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: March 31, 2007
-------------------------
Item 1. Reports to Stockholders
SunAmerica 2007
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[PHOTO]
Annual Report
[GRAPHIC]
Income Funds
[LOGO] AIG SunAmerica
Mutual Funds
March 31, 2007 ANNUAL 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................ 8
FINANCIAL HIGHLIGHTS.............................. 11
PORTFOLIO OF INVESTMENTS.......................... 17
NOTES TO FINANCIAL STATEMENTS..................... 63
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM................................... 78
TRUSTEE AND OFFICER INFORMATION................... 79
COMPARISONS: PORTFOLIO vs. INDEXES................ 84
Shareholder Letter
Dear Shareholder,
We are pleased to present the annual performance summary of the SunAmerica
Income Funds for the 12-month period from April 1, 2006 to March 31, 2007. As
always, we look forward to sharing the economic and market conditions that have
shaped the Funds' investments during the period.
After engaging in 17 consecutive Fed Funds rate increases beginning in June
2004, the Federal Reserve decided to leave rates unchanged at its August 2006
meeting. While the language accompanying this decision noted the Federal
Reserve's continuing concern with inflation, this move buoyed the financial
markets. Long-term bonds performed well while shorter-term issues, supported by
a 5.25% Fed Funds rate, returned solid current income.
Although the Federal Reserve left rates unchanged at its March 2007 meeting, it
modified its language in a fashion that removed the bias toward further
tightening--an acknowledgement that the risks of an economic slowdown or of
increasing inflation simultaneously exist. The slowdown in the housing market
and the issues in the sub-prime mortgage market, with their impact on consumer
spending, have been counterbalanced by greater- than-expected Consumer Price
Index numbers and solid job growth.
All of our Funds provided positive returns over the period. The SunAmerica High
Yield Bond Fund's, Tax-Exempt Insured Fund's and U.S. Government Securities
Fund's Class A shares' total returns were all in the top half of their
respective Lipper peer groups. The Strategic Bond Fund's and GNMA Fund's Class
A shares' total returns narrowly missed this mark, but continue to provide
solid long-term performance with both Funds' total return being in the top
quintile of their respective peer groups for the five-year period ending
March 31, 2007.
In the uncertain economic environment ahead, your portfolio managers continue
to work to build portfolios aimed at balancing risk and return. We remain
committed to achieving solid total return while recognizing investors' growing
demand for current income.
Thank you for your continued investment in our Funds. A more detailed
commentary on each Fund's performance is included at the end of the report. We
also encourage you to visit or website, www.sunamericafunds.com, for more
information.
Sincerely,
The SunAmerica Income Funds Investment Professionals
AIG SunAmerica Asset Management Corp. AIG Global Investment Corp.
------------------------------------- -
Michael Cheah Matthew Meyer Rob Vanden Assem
Andrew Doulos J. Hutchison Bryan Bryan Petermann
Raphael Davis Geoffrey Cornell
John Yovanovic Anthony King
Peter Stevenson Tim Lindvall
Rajeev Mittal
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Past performance is no guarantee of future results.
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2007 -- (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 October 1, 2006 and held until March 31,
2007.
Actual Expenses
The "Actual" section of the table provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the column under the heading entitled "Expenses Paid During the Six
Months Ended March 31, 2007" to estimate the expenses you paid on your account
during this period. The "Expenses Paid During the Six Months Ended March 31,
2007" column does not include small account fees that may be charged if your
account balance is below $500 ($250 for retirement plan accounts). In addition,
the "Expenses Paid During the Six Months Ended March 31, 2007" column does not
include administrative fees that may apply to qualified retirement plan
accounts. See the Trust's prospectus and/or your retirement plan document for a
full description of these fees. Had these fees been included, the "Expenses
Paid During the Six Months Ended March 31, 2007" 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 March 31, 2007" column does not include small account fees that may be
charged if your account balance is below $500 ($250 for retirement plan
accounts). In addition, the "Expenses Paid During the Six Months Ended March
31, 2007" column does not include administrative fees that may apply to
qualified retirement plan accounts. See the Fund's prospectus and/or your
retirement plan document for a full description of these fees. Had these fees
been included, the "Expenses Paid During the Six Months Ended March 31, 2007"
column would have been higher and the "Ending Account Value" would have been
lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, including sales
charges on purchase payments, contingent deferred sales charges; small account
fees and administrative fees, if applicable to your account. Please refer to
your prospectus and/or qualified retirement plan document for more information.
Therefore, the "Hypothetical" example is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs and other fees were
included, your costs would have been higher.
3
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2007 -- (unaudited) (continued)
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending Account
Ending Account Expenses Paid Value Using Expenses Paid
Value Using During the a Hypothetical During the Expense
Beginning Actual Six Months Beginning 5% Assumed Six Months Ratio
Account Value Return at Ended Account Value Return at Ended as of
at October 1, March 31, March 31, at October 1, March 31, March 31, March 31,
2006 2007 2007* 2006 2007 2007* 2007*
------------- -------------- ------------- ------------- -------------- ------------- ---------
U.S. Government
Securities Fund
Class A#........... $1,000.00 $1,020.17 $ 4.99 $1,000.00 $1,020.00 $ 4.99 0.99%
Class B#........... $1,000.00 $1,015.79 $ 8.24 $1,000.00 $1,016.75 $ 8.25 1.64%
Class C#........... $1,000.00 $1,016.88 $ 8.25 $1,000.00 $1,016.75 $ 8.25 1.64%
GNMA Fund
Class A#........... $1,000.00 $1,024.31 $ 5.00 $1,000.00 $1,020.00 $ 4.99 0.99%
Class B#........... $1,000.00 $1,021.00 $ 8.26 $1,000.00 $1,016.75 $ 8.25 1.64%
Class C#........... $1,000.00 $1,021.91 $ 8.27 $1,000.00 $1,016.75 $ 8.25 1.64%
Strategic Bond Fund
Class A............ $1,000.00 $1,044.28 $ 6.42 $1,000.00 $1,018.65 $ 6.34 1.26%
Class B............ $1,000.00 $1,040.84 $ 9.87 $1,000.00 $1,015.26 $ 9.75 1.94%
Class C............ $1,000.00 $1,040.86 $ 9.82 $1,000.00 $1,015.31 $ 9.70 1.93%
High Yield Bond Fund
Class A#........... $1,000.00 $1,051.26 $ 6.96 $1,000.00 $1,018.15 $ 6.84 1.36%
Class B#........... $1,000.00 $1,047.85 $10.26 $1,000.00 $1,014.91 $10.10 2.01%
Class C#........... $1,000.00 $1,047.78 $10.26 $1,000.00 $1,014.91 $10.10 2.01%
Tax Exempt Insured
Fund
Class A............ $1,000.00 $1,016.13 $ 6.38 $1,000.00 $1,018.60 $ 6.39 1.27%
Class B............ $1,000.00 $1,011.28 $10.58 $1,000.00 $1,014.41 $10.60 2.11%
Class C#........... $1,000.00 $1,012.50 $ 9.78 $1,000.00 $1,015.21 $ 9.80 1.95%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 182 days divided by 365
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges, small account fees
and administrative fees, if applicable to your account. Please refer to your
Prospectus and/or qualified retirement plan document for more information.
# During the stated period, the investment adviser either waived a portion of
or all fees and assumed a portion of or all expenses for the Funds. As a
result, if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended March 31,
2007" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2007
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
ASSETS:
Long-term investment securities, at value* (unaffiliated)............................ $155,876,497 $396,707,060 $673,736,595
Short-term investment securities, at value* (unaffiliated)........................... -- -- 12,055,168
Repurchase agreements (cost equals market)........................................... 41,132,000 18,288,000 19,710,000
------------ ------------ ------------
Total Investments.................................................................. 197,008,497 414,995,060 705,501,763
------------ ------------ ------------
Cash................................................................................. 411 483 47,992,335
Foreign cash*........................................................................ -- -- 1,014,662
Receivable for:
Shares of beneficial interest sold................................................. 84,054 286,132 6,401,268
Dividends and interest............................................................. 1,024,509 2,176,026 10,828,060
Investments sold................................................................... -- -- 16,451,793
Prepaid Expenses and other assets.................................................... 4,033 5,230 4,890
Due from investment adviser for expense reimbursements/fee waivers................... 92,776 137,883 --
Unrealized appreciation on forward currency contracts................................ -- -- --
------------ ------------ ------------
Total assets......................................................................... 198,214,280 417,600,814 788,194,771
------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed............................................. 307,522 782,647 1,124,081
Investments purchased.............................................................. 20,562,691 17,643,646 57,921,067
Interest on securities sold short.................................................. -- -- --
Investment advisory and management fees............................................ 96,763 156,158 373,001
Distribution and service maintenance fees.......................................... 65,801 168,201 353,109
Transfer agent fees and expenses................................................... 47,381 95,671 145,650
Trustees' fees and expenses........................................................ 90,951 54,315 29,255
Other accrued expenses............................................................. 95,878 147,499 117,294
Dividends payable.................................................................... 111,093 214,073 735,157
Due to custodian..................................................................... -- -- --
Due to broker........................................................................ -- -- --
Unrealized depreciation on forward currency contracts................................ -- -- 19,771
------------ ------------ ------------
Total liabilities.................................................................... 21,378,080 19,262,210 60,818,385
------------ ------------ ------------
Net assets........................................................................... $176,836,200 $398,338,604 $727,376,386
============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value....................................... $ 191,475 $ 359,142 $ 2,003,173
Paid-in capital...................................................................... 189,835,293 404,579,767 735,317,184
------------ ------------ ------------
190,026,768 404,938,909 737,320,357
Accumulated undistributed net investment income (loss)............................... 56,621 327,903 (954,680)
Accumulated undistributed net realized gain (loss) on investments, futures contracts,
securities sold short and foreign exchange transactions............................. (11,664,927) (4,854,668) (24,085,451)
Unrealized appreciation (depreciation) on investments................................ (1,582,262) (2,073,540) 15,016,052
Unrealized appreciation (depreciation) on foreign exchange transactions.............. -- -- 80,108
------------ ------------ ------------
Net Assets......................................................................... $176,836,200 $398,338,604 $727,376,386
============ ============ ============
*Cost
Long-term investment securities (unaffiliated)..................................... $157,458,759 $398,780,600 $658,720,543
============ ============ ============
Short-term investment securities (unaffiliated).................................... $ -- $ -- $ 12,055,168
============ ============ ============
Foreign cash....................................................................... $ -- $ -- $ 998,213
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
ASSETS:
Long-term investment securities, at value* (unaffiliated)............................ $359,323,802 $54,271,509
Short-term investment securities, at value* (unaffiliated)........................... -- 4,229,589
Repurchase agreements (cost equals market)........................................... 16,603,000 --
------------ -----------
Total Investments.................................................................. 375,926,802 58,501,098
------------ -----------
Cash................................................................................. -- --
Foreign cash*........................................................................ 158,476 --
Receivable for:
Shares of beneficial interest sold................................................. 1,859,099 38,597
Dividends and interest............................................................. 6,988,874 804,375
Investments sold................................................................... 28,645,991 --
Prepaid Expenses and other assets.................................................... 47,097 3,550
Due from investment adviser for expense reimbursements/fee waivers................... 179,754 --
Unrealized appreciation on forward currency contracts................................ -- --
------------ -----------
Total assets......................................................................... 413,806,093 59,347,620
------------ -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed............................................. 890,894 6,100
Investments purchased.............................................................. 11,210,371 --
Interest on securities sold short.................................................. -- --
Investment advisory and management fees............................................ 242,662 25,243
Distribution and service maintenance fees.......................................... 193,996 22,775
Transfer agent fees and expenses................................................... 88,225 15,415
Trustees' fees and expenses........................................................ 48,720 28,449
Other accrued expenses............................................................. 128,058 76,162
Dividends payable.................................................................... 556,870 53,308
Due to custodian..................................................................... 20,589,488 --
Due to broker........................................................................ 45,613 --
Unrealized depreciation on forward currency contracts................................ -- --
------------ -----------
Total liabilities.................................................................... 33,994,897 227,452
------------ -----------
Net assets........................................................................... $379,811,196 $59,120,168
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value....................................... $ 794,311 $ 46,734
Paid-in capital...................................................................... 451,662,065 56,219,020
------------ -----------
452,456,376 56,265,754
Accumulated undistributed net investment income (loss)............................... (2,773,841) (50,950)
Accumulated undistributed net realized gain (loss) on investments, futures contracts,
securities sold short and foreign exchange transactions............................. (86,811,392) 463,744
Unrealized appreciation (depreciation) on investments................................ 16,935,543 2,441,620
Unrealized appreciation (depreciation) on foreign exchange transactions.............. 4,510 --
------------ -----------
Net Assets......................................................................... $379,811,196 $59,120,168
============ ===========
*Cost
Long-term investment securities (unaffiliated)..................................... $342,388,259 $51,829,889
============ ===========
Short-term investment securities (unaffiliated).................................... $ -- $ 4,229,589
============ ===========
Foreign cash....................................................................... $ 153,966 $ --
============ ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2007 -- (continued)
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
Class A (unlimited shares authorized):
Net assets........................................................................ $152,239,216 $310,507,891 $453,893,034
Shares of beneficial interest issued and outstanding.............................. 16,483,896 28,013,598 125,141,916
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 9.24 $ 11.08 $ 3.63
Maximum sales charge (4.75% of offering price).................................... 0.46 0.55 0.18
------------ ------------ ------------
Maximum offering price to public.................................................. $ 9.70 $ 11.63 $ 3.81
============ ============ ============
Class B (unlimited shares authorized):
Net assets........................................................................ $ 14,716,154 $ 57,224,413 $ 55,728,375
Shares of beneficial interest issued and outstanding.............................. 1,592,759 5,149,484 15,368,309
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 9.24 $ 11.11 $ 3.63
============ ============ ============
Class C (unlimited shares authorized):
Net assets........................................................................ $ 9,880,830 $ 30,606,300 $217,754,977
Shares of beneficial interest issued and outstanding.............................. 1,070,838 2,751,074 59,807,057
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 9.23 $ 11.13 $ 3.64
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
Class A (unlimited shares authorized):
Net assets........................................................................ $241,554,439 $50,036,204
Shares of beneficial interest issued and outstanding.............................. 50,593,814 3,955,541
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 4.77 $ 12.65
Maximum sales charge (4.75% of offering price).................................... 0.24 0.63
------------ -----------
Maximum offering price to public.................................................. $ 5.01 $ 13.28
============ ===========
Class B (unlimited shares authorized):
Net assets........................................................................ $ 51,479,264 $ 5,093,187
Shares of beneficial interest issued and outstanding.............................. 10,764,041 402,636
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 4.78 $ 12.65
============ ===========
Class C (unlimited shares authorized):
Net assets........................................................................ $ 86,777,493 $ 3,990,777
Shares of beneficial interest issued and outstanding.............................. 18,073,205 315,241
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 4.80 $ 12.66
============ ===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2007
U.S.
Government Strategic High Yield Tax Exempt
Securities GNMA Bond Bond Insured
Fund Fund Fund Fund Fund
---------- ----------- ----------- ----------- ----------
INCOME:
Dividends (unaffiliated).................................... $ -- $ -- $ 183,974 $ 441,330 $ --
Interest (unaffiliated)..................................... 8,711,396 21,020,970 33,952,223 25,097,136 2,877,460
---------- ----------- ----------- ----------- ----------
Total investment income*.................................. 8,711,396 21,020,970 34,136,197 25,538,466 2,877,460
---------- ----------- ----------- ----------- ----------
EXPENSES:
Investment advisory and management fees..................... 1,122,507 1,861,785 3,528,616 2,414,284 315,937
Distribution and service maintenance fees:
Class A................................................... 515,046 1,065,614 1,278,867 670,556 185,425
Class B................................................... 168,580 657,301 504,536 522,532 58,351
Class C................................................... 86,798 352,101 1,433,116 832,021 43,738
Transfer agent fees:
Class A................................................... 367,820 702,772 837,830 448,312 119,420
Class B................................................... 43,049 159,423 122,994 124,663 15,208
Class C................................................... 22,953 83,151 327,833 194,040 11,154
Registration fees:
Class A................................................... 17,640 19,074 34,425 27,037 23,773
Class B................................................... 9,671 17,574 12,478 11,867 11,669
Class C................................................... 4,422 10,089 32,090 17,900 6,030
Custodian and accounting fees............................... 81,781 154,163 328,761 114,482 33,500
Reports to shareholders..................................... 27,222 87,220 94,726 86,947 274
Audit and tax fees.......................................... 42,261 43,406 44,833 46,191 40,498
Legal fees.................................................. 12,493 33,614 27,702 23,029 12,462
Trustees' fees and expenses................................. 11,561 28,152 30,702 20,769 4,296
Interest expense............................................ 12,019 50,839 6,944 75,783 --
Interest expense on securities sold short................... -- -- -- 7,431 --
Other expenses.............................................. 15,354 21,057 18,290 18,988 4,356
---------- ----------- ----------- ----------- ----------
Total expenses before fee waivers, expense reimbursement
and custody credits...................................... 2,561,177 5,347,335 8,664,743 5,656,832 886,091
Fees waived and expenses reimbursed by investment
advisor (Note 3)......................................... (669,714) (630,369) -- (313,242) (4,056)
Custody credits earned on cash balances................... (8,112) (2,205) (305,101) (14,837) (713)
---------- ----------- ----------- ----------- ----------
Net expenses.............................................. 1,883,351 4,714,761 8,359,642 5,328,753 881,322
---------- ----------- ----------- ----------- ----------
Net investment income (loss)................................. 6,828,045 16,306,209 25,776,555 20,209,713 1,996,138
---------- ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)....... (68,459) (171,039) 3,661,092 6,213,051 481,567
Net realized foreign exchange gain (loss) on other assets
and liabilities............................................. -- -- 74,765 -- --
---------- ----------- ----------- ----------- ----------
Net realized gain (loss) on investments and foreign
currencies.................................................. (68,459) (171,039) 3,735,857 6,213,051 481,567
---------- ----------- ----------- ----------- ----------
Change in unrealized appreciation (depreciation) on
investments (unaffiliated).................................. 1,657,175 4,010,650 13,294,624 6,274,268 281,498
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities...................................... -- -- 3,625 14,688 --
---------- ----------- ----------- ----------- ----------
Net unrealized gain (loss) on investments and foreign
currencies.................................................. 1,657,175 4,010,650 13,298,249 6,288,956 281,498
---------- ----------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1,588,716 3,839,611 17,034,106 12,502,007 763,065
---------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. $8,416,761 $20,145,820 $42,810,661 $32,711,720 $2,759,203
========== =========== =========== =========== ==========
*Net of foreign withholding taxes on interest and
dividends of.............................................. $ -- $ -- $ 100,866 $ -- $ --
========== =========== =========== =========== ==========
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
U.S. Government
Securities Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2007 2006
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 6,828,045 $ 7,348,908
Net realized gain (loss) on investments and foreign currencies........................ (68,459) (2,629,101)
Net unrealized gain (loss) on investments and foreign currencies...................... 1,657,175 (1,138,951)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 8,416,761 3,580,856
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (6,264,372) (6,505,119)
Net investment income (Class B)....................................................... (608,171) (786,554)
Net investment income (Class C)....................................................... (312,901) (307,714)
Net investment income (Class Z)....................................................... -- --
Net investment income (Class X)....................................................... -- --
Net realized gain on securities (Class A)............................................. -- --
Net realized gain on securities (Class B)............................................. -- --
Net realized gain on securities (Class C)............................................. -- --
Net realized gain on securities (Class Z)............................................. -- --
Net realized gain on securities (Class X)............................................. -- --
------------ ------------
Total distributions to shareholders..................................................... (7,185,444) (7,599,387)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 7) (3,236,594) (29,003,495)
------------ ------------
Total increase (decrease) in net assets................................................. (2,005,277) (33,022,026)
NET ASSETS:
Beginning of period..................................................................... 178,841,477 211,863,503
------------ ------------
End of period+.......................................................................... $176,836,200 $178,841,477
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 56,621 $ 57,877
============ ============
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2007 2006
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 16,306,209 $ 14,040,017
Net realized gain (loss) on investments and foreign currencies........................ (171,039) (1,409,187)
Net unrealized gain (loss) on investments and foreign currencies...................... 4,010,650 (2,932,719)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 20,145,820 9,698,111
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (13,350,095) (11,887,262)
Net investment income (Class B)....................................................... (2,448,583) (2,666,840)
Net investment income (Class C)....................................................... (1,311,888) (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..................................................... (17,110,566) (17,744,508)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 7) (24,531,303) (68,594,450)
------------ ------------
Total increase (decrease) in net assets................................................. (21,496,049) (76,640,847)
NET ASSETS:
Beginning of period..................................................................... 419,834,653 496,475,500
------------ ------------
End of period+.......................................................................... $398,338,604 $419,834,653
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 327,903 $ 20,580
============ ============
Strategic Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2007 2006
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 25,776,555 $ 10,165,505
Net realized gain (loss) on investments and foreign currencies........................ 3,735,857 3,525,730
Net unrealized gain (loss) on investments and foreign currencies...................... 13,298,249 (1,597,716)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 42,810,661 12,093,519
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (18,128,377) (5,369,145)
Net investment income (Class B)....................................................... (2,175,396) (1,942,089)
Net investment income (Class C)....................................................... (6,149,737) (2,927,876)
Net investment income (Class Z)....................................................... -- --
Net investment income (Class X)....................................................... -- --
Net realized gain on securities (Class A)............................................. -- --
Net realized gain on securities (Class B)............................................. -- --
Net realized gain on securities (Class C)............................................. -- --
Net realized gain on securities (Class Z)............................................. -- --
Net realized gain on securities (Class X)............................................. --
------------ ------------
Total distributions to shareholders..................................................... (26,453,510) (10,239,110)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 7) 400,002,265 175,766,449
------------ ------------
Total increase (decrease) in net assets................................................. 416,359,416 177,620,858
NET ASSETS:
Beginning of period..................................................................... 311,016,970 133,396,112
------------ ------------
End of period+.......................................................................... $727,376,386 $311,016,970
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ (954,680) $ (225)
============ ============
See Notes to Financial Statements
9
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2007 2006
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 20,209,713 $ 21,938,661
Net realized gain (loss) on investments and foreign currencies........................ 6,213,051 16,381,114
Net unrealized gain (loss) on investments and foreign currencies...................... 6,288,956 (3,300,370)
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 32,711,720 35,019,405
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (13,055,050) (11,905,182)
Net investment income (Class B)....................................................... (3,241,816) (3,703,477)
Net investment income (Class C)....................................................... (5,181,540) (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..................................................... (21,478,406) (21,693,351)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 7) 32,050,805 5,307,491
------------ ------------
Total increase (decrease) in net assets................................................. 43,284,119 18,633,545
NET ASSETS:
Beginning of period..................................................................... 336,527,077 317,893,532
------------ ------------
End of period+.......................................................................... $379,811,196 $336,527,077
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ (2,773,841) $ (2,050,534)
============ ============
Tax Exempt Insured Fund
------------------------
For the year For the year
ended ended
March 31, March 31,
2007 2006
------------ ------------
Operations:
Net investment income (loss).......................................................... $ 1,996,138 $ 2,192,275
Net realized gain (loss) on investments and foreign currencies........................ 481,567 828,946
Net unrealized gain (loss) on investments and foreign currencies...................... 281,498 (1,242,127)
----------- -----------
Net increase (decrease) in net assets resulting from operations......................... 2,759,203 1,779,094
----------- -----------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (1,775,224) (1,839,250)
Net investment income (Class B)....................................................... (149,453) (194,099)
Net investment income (Class C)....................................................... (115,967) (132,474)
Net investment income (Class Z)....................................................... -- --
Net investment income (Class X)....................................................... -- --
Net realized gain on securities (Class A)............................................. (365,409) (587,815)
Net realized gain on securities (Class B)............................................. (39,551) (75,670)
Net realized gain on securities (Class C)............................................. (31,739) (52,856)
Net realized gain on securities (Class Z)............................................. -- --
Net realized gain on securities (Class X)............................................. -- --
----------- -----------
Total distributions to shareholders..................................................... (2,477,343) (2,882,164)
----------- -----------
Net increase (decrease) in net assets resulting from capital share transactions (Note 7) (9,226,947) (7,564,719)
----------- -----------
Total increase (decrease) in net assets................................................. (8,945,087) (8,667,789)
NET ASSETS:
Beginning of period..................................................................... 68,065,255 76,733,044
----------- -----------
End of period+.......................................................................... $59,120,168 $68,065,255
=========== ===========
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ (50,950) $ (6,151)
=========== ===========
See Notes to Financial Statements
10
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, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
beginning investment and investment investment gains on Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets(3)
- ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- -------------
Class A
- -
03/31/03 $8.80 $0.37 $ 0.86 $ 1.23 $(0.40) $-- $(0.40) $9.63 14.14% $210,848 1.12%
03/31/04 9.63 0.30 0.01 0.31 (0.30) -- (0.30) 9.64 3.29 204,618 0.99
03/31/05 9.64 0.31 (0.26) 0.05 (0.32) -- (0.32) 9.37 0.61 174,905 0.99
03/31/06 9.37 0.36 (0.20) 0.16 (0.37) -- (0.37) 9.16 1.68 151,284 0.99
03/31/07 9.16 0.37 0.10 0.47 (0.39) -- (0.39) 9.24 5.25 152,239 0.99
Class B
- -
03/31/03 $8.80 $0.30 $ 0.87 $ 1.17 $(0.33) $-- $(0.33) $9.64 13.51% $ 62,595 1.76%
03/31/04 9.64 0.24 0.01 0.25 (0.24) -- (0.24) 9.65 2.62 36,605 1.64
03/31/05 9.65 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.37 (0.14) 27,013 1.64
03/31/06 9.37 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.16 1.02 19,276 1.64
03/31/07 9.16 0.32 0.09 0.41 (0.33) -- (0.33) 9.24 4.57 14,716 1.64
Class C*
- -
03/31/03 $8.79 $0.30 $ 0.87 $ 1.17 $(0.33) $-- $(0.33) $9.63 13.52% $ 24,322 1.75%
03/31/04 9.63 0.24 0.01 0.25 (0.24) -- (0.24) 9.64 2.62 15,139 1.64
03/31/05 9.64 0.25 (0.27) (0.02) (0.26) -- (0.26) 9.36 (0.14) 9,945 1.64
03/31/06 9.36 0.30 (0.20) 0.10 (0.31) -- (0.31) 9.15 1.02 8,281 1.64
03/31/07 9.15 0.31 0.10 0.41 (0.33) -- (0.33) 9.23 4.57 9,881 1.64
-
Ratio
of net
investment
income to
average Portfolio
net assets(3) Turnover
- ------------- --------- -
-
3.88% 630%(4)
3.14 267(4)
3.26 253(4)
3.80 357
4.05 243
-
3.20% 630%(4)
2.45 267(4)
2.61 253(4)
3.14 357
3.40 243
-
3.18% 630%(4)
2.45 267(4)
2.61 253(4)
3.14 357
3.40 243
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07
-------- -------- -------- -------- --------
U.S. Government Securities Fund Class A. 0.21% 0.37% 0.39% 0.36% 0.38%
U.S. Government Securities Fund Class B. 0.23 0.37 0.43 0.43 0.43
U.S. Government Securities Fund Class C. 0.27 0.38 0.48 0.57 0.43
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2003 2004 2005
---- ---- ----
U.S. Government Securities Fund......... 614% 256% 246%
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets(3)
- -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- -------------
Class A
- -
03/31/03 $10.77 $0.37 $ 0.93 $1.30 $(0.42) $(0.11) $(0.53) $11.54 $12.29 $255,096 0.99%
03/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467 0.99
03/31/05 11.38 0.31 (0.16) 0.15 (0.33) -- (0.33) 11.20 1.41 338,031 0.99
03/31/06 11.20 0.35 (0.07) 0.28 (0.40) (0.08) (0.48) 11.00 2.18 303,343 0.99
03/31/07 11.00 0.46 0.10 0.56 (0.48) -- (0.48) 11.08 5.23 310,508 0.99
Class B
- -
03/31/03 $10.80 $0.30 $ 0.93 $1.23 $(0.35) $(0.11) $(0.46) $11.57 $11.54 $189,323 1.64%
03/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923 1.64
03/31/05 11.41 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.23 0.75 102,497 1.64
03/31/06 11.23 0.28 (0.08) 0.20 (0.33) (0.08) (0.41) 11.02 1.43 76,304 1.64
03/31/07 11.02 0.39 0.11 0.50 (0.41) -- (0.41) 11.11 4.64 57,224 1.64
Class C*
- -
03/31/03 $10.81 $0.29 $ 0.94 $1.23 $(0.35) $(0.11) $(0.46) $11.58 $11.53 $137,173 1.64%
03/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184 1.64
03/31/05 11.42 0.24 (0.16) 0.08 (0.26) -- (0.26) 11.24 0.75 54,936 1.64
03/31/06 11.24 0.28 (0.07) 0.21 (0.33) (0.08) (0.41) 11.04 1.53 40,188 1.64
03/31/07 11.04 0.40 0.10 0.50 (0.41) -- (0.41) 11.13 4.64 30,606 1.64
Ratio
of net
investment
income to
average Portfolio
net assets(3) Turnover
- ------------- ---------
3.36% 436%(4)
2.51 225(4)
2.73 204(4)
3.17 138
4.19 142
2.71% 436%(4)
1.77 225(4)
2.10 204(4)
2.50 138
3.53 142
2.59% 436%(4)
1.74 225(4)
2.11 204(4)
2.49 138
3.53 142
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07
-------- -------- -------- -------- --------
GNMA Fund Class A............. 0.13% 0.18% 0.17% 0.13% 0.15%
GNMA Fund Class B............. 0.14 0.16 0.18 0.17 0.18
GNMA Fund Class C............. 0.13 0.16 0.18 0.19 0.17
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2003 2004 2005
---- ---- ----
GNMA Fund............................... 421% 213% 204%
See Notes to Financial Statements
12
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, Ratio of
Value, Net realized Total from from net realized Total Value, end of expense
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period+ Return(2) (000's) net assets(5)
- -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------- --------- -------- -------------
Class A
- -
03/31/03 $3.00 $0.20 $0.06 $0.26 $(0.18) $-- $(0.18) $3.08 9.07%(4) $ 37,136 1.62%
03/31/04 3.08 0.21 0.33 0.54 (0.21) -- (0.21) 3.41 18.04 43,840 1.55(3)
03/31/05 3.41 0.20 0.11 0.31 (0.23) -- (0.23) 3.49 9.36 59,279 1.40(3)
03/31/06 3.49 0.17 0.05 0.22 (0.18) -- (0.18) 3.53 6.54 167,072 1.34
03/31/07 3.53 0.16 0.12 0.28 (0.18) -- (0.18) 3.63 8.07 453,893 1.26
Class B
- -
03/31/03 $3.00 $0.18 $0.06 $0.24 $(0.16) $-- $(0.16) $3.08 8.36%(4) $ 27,879 2.28%
03/31/04 3.08 0.19 0.33 0.52 (0.19) -- (0.19) 3.41 17.29 36,110 2.19(3)
03/31/05 3.41 0.18 0.10 0.28 (0.21) -- (0.21) 3.48 8.35 37,250 2.05(3)
03/31/06 3.48 0.16 0.05 0.21 (0.16) -- (0.16) 3.53 6.14 46,294 2.00(3)
03/31/07 3.53 0.15 0.10 0.25 (0.15) -- (0.15) 3.63 7.36 55,728 1.94
Class C*
- -
03/31/03 $3.01 $0.19 $0.05 $0.24 $(0.16) $-- $(0.16) $3.09 8.47%(4) $ 14,423 2.17%(3)
03/31/04 3.09 0.19 0.34 0.53 (0.20) -- (0.20) 3.42 17.43 22,064 2.16(3)
03/31/05 3.42 0.18 0.11 0.29 (0.21) -- (0.21) 3.50 8.65 36,867 2.05(3)
03/31/06 3.50 0.15 0.05 0.20 (0.16) -- (0.16) 3.54 5.84 97,651 1.99(3)
03/31/07 3.54 0.14 0.12 0.26 (0.16) -- (0.16) 3.64 7.36 217,755 1.93
Ratio
of net
investment
income to
average Portfolio
net assets(5) Turnover
- ------------- ---------
6.93% 67%(6)
6.41(3) 71(6)
5.94(3) 190(6)
5.19 119
4.84 131
6.26% 67%(6)
5.76(3) 71(6)
5.32(3) 190(6)
4.51(3) 119
4.17 131
6.37%(3) 67%(6)
5.78(3) 71(6)
5.29(3) 190(6)
4.54(3) 119
4.17 131
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06
-------- -------- -------- --------
Strategic Bond Fund Class A............. -- % 0.02% 0.03% -- %
Strategic Bond Fund Class B............. -- 0.02 0.02 0.00
Strategic Bond Fund Class C............. 0.11 0.02 0.03 0.00
(4)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.
(5)Net of custody credits of:
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07
-------- -------- -------- -------- --------
Strategic Bond Fund..................... 0.01% 0.02% 0.01% 0.07% 0.05%
(6)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2003 2004 2005
- ---- ---- ----
Strategic Bond Fund 65% 69% 188%
See Notes to Financial Statements
13
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND
--------------------
Net gain
(loss) on
Net investments Distributions Net
Asset (both Dividends from net Asset Net Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expense
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investment butions period Return(2) (000's) net assets
- -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ----------- ----------
Class A
- -
03/31/03 $4.13 $0.37 $(0.49) $(0.12) $(0.35) $-- $(0.35) $3.66 (2.45)% $ 66,521 1.56%
03/31/04 3.66 0.33 0.60 0.93 (0.36) -- (0.36) 4.23 26.05 93,818 1.49
03/31/05 4.23 0.33 0.21 0.54 (0.34) -- (0.34) 4.43 13.26 101,661 1.38(3)
03/31/06 4.43 0.31 0.19 0.50 (0.33) -- (0.33) 4.60 11.61 214,041 1.36(3)(5)
03/31/07 4.60 0.30 0.19 0.49 (0.32) -- (0.32) 4.77 11.01 241,554 1.36(3)
Class B
- -
03/31/03 $4.13 $0.35 $(0.49) $(0.14) $(0.33) $-- $(0.33) $3.66 (3.06)% $ 57,596 2.18%
03/31/04 3.66 0.31 0.60 0.91 (0.33) -- (0.33) 4.24 25.55 73,751 2.14
03/31/05 4.24 0.31 0.20 0.51 (0.31) -- (0.31) 4.44 12.57 61,961 2.03(3)
03/31/06 4.44 0.31 0.16 0.47 (0.30) -- (0.30) 4.61 10.88 52,346 2.01(3)(5)
03/31/07 4.61 0.27 0.19 0.46 (0.29) -- (0.29) 4.78 10.29 51,479 2.01(3)
Class C*
- -
03/31/03 $4.15 $0.34 $(0.48) $(0.14) $(0.33) $-- $(0.33) $3.68 (2.97)% $ 27,814 2.15%(3)
03/31/04 3.68 0.30 0.60 0.90 (0.33) -- (0.33) 4.25 25.14 52,868 2.11(3)
03/31/05 4.25 0.30 0.22 0.52 (0.31) -- (0.31) 4.46 12.77 65,385 2.03(3)
03/31/06 4.46 0.30 0.17 0.47 (0.30) -- (0.30) 4.63 10.86 70,140 2.01(3)(5)
03/31/07 4.63 0.27 0.19 0.46 (0.29) -- (0.29) 4.80 10.27 86,777 2.01(3)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
10.26% 117%(4)
8.15 126(4)
7.59(3) 85(4)
7.20(3)(5) 91
6.44(3) 86
9.63% 117%(4)
7.52 126(4)
7.04(3) 85(4)
6.71(3)(5) 91
5.82(3) 86
9.67%(3) 117%(4)
7.53(3) 126(4)
6.97(3) 85(4)
6.67(3)(5) 91
5.80(3) 86
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07
-------- -------- -------- -------- --------
High Yield Bond Fund Class A............ -- % -- % 0.08% 0.11% 0.09%
High Yield Bond Fund Class B............ -- -- 0.07 0.14 0.11
High Yield Bond Fund Class C............ 0.10 0.01 0.09 0.12 0.10
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydown on securities and was as
follows:
2003 2004 2005
---- ---- ----
High Yield Bond Fund 117% 126% 85%
(5)Net of custody credits of 0.01%.
See Notes to Financial Statements
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
beginning investment and investment investment gains on Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ------- ----------
Class A
- -
03/31/03 $12.72 $0.41 $ 0.73 $1.14 $(0.43) $(0.09) $(0.52) $13.34 9.08% $78,358 1.24%
03/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 13.16 4.86 69,098 1.26
03/31/05 13.16 0.41 (0.18) 0.23 (0.41) (0.17) (0.58) 12.81 1.83 62,032 1.25
03/31/06 12.81 0.41 (0.10) 0.31 (0.40) (0.13) (0.53) 12.59 2.43 56,875 1.30
03/31/07 12.59 0.42 0.15 0.57 (0.42) (0.09) (0.51) 12.65 4.63 50,036 1.27
Class B
- -
03/31/03 $12.72 $0.32 $ 0.73 $1.05 $(0.34) $(0.09) $(0.43) $13.34 8.30% $19,031 1.97%
03/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 13.16 4.10 16,632 1.96
03/31/05 13.16 0.33 (0.18) 0.15 (0.32) (0.17) (0.49) 12.82 1.21 9,000 1.94
03/31/06 12.82 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.60 1.77 6,694 1.95
03/31/07 12.60 0.31 0.15 0.46 (0.32) (0.09) (0.41) 12.65 3.72 5,093 2.11
Class C*
- -
03/31/03 $12.72 $0.31 $ 0.74 $1.05 $(0.34) $(0.09) $(0.43) $13.34 8.32% $ 6,451 1.95%(3)
03/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 13.16 4.14 5,803 1.95(3)
03/31/05 13.16 0.32 (0.18) 0.14 (0.32) (0.17) (0.49) 12.81 1.12 5,701 1.95(3)
03/31/06 12.81 0.32 (0.09) 0.23 (0.32) (0.13) (0.45) 12.59 1.81 4,497 1.95(3)
03/31/07 12.59 0.33 0.17 0.50 (0.34) (0.09) (0.43) 12.66 3.98 3,991 1.95(3)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
3.12% 195%
2.90 131
3.14 153
3.14 81
3.28 84
2.39% 195%
2.20 131
2.44 153
2.48 81
2.44 84
2.40%(3) 195%
2.21(3) 131
2.44(3) 153
2.48(3) 81
2.60(3) 84
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07
-------- -------- -------- -------- --------
Tax Exempt Insured Fund Class C......... 0.00% 0.12% 0.09% 0.20% 0.09%
See Notes to Financial Statements
15
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited)
Industry Allocation*
Government National Mtg. Assoc. 47.5%
Repurchase Agreement........... 23.3
United States Treasury Bonds... 16.5
United States Treasury Notes... 16.3
Private Export Funding......... 5.7
U.S. Government Agencies....... 1.0
Federal Farm Credit Bank....... 0.7
Federal National Mtg. Assoc.... 0.4
-----
111.4%
=====
Credit Quality+#
Government -- Agency.. 56.2%
Government -- Treasury 37.3
AA.................... 6.5
-----
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.
16
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 55.3%
Federal Farm Credit Bank -- 0.7%
5.64% due 04/04/11............. $ 500,000 $ 514,953
6.00% due 03/07/11............. 200,000 208,160
6.30% due 12/03/13............. 500,000 538,869
-----------
1,261,982
-----------
Federal Home Loan Mtg. Corp. -- 0.0%
8.00% due 06/01/08............. 1,995 2,001
-----------
Federal National Mtg. Assoc. -- 0.4%
6.53% due 05/25/30(3).......... 669,833 671,337
8.00% due 01/01/23............. 34,003 35,946
11.00% due 02/01/15............ 32 36
11.50% due 09/01/19............ 10,048 11,024
-----------
718,343
-----------
Private Export Funding Corp. -- 5.7%
5.87% due 07/31/08............. 10,000,000 10,117,520
-----------
Government National Mtg. Assoc. -- 47.5%
4.50% due 05/15/18............. 963,986 939,633
4.50% due 08/15/18............. 1,541,596 1,502,651
4.50% due 09/15/18............. 4,454,601 4,342,067
4.50% due 10/15/18............. 4,432,453 4,320,477
4.50% due 09/15/33............. 4,884,905 4,631,184
5.00% due 04/15/18............. 4,579,038 4,545,276
5.00% due 08/15/33............. 1,953,026 1,903,522
5.00% due 09/15/33............. 903,046 880,157
5.00% due 10/15/33............. 618,021 602,356
5.00% due 11/15/34............. 211,048 205,581
5.00% due April TBA............ 4,000,000 3,891,248
5.00% due May TBA.............. 17,000,000 16,537,804
5.50% due 11/15/32............. 15,844 15,781
5.50% due 03/15/33............. 464,445 462,508
5.50% due 04/15/33............. 594,397 591,918
5.50% due 05/15/33............. 1,314,618 1,309,136
5.50% due 06/15/33............. 6,328,135 6,301,745
5.50% due 07/15/33............. 1,722,451 1,715,269
5.50% due 10/15/33............. 1,782,427 1,774,994
5.50% due 12/15/33............. 356,932 355,443
5.50% due 01/15/34............. 3,577,382 3,561,456
5.50% due 02/15/34............. 2,080,516 2,071,253
6.00% due 01/15/28............. 2,443 2,485
6.00% due 04/15/28............. 1,345,764 1,368,937
6.00% due 05/15/28............. 2,998 3,049
6.00% due 10/15/28............. 3,606 3,668
6.00% due 03/15/29............. 77,879 79,178
6.00% due 04/15/29............. 48,032 48,833
6.00% due 05/15/29............. 74,131 75,367
6.00% due 06/15/29............. 28,126 28,595
6.00% due 04/15/31............. 29,302 29,770
6.00% due 05/15/31............. 49,065 49,850
6.00% due 11/15/31............. 173,561 176,336
6.00% due 12/15/31............. 409,590 416,140
6.00% due 01/15/32............. 179,217 182,006
6.00% due 02/15/32............. 43,998 44,683
6.00% due 03/15/32............. 10,340 10,501
6.00% due 08/15/32............. 286,200 290,653
6.00% due 11/15/32............. 41,618 42,265
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Government National Mtg. Assoc. (continued)
6.00% due 12/15/32....................... $ 9,523 $ 9,671
6.00% due 01/15/33....................... 19,534 19,831
6.00% due 02/15/33....................... 59,634 60,541
6.00% due 03/15/33....................... 89,132 90,488
6.00% due 04/15/33....................... 341,420 346,612
6.00% due 07/15/33....................... 249,002 252,789
6.00% due 08/15/33....................... 2,582,240 2,622,761
6.00% due 09/15/33....................... 363,530 369,060
6.00% due 10/15/33....................... 1,500,761 1,523,593
6.00% due 11/15/33....................... 175,279 177,945
6.00% due 12/15/33....................... 776,189 787,995
6.00% due 02/15/34....................... 325,268 329,833
6.00% due 05/15/34....................... 49,285 49,977
6.00% due 06/15/34....................... 44,671 45,298
6.00% due 07/15/34....................... 1,506,043 1,527,179
6.00% due 08/15/34....................... 187,973 190,611
6.00% due 09/15/34....................... 1,381,302 1,400,687
6.00% due 10/15/34....................... 4,779,861 4,846,943
6.00% due 12/15/34....................... 413,995 419,805
6.00% due 06/15/35....................... 302,727 306,778
6.00% due 08/15/35....................... 317,123 321,366
6.50% due 02/15/29....................... 16,421 16,910
6.50% due 05/15/31....................... 21,044 21,652
6.50% due 06/15/31....................... 64,766 66,635
6.50% due 07/15/31....................... 36,591 37,647
6.50% due 08/15/31....................... 76,946 79,167
6.50% due 09/15/31....................... 190,508 196,007
6.50% due 10/15/31....................... 322,788 332,105
6.50% due 11/15/31....................... 13,365 13,751
6.50% due 12/15/31....................... 22,474 23,123
6.50% due 01/15/32....................... 34,230 35,186
6.50% due 02/15/32....................... 558,107 573,699
6.50% due 06/15/32....................... 51,288 52,720
7.00% due 07/15/23....................... 36,217 37,862
7.00% due 10/15/23....................... 84,221 88,045
7.00% due 09/15/25....................... 239,551 250,688
7.00% due 03/20/29....................... 18,505 19,296
7.00% due 06/20/29....................... 2,968 3,095
7.00% due 11/20/30....................... 74,814 78,006
7.50% due 04/15/17....................... 10,613 11,013
7.50% due 08/15/23....................... 186,956 195,087
7.50% due 09/15/23....................... 573,377 598,315
7.50% due 10/15/23....................... 16,624 17,347
8.00% due 02/15/08....................... 167 169
9.00% due 12/15/16....................... 58,043 62,178
11.00% due 08/20/15...................... 223 246
11.00% due 09/20/15...................... 414 456
11.50% due 05/20/15...................... 3,709 4,148
12.50% due 09/15/14...................... 6,313 7,042
13.00% due 01/15/11...................... 1,889 2,100
13.00% due 02/15/11...................... 2,458 2,734
13.00% due 03/15/11...................... 192 213
13.00% due 04/15/11...................... 443 493
13.00% due 09/15/13...................... 4,775 5,342
13.00% due 10/20/14...................... 1,073 1,186
13.00% due 11/15/14...................... 705 791
17
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
13.00% due 02/20/15...................... $ 643 $ 713
13.50% due 02/15/13...................... 10,478 11,812
15.00% due 01/15/12...................... 408 467
15.00% due 02/15/12...................... 1,008 1,154
15.00% due 06/15/12...................... 10,763 12,328
15.00% due 09/15/12...................... 604 692
15.50% due 09/15/11...................... 32,538 37,174
------------
83,912,332
------------
Small Business Administration -- 1.0%
6.30% due 06/01/18....................... 1,769,302 1,820,176
------------
Total U.S. Government Agencies
(cost $98,899,113)...................... 97,832,354
------------
U.S. GOVERNMENT TREASURIES -- 32.8%
United States Treasury Bonds -- 16.5%
4.50% due 02/15/36....................... 14,000,000 13,199,368
5.38% due 02/15/31....................... 15,000,000 15,991,410
------------
29,190,778
------------
United States Treasury Notes -- 16.3%
4.50% due 11/15/15....................... 8,000,000 7,918,440
4.63% due 11/15/16....................... 2,000,000 1,994,140
4.63% due 02/15/17....................... 9,000,000 8,981,721
4.75% due 02/15/37....................... 4,000,000 3,937,500
5.13% due 06/30/08....................... 6,000,000 6,021,564
------------
28,853,365
------------
Total U.S. Government Treasuries
(cost $58,559,646)...................... 58,044,143
------------
Total Long-Term Investment Securities
(cost $157,458,759)..................... 155,876,497
------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
REPURCHASE AGREEMENT -- 23.3%
UBS Securities, LLC Joint Repurchase
Agreement(1)
(cost $41,132,000).................. $41,132,000 $ 41,132,000
------------
TOTAL INVESTMENTS --
(cost $198,590,759)(2).............. 111.4% 197,008,497
Liabilities in excess of other assets.. (11.4) (20,172,297)
----------- ------------
NET ASSETS -- 100.0% $176,836,200
=========== ============
- --------
(1) See Note 2 for details of Joint Repurchase Agreement
(2) See Note 5 for cost of investment on tax basis
(3) Collateralized Mortgage Obligation
TBA --Securities purchased on a forward commitment basis with an approximate
principle amount and no definite maturity date. The actual principal and
maturity date will be determined upon settlement date.
See Notes to Financial Statements
18
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited)
Industry Allocation*
Government National Mtg. Assoc. 84.1%
United States Treasury Notes... 13.5
Repurchase Agreement........... 4.6
Federal National Mtg. Assoc.... 1.1
United States Treasury Bonds... 0.7
U.S. Government Agencies....... 0.2
-----
104.2%
=====
Credit Quality+#
Government -- Agency.. 85.6%
Government -- Treasury 14.4
-----
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.
19
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 85.4%
Federal National Mtg. Assoc. -- 1.1%
Federal National Mtg. Assoc.
Series 2005 -- 20
5.00% due 01/25/18(1)................ $ 4,342,944 $ 4,321,406
-----------
Government National Mtg. Assoc. -- 84.1%
4.50% due 05/15/18.................... 1,927,972 1,879,267
4.50% due 08/15/18.................... 1,000,960 975,673
4.50% due 09/15/18.................... 3,331,257 3,247,102
4.50% due 10/15/18.................... 5,161,323 5,030,935
4.50% due 08/15/33.................... 3,035,894 2,878,210
4.50% due 09/15/33.................... 3,551,151 3,366,704
5.00% due 03/15/18.................... 566,942 562,762
5.00% due 04/15/18.................... 7,374,476 7,320,102
5.00% due 05/15/18.................... 9,973,272 9,899,738
5.00% due 01/15/33.................... 18,124 17,664
5.00% due 05/15/33.................... 13,076 12,745
5.00% due 08/15/33.................... 2,868,398 2,795,692
5.00% due 09/15/33.................... 2,802,628 2,731,590
5.00% due 10/15/33.................... 6,371,650 6,210,146
5.00% due 04/15/34.................... 57,002 55,526
5.00% due 05/15/34.................... 165,083 160,808
5.00% due 11/15/34.................... 722,087 703,384
5.00% due 12/15/34.................... 726,923 708,095
5.00% due April TBA................... 15,000,000 14,592,180
5.00% due May TBA..................... 3,000,000 2,918,436
5.50% due 06/15/29.................... 6,193 6,180
5.50% due 01/15/32.................... 48,249 48,057
5.50% due 12/15/32.................... 777,047 773,956
5.50% due 01/15/33.................... 513,741 511,598
5.50% due 02/15/33.................... 2,068,091 2,059,466
5.50% due 03/15/33.................... 1,142,212 1,137,449
5.50% due 04/15/33.................... 6,085,020 6,059,642
5.50% due 05/15/33.................... 7,285,968 7,255,584
5.50% due 06/15/33.................... 8,174,772 8,140,807
5.50% due 07/15/33.................... 410,089 408,378
5.50% due 08/15/33.................... 2,563,508 2,552,817
5.50% due 09/15/33.................... 408,370 406,667
5.50% due 10/15/33.................... 6,944,387 6,915,428
5.50% due 12/15/33.................... 7,580,314 7,548,702
5.50% due 01/15/34.................... 10,441,517 10,395,032
5.50% due 02/15/34.................... 1,373,972 1,367,856
5.50% due 04/15/35.................... 2,439,505 2,427,589
5.50% due 07/15/35.................... 2,690,587 2,677,445
5.50% due 09/15/35.................... 26,958,060 26,826,384
5.50% due 10/15/35.................... 16,737,010 16,655,257
5.50% due 11/15/35.................... 33,249,602 33,087,194
5.50% due 12/15/35.................... 20,126,149 20,027,841
5.50% due 02/15/36.................... 2,821,487 2,806,322
5.50% due 03/15/36.................... 10,546,734 10,490,048
5.50% due 04/15/36.................... 467,990 465,474
5.50% due 05/15/36.................... 3,530,482 3,511,506
6.00% due 11/15/23.................... 4,051 4,109
6.00% due 01/15/24.................... 7,316 7,423
6.00% due 07/15/28.................... 5,189 5,277
6.00% due 11/15/28.................... 319,226 324,640
6.00% due 12/15/28.................... 350,335 356,277
6.00% due 01/15/29.................... 684,506 695,917
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
6.00% due 02/15/29....................... $ 777,361 $ 790,323
6.00% due 03/15/29....................... 591,443 601,305
6.00% due 04/15/29....................... 1,580,694 1,607,104
6.00% due 05/15/29....................... 71,507 72,699
6.00% due 06/15/29....................... 635,435 646,056
6.00% due 07/15/29....................... 217,084 220,704
6.00% due 08/15/29....................... 20,483 20,824
6.00% due 10/15/29....................... 106,033 107,801
6.00% due 04/15/31....................... 20,709 21,040
6.00% due 07/15/31....................... 15,317 15,562
6.00% due 10/15/31....................... 84,983 86,342
6.00% due 11/15/31....................... 1,493,862 1,517,753
6.00% due 12/15/31....................... 624,998 634,993
6.00% due 01/15/32....................... 716,573 727,724
6.00% due 02/15/32....................... 57,423 58,317
6.00% due 03/15/32....................... 485,490 493,045
6.00% due 07/15/32....................... 117,869 119,703
6.00% due 08/15/32....................... 1,705,996 1,733,090
6.00% due 09/15/32....................... 1,160,764 1,178,825
6.00% due 10/15/32....................... 213,829 217,156
6.00% due 11/15/32....................... 8,377 8,507
6.00% due 12/15/32....................... 171,388 174,055
6.00% due 01/15/33....................... 1,590,288 1,614,478
6.00% due 02/15/33....................... 1,774,626 1,801,618
6.00% due 03/15/33....................... 1,291,075 1,310,712
6.00% due 04/15/33....................... 1,465,367 1,487,657
6.00% due 05/15/33....................... 1,465,854 1,488,152
6.00% due 06/15/33....................... 1,103,653 1,120,441
6.00% due 08/15/33....................... 1,715,150 1,741,401
6.00% due 10/15/33....................... 536,378 544,537
6.00% due 11/15/33....................... 1,740,632 1,767,112
6.00% due 12/15/33....................... 3,284,143 3,334,099
6.00% due 01/15/34....................... 1,750,577 1,775,144
6.00% due 02/15/34....................... 11,596,802 11,759,555
6.00% due 03/15/34....................... 348,889 353,785
6.00% due 04/15/34....................... 3,663,100 3,714,510
6.00% due 05/15/34....................... 322,268 326,791
6.00% due 06/15/34....................... 342,214 347,016
6.00% due 07/15/34....................... 3,909,035 3,963,896
6.00% due 08/15/34....................... 5,430,193 5,506,418
6.00% due 09/15/34....................... 289,303 293,364
6.00% due 10/15/34....................... 827,376 838,987
6.00% due 11/15/34....................... 1,812,274 1,837,708
6.00% due 12/15/34....................... 75,810 76,874
6.00% due 01/15/35....................... 113,750 115,272
6.00% due 02/15/35....................... 1,101,788 1,116,532
6.00% due 04/15/35....................... 63,888 64,743
6.00% due 05/15/35....................... 118,083 119,663
6.00% due 06/15/35....................... 487,537 494,061
6.00% due 11/15/35....................... 29,555 29,951
6.00% due 12/15/35....................... 1,572,223 1,593,186
6.00% due 01/15/36....................... 1,152,482 1,167,529
6.00% due 02/15/36....................... 1,937,709 1,963,004
6.00% due 03/15/36....................... 1,878,470 1,902,993
6.00% due 04/15/36....................... 5,672,375 5,746,427
6.00% due 05/15/36....................... 6,264,887 6,346,675
20
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
6.00% due 06/15/36....................... $3,304,231 $ 3,347,367
6.00% due 07/15/36....................... 1,743,649 1,766,412
6.00% due 08/15/36....................... 25,319 25,679
6.00% due 09/15/36....................... 254,644 257,968
6.00% due 10/15/36....................... 1,841,875 1,866,949
6.00% due 11/15/36....................... 2,769,483 2,805,638
6.50% due 03/15/28....................... 26,787 27,586
6.50% due 08/15/28....................... 43,907 45,217
6.50% due 12/15/28....................... 1,344 1,385
6.50% due 01/15/29....................... 5,078 5,229
6.50% due 02/15/29....................... 1,651 1,700
6.50% due 03/15/29....................... 111,822 115,152
6.50% due 04/15/29....................... 1,951 2,009
6.50% due 05/15/29....................... 13,264 13,660
6.50% due 06/15/29....................... 38,637 39,787
6.50% due 07/15/29....................... 5,253 5,409
6.50% due 10/15/29....................... 3,523 3,628
6.50% due 08/15/31....................... 239,859 246,782
6.50% due 09/15/31....................... 17,653 18,162
6.50% due 10/15/31....................... 322,789 332,105
6.50% due 11/15/31....................... 167,838 172,683
6.50% due 12/15/31....................... 203,934 209,820
6.50% due 02/15/32....................... 272,715 280,333
6.50% due 05/15/32....................... 1,434,450 1,474,525
6.50% due 06/15/32....................... 122,700 126,128
7.00% due 03/15/23....................... 92,465 96,664
7.00% due 01/20/24....................... 721 751
7.00% due 03/20/24....................... 699 728
7.00% due 07/20/25....................... 4,130 4,308
7.00% due 09/15/25....................... 104,032 108,869
7.00% due 01/20/29....................... 41,541 43,316
7.00% due 02/20/29....................... 8,064 8,408
7.00% due 06/20/29....................... 14,720 15,349
7.00% due 07/20/29....................... 54,414 56,740
7.00% due 09/20/29....................... 5,505 5,740
7.00% due 10/20/29....................... 11,489 11,979
7.00% due 11/20/29....................... 3,676 3,833
7.00% due 03/20/30....................... 5,161 5,381
7.00% due 06/20/30....................... 8,476 8,837
7.00% due 08/20/30....................... 32,987 34,394
7.00% due 09/20/30....................... 27,707 28,889
7.00% due 10/20/30....................... 33,440 34,867
8.00% due 11/15/26....................... 190,705 202,419
8.00% due 12/15/29....................... 21,060 22,368
8.00% due 04/15/30....................... 43,775 46,451
8.00% due 05/15/30....................... 6,243 6,625
8.00% due 08/15/30....................... 42,980 45,608
8.50% due 03/15/17....................... 16,908 18,097
8.50% due 05/15/21....................... 51,895 55,884
8.50% due 12/15/22....................... 50,215 54,147
8.50% due 01/15/23....................... 116,664 125,949
8.50% due 09/15/24....................... 37,618 40,656
9.00% due 07/15/16....................... 66,519 71,257
9.00% due 10/15/16....................... 5,700 6,106
------------
335,096,233
------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Small Business Administration -- 0.2%
6.30% due 06/01/18................... $ 589,767 $ 606,725
------------
Total U.S. Government Agencies
(cost $342,011,341)................. 340,024,364
------------
U.S. GOVERNMENT TREASURIES -- 14.2%
United States Treasury Bonds -- 1.9%
4.50% due 02/15/36................... 3,000,000 2,828,436
4.75% due 02/15/37................... 5,000,000 4,921,875
------------
7,750,311
------------
United States Treasury Notes -- 12.3%
4.50% due 11/15/15................... 1,000,000 989,805
4.63% due 11/15/16................... 18,000,000 17,947,260
4.63% due 02/15/17................... 20,000,000 19,959,380
5.13% due 06/30/08................... 10,000,000 10,035,940
------------
48,932,385
------------
Total U.S. Government Treasuries
(cost $56,769,259).................. 56,682,696
------------
Total Long-Term Investment Securities
(cost $398,780,600)................. 396,707,060
------------
REPURCHASE AGREEMENT -- 4.6%
UBS Securities, LLC Joint Repurchase
Agreement(2)
(cost $18,288,000).................. 18,288,000 18,288,000
TOTAL INVESTMENTS --
(cost $417,068,600)(3).............. 104.2% 414,995,060
Liabilities in excess of other assets.. (4.2) (16,656,456)
----------- ------------
NET ASSETS -- 100.0% $398,338,604
=========== ============
- --------
(1) Collateralized Mortgaged Obligation
(2) See Note 2 for details of Joint Repurchase Agreement
(3) See Note 5 for cost of investment on a tax basis
TBA --Securities purchased on a forward commitment basis with an approximate
principle amount and no definite maturity date. The actual principal and
maturity date will be determined upon settlement date.
See Notes to Financial Statements
21
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited)
Industry Allocation*
Foreign Government Agencies.............. 33.2%
United States Treasury Notes............. 6.1
Federal National Mtg. Assoc.............. 6.0
Federal Home Loan Mtg. Corp.............. 3.8
Diversified Financial Services........... 2.8
Repurchase Agreements.................... 2.7
Oil Companies -- Exploration & Production 2.1
Finance -- Auto Loans.................... 2.0
Telephone -- Integrated.................. 1.9
Cable TV................................. 1.7
Special Purpose Entities................. 1.6
Pipelines................................ 1.4
Cellular Telecom......................... 1.2
Independent Power Producers.............. 1.2
Electric -- Integrated................... 1.1
United States Treasury Bonds............. 1.1
Chemicals -- Specialty................... 1.0
Medical -- Hospitals..................... 1.0
Time Deposits............................ 1.0
Multimedia............................... 0.9
Telecom Services......................... 0.9
Casino Hotels............................ 0.8
Medical -- Drugs......................... 0.8
Transport -- Air Freight................. 0.8
Satellite Telecom........................ 0.7
Auto -- Cars/Light Trucks................ 0.6
Banks -- Commercial...................... 0.6
Electronic Components -- Semiconductors.. 0.6
Television............................... 0.6
Airlines................................. 0.5
Oil Companies -- Integrated.............. 0.5
Paper & Related Products................. 0.5
Real Estate Investment Trusts............ 0.5
Theaters................................. 0.5
Agricultural Chemicals................... 0.4
Containers -- Metal/Glass................ 0.4
Medical Products......................... 0.4
Metal -- Diversified..................... 0.4
Banks -- Money Center.................... 0.3
Banks -- Super Regional.................. 0.3
Broadcast Services/Program............... 0.3
Building & Construction Products -- Misc. 0.3
Computer Services........................ 0.3
Containers -- Paper/Plastic.............. 0.3
Diversified Manufactured Operations...... 0.3
Electric -- Generation................... 0.3
Finance -- Investment Banker/Broker...... 0.3
Finance -- Mortgage Loan/Banker.......... 0.3
Funeral Services & Related Items......... 0.3
Housewares............................... 0.3
Oil -- Field Services.................... 0.3
Recycling................................ 0.3
Steel -- Producers....................... 0.3
Auto/Truck Parts & Equipment -- Original. 0.2
Brewery.................................. 0.2
Cosmetics & Toiletries................... 0.2
Direct Marketing......................... 0.2
Electronics -- Military.................. 0.2
Federal Home Loan Bank................... 0.2
Finance -- Consumer Loans................ 0.2
Gambling (Non-Hotel)..................... 0.2
Insurance -- Multi-line............... 0.2
Insurance -- Property/Casualty........ 0.2
Medical -- HMO........................ 0.2
Printing -- Commercial................ 0.2
Rental Auto/Equipment................. 0.2
Retail -- Drug Store.................. 0.2
Savings & Loans/Thrifts............... 0.2
Specified Purpose Acquisitions........ 0.2
Transport -- Rail..................... 0.2
Transport -- Services................. 0.2
Aerospace/Defense..................... 0.1
Applications Software................. 0.1
Beverages -- Wine/Spirits............. 0.1
Building Products -- Wood............. 0.1
Chemicals -- Diversified.............. 0.1
Coal.................................. 0.1
Commercial Services................... 0.1
Computers -- Memory Devices........... 0.1
Consumer Products -- Misc............. 0.1
Cruise Lines.......................... 0.1
Diagnostic Kits....................... 0.1
Diversified Minerals.................. 0.1
Electronic Components -- Misc......... 0.1
Energy -- Alternate Sources........... 0.1
Financial Guarantee Insurance......... 0.1
Food -- Meat Products................. 0.1
Food -- Misc.......................... 0.1
Gas -- Distribution................... 0.1
Golf.................................. 0.1
Home Furnishings...................... 0.1
Hotels/Motels......................... 0.1
Insurance Brokers..................... 0.1
Insurance -- Life/Health.............. 0.1
Machinery -- Farming.................. 0.1
Medical -- Biomedical/Gene............ 0.1
Medical -- Generic Drugs.............. 0.1
Medical -- Nursing Homes.............. 0.1
Medical -- Wholesale Drug Distribution 0.1
Metal Processors & Fabrication........ 0.1
Metal -- Aluminum..................... 0.1
Non-Hazardous Waste Disposal.......... 0.1
Oil Refining & Marketing.............. 0.1
Publishing -- Newspapers.............. 0.1
Publishing -- Periodicals............. 0.1
Research & Development................ 0.1
Retail -- Building Products........... 0.1
Retail -- Discount.................... 0.1
Retail -- Major Department Stores..... 0.1
Retail -- Petroleum Products.......... 0.1
Retail -- Regional Department Stores.. 0.1
Retail -- Restaurants................. 0.1
Storage/Warehousing................... 0.1
Transactional Software................ 0.1
Transport -- Marine................... 0.1
Travel Services....................... 0.1
Wire & Cable Products................. 0.1
----
97.0%
====
- --------
* Calculated as a percentage of net assets.
22
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited) (continued)
Country Allocation*
United States... 56.1%
Brazil.......... 5.7
United Kingdom.. 3.4
Switzerland..... 2.7
Canada.......... 2.4
Russia.......... 2.4
Sweden.......... 2.3
Mexico.......... 2.2
Norway.......... 2.0
Turkey.......... 1.9
Australia....... 1.6
Philippines..... 1.6
Germany......... 1.5
New Zealand..... 1.5
Venezuela....... 1.1
Argentina....... 1.0
Colombia........ 0.8
Bermuda......... 0.7
Denmark......... 0.7
Japan........... 0.6
Uruguay......... 0.6
Luxembourg...... 0.5
Peru............ 0.5
Netherlands..... 0.4
Belgium......... 0.3
Cayman Islands.. 0.3
France.......... 0.3
Ireland......... 0.3
Spain........... 0.3
Ukraine......... 0.3
Indonesia....... 0.2
Panama.......... 0.2
El Salvador..... 0.1
Greece.......... 0.1
Liberia......... 0.1
Marshall Islands 0.1
Singapore....... 0.1
South Africa.... 0.1
----
97.0%
====
Credit Quality+#
Government -- Treasury 7.1%
Government -- Agency.. 10.6
AAA................... 17.4
AA.................... 1.9
A..................... 4.6
BBB................... 11.6
BB.................... 21.3
B..................... 15.2
CCC................... 6.9
BELOW C............... 0.9
Not Rated@............ 2.5
-----
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.
23
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
ASSET BACKED SECURITIES -- 2.4%
Diversified Financial Services -- 2.4%
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2007-PW15, Class A2
5.21% due 02/11/44(1)......................... $ 825,000 $ 824,673
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class F
5.75% due 09/11/38*(1)(2)..................... 345,000 341,553
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class G
5.75% due 09/11/38(1)......................... 59,000 57,528
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2007-PW15, Class H
5.93% due 02/11/44*(1)........................ 1,250,000 1,223,986
Commercial Mtg. Pass Through Certs.,
Series 2004-LB4A, Class A3,
4.41% due 10/15/37(1)......................... 1,500,000 1,462,575
Commercial Mtg. Pass Through Certs.
Series 2004-LB2A, Class A3
4.22% due 03/10/39(1)......................... 1,086,000 1,056,526
Countrywide Asset-Backed Certs.
Series 2006-S6, Class A3
5.66% due 03/25/34............................ 1,596,000 1,597,755
Countrywide Asset-Backed Certs.
Series 2006-S4, Class A3
5.80% due 10/25/36............................ 2,800,000 2,825,377
Deutsche ALT-A Securities, Inc.
Alternate Loan Trust,
Series 2006-AB2, Class A5A,
6.09% due 06/25/36(1)......................... 600,000 609,299
J.P. Morgan Chase Commercial Mtg. Securities
Corp.,
Series 2006-CB16, Class E
5.84% due 05/12/45*(1)........................ 445,000 452,160
Merrill Lynch Mtg. Investors, Inc.
Series 2004-A1, Class 3A
4.83% due 02/25/34(1)(2)...................... 1,137,979 1,126,955
Merrill Lynch/Countrywide Commercial Mtg.
Trust,
Series 2007-5, Class H
6.12% due 08/25/48(1)(4)...................... 595,000 554,140
Morgan Stanley Capital I,
Series 2006-IQ12, Class AJ
5.40% due 12/15/43(1)......................... 1,350,000 1,342,094
Morgan Stanley Capital I,
Series 2006-IQ12, Class D
5.53% due 12/15/43(1)......................... 715,000 712,725
Ocwen Advance Receivables Backed Notes
Series 2006-1A
5.34% due 11/24/15*(4)........................ 830,000 827,925
Wachovia Bank Commercial Mtg. Trust,
Series 2006-C27, Class A3
5.77% due 07/15/45(1)......................... 445,000 456,923
Wachovia Bank Commercial Mtg. Trust,
Series 2006-WL7A, Class F
5.87% due 09/15/21*(1)(2)..................... 1,525,000 1,525,298
Washington Mutual, Inc.,
Series 2005-AR1, Class A2A2,
5.57% due 01/25/45(1)(2)...................... 86,724 86,743
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Diversified Financial Services (continued)
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR12, Class 2A1
6.11% due 09/25/36(1)(2)................ $ 784,200 $ 793,858
-----------
17,878,093
-----------
Total Asset Backed Securities
(cost $17,953,760)...................... 17,878,093
-----------
CONVERTIBLE BONDS & NOTES -- 0.1%
Medical Instruments -- 0.0%
Kyphon, Inc.
Senior Notes
1.25% due 02/01/14*..................... 75,000 73,969
-----------
Medical-Biomedical/Gene -- 0.0%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12...................... 125,000 120,781
-----------
Medical-Nursing Homes -- 0.0%
Genesis HealthCare Corp.
Senior Sub. Debentures
2.50% due 03/15/25*..................... 75,000 97,312
-----------
Telecom Services -- 0.1%
ICO North America, Inc.
Notes
7.50% due 08/15/09(3)(4)(5)............. 265,000 270,300
-----------
Total Convertible Bonds & Notes
(cost $555,037)......................... 562,362
-----------
CORPORATE BONDS & NOTES -- 33.3%
Aerospace/Defense -- 0.1%
Raytheon Co.
Debentures
6.00% due 12/15/10...................... 135,000 139,775
Raytheon Co.
Senior Notes
6.75% due 08/15/07...................... 335,000 336,433
Raytheon Co.
Senior Notes
6.75% due 03/15/18...................... 474,000 522,704
-----------
998,912
-----------
Agricultural Chemicals -- 0.4%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18...................... 320,000 318,400
Terra Capital, Inc.
Senior Notes
7.00% due 02/01/17*..................... 745,000 741,275
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*..................... 1,695,000 1,767,037
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*..................... 405,000 427,275
-----------
3,253,987
-----------
24
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Airlines -- 0.5%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11.............. $1,800,000 $1,840,500
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A
6.55% due 02/02/19.............. 662,408 688,905
Continental Airlines, Inc.
Pass Through Certs.
Series 1991-1, Class C
6.95% due 08/02/09.............. 89,125 88,679
Continental Airlines, Inc.
Pass Through Certs.
Series 1999, Class 2
7.73% due 03/15/11.............. 177,817 180,484
Continental Airlines, Inc.
Pass Through Certs.
Series 2000-2, Class B
8.31% due 04/02/18.............. 63,898 66,614
Delta Air Lines, Inc.
Pass Through Certs.
Class A-2
7.57% due 11/18/10(17).......... 250,000 260,079
Northwest Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-1
7.04% due 04/01/22+(17)......... 425,247 425,778
United AirLines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08.............. 114,353 115,211
----------
3,666,250
----------
Applications Software -- 0.1%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13............. 875,000 977,812
----------
Auto-Cars/Light Trucks -- 0.6%
DaimlerChrysler NA Holding Corp.
Company Guar. Notes
5.69% due 03/13/09(7)........... 240,000 240,418
DaimlerChrysler NA Holding Corp.
Company Guar. Bonds
5.75% due 09/08/11.............. 145,000 147,310
Ford Motor Co.
Debentures
6.38% due 02/01/29.............. 2,340,000 1,667,250
Ford Motor Co.
Notes
7.45% due 07/16/31.............. 425,000 328,844
General Motors Corp.
Debentures
8.25% due 07/15/23.............. 1,730,000 1,557,000
General Motors Corp.
Senior Bonds
8.38% due 07/15/33.............. 106,000 95,135
----------
4,035,957
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Auto/Truck Parts & Equipment-Original -- 0.2%
ArvinMeritor, Inc.
Senior Notes
8.13% due 09/15/15........................ $125,000 $ 124,062
TRW Automotive, Inc.
Company Guar. Notes
7.00% due 03/15/14*....................... 75,000 73,500
TRW Automotive, Inc.
Company Guar. Notes
7.25% due 03/15/17*....................... 500,000 490,000
Visteon Corp.
Senior Notes
8.25% due 08/01/10........................ 410,000 418,200
----------
1,105,762
----------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(3)(4)................ 225,000 0
----------
Banks-Commercial -- 0.4%
Colonial Bank NA
Sub. Notes
6.38% due 12/01/15........................ 451,000 468,184
Compass Bank
Notes
5.50% due 04/01/20........................ 430,000 422,936
Popular North America, Inc.
Company Guar. Notes
5.65% due 04/15/09........................ 135,000 135,818
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13........................ 340,000 333,462
SouthTrust Corp.
Sub. Notes
5.80% due 06/15/14........................ 470,000 480,641
UBS AG
Sub. Notes
5.88% due 07/15/16........................ 470,000 489,423
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16........................ 330,000 339,522
----------
2,669,986
----------
Banks-Money Center -- 0.1%
Comerica Bank
Senior Sub. Notes
5.75% due 11/21/16........................ 550,000 551,419
RBS Capital Trust I Bank
4.71% due 07/01/13(7)(8).................. 239,000 228,378
----------
779,797
----------
Banks-Special Purpose -- 0.0%
Rabobank Capital Funding II
Bonds
5.26% due 12/31/13*(7)(8)................. 270,000 262,697
25
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Banks-Super Regional -- 0.3%
Banc One Corp.
Sub. Debentures
8.00% due 04/29/27......................... $ 135,000 $ 164,449
Bank of America Corp.
Sub. Notes
5.42% due 03/15/17*........................ 440,000 435,431
Capital One Financial Corp.
Senior Notes
5.70% due 09/15/11......................... 813,000 821,241
Huntington National Bank
Sub. Notes
6.60% due 06/15/18......................... 470,000 499,358
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08......................... 198,000 200,305
Wachovia Capital Trust III
5.80% due 03/15/11(7)(8)................... 340,000 344,055
----------
2,464,839
----------
Beverages-Non-alcoholic -- 0.1%
Cott Beverages, Inc.
Company Guar. Notes
8.00% due 12/15/11......................... 350,000 357,000
----------
Brewery -- 0.1%
Anheuser-Busch Cos., Inc.
Bonds
6.00% due 11/01/41......................... 871,000 849,887
----------
Broadcast Services/Program -- 0.2%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14......................... 1,040,000 1,114,100
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14......................... 450,000 432,000
Nexstar Finance, Inc.
Senior Disc. Notes
11.38% due 04/01/13(9)..................... 165,000 159,637
----------
1,705,737
----------
Building & Construction Products-Misc. -- 0.3%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12......................... 765,000 795,600
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08........................ 1,040,000 1,066,000
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14......................... 645,000 665,962
----------
2,527,562
----------
Building Products-Air & Heating -- 0.1%
American Standard, Inc.
Company Guar. Notes
7.38% due 02/01/08......................... 347,000 351,418
----------
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Building Products-Wood -- 0.1%
Masonite Corp.
Senior Sub. Notes
11.00% due 04/06/15*................ $ 488,000 $ 453,840
-----------
Building-Residential/Commercial -- 0.0%
Lennar Corp.
Company Guar. Notes
5.95% due 10/17/11.................. 265,000 264,587
-----------
Cable TV -- 1.7%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12.................. 380,000 385,700
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15................. 2,202,000 2,273,565
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10................. 115,000 121,181
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10................. 445,000 469,475
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13................. 4,117,000 4,497,822
Comcast Corp.
Company Guar. Notes
5.88% due 02/15/18.................. 1,074,000 1,076,903
Comcast Corp.
Company Guar. Notes
6.50% due 01/15/15.................. 1,074,000 1,132,791
Cox Communications, Inc.
Bonds
5.50% due 10/01/15.................. 1,070,000 1,052,219
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11.................. 350,000 358,750
Insight Communications Co., Inc.
Senior Disc. Notes
12.25% due 02/15/11(9).............. 900,000 940,500
-----------
12,308,906
-----------
Casino Hotels -- 0.8%
Circus & Eldorado Joint Venture
Mtg. Notes
10.13% due 03/01/12................. 575,000 602,312
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(3)(10).......... 946,489 908,629
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(3)(4)............ 425,000 425,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14.................. 2,900,000 2,697,000
Riviera Holdings Corp.
Company Guar. Notes
11.00% due 06/15/10................. 135,000 140,738
26
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Casino Hotels (continued)
Seminole Hard Rock Entertainment, Inc.
Sec. Notes
7.85% due 03/15/14*(7)................ $ 225,000 $ 229,500
Station Casinos, Inc.
Senior Sub. Notes
6.63% due 03/15/18.................... 600,000 534,000
Station Casinos, Inc.
Senior Sub. Notes
6.88% due 03/01/16.................... 155,000 142,019
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 12/15/10*................... 225,000 228,375
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*................... 200,000 205,500
----------
6,113,073
----------
Cellular Telecom -- 0.6%
American Cellular Corp.
Senior Notes
10.00% due 08/01/11................... 296,000 313,390
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13................... 536,000 578,210
Centennial Communications Corp.
Senior Notes
11.11% due 01/01/13(7)................ 620,000 652,550
Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11.................... 1,406,000 1,538,469
Rural Cellular Corp.
Senior Sub. Notes
9.75% due 01/15/10.................... 1,210,000 1,246,300
Rural Cellular Corp.
Senior Sub. Notes
11.11% due 11/01/12(7)................ 200,000 208,000
----------
4,536,919
----------
Chemicals-Diversified -- 0.1%
Equistar Chemicals LP
Senior Notes
10.63% due 05/01/11................... 275,000 290,125
ICI Wilmington, Inc.
Company Guar. Notes
7.05% due 09/15/07.................... 268,000 269,630
----------
559,755
----------
Chemicals-Specialty -- 0.8%
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14*................... 1,055,000 1,090,606
JohnsonDiversey, Inc.
Senior Sub. Guar. Notes
9.63% due 05/15/12.................... 100,000 104,500
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Chemicals-Specialty (continued)
MacDermid, Inc.
Senior Notes
9.50% due 04/15/17*.................. $ 175,000 $ 179,375
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*................. 1,870,000 1,916,750
Nalco Co.
Senior Notes
7.75% due 11/15/11................... 280,000 287,000
Nalco Co.
Senior Sub. Notes
8.88% due 11/15/13................... 400,000 425,000
Rockwood Specialties Group, Inc.
Sub. Notes
7.50% due 11/15/14................... 625,000 634,375
Rockwood Specialties Group, Inc.
Senior Sub. Notes
10.63% due 05/15/11.................. 55,000 58,025
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12................... 1,210,000 1,282,600
----------
5,978,231
----------
Coal -- 0.1%
Massey Energy Co.
Senior Notes
6.63% due 11/15/10................... 870,000 878,700
----------
Commercial Services -- 0.1%
DI Finance/DynCorp International
Senior Sub. Notes
9.50% due 02/15/13................... 472,000 502,680
The ServiceMaster Co.
Notes
7.88% due 08/15/09................... 108,000 113,603
----------
616,283
----------
Computer Services -- 0.3%
Compucom Systems, Inc.
Senior Notes
12.00% due 11/01/14*................. 375,000 400,313
Computer Sciences Corp.
Notes
3.50% due 04/15/08................... 150,000 146,449
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13................... 1,210,000 1,297,725
----------
1,844,487
----------
Computers-Integrated Systems -- 0.0%
Activant Solutions, Inc.
Company Guar. Notes
9.50% due 05/01/16................... 225,000 221,625
----------
Consulting Services -- 0.0%
FTI Consulting, Inc.
Company Guar. Notes
7.63% due 06/15/13................... 225,000 233,438
----------
27
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Consumer Products-Misc. -- 0.1%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12....................... $ 286,000 $ 291,720
Jostens Holding Corp.
Senior Disc. Notes
10.25% due 12/01/13(9)................... 458,000 423,650
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12....................... 225,000 232,875
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13....................... 75,000 78,187
----------
1,026,432
----------
Containers-Metal/Glass -- 0.4%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23....................... 1,310,000 1,283,800
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13....................... 1,079,000 1,124,857
Owens Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09....................... 312,000 318,240
----------
2,726,897
----------
Containers-Paper/Plastic -- 0.4%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12....................... 695,000 695,000
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09...................... 1,080,000 1,080,000
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17*...................... 780,000 762,450
----------
2,537,450
----------
Cosmetics & Toiletries -- 0.2%
Procter & Gamble Co.
Senior Notes
2.00% due 06/21/10....................... JPY 79,000,000 688,492
Procter & Gamble Co.
Senior Notes
5.55% due 03/05/37....................... 1,142,000 1,111,091
----------
1,799,583
----------
Diagnostic Kits -- 0.1%
Inverness Medical Innovations, Inc.
Senior Sub. Notes
8.75% due 02/15/12....................... 425,000 443,063
----------
Direct Marketing -- 0.2%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12....................... 1,114,000 1,144,635
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Diversified Financial Services -- 0.3%
AXA Financial, Inc.
Senior Notes
6.50% due 04/01/08................. $ 210,000 $ 212,272
General Electric Capital Corp.
Senior Notes
1.00% due 03/21/12................. JPY 105,000,000 869,041
General Electric Capital Corp.
Senior Notes
5.65% due 06/09/14................. 470,000 478,767
General Electric Capital Corp.
Notes
6.75% due 03/15/32................. 279,000 316,116
----------
1,876,196
----------
Diversified Manufactured Operations -- 0.2%
3M Co.
Notes
6.38% due 02/15/28.................. 308,000 332,068
Crane Co.
Senior Notes
6.55% due 11/15/36.................. 518,000 516,611
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14................. 500,000 517,500
----------
1,366,179
----------
Electric-Generation -- 0.3%
Edison Mission Energy
Senior Notes
7.50% due 06/15/13.................. 425,000 438,812
Edison Mission Energy
Senior Notes
7.75% due 06/15/16.................. 225,000 234,563
Reliant Energy Mid-Atlantic Power
Holdings, LLC
Pass Through Certs. Series B
9.24% due 07/02/17.................. 200,890 222,988
The AES Corp.
Sec. Notes
8.75% due 05/15/13*................. 1,310,000 1,395,150
----------
2,291,513
----------
Electric-Integrated -- 1.1%
American Electric Power Co., Inc.
Senior Notes
4.71% due 08/16/07(9)............... 845,000 842,518
Appalachian Power Co.
Senior Notes
5.00% due 06/01/17.................. 1,074,000 1,016,544
Centerpoint Energy, Inc.
Senior Notes
5.88% due 06/01/08.................. 150,000 150,580
Commonwealth Edison Co.
1st Mtg. Bonds
5.90% due 03/15/36.................. 371,000 344,339
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric-Integrated (continued)
Commonwealth Edison Co.
1st Mtg. Bonds
5.95% due 08/15/16....................... $ 280,000 $ 274,088
Consumers Energy Co.
1st Mtg. Bonds
4.25% due 04/15/08....................... 180,000 178,111
Dominion Resources, Inc.
Senior Notes
5.69% due 05/15/08(9).................... 176,000 176,410
Dominion Resources, Inc.
Junior Sub. Notes
6.30% due 09/30/11(11)................... 374,000 381,014
Duke Energy Corp.
Senior Notes
4.20% due 10/01/08....................... 305,000 300,384
Duke Energy Indiana, Inc.
Debentures
5.00% due 09/15/13....................... 200,000 194,627
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10....................... 195,000 196,820
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11....................... 1,050,000 1,076,250
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21....................... 505,000 512,575
Pepco Holdings, Inc.
Notes
5.50% due 08/15/07....................... 278,000 277,891
Pepco Holdings, Inc.
Notes
6.45% due 08/15/12....................... 140,000 146,497
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11....................... 50,000 54,225
Public Service Electric & Gas Co.
Sec. Notes
5.00% due 08/15/14....................... 1,073,000 1,047,133
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15....................... 433,000 421,332
Southern California Edison Co.
1st Mtg. Bonds
5.75% due 04/01/35....................... 80,000 78,893
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(3)(4)(5)............. 1,550,000 0
----------
7,670,231
----------
Electronic Components-Semiconductors -- 0.5%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12....................... 344,000 347,870
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16....................... 1,190,000 1,240,575
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Electronic Components-Semiconductors (continued)
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14*..................... $ 500,000 $ 496,250
Freescale Semiconductor, Inc.
Senior Notes
9.23% due 12/15/14*(7).................. 100,000 99,750
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16*.................... 910,000 912,275
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*.................... 175,000 180,687
-----------
3,277,407
-----------
Electronics-Military -- 0.2%
L-3 Communications Corp.
Company Guar. Senior Sec. Notes
6.13% due 07/15/13...................... 995,000 980,075
L-3 Communications Corp.
Company Guar. Notes
6.38% due 10/15/15...................... 550,000 545,187
-----------
1,525,262
-----------
Energy-Alternate Sources -- 0.1%
Aventine Renewable Energy Holdings, Inc.
Senior Notes
10.00% due 04/01/17*.................... 590,000 609,912
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12...................... 375,000 390,938
-----------
1,000,850
-----------
Enterprise Software/Service -- 0.0%
Oracle Corp.
Notes
5.00% due 01/15/11...................... 270,000 269,007
-----------
Finance-Auto Loans -- 2.0%
Ford Motor Credit Co.
Senior Notes
5.80% due 01/12/09...................... 2,058,000 2,018,789
Ford Motor Credit Co.
Notes
7.38% due 10/28/09...................... 6,400,000 6,388,237
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14...................... 2,340,000 2,300,435
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11...................... 2,580,000 2,582,500
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12...................... 60,000 59,758
General Motors Acceptance Corp.
Notes
7.56% due 12/01/14(7)................... 1,215,000 1,228,821
-----------
14,578,540
-----------
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Finance-Commercial -- 0.0%
Transamerica Finance Corp.
Senior Notes
6.40% due 09/15/08............... $ 36,000 $ 36,585
----------
Finance-Consumer Loans -- 0.2%
HSBC Finance Corp.
Notes
4.75% due 07/15/13............... 320,000 309,107
John Deere Capital Corp.
Debentures
5.10% due 01/15/13............... 330,000 328,410
SLM Corp.
Notes
1.53% due 09/15/11............... JPY 100,000,000 848,688
----------
1,486,205
----------
Finance-Credit Card -- 0.1%
Capital One Bank
Senior Notes
6.50% due 06/13/13............... 341,000 356,818
----------
Finance-Investment Banker/Broker -- 0.3%
Lehman Brothers Holdings, Inc.
Senior Notes
5.25% due 02/06/12............... 250,000 249,771
Lehman Brothers Holdings, Inc.
Notes
5.50% due 04/04/16............... 240,000 238,645
Merrill Lynch & Co., Inc.
Sub. Notes
6.11% due 01/29/37............... 670,000 649,542
Morgan Stanley
Notes
5.45% due 01/09/17............... 470,000 462,269
Morgan Stanley
Senior Notes
5.63% due 01/09/12............... 250,000 253,285
The Bear Stearns Cos., Inc.
Sub. Notes
5.55% due 01/22/17............... 250,000 245,204
----------
2,098,716
----------
Finance-Mortgage Loan/Banker -- 0.3%
Countrywide Financial Corp.
Sub. Notes
6.25% due 05/15/16............... 470,000 473,771
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09............... 90,000 87,529
Residential Capital LLC
Company Guar. Notes
6.13% due 11/21/08............... 235,000 234,880
Residential Capital LLC
Company Guar. Notes
6.38% due 06/30/10............... 156,000 155,958
Residential Capital LLC
Company Guar. Notes
6.50% due 04/17/13............... 532,000 526,949
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Finance-Mortgage Loan/Banker (continued)
Residential Capital LLC
Company Guar. Notes
6.88% due 06/30/15................... $ 364,000 $ 367,245
----------
1,846,332
----------
Food-Misc. -- 0.1%
Kraft Foods, Inc.
Senior Bonds
5.63% due 11/01/11................... 480,000 485,853
Wornick Co.
Sec. Notes
10.88% due 07/15/11.................. 425,000 377,719
----------
863,572
----------
Funeral Services & Related Items -- 0.3%
Service Corp. International
Senior Notes
6.75% due 04/01/16................... 1,225,000 1,218,875
Service Corp. International
Senior Notes
7.00% due 06/15/17................... 185,000 186,387
Service Corp. International
Senior Notes
7.38% due 10/01/14................... 25,000 26,000
Service Corp. International
Senior Notes
7.63% due 10/01/18................... 25,000 26,438
Stewart Enterprises, Inc.
Senior Notes
6.25% due 02/15/13................... 725,000 703,250
----------
2,160,950
----------
Gambling (Non-Hotel) -- 0.2%
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*................. 860,000 920,200
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/12*.................. 160,000 169,600
----------
1,089,800
----------
Gas-Distribution -- 0.1%
Colorado Interstate Gas Co.
Senior Debentures
6.85% due 06/15/37................... 150,000 157,482
Sempra Energy
Senior Notes
4.62% due 05/17/07................... 432,000 431,523
----------
589,005
----------
Golf -- 0.1%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11................... 695,000 618,550
----------
Home Furnishings -- 0.1%
Simmons Co.
Senior Disc. Notes
10.00% due 12/15/14(9)............... 1,185,000 974,663
----------
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Hotels/Motels -- 0.1%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14................ $ 595,000 $ 579,381
Hilton Hotels Corp.
Senior Notes
7.20% due 12/15/09................ 68,000 70,720
----------
650,101
----------
Human Resources -- 0.0%
TeamHealth, Inc.
Company Guar. Notes
11.25% due 12/01/13............... 175,000 184,625
----------
Independent Power Producers -- 1.2%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(17)........... 5,378,000 5,727,570
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16................ 2,145,000 2,203,988
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10............... 100,000 115,500
Reliant Energy, Inc.
Sec. Notes
9.50% due 07/15/13................ 551,000 599,901
----------
8,646,959
----------
Insurance Brokers -- 0.1%
Marsh & McLennan Cos., Inc.
Senior Notes
5.15% due 09/15/10................ 200,000 198,255
Marsh & McLennan Cos., Inc.
Senior Notes
7.13% due 06/15/09................ 170,000 176,326
----------
374,581
----------
Insurance-Life/Health -- 0.1%
Americo Life, Inc.
Notes
7.88% due 05/01/13*............... 38,000 39,059
Monumental Global Funding II
Notes
5.65% due 07/14/11*............... 174,000 177,496
Presidential Life Corp.
Senior Notes
7.88% due 02/15/09................ 150,000 151,500
----------
368,055
----------
Insurance-Multi-line -- 0.0%
Metropolitan Life Global Funding I
Sec. Notes
5.75% due 07/25/11*............... 140,000 143,492
----------
Insurance-Property/Casualty -- 0.2%
Crum & Forster Holdings Corp.
Senior Notes
10.38% due 06/15/13............... 215,000 232,200
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Insurance-Property/Casualty (continued)
Fidelity National Title Group, Inc.
Notes
7.30% due 08/15/11.................. $ 447,000 $ 463,921
WR Berkley Corp.
Senior Sub. Notes
6.25% due 02/15/37.................. 480,000 468,834
----------
1,164,955
----------
Investment Management/Advisor Services -- 0.0%
Ameriprise Financial, Inc.
Senior Notes
5.35% due 11/15/10.................. 81,000 81,706
----------
Leisure Products -- 0.0%
Brunswick Corp.
Notes
5.00% due 06/01/11.................. 103,000 100,653
K2, Inc.
Company Guar. Senior Notes
7.38% due 07/01/14.................. 125,000 124,063
----------
224,716
----------
Machinery-Farming -- 0.1%
Case Corp.
Notes
7.25% due 01/15/16.................. 480,000 501,600
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09.................. 325,000 325,000
----------
826,600
----------
Machinery-General Industrial -- 0.0%
Stewart & Stevenson LLC
Senior Notes
10.00% due 07/15/14*................ 175,000 183,313
----------
Medical Information Systems -- 0.0%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12................. 150,000 149,625
----------
Medical Products -- 0.4%
Baxter International, Inc.
Senior Notes
5.90% due 09/01/16.................. 1,072,000 1,106,283
CDRV Investors, Inc.
Senior Disc. Notes
9.63% due 01/01/15(9)............... 325,000 279,500
Encore Medical Finance LLC
Senior Sub. Notes
11.75% due 11/15/14*................ 690,000 707,250
Universal Hospital Services, Inc.
Senior Notes
10.13% due 11/01/11................. 975,000 1,035,937
----------
3,128,970
----------
Medical-Biomedical/Gene -- 0.0%
Bio-Rad Laboratories, Inc.
Senior Sub. Notes
6.13% due 12/15/14.................. 349,000 338,530
----------
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Medical-Drugs -- 0.3%
Abbott Laboratories
Notes
5.88% due 05/15/16.............. $ 275,000 $ 284,487
American Home Products Corp.
Notes
6.95% due 03/15/11.............. 361,000 383,808
Eli Lilly & Co.
Notes
5.50% due 03/15/27.............. 500,000 481,742
Wyeth
Bonds
5.50% due 02/01/14.............. 1,074,000 1,080,542
Wyeth
Notes
5.95% due 04/01/37.............. 260,000 256,061
----------
2,486,640
----------
Medical-Generic Drugs -- 0.1%
Mylan Labs, Inc.
Company Guar. Notes
6.38% due 08/15/15.............. 375,000 370,313
----------
Medical-HMO -- 0.2%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*............ 1,055,000 1,081,375
WellPoint, Inc.
Notes
3.75% due 12/14/07.............. 633,184 626,119
----------
1,707,494
----------
Medical-Hospitals -- 1.0%
Community Health Systems, Inc.
Senior Sec. Notes
6.50% due 12/15/12.............. 616,000 634,480
HCA, Inc.
Senior Notes
6.25% due 02/15/13.............. 520,000 472,550
HCA, Inc.
Senior Notes
6.95% due 05/01/12.............. 600,000 579,000
HCA, Inc.
Sec Notes.
9.13% due 11/15/14*............. 965,000 1,031,344
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*............. 3,865,000 4,169,368
HCA, Inc.
Sec Notes.
9.63% due 11/15/16*............. 255,000 275,400
----------
7,162,142
----------
Medical-Nursing Homes -- 0.1%
Genesis HealthCare Corp.
Senior Notes
8.00% due 10/15/13.............. 75,000 79,688
Sun Healthcare Group, Inc.
Senior Sub. Notes
9.13% due 04/15/15*............. 675,000 691,875
----------
771,563
----------
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Medical-Wholesale Drug Distribution -- 0.1%
Cardinal Health, Inc.
Senior Notes
5.80% due 10/15/16*..................... $1,073,000 $1,069,093
----------
Metal Processors & Fabrication -- 0.1%
Metals USA, Inc.
Secured Notes
11.13% due 12/01/15..................... 510,000 566,100
Timken Co.
Notes
5.75% due 02/15/10...................... 162,000 161,846
----------
727,946
----------
Metal-Aluminum -- 0.1%
Alcoa, Inc.
Bonds
5.90% due 02/01/27...................... 371,000 362,071
Alcoa, Inc.
Bonds
6.50% due 06/15/18...................... 192,000 202,611
----------
564,682
----------
Metal-Diversified -- 0.4%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15...................... 730,000 785,662
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17...................... 2,175,000 2,351,719
----------
3,137,381
----------
Miscellaneous Manufacturing -- 0.0%
American Railcar Industries, Inc.
Senior Notes
7.50% due 03/01/14*..................... 175,000 180,250
----------
Multimedia -- 0.9%
Belo Corp.
Senior Notes
6.75% due 05/30/13...................... 145,000 152,489
Cox Enterprises, Inc.
Notes
7.88% due 09/15/10*..................... 578,000 620,991
Haights Cross Operating Co.
Company Guar. Senior Notes
11.75% due 08/15/11..................... 150,000 157,875
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28...................... 1,074,000 1,162,581
Time Warner Entertainment Co. LP
Debentures
8.38% due 03/15/23...................... 2,168,000 2,562,724
Time Warner, Inc.
Company Guar. Notes
6.75% due 04/15/11...................... 433,000 456,326
Viacom, Inc.
Senior Notes
6.88% due 04/30/36...................... 1,074,000 1,082,575
----------
6,195,561
----------
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Networking Products -- 0.0%
Cisco Systems, Inc.
Senior Notes
5.50% due 02/22/16......................... $ 347,000 $ 349,401
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(3)(4)(12)(13)......... 500,000 0
----------
Non-Hazardous Waste Disposal -- 0.1%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17......................... 915,000 917,288
----------
Office Automation & Equipment -- 0.0%
Pitney Bowes, Inc.
Notes
5.25% due 01/15/37......................... 330,000 322,178
----------
Oil & Gas Drilling -- 0.0%
Pride International, Inc.
Senior Notes
7.38% due 07/15/14......................... 50,000 51,250
----------
Oil Companies-Exploration & Production -- 1.5%
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... 200,000 204,500
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14......................... 550,000 555,500
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14*........................ 150,000 149,250
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15......................... 1,670,000 1,649,125
Chesapeake Energy Corp.
Senior Notes
6.25% due 01/15/18......................... 875,000 864,062
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16......................... 1,150,000 1,158,625
Costilla Energy, Inc.
Senior Notes
10.25% due 10/01/06+(3)(4)................. 500,000 0
Devon Energy Corp.
Company Guar. Debentures
7.95% due 04/15/32......................... 1,005,000 1,205,231
El Paso Production Holding Co.
Company Guar. Notes
7.75% due 06/01/13......................... 2,700,000 2,821,500
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15......................... 175,000 155,750
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14......................... 50,000 46,000
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Oil Companies-Exploration & Production (continued)
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11................ $ 125,000 $ 125,313
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*............... 790,000 776,175
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16................ 100,000 98,500
Sabine Pass LNG LP
Sec. Notes.
7.25% due 11/30/13*............... 200,000 201,500
Sabine Pass LNG LP
Sec. Notes.
7.50% due 11/30/16*............... 930,000 936,975
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10............... 325,000 307,938
-----------
11,255,944
-----------
Oil Companies-Integrated -- 0.3%
Hess Corp.
Notes
7.13% due 03/15/33................ 1,073,000 1,160,753
Hess Corp.
Bonds
7.88% due 10/01/29................ 461,000 531,768
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29................ 286,000 319,544
-----------
2,012,065
-----------
Oil Refining & Marketing -- 0.1%
The Premcor Refining Group, Inc.
Company Guar. Notes
6.75% due 05/01/14................ 666,000 693,825
-----------
Oil-Field Services -- 0.1%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14................ 190,000 191,425
Hanover Compressor Co.
Company Guar. Senior Sec. Notes
8.63% due 12/15/10................ 175,000 183,750
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11................ 160,552 164,422
-----------
539,597
-----------
Paper & Related Products -- 0.3%
Bowater, Inc.
Notes
6.50% due 06/15/13................ 750,000 676,875
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09................ 525,000 511,875
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Paper & Related Products (continued)
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*............... $ 200,000 $ 201,000
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*............... 325,000 325,813
Plum Creek Timberlands LP
Company Guar. Notes
5.88% due 11/15/15................ 294,000 292,118
Temple-Inland, Inc.
Bonds
6.63% due 01/15/18................ 235,000 247,045
----------
2,254,726
----------
Pipelines -- 1.3%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15................ 400,000 412,000
Centerpoint Energy Resources Corp.
Notes
7.75% due 02/15/11................ 290,000 313,568
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16................ 390,000 403,650
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11................ 178,000 187,329
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12................ 890,000 945,625
Dynegy-Roseton Danskammer
Pass Through Certs.
Series B
7.67% due 11/08/16................ 520,000 551,200
El Paso Natural Gas Co.
Senior Notes
5.95% due 04/15/17*............... 375,000 376,395
El Paso Natural Gas Co.
Senior Notes
7.63% due 08/01/10................ 100,000 104,358
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22................ 1,035,000 1,256,089
Enbridge Energy Partners LP
Senior Notes
5.88% due 12/15/16................ 118,000 118,551
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14................ 280,000 271,600
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16................ 350,000 364,875
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27................ 1,720,000 1,651,200
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Pipelines (continued)
ONEOK Partners LP
Company Guar. Notes
6.15% due 10/01/16................... $ 155,000 $ 158,462
Southern Natural Gas Co.
Notes
5.90% due 04/01/17*.................. 162,000 161,999
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28................... 905,000 968,953
Transcontinental Gas Pipe Line Corp.
Notes
7.00% due 08/15/11................... 150,000 157,125
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21................... 1,205,000 1,325,500
----------
9,728,479
----------
Precious Metals -- 0.0%
Barrick Gold Finance, Inc.
Company Guar. Debentures
7.50% due 05/01/07................... 233,000 233,350
----------
Printing-Commercial -- 0.1%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15*.................. 705,000 692,663
----------
Private Corrections -- 0.0%
Corrections Corp. of America
Company Guar. Notes
6.25% due 03/15/13................... 200,000 200,000
----------
Publishing-Newspapers -- 0.1%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29................... 205,000 190,470
Knight Ridder, Inc.
Debentures
7.15% due 11/01/27................... 205,000 195,665
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................... 220,000 200,200
----------
586,335
----------
Publishing-Periodicals -- 0.1%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 780,000 750,750
----------
Radio -- 0.0%
Chancellor Media Corp.
Company Guar. Notes
8.00% due 11/01/08................... 148,000 153,346
----------
Real Estate Investment Trusts -- 0.5%
AvalonBay Communities, Inc.
Senior Notes
5.75% due 09/15/16................... 310,000 314,093
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Real Estate Investment Trusts (continued)
Health Care Property Investors, Inc.
Senior Notes
5.65% due 12/15/13.................... $845,000 $ 839,274
Heritage Property Investment Trust
Notes
4.50% due 10/15/09.................... 152,000 149,134
Mack-Cali Realty LP
Bonds
5.80% due 01/15/16.................... 156,000 157,050
National Health Investors, Inc.
Notes
7.30% due 07/16/07.................... 100,000 100,115
New Plan Excel Realty Trust
Senior Notes
4.50% due 02/01/11.................... 484,000 467,746
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14.................... 400,000 404,000
Reckson Operating Partnership LP
Senior Notes
6.00% due 03/31/16.................... 86,000 84,534
Simon Property Group LP
Notes
5.00% due 03/01/12.................... 80,000 79,243
Simon Property Group LP
Notes
5.38% due 08/28/08.................... 124,000 123,995
Trustreet Properties, Inc.
Senior Notes
7.50% due 04/01/15.................... 500,000 544,635
Vornado Realty LP
Notes
4.50% due 08/15/09.................... 210,000 205,803
----------
3,469,622
----------
Recycling -- 0.3%
Aleris International, Inc.
Senior Notes
9.00% due 12/15/14*................... 840,000 886,200
Aleris International, Inc.
Senior Sub. Notes
10.00% due 12/15/16*.................. 890,000 934,500
----------
1,820,700
----------
Rental Auto/Equipment -- 0.2%
H&E Equipment Services, Inc.
Company Guar. Notes
8.38% due 07/15/16.................... 520,000 552,500
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13.................... 765,000 786,037
----------
1,338,537
----------
Research & Development -- 0.1%
Alion Science and Technology Corp.
Senior Notes
10.25% due 02/01/15*.................. 565,000 581,950
----------
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Retail-Building Products -- 0.1%
Home Depot, Inc.
Senior Notes
5.88% due 12/16/36.................... $1,074,000 $1,023,980
----------
Retail-Discount -- 0.1%
Wal-Mart Stores, Inc.
Senior Notes
5.88% due 04/05/27.................... 560,000 558,501
----------
Retail-Drug Store -- 0.1%
CVS Lease Pass Through Trust
Pass Through Certs.
6.04% due 12/10/28*................... 368,119 372,319
General Nutrition Centers, Inc.
Senior Notes
9.85% due 03/15/14*................... 250,000 245,000
Rite Aid Corp.
Sec. Notes
8.13% due 05/01/10.................... 425,000 436,687
----------
1,054,006
----------
Retail-Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11.................... 375,000 417,188
----------
Retail-Petroleum Products -- 0.1%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14.................... 940,000 921,200
----------
Retail-Regional Department Stores -- 0.1%
Neiman-Marcus Group, Inc.
Company Guar. Notes
9.00% due 10/15/15.................... 400,000 438,000
----------
Retail-Restaurants -- 0.1%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14................... 320,000 326,400
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14.................... 625,000 646,875
----------
973,275
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(3)(6)(14)........ 100,000 400
----------
Savings & Loans/Thrifts -- 0.2%
Independence Community Bank Corp.
Notes
3.50% due 06/20/08(11)................ 172,000 168,387
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10.................... 405,000 398,260
Washington Mutual Preferred Funding II
6.67% due 12/15/16*(7)(8)............. 607,000 595,711
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Savings & Loans/Thrifts (continued)
Western Financial Bank
Senior Debentures
9.63% due 05/15/12....................... $ 333,000 $ 362,216
----------
1,524,574
----------
Soap & Cleaning Preparation -- 0.0%
Johnsondiversey Holdings, Inc.
Senior Disc. Notes
10.67% due 05/15/13(9)................... 75,000 77,438
----------
Special Purpose Entities -- 1.2%
AAC Group Holding Corp.
Senior Disc. Notes
10.25% due 10/01/12(9)................... 565,000 507,088
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15...................... 125,000 137,500
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*...................... 1,065,000 1,043,036
Bluewater Finance, Ltd.
Company Guar. Notes
10.25% due 02/15/12...................... 650,000 677,625
Capital One Capital IV
Company Guar. Notes
6.75% due 02/17/37....................... 255,000 244,308
CCM Merger, Inc.
Notes
8.00% due 08/01/13*...................... 500,000 502,500
Chukchansi Economic Development Authority
Senior Notes
8.88% due 11/15/12*(7)................... 150,000 153,750
Consolidated Communications
Illinois/Texas Holdings, Inc.
Senior Notes
9.75% due 04/01/12....................... 632,000 669,130
Cyrus Reinsurance Holdings
Senior Notes
6.36% due 09/01/08*(4)(7)................ 239,000 238,403
Hawker Beechcraft Acquisition Co.
LLC / Hawker Beechcraft Notes Co.
Senior Notes
8.88% due 04/01/15*...................... 295,000 304,956
Hawker Beechcraft Acquisition Co.
LLC / Hawker Beechcraft Notes Co.
Senior Sub. Notes
9.75% due 04/01/17*...................... 410,000 428,450
ING USA Global Funding Trust
Notes
4.50% due 10/01/10....................... 268,000 263,246
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12....................... 129,000 139,643
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
Special Purpose Entities (continued)
MXEnergy Holdings, Inc.
Senior Notes
12.90% due 08/01/11*(7)............ $675,000 $ 621,000
Norbord Delaware GP I
Company Guar. Notes
6.45% due 02/15/17*................ 193,000 195,367
PCA LLC/PCA Finance Corp.
Senior Notes
11.88% due 08/01/09+(3)(6)......... 325,000 58,500
PNA Intermediate Holding Corp.
Senior Notes
12.36% due 02/15/13*(7)............ 150,000 153,750
Pricoa Global Funding I
Notes
5.30% due 09/27/13*................ 320,000 320,520
Principal Life Global Funding I
Sec. Notes
5.25% due 01/15/13*................ 296,000 295,421
Seitel Acquisition Corp.
Senior Notes
9.75% due 02/15/14*................ 510,000 516,375
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*................ 570,000 587,812
Snoqualmie Entertainment Authority
Senior Notes
9.15% due 02/01/14*(7)............. 75,000 76,313
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16................. 150,000 150,000
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12................. 475,000 483,312
----------
8,768,005
----------
Specified Purpose Acquisitions -- 0.0%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11................. 202,000 206,409
----------
Steel-Producers -- 0.3%
Chaparral Steel Co.
Company Guar. Notes
10.00% due 07/15/13................ 560,000 624,400
International Steel Group, Inc.
Senior Notes
6.50% due 04/15/14................. 540,000 562,275
Steel Dynamics, Inc.
Senior Notes
6.75% due 04/01/15*................ 700,000 700,875
----------
1,887,550
----------
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Steel-Specialty -- 0.0%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................ $ 75,000 $ 80,625
Tube City IMS Corp.
Senior Sub. Notes
9.75% due 02/01/15*............... 225,000 234,000
----------
314,625
----------
Storage/Warehousing -- 0.1%
Mobile Mini, Inc.
Senior Notes
9.50% due 07/01/13................ 178,000 190,460
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*............... 330,000 348,975
----------
539,435
----------
Telecom Services -- 0.6%
Bellsouth Telecommunications, Inc.
Debentures
7.00% due 12/01/95................ 932,000 956,276
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23................ 50,000 50,375
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23................ 225,000 218,250
Insight Midwest LP
Senior Notes
9.75% due 10/01/09................ 52,000 52,845
Mastec, Inc.
Senior Notes
7.63% due 02/01/17*............... 400,000 405,000
Qwest Corp.
Senior Notes
7.50% due 10/01/14................ 2,520,000 2,658,600
----------
4,341,346
----------
Telephone-Integrated -- 1.1%
AT&T Corp.
Senior Notes
7.30% due 11/15/11................ 463,000 502,612
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23................ 25,000 24,250
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14................ 1,140,000 1,165,650
Citizens Communications Co.
Bonds
7.13% due 03/15/19*............... 575,000 569,250
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31................ 1,677,000 1,836,315
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Telephone-Integrated (continued)
GTE Northwest, Inc.
Debentures
5.55% due 10/15/08................... $ 55,000 $ 55,160
LCI International, Inc.
Senior Notes
7.25% due 06/15/07................... 1,650,000 1,654,125
Level 3 Financing, Inc.
Senior Notes
8.75% due 02/15/17*.................. 400,000 403,000
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29................... 174,000 195,620
Sprint Capital Corp.
Company Guar. Notes
6.88% due 11/15/28................... 787,000 783,763
Verizon Communications, Inc.
Senior Notes
6.25% due 04/01/37................... 280,000 277,340
Verizon New York, Inc.
Debentures
6.88% due 04/01/12................... 261,000 275,444
----------
7,742,529
----------
Television -- 0.5%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12................... 1,025,000 1,050,625
ION Media Networks, Inc.
Sec. Notes
11.61% due 01/15/13*(7).............. 875,000 912,187
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13................... 960,000 939,600
Univision Communications, Inc.
Company Guar. Notes
3.50% due 10/15/07................... 80,000 78,800
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14................... 180,000 167,850
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11.................. 725,000 714,125
----------
3,863,187
----------
Textile-Products -- 0.0%
Collins & Aikman Floorcoverings, Inc.
Company Guar. Notes
9.75% due 02/15/10................... 248,000 252,340
----------
Theaters -- 0.5%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................... 1,970,000 2,004,475
Cinemark, Inc.
Senior Disc. Notes
9.75% due 03/15/14(9)................ 1,385,000 1,267,275
----------
3,271,750
----------
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transactional Software -- 0.1%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*............... $ 475,000 $ 489,250
----------
Transport-Air Freight -- 0.8%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-2
6.88% due 01/02/11................ 210,101 211,677
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19................ 1,596,775 1,640,687
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................ 1,701,936 1,884,894
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20................ 342,189 358,015
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11................ 62,428 60,555
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................ 1,346,314 1,575,187
----------
5,731,015
----------
Transport-Rail -- 0.2%
Burlington Northern Santa Fe Corp.
Debentures
7.29% due 06/01/36................ 738,000 823,942
Norfolk Southern Corp.
Senior Notes
7.70% due 05/15/17................ 510,000 568,369
----------
1,392,311
----------
Transport-Services -- 0.2%
FedEx Corp.
Company Guar. Notes
5.50% due 08/15/09................ 135,000 136,031
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................ 550,000 525,250
Ryder System, Inc.
Notes
5.85% due 03/01/14................ 125,000 124,778
Ryder System, Inc.
Notes
5.85% due 11/01/16................ 330,000 327,169
----------
1,113,228
----------
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Travel Services -- 0.1%
Travelport LLC
Senior Notes
9.88% due 09/01/14*................ $220,000 $ 230,450
Travelport LLC
Senior Notes
10.00% due 09/01/14*(7)............ 125,000 127,500
Travelport LLC
Senior Sub. Notes
11.88% due 09/01/16*............... 50,000 54,813
------------
412,763
------------
Wire & Cable Products -- 0.1%
Belden CDT, Inc.
Senior Sub. Notes
7.00% due 03/15/17*................ 400,000 408,009
------------
Total Corporate Bonds & Notes
(cost $237,813,345)................ 242,185,501
------------
FOREIGN CORPORATE BONDS & NOTES -- 5.7%
Banks-Commercial -- 0.2%
Barclays Bank PLC
Preferred Sub. Notes
5.93% due 12/15/16*(7)(8).......... 370,000 378,895
Caisse Nationale des Caisses
d'Epargne et de Prevoyance
Notes
4.96% due 12/30/09(8).............. 141,000 116,325
NIB Capital Bank
Bonds
5.82% due 12/11/13*(7)(8).......... 95,000 94,314
Royal Bank of Scotland Group PLC
Preferred Bonds
7.65% due 09/30/31(7)(8)........... 550,000 636,453
Societe Generale
Sub. Notes
5.92% due 04/05/17*(7)(8).......... 570,000 569,658
------------
1,795,645
------------
Banks-Money Center -- 0.1%
HBOS Capital Funding LP
Company Guar. Notes
6.85% due 03/23/09(8).............. 175,000 176,978
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Notes
8.38% due 04/27/09(8).............. 175,000 184,957
National Westminster Bank PLC
Sub. Notes
7.75% due 10/16/07(8).............. 67,000 67,639
------------
429,574
------------
Beverages-Wine/Spirits -- 0.1%
Diageo Capital PLC
Company Guar. Notes
5.13% due 01/30/13................. 732,000 728,438
------------
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Brewery -- 0.1%
SABMiller PLC
Notes
6.50% due 07/01/16*..................... $ 470,000 $ 496,671
----------
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25...................... 496,000 517,468
----------
Building & Construction-Misc. -- 0.0%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11...................... 310,000 316,200
----------
Building Products-Doors & Windows -- 0.0%
Masonite International Corp.
Senior Sub. Notes
11.00% due 04/06/15*.................... 117,000 108,810
----------
Cellular Telecom -- 0.1%
Vodafone Group PLC
Bonds
6.15% due 02/27/37...................... 1,152,000 1,112,119
----------
Chemicals-Specialty -- 0.2%
Rhodia SA
Senior Notes
8.88% due 06/01/11...................... 1,550,000 1,615,875
----------
Computers-Memory Devices -- 0.1%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16...................... 450,000 452,250
----------
Cruise Lines -- 0.1%
Royal Caribbean Cruises, Ltd.
Senior Notes
7.00% due 06/15/13...................... 400,000 413,326
----------
Diversified Manufactured Operations -- 0.1%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*..................... 330,000 341,550
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13...................... 310,000 325,870
----------
667,420
----------
Diversified Minerals -- 0.1%
BHP Billiton Finance, Ltd.
Company Guar. Notes
5.40% due 03/29/17...................... 550,000 545,815
----------
Electronic Components-Misc. -- 0.1%
NXP BV/NXP Funding LLC
Senior Notes
9.50% due 10/15/15*..................... 630,000 650,475
----------
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Electronic Components-Semiconductors -- 0.1%
Avago Technologies Finance Pte/Avago
Technologies US/Avago Technologies Wireless
Company Guar.
10.13% due 12/01/13......................... $ 590,000 $ 638,675
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11.......................... 475,000 490,437
----------
1,129,112
----------
Financial Guarantee Insurance -- 0.1%
Security Capital Assurance, Ltd.
Bonds
6.88% due 09/30/17*(4)(7)(8)................ 570,000 570,000
----------
Food-Meat Products -- 0.1%
JBS SA
Senior Notes
10.50% due 08/04/16*........................ 550,000 625,625
----------
Housewares -- 0.3%
Vitro SA de CV
Senior Notes
9.13% due 02/01/17*......................... 1,840,000 1,886,000
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(3)(6).................. 725,000 725
----------
Insurance-Multi-line -- 0.2%
Aegon NV
Sub. Notes
5.31% due 07/15/14(8)....................... 201,000 171,071
AXA SA
Sub. Notes
6.38% due 12/14/36*(7)(8)................... 285,000 273,558
ING Groep NV
Bonds
5.78% due 12/08/15(7)(8).................... 765,000 761,079
----------
1,205,708
----------
Investment Companies -- 0.0%
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*......................... 207,000 207,747
----------
Medical-Drugs -- 0.4%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14.......................... 475,000 438,188
Angiotech Pharmaceuticals, Inc.
Senior Notes
9.11% due 12/01/13*(7)...................... 590,000 602,537
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11.......................... 805,000 790,912
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Medical-Drugs (continued)
Elan Finance PLC
Senior Notes
8.88% due 12/01/13*................. $590,000 $ 599,588
Elan Finance PLC
Company Guar. Senior Notes
9.36% due 11/15/11(7)............... 790,000 803,825
----------
3,235,050
----------
Music -- 0.0%
Corporacion Interamericana de
Entretenimiento SA de CV
Senior Notes
8.88% due 06/14/15*................. 300,000 306,750
----------
Oil Companies-Exploration & Production -- 0.3%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13.................. 365,000 356,787
Nexen, Inc.
Bonds
5.88% due 03/10/35.................. 274,000 257,031
Nexen, Inc.
Notes
7.88% due 03/15/32.................. 219,000 259,254
OPTI Canada, Inc.
Company Guar. Notes
8.25% due 12/15/14*................. 375,000 390,000
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13.................. 750,000 748,125
----------
2,011,197
----------
Oil Companies-Integrated -- 0.2%
ConocoPhillips Canada Funding Co.
Company Guar. Notes
5.95% due 10/15/36.................. 358,000 361,986
ENI Coordination Center
Company Guar. Notes
5.25% due 12/27/07.................. GBP 205,000 401,046
Petro-Canada
Notes
5.95% due 05/15/35.................. 585,000 558,061
----------
1,321,093
----------
Oil-Field Services -- 0.0%
Weatherford International, Ltd.
Senior Notes
5.50% due 02/15/16.................. 214,000 209,873
----------
Paper & Related Products -- 0.2%
Abitibi-Consolidated, Inc.
Notes
6.00% due 06/20/13.................. 570,000 484,500
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10.................. 705,000 713,812
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Paper & Related Products (continued)
Abitibi-Consolidated, Inc.
Debentures
8.85% due 08/01/30....................... $ 270,000 $ 240,300
----------
1,438,612
----------
Pipelines -- 0.0%
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16....................... 183,000 171,582
----------
Printing-Commercial -- 0.1%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*...................... 545,000 551,813
----------
Real Estate Operations & Development -- 0.0%
Brookfield Asset Management, Inc.
Notes
8.13% due 12/15/08....................... 76,000 79,535
----------
Retail-Drug Store -- 0.1%
Jean Coutu Group (PJC), Inc.
Senior Sub. Notes
8.50% due 08/01/14....................... 575,000 623,875
----------
Satellite Telecom -- 0.7%
Intelsat Bermuda, Ltd.
Senior Notes
8.87% due 01/15/15(7).................... 1,055,000 1,076,100
Intelsat Bermuda, Ltd.
Guar. Senior Notes
11.25% due 06/15/16...................... 1,210,000 1,373,350
Intelsat Intermediate Holding Co., Ltd.
Company Guar. Notes
9.25% due 02/01/15(9).................... 1,475,000 1,224,250
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13....................... 1,360,000 1,200,200
----------
4,873,900
----------
Special Purpose Entities -- 0.3%
Hellas Telecommunications
Luxembourg II
Sub. Notes
11.12% due 01/15/15*(7).................. 955,000 981,262
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(8).................... 338,000 354,998
Rio Tinto Finance USA, Ltd.
Notes
2.63% due 09/30/08....................... 165,000 159,055
SMFG Preferred Capital, Ltd.
Bonds
6.08% due 01/25/17*(7)(8)................ 373,000 373,724
SovRisc BV
Notes
4.63% due 10/31/08*...................... 133,000 132,088
----------
2,001,127
----------
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Specified Purpose Acquisitions -- 0.1%
Basell AF SCA
Company Guar. Bonds
8.38% due 08/15/15*................ $ 925,000 $ 964,312
-----------
Telecom Services -- 0.3%
Digicel Group, Ltd.
Senior Notes
8.88% due 01/15/15*................ 100,000 97,000
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14................ 300,000 325,500
Telenet Group Holdings NV
Disc. Notes
11.50% due 06/15/14*(9)............ 1,706,000 1,599,375
TELUS Corp.
Notes
7.50% due 06/01/07................. 110,000 110,348
-----------
2,132,223
-----------
Telephone-Integrated -- 0.7%
British Telecommunications PLC
Bonds
8.63% due 12/15/30................. 1,812,000 2,487,900
Telecom Italia Capital SA
Company Guar. Notes
4.00% due 01/15/10................. 697,000 673,394
Telecom Italia Capital SA
Company Guar. Bonds
5.25% due 10/01/15................. 1,074,000 1,018,953
Telefonica Emisones SAU
Company Guar. Notes
6.42% due 06/20/16................. 685,000 714,951
-----------
4,895,198
-----------
Transport-Marine -- 0.1%
Navios Maritime Holdings, Inc.
Senior Notes
9.50% due 12/15/14*................ 375,000 390,469
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14................. 350,000 355,250
-----------
745,719
-----------
Transport-Rail -- 0.0%
Canadian National Railway Co.
Notes
6.38% due 10/15/11................. 315,000 329,001
-----------
Total Foreign Corporate Bonds & Notes
(cost $40,704,294)................. 41,365,863
-----------
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------
FOREIGN GOVERNMENT AGENCIES -- 30.8%
Sovereign -- 30.8%
Bundesrepublik Deutschland
Bonds
4.13% due 07/04/08........ EUR 1,845,000 $2,466,911
Bundesrepublik Deutschland
Bonds
4.50% due 01/04/13........ EUR 3,895,000 5,325,670
Bundesrepublik Deutschland
Bonds
4.75% due 07/04/34........ EUR 1,710,000 2,462,114
Bundesrepublik Deutschland
Bonds
5.50% due 01/04/31........ EUR 500,000 788,045
Federal Republic of Brazil
Bonds
6.00% due 01/17/17........ 3,390,000 3,423,900
Federal Republic of Brazil
Notes
7.88% due 03/07/15........ 2,440,000 2,777,940
Federal Republic of Brazil
Notes
8.00% due 01/15/18........ 5,330,000 6,020,235
Federal Republic of Brazil
Bonds
8.25% due 01/20/34........ 1,340,000 1,681,700
Federal Republic of Brazil
Notes
8.75% due 02/04/25........ 2,825,000 3,630,125
Federal Republic of Brazil
Bonds
8.88% due 10/14/19........ 2,560,000 3,233,280
Federal Republic of Brazil
Notes
8.88% due 04/15/24........ 145,000 188,500
Federal Republic of Brazil
Notes
10.25% due 06/17/13....... 2,480,000 3,091,320
Federal Republic of Brazil
Bonds
10.25% due 01/10/28....... BRL 3,100,000 1,500,874
Federal Republic of Brazil
Bonds
10.50% due 07/14/14....... 1,115,000 1,432,775
Federal Republic of Brazil
Notes
11.00% due 01/11/12....... 2,240,000 2,759,680
Federal Republic of Brazil
Notes
11.00% due 08/17/40....... 7,310,000 9,861,190
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Federal Republic of Brazil
Bonds
12.50% due 01/05/16....... $ 2,474,000 $1,380,315
France Government Bond
Bonds
3.00% due 10/25/15........ EUR 500,000 616,889
Government of Australia
Bonds
5.75% due 06/15/11........ AUD 9,180,000 7,330,119
Government of Australia
Bonds
7.50% due 09/15/09........ AUD 3,925,000 3,267,696
Government of Canada
Bonds
4.00% due 09/01/10........ CAD 2,684,000 2,324,560
Government of Canada
Bonds
5.00% due 06/01/14........ CAD 6,230,000 5,708,018
Government of Canada
Bonds
5.25% due 06/01/13........ CAD 2,920,000 2,693,836
Government of Japan
Bonds
1.00% due 12/20/12........ JPY 485,800,000 4,060,961
Government of New Zealand
Bonds
7.00% due 07/15/09........ NZD 7,900,000 5,650,216
Kingdom of Denmark
Bonds
7.00% due 11/15/07........ DKK 29,310,000 5,341,317
Kingdom of Netherlands
Bonds
3.00% due 07/15/07........ EUR 1,085,000 1,445,426
Kingdom of Norway
Bonds
5.50% due 05/15/09........ NOK 51,050,000 8,523,543
Kingdom of Norway
Bonds
6.50% due 05/15/13........ NOK 34,480,000 6,228,654
Kingdom of Spain
Bonds
5.75% due 07/30/32........ EUR 925,000 1,506,605
Kingdom of Sweden
Bonds
4.00% due 12/01/09........ SEK 28,200,000 4,051,418
Kingdom of Sweden
Bonds
4.50% due 08/12/15........ SEK 40,010,000 6,013,418
Kingdom of Sweden
Bonds
5.00% due 01/28/09........ SEK 10,500,000 1,535,122
Kingdom of Sweden
Bonds
5.50% due 10/08/12........ SEK 32,870,000 5,062,210
New Zealand Government
Bonds
6.00% due 07/15/08........ NZD 7,330,000 5,164,146
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------
Sovereign (continued)
Peru Government
Bonds
6.55% due 03/14/37..... $ 145,000 $ 150,510
Republic of Argentina
Bonds
5.25% due 12/31/38(9).. 2,144,761 1,109,914
Republic of Argentina
Bonds
5.59% due 08/03/12..... 2,300,000 1,652,550
Republic of Argentina
Bonds
7.00% due 03/28/11..... 3,255,000 3,233,842
Republic of Argentina
Bonds
7.00% due 09/12/13..... 1,690,000 1,630,005
Republic of Colombia
Notes
7.38% due 01/27/17..... 1,500,000 1,632,750
Republic of Colombia
Bonds
7.38% due 09/18/37..... 520,000 566,020
Republic of Colombia
Notes
12.00% due 10/22/15.... COP 2,147,000,000 1,101,451
Republic of Columbia
Bonds
8.13% due 05/21/24..... 710,000 827,150
Republic of Columbia
Notes
8.25% due 12/22/14..... 1,190,000 1,351,245
Republic of El Salvador
Bonds
7.65% due 06/15/35*.... 525,000 599,812
Republic of El Salvador
Bonds
8.25% due 04/10/32..... 360,000 434,700
Republic of Greece
Bonds
5.25% due 05/18/12..... EUR 611,000 857,162
Republic of Indonesia
Notes
8.50% due 10/12/35..... 1,300,000 1,590,607
Republic of Panama
Bonds
6.70% due 01/26/36..... 1,460,000 1,515,480
Republic of Peru
Notes
7.35% due 07/21/25..... 1,910,000 2,173,580
Republic of Peru
Bonds
8.75% due 11/21/33..... 720,000 946,800
Republic of Philippines
Bonds
7.75% due 01/14/31..... 580,000 653,950
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Republic of Philippines
Notes
8.00% due 01/15/16..... $1,180,000 $1,328,975
Republic of Philippines
Notes
8.25% due 01/15/14..... 2,320,000 2,601,300
Republic of Philippines
Notes
8.88% due 03/17/15..... 1,210,000 1,417,212
Republic of Philippines
Senior Notes
9.50% due 02/02/30..... 2,410,000 3,199,275
Republic of Philippines
Bonds
9.88% due 01/15/19..... 1,020,000 1,314,525
Republic of Philippines
Notes
10.63% due 03/16/25.... 1,000,000 1,417,500
Republic of Turkey
Bonds
7.00% due 09/26/16..... 2,100,000 2,136,750
Republic of Turkey
Notes
7.00% due 06/05/20..... 2,800,000 2,817,500
Republic of Turkey
Notes
7.25% due 03/15/15..... 3,330,000 3,454,875
Republic of Turkey
Notes
7.38% due 02/05/25..... 3,170,000 3,257,175
Republic of Turkey
Notes
8.00% due 02/14/34..... 820,000 892,775
Republic of Turkey
Notes
9.50% due 01/15/14..... 1,310,000 1,521,958
Republic of Uruguay
Bonds
7.50% due 03/15/15..... 750,000 810,000
Republic of Uruguay
Bonds
8.00% due 11/18/22..... 3,005,000 3,410,675
Republic of Uruguay
Notes
9.25% due 05/17/17..... 400,000 490,000
Republic of Venezuela
Bonds
5.75% due 02/26/16..... 810,000 761,805
Republic of Venezuela
Bonds
6.00% due 12/09/20..... 2,210,000 2,044,250
Republic of Venezuela
Bonds
7.00% due 12/01/18..... 700,000 712,600
Republic of Venezuela
Bonds
7.65% due 04/21/25..... 1,540,000 1,633,170
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Sovereign (continued)
Republic of Venezuela
Notes
8.50% due 10/08/14................. $ 1,060,000 $ 1,180,310
Republic of Venezuela
Bonds
9.25% due 09/15/27................. 660,000 829,950
Republic of Venezuela
Bonds
9.38% due 01/13/34................. 520,000 670,540
Russian Federation
Bonds
7.50% due 03/31/30(9).............. 13,980,000 15,865,902
Russian Federation
Bonds
7.50% due 03/31/30*(9)............. 650,000 737,750
Russian Federation
Notes
12.75% due 06/24/28................ 500,000 907,300
South Africa Government
Bonds
13.00% due 08/31/10................ ZAR 4,350,000 683,456
Ukraine Soviet Socialist Republic
Senior Notes
6.58% due 11/21/16................. 600,000 608,820
Ukrainian Soviet Socialist Republic
Senior Bonds
6.58% due 11/21/16*................ 1,580,000 1,601,330
Ukrainian Soviet Socialist Republic
Notes
7.65% due 06/11/13................. 1,270,000 1,376,045
United Mexican States
Notes
5.63% due 01/15/17................. 1,620,000 1,632,960
United Mexican States
Notes
6.63% due 03/03/15................. 1,520,000 1,641,600
United Mexican States
Notes
7.50% due 04/08/33................. 1,885,000 2,243,150
United Mexican States
Bonds
8.00% due 12/24/08................. MXN 18,300,000 1,675,279
United Mexican States
Bonds
8.00% due 09/24/22................. 1,170,000 1,442,025
United Mexican States
Notes
8.13% due 12/30/19................. 2,380,000 2,921,450
United Mexican States
Bonds
8.30% due 08/15/31................. 1,530,000 1,971,405
------------
Total Foreign Government Agencies
(cost $216,521,157) 223,787,848
------------
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
FOREIGN GOVERNMENT TREASURIES -- 2.5%
Sovereign -- 2.5%
Government of United Kingdom
Bonds
4.00% due 03/07/09............... GBP660,000 $ 1,265,337
Government of United Kingdom
Bonds
4.00% due 09/07/16............... GBP 3,280,000 6,126,645
Government of United Kingdom
Bonds
4.25% due 03/07/11............... GBP 4,430,000 8,401,064
Government of United Kingdom
Bonds
5.00% due 03/07/08............... GBP 1,115,000 2,185,046
-----------
Total Foreign Government Treasuries
(cost $17,743,746)............... 17,978,092
-----------
U.S. GOVERNMENT AGENCIES -- 9.9%
Federal Home Loan Bank -- 0.2%
3.50% due 05/15/07................ 600,000 598,711
4.50% due 09/08/08................ 600,000 596,483
-----------
1,195,194
-----------
Federal Home Loan Mtg. Corp. -- 3.7%
4.13% due 07/12/10................ 300,000 293,857
4.35% due 06/02/08................ 600,000 595,661
4.45% due 03/06/08................ 600,000 596,646
4.50% due 02/01/20................ 219,997 213,019
4.50% due 08/01/20................ 425,042 411,560
4.75% due 01/18/11................ 310,000 309,146
5.00% due 09/01/18................ 513,808 508,015
5.00% due 07/01/20................ 829,187 818,093
5.00% due 02/01/34................ 475,040 460,306
5.00% due 05/01/34................ 297,284 287,852
5.00% due 02/01/35................ 685,496 663,747
5.00% due 08/01/35................ 2,701,918 2,613,903
5.00% due 04/01/36................ 582,341 563,371
5.00% due 05/01/36................ 115,724 111,842
5.00% due 05/01/36................ 290,766 281,013
5.00% due 08/01/36................ 489,131 472,724
5.00% due 11/01/36................ 609,059 588,629
5.00% due 01/01/37................ 1,096,661 1,059,876
5.33% due 12/01/35(7)............. 445,621 445,832
5.46% due 03/01/36(7)............. 300,000 299,555
5.50% due 07/01/35................ 2,605,394 2,580,722
5.71% due 08/01/36(7)............. 2,635,788 2,648,148
5.81% due 01/01/37(7)............. 196,858 198,052
5.85% due 01/01/37(7)............. 899,650 908,639
6.00% due 07/01/35................ 193,614 195,296
6.00% due 06/01/36................ 4,063,194 4,095,929
6.20% due 09/01/36(7)............. 846,223 859,558
6.50% due 05/01/29................ 8,143 8,394
6.50% due 02/01/35................ 655,751 671,843
6.50% due April TBA............... 2,298,000 2,343,243
6.88% due 09/15/10................ 1,156,000 1,231,102
7.00% due 06/01/29................ 13,835 14,397
8.50% due 05/01/08................ 4,481 4,546
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Federal Home Loan Mtg. Corp. (continued)
10.00% due 05/15/20(1)................ $ 17,248 $ 17,201
Series 1103, Class N
11.57% due 06/15/21(1)(15)............. 9,974 107
-----------
27,371,824
-----------
Federal National Mtg. Assoc. -- 6.0%
4.47% due 02/01/34(7)................. 507,010 500,213
4.50% due 06/01/19.................... 540,286 523,769
4.66% due 10/01/35(7)................. 250,000 247,151
4.75% due 12/15/10.................... 375,000 374,060
4.88% due 01/01/35(7)................. 1,000,000 999,941
5.00% due 06/01/19.................... 277,480 274,064
5.00% due 04/01/21.................... 3,617,671 3,567,788
5.00% due 03/01/34.................... 323,962 313,560
5.00% due 11/01/34.................... 579,381 560,777
5.00% due 05/01/35.................... 1,337,291 1,293,331
5.00% due 01/01/37.................... 2,993,174 2,891,562
5.25% due 08/01/12.................... 300,000 303,447
5.50% due 06/01/19.................... 363,636 365,017
5.50% due 11/01/19.................... 1,639,657 1,645,883
5.50% due 08/01/20.................... 365,008 366,024
5.50% due 01/01/29.................... 8,817 8,774
5.50% due 06/01/29.................... 168,441 167,508
5.50% due 06/01/34.................... 381,746 378,397
5.50% due 02/01/35.................... 583,878 578,367
5.50% due 12/01/35.................... 786,960 779,532
5.50% due 02/01/36(7)................. 385,906 388,469
5.50% due 05/01/36.................... 4,739,350 4,691,217
5.50% due 11/01/36.................... 1,776,166 1,757,642
5.50% due 12/01/36.................... 4,140,378 4,085,710
5.50% due April TBA................... 5,457,000 5,399,019
6.00% due 02/01/32.................... 129,404 131,158
6.00% due 05/01/34.................... 21,812 22,032
6.00% due 10/01/34.................... 1,294,073 1,307,115
6.00% due 04/01/35.................... 724,352 731,653
6.00% due 06/01/35.................... 204,735 206,396
6.00% due 11/01/36.................... 2,596,131 2,605,650
6.00% due April TBA................... 4,645,000 4,678,388
6.50% due 04/01/34.................... 296,662 304,096
6.50% due 02/01/35.................... 79,512 81,161
6.50% due 07/01/36.................... 784,208 799,991
7.50% due 01/01/30.................... 19,717 20,668
7.50% due 09/01/30.................... 3,460 3,621
8.00% due 11/01/28.................... 25,997 27,539
8.80% due 01/25/19(1)................. 42,523 45,699
10.40% due 04/25/19(1)................ 6,981 7,463
13.00% due 11/01/15................... 6,717 7,453
-----------
43,441,305
-----------
Government National Mtg. Assoc. -- 0.0%
7.50% due 07/15/27.................... 16,570 17,315
7.50% due 10/15/27.................... 66,573 69,566
-----------
86,881
-----------
Total U.S. Government Agencies
(cost $71,963,064)................... 72,095,204
-----------
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Shares/
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
U.S. GOVERNMENT TREASURIES -- 6.5%
United States Treasury Bonds -- 1.1%
6.25% due 08/15/23......................... $ 166,000 $ 190,576
8.00% due 11/15/21......................... 6,000,000 7,929,372
-----------
8,119,948
-----------
United States Treasury Notes -- 5.4%
3.63% due 01/15/10......................... 803,000 783,710
3.88% due 05/15/10......................... 175,000 171,671
3.88% due 09/15/10......................... 7,000 6,855
4.00% due 08/31/07......................... 3,000,000 2,987,577
4.00% due 09/30/07......................... 15,000,000 14,924,415
4.00% due 02/15/........................... 6,701,000 6,424,061
4.25% due 01/15/11......................... 2,000,000 1,980,234
4.38% due 12/31/07......................... 1,400,000 1,393,547
4.38% due 12/15/10......................... 101,000 100,479
4.50% due 02/15/09......................... 240,000 239,363
4.50% due 11/15/10......................... 70,000 69,945
4.50% due 11/15/15......................... 270,000 267,247
4.63% due 02/29/08......................... 63,000 62,828
4.63% due 12/31/11......................... 500,000 501,660
4.63% due 11/15/16......................... 410,000 408,799
4.88% due 05/31/08......................... 3,500,000 3,501,642
4.88% due 05/31/11......................... 4,000,000 4,049,688
5.13% due 05/15/16......................... 1,579,000 1,632,599
-----------
39,506,320
-----------
Total U.S. Government Treasuries
(cost $47,538,887)........................ 47,626,268
-----------
COMMON STOCK -- 0.6%
Casino Services -- 0.0%
Shreveport Gaming Holdings, Inc.+(3)(4)(5). 2,441 56,199
-----------
Cellular Telecom -- 0.4%
iPCS, Inc.+(3)(5).......................... 60,413 2,959,633
-----------
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 15,327
-----------
Oil-Field Services -- 0.2%
Trico Marine Services, Inc.+............... 40,529 1,510,110
-----------
Total Common Stock
(cost $2,206,622)......................... 4,570,018
-----------
PREFERRED STOCK -- 0.8%
Banks-Money Center -- 0.1%
Santander Finance Preferred SA*
5.88%(7).................................. 32,800 808,727
-----------
Diversified Financial Services -- 0.1%
General Electric Capital Corp.
4.50%(9).................................. 16,000 383,360
-----------
Finance-Mortgage Loan/Banker -- 0.0%
Fannie Mae
Series O, 7.00%(7)........................ 1,080 57,434
-----------
Shares/
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
Oil Companies-Exploration & Production -- 0.3%
EXCO Resources, Inc.
11.00%, Series A-2(4)(5).................. 153 $ 1,530,000
EXCO Resources, Inc. Convertible
7.00%, Series A-1(4)(5)................... 37 370,000
Transmeridian Exploration, Inc.
15.00%(4)................................. 3,255 302,715
------------
2,202,715
------------
Special Purpose Entity -- 0.1%
Structured Repackaged Asset-Backed
Trust Securities
3.00%..................................... 29,200 686,200
------------
Telephone-Integrated -- 0.1%
AT&T, Inc.
6.38%..................................... 35,400 887,832
------------
Television -- 0.1%
ION Media Networks, Inc.
13.75%(10)................................ 81 631,800
------------
Total Preferred Stock
(cost $5,674,195)......................... 5,658,068
------------
RIGHTS -- 0.0%
Sovereign -- 0.0%
United Mexican States,
Series E
Expires 06/30/07 VRR+(4)
(cost $0)................................. 1,400,000 20,300
------------
WARRANTS -- 0.0%
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (strike price $4.31)+(4). 13,811 8,977
------------
Telecom Services -- 0.0%
Leap Wireless International, Inc.
Expires 04/15/10 (strike price
$96.80)+*(3)(4)........................... 500 0
------------
Telephone-Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10 (strike price
$0.00)+*(3)(4)............................ 150 1
------------
Total Warrants
(cost $46,436)............................ 8,978
------------
Total Long-Term Investment Securities
(cost $658,720,543)....................... 673,736,595
------------
SHORT-TERM INVESTMENT SECURITIES -- 1.0%
Time Deposits -- 1.0%
Euro Time Deposit with State Street Bank
& Trust Co.
2.80% due 04/02/07........................ 1,796,000 1,796,000
Euro Time Deposit with State Street Bank
& Trust Co.
4.05% due 04/02/07........................ 5,301,000 5,301,000
------------
7,097,000
------------
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT TREASURIES -- 0.7%
United States Treasury Notes -- 0.7%
United States Treasury Notes
2.75% due 08/15/07................. $ 5,000,000 $ 4,958,168
------------
Total Short-Term Investment Securities
(cost $12,055,168)................. 12,055,168
------------
REPURCHASE AGREEMENT -- 2.7%
UBS Securities, LLC
Joint Repurchase Agreement
(cost $19,710,000)(18)............. 19,710,000 19,710,000
------------
TOTAL INVESTMENTS
(cost $690,485,711)(16)............ 97.0 % 705,501,763
Other assets less liabilities......... 3.0 21,874,623
----------- ------------
NET ASSETS -- 100.0% $727,376,386
=========== ============
- --------
* 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 March 31, 2007, the
aggregate value of these securities was $70,532,410 representing 9.7% of
net assets. Unless otherwise indicated these securities are not considered
to be illiquid.
** Denominated in United States dollars unless otherwise indicated.
VRR --Value Recovery Right
TBA --Securities purchased on a forward commitment basis with an approximate
principal amount due and no definitive maturity date. The actual
principal and maturity date will be determined upon settlement date.
+ Non-income producing security
(1) Collateralized Mortgaged Obligation
(2) Variable Rate Security -- the rate reflected is as of March 31, 2007,
maturity date reflects the stated maturity date.
(3) Illiquid security
(4) Fair valued security; see Note 2
(5) To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are
valued pursuant to Note 2. Restricted securities held by a Fund may not be
sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of
widely held, publicly traded companies. Lack of a secondary market and
resale restrictions may result in the inability of a Fund to sell a
security at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist. As of
March 31, 2007, the Strategic Bond Fund held the following restricted
securities:
Market % of
Acquisition Principal/ Acquisition Market Value 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 $ 7.00 0.00%
EXCO
Resources,
Inc. 7.00%,
Series A-1
Preferred
Stock......... 3/29/2007 37 370,000 370,000 10,000.00 0.05
EXCO
Resources,
Inc. 11.00%,
Series A-2
Preferred
Stock......... 3/29/2007 153 1,530,000 1,530,000 10,000.00 0.21
Market
Value % of
Acquisition Principal/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ---------- ------ ------
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 $ 270,300 $ 1.02 0.04%
iPCS, Inc.
Common
Stock....... 7/28/2005 1,283 0
7/20/2004 59,130 916,515
--------- --------
60,413 916,515 2,959,633 48.99 0.41
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 23.02 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 0.00 0.00
---------- ----
$5,214,881 0.72%
========== ====
(6) Bond in default
(7) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of March 31, 2007
(8) Perpetual maturity -- maturity date reflects the next call date.
(9) "Step-up" security where the rate increases ("steps-up") at a
predetermined rate. Rate shown reflects the increased rate.
(10) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(11) Variable Rate Security -- the rate reflected is as of March 31, 2007,
maturity date reflects next reset date.
(12) Company has filed Chapter 11 bankruptcy protection.
(13) Bond is in default and did not pay principal at maturity
(14) Company has filed Chapter 7 bankruptcy.
(15) Interest Only
(16) See Note 5 for cost of investments on a tax basis.
(17) Company emerged from bankruptcy subsequent to March 31, 2007.
(18) See Note 2 for details of Joint Repurchase Agreement.
AUD --Australian Dollar
BRL --Brazilian Real
CAD --Canadian Dollar
COP --Colombian Peso
DKK --Danish Krone
EUR --Euro Dollar
GBP --British Pound
JPY --Japanese Yen
MXN --Mexican Peso
NOK --Norwegian Krone
SEK --Swedish Krona
USD --United States Dollar
ZAR --South African Rand
Open Forward Foreign Currency Contracts
Gross
Contract In Delivery Unrealized
to Deliver Exchange For Date Depreciation
-------------------
JPY 622,855,573 NZD 7,353,233 04/02/2007 $(19,771)
========
- --------
JPY --Japanese Yen
NZD --New Zealand Dollar
See Notes to Financials Statements
46
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited)
Industry Allocation*
Finance -- Auto Loans.................... 5.9%
Oil Companies -- Exploration & Production 5.7
Cellular Telecom......................... 5.5
Repurchase Agreements.................... 4.4
Pipelines................................ 4.0
Cable TV................................. 3.7
Special Purpose Entities................. 3.4
Independent Power Producers.............. 3.3
Chemicals -- Specialty................... 3.0
Medical -- Hospitals..................... 3.0
Casino Hotels............................ 2.8
Telecom Services......................... 2.6
Transport -- Air Freight................. 2.4
Airlines................................. 2.3
Electronic Components -- Semiconductors.. 1.9
Satellite Telecom........................ 1.9
Telephone -- Integrated.................. 1.8
Agricultural Chemicals................... 1.7
Television............................... 1.7
Auto -- Cars/Light Trucks................ 1.6
Medical -- Drugs......................... 1.5
Paper & Related Products................. 1.4
Theaters................................. 1.2
Containers -- Metal/Glass................ 1.1
Containers -- Paper/Plastic.............. 1.1
Metal -- Diversified..................... 1.1
Oil -- Field Services.................... 1.1
Building & Construction Products -- Misc. 1.0
Medical Products......................... 0.9
Non-Hazardous Waste Disposal............. 0.9
Computer Services........................ 0.8
Funeral Services & Related Items......... 0.8
Recycling................................ 0.8
Travel Services.......................... 0.8
Broadcast Services/Program............... 0.7
Electric -- Generation................... 0.7
Electric -- Integrated................... 0.7
Electronics -- Military.................. 0.7
Housewares............................... 0.7
Real Estate Investment Trusts............ 0.7
Applications Software.................... 0.6
Consumer Products -- Misc................ 0.6
Direct Marketing......................... 0.6
Rental Auto/Equipment.................... 0.6
Retail -- Drug Store..................... 0.6
Steel -- Producers....................... 0.6
Auto/Truck Parts & Equipment -- Original. 0.5
Chemicals -- Plastics.................... 0.5
Gambling (Non-Hotel)..................... 0.5
Medical -- HMO........................... 0.5
Printing -- Commercial................... 0.5
Storage/Warehousing...................... 0.5
Beverages -- Non-alcoholic............... 0.4
Coal..................................... 0.4
Diversified Manufactured Operations...... 0.4
Energy -- Alternate Sources.............. 0.4
Home Furnishings......................... 0.4
Machinery -- Farming..................... 0.4
Medical -- Nursing Homes................. 0.4
Transactional Software................... 0.4
Building & Construction -- Misc.......... 0.3
Building Products -- Wood................ 0.3
Diagnostic Kits..................... 0.3%
Publishing -- Periodicals........... 0.3
Diversified Financial Services...... 0.3
Research & Development.............. 0.3
Retail -- Petroleum Products........ 0.3
Retail -- Restaurants............... 0.3
Transport -- Marine................. 0.3
Transport -- Services............... 0.3
Commercial Services................. 0.2
Computers -- Memory Devices......... 0.2
Electronic Components -- Misc....... 0.2
Food -- Meat Products............... 0.2
Food -- Misc........................ 0.2
Golf................................ 0.2
Hotels/Motels....................... 0.2
Insurance -- Property/Casualty...... 0.2
Medical Information Systems......... 0.2
Medical -- Biomedical/Gene.......... 0.2
Medical -- Generic Drugs............ 0.2
Metal Processors & Fabrication...... 0.2
Music............................... 0.2
Private Corrections................. 0.2
Retail -- Regional Department Stores 0.2
Specified Purpose Acquisitions...... 0.2
Building Products -- Doors & Windows 0.1
Casino Services..................... 0.1
Consulting Services................. 0.1
Gas -- Distribution................. 0.1
Human Resources..................... 0.1
Insurance -- Life/Health............ 0.1
Machinery -- General Industrial..... 0.1
Medical -- Outpatient/Home Medical.. 0.1
Miscellaneous Manufacturing......... 0.1
Multimedia.......................... 0.1
Oil & Gas Drilling.................. 0.1
Publishing -- Newspapers............ 0.1
Retail -- Major Department Stores... 0.1
Steel -- Specialty.................. 0.1
Textile -- Products................. 0.1
Transport -- Rail................... 0.1
Wire & Cable Products............... 0.1
----
99.0%
====
Credit Quality+#
A......... 0.3%
BBB....... 0.3
BB........ 25.8
B......... 43.4
CCC....... 21.2
BELOW C... 2.2
Not Rated@ 6.8
-----
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 -- March 31, 2007
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.0%
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(1)(2)(3)
(cost $75,000)................ $ 75,000 $ 76,500
----------
CORPORATE BONDS & NOTES -- 76.9%
Agricultural Chemicals -- 1.7%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18............ 600,000 597,000
Terra Capital, Inc.
Senior Notes
7.00% due 02/01/17*........... 1,835,000 1,825,825
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*........... 2,425,000 2,528,062
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*........... 1,425,000 1,503,375
----------
6,454,262
----------
Airlines -- 2.3%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11............ 5,525,000 5,649,312
Continental Airlines, Inc.
Pass Through Certs.
Series 1991-1, Class C
6.95% due 08/02/09............ 461,731 459,423
Continental Airlines, Inc.
Pass Through Certs.
Series 1999, Class 2
7.73% due 03/15/11............ 700,808 711,320
Delta Air Lines, Inc.
Pass Through Certs.
Class A-2
7.57% due 11/18/10(14)........ 475,000 494,150
Northwest Airlines, Inc.
Pass Through Certs.
Series 1A-1
7.04% due 04/01/22(14)........ 1,142,192 1,143,620
United AirLines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08............ 371,649 374,436
----------
8,832,261
----------
Applications Software -- 0.6%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13........... 2,050,000 2,290,875
----------
Auto-Cars/Light Trucks -- 1.6%
Ford Motor Co.
Debentures
6.38% due 02/01/29............ 3,905,000 2,782,313
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
Auto-Cars/Light Trucks (continued)
Ford Motor Co.
Notes
7.45% due 07/16/31.............. $ 675,000 $ 522,281
General Motors Corp.
Debentures
8.25% due 07/15/23.............. 2,865,000 2,578,500
General Motors Corp.
Debentures
8.38% due 07/15/33.............. 202,000 181,295
----------
6,064,389
----------
Auto/Truck Parts & Equipment-Original -- 0.5%
ArvinMeritor, Inc.
Senior Notes
8.13% due 09/15/15.............. 200,000 198,500
TRW Automotive, Inc.
Company Guar. Notes
7.00% due 03/15/14*............. 125,000 122,500
TRW Automotive, Inc.
Company Guar. Notes
7.25% due 03/15/17*............. 925,000 906,500
Visteon Corp.
Senior Notes
8.25% due 08/01/10.............. 550,000 561,000
----------
1,788,500
----------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(1)(2)....... 1,650,000 0
----------
Beverages-Non-alcoholic -- 0.2%
Cott Beverages, Inc.
Company Guar. Notes
8.00% due 12/15/11............... 600,000 612,000
----------
Broadcast Services/Program -- 0.7%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14............... 1,376,000 1,474,040
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14............... 500,000 480,000
Nexstar Finance, Inc.
Senior Disc. Notes
11.38% due 04/01/13(6)........... 700,000 677,250
----------
2,631,290
----------
Building & Construction Products-Misc. -- 1.0%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12............... 1,375,000 1,430,000
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08.............. 1,299,000 1,331,475
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Building & Construction Products-Misc. (continued)
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14.................... $ 925,000 $ 955,062
-----------
3,716,537
-----------
Building Products-Wood -- 0.3%
Masonite Corp.
Senior Sub. Notes
11.00% due 04/06/15*.................. 1,092,000 1,015,560
-----------
Cable TV -- 3.7%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12.................... 1,800,000 1,827,000
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15................... 3,021,000 3,119,183
CCH II LLC/CCH II Capital Corp.
Senior Notes, Series B
10.25% due 09/15/10................... 1,000,000 1,053,750
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10................... 900,000 949,500
CCH II LLC/CCH II Capital Corp.
Company Guar.
10.25% due 10/01/13................... 5,027,000 5,491,997
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11.................... 360,000 369,000
Insight Communications Co., Inc.
Senior Disc. Notes
12.25% due 02/15/11(6)................ 1,165,000 1,217,425
-----------
14,027,855
-----------
Casino Hotels -- 2.8%
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(2)(7)............. 1,721,177 1,652,330
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(1)(2).............. 2,675,000 2,675,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14.................... 2,875,000 2,673,750
Riviera Holdings Corp.
Company Guar. Notes
11.00% due 06/15/10................... 800,000 834,000
Seminole Hard Rock Entertainment, Inc.
Sec. Notes
7.85% due 03/15/14*(8)................ 400,000 408,000
Station Casinos, Inc.
Senior Sub. Notes
6.88% due 03/01/16.................... 1,625,000 1,488,906
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 12/15/10*................... 450,000 456,750
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Casino Hotels (continued)
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*................... $ 425,000 $ 436,688
-----------
10,625,424
-----------
Cellular Telecom -- 1.1%
American Cellular Corp.
Senior Notes
10.00% due 08/01/11................... 280,000 296,450
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13................... 834,000 899,677
Centennial Communications Corp.
Senior Notes
11.11% due 01/01/13(8)................ 825,000 868,313
Rural Cellular Corp.
Senior Sub. Notes
9.75% due 01/15/10.................... 2,085,000 2,147,550
-----------
4,211,990
-----------
Chemicals-Specialty -- 2.3%
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14*................... 1,500,000 1,550,625
JohnsonDiversey, Inc.
Company Guar. Notes
9.63% due 05/15/12.................... 200,000 209,000
MacDermid, Inc.
Senior Notes
9.50% due 04/15/17*................... 325,000 333,125
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*.................. 2,725,000 2,793,125
Nalco Co.
Senior Notes
7.75% due 11/15/11.................... 325,000 333,125
Nalco Co.
Senior Sub. Notes
8.88% due 11/15/13.................... 465,000 494,062
Rockwood Specialties Group, Inc.
Sub. Notes
7.50% due 11/15/14.................... 925,000 938,875
Rockwood Specialties Group, Inc.
Senior Sub. Notes
10.63% due 05/15/11................... 292,000 308,060
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12.................... 1,825,000 1,934,500
-----------
8,894,497
-----------
Coal -- 0.4%
Massey Energy Co.
Senior Notes
6.63% due 11/15/10.................... 1,384,000 1,397,840
-----------
49
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Commercial Services -- 0.2%
DI Finance/DynCorp International
Senior Sub. Notes
9.50% due 02/15/13.................. $ 573,000 $ 610,245
----------
Computer Services -- 0.8%
Compucom Systems, Inc.
Senior Notes
12.00% due 11/01/14*................ 650,000 693,875
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13.................. 2,100,000 2,252,250
----------
2,946,125
----------
Consulting Services -- 0.1%
FTI Consulting, Inc.
Company Guar. Notes
7.63% due 06/15/13.................. 425,000 440,938
----------
Consumer Products-Misc. -- 0.6%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12.................. 407,000 415,140
Jostens Holding Corp.
Senior Disc. Notes
10.25% due 12/01/13(6).............. 1,600,000 1,480,000
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12.................. 250,000 258,750
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13.................. 100,000 104,250
----------
2,258,140
----------
Containers-Metal/Glass -- 1.1%
Crown Cork & Seal Co., Inc.
Debentures
7.38% due 12/15/26.................. 75,000 70,875
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23.................. 2,125,000 2,082,500
Owens Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13.................. 1,580,000 1,647,150
Owens Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09.................. 440,000 448,800
----------
4,249,325
----------
Containers-Paper/Plastic -- 1.1%
Jefferson Smurfit Corp.
Senior Guar. Notes
8.25% due 10/01/12.................. 950,000 950,000
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09................. 2,190,000 2,190,000
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
Containers-Paper/Plastic (continued)
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17*............................ $1,100,000 $1,075,250
----------
4,215,250
----------
Diagnostic Kits -- 0.3%
Inverness Medical Innovations, Inc.
Senior Sub. Notes
8.75% due 02/15/12............................. 1,189,000 1,239,532
----------
Direct Marketing -- 0.6%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12............................. 2,100,000 2,157,750
----------
Diversified Manufactured Operations -- 0.2%
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14............................ 925,000 957,375
----------
Electric-Generation -- 0.7%
Edison Mission Energy
Senior Notes
7.75% due 06/15/16............................. 375,000 390,938
Reliant Energy Mid-Atlantic Power Holdings, LLC
Pass Through Certs.
Series B
9.24% due 07/02/17............................. 401,780 445,976
The AES Corp.
Sec. Notes
8.75% due 05/15/13*............................ 1,875,000 1,996,875
----------
2,833,789
----------
Electric-Integrated -- 0.7%
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11............................. 1,725,000 1,768,125
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21............................. 725,000 735,875
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(1)(2)(3)................... 3,525,000 0
----------
2,504,000
----------
Electronic Components-Semiconductors -- 1.5%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12............................. 804,000 813,045
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16............................. 1,780,000 1,855,650
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14*............................ 1,300,000 1,290,250
Freescale Semiconductor, Inc.
Senior Notes
9.23% due 12/15/14*(8)......................... 175,000 174,562
50
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electronic Components-Semiconductors (continued)
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16*.................... $ 1,250,000 $ 1,253,125
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*.................... 320,000 330,400
-----------
5,717,032
-----------
Electronics-Military -- 0.7%
L-3 Communications Corp.
Company Guar. Senior Sec. Notes
6.13% due 07/15/13...................... 2,725,000 2,684,125
-----------
Energy-Alternate Sources -- 0.4%
Aventine Renewable Energy Holdings, Inc.
Senior Notes
10.00% due 04/01/17*.................... 775,000 801,156
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12...................... 625,000 651,563
-----------
1,452,719
-----------
Finance-Auto Loans -- 5.9%
Ford Motor Credit Co.
Notes
7.38% due 10/28/09...................... 13,625,000 13,599,957
General Motors Acceptance Corp.
Notes
6.75% due 12/01/14...................... 2,910,000 2,860,798
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11...................... 2,475,000 2,477,398
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12...................... 269,000 267,916
General Motors Acceptance Corp.
Notes
7.56% due 12/01/14(8)................... 3,025,000 3,059,410
-----------
22,265,479
-----------
Food-Misc. -- 0.2%
Wornick Co.
Sec. Notes
10.88% due 07/15/11..................... 700,000 622,125
-----------
Funeral Services & Related Items -- 0.8%
Service Corp. International
Senior Notes
7.00% due 06/15/17...................... 2,075,000 2,090,562
Service Corp. International
Senior Notes
7.38% due 10/01/14...................... 155,000 161,200
Service Corp. International
Senior Notes
7.63% due 10/01/18...................... 155,000 163,913
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Funeral Services & Related Items (continued)
Stewart Enterprises, Inc.
Senior Notes
6.25% due 02/15/13....................... $ 850,000 $ 824,500
-----------
3,240,175
-----------
Gambling (Non-Hotel) -- 0.5%
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*..................... 975,000 1,043,250
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/12*...................... 938,000 994,280
-----------
2,037,530
-----------
Gas-Distribution -- 0.1%
Colorado Interstate Gas Co.
Senior Debentures
6.85% due 06/15/37....................... 500,000 524,940
-----------
Golf -- 0.2%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11....................... 1,000,000 890,000
-----------
Home Furnishings -- 0.4%
Simmons Co.
Senior Disc. Notes
10.00% due 12/15/14(6)................... 1,726,000 1,419,635
-----------
Hotel/Motel -- 0.2%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14....................... 775,000 754,656
-----------
Human Resources -- 0.1%
TeamHealth, Inc.
Company Guar. Notes
11.25% due 12/01/13...................... 325,000 342,875
-----------
Independent Power Producers -- 3.3%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(14).................. 7,085,000 7,545,525
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16....................... 3,700,000 3,801,750
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10...................... 200,000 231,000
Reliant Energy, Inc.
Sec. Notes
9.50% due 07/15/13....................... 1,002,000 1,090,927
-----------
12,669,202
-----------
Insurance-Life/Health -- 0.1%
Presidential Life Corp.
Senior Notes
7.88% due 02/15/09....................... 275,000 277,750
-----------
51
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Insurance-Property/Casualty -- 0.2%
Crum & Forster Holdings Corp.
Senior Notes
10.38% due 06/15/13.............. $ 850,000 $ 918,000
----------
Machinery-Farming -- 0.4%
Case Corp.
Notes
7.25% due 01/15/16............... 900,000 940,500
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09............... 500,000 500,000
----------
1,440,500
----------
Machinery-General Industrial -- 0.1%
Stewart & Stevenson LLC
Senior Notes
10.00% due 07/15/14*............. 250,000 261,875
----------
Medical Information Systems -- 0.3%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12.............. 975,000 972,563
----------
Medical Instruments -- 0.0%
Kyphon, Inc.
Senior Notes
1.25% due 02/01/14*.............. 125,000 123,281
----------
Medical Products -- 0.9%
CDRV Investors, Inc.
Senior Disc. Notes
9.63% due 01/01/15(6)............ 875,000 752,500
Encore Medical Finance LLC
Senior Sub. Notes
11.75% due 11/15/14*............. 950,000 973,750
Universal Hospital Services, Inc.
Senior Notes
10.13% due 11/01/11.............. 1,455,000 1,545,937
----------
3,272,187
----------
Medical-Biomedical/Gene -- 0.2%
Bio-Rad Laboratories, Inc.
Senior Sub. Notes
6.13% due 12/15/14............... 600,000 582,000
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12............... 250,000 241,563
----------
823,563
----------
Medical-Generic Drugs -- 0.2%
Mylan Labs, Inc.
Company Guar. Notes
6.38% due 08/15/15............... 775,000 765,313
----------
Medical-HMO -- 0.5%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*............. 1,900,000 1,947,500
----------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Medical-Hospitals -- 3.0%
Community Health Systems, Inc.
Senior Sec. Notes
6.50% due 12/15/12.................. $ 988,000 $ 1,017,640
HCA, Inc.
Senior Notes
6.25% due 02/15/13.................. 900,000 817,875
HCA, Inc.
Senior Notes
6.95% due 05/01/12.................. 820,000 791,300
HCA, Inc.
Sec. Notes
9.13% due 11/15/14*................. 1,325,000 1,416,094
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*................. 5,275,000 5,690,406
HCA, Inc.
Sec Notes
9.63% due 11/15/16*................. 1,450,000 1,566,000
-----------
11,299,315
-----------
Medical-Nursing Homes -- 0.4%
Genesis HealthCare Corp.
Senior Notes
8.00% due 10/15/13.................. 475,000 504,687
Sun Healthcare Group, Inc.
Sr Sub. Notes
9.13% due 04/15/15*................. 1,175,000 1,204,375
-----------
1,709,062
-----------
Metal Processors & Fabrication -- 0.2%
Metals USA, Inc.
Sec. Notes
11.13% due 12/01/15................. 725,000 804,750
-----------
Metal-Diversified -- 1.2%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15.................. 1,015,000 1,092,394
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17.................. 3,045,000 3,292,406
-----------
4,384,800
-----------
Miscellaneous Manufacturing -- 0.1%
American Railcar Industries, Inc.
Senior Notes
7.50% due 03/01/14*................. 325,000 334,750
-----------
Multimedia -- 0.1%
Haights Cross Operating Co.
Company Guar. Senior Notes
11.75% due 08/15/11................. 475,000 499,938
-----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(1)(2)(4)(11)... 2,150,000 0
-----------
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Non-Hazardous Waste Disposal -- 0.9%
Allied Waste North America, Inc.
Company Guar.
6.88% due 06/01/17............... $3,575,000 $ 3,583,937
-----------
Oil & Gas Drilling -- 0.1%
Pride International, Inc.
Senior Notes
7.38% due 07/15/14............... 350,000 358,750
-----------
Oil Companies-Exploration & Production -- 3.7%
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12............... 450,000 460,125
Brigham Exploration Co.
Senior Notes
9.63% due 05/01/14............... 775,000 782,750
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14*.............. 225,000 223,875
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15............... 850,000 839,375
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16............... 2,975,000 2,997,312
El Paso Production Holding Co.
Company Guar. Notes
7.75% due 06/01/13............... 3,525,000 3,683,625
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15............... 550,000 489,500
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14............... 300,000 276,000
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*.............. 1,150,000 1,129,875
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16............... 300,000 295,500
Sabine Pass LNG LP
Sec. Notes
7.25% due 11/30/13*.............. 400,000 403,000
Sabine Pass LNG LP
Sec. Notes
7.50% due 11/30/16*.............. 1,825,000 1,838,688
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10.............. 650,000 615,875
-----------
14,035,500
-----------
Oil-Field Services -- 0.3%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14............... 465,000 468,487
Hanover Compressor Co.
Company Guar. Senior Sec. Notes
8.63% due 12/15/10............... 275,000 288,750
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
Oil-Field Services (continued)
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11........... $ 550,465 $ 563,734
-----------
1,320,971
-----------
Paper & Related Products -- 0.9%
Bowater, Inc.
Notes
6.50% due 06/15/13........... 1,325,000 1,195,812
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09........... 1,125,000 1,096,875
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*.......... 400,000 402,000
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*.......... 600,000 601,500
-----------
3,296,187
-----------
Pipelines -- 4.0%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15........... 1,050,000 1,081,500
Copano Energy LLC
Senior Notes
8.13% due 03/01/16........... 1,750,000 1,811,250
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12........... 1,250,000 1,328,125
Dynegy-Roseton Danskammer
Pass Through Certs.
Series B
7.67% due 11/08/16........... 975,000 1,033,500
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22........... 1,775,000 2,154,163
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14........... 1,125,000 1,091,250
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16........... 250,000 260,625
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27........... 2,300,000 2,208,000
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28........... 1,175,000 1,258,033
The Williams Cos., Inc.
Notes
7.88% due 09/01/21........... 2,650,000 2,915,000
-----------
15,141,446
-----------
Printing-Commercial -- 0.3%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15*.......... 1,000,000 982,500
-----------
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Private Corrections -- 0.2%
Corrections Corp. of America
Company Guar. Notes
6.25% due 03/15/13................... $ 725,000 $ 725,000
----------
Publishing-Newspapers -- 0.1%
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................... 620,000 564,200
----------
Publishing-Periodicals -- 0.3%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 1,075,000 1,034,688
----------
Real Estate Investment Trusts -- 0.7%
National Health Investors, Inc.
Notes
7.30% due 07/16/07................... 1,120,000 1,121,291
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14................... 700,000 707,000
Trustreet Properties, Inc.
Senior Notes
7.50% due 04/01/15................... 725,000 789,720
----------
2,618,011
----------
Recycling -- 0.8%
Aleris International, Inc.
Senior Notes
9.00% due 12/15/14*.................. 1,450,000 1,529,750
Aleris International, Inc.
Senior Sub. Notes
10.00% due 12/15/16*................. 1,375,000 1,443,750
----------
2,973,500
----------
Rental Auto/Equipment -- 0.6%
H&E Equipment Services, Inc.
Company Guar. Notes
8.38% due 07/15/16................... 775,000 823,438
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13................... 1,425,000 1,464,187
----------
2,287,625
----------
Research & Development -- 0.3%
Alion Science and Technology Corp.
Senior Notes
10.25% due 02/01/15*................. 950,000 978,500
----------
Retail-Drug Store -- 0.3%
General Nutrition Centers, Inc.
Senior Notes
9.85% due 03/15/14*.................. 450,000 441,000
Rite Aid Corp.
Sec. Notes
8.13% due 05/01/10................... 750,000 770,625
----------
1,211,625
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Retail-Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11........................ $ 225,000 $ 250,313
----------
Retail-Petroleum Products -- 0.3%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14........................ 1,125,000 1,102,500
----------
Retail-Regional Department Stores -- 0.2%
Neiman-Marcus Group, Inc.
Company Guar. Notes
9.00% due 10/15/15........................ 700,000 766,500
----------
Retail-Restaurants -- 0.3%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14....................... 750,000 765,000
NPC International, Inc.
Company Guar.
9.50% due 05/01/14........................ 550,000 569,250
----------
1,334,250
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(2)(5)(12)............ 550,000 2,200
----------
Soap & Cleaning Preparation -- 0.0%
Johnsondiversey Holdings, Inc.
Disc. Notes
10.67% due 05/15/13(6).................... 125,000 129,063
----------
Special Purpose Entities -- 3.4%
AAC Group Holding Corp.
Senior Disc. Notes
10.25% due 10/01/12(6).................... 1,200,000 1,077,000
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15....................... 450,000 495,000
Bluewater Finance, Ltd.
Company Guar. Notes
10.25% due 02/15/12....................... 1,125,000 1,172,813
CCM Merger, Inc.
Notes
8.00% due 08/01/13*....................... 900,000 904,500
Chukchansi Economic Development Authority
Senior Notes
8.88% due 11/15/12*(8).................... 500,000 512,500
Consolidated Communications Holdings, Inc.
Senior Notes
9.75% due 04/01/12........................ 810,000 857,588
Hawker Beechcraft Acquisition Co. LLC/
Hawker Beechcraft Notes Co.
Senior Notes
8.88% due 04/01/15*....................... 375,000 387,656
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
Hawker Beechcraft Acquisition Co. LLC/
Hawker Beechcraft Notes Co.
Sr. Sub. Notes
9.75% due 04/01/17*.................... $ 575,000 $ 600,875
Hellas Telecommunications Luxembourg II
Sub. Notes
11.12% due 01/15/15*(8)................ 1,375,000 1,412,812
Jostens IH Corp.
Company Guar. Notes
7.63% due 10/01/12..................... 700,000 712,250
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12..................... 646,000 699,295
MXEnergy Holdings, Inc.
Senior Notes
12.90% due 08/01/11*(8)................ 1,050,000 966,000
PCA LLC/PCA Finance Corp.
Senior Notes
11.88% due 08/01/09+(2)(5)............. 2,000,000 360,000
PNA Intermediate Holding Corp.
Senior Notes
12.36% due 02/15/13*(8)................ 300,000 307,500
Seitel Acquisition Corp.
Senior Notes
9.75% due 02/15/14*.................... 750,000 759,375
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*.................... 1,200,000 1,237,500
Snoqualmie Entertainment Authority
Senior Notes
9.15% due 02/01/14*(8)................. 150,000 152,625
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16..................... 500,000 500,000
-----------
13,115,289
-----------
Specified Purpose Acquisitions -- 0.2%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11..................... 691,000 706,082
-----------
Steel-Producers -- 0.6%
Chaparral Steel Co.
Guar. Notes
10.00% due 07/15/13.................... 925,000 1,031,375
Steel Dynamics, Inc.
Senior Notes
6.75% due 04/01/15*.................... 1,200,000 1,201,500
-----------
2,232,875
-----------
Steel-Specialty -- 0.1%
Tube City IMS Corp.
Senior Sub. Notes
9.75% due 02/01/15*.................... 450,000 468,000
-----------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------
Storage/Warehousing -- 0.5%
Mobile Mini, Inc.
Senior Notes
9.50% due 07/01/13........... $ 847,000 $ 906,290
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*.......... 850,000 898,875
----------
1,805,165
----------
Telecom Services -- 1.7%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23........... 375,000 377,813
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23........... 1,525,000 1,479,250
Mastec, Inc.
Senior Notes
7.63% due 02/01/17*.......... 775,000 784,687
Qwest Corp.
Senior Notes
7.50% due 10/01/14........... 3,675,000 3,877,125
----------
6,518,875
----------
Telephone-Integrated -- 1.8%
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23........... 225,000 218,250
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14........... 1,750,000 1,789,375
Citizens Communications Co.
Bonds
7.13% due 03/15/19*.......... 1,025,000 1,014,750
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31........... 2,356,000 2,579,820
LCI International, Inc.
Senior Notes
7.25% due 06/15/07........... 425,000 426,062
Level 3 Financing, Inc.
Senior Notes
8.75% due 02/15/17*.......... 750,000 755,625
----------
6,783,882
----------
Television -- 1.4%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12........... 1,525,000 1,563,125
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13........... 1,525,000 1,492,594
Paxson Communication Corp.
Sec. Senior Notes
11.61% due 01/15/13*(8)...... 975,000 1,016,437
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Television (continued)
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14................... $ 725,000 $ 676,063
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11.................. 600,000 591,000
----------
5,339,219
----------
Textile-Products -- 0.1%
Collins & Aikman Floorcoverings, Inc.
Company Guar. Notes
9.75% due 02/15/10................... 280,000 284,900
----------
Theaters -- 1.2%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................... 2,750,000 2,798,125
Cinemark, Inc.
Senior Disc. Notes
9.75% due 03/15/14(6)................ 1,925,000 1,761,375
----------
4,559,500
----------
Transactional Software -- 0.4%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*.................. 1,350,000 1,390,500
----------
Transport-Air Freight -- 2.4%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................... 5,437,354 6,021,870
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19*.................. 845,713 884,827
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19................... 258,268 270,213
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11................... 574,341 557,111
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................... 1,301,358 1,522,589
----------
9,256,610
----------
Transport-Services -- 0.3%
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................... 1,225,000 1,169,875
----------
Travel Services -- 0.5%
TDS Investor Corp.
Senior Notes
9.88% due 09/01/14*.................. 1,375,000 1,440,312
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Travel Services (continued)
TDS Investor Corp.
Senior Notes
9.99% due 09/01/14*(8).................. $ 200,000 $ 204,000
TDS Investor Corp.
Senior Sub. Notes
11.88% due 09/01/16*.................... 100,000 109,625
------------
1,753,937
------------
Wire & Cable Products -- 0.1%
Belden CDT, Inc.
Sr. Sub. Notes
7.00% due 03/15/17*..................... 525,000 535,512
------------
Total Corporate Bonds & Notes
(cost $283,229,495)..................... 292,048,876
------------
FOREIGN CORPORATE BONDS & NOTES -- 10.1%
Building & Construction-Misc. -- 0.3%
North American Energy Partners, Inc.
Company Guar. Notes
8.75% due 12/01/11...................... 1,010,000 1,030,200
------------
Building Products-Doors & Windows -- 0.1%
Masonite International Corp.
Senior Sub. Notes
11.00% due 04/06/15*.................... 233,000 216,690
------------
Chemicals-Plastics -- 0.5%
Montell Finance Co. BV
Company Guar. Notes
8.10% due 03/15/27*..................... 1,875,000 1,875,000
------------
Chemicals-Specialty -- 0.6%
Rhodia SA
Senior Notes
8.88% due 06/01/11...................... 2,273,000 2,369,602
------------
Computers-Memory Devices -- 0.2%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16...................... 850,000 854,250
------------
Diversified Manufactured Operations -- 0.1%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*..................... 500,000 517,500
------------
Electronic Components-Misc. -- 0.2%
NXP BV/NXP Funding LLC
Senior Notes
9.50% due 10/15/15*..................... 885,000 913,763
------------
Electronic Components-Semiconductors -- 0.3%
Avago Technologies Finance, Ltd.
Company Guar. Notes
10.13% due 12/01/13..................... 925,000 1,001,312
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11...................... 325,000 335,563
------------
1,336,875
------------
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Food-Meat Products -- 0.2%
JBS SA
Company Guar. Notes
10.50% due 08/04/16*....................... $ 625,000 $ 710,938
----------
Housewares -- 0.8%
Vitro SA de CV
Senior Notes
9.13% due 02/01/17*........................ 2,800,000 2,870,000
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Series B
Sec. Notes
11.50% due 08/30/10+(2)(5)................. 4,460,000 4,460
----------
Medical-Drugs -- 1.5%
Angiotech Pharmaceuticals, Inc.
Company Guar.
7.75% due 04/01/14......................... 700,000 645,750
Angiotech Pharmaceuticals, Inc.
Senior Notes
9.11% due 12/01/13*(8)..................... 850,000 868,063
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11......................... 1,875,000 1,842,187
Elan Finance PLC
Senior Notes
8.88% due 12/01/13*........................ 825,000 838,406
Elan Finance PLC
Company Guar. Senior Notes
9.36% due 11/15/11(8)...................... 1,350,000 1,373,625
----------
5,568,031
----------
Metal Processors & Fabrication -- 0.0%
International Utility Structures, Inc.
Senior Sub. Notes
10.75% due 02/01/08+(1)(2)(5)(13).......... 2,150,000 43,000
----------
Music -- 0.2%
Corporacion Interamericana de
Entetenimiento SA de CV
Senior Notes
8.88% due 06/14/15*........................ 795,000 812,888
----------
Oil Companies-Exploration & Production -- 0.8%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13......................... 1,400,000 1,368,500
OPTI Canada, Inc.
Company Guar. Notes
8.25% due 12/15/14*........................ 675,000 702,000
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13......................... 1,025,000 1,022,437
----------
3,092,937
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Paper & Related Products -- 0.6%
Abitibi-Consolidated, Inc.
Notes
6.00% due 06/20/13..................... $ 780,000 $ 663,000
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10..................... 1,000,000 1,012,500
Abitibi-Consolidated, Inc.
Debentures
8.85% due 08/01/30..................... 490,000 436,100
----------
2,111,600
----------
Printing-Commercial -- 0.2%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*.................... 775,000 784,688
----------
Retail-Drug Store -- 0.3%
Jean Coutu Group (PJC), Inc.
Senior Sub. Notes
8.50% due 08/01/14..................... 1,025,000 1,112,125
----------
Satellite Telecom -- 1.9%
Intelsat Bermuda, Ltd.
Senior Notes
8.87% due 01/15/15*(8)................. 1,670,000 1,703,400
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16*................... 1,650,000 1,872,750
Intelsat Intermediate Holding Co., Ltd.
Company Guar. Notes
9.25% due 02/01/15(6).................. 2,160,000 1,792,800
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13..................... 1,975,000 1,742,937
----------
7,111,887
----------
Telecom Services -- 0.9%
Digicel Group, Ltd.
Senior Notes
8.88% due 01/15/15*.................... 175,000 169,750
Global Crossing UK Finance PLC
Company Guar.
10.75% due 12/15/14.................... 575,000 623,875
Telenet Group Holdings NV
Disc. Notes
11.50% due 06/15/14*(6)................ 2,714,000 2,544,375
----------
3,338,000
----------
Transport-Marine -- 0.3%
Navios Maritime Holdings, Inc.
Senior Notes
9.50% due 12/15/14*.................... 650,000 676,812
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14..................... 625,000 634,375
----------
1,311,187
----------
57
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Principal
Amount/ Value
Security Description Shares (Note 2)
-------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Transport-Rail -- 0.1%
Grupo Transportacion Ferroviaria
Mexicana SA de CV
Senior Notes
9.38% due 05/01/12........................ $ 325,000 $ 349,374
-----------
Total Foreign Corporate Bonds & Notes
(cost $41,248,450)........................ 38,334,995
-----------
LOAN AGREEMENTS -- 1.0%
Beverages-Non-alcoholic -- 0.2%
Le-Natures, Inc.
9.39% due 01/01/11(4)(5).................. 1,200,000 751,200
-----------
Diversified Financial Services -- 0.3%
Wind Acquisition Holdings Finance S.A.
12.61% due 12/21/11....................... 1,200,000 1,231,750
-----------
Oil Companies-Exploration & Production -- 0.2%
Sandridge Energy, Inc.
8.63% due 04/01/15(2)..................... 600,000 610,500
-----------
Travel Services -- 0.3%
Travelport Holdings, Ltd................... 1,000,000 970,000
-----------
Total Loan Agreements
(cost $4,001,750)......................... 3,563,450
-----------
COMMON STOCK -- 5.4%
Casino Services -- 0.1%
Capital Gaming International, Inc.+(1)(2).. 77 0
Shreveport Gaming Holdings, Inc.+(1)(2)(3). 14,150 325,776
-----------
325,776
-----------
Cellular Telecom -- 4.5%
iPCS, Inc.+(2)(3).......................... 344,285 16,866,522
-----------
Medical-Outpatient/Home Medical -- 0.1%
Critical Care Systems International,
Inc.+(1)(2)(3)............................ 69,700 487,900
-----------
Oil-Field Services -- 0.7%
Trico Marine Services, Inc.+............... 74,859 2,789,246
-----------
Total Common Stock
(cost $7,461,978)......................... 20,469,444
-----------
PREFERRED STOCK -- 1.2%
Oil Companies-Exploration & Production -- 1.0%
EXCO Resources, Inc. Convertible
7.00%, Series A-1(1)(3)................... 62 620,000
EXCO Resources, Inc.
11.00%, Series A-2(1)(3).................. 256 2,560,000
Transmeridian Exploration, Inc. 15.00%..... 6,195 576,135
-----------
3,756,135
-----------
Television -- 0.2%
ION Media Networks, Inc. 13.25%(7)......... 129 1,045,200
-----------
Total Preferred Stock
(cost $4,935,366)......................... 4,801,335
-----------
WARRANTS -- 0.0%
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10
(strike price $4.31)+(1).................. 44,885 29,175
-----------
Shares/
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
WARRANTS (continued)
Telecom Services -- 0.0%
KMC Telecom Holdings, Inc
Expires 01/31/08
(strike price $0.01)+(1)(2)......... 3,650 $ 0
Leap Wireless International, Inc.
Expires 04/15/10
(strike price $96.80)+*(1)(2)....... 2,250 0
------------
0
------------
Telephone-Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10
(Strike Price $0.00)+*(1)(2)........ 2,650 27
------------
Transport-Equipment & Leasing -- 0.0%
Maxim Crane Works Holdings, Inc.
Expires 01/20/10
(Strike Price $30.05)+(1)(2)(3)..... 1,587 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10
(Strike Price $31.58)+(1)(2)(3)..... 1,619 0
Maxim Crane Works Holdings, Inc.
Expires 01/20/10
(Strike Price $33.04)+(1)(2)(3)..... 1,182 0
------------
0
------------
Total Warrants
(cost $1,436,220)................... 29,202
------------
Total Long-Term Investment Securities
(cost $342,388,259)................. 359,323,802
------------
REPURCHASE AGREEMENT -- 4.4%
UBS Securities, LLC Joint Repurchase
Agreement
(cost $16,603,000)(10).............. $16,603,000 16,603,000
------------
TOTAL INVESTMENTS
(cost $358,991,259)(9).............. 99.0% 375,926,802
Other assets less liabilities.......... 1.0 3,884,394
----------- ------------
NET ASSETS -- 100.0% $379,811,196
=========== ============
- --------
+ 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 March 31, 2007, the
aggregate value of these securities was $91,628,883 representing 24.5% of
net assets. Unless otherwise indicated these securities are not considered
to be illiquid.
(1) Fair valued security; see Note 2
(2) Illiquid security
(3) To the extent permitted by the Statement of Additional Information, the
High Yield Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are
valued pursuant to Note 2. Restricted securities held by a Fund may not be
sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of widely
58
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of March 31, 2007, 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
Systems
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 0.13%
EXCO
Resources,
Inc.
7.00%, Series
A-1 Preferred
Stock......... 3/29/2007 62 620,000 620,000 10,000 0.16%
EXCO
Resources,
Inc.
11.00%,
Series A-2
Preferred
Stock......... 3/29/2007 256 2,560,000 2,560,000 10,000 0.67%
ICO North
America, Inc.
7.50% due
08/15/09...... 8/11/2005 $ 75,000 75,000 76,500 1 0.02%
iPCS, Inc.
Common
Stock......... 7/28/2005 7,313 0
7/20/2004 336,972 5,223,066
-------- ----------
344,285 5,223,066 16,866,522 49 4.44%
Maxim Crane
Works
Holdings, Inc.
Warrants
(Strike Price
$30.05)....... 1/28/2005 1,587 432,280 0 0 0.00%
Maxim Crane
Works
Holdings, Inc.
Warrants
(Strike Price
$31.58)....... 1/28/2005 1,619 441,126 0 0 0.00%
Maxim Crane
Works
Holdings, Inc.
Warrants
(Strike Price
$33.04)....... 1/28/2005 1,182 322,058 0 0 0.00%
Market
Value % of
Acquisition Principal/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ----------- ------ ------
Sandridge
Energy, Inc.
8.63% due
04/01/15...... 03/07/2007 $ 600,000 $600,000 $ 610,500 1 0.16%
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 0.09%
Southern
Energy, Inc.
7.90% due
07/15/09...... 1/25/2006 3,525,000 0 0 0.00 0.00%
----------- ----
$21,547,197 5.67%
=========== ====
(4) Company has filed Chapter 11 bankruptcy protection.
(5) Security in default
(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 up or
down at each reset date. The rate reflected is as of March 31, 2007.
(9) See Note 5 for cost of investments on a tax basis
(10) See Note 2 for details of Joint Repurchase Agreement.
(11) Bond is in default and did not pay principal at maturity
(12) Company has filed for Chapter 7 bankruptcy protection.
(13) Company has filed bankruptcy in country of issuance.
(14) Company emerged from bankruptcy subsequent to March 31, 2007.
ADR --America Depository Receipt
See Notes to Financials Statements
59
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- March 31, 2007 -- (unaudited)
Allocation by States*
Ohio......................... 22.5%
New York..................... 15.2
Massachusetts................ 12.6
New Jersey................... 10.5
Indiana...................... 6.5
Connecticut.................. 4.6
New Mexico................... 4.6
Texas........................ 4.4
Michigan..................... 4.2
South Dakota................. 3.8
Illinois..................... 2.9
Alabama...................... 2.7
South Carolina............... 2.7
Tennessee.................... 1.2
California................... 0.2
Georgia...................... 0.3
Registered Investment Company 0.1
----
99.0%
====
Credit Quality Allocation+#
AAA....... 87.6%
AA........ 5.9
A......... 4.3
Not Rated@ 2.2
-----
100.0%
=====
- --------
* Calculate 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.
60
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 91.8%
Alabama -- 2.7%
Auburn University
Series A
5.00% due 06/01/32(1)........................... $1,500,000 $1,589,205
----------
California -- 0.2%
State of California
5.50% due 04/01/28.............................. 115,000 126,239
----------
Connecticut -- 4.6%
State of Connecticut,
Refunded, Series B,
5.00% due 06/01/14(1)........................... 2,500,000 2,705,900
----------
Georgia -- 0.3%
Georgia Municipal Electric Authority,
Power Revenue, Series Y,
6.40% due 01/01/09(1)........................... 60,000 62,808
Georgia Municipal Electric Authority,
Power Revenue, Series Y,
6.40% due 01/01/13(1)........................... 85,000 93,759
----------
156,567
----------
Illinois -- 2.9%
Chicago Metropolitan Water Reclamation District-
Greater Chicago
Series C
5.25% due 12/01/33.............................. 1,500,000 1,737,825
----------
Indiana -- 6.5%
Indiana Transportation Finance Authority
Highway Revenue, Series A,
5.25% due 06/01/26(1)........................... 3,500,000 3,829,035
----------
Massachusetts -- 12.6%
Massachusetts State Water Resources Authority,
Revenue Bonds, Series A,
5.00% due 08/01/24(1)........................... 3,910,000 4,133,026
University Massachusetts Building Authority
Project Revenue, Series 04-1,
5.25% due 11/01/27(1)........................... 3,000,000 3,302,580
----------
7,435,606
----------
Michigan -- 4.2%
Detroit Michigan Sewage Disposal
Revenue
4.19% due 07/01/32(1)(3)........................ 2,500,000 2,500,000
----------
New Jersey -- 10.5%
Garden State New Jersey Preservation Trust
Open Space And Farmland Preservation,
Series A,
5.80% due 11/01/17(1)........................... 2,500,000 2,857,000
Tobacco Settlement Financing Corp.
6.13% due 06/01/42(1)........................... 3,000,000 3,343,080
----------
6,200,080
----------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
New Mexico -- 4.6%
New Mexico Finance Authority Transportation,
Series A,
5.25% due 06/15/21(1)......................... $2,500,000 $ 2,693,600
-----------
New York -- 12.0%
City of Niagara Falls New York
Unrefunded
7.50% due 03/01/13(1)......................... 410,000 490,065
City of Niagara Falls New York
Prerefunded
7.50% due 03/01/13(1)......................... 35,000 42,143
City of Niagara Falls New York
Unrefunded
7.50% due 03/01/14(1)......................... 510,000 622,990
City of Niagara Falls New York
Prerefunded
7.50% due 03/01/14(1)......................... 45,000 55,462
New York State Environmental Facilities Corp.,
Series A,
4.75% due 06/15/31............................ 2,000,000 2,072,280
New York State Thruway Authority,
Series G,
5.25% due 01/01/27(1)......................... 1,500,000 1,632,645
Sales Tax Asset Receivables Corp.,
Series A,
5.25% due 10/15/27(1)......................... 2,000,000 2,170,620
-----------
7,086,205
-----------
Ohio -- 22.5%
Cincinnati, Ohio City School District
Classroom Facilities,
General Obligation,
5.00% due 12/01/24(1)......................... 3,000,000 3,231,840
Cuyahoga County, Ohio Revenue,
Series A,
5.75% due 01/01/24............................ 2,000,000 2,176,520
Franklin County, Ohio Hospital Revenue,
Series C,
5.25% due 05/15/23............................ 3,000,000 3,198,120
Olentangy Local School District Ohio,
Series A,
5.25% due 12/01/27(1)......................... 3,250,000 3,561,967
Woodridge, Ohio, Woodmore Local School
District,
6.80% due 12/01/14(1)......................... 1,000,000 1,124,880
-----------
13,293,327
-----------
South Dakota -- 3.8%
South Dakota State Health & Educational
Facilities Revenue,
Refunding,
6.25% due 07/01/10(1)......................... 2,120,000 2,274,845
-----------
61
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2007 -- (continued)
Shares/
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
MUNICIPAL BONDS & NOTES (continued)
Texas -- 4.4%
Dallas Area Rapid Transit Revenue
5.00% due 12/01/32(1).............. $2,500,000 $ 2,643,075
-----------
Total Long-Term Investment Securities
(cost $51,829,889)................. 54,271,509
-----------
SHORT-TERM INVESTMENT SECURITIES -- 7.2%
New York -- 3.2%
City of New York NY
Series A7
3.76% due 04/23/07(1)(2)........... 900,000 900,000
Long Island Power Authority,
Sub. Series 7-A,
3.59% due 04/23/07(1)(2)........... 1,000,000 1,000,000
-----------
1,900,000
-----------
South Carolina -- 2.7%
Piedmont Municipal Power Agency,
South Carolina, Electric Revenue,
3.65% due 04/25/07(1)(2)........... 600,000 600,000
Piedmont Municipal Power Agency,
South Carolina, Electric Revenue,
Sub. Series B-1,
3.65% due 04/25/07(1)(2)........... 1,000,000 1,000,000
-----------
1,600,000
-----------
Tennessee -- 1.2%
Jackson Tennessee Energy Authority
3.66% due 04/19/07(1)(2)........... 100,000 100,000
Jackson Tennessee Energy Authority
3.66% due 04/19/07(1)(2)........... 600,000 600,000
-----------
700,000
-----------
Registered Investment Company -- 0.1%
SSGA Tax Free Money Market Fund..... 29,589 29,589
-----------
Total Short-Term Investment Securities
(cost $4,229,589).................. 4,229,589
-----------
TOTAL INVESTMENTS --
(cost $56,059,478)@................ 99.0% 58,501,098
Other assets less liabilities......... 1.0 619,070
---------- -----------
NET ASSETS -- 100.0 % $59,120,168
========== ===========
- --------
@ 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 $49,160,525 or 83.2% of Net Assets.
(2)Variable rate security -- the rate reflected is as of March 31, 2007;
maturity date reflects next reset date.
(3)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of March 31, 2007.
See Notes to Financial Statements
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007
Note 1. Organization
The Trust 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, as a series of the
Trust, 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 U.S. government
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 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 Fund's 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
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (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 the
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 fees. 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 contain the obligation to
indemnify others. The Funds' maximum exposure under these arrangements is
unknown. Currently, however, the Funds expect the risk of loss to be remote.
Note 2. Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates. The
following is a summary of the significant accounting policies followed by
the Funds in the preparation of their financial statements:
Security Valuations: Stocks are generally valued based upon closing sales
prices reported on recognized securities exchanges. Stocks listed on the
NASDAQ are valued using the NASDAQ Official Closing Price ("NOCP").
Generally, the NOCP will be the last sale price unless the reported trade
for the stock is outside the range of the bid/ask price. In such cases, the
NOCP will be normalized to the nearer of the bid or ask price. For listed
securities having no sales reported and for unlisted securities, such
securities will be valued based upon the last reported bid price.
As of the close of regular trading on the New York Stock Exchange ("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 Funds are 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.
Forward contracts are valued at the 4:00 p.m. eastern time forward rate.
Other securities are valued on the basis of last sale or bid price (if a
last sale price is not available) in what is, in the opinion of the Adviser,
the broadest and most representative market, that may be either a securities
exchange or over-the-counter market. 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.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (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.
Repurchase Agreements: The Funds, along with other affiliated registered
investment companies, pursuant to exemptive relief granted by the Securities
and Exchange Commission, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. For repurchase agreements and joint repurchase agreements, the
Funds' custodian takes possession of the collateral pledged for investments
in such repurchase agreements. The underlying collateral is valued daily on
a mark to market basis to ensure that the value, at the time the agreement
is entered into, is equal to at least 102% of the repurchase price,
including accrued interest. In the event of default of the obligation to
repurchase, a Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by
the Fund may be delayed or limited.
As of March 31, 2007, 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 18.28% $41,132,000
GNMA...................... 8.13 18,288,000
Strategic Bond............ 8.76 19,710,000
High Yield Bond........... 7.38 16,603,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Securities LLC, dated March 31, 2007, bearing interest at a rate of
5.12% per annum, with a principal amount of $225,000,000 a repurchase price
of $225,096,000, and a maturity date of April 2, 2007. The repurchase
agreement is is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ------------------ -------- -------- ------------ ------------
U.S. Treasury Inflation Index Notes 1.63% 01/15/15 $225,000,000 $229,500,000
Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders: Security transactions are recorded on a trade
date basis. Realized gains and losses on sales of investments are calculated
on the identified cost basis. Interest income, is accrued daily except when
collection is not expected. Dividend income is recorded on the ex-dividend
date except for certain dividends from foreign securities, which are
recorded as soon as the Fund is informed after the ex-dividend date. For
financial statement purposes, the Funds amortize all premiums and accrete
all discounts on fixed income securities. Funds which earn foreign income
and capital gains may be subject to foreign withholding taxes at various
rates. Under applicable foreign law, a withholding tax may be imposed on
interest, dividends, and capital gains at various rates.
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.
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
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.
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. However, Registered Investment
Companies are not required to implement FIN 48 until their last net asset
value calculation in the first required financial statement reporting period
for fiscal years beginning after December 15, 2006. 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 March 31, 2007, the Trust does 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.
Investment Securities Loaned: During the year ended March 31, 2007, U.S.
Government Securities Fund and GNMA Fund participated in securities lending
with qualified brokers. In lending portfolio securities to brokers the Funds
receive cash as collateral against the loaned securities, which must be
maintained at not less than 102% of the market value of the loaned
securities during the period of the loan. The Funds may use the cash
collateral received to invest in short-term investments which earn interest
income or to cover bank overdrafts. Any interest earned from the investment
of the collateral is recorded by the Funds net of the portion of interest
that is rebated to the borrowing broker. If the amounts are used to cover
bank overdrafts, the broker rebates incurred are reflected as interest
expense on the Statement of Operations. During the period ended March 31,
2007, $7,687 and $45,198 of broker rebates were reclassified to interest
expense for the U.S. Government Securities Fund and GNMA Fund, respectively.
As with other extensions of credit, should the borrower of the securities
fail financially, the Funds may bear the risk of delay in recovery or may be
subject to replacing the loaned securities by purchasing them with the cash
collateral held, which may be less than 100% of the market value of such
securities at the time of replacement.
At March 31, 2007, there were no loaned securities outstanding in the U.S.
Government Securities Fund or the GNMA Fund.
Forward Foreign Currency Contracts: Certain Funds may enter into forward
foreign currency contracts ("forward contracts") to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates or to enhance return. A forward contract is an
agreement between two parties to buy or sell currency at a set price on a
future date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market daily using the
forward rate and the change in market value is recorded by the Fund as
unrealized gain or loss. On the settlement date, the Fund records either
realized gains or losses when the contract is closed equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Risks may arise upon entering into these contracts
from the potential inability of counterparties
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. Forward contracts
involve elements of risk in excess of the amount reflected in the Statement
of Assets and Liabilities. The Trust bears the risk of an unfavorable change
in the foreign exchange rate underlying the forward contract.
Foreign Currency Translation: The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars based on the exchange rate of such currencies
against U.S. dollars on the date of valuation.
The Funds do 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
Funds do not isolate the effect of changes in foreign exchange rates from
the changes in the market prices of portfolio securities sold during the
year.
Realized foreign exchange gains and losses on other assets and liabilities
and change in unrealized foreign exchange gains and losses on other assets
and liabilities include foreign exchange gains and losses from currency
gains or losses realized between the trade and settlement dates of
securities transactions, the difference between the amounts of interest,
dividends and foreign withholding taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid and changes in the
unrealized foreign exchange gains and losses relating to other assets and
liabilities arising as a result of changes in the exchange rate.
Short Sales: Each Fund may engage in "short sales against the box." A short
sale is against the box to the extent that the Fund contemporaneously owns,
or has the right to obtain without payment, securities identical to those
sold short. In addition, the High Yield Bond Fund ("Fund") may sell a
security it does not own in anticipation of a decline in the market value of
that security "short sales." To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at market price
at the time of replacement. The price at such time may be more or less than
the price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender any dividends or
interest that accrue during the period of the loan. To borrow the security,
the Fund also may be required to pay a premium, which would increase the
cost of the security sold. The proceeds of the short sale will be retained
by the broker, to the extent necessary to meet margin requirements, until
the short position is closed out. Until the Fund replaces a borrowed
security, the Fund will maintain daily a segregated account, containing cash
or liquid securities, at such a level that (i) the amount deposited in the
account plus the amount deposited with the broker as collateral will equal
the current value of the security sold short and (ii) the amount deposited
in the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the
time it was sold short. Liabilities for securities sold short are reported
at market value in the financial statements. Such liabilities are subject to
off balance sheet risk to the extent of any future increases in market value
of the securities sold short. The ultimate liability for securities sold
short could exceed the liabilities recorded in the Statement of Assets and
Liabilities. The Fund bears the risk of potential inability of the broker to
meet their obligation to perform. At March 31, 2007, none of the Funds had
short sales outstanding.
Mortgage-Backed Dollar Rolls: Certain Funds may enter into dollar roll
transactions using "to be announced" ("TBA") mortgage-backed securities
("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as
purchase/sale transactions. Any difference between the purchase and sale
price is recorded as a realized gain or loss on the date the transaction is
entered into. During the period ended March 31, 2007 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
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
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.
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 Trustees, including a majority of the Disinterested
Trustees.
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
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. The voluntary fee waivers and/or
expense reimbursements will continue indefinitely but may be terminated at
any time at the option of AIG SunAmerica.
Fund Percentage
- ---- ----------
Tax Exempt Insured Fund Class C 1.95%
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
For the year ended March 31, 2007, AIG SunAmerica has agreed to reimburse
expenses as follows:
Fund Amount
- ---- --------
U.S. Government Securities Class A $559,429
U.S. Government Securities Class B 72,674
U.S. Government Securities Class C 37,611
GNMA Class A...................... 451,371
GNMA Class B...................... 117,582
GNMA Class C...................... 61,416
High Yield Bond Class A........... 177,537
High Yield Bond Class B........... 55,370
High Yield Bond Class C........... 80,335
Tax Exempt Insured Class C........ 4,056
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 in accordance with the provisions of Rule 12b-1 under
the 1940 Act (each a "Plan" and collectively the "Plans"). Hereinafter
referred to as the "Class A Plan," the "Class B Plan" and the "Class C
Plan." In adopting the Class A Plan, the Class B Plan and the Class C Plan,
the Trustees determined that there was a reasonable likelihood that each
such 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.
The Class A, Class B and Class C Plans, provide that the Trust, on behalf of
the respective classes, shall pay the Distributor a distribution fee at an
annual rate of up to 0.10%, 0.75% and 0.75%, of average daily net assets of
such Fund's Class A, Class B and Class C shares respectively, 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 also provide that each class of shares
of the Trust 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 to compensate the Distributor and
securities firms for account maintenance activities. Accordingly, for the
year ended March 31, 2007, 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 year
ended March 31, 2007, 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 Class C
------------------------------------------------------- -------------- --------------
Contingent Contingent Contingent
Sales Affiliated Non-affiliated Deferred Sales Deferred Sales Deferred Sales
Fund Charges Broker-dealers Broker-dealers Charges Charges Charges
- ---- ---------- -------------- -------------- -------------- -------------- --------------
U.S. Government Securities $ 121,989 $ 9,990 $ 90,771 $1,288 $ 63,849 $ 1,243
GNMA...................... 91,347 28,278 47,210 4,796 230,339 3,138
Strategic Bond............ 1,110,696 137,002 787,540 2,889 100,970 45,025
High Yield Bond........... 1,016,367 95,124 748,659 5,594 121,825 23,953
Tax Exempt Insured........ 35,371 11,753 17,310 -- 16,691 209
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
The Trust has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent in connection with the services that it offers to
the shareholders of the Funds. The Service Agreement permits the Funds to
compensate SAFS for services rendered, based upon an annual rate of 0.22% of
average daily net assets, which is approved annually by the Trustees. For
the year ended March 31, 2007, 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 March 31, 2007
- ---- -------- --------------
US Government Securities Fund Class A $323,743 $28,115
US Government Securities Fund Class B 37,088 2,806
US Government Securities Fund Class C 19,095 1,831
GNMA Fund Class A.................... 669,814 58,127
GNMA Fund Class B.................... 144,606 10,853
GNMA Fund Class C.................... 77,462 5,807
Strategic Bond Fund Class A.......... 803,859 82,513
Strategic Bond Fund Class B.......... 110,998 10,368
Strategic Bond Fund Class C.......... 315,285 38,436
High Yield Bond Fund Class A......... 421,492 46,029
High Yield Bond Fund Class B......... 114,957 9,704
High Yield Bond Fund Class C......... 183,044 16,865
Tax Exempt Insured Fund Class A...... 116,553 9,379
Tax Exempt Insured Fund Class B...... 12,837 960
Tax Exempt Insured Fund Class C...... 9,622 768
At March 31, 2007, affiliate funds of the SunAmerica Focused Series, Inc.
owned 10%, 53% and 35% of the outstanding Class A Shares of U.S. Government
Securities Fund, GNMA Fund, and Strategic Bond Fund, respectively. At March
31, 2007, AIG SunAmerica owned 7% 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 year ended March 31, 2007 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)........................... $ -- $ -- $837,118,313 $298,100,255 $45,884,492
Sales (excluding U.S. government
securities)........................... -- -- 516,960,398 263,195,679 50,604,149
Purchases of U.S. government securities 376,359,525 673,391,602 205,648,006 -- --
Sales of U.S. government securities.... 402,905,344 567,930,880 145,097,073 -- --
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (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, 2007 For the year ended March 31, 2007
--------------------------------------- ------------------------------------
Long-term
Gains/Capital Unrealized
Ordinary Loss Appreciation Ordinary Long-term
Fund Income CarryForward (Depreciation) Income Capital Gains Tax Exempt
- ---- ---------- ------------- -------------- ----------- ------------- ----------
U.S. Government Securities $ 405,476 $(11,218,496) $(2,060,965) $ 7,185,444 $ -- $ --
GNMA...................... 864,272 (4,166,987) (2,662,397) 17,110,566 -- --
Strategic Bond............ 1,153,693 (23,321,409) 13,789,453 26,453,510 -- --
High Yield Bond........... 585,040 (86,646,972) 16,787,099 21,478,406 -- --
Tax Exempt Insured........ 133,027* 360,488 2,442,373 -- 436,699 2,040,644
Tax Distributions
For the year ended March 31, 2006
------------------------------------
Ordinary Long-term
Fund Income Capital Gains Tax Exempt
- ---- ----------- ------------- ----------
U.S. Government Securities......................................... $ 7,599,387 $ -- $ --
GNMA............................................................... 17,568,716 175,792 --
Strategic Bond..................................................... 10,239,110 -- --
High Yield Bond.................................................... 21,693,351 -- --
Tax Exempt Insured................................................. -- 716,341 2,165,823
- --------
* Includes tax exempt distributable earnings of $29,773.
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......................................... $199,069,462 $417,657,458 $691,808,607 $359,144,213 $56,058,725
============ ============ ============ ============ ===========
Appreciation................................. 457,607 2,136,267 18,353,961 27,210,739 2,495,421
Depreciation................................. (2,518,572) (4,798,665) (4,660,805) (10,428,150) (53,048)
------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ (2,060,965) $ (2,662,398) $ 13,693,156 $ 16,782,589) $ 2,442,373
============ ============ ============ ============ ===========
As of March 31, 2007, 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 2008 2009 2010 2011 2012 2013 2014 2015
- ---- ---------- ---------- ----------- ----------- ---- ---- ---------- ----------
U.S. Government Securities $7,263,249 $ -- $ -- $ -- $-- $-- $ 271,576 $3,683,671
GNMA...................... -- -- -- -- -- -- 1,498,599 2,668,388
Strategic Bond............ 1,214,819 5,601,470 6,464,175 10,040,945 -- -- -- --
High Yield Bond........... -- 5,402,440 32,249,552 48,994,980 -- -- -- --
Included in the capital loss carryforward amounts at March 31, 2007 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 Strategic Income Fund $2,727,955
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
As a result of reorganizations into some of these portfolios during the
period ended March 31, 2002, certain capital loss carryforwards may be
subject to limitations on use pursuant to applicable U.S. Federal Income Tax
Law. Therefore, it is possible not all of these capital losses will be
available for use.
The Funds indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended March 31, 2007:
Capital Loss
Carryforward
Fund Utilized
- ---- ------------
Strategic Bond Fund. $4,314,618
High Yield Bond Fund 3,520,928
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, 2007, the Funds elected to defer capital losses
as follows:
Deferred Deferred
Post-October Post-October
Fund Capital Loss Currency Loss
- ---- ------------ -------------
U.S. Government Securities $115,204 $--
GNMA...................... 368,974 --
Strategic Bond............ 218,219 --
High Yield Bond........... -- --
Tax Exempt Insured........ -- --
For the period ended March 31, 2007, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to net paydown adjustments, expiration of capital loss carry forward
amounts and treatment of foreign currency to the components of net assets as
follows:
Accumulated Accumulated
Undistributed Undistributed
Net Investment Net Realized Capital
Fund Income (Loss) Gain (Loss) Paid-in
- ---- -------------- ------------- ---------
U.S. Government Securities $ 356,143 $ 641,693 $(997,836)
GNMA...................... 1,111,679 (1,111,679) --
Strategic Bond............ (277,500) 277,500 --
High Yield Bond........... 545,386 (545,386) --
Tax Exempt Insured........ (293) 297 (4)
Note 6. Security Transactions with Affiliated Funds
The Funds are permitted to purchase or sell securities from or to certain
other affiliated funds under specified conditions outlined in procedures
adopted by the Board of Trustees of the Trust. The procedures have been
designed to ensure that any purchase or sale of securities by a Fund from or
to another fund or portfolio that is or could be considered an affiliate by
virtue of having a common investment adviser (or affiliated investment
adviser), common directors or trustees and/or common officers complies with
Rule 17a-7 under the 1940 Act. Further, as defined under the procedures,
each transaction is effected at the current market price. For the period
ended March 31, 2007, the following Funds engaged in security transactions
with affiliated funds:
Cost of Proceeds Realized
Fund Purchases from sales Gain\Loss
- ---- ----------- ----------- ----------
Strategic Bond. $21,272,941 $ -- $ --
High Yield Bond -- 25,413,697 1,042,601
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
Note 7. 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 For the For the
year ended year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006
------------------------ ------------------------ --------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold(1)(2)(3)(4) 3,646,252 $ 33,613,249 3,833,993 $ 35,900,779 282,251 $ 2,588,038 308,662 $ 2,907,116
Reinvested shares...... 526,641 4,833,737 525,900 4,936,255 49,844 457,468 63,611 597,394
Shares redeemed(1)(3).. (4,206,287) (38,554,728) (6,513,774) (61,084,959) (842,993) (7,715,872) (1,150,867) (10,789,192)
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase (decrease) (33,394) $ (107,742) (2,153,881) $(20,247,925) (510,898) $(4,670,366) (778,594) $ (7,284,682)
========== ============ ========== ============ ======== =========== ========== ============
U.S. Government Securities Fund
--------------------------------------------------
Class C
--------------------------------------------------
For the For the
year ended year ended
March 31, 2007 March 31, 2006
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 496,953 $ 4,562,238 290,146 $ 2,736,476
Reinvested shares...... 27,739 254,466 26,443 247,808
Shares redeemed(2)(4).. (358,841) (3,275,190) (474,314) (4,455,172)
---------- ------------ ---------- ------------
Net increase (decrease) 165,851 $ 1,541,514 (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 year ended March 31, 2007, includes automatic conversion of 219,512
shares of Class B shares in the amount of $1,837,805 to 219,626 shares of
Class A shares in the amount of $1,837,805.
(4)For the year ended March 31, 2007, includes automatic conversion of 14,969
shares of Class C shares in the amount of $136,518 to 14,953 shares of Class
A shares in the amount of $136,518.
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
GNMA Fund
--------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------- --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006
-------------------------- ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------
Shares
sold(1)(3)(5)(7) 5,070,934 $ 55,936,052 3,679,546 $ 41,272,893 202,312 $ 2,228,911 404,406 $ 4,553,528
Reinvested
shares.......... 1,007,246 11,085,707 1,003,485 11,219,648 164,211 1,810,798 198,444 2,224,433
Shares
redeemed(1)(5).. (5,652,486) (62,223,827) (7,280,453) (81,346,189) (2,138,731) (23,557,708) (2,809,670) (31,520,044)
----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)...... 425,694 $ 4,797,932 (2,597,422) $(28,853,648) (1,772,208) $(19,517,999) (2,206,820) $(24,742,083)
=========== ============= ========== ============ ========== ============ ========== ============
GNMA Fund
------------------------------------------------------------------------------
Class C Class X
---------------------------------------------------- ------------------------
For the For the For the
year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2006
-------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ------------ ---------- ------------
Shares sold...... 360,698 $ 3,979,813 602,279 $ 6,796,898 2,510 $ 28,279
Reinvested
shares.......... 88,961 982,412 104,533 1,173,387 821 9,297
Shares
redeemed(3)(7).. (1,340,161) (14,773,461) (1,952,806) (21,948,681) (93,618) (1,057,899)
----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)...... (890,502) $ (9,811,236) (1,245,994) $(13,978,396) (90,287) $ (1,020,323)
=========== ============= ========== ============ ========== ============
Strategic Bond Fund
--------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------- --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006
-------------------------- ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------
Shares
sold(2)(4)(6)(8) 102,882,348 $ 365,610,133 37,513,168 $132,293,432 5,637,811 $ 20,072,310 5,688,635 $ 20,006,461
Reinvested
shares.......... 4,121,411 14,717,371 1,059,222 3,741,901 390,832 1,394,386 326,591 1,152,376
Shares
redeemed(2)(6).. (29,208,072) (104,210,772) (8,234,142) (29,041,992) (3,782,125) (13,433,833) (3,586,213) (12,634,437)
----------- ------------- ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)...... 77,795,687 $ 276,116,732 30,338,248 $106,993,341 2,246,518 $ 8,032,863 2,429,013 $ 8,524,400
=========== ============= ========== ============ ========== ============ ========== ============
Strategic Bond Fund
----------------------------------------------------
Class C
----------------------------------------------------
For the For the
year ended year ended
March 31, 2007 March 31, 2006
-------------------------- ------------------------
Shares Amount Shares Amount
----------- ------------- ---------- ------------
Shares sold...... 38,346,566 $ 137,670,076 20,236,121 $ 71,570,743
Reinvested
shares.......... 848,064 3,043,431 417,085 1,477,074
Shares
redeemed(4)(8).. (6,961,530) (24,860,837) (3,618,681) (12,799,109)
----------- ------------- ---------- ------------
Net increase
(decrease)...... 32,233,100 $ 115,852,670 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 year ended March 31, 2007, includes automatic conversion of 305,255
shares of Class B shares in the amount of $3,280,252 to 306,071 shares of
Class A shares in the amount of $3,280,252.
(6)For the year ended March 31, 2007, includes automatic conversion of
1,075,478 shares of Class B shares in the amount of $3,665,333 to 1,075,184
shares of Class A shares in the amount of $3,665,333.
(7)For the year ended March 31, 2007, includes automatic conversion of 6,088
shares of Class C shares in the amount of $66,265 to 6,110 shares of Class A
shares in the amount of $66,265.
(8)Includes automatic conversion of $1,181 shares of Class C shares in the
amount of $4,180 to 1,185 shares of Class A shares in the amount of $4,180.
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
High Yield Bond Fund
-----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ ---------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006
-------------------------- -------------------------- ------------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Shares
sold(1)(4)...... 38,615,170 $ 182,039,488 60,157,451 $ 269,492,069 2,939,699 $ 13,768,068 2,657,600 $ 12,034,094
Reinvested
shares.......... 1,677,533 7,908,201 1,245,496 5,639,708 333,914 1,571,933 363,347 1,644,185
Shares
redeemed(1)(4).. (36,217,526) (168,508,994) (37,827,675) (171,886,729) (3,870,265) (18,168,508) (5,617,900) (25,321,387)
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Net increase
(decrease)...... 4,075,177 $ 21,438,695 23,575,272 $ 103,245,048 (596,652) $ (2,828,507) (2,596,953) $(11,643,108)
=========== ============= =========== ============= =========== ============ ========== ============
High Yield Bond Fund
---------------------------------------------------------------------------------
Class C Class Z
------------------------------------------------------ -------------------------
For the For the For the
year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2006
-------------------------- -------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------
Shares sold...... 8,874,645 $ 41,729,495 9,135,786 $ 41,520,484 -- $ (1,745)
Reinvested
shares.......... 542,788 2,569,206 456,958 2,077,622 380,489 1,688,457
Shares
redeemed........ (6,505,750) (30,858,084) (9,102,263) (41,384,506) (20,406,473) (90,194,761)
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)...... 2,911,683 $ 13,440,617 490,481 $ 2,213,600 (20,025,984) $(88,508,049)
=========== ============= =========== ============= =========== ============
Tax Exempt Insured Fund
-----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ ---------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2006
-------------------------- -------------------------- ------------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Shares
sold(2)(3)(5)(6) 181,928 $ 2,305,652 238,472 $ 3,042,167 26,325 $ 335,141 27,050 $ 345,577
Reinvested
shares.......... 104,191 1,320,929 120,617 1,542,466 8,813 111,816 12,879 164,760
Shares
redeemed(2)(5).. (846,556) (10,699,293) (686,079) (8,829,065) (163,672) (2,069,946) (210,933) (2,709,988)
----------- ------------- ----------- ------------- ----------- ------------ ---------- ------------
Net increase
(decrease)...... (560,437) $ (7,072,712) (326,990) $ (4,244,432) (128,534) $ (1,622,989) (171,004) $ (2,199,651)
=========== ============= =========== ============= =========== ============ ========== ============
Tax Exempt Insured Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the For the
year ended year ended
March 31, 2007 March 31, 2006
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares sold...... 51,686 $ 654,807 63,887 $ 822,552
Reinvested
shares.......... 6,918 87,817 8,147 104,235
Shares
redeemed(3)(6).. (100,404) (1,273,870) (159,889) (2,047,423)
----------- ------------- ----------- -------------
Net increase
(decrease)...... (41,800) $ (531,246) (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 year ended March 31, 2007, includes automatic conversion of
1,213,503 shares of Class B shares in the amount of $5,313,435 to 1,215,237
shares of Class A shares in the amount of $5,313,435.
(5)For the year ended March 31, 2007, includes automatic conversion of 71,186
shares of Class B shares in the amount of $494,110 to 71,233 shares of Class
A shares in the amount of $494,110.
(6)For the year ended March 31, 2007, 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.
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
Note 8. Lines of Credit
The AIG SunAmerica Family of Mutual Funds has established $75 million
committed and $50 million uncommitted lines of credit with State Street Bank
and Trust Company, the Funds' custodian. Interest is currently payable at
the Federal Funds rate plus 50 basis points on the committed line and State
Street's discretionary bid rate on the uncommitted line of credit. There is
also a commitment fee of 10 basis points per annum on the daily unused
portion of the $75 million committed line of credit, which is included in
other expenses on the Statement of Operations. Borrowings under the line of
credit will commence when the Fund's cash shortfall exceeds $100,000. For
the year ended March 31, 2007, the following Funds had borrowings:
Average Weighted
Days Interest Debt Average
Fund Outstanding Charges Utilized Interest
- ---- ----------- -------- ---------- --------
U.S. Government Securities 17 $ 4,332 $1,592,173 5.74%
GNMA...................... 28 5,641 1,254,787 5.78
Strategic Bond............ 8 6,944 5,434,080 5.77
High Yield Bond........... 61 75,783 7,996,708 5.62
At March 31, 2007, there were no borrowings outstanding.
Note 9. Interfund Lending Agreement
Pursuant to exemptive relief granted by the Securities and Exchange
Commission, the Portfolios are permitted to participate in an interfund
lending program among investment companies advised by 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 year ended March 31, 2007 none of the Funds participated in this program.
Note 10. Trustees Retirement Plan
The Trustees have adopted the AIG SunAmerica Disinterested Trustees' and
Directors' Retirement Plan (the "Retirement Plan") effective January 1,
1993, as amended December 9, 2006 for the unaffiliated Trustees. The
Retirement Plan provides generally that an unaffiliated Trustee may become a
participant ("Participant") in the Retirement Plan if he or she has at least
10 years of consecutive service as a Disinterested Trustee of any of the
adopting AIG SunAmerica mutual funds (the "Adopting Fund"), or has attained
the age of 60 while a Trustee and completed five (5) consecutive years of
service as a Trustee of any Adopting Fund (an "Eligible Trustee"). Pursuant
to the Retirement Plan, an Eligible Trustee may receive benefits upon
(i) his or her death or disability while a Trustee or (ii) the termination
or his or her tenure as a Trustee, other than removal for cause from each of
the Adopting Funds with respect to which he or she is an Eligible Trustee.
As of each of the first ten birthdays after becoming a Participant and on
which he or she is both a Trustee and a Participant, 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
Adopting Fund for the calendar year in which such birthday occurs. In
addition, an amount equal to 8.50% of any amounts credited under the
preceding clause during prior years is added to each Eligible Trustee's
Account. The rights of any Participant to benefits under the Retirement Plan
shall be an unsecured claim against the assets of the Adopting Funds. 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 15 annual
installments. Any undistributed amounts shall continue to accrue interest at
8.50%.
76
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2007 -- (continued)
The following amounts of the Retirement Plan liabilities 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 Plan Retirement Plan Retirement Plan
Liability Expense Payments
--------------- --------------- ---------------
Fund As of March 31, 2007
- ---- -----------------------------------------------
U.S. Government Securities $90,403 $2,638 $9,348
GNMA...................... 52,427 6,219 2,596
Strategic Bond............ 27,601 4,962 2,218
High Yield Bond........... 47,765 4,611 3,495
Tax Exempt Insured........ 28,211 956 2,639
Note 11. Other Information
On February 9, 2006, AIG, the parent company and an affiliated person of AIG
SunAmerica, SACS and AIGGIC, 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 Funds.
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 statutes 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 "1940 Act". Certain affiliated persons of AIG, including
the Adviser, 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 AIG's
investment management subsidiaries, to serve as investment adviser,
sub-adviser, principal underwriter or sponsor of the Funds. The Adviser
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 made 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, AIG SunAmerica, SACS and AIGGIC
believe that the settlements are not likely to have a material adverse
effect on their ability to perform their respective investment advisory or
distribution services relating to the Funds.
77
SunAmerica Income Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of SunAmerica Income Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of each of the five
funds constituting SunAmerica Income Funds (the "Funds") at March 31, 2007, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Houston, Texas
May 24, 2007
78
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2007
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, 41 None
DOB: February 27, 1963 Chairman and
CEO of
Southern
California
Development
Corporation/
National
Housing
Development
Corp; (1992 to
present)
Founder, Owner
and Partner of
Colonies
Crossroads,
Inc. (1999 to
present);
Owner and
Managing
Member of
Diversified
Pacific
Development
Group, LLC
(1998 to
present).
Dr. Judith L. Craven Trustee 2001-present Retired. 89 Director,
DOB: October 6, 1945 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. 89 Director,
DOB: December 30, 1938 Boston
Options
Exchange
(1985-Present).
Samuel M. Eisenstat Chairman 1986-present Attorney, solo 51 Director,
DOB: March 7, 1940 of the practitioner. North
Board European
Oil
Royalty
Trust.
Stephen J. Gutman Trustee 1986-present Senior 51 None
DOB: May 10, 1943 Associate,
Corcoran Group
(Real Estate)
(2003 to
present);
President 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 Managing 51 Director,
DOB: February 9, 1948 Partner, DLB Boston
Capital, LLC Private
(Private Financial
Equity) Holdings
(2006-present) (2004 to
President and present)
CEO, Conseco,
Inc.
(Financial
Services)
(2001 to
2004);
Chairman of
the Board of
Centennial
Technologies,
Inc. (1998 to
2001)
Interested Trustee
Peter A. Harbeck(3) Trustee 1995-present President, CEO 98 None
DOB: January 23, 1954 and Director,
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)
79
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2007 -- (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).
Gregory R. Kingston Vice 2002-present Vice President, SAAMCo N/A N/A
DOB: January 18, 1966 President (2001-present); Formerly,
and Vice President, American
Assistant General Investment
Treasurer Management, L.P. (1999-
2001)
Nori L. Gabert Vice 2002-present Vice President and Deputy N/A N/A
DOB: August 15, 1953 President General Counsel, AIG
and SunAmerica (2001-present);
Assistant Vice President and Secretary,
Secretary VALIC Company I and
VALIC Company II (2000-
present) Formerly, Associate
General Counsel, American
General Corporation, (1997 to
2001).
80
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2007 -- (continued)
Number of
Position Held Term of Funds in
Name, 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)
- ---------------------- ------------- -------------- --------------------------------- ------------ -------------------
Matthew J. Hackethal Anti- 2006- Senior Compliance Manager, N/A N/A
DOB: December 31, 1971 Money present AIG SunAmerica (November
Laundering 2006 to present); Vice President,
Compliance Credit Suisse Asset Management
Officer (May, 2001 to October 2006);
CCO, Credit Suisse Altemative
Funds (November 2005 to
October 2006); CCO, Credit
Suisse Asset Management
Securities, Inc. (April 2004 to
August 2005)
James Nichols Vice 2006- Director, President and CEO; N/A N/A
DOB: April 7, 1966 President Present AIG SACS (July 2006 to
present); Senior Vice
President, AIG SACS (March
2002 to July 2006); Vice
President, AIG SunAmerica
(1995 to March 2002)
Cynthia Gibbons Vice 2002- Vice President, AIG N/A N/A
DOB: December 6, 1967 President present SunAmerica (August 2002-
and Chief present); Securities
Compliance Compliance Manager,
Officer American General Investment
Management (June 2000 -
August 2002).
Timothy Pettee Vice August Chief Investment Officer AIG N/A N/A
DOB: April 7, 1958 President 2004- SunAmerica (January 2003-
Present present); Executive Vice
president and Global Director
of Research Schroder
Investment Management
(2000-2002); Director of
Research U.S. Trust Co.
(1998-2000).
Michael Cheah Vice November Senior Vice President, AIG N/A N/A
DOB: January 4, 1960 President 2000- SunAmerica (July 1999-present).
Present
- --------
* The business address for each Trustee is the Harborside Financial Center,
3200 Plaza 5, Jersey City, NJ 07311-4992.
(1) The "Fund Complex" means two or more registered investment companies that
hold themselves out to investors as related companies for purposes of
investment services or have a common investment adviser or an investment
adviser that is an affiliated person of the Adviser. The "Fund Complex"
includes The Trust (5 Funds), SunAmerica Money Market Funds (2 funds),
SunAmerica Equity Funds (10 funds), SunAmerica Focused Series, Inc. (18
portfolios), Anchor Series Trust (9 portfolios), SunAmerica Senior Floating
Rate Fund, Inc. (1 fund), SunAmerica Series Trust (35 portfolios), VALIC
Company I (32 portfolios), VALIC Company II (15 funds), Seasons Series
Trust (24 portfolios), AIG Series Trust (5 funds), SunAmerica Focused Alpha
Growth Fund, Inc. (1 fund), SunAmerica Focused Alpha Large-Cap Fund, Inc.
(1 fund), AIG Strategic Hedge Fund of Funds (1 Fund) and Brazos Mutual
Funds (4 funds).
(2) Directorships of companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e. "public
companies") or other investment companies registered under the Investment
Company Act of 1940.
(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
SunAmerica Income Funds
SHAREHOLDER TAX INFORMATION -- March 31, 2007 -- (unaudited)
Certain tax information regarding the SunAmerica Income Funds is required to be
provided to shareholders based upon each Fund's income and distributions for
the taxable periods ended March 31, 2007. The information and distributions
reported herein may differ from the information and distributions taxable to
the shareholders for the calendar year ending December 31, 2007. The
information necessary to complete your income tax returns will be included with
your Form 1099-DIV to be received under separate cover in January 2008.
During the year ended March 31, 2007 the Funds paid the following dividends per
share along with the percentage of ordinary income dividends that qualified for
the 70% dividends received deductions for corporations.
Net Net Net Long- Qualifying % for the
Total Investment Short-Term Term 70% Dividends
Dividends Income Capital Gains Capital Gains Received Deduction
--------- ---------- ------------- ------------- --------------------
U.S. Government Securities Fund Class A $0.39 $0.39 $-- $ -- -- %
U.S. Government Securities Fund Class B 0.33 0.33 -- -- --
U.S. Government Securities Fund Class C 0.33 0.33 -- -- --
GNMA Fund Class A...................... 0.48 0.48 -- -- --
GNMA Fund Class B...................... 0.41 0.41 -- -- --
GNMA Fund Class C...................... 0.41 0.41 -- -- --
Strategic Bond Fund Class A............ 0.18 0.18 -- -- 0.71
Strategic Bond Fund Class B............ 0.15 0.15 -- -- 0.71
Strategic Bond Fund Class C............ 0.16 0.16 -- -- 0.71
High Yield Bond Fund Class A........... 0.32 0.32 -- -- 1.99
High Yield Bond Fund Class B........... 0.29 0.29 -- -- 1.99
High Yield Bond Fund Class C........... 0.29 0.29 -- -- 1.99
Tax-Exempt Insured Fund Class A........ 0.51 0.42* -- 0.09 --
Tax-Exempt Insured Fund Class B........ 0.41 0.32* -- 0.09 --
Tax-Exempt Insured Fund Class C........ 0.43 0.34* -- 0.09 --
- --------
* Tax exempt interest dividends
For the year ended March 31, 2007, certain dividends paid by the Strategic Bond
Fund and High Yield Bond Fund may be subject to a maximum tax rate of 15%, as
provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the
distributions paid during the fiscal year, the following represents the maximum
amount that may be considered qualified dividend income:
Portfolio Amount
--------- --------
Strategic Bond Fund. $183,974
High Yield Bond Fund 441,330
82
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited)
As required by the Securities and Exchange Commission, the following graphs
compare the performance of a $10,000 investment in the SunAmerica Income Funds'
portfolios to a similar investment in an index. Please note that "inception" as
used herein reflects the date on which a specific class of shares commenced
operations. It is important to note that the SunAmerica Income Funds are
professionally managed mutual funds while the indices are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only. The graphs present the performance of the largest class of that
particular Fund. The performance of the other classes will vary based upon the
difference in sales charges and fees assessed to shareholders of that class.
83
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
U.S. Government Securities Fund
For the one-year period ended March 31, 2007, the SunAmerica U.S. Government
Securities Fund Class A shares returned 5.25% at net asset value (NAV) (before
maximum sales charge). The Fund's benchmark, the Lehman Brothers U.S.
Government Bond Index*, returned 5.93% over the same period.
As a result of sharply rising yields on mortgage-backed bonds and Treasury
securities, the one-year period began on a challenging note. After initially
indicating that future Federal Funds rate increases would be data-dependent,
Federal Reserve Chairman Bernanke said that inflationary pressures were present
and that further rate increases might be necessary. Following the
implementation of 17 consecutive 25-basis point increases, the central bank
left monetary rates unchanged at its August meeting. The Federal Open Market
Committee maintained its monetary target at its regularly scheduled meetings in
September, October, December, and January, but its assessment continued to
focus on inflation risk. The threat of potential downgrades of a number of
corporate debt issuers provided additional pressure in the fixed income market.
Although the Federal Reserve elected to keep rates steady in March, it adopted
language interpreted by certain investors as placing inflation risk and the
risk of an economic slowdown on equal footing.
The Fund was positioned for an economic slowdown and subsequent Treasury rally
which contributed to the Fund's underperformance of its benchmark.
- --------
Past performance is no guarantee of future results.
U.S. Government guarantee applies only to the underlying securities of the
Fund's portfolio and not to the Fund shares.
* The Lehman Brothers U.S. Government Bond Index is a broad index composed
solely of U.S. Treasury Securities maturing from 1-30 years.
84
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
U.S. Government Securities Lehman Brothers U.S.Government
Fund Class A/#/ Bond Index**
-------------------------- --------------------------
3/31/1997 $ 9,521.00 $10,000.00
4/30/1997 9,643.00 10,144.34
5/31/1997 9,697.00 10,231.84
6/30/1997 9,800.00 10,346.69
7/31/1997 10,007.00 10,640.41
8/31/1997 9,948.00 10,535.15
9/30/1997 10,077.00 10,693.60
10/31/1997 10,205.00 10,878.60
11/30/1997 10,253.00 10,934.30
12/31/1997 10,353.00 11,048.61
1/31/1998 10,438.00 11,213.93
2/28/1998 10,440.00 11,183.49
3/31/1998 10,437.00 11,215.20
4/30/1998 10,472.00 11,265.62
5/31/1998 10,569.00 11,381.30
6/30/1998 10,639.00 11,510.77
7/31/1998 10,643.00 11,528.56
8/31/1998 10,833.00 11,828.49
9/30/1998 11,023.00 12,147.32
10/31/1998 10,977.00 12,105.91
11/30/1998 11,035.00 12,110.01
12/31/1998 11,063.00 12,137.03
1/31/1999 11,087.00 12,207.55
2/28/1999 10,932.00 11,917.24
3/31/1999 10,949.00 11,963.98
4/30/1999 10,981.00 11,991.08
5/31/1999 10,886.00 11,885.96
6/30/1999 10,803.00 11,861.71
7/31/1999 10,782.00 11,844.47
8/31/1999 10,826.00 11,844.36
9/30/1999 10,920.00 11,940.55
10/31/1999 10,951.00 11,959.70
11/30/1999 10,944.00 11,943.21
12/31/1999 10,932.00 11,865.91
1/31/2000 10,849.00 11,882.52
2/29/2000 10,935.00 12,051.64
3/31/2000 11,047.00 12,263.22
4/30/2000 11,055.00 12,229.29
5/31/2000 11,061.00 12,237.17
6/30/2000 11,230.00 12,455.39
7/31/2000 11,306.00 12,576.04
8/31/2000 11,449.00 12,761.95
9/30/2000 11,539.00 12,798.32
10/31/2000 11,675.00 12,920.75
11/30/2000 11,881.00 13,174.84
12/31/2000 12,196.00 13,437.02
1/31/2001 12,272.00 13,572.73
2/28/2001 12,382.00 13,727.46
3/31/2001 12,491.00 13,775.51
4/30/2001 12,369.00 13,635.00
5/31/2001 12,391.00 13,679.99
6/30/2001 12,479.00 13,742.92
7/31/2001 12,786.00 14,072.75
8/31/2001 12,921.00 14,247.25
9/30/2001 13,140.00 14,495.16
10/31/2001 13,390.00 14,869.13
11/30/2001 13,071.00 14,536.06
12/31/2001 12,904.00 14,409.64
1/31/2002 13,028.00 14,502.93
2/28/2002 13,196.00 14,636.82
3/31/2002 12,921.00 14,318.47
4/30/2002 13,246.00 14,659.65
5/31/2002 13,356.00 14,747.52
6/30/2002 13,553.00 14,953.90
7/31/2002 13,812.00 15,282.21
8/31/2002 14,086.00 15,585.03
9/30/2002 14,420.00 15,950.45
10/31/2002 14,397.00 15,822.24
11/30/2002 14,311.00 15,685.99
12/31/2002 14,623.00 16,066.05
1/31/2003 14,596.00 16,025.77
2/28/2003 14,789.00 16,284.33
3/31/2003 14,747.00 16,237.89
4/30/2003 14,803.00 16,313.14
5/31/2003 15,168.00 16,736.56
6/30/2003 15,070.00 16,648.93
7/31/2003 14,240.00 15,960.73
8/31/2003 14,379.00 16,050.01
9/30/2003 14,890.00 16,516.57
10/31/2003 14,672.00 16,281.44
11/30/2003 14,687.00 16,300.19
12/31/2003 14,821.00 16,444.61
1/31/2004 14,952.00 16,580.81
2/29/2004 15,116.00 16,779.40
3/31/2004 15,232.00 16,927.12
4/30/2004 14,736.00 16,417.77
5/31/2004 14,676.00 16,357.06
6/30/2004 14,769.00 16,423.40
7/31/2004 14,911.00 16,576.38
8/31/2004 15,194.00 16,899.21
9/30/2004 15,218.00 16,933.57
10/31/2004 15,340.00 17,068.39
11/30/2004 15,219.00 16,865.55
12/31/2004 15,341.00 17,016.41
1/31/2005 15,464.00 17,123.14
2/28/2005 15,390.00 17,002.18
3/31/2005 15,325.00 16,945.53
4/30/2005 15,605.00 17,217.47
5/31/2005 15,739.00 17,416.88
6/30/2005 15,785.00 17,515.01
7/31/2005 15,615.00 17,303.66
8/31/2005 15,844.00 17,558.85
9/30/2005 15,643.00 17,351.10
10/31/2005 15,474.00 17,229.08
11/30/2005 15,546.00 17,306.99
12/31/2005 15,754.00 17,467.53
1/31/2006 15,744.00 17,437.66
2/28/2006 15,779.00 17,465.37
3/31/2006 15,582.00 17,308.10
4/30/2006 15,466.00 17,259.86
5/31/2006 15,436.00 17,263.33
6/30/2006 15,473.00 17,311.49
7/31/2006 15,685.00 17,518.16
8/31/2006 15,933.00 17,765.57
9/30/2006 16,076.00 17,923.71
10/31/2006 16,168.00 18,017.37
11/30/2006 16,346.00 18,200.22
12/31/2006 16,212.00 18,074.58
1/31/2007 16,164.00 18,052.37
2/28/2007 16,447.00 18,330.19
3/31/2007 16,400.00 18,334.97
U.S. Government Securities Fund
Class A Class B Class C
U.S. ------------------ ------------------ ------------------
Government Average Average Average
Securities Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 0.22% 5.25% 0.57% 4.57% 3.57% 4.57%
- -------------------------------------------------------------------------
5 Year Return 3.87% 26.93% 3.86% 22.87% 4.21% 22.88%
- -------------------------------------------------------------------------
10 Year Return 5.07% 75.25% 5.02% 63.23% N/A N/A
- -------------------------------------------------------------------------
Since Inception* 4.99% 102.57% 5.91% 235.27% 4.69% 43.14%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/1/93; Class B: 03/3/86; Class C: 06/1/99.
# For the purpose of the graph, it has been assumed that the maximum sales
charge of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2007, the SunAmerica U.S. Government
Securities Fund Class A returned 0.22%, compared to 5.93% for the Lehman
Brothers U.S. Government Bond Index. (The performance data and graph do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
** The Lehman Brothers U.S. Government Bond Index is a broad index composed
solely of U.S. Treasury Securities maturing from 1-30 years. Indicies are
not managed and an investor cannot invest directly into an index.
85
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
GNMA Fund
For the one-year period ended March 31, 2007, the SunAmerica GNMA Fund Class A
shares returned 5.23% at net asset value (NAV) (before maximum sales charge).
The Fund's benchmark, the Citigroup Mortgage GNMA Index*, returned 6.24% over
the same period.
The fiscal year began on a challenging note as both mortgage-backed bonds and
Treasury yields rose sharply in tandem ahead of the Federal Reserve's
tightening cycle. In the spring, Federal Reserve Chairman Ben Bernanke said
that inflationary pressures were present and that further rate increases might
be necessary, after initially indicating that future Federal Funds rate
increases would be data-dependent. After implementing its 17/th/ consecutive
25-basis point increase in June, taking the Fed Funds Rate to 5.25%, the
central bank left monetary rates unchanged at its August meeting. The Federal
Open Market Committee maintained its monetary target at its regularly scheduled
meetings in September, October, December, and January, but its assessment
continued to focus on inflation risk. The threat of potential downgrades of a
number of corporate debt issuers provided additional selling pressure in the
fixed income market. In March, the Federal Reserve kept rates steady. However,
it adopted language interpreted by certain investors as placing inflation risk
and the risk of an economic slowdown on equal footing.
While the Fund was not impacted by sector selection it did benefit from its
strategy of holding minimal exposure to Freddie Mac and Fannie Mae securities.
This helped the Fund as the spread continued to move in favor of GNMA
securities.
- --------
Past performance is no guarantee of future results.
U.S. Government guarantee applies only to the underlying securities of the
Fund's portfolio and not to the Fund shares.
* The Citigroup Mortgage GNMA Index is comprised of 15- and 30-year fixed-rate
pass-through mortgage-backed securities.
86
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
GNMA Fund Class A/#/ Citigroup Mortgage GNMA Index**
-------------------- -------------------------------
3/31/1997 $ 9,523.00 $10,000.00
4/30/1997 9,676.00 10,150.91
5/31/1997 9,764.00 10,250.36
6/30/1997 9,884.00 10,370.50
7/31/1997 10,163.00 10,553.18
8/31/1997 10,097.00 10,536.47
9/30/1997 10,229.00 10,673.98
10/31/1997 10,369.00 10,781.54
11/30/1997 10,415.00 10,811.49
12/31/1997 10,548.00 10,912.26
1/31/1998 10,649.00 11,004.60
2/28/1998 10,649.00 11,041.00
3/31/1998 10,684.00 11,086.68
4/30/1998 10,728.00 11,151.05
5/31/1998 10,841.00 11,228.98
6/30/1998 10,924.00 11,274.49
7/31/1998 10,948.00 11,331.25
8/31/1998 11,140.00 11,423.25
9/30/1998 11,351.00 11,556.46
10/31/1998 11,333.00 11,548.35
11/30/1998 11,407.00 11,605.28
12/31/1998 11,455.00 11,656.90
1/31/1999 11,490.00 11,738.32
2/28/1999 11,315.00 11,713.99
3/31/1999 11,358.00 11,783.33
4/30/1999 11,392.00 11,841.74
5/31/1999 11,298.00 11,784.82
6/30/1999 11,224.00 11,741.46
7/31/1999 11,213.00 11,662.20
8/31/1999 11,225.00 11,654.09
9/30/1999 11,356.00 11,854.15
10/31/1999 11,412.00 11,917.03
11/30/1999 11,440.00 11,923.98
12/31/1999 11,447.00 11,891.05
1/31/2000 11,337.00 11,796.90
2/29/2000 11,451.00 11,945.82
3/31/2000 11,630.00 12,131.49
4/30/2000 11,624.00 12,118.74
5/31/2000 11,686.00 12,173.02
6/30/2000 11,873.00 12,397.24
7/31/2000 11,928.00 12,458.47
8/31/2000 12,097.00 12,643.30
9/30/2000 12,210.00 12,770.39
10/31/2000 12,296.00 12,863.22
11/30/2000 12,478.00 13,041.60
12/31/2000 12,734.00 13,223.46
1/31/2001 12,925.00 13,438.74
2/28/2001 13,060.00 13,502.12
3/31/2001 13,155.00 13,579.23
4/30/2001 13,099.00 13,608.02
5/31/2001 13,139.00 13,717.73
6/30/2001 13,180.00 13,745.86
7/31/2001 13,558.00 13,994.08
8/31/2001 13,671.00 14,097.50
9/30/2001 13,926.00 14,288.13
10/31/2001 14,199.00 14,473.95
11/30/2001 13,837.00 14,352.66
12/31/2001 13,687.00 14,313.94
1/31/2002 13,835.00 14,469.32
2/28/2002 14,056.00 14,607.16
3/31/2002 13,766.00 14,471.64
4/30/2002 14,114.00 14,720.02
5/31/2002 14,209.00 14,822.11
6/30/2002 14,377.00 14,934.64
7/31/2002 14,600.00 15,101.93
8/31/2002 14,794.00 15,225.05
9/30/2002 15,024.00 15,353.12
10/31/2002 15,071.00 15,401.28
11/30/2002 15,047.00 15,408.06
12/31/2002 15,264.00 15,562.78
1/31/2003 15,300.00 15,610.60
2/28/2003 15,452.00 15,695.16
3/31/2003 15,456.00 15,690.69
4/30/2003 15,539.00 15,727.76
5/31/2003 15,757.00 15,736.86
6/30/2003 15,722.00 15,780.88
7/31/2003 14,882.00 15,531.34
8/31/2003 15,066.00 15,623.84
9/30/2003 15,573.00 15,864.28
10/31/2003 15,419.00 15,828.68
11/30/2003 15,403.00 15,891.53
12/31/2003 15,588.00 16,030.99
1/31/2004 15,711.00 16,110.72
2/29/2004 15,837.00 16,217.26
3/31/2004 15,930.00 16,284.87
4/30/2004 15,513.00 16,029.22
5/31/2004 15,455.00 15,984.81
6/30/2004 15,588.00 16,131.19
7/31/2004 15,756.00 16,269.33
8/31/2004 16,002.00 16,516.21
9/30/2004 16,019.00 16,549.20
10/31/2004 16,149.00 16,687.58
11/30/2004 16,095.00 16,642.62
12/31/2004 16,202.00 16,764.25
1/31/2005 16,298.00 16,866.48
2/28/2005 16,206.00 16,810.89
3/31/2005 16,154.00 16,767.04
4/30/2005 16,332.00 16,942.48
5/31/2005 16,435.00 17,068.47
6/30/2005 16,479.00 17,124.07
7/31/2005 16,406.00 17,068.11
8/31/2005 16,554.00 17,210.35
9/30/2005 16,442.00 17,135.42
10/31/2005 16,344.00 17,054.46
11/30/2005 16,380.00 17,095.93
12/31/2005 16,571.00 17,324.17
1/31/2006 16,610.00 17,372.70
2/28/2006 16,630.00 17,409.50
3/31/2006 16,506.00 17,288.31
4/30/2006 16,426.00 17,225.51
5/31/2006 16,364.00 17,182.87
6/30/2006 16,376.00 17,189.85
7/31/2006 16,604.00 17,435.32
8/31/2006 16,834.00 17,722.30
9/30/2006 16,957.00 17,827.34
10/31/2006 17,067.00 17,956.08
11/30/2006 17,206.00 18,132.07
12/31/2006 17,163.00 18,107.33
1/31/2007 17,134.00 18,106.91
2/28/2007 17,381.00 18,333.83
3/31/2007 17,369.00 18,367.52
GNMA Fund
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
GNMA Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 0.22% 5.23% 0.64% 4.64% 3.64% 4.64%
- -------------------------------------------------------------------------
5 Year Return 3.74% 26.18% 3.74% 22.14% 4.10% 22.24%
- -------------------------------------------------------------------------
10 Year Return 5.68% 82.38% 5.50% 70.82% N/A N/A
- -------------------------------------------------------------------------
Since Inception* 5.63% 119.63% 7.34% 445.41% 5.01% 46.63%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/11/93; Class B: 04/25/83; Class C: 06/1/99.
# For the purpose of the graph, it has been assumed that the maximum sales
charge of 4.75% of offering, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2007, the SunAmerica GNMA Fund Class A
returned 0.22%, compared to 6.24% for the Citigroup Mortgage GNMA Index. (The
performance data and graph do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
**The Citigroup Mortgage GNMA Index is comprised of 15 and 30-year fixed-rate
pass-through mortgage-backed securities. Indicies are not managed and an
investor cannot invest directly into an index.
87
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
SunAmerica Strategic Bond Fund
For the one-year period ended March 31, 2007, the SunAmerica Strategic Bond
Fund Class A shares returned 8.07% at net asset value (NAV) (before maximum
sales charge), outperforming its benchmark, the Lehman Brothers U.S. Aggregate
Bond Index*, which returned 6.59%.
During the fiscal year ended March 31, 2007, the credit market posted strong
performance sustained by a solid macroeconomic backdrop and strong technical
dynamics. New issuance volume was supportive in the fixed-income market as a
whole. Demand from both domestic and foreign investors supported primary and
secondary market activity. Volatility in financial markets around the world
continued to affect investor sentiment. Leveraged buyout and
shareholder-friendly activities remained bondholders' main concern.
The portfolio engaged in trades in both primary and secondary markets, as they
were both sustained by strong technical factors. When volatility in financial
markets around the world increased unexpectedly, we traded with cautious
aggression, looking to take advantage of what we saw as undue weakness in
certain sectors, while still respecting the risks involved and what potential
problems could develop. We continued to focus on individual credits from a
bottom-up perspective, taking into consideration liquidity, diversification and
curve positioning.
Emerging market and high-yield bonds were the top-performing asset classes.
Fundamentals for emerging market countries improved during the course of the
year. The U.S. economic backdrop remained positive for high-yield bonds, as
default rates remained at multi-year lows.
Emerging market bonds were among the top contributors to the Fund's performance
during the year. Top-performing emerging market credits included bonds from the
governments of Brazil (12.50%, due 1/05/2016), Argentina (8.28%, due
12/31/2033), and Uruguay (8.00%, due 11/18/2022). Bonds offered by the
Republics of South Africa (13.00%, due 8/31/2010) and Colombia (12.00%, due
10/22/2015) were among the main emerging market detractors.
Other top contributing credits included two high yield credits, Calpine
Corporation (8.75%, due 7/15/2013) and Charter Communications Inc. (11.25%, due
1/15/2011) and a bond offered by Commonwealth of Australia (7.50%, due
9/15/2009). Bonds offered by HCA International (6.375%, due 1/15/2015), Kingdom
of Norway (5.00%, due 5/15/2015), and the Government of Japan (0.70%, due
5/15/2008) were among the main detractors to the Fund's performance during the
period.
- --------
Past performance is no guarantee of future results.
Interest rates and bond prices typically move inversely to each other;
therefore, as with any bond fund, the value of an investment in this Fund may
go up or down in response to changes in interest rates.
* The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index
generally representative of intermediate-term government bonds, investment
grade corporate debt securities and mortgage-backed securities.
88
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Strategic Bond Lehman Brothers
Fund Class A/#/ U.S. Aggregate Bond Index/+/
--------------- ----------------------------
3/31/1997 $ 9,528.00 $10,000.00
4/30/1997 9,635.00 10,150.00
5/31/1997 9,845.00 10,246.42
6/30/1997 9,964.00 10,368.36
7/31/1997 10,236.00 10,648.30
8/31/1997 10,198.00 10,557.79
9/30/1997 10,402.00 10,714.05
10/31/1997 10,253.00 10,869.40
11/30/1997 10,386.00 10,919.40
12/31/1997 10,485.00 11,029.69
1/31/1998 10,601.00 11,170.87
2/28/1998 10,686.00 11,161.93
3/31/1998 10,737.00 11,199.88
4/30/1998 10,763.00 11,258.12
5/31/1998 10,757.00 11,365.07
6/30/1998 10,732.00 11,461.68
7/31/1998 10,772.00 11,485.74
8/31/1998 10,036.00 11,672.96
9/30/1998 10,337.00 11,946.11
10/31/1998 10,275.00 11,882.80
11/30/1998 10,543.00 11,950.53
12/31/1998 10,561.00 11,986.38
1/31/1999 10,521.00 12,071.48
2/28/1999 10,457.00 11,860.23
3/31/1999 10,617.00 11,925.46
4/30/1999 10,818.00 11,963.62
5/31/1999 10,581.00 11,858.34
6/30/1999 10,547.00 11,820.40
7/31/1999 10,490.00 11,770.75
8/31/1999 10,371.00 11,764.87
9/30/1999 10,474.00 11,901.34
10/31/1999 10,491.00 11,945.37
11/30/1999 10,620.00 11,944.18
12/31/1999 10,705.00 11,886.85
1/31/2000 10,697.00 11,847.62
2/29/2000 10,778.00 11,990.98
3/31/2000 10,847.00 12,149.26
4/30/2000 10,693.00 12,114.02
5/31/2000 10,617.00 12,107.97
6/30/2000 10,870.00 12,359.81
7/31/2000 11,024.00 12,472.29
8/31/2000 11,220.00 12,653.14
9/30/2000 11,166.00 12,732.85
10/31/2000 10,920.00 12,816.89
11/30/2000 10,754.00 13,027.08
12/31/2000 11,047.00 13,269.39
1/31/2001 11,486.00 13,485.68
2/28/2001 11,560.00 13,603.00
3/31/2001 11,408.00 13,671.02
4/30/2001 11,265.00 13,613.60
5/31/2001 11,381.00 13,695.28
6/30/2001 11,369.00 13,747.33
7/31/2001 11,444.00 14,055.27
8/31/2001 11,640.00 14,216.90
9/30/2001 11,358.00 14,381.82
10/31/2001 11,628.00 14,682.40
11/30/2001 11,805.00 14,479.78
12/31/2001 11,760.00 14,387.73
1/31/2002 11,848.00 14,504.21
2/28/2002 11,918.00 14,644.76
3/31/2002 11,913.00 14,401.19
4/30/2002 12,139.00 14,680.47
5/31/2002 12,086.00 14,805.18
6/30/2002 11,789.00 14,933.26
7/31/2002 11,564.00 15,113.39
8/31/2002 11,865.00 15,368.53
9/30/2002 11,837.00 15,617.49
10/31/2002 11,933.00 15,546.29
11/30/2002 12,194.00 15,542.18
12/31/2002 12,469.00 15,863.19
1/31/2003 12,664.00 15,876.75
2/28/2003 12,884.00 16,096.53
3/31/2003 12,994.00 16,084.09
4/30/2003 13,489.00 16,216.85
5/31/2003 13,907.00 16,519.21
6/30/2003 14,024.00 16,486.41
7/31/2003 13,671.00 15,932.13
8/31/2003 13,876.00 16,037.87
9/30/2003 14,342.00 16,462.38
10/31/2003 14,421.00 16,308.95
11/30/2003 14,630.00 16,347.95
12/31/2003 15,014.00 16,514.30
1/31/2004 15,270.00 16,647.19
2/29/2004 15,254.00 16,827.32
3/31/2004 15,338.00 16,953.45
4/30/2004 15,010.00 16,512.29
5/31/2004 14,814.00 16,446.19
6/30/2004 15,078.00 16,539.13
7/31/2004 15,255.00 16,703.08
8/31/2004 15,573.00 17,021.73
9/30/2004 15,806.00 17,067.87
10/31/2004 16,087.00 17,210.99
11/30/2004 16,414.00 17,073.71
12/31/2004 16,868.00 17,230.84
1/31/2005 16,905.00 17,338.96
2/28/2005 17,047.00 17,236.70
3/31/2005 16,726.00 17,148.09
4/30/2005 16,801.00 17,380.15
5/31/2005 16,973.00 17,568.19
6/30/2005 17,190.00 17,663.99
7/31/2005 17,262.00 17,503.31
8/31/2005 17,528.00 17,727.69
9/30/2005 17,504.00 17,544.93
10/31/2005 17,281.00 17,406.14
11/30/2005 17,405.00 17,483.16
12/31/2005 17,638.00 17,649.28
1/31/2006 17,878.00 17,650.36
2/28/2006 17,996.00 17,708.89
3/31/2006 17,871.00 17,535.15
4/30/2006 17,998.00 17,503.41
5/31/2006 17,771.00 17,484.66
6/30/2006 17,743.00 17,521.77
7/31/2006 18,130.00 17,758.64
8/31/2006 18,417.00 18,030.55
9/30/2006 18,494.00 18,188.93
10/31/2006 18,724.00 18,309.26
11/30/2006 19,007.00 18,521.71
12/31/2006 19,036.00 18,414.17
1/31/2007 19,007.00 18,406.57
2/28/2007 19,235.00 18,690.42
3/31/2007 19,313.00 18,691.02
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
Strategic Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return Return+ Return Return+ Return Return+
- ------------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 2.83% 8.07% 3.36% 7.36% 6.36% 7.36%
- ----------------------------------------------------------------------------------------
5 Year Return 9.08% 62.11% 9.15% 56.90% 9.48% 57.26%
- ----------------------------------------------------------------------------------------
10 Year Return 6.80% 102.69% 6.74% 92.02% 6.64% 90.27%
- ----------------------------------------------------------------------------------------
Since Inception* 7.06% 162.00% 7.63% 160.03% 7.40% 152.79%
- ----------------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/1/93; Class B: 04/1/94; Class C: 04/1/94.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2007, the SunAmerica Strategic Bond
Fund Class A returned 2.83%, compared to 6.59% for the Lehman Brothers U.S.
Aggregate Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers U.S. Aggregate Bond Index is a broad, unmanaged index
generally representative of intermediate-term government bonds, investment
grade corporate debt securities and mortgage-backed securities. Indices are
not managed and an investor cannot invest directly into an index.
89
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
The SunAmerica High Yield Bond Fund
For the one-year period ended March 31, 2007, the SunAmerica High Yield Bond
Fund Class A shares returned 11.01% at net asset value (NAV) (before maximum
sales charge), lagging its benchmark, the Citigroup High Yield Market Index*,
which returned 11.50%
The one-year period was marked by low default rates, tightening spreads and
strong fundamental conditions all of which contributed to strong high-yield
returns. Additionally, as the Federal Reserve decided to leave rates unchanged
in the second half of the year, the interest-rate backdrop provided a boost to
the market.
There was a strong demand for leveraged credit assets in general, including
high-yield. Lower-rated securities again outperformed higher-rated tiers. The
Fund continued to benefit from this trend as it maintained a relatively larger
exposure to these securities.
In regards to industry selection, the most notable sectors were airlines and
automotive. Our large overweight position within the airlines sector
contributed significantly to the Fund's performance. In addition, an
underweight position within the automotive sector detracted from the Fund's
performance, as this sector performed well during the period.
For the fiscal year, security selection was the primary contributor to the
Fund's performance. Notable contributors were securities in the cable,
utilities and aerospace sectors. Within the cable sector, Charter
Communications Inc. was the primary driver of the Fund's strong performance. To
a lesser extent, Calpine Corp. and Decrane Aircraft, within the utility and
aerospace sectors, respectively, contributed to the Fund's performance for the
period. The Fund's cash allocation, given the strong market return for the
period, was the primary detractor. To a lesser extent, our beverage sector
holding in Le-Nature's Inc. and our wireless sector position in iPCS, Inc.
detracted from the Fund's performance
- --------
Past performance is no guarantee of future results.
High-yield bonds tend to have lower interest-rate risk than higher-quality
bonds of similar maturity but carry greater credit and default risk.
Interest rates and bond prices typically move inversely to each other;
therefore, as with any bond fund, the value of an investment in this Fund may
go up or down in response to changes in interest rates.
* The Citigroup High Yield Market Index is a broad-based unmanaged index
composed of high yield securities.
90
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
High Yield Bond Citigroup High Yield
Fund Class A/#/ Market Index/+/
--------------- --------------------
11/2/1998 $ 9,524.00 $10,000.00
11/30/1998 9,666.00 10,501.84
12/31/1998 9,625.00 10,494.11
1/31/1999 9,774.00 10,651.58
2/28/1999 9,814.00 10,561.81
3/31/1999 9,999.00 10,651.21
4/30/1999 10,279.00 10,874.17
5/31/1999 10,043.00 10,703.46
6/30/1999 10,018.00 10,679.54
7/31/1999 10,063.00 10,702.72
8/31/1999 9,928.00 10,575.42
9/30/1999 9,866.00 10,495.22
10/31/1999 9,741.00 10,423.84
11/30/1999 9,909.00 10,587.20
12/31/1999 10,015.00 10,676.23
1/31/2000 9,923.00 10,587.93
2/29/2000 9,925.00 10,612.95
3/31/2000 9,710.00 10,396.98
4/30/2000 9,785.00 10,438.56
5/31/2000 9,725.00 10,293.23
6/30/2000 9,900.00 10,524.28
7/31/2000 9,945.00 10,638.71
8/31/2000 10,139.00 10,717.81
9/30/2000 10,044.00 10,603.02
10/31/2000 9,745.00 10,289.18
11/30/2000 9,224.00 9,868.29
12/31/2000 9,356.00 10,069.90
1/31/2001 10,021.00 10,748.34
2/28/2001 10,155.00 10,876.75
3/31/2001 9,877.00 10,679.18
4/30/2001 9,679.00 10,522.08
5/31/2001 9,817.00 10,690.95
6/30/2001 9,591.00 10,396.98
7/31/2001 9,631.00 10,592.72
8/31/2001 9,756.00 10,737.31
9/30/2001 9,345.00 9,964.31
10/31/2001 9,533.00 10,295.25
11/30/2001 9,752.00 10,686.53
12/31/2001 9,689.00 10,618.10
1/31/2002 9,678.00 10,663.36
2/28/2002 9,497.00 10,547.46
3/31/2002 9,692.00 10,828.18
4/30/2002 9,784.00 11,005.52
5/31/2002 9,620.00 10,869.02
6/30/2002 8,904.00 9,911.70
7/31/2002 8,521.00 9,463.58
8/31/2002 8,568.00 9,823.77
9/30/2002 8,464.00 9,630.61
10/31/2002 8,384.00 9,597.50
11/30/2002 8,849.00 10,330.02
12/31/2002 8,953.00 10,455.85
1/31/2003 9,207.00 10,845.11
2/28/2003 9,274.00 10,990.43
3/31/2003 9,454.00 11,360.56
4/30/2003 10,016.00 12,066.23
5/31/2003 10,195.00 12,146.43
6/30/2003 10,533.00 12,523.91
7/31/2003 10,479.00 12,338.85
8/31/2003 10,610.00 12,465.42
9/30/2003 10,983.00 12,834.81
10/31/2003 11,174.00 13,133.19
11/30/2003 11,364.00 13,315.67
12/31/2003 11,743.00 13,657.47
1/31/2004 12,142.00 13,893.67
2/29/2004 11,988.00 13,817.51
3/31/2004 11,917.00 13,904.34
4/30/2004 11,939.00 13,856.88
5/31/2004 11,737.00 13,617.00
6/30/2004 12,058.00 13,819.85
7/31/2004 12,145.00 13,997.42
8/31/2004 12,286.00 14,253.34
9/30/2004 12,456.00 14,447.02
10/31/2004 12,747.00 14,746.50
11/30/2004 13,201.00 14,916.30
12/31/2004 13,596.00 15,130.61
1/31/2005 13,675.00 15,110.01
2/28/2005 13,914.00 15,337.01
3/31/2005 13,497.00 14,906.18
4/30/2005 13,275.00 14,700.88
5/31/2005 13,538.00 15,003.31
6/30/2005 13,871.00 15,254.60
7/31/2005 14,236.00 15,475.35
8/31/2005 14,535.00 15,539.74
9/30/2005 14,430.00 15,384.47
10/31/2005 14,241.00 15,269.68
11/30/2005 14,401.00 15,309.05
12/31/2005 14,597.00 15,444.81
1/31/2006 14,914.00 15,687.27
2/28/2006 14,952.00 15,765.64
3/31/2006 15,064.00 15,879.32
4/30/2006 15,276.00 15,966.15
5/31/2006 15,262.00 15,955.48
6/30/2006 15,212.00 15,886.31
7/31/2006 15,398.00 16,058.13
8/31/2006 15,721.00 16,326.34
9/30/2006 15,907.00 16,552.24
10/31/2006 16,132.00 16,789.55
11/30/2006 16,253.00 17,068.80
12/31/2006 16,445.00 17,274.49
1/31/2007 16,529.00 17,436.72
2/28/2007 16,709.00 17,679.32
3/31/2007 16,723.00 17,705.24
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
High Yield Annual Cumulative Annual Cumulative Annual Cumulative
Bond Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 5.72% 11.01% 6.29% 10.29% 9.27% 10.27%
- -------------------------------------------------------------------------
5 Year Return 10.43% 72.55% 10.61% 67.53% 10.85% 67.39%
- -------------------------------------------------------------------------
10 Year Return N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------
Since Inception* 6.31% 75.59% 6.08% 64.20% 7.32% 59.54%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/2/98; Class B: 11/2/98; Class C: 08/21/00.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2007, the SunAmerica High Yield Bond
Fund Class A returned 5.72%, compared to 11.50% for the Citigroup High Yield
Market Index. (The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Citigroup High Yield Market Index is a broad-based unmanaged index
composed of high yield securities. Indices are not managed and an investor
cannot invest directly into an index.
91
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
The SunAmerica Tax Exempt Insured Fund
For the one-year period ending March 31, 2007, the SunAmerica Tax Exempt
Insured Fund Class A returned 4.63% at net asset value (NAV) before (maximum
sales charge), underperforming its benchmark, the Lehman Brothers Municipal
Bond Index*, which returned 5.43%.
As growth slowed in the final two quarters, the U.S. Treasury yield curve ended
2006 with an inverted slope, as the Federal Reserve ended its tightening of the
Federal Funds rate with a final 25-basis point increase in June to 5.25%. For
the first half of the one-year period, the 10-year U.S. Treasury bond yielded
between 4.42% and 5.24%, as market participants oscillated between weaker
growth and higher inflation.
Since January 2007, the U.S. Treasury yield curve has steepened, with short
yields falling and longer yields increasing modestly. This trend was the result
of market anticipation that the Federal Reserve may have to lower the Federal
Funds rate before year end, as growth slowed due to the weakening housing
market.
Municipal Bond new issuance in 2006 declined 6% from the record pace generated
in 2005. However, first quarter volume in 2007 was a record for any first
quarter, with a 49% increase from the prior fiscal year. The rise in new
issuance was led by refunding issuance, which increased 88%. Due to this surge
in activity, municipal bonds underperformed taxable bonds during the past 12
months. However, the taxable-equivalent yield for municipal bonds still
remained attractive. As of March 31, 2007, the 10-year AAA municipal bond was
yielding 3.77%, with a taxable equivalent of 5.80% (based on a 35% tax
bracket), as compared to a 4.64% yield for the 10-year U.S. Treasury bond.
The Fund benefited from bonds with maturities of 20 years and beyond, as the
municipal yield curve continued its flattening bias. In addition, the Fund was
helped by executing a few relative-value transactions whereby bonds were sold
and replaced with either higher-yielding bonds of like quality or
better-structured bonds. The Fund's performance was also helped by several
holdings being pre-refunded to a call date, which resulted in an increase in
price.
Three of the Fund's best performing bonds were New York Thruway General Revenue
(5.25%, due 1/1/27), Sales Tax Asset Receivable Corporation (NY 5.25%, due
01/01/27), and New York Environmental Facilities Corporation (4.75%, due
6/15/31). These issuers have benefited from strong demand for New York bonds
and a 16% reduction in New York supply over the last year. As a result, New
York prices have risen as spreads have tightened to the municipal generic yield
curve.
Among the Fund's performance detractors were Chicago Metropolitan Water
Reclamation District 5.25% due 12/1/33 and Dallas TX Area Rapid Transit
Authority 5.00% 12/1/32, which were added in the first quarter 2007. The bonds
detracted from the performance of the fund due to the steeper yield curve and
spreads.
- --------
Past performance is no guarantee of future results.
Interest rates and bond prices typically move inversely to each other;
therefore, as with any bond fund, the value of an investment in this Fund may
go up or down in response to changes in interest rates.
* The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market. It is currently derived from
approximately 40,000 issues.
92
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDEXES -- (unaudited) (continued)
[CHART]
Tax Exempt Insured Lehman Brothers
Fund Class A/#/ Municipal Bond Index/+/
------------------ -----------------------
3/31/1997 $ 9,522.00 $10,000.00
4/30/1997 9,581.00 10,083.74
5/31/1997 9,725.00 10,235.38
6/30/1997 9,841.00 10,344.41
7/31/1997 10,151.00 10,630.96
8/31/1997 9,999.00 10,531.38
9/30/1997 10,124.00 10,656.36
10/31/1997 10,160.00 10,724.91
11/30/1997 10,212.00 10,787.97
12/31/1997 10,413.00 10,945.32
1/31/1998 10,505.00 11,058.29
2/28/1998 10,529.00 11,061.66
3/31/1998 10,501.00 11,071.38
4/30/1998 10,417.00 11,021.45
5/31/1998 10,618.00 11,195.92
6/30/1998 10,639.00 11,240.03
7/31/1998 10,651.00 11,268.22
8/31/1998 10,821.00 11,442.35
9/30/1998 10,973.00 11,584.94
10/31/1998 10,917.00 11,584.65
11/30/1998 10,938.00 11,625.32
12/31/1998 10,991.00 11,654.63
1/31/1999 11,119.00 11,793.17
2/28/1999 11,017.00 11,741.64
3/31/1999 10,978.00 11,757.93
4/30/1999 10,999.00 11,787.21
5/31/1999 10,895.00 11,718.97
6/30/1999 10,703.00 11,550.23
7/31/1999 10,749.00 11,592.28
8/31/1999 10,651.00 11,499.50
9/30/1999 10,637.00 11,504.24
10/31/1999 10,511.00 11,379.51
11/30/1999 10,636.00 11,500.63
12/31/1999 10,597.00 11,414.92
1/31/2000 10,494.00 11,365.29
2/29/2000 10,640.00 11,497.16
3/31/2000 10,846.00 11,748.55
4/30/2000 10,775.00 11,679.07
5/31/2000 10,683.00 11,618.36
6/30/2000 10,963.00 11,926.05
7/31/2000 11,120.00 12,092.09
8/31/2000 11,268.00 12,278.37
9/30/2000 11,201.00 12,214.62
10/31/2000 11,316.00 12,347.91
11/30/2000 11,393.00 12,441.25
12/31/2000 11,724.00 12,748.64
1/31/2001 11,815.00 12,875.03
2/28/2001 11,859.00 12,915.85
3/31/2001 11,940.00 13,031.60
4/30/2001 11,724.00 12,890.46
5/31/2001 11,868.00 13,029.16
6/30/2001 11,976.00 13,116.33
7/31/2001 12,158.00 13,310.81
8/31/2001 12,350.00 13,530.02
9/30/2001 12,298.00 13,484.65
10/31/2001 12,443.00 13,645.14
11/30/2001 12,273.00 13,530.29
12/31/2001 12,119.00 13,402.23
1/31/2002 12,295.00 13,634.65
2/28/2002 12,473.00 13,799.05
3/31/2002 12,164.00 13,528.54
4/30/2002 12,412.00 13,792.97
5/31/2002 12,483.00 13,876.82
6/30/2002 12,602.00 14,023.50
7/31/2002 12,801.00 14,203.77
8/31/2002 12,972.00 14,374.50
9/30/2002 13,308.00 14,689.47
10/31/2002 12,945.00 14,445.85
11/30/2002 12,841.00 14,385.85
12/31/2002 13,136.00 14,689.31
1/31/2003 13,054.00 14,652.16
2/28/2003 13,274.00 14,857.01
3/31/2003 13,269.00 14,865.90
4/30/2003 13,378.00 14,964.24
5/31/2003 13,678.00 15,314.62
6/30/2003 13,589.00 15,249.44
7/31/2003 13,088.00 14,715.75
8/31/2003 13,239.00 14,825.63
9/30/2003 13,622.00 15,261.36
10/31/2003 13,522.00 15,184.59
11/30/2003 13,644.00 15,342.97
12/31/2003 13,760.00 15,469.95
1/31/2004 13,813.00 15,558.52
2/29/2004 14,036.00 15,792.77
3/31/2004 13,924.00 15,737.62
4/30/2004 13,597.00 15,364.89
5/31/2004 13,525.00 15,309.33
6/30/2004 13,560.00 15,365.09
7/31/2004 13,715.00 15,567.10
8/31/2004 13,978.00 15,879.07
9/30/2004 14,036.00 15,963.48
10/31/2004 14,150.00 16,100.74
11/30/2004 14,015.00 15,968.11
12/31/2004 14,197.00 16,162.90
1/31/2005 14,347.00 16,314.11
2/28/2005 14,295.00 16,259.70
3/31/2005 14,167.00 16,157.29
4/30/2005 14,381.00 16,412.03
5/31/2005 14,496.00 16,527.97
6/30/2005 14,565.00 16,630.69
7/31/2005 14,457.00 16,555.37
8/31/2005 14,605.00 16,722.48
9/30/2005 14,483.00 16,609.83
10/31/2005 14,372.00 16,509.01
11/30/2005 14,409.00 16,588.24
12/31/2005 14,530.00 16,730.95
1/31/2006 14,538.00 16,776.11
2/28/2006 14,642.00 16,888.83
3/31/2006 14,511.00 16,772.22
4/30/2006 14,493.00 16,766.53
5/31/2006 14,535.00 16,841.30
6/30/2006 14,469.00 16,777.74
7/31/2006 14,627.00 16,977.46
8/31/2006 14,843.00 17,229.33
9/30/2006 14,941.00 17,349.11
10/31/2006 15,043.00 17,457.79
11/30/2006 15,178.00 17,603.50
12/31/2006 15,104.00 17,541.12
1/31/2007 15,052.00 17,496.32
2/28/2007 15,235.00 17,726.92
3/31/2007 15,182.00 17,683.19
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
Annual Cumulative Annual Cumulative Annual Cumulative
Tax Exempt Insured Fund Return Return+ Return Return+ Return Return+
- ----------------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return (0.36)% 4.63% (0.28)% 3.72% 2.98% 3.98%
- --------------------------------------------------------------------------------
5 Year Return 3.53% 24.81% 3.46% 20.53% 3.84% 20.75%
- --------------------------------------------------------------------------------
10 Year Return 4.26% 59.44% 4.20% 50.94% N/A N/A
- --------------------------------------------------------------------------------
Since Inception* 5.50% 229.33% 4.11% 72.26% 3.65% 32.46%
- --------------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, return would be lower.
* Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 06/1/99.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2007, SunAmerica Tax Exempt Insured
Fund Class A returned (0.36)%, compared to 5.43% for the Lehman Brothers
Municipal Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers Municipal Bond Index is a broad market performance
benchmark for the tax-exempt bond market. It is currently derived from
approximately 40,000 issues. Indices are not managed and an investor cannot
invest directly into an index.
93
[LOGO] AIG SunAmerica
Mutual Funds
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Directors/Trustees VOTING PROXIES ON TRUST DISCLOSURE OF QUARTERLY
Samuel M. Eisenstat PORTFOLIO SECURITIES PORTFOLIO HOLDINGS
Peter A. Harbeck A description of the The Trust is required to
Dr. Judith L. Craven policies and proce-dures file its com-plete
William F. Devin that the Trust uses to schedule of portfolio
Stephen J. Gutman determine how to vote holdings with the U.S.
Jeffrey S. Burum proxies relating to Securities and Exchange
William J. Shea secu-rities held in a Commission for its first
Fund's portfolio which is and third fiscal quarters
Officers available in the Trust's on Form N-Q. The Trust's
Vincent M. Marra, Statement of Additional Forms N-Q are available
President Information, may be on the U.S. Securities
Donna M. Handel, ob-tained without charge and Exchange Commis-sion
Treasurer upon request, by calling website at www.sec.gov.
James Nichols, Vice (800) 858-8850. The You can also review and
President in-formation is also obtain copies of the
Timothy Pettee, Vice available from the EDGAR Forms N-Q at the U.S.
President database on the U.S. Securities and Exchange
Michael Cheah, Vice Secu-rities and Exchange Commission Public
President Commission's website at Refer-ence Room in
Cynthia Gibbons, Vice http://www.sec.gov. Washington DC
President and Chief (information on the
Compliance Officer DELIVERY OF SHAREHOLDER operation of the Public
Gregory N. Bressler, DOCUMENTS Reference Room may be
Chief Legal Officer The Funds have adopted a ob-tained by calling
and Secretary policy that allows them 1-800-SEC-0330).
Nori L. Gabert, Vice to send only one copy of
President and a Fund's prospectus, PROXY VOTING RECORD ON
Assistant Secretary proxy material, annual SUNAMERICA INCOME FUNDS
Kathleen Fuentes, report and semi-annual Information regarding how
Assistant Secretary report (the "shareholder the SunAmerica Income
Corey A. Issing, documents") to Funds voted proxies
Assistant Secretary shareholders with related to securities
Gregory R. Kingston, multiple accounts held in the SunAmerica
Vice President and residing at the same Income Funds during the
Assistant Treasurer "household." This most recent twelve month
Chris Okeke, Assistant practice is called period ended June 30 is
Treasurer householding and reduces available, once filed
Matthew J. Hackethal, Fund expenses, which with the U.S. Securities
Anti-Money Laundering benefits you and other and Exchange Commission,
Compliance Officer shareholders. Unless the without charge, upon
Funds receive request, by calling
Investment Adviser instructions to the (800) 858-8850 or on the
con-trary, you will only U.S. Securities and
AIG SunAmerica Asset Management Corp. receive one copy of the Exchange Commission's
Harborside Financial shareholder documents. website at
Center The Funds will continue http://www.sec.gov.
3200 Plaza 5 to household the
Jersey City, NJ share-holder documents This report is submitted
07311-4992 indefinitely, until we solely for the general
are instructed otherwise. information of
Distributor If you do not wish to shareholders of the
AIG SunAmerica Capital participate in Funds. Distribution of
Services, Inc. householding please this report to persons
Harborside Financial contact Shareholder other than shareholders
Center Services at (800) of the Funds is
3200 Plaza 5 858-8850 ext. 6010 or authorized only in
Jersey City, NJ send a written request con-nection with a
07311-4992 with your name, the name currently effective
of your fund(s) and your pro-spectus, setting
Shareholder Servicing account number(s) to AIG forth details of the
Agent SunAmerica Mutual Funds Funds, which must precede
AIG SunAmerica Fund c/o BFDS, P.O. Box or accom-pany this report.
Services, Inc. 219186, Kansas City MO,
Harborside Financial 64121-9186. We will
Center resume individual
3200 Plaza 5 mailings for your account
Jersey City, NJ within thirty (30) days
07311-4992 of receipt of your
request.
Custodian and Transfer
Agent
State Street Bank and
Trust Company
P.O. Box 419572
Kansas City, MO
64141-6572
94
[LOGO]
Distributed by:
AIG SunAmerica Capital Services, Inc.
Harborside Financial Center
3200 Plaza 5
Jersey City, NJ 07311-4992
Investors should carefully consider the investment objectives, risks, charges
and expenses of any mutual fund before investing. This and other important
information is contained in the prospectus, which can be obtained from your
financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext.
6003. Read the prospectus carefully before you invest. Funds distributed by AIG
SunAmerica Capital Services, Inc.
www.sunamericafunds.com
INANN-3/07
Item 2. Code of Ethics
SunAmerica Income Funds (the "registrant") has adopted a Code of Ethics
applicable to its Principal Executive and Principal Accounting
Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that William J. Shea,
the Chairman of the Registrant's Audit Committee, qualifies as an audit
committee financial expert, as defined in the instructions to Item
3(a) of Form N-CSR. Mr. Shea is considered to be "independent" for
purposes of Item 3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)--(d) Aggregate fees billed to the registrant for the last two
fiscal years for services rendered by the registrant's principal
accountant were as follows:
2006 2007
(a) Audit Fees ....................$ 151,472 $ 135,755
(b) Audit-Related Fees ............$ 49,316 $ 0
(c) Tax Fees ......................$ 56,470 $ 54,670
(d) All Other Fees ................$ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
principal accountant in connection with statutory and regulatory
filings. Audit-Related Fees principally include a SAS No. 100 review of
the registrant's Semiannual Shareholder Report. Tax Fees principally
include tax compliance, tax advice, tax planning and preparation of tax
returns.
Aggregate fees billed to the investment adviser and Adviser Affiliates
(as defined below in Item 4(e)) that are required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X for
the last two fiscal years for services rendered by the Registrant's
principal accountant were as follows:
2006 2007
(b) Audit-Related Fees ............$ 0 $ 0
(c) Tax Fees ......................$ 0 $ 0
(d) All Other Fees ................$ 0 $ 0
(e) (1) The registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the Registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliates") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliate relates directly to the operations and
financial reporting of the registrant. The audit committee has not
presently established any pre-approval policies and procedures that
permit the pre-approval of the above services other than by the full
audit committee. Certain de minimis exceptions are allowed for non-
audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation
S-X as set forth in the Registrant's audit committee charter.
(2) No services included in (b)-(d) above in connection with fees
billed to the registrant or the investment adviser or Adviser
Affiliates were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-
01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the registrant's principal accountant for
non-audit services rendered to the registrant, its investment adviser,
and Adviser Affiliates that provides ongoing services to the registrant
for 2007 and 2006 were $537,120 and $607,911, respectively.
(h) 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 last 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) Code of Ethics applicable to its Principal Executive and
Principle Accounting Officers pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406.
Code of Ethics.
(2) 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) Certification 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: June 8, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Vincent M. Marra
-------------------
Vincent M. Marra
President
Date: June 8, 2007
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: June 8, 2007