and High Yield Bond
Funds received a payment from AIGGIC, the subadvisor for the Funds, of
$34,151 and $203,640, respectively. These amounts represent a reimbursement
of the amount that the funds paid to certain other creditors of Fibermark,
Inc. (certain bonds of which were previously held by the Fund) in connection
with the resolution of the bankruptcy of Fibermark, Inc.
Note 4. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments during the year ended March 31, 2006 were as follows:
U.S. Government High Tax Exempt
Core Bond Securities GNMA Strategic Yield Bond Insured
Fund Fund Fund Bond Fund Fund Fund
------------ --------------- ------------ ------------ ------------ -----------
Purchases (excluding U.S.
government securities)......... $252,280,493 $ -- $ -- $303,024,439 $271,165,008 $53,298,176
Sales (excluding U.S. government
securities).................... 232,605,048 -- -- 173,277,133 249,889,480 63,641,913
Purchases of U.S. government
securities..................... 122,844,576 672,797,541 613,353,260 110,038,562 -- --
Sales of U.S. government
securities..................... 131,478,699 682,620,859 683,900,638 57,566,112 -- --
76
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
Note 5. Federal Income Taxes
The following details the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of
distributable earnings differ from the amounts reflected in the Statement of
Assets and Liabilities by temporary book/tax differences primarily arising
from wash sales, Fund mergers, treatment of defaulted securities, deferred
directors compensation, amortization of premium/discount and derivative
transactions.
Distributable Earnings Tax Distributions
For the year ended March 31, 2006 For the year ended March 31, 2006
------------------------------------- ------------------------------------
Long-term
Gains/Capital Unrealized
Ordinary Loss Appreciation Ordinary Long-term
Fund Income CarryForward (Depreciation) Income Capital Gains Tax Exempt
- ---- -------- ------------- -------------- ----------- ------------- ----------
Core Bond Fund................. $438,490 $ (1,649,562) $(1,985,827) $ 8,133,286 $ -- $ --
U.S. Government Securities Fund 314,426 (8,532,661) (4,556,713) 7,599,387 -- --
GNMA Fund...................... 407,397 (1,498,599) (6,985,389) 17,568,716 175,792 --
Strategic Bond Fund............ 668,211 (27,636,027) 1,173,974 10,239,110 -- --
High Yield Bond Fund........... 24,077 (90,167,900) 10,778,425 21,693,351 -- --
Tax Exempt Insured Fund........ 50,185* 418,577 2,160,766 -- 716,341 2,165,823
- --------
* Tax exempt distributable earnings
Tax Distributions
For the year ended March 31, 2005
-----------------------------------
Ordinary Long-Term
Fund Income Capital Gain Tax Exempt
- ---- ----------- ------------ ----------
Core Bond................. $ 8,948,407 $2,408,211 $ --
U.S. Government Securities 7,670,802 -- --
GNMA...................... 14,716,823 -- --
Strategic Bond............ 6,802,946 -- --
High Yield Bond........... 25,444,795 -- --
Tax Exempt Insured........ 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......................................... $176,494,981 $182,749,329 $575,818,814 $303,110,701 $321,272,490 $65,721,098
============ ============ ============ ============ ============ ===========
Appreciation................................. 1,998,832 405,397 490,962 8,461,986 25,499,243 2,242,714
Depreciation................................. (3,984,659) (4,962,110) (7,476,351) (7,303,204) (14,710,640) (81,948)
------------ ------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ (1,985,827) $ (4,556,713) $ (6,985,389) $ 1,158,782 $ 10,788,603 $ 2,160,766
============ ============ ============ ============ ============ ===========
As of March 31, 2006, 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 2014
- ---- -------- ---------- ---------- ----------- ----------- ---- -------- ----------
Core Bond................. $ -- $ -- $ -- $ -- $ -- $-- $829,951 $ 819,611
U.S. Government Securities 997,836 7,263,249 -- -- -- -- -- 271,576
GNMA...................... -- -- -- -- -- -- -- 1,498,599
Strategic Bond............ 721,003 4,808,434 5,601,470 6,464,175 10,040,945 -- -- --
High Yield Bond........... -- -- 8,923,368 32,249,552 48,994,980 -- -- --
Included in the capital loss carryforward amounts at March 31, 2006 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.......... 2,727,955
77
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
As a result of reorganizations into some of these portfolios during the
period ended March 31, 2002, certain capital loss carryforwards may be
subject to limitations on use pursuant to applicable U.S. Federal Income Tax
Law. Therefore, it is possible not all of these capital losses will be
available for use.
The Fund's indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended March 31, 2006:
Capital Loss
Carryforward
Fund Utilized
- ---- ------------
Strategic Bond Fund. $ 4,022,796
High Yield Bond Fund 18,815,390
Under the current law, capital losses related to securities and foreign
currency realized after October 31 and prior to the Fund's fiscal year end
may be deferred as occurring the first day of the following year. For the
fiscal year ended March 31, 2006, the Funds elected to defer capital losses
as follows:
Deferred Deferred
Post-October Post-October
Fund Capital Loss Currency Loss
- ---- ------------ -------------
Core Bond Fund................. $1,907,274 $--
U.S. Government Securities Fund 2,498,303 --
GNMA Fund...................... 1,422,349 --
Strategic Bond Fund............ 34,802 --
High Yield Bond Fund........... 2,172,571 --
Tax Exempt Insured Fund........ -- --
For the period ended March 31, 2006, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to net paydown adjustments, amortization of premium/discount and
treatment of foreign currency to the components of net assets as follows:
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain
Fund (Loss) (Loss) Capital Paid-in
- ---- ----------------- ----------------- ---------------
Core Bond Fund................. $ 248,364 $ (248,364) $--
U.S. Government Securities Fund 446,194 (446,194) --
GNMA Fund...................... 1,986,376 (1,986,376) --
Strategic Bond Fund............ (314,419) 314,419 --
High Yield Bond Fund........... (416,150) 416,150 --
Tax Exempt Insured Fund........ 1,458 (1,458) --
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each series were as follows:
Core Bond Fund
------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- --------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
------------------------ ------------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares
sold(1)(2)(3)... 1,748,062 $ 17,733,242 4,080,810 $ 41,782,506 92,365 $ 937,854 75,896 $ 777,468
Reinvested shares 696,578 7,070,484 820,201 8,427,158 11,448 115,912 16,776 171,948
Shares
redeemed(1)(2).. (3,274,876) (33,123,195) (1,771,439) (18,067,712) (156,895) (1,586,906) (143,212) (1,463,512)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase
(decrease)...... (830,236) $ (8,319,469) 3,129,572 $ 32,141,952 (53,082) $ (533,140) (50,540) $ (514,096)
========== ============ ========== ============ ======== =========== ======== ===========
78
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
Core Bond Fund
---------------------------------------------------------------------------------------
Class C+ Class I
-------------------------------------------- -----------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
--------------------- --------------------- ------------------ ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------- ----------- -------- ----------- ------- --------- -------- -----------
Shares sold............ 70,417 $ 713,978 92,653 $ 949,365 32,099 $ 325,572 51,056 $ 524,372
Reinvested shares...... 10,651 108,034 19,166 196,692 5,923 60,179 10,987 112,886
Shares redeemed(3)..... (222,046) (2,250,537) (150,429) (1,541,314) (46,817) (474,822) (217,983) (2,213,708)
-------- ----------- -------- ----------- ------- --------- -------- -----------
Net increase (decrease) (140,978) $(1,428,525) (38,610) $ (395,257) (8,795) $ (89,071) (155,940) $(1,576,450)
======== =========== ======== =========== ======= ========= ======== ===========
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
(1)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.
(2)Includes automatic conversion of 9,062 shares of Class B shares in the
amount of $90,626 to 9,042 shares of Class A shares in the amount of $90,626.
(3)Includes automatic conversion of 9,653 shares of Class C shares in the
amount of $97,292 to 9,643 shares of Class A shares in the amount of $97,292.
Core Bond Fund
--------------------------------------------------
Class Z
--------------------------------------------------
For the For the
year ended year ended
March 31, 2006 March 31, 2005
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold...... 8 $ 81 -- $ --
Reinvested shares 60,692 617,407 225,039 2,309,447
Shares redeemed.. (1,684,510) (17,100,137) (4,558,155) (46,800,000)
---------- ------------ ---------- ------------
Net increase
(decrease)...... (1,623,810) $(16,482,649) (4,333,116) $(44,490,553)
========== ============ ========== ============
U.S. Government Securities Fund
------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares
sold(1)(2)(3)... 3,833,993 $ 35,900,779 1,851,870 $ 17,318,940 308,662 $ 2,907,116 270,431 $ 2,539,712
Reinvested shares 525,900 4,936,255 517,015 4,852,956 63,611 597,394 68,488 642,865
Shares
redeemed(1)(2).. (6,513,774) (61,084,959) (4,914,341) (46,091,272) (1,150,867) (10,789,192) (1,250,517) (11,737,869)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)...... (2,153,881) $(20,247,925) (2,545,456) $(23,919,376) (778,594) $ (7,284,682) (911,568) $ (8,555,292)
========== ============ ========== ============ ========== ============ ========== ============
U.S. Government Securities Fund
--------------------------------------------------
Class C+
--------------------------------------------------
For the For the
year ended year ended
March 31, 2006 March 31, 2005
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold...... 290,146 $ 2,736,476 225,967 $ 2,132,586
Reinvested shares 26,443 247,808 27,763 260,245
Shares
redeemed(3)..... (474,314) (4,455,172) (762,001) (7,152,432)
---------- ------------ ---------- ------------
Net increase
(decrease)...... (157,725) $ (1,470,888) (508,271) $ (4,759,601)
========== ============ ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
(1)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.
(2)Includes automatic conversion of 255,677 shares of Class B shares in the
amount of $2,072,021 to 255,775 shares of Class A shares in the amount of
$2,072,021.
(3)Includes automatic conversion of 11,098 shares of Class C shares in the
amount of $103,548 to 11,086 shares of Class A shares in the amount of
$103,548.
79
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
GNMA Fund
------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold(1)(3)(5) 3,679,546 $ 41,272,893 6,894,773 $ 77,011,294 404,406 $ 4,553,528 508,758 $ 5,716,800
Reinvested
shares............. 1,003,485 11,219,648 796,791 8,909,301 198,444 2,224,433 173,434 1,942,448
Shares
redeemed(1)(3)..... (7,280,453) (81,346,189) (7,168,924) (80,162,014) (2,809,670) (31,520,044) (3,556,936) (39,827,017)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net
increase
(decrease)......... (2,597,422) $(28,853,648) 522,640 $ 5,758,581 (2,206,820) $(24,742,083) (2,874,744) $(32,167,769)
========== ============ ========== ============ ========== ============ ========== ============
GNMA Fund
------------------------------------------------------------------------------------------------------
Class C+ Class X
-------------------------------------------------- --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold......... 602,279 $ 6,796,898 853,099 $ 9,604,217 2,510 $ 28,279 273,192 $ 3,065,920
Reinvested
shares............. 104,533 1,173,387 101,604 1,138,268 821 9,297 22,436 251,259
Shares
redeemed(5)........ (1,952,806) (21,948,681) (3,789,770) (42,453,144) (93,618) (1,057,899) (946,348) (10,755,314)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net
increase
(decrease)......... (1,245,994) $(13,978,396) (2,835,067) $(31,710,659) (90,287) $ (1,020,323) (650,720) $ (7,438,135)
========== ============ ========== ============ ========== ============ ========== ============
Strategic Bond Fund
------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold(2)(4)(6) 37,513,168 $132,293,432 6,957,950 $ 24,096,113 5,688,635 $ 20,006,461 3,302,013 $ 11,307,598
Reinvested
shares............. 1,059,222 3,741,901 532,965 1,826,684 326,591 1,152,376 359,941 1,230,161
Shares
redeemed(2)(4)..... (8,234,142) (29,041,992) (3,331,876) (11,327,054) (3,586,213) (12,634,437) (3,556,677) (12,132,722)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)......... 30,338,248 $106,993,341 4,159,039 $ 14,595,743 2,429,013 $ 8,524,400 105,277 405,037
========== ============ ========== ============ ========== ============ ========== ============
Strategic Bond Fund
----------------------------------------------------------------------------
Class C+ Class I
-------------------------------------------------- ------------------------
For the For the For the
year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2005
------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------
Shares sold......... 20,236,121 $ 71,570,743 5,570,700 $ 19,497,879 -- $ --
Reinvested
shares............. 417,085 1,477,074 243,819 839,417 29,881 99,113
Shares
redeemed(6)........ (3,618,681) (12,799,109) (1,723,947) (5,880,680) (1,122,765) (3,817,402)
---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)......... 17,034,525 $ 60,248,708 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.
(1)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.
(2)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.
(3)Includes automatic conversion of 312,753 shares of Class B shares in the
amount of $3,254,695 to 313,548 shares of Class A shares in the amount of
$3,254,695.
(4)Includes automatic conversion of 853,201 shares of Class B shares in the
amount of $2,990,264 to 853,082 shares of Class A shares in the amount of
$2,990,264.
(5)Includes automatic conversion of 115 shares of Class C shares in the amount
of $1,284 to 115 shares of Class A shares in the amount of $1,284.
(6)Includes automatic conversion of 1,485 shares of Class C shares in the
amount of $5,269 to 1,489 shares of Class A shares in the amount of $5,269.
80
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
High Yield Bond Fund
-----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ ---------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
-------------------------- -------------------------- ------------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Shares
sold(1)(3).... 60,157,451 $ 269,492,069 33,645,561 $ 144,289,277 2,657,600 $ 12,034,094 2,940,030 $ 12,724,157
Reinvested
shares........ 1,245,496 5,639,708 1,222,912 5,293,782 363,347 1,644,185 485,730 2,096,352
Shares
redeemed(1)(3) (37,827,675) (171,886,729) (34,116,411) (147,909,905) (5,617,900) (25,321,387) (6,876,355) (29,724,616)
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Net increase
(decrease).... 23,575,272 $ 103,245,048 752,062 $ 1,673,154 (2,596,953) $(11,643,108) (3,450,595) $(14,904,107)
=========== ============= =========== ============= =========== ============ ========== ============
High Yield Bond Fund
-----------------------------------------------------------------------------------------------------------
Class C+ Class Z
------------------------------------------------------ ---------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
-------------------------- -------------------------- ------------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Shares sold.... 9,135,786 $ 41,520,484 7,504,054 $ 32,828,182 -- $ (1,745) -- $ --
Reinvested
shares........ 456,958 2,077,622 475,915 2,070,792 380,489 1,688,457 1,616,351 6,993,860
Shares
redeemed...... (9,102,263) (41,384,506) (5,742,182) (25,067,974) (20,406,473) (90,194,761) -- --
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Net increase
(decrease).... 490,481 $ 2,213,600 2,237,787 $ 9,831,000 (20,025,984) $(88,508,049) 1,616,351 $ 6,993,860
=========== ============= =========== ============= =========== ============ ========== ============
Tax Exempt Insured Fund
-------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------- --------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005
--------------------- ---------------------- --------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------- ----------- -------- ------------ -------- ----------- -------- -----------
Shares
sold(2)(4)(5). 238,472 $ 3,042,167 224,481 $ 2,913,673 27,050 $ 345,577 31,978 $ 416,668
Reinvested
shares........ 120,617 1,542,466 143,521 1,856,004 12,879 164,760 19,131 247,355
Shares
redeemed(2)(4) (686,079) (8,829,065) (777,009) (10,040,254) (210,933) (2,709,988) (612,542) (7,956,706)
-------- ----------- -------- ------------ -------- ----------- -------- -----------
Net increase
(decrease).... (326,990) $(4,244,432) (409,007) $ (5,270,577) (171,004) $(2,199,651) (561,433) $(7,292,683)
======== =========== ======== ============ ======== =========== ======== ===========
Tax Exempt Insured Fund
---------------------------------------------
Class C+
---------------------------------------------
For the For the
year ended year ended
March 31, 2006 March 31, 2005
--------------------- ----------------------
Shares Amount Shares Amount
-------- ----------- -------- ------------
Shares sold.... 63,887 $ 822,552 104,291 $ 1,344,350
Reinvested
shares........ 8,147 104,235 9,966 128,971
Shares
redeemed(5)... (159,889) (2,047,423) (110,179) (1,429,778)
-------- ----------- -------- ------------
Net increase
(decrease).... (87,855) $(1,120,636) 4,078 $ 43,543
======== =========== ======== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C
shares.
(1)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.
(2)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.
(3)Includes automatic conversion of 1,641,545 shares of Class B shares in the
amount of $6,887,072 to 1,643,704 shares of Class A shares in the amount of
$6,887,072.
(4)Includes automatic conversion of 58,150 shares of Class B shares in the
amount of $713,143 to 58,187 shares of Class A shares in the amount of
$713,143.
(5)Includes automatic conversion of 40,574 shares of Class C shares in the
amount of $514,904 to 40,574 shares of Class A shares in the amount of
$514,904.
81
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
Note 7. Transactions with Affiliates:
As disclosed in the Investment Portfolios, certain funds own securities
issued by American International Group, Inc. ("AIG") or an affiliate
thereof. During the year ended March 31, 2006, the following funds recorded
realized gains (losses) and income on security transactions of affiliates of
AIG as follows:
Market Value Cost of Proceeds of Realized Change in Market Value
Fund Security Income at March 31, Purchases Sales Gain/(Loss) Unrealized at March 31,
Core Bond. Riviera Holdings Corp.
11.00% due 06/15/10 $13,750 $138,125 $-- $-- $-- $ (5,312) $132,813
Strategic
Bond..... Riviera Holdings Corp.
11.00% due 06/15/10 14,850 149,175 -- -- -- (5,738) 143,437
High Yield
Bond..... Riviera Holdings Corp.
11.00% due 06/15/10 88,000 884,000 -- -- -- (34,000) 850,000
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 year ended March 31, 2006, the following Funds had borrowings:
Weighted
Days Interest Average Average
Fund Outstanding Charges Debt Utilized Interest
- ---- ----------- -------- ------------- --------
Core Bond................. 1 $ 425 $ 3,018,775 5.06%
U.S. Government Securities 10 3,295 2,732,275 4.34
High Yield Bond........... 82 147,788 15,602,141 4.03
Note 9. Interfund Lending Agreement
Pursuant to exemptive relief granted by the Securities and Exchange
Commission, the Portfolios are permitted to participate in an interfund
lending program among investment companies advised by SAAMCo or an
affiliate. The interfund lending program allows the participating Funds to
borrow money from and loan money to each other for temporary or emergency
purposes. An interfund loan will be made under this facility only if the
participating Funds receive a more favorable interest rate than would
otherwise be available from a typical bank for a comparable transaction. For
the year ended March 31, 2006 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 8.5% of any amounts credited under
the preceding clause during prior years is added to each Eligible Trustee's
Account until such Eligible
82
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2006 -- (continued)
Trustee reaches his or her 70th birthday. An Eligible Trustee may receive
any benefits payable under the Retirement Plan, at his or her election,
either in one lump sum or in up to fifteen annual installments. Any
undistributed amounts shall continue to accrue interest at 8.50%.
The following amounts of the Retirement Plan liability are included in the
Trustees fees and expenses line on the Statement of Assets and Liabilities
and the amount for the Retirement Plan expenses are included in the
Trustees' fees and expenses line on the Statement of Operations.
Retirement Retirement Retirement
Plan Plan Plan
Liability Expense Payments
---------- ---------- ----------
Fund As of March 31, 2006
- ---- --------------------------------
Core Bond................. $23,000 $2,019 $ 952
U.S. Government Securities 96,995 2,253 10,027
GNMA...................... 48,523 5,320 2,525
Strategic Bond............ 24,699 1,535 2,322
High Yield Bond........... 46,446 3,638 3,598
Tax Exempt Insured........ 29,851 812 2,824
Note 11. Other Information
On February 9, 2006, American International Group, Inc. ("AIG"), the parent
company and an affiliated person of the Adviser, the Distributor and AIGGIC
(the "Subadviser"), announced that it had consented to the settlement of an
injunctive action instituted by the Securities and Exchange Commission
("SEC"). In its complaint, the SEC alleged that AIG violated Section 17(a)
of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)
and 13(b)(5) of the Securities Exchange Act of 1934, as amended, and Rules
10b-5, 12b-20, 13a-1 and 13b2-1 promulgated thereunder, in connection with
AIG's accounting and public reporting practices. The conduct described in
the complaint did not involve any conduct of AIG or its subsidiaries related
to their investment advisory or distribution activities with respect to the
assets of the Trust.
AIG, without admitting or denying the allegations in the complaint except as
to jurisdiction, consented to the entry of an injunction against further
violations of the statues referred to above. Absent exemptive relief granted
by the SEC, the entry of such an injunction would prohibit AIG and its
affiliated persons from, among other things, serving as an investment
adviser of any registered investment management company or principal
underwriter for any registered open-end investment company pursuant to
Section 9(a) of the Investment Company Act of 1940, as amended ("1940 Act").
Certain affiliated persons of AIG, including the Adviser, the Distributor
and the Subadviser received a temporary order from the SEC pursuant to
Section 9(c) of the 1940 Act with respect to the entry of the injunction,
granting exemptive relief from the provisions of Section 9(a) of the 1940
Act. The temporary order permits AIG and its affiliated persons, including
the Adviser, the Subadviser and the Distributor, to continue to serve as
investment adviser, sub-adviser, and principal underwriter of the Funds. The
Adviser, the Distributor and the Subadvisor expects that a permanent
exemptive order will be granted, although there is no assurance the SEC will
issue the order.
Additionally, AIG and its subsidiaries reached a resolution of claims and
matters under investigation with the United State Department of Justice
("DOJ"), the Attorney General of the State of New York ("NYAG") and the New
York State Department of Insurance ("DOI"), regarding accounting, financial
reporting and insurance brokerage practices of AIG and its subsidiaries, as
well as claims relating to the underpayment of certain workers compensation
premium taxes and other assessments.
As a result of the settlements with the SEC, the DOJ, the NYAG and the DOI,
AIG will make payments totaling approximately $1.64 billion. In addition, as
part of its settlements, AIG has agreed to retain for a period of three
years an Independent Consultant who will conduct a review that will include
the adequacy of AIG's internal controls over financial reporting and the
remediation plan that AIG has implemented as a result of its own internal
review.
Subject to receipt of permanent relief, the Adviser, the Subadviser and the
Distributor believe that the settlements are not likely to have a material
adverse effect on their ability to perform investment advisory and
underwriting services, respectively, relating to the Funds.
Note 12. Subsequent Event
On February 21, 2006, the Board of Trustees of the SunAmerica Income Funds
approved the liquidation of the SunAmerica Core Bond Fund. Accordingly, the
Fund will be liquidated on or about May 31, 2006. In anticipation of the
liquidation, as of April 1, 2006, the SunAmerica Core Bond Fund ceased
offering new shares (other than purchases of shares pursuant to a dividend
reinvestment plan and certain group and/or retirement plans) and the
Distributor discontinued the collection of Distribution and/or Service
(Rule 12b-1) Fees.
83
SunAmerica Income Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of SunAmerica Income Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the SunAmerica Core
Bond Fund, SunAmerica U.S. Government Securities Fund, SunAmerica GNMA Fund,
SunAmerica Strategic Bond Fund, SunAmerica High Yield Bond Fund, and SunAmerica
Tax Exempt Insured Fund, (constituting the six portfolios of the SunAmerica
Income Funds hereafter referred to as the "Funds") at March 31, 2006, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
As described in Note 12, the Board of Trustees has approved a plan of
liquidation of the SunAmerica Core Bond Fund (the "Portfolio"). This
liquidation is expected to take place following the approval by the Funds'
shareholders, at which the portfolio will cease to operate.
PricewaterhouseCoopers LLP
Houston, Texas
May 23, 2006
84
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2006 -- (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 43 None
DOB: February 27, 1963 Housing Development Corp;
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. 92 Director, A.G. Belo Corporation
DOB: October 6, 1945 (1992 to present); Director,
Sysco Corporation (1996 to
present); Director, Luby's Inc.
(1998 to present); Director,
University of Texas Board of
Regents (2001-Present).
William F. Devin Trustee 2001-present Retired. 92 Member of the Board of
DOB: December 30, Governors, Boston Stock
1938 Exchange (1985-Present).
Samuel M. Eisenstat Chairman 1986-present Attorney, solo practitioner. 53 Director, North European Oil
DOB: March 7, 1940 of the Royalty Trust.
Board
Stephen J. Gutman Trustee 1986-present Associate, Corcoran Group (Real 53 None
DOB: May 10, 1943 Estate) (October 2003-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, 101 None
DOB: January 23, 1954 AIG SunAmerica Asset
Management Corp.
("SAAMCo") (August 1995 to
present); Director, AIG
SunAmerica Capital Services,
Inc. ("SACS") (August 1993 to
present); President and CEO,
AIG Advisor Group, Inc. (June
2004 to present)
85
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2006 -- (unaudited)
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)
- --------------------- ---------- -------------- -------------------------------- ------------ -----------------------------
William J. Shea Trustee 2004-present President and CEO, Conseco, 53 Chairman of the Board, Royal
DOB: February 9, 1948 Inc. (2001 to 2004); Chairman of and SunAlliance, U.S.A., Inc.
the Board of Centennial (March 2005 to present);
Technologies, Inc. (1998 to Director, Boston Private
2001); Vice Chairman, Bank Holdings (October 2004 to
Boston Corporation (1993 to present).
1998)
OFFICERS
Vincent M. Marra President 2004-present Senior Vice President and Chief N/A N/A
DOB: May 28, 1950 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-present Senior Vice President, SAAMCo N/A N/A
DOB: June 25, 1966 (December 2004 to present);
Vice President, SAAMCo (1997
to December 2004); Assistant
Treasurer (1993 to 2002).
Gregory N. Bressler Secretary September Senior Vice President and N/A N/A
DOB: November 17, and Chief 2005-present General Counsel, SAAMCo
1966 Legal (June 2005 to Present); Vice
Officer President and Director of U.S.
Asset Management Compliance,
Goldman Sachs Asset
Management, L.P. (June 2004 to
June 2005); Deputy General
Counsel, Credit Suisse Asset
Management, LLC. (June 2002-
June 2004); Counsel, Credit
Suisse Asset Management, LLC
(January 2000-June 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 administrator. The "Fund
Complex" includes the SunAmerica Money Market Funds (2 funds), SunAmerica
Equity Funds (10 funds), The Trust (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 (33 portfolios), VALIC Company II (15 funds), Seasons
Series Trust (24 portfolios), AIG Series Trust (6 funds), SunAmerica
Focused Alpha Growth Fund, Inc. (1 fund) and SunAmerica Focused Alpha
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 10 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.
86
SunAmerica Income Funds
SHAREHOLDER TAX INFORMATION -- March 31, 2006 -- (unaudited)
Certain tax information regarding the SunAmerica Income Funds is required to be
provided to shareholders based upon each Fund's income and distributions for
the taxable periods ended March 31, 2006. The information and distributions
reported herein may differ from the information and distributions taxable to
the shareholders for the calendar year ending December 31, 2006. The
information necessary to complete your income tax returns will be included with
your Form 1099-DIV to be received under separate cover in January 2007.
During the year ended March 31, 2006 the Funds paid the following dividends per
share along with the percentage of ordinary income dividends that qualified for
the 70% dividends received deductions for corporations.
Net Net Net Long- Qualifying % for the
Total Investment Short-Term Term 70% Dividends
Dividends Income Capital Gains Capital Gains Received Deduction
--------- ---------- ------------- ------------- --------------------
Core Bond Fund Class A................. $0.44 $0.44 $ -- $ -- -- %
Core Bond Fund Class B................. 0.37 0.37 -- -- --
Core Bond Fund Class C................. 0.37 0.37 -- -- --
Core Bond Fund Class I................. 0.45 0.45 -- -- --
Core Bond Fund Class Z................. 0.50 0.50 -- -- --
U.S. Government Securities Fund Class A 0.37 0.37 -- -- --
U.S. Government Securities Fund Class B 0.31 0.31 -- -- --
U.S. Government Securities Fund Class C 0.31 0.31 -- -- --
GNMA Fund Class A...................... 0.48 0.40 0.04 0.04 --
GNMA Fund Class B...................... 0.41 0.33 0.04 0.04 --
GNMA Fund Class C...................... 0.41 0.33 0.04 0.04 --
Strategic Bond Fund Class A............ 0.18 0.18 -- -- 1.19
Strategic Bond Fund Class B............ 0.16 0.16 -- -- 1.19
Strategic Bond Fund Class C............ 0.16 0.16 -- -- 1.19
High Yield Bond Fund Class A........... 0.33 0.33 -- -- 0.80
High Yield Bond Fund Class B........... 0.30 0.30 -- -- 0.80
High Yield Bond Fund Class C........... 0.30 0.30 -- -- 0.80
High Yield Bond Fund Class Z........... 0.27 0.27 -- -- 0.80
Tax-Exempt Insured Fund Class A........ 0.53 0.40* -- 0.13 --
Tax-Exempt Insured Fund Class B........ 0.45 0.32* -- 0.13 --
Tax-Exempt Insured Fund Class C........ 0.45 0.32* -- 0.13 --
- --------
* Tax exempt interest dividends
For the year ended March 31, 2006, certain dividends paid by the Strategic Bond
Fund and High Yield Bond Fund may be subject to a maximum tax rate of 15%, as
provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the
distributions paid during the fiscal year, the following represents the maximum
amount that may be considered qualified dividend income:
Portfolio Amount
--------- --------
Strategic Bond Fund. $129,179
High Yield Bond Fund 188,311
87
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited)
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in the SunAmerica Income Funds'
portfolios to a similar investment in an index. Please note that "inception" as
used herein reflects the date on which a specific class of shares commenced
operations. It is important to note that the SunAmerica Income Funds are
professionally managed mutual funds while the indices are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only. The graphs present the performance of the largest class of that
particular Fund. The performance of the other classes will vary based upon the
difference in sales charges and fees assessed to shareholders of that class.
88
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
Core Bond Fund
For the annual period ended March 31, 2006, the SunAmerica Core Bond Fund Class
A returned 2.96% at net asset value (before maximum sales charge). The Fund's
benchmark, the Lehman Brothers U.S. Aggregate Bond Index*, returned 2.26% for
the same period.
During the fiscal year ended March 31, 2006, the credit market posted a solid
performance sustained by favorable macroeconomic conditions and strong
technical dynamics. Strong new issuance volume supported activity in the fixed
income market as a whole. Robust demand from both domestic and foreign
investors supported primary and secondary market activity. In addition,
synthetic market activity continued to provide support. Leveraged Buy Out and
shareholder friendly activity continued to affect investor sentiment.
Nevertheless, during the later half of the period the overall effect of this
type of activity garnered a more muted reaction from market participants.
The market environment provided both challenges and opportunities during the
period. Secondary activity in the portfolio included trades which looked to
take advantage of volatility in specific credits. In addition, positions were
added to take advantage of the steep slope of the credit curve in many names as
the U.S. Treasury curve flattened 90 basis points during the fiscal year.
Emerging market and high yield bonds were the top performing asset classes
within the portfolio. High yield bonds performed well as fundamentals remained
solid and volatility muted as evidenced by the performance of the airline
industry. Emerging market bonds posted strong performance as the economic
backdrop of emerging economies improved and commodity prices increased.
Security selection was the main contributor to the Fund's yearly performance
followed by the overall yield of the portfolio. Longer dated emerging market
bonds and short maturity high yield bonds were among the top contributors to
the portfolio's performance. Intermediate high yield bonds and sovereign risk
bonds in non-U.S. dollar currencies were among the major detractors to
performance for the annual period. In the emerging markets, credits issued by
Venezuela, Turkey, Russia and Argentina were among the top contributors.
Calpine due 2013 and American Cellular due 2011 were two high yield credits
that contributed significantly to the portfolio.
- --------
* The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index
generally representative of intermediate-term government bonds, investment
grade corporate debt securities and mortgage-backed securities.
89
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Lehman Brothers
Core Bond Fund Class A/#/ U.S. Aggregate Bond Index+
------------------------ -------------------------
3/96 $ 9,521 $10,000.00
3/97 9,882 10,491.05
3/98 11,102 11,749.85
3/99 11,615 12,511.07
3/00 11,675 12,745.85
3/01 12,707 14,342.34
3/02 13,095 15,108.36
3/03 14,349 16,873.91
3/04 14,966 17,785.96
3/05 15,256 17,990.15
3/06 15,707 18,396.22
Class A Class B Class C Class I Class Z
------------------ ------------------ ------------------ ------------------ ------------------
Core Average Average Average Average Average
Bond Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -1.98% 2.96% -1.75% 2.19% 1.31% 2.29% 2.96% 2.96% 3.44% 3.44%
- ---------------------------------------------------------------------------------------------------------------
5 Year Return 3.32% 23.61% 3.26% 19.41% 3.65% 19.65% 4.38% 23.92% 4.91% 27.07%
- ---------------------------------------------------------------------------------------------------------------
10 Year Return 4.62% 64.97% 4.62% 57.07% 4.48% 55.04% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Since Inception* 5.69% 139.60% 5.02% 80.07% 4.82% 75.83% 5.30% 34.38% 5.78% 37.90%
- ---------------------------------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 05/1/91; Class B: 04/1/94; Class C: 04/1/94; Class
I: 07/10/00; Class Z: 07/10/00
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2006, the SunAmerica Core Bond Fund
Class A returned (1.98%), compared to 2.26% for the Lehman Brothers U.S.
Aggregate Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index
generally representative of intermediate-term government bonds, investment
grade corporate debt securities and mortgage-backed securities.
90
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
U.S. Government Securities Fund
For the annual period ended March 31, 2006, the SunAmerica U.S. Government
Securities Fund Class A returned 1.68% at net asset value (before maximum sales
charge). The Fund's benchmark, the Lehman Brothers Government Index**, returned
2.14% over the same period.
The period began with rates dropping sharply for Treasury securities. Rates
then rose steadily with some pullbacks intermittently to end the year higher.
In general, for most of the year, the Fund was managed with a bullish bias,
expecting an end of the Federal rate hike cycle that was earlier than the
market anticipated. This portfolio stance was based on early signs of weakness
in the housing sector and a subdued core personal consumption expenditure
deflator. However, as it turned out, the policy makers seemed to err on the
side of being pre-emptive against inflation by focusing on the tightening labor
condition, rising capacity utilization rates and the fear that higher oil price
could eventually be inflationary. As a result, the Fund underperformed as rates
rose higher over the second half of the year and the Federal Reserve took
Federal Funds rate from 2.75% in March 2005 to 4.75% a year later.
The Fund maintained its strategy of holding minimal exposure to Freddie Mac and
Fannie Mae securities. This benefited the Fund as spreads continued to move in
favor of Treasury and GNMA securities.
[CHART]
U.S. Government Lehman Brothers U.S.
Securities Fund Class A#@ Government Bond Index**
------------------------- -----------------------
3/96 $9,529 $10,000.00
3/97 9,908 10,429.21
3/98 10,861 11,696.57
3/99 11,394 12,477.48
3/00 11,495 12,789.57
3/01 12,999 14,366.76
3/02 13,446 14,933.03
3/03 15,346 16,934.83
3/04 15,851 17,653.65
3/05 15,948 17,672.85
3/06 16,215 18,050.97
Class A Class B Class C
U.S. ------------------ ------------------ ------------------
Government Average Average Average
Securities Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -3.18% 1.68% -2.89% 1.02% 0.04% 1.02%
- -------------------------------------------------------------------------
5 Year Return 3.52% 24.74% 3.49% 20.69% 3.80% 20.53%
- -------------------------------------------------------------------------
10 Year Return 4.95% 70.16% 4.91% 61.44% N/A N/A
- -------------------------------------------------------------------------
Since Inception* 4.97% 92.46% 5.94% 218.55% 4.70% 36.89%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/1/93; Class B: 03/3/86; Class C: 06/1/99.
# For the purpose of the graph, it has been assumed that the maximum sales
charge of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
@ Beginning with the fiscal year ended March 31, 2006, the average annual total
return displayed in the Line Graph is for Class A shares. Returns of Class A
shares have replaced the returns of Class B shares in the Line Graph because
Class A currently has the largest amount of assets of any Class of the Fund.
For the 12-month period ending March 31, 2006, the SunAmerica U.S. Government
Securities Fund Class A returned (3.18)%, compared to 2.14% for the Lehman
Brothers Government Bond Index. (The performance data and graph do not reflect
the deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
** The Lehman Brothers U.S. Government Index is a broad index composed solely
of U.S. Treasury Securities maturing from 1-30 years.
91
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
GNMA Fund
For the annual period ended March 31,2006, the SunAmerica GNMA Fund Class A
returned 2.18% at net asset value (before maximum sales charge). The Fund's
benchmark, the Citigroup Mortgage GNMA Index**, returned 3.11% over the same
period.
The period began with rates dropping sharply for both mortgage-backed
securities and Treasury securities, rates then rose steadily with some
pullbacks intermittently to end the period higher. In general, for most part of
the year, the Fund was managed with a bullish bias expecting an earlier than
consensus ending of the Federal rate hike cycle. This portfolio stance was
based on early signs of weakness in the housing sector and a subdued core
personal consumption expenditure deflator. However, as it turned out, the
policy makers seemed to err on the side of being pre-emptive against inflation
by focusing on the tightening labor market, rising capacity utilization rates
and the fear that higher oil price could eventually be inflationary. As a
result, the Fund underperformed as rates rose higher over the second half of
the year and the Federal Reserve took the Federal Funds rate from 2.75% in
March 2005 to 4.75% a year later.
The Fund maintained its strategy of holding minimal exposure to Freddie Mac and
Fannie Mae securities. This benefited the Fund as spreads continued to move in
favor of GNMA securities.
[CHART]
GNMA Fund Salomon Brothers
Class A#@ GNMA Index**
---------- ----------------
3/96 $9,525 $10,000
3/97 10,039 10,597
3/98 11,262 11,749
3/99 11,973 12,487
3/00 12,259 12,856
3/01 13,867 14,390
3/02 14,511 15,336
3/03 16,293 16,628
3/04 16,792 17,257
3/05 17,028 17,768
3/06 17,400 18,321
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
GNMA Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -2.68% 2.18% -2.49% 1.43% 0.54% 1.53%
- -------------------------------------------------------------------------
5 Year Return 3.64% 25.47% 3.60% 21.32% 3.96% 21.42%
- -------------------------------------------------------------------------
10 Year Return 5.69% 82.67% 5.52% 71.10% N/A N/A
- -------------------------------------------------------------------------
Since Inception* 5.66% 108.72% 7.44% 418.31% 5.06% 40.13%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/11/93; Class B: 04/25/83; Class C: 06/1/99.
# For the purpose of the graph, it has been assumed that the maximum sales
charge of 4.75% of offering, was deducted from the initial $10,000 investment
in the Fund.
@ Beginning with the fiscal year ended March 31, 2006, the average annual total
return displayed in the Line Graph is for Class A shares. Returns of Class A
shares have replaced the returns of Class B shares in the Line Graph because
Class A currently has the largest amount of assets of any Class of the Fund.
For the 12-month period ending March 31, 2006, the SunAmerica GNMA Fund Class A
returned (2.68)%, compared to 3.11% for the Citigroup Mortgage GNMA Index. (The
performance data and graph do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
**The Citigroup Mortgage GNMA Index is comprised of 15 and 30-year fixed-rate
pass-through mortgage-backed securities.
92
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
Strategic Bond Fund
For the annual period ended March 31, 2006, the SunAmerica Strategic Bond Fund
Class A returned 6.54% at net asset value (before maximum sales charge). The
Fund's benchmark, the Lehman Brothers U.S. Aggregate Bond Index*, returned
2.26% over the same period.
During the fiscal year ended March 31, 2006, the credit market posted a solid
performance sustained by favorable macroeconomic conditions and strong
technical dynamics. Strong new issuance volume supported activity in the fixed
income market as a whole. Robust demand from both domestic and foreign
investors supported primary and secondary market activity. In addition,
synthetic market activity continued to provide support. Leveraged buyout and
shareholder friendly activity continued to impact investor sentiment.
Nevertheless, during the later half of the period the overall effect of this
type of activity garnered a more muted reaction from market participants.
The market environment provided both challenges and opportunities during the
period. Secondary activity in the portfolio included trades which looked to
take advantage of volatility in specific credits. In addition, positions were
added to take advantage of the steep slope of the credit curve for many names
relative to the U.S. Treasury curve which flattened 90 basis points during the
fiscal year.
Emerging market and high yield bonds were the top-performing asset classes.
High yield bonds performed well as fundamentals remained solid and volatility
muted as evidenced by the performance of the airline industry. Emerging market
bonds posted strong performance as the economic backdrop of emerging economies
improved and commodity prices increased.
Security selection was the main contributor to yearly performance followed by
the overall yield of the portfolio. Long-dated sovereign bonds of Venezuela and
Brazil were among the top contributors to the performance. The main detractor
were investments in non-U.S. Dollar currencies and intermediate high yield
bonds. Specifically, short-dated Swedish sovereign bonds and intermediate term
holdings in Charter Communication and Precession Cable Assemblies, were among
the poorest contributors to portfolio performance.
- --------
* The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index
generally representative of intermediate-term government bonds, investment
grade corporate debt securities and mortgage-backed securities.
93
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Strategic Bond Lehman Brothers U.S.
Fund Class A# Aggregate Bond Index+
-------------- --------------------
3/96 $9,524 $10,000
3/97 10,703 10,491
3/98 12,061 11,750
3/99 11,926 12,511
3/00 12,184 12,746
3/01 12,814 14,342
3/02 13,382 15,108
3/03 14,596 16,874
3/04 17,229 17,786
3/05 18,788 17,990
3/06 20,074 18,396
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
Strategic Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return Return+ Return Return+ Return Return+
- ------------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 1.59% 6.54% 2.14% 6.14% 4.84% 5.84%
- ----------------------------------------------------------------------------------------
5 Year Return 8.34% 56.65% 8.34% 51.24% 8.72% 51.88%
- ----------------------------------------------------------------------------------------
10 Year Return 7.22% 110.77% 7.17% 99.89% 7.07% 98.10%
- ----------------------------------------------------------------------------------------
Since Inception* 6.97% 142.44% 7.59% 140.62% 7.40% 135.46%
- ----------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/1/93; Class B: 04/1/94; Class C: 04/1/94.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2006, the SunAmerica Strategic Bond
Fund Class A returned 1.59%, compared to 2.26% for the Lehman Brothers U.S.
Aggregate Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index
generally representative of intermediate-term government bonds, investment
grade corporate debt securities and mortgage-backed securities.
94
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
High Yield Bond Fund
For the annual period ended March 31, 2006, the SunAmerica High Yield Bond Fund
Class A returned 11.61% at net asset value (before maximum sales charge). The
Fund's benchmark, the Citigroup High Yield Market Index*, returned 6.53% for
the same period.
We have seen continued spread tightening in the high yield market over the past
year as measured by the Citigroup High Yield Market Index. During the annual
period, spread on the overall index tightened from 368 basis points (bp) over
treasuries to 314 bp. Spreads by credit rating at March 31, 2005 to March 31,
2006 were as follows: BBs from 256 bp to 258 bp, single B from 347 bp to 296
bp, and CCC from 777 bp to 672 bp. A big driver of this compression was the
decline in default rates as measured by Moody's from 2.30% to 1.70% for the
trailing 12-month periods ending March 31, 2005 and March 31, 2006,
respectively. The stronger tightening of spreads in lower rated securities
positively affected fund performance due to the portfolio's overweight in these
securities.
Sector selection was a minor contributor to outperformance versus the benchmark
during the year. Among the sectors which contributed positively were wireless,
due to an overweight versus the benchmark, airlines, also due to an overweight,
and automotive, due to an underweight position. Finally, our cash position
detracted from performance given the strong return on the benchmark versus
returns available on cash.
Security selection was the main performance driver. Positive contributors
included our stock holdings in IWO Holdings and IPCS in the wireless sector,
Southern Energy/Mirant in the utility sector and our stock holding in Trico
Marine, a provider of marine support services to the oil and gas industry.
Additionally, our holdings in GMAC in the automotive sector and Elan in the
pharmaceutical sector contributed positively to performance. On the negative
side, our positions in Charter Communications in the cable sector, and Pliant
in the container sector detracted from returns.
- --------
* The Citigroup High Yield Market Index is a broad-based unmanaged index
composed of high yield securities.
95
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
High Yield Bond Citigroup
Fund Class A/#/ High Yield Market Index+
--------------- -----------------------
11/98 $ 9,524 $10,000.00
3/99 9,999 10,651.21
3/00 9,710 10,396.98
3/01 9,877 10,679.18
3/02 9,692 10,828.18
3/03 9,454 11,360.56
3/04 11,917 13,904.34
3/05 13,497 14,906.18
3/06 15,064 15,879.32
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
High Yield Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 6.33% 11.61% 6.88% 10.88% 9.86% 10.86%
- -------------------------------------------------------------------------
5 Year Return 7.77% 52.52% 7.84% 47.85% 8.11% 47.71%
- -------------------------------------------------------------------------
10 Year Return N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------
Since Inception* 5.69% 58.18% 5.67% 50.44% 6.77% 44.37%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/2/98; Class B: 11/2/98; Class C: 08/21/00.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2006, the SunAmerica High Yield Bond
Fund Class A returned 6.33%, compared to 6.53% for the Citigroup High Yield
Market Index. (The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Citigroup High Yield Market Index is a broad-based unmanaged index
composed of high yield securities.
96
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
Tax Exempt Insured Fund
For the annual period ended March 31, 2006, the SunAmerica Tax Exempt Bond Fund
Class A returned 2.43% at net asset value (before maximum sales charge). The
Fund's benchmark, the Lehman Brothers Municipal Bond Index*, returned 3.81%
over the same period.
During the last three quarters of 2005, the Treasury market experienced a
flattening yield curve. Short-term yields rose more than longer yields as the
Federal Reserve increased the benchmark Federal Funds rate, and longer-term
rates remaining range bound as the 10-year Treasury Note yielded between 4.00%
and 4.40%. As mentioned, the Federal Reserve continued their inflation fighting
campaign, raising the Federal Funds rate by a total of 1.25% to 4.25% at the
end of 2005.
Since mid-January, fixed income yields have risen substantially in response to
solid first quarter growth, higher oil prices and renewed inflation concerns.
However, housing demand weakened and supply increased as mortgage rates rose.
The Federal Reserve continued to increase its Federal Funds rate by an
additional 50 basis points to 4.75% during the quarter, a total of 3.75% since
they began raising rates in June 2004.
After record municipal new issuance in 2005, the first quarter's new issuance
had a sharp decline from the same period last year. The decline in new issuance
was led by a 55% reduction in refunding issuance. However, municipals have
outperformed taxable product over the past 12 months as strong demand from
Property & Casualty Insurance companies, hedge funds, mutual funds, and
individual investors met record supply in 2005. More recently, municipals have
outperformed taxable product based on lighter new issuance and a rising
interest rate environment.
The Fund was helped during the period by bonds maturing 20 years and beyond as
the municipal yield curve continued its flattening bias. In addition, the Fund
was helped by executing a few relative value swaps whereby bonds were sold, and
replaced with either higher yielding bonds of like quality, or better
structured bonds. In particular, Los Angeles, CA Department of Water and Power
4.75% due 7/01/2030 outperformed as its spread tightened to the municipal yield
curve.
Two of the Fund's best performing bonds have been State of California General
Obligation 5.50% due 4/1/28 and New York City, NY General Obligation 5.00% due
11/1/28. Both issuers have benefited from positive credit trends, and their
bond prices have risen as spreads have tightened to the municipal generic yield
curve. Some bonds that negatively affected the Fund include Jefferson Co., AL
Sewer 5.25% pre-refunded due 8/1/12, Sikeston, MO 6.20% due 6/1/10 and South
Dakota Health and Education 6.25% due 7/1/10. The maturity ranges of these
securities underperformed and the high coupons also underperformed in a
flattening rate environment in which short rates rose more than longer-term
rates.
- --------
* The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market. It is currently derived from
approximately 40,000 issues.
97
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Tax Exempt Lehman Brothers
Insured Fund Class A/#/ Municipal Bond Index+
----------------------- --------------------
3/96 $ 9,525 $10,000.00
3/97 9,928 10,544.86
3/98 10,949 11,674.61
3/99 11,447 12,398.57
3/00 11,309 12,388.68
3/01 12,450 13,741.64
3/02 12,684 14,265.65
3/03 13,835 15,675.88
3/04 14,518 16,595.09
3/05 14,772 17,037.64
3/06 15,131 17,686.07
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
Annual Cumulative Annual Cumulative Annual Cumulative
Tax Exempt Insured Fund Return Return+ Return Return+ Return Return+
- ----------------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -2.45% 2.43% -2.17% 1.77% 0.83% 1.81%
- --------------------------------------------------------------------------------
5 Year Return 2.97% 21.53% 2.91% 17.38% 3.28% 17.54%
- --------------------------------------------------------------------------------
10 Year Return 4.23% 58.86% 4.16% 50.33% N/A N/A
- --------------------------------------------------------------------------------
Since Inception* 5.54% 214.77% 4.07% 64.65% 3.62% 27.49%
- --------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, return would be lower.
* Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 06/1/99.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2006, SunAmerica Tax Exempt Insured
Fund Class A returned (2.45)%, compared to 3.81% for the Lehman Brothers
Municipal Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market. It is currently derived from
approximately 40,000 issues.
98
[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
Corey A. Issing, Agent a duplicating fee to the
Assistant Secretary State Street Bank and U.S. Securities and
Gregory R. Kingston, Trust Company Exchange Commission
Vice President and P.O. Box 419572 Public Reference Room,
Assistant Treasurer Kansas City, MO Washington, DC 20549-0102
64141-6572 or (iii) sending your
request electronically to
VOTING PROXIES ON TRUST www.publicinfo.sec.gov.
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 SunAmerica Income
proxies relating to Funds voted proxies
secu-rities held in the related to securities
Fund's portfolio which is held in the SunAmerica
available in the Trust's Income Funds' during the
State-ment of Additional twelve month period ended
Information, may be June 30, 2005 is
obtained without charge available without charge,
upon re-quest, by calling upon request, by calling
(800) 858-8850. The (800) 858-8850 or on the
information is also U.S. Securities and
available from the EDGAR Exchange Commission
database on the U.S. website at
Secu-rities and Exchange http://www.sec.gov.
Commission's website at
http://www.sec.gov. This report is submitted
solely for the general
information of
shareholders of the Fund.
Distribution of this
report to persons other
than shareholders of the
Fund is authorized only
in connection with a
currently effective
prospectus, setting forth
details of the Fund,
which must precede or
accompany this report.
99
[LOGO]
Distributed by:
AIG SunAmerica Capital Services, Inc.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
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 you invest. Funds distributed by AIG
SunAmerica Capital Services, Inc.
www.sunamericafunds.com
INANN-3/06
Item 2. Code of Ethics
The SunAmerica Income Funds ("the registrant") has adopted a Code of
Ethics applicable to its Principal Executive and Principal Accounting
Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that William J.
Shea, the Chairman of the Registrant's Audit Committee, qualifies as
an audit committee financial expert, as defined in the instructions to
Item 3(a) of Form N-CSR. Mr. Shea is considered to be "independent"
for purposes of Item 3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)--(d) Aggregate fees billed to the registrant for the last two
fiscal years for professional services rendered by the registrant's
principal accountant were as follows:
2005 2006
-------- --------
Audit Fees................................. $151,621 $151,472
Audit-Related Fees......................... $ 48,006 $ 49,316
Tax Fees................................... $ 57,188 $ 56,470
All Other Fees............................. $ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
principal accountant in connection with statutory and regulatory
filings. Audit-Related Fees principally include a SAS No. 100 review
of the registrant's Semiannual Shareholder Report. Tax Fees
principally include tax compliance, tax advice, tax planning and
preparation of tax returns.
(e)
(1) The Registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the Registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliate") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the operations and
financial reporting of the registrant.
(2) No services included in (b)-(d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the registrant's principal accountant for
non-audit services rendered to the registrant, its investment adviser,
and Adviser Affiliate that provides ongoing services to the registrant
for 2006 and 2005 were $607,911 and $1,574,866, respectively.
(h) Non-audit services rendered to the registrant's investment adviser and
any Adviser Affiliate that were not pre-approved pursuant to Paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were considered by the
registrant's audit committee as to whether they were compatible with
maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
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) Code of Ethics applicable to its Principal Executive and Principle
Accounting Officers pursuant to Section 406 of the Sarbanes-Oxley Act
of 2002 attached hereto as Exhibit 99.406. Code of Ethics.
(2) Certification pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Income Funds
By: /s/ Vincent M. Marra
-------------------------
Vincent M. Marra
President
Date: June 9, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Vincent M. Marra
-------------------------
Vincent M. Marra
President
Date: June 9, 2006
By: /s/ Donna M. Handel
-------------------------
Donna M. Handel
Treasurer
Date: June 9, 2006