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
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: September 30, 2006
-------------------------
Item 1. Reports to Stockholders
SunAmerica 2006
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[PHOTO]
Semi-annual Report
[GRAPHIC]
Income Funds
[LOGO] AIG SunAmerica
Mutual Funds
September 30, 2006 SEMIANNUAL REPORT
SUNAMERICA INCOME FUNDS
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.......................... 17
NOTES TO FINANCIAL STATEMENTS..................... 61
APPROVAL OF THE INVESTMENT ADVISORY AND
MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT.... 76
TRUSTEE AND OFFICER INFORMATION................... 80
Shareholder Letter
Dear Shareholder,
We are pleased to present the semi-annual report for the SunAmerica Income
Funds for the period ended September 30, 2006.
The six-month period will be best remembered for the Federal Reserve halting
its policy of raising interest rates, following 17 consecutive quarter-point
increases commencing in June 2004. Currently, the question overhanging the
financial markets is whether the Federal Reserve's action is merely a pause
toward higher interest rates or truly represents the end of the tightening
cycle.
The beginning of the semi-annual period was a rocky time for the fixed income
markets. The first three months were marked by increased awareness of risk.
This re-emergence of risk and the continued headwinds posed by increasing
interest rates took its toll on most fixed income markets. The Lipper Emerging
Market Debt category declined by 2.69% as aversion to risk increased. As one
would expect, short-term maturities and Treasury-Inflation-Protected securities
held up the best--delivering small positive returns. The Lipper U.S Government
Money Market Fund category lead the way returning 1.02% for the quarter.
The fixed income markets rallied upon the cessation of interest rate hikes at
the August Federal Reserve meeting. The 10-year Treasury yield went from a high
of 5.22% during the quarter to a yield of 4.63% at quarter's end. All major
Lipper fixed income categories produced positive returns in the third calendar
quarter with longer duration portfolios leading the way. High yield and
municipal bonds also posted solid returns. Despite the challenging start to the
period, six-month returns for major indices were positive. The Lehman Aggregate
Bond Index returned 3.73%; the Lehman U.S. Government Bond Index rose 3.56%;
and the Lehman Brothers Municipal Bond Index returned 3.44%. The high yield
market continued its run of solid performance with the CSFB High Yield Index
delivering a 3.93% return for the period.
We are proud that the SunAmerica Income Funds' portfolio managers were able to
add value for our investors. Each of the five SunAmerica Income Funds (A
shares) were in the top half of their respective Lipper peer group for the
six-month period. Of particular note is the SunAmerica High Yield Bond Fund
which finished in the top 10% of its Lipper peer group during the period. We
continue to recommend that investors construct a diversified portfolio with an
asset allocation appropriate to their individual circumstances and risk
profile. We urge you to sit down with your financial adviser to review your
portfolio.
Thank you for including AIG SunAmerica Mutual Funds in your investment plan. We
value your ongoing confidence in us and look forward to serving your investment
needs in the future.
Sincerely,
The SunAmerica Income Funds Investment Professionals
AIG SunAmerica Asset Management Corp. AIG Global Investment Corp.
- ------------------------------------- ---------------------------
Michael Cheah Rich Mercante J.Hutchinson Bryan
Andrew Doulous Gregory Braun Geoffrey Cornell
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The Lehman Aggregate Bond Index used by bond funds as a benchmark to measure
their relative performance. The index comprises government securities,
mortgage-backed securities, asset-backed securities and corporate securities to
simulate the universe of bonds in the market. The maturity of the bonds in the
index are over one year. Lehman Brothers U.S. Government Bond Index is a
benchmark index made up of the Treasury Bond Index and the Agency Bond Index as
well as the 1-3 Year Government Index and the 20+ Year Treasury Index. 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 CSFB High Yield Index is designed to mirror the investible
universe of the $US-denominated high yield debt market. As of March 30, 2001,
the index included $379 billion in tradable securities representing a universe
of $704 billion. Indices are not managed and an investor cannot invest directly
into an index.
Investors should carefully consider the investment objectives, risks, charges,
and expenses of any mutual fund before investing. This and other important
information is contained in the prospectus, which can be obtained from your
financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext.
6003. Read the prospectus carefully before investing.
Funds distributed by AIG SunAmerica Capital Services, Inc.
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- September 30, 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
(loads) 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 April 1, 2006 and held until September
30, 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 September 30, 2006" to estimate the expenses you paid on your
account during this period. The "Expenses Paid During the Six Months Ended
September 30, 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
September 30, 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 September 30,
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. The "Expenses Paid During the Six Months
Ended September 30, 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
September 30, 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 September 30,
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 -- September 30, 2006 -- (unaudited) (continued)
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending Account
Ending Account Value Using
Value Using Expenses Paid a Hypothetical Expenses Paid
Beginning Actual During the Beginning 5% Assumed During the
Account Value Return at Period Ended Account Value Return at Period Ended
at April 1, September 30, September 30, at April 1, September 30, September 30,
2006 2006 2006* 2006 2006 2006*
------------- -------------- ------------- ------------- -------------- -------------
U.S. Government Securities Fund
Class A#..................... $1,000.00 $1,031.67 $ 5.04 $1,000.00 $1,020.10 $ 5.01
Class B#..................... $1,000.00 $1,029.44 $ 8.34 $1,000.00 $1,016.85 $ 8.29
Class C#..................... $1,000.00 $1,028.34 $ 8.34 $1,000.00 $1,016.85 $ 8.29
GNMA Fund
Class A#..................... $1,000.00 $1,027.32 $ 5.03 $1,000.00 $1,020.10 $ 5.01
Class B#..................... $1,000.00 $1,024.91 $ 8.32 $1,000.00 $1,016.85 $ 8.29
Class C#..................... $1,000.00 $1,023.97 $ 8.32 $1,000.00 $1,016.85 $ 8.29
Strategic Bond Fund
Class A...................... $1,000.00 $1,034.87 $ 6.48 $1,000.00 $1,018.70 $ 6.43
Class B...................... $1,000.00 $1,031.44 $ 9.83 $1,000.00 $1,015.39 $ 9.75
Class C...................... $1,000.00 $1,031.48 $ 9.83 $1,000.00 $1,015.39 $ 9.75
High Yield Bond Fund
Class A#..................... $1,000.00 $1,055.97 $ 7.01 $1,000.00 $1,018.25 $ 6.88
Class B#..................... $1,000.00 $1,052.52 $10.34 $1,000.00 $1,014.99 $10.15
Class C#..................... $1,000.00 $1,052.42 $10.34 $1,000.00 $1,014.99 $10.15
Tax Exempt Insured Fund
Class A...................... $1,000.00 $1,029.65 $ 6.41 $1,000.00 $1,018.75 $ 6.38
Class B...................... $1,000.00 $1,024.83 $10.71 $1,000.00 $1,014.49 $10.66
Class C#..................... $1,000.00 $1,026.14 $ 9.90 $1,000.00 $1,015.29 $ 9.85
Expense
Ratio
as of
September 30,
2006*
-------------
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...................... 1.27%
Class B...................... 1.93%
Class C...................... 1.93%
High Yield Bond Fund
Class A#..................... 1.36%
Class B#..................... 2.01%
Class C#..................... 2.01%
Tax Exempt Insured Fund
Class A...................... 1.26%
Class B...................... 2.11%
Class C#..................... 1.95%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 183 days divided by 365
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges, small account fees
and administrative fees, if applicable to your account. Please refer to your
Prospectus and/or qualified retirement plan document for more information.
# During the stated period, the investment adviser either waived a portion of
or all fees and assumed a portion of or all expenses for the Funds. As a
result, if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended September 30,
2006" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2006 -- (unaudited)
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
ASSETS:
Long-term investment securities, at value* (unaffiliated)................. $159,635,445 $409,845,619 $501,332,059
Short-term investment securities, at value* (unaffiliated)................ -- -- 28,214,000
Repurchase agreements (cost equals market)................................ 13,510,000 -- 12,365,000
------------ ------------ ------------
Total investments....................................................... 173,145,445 409,845,619 541,911,059
------------ ------------ ------------
Cash...................................................................... 958 -- 21,284,659
Foreign cash*............................................................. -- -- 927,381
Receivable for:
Shares of beneficial interest sold...................................... 988,213 1,107,495 5,799,732
Dividends and interest.................................................. 1,176,366 2,284,313 7,636,590
Investments sold........................................................ -- -- 6,520,423
Prepaid expenses and other assets......................................... 1,660 3,969 2,107
Due from investment adviser for expense reimbursements/fee waivers........ 51,289 105,696 --
------------ ------------ ------------
Total assets.............................................................. 175,363,931 413,347,092 584,081,951
------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.................................. 166,764 716,966 928,616
Investments purchased................................................... -- -- 15,888,696
Investment advisory and management fees................................. 91,246 153,205 281,973
Distribution and service maintenance fees............................... 62,690 171,460 251,897
Transfer agent fees and expenses........................................ 46,217 120,636 85,168
Trustees' fees and expenses............................................. 96,711 56,433 23,132
Line of credit.......................................................... -- 1,312,708 --
Other accrued expenses.................................................. 63,047 91,266 90,656
Dividends payable......................................................... 110,072 215,581 517,289
Securities sold short, at value#.......................................... -- -- 646,196
------------ ------------ ------------
Total liabilities......................................................... 636,747 2,838,255 18,713,623
------------ ------------ ------------
Net Assets................................................................ $174,727,184 $410,508,837 $565,368,328
============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value............................ $ 188,843 $ 370,804 $ 1,587,408
Paid-in capital........................................................... 188,359,871 417,477,982 585,339,113
------------ ------------ ------------
188,548,714 417,848,786 586,926,521
Accumulated undistributed net investment income (loss).................... 28,557 (366,643) 400,854
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short and foreign exchange transactions....... (13,237,465) (5,105,381) (28,476,833)
Unrealized appreciation (depreciation) on investments..................... (612,622) (1,867,925) 6,542,043
Unrealized appreciation (depreciation) on foreign exchange transactions... -- -- (24,257)
------------ ------------ ------------
Net Assets.............................................................. $174,727,184 $410,508,837 $565,368,328
============ ============ ============
*Cost
Long-term investment securities (unaffiliated).......................... $160,248,067 $411,713,544 $494,790,016
============ ============ ============
Short-term investment securities (unaffiliated)......................... $ -- $ -- $ 28,214,000
============ ============ ============
Foreign currency........................................................ $ -- $ -- $ 949,727
============ ============ ============
#Proceeds from securities sold short...................................... $ -- $ -- $ 646,196
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
ASSETS:
Long-term investment securities, at value* (unaffiliated)................. $265,831,247 $54,459,245
Short-term investment securities, at value* (unaffiliated)................ -- 9,900,215
Repurchase agreements (cost equals market)................................ 28,102,000 --
------------ -----------
Total investments....................................................... 293,933,247 64,359,460
------------ -----------
Cash...................................................................... 30,193 --
Foreign cash*............................................................. 150,189 --
Receivable for:
Shares of beneficial interest sold...................................... 3,893,880 26,138
Dividends and interest.................................................. 5,070,303 785,922
Investments sold........................................................ 3,836,597 --
Prepaid expenses and other assets......................................... 44,248 607
Due from investment adviser for expense reimbursements/fee waivers........ 88,790 1,023
------------ -----------
Total assets.............................................................. 307,047,447 65,173,150
------------ -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.................................. 325,623 22,563
Investments purchased................................................... 479,050 2,035,040
Investment advisory and management fees................................. 178,233 26,019
Distribution and service maintenance fees............................... 156,669 23,712
Transfer agent fees and expenses........................................ 57,841 19,686
Trustees' fees and expenses............................................. 49,943 30,322
Line of credit.......................................................... -- --
Other accrued expenses.................................................. 88,363 49,901
Dividends payable......................................................... 610,027 55,770
Securities sold short, at value#.......................................... -- --
------------ -----------
Total liabilities......................................................... 1,945,749 2,263,013
------------ -----------
Net Assets................................................................ $305,101,698 $62,910,137
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value............................ $ 647,882 $ 49,335
Paid-in capital........................................................... 382,348,920 59,524,175
------------ -----------
382,996,802 59,573,510
Accumulated undistributed net investment income (loss).................... (1,328,534) (17,076)
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short and foreign exchange transactions....... (90,975,561) 420,787
Unrealized appreciation (depreciation) on investments..................... 14,412,519 2,932,916
Unrealized appreciation (depreciation) on foreign exchange transactions... (3,528) --
------------ -----------
Net Assets.............................................................. $305,101,698 $62,910,137
============ ===========
*Cost
Long-term investment securities (unaffiliated).......................... $251,418,728 $51,526,329
============ ===========
Short-term investment securities (unaffiliated)......................... $ -- $ 9,900,215
============ ===========
Foreign currency........................................................ $ 153,717 $ --
============ ===========
#Proceeds from securities sold short...................................... $ -- $ --
============ ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30,
2006 -- (unaudited) (continued)
U.S. Government Strategic High Yield Tax Exempt
Securities GNMA Bond Bond Insured
Fund Fund Fund Fund Fund
--------------- ------------ ------------ ------------ -----------
Class A (unlimited shares authorized):
Net assets.................................................. $149,016,630 $308,835,825 $377,587,069 $166,187,155 $52,787,457
Shares of beneficial interest issued and outstanding........ 16,105,358 27,916,972 106,112,027 35,354,004 4,139,752
Net asset value and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 9.25 $ 11.06 $ 3.56 $ 4.70 $ 12.75
Maximum sales charge (4.75% of offering price).............. 0.46 0.55 0.18 0.23 0.64
------------ ------------ ------------ ------------ -----------
Maximum offering price to public............................ $ 9.71 $ 11.61 $ 3.74 $ 4.93 $ 13.39
============ ============ ============ ============ ===========
Class B (unlimited shares authorized):
Net assets.................................................. $ 17,076,645 $ 66,021,089 $ 50,373,492 $ 52,604,705 $ 5,819,680
Shares of beneficial interest issued and outstanding........ 1,844,868 5,952,561 14,157,821 11,173,487 456,289
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 9.26 $ 11.09 $ 3.56 $ 4.71 $ 12.75
============ ============ ============ ============ ===========
Class C (unlimited shares authorized):
Net assets.................................................. $ 8,633,909 $ 35,651,923 $137,407,767 $ 86,309,838 $ 4,303,000
Shares of beneficial interest issued and outstanding........ 934,042 3,210,863 38,470,923 18,260,686 337,473
Net asset value, offering and redemption price per share
(excluding any applicable contingent deferred sales charge) $ 9.24 $ 11.10 $ 3.57 $ 4.73 $ 12.75
============ ============ ============ ============ ===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30, 2006
-- (unaudited)
U.S. Government Strategic
Securities Fund GNMA Fund Bond Fund
--------------- ----------- -----------
INCOME:
Dividends* (unaffiliated)......................... $ -- $ -- $ 85,514
Interest (unaffiliated)........................... 4,491,023 10,420,775 15,710,484
---------- ----------- -----------
Total investment income......................... 4,491,023 10,420,775 15,795,998
---------- ----------- -----------
EXPENSES:
Investment advisory and management fees........... 557,316 937,804 1,522,158
Distribution and service maintenance fees:
Class A......................................... 255,194 526,570 555,556
Class B......................................... 88,232 350,863 238,548
Class C......................................... 40,051 186,879 567,045
Transfer agent fees:
Class A......................................... 181,727 356,790 351,293
Class B......................................... 22,293 92,379 52,481
Class C......................................... 10,687 47,518 124,823
Registration fees:
Class A......................................... 3,203 7,054 23,469
Class B......................................... 2,928 7,094 7,416
Class C......................................... 293 5,580 17,283
Custodian and accounting fees..................... 39,060 77,781 217,604
Reports to shareholders........................... 11,026 44,150 51,237
Audit and tax fees................................ 16,699 17,248 16,287
Legal fees........................................ 2,955 13,878 21,330
Trustees' fees and expenses....................... 8,325 18,829 8,023
Interest expense.................................. 4,332 2,202 32
Other expenses.................................... 5,909 9,880 7,471
---------- ----------- -----------
Total expenses before fee waivers, expense
reimbursements and custody credits............. 1,250,230 2,702,499 3,782,056
Fees waived and expenses reimbursed by
investment advisor (Note 3).................... (317,453) (330,871) --
Custody credits earned on cash balances......... (557) (343) (217,604)
---------- ----------- -----------
Net expenses.................................... 932,220 2,371,285 3,564,452
---------- ----------- -----------
Net investment income (loss)....................... 3,558,803 8,049,490 12,231,546
---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments
(unaffiliated).................................... (999,304) (1,533,432) 105,289
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... -- -- (483,314)
---------- ----------- -----------
Net realized gain (loss) on investments and
foreign currencies................................ (999,304) (1,533,432) (378,025)
---------- ----------- -----------
Change in unrealized appreciation (depreciation)
on investments (unaffiliated)..................... 2,626,815 4,216,265 4,820,615
Change in unrealized foreign exchange gain (loss)
on other assets and liabilities................... -- -- (100,740)
---------- ----------- -----------
Net unrealized gain (loss) on investments and
foreign currencies................................ 2,626,815 4,216,265 4,719,875
---------- ----------- -----------
Net realized and unrealized gain (loss) on
investments and foreign currencies................ 1,627,511 2,682,833 4,341,850
---------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $5,186,314 $10,732,323 $16,573,396
========== =========== ===========
*Net of foreign withholding taxes on interest
and dividends of................................ $ -- $ -- $ 44,138
========== =========== ===========
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30,
2006 -- (unaudited) (continued)
HighYield Tax Exempt
Bond Fund Insured Fund
----------- ------------
INCOME:
Dividends* (unaffiliated)......................... $ 99,207 $ --
Interest (unaffiliated)........................... 12,458,935 1,480,533
----------- ----------
Total investment income......................... 12,558,142 1,480,533
----------- ----------
EXPENSES:
Investment advisory and management fees........... 1,100,842 162,711
Distribution and service maintenance fees:
Class A......................................... 299,757 95,272
Class B......................................... 257,537 31,143
Class C......................................... 373,180 22,075
Transfer agent fees:
Class A......................................... 192,079 60,590
Class B......................................... 58,900 7,885
Class C......................................... 84,836 5,396
Registration fees:
Class A......................................... 21,933 13,944
Class B......................................... 7,428 6,843
Class C......................................... 8,756 2,579
Custodian and accounting fees..................... 54,719 15,447
Reports to shareholders........................... 41,790 --
Audit and tax fees................................ 16,964 15,994
Legal fees........................................ 21,270 5,269
Trustees' fees and expenses....................... 11,485 3,073
Interest expense.................................. 68,909 --
Other expenses.................................... 9,411 4,318
----------- ----------
Total expenses before fee waivers, expense
reimbursements and custody credits............. 2,629,796 452,539
Fees waived and expenses reimbursed by
investment advisor............................. (193,854) (1,023)
Custody credits earned on cash balances (Note
3)............................................. (3,430) (166)
----------- ----------
Net expenses.................................... 2,432,512 451,350
----------- ----------
Net investment income (loss)....................... 10,125,630 1,029,183
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments
(unaffiliated).................................... 1,503,496 2,208
Net realized foreign exchange gain (loss) on
other assets and liabilities...................... -- --
----------- ----------
Net realized gain (loss) on investments and
foreign currencies................................ 1,503,496 2,208
----------- ----------
Change in unrealized appreciation (depreciation)
on investments (unaffiliated)..................... 3,751,244 772,794
Change in unrealized foreign exchange gain (loss)
on other assets and liabilities................... 6,650 --
----------- ----------
Net unrealized gain (loss) on investments and
foreign currencies................................ 3,757,894 772,794
----------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currencies................ 5,261,390 775,002
----------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $15,387,020 $1,804,185
=========== ==========
*Net of foreign withholding taxes on interest
and dividends of................................ $ -- $ --
=========== ==========
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
U.S. Government
Securities Fund GNMA Fund
-------------------------- --------------------------
For the For the
six months six months
ended For the year ended For the year
September 30, ended September 30, ended
2006 March 31, 2006 March 31,
(unaudited) 2006 (unaudited) 2006
------------- ------------ ------------- ------------
Operations:
Net investment income (loss)..................... $ 3,558,803 $ 7,348,908 $ 8,049,490 $ 14,040,017
Net realized gain (loss) on investments and
foreign currencies............................. (999,304) (2,629,101) (1,533,432) (1,409,187)
Net unrealized gain (loss) on investments and
foreign currencies............................. 2,626,815 (1,138,951) 4,216,265 (2,932,719)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................. 5,186,314 3,580,856 10,732,323 9,698,111
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (Class A).................. (3,122,313) (6,505,119) (6,474,790) (11,887,262)
Net investment income (Class B).................. (320,385) (786,554) (1,280,056) (2,666,840)
Net investment income (Class C).................. (145,425) (307,714) (681,867) (1,429,033)
Net investment income (Class Z).................. -- -- -- --
Net investment income (Class X).................. -- -- -- (10,305)
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 Z)........ -- -- -- --
Net realized gain on securities (Class X)........ -- -- -- --
------------ ------------ ------------ ------------
Total distributions to shareholders............... (3,588,123) (7,599,387) (8,436,713) (17,744,508)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from capital share transactions (Note 6)......... (5,712,484) (29,003,495) (11,621,426) (68,594,450)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets........... (4,114,293) (33,022,026) (9,325,816) (76,640,847)
NET ASSETS:
Beginning of period............................... 178,841,477 211,863,503 419,834,653 496,475,500
------------ ------------ ------------ ------------
End of period+.................................... $174,727,184 $178,841,477 $410,508,837 $419,834,653
============ ============ ============ ============
- --------
+Includes accumulated undistributed net
investment income (loss)......................... $ 28,557 $ 57,877 $ (366,643) $ 20,580
============ ============ ============ ============
See Notes to Financial Statements
9
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
Strategic Bond Fund High Yield Bond Fund
-------------------------- --------------------------
For the For the
six months six months
ended For the year ended For the year
September 30, ended September 30, ended
2006 March 31, 2006 March 31,
(unaudited) 2006 (unaudited) 2006
------------- ------------ ------------- ------------
Operations:
Net investment income (loss)..................... $ 12,231,546 $ 10,165,505 $ 10,125,630 $ 21,938,661
Net realized gain (loss) on investments and
foreign currencies............................. (378,025) 3,525,730 1,503,496 16,381,114
Net unrealized gain (loss) on investments and
foreign currencies............................. 4,719,875 (1,597,716) 3,757,894 (3,300,370)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations.................................. 16,573,396 12,093,519 15,387,020 35,019,405
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (Class A).................. (8,198,850) (5,369,145) (5,646,159) (11,905,182)
Net investment income (Class B).................. (1,074,312) (1,942,089) (1,533,798) (3,703,477)
Net investment income (Class C).................. (2,557,305) (2,927,876) (2,223,673) (4,398,206)
Net investment income (Class Z).................. -- -- -- (1,686,486)
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 Z)........ -- -- -- --
Net realized gain on securities (Class X)........ -- -- -- --
------------ ------------ ------------ ------------
Total distributions to shareholders............... (11,830,467) (10,239,110) (9,403,630) (21,693,351)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from capital share transactions (Note 6)......... 249,608,429 175,766,449 (37,408,769) 5,307,491
------------ ------------ ------------ ------------
Total increase (decrease) in net assets........... 254,351,358 177,620,858 (31,425,379) 18,633,545
NET ASSETS:
Beginning of period............................... 311,016,970 133,396,112 336,527,077 317,893,532
------------ ------------ ------------ ------------
End of period+.................................... $565,368,328 $311,016,970 $305,101,698 $336,527,077
============ ============ ============ ============
- --------
+Includes accumulated undistributed net
investment income (loss)......................... $ 400,854 $ (225) $ (1,328,534) $ (2,050,534)
============ ============ ============ ============
See Notes to Financial Statements
10
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
Tax Exempt Insured Fund
-------------------------
For the
six months
ended For the year
September 30, ended
2006 March 31,
(unaudited) 2006
------------- ------------
Operations:
Net investment income (loss)..................... $ 1,029,183 $ 2,192,275
Net realized gain (loss) on investments and
foreign currencies............................. 2,208 828,946
Net unrealized gain (loss) on investments and
foreign currencies............................. 772,794 (1,242,127)
----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. 1,804,185 1,779,094
----------- -----------
Distributions to shareholders from:
Net investment income (Class A).................. (902,877) (1,839,250)
Net investment income (Class B).................. (79,061) (194,099)
Net investment income (Class C).................. (58,170) (132,474)
Net investment income (Class Z).................. -- --
Net investment income (Class X).................. -- --
Net realized gain on securities (Class A)........ -- (587,815)
Net realized gain on securities (Class B)........ -- (75,670)
Net realized gain on securities (Class C)........ -- (52,856)
Net realized gain on securities (Class Z)........ -- --
Net realized gain on securities (Class X)........ -- --
----------- -----------
Total distributions to shareholders............... (1,040,108) (2,882,164)
----------- -----------
Net increase (decrease) in net assets resulting
from capital share transactions (Note 6)......... (5,919,195) (7,564,719)
----------- -----------
Total increase (decrease) in net assets........... (5,155,118) (8,667,789)
NET ASSETS:
Beginning of period............................... 68,065,255 76,733,044
----------- -----------
End of period+.................................... $62,910,137 $68,065,255
=========== ===========
--------
+Includes accumulated undistributed net
investment income (loss)......................... $ (17,076) $ (6,151)
=========== ===========
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS
U.S. GOVERNMENT SECURITIES 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
-------
03/31/02 $8.91 $0.37(4) $(0.08) $ 0.29 $(0.40) $-- $(0.40) $8.80 3.25% $187,615
03/31/03 8.80 0.37 0.86 1.23 (0.40) -- (0.40) 9.63 14.14 210,848
03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618
03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905
03/31/06 9.37 0.36 (0.20) 0.16 (0.37) -- (0.37) 9.16 1.68 151,284
04/01/06-09/30/06+ 9.16 0.19 0.10 0.29 (0.20) -- (0.20) 9.25 3.17 149,016
Class B
-------
03/31/02 $8.91 $0.31(4) $(0.08) $ 0.23 $(0.34) $-- $(0.34) $8.80 2.55% $ 38,878
03/31/03 8.80 0.30 0.87 1.17 (0.33) -- (0.33) 9.64 13.51 62,595
03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605
03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013
03/31/06 9.37 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.16 1.02 19,276
04/01/06-09/30/06+ 9.16 0.17 0.10 0.27 (0.17) -- (0.17) 9.26 2.94 17,077
Class C*
--------
03/31/02 $8.91 $0.29(4) $(0.09) $ 0.20 $(0.32) $-- $(0.32) $8.79 2.40% $ 12,209
03/31/03 8.79 0.30 0.87 1.17 (0.33) -- (0.33) 9.63 13.52 24,322
03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139
03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945
03/31/06 9.36 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.15 1.02 8,281
04/01/06-09/30/06+ 9.15 0.16 0.10 0.26 (0.17) -- (0.17) 9.24 2.83 8,634
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.42% 4.12%(4) 579%(5)
1.12(3) 3.88(3) 630(5)
0.99(3) 3.14(3) 267(5)
0.99(3) 3.26(3) 253(5)
0.99(3) 3.80(3) 357
0.99(3)(6) 4.25(3)(6) 147
2.09%(3) 3.42%(3)(4) 579%(5)
1.76(3) 3.20(3) 630(5)
1.64(3) 2.45(3) 267(5)
1.64(3) 2.61(3) 253(5)
1.64(3) 3.14(3) 357
1.64(3)(6) 3.60(3)(6) 147
2.10%(3) 3.33%(3)(4) 579%(5)
1.75(3) 3.18(3) 630(5)
1.64(3) 2.45(3) 267(5)
1.64(3) 2.61(3) 253(5)
1.64(3) 3.14(3) 357
1.64(3)(6) 3.60(3)(6) 147
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)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 09/30/06(6)+
-------- -------- -------- -------- -------- ------------
U.S. Government Securities Fund Class A. -- % 0.21% 0.37% 0.39% 0.36% 0.37%
U.S. Government Securities Fund Class B. 0.01 0.23 0.37 0.43 0.43 0.40
U.S. Government Securities Fund Class C. 0.16 0.27 0.38 0.48 0.57 0.39
(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%
(6)Annualized
See Notes to Financial Statements
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA 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
- -
03/31/02 $11.12 $0.51(5) $(0.03) $0.48 $(0.51) $(0.32) $(0.83) $10.77 4.45% $118,440
03/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096
03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467
03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031
03/31/06 11.20 0.35 (0.07) 0.28 (0.40) (0.08) (0.48) 11.00 2.18 303,343
04/01/06-09/30/06+ 11.00 0.22 0.08 0.30 (0.24) -- (0.24) 11.06 2.73 308,836
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
03/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323
03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923
03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497
03/31/06 11.23 0.28 (0.08) 0.20 (0.33) (0.08) (0.41) 11.02 1.43 76,304
04/01/06-09/30/06+ 11.02 0.19 0.08 0.27 (0.20) -- (0.20) 11.09 2.49 66,021
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
03/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173
03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184
03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936
03/31/06 11.24 0.28 (0.07) 0.21 (0.33) (0.08) (0.41) 11.04 1.53 40,188
04/01/06-09/30/06+ 11.04 0.19 0.07 0.26 (0.20) -- (0.20) 11.10 2.40 35,652
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
0.99%(3)(4) 4.61%(3)(4)(5) 544%(6)
0.99(4) 3.36(4) 436(6)
0.99(4) 2.51(4) 225(6)
0.99(4) 2.73(4) 204(6)
0.99(4) 3.17(4) 138
0.99(4)(7) 4.11(4)(7) 59
1.64%(3)(4) 3.96%(3)(4)(5) 544%(6)
1.64(4) 2.71(4) 436(6)
1.64(4) 1.77(4) 225(6)
1.64(4) 2.10(4) 204(6)
1.64(4) 2.50(4) 138
1.64(4)(7) 3.46(4)(7) 59
1.64%(3)(4) 3.96%(3)(4)(5) 544%(6)
1.64(4) 2.59(4) 436(6)
1.64(4) 1.74(4) 225(6)
1.64(4) 2.11(4) 204(6)
1.64(4) 2.49(4) 138
1.64(4)(7) 3.46(4)(7) 59
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)The ratios 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.
(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 09/30/06(7)+
-------- -------- -------- -------- -------- ------------
GNMA Fund Class A............. 0.19% 0.13% 0.18% 0.17% 0.13% 0.15%
GNMA Fund Class B............. 0.19 0.14 0.16 0.18 0.17 0.19
GNMA Fund Class C............. 0.21 0.13 0.16 0.18 0.19 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%
(7)Annualized
See Notes to Financial Statements
13
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
04/01/06-09/30/06++ 3.53 0.09 0.03 0.12 (0.09) -- (0.09) 3.56 3.49 377,587
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
04/01/06-09/30/06++ 3.53 0.08 0.03 0.11 (0.08) -- (0.08) 3.56 3.14 50,373
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
04/01/06-09/30/06++ 3.54 0.08 0.03 0.11 (0.08) -- (0.08) 3.57 3.15 137,408
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(5)(9) 71(10)
1.40(5)(8) 5.94(5)(8) 190(10)
1.34(5)(11) 5.19(5)(11) 119
1.27(4)(12) 5.34(4)(12) 68
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
1.93(4)(12) 4.67(4)(12) 68
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
1.93(4)(12) 4.67(4)(12) 68
- --------
* 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.
++ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)The ratios reflect an expense cap of 2.22%, for Class C, which is net of
custody credits of 0.02% for Class C. Class A and Class B are gross of
custody credits of 0.03% for the period ended March 31, 2002.
(4)Annualized
(5)Net of the following expense reimbursements, 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 of 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%.
(12)Net of custody credits of 0.09%
See Notes to Financial Statements
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD 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+ 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
04/01/06-09/30/06++ 4.60 0.17 0.08 0.25 (0.15) -- (0.15) 4.70 5.60 166,187
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
04/01/06-09/30/06++ 4.61 0.15 0.09 0.24 (0.14) -- (0.14) 4.71 5.25 52,605
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
04/01/06-09/30/06++ 4.63 0.15 0.09 0.24 (0.14) -- (0.14) 4.73 5.24 86,310
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
1.36(4)(5) 7.06(4)(5) 30
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
2.01(4)(5) 6.47(4)(5) 30
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
2.01(4)(5) 6.46(4)(5) 30
- --------
* 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.
++ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)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 09/30/06(4)++
-------- ----------- -------- -------- -------- -------- -------------
High Yield Bond Fund Class A............ 0.18% -- % -- % -- % 0.08% 0.11% 0.13%
High Yield Bond Fund Class B............ 0.18 -- -- -- 0.07 0.14 0.14
High Yield Bond Fund Class C............ 0.18 0.01 0.10 0.01 0.09 0.12 0.13
(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
15
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,
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
- -
03/31/02 $13.02 $0.52(5) $(0.30) $0.22 $(0.52) $ -- $(0.52) $12.72 1.70% $75,071
03/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 13.34 9.08 78,358
03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098
03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032
03/31/06 12.81 0.41 (0.10) 0.31 (0.40) (0.13) (0.53) 12.59 2.43 56,875
04/01/06-09/30/06+ 12.59 0.21 0.16 0.37 (0.21) -- (0.21) 12.75 2.96 52,787
Class B
- -
03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.95% $18,090
03/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 13.34 8.30 19,031
03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632
03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000
03/31/06 12.82 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.60 1.77 6,694
04/01/06-09/30/06+ 12.60 0.16 0.15 0.31 (0.16) -- (0.16) 12.75 2.48 5,820
Class C*
- -
03/31/02 $13.02 $0.41(5) $(0.28) $0.13 $(0.43) $ -- $(0.43) $12.72 0.99% $ 4,095
03/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 13.34 8.32 6,451
03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803
03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701
03/31/06 12.81 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.59 1.81 4,497
04/01/06-09/30/06+ 12.59 0.16 0.17 0.33 (0.17) -- (0.17) 12.75 2.61 4,303
Ratio
of net
Ratio of investment
expenses income to
to average average Portfolio
net assets net assets Turnover
- ---------- ---------- ---------
1.29%(3) 3.99%(3)(5) 140%
1.24 3.12 195
1.26 2.90 131
1.25 3.14 153
1.30 3.14 81
1.26(6) 3.29(6) 42
2.04%(3) 3.22%(3)(5) 140%
1.97 2.39 195
1.96 2.20 131
1.94 2.44 153
1.95 2.48 81
2.11(6) 2.44(6) 42
1.95%(3)(4) 3.21%(3)(4)(5) 140%
1.95(4) 2.40(4) 195
1.95(4) 2.21(4) 131
1.95(4) 2.44(4) 153
1.95(4) 2.48(4) 81
1.95(4)(6) 2.60(4)(6) 42
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1) Calculated based upon average shares outstanding.
(2) Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3) The ratios for Class C reflects an expense cap of 1.95%, which is net of
custody credits of 0.01%. Ratios for Class A and Class B are gross of
custody credits of 0.01%.
(4) 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 09/30/06(6)+
-------- -------- -------- -------- -------- ------------
Tax Exempt Insured Fund Class C......... 0.56% 0.00% 0.12% 0.09% 0.20% 0.05%
(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.
(6)Annualized
See Notes to Financial Statements
16
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited)
Industry Allocation*
Government National Mortgage Association 40.1%
U.S. Treasury Notes..................... 25.0
U.S. Treasury Bonds..................... 18.0
Repurchase Agreements................... 7.7
Private Export Funding.................. 5.8
U.S. Government Agencies................ 1.3
Federal Farm Credit Bank................ 0.7
Federal National Mortgage Association... 0.5
Federal Home Loan Mortgage Corporation.. 0.0
----
99.1%
====
Credit Quality+#
Government -- Treasury 47.1%
Government -- Agency.. 46.5%
AA.................... 6.4%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source Standard and Poors.
# Calculated as a percentage of total debt issues, excluding short-term
securities.
17
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------
U.S. GOVERNMENT AGENCIES -- 48.4%
Federal Farm Credit Bank Consolidated -- 0.7%
5.64% due 04/04/11......................... $ 500,000 $ 514,493
6.00% due 03/07/11......................... 200,000 208,209
6.30% due 12/03/13, Series 1998 -- M4C(2).. 500,000 539,800
-----------
1,262,502
-----------
Federal Home Loan Mtg. Corp. -- 0.0%
8.00% due 06/01/08......................... 4,762 4,755
8.50% due 05/01/08......................... 69 69
-----------
4,824
-----------
Federal National Mtg. Assoc. -- 0.5%
6.53% due 05/25/30......................... 756,882 760,519
8.00% due 01/01/23......................... 34,690 36,645
11.00% due 02/01/15........................ 33 37
11.50% due 09/01/19........................ 10,623 11,631
-----------
808,832
-----------
Private Export Funding Corp. -- 5.8%
5.87% due 07/31/08......................... 10,000,000 10,154,030
-----------
Government National Mtg. Assoc. -- 40.1%
4.50% due 05/15/18......................... 1,079,919 1,048,217
4.50% due 08/15/18......................... 1,756,758 1,705,187
4.50% due 09/15/18......................... 4,839,630 4,697,556
4.50% due 10/15/18......................... 4,805,520 4,664,448
4.50% due 09/15/33......................... 5,129,746 4,855,340
5.00% due 04/15/18......................... 5,113,034 5,058,159
5.00% due 08/15/33......................... 2,106,897 2,050,987
5.00% due 09/15/33......................... 964,892 939,287
5.00% due 10/15/33......................... 671,070 653,261
5.00% due 11/15/34......................... 227,989 221,691
5.50% due 11/15/32......................... 16,015 15,924
5.50% due 03/15/33......................... 517,114 514,165
5.50% due 04/15/33......................... 665,776 661,981
5.50% due 05/15/33......................... 1,458,819 1,450,506
5.50% due 06/15/33......................... 6,890,695 6,851,426
5.50% due 07/15/33......................... 1,909,021 1,898,142
5.50% due 10/15/33......................... 1,928,839 1,917,847
5.50% due 12/15/33......................... 388,061 385,849
5.50% due 01/15/34......................... 3,805,023 3,782,751
5.50% due 02/15/34......................... 2,291,592 2,278,177
6.00% due 01/15/28......................... 4,194 4,257
6.00% due 04/15/28......................... 1,459,184 1,480,495
6.00% due 05/15/28......................... 3,052 3,098
6.00% due 10/15/28......................... 16,432 16,678
6.00% due 03/15/29......................... 102,723 104,183
6.00% due 04/15/29......................... 52,758 53,508
6.00% due 05/15/29......................... 95,278 96,632
6.00% due 06/15/29......................... 29,961 30,387
6.00% due 04/15/31......................... 30,956 31,380
6.00% due 05/15/31......................... 59,019 59,828
6.00% due 11/15/31......................... 232,970 236,163
6.00% due 12/15/31......................... 415,464 421,159
6.00% due 01/15/32......................... 197,255 199,986
6.00% due 02/15/32......................... 46,538 47,182
6.00% due 03/15/32......................... 10,428 10,572
6.00% due 08/15/32......................... 320,405 324,840
6.00% due 11/15/32......................... 44,105 44,716
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Government National Mtg. Assoc. (continued)
6.00% due 12/15/32....................... $ 9,620 $ 9,753
6.00% due 01/15/33....................... 20,416 20,690
6.00% due 02/15/33....................... 64,047 64,906
6.00% due 03/15/33....................... 105,154 106,565
6.00% due 04/15/33....................... 413,279 418,822
6.00% due 07/15/33....................... 287,993 291,856
6.00% due 08/15/33....................... 2,863,804 2,903,304
6.00% due 09/15/33....................... 408,536 414,017
6.00% due 10/15/33....................... 1,746,452 1,769,885
6.00% due 11/15/33....................... 197,557 200,207
6.00% due 12/15/33....................... 989,495 1,002,770
6.00% due 02/15/34....................... 434,535 440,406
6.00% due 05/15/34....................... 55,769 56,522
6.00% due 06/15/34....................... 47,013 47,648
6.00% due 07/15/34....................... 1,567,066 1,588,237
6.00% due 08/15/34....................... 207,458 210,261
6.00% due 09/15/34....................... 1,409,221 1,428,260
6.00% due 10/15/34....................... 5,715,860 5,793,083
6.00% due 12/15/34....................... 492,628 499,283
6.00% due 06/15/35....................... 353,752 358,092
6.00% due 08/15/35....................... 423,494 428,690
6.50% due 02/15/29....................... 18,427 18,955
6.50% due 05/15/31....................... 21,233 21,816
6.50% due 06/15/31....................... 65,330 67,124
6.50% due 07/15/31....................... 56,268 57,813
6.50% due 08/15/31....................... 82,708 84,979
6.50% due 09/15/31....................... 192,509 197,796
6.50% due 10/15/31....................... 379,649 390,076
6.50% due 11/15/31....................... 13,833 14,213
6.50% due 12/15/31....................... 22,644 23,266
6.50% due 01/15/32....................... 34,547 35,481
6.50% due 02/15/32....................... 660,208 678,057
6.50% due 06/15/32....................... 51,678 53,076
7.00% due 07/15/23....................... 36,916 38,113
7.00% due 10/15/23....................... 88,041 90,897
7.00% due 09/15/25....................... 272,615 281,710
7.00% due 03/20/29....................... 20,275 20,870
7.00% due 06/20/29....................... 3,378 3,477
7.00% due 11/20/30....................... 87,109 89,665
7.50% due 04/15/17....................... 10,998 11,394
7.50% due 08/15/23....................... 208,719 217,343
7.50% due 09/15/23....................... 606,292 631,346
7.50% due 10/15/23....................... 16,872 17,570
8.00% due 02/15/08....................... 407 413
9.00% due 12/15/16....................... 82,475 88,225
11.00% due 08/20/15...................... 235 258
11.00% due 09/20/15...................... 547 602
11.50% due 05/20/15...................... 3,838 4,281
12.50% due 09/15/14...................... 6,834 7,604
13.00% due 01/15/11...................... 2,410 2,677
13.00% due 02/15/11...................... 2,793 3,102
13.00% due 03/15/11...................... 222 246
13.00% due 04/15/11...................... 496 551
13.00% due 09/15/13...................... 5,009 5,591
13.00% due 10/20/14...................... 1,122 1,237
13.00% due 11/15/14...................... 756 846
13.00% due 02/20/15...................... 675 747
18
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
13.50% due 02/15/13................... $ 11,147 $ 12,536
15.00% due 01/15/12................... 445 508
15.00% due 02/15/12................... 1,080 1,235
15.00% due 06/15/12................... 11,569 13,224
15.00% due 09/15/12................... 643 735
15.50% due 09/15/11................... 34,918 39,826
------------
70,098,703
------------
Small Business Administration -- 1.3%
6.30% due 06/01/18..................... 2,136,145 2,193,754
------------
Total U.S. Government Agencies
(cost $85,793,195)................... 84,522,645
------------
U.S. GOVERNMENT TREASURIES -- 43.0%
United States Treasury Bonds -- 18.0%
4.50% due 02/15/36................... 16,000,000 15,331,248
5.38% due 02/15/31................... 15,000,000 16,201,170
------------
31,532,418
------------
United States Treasury Notes -- 25.0%
4.50% due 11/15/15................... 8,000,000 7,922,496
4.50% due 02/15/16................... 2,000,000 1,979,922
4.88% due 08/15/16................... 20,000,000 20,378,120
5.13% due 05/15/16................... 7,000,000 7,261,408
5.13% due 06/30/08................... 6,000,000 6,038,436
------------
43,580,382
------------
Total U.S. Government Treasuries
(cost $74,454,872)................... 75,112,800
------------
Total Long-Term Investment Securities
(cost $160,248,067).................. 159,635,445
------------
REPURCHASE AGREEMENTS -- 7.7%
UBS Securities, LLC Joint Repurchase
Agreement Account (1)
(cost $13,510,000)................... 13,510,000 13,510,000
------------
TOTAL INVESTMENTS
(cost $173,758,067) @................ 99.1% 173,145,445
Other assets less liabilities........... 0.9 1,581,739
----------- ------------
NET ASSETS -- 100.0% $174,727,184
=========== ============
- --------
@ See Note 5 for cost of investment on a tax basis
(1)See Note 2 for details of Joint Repurchase Agreements
(2)Collateralized Mortgage Obligation
See Note to Financial Statements
19
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited)
Industry Allocation*
Government National Mortgage Association 80.7%
U.S. Treasury Notes..................... 15.1
U.S. Treasury Bonds..................... 2.1
Federal National Mortgage Association... 1.7
Small Business Administration........... 0.2
----
99.8%
====
Credit Quality+#
Government -- Agency.. 82.7%
Government -- Treasury 17.3
-----
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.
20
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 82.6%
Federal National Mtg. Assoc. -- 1.7%
5.00% due 01/25/18(1)................. $ 7,145,761 $ 7,104,678
-----------
Government National Mtg. Assoc. -- 80.7%
4.50% due 05/15/18.................... 2,159,838 2,096,433
4.50% due 08/15/18.................... 1,177,474 1,142,908
4.50% due 09/15/18.................... 3,669,252 3,561,536
4.50% due 10/15/18.................... 5,470,473 5,309,880
4.50% due 08/15/33.................... 3,357,718 3,178,104
4.50% due 09/15/33.................... 3,616,733 3,423,263
5.00% due 03/15/18.................... 585,746 579,460
5.00% due 04/15/18.................... 8,144,655 8,057,245
5.00% due 05/15/18.................... 10,936,174 10,818,802
5.00% due 01/15/33.................... 18,439 17,950
5.00% due 05/15/33.................... 14,050 13,676
5.00% due 08/15/33.................... 3,058,169 2,977,014
5.00% due 09/15/33.................... 2,939,163 2,861,166
5.00% due 10/15/33.................... 6,856,349 6,674,401
5.00% due 04/15/34.................... 65,593 63,781
5.00% due 05/15/34.................... 176,688 171,808
5.00% due 11/15/34.................... 780,051 758,504
5.00% due 12/15/34.................... 772,648 751,305
5.50% due 06/15/29.................... 6,635 6,599
5.50% due 01/15/32.................... 54,516 54,208
5.50% due 12/15/32.................... 860,330 855,456
5.50% due 01/15/33.................... 564,008 560,794
5.50% due 02/15/33.................... 2,244,087 2,231,299
5.50% due 03/15/33.................... 1,269,972 1,262,736
5.50% due 04/15/33.................... 6,734,506 6,696,131
5.50% due 05/15/33.................... 8,010,392 7,964,739
5.50% due 06/15/33.................... 8,932,500 8,881,617
5.50% due 07/15/33.................... 455,060 452,466
5.50% due 08/15/33.................... 2,811,901 2,795,877
5.50% due 09/15/33.................... 498,323 495,483
5.50% due 10/15/33.................... 7,514,812 7,471,987
5.50% due 12/15/33.................... 8,221,438 8,174,585
5.50% due 01/15/34.................... 11,863,280 11,793,839
5.50% due 02/15/34.................... 1,519,171 1,510,280
5.50% due 04/15/35.................... 2,811,588 2,793,102
5.50% due 07/15/35.................... 2,886,811 2,867,830
5.50% due 09/15/35.................... 28,210,241 28,024,762
5.50% due 10/15/35.................... 18,042,241 17,923,615
5.50% due 11/15/35.................... 35,551,010 35,317,266
5.50% due 12/15/35.................... 20,951,215 20,813,462
5.50% due 02/15/36.................... 2,840,782 2,821,803
5.50% due 03/15/36.................... 11,000,562 10,927,067
5.50% due 04/15/36.................... 488,966 485,700
5.50% due 05/15/36.................... 3,562,211 3,538,411
6.00% due 11/15/23.................... 6,846 6,939
6.00% due 01/15/24.................... 7,437 7,541
6.00% due 07/15/28.................... 5,272 5,351
6.00% due 11/15/28.................... 342,970 348,114
6.00% due 12/15/28.................... 378,140 383,813
6.00% due 01/15/29.................... 811,525 823,061
6.00% due 02/15/29.................... 833,779 845,630
6.00% due 03/15/29.................... 633,887 642,897
6.00% due 04/15/29.................... 1,656,305 1,680,015
6.00% due 05/15/29.................... 75,144 76,212
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
6.00% due 06/15/29....................... $ 662,684 $ 672,169
6.00% due 07/15/29....................... 228,629 231,880
6.00% due 08/15/29....................... 20,771 21,067
6.00% due 10/15/29....................... 107,126 108,648
6.00% due 04/15/31....................... 24,212 24,544
6.00% due 07/15/31....................... 15,444 15,656
6.00% due 10/15/31....................... 86,012 87,191
6.00% due 11/15/31....................... 1,594,897 1,616,760
6.00% due 12/15/31....................... 667,199 676,346
6.00% due 01/15/32....................... 789,839 800,772
6.00% due 02/15/32....................... 60,950 61,793
6.00% due 03/15/32....................... 516,228 523,374
6.00% due 07/15/32....................... 125,335 127,070
6.00% due 08/15/32....................... 1,887,308 1,913,245
6.00% due 09/15/32....................... 1,335,503 1,353,989
6.00% due 10/15/32....................... 226,446 229,580
6.00% due 11/15/32....................... 9,796 9,932
6.00% due 12/15/32....................... 173,359 175,759
6.00% due 01/15/33....................... 1,732,620 1,755,863
6.00% due 02/15/33....................... 1,930,927 1,956,832
6.00% due 03/15/33....................... 1,389,906 1,408,551
6.00% due 04/15/33....................... 1,674,488 1,696,950
6.00% due 05/15/33....................... 1,573,625 1,594,735
6.00% due 06/15/33....................... 1,254,919 1,271,755
6.00% due 08/15/33....................... 1,807,448 1,831,851
6.00% due 10/15/33....................... 592,460 600,408
6.00% due 11/15/33....................... 1,937,193 1,963,188
6.00% due 12/15/33....................... 3,561,525 3,609,305
6.00% due 01/15/34....................... 1,956,892 1,983,330
6.00% due 02/15/34....................... 12,759,878 12,932,267
6.00% due 03/15/34....................... 427,432 433,207
6.00% due 04/15/34....................... 4,076,225 4,131,296
6.00% due 05/15/34....................... 349,403 354,123
6.00% due 06/15/34....................... 358,720 363,567
6.00% due 07/15/34....................... 4,260,477 4,318,038
6.00% due 08/15/34....................... 6,113,505 6,196,115
6.00% due 09/15/34....................... 301,144 305,214
6.00% due 10/15/34....................... 958,605 971,556
6.00% due 11/15/34....................... 1,994,664 2,021,612
6.00% due 12/15/34....................... 76,369 77,401
6.00% due 01/15/35....................... 95,355 96,525
6.00% due 02/15/35....................... 1,343,804 1,360,292
6.00% due 04/15/35....................... 66,627 67,444
6.00% due 05/15/35....................... 137,077 138,759
6.00% due 06/15/35....................... 516,749 523,089
6.00% due 12/15/35....................... 1,587,324 1,606,804
6.00% due 01/15/36....................... 426,370 431,599
6.00% due 02/15/36....................... 1,845,956 1,868,591
6.00% due 03/15/36....................... 2,120,105 2,146,102
6.00% due 04/15/36....................... 5,794,207 5,865,260
6.00% due 05/15/36....................... 5,646,439 5,715,682
6.00% due 06/15/36....................... 2,292,296 2,320,406
6.50% due 03/15/28....................... 29,032 29,856
6.50% due 08/15/28....................... 44,383 45,656
6.50% due 12/15/28....................... 1,721 1,770
6.50% due 01/15/29....................... 5,579 5,739
6.50% due 02/15/29....................... 1,798 1,849
21
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
6.50% due 03/15/29....................... $ 120,347 $ 123,793
6.50% due 04/15/29....................... 2,059 2,118
6.50% due 05/15/29....................... 14,706 15,128
6.50% due 06/15/29....................... 43,548 44,795
6.50% due 07/15/29....................... 6,187 6,364
6.50% due 10/15/29....................... 6,468 6,654
6.50% due 08/15/31....................... 277,154 284,767
6.50% due 09/15/31....................... 17,787 18,276
6.50% due 10/15/31....................... 379,649 390,077
6.50% due 11/15/31....................... 182,978 188,004
6.50% due 12/15/31....................... 223,362 229,497
6.50% due 02/15/32....................... 309,917 318,296
6.50% due 05/15/32....................... 1,647,543 1,692,087
6.50% due 06/15/32....................... 125,820 129,220
7.00% due 03/15/23....................... 97,887 101,063
7.00% due 01/20/24....................... 739 761
7.00% due 03/20/24....................... 767 789
7.00% due 07/20/25....................... 4,203 4,328
7.00% due 09/15/25....................... 118,391 122,341
7.00% due 01/20/29....................... 47,695 49,094
7.00% due 02/20/29....................... 9,095 9,361
7.00% due 06/20/29....................... 16,752 17,243
7.00% due 07/20/29....................... 60,537 62,313
7.00% due 09/20/29....................... 6,113 6,293
7.00% due 10/20/29....................... 12,543 12,911
7.00% due 11/20/29....................... 4,175 4,297
7.00% due 03/20/30....................... 6,147 6,327
7.00% due 06/20/30....................... 10,681 10,994
7.00% due 08/20/30....................... 35,720 36,768
7.00% due 09/20/30....................... 29,996 30,876
7.00% due 10/20/30....................... 40,047 41,222
8.00% due 11/15/26....................... 214,319 227,172
8.00% due 12/15/29....................... 24,282 25,755
8.00% due 04/15/30....................... 44,092 46,719
8.00% due 05/15/30....................... 6,308 6,683
8.00% due 08/15/30....................... 43,325 45,906
8.50% due 03/15/17....................... 18,308 19,567
8.50% due 05/15/21....................... 53,697 57,744
8.50% due 12/15/22....................... 110,244 118,712
8.50% due 01/15/23....................... 118,963 128,255
8.50% due 09/15/24....................... 42,627 46,005
9.00% due 07/15/16....................... 81,526 87,210
9.00% due 10/15/16....................... 15,406 16,480
------------
331,442,550
------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Small Business Administration -- 0.2%
6.30% due 06/01/18.................... $ 712,048 $ 731,251
------------
Total U.S. Government Agencies
(cost $342,046,359).................. 339,278,479
------------
U.S. GOVERNMENT TREASURIES -- 17.2%
United States Treasury Bonds -- 2.1%
4.50% due 02/15/36................... 9,000,000 8,623,827
------------
United States Treasury Notes -- 15.1%
4.50% due 11/15/15................... 1,000,000 990,312
4.50% due 02/15/16................... 7,000,000 6,929,727
4.88% due 08/15/16................... 25,000,000 25,472,650
5.13% due 06/30/08................... 16,000,000 16,102,496
5.13% due 05/15/16................... 12,000,000 12,448,128
------------
61,943,313
------------
Total U.S. Government Treasuries
(cost $69,667,185)................... 70,567,140
------------
Total Long-Term Investment Securities
(cost $411,713,544).................. 409,845,619
------------
TOTAL INVESTMENTS
(cost $411,713,544)@................. 99.8% 409,845,619
Other Assets Less Liabilities........... 0.2 663,218
----------- ------------
NET ASSETS 100.0% $410,508,837
=========== ============
- --------
@ See Note 5 for cost of investment on a tax basis
(1)Collateralized Mortgaged Obligation
22
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited)
Industry Allocation*
Foreign Government Agencies........... 31.8%
U.S. Treasury Notes................... 5.2
Federal Home Loan Mtg. Corp........... 5.1
Time Deposits......................... 5.0
Federal National Mtg. Assoc........... 4.7
Diversified Financial Services........ 3.5
Finance-Auto Loans.................... 2.2
Repurchase Agreements................. 2.2
Oil Companies-Exploration & Production 1.7
U.S. Treasury Bonds................... 1.7
Cable TV.............................. 1.6
Cellular Telecom...................... 1.5
Pipelines............................. 1.4
Independent Power Producers........... 1.1
Telephone-Integrated.................. 1.1
Casino Hotels......................... 1.0
Electric-Integrated................... 1.0
Foreign Government Treasury........... 1.0
Transport-Air Freight................. 1.0
Airlines.............................. 0.9
Special Purpose Entities.............. 0.9
Television............................ 0.9
Real Estate Investment Trusts......... 0.8
Paper & Related Products.............. 0.7
Chemicals-Specialty................... 0.6
Medical-Drugs......................... 0.6
Oil-Field Services.................... 0.6
Telecom Services...................... 0.6
Auto-Cars/Light Trucks................ 0.5
Banks-Commercial...................... 0.5
Building & Construction Products-Misc. 0.5
Funeral Services & Related Items...... 0.5
Broadcast Services/Program............ 0.4
Containers-Metal/Glass................ 0.4
Insurance-Multi-line.................. 0.4
Rental Auto/Equipment................. 0.4
Savings & Loans/Thrifts............... 0.4
Banks-Super Regional.................. 0.3
Diversified Manufactured Operations... 0.3
Electric-Generation................... 0.3
Electronic Components-Semiconductors.. 0.3
Federal Home Loan Bank................ 0.3
Finance-Investment Banker/Broker...... 0.3
Insurance-Life/Health................. 0.3
Multimedia............................ 0.3
Retail-Drug Store..................... 0.3
Satellite Telecom..................... 0.3
Specified Purpose Acquisitions........ 0.3
Theaters.............................. 0.3
Applications Software................. 0.2
Commercial Services................... 0.2
Consumer Products-Misc................ 0.2
Containers-Paper/Plastic.............. 0.2
Electronics-Military.................. 0.2
Finance-Consumer Loans................ 0.2
Finance-Mortgage Loan/Banker.......... 0.2
Food-Meat Products.................... 0.2
Gambling (Non-Hotel).................. 0.2
Non-Hazardous Waste Disposal.......... 0.2
Office Automation & Equipment......... 0.2
Oil Companies-Integrated.............. 0.2
Retail-Restaurants................. 0.2%
Advertising Services............... 0.1
Aerospace/Defense.................. 0.1
Agricultural Chemicals............. 0.1
Agricultural Operations............ 0.1
Banks-Money Center................. 0.1
Beverages-Non-alcoholic............ 0.1
Beverages-Wine/Spirits............. 0.1
Brewery............................ 0.1
Building & Construction-Misc....... 0.1
Chemicals-Diversified.............. 0.1
Computer Services.................. 0.1
Cosmetics & Toiletries............. 0.1
Diagnostic Kits.................... 0.1
Direct Marketing................... 0.1
Electronic Components-Misc......... 0.1
Electronic Parts Distribution...... 0.1
Energy-Alternate Sources........... 0.1
Finance-Credit Card................ 0.1
Food-Misc.......................... 0.1
Gas-Distribution................... 0.1
Golf............................... 0.1
Hotels/Motels...................... 0.1
Housewares......................... 0.1
Insurance-Mutual................... 0.1
Machinery-Farming.................. 0.1
Medical Products................... 0.1
Medical-Generic Drugs.............. 0.1
Medical-HMO........................ 0.1
Medical-Hospitals.................. 0.1
Medical-Wholesale Drug Distribution 0.1
Metal Processors & Fabrication..... 0.1
Metal-Aluminum..................... 0.1
Metal-Diversified.................. 0.1
Music.............................. 0.1
Oil Refining & Marketing........... 0.1
Precious Metals.................... 0.1
Property Trust..................... 0.1
Protection/Safety.................. 0.1
Publishing-Newspapers.............. 0.1
Real Estate Management/Services.... 0.1
Retail-Major Department Stores..... 0.1
Retail-Petroleum Products.......... 0.1
Retail-Regional Deptment Stores.... 0.1
Seismic Data Collection............ 0.1
Steel-Producers.................... 0.1
Steel-Specialty.................... 0.1
Storage/Warehousing................ 0.1
Telecom Equipment-Fiber Optics..... 0.1
Textile-Products................... 0.1
Transport-Marine................... 0.1
Transport-Rail..................... 0.1
Transport-Services................. 0.1
Travel Services.................... 0.1
----
95.9%
====
- --------
* Calculated as a percentage of net assets.
23
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited) (continued)
Country Allocation*
United States........................... 56.5%
Brazil.................................. 5.1
Russia.................................. 3.0
Turkey.................................. 2.9
Sweden.................................. 2.6
Switzerland............................. 2.2
Japan................................... 2.1
Canada.................................. 2.1
United Kingdom.......................... 1.9
Germany................................. 1.9
Mexico.................................. 1.6
Argentina............................... 1.4
Philippines............................. 1.4
Australia............................... 1.3
Norway.................................. 1.3
Uruguay................................. 1.0
Colombia................................ 1.0
Venezuela............................... 1.0
Hungary................................. 0.7
Spain................................... 0.6
Peru.................................... 0.6
South Africa............................ 0.5
Netherlands............................. 0.5
Luxembourg.............................. 0.5
Belgium................................. 0.4
Bermuda................................. 0.3
Greece.................................. 0.3
Cayman Islands.......................... 0.3
Ireland................................. 0.3
Poland.................................. 0.3
France.................................. 0.3
----
95.9%
====
Credit Quality+#
Government -- Agency.................... 11.3%
Government -- Treasury.................. 8.0%
AAA..................................... 13.8%
AA...................................... 3.6%
A....................................... 4.3%
BBB..................................... 10.0%
BB...................................... 21.9%
B....................................... 15.5%
CCC..................................... 6.9%
Below C................................. 1.0%
Not Rated @............................. 3.7%
-----
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.
24
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 3.1%
Diversified Financial Services -- 3.1%
Banc of America Commercial Mtg., Inc.,
Series 2006-4, Class AJ,
5.70% due 07/10/46(1)(2)......................... 2,140,000 $2,179,355
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class G,
5.75% due 09/11/38(1)(2)......................... 59,000 58,867
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class F,
5.93% due 09/11/38*(1)(2)........................ 345,000 347,227
Commercial Mtg. Pass Through Certificates, Series
2004-LB2A, Class A3,
4.22% due 03/10/39(1)............................ 1,586,000 1,533,519
Commercial Mtg. Pass Through Certificates, Series
2004-LB4A, Class A3,
4.41% due 10/15/37(1)............................ 1,500,000 1,451,469
Countrywide Asset-Backed Certificates,
Series 2006-S6, Class A3,
5.66% due 03/25/34(2)(3)......................... 1,596,000 1,593,287
Countrywide Asset-Backed Certificates,
Series 2006-S4, Class A3,
5.80% due 10/25/36............................... 2,800,000 2,821,000
Credit Suisse Mtg. Capital Certificates,
Series 2006-TFLA, Class C,
5.59% due 04/15/08*(1)(10)....................... 550,000 550,169
Credit Suisse Mtg. Capital Certificates,
Series 2006-TFLA, Class D,
5.61% due 04/15/08*(1)(10)....................... 550,000 550,168
Deutsche ALT-A Securities, Inc.
Series 2006-AB2, Class A5A,
6.09% due 06/25/36(1)............................ 600,000 609,189
JP Morgan Chase Commercial Mtg. Securities
Corp.,
Series 2006-CB16, Class E,
5.84% due 05/12/45*(1)(2)........................ 445,000 451,568
JP Morgan Chase Commercial Mtg. Securities
Corp.,
Series 2006-LDP8, Class H,
5.99% due 05/15/45*(1)(2)(3)..................... 505,000 501,273
LB-UBS Commercial Mtg. Trust,
Series 2004-C4, Class C,
5.30% due 06/15/36(1)(2)......................... 100,000 100,363
LB-UBS Commercial Mtg. Trust,
Series 2006-C6,
6.06% due 09/15/39............................... 1,205,000 1,210,002
Merrill Lynch/Countrywide Commercial Mtg. Trust,
Series 2006-3, Clas AJ,
5.49% due 07/12/46(1)(2)......................... 1,370,000 1,374,809
Morgan Stanley Capital I,
Series 2004-IQ8, Class C,
5.30% due 06/15/40(1)(2)......................... 240,000 236,565
Wachovia Bank Commercial Mtg. Trust,
Series 2006-WL7A, Class E,
5.60% due 08/11/18*(1)(3)........................ 350,000 350,000
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Diversified Financial Services (continued)
Wachovia Bank Commercial Mtg. Trust,
Series 2006-WL7A, Class F,
5.66% due 08/11/18*(1)(3).............. 1,525,000 $ 1,525,000
Washington Mutual, Inc.,
Series 2005-AR1, Class A2,
5.58% due 01/25/45(1).................. 316,346 316,833
-----------
Total Asset Backed Securities
(cost $17,986,694)..................... 17,760,663
-----------
CONVERTIBLE BONDS & NOTES -- 0.1%
Telecom Services -- 0.1%
ICO North America, Inc.
7.50% due 08/15/09(3)(4)(5)
(cost $280,925)........................ 265,000 323,300
-----------
CORPORATE BONDS & NOTES -- 29.1%
Advertising Services -- 0.1%
Vertis, Inc.
Sec. Notes
9.75% due 04/01/09..................... 100,000 100,875
Vertis, Inc.
Company Guar. Notes
10.88% due 06/15/09.................... 725,000 728,625
-----------
829,500
-----------
Aerospace/Defense -- 0.1%
Raytheon Co.
Debentures
6.00% due 12/15/10..................... 135,000 138,561
Raytheon Co.
Senior Notes
6.75% due 08/15/07..................... 335,000 338,627
-----------
477,188
-----------
Aerospace/Defense-Equipment -- 0.0%
DeCrane Aircraft Holdings, Inc.
Company Guar. Series B
12.00% due 09/30/08.................... 175,000 130,813
-----------
Agricultural Chemicals -- 0.1%
Freeport-McMoRan Resource Partners LP
Senior Notes
7.00% due 02/15/08..................... 375,000 377,812
Terra Capital, Inc.
Sec. Notes
11.50% due 06/01/10.................... 162,000 176,175
Terra Capital, Inc.
Company Guar. Notes
12.88% due 10/15/08.................... 75,000 83,813
-----------
637,800
-----------
Agricultural Operations -- 0.1%
Bunge Ltd. Finance Corp
Notes
5.35% due 04/15/14..................... 281,000 269,133
-----------
25
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Airlines -- 0.9%
American Airlines, Inc.
Pass Through Certs.,
Series 2001-1, Class A-2,
6.82% due 05/23/11........................ 1,800,000 $1,770,750
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A,
6.55% due 02/02/19........................ 679,766 691,522
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991-1, Class C,
6.95% due 08/02/09........................ 103,950 94,075
Continental Airlines, Inc.
Pass Through Certs.,
Series 1999, Class 2,
7.73% due 03/15/11........................ 186,534 163,683
Continental Airlines, Inc.
Pass Through Certs.,
Series 2000-2,
8.31% due 04/02/18........................ 64,786 62,842
Delta Air Lines, Inc.
Pass Through Certs.
7.57% due 11/18/10(6)(7).................. 1,125,000 1,126,406
Delta Air Lines, Inc.
Sec. Notes
9.50% due 11/18/08*(7).................... 375,000 414,375
Northwest Airlines, Inc.
Pass Through Certs.
7.04% due 04/01/22(7)..................... 374,162 371,823
United AirLines, Inc.
Pass Through Certs.
6.20% due 09/01/08........................ 131,839 131,839
----------
4,827,315
----------
Applications Software -- 0.2%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13....................... 875,000 920,937
----------
Auto-Cars/Light Trucks -- 0.5%
DaimlerChrysler NA Holding Corp.
Notes
5.75% due 09/08/11........................ 145,000 144,318
DaimlerChrysler NA Holding Corp.
Company Guar. Notes
7.30% due 01/15/12........................ 160,000 170,061
General Motors Corp.
Senior Notes
7.13% due 07/15/13........................ 1,900,000 1,669,625
General Motors Corp.
Debentures
8.25% due 07/15/23........................ 1,100,000 952,875
----------
2,936,879
----------
Auto/Truck Parts & Equipment-Original -- 0.0%
BREED Technologies, Inc.
Guar. Senior Sub. Notes
9.25% due 04/15/08+(3)(4)(6)(7)........... 500,000 0
----------
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(3)(4)......... 225,000 $ 0
----------
Banks-Commercial -- 0.2%
Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sub. Notes
7.40% due 06/15/11................. 100,000 108,030
Branch Banking & Trust Co.
Sub. Notes
5.63% due 09/15/16................. 150,000 151,564
Popular North America, Inc.
Company Guar. Notes
5.65% due 04/15/09................. 135,000 135,459
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13................. 340,000 329,873
UBS AG
Sub. Notes
5.88% due 07/15/16................. 140,000 144,090
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16................. 330,000 340,293
----------
1,209,309
----------
Banks-Super Regional -- 0.3%
Banc One Corp.
Sub. Debentures
8.00% due 04/29/27................. 135,000 166,284
Chemical Bank NA
Sub. Notes
6.13% due 11/01/08................. 198,000 202,161
Comerica, Inc.
Sub. Notes
4.80% due 05/01/15................. 168,000 158,607
Huntington National Bank
Sub. Notes
6.60% due 06/15/18................. 177,000 188,097
Wells Fargo & Co.
Notes
3.98% due 10/29/10................. 360,000 344,780
Wells Fargo Bank NA
Sub. Notes
4.75% due 02/09/15................. 500,000 479,065
----------
1,538,994
----------
Beverages-Non-alcoholic -- 0.1%
Cott Beverages, Inc.
Company Guar. Notes
8.00% due 12/15/11................. 350,000 357,000
Le-Natures, Inc.
Sub. Notes
10.00% due 06/15/13*(15)........... 325,000 334,750
----------
691,750
----------
Broadcast Services/Program -- 0.3%
Clear Channel Communications, Inc.
Bonds
4.90% due 05/15/15................. 329,000 290,631
26
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Broadcast Services/Program (continued)
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14......................... 950,000 $ 985,625
Nexstar Finance Holdings
LLC/Nexstar Finance Holdings, Inc.
Senior Disc. Notes
11.38% due 04/01/13(8)..................... 175,000 146,125
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14......................... 450,000 409,500
----------
1,831,881
----------
Building & Construction Products-Misc. -- 0.5%
Associated Materials, Inc.
Senior Disc. Notes
11.25% due 03/01/14(8)..................... 250,000 137,500
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12......................... 625,000 623,437
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08........................ 648,000 667,440
Dayton Superior Corp.
Company Guar. Notes
13.00% due 06/15/09........................ 932,000 876,080
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14......................... 325,000 329,063
----------
2,633,520
----------
Building Products-Air & Heating -- 0.0%
American Standard, Inc.
Company Guar. Notes
7.38% due 02/01/08......................... 152,000 154,899
----------
Cable TV -- 1.6%
Adelphia Communications Corp.
Senior Notes
10.25% due 06/15/11+(6)(7)................. 50,000 32,375
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12......................... 240,000 243,000
CCH I Holdings LLC/CCH I Holdings
Capital Corp.
Bonds
11.00% due 10/01/15*....................... 3,180,506 2,870,407
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10........................ 775,000 786,625
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13*....................... 3,267,690 3,324,875
COX Communications, Inc.
Bonds
5.50% due 10/01/15......................... 290,000 279,449
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11......................... 350,000 359,187
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Cable TV (continued)
CSC Holdings, Inc.
Debentures
8.13% due 08/15/09........................... 250,000 $ 259,062
Insight Communications Co., Inc.
Senior Disc. Notes
12.25% due 02/15/11(8)....................... 900,000 954,000
----------
9,108,980
----------
Casino Hotels -- 1.0%
Circus & Eldorado Joint Venture/Silver Legacy
Capital Corp.
Notes
10.13% due 03/01/12.......................... 575,000 604,469
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(4)(9).................... 946,489 894,432
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(3)(4)..................... 425,000 425,000
Harrah's Operating Co., Inc.
Notes
6.50% due 06/01/16........................... 642,000 629,346
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14........................... 1,800,000 1,667,250
Riviera Holdings Corp.
Company Guar. Notes
11.00% due 06/15/10.......................... 135,000 142,425
Station Casinos, Inc.
Senior Sub. Notes
6.63% due 03/15/18........................... 1,325,000 1,195,812
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*.......................... 125,000 126,250
----------
5,684,984
----------
Cellular Telecom -- 0.9%
American Cellular Corp.
Senior Notes
Series B
10.00% due 08/01/11.......................... 1,800,000 1,885,500
Centennial Cellular Operating Co./Centennial
Communications Corp.
Company Guar. Notes
10.13% due 06/15/13.......................... 200,000 212,500
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13.......................... 61,000 61,763
Centennial Communications Corp.
Senior Notes
11.12% due 01/01/13(10)...................... 525,000 542,062
New Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11........................... 841,000 920,973
Rural Cellular Corp.
Sec. Notes
8.25% due 03/15/12........................... 350,000 360,500
27
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Cellular Telecom (continued)
Rural Cellular Corp.
Senior Sub. Notes
9.75% due 01/15/10.......................... 900,000 $ 905,625
Rural Cellular Corp.
Senior Sub. Notes
11.12% due 11/01/12(10)..................... 200,000 206,250
----------
5,095,173
----------
Chemicals-Diversified -- 0.1%
Equistar Chemicals LP/Equistar Funding Corp.
Senior Notes
10.63% due 05/01/11......................... 275,000 294,937
ICI Wilmington, Inc.
Company Guar. Notes
7.05% due 09/15/07.......................... 268,000 271,513
Lyondell Chemical Co.
Company Guar. Notes
8.00% due 09/15/14.......................... 225,000 227,813
----------
794,263
----------
Chemicals-Plastics -- 0.0%
BCI US Finance Corp.
Sec. Notes
11.89% due 07/15/10*(10).................... 100,000 102,000
----------
Chemicals-Specialty -- 0.4%
Cytec Industries, Inc.
Notes
6.00% due 10/01/15.......................... 270,000 266,683
Eastman Chemical Co.
Debentures
7.63% due 06/15/24.......................... 180,000 197,280
Nalco Co.
Senior Notes
7.75% due 11/15/11.......................... 250,000 255,000
Nalco Co.
Senior Sub. Notes
8.88% due 11/15/13.......................... 350,000 364,875
Rockwood Specialties Group, Inc.
Senior Sub. Notes
7.50% due 11/15/14.......................... 625,000 615,625
Rockwood Specialties Group, Inc.
Senior Sub. Notes
10.63% due 05/15/11......................... 55,000 58,850
Tronox Worldwide LLC/Tronox Finance Corp.
Company Guar. Notes
9.50% due 12/01/12.......................... 325,000 333,531
----------
2,091,844
----------
Commercial Services -- 0.2%
DI Finance/DynCorp International
Senior Sub. Notes
9.50% due 02/15/13.......................... 817,000 845,595
The ServiceMaster Co.
Notes
7.88% due 08/15/09.......................... 108,000 113,325
----------
958,920
----------
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Computer Services -- 0.1%
Computer Sciences Corp.
Notes
3.50% due 04/15/08.................. 150,000 $ 145,624
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13.................. 175,000 181,125
----------
326,749
----------
Computers-Integrated Systems -- 0.0%
Activant Solutions, Inc.
Senior Sub. Notes
9.50% due 05/01/16*................. 225,000 208,125
----------
Consulting Services -- 0.0%
FTI Consulting, Inc.
Company Guar. Notes
7.63% due 06/15/13.................. 225,000 227,250
----------
Consumer Products-Misc. -- 0.2%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12.................. 86,000 86,860
Jostens Holding Corp.
Senior Disc. Notes
10.25% due 12/01/13(8).............. 323,000 266,475
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12.................. 100,000 100,500
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13*................. 525,000 528,281
----------
982,116
----------
Containers-Metal/Glass -- 0.4%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23.................. 1,110,000 1,060,050
Owens Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09.................. 593,000 609,307
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13.................. 375,000 384,375
----------
2,053,732
----------
Containers-Paper/Plastic -- 0.2%
Pliant Corp.
Sec. Notes
11.13% due 09/01/09................. 870,000 850,425
----------
Cosmetics & Toiletries -- 0.1%
Procter & Gamble Co.
Senior Notes
2.00% due 06/21/10.................. JPY 79,000,000 691,016
----------
Diagnostic Kits -- 0.1%
Inverness Medical Innovations, Inc.
Senior Sub. Notes
8.75% due 02/15/12.................. 425,000 418,625
----------
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Direct Marketing -- 0.1%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12...................... 814,000 $ 814,000
----------
Diversified Financial Services -- 0.3%
ANZ Capital Trust II
Bonds
5.36% due 12/15/13*(12)................. 370,000 356,643
General Electric Capital Corp.
Senior Notes
Series E
5.13% due 03/21/12...................... JPY105,000,000 867,194
General Electric Capital Corp.
Notes
Series A
6.75% due 03/15/32...................... 279,000 318,908
ZFS Finance USA Trust I
Bonds
6.45% due 06/15/16*(11)................. 310,000 306,604
----------
1,849,349
----------
Diversified Manufactured Operations -- 0.2%
Covalence Specialty Materials Corp.
Senior Sub. Notes
10.25% due 03/01/16*.................... 325,000 315,250
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14*.................... 500,000 530,000
Park-Ohio Industries, Inc.
Company Guar. Notes
8.38% due 11/15/14...................... 75,000 68,250
----------
913,500
----------
Electric-Generation -- 0.3%
Edison Mission Energy
Senior Notes
7.50% due 06/15/13*..................... 425,000 429,250
Edison Mission Energy
Senior Notes
7.75% due 06/15/16*..................... 225,000 227,812
The AES Corp.
Sec. Notes
8.75% due 05/15/13*..................... 1,150,000 1,233,375
----------
1,890,437
----------
Electric-Integrated -- 1.0%
American Electric Power Co., Inc.
Senior Notes
4.71% due 08/16/07(8)................... 370,000 367,473
Appalachian Power Co.
Senior Notes
5.00% due 06/01/17...................... 186,000 174,236
CenterPoint Energy Houston Electric LLC
Sec. Notes
Series L2
5.60% due 07/01/23...................... 244,000 236,356
Centerpoint Energy, Inc.
Senior Notes
Series B
5.88% due 06/01/08...................... 150,000 150,704
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
Electric-Integrated (continued)
Commonwealth Edison Co.
1st Mtg. Notes
5.95% due 08/15/16............... 280,000 $ 283,875
Consumers Energy Co.
1st Mtg. Bonds
Series C
4.25% due 04/15/08............... 180,000 176,843
Dominion Resources, Inc.
Senior Notes
Series A
5.69% due 05/15/08(8)............ 176,000 176,720
Duke Energy Corp.
Senior Notes
4.20% due 10/01/08............... 305,000 298,629
Energy East Corp.
Notes
6.75% due 07/15/36............... 295,000 308,785
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10............... 195,000 194,499
Florida Power & Light Co.
1st Mtg. Bonds
5.95% due 10/01/33............... 100,000 103,199
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11............... 900,000 901,125
Mission Energy Holding Co.
Sec. Notes
13.50% due 07/15/08.............. 1,075,000 1,199,969
Pepco Holdings, Inc.
Notes
5.50% due 08/15/07............... 278,000 277,935
Pepco Holdings, Inc.
Notes
6.45% due 08/15/12............... 140,000 144,885
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11............... 50,000 54,250
Public Service Electric & Gas Co.
Sec. Notes
5.00% due 08/15/14............... 96,000 93,482
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15............... 433,000 416,867
Southern California Edison Co.
1st Mtg. Bonds
5.75% due 04/01/35............... 80,000 79,050
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(3)(4)(5)..... 1,550,000 0
----------
5,638,882
----------
Electronic Components-Misc. -- 0.0%
Sanmina-SCI Corp.
Company Guar. Notes
6.75% due 03/01/13............... 75,000 70,688
----------
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electronic Components-Semiconductors -- 0.1%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12....................... 244,000 $ 247,660
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16....................... 550,000 515,625
----------
763,285
----------
Electronic Parts Distribution -- 0.1%
Arrow Electronics, Inc.
Debentures
6.88% due 06/01/18....................... 279,000 285,139
----------
Electronics-Military -- 0.2%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13....................... 750,000 729,375
L-3 Communications Corp.
Senior Sub. Notes
6.38% due 10/15/15....................... 550,000 534,875
----------
1,264,250
----------
Energy-Alternate Sources -- 0.1%
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12....................... 375,000 391,875
----------
Enterprise Software/Service -- 0.0%
Oracle Corp and Ozark Holding, Inc.
Notes
5.00% due 01/15/11....................... 118,000 116,873
----------
Finance-Auto Loans -- 2.2%
Ford Motor Credit Co.
Senior Notes
5.80% due 01/12/09....................... 2,117,000 2,015,418
Ford Motor Credit Co.
Notes
6.38% due 11/05/08....................... 123,000 118,198
Ford Motor Credit Co.
Notes
7.38% due 10/28/09....................... 1,150,000 1,117,575
Ford Motor Credit Co.
Notes
9.96% due 04/15/12(10)................... 800,000 837,122
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14....................... 2,050,000 2,001,323
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11....................... 4,100,000 4,078,278
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12....................... 60,000 59,388
General Motors Acceptance Corp.
Notes
7.25% due 03/02/11....................... 425,000 427,430
General Motors Acceptance Corp.
Notes
9.82% due 12/01/14(10)................... 925,000 927,317
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Finance-Auto Loans (continued)
General Motors Acceptance Corp.
Notes
7.75% due 01/19/10................... 575,000 $ 589,170
-----------
12,171,219
-----------
Finance-Commercial -- 0.0%
CIT Group, Inc.
Notes
5.85% due 09/15/16................... 150,000 151,772
Transamerica Finance Corp.
Senior Notes
6.40% due 09/15/08................... 36,000 36,708
-----------
188,480
-----------
Finance-Credit Card -- 0.1%
Capital One Financial Corp.
Senior Notes
5.70% due 09/15/11................... 290,000 292,043
Capital One Financial Corp.
Sub. Notes
6.15% due 09/01/16................... 280,000 283,322
-----------
575,365
-----------
Finance-Investment Banker/Broker -- 0.3%
Citigroup, Inc.
Sub. Notes
5.00% due 09/15/14................... 140,000 136,399
Goldman Sachs Group, Inc.
Notes
6.13% due 02/15/33................... 320,000 318,775
JP Morgan Chase Capital XVIII
Bonds Series R,
6.95% due 08/17/36................... 145,000 154,016
Lehman Brothers Holdings, Inc.
Notes
4.50% due 07/26/10................... 120,000 116,710
Lehman Brothers Holdings, Inc.
Notes
5.50% due 04/04/16................... 240,000 239,113
Lehman Brothers Holdings, Inc.
Senior Notes
5.75% due 05/17/13................... 330,000 335,861
Merrill Lynch & Co., Inc.
Sub. Notes
6.22% due 09/15/26................... 340,000 345,864
Morgan Stanley
Senior Notes
5.63% due 01/09/12................... 150,000 151,944
Morgan Stanley
Senior Notes
6.25% due 08/09/26................... 150,000 155,286
-----------
1,953,968
-----------
Finance-Mortgage Loan/Banker -- 0.2%
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09................... 90,000 87,187
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Finance-Mortgage Loan/Banker (continued)
Residential Capital Corp.
Senior Notes
6.38% due 06/30/10................... 750,000 $ 758,834
Residential Capital Corp.
Senior Notes
6.50% due 04/17/13................... 155,000 157,409
----------
1,003,430
----------
Financial Guarantee Insurance -- 0.0%
The PMI Group, Inc.
Notes
6.00% due 09/15/16................... 227,000 229,876
----------
Food-Meat Products -- 0.1%
Smithfield Foods, Inc.
Senior Notes
7.75% due 05/15/13................... 550,000 566,500
----------
Food-Misc. -- 0.1%
Wornick Co.
Sec. Notes
10.88% due 07/15/11.................. 800,000 796,000
----------
Forestry -- 0.0%
Weyerhaeuser Co.
Debentures
6.88% due 12/15/33................... 160,000 157,138
----------
Funeral Services & Related Items -- 0.5%
Alderwoods Group, Inc.
Company Guar. Notes
7.75% due 09/15/12................... 50,000 53,875
Carriage Services, Inc.
Senior Notes
7.88% due 01/15/15................... 687,000 668,108
Service Corp. International
Senior Notes
6.75% due 04/01/16................... 1,225,000 1,174,469
Service Corp. International
Senior Notes
7.00% due 06/15/17*.................. 400,000 383,000
Service Corp. International
Senior Notes
7.38% due 10/01/14*.................. 25,000 25,156
Service Corp. International
Senior Notes
7.63% due 10/01/18*.................. 25,000 25,156
Stewart Enterprises, Inc.
Senior Notes
6.25% due 02/15/13................... 725,000 670,625
----------
3,000,389
----------
Gambling (Non-Hotel) -- 0.2%
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*................. 750,000 791,250
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/12*.................. 172,000 181,890
----------
973,140
----------
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Gas-Distribution -- 0.1%
Colorado Interstate Gas Co.
Senior Debentures
6.85% due 06/15/37.................... 150,000 $ 150,815
Sempra Energy
Senior Notes
4.62% due 05/17/07.................... 432,000 429,906
Southern California Gas Co
1st Mtg. Bonds
5.75% due 11/15/35.................... 70,000 70,331
----------
651,052
----------
Gold Mining -- 0.0%
Newmont Mining Corp.
Notes
8.63% due 05/15/11.................... 146,000 164,025
----------
Golf -- 0.1%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11.................... 600,000 537,000
----------
Hotels/Motels -- 0.1%
Gaylord Entertainment Co.
Company Guar. Senior Notes
6.75% due 11/15/14.................... 500,000 478,125
Hilton Hotels Corp.
Senior Notes
7.20% due 12/15/09.................... 68,000 70,295
----------
548,420
----------
Independant Power Producers -- 1.1%
Calpine Corp
Sec. Notes
8.75% due 07/15/13*+(6)(7)............ 4,648,000 4,682,860
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16.................... 1,125,000 1,117,969
Reliant Energy, Inc.
Sec. Notes
6.75% due 12/15/14.................... 50,000 47,562
Reliant Energy, Inc.
Sec. Notes
9.50% due 07/15/13.................... 176,000 182,600
----------
6,030,991
----------
Industrial Audio & Video Products -- 0.0%
Telex Communications, Inc.
Sec. Notes
11.50% due 10/15/08................... 50,000 53,000
----------
Instruments-Scientific -- 0.0%
Fisher Scientific International, Inc.
Senior Sub. Notes
6.75% due 08/15/14.................... 250,000 254,375
----------
Insurance-Life/Health -- 0.3%
Americo Life, Inc.
Notes
7.88% due 05/01/13*................... 38,000 38,212
AmerUs Group Co.
Senior Notes
6.58% due 05/16/11.................... 310,000 322,408
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Insurance-Life/Health (continued)
Great West Life & Annuity Insurance Co.
Bonds
7.15% due 05/16/46*(11)................ 550,000 $ 571,227
MIC Financing Trust I
Pass Through Certs.
8.38% due 02/01/27*.................... 123,000 123,688
Monumental Global Funding II
Notes
5.65% due 07/14/11*.................... 174,000 176,941
Nationwide Life Global Funding I
Notes
5.35% due 03/15/11*.................... 200,000 201,077
Presidential Life Corp.
Senior Notes
7.88% due 02/15/09..................... 150,000 144,000
----------
1,577,553
----------
Insurance-Multi-line -- 0.1%
MetLife, Inc.
Senior Notes
5.00% due 11/24/13..................... 203,000 197,365
Metropolitan Life Global Funding I
Sec. Notes
5.75% due 07/25/11*.................... 140,000 143,015
----------
340,380
----------
Insurance-Mutual -- 0.0%
Liberty Mutual Group, Inc.
Bonds
7.50% due 08/15/36*.................... 200,000 214,540
----------
Insurance-Property/Casualty -- 0.0%
Crum & Forster Holdings Corp.
Senior Notes
10.38% due 06/15/13.................... 125,000 128,125
----------
Invest Management/Advisor Services -- 0.0%
Ameriprise Financial, Inc.
Senior Notes
5.35% due 11/15/10..................... 81,000 81,279
----------
Leisure Products -- 0.0%
Brunswick Corp.
Notes
5.00% due 06/01/11..................... 103,000 98,497
K2, Inc. Guar.
Senior Notes
7.38% due 07/01/14..................... 125,000 121,719
----------
220,216
----------
Machinery-Farming -- 0.1%
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09..................... 325,000 320,531
----------
Machinery-General Industrial -- 0.0%
Stewart & Stevenson LLC/Stewart &
Stevenson Corp.
Senior Notes
10.00% due 07/15/14.................... 175,000 177,187
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
Medical Information Systems -- 0.0%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12.............. 150,000 $140,625
--------
Medical Products -- 0.1%
Baxter International, Inc.
Senior Bonds
5.90% due 09/01/16............... 135,000 138,649
CDRV Investors, Inc.
Senior Disc. Notes
9.63% due 01/01/15(8)............ 325,000 240,500
Encore Medical IHC, Inc.
Company Guar. Notes
9.75% due 10/01/12............... 75,000 82,500
Universal Hospital Services, Inc.
Senior Notes
10.13% due 11/01/11.............. 250,000 262,500
--------
724,149
--------
Medical-Biomedical/Gene -- 0.0%
Bio-Rad Laboratories, Inc.
Senior Sub. Notes
6.13% due 12/15/14............... 27,000 25,515
--------
Medical-Drugs -- 0.2%
Abbott Laboratories
Notes
5.88% due 05/15/16............... 348,000 360,510
American Home Products Corp.
Notes
6.95% due 03/15/11............... 158,000 168,010
Merck & Co., Inc.
Notes
2.50% due 03/30/07............... 40,000 39,466
Wyeth
Bonds
5.50% due 02/01/14............... 250,000 250,474
Wyeth
Notes
6.00% due 02/15/36............... 168,000 169,846
--------
988,306
--------
Medical-Generic Drugs -- 0.1%
Mylan Laboratories, Inc.
Company Guar. Notes
5.75% due 08/15/10............... 25,000 24,719
Mylan Laboratories, Inc.
Company Guar. Notes
6.38% due 08/15/15............... 450,000 435,937
--------
460,656
--------
Medical-HMO -- 0.1%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16.............. 450,000 452,250
--------
Medical-Hospitals -- 0.1%
Community Health Systems, Inc.
Senior Sec. Notes
6.50% due 12/15/12............... 616,000 589,050
--------
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Medical-Nursing Homes -- 0.0%
Genesis HealthCare Corp.
Senior Sub. Debentures
2.50% due 03/15/25*..................... 75,000 $ 79,875
Genesis HealthCare Corp.
Senior Notes
8.00% due 10/15/13...................... 75,000 77,813
----------
157,688
----------
Medical-Wholesale Drug Distribution -- 0.1%
Cardinal Health, Inc.
Notes
5.80% due 10/15/16*..................... 330,000 329,545
----------
Metal Processors & Fabrication -- 0.1%
Metals USA, Inc.
Secured Notes
11.13% due 12/01/15..................... 450,000 492,750
Timken Co.
Notes
5.75% due 02/15/10...................... 162,000 161,350
----------
654,100
----------
Multimedia -- 0.3%
Belo Corp.
Senior Notes
6.75% due 05/30/13...................... 145,000 148,644
Haights Cross Operating Co.
Guar. Senior Notes
11.75% due 08/15/11..................... 150,000 153,750
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28...................... 173,000 184,526
Time Warner Cos., Inc.
Company Guar. Notes
7.25% due 10/15/17...................... 151,000 162,989
Time Warner Entertainment Co. LP
Senior Notes
8.38% due 07/15/33...................... 160,000 188,703
Time Warner Entertainment Co. LP
Senior Debentures
8.38% due 03/15/23...................... 458,000 528,932
Time Warner, Inc.
Company Guar. Notes
6.75% due 04/15/11...................... 190,000 198,717
Viacom, Inc.
Senior Notes
6.88% due 04/30/36*..................... 137,000 135,437
----------
1,701,698
----------
Networking Products -- 0.0%
Cisco Systems, Inc.
Senior Notes
5.50% due 02/22/16...................... 152,000 153,209
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Local Government Guar. Notes
11.50% due 07/01/03+(3)(4)(7)(16)....... 500,000 0
----------
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
Non-hazardous Waste Disposal -- 0.2%
Allied Waste North America, Inc.
Senior Notes
Series B
8.50% due 12/01/08......................... 1,250,000 $1,309,375
----------
Office Automation & Equipment -- 0.2%
Pitney Bowes, Inc.
Senior Notes
4.75% due 01/15/16......................... 256,000 243,599
Xerox Corp.
Senior Notes
6.75% due 02/01/17......................... 500,000 507,500
Xerox Corp.
Senior Notes
7.63% due 06/15/13......................... 275,000 288,750
----------
1,039,849
----------
Office Supplies & Forms -- 0.0%
Acco Brands Corp.
Company Guar. Notes
7.63% due 08/15/15......................... 75,000 72,563
----------
Oil & Gas Drilling -- 0.0%
Pride International, Inc.
Senior Notes
7.38% due 07/15/14......................... 50,000 51,500
----------
Oil Comp-Integrated -- 0.1%
Hess Corp.
Bonds
7.88% due 10/01/29......................... 202,000 238,710
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29......................... 125,000 143,367
----------
382,077
----------
Oil Companies-Exploration & Production -- 1.5%
Anadarko Petroleum Corp.
Senior Notes
5.95% due 09/15/16......................... 290,000 293,465
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... 200,000 205,500
Brigham Exploration Co.
Senior Notes
9.63% due 05/01/14*........................ 550,000 536,250
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15......................... 1,550,000 1,538,375
Chesapeake Energy Corp.
Senior Notes
6.25% due 01/15/18......................... 875,000 811,562
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16......................... 925,000 892,625
Costilla Energy, Inc.
Senior Notes
10.25% due 10/01/06+(3)(4)................. 500,000 0
El Paso Production Holding Co.
Company Guar. Notes
7.75% due 06/01/13......................... 2,375,000 2,428,437
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil Companies-Exploration & Production (continued)
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15................... 175,000 $ 160,125
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14................... 50,000 46,750
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11................... 125,000 122,188
Hilcorp Energy LP
Senior Notes
7.75% due 11/01/15*.................. 425,000 411,187
Hilcorp Energy I LP
Senior Notes
10.50% due 09/01/10*................. 170,000 182,963
Newfield Exploration Co.
Senior Sub. Notes
6.63% due 09/01/14................... 150,000 146,813
Quicksilver Resources, Inc.
Company Guar.
7.13% due 04/01/16................... 200,000 189,500
Transmeridian Exploration, Inc.
Company Guar.
12.00% due 12/15/10(3)............... 325,000 325,000
----------
8,290,740
----------
Oil Field Machinery & Equipment -- 0.0%
Dresser-Rand Group, Inc.
Company Guar.
7.38% due 11/01/14................... 188,000 184,710
----------
Oil Refining & Marketing -- 0.1%
The Premcor Refining Group, Inc.
Senior Notes
6.75% due 02/01/11................... 335,000 349,761
----------
Oil-Field Services -- 0.1%
Allis-Chalmers Energy, Inc.
Senior Notes
9.00% due 01/15/14*.................. 350,000 350,875
Hanover Compressor Co.
Guar. Senior Sub. Notes
8.63% due 12/15/10................... 175,000 182,000
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11................... 173,564 177,914
----------
710,789
----------
Paper & Related Products -- 0.4%
Bowater, Inc.
Notes
6.50% due 06/15/13................... 1,500,000 1,331,250
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09................... 425,000 399,500
Plum Creek Timberlands LP
Company Guar. Notes
5.88% due 11/15/15................... 294,000 290,818
----------
2,021,568
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------------
Pipelines -- 1.4%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15............................... 300,000 $ 305,250
Consolidated Natural Gas Co.
Senior Notes
Series B
5.38% due 11/01/06............................... 114,000 113,981
Copano Energy LLC
Senior Notes
8.13% due 03/01/16............................... 250,000 253,125
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11............................... 178,000 187,087
Dynegy-Roseton Danskammer
Company Guar. Bonds
Series B
7.67% due 11/08/16............................... 425,000 433,500
El Paso Natural Gas Co.
Senior Notes
Series A
7.63% due 08/01/10............................... 100,000 103,000
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22............................... 875,000 1,001,082
MarkWest Energy Partners LP/MarkWest Energy
Finance Corp.
Senior Notes
6.88% due 11/01/14............................... 200,000 188,000
NGC Corp Capital Trust
Company Guar. Bonds
Series B
8.32% due 06/01/27............................... 1,875,000 1,706,250
ONEOK Partners LP
Bonds
6.15% due 10/01/16............................... 155,000 156,461
Pacific Energy Partners LP
Senior Notes
7.13% due 06/15/14............................... 332,000 338,640
Pacific Energy Partners LP/Pacific Energy Finance
Corp.
Company Guar. Notes
6.25% due 09/15/15............................... 218,000 214,730
Reliant Energy, Inc.
Notes
7.75% due 02/15/11............................... 290,000 314,526
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28............................... 800,000 796,771
Transcontinental Gas Pipe Line Corp.
Notes
7.00% due 08/15/11............................... 150,000 153,750
Transcontinental Gas Pipe Line Corp.
Senior Notes
Series B
8.88% due 07/15/12............................... 425,000 470,156
Williams Cos., Inc.
Notes
7.88% due 09/01/21............................... 975,000 1,018,875
----------
7,755,184
----------
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Precious Metals -- 0.1%
Barrick Gold Finance Co.
Bonds
5.80% due 11/15/34................ 175,000 $162,847
Barrick Gold Finance Co.
Company Guar. Bonds
7.50% due 05/01/07................ 233,000 235,758
--------
398,605
--------
Private Corrections -- 0.0%
Corrections Corp. of America
Company Guar. Notes
6.25% due 03/15/13................ 200,000 196,000
--------
Protection/Safety -- 0.1%
Monitronics International, Inc.
Senior Sub. Notes
11.75% due 09/01/10............... 335,000 324,112
--------
Publishing-Newspapers -- 0.1%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29................ 90,000 85,898
Knight Ridder, Inc.
Debentures
7.15% due 11/01/27................ 205,000 197,653
Medianews Group, Inc.
Senior Sub. Notes
6.38% due 04/01/14................ 20,000 17,650
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................ 255,000 235,875
--------
537,076
--------
Radio -- 0.0%
Chancellor Media Corp.
Company Guar. Notes
8.00% due 11/01/08................ 148,000 154,749
--------
Real Estate Investment Trusts -- 0.8%
AvalonBay Communities, Inc.
Senior Notes
5.75% due 09/15/16................ 310,000 313,092
Equity One, Inc.
Senior Notes
6.25% due 01/15/17................ 126,000 128,895
Heritage Property Investment Trust
Notes
4.50% due 10/15/09................ 152,000 148,348
Mack-Cali Realty LP
Bonds
5.80% due 01/15/16................ 156,000 156,317
National Health Investors, Inc.
Notes
7.30% due 07/16/07................ 100,000 100,233
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14................ 200,000 198,000
Reckson Operating Partnership LP
Senior Notes
6.00% due 03/31/16................ 86,000 86,770
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Real Estate Investment Trusts (continued)
Senior Housing Properties Trust
Senior Notes
8.63% due 01/15/12.................... 2,027,000 $2,176,491
Simon Property Group LP
Notes
5.38% due 08/28/08.................... 124,000 123,928
Simon Property Group LP
Notes
5.60% due 09/01/11.................... 140,000 141,042
Trustreet Properties, Inc.
Senior Notes
7.50% due 04/01/15.................... 775,000 769,187
----------
4,342,303
----------
Real Estate Management/Services -- 0.1%
AMB Property LP
Company Guar. Notes
5.90% due 08/15/13.................... 112,000 113,753
EOP Operating LP
Senior Notes
7.00% due 07/15/11.................... 321,000 339,797
----------
453,550
----------
Rental Auto/Equipment -- 0.4%
Avis Budget Car Rental LLC/Avis
Budget Finance, Inc.
Senior Notes
7.63% due 05/15/14*................... 100,000 97,000
Avis Budget Car Rental LLC/Avis
Budget Finance, Inc.
Senior Notes
7.91% due 05/15/14*(10)............... 150,000 147,000
H&E Equipment Services, Inc.
Senior Notes
8.38% due 07/15/16*................... 450,000 461,250
Rent-Way, Inc.
Sec. Notes
11.88% due 06/15/10................... 758,000 879,280
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13.................... 650,000 640,250
----------
2,224,780
----------
Retail-Drug Store -- 0.3%
General Nutrition Centers, Inc.
Senior Sub. Notes
8.50% due 12/01/10.................... 1,050,000 1,018,500
Rite Aid Corp.
Sec. Notes
8.13% due 05/01/10.................... 425,000 426,062
----------
1,444,562
----------
Retail-Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11.................... 375,000 409,219
----------
Retail-Petroleum Products -- 0.1%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14.................... 850,000 830,875
----------
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Retail-Regional Deptment Stores -- 0.1%
Neiman-Marcus Group, Inc.
Company Guar. Notes
9.00% due 10/15/15.................. 400,000 $ 425,000
----------
Retail-Restaurants -- 0.2%
Dave & Buster's, Inc.
Senior Notes
11.25% due 03/15/14................. 250,000 237,500
NPC International, Inc.
Senior Sub. Notes
9.50% due 05/01/14*................. 950,000 935,750
The Restaurant Co.
Senior Notes
10.00% due 10/01/13................. 100,000 92,375
----------
1,265,625
----------
Rubber-Tires -- 0.0%
Cooper-Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14.................. 64,000 47,040
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(4)(6)(17)...... 100,000 400
----------
Savings & Loans/Thrifts -- 0.3%
Downey Financial Corp.
Notes
6.50% due 07/01/14.................. 180,000 180,482
Golden West Financial Corp.
Senior Notes
4.75% due 10/01/12.................. 354,000 344,623
Independence Community Bank Corp.
Notes
3.50% due 06/20/13(11).............. 172,000 166,801
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10*................. 405,000 396,535
Washington Mutual Bank
Sub. Notes
5.95% due 05/20/13.................. 330,000 336,859
Western Financial Bank
Senior Debentures
9.63% due 05/15/12.................. 333,000 367,973
----------
1,793,273
----------
Seismic Data Collection -- 0.1%
Seitel, Inc.
Senior Notes
11.75% due 07/15/11................. 475,000 564,062
----------
Special Purpose Entities -- 0.7%
AAC Group Holding Corp.
Senior Disc. Notes
10.25% due 10/01/12(8).............. 450,000 373,500
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15................. 125,000 133,125
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Special Purpose Entities (continued)
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*...................... 465,000 $ 444,910
Chukchansi Economic Development Authority
Senior Notes
8.78% due 11/15/12*(10).................. 150,000 154,500
Consolidated Communications
Illinois/Texas Holdings, Inc.
Senior Notes
9.75% due 04/01/12....................... 347,000 366,085
Hexion US Finance Corp/Hexion
Nova Scotia Finance ULC
Sec. Notes
9.00% due 07/15/14....................... 645,000 657,900
ING USA Global Funding Trust
Notes
4.25% due 10/01/10....................... 268,000 260,844
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12....................... 175,000 186,375
MXEnergy Holdings, Inc.
Senior Notes
13.02% due 08/01/11*(10)................. 675,000 658,125
PCA LLC/PCA Finance Corp.
Senior Notes
11.88% due 08/01/09(4)................... 325,000 78,000
Pricoa Global Funding I
Notes
5.30% due 09/27/13*...................... 320,000 319,811
Principal Life Global Funding I
Sec. Notes
5.25% due 01/15/13*...................... 296,000 294,586
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16....................... 150,000 147,375
Swiss Re Capital I LP
Company Guar. Notes
6.85% due 05/25/16*(12).................. 149,000 153,461
----------
4,228,597
----------
Specified Purpose Acquisitions -- 0.0%
ESI Tractebel Acquisition Corp.
Company Guar. Notes
Series B
7.99% due 12/30/11....................... 210,000 216,600
----------
Steel-Producer -- 0.1%
Chaparral Steel Co.
Company Guar. Notes
10.00% due 07/15/13...................... 300,000 334,500
----------
Steel-Specialty -- 0.0%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11....................... 75,000 78,938
----------
Storage/Warehousing -- 0.1%
Mobile Mini, Inc.
Senior Notes
9.50% due 07/01/13....................... 98,000 104,860
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Storage/Warehousing (continued)
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*.................. 250,000 $ 256,250
----------
361,110
----------
Telecom Equipment-Fiber Optics -- 0.1%
Corning, Inc.
Bonds
7.25% due 08/15/36................... 288,000 306,729
----------
Telecom Services -- 0.1%
Cincinnati Bell Telephone Co.
Company Guar. Series MTN
7.18% due 12/15/23................... 50,000 50,250
Cincinnati Bell Telephone Co.
Company Guar. Series MTN
7.20% due 11/29/23................... 225,000 218,250
Embarq Corp.
Notes
7.08% due 06/01/16................... 8,000 8,161
Insight Midwest LP
Senior Notes
9.75% due 10/01/09................... 100,000 101,750
Qwest Corp.
Senior Notes
7.50% due 10/01/14*.................. 375,000 387,187
----------
765,598
----------
Telephone-Integrated -- 0.9%
Cincinnati Bell, Inc.
Senior Notes
7.00% due 02/15/15................... 150,000 147,000
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23................... 25,000 24,000
GTE Northwest, Inc.
Debentures
Series D
5.55% due 10/15/08................... 55,000 55,031
GTE Southwest, Inc.
1st Mtg. Bonds
8.50% due 11/15/31................... 230,000 275,291
LCI International, Inc.
Senior Notes
7.25% due 06/15/07................... 2,550,000 2,556,375
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29................... 174,000 188,851
Verizon New York, Inc.
Debentures
Series A
6.88% due 04/01/12................... 117,000 122,012
Windstream Corp.
Senior Notes
8.63% due 08/01/16*.................. 1,450,000 1,551,500
----------
4,920,060
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Television -- 0.8%
Allbritton Communications Co
Senior Sub. Notes
7.75% due 12/15/12................... 875,000 $ 881,562
CBS Corp.
Company Guar. Notes
6.63% due 05/15/11................... 320,000 332,492
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13................... 810,000 755,325
Paxson Communications, Inc.
Sec. Notes
11.62% due 01/15/13*(10)............. 1,550,000 1,561,625
Univision Communications, Inc.
Company Guar. Notes
3.50% due 10/15/07................... 80,000 77,815
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14................... 100,000 85,000
Young Broadcasting, Inc.
Company Guar. Bonds
10.00% due 03/01/11.................. 725,000 676,969
----------
4,370,788
----------
Textile-Products -- 0.1%
Collins & Aikman Floorcoverings, Inc.
Company Guar. Series B
9.75% due 02/15/10................... 273,000 271,635
----------
Theaters -- 0.3%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................... 450,000 423,000
AMC Entertainment, Inc.
Senior Sub. Notes
9.88% due 02/01/12................... 475,000 488,062
Cinemark, Inc.
Senior Disc. Notes
9.75% due 03/15/14(8)................ 1,200,000 957,000
----------
1,868,062
----------
Transport-Air Freight -- 1.0%
Atlas Air, Inc.
Pass Through Certs.
Series 1991 Class A
6.88% due 01/02/11................... 225,771 218,998
Atlas Air, Inc.
Pass Through Certs.
Series 1991 Class A
7.20% due 01/02/19................... 1,713,503 1,700,651
Atlas Air, Inc.
Pass Through Certs.
Series 1991 Class B
7.63% due 01/02/15................... 1,701,936 1,770,014
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transport-Air Freight (continued)
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19.......................... 363,674 $ 376,402
Atlas Air, Inc.
Pass Through Certs.
Series 1991 Class C
8.77% due 01/02/11.......................... 62,428 54,001
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17.......................... 1,346,314 1,494,408
------------
5,614,474
------------
Transport-Rail -- 0.1%
Burlington Northern Santa Fe Corp.
Debentures
7.29% due 06/01/36.......................... 323,000 382,777
------------
Transport-Services -- 0.1%
FedEx Corp.
Company Guar. Notes
5.50% due 08/15/09.......................... 135,000 135,867
PHI, Inc.
Senior Notes
7.13% due 04/15/13*......................... 325,000 307,938
Ryder System, Inc.
Notes
5.00% due 06/15/12.......................... 131,000 126,069
------------
569,874
------------
Travel Services -- 0.1%
Travelport, Inc.
Senior Notes
9.88% due 09/01/14*......................... 125,000 120,625
Travelport, Inc.
Senior Notes
10.02% due 09/01/14*(10).................... 125,000 120,000
Travelport, Inc.
Senior Sub. Notes
11.88% due 09/01/16*........................ 500,000 480,000
------------
720,625
------------
Total Corporate Bonds & Notes
(cost $162,537,343)......................... 164,563,082
------------
FOREIGN CORPORATE BONDS & NOTES -- 5.2%
Banks-Commercial -- 0.2%
Barclays Bank PLC
Notes
5.93% due 12/15/16*(12)..................... 370,000 369,430
Caisse Nationale des Caisses d'Epargne et de
Prevoyance
Notes
4.90% due 12/30/49(10)...................... 141,000 113,505
Glitnir Banki HF
Sub. Notes
6.69% due 06/15/11*(11)..................... 144,000 147,255
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
Banks-Commercial (continued)
Landsbanki Islands HF
Notes
6.10% due 08/25/11*................. 145,000 $ 146,518
NIBC Bank NV
Bonds
5.82% due 12/11/13*(12)............. 95,000 92,474
Standard Bank PLC
Sub. Bonds
8.01% due 07/27/16(12).............. 495,000 511,899
----------
1,381,081
----------
Banks-Money Center -- 0.1%
HBOS Capital Funding LP
Bank Guar. Bonds
6.85% due 03/23/09(12).............. 175,000 175,437
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Notes
8.38% due 12/29/49.................. 175,000 185,395
National Westminster Bank PLC
Sub. Notes
7.75% due 10/16/07(12).............. 67,000 68,396
----------
429,228
----------
Beverages-Wine/Spirits -- 0.1%
Diageo Capital PLC
Company Guar. Notes
5.13% due 01/30/13.................. 320,000 316,922
----------
Brewery -- 0.1%
SABMiller PLC
Notes
6.50% due 07/01/16*................. 315,000 329,057
----------
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25.................. 496,000 506,020
----------
Building & Construction-Misc. -- 0.1%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11.................. 310,000 309,225
North American Energy Partners, Inc.
Sec. Notes
9.00% due 06/01/10.................. 175,000 189,000
----------
498,225
----------
Cellular Telecom -- 0.0%
Rogers Wireless, Inc.
Sec. Notes
7.25% due 12/15/12.................. 125,000 130,781
----------
Chemicals-Specialty -- 0.2%
Rhodia SA
Senior Notes
8.88% due 06/01/11.................. 1,325,000 1,368,062
----------
Coal -- 0.0%
Adaro Finance B.V.
Company Guar.
8.50% due 12/08/10*................. 200,000 203,250
----------
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Computers-Memory Devices -- 0.0%
Seagate Technology HDD Holdings
Company Guar. Bonds
6.80% due 10/01/16........................ 200,000 $199,000
--------
Cruise Lines -- 0.0%
Royal Caribbean Cruises, Ltd.
Senior Notes
7.00% due 06/15/13........................ 175,000 176,918
--------
Diversified Manufactured Operations -- 0.1%
Siemens Financieringsmaatschappij NV
Notes
5.75% due 10/17/16*....................... 145,000 147,172
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13........................ 310,000 320,797
--------
467,969
--------
Electronic Components-Misc. -- 0.0%
Celestica, Inc.
Senior Sub. Notes
7.63% due 07/01/13........................ 50,000 49,625
Solectron Global Finance, Ltd.
Company Guar.
8.00% due 03/15/16........................ 175,000 173,250
--------
222,875
--------
Electronic Components-Semiconductors -- 0.2%
Avago Technologies Finance PTE. Ltd./Avago
Technologies US/Avago Technologies
Wireless
Senior Notes
10.13% due 12/01/13*...................... 500,000 530,000
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11........................ 475,000 456,000
--------
986,000
--------
Finance-Consumer Loans -- 0.2%
Aiful Corp.
Notes
4.45% due 02/16/10*....................... 140,000 134,166
SLM Corp.
Notes
1.53% due 09/15/11........................ JPY 100,000,000 846,863
--------
981,029
--------
Finance-Mortgage Loan/Banker -- 0.0%
Nationwide Building Society
Senior Notes
2.63% due 01/30/07*....................... 219,000 217,085
--------
Food-Meat Products -- 0.1%
JBS SA
Company Guar. Bonds
10.50% due 08/04/16*...................... 550,000 556,875
--------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Hotel/Motel -- 0.0%
Grupo Posadas SA de CV
Senior Notes
8.75% due 10/04/11*............. 100,000 $ 104,500
----------
Housewares -- 0.1%
Vitro Envases Norteamerica SA
Sec. Notes
10.75% due 07/23/11*............ 350,000 372,750
----------
Independant Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes, Series B,
11.50% due 08/30/10+(4)(6)...... 725,000 73
----------
Insurance-Multi-line -- 0.4%
Aegon NV
Sub. Notes
5.80% due 07/15/14(12).......... 201,000 166,931
Fairfax Financial Holdings, Ltd.
Notes
7.75% due 04/26/12.............. 169,000 157,170
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.............. 1,350,000 1,250,437
ING Groep NV
Bonds
5.78% due 12/08/15(12).......... 470,000 463,786
----------
2,038,324
----------
Insurance-Reinsurance -- 0.0%
Montpelier Re Holdings, Ltd.
Senior Notes
6.13% due 08/15/13.............. 128,000 123,655
----------
Investment Companies -- 0.0%
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*............. 207,000 208,461
----------
Medical-Drugs -- 0.4%
Abbott Japan Co., Ltd.
Company Guar. Bonds
1.05% due 11/06/08.............. JPY 76,000,000 644,578
Elan Finance PLC
Company Guar. Senior Notes
7.75% due 11/15/11.............. 800,000 779,000
Elan Finance PLC
Company Guar. Senior Notes
9.41% due 11/15/11(10).......... 700,000 707,000
----------
2,130,578
----------
Metal-Aluminum -- 0.1%
Novelis, Inc.
Senior Notes
8.00% due 02/15/15*............. 350,000 332,500
----------
Metal-Diversified -- 0.1%
Inco Ltd
Bonds
5.70% due 10/15/15.............. 290,000 279,499
Inco, Ltd.
Bonds
7.20% due 09/15/32.............. 160,000 163,408
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Metal-Diversified (continued)
Inco, Ltd.
Notes
7.75% due 05/15/12.......................... 310,000 $ 334,931
----------
777,838
----------
Music -- 0.1%
Corporacion Interamericana de Entetenimiento
SA de CV
Senior Notes
8.88% due 06/14/15*......................... 300,000 291,000
----------
Oil Comp-Integrated -- 0.1%
ENI Coordination Center
Company Guar. Notes
5.25% due 12/27/07.......................... GBP 205,000 383,329
Petro-Canada
Notes
5.95% due 05/15/35.......................... 71,000 67,754
Shell International Finance BV
Company Guar. Notes
5.63% due 06/27/11.......................... 280,000 286,688
----------
737,771
----------
Oil Companies-Exploration & Production -- 0.2%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13.......................... 250,000 241,250
Nexen, Inc.
Bonds
5.88% due 03/10/35.......................... 155,000 147,782
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13.......................... 650,000 651,625
----------
1,040,657
----------
Oil-Field Services -- 0.0%
Weatherford International, Ltd.
Senior Notes
5.50% due 02/15/16.......................... 214,000 210,759
----------
Paper & Related Products -- 0.3%
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10.......................... 1,425,000 1,414,313
Abitibi-Consolidated, Inc.
Debentures
8.85% due 08/01/30.......................... 225,000 189,000
Stora Enso Oyj
Bonds
7.25% due 04/15/36*......................... 200,000 207,067
----------
1,810,380
----------
Pipelines -- 0.0%
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16.......................... 183,000 168,930
----------
Property Trust -- 0.1%
WEA Finance LLC/WCI Finance LLC
Senior Notes
5.70% due 10/01/16*......................... 320,000 319,575
----------
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Real Estate Operations & Development -- 0.0%
Brookfield Asset Management, Inc.
Notes
8.13% due 12/15/08........................ 76,000 $ 80,015
----------
Retail-Drug Store -- 0.0%
Jean Coutu Group (PJC), Inc.
Senior Sub. Notes
8.50% due 08/01/14........................ 200,000 192,500
Jean Coutu Group, Inc.
Senior Notes
7.63% due 08/01/12........................ 2,000 2,102
----------
194,602
----------
Satellite Telecom -- 0.3%
Intelsat Bermuda, Ltd.
Company Guar. Notes
9.25% due 06/15/16*....................... 750,000 788,437
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16*...................... 400,000 425,000
Intelsat Intermediate Holding Co., Ltd.
Company Guar. Notes
9.25% due 02/01/15(8)..................... 775,000 561,875
----------
1,775,312
----------
Savings & Loans/Thrifts -- 0.1%
Washington Mutual Preferred Funding Cayman
Bonds
7.25% due 03/15/11(12)*................... 310,000 309,994
----------
Semiconductor Equipment -- 0.0%
MagnaChip Semiconductor SA
Sec. Notes
6.88% due 12/15/11........................ 75,000 60,000
MagnaChip Semiconductor SA
Senior Sub. Notes
8.00% due 12/15/14........................ 25,000 15,188
----------
75,188
----------
Special Purpose Entities -- 0.2%
Bluewater Finance, Ltd.
Company Guar. Notes
10.25% due 02/15/12....................... 650,000 658,125
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(12).................... 338,000 349,320
SovRisc BV
Notes
4.63% due 10/31/08*....................... 133,000 131,937
----------
1,139,382
----------
Specified Purpose Acquisitions -- 0.2%
Nell AF SARL
Guar. Bonds
8.38% due 08/15/15*....................... 1,225,000 1,215,812
----------
Steel-Specialty -- 0.1%
CSN Islands IX Corp.
Company Guar. Notes
10.00% due 01/15/15*...................... 250,000 290,000
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Steel-Specialty (continued)
CSN Islands VIII Corp.
Company Guar. Notes
9.75% due 12/16/13*........................... 275,000 $ 314,187
-----------
604,187
-----------
Telecom Services -- 0.4%
Nordic Telephone Co. Holdings
Senior Notes
8.88% due 05/01/16*........................... 425,000 446,781
Telenet Group Holdings NV
Disc. Notes
11.50% due 06/15/14*(8)....................... 2,106,000 1,842,750
TELUS Corp.
Notes
7.50% due 06/01/07............................ 110,000 111,435
-----------
2,400,966
-----------
Telephone-Integrated -- 0.3%
British Telecommunications PLC
Bonds
8.63% due 12/15/30............................ 392,000 522,956
Telecom Italia Capital
Company Guar. Notes
5.25% due 11/15/13............................ 14,000 13,257
Telecom Italia Capital SA
Company Guar. Notes
4.00% due 01/15/10............................ 465,000 440,592
Telecom Italia Capital SA
Notes
5.25% due 10/01/15............................ 155,000 143,624
Telecom Italia Capital SA
Company Guar. Bonds
6.38% due 11/15/33............................ 367,000 343,224
-----------
1,463,653
-----------
Transport-Marine -- 0.1%
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14............................ 425,000 391,000
-----------
Transport-Rail -- 0.1%
Canadian National Railway Co.
Notes
6.38% due 10/15/11............................ 315,000 330,072
-----------
Total Foreign Corporate Bonds & Notes
(cost $29,805,262)............................ 29,618,311
-----------
FOREIGN GOVERNMENT AGENCIES -- 31.8%
Sovereign -- 31.8%
Canadian Government
Bonds
4.00% due 09/01/10............................ CAD 2,684,000 2,410,809
CS First Boston International for City of Kiev
Ukraine
Loan Participation Notes
8.00% due 11/06/15............................ 1,270,000 1,276,045
Federal Republic of Brazil
Bonds
5.78% due 01/05/16............................ BRL 2,474,000 1,119,405
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Sovereign (continued)
Federal Republic of Brazil
Notes
7.88% due 03/07/15.......... 960,000 $1,052,160
Federal Republic of Brazil
Notes
8.00% due 01/15/18.......... 8,330,000 9,150,505
Federal Republic of Brazil
Notes
8.75% due 02/04/25.......... 2,200,000 2,620,200
Federal Republic of Brazil
Bonds
10.50% due 07/14/14......... 485,000 609,403
Federal Republic of Germany
Bonds
3.50% due 10/09/09.......... EUR 1,888,000 2,388,142
Federal Republic of Germany
Bonds
3.50% due 01/04/16.......... EUR 500,000 624,642
Federal Republic of Germany
Bonds
3.75% due 07/04/13.......... EUR 2,915,000 3,717,289
Federal Republic of Germany
Bonds
4.75% due 07/04/34.......... EUR 1,710,000 2,469,921
Federal Republic of Germany
Bonds
5.50% due 01/04/31.......... EUR 500,000 787,707
Government of Australia
Bonds
6.25% due 04/15/15.......... AUD 3,313,000 2,586,970
Government of Australia
Bonds
7.50% due 09/15/09.......... AUD 5,765,000 4,496,112
Government of Canada
Bonds
4.25% due 09/01/08.......... CAD 2,157,000 1,941,252
Government of Japan
Bonds
0.70% due 05/15/08.......... JPY 258,500,000 2,193,467
Government of Japan
Bonds
0.90% due 12/22/08.......... JPY 399,200,000 3,396,203
Government of Japan
Bonds
1.00% due 12/20/12.......... JPY 354,800,000 2,953,618
Government of Japan
Bonds
1.80% due 03/22/10.......... JPY 280,000,000 2,443,077
Government of Poland
Bonds
4.25% due 05/24/11.......... PLN 5,000,000 1,522,656
Government of Ukraine
Notes
7.65% due 06/11/13.......... 820,000 865,838
Government of United Kingdom
Bonds
5.00% due 03/07/08.......... GBP 1,115,000 2,090,594
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Kingdom of Norway
Bonds
5.50% due 05/15/09..... NOK 8,920,000 $1,418,688
Kingdom of Norway
Bonds NOK
6.50% due 05/15/13..... 34,480,000 6,030,603
Kingdom of Spain
Bonds
5.75% due 07/30/32..... EUR 925,000 1,508,445
Kingdom of Spain
Bonds
6.15% due 01/31/13..... EUR 1,199,000 1,729,614
Kingdom of Sweden
Bonds SEK
4.00% due 12/01/09..... 14,100,000 1,951,987
Kingdom of Sweden
Bonds
Series 1049 SEK
4.50% due 08/12/15..... 26,210,000 3,808,741
Kingdom of Sweden
Bonds SEK
5.00% due 01/28/09..... 26,640,000 3,759,624
Kingdom of Sweden
Bonds SEK
5.50% due 10/08/12..... 32,870,000 4,939,819
Kingdom of Netherlands
Bonds
5.25% due 07/15/08..... EUR 1,045,000 1,362,110
Republic of Argentina
Bonds
5.59% due 08/03/12(10). 1,930,000 1,350,035
Republic of Argentina
Notes
5.25% due 12/31/38(8).. 2,144,761 932,971
Republic of Argentina
Bonds
7.00% due 03/28/11..... 3,255,000 3,124,800
Republic of Argentina
Notes
8.28% due 12/31/33..... 2,789,886 2,685,265
Republic of Brazil
Bonds
8.25% due 01/20/34..... 2,060,000 2,369,000
Republic of Brazil
Bonds
8.88% due 10/14/19..... 2,560,000 3,036,160
Republic of Brazil
Notes
8.88% due 04/15/24..... 145,000 174,363
Republic of Brazil
Notes
10.25% due 06/17/13.... 580,000 708,180
Republic of Brazil
Notes
11.00% due 01/11/12.... 240,000 293,880
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
Sovereign (continued)
Republic of Brazil
Notes
11.00% due 08/17/40..... 5,865,000 $7,639,162
Republic of Colombia
Notes
7.38% due 01/27/17...... 1,100,000 1,146,750
Republic of Colombia
Notes
12.00% due 10/22/15(3).. COP 6,497,000,000 3,099,243
Republic of Columbia
Notes
8.25% due 12/22/14...... 1,190,000 1,313,760
Republic of El Salvador
Bonds
7.65% due 06/15/35...... 525,000 564,375
Republic of El Salvador
Bonds
8.25% due 04/10/32*..... 360,000 412,560
Republic of Greece
Bonds
5.25% due 05/18/12...... EUR 1,421,000 1,931,529
Republic of Hungary
Bonds
6.25% due 04/24/09...... HUF 569,000,000 2,507,597
Republic of Hungary
Bonds
6.50% due 08/12/08...... HUF 275,000,000 1,234,009
Republic of Indonesia
Bonds
7.50% due 01/15/16...... 550,000 585,770
Republic of Peru
Bonds
5.00% due 03/07/17(11).. 152,000 149,910
Republic of Peru
Notes
7.35% due 07/21/25...... 1,910,000 2,036,060
Republic of Peru
Bonds
8.75% due 11/21/33...... 720,000 882,000
Republic of Philippines
Senior Notes
6.25% due 03/15/16...... EUR 800,000 1,028,440
Republic of Philippines
Bonds
7.75% due 01/14/31...... 580,000 605,375
Republic of Philippines
Notes
8.00% due 01/15/16...... 1,180,000 1,295,050
Republic of Philippines
Notes
8.25% due 01/15/14...... 2,320,000 2,525,900
Republic of Philippines
Bonds
9.88% due 01/15/19...... 1,020,000 1,258,425
Republic of Philippines
Notes
10.63% due 03/16/25..... 850,000 1,132,625
Republic of South Africa
Bonds
8.75% due 12/21/14...... ZAR 6,830,000 887,315
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Republic of South Africa
Bonds,
13.00% due 08/31/10..... ZAR 7,520,000 $ 1,102,789
Republic of South Africa
Bonds
13.50% due 09/15/15..... ZAR 5,575,000 934,202
Republic of Turkey
Notes
6.88% due 03/17/36...... 2,650,000 2,404,875
Republic of Turkey
Bonds
7.00% due 09/26/16...... 2,620,000 2,567,600
Republic of Turkey
Notes
7.00% due 06/05/20...... 700,000 677,250
Republic of Turkey
Notes
7.25% due 03/15/15...... 5,220,000 5,246,100
Republic of Turkey
Notes
8.00% due 02/14/34...... 1,870,000 1,930,775
Republic of Turkey
Notes
9.50% due 01/15/14...... 1,310,000 1,490,125
Republic of Turkey
Senior Notes
11.88% due 01/15/30..... 1,285,000 1,893,769
Republic of Uruguay
Bonds
7.50% due 03/15/15...... 750,000 779,250
Republic of Uruguay
Bonds
8.00% due 11/18/22...... 4,155,000 4,383,525
Republic of Uruguay
Notes
9.25% due 05/17/17...... 400,000 465,000
Republic of Venezuela
Bonds
6.00% due 12/09/20...... 1,290,000 1,154,550
Republic of Venezuela
Notes
8.50% due 10/08/14...... 1,340,000 1,484,050
Republic of Venezuela
Bonds
9.25% due 09/15/27...... 945,000 1,157,153
Republic of Venezuela
Bonds
9.38% due 01/13/34...... 1,340,000 1,656,240
Russian Federation
Bonds
7.50% due 03/31/30*(8).. 650,000 724,347
Russian Federation
Bonds
7.50% due 03/31/30(8)... 13,460,000 15,022,706
Russian Federation
Notes
12.75% due 06/24/28..... 500,000 897,250
United Mexican States
Notes
6.63% due 03/03/15...... 1,120,000 1,190,000
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Sovereign (continued)
United Mexican States
Notes
Series A
7.50% due 04/08/33............... 1,485,000 $ 1,712,947
United Mexican States
Notes
8.13% due 12/30/19............... 2,380,000 2,856,000
United Mexican States
Bonds
8.30% due 08/15/31............... 1,530,000 1,907,910
------------
179,774,568
------------
Total Foreign Government Agencies
(cost $178,141,247).............. 179,774,568
------------
FOREIGN GOVERNMENT TREASURIES -- 1.0%
Sovereign -- 1.0%
United Kingdom Treasury
Bonds
4.00% due 03/07/09............... GBP 660,000 1,212,471
United Kingdom Treasury
Bonds
4.25% due 03/07/11............... GBP 2,405,000 4,418,451
------------
5,630,922
------------
Total Foreign Government Treasuries
(cost $5,584,528)................ 5,630,922
------------
U.S. GOVERNMENT AGENCIES -- 10.1%
Federal Home Loan Bank -- 0.3%
Federal Home Loan Bank
3.50% due 05/15/07............... 600,000 593,566
3.88% due 12/20/06............... 600,000 598,094
4.50% due 09/08/08............... 600,000 594,504
------------
1,786,164
------------
Federal Home Loan Mtg. Corp. -- 5.0%
Federal Home Loan Mtg. Corp.
3.63% due 02/15/07............... 624,000 620,156
4.13% due 07/12/10............... 300,000 291,921
4.35% due 06/02/08............... 600,000 592,738
4.45% due 03/06/08............... 600,000 594,931
4.50% due 02/01/20............... 246,347 237,404
4.50% due 08/01/20............... 437,341 421,465
4.75% due 01/18/11............... 310,000 308,125
5.00% due 09/01/18............... 566,063 557,679
5.00% due 07/01/20............... 864,374 849,411
5.00% due 02/01/34............... 498,603 481,153
5.00% due 05/01/34............... 308,038 296,838
5.00% due 02/01/35............... 721,083 694,867
5.00% due 08/01/35............... 1,036,180 997,107
5.00% due 08/01/35............... 1,799,324 1,731,473
5.00% due 05/01/36............... 180,539 173,642
5.50% due 07/01/35............... 2,738,977 2,702,474
5.74% due 08/01/36(10)........... 2,816,000 2,824,785
6.00% due 07/01/35............... 232,937 234,216
6.00% due 06/01/36............... 8,900,477 8,947,090
6.00% due 06/01/36............... 977,422 982,540
6.00% due October TBA............ 634,400 637,175
6.50% due 05/01/29............... 9,103 9,329
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal Home Loan Mtg. Corp. (continued)
6.50% due 02/01/35................... 1,160,749 $ 1,183,574
6.50% due 03/01/36................... 386,494 393,712
6.88% due 09/15/10................... 1,156,000 1,237,008
7.00% due 06/01/29................... 18,346 18,916
8.50% due 05/01/08................... 9,526 9,673
10.00% due 05/15/20(13).............. 18,893 18,851
11.57% due 06/15/21
Series 1103, Class N(13)(14)........ 12,254 242
-----------
28,048,495
-----------
Federal Home Loan Mtg. Corp. Reference
REMIC -- 0.1%
Series R004, Class AL
5.13% due 12/15/13(13)............. 330,196 327,436
Series R005, Class AB
5.50% due 12/15/18(13)............. 419,541 418,630
-----------
746,066
-----------
Federal National Mtg. Assoc. -- 4.6%
3.00% due 03/02/07................... 600,000 594,340
4.50% due 06/01/19................... 589,143 569,222
4.75% due 12/15/10................... 375,000 372,831
5.00% due 06/01/19................... 312,213 307,220
5.00% due 04/01/21................... 3,858,115 3,791,263
5.00% due 03/01/34................... 346,397 333,538
5.00% due 11/01/34................... 611,540 588,840
5.00% due 05/01/35................... 1,763,786 1,695,910
5.00% due 05/01/36................... 983,929 945,611
5.25% due 08/01/12................... 576,000 579,011
5.50% due 06/01/19................... 406,031 406,363
5.50% due 11/01/19................... 1,801,540 1,803,013
5.50% due 08/01/20................... 422,554 422,514
5.50% due 01/01/29................... 10,163 10,067
5.50% due 06/01/29................... 170,465 168,834
5.50% due 06/01/34................... 405,395 400,164
5.50% due 02/01/35................... 627,108 618,133
5.50% due 12/01/35................... 833,712 821,781
5.50% due 05/01/36................... 4,933,664 4,860,430
5.82% due 02/01/36(10)............... 408,597 408,553
6.00% due 02/01/32................... 152,541 153,813
6.00% due 05/01/34................... 24,039 24,187
6.00% due 10/01/34................... 748,351 752,950
6.00% due 10/01/34................... 694,049 698,314
6.00% due 04/01/35................... 802,185 807,116
6.00% due 06/01/35................... 631,784 634,858
6.00% due 03/01/36................... 2,453,420 2,464,735
6.50% due 04/01/34................... 370,689 377,881
6.50% due 02/01/35................... 105,374 107,325
7.50% due 01/01/30................... 19,897 20,650
7.50% due 09/01/30................... 3,485 3,608
8.00% due 11/01/28................... 29,342 31,052
8.80% due 01/25/19(13)............... 46,695 49,995
10.40% due 04/25/19(13).............. 7,671 8,254
13.00% due 11/01/15.................. 9,014 9,987
-----------
25,842,363
-----------
Principal
Amount/ Value
Security Description Shares** (Note 2)
---------------------------------------------------------------------
Federal National Mtg. Assoc. Benchmark
REMIC -- 0.1%
Series 2006-B1, Class AB
6.00% due 06/25/16(13)................... 329,762 331,822
-----------
Government National Mtg. Assoc. -- 0.0%
7.50% due 07/15/27......................... 16,730 $ 17,453
7.50% due 10/15/27......................... 67,436 70,350
-----------
87,803
-----------
Total U.S. Government Agencies
(cost $56,801,837)........................... 56,842,713
-----------
U.S. GOVERNMENT TREASURIES -- 6.9%
United States Treasury Bonds -- 1.7%
4.50% due 02/15/36......................... 4,277,000 4,098,234
6.25% due 08/15/23......................... 166,000 192,729
7.88% due 02/15/21......................... 4,000,000 5,256,564
-----------
9,547,527
-----------
United States Treasury Notes -- 5.2%
3.63% due 01/15/10......................... 803,000 779,193
3.88% due 05/15/10......................... 175,000 170,878
3.88% due 09/15/10......................... 7,000 6,821
4.00% due 02/15/15......................... 3,201,000 3,064,084
4.25% due 01/15/11......................... 2,000,000 1,972,734
4.25% due 08/15/15......................... 2,262,000 2,200,412
4.38% due 12/31/07......................... 1,400,000 1,391,743
4.38% due 12/15/10......................... 101,000 100,164
4.50% due 02/15/09......................... 240,000 239,147
4.50% due 11/15/10......................... 70,000 69,759
4.50% due 11/15/15......................... 270,000 267,384
4.63% due 02/29/08......................... 63,000 62,847
4.88% due 05/31/08......................... 3,500,000 3,506,562
4.88% due 05/31/11......................... 4,000,000 4,045,936
4.88% due 02/15/12......................... 10,000,000 10,139,450
5.13% due 05/15/16......................... 1,579,000 1,637,966
-----------
29,655,080
-----------
Total U.S. Government Treasuries
(cost $38,880,413)......................... 39,202,607
-----------
COMMON STOCK -- 1.1%
Cable TV -- 0.0%
Ono Finance PLC*(3)(4)...................... 100 0
-----------
Casino Services -- 0.0%
Shreveport Gaming Holdings, Inc.+(3)(4)(5).. 2,441 56,199
-----------
Cellular Telecom -- 0.6%
iPCS, Inc.+(4)(5)........................... 60,413 3,235,116
-----------
Independant Power Producer -- 0.1%
Mirant Corp.+............................... 16,019 437,479
-----------
Medical-Outpatient/Home Medical -- 0.0%
Critical Care Systems International,
Inc.(3)(4)(5).............................. 4,107 28,749
-----------
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+............ 5,359 21,168
-----------
Oil-Field Services -- 0.4%
Trico Marine Services, Inc.+................ 68,333 2,306,239
-----------
Total Common Stock
(cost $3,303,737).......................... 6,084,950
-----------
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal
Amount/ Value
Security Description Shares** (Note 2)
----------------------------------------------------------------------
PREFERRED STOCKS -- 0.3%
Diversified Financial Services -- 0.1%
General Electric Capital Corp. 8.00% (8)...... 16,000 $ 368,000
------------
Finance-Mortgage Loan/Banker -- 0.0%
Federal National Mtg. Assoc., 7.01% (10)...... 1,080 57,174
------------
Food-Dairy Products -- 0.0%
TCR Holdings, Class B (3)(4).................. 570 6
TCR Holdings, Class C (3)(4).................. 314 3
TCR Holdings, Class D (3)(4).................. 827 8
TCR Holdings, Class E (3)(4).................. 1,711 17
------------
34
------------
Rental Auto/Equipment -- 0.0%
Rent-Way, Inc.
8.00% (3)(4)(5).............................. 4 62,412
------------
Retail-Drug Store -- 0.0%
GNC Corp.
Series A,
12.00% (4)(9)................................ 100 110,000
------------
Television -- 0.2%
Ion Media Networks, Inc. 14.25% (9)........... 106 879,800
------------
Total Preferred Stocks
(cost $1,421,594)............................ 1,477,420
------------
RIGHTS+ -- 0.0%
Sovereign -- 0.0%
United Mexican States,
Series E
Expires 06/30/07 VRR
(cost $0).................................... 1,400,000 25,900
------------
WARRANTS+ -- 0.0%
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (Strike Price $4.31)........ 13,811 27,622
------------
Telecom Services -- 0.0%
Leap Wireless International, Inc.
Expires 04/15/10 (Strike Price $96.80) (4)... 500 0
------------
Telephone-Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 04/15/10 (Strike Price $0.00) (3)(4). 150 1
------------
Total Warrants
(cost $46,436)............................... 27,623
------------
Total Long-Term Investment Securities
(cost $494,790,016).......................... 501,332,059
------------
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 5.0%
Time Deposits -- 5.0%
Time Deposit with State Street Bank & Trust
2.80% due 10/02/06......................... 2,007,000 $ 2,007,000
Time Deposit with State Street Bank & Trust
4.05% due 10/02/06......................... 26,207,000 26,207,000
------------
Total Short-term Investment Securities
(cost $28,214,000)........................... 28,214,000
------------
REPURCHASE AGREEMENTS -- 2.2%
UBS Securities, LLC Joint Repurchase
Agreement Account (Note 2)
(cost $12,365,000)......................... 12,365,000 12,365,000
------------
TOTAL INVESTMENTS
(cost $535,369,016)@....................... 95.9% 541,911,059
Other assets less liabilities................. 4.1 23,457,269
---------- ------------
NET ASSETS -- 100.0% $565,368,328
========== ============
BONDS & NOTES SOLD SHORT -- (0.1%)
Government Agencies -- (0.1%)
Federal Home Loan Mtg. Corp.
6.50% due October TBA
(Proceeds $(646,196))...................... (634,400) (646,196)
------------
- --------
REMIC--RealEstate Mortgage Investment Conduits
VRR--ValueRecovery Right
TBA--Securitiespurchased on a forward commitment basis with an approximate
principal amount due and no definative maturity date. The actual
principal and maturity date will be determined upon settlement
date.
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. The Fund has no
rights to demand registration of these securities. At September 30, 2006,
the aggregate value of these securities was $46,407,798 representing 8.2%
of net assets. Unless otherwise indicated these securities are not
considered to be illiquid.
** Denominated in United States dollars unless otherwise indicated.
@ See Note 5 for cost of investments on a tax basis.
(1) Commercial Mortgaged Back Security
(2) Variable Rate Security -- the rate reflected is as of September 30, 2006;
maturity date reflects the stated maturity date.
(3) Fair valued security; see Note 2
(4) Illiquid security
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
(5) To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. These restricted
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
September 30, 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
---- ----------- ---------- ----------- ---------- ------- ------
Critical Care
Systems
International,
Inc. Common
Stock.......... 7/20/2006 4,107 $ 37,181 $ 28,749 $ 7 0.01%
ICO North
America, Inc.
7.50% due
08/15/09....... 8/11/2005 200,000 200,000
4/19/2006 65,000 81,805
----------------------
265,000 281,805 323,300 1 0.06
iPCS, Inc.
Common
Stock.......... 7/28/2005 1,283 0
7/20/2004 59,130 916,515
----------------------
60,413 916,515 3,235,116 54 0.60
Rent-Way 8.00%
Preferred
Stock.......... 5/29/2003 3 25,000
5/19/2004 1 10,000
----------------------
4 35,000 62,412 15,603 0.01
Shreveport
Gaming
Holdings, Inc.
Common
Stock.......... 7/29/2005 2,047 47,128
7/21/2005 394 9,073
----------------------
2,441 56,201 56,199 23 0.01
Southern Energy,
Inc. 7.90% due
07/15/09....... 1/25/2006 1,125,000 0
6/6/2006 425,000 0
----------------------
1,550,000 0 0 0 0.00
---------- ----
$3,705,776 0.69%
========== ====
(6) Bond in default
(7) Company has filed Chapter 11 bankruptcy protection.
(8) "Step-up" security where the rate increases ("steps-up") at a
predetermined rate. Rate shown reflects the increased rate.
(9) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(10) Floating rate security where the rate fluctuates. The rate moves us or
down at each reset date. The rate reflected is as of September 30, 2006.
(11) Variable Rate Security -- the rate reflected is as of September 30, 2006,
maturity date reflects next reset date.
(12) Perpetual maturity -- maturity date reflects the next call date.
(13) Collateralized Mortgaged Obligation
(14) Interest Only
(15) Company filed for Chapter 11 bankruptcy protection subsequent to
September 30, 2006.
(16) Bond is in default and did not pay principal at maturity. Security is
subject to litigation, the outcome of which is still to be determined.
(17) Company has filed for Chapter 7 bankruptcy protection.
AUD -- AustralianDollar
BRL -- BrazilianReal
CAD -- CanadianDollar
COP -- ColombianPeso
EUR -- Euro
GBP -- PoundSterling
HUF -- HungarianForint
JPY -- JapaneseYen
MXN -- MexicanPeso
NOK -- NorwegianKrone
PLN -- PolishZloty
SEK -- SwedishKrone
ZAR -- SouthAfrican Rand
See Notes to Financial Statements
46
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited)
Industry Allocation*
Repurchase Agreements................. 9.2%
Cellular Telecom...................... 8.1
Finance-Auto Loans.................... 6.0
Oil Companies-Exploration & Production 4.3
Pipelines............................. 4.1
Cable TV.............................. 4.0
Independant Power Producers........... 3.4
Telecom Services...................... 2.8
Special Purpose Entities.............. 2.7
Transport-Air Freight................. 2.6
Airlines.............................. 2.5
Television............................ 2.4
Casino Hotels......................... 2.1
Chemicals-Specialty................... 1.8
Oil-Field Services.................... 1.6
Paper & Related Products.............. 1.6
Auto-Cars/Light Trucks................ 1.4
Building & Construction Products-Misc. 1.4
Real Estate Investment Trusts......... 1.4
Rental Auto/Equipment................. 1.3
Electric-Integrated................... 1.2
Funeral Services & Related Items...... 1.2
Containers-Metal/Glass................ 1.1
Electronic Components-Semiconductors.. 1.0
Retail-Drug Store..................... 1.0
Satellite Telecom..................... 1.0
Telephone-Integrated.................. 1.0
Theaters.............................. 1.0
Beverages-Non-alcoholic............... 0.9
Electric-Generation................... 0.8
Medical Products...................... 0.8
Broadcast Services/Program............ 0.7
Advertising Services.................. 0.6
Auto/Truck Parts & Equipment-Original. 0.6
Building & Construction-Misc.......... 0.6
Chemicals-Plastics.................... 0.6
Consumer Products-Misc................ 0.6
Electronics-Military.................. 0.6
Non-hazardous Waste Disposal.......... 0.6
Applications Software................. 0.5
Containers-Paper/Plastic.............. 0.5
Diagnostic Kits....................... 0.5
Food-Meat Products.................... 0.5
Retail-Restaurants.................... 0.5
Aerospace/Defense-Equipment........... 0.4
Commercial Services................... 0.4
Direct Marketing...................... 0.4
Diversified Manufactured Operations... 0.4
Gambling (Non-Hotel).................. 0.4
Housewares............................ 0.4
Insurance-Multi-line.................. 0.4
Medical-Drugs......................... 0.4
Office Automation & Equipment......... 0.4
Travel Services....................... 0.4
Coal.................................. 0.3
Computer Services..................... 0.3
Golf.................................. 0.3
Hotels/Motels......................... 0.3
Insurance-Property/Casualty........... 0.3
Medical Information Systems........... 0.3
Medical-Generic Drugs............ 0.3%
Medical-Hospitals................ 0.3
Music............................ 0.3
Protection/Safety................ 0.3
Seismic Data Collection.......... 0.3
Steel-Producers.................. 0.3
Steel-Specialty.................. 0.3
Transport-Marine................. 0.3
Transport-Services............... 0.3
Energy-Alternate Sources......... 0.2
Food-Misc........................ 0.2
Gas-Distribution................. 0.2
Machinery-Farming................ 0.2
Medical-HMO...................... 0.2
Medical-Nursing Homes............ 0.2
Medical-Outpatient/Home Medical.. 0.2
Metal Processors & Fabrication... 0.2
Metal-Aluminum................... 0.2
Multimedia....................... 0.2
Oil Field Machinery & Equipment.. 0.2
Private Corrections.............. 0.2
Publishing-Newspapers............ 0.2
Retail-Regional Deptment Stores.. 0.2
Specified Purpose Acquisitions... 0.2
Storage/Warehousing.............. 0.2
Casino Services.................. 0.1
Chemicals-Diversified............ 0.1
Computers-Memory Devices......... 0.1
Consulting Services.............. 0.1
Electronic Components-Misc....... 0.1
Industrial Audio & Video Products 0.1
Insurance-Life/Health............ 0.1
Machinery-General Industrial..... 0.1
Office Supplies & Forms.......... 0.1
Oil & Gas Drilling............... 0.1
Retail-Major Department Stores... 0.1
Rubber-Tires..................... 0.1
Semiconductor Equipment.......... 0.1
Textile-Products................. 0.1
Transport-Rail................... 0.1
----
96.3%
====
Credit Quality+#
BBB........ 0.6%
BB......... 25.2%
B.......... 43.6%
CCC........ 22.0%
Below C.... 2.9%
Not Rated @ 5.7%
-----
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.
47
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES -- 68.4%
Advertising Services -- 0.6%
Vertis, Inc.
Sec. Notes
9.75% due 04/01/09.............. $ 200,000 $ 201,750
Vertis, Inc.
Company Guar. Notes
10.88% due 06/15/09............. 1,575,000 1,582,875
----------
1,784,625
----------
Aerospace/Defense-Equipment -- 0.4%
DeCrane Aircraft Holdings, Inc.
Company Guar. Series B
12.00% due 09/30/08............. 1,700,000 1,270,750
----------
Airlines -- 2.5%
American Airlines, Inc.
Pass Through Certs.,
Series 2001-1, Class A-2,
6.82% due 05/23/11.............. 4,125,000 4,057,969
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991-1, Class C,
6.95% due 08/02/09.............. 538,536 487,375
Continental Airlines, Inc.
Pass Through Certs.,
Series 1999, Class 2,
7.73% due 03/15/11.............. 735,162 645,104
Delta Air Lines, Inc.
Pass Through Certs.
7.57% due 11/18/10(1)........... 150,000 150,188
Delta Air Lines, Inc.
Sec. Notes
9.50% due 11/18/08*(1)(2)....... 500,000 552,500
Northwest Airlines, Inc.
Pass Through Certs.
7.04% due 04/01/22(1)........... 1,309,566 1,301,381
United AirLines, Inc.
Pass Through Certs.
6.20% due 09/01/08.............. 428,477 428,477
----------
7,622,994
----------
Applications Software -- 0.5%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13............. 1,400,000 1,473,500
----------
Auto-Cars/Light Trucks -- 1.4%
General Motors Corp.
Senior Notes
7.13% due 07/15/13.............. 3,200,000 2,812,000
General Motors Corp.
Debentures
8.25% due 07/15/23.............. 1,750,000 1,515,937
----------
4,327,937
----------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(3)(4)........ 1,650,000 0
----------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
Beverages-Non-alcoholic -- 0.5%
Cott Beverages, Inc.
Company Guar. Notes
8.00% due 12/15/11............................. $ 600,000 $ 612,000
Le-Natures, Inc.
Sub. Notes
10.00% due 06/15/13*(5)........................ 850,000 875,500
----------
1,487,500
----------
Broadcast Services/Program -- 0.7%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14............................. 1,100,000 1,141,250
Nexstar Finance Holdings LLC/Nexstar Finance
Holdings, Inc.
Senior Disc. Notes
11.38% due 04/01/13(6)......................... 750,000 626,250
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14............................. 500,000 455,000
----------
2,222,500
----------
Building & Construction Products-Misc. -- 1.4%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12............................. 875,000 872,812
Associated Materials, Inc.
Senior Disc. Notes
11.25% due 03/01/14(6)......................... 1,000,000 550,000
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08............................ 1,074,000 1,106,220
Dayton Superior Corp.
Company Guar. Notes
13.00% due 06/15/09............................ 1,150,000 1,081,000
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14............................. 525,000 531,563
----------
4,141,595
----------
Cable TV -- 4.0%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12............................. 250,000 253,125
CCH I Holdings LLC/CCH I Holdings Capital Corp.
Bonds
11.00% due 10/01/15*........................... 4,573,529 4,127,610
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10............................ 1,125,000 1,141,875
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13*........................... 4,077,765 4,149,126
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11............................. 360,000 369,450
CSC Holdings, Inc.
Debentures
8.13% due 08/15/09............................. 825,000 854,906
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Cable TV (continued)
Insight Communications Co., Inc.
Senior Disc. Notes
12.25% due 02/15/11(6)..................... $1,165,000 $ 1,234,900
-----------
12,130,992
-----------
Casino Hotels -- 2.1%
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(4)(7).................. 1,721,177 1,626,512
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(3)(4)................... 2,675,000 2,675,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14......................... 1,200,000 1,111,500
Riviera Holdings Corp.
Company Guar. Notes
11.00% due 06/15/10........................ 800,000 844,000
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*........................ 175,000 176,750
-----------
6,433,762
-----------
Cellular Telecom -- 2.0%
American Cellular Corp.
Senior Notes/Series B
10.00% due 08/01/11........................ 1,700,000 1,780,750
Centennial Cellular Operating Co/Centennial
Communications Corp.
Company Guar. Notes
10.13% due 06/15/13........................ 725,000 770,312
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13........................ 209,000 211,613
Centennial Communications Corp.
Senior Notes
11.12% due 01/01/13(8)..................... 925,000 955,062
Rural Cellular Corp.
Sec. Notes
8.25% due 03/15/12......................... 1,050,000 1,081,500
Rural Cellular Corp.
Senior Sub. Notes
9.75% due 01/15/10......................... 1,375,000 1,383,594
-----------
6,182,831
-----------
Chemicals-Diversified -- 0.1%
Lyondell Chemical Co.
Company Guar.
8.00% due 09/15/14......................... 400,000 405,000
-----------
Chemicals-Specialty -- 0.9%
Nalco Co.
Senior Notes
7.75% due 11/15/11......................... 350,000 357,000
Nalco Co.
Senior Sub. Notes
8.88% due 11/15/13......................... 515,000 536,887
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Chemicals-Specialty (continued)
Rockwood Specialties Group, Inc.
Senior Sub. Notes
7.50% due 11/15/14....................... $ 925,000 $ 911,125
Rockwood Specialties Group, Inc.
Senior Sub. Notes
10.63% due 05/15/11...................... 292,000 312,440
Tronox Worldwide LLC/Tronox Finance Corp.
Company Guar. Notes
9.50% due 12/01/12....................... 600,000 615,750
----------
2,733,202
----------
Commercial Services -- 0.4%
DI Finance/DynCorp International
Senior Sub. Notes
9.50% due 02/15/13....................... 1,273,000 1,317,555
----------
Computer Services -- 0.3%
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13....................... 825,000 853,875
----------
Consulting Services -- 0.1%
FTI Consulting, Inc.
Company Guar. Notes
7.63% due 06/15/13....................... 425,000 429,250
----------
Consumer Products-Misc. -- 0.6%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12....................... 67,000 67,670
Jostens Holding Corp.
Senior Disc. Notes
10.25% due 12/01/13(6)................... 1,000,000 825,000
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13*...................... 775,000 779,844
----------
1,672,514
----------
Containers-Metal/Glass -- 1.1%
Crown Cork & Seal Co., Inc.
Debentures
7.38% due 12/15/26....................... 75,000 68,250
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23....................... 1,750,000 1,671,250
Owens Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09....................... 835,000 857,962
Owens-Brockway Glass Container, Inc.
Guar. Notes
8.25% due 05/15/13....................... 600,000 615,000
----------
3,212,462
----------
Containers-Paper/Plastic -- 0.5%
Pliant Corp.
Sec. Notes
11.13% due 09/01/09...................... 1,540,000 1,505,350
----------
49
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Diagnostic Kits -- 0.5%
Inverness Medical Innovations, Inc.
Senior Sub. Notes
8.75% due 02/15/12....................... $1,400,000 $1,379,000
----------
Direct Marketing -- 0.4%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12....................... 1,325,000 1,325,000
----------
Diversified Manufactured Operations -- 0.4%
Covalence Specialty Materials Corp.
Senior Sub. Notes
10.25% due 03/01/16*..................... 450,000 436,500
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14*..................... 700,000 742,000
----------
1,178,500
----------
Electric-Generation -- 0.8%
Edison Mission Energy
Senior Notes
7.50% due 06/15/13*...................... 900,000 909,000
Edison Mission Energy
Senior Notes
7.75% due 06/15/16*...................... 375,000 379,688
The AES Corp.
Sec. Notes
8.75% due 05/15/13*...................... 1,150,000 1,233,375
----------
2,522,063
----------
Electric-Integrated -- 1.2%
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11....................... 1,325,000 1,326,656
Mission Energy Holding Co.
Sec. Notes
13.50% due 07/15/08...................... 2,125,000 2,372,031
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(3)(4)(9)............. 3,525,000 0
----------
3,698,687
----------
Electronic Components-Misc. -- 0.1%
Sanmina-SCI Corp.
Company Guar. Notes
6.75% due 03/01/13....................... 350,000 329,875
----------
Electronic Components-Semiconductors -- 0.6%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12....................... 1,024,000 1,039,360
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16....................... 975,000 914,063
----------
1,953,423
----------
Electronics-Military -- 0.6%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13....................... 1,925,000 1,872,063
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Energy-Alternate Sources -- 0.2%
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12................... $ 625,000 $ 653,125
-----------
Finance-Auto Loans -- 6.0%
Ford Motor Credit Co.
Notes
7.38% due 10/28/09................... 4,350,000 4,227,347
Ford Motor Credit Co.
Notes
9.82% due 04/15/12(8)................ 1,375,000 1,438,803
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14................... 3,235,000 3,158,185
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11................... 5,950,000 5,918,477
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12................... 269,000 266,257
General Motors Acceptance Corp.
Notes
7.60% due 12/01/14(8)................ 3,375,000 3,383,454
-----------
18,392,523
-----------
Food-Meat Products -- 0.3%
Smithfield Foods, Inc.
Senior Notes
7.75% due 05/15/13................... 825,000 849,750
-----------
Food-Misc. -- 0.2%
Wornick Co.
Sec. Notes
10.88% due 07/15/11.................. 700,000 696,500
-----------
Funeral Services & Related Items -- 1.2%
Carriage Services, Inc.
Senior Notes
7.88% due 01/15/15................... 1,134,000 1,102,815
Service Corp. International
Senior Notes
7.38% due 10/01/14*.................. 155,000 155,968
Service Corp. International
Senior Notes
7.63% due 10/01/18*.................. 155,000 155,969
Service Corp. International
Senior Notes
8.00% due 06/15/17*.................. 2,300,000 2,202,250
-----------
3,617,002
-----------
Gambling (Non-Hotel) -- 0.4%
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/12*.................. 1,011,000 1,069,133
-----------
Gas-Distribution -- 0.2%
Colorado Interstate Gas Co.
Senior Debentures
6.85% due 06/15/37................... 500,000 502,719
-----------
50
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Golf -- 0.3%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11.................... $1,100,000 $ 984,500
----------
Hotel/Motel -- 0.3%
Gaylord Entertainment Co.
Company Guar. Senior Notes
6.75% due 11/15/14.................... 875,000 836,719
----------
Independent Power Producers -- 3.2%
Calpine Corp
Sec. Notes
8.75% due 07/15/13*+(1)(2)............ 6,985,000 7,037,387
NRG Energy, Inc. Company
Company Guar. Notes
7.38% due 02/01/16.................... 2,025,000 2,012,344
Reliant Energy, Inc.
Sec. Notes
9.50% due 07/15/13.................... 652,000 676,450
----------
9,726,181
----------
Industrial Audio & Video Products -- 0.1%
Telex Communications, Inc.
Sec. Notes
11.50% due 10/15/08................... 300,000 318,000
----------
Insurance-Life/Health -- 0.1%
Presidential Life Corp.
Senior Notes
7.88% due 02/15/09.................... 275,000 264,000
----------
Insurance-Property/Casualty -- 0.3%
Crum & Forster Holdings Corp.
Senior Notes
10.38% due 06/15/13................... 775,000 794,375
----------
Machinery-Farming -- 0.2%
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09.................... 500,000 493,125
----------
Machinery-General Industrial -- 0.1%
Stewart & Stevenson LLC/Stewart &
Stevenson Corp.
Senior Notes
10.00% due 07/15/14*.................. 250,000 253,125
----------
Medical Information Systems -- 0.3%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12................... 975,000 914,063
----------
Medical Products -- 0.8%
CDRV Investors, Inc.
Senior Disc. Notes
9.63% due 01/01/15(6)................. 875,000 647,500
Encore Medical IHC, Inc.
Company Guar. Notes
9.75% due 10/01/12.................... 625,000 687,500
Universal Hospital Services, Inc.
Senior Notes
10.13% due 11/01/11................... 1,150,000 1,207,500
----------
2,542,500
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Medical-Generic Drugs -- 0.3%
Mylan Laboratories, Inc.
Company Guar. Notes
5.75% due 08/15/10................. $ 200,000 $ 197,750
Mylan Laboratories, Inc.
Company Guar. Notes
6.38% due 08/15/15................. 875,000 847,656
----------
1,045,406
----------
Medical-HMO -- 0.2%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*............... 600,000 603,000
----------
Medical-Hospitals -- 0.3%
Community Health Systems, Inc.
Senior Sec. Notes
6.50% due 12/15/12................. 988,000 944,775
----------
Medical-Nursing Homes -- 0.2%
Genesis HealthCare Corp.
Senior Notes
8.00% due 10/15/13................. 475,000 492,813
----------
Metal Processors & Fabrication -- 0.2%
Metals USA, Inc.
Secured Notes
11.13% due 12/01/15................ 500,000 547,500
----------
Multimedia -- 0.2%
Haights Cross Operating Co.
Guar. Senior Notes
11.75% due 08/15/11................ 475,000 486,875
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Local Government Guar. Notes
11.50% due 07/01/03+ (1)(2)(3)(4).. 2,150,000 0
----------
Non-hazardous Waste Disposal -- 0.6%
Allied Waste North America, Inc.
Senior Notes Series B
8.50% due 12/01/08................. 1,700,000 1,780,750
----------
Office Automation & Equipment -- 0.4%
Xerox Corp.
Senior Notes
6.75% due 02/01/17................. 975,000 989,625
Xerox Corp.
Senior Notes
7.63% due 06/15/13................. 275,000 288,750
----------
1,278,375
----------
Office Supplies & Forms -- 0.1%
Acco Brands Corp.
Company Guar. Notes
7.63% due 08/15/15................. 225,000 217,688
----------
Oil & Gas Drilling -- 0.1%
Pride International, Inc.
Senior Notes
7.38% due 07/15/14................. 350,000 360,500
----------
51
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil Companies-Exploration & Production -- 3.6%
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... $ 450,000 $ 462,375
Brigham Exploration Co.
Senior Notes
9.63% due 05/01/14*........................ 775,000 755,625
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15......................... 950,000 942,875
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16......................... 3,075,000 2,967,375
El Paso Production Holding Co.
Company Guar. Notes
7.75% due 06/01/13......................... 1,525,000 1,559,312
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15......................... 550,000 503,250
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14......................... 300,000 280,500
Hilcorp Energy LP
Senior Notes
7.75% due 11/01/15*........................ 800,000 774,000
Hilcorp Energy I LP
Senior Notes
10.50% due 09/01/10*....................... 791,000 851,314
Newfield Exploration Co.
Senior Sub. Notes
6.63% due 09/01/14......................... 675,000 660,656
Quicksilver Resources, Inc.
Company Guar. Bonds
7.13% due 04/01/16......................... 600,000 568,500
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10........................ 650,000 650,000
-----------
10,975,782
-----------
Oil Field Machinery & Equipment -- 0.2%
Dresser-Rand Group, Inc.
Company Guar. Notes
7.38% due 11/01/14......................... 683,000 671,048
-----------
Oil-Field Services -- 0.6%
Allis-Chalmers Energy, Inc.
Senior Notes
9.00% due 01/15/14*........................ 975,000 977,437
Hanover Compressor Co.
Company Guar. Senior Sub. Notes
8.63% due 12/15/10......................... 275,000 286,000
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11......................... 595,075 609,991
-----------
1,873,428
-----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
Paper & Related Products -- 0.9%
Bowater, Inc.
Notes
6.50% due 06/15/13......................... $1,750,000 $ 1,553,125
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09......................... 1,250,000 1,175,000
-----------
2,728,125
-----------
Pipelines -- 4.1%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15......................... 950,000 966,625
Copano Energy LLC
Senior Notes
8.13% due 03/01/16......................... 875,000 885,938
Dynegy-Roseton Danskammer
Company Guar. Bonds Series B
7.67% due 11/08/16......................... 1,075,000 1,096,500
El Paso Natural Gas Co.
Senior Notes, Series A
7.63% due 08/01/10......................... 300,000 309,000
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22......................... 1,225,000 1,401,514
MarkWest Energy Partners LP / MarkWest
Energy Finance Corp.
Senior Notes
6.88% due 11/01/14......................... 750,000 705,000
NGC Corp Capital Trust
Company Guar. Bonds Series B
8.32% due 06/01/27......................... 2,900,000 2,639,000
Pacific Energy Partners LP
Senior Notes
7.13% due 06/15/14......................... 1,151,000 1,174,020
Pacific Energy Partners LP / Pacific Energy
Finance Corp.
Company Guar. Notes
6.25% due 09/15/15......................... 624,000 614,640
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28......................... 1,300,000 1,294,753
Williams Cos., Inc.
Notes
7.88% due 09/01/21......................... 1,275,000 1,332,375
-----------
12,419,365
-----------
Private Corrections -- 0.2%
Corrections Corp. of America
Company Guar. Notes
6.25% due 03/15/13......................... 725,000 710,500
-----------
Protection/Safety -- 0.3%
Monitronics International, Inc.
Senior Sub. Notes
11.75% due 09/01/10........................ 1,000,000 967,500
-----------
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Publishing-Newspapers -- 0.2%
Medianews Group, Inc.
Senior Sub. Notes
6.38% due 04/01/14................. $ 60,000 $ 52,950
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................. 710,000 656,750
----------
709,700
----------
Real Estate Investment Trusts -- 1.4%
National Health Investors, Inc.
Notes
7.30% due 07/16/07................. 1,120,000 1,122,607
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14................. 700,000 693,000
Senior Housing Properties Trust
Senior Notes
8.63% due 01/15/12................. 1,600,000 1,718,000
Trustreet Properties, Inc.
Senior Notes
7.50% due 04/01/15................. 725,000 719,563
----------
4,253,170
----------
Rental Auto/Equipment -- 1.2%
Avis Budget Car Rental LLC/Avis
Budget Finance, Inc.
Senior Notes
7.63% due 05/15/14*................ 325,000 315,250
Avis Budget Car Rental LLC/Avis
Budget Finance, Inc.
Senior Notes
7.91% due 05/15/14*(8)............. 450,000 441,000
H&E Equipment Services, Inc.
Senior Notes
8.38% due 07/15/16*................ 850,000 871,250
Rent-Way, Inc.
Sec. Notes
11.88% due 06/15/10................ 1,000,000 1,160,000
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13................. 1,000,000 985,000
----------
3,772,500
----------
Retail-Drug Store -- 0.7%
General Nutrition Centers, Inc.
Senior Sub. Notes
8.50% due 12/01/10................. 1,250,000 1,212,500
Rite Aid Corp.
Sec. Notes
8.13% due 05/01/10................. 750,000 751,875
----------
1,964,375
----------
Retail-Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11................. 225,000 245,531
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Retail-Regional Department Stores -- 0.2%
Neiman-Marcus Group, Inc.
Company Guar. Notes
9.00% due 10/15/15........................ $ 700,000 $ 743,750
----------
Retail-Restaurants -- 0.5%
Dave & Buster's, Inc.
Senior Notes
11.25% due 03/15/14....................... 850,000 807,500
NPC International, Inc.
Senior Sub. Notes
9.50% due 05/01/14*....................... 825,000 812,625
----------
1,620,125
----------
Rubber-Tires -- 0.1%
Cooper-Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14........................ 354,000 260,190
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(2)(4)(10)............ 550,000 2,200
----------
Seismic Data Collection -- 0.3%
Seitel, Inc.
Senior Notes
11.75% due 07/15/11....................... 850,000 1,009,375
----------
Special Purpose Entities -- 2.3%
AAC Group Holding Corp.
Senior Disc. Notes
10.25% due 10/01/12(6).................... 1,350,000 1,120,500
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15....................... 450,000 479,250
Chukchansi Economic Development Authority
Senior Notes
8.78% due 11/15/12*(8).................... 500,000 515,000
Consolidated Communications Illinois/Texas
Holdings, Inc.
Senior Notes
9.75% due 04/01/12........................ 910,000 960,050
Hexion US Finance Corp/Hexion Nova Scotia
Finance ULC
Sec. Notes
9.00% due 07/15/14........................ 960,000 979,200
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12........................ 875,000 931,875
MXEnergy Holdings, Inc.
Senior Notes
13.02% due 08/01/11*(8)................... 1,050,000 1,023,750
PCA LLC/PCA Finance Corp.
Senior Notes
11.88% due 08/01/09(2)(4)................. 2,000,000 480,000
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16........................ 500,000 491,250
----------
6,980,875
----------
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Specified Purpose Acquisitions -- 0.2%
ESI Tractebel Acquisition Corp.
Company Guar. Notes Series B
7.99% due 12/30/11................. $ 718,000 $ 740,566
----------
Steel-Producer -- 0.3%
Chaparral Steel Co.
Company Guar. Notes
10.00% due 07/15/13................ 875,000 975,625
----------
Storage/Warehousing -- 0.2%
Mobile Mini, Inc.
Senior Notes
9.50% due 07/01/13................. 274,000 293,180
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*................ 400,000 410,000
----------
703,180
----------
Telecom Services -- 1.4%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23................. 375,000 376,875
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23................. 1,525,000 1,479,250
Qwest Corp.
Senior Notes
7.50% due 10/01/14*................ 2,275,000 2,348,937
----------
4,205,062
----------
Telephone-Integrated -- 1.0%
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23................. 225,000 216,000
LCI International, Inc.
Senior Notes
7.25% due 06/15/07................. 425,000 426,062
Windstream Corp.
Senior Notes
8.63% due 08/01/16*................ 2,325,000 2,487,750
----------
3,129,812
----------
Television -- 2.0%
Allbritton Communications Co
Senior Sub. Notes
7.75% due 12/15/12................. 1,700,000 1,712,750
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13................. 1,700,000 1,585,250
Paxson Communications, Inc.
Sec. Notes
11.76% due 01/15/13*(8)............ 1,450,000 1,460,875
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14................. 800,000 680,000
Young Broadcasting, Inc.
Company Guar. Bonds
10.00% due 03/01/11................ 600,000 560,250
----------
5,999,125
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Textile-Products -- 0.1%
Collins & Aikman Floorcoverings, Inc.
Company Guar. Notes Series B
9.75% due 02/15/10................... $ 305,000 $ 303,475
------------
Theaters -- 1.0%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................... 775,000 728,500
AMC Entertainment, Inc.
Senior Sub. Notes
9.88% due 02/01/12................... 700,000 719,250
Cinemark, Inc.
Senior Disc. Notes
9.75% due 03/15/14(6)................ 2,150,000 1,714,625
------------
3,162,375
------------
Transport-Air Freight -- 2.6%
Atlas Air, Inc.
Pass Through Certs.
Series 1991, Class B
7.63% due 01/02/15................... 5,437,354 5,654,848
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19................... 274,484 284,091
Atlas Air, Inc.
Pass Through Certs.
Series 1991, Class C
8.77% due 01/02/11................... 574,341 496,805
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................... 1,301,358 1,444,507
------------
7,880,251
------------
Transport-Services -- 0.3%
PHI, Inc.
Senior Notes
7.13% due 04/15/13*.................. 925,000 876,438
------------
Travel Services -- 0.4%
Travelport, Inc.
Senior Notes
9.88% due 09/01/14*.................. 200,000 193,000
Travelport, Inc.
Senior Notes
10.02% due 09/01/14*(8).............. 200,000 192,000
Travelport, Inc.
Senior Sub. Notes
11.88% due 09/01/16*................. 825,000 792,000
------------
1,177,000
------------
Total Corporate Bonds & Notes
(cost $203,003,711).................. 207,192,275
------------
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES -- 9.5%
Chemicals -- 1.4%
Montell Finance Co BV
Company Guar. Bonds
8.10% due 03/15/27.................. $1,875,000 $1,734,375
Rhodia SA
Senior Notes
8.88% due 06/01/11.................. 2,548,000 2,630,810
----------
4,365,185
----------
Coal -- 0.3%
Adaro Finance B.V.
Company Guar. Notes
8.50% due 12/08/10.................. 775,000 787,594
----------
Computers -- 0.1%
Seagate Technology HDD Holdings
Company Guar. Bonds
6.80% due 10/01/16.................. 350,000 348,250
----------
Diversified Financial Services -- 0.4%
Bluewater Finance, Ltd.
Company Guar. Notes
10.25% due 02/15/12................. 1,125,000 1,139,062
----------
Electric -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes, Series B,
11.50% due 08/30/10+(2)(4).......... 4,460,000 446
----------
Engineering & Construction -- 0.6%
North American Energy Partners, Inc.
Sec. Notes
9.00% due 06/01/10.................. 700,000 756,000
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11.................. 1,010,000 1,007,475
----------
1,763,475
----------
Entertainment -- 0.3%
Corporacion Interamericana de
Entetenimiento SA de CV
Senior Notes
8.88% due 06/14/15.................. 795,000 771,150
----------
Food -- 0.2%
JBS SA
Company Guar. Notes
10.50% due 08/04/16*................ 625,000 632,813
----------
Forest Products & Paper -- 0.7%
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10.................. 1,525,000 1,513,562
Abitibi-Consolidated, Inc.
Debs.
8.85% due 08/01/30.................. 650,000 546,000
----------
2,059,562
----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Housewares -- 0.1%
Vitro Envases Norteamerica SA
Sec. Notes
10.75% due 07/23/11................... $ 225,000 $ 239,625
----------
1,213,542
----------
Insurance -- 0.4%
Fairfax Financial Holdings, Ltd.
Notes
8.25% due 10/01/15.................... 1,150,000 1,065,187
Fairfax Financial Holdings, Ltd.
Notes
7.75% due 04/26/12.................... 243,000 225,990
----------
1,291,177
----------
Iron/Steel -- 0.3%
CSN Islands IX Corp.
Company Guar. Notes
10.00% due 01/15/15................... 900,000 1,044,000
----------
Lodging -- 0.0%
Grupo Posadas SA DE CV
Senior Notes
8.75% due 10/04/11.................... 100,000 104,500
----------
Metal Fabrication/Hardware -- 0.0%
International Utility Structures, Inc.
Senior Sub. Notes
10.75% due 02/01/08+(3)(4)............ 2,150,000 43,000
----------
Mining -- 0.2%
Novelis, Inc.
Senior Notes
8.00% due 02/15/15.................... 575,000 546,250
----------
Oil & Gas -- 0.6%
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13.................... 1,150,000 1,152,875
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13.................... 800,000 772,000
----------
1,924,875
----------
Pharmaceuticals -- 0.4%
Elan Finance PLC
Company Guar. Senior Notes
7.75% due 11/15/11.................... 1,300,000 1,265,875
----------
Retail -- 0.1%
Jean Coutu Group (PJC), Inc.
Senior Sub. Notes
8.50% due 08/01/14.................... 350,000 336,875
Jean Coutu Group, Inc.
Senior Notes
7.63% due 08/01/12.................... 23,000 24,179
----------
361,054
----------
Semiconductors -- 0.5%
MagnaChip Semiconductor SA
Senior Sub. Notes
8.00% due 12/15/14.................... 50,000 30,375
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Semiconductors (continued)
MagnaChip Semiconductor SA
Sec. Notes
6.88% due 12/15/11..................... $ 475,000 $ 380,000
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11..................... 325,000 312,000
Avago Technologies Finance Pte/Avago
Technologies US/Avago Technologies
Wireless
Senior Notes
10.13% due 12/01/13*................... 675,000 715,500
-----------
1,437,875
-----------
Telecommunications -- 2.4%
Telenet Group Holdings NV
Disc. Notes
11.50% due 06/15/14(6)*................ 3,389,000 2,965,375
Intelsat Intermediate Holding Co., Ltd.
Company Guar. Notes
9.25% due 02/01/15(6).................. 1,350,000 978,750
Intelsat Bermuda, Ltd.
Company Guar. Notes
9.25% due 06/15/16*.................... 1,275,000 1,340,344
Nordic Telephone Co. Holdings
Senior Notes
8.88% due 05/01/16*.................... 1,250,000 1,314,062
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16*................... 725,000 770,313
-----------
7,368,844
-----------
Transportation -- 0.5%
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14..................... 1,100,000 1,012,000
Grupo Transportacion Ferroviaria
Mexicana SA de CV
Senior Notes
9.38% due 05/01/12..................... 325,000 344,500
-----------
1,356,500
-----------
Total Foreign Corporate Bonds & Notes
(cost $32,512,123)..................... 28,851,112
-----------
LOAN AGREEMENTS -- 1.3%
Auto Parts & Equipment -- 0.6%
Delphi Corp.
Notes
13.75% due 06/14/11(4)................. 1,745,625 1,808,249
Beverages -- 0.4%
Le-Natures, Inc.
Notes
9.36% due 03/01/11(5).................. 1,200,000 1,218,750
-----------
Housewares -- 0.3%
Vitro Envases Norteamerica SA
Term Loan
11.64% due 02/26/10(4)(9).............. 966,667 973,917
-----------
Total Loan Agreements
(cost $3,952,555)...................... 4,000,916
-----------
Shares/
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.0%
Telecommunications -- 0.0%
ICO North America, Inc.
Senior Notes
7.50% due 08/15/09(3)(4)(9)
(cost $75,000)............................ $ 75,000 $ 91,500
-----------
COMMON STOCK -- 7.6%
Cable TV -- 0.0%
Ono Finance PLC*(3)(4)..................... 500 0
-----------
Casino Services -- 0.1%
Capital Gaming International, Inc.+(3)(4).. 77 0
Shreveport Gaming Holdings, Inc.+(3)(4)(9). 14,150 325,775
-----------
325,775
-----------
Cellular Telecom -- 6.1%
iPCS, Inc.+(4)(9).......................... 344,285 18,436,462
-----------
Independent Power Producer -- 0.2%
Mirant Corp.+.............................. 26,255 717,024
-----------
Medical-Outpatient/Home Medical -- 0.2%
Critical Care Systems International,
Inc.(3)(4)(9)............................. 69,700 487,900
-----------
Oil-Field Services -- 1.0%
Trico Marine Services, Inc.+............... 93,285 3,148,369
-----------
Total Common Stock
(cost $8,088,161)......................... 23,115,530
-----------
PREFERRED STOCKS -- 0.8%
Rental Auto/Equipment -- 0.1%
Rent-Way, Inc.
8.00%(3)(4)(9)............................ 13 231,817
-----------
Retail-Drug Store -- 0.2%
GNC Corp., Series A,
12.00%(4)................................. 725 797,500
-----------
Television -- 0.5%
ION Media Networks, Inc.
14.25%(7)................................. 176 1,460,800
-----------
Total Preferred Stocks
(cost $2,350,958)......................... 2,490,117
-----------
WARRANTS+ -- 0.0%
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10
(Strike Price $4.31)(3)................... 44,885 89,770
-----------
Telecom Services -- 0.0%
KMC Telecom Holdings, Inc.
Expires 01/31/08
(Strike Price $0.01)(3)(4)................ 3,650 0
Leap Wireless International, Inc.
Expires 04/15/10
(Strike Price $96.80)*(3)(4).............. 2,250 0
-----------
0
-----------
Telephone-Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10
(Strike Price $0.00)*(3).................. 2,650 27
-----------
Transport-Equipment & Leasing -- 0.0%
Maxim Crane Works Holdings, Inc.
Expires 01/20/10
(Strike Price $30.05)(3)(4)(9)............ 1,587 0
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Shares/
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
WARRANTS (continued)
Transport-Equipment & Leasing (continued)
Maxim Crane Works Holdings, Inc.
Expires 01/20/10
(Strike Price $33.04)(3)(4)(9)........ 1,619 $ 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10
(Strike Price $31.58)(3)(4)(9)........ 1,182 0
------------
0
------------
Total Warrants
(cost $1,436,220)..................... 89,797
------------
Total Long-Term Investment Securities
(cost $251,418,728)................... 265,831,247
------------
REPURCHASE AGREEMENTS -- 9.2%
UBS Securities, LLC Joint Repurchase
Agreement Account (Note 2)
(cost $28,102,000).................... $28,102,000 28,102,000
------------
TOTAL INVESTMENTS --
(cost $279,520,728)@.................. 96.3% 293,933,247
Other assets less liabilities............ 3.7 11,168,451
----------- ------------
NET ASSETS -- 100.0% $305,101,698
=========== ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no rights to demand
registration of these securities. At September 30, 2006, the aggregate value
of these securities was $54,903,922 representing 18.0% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
+ Non-income producing security
@ See Note 5 for cost of investments on a tax basis.
(1)Company has filed Chapter 11 bankruptcy protection.
(2)Bond in default
(3)Fair valued security; see Note 2
(4)Illiquid security
(5)Company has filed Chapter 11 bankruptcy protection subsequent to
September 30, 2006.
(6)"Step-up" security where the rate increases ("steps-up") at a predetermined
rate. Rate shown reflects the increased rate.
(7)PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(8)Floating rate security where the rate fluctuates. The rate moves us or down
at each reset date. The rate reflected is as of September 30, 2006.
(9)To the extent permitted by the Statement of Additional Information, the High
Yield Bond Fund may invest in restricted securities. These restricted
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 September 30, 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
---- ----------- ---------- ----------- ----------- ------- ------
Critical Care
System
International,
Inc.
Common
Stock......... 7/20/2006 11,842 $ 92,960
7/20/2006 28,420 247,254
7/20/2006 7,105 64,300
7/20/2006 18,951 171,507
7/20/2006 3,382 30,607
---------- ----------
69,700 606,628 $ 487,900 $ 7 0.16%
ICO North
America,
Inc.
7.50% due
08/15/09...... 8/11/2005 $ 75,000 75,000 91,500 1 0.03
iPCS, Inc.
Common
Stock......... 7/28/2005 7,313 0
7/20/2004 336,972 5,223,066
---------- ----------
344,285 5,223,066 18,436,462 54 6.10
Rent-Way
8.00%
Preferred
Stock......... 5/29/2003 10 $ 100,000
5/19/2004 3 30,000
---------- ----------
13 130,000 231,817 17,832 0.08
Maxim Crane
Works
Holdings,
Inc.
Warrants...... 1/28/2005 1,587 432,280 0 0 0.00
Maxim Crane
Works
Holdings,
Inc.
Warrants...... 1/28/2005 1,619 441,126 0 0 0.00
Maxim Crane
Works
Holdings,
Inc.
Warrants...... 1/28/2005 1,182 322,058 0 0 0.00
Shreveport
Gaming
Holdings,
Inc.
Common
Stock......... 7/29/2005 11,829 272,336
7/21/2005 2,321 53,448
---------- ----------
14,150 325,784 325,775 23 0.11
Southern
Energy,
Inc.
7.90% due
07/15/09...... 1/25/2006 3,525,000 0 0 0 0.00
Vitro Envases
Norteamerica
SA
11.64% due
02/26/10...... 3/31/2005 650,356 650,356
2/24/2005 316,311 314,493
---------- ----------
966,667 964,849 973,917 101 0.32
----------- ----
$20,547,370 6.80%
=========== ====
(10)Company has filed for Chapter 7 bankruptcy protection.
See Notes to Financial Statements
57
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- September 30, 2006 -- (unaudited)
Industry Allocation*
Ohio........................... 21.0%
New York....................... 16.1
Massachusetts.................. 11.9
California..................... 7.6
Indiana........................ 6.0
South Carolina................. 5.7
Alabama........................ 5.2
New Jersey..................... 4.6
Connecticut.................... 4.3
New Mexico..................... 4.3
South Dakota................... 3.7
Florida........................ 3.2
Arizona........................ 3.2
Kentucky....................... 2.4
Illinois....................... 1.3
Tennessee...................... 0.9
Georgia........................ 0.3
Missouri....................... 0.3
Kansas......................... 0.2
Registered Investment Companies 0.1
-----
102.3%
=====
Credit Quality+#
AAA 85.0%
AA. 5.9%
A.. 9.1%
-----
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.
58
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 86.6%
Alabama -- 5.2%
Jefferson County, Alabama Sewer Revenue,
Series D,
5.25% due 02/01/26(1).......................... $3,000,000 $3,259,500
----------
California -- 7.6%
Los Angeles County Metropolitan Transportation
Authority,
Series C, Class 2A,
4.50% due 07/01/29(1).......................... 2,000,000 2,009,280
State of California,
Unrefunded,
5.50% due 04/01/28............................. 2,230,000 2,450,748
State of California,
Prefunded,
5.50% due 04/01/28............................. 270,000 303,234
----------
4,763,262
----------
Connecticut -- 4.3%
State of Connecticut,
Refunded,
Series B,
5.00% due 06/01/14(1).......................... 2,500,000 2,725,350
----------
Florida -- 3.2%
Tampa Bay Water Regional Water Supply
Authority,
4.75% due 10/01/33(1).......................... 2,000,000 2,046,340
----------
Georgia -- 0.3%
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/09(1).......................... 60,000 63,689
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/13(1).......................... 85,000 95,073
----------
158,762
----------
Indiana -- 6.0%
Indiana Transportation Finance Authority
Highway Revenue,
Series A,
5.25% due 06/01/26(1).......................... 3,500,000 3,771,600
----------
Massachusetts -- 11.9%
Massachusetts State Water Resources Authority,
Revenue Bonds,
Series A,
5.00% due 08/01/24(1).......................... 3,910,000 4,151,364
University Massachusetts Building Authority,
Project Revenue,
Series 04-1,
5.25% due 11/01/27(1).......................... 3,000,000 3,330,780
----------
7,482,144
----------
New Jersey -- 4.6%
Garden State New Jersey Preservation Trust Open
Space and Farmland Preservation, Series A,
5.80% due 11/01/17(1).......................... 2,500,000 2,884,825
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
New Mexico -- 4.3%
New Mexico Finance Authority Transportation,
Series A,
5.25% due 06/15/21(1).......................... $2,500,000 $ 2,708,575
-----------
New York -- 11.3%
New York State Environmental Facilities Corp.,
Series A,
4.75% due 06/15/31............................. 2,000,000 2,070,640
New York State Thruway Authority,
Series G,
5.25% due 01/01/27(1).......................... 1,500,000 1,637,085
Niagara Falls, New York, Public Improvement,
7.50% due 03/01/13(1).......................... 445,000 539,540
Niagara Falls, New York, Public Improvement,
7.50% due 03/01/14(1).......................... 555,000 687,295
Sales Tax Asset Receivables Corp.,
Series A,
5.25% due 10/15/27(1).......................... 2,000,000 2,170,240
-----------
7,104,800
-----------
Ohio -- 21.0%
Cincinnati, Ohio City School District Classroom
Facilities,
General Obligation,
5.00% due 12/01/24(1).......................... 3,000,000 3,169,680
Cuyahoga County,
Ohio Revenue,
Series A,
5.75% due 01/01/24............................. 2,000,000 2,185,140
Franklin County, Ohio Hospital,
Revenue,
Series C,
5.25% due 05/15/23............................. 3,000,000 3,206,910
Olentangy Local School District Ohio,
Series A,
5.25% due 12/01/27(1).......................... 3,250,000 3,515,525
Woodridge, Ohio, Local School District
6.80% due 12/01/14(1).......................... 1,000,000 1,141,690
-----------
13,218,945
-----------
South Carolina -- 3.2%
Horry County School District,
Series A,
4.50% due 03/01/28(1).......................... 2,000,000 2,030,320
-----------
South Dakota -- 3.7%
South Dakota State Health & Educational
Facilities Revenue,
Refunding,
6.25% due 07/01/10(1).......................... 2,120,000 2,304,822
-----------
Total Long-Term Investment Securities
(cost $51,526,329)............................. 54,459,245
-----------
SHORT-TERM INVESTMENT SECURITIES -- 15.7%
Arizona -- 3.2%
Mesa Arizona Industrial Development
Auth. Revenue,
Series B,
3.71% due 10/03/06(2).......................... 2,000,000 2,000,000
-----------
59
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2006 -- (unaudited)
(continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES (continued)
Illinois -- 1.3%
Chicago O'Hare International Airport,
2nd Lien,
Series B,
3.69% due 10/03/06(2)......................... $ 800,000 $ 800,000
----------
Kansas -- 0.2%
Shawnee Industrial Revenue, Shawnee, Kansas,
Series B,
3.75% due 10/03/06(2)......................... 105,000 105,000
----------
Kentucky -- 2.4%
Breckinridge County, Kentucky,
Breckinridge Lease,
3.75% due 10/03/06(2)......................... 1,500,000 1,500,000
----------
Missouri -- 0.3%
Missouri State Health & Educational Facilities
Authority,
Refunding,
3.78% due 10/03/06(2)......................... 200,000 200,000
----------
New York -- 4.8%
Long Island Power Authority,
Sub. Series 7-A,
3.62% due 10/03/06(1)(2)...................... 900,000 900,000
Metropolitan Transportation Authority,
Series G2,
3.66% due 10/03/06(1)(2)...................... 2,100,000 2,100,000
----------
3,000,000
----------
South Carolina -- 2.5%
Piedmont Municipal Power Agency, South
Carolina, Electric Revenue,
3.73% due 10/02/06(1)(2)...................... 950,000 950,000
Piedmont Municipal Power Agency, South
Carolina, Electric Revenue, Sub. Series B-1
3.73% due 10/03/06(1)(2)...................... 650,000 650,000
----------
1,600,000
----------
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Tennessee -- 0.9%
Jackson Energy Authority, Jackson, Tennessee,
Adjustable,
3.75% due 10/03/06(1)(2)..................... $600,000 $ 600,000
-----------
Registered Investment Companies -- 0.1%
SSGA Tax Free Money Market Fund............... 95,215 95,215
-----------
Total Short-Term Investment Securities
(cost $9,900,215)............................ 9,900,215
-----------
TOTAL INVESTMENTS
(cost $61,426,544)@.......................... 102.3% 64,359,460
Liabilities in Excess of Other Assets......... (2.3) (1,449,323)
-------- -----------
NET ASSETS -- 100.0% $62,910,137
======== ===========
- --------
@ 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 $51,642,573 or 82.1% of
Net Assets.
(2) Variable rate security -- the rate reflected is as of September 30, 2006;
maturity date reflects next reset date.
See Notes to Financial Statements
60
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
Note 1. Organization
SunAmerica Income Funds is an open-end diversified management investment
company organized as a Massachusetts business trust (the "Trust"). It
currently consists of five different 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 "AIG SunAmerica"),
an indirect wholly-owned subsidiary of American International Group, Inc.
("AIG"). An investor may invest in one or more of the following Funds:
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. On May 31, 2006, the SunAmerica Core
Bond Fund of the SunAmerica Income Funds was liquidated. The investment
objectives and principal investment techniques for each of the Funds are as
follows:
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 in tax-exempt municipal bonds that, in addition to having income
exempt from federal income taxes, also 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. Under normal
market conditions, at least 80% of Fund's assets plus any borrowing for
investment purposes will be invested in 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, purchases of Class A shares in excess of
$1,000,000 will be purchased at net asset value but will be subject to a
contingent deferred sales charge on redemptions made within two years of
purchase.
Class B shares are offered without an initial sales charge, although a
declining contingent deferred sales charge may be imposed on redemptions
made within six years of purchase. Class B shares of each Fund convert
automatically to Class A shares on the first business day of the month
following the eighth anniversary of the issuance of such Class B shares and
at such time will be subject to the lower distribution fee applicable to
Class A shares.
Class 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
61
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
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 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 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, as amended (the "1940 Act") except that Class B and Class C shares are
subject to higher distribution fee rates. There are 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 material loss from
such claims 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 ("NYSE"),
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 a 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 a 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 NYSE. The
Funds 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 Funds use 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.
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.
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to a 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 where a
development/significant event occurs that may significantly impact the value
of the security, are fair valued, as determined pursuant to procedures
adopted in good faith by the Board of Trustees.
On July 13, 2006, the Financial Accounting Standards Board (FASB) released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should
be recognized, measured, presented and disclosed in the financial
statements. FIN 48 requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the Fund's tax returns to
determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Adoption of FIN 48 is required
for fiscal years beginning after December 15, 2006 and is to be applied to
all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and its impact in the financial
statements, if any, has not yet been determined.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards No. 157, "Fair Value
Measurements" (FAS 157). This standard clarifies the definition of fair
value for financial reporting, establishes a framework for measuring fair
value and requires additional disclosures about the use of fair value
measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. As of September 30, 2006, the Funds do not believe the
adoption of FAS 157 will impact the amounts reported in the financial
statements, however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
Repurchase Agreements: The Funds, along with other affiliated registered
investment companies, pursuant to exemptive relief granted by the Securities
and Exchange Commission, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. For repurchase agreements and joint repurchase agreements, the
Funds' custodian takes possession of the collateral pledged for investments
in such repurchase agreements. The underlying collateral is valued daily on
a mark to market basis to ensure that the value, at the time the agreement
is entered into, is equal to at least 102% of the repurchase price,
including accrued interest. In the event of default of the obligation to
repurchase, a Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by
the Fund may be delayed or limited.
As of September 30, 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 6.76% $13,510,000
Strategic Bond............ 6.18 12,365,000
High Yield Bond........... 14.05 28,102,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Securities LLC, dated September 30, 2006, bearing interest at a rate of
5.00% per annum, with a principal amount of $200,000,000 a repurchase price
of $200,083,333, and a maturity date of October 2, 2006. The repurchase
agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ------------------ -------- -------- ------------ ------------
U.S. Treasury Inflation Index Bonds 2.38% 01/15/25 $161,580,000 $164,812,500
U.S. Treasury Inflation Index Bonds 3.38 04/15/32 38,420,000 39,188,673
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
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 period ended September 30, 2006,
none of the Funds 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 period ended September 30, 2006, no broker rebates
were reclassified to interest expense for any of the Funds. As with other
extensions of credit, should the borrower of the securities fail
financially, the Funds may bear the risk of delay in recovery or may be
subject to replacing the loaned securities by purchasing them with the cash
collateral held, which may be less than 100% of the market value of such
securities at the time of replacement.
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.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
Foreign Currency Translation: The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars based on the exchange rate of such currencies
against U.S. dollars on the date of valuation.
The Fund does not isolate that portion of the results of operations arising
as a result of changes in the foreign exchange rates from the changes in the
market prices of securities held at the end of the period. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of
securities transactions, the difference between the amounts of interest,
dividends and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
Short Sales: Each Fund may engage in "short sales against the box." A short
sale is against the box to the extent that the Fund contemporaneously owns,
or has the right to obtain without payment, securities identical to those
sold short. In addition, the High Yield Bond Fund ("Fund") may sell a
security it does not own in anticipation of a decline in the market value of
that security "short sales." To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at market price
at the time of replacement. The price at such time may be more or less than
the price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender any dividends or
interest that accrue during the period of the loan. To borrow the security,
the Fund also may be required to pay a premium, which would increase the
cost of the security sold. The proceeds of the short sale will be retained
by the broker, to the extent necessary to meet margin requirements, until
the short position is closed out. Until the Fund replaces a borrowed
security, the Fund will maintain daily a segregated account, containing cash
or liquid securities, at such a level that (i) the amount deposited in the
account plus the amount deposited with the broker as collateral will equal
the current value of the security sold short and (ii) the amount deposited
in the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the
time it was sold short. Liabilities for securities sold short are reported
at market value in the financial statements. Such liabilities are subject to
off balance sheet risk to the extent of any future increases in market value
of the securities sold short. The ultimate liability for securities sold
short could exceed the liabilities recorded in the Statement of Assets and
Liabilities. The Fund bears the risk of potential inability of the broker to
meet their obligation to perform.
Mortgage-Backed Dollar Rolls: 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 period ended September 30, 2006, none of the Funds
entered in dollar roll transactions.
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 AIG SunAmerica. Under the Agreement, AIG
SunAmerica provides continuous supervision of a Fund's portfolio
and administers its corporate affairs, subject to general review by the
Trustees. In connection therewith, AIG SunAmerica 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 AIG SunAmerica and its affiliates.
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
The Funds pay AIG SunAmerica 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
--------------------------- ----------
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 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 AIG SunAmerica. AIGGIC is an indirect
wholly-owned subsidiary of AIG and an affiliate of AIG SunAmerica. AIGGIC
receives the following fees from AIG SunAmerica, based upon each Fund's
average daily net assets:
Sub-advisory Fees
-------------------------------------
Strategic Bond High Yield Tax Exempt
Assets Fund Bond Fund Insured Fund
- ------ -------------- ---------- ------------
$0 - $200 million............ 0.35% 0.45% 0.25%
(greater than) $200 million 0.25 0.35 0.22
(greater than) $500 million 0.20 0.30 0.15
AIG SunAmerica 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
- ---- ----------
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
AIG SunAmerica 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
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
For the six months ended September 30, 2006, AIG SunAmerica has agreed to
reimburse expenses as follows:
Fund Amount
---- --------
U.S. Government Securities Class A $266,853
U.S. Government Securities Class B 35,123
U.S. Government Securities Class C 15,477
GNMA Class A...................... 227,183
GNMA Class B...................... 67,577
GNMA Class C...................... 36,111
High Yield Bond Class A........... 110,038
High Yield Bond Class B........... 35,506
High Yield Bond Class C........... 48,310
Tax Exempt Insured Class C........ 1,023
The Trust, on behalf of each Fund, has entered into a Distribution Agreement
with AIG SunAmerica Capital Services, Inc. ("SACS" or "Distributor"), an
affiliate of the Adviser. Each Fund has adopted a Distribution Plan on
behalf of each Class (each a "Plan" and collectively the "Plans") in
accordance with the provisions of Rule 12b-1 under the 1940 Act, 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 Plans provide that each class of shares of each Fund will also pay the
Distributor an account maintenance and service fee at the annual rate of up
to 0.25% of the aggregate average daily net assets of such class of shares
for payments to broker-dealers for providing continuing account maintenance.
Accordingly, for the six months ended September 30, 2006, SACS received fees
(see the 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 six
months ended September 30, 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 $ 47,093 $ 6,465 $ 32,188 $1,260 $ 38,594
GNMA...................... 63,898 17,284 35,606 4,627 137,924
Strategic Bond............ 485,375 54,050 348,580 2,886 64,447
High Yield Bond........... 520,537 51,659 384,506 5,591 67,638
Tax Exempt Insured........ 15,359 7,115 5,533 -- 10,252
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
Class C
--------------
Contingent
Deferred Sales
Fund Charges
- ---- --------------
U.S. Government Securities $ 296
GNMA...................... 1,522
Strategic Bond............ 23,737
High Yield Bond........... 12,488
Tax Exempt Insured........ 99
The Trust has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent in connection with the services that it offers to
the shareholders of the Funds. The Service Agreement permits the Funds to
compensate SAFS for services rendered, based upon an annual rate of 0.22% of
average daily net assets, which is approved annually by the Trustees. For
the six months ended September 30, 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
Fund Expenses September 30, 2006
- ---- -------- ------------------
US Government Securities Class A $160,408 $26,293
US Government Securities Class B 19,411 3,068
US Government Securities Class C 8,811 1,521
GNMA Fund Class A............... 330,987 54,864
GNMA Fund Class B............... 77,190 12,050
GNMA Fund Class C............... 41,113 6,469
Strategic Bond Class A.......... 349,207 65,690
Strategic Bond Class B.......... 52,481 8,938
Strategic Bond Class C.......... 124,750 23,487
High Yield Bond Fund Class A.... 188,419 28,439
High Yield Bond Fund Class B.... 56,658 9,371
High Yield Bond Fund Class C.... 82,100 15,144
Tax Exempt Insured Class A...... 59,885 9,587
Tax Exempt Insured Class B...... 6,851 1,070
Tax Exempt Insured Class C...... 4,856 791
At September 30, 2006, affiliate funds of the SunAmerica Focused Series,
Inc. owned 11%, 51% and 42% of the outstanding Class A Shares of U.S.
Government Securities Fund, GNMA Fund, and Strategic Bond Fund,
respectively. At September 30, 2006, AIG SunAmerica, an indirect
wholly-owned subsidiary of AIG, owned 6% of the outstanding Class C shares
of the Tax Exempt Insured Fund.
Note 4. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments during the six months ended September 30, 2006 were as
follows:
U.S. Government High Tax Exempt
Securities GNMA Strategic Yield Bond Insured
Fund Fund Bond Fund Fund Fund
--------------- ------------ ------------ ------------ -----------
Purchases (excluding U.S. government
securities)........................... $ -- $ -- $395,185,353 $ 85,318,935 $22,728,923
Sales (excluding U.S. government
securities)........................... -- -- 229,096,792 145,004,914 27,320,457
Purchases of U.S. government securities 234,108,440 376,460,698 125,111,596 -- --
Sales of U.S. government securities.... 236,798,858 239,624,262 63,975,359 -- --
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(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
- ---- -------- ------------- -------------- ----------- ------------- ----------
U.S. Government Securities $314,426 $ (8,532,661) $(4,556,713) $ 7,599,387 $ -- $ --
GNMA...................... 407,397 (1,498,599) (6,985,389) 17,568,716 175,792 --
Strategic Bond............ 668,211 (27,636,027) 1,173,974 10,239,110 -- --
High Yield Bond........... 24,077 (90,167,900) 10,778,425 21,693,351 -- --
Tax Exempt Insured........ 50,185* 418,577 2,160,766 -- 716,341 2,165,823
- --------
* Tax exempt distributable earnings
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.
Government Tax Exempt
Securities GNMA Strategic High Yield Insured
Fund Fund Bond Fund Bond Fund Fund
------------ ------------ ------------ ------------ -----------
Cost......................................... $175,089,345 $412,624,024 $535,333,522 $279,075,455 $61,425,785
============ ============ ============ ============ ===========
Appreciation................................. 1,311,841 2,719,950 12,814,403 25,410,410 2,933,675
Depreciation................................. (3,255,741) (5,498,355) (6,883,062) (10,522,619) --
------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ (1,943,900) $ (2,778,405) $ 5,931,341 $ 14,857,791 $ 2,933,675
============ ============ ============ ============ ===========
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
- ---- -------- ---------- ---------- ----------- ----------- ---- ---- ----------
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
As a result of reorganizations into some of these portfolios during the
period ended March 31, 2002, certain capital loss carryforwards may be
subject to limitations on use pursuant to applicable U.S. Federal Income Tax
Law. Therefore, it is possible not all of these capital losses will be
available for use.
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
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
- ---- ------------ -------------
U.S. Government Securities $2,498,303 $--
GNMA...................... 1,422,349 --
Strategic Bond............ 34,802 --
High Yield Bond........... 2,172,571 --
Tax Exempt Insured........ -- --
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (continued)
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each series were as follows:
U.S. Government Securities Fund
---------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- -----------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
------------------------ ------------------------ --------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold(1)(2)(3)(4) 1,324,670 $ 12,109,597 3,833,993 $ 35,900,779 154,527 $ 1,407,590 308,662 $ 2,907,116
Reinvested shares...... 265,075 2,412,482 525,900 4,936,255 26,571 241,940 63,611 597,394
Shares redeemed(1)(3).. (2,001,677) (18,170,731) (6,513,774) (61,084,959) (439,887) (3,990,215) (1,150,867) (10,789,192)
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase (decrease) (411,932) $ (3,648,652) (2,153,881) $(20,247,925) (258,789) $(2,340,685) (778,594) $ (7,284,682)
========== ============ ========== ============ ======== =========== ========== ============
U.S. Government Securities Fund
--------------------------------------------------
Class C
--------------------------------------------------
For the
six months ended For the
September 30, 2006 year ended
(unaudited) March 31, 2006
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 204,415 $ 1,863,215 290,146 $ 2,736,476
Reinvested shares...... 13,384 121,710 26,443 247,808
Shares redeemed(2)(4).. (188,744) (1,708,072) (474,314) (4,455,172)
---------- ------------ ---------- ------------
Net increase (decrease) 29,055 $ 276,853 (157,725) $ (1,470,888)
========== ============ ========== ============
(1)For the year ended March 31, 2006, 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.
(2)For the year ended March 31, 2006, 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.
(3)For the six months ended September 30, 2006, includes automatic conversion
of 81,119 shares of Class B shares in the amount of $663,527 to 81,166
shares of Class A shares in the amount of $663,527.
(4)For the six months ended September 30, 2006, includes automatic conversion
of 13,953 shares of Class C shares in the amount of $127,108 to 13,938
shares of Class A shares in the amount of $127,108.
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (continued)
GNMA Fund
-------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------- --------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
------------------------- ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold(1)(3)(5)(7) 2,597,103 $ 28,492,182 3,679,546 $ 41,272,893 116,078 $ 1,270,925 404,406 $ 4,553,528
Reinvested
shares................ 490,316 5,355,296 1,003,485 11,219,648 86,065 942,287 198,444 2,224,433
Shares
redeemed(1)(5)........ (2,758,351) (30,168,453) (7,280,453) (81,346,189) (1,171,274) (12,813,803) (2,809,670) (31,520,044)
----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)............ 329,068 $ 3,679,025 (2,597,422) $(28,853,648) (969,131) $(10,600,591) (2,206,820) $(24,742,083)
=========== ============ ========== ============ ========== ============ ========== ============
GNMA Fund
-------------------------------------------------------------------------------------------------------
Class C Class X
--------------------------------------------------- --------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
------------------------- ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold............ 225,101 $ 2,470,509 602,279 $ 6,796,898 -- $ -- 2,510 $ 28,279
Reinvested
shares................ 45,956 503,716 104,533 1,173,387 -- -- 821 9,297
Shares
redeemed(3)(7)........ (701,770) (7,674,085) (1,952,806) (21,948,681) -- -- (93,618) (1,057,899)
----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)............ (430,713) $ (4,699,860) (1,245,994) $(13,978,396) -- $ -- (90,287) $ (1,020,323)
=========== ============ ========== ============ ========== ============ ========== ============
Strategic Bond Fund
-------------------------------------------------------------------------------------------------------
Class A Class B
--------------------------------------------------- --------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
------------------------- ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Shares sold(2)(4)(6)(8) 68,927,367 $243,053,521 37,513,168 $132,293,432 2,974,229 $ 10,471,678 5,688,635 $ 20,006,461
Reinvested
shares................ 1,919,073 6,751,721 1,059,222 3,741,901 196,841 692,740 326,591 1,152,376
Shares
redeemed(2)(6)........ (12,080,642) (42,422,206) (8,234,142) (29,041,992) (2,135,040) (7,496,450) (3,586,213) (12,634,437)
----------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)............ 58,765,798 $207,383,036 30,338,248 $106,993,341 1,036,030 $ 3,667,968 2,429,013 $ 8,524,400
=========== ============ ========== ============ ========== ============ ========== ============
Strategic Bond Fund
---------------------------------------------------
Class C
---------------------------------------------------
For the
six months ended For the
September 30, 2006 year ended
(unaudited) March 31, 2006
------------------------- ------------------------
Shares Amount Shares Amount
----------- ------------ ---------- ------------
Shares sold............ 14,169,526 $ 50,085,599 20,236,121 $ 71,570,743
Reinvested
shares................ 357,562 1,263,155 417,085 1,477,074
Shares
redeemed(4)(8)........ (3,630,122) (12,791,329) (3,618,681) (12,799,109)
----------- ------------ ---------- ------------
Net increase
(decrease)............ 10,896,966 $ 38,557,425 17,034,525 $ 60,248,708
=========== ============ ========== ============
(1)For the year ended March 31, 2006, 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.
(2)For the year ended March 31, 2006, 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.
(3)For the year ended March 31, 2006, 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.
(4)For the year ended March 31, 2006, 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.
(5)For the six months ended September 30, 2006, includes automatic conversion
of 117,524 shares of Class B shares in the amount of $1,267,703 to 117,832
shares of Class A shares in the amount of $1,267,703.
(6)For the six months ended September 30, 2006, includes automatic conversion
of 562,555 shares of Class B shares in the amount of $1,885,764 to 562,555
shares of Class A shares in the amount of $1,885,764.
(7)For the six months ended September 30, 2006, includes automatic conversion
of 6,016 shares of Class C shares in the amount of $65,467 to 6,037 shares
of Class A shares in the amount of $65,467.
(8)Includes automatic conversion of 838 shares of Class C shares in the amount
of $2,936 to 841 shares of Class A shares in the amount of $2,936.
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (continued)
High Yield Bond Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ --------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
-------------------------- -------------------------- ----------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------
Shares
sold(1)(4)...... 12,742,073 $ 58,963,016 60,157,451 $ 269,492,069 1,663,617 $ 7,694,726 2,657,600 $ 12,034,094
Reinvested
shares.......... 634,304 2,939,278 1,245,496 5,639,708 153,975 713,992 363,347 1,644,185
Shares
redeemed(1)(4).. (24,541,010) (112,836,389) (37,827,675) (171,886,729) (2,004,798) (9,271,309) (5,617,900) (25,321,387)
----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------
Net increase
(decrease)...... (11,164,633) $ (50,934,095) 23,575,272 $ 103,245,048 (187,206) $ (862,591) (2,596,953) $(11,643,108)
=========== ============= =========== ============= ========== =========== =========== ============
High Yield Bond Fund
----------------------------------------------------------------------------------------------------------
Class C Class Z
------------------------------------------------------ --------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
-------------------------- -------------------------- ----------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------
Shares sold...... 5,193,785 $ 24,126,598 9,135,786 $ 41,520,484 -- $ -- -- $ (1,745)
Reinvested
shares.......... 231,464 1,078,548 456,958 2,077,622 -- -- 380,489 1,688,457
Shares
redeemed........ (2,326,085) (10,817,229) (9,102,263) (41,384,506) -- -- (20,406,473) (90,194,761)
----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------
Net increase
(decrease)...... 3,099,164 $ 14,387,917 490,481 $ 2,213,600 -- $ -- (20,025,984) $(88,508,049)
=========== ============= =========== ============= ========== =========== =========== ============
Tax Exempt Insured Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ --------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2006 year ended September 30, 2006 year ended
(unaudited) March 31, 2006 (unaudited) March 31, 2006
-------------------------- -------------------------- ----------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------
Shares
sold(2)(3)(5)(6) 75,844 $ 957,886 238,472 $ 3,042,167 10,130 $ 128,377 27,050 $ 345,577
Reinvested
shares.......... 42,083 529,647 120,617 1,542,466 3,562 44,846 12,879 164,760
Shares
redeemed(2)(5).. (494,153) (6,217,121) (686,079) (8,829,065) (88,573) (1,114,296) (210,933) (2,709,988)
----------- ------------- ----------- ------------- ---------- ----------- ----------- ------------
Net increase
(decrease)...... (376,226) $ (4,729,588) (326,990) $ (4,244,432) (74,881) $ (941,073) (171,004) $ (2,199,651)
=========== ============= =========== ============= ========== =========== =========== ============
Tax Exempt Insured Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the
six months ended For the
September 30, 2006 year ended
(unaudited) March 31, 2006
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares sold...... 15,247 $ 190,579 63,887 $ 822,552
Reinvested
shares.......... 2,558 32,222 8,147 104,235
Shares
redeemed(3)(6).. (37,373) (471,335) (159,889) (2,047,423)
----------- ------------- ----------- -------------
Net increase
(decrease)...... (19,568) $ (248,534) (87,855) $ (1,120,636)
=========== ============= =========== =============
(1)For the year ended March 31, 2006, 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.
(2)For the year ended March 31, 2006, 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.
(3)For the year ended March 31, 2006, 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.
(4)For the six months ended September 30, 2006, includes automatic conversion
of 586,565 shares of Class B shares in the amount of $2,604,749 to 587,484
shares of Class A shares in the amount of $2,604,749.
(5)For the six months ended September 30, 2006, includes automatic conversion
of 20,573 shares of Class B shares in the amount of $57,078 to 20,589 shares
of Class A shares in the amount of $57,078.
(6)For the six months ended September 30, 2006, includes automatic conversion
of 751 shares of Class C shares in the amount of $9,445 to 751 shares of
Class A shares in the amount of $9,445.
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
Note 7. Lines of Credit
The AIG SunAmerica Family of Mutual Funds has established $75 million
committed and $50 million uncommitted lines of credit with State Street Bank
and Trust Company, the Funds' custodian. Interest is currently payable at
the Federal Funds rate plus 50 basis points on the committed line and State
Street's discretionary bid rate on the uncommitted line of credit. There is
also a commitment fee of 10 basis points per annum on the daily unused
portion of the $75 million committed line of credit, which is included in
other expenses on the Statement of Operations. Borrowings under the line of
credit will commence when the Fund's cash shortfall exceeds $100,000. For
the six months ended September 30, 2006, the following Funds had borrowings:
Weighted
Days Interest Average Average
Fund Outstanding Charges Debt Utilized Interest
- ---- ----------- -------- ------------- --------
U.S. Government Securities 17 $ 4,332 $1,592,172 5.74%
GNMA...................... 18 2,202 760,700 5.78
Strategic Bond............ 1 32 199,009 5.75
High Yield Bond........... 53 68,909 8,237,529 5.59
At September 30, 2006, the GNMA Fund had a balance open under the line of
credit agreement of $1,312,708.
Note 8. 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 AIG SunAmerica 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 six months ended September 30, 2006 none of the Funds participated in
this program.
Note 9. Trustees Retirement Plan
The Trustees of the SunAmerica Income Funds have adopted the AIG SunAmerica
Disinterested Trustees' and Directors' Retirement Plan (the "Retirement
Plan") effective January 1, 1993 for the unaffiliated Trustees. The
Retirement Plan provides generally that if an unaffiliated Trustee who has
at least 10 years of consecutive service as a Disinterested Trustee of any
of the AIG SunAmerica mutual funds (an "Eligible Trustee") retires after
reaching age 60 but before age 70, or who has at least 5 years of
consecutive service after reaching age 65 but before age 70, or dies while a
Trustee, such person will be eligible to receive a retirement or death
benefit from each AIG SunAmerica mutual fund with respect to which he or she
is an Eligible Trustee. As of each birthday, prior to the 70th birthday, but
in no event for a period greater than 10 years, each Eligible Trustee will
be credited with an amount equal to 50% of his or her regular fees
(excluding committee fees) for services as a Disinterested Trustee of each
AIG SunAmerica mutual fund for the calendar year in which such birthday
occurs. In addition, an amount equal to 8.5% of any amounts credited under
the preceding clause during prior years is added to each Eligible Trustee's
Account until such Eligible Trustee reaches his or her 70th birthday. An
Eligible Trustee may receive any benefits payable under the Retirement Plan,
at his or her election, either in one lump sum or in up to fifteen annual
installments. Any undistributed amounts shall continue to accrue interest at
8.50%.
The following amounts of the Retirement Plan liability are included in the
Trustees fees and expenses line on the Statement of Assets and Liabilities
and the amount for the Retirement Plan expenses are included in the
Trustees' fees and expenses line on the Statement of Operations.
Retirement Retirement Retirement
Plan Plan Plan
Liability Expense Payments
---------- ---------- ----------
Fund As of September 30, 2006
- ---- --------------------------------
U.S. Government Securities $93,286 $1,053 $4,762
GNMA...................... 49,737 2,507 1,293
Strategic Bond............ 24,955 1,371 1,115
High Yield Bond........... 46,459 1,775 1,762
Tax Exempt Insured........ 28,892 384 1,343
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2006 -- (unaudited)
(continued)
Note 10. 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.
75
SunAmerica Income Funds
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited)
The Board of Trustees (the "Board"), including the Trustees that are not
interested persons of SunAmerica Income Funds (the "Trust"), AIG SunAmerica
Asset Management Corp. ("AIG SunAmerica" or the "Adviser") or AIG Global
Investment Corp. ("AIGGIC" or the "Subadviser"), within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act") (the "Disinterested
Trustees"), approved the continuation of the Investment Advisory and Management
Agreement between the Trust on behalf of each of its series (each a "Fund" and
collectively, the "Funds"), and AIG SunAmerica (the "Advisory Agreement") for a
one-year period ending August 31, 2007, at a meeting held on August 29, 2006.
At this same meeting, the Board also approved the continuation of the
Subadvisory Agreements between AIG SunAmerica and AIGGIC with respect to the
SunAmerica Strategic Bond Fund ("Strategic Bond Fund"), SunAmerica High Yield
Bond Fund ("High Yield Bond Fund") and SunAmerica Tax Exempt Insured Fund ("Tax
Exempt Insured Fund") for a one-year period ending August 31, 2007.
In accordance with Section 15(c) of the 1940 Act, the Board requested and the
Adviser provided materials relating to the Board's consideration of whether to
approve the continuation of the Advisory Agreement and Subadvisory Agreements.
In determining whether to approve the continuation of the Advisory Agreement
and Subadvisory Agreements, the Board, including the Disinterested Trustees,
considered the following information:
Nature, Extent and Quality of Services Provided by the Adviser and Subadviser
The Board, including the Disinterested Trustees, considered the nature, quality
and extent of services to be provided by AIG SunAmerica and AIGGIC. The Board
noted that the services include acting as investment manager and adviser to the
Funds, managing the daily business affairs of the Funds, and obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment policies. Additionally, the Board observed that AIG
SunAmerica provides office space, accounting, legal, compliance, clerical and
administrative services (exclusive of, and in addition to, overseeing any such
service provided by any others retained by the Funds, including the
Subadviser), and has authorized any of its officers and employees, if elected,
to serve as officers or trustees of the Funds without compensation. Finally,
the Board noted that AIG SunAmerica is responsible for monitoring and reviewing
the activities of affiliated and unaffiliated third-party service providers,
including the Subadviser.
In connection with the services provided by AIG SunAmerica, the Board analyzed
the structure and duties of AIG SunAmerica's fund administration, accounting,
legal and compliance departments and concluded that they were adequate to meet
the needs of the Funds. The Board further noted that AIG SunAmerica provides
and compensates a Chief Compliance Officer for the Funds and reviewed
information concerning AIG SunAmerica's compliance staff. The Board also
reviewed the personnel responsible for providing advisory services to the
Funds, and the level and process of monitoring the portfolio managers, and
concluded, based on their experience and interaction with the Adviser, that (i)
the Adviser was able to retain quality portfolio managers and other personnel;
(ii) the Adviser exhibited a high level of diligence and attention to detail in
carrying out its advisory responsibilities under the Advisory Agreement; (iii)
the Adviser was responsive to requests of the Board; and (iv) the Adviser had
kept the Board apprised of developments relating to the Funds and the industry
in general. The Board concluded that the nature and extent of services provided
under the Advisory Agreement were reasonable and appropriate in relation to the
management fee and that the quality of services continues to be high.
The Board also considered AIG SunAmerica's reputation and long-standing
relationship with the Funds and considered the benefit to shareholders of
investing in funds that are part of a family of funds offering a variety of
types of mutual fund and shareholder services. The Board considered AIG
SunAmerica's experience in providing management and investment advisory and
administrative services to advisory clients, including approximately 130
registered mutual funds and the fact that as of June 30, 2006 AIG SunAmerica
managed, advised an/or administered approximately $44.7 billion of assets.
With respect to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt
Insured Fund, for which AIG SunAmerica has delegated daily investment
management responsibilities to AIGGIC, the Board also considered the nature,
quality and extent of services provided by AIGGIC. The Board observed that
AIGGIC is responsible for providing investment management services, including
investment research, advice and supervision, and determining which securities
will be purchased or sold by the Funds for which it serves as Subadviser. The
Board reviewed AIGGIC's history, structure, size, visibility and resources,
which are needed to attract and retain highly qualified investment
professionals. The Board reviewed the personnel responsible for providing
subadvisory
76
SunAmerica Income Funds
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) (continued)
services to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt
Insured Fund and concluded, based on their experience with AIGGIC, that (i)
AIGGIC was able to retain high quality portfolio managers and other investment
personnel; (ii) AIGGIC exhibited a high level of diligence and attention to
detail in carrying out its responsibilities under the Subadvisory Agreement;
and (iii) AIGGIC was responsive to requests of the Board and of AIG SunAmerica.
With respect to the administrative services provided by AIGGIC, the Board
considered that AIGGIC provides general marketing assistance and has developed
internal policies and procedures for monitoring compliance with the investment
objectives, policies and restrictions of the Strategic Bond Fund, High Yield
Bond Fund and Tax Exempt Insured Fund as set forth in each Fund's prospectus.
The Board concluded that the nature and extent of services provided by AIGGIC
under the Subadvisory Agreements were reasonable and appropriate in relation to
the subadvisory fee and that the quality of services continues to be high.
The Board also considered AIG SunAmerica's and AIGGIC's compliance and
regulatory history, and noted that neither AIG SunAmerica nor AIGGIC had been
the target of any regulatory actions or investigations that could potentially
affect its ability to provide investment management and advisory services to
the Funds.
Investment Performance of the Funds and the Adviser and Subadviser
The Board also reviewed and considered the performance of the Funds. In
preparation for the August 29, 2006 meeting, the Board was provided with
reports independently prepared by Lipper, Inc. ("Lipper"). In connection with
its review, the Board received and reviewed information regarding the
investment performance of the Funds as compared to each Fund's peer group
("Peer Group") and peer universe ("Peer Universe"), as determined by Lipper,
and to an appropriate index or combination of indices. The Board also noted
that it regularly reviews the performance of the Funds periodically throughout
the year.
Based on the Lipper reports, the Board reviewed each Fund's annualized total
return, as applicable, for the prior one-, two-, three-, four-, five- and
ten-year periods ended June 30, 2006. The Board also received a report prepared
by AIG SunAmerica that detailed the Funds performance for the one-, three-,
six-, and nine-month periods ended July 31, 2006. Specifically, the Board noted
that while the SunAmerica GNMA Fund ("GNMA Fund") and the SunAmerica U.S.
Government Securities Fund ("U.S. Government Fund") ranked in the fourth
quintile of each Fund's respective Performance Universe during the past
one-year period, that each Fund had strong performance over longer periods and
that more recently, for the one- and three- month periods ended July 31, 2006,
each Fund ranked in the top quintile of its respective performance universe.
In considering the performance of AIGGIC, the Board noted that the Strategic
Bond Fund ranked in the first quintile of its Peer Group in each of the one-,
three-, five-, and ten-year periods and the Fund also ranked in the first
quintile for the one- and three-month period ended July 31, 2006. With respect
to the High Yield Bond Fund, the Board considered that the Fund's performance
had also ranked in the first quintile of its Peer Group in each of the one-,
three-, five-, and ten-year periods and that the Fund also had first quintile
performance for the one- and three-month period ended July 31, 2006. The Board
also considered that the Tax Exempt Insured Fund's performance ranked in the
fifth quintile of its Peer Group in each of the last one-, three-, five, and
ten-year periods and while performance had improved during the one- and
three-month periods ending July 31, 2006, the Board noted its concern with the
Tax Exempt Insured Fund's continued underperformance.
In considering AIG SunAmerica's performance as investment adviser, the Board
was provided with a presentation that compared the present and historical
staffing levels and annual budget of the Investments Department. Based on this
presentation, the Board noted that AIG SunAmerica had made significant
enhancements to the Investments Department in an effort to improve Fund
performance; with respect to the performance of the Tax Exempt Insured Fund,
the Board asked AIG SunAmerica to meet with AIGGIC to discuss and consider
other strategic plans to improve Fund performance and to report back to the
Board at a later date. In considering the performance of AIG SunAmerica and
AIGGIC, the Board did not rely upon comparisons of AIG SunAmerica's performance
with respect to its other advisory clients.
Consideration of the Management Fee and Subadvisory Fee and the Cost of the
Services and Profits Realized by the Investment Adviser, Subadviser and their
Affiliates from the Relationship with the Funds
The Board, including the Disinterested Trustees, received and reviewed
information regarding the fees paid by the Funds to AIG SunAmerica for
investment advisory and management services and the fees paid by AIG SunAmerica
to AIGGIC pursuant to the
77
SunAmerica Income Funds
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) (continued)
Subadvisory Agreements. The Board examined this information in order to
determine the reasonableness of the fees in light of the nature and quality of
services provided and any potential additional benefits received by AIG
SunAmerica, the Subadviser or their affiliates in connection with providing
such services to the Funds.
To assist in analyzing the reasonableness of the fees, the Board received
reports prepared independently by Lipper. The reports showed comparative fee
information of the Funds' Peer Groups, including rankings within the Peer
Groups, as well as reports prepared by AIG SunAmerica. In considering the
reasonableness of the management fee, the Board reviewed a number of expense
comparisons, including: (i) contractual advisory and subadvisory fees; and (ii)
actual total operating expenses. The Board also received information on fees
charged by the Subadviser for management of funds similar to the Strategic Bond
Fund, High Yield Bond Fund and Tax Exempt Insured Fund. This information
assisted the Board in considering what other clients pay AIGGIC for similar
services. The Board did not rely upon comparisons of the fees earned by AIG
SunAmerica with respect to other investment advisory contracts. In considering
the Funds' total operating expenses, the Board analyzed the level of fee
waivers and expense reimbursements and the net expense caps contractually
agreed upon by AIG SunAmerica with respect to the Strategic Bond Fund and High
Yield Bond Fund. The Board compared the Funds' net expense ratios to those of
other funds within the Funds' respective Peer Groups as a guide to help assess
the reasonableness of the Fund's management fee. The Board acknowledged that it
was difficult to make precise comparisons with other funds in the Peer Groups
since the exact nature of services provided under the Peer Groups' fund
agreements is often not apparent. The Board noted that the Peer Group fee
information as a whole was useful in assessing whether the Adviser was
providing services at a cost that was competitive with other, similar funds.
The Board also took into account that the management fee arrangements included
breakpoints that will adjust the fee downward as the size of Funds increase,
thereby allowing the shareholders to participate in economies of scale.
In considering the subadvisory fees, the Board, including the Disinterested
Trustees, considered that the Strategic Bond Fund, High Yield Bond Fund and Tax
Exempt Insured Fund each pay a fee to AIG SunAmerica pursuant to the Advisory
Agreement, and that, in turn, AIG SunAmerica and not the Funds, pay a fee to
AIGGIC. Therefore, the Board considered the amount of the advisory fee retained
by AIG SunAmerica and the fee paid to AIGGIC in connection with the services
provided. The Board also considered that the Subadvisory Agreement contained
breakpoints in the fee schedule that would adjust the subadvisory fee downward
if each of the funds for which AIGGIC serves as subadviser increased its assets
to certain levels. The Board noted that such breakpoints would not directly
benefit the shareholders, but would result in AIG SunAmerica retaining a larger
portion of the advisory fee.
The Board also considered AIG SunAmerica's profitability and the benefits AIG
SunAmerica and its affiliates received from its relationship with the Funds.
The Board reviewed financial statements relating to AIG SunAmerica's
profitability and financial condition with respect to the services it provided
the Funds and considered how profit margins could affect AIG SunAmerica's
ability to attract and retain high quality investment professionals. The Board
was also provided with a profitability analysis that detailed the revenues
earned and the expenses incurred on a fund by fund basis by AIG SunAmerica and
its affiliates in providing services to the Funds. Based on this information,
the Board considered the revenues received by AIG SunAmerica under the Advisory
Agreement, and where applicable, the Administrative Agreement. The Board also
considered revenues received by AIG SunAmerica's affiliates under the Rule
12b-1 Plans, Service Agreements, and Administrative and Shareholder Service
Agreements. Additionally, the Board reviewed AIGGIC's financial statements and
considered whether AIGGIC had the financial resources necessary to attract and
retain high quality investment management personnel, continue to perform its
obligations under the Subadvisory Agreement and to continue to provide the high
quality of services that it had provided to Strategic Bond Fund, High Yield
Bond Fund and Tax Exempt Insured Fund to date.
With respect to indirect costs and benefits, the Board considered that (1) any
indirect costs incurred by AIG SunAmerica in connection with rendering
investment advisory services to the Funds are inconsequential based on
management's judgment on the analysis of the adequacy of the advisory fees, and
(2) any collateral benefits derived as a result of providing advisory services
to the Funds are de minimis according to management and do not impact upon the
reasonableness of the advisory fee. The Board did, however, consider the
reputational value to AIG SunAmerica from serving as investment adviser.
The Board concluded that AIG SunAmerica had the financial resources necessary
to perform its obligations under the Advisory Agreement and to continue to
provide the high quality of services that it had provided to the Funds to date
and that the profitability of the Adviser and its affiliates as a result of
their relationships with the Funds was reasonable. The Board also concluded
that the level of the management fee was reasonable in light of the factors
discussed above.
78
SunAmerica Income Funds
APPROVAL OF THE INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND
SUBADVISORY AGREEMENT -- September 30, 2006 -- (unaudited) (continued)
Economies of Scale
The Board, including the Disinterested Trustees, considered whether the Funds
have benefited from economies of scale and whether there is potential for
future realization of economies with respect to the Funds. Based on the current
management fee levels, the Board concluded that any potential economies of
scale will be shared between shareholders and AIG SunAmerica in an appropriate
manner. The Board considered that the funds in the AIG SunAmerica complex share
common resources and as a result, an increase in the overall size of the
complex could permit each fund to incur lower expenses than they otherwise
would achieve as stand-alone entities. The Board also considered the
anticipated efficiencies in the processes of AIG SunAmerica as it adds labor
and capital to expand the scale of operations.
The Board concluded that the management fee structure was reasonable and that
no changes were currently necessary to further reflect economies of scale. The
Board noted that it will continue to review fees, including breakpoints and
expense caps in connection with contract renewals.
Other Factors
The Board also reviewed the reports from the past year on soft dollar
commissions. These reports included information on brokers and total
commissions paid for each Fund. The reports also detailed the types of research
and services AIG SunAmerica obtained in connection with soft dollar
commissions. The Board also considered the potential benefits the Adviser
derived from the Fund's soft dollar arrangements whereby brokers provide
research to the Adviser in return for allocating fund brokerage.
Conclusion
After a full and complete discussion, the Board approved the continuation of
the Advisory Agreement for each of the Funds, and the Subadvisory Agreement
with respect to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt
Insured Fund, for a one-year period ending August 31, 2007. Based upon their
evaluation of all these factors in their totality, the Board, including the
Disinterested Trustees, was satisfied that the terms of the Advisory Agreement
and Subadvisory Agreement were fair and reasonable and in the best interests of
the Funds and the Funds' shareholders. In arriving at a decision to approve the
continuation of the Advisory Agreement and Subadvisory Agreement, the Board did
not identify any single factor or group of factors as all-important or
controlling, but considered all factors together. The Disinterested Trustees
were also assisted by the advice of independent counsel in making this
determination.
79
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 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 Principal Funds in
Name, Held With Office and Occupations Fund Complex Other Directorships
Address and SunAmerica Length of During Past 5 Overseen by Held by
Date of Birth* Complex Time Served(4) Years Trustee(1) Trustee(2)
- ---------------------- ---------- -------------- -------------- ------------ -------------------
Disinterested Trustees
Jeffrey S. Burum Trustee 2004-present Founder and 42 None
DOB: February 27, 1963 CEO of
National
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. 90 Director,
DOB: October 6, 1945 A.G. Belo
Corporation
(1992 to
present);
Director,
Sysco
Corporation
(1996 to
present);
Director,
Luby's
Inc.
(1998 to
present);
Director,
University
of Texas
Board of
Regents
(2001-Present).
William F. Devin Trustee 2001-present Retired. 90 Member of
DOB: December 30, 1938 the Board
of
Governors,
Boston
Stock
Exchange
(1985-Present).
Samuel M. Eisenstat Chairman 1986-present Attorney, solo 52 Director,
DOB: March 7, 1940 of the practitioner. North
Board European
Oil
Royalty
Trust.
Stephen J. Gutman Trustee 1986-present Senior 52 None
DOB: May 10, 1943 Associate,
Corcoran Group
(Real 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).
William J. Shea Trustee 2004-present President and 52 Chairman
DOB: February 9, 1948 CEO, Conseco, of the
Inc. (2001 to Board,
2004); Royal and
Chairman of SunAlliance,
the Board of U.S.A.,
Centennial Inc.
Technologies, (March
Inc. (1998 to 2005 to
2001); Vice present);
Chairman, Bank Director,
Boston Boston
Corporation Private
(1993 to 1998) Holdings
(October
2004 to
present).
Interested Trustee
Peter A. Harbeck(3) Trustee 1995-present President, CEO 99 None
DOB: January 23, 1954 and Director,
AIG SunAmerica
Asset
Management
Corp. ("AIG
SunAmerica")
(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)
80
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- September 30, 2006 -- (unaudited)
(continued)
Number of
Position Term of Funds in
Name, Held With Office and Fund Complex
Address and SunAmerica Length of Principal Occupations Overseen by Other Directorships
Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) Held by Trustee(2)
- ---------------------- ---------- -------------- ------------------------------ ------------ -------------------
OFFICERS
Vincent M. Marra President 2004-present Senior Vice President, AIG N/A N/A
DOB: May 28, 1950 and CEO SunAmerica (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, AIG N/A N/A
DOB: June 25, 1966 SunAmerica (December 2004
to present); Vice President,
AIG SunAmerica (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, 1966 and Chief 2005-present General Counsel, AIG
Legal SunAmerica (June 2005 to
Officer Present); Vice 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 AIG SunAmerica serves as investment adviser or administrator. The
"Fund Complex" includes the SunAmerica Money Market Funds (2 funds),
SunAmerica Equity Funds (10 funds), The Trust (5 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 (32 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.
(3) Interested trustee, as defined within 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.
(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. Each officer will hold office for an indefinite term
until the date he or she resigns or retires or until his/her successor is
duly elected and qualifies.
Additional information concerning the Trustees is contained in the Statement of
Additional Information which is available; without charge, by calling (800)
858-8850.
81
[LOGO] AIG SunAmerica
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. The Trust's
Vincent M. Marra, AIG SunAmerica Capital Forms N-Q are available
President and Services, Inc. on the U.S. Securities
Chief Executive Officer Harborside Financial and Exchange Commis-sion
Donna M. Handel, Center website at www.sec.gov.
Treasurer 3200 Plaza 5 You can also review and
Michael Cheah, Vice Jersey City, NJ obtain copies of the
President 07311-4992 Forms N-Q at the U.S.
Timothy P. Pettee, Vice Securities and Exchange
President Shareholder Servicing Commission Public
Cynthia Gibbons, Vice Agent Refer-ence Room in
President and Chief AIG SunAmerica Fund Washington DC
Compliance Officer Services, Inc. (information on the
James Nichols, Vice Harborside Financial operation of the Public
President Center Reference Room may be
Gregory N. Bressler, 3200 Plaza 5 ob-tained by calling
Chief Legal Officer Jersey City, NJ 1-800-SEC-0330).
and Secretary 07311-4992
Nori L. Gabert, Vice PROXY VOTING RECORD ON
President and Custodian and Transfer SUNAMERICA INCOME FUNDS
Assistant Secretary Agent Information regarding how
Corey A. Issing, State Street Bank and the SunAmerica Income
Assistant Secretary Trust Company Funds voted proxies
Gregory R. Kingston, P.O. Box 419572 related to securities
Vice President and Kansas City, MO held in the SunAmerica
Assistant Treasurer 64141-6572 Income Funds during the
Kathleen Fuentes, most recent twelve month
Assistant Secretary VOTING PROXIES ON TRUST period ended June 30 is
PORTFOLIO SECURITIES available, once filed
A description of the with the U.S. Securities
policies and proce-dures and Exchange Commission,
that the Trust uses to without charge, upon
determine how to vote request, by calling
proxies relating to (800) 858-8850 or on the
secu-rities held in a U.S. Securities and
Fund's portfolio which is Exchange Commission's
available in the Trust's website at
Statement of Additional http://www.sec.gov.
Information, may be
ob-tained without charge This report is submitted
upon request, by calling solely for the general
(800) 858-8850. The information of
in-formation is also shareholders of the
available from the EDGAR Funds. Distribution of
database on the U.S. this report to persons
Secu-rities and Exchange other than shareholders
Commission's website at of the Funds is
http://www.sec.gov. authorized only in
con-nection with a
currently effective
pro-spectus, setting
forth details of the
Funds, which must precede
or accom-pany this report.
The accompanying report
has not been audited by
independent accountants
and accordingly no
opinion has been
expressed thereon.
82
[LOGO] AIG SunAmerica
Mutual Funds
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
INSAN-9/06
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 to the Form
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders
may recommend nominees to the Registrant's board of trustees that were
implemented after the Registrant last provided disclosure in response
to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a-
101), or this Item 10.
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 as defined under Rule 30a- 3(c)
under the Investment Company Act of 1940 (17 CFR 270. 30a- 3(c)).
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 contro1 over financial reporting.
Item 12. Exhibits.
(a) (1) Not applicable.
(2) Certifications 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) Certifications pursuant to Rule 30a- 2(b) under the Investment
Company Act of 1940 (17 CFR 270. 30a- 2(a)) and Section 906 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Income Funds
By: /s/ Vincent M. Marra
-------------------
Vincent M. Marra
President
Date: December 8, 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: December 8, 2006
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: December 8, 2006