UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4708
---------------------------------------------
SunAmerica Income Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Vincent M. Marra
Senior Vice President
AIG SunAmerica Asset Management Corp.
Harborside Financial Center,
3200 Plaza 5
Jersey City, NJ 07311
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (201) 324-6464
-----------------------------
Date of fiscal year end: March 31
--------------------------
Date of reporting period: September 30, 2007
-------------------------
Item 1. Reports to Stockholders
[PHOTO]
SEMI-ANNUAL REPORT 2007
AIG SUNAMERICA
Income Funds
[LOGO]
www.sunamericafunds.com
live longer retire stronger/sm/
September 30, 2007 SEMI-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........... 16
NOTES TO FINANCIAL STATEMENTS...... 62
APPROVAL OF ADVISORY AGREEMENT..... 77
Shareholder Letter
Dear Shareholder:
Enclosed is the semi-annual report for the SunAmerica Income Funds for the
six-month period ended September 30, 2007. The semi-annual period was a
turbulent one for the fixed-income markets and presented many challenges.
Unquestionably, the top story of the six-month period was the credit crunch
that hit the markets in August. The deterioration in the housing market created
concern regarding the subprime mortgage market. This concern spread throughout
the credit markets and caused great uncertainty as the era of seemingly endless
liquidity came to an end. Banks tightened lending standards and investors ran
to short-term Treasuries, driving yields down. The period was also marked by
rising oil prices and a declining dollar which raised the specter of inflation
in some circles. As the equity markets sold off and the credit markets weren't
functioning efficiently, the state of the economy hung in the balance.
Fortunately, the Federal Reserve decided to take action. In August it initiated
a 50-basis point cut in the discount rate (the rate at which the Federal
Reserve lends money to banks). They followed that cut with a 50-basis point cut
in the Federal Funds rate (the rate at which banks lend to other banks
overnight) in September, which sparked a strong stock rally. This reversed the
decline in the equity markets which had occurred earlier in the quarter. The
Federal Reserve's actions seemed to instill confidence in the market that the
central bank would move aggressively to ward off a possible recession.
While the immediate pressure on the fixed-income markets appears to have been
reduced, we are not out of the woods yet. Uncertainty still reigns over the
housing market and no one knows what other credit events may occur. We
recommend that investors meet with their financial adviser to review their
portfolios, make sure they are properly diversified and have the appropriate
level of risk.
We thank you for your investment in the SunAmerica Income Funds. We continue to
work diligently, and strive to preserve and grow your capital consistent with
each Fund's individual investment objective. We also encourage you to visit our
website, www.sunamericafunds.com, for more information.
Sincerely,
The SunAmerica Income Funds Investment Professionals
AIG SunAmerica Asset Management Corp. AIG Investments
------------------------------------- -
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
- --------
Past performance is no guarantee of future results.
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- September 30, 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 April 1, 2007 and held until September
30, 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 September 30, 2007" to estimate the expenses you paid on your
account during this period. The "Expenses Paid During the Six Months Ended
September 30, 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
September 30, 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 September 30,
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 September 30, 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
September 30, 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 September 30,
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 -- September 30, 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 April 1, September 30, September 30, at April 1, September 30, September 30, September 30,
Fund 2007 2007 2007* 2007 2007 2007* 2007*
- ---- ------------- -------------- ------------- ------------- -------------- ------------- -------------
U.S. Government
Securities
Class A#........... $1,000.00 $1,020.15 $ 5.00 $1,000.00 $1,020.05 $ 5.00 0.99%
Class B#........... $1,000.00 $1,016.86 $ 8.27 $1,000.00 $1,016.80 $ 8.27 1.64%
Class C#........... $1,000.00 $1,016.86 $ 8.27 $1,000.00 $1,016.80 $ 8.27 1.64%
GNMA
Class A#........... $1,000.00 $1,019.76 $ 5.00 $1,000.00 $1,020.05 $ 5.00 0.99%
Class B#........... $1,000.00 $1,016.47 $ 8.27 $1,000.00 $1,016.80 $ 8.27 1.64%
Class C#........... $1,000.00 $1,015.56 $ 8.26 $1,000.00 $1,016.80 $ 8.27 1.64%
Strategic Bond
Class A............ $1,000.00 $1,016.27 $ 6.45 $1,000.00 $1,018.60 $ 6.46 1.28%
Class B............ $1,000.00 $1,010.03 $ 9.80 $1,000.00 $1,015.25 $ 9.82 1.95%
Class C............ $1,000.00 $1,012.96 $ 9.76 $1,000.00 $1,015.30 $ 9.77 1.94%
High Yield Bond
Class A#........... $1,000.00 $1,000.51 $ 6.80 $1,000.00 $1,018.20 $ 6.86 1.36%
Class B#........... $1,000.00 $ 997.34 $10.04 $1,000.00 $1,014.95 $10.13 2.01%
Class C#........... $1,000.00 $ 995.32 $10.03 $1,000.00 $1,014.95 $10.13 2.01%
Tax Exempt Insured
Class A............ $1,000.00 $1,005.69 $ 6.62 $1,000.00 $1,018.40 $ 6.66 1.32%
Class B............ $1,000.00 $ 1000.70 $11.50 $1,000.00 $1,013.50 $11.58 2.30%
Class C#........... $1,000.00 $1,002.54 $ 9.76 $1,000.00 $1,015.25 $ 9.82 1.95%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 183 days divided by 366
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges, small account fees
and administrative fees, if applicable to your account. Please refer to your
Prospectus and/or qualified retirement plan document for more information.
# During the stated period, the investment adviser either waived a portion of
or all fees and assumed a portion of or all expenses for the Funds. As a
result, if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended September 30,
2007" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2007 -- (unaudited)
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
ASSETS:
Long-term investment securities, at market value* (unaffiliated).......... $153,867,093 $394,986,583 $783,235,038
Short term investment securities, at market value* (unaffiliated)......... -- -- 17,067,000
Repurchase agreements (cost approximates market value).................... 29,653,000 42,227,000 6,047,000
------------ ------------ ------------
Total investments....................................................... 183,520,093 437,213,583 806,349,038
------------ ------------ ------------
Cash...................................................................... 467 415 938,794
Foreign cash*............................................................. -- -- 1,424,208
Receivable for:
Shares of beneficial interest sold...................................... 363,815 523,679 3,500,688
Dividends and interest.................................................. 1,365,168 2,033,657 12,450,993
Investments sold........................................................ 4,013,121 15,049,203 32,664,143
Prepaid expenses and other assets......................................... 1,924 2,714 3,538
Due from investment adviser for expense reimbursements/fee waivers........ 67,545 53,335 --
------------ ------------ ------------
Total assets.............................................................. 189,332,133 454,876,586 857,331,402
------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.................................. 729,638 713,377 1,289,646
Investments purchased................................................... 4,011,089 55,454,919 39,185,947
Interest on securities sold short....................................... -- -- --
Investment advisory and management fees................................. 101,438 150,480 409,081
Distribution and service maintenance fees............................... 67,640 156,073 391,043
Transfer agent fees and expenses........................................ 52,126 96,306 154,919
Trustees' fees and expenses............................................. 88,159 56,207 27,739
Other accrued expenses.................................................. 89,035 131,782 110,004
Dividends payable......................................................... 113,212 176,949 827,342
Due to custodian.......................................................... -- -- --
Securities sold short, at market value#................................... -- -- --
Commitments (Note 10)..................................................... -- -- --
------------ ------------ ------------
Total liabilities......................................................... 5,252,337 56,936,093 42,395,721
------------ ------------ ------------
Net assets................................................................ $184,079,796 $397,940,493 $814,935,681
============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value............................ $ 199,533 $ 359,826 $ 2,264,002
Paid-in capital........................................................... 196,992,839 404,883,237 829,612,897
------------ ------------ ------------
197,192,372 405,243,063 831,876,899
Accumulated undistributed net investment income (loss).................... 3,886 94,434 1,456,268
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short and foreign exchange transactions....... (13,851,811) (4,453,798) (24,873,863)
Unrealized appreciation (depreciation) on investments..................... 735,349 (2,943,206) 6,287,852
Unrealized appreciation (depreciation) on securities sold short........... --
Unrealized appreciation (depreciation) on foreign exchange transactions... -- -- 188,525
------------ ------------ ------------
Net assets................................................................ $184,079,796 $397,940,493 $814,935,681
============ ============ ============
*Cost
Long-term investment securities (unaffiliated).......................... $153,131,744 $397,929,789 $776,947,186
============ ============ ============
Short-term securities (unaffiliated).................................... $ -- $ -- $ 17,067,000
============ ============ ============
Foreign cash............................................................ $ -- $ -- $ 1,346,039
============ ============ ============
#Proceeds from securities sold short...................................... $ $ $ --
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
ASSETS:
Long-term investment securities, at market value* (unaffiliated).......... $267,080,153 $52,386,793
Short term investment securities, at market value* (unaffiliated)......... -- 5,741,558
Repurchase agreements (cost approximates market value).................... 13,896,000 --
------------ -----------
Total investments....................................................... 280,976,153 58,128,351
------------ -----------
Cash...................................................................... -- --
Foreign cash*............................................................. -- --
Receivable for:
Shares of beneficial interest sold...................................... 383,851 17,980
Dividends and interest.................................................. 5,698,377 788,486
Investments sold........................................................ 1,264,953 --
Prepaid expenses and other assets......................................... 72,869 1,525
Due from investment adviser for expense reimbursements/fee waivers........ 59,117 3,288
------------ -----------
Total assets.............................................................. 288,455,320 58,939,630
------------ -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.................................. 1,981,186 16,728
Investments purchased................................................... 3,165,620 1,670,705
Interest on securities sold short....................................... 4,278 --
Investment advisory and management fees................................. 166,205 22,822
Distribution and service maintenance fees............................... 142,744 20,122
Transfer agent fees and expenses........................................ 62,587 12,388
Trustees' fees and expenses............................................. 48,372 27,795
Other accrued expenses.................................................. 123,980 64,455
Dividends payable......................................................... 406,344 38,483
Due to custodian.......................................................... 18,645 1,446,833
Securities sold short, at market value#................................... 1,150,897 --
Commitments (Note 10)..................................................... -- --
------------ -----------
Total liabilities......................................................... 7,270,858 3,320,331
------------ -----------
Net assets................................................................ $281,184,462 $55,619,299
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value............................ $ 606,468 $ 44,470
Paid-in capital........................................................... 367,407,561 53,384,737
------------ -----------
368,014,029 53,429,207
Accumulated undistributed net investment income (loss).................... (2,241,803) (43,507)
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short and foreign exchange transactions....... (92,013,350) 197,545
Unrealized appreciation (depreciation) on investments..................... 7,428,358 2,036,054
Unrealized appreciation (depreciation) on securities sold short........... (2,772)
Unrealized appreciation (depreciation) on foreign exchange transactions... -- --
------------ -----------
Net assets................................................................ $281,184,462 $55,619,299
============ ===========
*Cost
Long-term investment securities (unaffiliated).......................... $259,651,795 $50,350,739
============ ===========
Short-term securities (unaffiliated).................................... $ -- $ 5,741,558
============ ===========
Foreign cash............................................................ $ -- $ --
============ ===========
#Proceeds from securities sold short...................................... $ (1,148,125) $
============ ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2007 --
(unaudited) (continued)
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
Class A (unlimited shares authorized):
Net assets........................................................................ $160,325,678 $321,145,317 $508,419,434
Shares of beneficial interest issued and outstanding.............................. 17,378,113 29,055,300 141,410,788
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 9.23 $ 11.05 $ 3.60
Maximum sales charge (4.75% of offering price).................................... 0.46 0.55 0.18
------------ ------------ ------------
Maximum offering price to public.................................................. $ 9.69 $ 11.60 $ 3.78
============ ============ ============
Class B (unlimited shares authorized):
Net assets........................................................................ $ 13,277,833 $ 49,408,670 $ 53,670,752
Shares of beneficial interest issued and outstanding.............................. 1,438,647 4,458,724 14,931,735
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 9.23 $ 11.08 $ 3.59
============ ============ ============
Class C (unlimited shares authorized):
Net assets........................................................................ $ 10,476,285 $ 27,386,506 $252,845,495
Shares of beneficial interest issued and outstanding.............................. 1,136,544 2,468,610 70,057,719
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 9.22 $ 11.09 $ 3.61
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
Class A (unlimited shares authorized):
Net assets........................................................................ $159,756,141 $47,845,520
Shares of beneficial interest issued and outstanding.............................. 34,515,725 3,825,662
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 4.63 $ 12.51
Maximum sales charge (4.75% of offering price).................................... 0.23 0.62
------------ -----------
Maximum offering price to public.................................................. $ 4.86 $ 13.13
============ ===========
Class B (unlimited shares authorized):
Net assets........................................................................ $ 42,692,424 $ 3,972,170
Shares of beneficial interest issued and outstanding.............................. 9,210,861 317,604
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 4.64 $ 12.51
============ ===========
Class C (unlimited shares authorized):
Net assets........................................................................ $ 78,735,897 $ 3,801,609
Shares of beneficial interest issued and outstanding.............................. 16,920,213 303,739
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge)................................................ $ 4.65 $ 12.52
============ ===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30, 2007
-- (unaudited)
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ----------- -----------
INCOME:
Dividend (unaffiliated).......................................................... $ -- $ -- $ 213,061
Interest (unaffiliated).......................................................... 4,659,499 10,496,243 26,080,839
----------- ----------- -----------
Total investment income*........................................................ 4,659,499 10,496,243 26,293,900
----------- ----------- -----------
EXPENSES:
Investment advisory and management fees.......................................... 587,897 903,790 2,420,790
Distribution and service maintenance fees:
Class A......................................................................... 274,464 546,219 849,195
Class B......................................................................... 68,431 263,294 273,496
Class C......................................................................... 51,843 142,836 1,189,051
Transfer agent fees:
Class A......................................................................... 195,618 361,704 549,803
Class B......................................................................... 20,641 67,166 65,515
Class C......................................................................... 13,932 35,811 268,163
Registration fees:
Class A......................................................................... 12,887 12,721 35,367
Class B......................................................................... 8,312 7,858 7,831
Class C......................................................................... 10,379 10,131 31,633
Custodian and accounting fees.................................................... 39,642 75,937 134,249
Reports to shareholders.......................................................... 18,360 34,873 48,040
Audit and tax fees............................................................... 20,588 20,757 21,692
Legal fees....................................................................... 5,361 5,773 10,412
Trustees' fees and expenses...................................................... 6,314 13,749 19,384
Interest expense................................................................. -- -- 1,828
Interest expense on securities sold short........................................ -- -- --
Other expenses................................................................... 8,195 10,254 12,158
----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements, and custody credits.. 1,342,864 2,512,873 5,938,607
Fees waived and expenses reimbursed by investment advisor (Note 3).............. (368,307) (301,733) --
Custody credits earned on cash balances......................................... (966) (67) (119,474)
----------- ----------- -----------
Net expenses.................................................................... 973,591 2,211,073 5,819,133
----------- ----------- -----------
Net investment income (loss)....................................................... 3,685,908 8,285,170 20,474,767
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)............................. (2,186,884) 400,870 (7,196,210)
Net realized foreign exchange gain (loss) on other assets and liabilities.......... -- -- 6,407,798
----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies..................... (2,186,884) 400,870 (788,412)
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)..... 2,317,611 (869,666) (8,728,200)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities.. -- -- 108,417
Change in unrealized appreciation (depreciation) on securities sold short.......... -- -- --
----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies................... 2,317,611 (869,666) (8,619,783)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies...... 130,727 (468,796) (9,408,195)
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 3,816,635 $ 7,816,374 $11,066,572
=========== =========== ===========
- --------
*Net of foreign withholding taxes on interest and dividends of..................... $ -- $ -- $ 76,717
=========== =========== ===========
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ ----------
INCOME:
Dividend (unaffiliated).......................................................... $ 268,872 $ --
Interest (unaffiliated).......................................................... 13,586,637 1,332,226
------------ ----------
Total investment income*........................................................ 13,855,509 1,332,226
------------ ----------
EXPENSES:
Investment advisory and management fees.......................................... 1,321,745 141,404
Distribution and service maintenance fees:
Class A......................................................................... 398,646 84,268
Class B......................................................................... 236,858 23,356
Class C......................................................................... 418,243 18,688
Transfer agent fees:
Class A......................................................................... 265,871 58,865
Class B......................................................................... 56,958 6,745
Class C......................................................................... 97,391 5,379
Registration fees:
Class A......................................................................... 25,778 10,035
Class B......................................................................... 9,252 7,720
Class C......................................................................... 10,913 10,098
Custodian and accounting fees.................................................... 65,326 16,141
Reports to shareholders.......................................................... 29,636 3,766
Audit and tax fees............................................................... 22,014 19,263
Legal fees....................................................................... 8,074 3,804
Trustees' fees and expenses...................................................... 11,625 2,159
Interest expense................................................................. 44,361 --
Interest expense on securities sold short........................................ 97,818 --
Other expenses................................................................... 10,554 6,483
------------ ----------
Total expenses before fee waivers, expense reimbursements, and custody credits.. 3,131,063 418,174
Fees waived and expenses reimbursed by investment advisor (Note 3).............. (257,702) (10,458)
Custody credits earned on cash balances......................................... (7,590) (213)
------------ ----------
Net expenses.................................................................... 2,865,771 407,503
------------ ----------
Net investment income (loss)....................................................... 10,989,738 924,723
------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)............................. (5,209,297) (266,199)
Net realized foreign exchange gain (loss) on other assets and liabilities.......... 7,339 --
------------ ----------
Net realized gain (loss) on investments and foreign currencies..................... (5,201,958) (266,199)
------------ ----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)..... (9,507,185) (405,566)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities.. (4,510) --
Change in unrealized appreciation (depreciation) on securities sold short.......... (2,772) --
------------ ----------
Net unrealized gain (loss) on investments and foreign currencies................... (9,514,467) (405,566)
------------ ----------
Net realized and unrealized gain (loss) on investments and foreign currencies...... (14,716,425) (671,765)
------------ ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $ (3,726,687) $ 252,958
============ ==========
- --------
*Net of foreign withholding taxes on interest and dividends of..................... $ 5,210 $ --
============ ==========
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
U.S. Government
Securities Fund
--------------------------
For the
six months
ended For the year
September 30, ended
2007 March 31,
(unaudited) 2007
------------- ------------
Operations:
Net investment income (loss).......................................................... $ 3,685,908 $ 6,828,045
Net realized gain (loss) on investments and foreign currencies........................ (2,186,884) (68,459)
Net unrealized gain (loss) on investments and foreign currencies...................... 2,317,611 1,657,175
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 3,816,635 8,416,761
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (3,309,163) (6,264,372)
Net investment income (Class B)....................................................... (244,460) (608,171)
Net investment income (Class C)....................................................... (185,020) (312,901)
Net realized gain on securities (Class A)............................................. -- --
Net realized gain on securities (Class B)............................................. -- --
Net realized gain on securities (Class C)............................................. -- --
------------ ------------
Total distributions to shareholders..................................................... (3,738,643) (7,185,444)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 7,165,604 (3,236,594)
------------ ------------
Total increase (decrease) in net assets................................................. 7,243,596 (2,005,277)
NET ASSETS:
Beginning of period..................................................................... 176,836,200 178,841,477
------------ ------------
End of period+.......................................................................... $184,079,796 $176,836,200
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 3,886 $ 56,621
============ ============
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund
-------------------------------
For the six months
ended For the year
September 30, ended
2007 March 31,
(unaudited) 2007
------------------ ------------
Operations:
Net investment income (loss).......................................................... $ 8,285,170 $ 16,306,209
Net realized gain (loss) on investments and foreign currencies........................ 400,870 (171,039)
Net unrealized gain (loss) on investments and foreign currencies...................... (869,666) 4,010,650
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 7,816,374 20,145,820
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (6,967,662) (13,350,095)
Net investment income (Class B)....................................................... (1,005,628) (2,448,583)
Net investment income (Class C)....................................................... (545,349) (1,311,888)
Net realized gain on securities (Class A)............................................. -- --
Net realized gain on securities (Class B)............................................. -- --
Net realized gain on securities (Class C)............................................. -- --
------------ ------------
Total distributions to shareholders..................................................... (8,518,639) (17,110,566)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 304,154 (24,531,303)
------------ ------------
Total increase (decrease) in net assets................................................. (398,111) (21,496,049)
NET ASSETS:
Beginning of period..................................................................... 398,338,604 419,834,653
------------ ------------
End of period+.......................................................................... $397,940,493 $398,338,604
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 94,434 $ 327,903
============ ============
Strategic Bond Fund
-------------------------------
For the six months
ended For the year
September 30, ended
2007 March 31,
(unaudited) 2007
------------------ ------------
Operations:
Net investment income (loss).......................................................... $ 21,139,310 $ 25,776,555
Net realized gain (loss) on investments and foreign currencies........................ (788,412) 3,735,857
Net unrealized gain (loss) on investments and foreign currencies...................... (9,284,326) 13,298,249
------------ ------------
Net increase (decrease) in net assets resulting from operations......................... 11,066,572 42,810,661
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)....................................................... (11,876,768) (18,128,377)
Net investment income (Class B)....................................................... (1,153,076) (2,175,396)
Net investment income (Class C)....................................................... (5,033,975) (6,149,737)
Net realized gain on securities (Class A)............................................. -- --
Net realized gain on securities (Class B)............................................. -- --
Net realized gain on securities (Class C)............................................. -- --
------------ ------------
Total distributions to shareholders..................................................... (18,063,819) (26,453,510)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 94,556,542 400,002,265
------------ ------------
Total increase (decrease) in net assets................................................. 87,559,295 416,359,416
NET ASSETS:
Beginning of period..................................................................... 727,376,386 311,016,970
------------ ------------
End of period+.......................................................................... $814,935,681 $727,376,386
============ ============
- --------
+Includes accumulated undistributed net investment income (loss)........................ $ 1,456,268 $ (954,680)
============ ============
See Notes to Financial Statements
9
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund Tax Exempt Insured Fund
-------------------------- -------------------------
For the six For the six
months ended For the year months ended For the year
September 30, ended September 30, ended
2007 March 31, 2007 March 31,
(unaudited) 2007 (unaudited) 2007
------------- ------------ ------------- ------------
Operations:
Net investment income (loss).......................... $ 14,776,873 $ 20,209,713 $ 924,723 $ 1,996,138
Net realized gain (loss) on investments and foreign
currencies.......................................... (5,201,958) 6,213,051 (266,199) 481,567
Net unrealized gain (loss) on investments and foreign
currencies.......................................... (13,301,602) 6,288,956 (405,566) 281,498
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................ (3,726,687) 32,711,720 252,958 2,759,203
------------ ------------ ----------- -----------
Distributions to shareholders from:
Net investment income (Class A)....................... (6,913,817) (13,055,050) (810,473) (1,775,224)
Net investment income (Class B)....................... (1,281,344) (3,241,816) (55,721) (149,453)
Net investment income (Class C)....................... (2,262,539) (5,181,540) (51,086) (115,967)
Net realized gain on securities (Class A)............. -- -- -- (365,409)
Net realized gain on securities (Class B)............. -- -- -- (39,551)
Net realized gain on securities (Class C)............. -- -- -- (31,739)
------------ ------------ ----------- -----------
Total distributions to shareholders.................... (10,457,700) (21,478,406) (917,280) (2,477,343)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)................... (84,442,347) 32,050,805 (2,836,547) (9,226,947)
------------ ------------ ----------- -----------
Total increase (decrease) in net assets................ (98,626,734) 43,284,119 (3,500,869) (8,945,087)
NET ASSETS:
Beginning of period.................................... 379,811,196 336,527,077 59,120,168 68,065,255
------------ ------------ ----------- -----------
End of period+......................................... $281,184,462 $379,811,196 $55,619,299 $59,120,168
============ ============ =========== ===========
- --------
+Includes accumulated undistributed net investment
income (loss)......................................... $ (2,241,803) $ (2,773,841) $ (43,507) $ (50,950)
============ ============ =========== ===========
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 1.21%
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
09/30/07+ 9.24 0.19 (0.01) 0.18 (0.19) -- (0.19) 9.23 2.02 160,326 0.99(5)
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
09/30/07+ 9.24 0.16 (0.01) 0.15 (0.16) -- (0.16) 9.23 1.69 13,278 1.64(5)
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
09/30/07+ 9.23 0.16 (0.01) 0.15 (0.16) -- (0.16) 9.22 1.69 10,476 1.64(5)
-
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
4.16(5) 186
-
3.20% 630%(4)
2.45 267(4)
2.61 253(4)
3.14 357
3.40 243
3.52(5) 186
-
3.18% 630%(4)
2.45 267(4)
2.61 253(4)
3.14 357
3.40 243
3.51(5) 186
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 09/30/07(5)+
-------- -------- -------- -------- -------- ------------
U.S. Government Securities Fund Class A. 0.21% 0.37% 0.39% 0.36% 0.38% 0.38%
U.S. Government Securities Fund Class B. 0.23 0.37 0.43 0.43 0.43 0.54
U.S. Government Securities Fund Class C. 0.27 0.38 0.48 0.57 0.43 0.59
(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%
(5)Annualized
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
09/30/07+ 11.08 0.24 (0.03) 0.21 (0.24) -- (0.24) 11.05 1.98 321,145 0.99(5)
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
09/30/07+ 11.11 0.21 (0.03) 0.18 (0.21) -- (0.21) 11.08 1.65 49,409 1.64(5)
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
09/30/07+ 11.13 0.21 (0.04) 0.17 (0.21) -- (0.21) 11.09 1.56 27,387 1.64(5)
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
4.35(5) 159
2.71% 436%(4)
1.77 225(4)
2.10 204(4)
2.50 138
3.53 142
3.70(5) 159
2.59% 436%(4)
1.74 225(4)
2.11 204(4)
2.49 138
3.53 142
3.70(5) 159
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 09/30/07(5)+
-------- -------- -------- -------- -------- ------------
GNMA Fund Class A............. 0.13% 0.18% 0.17% 0.13% 0.15% 0.14%
GNMA Fund Class B............. 0.14 0.16 0.18 0.17 0.18 0.19
GNMA Fund Class C............. 0.13 0.16 0.18 0.19 0.17 0.22
(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%
(5)Annualized
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(4)
- --------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------- --------- -------- -------------
Class A
- -
03/31/03 $3.00 $0.20 $ 0.06 $0.26 $(0.18) $-- $(0.18) $3.08 9.07%(7) $ 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
09/30/07+ 3.63 0.10 (0.04) 0.06 (0.09) -- (0.09) 3.60 1.63 508,419 1.28(6)
Class B
- -
03/31/03 $3.00 $0.18 $ 0.06 $0.24 $(0.16) $-- $(0.16) $3.08 8.36%(7) $ 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
09/30/07+ 3.63 0.09 (0.05) 0.04 (0.08) -- (0.08) 3.59 1.00 53,671 1.95(6)
Class C*
- -
03/31/03 $3.01 $0.19 $ 0.05 $0.24 $(0.16) $-- $(0.16) $3.09 8.47%(7) $ 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
09/30/07+ 3.64 0.09 (0.04) 0.05 (0.08) -- (0.08) 3.61 1.30 252,845 1.94(6)
Ratio
of net
investment
income to
average Portfolio
net assets(4) Turnover
- ------------- ---------
6.93% 67%(5)
6.41(3) 71(5)
5.94(3) 190(5)
5.19 119
4.84 131
5.48(6) 65
6.26% 67%(5)
5.76(3) 71(5)
5.32(3) 190(5)
4.51(3) 119
4.17 131
4.81(6) 65
6.37%(3) 67%(5)
5.78(3) 71(5)
5.29(3) 190(5)
4.54(3) 119
4.17 131
4.82(6) 65
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 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)Net of custody credits of:
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 9/30/07(6)+
-------- -------- -------- -------- -------- -----------
Strategic Bond Fund..................... 0.01% 0.02% 0.01% 0.07% 0.05% 0.03%
(5)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%
(6)Annualized
(7)Total return for each class was increased by less than 0.01% from
reimbursements for losses realized on the disposal of investments in
violation of investment restrictions.
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 (2.54)% $ 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)
09/30/07+ 4.77 0.16 (0.16) 0.00 (0.14) -- (0.14) 4.63 0.05 159,756 1.36(3)(6)
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)
09/30/07+ 4.78 0.14 (0.15) (0.01) (0.13) -- (0.13) 4.64 (0.27) 42,692 2.01(3)(6)
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)
09/30/07+ 4.80 0.13 (0.15) (0.02) (0.13) -- (0.13) 4.65 (0.47) 78,736 2.01(3)(6)
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
6.37(3)(6) 39
9.63% 117%(4)
7.52 126(4)
7.04(3) 85(4)
6.71(3)(5) 91
5.82(3) 86
5.73(3)(6) 39
9.67%(3) 117%(4)
7.53(3) 126(4)
6.97(3) 85(4)
6.67(3)(5) 91
5.80(3) 86
5.68(3)(6) 39
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 09/30/07(6)+
-------- -------- -------- -------- -------- ------------
High Yield Bond Fund Class A............ -- % -- % 0.08% 0.11% 0.09% 0.14%
High Yield Bond Fund Class B............ -- -- 0.07 0.14 0.11 0.17
High Yield Bond Fund Class C............ 0.10 0.01 0.09 0.12 0.10 0.15
(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%.
(6)Annualized
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
09/30/07+ 12.65 0.21 (0.14) 0.07 (0.21) -- (0.21) 12.51 0.57 47,846 1.32(4)
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
09/30/07+ 12.65 0.16 (0.15) 0.01 (0.15) -- (0.15) 12.51 0.07 3,972 2.30(4)
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)
09/30/07+ 12.66 0.17 (0.14) 0.03 (0.17) -- (0.17) 12.52 0.25 3,802 1.95(3)(4)
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
3.39(4) 27
2.39% 195%
2.20 131
2.44 153
2.48 81
2.44 84
2.41(4) 27
2.40%(3) 195%
2.21(3) 131
2.44(3) 153
2.48(3) 81
2.60(3) 84
2.76(3)(4) 27
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/03 03/31/04 03/31/05 03/31/06 03/31/07 09/30/07(4)+
-------- -------- -------- -------- -------- ------------
Tax Exempt Insured Fund Class C......... 0.00% 0.12% 0.09% 0.20% 0.09% 0.56%
(4)Annualized.
See Notes to Financial Statements
15
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- September 30, 2007 -- (unaudited)
Industry Allocation*
Government National Mtg. Assoc. 42.2%
United States Treasury Notes... 21.7
Repurchase Agreements.......... 16.1
United States Treasury Bonds... 12.4
Finance -- Other Services...... 5.5
Small Business Administration.. 0.9
Federal Farm Credit Bank....... 0.7
Federal National Mtg. Assoc.... 0.2
----
99.7%
====
Credit Quality+#
Government -- Agency.. 52.5%
Government -- Treasury 40.9
AA.................... 6.6
-----
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 -- September 30, 2007 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 49.5%
Federal Farm Credit Bank -- 0.7%
5.64% due 04/04/11................... $ 500,000 $ 519,402
6.00% due 03/07/11................... 200,000 209,648
6.30% due 12/03/13(1)................ 500,000 540,647
-----------
1,269,697
-----------
Federal Home Loan Mtg. Corp. -- 0.0%
8.00% due 06/01/08................... 436 437
-----------
Federal National Mtg. Assoc. -- 0.2%
6.53% due 05/25/30................... 354,553 353,706
8.00% due 01/01/23................... 33,286 35,174
11.00% due 02/01/15.................. 31 35
11.50% due 09/01/19.................. 8,969 9,956
-----------
398,871
-----------
Finance-Other Services -- 5.5%
Private Export Funding Corp.
5.87% due 07/31/08................... 10,000,000 10,097,060
-----------
Government National Mtg. Assoc. -- 42.2%
4.50% due 05/15/18................... 885,323 856,504
4.50% due 08/15/18................... 1,384,217 1,339,158
4.50% due 09/15/18................... 4,115,076 3,981,123
4.50% due 10/15/18................... 4,086,236 3,953,222
4.50% due 09/15/33................... 4,622,102 4,346,406
5.00% due 04/15/18................... 4,088,970 4,028,229
5.00% due 04/15/33................... 27,525 26,675
5.00% due 08/15/33................... 1,791,375 1,736,054
5.00% due 09/15/33................... 823,375 797,947
5.00% due 10/15/33................... 577,818 559,974
5.00% due 04/15/34................... 28,071 27,192
5.00% due 11/15/34................... 200,196 193,922
5.00% due 02/15/35................... 25,900 25,075
5.00% due 03/15/35................... 505,049 488,963
5.00% due 04/15/35................... 62,756 60,757
5.00% due 05/15/35................... 2,136,008 2,067,973
5.00% due 09/15/35................... 971,511 940,567
5.00% due 10/15/35................... 153,297 148,414
5.00% due 12/15/35................... 96,128 93,066
5.00% due 03/15/36................... 891,483 862,582
5.00% due 05/15/36................... 1,394,852 1,349,633
5.00% due 06/15/36................... 944,917 914,284
5.00% due 09/15/36................... 2,115,260 2,046,277
5.00% due 10/15/36................... 504,313 487,964
5.00% due 11/15/36................... 54,517 52,750
5.00% due 12/15/36................... 401,957 388,926
5.00% due 01/15/37................... 4,619,152 4,468,482
5.00% due 02/15/37................... 2,108,322 2,039,551
5.00% due 03/15/37................... 1,702,028 1,646,510
5.00% due 04/15/37................... 1,812,502 1,753,381
5.50% due 11/15/32................... 14,141 13,966
5.50% due 03/15/33................... 444,045 438,470
5.50% due 04/15/33................... 527,305 520,685
5.50% due 05/15/33................... 1,232,672 1,217,196
5.50% due 06/15/33................... 5,839,625 5,766,314
5.50% due 07/15/33................... 1,569,428 1,549,725
5.50% due 10/15/33................... 1,603,139 1,583,013
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
5.50% due 12/15/33...................... $ 336,833 $ 332,604
5.50% due 01/15/34...................... 3,449,861 3,405,394
5.50% due 02/15/34...................... 1,952,722 1,927,553
6.00% due 01/15/28...................... 2,408 2,432
6.00% due 04/15/28...................... 1,255,000 1,268,134
6.00% due 05/15/28...................... 1,366 1,380
6.00% due 10/15/28...................... 3,567 3,602
6.00% due 03/15/29...................... 56,961 57,510
6.00% due 04/15/29...................... 43,761 44,183
6.00% due 05/15/29...................... 69,987 70,662
6.00% due 06/15/29...................... 27,787 28,054
6.00% due 04/15/31...................... 24,247 24,472
6.00% due 05/15/31...................... 45,381 45,801
6.00% due 11/15/31...................... 165,897 167,434
6.00% due 12/15/31...................... 340,588 343,741
6.00% due 01/15/32...................... 159,697 161,076
6.00% due 02/15/32...................... 39,413 39,754
6.00% due 03/15/32...................... 8,396 8,469
6.00% due 08/15/32...................... 256,146 258,358
6.00% due 11/15/32...................... 37,172 37,493
6.00% due 12/15/32...................... 9,422 9,503
6.00% due 01/15/33...................... 18,238 18,388
6.00% due 02/15/33...................... 55,028 55,482
6.00% due 03/15/33...................... 80,114 80,776
6.00% due 04/15/33...................... 319,524 322,162
6.00% due 07/15/33...................... 234,609 236,546
6.00% due 08/15/33...................... 2,349,924 2,370,672
6.00% due 09/15/33...................... 327,958 330,666
6.00% due 10/15/33...................... 1,329,310 1,340,291
6.00% due 11/15/33...................... 147,039 148,252
6.00% due 12/15/33...................... 690,686 696,388
6.00% due 02/15/34...................... 322,247 324,668
6.00% due 05/15/34...................... 42,220 42,537
6.00% due 06/15/34...................... 42,219 42,536
6.00% due 07/15/34...................... 1,413,945 1,424,568
6.00% due 08/15/34...................... 170,518 171,800
6.00% due 09/15/34...................... 1,186,536 1,195,451
6.00% due 10/15/34...................... 4,413,486 4,446,648
6.00% due 12/15/34...................... 314,329 316,691
6.00% due 06/15/35...................... 267,303 269,128
6.00% due 08/15/35...................... 315,047 317,198
6.50% due 02/15/29...................... 14,143 14,504
6.50% due 05/15/31...................... 10,931 11,204
6.50% due 06/15/31...................... 64,206 65,807
6.50% due 07/15/31...................... 36,291 37,195
6.50% due 08/15/31...................... 73,725 75,563
6.50% due 09/15/31...................... 188,354 193,049
6.50% due 10/15/31...................... 284,569 291,663
6.50% due 11/15/31...................... 12,678 12,994
6.50% due 12/15/31...................... 19,020 19,494
6.50% due 01/15/32...................... 30,302 31,043
6.50% due 02/15/32...................... 508,240 520,657
6.50% due 06/15/32...................... 50,908 52,152
7.00% due 07/15/23...................... 30,487 31,976
7.00% due 10/15/23...................... 44,683 46,865
7.00% due 09/15/25...................... 216,352 227,017
7.00% due 03/20/29...................... 16,261 16,989
17
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
7.00% due 06/20/29...................... $ 2,681 $ 2,801
7.00% due 11/20/30...................... 67,787 70,798
7.50% due 04/15/17...................... 10,213 10,676
7.50% due 08/15/23...................... 178,471 187,349
7.50% due 09/15/23...................... 530,809 557,217
7.50% due 10/15/23...................... 16,371 17,185
8.00% due 02/15/08...................... 37 38
9.00% due 12/15/16...................... 56,161 60,215
11.00% due 08/20/15..................... 127 142
11.00% due 09/20/15..................... 393 440
11.50% due 05/20/15..................... 3,572 4,063
12.50% due 09/15/14..................... 5,069 5,755
13.00% due 01/15/11..................... 1,330 1,491
13.00% due 02/15/11..................... 2,198 2,464
13.00% due 03/15/11..................... 160 179
13.00% due 04/15/11..................... 386 433
13.00% due 09/15/13..................... 4,525 5,137
13.00% due 10/20/14..................... 1,025 1,154
13.00% due 11/15/14..................... 651 743
13.00% due 02/20/15..................... 608 684
13.50% due 02/15/13..................... 8,112 9,296
15.00% due 01/15/12..................... 368 427
15.00% due 02/15/12..................... 930 1,079
15.00% due 06/15/12..................... 9,892 11,483
15.00% due 09/15/12..................... 562 653
15.50% due 09/15/11..................... 29,961 34,662
------------
77,794,123
------------
Small Business Administration -- 0.9%
6.30% due 06/01/18...................... 1,575,042 1,615,109
------------
Total U.S. Government Agencies
(cost $92,712,093)...................... 91,175,297
------------
U.S. GOVERNMENT TREASURIES -- 34.1%
United States Treasury Bonds -- 12.4%
5.00% due 05/15/37...................... 4,000,000 4,103,124
4.75% due 02/15/37...................... 19,000,000 18,737,268
------------
22,840,392
------------
United States Treasury Notes -- 21.7%
4.50% due 05/15/17...................... 34,000,000 33,808,750
5.13% due 06/30/08...................... 6,000,000 6,042,654
------------
39,851,404
------------
Total U.S. Government Treasuries
(cost $60,419,651)...................... 62,691,796
------------
Total Long-Term Investment Securities
(cost $153,131,744)..................... 153,867,093
------------
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
REPURCHASE AGREEMENT -- 16.1%
UBS Securities, LLC Joint Repurchase
Agreement(2)
(cost $29,653,000).................. $29,653,000 $ 29,653,000
------------
TOTAL INVESTMENTS
(cost $182,784,744)(3).............. 99.7% 183,520,093
Other assets less liabilities.......... 0.3 559,703
----------- ------------
NET ASSETS 100.0% $184,079,796
=========== ============
- --------
(1) Collateralized Mortgage Obligation
(2) See Note 2 for details of Joint Repurchase Agreements.
(3) See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
18
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- September 30, 2007 -- (unaudited)
Industry Allocation*
Government National Mtg. Assoc. 87.7%
Repurchase Agreements.......... 10.6
United States Treasury Notes... 6.3
United States Treasury Bonds... 4.8
Federal National Mtg. Assoc.... 0.4
Small Business Administration.. 0.1
-----
109.9%
=====
Credit Quality+#
Government -- Agency.. 88.8%
Government -- Treasury 11.2%
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
19
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 88.2%
Federal National Mtg. Assoc. -- 0.4%
Federal National Mtg. Assoc. Series 2005 -- 20
5.00% due 01/25/18(1)......................... $ 1,588,903 $ 1,585,641
-----------
Government National Mtg. Assoc. -- 87.7%
4.50% due 05/15/18............................ 1,770,647 1,713,009
4.50% due 08/15/18............................ 891,274 862,261
4.50% due 09/15/18............................ 3,088,710 2,988,167
4.50% due 10/15/18............................ 4,771,978 4,616,641
4.50% due 08/15/33............................ 2,683,041 2,523,005
4.50% due 09/15/33............................ 3,347,203 3,147,552
5.00% due 03/15/18............................ 547,717 539,581
5.00% due 04/15/18............................ 6,477,117 6,380,898
5.00% due 05/15/18............................ 9,200,358 9,063,692
5.00% due 01/15/33............................ 17,774 17,225
5.00% due 05/15/33............................ 12,113 11,744
5.00% due 08/15/33............................ 2,711,838 2,628,091
5.00% due 09/15/33............................ 2,530,271 2,452,131
5.00% due 10/15/33............................ 5,813,402 5,633,874
5.00% due 04/15/34............................ 53,603 51,923
5.00% due 05/15/34............................ 152,352 147,578
5.00% due 11/15/34............................ 684,958 663,493
5.00% due 12/15/34............................ 673,455 652,351
5.00% due 09/15/35............................ 21,174 20,499
5.00% due 10/15/35............................ 131,675 127,481
5.00% due 11/15/35............................ 130,751 126,587
5.00% due 12/15/35............................ 69,858 67,633
5.00% due 02/15/36............................ 163,580 158,277
5.00% due 04/15/36............................ 517,443 500,669
5.00% due 06/15/36............................ 1,542,015 1,492,026
5.00% due 07/15/36............................ 491,762 475,820
5.00% due 08/15/36............................ 26,447 25,590
5.00% due 09/15/36............................ 911,730 881,907
5.00% due 10/15/36............................ 26,336 25,483
5.00% due 11/15/36............................ 487,505 471,701
5.00% due 12/15/36............................ 1,304,080 1,261,804
5.00% due 01/15/37............................ 827,695 800,697
5.00% due 02/15/37............................ 889,933 860,905
5.00% due 04/15/37............................ 10,056,889 9,728,849
5.50% due 06/15/29............................ 5,660 5,596
5.50% due 01/15/32............................ 44,868 44,312
5.50% due 12/15/32............................ 719,936 711,021
5.50% due 01/15/33............................ 471,868 465,944
5.50% due 02/15/33............................ 1,869,918 1,846,443
5.50% due 03/15/33............................ 1,068,789 1,055,372
5.50% due 04/15/33............................ 5,791,927 5,719,214
5.50% due 05/15/33............................ 6,783,687 6,698,523
5.50% due 06/15/33............................ 7,496,786 7,402,773
5.50% due 07/15/33............................ 384,009 379,188
5.50% due 08/15/33............................ 2,319,140 2,290,025
5.50% due 09/15/33............................ 381,999 377,204
5.50% due 10/15/33............................ 6,245,874 6,167,462
5.50% due 12/15/33............................ 7,166,834 7,076,860
5.50% due 01/15/34............................ 9,505,749 9,383,224
5.50% due 02/15/34............................ 1,278,583 1,262,102
5.50% due 04/15/35............................ 2,181,715 2,152,703
5.50% due 07/15/35............................ 2,461,699 2,428,964
5.50% due 09/15/35............................ 24,716,499 24,387,822
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
5.50% due 10/15/35...................... $15,928,459 $ 15,716,644
5.50% due 11/15/35...................... 30,667,645 30,259,831
5.50% due 12/15/35...................... 18,783,478 18,533,698
5.50% due 02/15/36...................... 2,614,417 2,578,340
5.50% due 03/15/36...................... 10,159,645 10,019,449
5.50% due 04/15/36...................... 447,055 440,886
5.50% due 05/15/36...................... 3,308,042 3,262,395
6.00% due 11/15/23...................... 3,935 3,980
6.00% due 01/15/24...................... 5,503 5,565
6.00% due 07/15/28...................... 5,101 5,152
6.00% due 11/15/28...................... 297,727 300,685
6.00% due 12/15/28...................... 298,720 301,688
6.00% due 01/15/29...................... 626,005 632,039
6.00% due 02/15/29...................... 746,731 753,929
6.00% due 03/15/29...................... 553,478 558,815
6.00% due 04/15/29...................... 1,446,334 1,460,329
6.00% due 05/15/29...................... 70,607 71,288
6.00% due 06/15/29...................... 610,163 616,072
6.00% due 07/15/29...................... 170,736 172,382
6.00% due 08/15/29...................... 20,184 20,379
6.00% due 10/15/29...................... 104,905 105,916
6.00% due 04/15/31...................... 16,649 16,803
6.00% due 07/15/31...................... 15,185 15,326
6.00% due 10/15/31...................... 83,918 84,695
6.00% due 11/15/31...................... 1,385,415 1,398,242
6.00% due 12/15/31...................... 581,832 587,220
6.00% due 01/15/32...................... 658,719 664,408
6.00% due 02/15/32...................... 50,868 51,307
6.00% due 03/15/32...................... 434,192 437,942
6.00% due 07/15/32...................... 108,315 109,250
6.00% due 08/15/32...................... 1,564,134 1,578,367
6.00% due 09/15/32...................... 1,046,514 1,055,552
6.00% due 10/15/32...................... 202,843 204,595
6.00% due 11/15/32...................... 6,211 6,265
6.00% due 12/15/32...................... 169,282 170,744
6.00% due 01/15/33...................... 1,514,111 1,526,612
6.00% due 02/15/33...................... 1,638,649 1,652,178
6.00% due 03/15/33...................... 1,191,900 1,201,742
6.00% due 04/15/33...................... 1,289,957 1,300,607
6.00% due 05/15/33...................... 1,365,215 1,376,485
6.00% due 06/15/33...................... 1,000,800 1,009,061
6.00% due 08/15/33...................... 1,566,078 1,579,180
6.00% due 10/15/33...................... 481,525 485,501
6.00% due 11/15/33...................... 1,606,140 1,619,406
6.00% due 12/15/33...................... 3,117,194 3,142,928
6.00% due 01/15/34...................... 1,577,537 1,589,391
6.00% due 02/15/34...................... 10,170,476 10,246,892
6.00% due 03/15/34...................... 305,077 307,369
6.00% due 04/15/34...................... 3,547,402 3,574,057
6.00% due 05/15/34...................... 263,799 265,782
6.00% due 06/15/34...................... 316,984 319,365
6.00% due 07/15/34...................... 3,480,524 3,506,676
6.00% due 08/15/34...................... 5,040,191 5,077,955
6.00% due 09/15/34...................... 249,285 251,149
6.00% due 10/15/34...................... 696,080 701,310
6.00% due 11/15/34...................... 1,654,341 1,666,771
20
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
6.00% due 12/15/34...................... $ 58,621 $ 59,061
6.00% due 01/15/35...................... 96,778 97,440
6.00% due 02/15/35...................... 1,003,909 1,010,762
6.00% due 04/15/35...................... 59,880 60,289
6.00% due 05/15/35...................... 117,296 118,097
6.00% due 06/15/35...................... 423,910 426,803
6.00% due 11/15/35...................... 22,016 22,166
6.00% due 12/15/35...................... 1,525,346 1,535,349
6.00% due 01/15/36...................... 1,037,528 1,044,265
6.00% due 02/15/36...................... 1,910,184 1,922,587
6.00% due 03/15/36...................... 1,788,468 1,800,080
6.00% due 04/15/36...................... 5,217,187 5,251,061
6.00% due 05/15/36...................... 6,002,723 6,041,698
6.00% due 06/15/36...................... 3,124,335 3,144,621
6.00% due 07/15/36...................... 1,660,392 1,671,173
6.00% due 08/15/36...................... 23,195 23,351
6.00% due 09/15/36...................... 240,334 241,894
6.00% due 10/15/36...................... 1,743,587 1,755,093
6.00% due 11/15/36...................... 2,730,049 2,747,774
6.00% due October TBA................... 40,000,000 40,250,000
6.50% due 03/15/28...................... 24,443 25,100
6.50% due 08/15/28...................... 39,166 40,190
6.50% due 12/15/28...................... 695 713
6.50% due 01/15/29...................... 4,454 4,568
6.50% due 02/15/29...................... 1,543 1,583
6.50% due 03/15/29...................... 110,229 113,047
6.50% due 04/15/29...................... 1,764 1,809
6.50% due 05/15/29...................... 12,061 12,375
6.50% due 06/15/29...................... 38,054 39,027
6.50% due 07/15/29...................... 4,571 4,688
6.50% due 10/15/29...................... 3,467 3,555
6.50% due 08/15/31...................... 236,359 242,252
6.50% due 09/15/31...................... 17,513 17,949
6.50% due 10/15/31...................... 284,569 291,663
6.50% due 11/15/31...................... 149,428 153,153
6.50% due 12/15/31...................... 179,159 183,625
6.50% due 02/15/32...................... 220,470 225,857
6.50% due 05/15/32...................... 1,373,472 1,407,028
6.50% due 06/15/32...................... 119,794 122,720
7.00% due 03/15/23...................... 89,655 94,033
7.00% due 01/20/24...................... 613 641
7.00% due 03/20/24...................... 633 662
7.00% due 07/20/25...................... 3,429 3,587
7.00% due 09/15/25...................... 93,957 98,589
7.00% due 01/20/29...................... 37,712 39,400
7.00% due 02/20/29...................... 7,202 7,524
7.00% due 06/20/29...................... 13,296 13,892
7.00% due 07/20/29...................... 50,342 52,596
7.00% due 09/20/29...................... 4,982 5,206
7.00% due 10/20/29...................... 10,321 10,784
7.00% due 11/20/29...................... 3,359 3,509
7.00% due 03/20/30...................... 4,804 5,018
7.00% due 06/20/30...................... 7,603 7,941
7.00% due 08/20/30...................... 28,047 29,293
7.00% due 09/20/30...................... 25,353 26,479
7.00% due 10/20/30...................... 29,737 31,057
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Government National Mtg. Assoc. (continued)
8.00% due 11/15/26.................. $ 166,042 $ 176,550
8.00% due 12/15/29.................. 16,154 17,179
8.00% due 04/15/30.................. 34,161 36,342
8.00% due 05/15/30.................. 5,512 5,864
8.00% due 08/15/30.................. 42,584 45,302
8.50% due 03/15/17.................. 16,003 17,182
8.50% due 05/15/21.................. 50,010 53,939
8.50% due 12/15/22.................. 44,920 48,501
8.50% due 01/15/23.................. 114,238 123,456
8.50% due 09/15/24.................. 31,490 34,058
9.00% due 07/15/16.................. 62,017 66,492
9.00% due 10/15/16.................. 5,485 5,881
------------
348,749,914
------------
Small Business Administration -- 0.1%
6.30% due 06/01/18................... 525,014 538,370
------------
Total U.S. Government Agencies
(cost $354,909,630)................. 350,873,925
------------
U.S. GOVERNMENT TREASURIES --11.1%
United States Treasury Bonds -- 4.8%
4.75% due 02/15/37................... 14,000,000 13,806,408
5.00% due 05/15/37................... 5,000,000 5,128,905
------------
18,935,313
------------
United States Treasury Notes -- 6.3%
4.50% due 05/15/17................... 5,000,000 4,971,875
4.75% due 08/15/17................... 10,000,000 10,134,380
5.13% due 06/30/08................... 10,000,000 10,071,090
------------
25,177,345
------------
Total U.S. Government Treasuries
(cost $43,020,159).................. 44,112,658
------------
Total Long-Term Investment Securities
(cost $397,929,789)................. 394,986,583
------------
REPURCHASE AGREEMENT -- 10.6%
UBS Securities, LLC Joint Repurchase
Agreement(2)
(cost $42,227,000).................. 42,227,000 42,227,000
------------
TOTAL INVESTMENTS
(cost $440,156,789) (3).............. 109.9% 437,213,583
Liabilities in excess of other assets.. (9.9) (39,273,090)
----------- ------------
NET ASSETS 100.0% $397,940,493
=========== ============
- --------
(1) Collateralized Mortgage Obligation
(2) See Note 2 for details of Joint Repurchase Agreements.
(3) See Note 5 for cost of investments on a tax basis.
TBA --Securities purchased on a forward commitment basis with an approximate
principal 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 -- September 30, 2007 -- (unaudited)
Industry Allocation*
Foreign Government Agencies........... 32.3%
Federal National Mtg. Assoc........... 9.6
Diversified Financial Services........ 4.7
Federal Home Loan Mtg. Corp........... 4.7
United States Treasury Notes.......... 2.2
Oil Companies-Exploration & Production 2.1
Telephone-Integrated.................. 2.1
Time Deposits......................... 2.1
Special Purpose Entities.............. 1.6
Medical-Hospitals..................... 1.5
Cable TV.............................. 1.4
Cellular Telecom...................... 1.4
Independent Power Producers........... 1.3
Pipelines............................. 1.3
Chemicals-Specialty................... 1.1
Electric-Integrated................... 1.1
Finance-Auto Loans.................... 1.1
Electronic Components-Semiconductors.. 0.9
Auto-Cars/Light Trucks................ 0.8
Medical-Drugs......................... 0.8
Banks-Commercial...................... 0.7
Casino Hotels......................... 0.7
Finance-Investment Banker/Broker...... 0.7
Repurchase Agreements................. 0.7
Telecom Services...................... 0.7
Television............................ 0.7
Transport-Air Freight................. 0.7
Containers-Metal/Glass................ 0.6
Electric-Generation................... 0.6
Metal-Diversified..................... 0.6
Multimedia............................ 0.6
Satellite Telecom..................... 0.6
Paper & Related Products.............. 0.5
Retail-Drug Store..................... 0.5
Agricultural Chemicals................ 0.4
Airlines.............................. 0.4
Building & Construction Products-Misc. 0.4
Containers-Paper/Plastic.............. 0.4
Finance-Mortgage Loan/Banker.......... 0.4
Gambling (Non-Hotel).................. 0.4
Medical Products...................... 0.4
Office Automation & Equipment......... 0.4
Real Estate Investment Trusts......... 0.4
Savings & Loans/Thrifts............... 0.4
Steel-Producers....................... 0.4
Theaters.............................. 0.4
United States Treasury Bonds.......... 0.4
Banks-Super Regional.................. 0.3
Broadcast Services/Program............ 0.3
Chemicals-Diversified................. 0.3
Computer Services..................... 0.3
Diversified Manufacturing Operations.. 0.3
Food-Meat Products.................... 0.3
Investment Management/Advisor Services 0.3
Non-Hazardous Waste Disposal.......... 0.3
Oil Companies-Integrated.............. 0.3
Oil-Field Services.................... 0.3
Recycling............................. 0.3
Rental Auto/Equipment................. 0.3
Transport-Rail........................ 0.3
Transport-Services................... 0.3%
Aerospace/Defense-Equipment.......... 0.2
Auto/Truck Parts & Equipment-Original 0.2
Banks-Money Center................... 0.2
Consumer Products-Misc............... 0.2
Distribution/Wholesale............... 0.2
Energy-Alternate Sources............. 0.2
Food-Misc............................ 0.2
Funeral Services & Related Items..... 0.2
Medical-HMO.......................... 0.2
Metal Processors & Fabrication....... 0.2
Printing-Commercial.................. 0.2
Publishing-Periodicals............... 0.2
Advertising Services................. 0.1
Applications Software................ 0.1
Brewery.............................. 0.1
Building Products-Wood............... 0.1
Building-Residential/Commercial...... 0.1
Commercial Services-Finance.......... 0.1
Computers............................ 0.1
Computers-Memory Devices............. 0.1
Cosmetics & Toiletries............... 0.1
Data Processing/Management........... 0.1
Direct Marketing..................... 0.1
Electronic Components-Misc........... 0.1
Electronics-Military................. 0.1
Federal Home Loan Bank............... 0.1
Finance-Consumer Loans............... 0.1
Finance-Credit Card.................. 0.1
Food-Retail.......................... 0.1
Golf................................. 0.1
Home Furnishings..................... 0.1
Hotels/Motels........................ 0.1
Insurance Brokers.................... 0.1
Insurance-Multi-line................. 0.1
Insurance-Property/Casualty.......... 0.1
Leisure Products..................... 0.1
Machinery-Farming.................... 0.1
Medical Information Systems.......... 0.1
Medical-Nursing Homes................ 0.1
Metal-Aluminum....................... 0.1
Oil Refining & Marketing............. 0.1
Physicians Practice Management....... 0.1
Poultry.............................. 0.1
Research & Development............... 0.1
Retail-Discount...................... 0.1
Retail-Petroleum Products............ 0.1
Retail-Restaurants................... 0.1
Rubber-Tires......................... 0.1
Storage/Warehousing.................. 0.1
Transactional Software............... 0.1
Transport-Marine..................... 0.1
Transport-Truck...................... 0.1
Travel Services...................... 0.1
----
98.9%
====
- --------
* Calculated as a percentage of net assets
22
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- September 30, 2007 -- (unaudited) (continued)
Country Allocation*
United States. 61.1%
Brazil........ 3.9
Canada........ 3.6
Australia..... 2.4
Norway........ 2.1
Japan......... 2.0
United Kingdom 1.9
Philippines... 1.7
Russia........ 1.7
Venezuela..... 1.7
Argentina..... 1.6
Sweden........ 1.6
Germany....... 1.5
Turkey........ 1.4
Mexico........ 1.1
Colombia...... 0.9
Cayman Islands 0.7
Denmark....... 0.7
France........ 0.7
Luxembourg.... 0.7
Ukraine....... 0.7
Uruguay....... 0.7
Bermuda....... 0.6
Indonesia..... 0.6
Peru.......... 0.6
Belgium....... 0.4
Spain......... 0.4
Ecuador....... 0.3
Greece........ 0.3
Egypt......... 0.2
Ireland....... 0.2
Netherlands... 0.2
Panama........ 0.2
Poland........ 0.2
South Africa.. 0.2
Pakistan...... 0.1
----
98.9%
====
- --------
* Calculated as a percentage of net assets
Credit Quality+#
Government -- Treasury 2.7%
Government -- Agency.. 15.0
AAA................... 17.2
AA.................... 2.9
A..................... 5.2
BBB................... 10.4
BB.................... 19.1
B..................... 16.3
CCC................... 8.9
Below C............... 0.8
Not Rated@............ 1.5
-----
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 -- September 30, 2007 -- (unaudited)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
ASSET BACKED SECURITIES -- 4.3%
Diversified Financial Services -- 4.3%
Banc of America Funding Corp.,
Series 2007-C, Class 5A1
5.37% due 05/20/36(1)......................... $1,590,878 $1,582,153
Banc of America Funding Corp.,
Series 2006-J, Class 2A1
5.89% due 01/20/47(1)(2)...................... 1,596,849 1,618,817
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2007-PW15, Class A2
5.21% due 02/11/44(1)......................... 825,000 818,790
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class G
5.75% due 09/11/38*(1)........................ 59,000 49,633
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2007-PW15, Class H
5.93% due 02/11/44*(1)(2)..................... 1,250,000 930,190
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class F
5.93% due 09/11/38*(1)(2)..................... 345,000 304,939
Chase Mtg. Finance Corp.
Series 2007-A2, Class 1A1
4.56% due 07/25/37(2)......................... 3,246,857 3,228,166
Commercial Mtg. Pass Through Certificates,
Series 2004-LB2A, Class A3
4.22% due 03/10/39(1)......................... 86,000 84,223
Commercial Mtg. Pass Through Certificates,
Series 2004-LB4A, Class A3,
4.41% due 10/15/37(1)......................... 1,500,000 1,470,019
Commercial Mtg. Pass Through Certificates
Series CN2A, Class A2FL
5.99% due 02/05/19*(1)(2)..................... 1,575,000 1,552,024
Countrywide Asset-Backed Certificates,
Series 2006-S6, Class A3
5.66% due 03/25/34............................ 1,596,000 1,565,746
Countrywide Asset-Backed Certificates
Series 2006-S4, Class A3
5.80% due 10/25/36............................ 2,800,000 2,762,750
CS First Boston Mtg. Securities Corp.
Series 2002-CKN2, Class A3
6.13% due 04/15/37(1)......................... 2,250,000 2,331,611
Deutsche ALT-A Securities, Inc.
Alternate Loan Trust,
Series 2006-AB2, Class A5A,
6.09% due 06/25/36(1)......................... 600,000 575,707
JP Morgan Chase Commercial Mtg. Securities
Corp.,
Series 2006-CB16, Class E
5.84% due 05/12/45*(1)........................ 445,000 447,554
LB-UBS Commercial Mtg. Trust,
Series 2007-C6, Class AM
6.11% due 07/17/40(1)......................... 6,600,000 6,719,330
LB-UBS Commercial Mtg. Trust,
Series 2007-C6, Class B
6.45% due 07/17/40(1)(2)...................... 675,000 671,026
Merrill Lynch Mtg. Investors Trust,
Series 2004-A1, Class 3A
4.84% due 02/25/34(1)(2)...................... 1,022,844 1,013,377
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
Diversified Financial Services (continued)
Merrill Lynch/ Countrywide Commercial Mtg.
Trust,
Series 2007-5, Class H
6.12% due 08/25/48*(1)(3)................. $ 595,000 $ 453,864
Morgan Stanley Capital I,
Series 2006-IQ12, Class D
5.53% due 12/15/43(1)..................... 715,000 668,110
Ocwen Advance Receivables Backed Notes,
Series 2006-1A
5.34% due 11/24/15*(3).................... 830,000 705,500
Wachovia Bank Commercial Mtg. Trust,
Series 2006-WL7A, Class F
6.09% due 09/15/21*(1)(2)................. 1,525,000 1,501,002
Wells Fargo Mtg. Backed Securities Trust,
Series 2006-AR17, Class A2
5.84% due 10/25/36(1)(2).................. 3,105,848 3,136,060
Wells Fargo Mtg. Backed Securities Trust,
Series 2006-AR12, Class 2A1
6.10% due 09/25/36(1)(2).................. 724,283 733,013
-----------
Total Asset Backed Securities
(cost $35,503,069)........................ 34,923,604
-----------
CONVERTIBLE BONDS & NOTES -- 0.1%
Electronic Components-Semiconductors -- 0.1%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*....................... 50,000 44,937
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*....................... 800,000 599,000
-----------
643,937
-----------
Medical Instruments -- 0.0%
Kyphon, Inc.
Senior Notes
1.25% due 02/01/14*....................... 75,000 97,875
-----------
Medical-Biomedical/Gene -- 0.0%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12........................ 125,000 107,188
-----------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(3)(4)(5)............... 265,000 257,050
-----------
Total Convertible Bonds & Notes
(cost $1,211,240)......................... 1,106,050
-----------
CORPORATE BONDS & NOTES -- 35.2%
Advertising Services -- 0.1%
R.H. Donnelley Corp.
Senior Notes
6.88% due 01/15/13........................ 400,000 378,000
R.H. Donnelley Corp.
Senior Notes
8.88% due 10/15/17*....................... 375,000 380,625
-----------
758,625
-----------
24
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Aerospace/Defense-Equipment -- 0.2%
United Technologies Corp.
Senior Notes
6.10% due 05/15/12.............. $1,314,000 $1,369,001
----------
Agricultural Chemicals -- 0.4%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18.............. 320,000 310,400
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*............. 1,895,000 1,989,750
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*............. 605,000 645,081
----------
2,945,231
----------
Airlines -- 0.4%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11.............. 1,675,000 1,633,125
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A
6.55% due 02/02/19.............. 656,117 660,218
Continental Airlines, Inc.
Pass Through Certs.
Series 2000-2, Class B
8.31% due 04/02/18.............. 62,681 62,524
Delta Air Lines, Inc.
Pass Through Certs.
Series 2000-1, Class A-2
7.57% due 11/18/10.............. 275,000 282,047
Northwest Airlines, Inc.
Pass Through Certs.
Series 2002-1 Class G2
6.26% due 11/20/21.............. 283,968 280,063
United Air Lines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08.............. 77,189 76,996
----------
2,994,973
----------
Applications Software -- 0.1%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13............. 530,000 561,800
----------
Auto-Cars/Light Trucks -- 0.8%
DaimlerChrysler NA Holding Corp.
Company Guar. Notes
6.05% due 03/13/09(6)........... 240,000 238,424
Ford Motor Co.
Debentures
6.38% due 02/01/29.............. 3,515,000 2,583,525
General Motors Corp.
Debentures
8.25% due 07/15/23.............. 1,930,000 1,688,750
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
Auto-Cars/Light Trucks (continued)
General Motors Corp.
Senior Bonds
8.38% due 07/15/33........................... $2,340,000 $2,050,425
----------
6,561,124
----------
Auto/Truck Parts & Equipment-Original -- 0.2%
Lear Corp.
Senior Notes
8.75% due 12/01/16........................... 800,000 752,000
Visteon Corp.
Senior Notes
8.25% due 08/01/10........................... 610,000 536,800
----------
1,288,800
----------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(3)(5)................... 225,000 0
----------
Banks-Commercial -- 0.4%
American Express Centurion Bank
Notes
6.00% due 09/13/17........................... 240,000 238,791
Colonial Bank NA
Sub. Notes
6.38% due 12/01/15........................... 451,000 445,531
Compass Bank
Notes
5.50% due 04/01/20........................... 430,000 410,901
Compass Bank
Sub. Notes
6.40% due 10/01/17........................... 560,000 556,686
Popular North America, Inc.
Company Guar. Notes
5.65% due 04/15/09........................... 135,000 136,070
Silicon Valley Bank
Senior Notes
5.70% due 06/01/12........................... 398,000 397,154
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13........................... 340,000 332,737
SouthTrust Corp.
Sub. Notes
5.80% due 06/15/14........................... 470,000 470,405
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16........................... 330,000 327,569
----------
3,315,844
----------
Banks-Super Regional -- 0.3%
Banc One Corp.
Sub. Debentures
8.00% due 04/29/27........................... 135,000 159,072
Capital One Financial Corp.
Senior Notes
5.70% due 09/15/11........................... 813,000 814,350
Capital One Financial Corp.
Senior Notes
6.75% due 09/15/17........................... 443,000 453,604
25
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Banks-Super Regional (continued)
JPMorgan Chase Bank NA
Sub. Notes
6.00% due 10/01/17......................... $ 660,000 $ 666,398
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08......................... 198,000 199,407
----------
2,292,831
----------
Beverages-Non-alcoholic -- 0.0%
Cott Beverages USA Inc.
Company Guar. Notes
8.00% due 12/15/11......................... 350,000 344,750
----------
Beverages-Wine/Spirits -- 0.0%
Constellation Brands, Inc.
Senior Notes
7.25% due 05/15/17*........................ 125,000 125,000
----------
Brewery -- 0.1%
Anheuser-Busch Cos., Inc.
Bonds
6.00% due 11/01/41......................... 871,000 829,804
----------
Broadcast Services/Program -- 0.2%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14......................... 1,290,000 1,335,150
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14......................... 650,000 624,000
----------
1,959,150
----------
Building & Construction Products-Misc. -- 0.4%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12......................... 965,000 979,475
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08........................ 1,040,000 1,045,200
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14......................... 770,000 760,375
NTK Holdings, Inc.
Senior Notes
10.75% due 03/01/14(7)..................... 650,000 399,750
----------
3,184,800
----------
Building Products-Air & Heating -- 0.0%
American Standard, Inc.
Company Guar. Notes
7.38% due 02/01/08......................... 347,000 348,647
----------
Building Products-Wood -- 0.1%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15........................ 688,000 581,360
----------
Building-Residential/Commercial -- 0.1%
Centex Corp.
Senior Notes
5.45% due 08/15/12......................... 250,000 228,256
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Building-Residential/Commercial (continued)
D.R. Horton, Inc.
Company Guar. Notes
5.00% due 01/15/09......................... $ 266,000 $ 255,822
-----------
484,078
-----------
Cable TV -- 1.4%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12......................... 810,000 785,700
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15........................ 2,402,000 2,462,050
CCH II LLC/CCH II Capital Corp.
Senior Notes, Series B
10.25% due 09/15/10........................ 115,000 119,600
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13........................ 4,117,000 4,291,972
CCO Holdings LLC/CCO Holdings Capital Corp.
Senior Notes
8.75% due 11/15/13......................... 460,000 462,300
Comcast Corp.
Company Guar. Notes
5.85% due 11/15/15......................... 310,000 307,434
Comcast Corp.
Company Guar. Notes
5.88% due 02/15/18......................... 1,074,000 1,056,430
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11......................... 625,000 626,563
Insight Communications Co., Inc.
Senior Notes
12.25% due 02/15/11(7)..................... 900,000 929,250
-----------
11,041,299
-----------
Casino Hotels -- 0.7%
Circus & Eldorado Joint Venture
Mtg. Notes
10.13% due 03/01/12........................ 575,000 599,437
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(5)(8).................. 946,489 955,954
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(3)(5)................... 425,000 425,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14......................... 1,600,000 1,474,000
Station Casinos, Inc.
Senior Sub. Notes
6.63% due 03/15/18......................... 600,000 502,500
Station Casinos, Inc.
Senior Sub. Notes
6.88% due 03/01/16......................... 355,000 308,850
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 12/15/10*........................ 425,000 433,500
26
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Casino Hotels (continued)
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*................... $ 800,000 $ 828,000
----------
5,527,241
----------
Cellular Telecom -- 0.9%
American Cellular Corp.
Senior Notes
10.00% due 08/01/11................... 296,000 309,320
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13................... 736,000 778,320
Centennial Communications Corp.
Senior Notes
10.13% due 06/15/13................... 100,000 106,000
Centennial Communications Corp.
Senior Notes
11.11% due 01/01/13(6)................ 1,020,000 1,050,600
Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11.................... 1,406,000 1,521,306
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14.................... 275,000 279,125
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14*................... 825,000 837,375
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14*................... 1,075,000 1,096,500
Nextel Communications, Inc.
Company Guar. Notes
5.95% due 03/15/14.................... 600,000 572,826
Rural Cellular Corp.
Senior Sub. Notes
8.62% due 06/01/13*(6)................ 850,000 871,250
Rural Cellular Corp.
Senior Notes
11.11% due 11/01/12(6)................ 275,000 280,500
----------
7,703,122
----------
Chemicals-Diversified -- 0.3%
Lyondell Chemical Co.
Company Guar. Notes
6.88% due 06/15/17.................... 825,000 895,125
Lyondell Chemical Co.
Company Guar. Notes
8.00% due 09/15/14.................... 1,100,000 1,210,000
Rohm & Haas Co.
Notes
6.00% due 09/15/17.................... 310,000 310,902
----------
2,416,027
----------
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Chemicals-Specialty -- 1.1%
Huntsman International LLC
Senior Sub. Notes
7.38% due 01/01/15................... $1,380,000 $1,442,100
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14................... 1,355,000 1,443,075
JohnsonDiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12................... 525,000 532,875
Lubrizol Corp.
Senior Notes
4.63% due 10/01/09................... 1,300,000 1,289,380
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*................. 2,520,000 2,494,800
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12................... 1,760,000 1,755,600
----------
8,957,830
----------
Commercial Services-Finance -- 0.1%
The Western Union Co.
Senior Notes
5.40% due 11/17/11................... 672,000 670,729
----------
Computer Services -- 0.3%
Compucom Systems, Inc.
Senior Notes
12.00% due 11/01/14*................. 575,000 724,500
Compucom Systems, Inc.
Senior Sub. Notes
12.50% due 10/01/15*................. 1,225,000 1,194,375
Computer Sciences Corp.
Notes
3.50% due 04/15/08................... 150,000 148,014
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13................... 485,000 504,400
----------
2,571,289
----------
Computers -- 0.1%
International Business Machines Corp.
Senior Notes
5.70% due 09/14/17................... 650,000 653,405
----------
Computers-Integrated Systems -- 0.0%
Activant Solutions, Inc.
Company Guar. Notes
9.50% due 05/01/16................... 225,000 198,000
----------
Consumer Products-Misc. -- 0.2%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12................... 406,000 403,970
Jostens Holding Corp.
Senior Notes
10.25% due 12/01/13(7)............... 458,000 425,940
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12................... 325,000 328,250
27
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Consumer Products-Misc. (continued)
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13....................... $ 125,000 $ 127,812
----------
1,285,972
----------
Containers-Metal/Glass -- 0.4%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23....................... 1,510,000 1,479,800
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13....................... 1,633,000 1,690,155
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09....................... 218,000 221,270
----------
3,391,225
----------
Containers-Paper/Plastic -- 0.4%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12....................... 520,000 521,300
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09...................... 1,080,000 972,000
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17....................... 1,630,000 1,601,475
----------
3,094,775
----------
Cosmetics & Toiletries -- 0.1%
Revlon Consumer Products Corp.
Senior Sub. Notes
8.63% due 02/01/08....................... 700,000 689,500
Revlon Consumer Products Corp.
Senior Notes
9.50% due 04/01/11....................... 150,000 142,500
----------
832,000
----------
Data Processing/Management -- 0.1%
Seitel, Inc.
Senior Notes
9.75% due 02/15/14....................... 620,000 585,900
----------
Direct Marketing -- 0.1%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12....................... 1,114,000 1,136,280
----------
Distribution/Wholesale -- 0.2%
Varietal Distribution, Inc.
Senior Notes
10.25% due 07/15/15*..................... 1,350,000 1,269,000
----------
Diversified Financial Services -- 0.1%
AXA Financial, Inc.
Senior Notes
6.50% due 04/01/08....................... 210,000 211,165
General Electric Capital Corp.
Senior Notes
5.63% due 09/15/17....................... 323,000 322,912
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Diversified Financial Services (continued)
General Electric Capital Corp.
Notes
6.75% due 03/15/32............................ $279,000 $ 307,171
----------
841,248
----------
Diversified Manufacturing Operations -- 0.2%
Harland Clarke Holdings Corp.
Notes
9.50% due 05/15/15............................ 525,000 468,563
Harland Clarke Holdings Corp.
Notes
10.31% due 05/15/15(6)........................ 425,000 378,781
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14........................... 625,000 587,500
----------
1,434,844
----------
Diversified Operations -- 0.0%
Capmark Financial Group, Inc.
Company Guar. Notes
5.88% due 05/10/12*........................... 255,000 232,235
----------
Electric-Generation -- 0.6%
Bruce Mansfield Unit Trust
Pass Through Certs.
6.85% due 06/01/34............................ 649,000 650,548
Edison Mission Energy
Senior Notes
7.20% due 05/15/19*........................... 475,000 467,875
Edison Mission Energy
Senior Notes
7.50% due 06/15/13............................ 425,000 435,625
Edison Mission Energy
Senior Notes
7.63% due 05/15/27*........................... 950,000 916,750
Edison Mission Energy
Senior Notes
7.75% due 06/15/16............................ 775,000 802,125
Reliant Energy Mid-Atlantic Power Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17............................ 143,337 154,088
The AES Corp.
Sec. Notes
8.75% due 05/15/13*........................... 935,000 978,244
The AES Corp.
Senior Notes
8.88% due 02/15/11............................ 550,000 574,062
----------
4,979,317
----------
Electric-Integrated -- 1.0%
Centerpoint Energy, Inc.
Senior Notes
5.88% due 06/01/08............................ 150,000 149,856
Commonwealth Edison Co.
1st Mtg. Bonds
5.90% due 03/15/36............................ 505,000 472,848
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
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....................... $1,290,000 $1,285,591
Commonwealth Edison Co.
1st Mtg. Notes
6.15% due 09/15/17....................... 288,000 289,712
Consumers Energy Co.
1st Mtg. Bonds
Series C
4.25% due 04/15/08....................... 180,000 178,728
Dominion Resources, Inc.
Senior Notes
5.69% due 05/15/08(7).................... 176,000 176,077
Dominion Resources, Inc.
Jr. Sub. Notes
6.30% due 09/30/11(9).................... 374,000 370,540
Duke Energy Corp.
Senior Notes
4.20% due 10/01/08....................... 305,000 301,906
Duke Energy Indiana, Inc.
Debentures
5.00% due 09/15/13....................... 200,000 192,243
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10....................... 195,000 195,402
Mackinaw Power LLC
Secured Notes
6.30% due 10/31/23*...................... 671,000 686,610
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11....................... 1,975,000 1,994,750
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21....................... 505,000 481,013
Nisource Finance Corp.
Company Guar. Notes
5.25% due 09/15/17....................... 180,000 167,061
Pepco Holdings, Inc.
Senior Notes
6.45% due 08/15/12....................... 940,000 978,940
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11....................... 50,000 53,539
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15....................... 433,000 414,375
Southern California Edison Co.
1st Mtg. Bonds
5.75% due 04/01/35....................... 80,000 76,105
Southern Energy, Inc.
Notes
7.90% due 07/15/09*+(3)(4)(5)............ 1,550,000 0
----------
8,465,296
----------
Electronic Components-Semiconductors -- 0.7%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12....................... 515,000 473,800
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16....................... 1,390,000 1,403,900
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Electronic Components-Semiconductors (continued)
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14...................... $ 975,000 $ 901,875
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16..................... 1,905,000 1,771,650
National Semiconductor Corp.
Senior Notes
6.60% due 06/15/17...................... 590,000 604,354
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*.................... 305,000 298,900
----------
5,454,479
----------
Electronics-Military -- 0.1%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13...................... 825,000 810,562
L-3 Communications Corp.
Company Guar. Notes
6.38% due 10/15/15...................... 175,000 171,938
----------
982,500
----------
Energy-Alternate Sources -- 0.2%
Aventine Renewable Energy Holdings, Inc.
Notes
10.00% due 04/01/17..................... 715,000 647,075
VeraSun Energy Corp.
Senior Notes
9.38% due 06/01/17*..................... 300,000 258,000
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12...................... 510,000 515,100
----------
1,420,175
----------
Finance-Auto Loans -- 1.1%
Ford Motor Credit Co. LLC
Senior Notes
5.80% due 01/12/09...................... 58,000 56,020
Ford Motor Credit Co. LLC
Notes
7.38% due 10/28/09...................... 5,115,000 5,015,549
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10...................... 1,000,000 977,524
General Motors Acceptance Corp.
Senior Notes
6.00% due 12/15/11...................... 500,000 461,489
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11...................... 1,480,000 1,408,463
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12...................... 30,000 28,140
General Motors Acceptance Corp.
Notes
7.82% due 12/01/14(6)................... 945,000 871,194
----------
8,818,379
----------
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
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 $ 36,360
----------
Finance-Consumer Loans -- 0.1%
John Deere Capital Corp.
Debentures
5.10% due 01/15/13................... 1,030,000 1,014,201
----------
Finance-Credit Card -- 0.1%
Capital One Bank
Senior Sub. Notes
6.50% due 06/13/13................... 1,091,000 1,105,789
----------
Finance-Investment Banker/Broker -- 0.7%
Citigroup, Inc.
Senior Notes
5.88% due 05/29/37................... 280,000 269,899
Goldman Sachs Group, Inc.
Sub. Notes
6.45% due 05/01/36................... 310,000 302,480
JPMorgan Chase & Co.
Senior Notes
5.38% due 01/15/14................... 520,000 516,540
Lehman Brothers Holdings, Inc.
Notes
5.50% due 04/04/16................... 1,040,000 980,824
Lehman Brothers Holdings, Inc.
Sub. Notes
6.50% due 07/19/17................... 315,000 319,233
Lehman Brothers Holdings, Inc.
Sub. Notes
6.88% due 07/17/37................... 437,000 433,492
Lehman Brothers Holdings, Inc.
Senior Notes
7.00% due 09/27/27................... 381,000 390,101
Morgan Stanley
Senior Notes
5.75% due 08/31/12................... 620,000 621,049
The Bear Stearns Cos., Inc.
Senior Notes
6.40% due 10/02/17................... 1,240,000 1,234,491
The Goldman Sachs Group, Inc.
Sub. Notes
6.75% due 10/01/37................... 551,000 554,537
----------
5,622,646
----------
Finance-Mortgage Loan/Banker -- 0.3%
Countrywide Financial Corp.
Company Guar. Notes
5.80% due 06/07/12................... 58,000 54,362
Countrywide Financial Corp.
Sub. Notes
6.25% due 05/15/16................... 346,000 313,118
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09................... 90,000 82,718
Residential Capital LLC
Senior Notes
7.50% due 06/01/12................... 828,000 670,680
Residential Capital LLC
Company Guar. Notes
7.50% due 04/17/13................... 532,000 429,590
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Finance-Mortgage Loan/Banker (continued)
Residential Capital LLC
Company Guar. Notes
7.88% due 06/30/15..................... $ 924,000 $ 746,130
----------
2,296,598
----------
Food-Meat Products -- 0.1%
Smithfield Foods, Inc.
Senior Notes
7.00% due 08/01/11..................... 150,000 151,875
Smithfield Foods, Inc.
Senior Notes
7.75% due 07/01/17..................... 750,000 768,750
----------
920,625
----------
Food-Misc. -- 0.2%
Del Monte Corp.
Company Guar. Notes
6.75% due 02/15/15..................... 425,000 408,000
Kraft Foods, Inc.
Senior Notes
7.00% due 08/11/37..................... 671,000 703,934
Wornick Co.
Sec. Notes
10.88% due 07/15/11+(14)............... 600,000 420,000
----------
1,531,934
----------
Food-Retail -- 0.0%
The Kroger Co.
Company Guar. Notes
6.40% due 08/15/17..................... 155,000 158,050
----------
Funeral Services & Related Items -- 0.2%
Service Corp. International
Senior Notes
6.75% due 04/01/16..................... 1,225,000 1,186,719
Service Corp. International
Senior Notes
7.00% due 06/15/17..................... 185,000 181,763
Service Corp. International
Senior Notes
7.38% due 10/01/14..................... 225,000 231,187
Service Corp. International
Senior Notes
7.63% due 10/01/18..................... 200,000 207,500
----------
1,807,169
----------
Gambling (Non-Hotel) -- 0.4%
Downstream Development Authority
Senior Notes
12.00% due 10/15/15*................... 900,000 909,000
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*................... 960,000 950,400
Jacobs Entertainment, Inc.
Company Guar. Bonds
9.75% due 06/15/14..................... 650,000 646,750
Shingle Springs Tribal Gaming Authority
Senior Notes
9.38% due 06/15/15*.................... 275,000 277,750
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Gambling (Non-Hotel) (continued)
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/14....................... $ 675,000 $ 695,250
-----------
3,479,150
-----------
Golf -- 0.1%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11....................... 895,000 492,250
-----------
Home Furnishings -- 0.1%
Simmons Co.
Senior Notes
10.00% due 12/15/14(7)................... 1,529,000 1,219,377
-----------
Hotels/Motels -- 0.1%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14....................... 695,000 667,200
Hilton Hotels Corp.
Senior Notes
7.20% due 12/15/09....................... 68,000 71,768
Starwood Hotels & Resorts Worldwide, Inc.
Senior Notes
6.25% due 02/15/13....................... 310,000 311,132
-----------
1,050,100
-----------
Human Resources -- 0.0%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13...................... 225,000 238,500
-----------
Independent Power Producers -- 1.3%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(10).................. 5,578,000 6,080,020
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16....................... 2,550,000 2,556,375
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10...................... 100,000 109,500
Reliant Energy, Inc.
Senior Notes
7.63% due 12/31/14....................... 525,000 528,938
Reliant Energy, Inc
Senior Notes
7.88% due 12/31/17....................... 950,000 955,937
-----------
10,230,770
-----------
Insurance Brokers -- 0.1%
Marsh & McLennan Cos., Inc.
Senior Notes
5.15% due 09/15/10....................... 200,000 199,300
Marsh & McLennan Cos., Inc.
Senior Notes
7.13% due 06/15/09....................... 170,000 175,756
USI Holdings Corp.
Senior Notes
9.43% due 11/15/14*(6)................... 525,000 498,750
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Insurance Brokers (continued)
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*.............. $ 300,000 $ 269,250
----------
1,143,056
----------
Insurance-Life/Health -- 0.0%
Americo Life, Inc.
Notes
7.88% due 05/01/13*.............. 38,000 38,809
Monumental Global Funding II
Notes
5.65% due 07/14/11*.............. 174,000 178,118
----------
216,927
----------
Insurance-Property/Casualty -- 0.1%
The Travelers Cos., Inc.
Senior Notes
6.25% due 06/15/37............... 460,000 443,713
----------
Investment Management/Advisor Services -- 0.3%
Ameriprise Financial, Inc.
Senior Notes
5.35% due 11/15/10............... 81,000 81,532
LVB Acquisition Merger Sub, Inc.
Senior Notes
10.38% due 10/15/17*............. 575,000 555,594
LVB Acquisition Merger Sub, Inc.
Senior Sub. Notes
11.63% due 10/15/17*............. 850,000 824,500
LVB Acquisition Merger, Inc.
Senior Notes
10.00% due 10/15/17*............. 625,000 625,000
----------
2,086,626
----------
Machinery-Farming -- 0.1%
Case Corp.
Notes
7.25% due 01/15/16............... 680,000 703,800
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09............... 325,000 322,563
----------
1,026,363
----------
Medical Information Systems -- 0.1%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12.............. 1,025,000 1,025,000
----------
Medical Products -- 0.4%
Baxter International, Inc.
Senior Notes
5.90% due 09/01/16............... 1,001,000 1,009,213
ReAble Therapeutics Finance LLC
Company Guar. Notes
11.75% due 11/15/14.............. 1,040,000 988,000
Universal Hospital Services, Inc.
Sec. Bonds
8.50% due 06/01/15*.............. 500,000 495,000
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Medical Products (continued)
Universal Hospital Services, Inc.
Sec. Notes
8.76% due 06/01/15*(6).................... $ 575,000 $ 572,125
-----------
3,064,338
-----------
Medical-Drugs -- 0.3%
American Home Products Corp.
Notes
6.95% due 03/15/11........................ 361,000 378,346
Schering-Plough Corp.
Senior Notes
6.00% due 09/15/17........................ 650,000 652,921
Wyeth
Bonds
5.50% due 02/01/14........................ 1,074,000 1,067,990
-----------
2,099,257
-----------
Medical-HMO -- 0.2%
Coventry Health Care, Inc.
Senior Notes
5.95% due 03/15/17........................ 202,000 195,342
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*...................... 1,205,000 1,205,000
WellPoint, Inc.
Notes
3.75% due 12/14/07........................ 633,184 630,881
-----------
2,031,223
-----------
Medical-Hospitals -- 1.5%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15*....................... 3,585,000 3,683,587
HCA, Inc.
Senior Notes
6.25% due 02/15/13........................ 945,000 836,325
HCA, Inc.
Sec. Notes
9.13% due 11/15/14*....................... 965,000 1,018,075
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*....................... 4,865,000 5,169,062
HCA, Inc.
Sec. Notes
9.63% due 11/15/16*....................... 455,000 485,713
IASIS Healthcare LLC / IASIS Capital Corp.
Bank Guar. Notes
8.75% due 06/15/14........................ 1,185,000 1,199,813
-----------
12,392,575
-----------
Medical-Nursing Homes -- 0.1%
Sun Healthcare Group, Inc.
Senior Sub. Notes
9.13% due 04/15/15*....................... 675,000 688,500
-----------
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Metal Processors & Fabrication -- 0.2%
Commercial Metals Co.
Senior Notes
6.50% due 07/15/17.................. $ 515,000 $ 534,563
Metals USA, Inc.
Sec. Notes
11.13% due 12/01/15................. 510,000 543,150
Timken Co.
Notes
5.75% due 02/15/10.................. 162,000 164,369
----------
1,242,082
----------
Metal-Aluminum -- 0.1%
Alcoa, Inc.
Notes
6.00% due 01/15/12.................. 312,000 318,208
Alcoa, Inc.
Bonds
6.50% due 06/15/18.................. 634,000 652,137
----------
970,345
----------
Metal-Diversified -- 0.6%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15.................. 550,000 594,000
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17.................. 2,350,000 2,567,375
Noranda Aluminum Acquisition Corp.
Senior Notes
9.36% due 05/15/15*(6).............. 1,450,000 1,363,000
Noranda Aluminum Holding Corp.
Senior Notes
11.14% due 11/15/14*(6)............. 500,000 482,500
----------
5,006,875
----------
Mining -- 0.0%
Newmont Mining Corp.
Company Guar. Notes
5.88% due 04/01/35.................. 250,000 220,271
----------
Multimedia -- 0.5%
Belo Corp.
Senior Notes
6.75% due 05/30/13.................. 145,000 148,717
Cox Enterprises, Inc.
Notes
7.88% due 09/15/10*................. 578,000 618,398
Haights Cross Operating Co.
Company Guar. Senior Notes
11.75% due 08/15/11................. 125,000 129,688
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28.................. 1,074,000 1,121,596
Time Warner Entertainment Co. LP
Senior Notes
8.38% due 07/15/33.................. 650,000 762,197
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Multimedia (continued)
Viacom, Inc.
Senior Notes
6.88% due 04/30/36......................... $1,074,000 $1,069,526
----------
3,850,122
----------
Networking Products -- 0.0%
Cisco Systems, Inc.
Senior Notes
5.50% due 02/22/16......................... 347,000 344,680
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 7/01/03+(3)(5)(10)(11).......... 500,000 0
----------
Non-Hazardous Waste Disposal -- 0.3%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17......................... 1,090,000 1,095,450
Waste Management, Inc.
Company Guar. Notes
6.88% due 05/15/09......................... 985,000 1,018,105
Waste Management, Inc.
Company Guar. Notes
7.75% due 05/15/32......................... 250,000 280,760
----------
2,394,315
----------
Office Automation & Equipment -- 0.4%
IKON Office Solutions, Inc.
Senior Notes
7.75% due 09/15/15......................... 1,775,000 1,783,875
Pitney Bowes, Inc.
Notes
5.25% due 01/15/37......................... 680,000 652,388
Pitney Bowes, Inc.
Notes
5.75% due 09/15/17......................... 553,000 553,801
----------
2,990,064
----------
Oil Companies-Exploration & Production -- 1.3%
Anadarko Petroleum Corp.
Senior Notes
5.95% due 09/15/16......................... 500,000 495,205
Apache Corp.
Senior Notes
6.25% due 04/15/12......................... 1,300,000 1,353,405
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... 175,000 178,063
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14......................... 950,000 895,375
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15......................... 895,000 839,062
Chaparral Energy, Inc.
Company Guar. Senior Notes
8.88% due 02/01/17*........................ 150,000 140,625
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Oil Companies-Exploration & Production (continued)
Chesapeake Energy Corp.
Senior Notes
6.25% due 01/15/18................ $ 300,000 $ 289,500
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16................ 1,350,000 1,343,250
Costilla Energy, Inc.
Senior Notes
10.25% due 10/01/06+(3)(5)........ 500,000 0
Dune Energy, Inc.
Sec. Notes
10.50% due 06/01/12*.............. 425,000 405,875
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15................ 950,000 857,375
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14................ 175,000 163,625
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14*............... 525,000 504,000
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11................ 100,000 99,500
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*............... 990,000 967,725
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16................ 275,000 270,875
Sabine Pass LNG LP
Company Guar. Senior Notes
7.25% due 11/30/13................ 400,000 394,000
Sabine Pass LNG LP
Sec. Notes
7.50% due 11/30/16................ 1,130,000 1,113,050
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10............... 375,000 363,281
-----------
10,673,791
-----------
Oil Companies-Integrated -- 0.2%
Hess Corp.
Bonds
7.88% due 10/01/29................ 461,000 529,881
Marathon Oil Corp.
Notes
6.60% due 10/01/37................ 477,000 487,708
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29................ 286,000 309,397
-----------
1,326,986
-----------
Oil Refining & Marketing -- 0.1%
The Premcor Refining Group, Inc
Company Guar. Notes
6.75% due 05/01/14................ 666,000 694,191
-----------
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil-Field Services -- 0.2%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14........................ $610,000 $ 614,575
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11........................ 147,372 152,295
Weatherford International, Inc.
Company Guar. Notes
6.80% due 06/15/37*....................... 530,000 544,361
----------
1,311,231
----------
Paper & Related Products -- 0.3%
AbitibiBowater, Inc.
Notes
6.50% due 06/15/13........................ 700,000 511,000
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09........................ 650,000 593,125
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*....................... 920,000 897,000
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*....................... 350,000 338,625
----------
2,339,750
----------
Physical Therapy/Rehabilation Centers -- 0.0%
Psychiatric Solutions, Inc.
Senior Sub. Notes
7.75% due 07/15/15........................ 158,000 159,975
----------
Physicians Practice Management -- 0.1%
US Oncology, Inc.
Senior Sub. Notes
10.75% due 08/15/14....................... 660,000 681,450
----------
Pipelines -- 1.2%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15........................ 525,000 517,125
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11........................ 990,000 1,052,302
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16........................ 540,000 549,450
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11........................ 178,000 184,692
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12........................ 965,000 996,362
Dynegy-Roseton Danskammer
Pass Through Certs.
Series B
7.67% due 11/08/16........................ 720,000 723,600
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14........................ 925,000 936,563
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Pipelines (continued)
El Paso Natural Gas Co.
Senior Notes
5.95% due 04/15/17*.................. $ 375,000 $ 366,239
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14................... 255,000 235,875
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16................... 550,000 541,750
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27................... 1,045,000 966,625
ONEOK Partners LP
Company Guar. Notes
6.85% due 10/15/37................... 507,000 510,989
Transcontinental Gas Pipe Line Corp.
Notes
7.00% due 08/15/11................... 150,000 155,625
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21................... 1,955,000 2,126,062
----------
9,863,259
----------
Poultry -- 0.1%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17................... 450,000 459,000
----------
Printing-Commercial -- 0.1%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15................... 790,000 687,300
----------
Publishing-Newspapers -- 0.0%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29................... 205,000 166,577
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................... 220,000 167,200
----------
333,777
----------
Publishing-Periodicals -- 0.2%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 1,505,000 1,354,500
----------
Radio -- 0.0%
Chancellor Media Corp.
Company Guar. Notes
8.00% due 11/01/08................... 148,000 150,401
----------
Real Estate Investment Trusts -- 0.4%
Health Care Property Investors, Inc.
Senior Notes
5.65% due 12/15/13................... 845,000 816,234
Liberty Property LP
Senior Notes
5.63% due 10/01/17................... 310,000 309,422
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Real Estate Investment Trusts (continued)
New Plan Excel Realty Trust
Senior Notes
4.50% due 02/01/11.................... $ 484,000 $ 474,012
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14.................... 600,000 598,500
PPF Funding, Inc.
Bonds
5.35% due 04/15/12*................... 270,000 267,660
Reckson Operating Partnership LP
Senior Notes
6.00% due 03/31/16.................... 86,000 81,716
Simon Property Group LP
Notes
5.38% due 08/28/08.................... 124,000 123,282
Vornado Realty LP
Notes
4.50% due 08/15/09.................... 210,000 206,728
----------
2,877,554
----------
Recycling -- 0.3%
Aleris International, Inc.
Senior Notes
9.00% due 12/15/14.................... 1,250,000 1,156,250
Aleris International, Inc.
Senior Sub. Notes
10.00% due 12/15/16................... 1,090,000 964,650
----------
2,120,900
----------
Rental Auto/Equipment -- 0.3%
Erac USA Finance Co.
Notes
7.35% due 06/15/08*................... 620,000 626,762
H&E Equipment Services, Inc.
Company Guar. Notes
8.38% due 07/15/16.................... 20,000 19,500
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13.................... 1,665,000 1,714,950
----------
2,361,212
----------
Research & Development -- 0.1%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15................... 815,000 739,613
----------
Retail-Discount -- 0.1%
Dollar General Corp.
Senior Notes
10.63% due 07/15/15*.................. 450,000 423,000
----------
Retail-Drug Store -- 0.5%
CVS Caremark Corp.
Senior Notes
6.25% due 06/01/27.................... 510,000 494,252
CVS Lease Pass Through Trust
Pass Through Certs.
6.04% due 12/10/28*................... 1,052,492 1,022,318
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Retail-Drug Store (continued)
General Nutrition Centers, Inc.
Senior Notes
10.01% due 03/15/14*(6)................ $ 375,000 $ 360,000
Rite Aid Corp.
Senior Notes
9.25% due 06/01/13..................... 425,000 403,750
Rite Aid Corp.
Company Guar. Notes
9.50% due 06/15/17*.................... 1,925,000 1,799,875
----------
4,080,195
----------
Retail-Major Department Stores -- 0.0%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11..................... 375,000 399,375
----------
Retail-Petroleum Products -- 0.1%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14..................... 1,090,000 1,062,750
----------
Retail-Regional Department Stores -- 0.0%
JC Penney Corp., Inc.
Senior Notes
5.75% due 02/15/18..................... 57,000 54,719
----------
Retail-Restaurants -- 0.1%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14.................... 445,000 449,450
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14..................... 765,000 696,150
----------
1,145,600
----------
Rubber-Tires -- 0.1%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14..................... 625,000 543,750
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(5)(11)(13)........ 100,000 400
----------
Savings & Loans/Thrifts -- 0.4%
Independence Community Bank Corp.
Sub. Notes
3.50% due 06/20/08(9).................. 172,000 169,250
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10..................... 405,000 395,678
Washington Mutual Bank
Sub. Notes
5.13% due 01/15/15..................... 880,000 819,630
Washington Mutual Preferred Funding III
6.90% due 06/15/12*(6)(15)............. 600,000 614,687
Washington Mutual, Inc.
Senior Notes
5.50% due 08/24/11..................... 760,000 750,308
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
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 $ 357,471
----------
3,107,024
----------
Soap & Cleaning Preparation -- 0.0%
JohnsonDiversey Holdings, Inc.
Notes
10.67% due 05/15/13(7)...................... 75,000 75,750
----------
Special Purpose Entities -- 1.2%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12(7)...................... 565,000 502,850
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15......................... 125,000 132,500
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*......................... 1,065,000 1,015,015
Capital One Capital IV
6.75% due 02/17/37(6)....................... 255,000 227,398
CCM Merger, Inc.
Notes
8.00% due 08/01/13*......................... 625,000 609,375
Consolidated Communications Illinois/Texas
Holdings, Inc.
Senior Notes
9.75% due 04/01/12.......................... 632,000 638,320
Cyrus Reinsurance Holdings SPC
Senior Notes
6.36% due 12/01/07*(3)(9)................... 239,000 234,220
Hawker Beechcraft Acquisition Co. LLC/Hawker
Beechcraft Notes Co.
Senior Sub. Notes
9.75% due 04/01/17*......................... 510,000 521,475
Hexion US Finance Corp.
Company Guar. Notes
9.75% due 11/15/14.......................... 475,000 522,500
ING USA Global Funding Trust
Notes
4.50% due 10/01/10.......................... 268,000 265,260
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14*......................... 305,000 292,037
KAR Holdings, Inc.
Senior Notes
9.36% due 05/01/14*(6)...................... 600,000 574,500
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*......................... 600,000 564,000
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12.......................... 129,000 136,740
MXEnergy Holdings, Inc.
Senior Notes
12.81% due 08/01/11(6)...................... 650,000 601,250
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
Special Purpose Entities (continued)
Norbord Delaware GP I
Company Guar. Notes
6.45% due 02/15/17*................ $ 193,000 $ 175,540
PNA Intermediate Holding Corp.
Senior Notes
12.56% due 02/15/13*(6)............ 350,000 343,000
Pricoa Global Funding I
Notes
5.30% due 09/27/13*................ 320,000 321,624
Principal Life Global Funding I
Sec. Notes
5.25% due 01/15/13*................ 296,000 295,193
Snoqualmie Entertainment Authority
Sec. Notes
9.06% due 02/01/14*(6)............. 75,000 72,938
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*................ 475,000 467,875
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16................. 125,000 119,531
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12................. 800,000 814,000
----------
9,447,141
----------
Specified Purpose Acquisitions -- 0.0%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11................. 189,000 194,923
----------
Steel-Producers -- 0.3%
International Steel Group, Inc.
Senior Notes
6.50% due 04/15/14................. 540,000 536,179
Reliance Steel & Aluminum Co.
Company Guar. Notes
6.85% due 11/15/36................. 1,070,000 1,044,860
Steel Dynamics, Inc.
Senior Notes
6.75% due 04/01/15*................ 700,000 675,500
United States Steel Corp.
Senior Notes
6.05% due 06/01/17................. 360,000 344,491
United States Steel Corp.
Senior Notes
6.65% due 06/01/37................. 232,000 214,033
----------
2,815,063
----------
Steel-Specialty -- 0.0%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 75,000 79,125
----------
Storage/Warehousing -- 0.1%
Mobile Mini, Inc.
Notes
6.88% due 05/01/15................. 500,000 486,250
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Storage/Warehousing (continued)
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*.................. $ 655,000 $ 655,000
----------
1,141,250
----------
Telecom Services -- 0.5%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23................... 50,000 48,250
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23................... 225,000 214,875
Insight Midwest LP
Senior Notes
9.75% due 10/01/09................... 52,000 52,065
MasTec, Inc.
Senior Notes
7.63% due 02/01/17................... 400,000 389,000
PAETEC Holding Corp.
Senior Notes
9.50% due 07/15/15*.................. 1,200,000 1,197,000
Qwest Corp.
Senior Notes
7.50% due 10/01/14................... 1,440,000 1,497,600
Verizon Global Funding Corp.
Senior Notes
6.88% due 06/15/12................... 750,000 799,557
----------
4,198,347
----------
Telephone-Integrated -- 1.3%
AT&T Corp.
Senior Notes
7.30% due 11/15/11................... 1,003,000 1,077,505
BellSouth Corp.
Senior Notes
6.00% due 10/15/11................... 1,300,000 1,331,823
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23................... 25,000 23,750
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14................... 1,265,000 1,261,837
Citizens Communications Co.
Senior Notes
7.13% due 03/15/19................... 775,000 763,375
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31................... 1,502,000 1,524,530
GTE Northwest, Inc.
Debentures
5.55% due 10/15/08................... 55,000 55,130
Level 3 Financing, Inc.
Company Guar. Notes
9.25% due 11/01/14................... 500,000 492,500
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29................... 174,000 193,336
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Telephone-Integrated (continued)
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14...................... $2,725,000 $ 2,759,062
Sprint Capital Corp.
Company Guar. Notes
6.88% due 11/15/28...................... 787,000 759,532
Verizon New York, Inc.
Debentures
6.88% due 04/01/12...................... 261,000 274,939
-----------
10,517,319
-----------
Television -- 0.7%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12...................... 1,175,000 1,186,750
Bonten Media Acquisition Co.
Company Guar. Notes
9.00% due 06/01/15*..................... 250,000 223,750
ION Media Networks, Inc.
Senior Notes
8.49% due 01/15/12*(6).................. 25,000 24,875
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13...................... 960,000 933,600
Paxson Communication Corp.
Sec. Senior Notes
11.49% due 01/15/13*(6)................. 2,225,000 2,269,500
Univision Communications, Inc.
Company Guar. Notes
3.50% due 10/15/07...................... 80,000 79,400
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14...................... 380,000 321,100
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11..................... 1,035,000 954,787
-----------
5,993,762
-----------
Theaters -- 0.4%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14...................... 2,195,000 2,090,737
Cinemark, Inc.
Senior Notes
9.75% due 03/15/14(7)................... 1,585,000 1,497,825
-----------
3,588,562
-----------
Transactional Software -- 0.1%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*..................... 1,225,000 1,179,062
-----------
Transport-Air Freight -- 0.7%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-2
6.88% due 01/02/11...................... 193,987 190,107
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transport-Air Freight (continued)
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19.............. $1,475,567 $1,449,744
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15.............. 1,701,936 1,957,227
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20.............. 320,355 336,773
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11.............. 62,428 60,556
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17.............. 1,346,314 1,642,503
----------
5,636,910
----------
Transport-Rail -- 0.3%
BNSF Funding Trust I
6.61% due 01/15/26(9)........... 580,000 523,224
CSX Corp.
Senior Notes
6.25% due 03/15/18.............. 620,000 623,255
Union Pacific Corp.
Notes
3.88% due 02/15/09.............. 875,000 857,003
----------
2,003,482
----------
Transport-Services -- 0.1%
Bristow Group, Inc.
Senior Notes
7.50% due 09/15/17*............. 250,000 255,000
FedEx Corp.
Company Guar. Notes
5.50% due 08/15/09.............. 135,000 136,510
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13.............. 300,000 288,000
Ryder System, Inc.
Notes
5.85% due 03/01/14.............. 125,000 126,003
----------
805,513
----------
Transport-Truck -- 0.1%
Saint Acquisition Corp.
Senior Sec. Notes
13.31% due 05/15/15*(6)......... 325,000 221,000
Swift Acquisition Corp.
Sec. Notes
12.50% due 05/15/17*............ 375,000 251,250
----------
472,250
----------
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Travel Services -- 0.1%
Travelport LLC
Company Guar. Notes
9.88% due 09/01/14.......................... $820,000 $ 836,400
Travelport LLC
Company Guar. Notes
10.25% due 09/01/14(6)...................... 225,000 224,437
------------
1,060,837
------------
Total Corporate Bonds & Notes
(cost $290,444,175)......................... 286,509,235
------------
FOREIGN CORPORATE BONDS & NOTES -- 5.9%
Banks-Commercial -- 0.3%
Caisse Nationale des Caisses d'Epargne et de
Prevoyance
Notes
4.93% due 12/30/09(15)...................... 141,000 113,152
Credit Agricole SA
Jr. Sub. Notes
6.64% due 05/31/17*(6)(15).................. 557,000 519,649
HSBC Holdings PLC
Sub. Notes
6.50% due 09/15/37.......................... 650,000 654,246
Royal Bank of Scotland Group PLC
Bonds
6.99% due 10/15/17*(6)(15).................. 660,000 672,349
Societe Generale
Sub. Notes
5.92% due 04/15/17*(6)(15).................. 270,000 255,771
------------
2,215,167
------------
Banks-Money Center -- 0.1%
HBOS Capital Funding LP
Bank Guar. Bonds
6.85% due 03/23/09(15)...................... 175,000 166,688
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Bonds
8.38% due 04/27/09(15)...................... 175,000 182,276
National Westminster Bank PLC
Sub. Notes
7.75% due 10/16/07(6)(15)................... 67,000 67,127
------------
416,091
------------
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25.......................... 496,000 504,057
------------
Building & Construction-Misc. -- 0.0%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11.......................... 275,000 277,750
------------
Building Products-Doors & Windows -- 0.0%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15......................... 117,000 99,450
------------
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Cellular Telecom -- 0.2%
Mobile Telesystems Finance SA
Company Guar. Senior Notes
8.38% due 10/14/10....................... $1,650,000 $1,685,062
----------
Computers-Memory Devices -- 0.1%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16....................... 435,000 425,213
----------
Containers-Metal/Glass -- 0.2%
Vitro SAB de CV
Senior Notes
9.13% due 02/01/17....................... 2,040,000 2,004,300
----------
Cruise Lines -- 0.0%
Royal Caribbean Cruises, Ltd.
Senior Notes
7.00% due 06/15/13....................... 400,000 397,779
----------
Diversified Financial Services -- 0.3%
CIT Group Funding Co. of Canada
Company Guar. Notes
5.20% due 06/01/15....................... 447,000 405,866
TNK-BP Finance SA
Senior Notes
6.13% due 03/20/12....................... 1,380,000 1,324,938
TNK-BP Finance SA
Company Guar. Senior Notes
6.88% due 07/18/11....................... 350,000 347,214
----------
2,078,018
----------
Diversified Manufacturing Operations -- 0.1%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*...................... 415,000 434,713
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13....................... 310,000 312,920
----------
747,633
----------
Diversified Operations -- 0.0%
Hutchison Whampoa Finance, Ltd.
Company Guar. Notes
7.50% due 08/01/27*...................... 150,000 167,499
----------
Electric-Integrated -- 0.1%
Enel Finance International SA
Company Guar. Notes
6.25% due 09/15/17*...................... 201,000 201,744
Enel Finance International SA
Company Guar. Notes
6.80% due 09/15/37*...................... 675,000 687,338
----------
889,082
----------
Electronic Components-Misc. -- 0.1%
NXP BV / NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15....................... 830,000 773,975
----------
Electronic Components-Semiconductors -- 0.1%
Avago Technologies Finance
Company Guar. Notes
10.13% due 12/01/13...................... 590,000 634,250
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Electronic Components-Semiconductors (continued)
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11........................... $325,000 $ 325,813
----------
960,063
----------
Food-Meat Products -- 0.2%
JBS SA
Company Guar. Notes
9.38% due 02/07/11........................... 850,000 873,375
JBS SA
Senior Notes
10.50% due 08/04/16*......................... 650,000 687,375
----------
1,560,750
----------
Food-Retail -- 0.1%
Delhaize Group
Notes
6.50% due 06/15/17*.......................... 555,000 559,734
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(5)(14).................. 725,000 725
----------
Insurance-Multi-line -- 0.1%
Aegon NV
Sub. Bonds
5.40% due 07/15/14(15)....................... 201,000 156,780
AXA SA
Sub. Notes
6.38% due 12/14/36*(6)(15)................... 285,000 256,966
ING Groep NV
Bonds
5.78% due 12/18/15(6)(15).................... 765,000 722,802
----------
1,136,548
----------
Investment Companies -- 0.0%
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*.......................... 207,000 205,172
----------
Medical-Drugs -- 0.4%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14........................... 400,000 366,000
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
9.37% due 12/01/13(6)........................ 590,000 604,750
AstraZeneca PLC
Notes
6.45% due 09/15/37........................... 616,000 638,709
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11........................... 895,000 877,100
Elan Finance PLC
Company Guar. Notes
8.88% due 12/01/13........................... 790,000 776,175
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Medical-Drugs (continued)
Elan Finance PLC
Company Guar. Notes
9.56% due 11/15/11(6).......... $ 5,000 $ 4,963
----------
3,267,697
----------
Metal-Aluminum -- 0.0%
Alcan, Inc.
Notes
6.13% due 12/15/33............. 403,000 386,986
----------
Multimedia -- 0.1%
Quebecor Media, Inc.
Senior Notes
7.75% due 03/15/16*............ 375,000 357,656
The Thomson Corp.
Notes
5.70% due 10/01/14............. 620,000 614,755
----------
972,411
----------
Music -- 0.0%
Corporacion Interamericana de
Entetenimiento SA de CV
Senior Notes
8.88% due 06/14/15*............ 275,000 270,188
----------
Oil Companies-Exploration & Production -- 0.5%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13............. 965,000 931,225
Nexen, Inc.
Bonds
6.40% due 05/15/37............. 415,000 403,278
OPTI Canada, Inc.
Secured Notes
7.88% due 12/15/14*............ 1,100,000 1,100,000
OPTI Canada, Inc.
Company Guar. Notes
8.25% due 12/15/14*............ 575,000 579,313
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13............. 675,000 688,500
----------
3,702,316
----------
Oil Companies-Integrated -- 0.1%
ENI Coordination Center SA
Company Guar. Notes
5.25% due 12/27/07............. GBP 205,000 418,683
----------
Paper & Related Products -- 0.2%
Abitibi-Consolidated, Inc.
Notes
5.25% due 06/20/08............. 100,000 95,500
Abitibi-Consolidated, Inc.
Notes
6.00% due 06/20/13............. 300,000 210,000
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10............. 955,000 787,875
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Paper & Related Products (continued)
Bowater Canada Finance Corp.
Company Guar. Notes
7.95% due 11/15/11....................... $ 200,000 $ 164,500
----------
1,257,875
----------
Pipelines -- 0.1%
Enbridge, Inc.
Bonds
5.80% due 06/15/14....................... 931,000 927,898
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16....................... 183,000 166,336
----------
1,094,234
----------
Printing-Commercial -- 0.1%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*...................... 745,000 676,088
----------
Real Estate Operations & Development -- 0.0%
Brascan Corp.
Notes
8.13% due 12/15/08....................... 76,000 78,913
----------
Satellite Telecom -- 0.6%
Intelsat Bermuda, Ltd.
Company Guar. Notes
8.89% due 01/15/15(6).................... 1,055,000 1,065,550
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16...................... 985,000 1,055,181
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(7).................... 1,925,000 1,583,313
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13....................... 935,000 710,600
Intelsat, Ltd.
Senior Notes
7.63% due 04/15/12....................... 475,000 406,125
----------
4,820,769
----------
Semiconductor Equipment -- 0.0%
MagnaChip Semiconductor SA
Sec. Notes
6.88% due 12/15/11....................... 100,000 81,500
MagnaChip Semiconductor SA
Sec. Notes
8.94% due 12/15/11(6).................... 75,000 63,750
----------
145,250
----------
Special Purpose Entities -- 0.3%
Hellas Telecommunications Luxembourg II
Sub. Notes
11.11% due 01/15/15*(6).................. 1,155,000 1,117,463
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(15)................... 338,000 312,509
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
Rio Tinto Finance USA, Ltd.
Notes
2.63% due 09/30/08............................... $ 165,000 $ 161,567
SMFG Preferred Capital, Ltd.
6.08% due 01/25/17*(6)(15)....................... 373,000 344,909
SovRisc BV
Notes
4.63% due 10/31/08*.............................. 133,000 133,117
----------
2,069,565
----------
Steel-Producer -- 0.1%
Citibank Global Markets Deutschland for Severstal
Notes
8.63% due 02/24/09............................... 1,100,000 1,121,417
----------
Telecom Services -- 0.2%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14.............................. 375,000 392,812
Telenet Group Holdings NV
Notes
11.50% due 06/15/14*(7).......................... 1,231,000 1,218,690
----------
1,611,502
----------
Telephone-Integrated -- 0.7%
British Telecommunications PLC
Bonds
9.13% due 12/15/30............................... 1,807,000 2,392,833
Telecom Italia Capital SA
Company Guar. Bonds
5.25% due 10/01/15............................... 1,074,000 1,019,578
Telecom Italia Capital SA
Company Guar. Bonds
6.20% due 07/18/11............................... 1,000,000 1,024,696
Telefonica Emisiones SAU
Company Guar. Notes
6.22% due 07/03/17............................... 481,000 485,913
Telefonica Emisones SAU
Company Guar. Notes
6.42% due 06/20/16............................... 685,000 702,916
----------
5,625,936
----------
Transport-Marine -- 0.1%
Navios Maritime Holdings, Inc.
Senior Notes
9.50% due 12/15/14............................... 325,000 335,156
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14............................... 525,000 502,032
----------
837,188
----------
Transport-Rail -- 0.1%
Canadian National Railway Co.
Notes
6.38% due 10/15/11............................... 315,000 326,948
Canadian National Railway Co.
Debentures
6.38% due 11/15/37............................... 448,000 453,380
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Transport-Rail (continued)
Kansas City Southern de Mexico SA
de CV
Senior Notes
7.38% due 03/01/14*............... $ 175,000 $ 171,063
-----------
951,391
-----------
Transport-Services -- 0.2%
TGI International Ltd.
Senior Notes
9.50% due 10/03/17*............... 1,720,000 1,720,000
-----------
Total Foreign Corporate Bonds & Notes
(cost $49,456,227)................ 48,132,477
-----------
FOREIGN GOVERNMENT AGENCIES -- 31.1%
Sovereign -- 31.1%
Arab Republic of Egypt
Notes
8.75% due 07/18/12*............... EGP 7,200,000 1,298,319
Federal Republic of Brazil
Bonds
6.00% due 01/17/17................ 3,390,000 3,435,765
Federal Republic of Brazil
Bonds
6.43% due 01/05/16................ 2,894,000 1,835,393
Federal Republic of Brazil
Bonds
7.13% due 01/20/37................ 1,620,000 1,809,540
Federal Republic of Brazil
Notes
7.88% due 03/07/15................ 900,000 1,016,550
Federal Republic of Brazil
Notes
8.00% due 01/15/18................ 6,230,000 6,952,680
Federal Republic of Brazil
Bonds
8.25% due 01/20/34................ 1,430,000 1,801,085
Federal Republic of Brazil
Notes
8.75% due 02/04/25................ 2,825,000 3,616,000
Federal Republic of Brazil
Bonds
8.88% due 10/14/19................ 2,110,000 2,626,950
Federal Republic of Brazil
Notes
8.88% due 04/15/24................ 845,000 1,087,937
Federal Republic of Brazil
Bonds
10.50% due 07/14/14............... 1,115,000 1,410,475
Federal Republic of Brazil
Notes
11.00% due 08/17/40............... 4,790,000 6,406,625
Federal Republic of Germany
Bonds
4.13% due 07/04/08................ EUR2,530,000 3,608,194
Federal Republic of Germany
Bonds
4.25% due 07/04/14................ EUR5,190,000 7,398,681
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Federal Republic of Germany
Bonds
5.50% due 01/04/31......... $ 500,000 $ 800,364
Government of Australia
Bonds
5.25% due 08/15/10......... AUD 6,960,000 5,985,045
Government of Australia
Bonds
5.75% due 06/15/11......... AUD 9,180,000 7,967,169
Government of Australia
Bonds
7.50% due 09/15/09......... AUD 6,355,000 5,748,063
Government of Canada
Bonds
4.00% due 09/01/10......... CAD 9,639,000 9,647,334
Government of Canada
Bonds
5.00% due 06/01/14......... CAD 6,230,000 6,523,508
Government of Canada
Bonds
5.25% due 06/01/13......... CAD 2,920,000 3,082,433
Government of France
Bonds
4.75% due 04/25/35......... EUR 3,425,000 4,952,545
Government of Japan
Bonds
1.40% due 06/20/12......... JPY 815,000,000 7,169,673
Government of Japan
Bonds
1.40% due 12/20/15......... JPY1,080,000,000 9,332,614
Government of Norway
Bonds
6.00% due 05/16/11......... NOK 10,200,000 1,969,826
Government of Poland
Bonds
5.75% due 03/24/10......... PLN4,400,000 1,680,027
Kingdom of Denmark
Bonds
7.00% due 11/15/07......... DKK29,310,000 5,621,360
Kingdom of Norway
Bonds
5.50% due 05/15/09......... NOK40,140,000 7,519,383
Kingdom of Norway
Bonds
6.50% due 05/15/13......... NOK40,460,000 8,125,163
Kingdom of Spain
Bonds
5.75% due 07/30/32......... EUR925,000 1,523,370
Kingdom of Sweden
Bonds
4.00% due 12/01/09......... SEK41,000,000 6,349,048
Kingdom of Sweden
Bonds
4.50% due 08/12/15......... SEK6,810,000 1,070,836
Kingdom of Sweden
Bonds
5.00% due 01/28/09......... SEK36,900,000 5,800,608
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------
Sovereign (continued)
Republic of Argentina
Notes
5.25% due 12/31/38(7).. $ 7,369,761 $3,003,178
Republic of Argentina
Bonds
7.00% due 03/28/11..... 785,000 735,937
Republic of Argentina
Bonds
7.00% due 09/12/13..... 3,450,000 3,004,950
Republic of Argentina
Bonds
7.00% due 10/03/15..... 2,680,000 2,190,900
Republic of Argentina
Notes
8.28% due 12/31/33..... 4,011,108 3,640,081
Republic of Colombia
Notes
7.38% due 01/27/17..... 1,500,000 1,631,250
Republic of Colombia
Bonds
7.38% due 09/18/37..... 1,615,000 1,776,500
Republic of Colombia
Bonds
8.13% due 05/21/24..... 710,000 827,150
Republic of Colombia
Notes
8.25% due 12/22/14..... 1,950,000 2,193,750
Republic of Colombia
Bonds
12.00% due 10/22/15.... COP980,000,000 532,477
Republic of Ecuador
Bonds
10.00% due 08/15/30(7). 2,410,000 2,169,000
Republic of El Salvador
Bonds
7.65% due 06/15/35*.... 525,000 589,313
Republic of Ghana
Notes
8.50% due 10/04/17*.... 710,000 710,000
Republic of Greece
Senior Bonds
4.50% due 09/20/37..... EUR1,365,000 1,809,880
Republic of Indonesia
Bonds
6.63% due 02/17/37..... 1,450,000 1,396,733
Republic of Indonesia
Bonds
7.50% due 01/15/16..... 1,270,000 1,376,361
Republic of Indonesia
Notes
8.50% due 10/12/35..... 1,300,000 1,539,946
Republic of Pakistan
Bonds
6.88% due 06/01/17*.... 1,340,000 1,159,100
Republic of Panama
Bonds
6.70% due 01/26/36..... 1,910,000 1,962,525
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Republic of Peru
Bonds
6.55% due 03/14/37....... $1,130,000 $1,166,160
Republic of Peru
Notes
7.35% due 07/21/25....... 2,760,000 3,153,300
Republic of Peru
Bonds
8.75% due 11/21/33....... 720,000 945,720
Republic of Philippines
Bonds
7.75% due 01/14/31....... 2,090,000 2,314,675
Republic of Philippines
Notes
8.00% due 01/15/16....... 2,680,000 2,994,900
Republic of Philippines
Notes
8.25% due 01/15/14....... 1,360,000 1,519,800
Republic of Philippines
Notes
8.88% due 03/17/15....... 2,990,000 3,460,925
Republic of Philippines
Senior Notes
9.50% due 02/02/30....... 2,380,000 3,105,900
Republic of South Africa
Bonds
5.88% due 05/30/22....... 1,880,000 1,840,050
Republic of Turkey
Notes
6.88% due 03/17/36....... 1,620,000 1,545,075
Republic of Turkey
Notes
7.00% due 06/05/20....... 3,460,000 3,477,473
Republic of Turkey
Notes
7.25% due 03/15/15....... 2,460,000 2,564,550
Republic of Turkey
Notes
8.00% due 02/14/34....... 1,480,000 1,603,950
Republic of Turkey
Notes
9.50% due 01/15/14....... 1,870,000 2,166,862
Republic of Uruguay
Bonds
8.00% due 11/18/22....... 4,080,000 4,528,800
Republic of Uruguay
Notes
9.25% due 05/17/17....... 400,000 474,000
Republic of Venezuela
Bonds
5.75% due 02/26/16....... 1,970,000 1,664,650
Republic of Venezuela
Bonds
6.00% due 12/09/20....... 540,000 434,700
Republic of Venezuela
Bonds
7.00% due 12/01/18....... 700,000 623,829
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Sovereign (continued)
Republic of Venezuela
Bonds
7.65% due 04/21/25................. $ 2,290,000 $ 2,049,550
Republic of Venezuela
Notes
8.50% due 10/08/14................. 1,060,000 1,062,650
Republic of Venezuela
Bonds
9.25% due 09/15/27................. 3,650,000 3,777,750
Republic of Venezuela
Bonds
9.38% due 01/13/34................. 3,580,000 3,732,150
Russian Federation
Bonds
7.50% due 03/31/30(7).............. 10,328,100 11,649,064
Russian Federation
Bonds
7.50% due 03/31/30*(7)............. 646,750 722,743
Russian Federation
Notes
12.75% due 06/24/28................ 770,000 1,372,525
Ukrainian Soviet Socialist Republic
Bonds
6.39% due 06/26/12*................ 1,700,000 1,715,963
Ukrainian Soviet Socialist Republic
Senior Bonds
6.58% due 11/21/16*................ 1,580,000 1,595,800
Ukrainian Soviet Socialist Republic
Senior Notes
6.58% due 11/21/16................. 1,100,000 1,116,665
Ukrainian Soviet Socialist Republic
Notes
7.65% due 06/11/13................. 1,270,000 1,355,788
United Mexican States
Notes
5.63% due 01/15/17................. 2,250,000 2,250,000
United Mexican States
Bonds
8.00% due 09/24/22................. 2,550,000 3,094,425
United Mexican States
Bonds
8.30% due 08/15/31................. 650,000 832,975
------------
Total Foreign Government Agencies
(cost $243,693,547)................ 253,334,961
------------
FOREIGN GOVERNMENT TREASURIES -- 1.2%
Sovereign -- 1.2%
Government of United Kingdom
Bonds
4.00% due 03/07/09................. GBP660,000 1,331,062
Government of United Kingdom
Bonds
4.00% due 09/07/16................. GBP2,255,000 4,281,953
Government of United Kingdom
Bonds
4.25% due 03/07/11................. GBP1,930,000 3,849,662
------------
Total Foreign Government Treasuries
(cost $8,962,556).................. 9,462,677
------------
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------------
LOANS -- 0.2%
Leisure Products -- 0.0%
AMC Entertainment Holdings, Inc. -- First Lien
10.65% due 06/15/12(4)(5)(16)(17)............. $ 411,051 $ 401,802
Medical Drugs -- 0.2%
Triax Pharmaceuticals LLC -- First Lien
15.54% due
08/30/11(3)(4)(5)(16)(17)(21)(22)............. 1,500,000 1,348,961
Total Loans
(cost $1,752,752).............................. 1,750,763
-----------
U.S. GOVERNMENT AGENCIES -- 14.4%
Federal Home Loan Bank -- 0.1%
4.50% due 09/08/08............................. 600,000 599,342
-----------
Federal Home Loan Mtg. Corp. -- 4.7%
4.13% due 07/12/10............................ 300,000 297,647
4.35% due 06/02/08............................ 600,000 598,275
4.45% due 03/06/08............................ 600,000 598,792
4.50% due 02/01/20............................ 200,295 192,826
4.50% due 08/01/20............................ 386,726 372,305
4.75% due 01/18/11............................ 310,000 312,818
5.00% due 09/01/18............................ 461,823 453,972
5.00% due 07/01/20............................ 756,344 741,587
5.00% due 02/01/34............................ 448,842 429,635
5.00% due 05/01/34............................ 283,898 271,520
5.00% due 02/01/35............................ 646,922 618,716
5.00% due 08/01/35............................ 2,585,775 2,470,623
5.00% due 04/01/36............................ 557,769 532,930
5.00% due 05/01/36............................ 390,766 372,850
5.00% due 08/01/36............................ 468,880 447,383
5.00% due 11/01/36............................ 592,313 565,158
5.00% due 01/01/37............................ 1,067,985 1,019,022
5.33% due 12/01/35(6)......................... 422,324 423,493
5.47% due 03/01/36(6)......................... 280,966 277,950
5.50% due 07/01/35............................ 2,460,647 2,412,394
5.50% due 05/01/37............................ 2,058,493 2,015,646
5.70% due 08/01/36(6)......................... 2,446,959 2,453,026
5.80% due 01/01/37(6)......................... 809,705 815,471
5.81% due 01/01/37............................ 186,725 186,850
5.98% due 10/01/36............................ 4,103,050 4,107,244
6.00% due 07/01/35............................ 182,146 182,509
6.00% due 06/01/36............................ 872,369 873,563
6.00% due 05/01/37............................ 2,935,669 2,939,142
6.00% TBA due October......................... 5,541,000 5,546,198
6.20% due 09/01/36(6)......................... 841,551 852,896
6.50% due 05/01/29............................ 6,207 6,369
6.50% due 02/01/35............................ 581,849 594,116
6.50% due 05/01/37............................ 1,371,979 1,396,586
6.88% due 09/15/10............................ 1,156,000 1,232,168
7.00% due 06/01/29............................ 13,675 14,223
8.50% due 05/01/08............................ 1,060 1,071
REMIC Series 3349, Class HB
5.50% due 06/15/31............................ 1,724,000 1,719,251
REMIC
Series 41, Class F
10.00% due 05/15/20(1)....................... 14,659 14,646
Series 1103, Class N
11.57% due 06/15/21(1)(12)................... 9,139 165
-----------
38,361,036
-----------
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Federal National Mtg. Assoc. -- 9.6%
4.46% due 02/01/34(6)............... $ 441,028 $ 433,806
4.50% due 06/01/19.................. 504,151 485,896
4.67% due 10/01/35(6)............... 229,025 228,711
4.75% due 12/15/10.................. 375,000 378,319
4.87% due 01/01/35(6)............... 918,269 909,219
5.00% due 06/01/19.................. 259,774 255,098
5.00% due 03/01/34.................. 297,097 284,146
5.00% due 11/01/34.................. 565,835 541,169
5.00% due 05/01/35.................. 1,267,835 1,211,339
5.00% due 01/01/37.................. 2,934,421 2,799,064
5.00% due 05/01/37.................. 3,157,327 3,011,689
5.00% TBA due October............... 14,459,000 13,790,271
5.25% due 08/01/12.................. 300,000 306,123
5.50% due 11/01/19.................. 1,431,207 1,429,575
5.50% due 08/01/20.................. 340,950 340,286
5.50% due 01/01/29.................. 8,213 8,089
5.50% due 06/01/29.................. 157,762 155,303
5.50% due 06/01/34.................. 367,899 361,090
5.50% due 02/01/35.................. 543,178 532,681
5.50% due 12/01/35.................. 737,622 723,367
5.50% due 02/01/36(6)............... 348,780 350,321
5.50% due 05/01/36.................. 4,416,814 4,332,101
5.50% due 11/01/36.................. 583,808 571,939
5.50% due 12/01/36.................. 3,360,779 3,266,551
5.50% due 04/01/37.................. 6,711,688 6,574,083
5.50% due 05/01/37.................. 7,086,574 6,941,284
5.50% due 07/01/37.................. 2,814,733 2,757,025
5.51% due 01/01/37.................. 4,270,880 4,284,582
6.00% due 02/01/32.................. 103,513 104,260
6.00% due 05/01/34.................. 20,123 20,197
6.00% due 10/01/34.................. 536,380 538,344
6.00% due 06/01/35.................. 192,533 192,985
6.00% due 10/01/36.................. 5,890,442 5,900,250
6.00% due 11/01/36.................. 2,462,254 2,445,992
6.00% due 07/01/37.................. 3,326,731 3,331,706
6.50% due 04/01/34.................. 255,312 260,766
6.50% due 02/01/35.................. 79,028 80,561
6.50% due 07/01/36.................. 698,487 711,304
6.50% due 07/01/37.................. 7,608,645 7,747,486
7.50% due 01/01/30.................. 16,926 17,744
7.50% due 09/01/30.................. 3,434 3,594
8.00% due 11/01/28.................. 23,116 24,460
REMIC
Series 1989-2, Class D
8.80% due 01/25/19(1).............. 37,587 40,618
Series 1989-17, Class E
10.40% due 04/25/19(1)............. 5,911 6,384
13.00% due 11/01/15................. 5,443 6,090
------------
78,695,868
------------
Government National Mtg. Assoc. -- 0.0%
7.50% due 07/15/27.................. 16,404 17,232
7.50% due 10/15/27.................. 65,653 68,969
------------
86,201
------------
Total U.S. Government Agencies
(cost $118,234,813)................. 117,742,447
------------
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Shares/ Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
U.S. GOVERNMENT TREASURIES -- 2.6%
United States Treasury Bonds -- 1.1%
4.50% due 05/15/17........................ $6,000,000 $ 5,966,250
4.75% due 02/15/37........................ 3,000,000 2,958,516
6.25% due 08/15/23........................ 166,000 190,705
-----------
9,115,471
-----------
United States Treasury Notes -- 1.5%
3.88% due 05/15/10........................ 175,000 174,494
3.88% due 09/15/10........................ 7,000 6,973
4.00% due 02/15/15........................ 6,000,000 5,837,346
4.38% due 12/15/10........................ 101,000 102,034
4.63% due 12/31/11........................ 500,000 508,750
4.75% due 05/31/12........................ 3,400,000 3,477,295
4.88% due 05/31/11........................ 1,800,000 1,847,250
-----------
11,954,142
-----------
Total U.S. Government Treasuries
(cost $20,246,436)........................ 21,069,613
-----------
COMMON STOCK -- 0.4%
Casino Services -- 0.0%
Shreveport Gaming Holdings, Inc.+(3)(4)(5). 2,441 56,199
-----------
Cellular Telecom -- 0.3%
iPCS, Inc.(4)(5)........................... 60,413 2,077,603
-----------
Independent Power Producer -- 0.0%
Mirant Corp.+.............................. 1,929 78,472
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC(3)(4)(5)(20)..... 128,418 53,936
-----------
Medical-Outpatient/Home Medical -- 0.0%
Critical Care Systems International,
Inc.(3)(4)(5)............................. 4,107 21,562
-----------
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+........... 5,362 11,153
-----------
Oil-Field Services -- 0.1%
Trico Marine Services, Inc.+............... 40,529 1,207,764
-----------
Telecom Services -- 0.0%
NEON Communications Group, Inc............. 152 745
-----------
Total Common Stock
(cost $1,596,020)......................... 3,507,434
-----------
PREFERRED STOCK -- 0.7%
Banks-Money Center -- 0.1%
Santander Finance Preferred SA 5.87%*(6)... 32,800 676,500
-----------
Banks-Super Regional -- 0.0%
Wachovia Capital Trust IX 6.38%............ 12,800 295,296
-----------
Diversified Financial Services -- 0.0%
General Electric Capital Corp. 8.00%(7).... 16,000 368,800
-----------
Finance-Mortgage Loan/Banker -- 0.1%
Freddie Mac, 6.55%......................... 15,205 381,798
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC,
Class C
(3)(4)(5)(20)............................. 39,177 78,353
-----------
Shares/ Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------------
Oil Companies-Exploration & Production -- 0.3%
EXCO Resources, Inc. Convertible
Series A-1, 7.00%(3)(4)........................ 190 $ 2,166,000
Transmeridian Exploration, Inc.
15.00%(3)(8)................................... 3,528 289,296
------------
2,455,296
------------
Special Purpose Entity -- 0.1%
Structured Repackaged Asset-Backed
Trust Securities 5.47%(6)...................... 29,200 593,052
------------
Telephone-Integrated -- 0.1%
AT&T, Inc. 6.38%................................ 35,400 843,228
------------
Total Preferred Stock
(cost $5,799,915).............................. 5,692,323
------------
WARRANTS -- 0.0%
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (strike price
$4.31)+(3)..................................... 13,811 3,453
------------
Telecom Services -- 0.0%
Leap Wireless International, Inc.
Expires 04/15/10 (strike price $96.80)*+(3)(5). 500 0
------------
Telephone-Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10 (strike price $0.00)*+(3)(5).. 150 1
------------
Total Warrants
(cost $46,436)................................. 3,454
------------
Total Long-Term Investment Securities
(cost $776,947,186)............................ 783,235,038
------------
SHORT-TERM INVESTMENT SECURITIES -- 2.1%
Time Deposits -- 2.1%
State Street Euro Dollar Time Deposit
1.40% due 10/01/07............................. $ 685,000 685,000
State Street Euro Dollar Time Deposit
3.55% due 10/01/07............................. 16,382,000 16,382,000
------------
Total Short-Term Investment Securities
(cost $17,067,000)............................. 17,067,000
------------
REPURCHASE AGREEMENT -- 0.7%
State Street Bank & Trust Co. Joint
Repurchase Agreement(19)
(cost $6,047,000).............................. 6,047,000 6,047,000
------------
TOTAL INVESTMENTS --
(cost $800,061,186)(18)........................ 98.9% 806,349,038
Other assets less liabilities..................... 1.1 8,586,643
----------- ------------
NET ASSETS -- 100.0% $814,935,681
=========== ============
- --------
* 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
right to demand registration of these securities. At September 30, 2007,
the aggregate value of these securities was $94,279,556 representing 11.6%
of net assets. Unless otherwise indicated these securities are not
considered to be illiquid.
** Denominated in United States dollars unless otherwise indicated.
+ Non-income producing security
(1) Collateralized Mortgage Obligation
(2) Variable Rate Security -- the rate reflected is as of September 30, 2007,
maturity date reflects the stated maturity date.
(3) Fair valued security; see Note 2
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
(4) 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
September 30, 2007, the Strategic Bond Fund held the following restricted
securities:
Market
Principal Value % of
Acquisition Amount/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
- ---- ----------- --------- ----------- ---------- --------- ------
AMC
Entertainment
Holdings, Inc.
10.65% due
06/15/12........ 6/8/2007 400,000 $ 390,000
9/27/2007 11,051 --
---------------------
411,051 390,000 $ 401,802 $ 0.98 0.05%
Critical Care
Systems
International,
Inc. Common
Stock........... 7/20/2006 4,107 37,181 21,562 5.25 0.00
EXCO Resources,
Inc. Convertible
Preferred Stock
Series A-1,
7.00%........... 3/29/2007 37 370,000
9/20/2007 153 1,530,000
---------------------
190 1,900,000 2,166,000 11,400.00 0.27
ICO North
America, Inc.
7.50% due
08/15/09........ 8/11/2005 200,000 200,000
4/19/2006 65,000 81,805
---------------------
265,000 281,805 257,050 0.97 0.03
iPCS, Inc.
Common
Stock........... 7/28/2005 1,283 0
7/20/2004 59,130 916,515
---------------------
60,413 916,515 2,077,603 34.39 0.25
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
Triax
Pharmaceuticals
15.54% due
08/30/11........ 08/31/2007 1,500,000 1,348,961 1,348,961 0.90 0.17
Triax
Pharmaceuticals
Common
Stock........... 08/31/2007 128,418 53,936 53,936 0.42 0.01
Triax
Pharmaceuticals
Preferred
Stock........... 08/31/2007 39,177 78,353 78,353 2.00 0.01
---------- ----
$6,461,466 0.79%
========== ====
(5) Illiquid security
(6) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of September 30, 2007.
(7) "Step-up" security where the rate increases ("steps-up") at a
predetermined rate. Rate shown reflects the increased rate.
(8) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(9) Variable Rate Security -- the rate reflected is as of September 30, 2007,
maturity date reflects next reset date.
(10) Company has filed Chapter 11 bankruptcy protection.
(11) Bond is in default and did not pay principal at maturity.
(12) Interest Only
(13) Company has filed Chapter 7 bankruptcy.
(14) Bond in default
(15) Perpetual maturity -- maturity date reflects the next call date.
(16) Senior Loans in the Fund's Portfolio are generally subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment
conditions and because there may be significant economic incentives for a
borrower to prepay, prepayments may occur. As a result, the actual
remaining maturity may be substantially less than the stated maturities
shown.
(17) The Fund invests in Senior Loans which generally pay interest at rates
which are periodically re-determined by reference to a base lending rate
plus a premium. These base lending rates are generally either the lending
rate offered by one or more major United States banks, or the certificate
of deposit rate. Senior Loans are generally considered to be restrictive
in that the Fund is ordinarily contractually obligated to receive approval
from the Agent Bank and/or borrower prior to the disposition of a Senior
Loan.
(18) See Note 5 for cost of investments on a tax basis.
(19) See Note 2 for details of Joint Repurchase Agreement.
(20) Consists of more than one class of securities traded together as a unit.
(21) A portion of the interest is paid in the form of additional bonds.
(22) Loan is subject to an unfunded loan commitment. See Note 10 for details
ADR --American Depository Receipt
TBA --Securities purchased on a forward commitment basis with an approximate
principal amount and no definitive maturity date. The actual principal
and maturity date will be determined upon settlement date.
AUD --Australian Dollar
CAD --Canadian Dollar
COP --Columbian Peso
DKK --Danish Krone
EGP --Egyptian Pound
EUR --Euro
GBP --British Pound
JPY --Japanese Yen
MXN --Mexican Peso
NOK --Norwegian Krone
PLN --Polish Zloty
SEK --Swedish Krona
USD --U.S. Dollar
ZAR --South African Rand
See Notes to Financial Statements
46
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- September 30, 2007 -- (unaudited)
Industry Allocation*
Cellular Telecom...................... 5.6%
Medical-Hospitals..................... 5.5
Oil Companies-Exploration & Production 5.4
Repurchase Agreements................. 4.9
Independent Power Producers........... 4.4
Chemicals-Specialty................... 3.4
Special Purpose Entities.............. 3.3
Cable TV.............................. 3.1
Transport-Air Freight................. 3.1
Casino Hotels......................... 2.9
Pipelines............................. 2.8
Television............................ 2.4
Electronic Components-Semiconductors.. 2.3
Metal-Diversified..................... 2.3
Containers-Metal/Glass................ 2.2
Telecom Services...................... 2.2
Auto-Cars/Light Trucks................ 1.9
Medical-Drugs......................... 1.9
Finance-Auto Loans.................... 1.7
Telephone-Integrated.................. 1.7
Satellite Telecom..................... 1.6
Oil-Field Services.................... 1.5
Containers-Paper/Plastic.............. 1.4
Paper & Related Products.............. 1.2
Agricultural Chemicals................ 1.1
Building & Construction Products-Misc. 1.1
Computer Services..................... 1.1
Electric-Integrated................... 1.1
Direct Marketing...................... 1.0
Electric-Generation................... 1.0
Gambling (Non-Hotel).................. 1.0
Medical Products...................... 1.0
Theaters.............................. 1.0
Airlines.............................. 0.8
Food-Meat Products.................... 0.8
Investment Management/Advisor Services 0.8
Recycling............................. 0.8
Rental Auto/Equipment................. 0.8
Retail-Drug Store..................... 0.8
Travel Services....................... 0.7
Chemicals-Diversified................. 0.6
Consumer Products-Misc................ 0.6
Diversified Financial Services........ 0.6
Diversified Manufacturing Operations.. 0.6
Beverages-Non-alcoholic............... 0.5
Broadcast Services/Program............ 0.5
Distribution/Wholesale................ 0.5
Funeral Services & Related Items...... 0.5
Medical Information Systems........... 0.5
Medical-HMO........................... 0.5
Publishing-Periodicals................ 0.5
Energy-Alternate Sources.............. 0.4
Home Furnishings...................... 0.4
Insurance Brokers..................... 0.4
Non-Hazardous Waste Disposal.......... 0.4
Printing-Commercial................... 0.4
Research & Development................ 0.4
Retail-Restaurants.................... 0.4
Storage/Warehousing................... 0.4
Auto/Truck Parts & Equipment-Original. 0.3
Building Products-Wood........... 0.3%
Cosmetics & Toiletries........... 0.3
Human Resources.................. 0.3
Medical-Nursing Homes............ 0.3
Physicians Practice Management... 0.3
Retail-Petroleum Products........ 0.3
Steel-Producers.................. 0.3
Transactional Software........... 0.3
Advertising Services............. 0.2
Applications Software............ 0.2
Building & Construction-Misc..... 0.2
Computers-Memory Devices......... 0.2
Electronic Components-Misc....... 0.2
Electronics-Military............. 0.2
Food-Misc........................ 0.2
Golf............................. 0.2
Hotels/Motels.................... 0.2
Leisure Products................. 0.2
Machinery-Farming................ 0.2
Metal Processors & Fabrication... 0.2
Multimedia....................... 0.2
Poultry.......................... 0.2
Retail-Discount.................. 0.2
Rubber-Tires..................... 0.2
Seismic Data Collection.......... 0.2
Transport-Marine................. 0.2
Transport-Services............... 0.2
Transport-Truck.................. 0.2
Building Products-Doors & Windows 0.1
Casino Services.................. 0.1
Medical Instruments.............. 0.1
Medical-Biomedical/Gene.......... 0.1
Medical-Outpatient/Home Medical.. 0.1
----
99.9%
====
- --------
* Calculated as a percentage of net assets.
Credit Quality+#
BBB....... 0.3%
BB........ 15.9
B......... 44.9
CCC....... 29.3
Below C... 3.2
Not Rated@ 6.4
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
47
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.5%
Electronic Components-Semiconductors -- 0.3%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*........... $ 50,000 $ 44,938
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*........... 1,150,000 861,062
----------
906,000
----------
Medical Instruments -- 0.1%
Kyphon, Inc.
Senior Notes
1.25% due 02/01/14*........... 125,000 163,125
----------
Medical-Biomedical/Gene -- 0.1%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12............ 250,000 214,375
----------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(1)(2)(3)... 75,000 72,750
----------
Total Convertible Bonds & Notes
(cost $1,477,570)............. 1,356,250
----------
CORPORATE BONDS & NOTES -- 77.0%
Advertising Services -- 0.2%
R.H. Donnelley Corp.
Senior Notes
8.88% due 10/15/17*........... 400,000 406,000
----------
Agricultural Chemicals -- 1.1%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18............ 425,000 412,250
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*........... 1,675,000 1,758,750
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*........... 975,000 1,039,594
----------
3,210,594
----------
Airlines -- 0.8%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11............ 1,800,000 1,755,000
Delta Air Lines, Inc.
Pass Through Certs.
Series 2000-1, Class A-2
7.57% due 11/18/10............ 350,000 358,969
United Air Lines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08............ 250,863 250,236
----------
2,364,205
----------
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
Applications Software -- 0.2%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13........................ $ 525,000 $ 556,500
----------
Auto-Cars/Light Trucks -- 1.9%
Ford Motor Co.
Debentures
6.38% due 02/01/29......................... 3,455,000 2,539,425
General Motors Corp.
Debentures
8.25% due 07/15/23......................... 2,865,000 2,506,875
General Motors Corp.
Senior Bonds
8.38% due 07/15/33......................... 454,000 397,817
----------
5,444,117
----------
Auto/Truck Parts & Equipment-Original -- 0.3%
Lear Corp.
Senior Notes
8.75% due 12/01/16......................... 925,000 869,500
----------
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 USA Inc.
Company Guar. Notes
8.00% due 12/15/11......................... 425,000 418,625
----------
Broadcast Services/Program -- 0.5%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14......................... 976,000 1,010,160
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14......................... 500,000 480,000
----------
1,490,160
----------
Building & Construction Products-Misc. -- 1.1%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12......................... 950,000 964,250
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08........................ 899,000 903,495
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14......................... 550,000 543,125
NTK Holdings, Inc.
Senior Disc. Notes
10.75% due 03/01/14........................ 925,000 568,875
----------
2,979,745
----------
Building Products-Wood -- 0.3%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15........................ 1,092,000 922,740
----------
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Cable TV -- 3.1%
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15............. $3,021,000 $3,096,525
CCH II LLC/CCH II Capital Corp.
Senior Notes, Series B
10.25% due 09/15/10............. 1,000,000 1,040,000
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13............. 2,527,000 2,634,397
CCO Holdings LLC/CCO Holdings
Capital Corp.
Senior Notes
8.75% due 11/15/13.............. 500,000 502,500
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11.............. 300,000 300,750
Insight Communications Co., Inc.
Senior Notes
12.25% due 02/15/11(6).......... 1,165,000 1,202,863
----------
8,777,035
----------
Casino Hotels -- 2.9%
Eldorado Casino Corp.
Sec. Bonds
10.00% due 08/01/12(2)(5)....... 1,721,177 1,738,389
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.............. 1,775,000 1,635,219
Station Casinos, Inc.
Senior Sub. Notes
6.88% due 03/01/16.............. 1,125,000 978,750
Turning Stone Resort Casino
Enterprise
Senior Notes
9.13% due 09/15/14*............. 1,200,000 1,242,000
----------
8,269,358
----------
Cellular Telecom -- 2.0%
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13............. 834,000 881,955
Centennial Communications Corp.
Senior Notes
10.13% due 06/15/13............. 150,000 159,000
Centennial Communications Corp.
Senior Notes
10.98% due 01/01/13(4).......... 825,000 849,750
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14.............. 250,000 253,750
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14*............. 950,000 964,250
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Cellular Telecom (continued)
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14*.................. $1,200,000 $1,224,000
Rural Cellular Corp.
Senior Sub. Notes
8.62% due 06/01/13*(4)............... 1,225,000 1,255,625
Rural Cellular Corp.
Senior Notes
11.11% due 11/01/12(4)............... 100,000 102,000
----------
5,690,330
----------
Chemicals-Diversified -- 0.6%
Lyondell Chemical Co.
Company Guar. Notes
8.00% due 09/15/14................... 1,575,000 1,732,500
----------
Chemicals-Specialty -- 3.4%
Huntsman International LLC
Senior Sub. Notes
7.38% due 01/01/15................... 1,900,000 1,985,500
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14................... 1,650,000 1,757,250
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*................. 3,425,000 3,390,750
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12................... 2,375,000 2,369,062
----------
9,502,562
----------
Computer Services -- 0.8%
Compucom Systems, Inc.
Senior Notes
12.00% due 11/01/14*................. 650,000 819,000
Compucom Systems, Inc.
Senior Sub. Notes
12.50% due 10/01/15*................. 1,325,000 1,291,875
----------
2,110,875
----------
Consumer Products-Misc. -- 0.6%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12................... 372,000 370,140
Jostens Holding Corp.
Senior Notes
10.25% due 12/01/13(6)............... 1,300,000 1,209,000
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13................... 150,000 153,375
----------
1,732,515
----------
Containers-Metal/Glass -- 1.4%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23................... 2,125,000 2,082,500
49
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Containers-Metal/Glass (continued)
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13....................... $1,865,000 $1,930,275
----------
4,012,775
----------
Containers-Paper/Plastic -- 1.4%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12....................... 650,000 651,625
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09...................... 1,790,000 1,611,000
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17....................... 1,675,000 1,645,687
----------
3,908,312
----------
Cosmetics & Toiletries -- 0.3%
Revlon Consumer Products Corp.
Senior Sub. Notes
8.63% due 02/01/08....................... 775,000 763,375
Revlon Consumer Products Corp.
Senior Notes
9.50% due 04/01/11....................... 175,000 166,250
----------
929,625
----------
Data Processing/Management -- 0.2%
Seitel, Inc.
Senior Notes
9.75% due 02/15/14....................... 650,000 614,250
----------
Direct Marketing -- 0.8%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12....................... 2,100,000 2,142,000
----------
Distribution/Wholesale -- 0.5%
Varietal Distribution, Inc.
Senior Notes
10.25% due 07/15/15*..................... 1,375,000 1,292,500
----------
Diversified Manufacturing Operations -- 0.6%
Harland Clarke Holdings Corp.
Notes
9.50% due 05/15/15....................... 625,000 557,813
Harland Clarke Holdings Corp.
Notes
10.31% due 05/15/15(4)................... 500,000 445,625
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14...................... 600,000 564,000
----------
1,567,438
----------
Electric-Generation -- 1.0%
Edison Mission Energy
Senior Notes
7.20% due 05/15/19*...................... 1,500,000 1,477,500
Edison Mission Energy
Senior Notes
7.63% due 05/15/27*...................... 950,000 916,750
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Electric-Generation (continued)
Reliant Energy Mid-Atlantic Power
Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17....................... $ 329,676 $ 354,401
----------
2,748,651
----------
Electric-Integrated -- 1.1%
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11....................... 2,700,000 2,727,000
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21....................... 500,000 476,250
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(1)(2)(3)............. 3,525,000 0
----------
3,203,250
----------
Electronic Components-Semiconductors -- 1.7%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12....................... 536,000 493,120
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16....................... 1,230,000 1,242,300
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14....................... 1,175,000 1,086,875
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16...................... 1,975,000 1,836,750
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*..................... 170,000 166,600
----------
4,825,645
----------
Electronics-Military -- 0.2%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13....................... 525,000 515,813
----------
Energy-Alternate Sources -- 0.4%
Aventine Renewable Energy Holdings, Inc.
Notes
10.00% due 04/01/17...................... 475,000 429,875
VeraSun Energy Corp.
Senior Notes
9.38% due 06/01/17*...................... 275,000 236,500
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12....................... 500,000 505,000
----------
1,171,375
----------
Finance-Auto Loans -- 1.7%
Ford Motor Credit Co. LLC
Notes
7.38% due 10/28/09....................... 4,825,000 4,731,188
----------
50
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Food-Misc. -- 0.2%
Wornick Co.
Sec. Notes
10.88% due 07/15/11+(8).............. $ 950,000 $ 665,000
----------
Funeral Services & Related Items -- 0.5%
Service Corp. International
Senior Notes
7.00% due 06/15/17................... 825,000 810,562
Service Corp. International
Senior Notes
7.63% due 10/01/18................... 105,000 108,938
Stewart Enterprises, Inc.
Senior Notes
6.25% due 02/15/13................... 600,000 583,500
----------
1,503,000
----------
Gambling (Non-Hotel) -- 1.0%
Downstream Development Authority
Senior Notes
12.00% due 10/15/15*................. 1,000,000 1,010,000
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*................. 600,000 594,000
Shingle Springs Tribal Gaming
Authority
Senior Notes
9.38% due 06/15/15*.................. 400,000 404,000
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/14*.................. 750,000 772,500
----------
2,780,500
----------
Golf -- 0.2%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11................... 1,000,000 550,000
----------
Home Furnishings -- 0.4%
Simmons Co.
Senior Notes
10.00% due 12/15/14(6)............... 1,426,000 1,137,235
----------
Hotel/Motel -- 0.2%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14................... 460,000 441,600
----------
Human Resources -- 0.3%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13.................. 800,000 848,000
----------
Independent Power Producers -- 4.3%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(9)............... 7,085,000 7,722,650
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16................... 2,550,000 2,556,375
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Independent Power Producers (continued)
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10................. $ 200,000 $ 219,000
Reliant Energy, Inc.
Senior Notes
7.63% due 12/31/14.................. 525,000 528,938
Reliant Energy, Inc
Senior Notes
7.88% due 12/31/17.................. 925,000 930,781
-----------
11,957,744
-----------
Insurance Brokers -- 0.4%
USI Holdings Corp.
Senior Notes
9.43% due 11/15/14*(4).............. 725,000 688,750
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*................. 450,000 403,875
-----------
1,092,625
-----------
Investment Management/Advisor Services -- 0.8%
LVB Acquisition Merger Sub, Inc.
Senior Notes
10.38% due 10/15/17*................ 650,000 628,062
LVB Acquisition Merger Sub, Inc.
Senior Sub. Notes
11.63% due 10/15/17*................ 925,000 897,250
LVB Acquisition Merger, Inc.
Senior Notes
10.00% due 10/15/17*................ 675,000 675,000
-----------
2,200,312
-----------
Machinery-Farming -- 0.2%
Case Corp.
Notes
7.25% due 01/15/16.................. 625,000 646,875
-----------
Medical Information Systems -- 0.5%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12................. 1,475,000 1,475,000
-----------
Medical Products -- 1.0%
ReAble Therapeutics Finance LLC
Company Guar. Notes
11.75% due 11/15/14................. 1,300,000 1,235,000
Universal Hospital Services, Inc.
Sec. Bonds
8.50% due 06/01/15*................. 725,000 717,750
Universal Hospital Services, Inc.
Senior Notes
8.76% due 06/01/15*(4).............. 825,000 820,875
-----------
2,773,625
-----------
Medical-HMO -- 0.5%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*................ 1,325,000 1,325,000
-----------
51
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Medical-Hospitals -- 5.2%
Community Health Systems, Inc.
Senior Sec. Notes
8.88% due 07/15/15*....................... $3,715,000 $ 3,817,162
HCA, Inc.
Senior Notes
6.25% due 02/15/13........................ 875,000 774,375
HCA, Inc.
Sec. Notes
9.13% due 11/15/14*....................... 1,325,000 1,397,875
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*....................... 5,750,000 6,109,375
HCA, Inc.
Sec. Notes
9.63% due 11/15/16*....................... 1,000,000 1,067,500
IASIS Healthcare LLC / IASIS Capital Corp.
Bank Guaranteed Notes
8.75% due 06/15/14........................ 1,335,000 1,351,688
-----------
14,517,975
-----------
Medical-Nursing Homes -- 0.3%
Sun Healthcare Group, Inc.
Senior Sub. Notes
9.13% due 04/15/15*....................... 825,000 841,500
-----------
Metal Processors & Fabrication -- 0.2%
Metals USA, Inc.
Sec. Notes
11.13% due 12/01/15....................... 500,000 532,500
-----------
Metal-Diversified -- 2.3%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15........................ 410,000 442,800
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17........................ 3,045,000 3,326,662
Noranda Aluminium Acquisition Corp.
Senior Notes
9.36% due 05/15/15*....................... 1,950,000 1,833,000
Noranda Aluminium Holding Corp.
Senior Notes
11.14% due 11/15/14*...................... 750,000 723,750
-----------
6,326,212
-----------
Multimedia -- 0.1%
Haights Cross Operating Co.
Company Guar. Senior Notes
11.75% due 08/15/11....................... 325,000 337,188
-----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(1)(2)(9)(10)......... 2,150,000 0
-----------
Non-Hazardous Waste Disposal -- 0.4%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17........................ 1,225,000 1,231,125
-----------
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
Oil Companies-Exploration & Production -- 2.9%
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... $ 375,000 $ 381,563
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14......................... 875,000 824,687
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15......................... 1,025,000 960,937
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16......................... 1,325,000 1,318,375
Dune Energy, Inc.
Sec. Notes
10.50% due 06/01/12*....................... 425,000 405,875
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15......................... 550,000 496,375
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14*........................ 425,000 408,000
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*........................ 800,000 782,000
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16......................... 250,000 246,250
Sabine Pass LNG LP
Sec. Notes
7.50% due 11/30/16......................... 1,825,000 1,797,625
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10........................ 650,000 629,688
----------
8,251,375
----------
Oil-Field Services -- 0.4%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14......................... 655,000 659,913
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11......................... 505,275 522,156
----------
1,182,069
----------
Paper & Related Products -- 0.9%
Bowater, Inc.
Notes
6.50% due 06/15/13......................... 600,000 438,000
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09......................... 825,000 752,812
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*........................ 875,000 853,125
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Paper & Related Products (continued)
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*.................. $ 575,000 $ 556,313
----------
2,600,250
----------
Physicians Practice Management -- 0.3%
US Oncology, Inc.
Senior Sub. Notes
10.75% due 08/15/14.................. 810,000 836,325
----------
Pipelines -- 2.8%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15................... 650,000 640,250
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16................... 1,075,000 1,093,812
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12................... 750,000 774,375
Dynegy-Roseton Danskammer
Pass Through Certs.
Series B
7.67% due 11/08/16................... 675,000 678,375
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14................... 875,000 885,938
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14................... 600,000 555,000
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16................... 175,000 172,375
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27................... 1,050,000 971,250
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21................... 1,825,000 1,984,687
----------
7,756,062
----------
Poultry -- 0.2%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17................... 525,000 535,500
----------
Printing-Commercial -- 0.2%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15................... 650,000 565,500
----------
Publishing-Periodicals -- 0.5%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 1,600,000 1,440,000
----------
Recycling -- 0.8%
Aleris International, Inc.
Senior Notes
9.00% due 12/15/14................... 1,315,000 1,216,375
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Recycling (continued)
Aleris International, Inc.
Senior Sub. Notes
10.00% due 12/15/16.................. $1,225,000 $1,084,125
----------
2,300,500
----------
Rental Auto/Equipment -- 0.6%
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13................... 1,650,000 1,699,500
----------
Research & Development -- 0.4%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15.................. 1,080,000 980,100
----------
Retail-Discount -- 0.2%
Dollar General Corp.
Senior Notes
10.63% due 07/15/15*................. 600,000 564,000
----------
Retail-Drug Store -- 0.8%
General Nutrition Centers, Inc.
Senior Notes
10.01% due 03/15/14*................. 175,000 168,000
Rite Aid Corp.
Company Guar. Notes
9.50% due 06/15/17*.................. 2,175,000 2,033,625
----------
2,201,625
----------
Retail-Petroleum Products -- 0.3%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14................... 725,000 706,875
----------
Retail-Restaurants -- 0.4%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14.................. 475,000 479,750
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14................... 775,000 705,250
----------
1,185,000
----------
Rubber-Tires -- 0.2%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14................... 750,000 652,500
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(10)(12)......... 550,000 2,200
----------
Special Purpose Entities -- 3.2%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12(6)............... 1,200,000 1,068,000
AMR HoldCo, Inc./EmCare Hold Co, Inc.
Senior Sub. Notes
10.00% due 02/15/15.................. 450,000 477,000
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
CCM Merger, Inc.
Notes
8.00% due 08/01/13*......................... $ 475,000 $ 463,125
CHR Intermediate Holding Corp.
Senior Notes
12.61% due 06/01/13*........................ 75,000 76,313
Consolidated Communications Holdings, Inc.
Senior Notes
9.75% due 04/01/12.......................... 810,000 818,100
Hawker Beechcraft Acquisition Co. LLC/Hawker
Beechcraft Notes Co.
Senior Sub. Notes
9.75% due 04/01/17*......................... 425,000 434,562
Hexion US Fin Corp.
Company Guar. Notes
9.75% due 11/15/14.......................... 400,000 440,000
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14*......................... 300,000 287,250
KAR Holdings, Inc.
Senior Notes
9.36% due 05/01/14*(4)...................... 725,000 694,187
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*......................... 725,000 681,500
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12.......................... 646,000 684,760
MXEnergy Holdings, Inc.
Senior Notes
12.81% due 08/01/11(4)...................... 1,075,000 994,375
PNA Intermediate Holding Corp.
Senior Notes
12.56% due 02/15/13*(4)..................... 300,000 294,000
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*......................... 950,000 935,750
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12.......................... 750,000 763,125
----------
9,112,047
----------
Steel-Producer -- 0.3%
Steel Dynamics, Inc.
Senior Notes
6.75% due 04/01/15*......................... 825,000 796,125
----------
Storage/Warehousing -- 0.4%
Mobile Mini, Inc.
Senior Notes
6.88% due 05/01/15.......................... 510,000 495,975
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*......................... 725,000 725,000
----------
1,220,975
----------
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Telecom Services -- 1.2%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23...................... $ 375,000 $ 361,875
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23...................... 1,525,000 1,456,375
PAETEC Holding Corp.
Senior Notes
9.50% due 07/15/15*..................... 1,450,000 1,446,375
----------
3,264,625
----------
Telephone-Integrated -- 1.7%
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23...................... 225,000 213,750
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14...................... 1,150,000 1,147,125
Citizens Communications Co.
Senior Notes
7.13% due 03/15/19...................... 825,000 812,625
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31...................... 1,031,000 1,046,465
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14...................... 1,650,000 1,670,625
----------
4,890,590
----------
Television -- 2.4%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12...................... 500,000 505,000
Bonten Media Acquisition Co.
Company Guar. Notes
9.00% due 06/01/15*..................... 275,000 246,125
ION Media Networks, Inc.
Senior Notes
8.49% due 01/15/12*(4).................. 25,000 24,875
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13...................... 1,250,000 1,215,625
Paxson Communication Corp.
Sec. Senior Notes
11.49% due 01/15/13*(4)................. 3,275,000 3,340,500
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14...................... 725,000 612,625
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11..................... 750,000 691,875
----------
6,636,625
----------
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Theaters -- 1.0%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................. $1,900,000 $ 1,809,750
Cinemark, Inc.
Senior Notes
9.75% due 03/15/14(6).............. 925,000 874,125
------------
2,683,875
------------
Transactional Software -- 0.3%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*................ 1,000,000 962,500
------------
Transport-Air Freight -- 3.1%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................. 5,437,354 6,252,957
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20................. 17,935 18,854
Atlas Air, Inc. Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20*................ 791,752 832,329
Atlas Air, Inc. Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................. 1,301,358 1,587,657
------------
8,691,797
------------
Transport-Services -- 0.2%
Bristow Group, Inc.
Senior Notes
7.50% due 09/15/17*................ 250,000 255,000
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................. 425,000 408,000
------------
663,000
------------
Transport-Truck -- 0.2%
Swift Acquisition Corp.
Sec. Senior Notes
13.31% due 05/15/15*(4)............ 375,000 255,000
Swift Acquisition Corp.
Sec. Notes
12.50% due 05/15/17*............... 450,000 301,500
------------
556,500
------------
Travel Services -- 0.3%
Travelport LLC
Company Guar. Notes
9.88% due 09/01/14................. 650,000 663,000
Travelport LLC
Company Guar. Notes
11.88% due 09/01/16................ 100,000 104,750
------------
767,750
------------
Total Corporate Bonds & Notes
(cost $212,869,611)................ 215,028,989
------------
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES -- 8.7%
Building & Construction-Misc. -- 0.2%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11.................... $ 610,000 $ 616,100
----------
Building Products-Doors & Windows -- 0.1%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15................... 233,000 198,050
----------
Computers-Memory Devices -- 0.2%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16.................... 425,000 415,438
----------
Containers-Metal/Glass -- 0.8%
Vitro SAB de CV
Senior Notes
9.13% due 02/01/17.................... 2,300,000 2,259,750
----------
Electronic Components-Misc. -- 0.2%
NXP BV / NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15.................... 610,000 568,825
----------
Electronic Components-Semiconductors -- 0.3%
Avago Technologies Finance
Company Guar. Notes
10.13% due 12/01/13................... 650,000 698,750
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11.................... 225,000 225,562
----------
924,312
----------
Food-Meat Products -- 0.8%
JBS SA
Company Guar. Notes
9.38% due 02/07/11.................... 1,150,000 1,181,625
JBS SA
Notes
9.38% due 02/07/11.................... 250,000 256,875
JBS SA
Senior Notes
10.50% due 08/04/16*.................. 825,000 872,437
----------
2,310,937
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(2)(8)............ 4,460,000 4,460
----------
Medical-Drugs -- 1.4%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14.................... 550,000 503,250
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
9.37% due 12/01/13(4)................. 825,000 845,625
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11.................... 1,400,000 1,372,000
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Medical-Drugs (continued)
Elan Finance PLC
Company Guar. Notes
8.88% due 12/01/13......................... $ 575,000 $ 564,938
Elan Finance PLC
Company Guar. Notes
9.56% due 11/15/11(4)...................... 575,000 570,687
----------
3,856,500
----------
Metal Processors & Fabrication -- 0.0%
International Utility Structures, Inc.
Senior Sub. Notes
10.75% due 02/01/08+(1)(2)(8)(11).......... 2,150,000 43,000
----------
Multimedia -- 0.1%
Quebecor Media, Inc.
Senior Notes
7.75% due 03/15/16*........................ 425,000 405,344
----------
Oil Companies-Exploration & Production -- 1.0%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13......................... 875,000 844,375
OPTI Canada, Inc.
Sec. Notes
7.88% due 12/15/14*........................ 1,150,000 1,150,000
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13......................... 650,000 663,000
----------
2,657,375
----------
Paper & Related Products -- 0.3%
Abitibi-Consolidated, Inc.
Notes
5.25% due 06/20/08......................... 100,000 95,500
Abitibi-Consolidated, Inc.
Notes
6.00% due 06/20/13......................... 285,000 199,500
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10......................... 700,000 577,500
----------
872,500
----------
Printing-Commercial -- 0.2%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*........................ 625,000 567,188
----------
Satellite Telecom -- 1.6%
Intelsat Bermuda, Ltd.
Company Guar. Notes
8.89% due 01/15/15(4)...................... 645,000 651,450
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16........................ 1,100,000 1,178,375
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(6)...................... 2,010,000 1,653,225
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Satellite Telecom (continued)
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13..................... $ 950,000 $ 722,000
Intelsat, Ltd.
Senior Notes
7.63% due 04/15/12..................... 450,000 384,750
-----------
4,589,800
-----------
Special Purpose Entity -- 0.3%
Hellas Telecommunications Luxembourg II
Sub. Notes
10.99% due 01/15/15*(4)................ 950,000 919,125
-----------
Telecom Services -- 1.0%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14.................... 675,000 707,062
Telenet Group Holdings NV
Notes
11.50% due 06/15/14*(6)................ 2,014,000 1,993,860
-----------
2,700,922
-----------
Transport-Marine -- 0.2%
Navios Maritime Holdings, Inc.
Senior Notes
9.50% due 12/15/14..................... 475,000 489,844
-----------
Total Foreign Corporate Bonds & Notes
(cost $28,869,325)..................... 24,399,470
-----------
LOANS(13)(14) -- 2.6%
Beverages-Non-alcoholic -- 0.3%
Le-Natures, Inc.
9.39% due 01/01/11+(2)(8)(9)........... 1,200,000 732,000
-----------
Computer Services -- 0.3%
CompuCom Systems, Inc., Series B
8.63% due 08/30/14(2).................. 1,000,000 975,000
-----------
Diversified Financial Services -- 0.6%
Wind Acquisitions Holdings Finance S.A.
12.61% due 12/21/11(2)(3).............. 1,690,031 1,701,299
-----------
Leisure Products -- 0.2%
AMC Entertainment Holdings, Inc.
10.69% due 06/15/12(2)(3).............. 616,576 602,703
-----------
Medical-Drugs -- 0.5%
Triax Pharmaceuticals LLC -- First Lien
15.54% due 08/30/11(1)(2)(3)(17)(18)... 1,500,000 1,348,961
-----------
Medical-Hospitals -- 0.3%
Iasis Healthcare Corp.
10.61% due 06/15/14(2)................. 1,026,516 980,964
-----------
Oil-Field Services -- 0.3%
Stallion Oilfield Service
9.82% due 07/30/12(2).................. 1,000,000 975,000
-----------
Rental Auto/Equipment -- 0.2%
Neff Corp.
8.89% due 11/30/14(2).................. 500,000 453,541
-----------
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Share/ Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
LOANS (continued)
Travel Service -- 0.4%
Travelport Holdings, Ltd.
12.35% due 03/27/12(2)(3)..................... $1,064,645 $ 1,020,284
-----------
Total Loans
(cost $9,362,016)............................. 8,789,752
-----------
COMMON STOCK -- 4.7%
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 -- 3.6%
iPCS, Inc.(2)(3)............................... 293,260 10,085,211
-----------
Independent Power Producer -- 0.1%
Mirant Corp.+.................................. 4,388 178,504
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC(1)(2)(3)(16)......... 128,418 53,936
-----------
Medical-Outpatient/Home Medical -- 0.1%
Critical Care Systems
International, Inc.(1)(2)(3).................. 69,700 365,925
-----------
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+............... 14 29
-----------
Oil-Field Services -- 0.8%
Trico Marine Services, Inc.+................... 74,859 2,230,798
-----------
Total Common Stock
(cost $2,954,714)............................. 13,240,179
-----------
PREFERRED STOCK -- 1.5%
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC,
Class C(1)(2)(3)(16).......................... 39,176 78,353
-----------
Oil Companies-Exploration & Production -- 1.5%
EXCO Resources, Inc.
Convertible
7.00% Series A-1(1)(3)(5)..................... 318 3,625,200
Transmeridian Exploration, Inc.
15.00%(1)..................................... 6,716 550,712
-----------
4,175,912
-----------
Total Preferred Stock
(cost $3,877,803)............................. 4,254,265
-----------
WARRANTS -- 0.0%+
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (strike price $4.31)*(1)(2).. 44,885 11,221
-----------
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
-----------
Share/ Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Telephone-Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10
(strike price $0.00)*(1)(2)....... $ 2,650 $ 27
------------
Total Warrants
(cost $240,756)................... 11,248
------------
Total Long-Term Investment Securities
(cost $259,651,795)............... 267,080,153
------------
REPURCHASE AGREEMENT -- 4.9%
State Street Bank & Trust Co.
Joint Repurchase Agreement
(cost $13,896,000)(15)............ 13,896,000 13,896,000
------------
TOTAL INVESTMENTS --
(cost $273,547,795)(7)............ 99.9% 280,976,153
------------
Other assets less liabilities........ 0.1 208,309
----------- ------------
NET ASSETS -- 100.0% $281,184,462
=========== ============
Bonds & Notes Sold Short -- (0.4%)
Telephone-Integrated -- (0.4%)
Alltel Corp.
Debentures
7.00% due 03/15/16
(Proceeds $(1,148,125))........... $(1,375,000) $ (1,150,897)
============
- --------
* 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
right to demand registration of these securities. At September 30, 2007,
the aggregate value of these securities was $77,171,628 representing 27.5%
of net assets. Unless otherwise indicated these securities are not
considered to be illiquid.
+ Non-income producing security
(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 held, publicly traded companies. Lack of a secondary market and
resale restrictions may result in the inability of a Fund to sell a
security at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist. As of
September 30, 2007, the High Yield Bond Fund held the following restricted
securities:
57
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Market
Value % of
Acquisition Principal/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ----------- ------ ------
AMC
Entertainment
Holdings
10.69% due
06/15/12 Loan
Agreement....... 6/8/2007 600,000 $585,000
9/17/2007 16,576 16,576
--------- --------- ---------
616,576 601,576 $ 602,703 $1 0.21%
Critical Care
Systems
International,
Inc. Common
Stock........... 7/20/2006 69,700 606,739 365,925 5 0.13%
EXCO Resources,
Inc. 7.00%,
Series A-1
Preferred
Stock........... 3/29/2007 318 3,180,000 3,625,200 11,400 1.29%
ICO North
America, Inc.
7.50% due
08/15/09........ 8/11/2005 75,000 75,000 72,750 1 0.03%
iPCS, Inc.
Common
Stock........... 7/20/2004 285,947 4,432,178
7/28/2005 7,313 0
--------- --------- ---------
293,260 4,432,178 10,085,211 34 3.59%
Shreveport
Gaming
Holdings, Inc.
Common
Stock........... 7/21/2005 2,321 53,448
7/29/2005 11,829 272,336
--------- --------- ---------
14,150 325,784 325,776 23 0.12%
Southern Energy,
Inc. 7.90% due
07/15/09........ 1/10/2006 3,525,000 0 0 0 0.00%
Stallion Oilfield
Service 9.82%
due 07/30/12
Loan
Agreement....... 7/18/2007 1,000,000 980,000 975,000 0 0.35%
Travelport
Holdings, Ltd.
12.35% due
03/27/12 Loan
Agreement....... 3/30/2007 1,000,000 970,000
6/29/2007 32,390 32,389
9/28/2007 32,255 32,255
--------- --------- ---------
1,064,645 1,034,644 1,020,284 1 0.36%
Triax
Pharmaceuticals
LLC Common
Stock........... 8/31/2007 128,418 53,936 53,936 1 0.02%
Triax
Pharmaceuticals
LLC 15.54%,
Class C Loan
Agreement....... 8/30/2007 1,500,000 1,348,961 1,348,961 1 0.48%
Triax
Pharmaceuticals,
LLC Class C
Preferred
Stock........... 8/31/2007 39,176 78,353 78,353 2 0.03%
Wind Acquisition
Holdings
Finance S.A.
12.61% due
12/21/11 Loan
Agreement....... 2/27/2007 206,305 205,512
3/06/2007 206,305 205,020
Market
Value % of
Acquisition Principal/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ----------- ------ ------
3/15/2007 515,763 513,799
3/19/2007 309,459 307,530
6/21/2007 412,748 415,000
8/15/2007 16,438 16,438
7/18/2007 6,575 6,575
7/18/2007 6,575 6,575
7/18/2007 9,863 9,863
--------- --------- ---------
1,690,031 1,646,861 1,701,299 1 0.60
----------- ----
$20,255,398 7.21%
=========== ====
(4) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of September 30, 2007.
(5) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(6) "Step-up" security where the rate increases ("steps-up") at a
predetermined rate. Rate shown reflects the increased rate.
(7) See Note 5 for cost of investments on a tax basis.
(8) Security in default
(9) Company has filed Chapter 11 bankruptcy protection.
(10) Bond is in default and did not pay principal at maturity.
(11) Company has filed bankruptcy in country of issuance.
(12) Company has filed for Chapter 7 bankruptcy protection.
(13) The Fund invests in Senior Loans which generally pay interest at rates
which are periodically re-determined by reference to a base lending rate
plus a premium. These base lending rates are generally either the lending
rate offered by one or more major United States banks, or the certificate
of deposit rate. Senior Loans are generally considered to be restrictive
in that the Fund is ordinarily contractually obligated to receive approval
from the Agent Bank and/or borrower prior to the disposition of a Senior
Loan.
(14) Senior Loans in the Fund's Portfolio are generally subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment
conditions and because there may be significant economic incentives for a
borrower to prepay, prepayments may occur. As a result, the actual
remaining maturity may be substantially less than the stated maturities
shown.
(15) See Note 2 for details of Joint Repurchase Agreement.
(16) Consists of more than one class of securities traded together as a unit.
(17) A portion of the interest is paid in the form of additional bonds.
(18) Loan is subject to an unfunded loan commitment. See Note 10 for details.
ADR --American Depository Receipt
See Notes to Financials Statements
58
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- September 30, 2007 -- (unaudited)
Allocation by States*
Ohio......................... 26.8%
Massachusetts................ 13.3
New Jersey................... 11.0
New York..................... 8.9
Indiana...................... 6.9
Connecticut.................. 4.9
New Mexico................... 4.8
Michigan..................... 4.7
South Carolina............... 4.5
South Dakota................. 4.1
Alaska....................... 3.7
Georgia...................... 3.1
Alabama...................... 2.9
California................... 2.7
Tennessee.................... 1.3
Texas........................ 0.5
Nevada....................... 0.3
Registered Investment Company 0.1
-----
104.5%
=====
Credit Quality Allocation+#
AAA....... 84.8%
AA........ 6.0
A......... 7.0
Not Rated@ 2.2
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or, the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
59
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 94.2%
Alabama -- 2.9%
State of Alabama
Series A
5.00% due 08/01/17(1).......................... $1,500,000 $1,632,270
----------
California -- 2.7%
State of California
5.00% due 06/01/37............................. 1,500,000 1,527,525
----------
Connecticut -- 4.9%
State of Connecticut, Refunded,
Series B,
5.00% due 06/01/14(1).......................... 2,500,000 2,700,925
----------
Georgia -- 3.1%
City of Augusta GA
5.00% due 10/01/30(1).......................... 1,500,000 1,575,630
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/09(1).......................... 60,000 62,141
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/13(1).......................... 85,000 92,799
----------
1,730,570
----------
Indiana -- 6.9%
Indiana Transportation Finance Authority
Highway Revenue,
Series A,
5.25% due 06/01/26(1).......................... 3,500,000 3,826,165
----------
Massachusetts -- 13.3%
Massachusetts State Water Resources Authority,
Revenue Bonds,
Series A,
5.00% due 08/01/24(1).......................... 3,910,000 4,079,616
University Massachusetts Building Authority
Project Revenue,
Series 04-1,
5.25% due 11/01/27(1).......................... 3,000,000 3,294,960
----------
7,374,576
----------
Michigan -- 4.3%
Detroit Michigan Sewage Disposal Revenue
4.19% due 07/01/32(1)(3)....................... 2,445,000 2,383,410
----------
New Jersey -- 11.0%
Garden State New Jersey Preservation Trust Open
Space And Farmland Preservation,
Series A,
5.80% due 11/01/17(1).......................... 2,500,000 2,830,050
Tobacco Settlement Financing Corp.
6.13% due 06/01/42............................. 3,000,000 3,315,420
----------
6,145,470
----------
New Mexico -- 4.8%
New Mexico Finance Authority Transportation,
Series A,
5.25% due 06/15/21(1).......................... 2,500,000 2,665,275
----------
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------------
New York -- 8.9%
City of Niagara Falls New York
7.50% due 03/01/13(1).......................... $ 410,000 $ 485,973
City of Niagara Falls New York Prerefunded
7.50% due 03/01/13(1).......................... 35,000 41,712
City of Niagara Falls New York
7.50% due 03/01/14(1).......................... 510,000 617,422
City of Niagara Falls New York Prerefunded
7.50% due 03/01/14(1).......................... 45,000 54,937
New York State Thruway Authority,
Series G,
5.25% due 01/01/27(1).......................... 1,500,000 1,599,030
Sales Tax Asset Receivables Corp.,
Series A,
5.25% due 10/15/27(1).......................... 2,000,000 2,127,960
------------
4,927,034
------------
Ohio -- 23.6%
Cincinnati, Ohio City School District Classroom
Facilities, General Obligation,
5.00% due 12/01/24(1).......................... 3,000,000 3,226,650
Cuyahoga County, Ohio Revenue,
Series A,
5.75% due 01/01/24............................. 2,000,000 2,129,320
Franklin County, Ohio Hospital Revenue,
Series C,
5.25% due 05/15/23............................. 3,000,000 3,122,490
Olentangy Local School District Ohio,
Series A,
5.25% due 12/01/27(1).......................... 3,250,000 3,552,868
Woodridge, Ohio,
Woodmore Local School District,
6.80% due 12/01/14(1).......................... 1,000,000 1,110,580
------------
13,141,908
------------
South Carolina -- 3.7%
South Carolina State Public Service Authority
Series A
5.00% due 01/01/32(1).......................... 2,000,000 2,074,820
------------
South Dakota -- 4.1%
South Dakota State Health & Educational
Facilities Revenue, Refunding,
6.25% due 07/01/10(1).......................... 2,120,000 2,256,845
------------
Total Long-Term Investment Securities
(cost $50,350,739)............................. 52,386,793
------------
SHORT-TERM INVESTMENT SECURITIES --10.3%
Alaska -- 3.7%
Alaska Housing Finance Corp.
Series B
3.78% due 10/18/07(1)(2)....................... 2,050,000 2,050,000
------------
Michigan -- 0.4%
Detroit Michigan Water Supply System
Series B
3.55% due 10/18/07(1)(2)....................... 200,000 200,000
------------
60
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2007 -- (unaudited)
(continued)
Principal Market
Amount/ Value
Security Description Shares (Note 2)
-----------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES (continued)
Nevada -- 0.3%
Clark County School District
Series B
4.13% due 10/18/07(1)(2).............. $ 190,000 $ 190,000
-----------
Ohio -- 3.2%
Kent State University Revenues
3.55% due 10/17/07 (1)(2)............. 1,790,000 1,790,000
-----------
South Carolina -- 0.8%
Piedmont Municipal Power Agency, South
Carolina, Electric Revenue Sub.
Series B-1,
3.57% due 10/17/07 (1)(2)............. 150,000 150,000
Piedmont Municipal Power Agency, South
Carolina, Electric Revenue,
3.57% due 10/17/07 (1)(2)............. 300,000 300,000
-----------
450,000
-----------
Tennessee -- 1.3%
Jackson Energy Authority
3.57% due 10/18/07(1)(2).............. 705,000 705,000
-----------
Texas -- 0.5%
Harris Cnty Tx Hlth Facs Dev
Christus Health Ser A 1
3.54% due 10/17/07(1)(2).............. 300,000 300,000
-----------
Registered Investment Company -- 0.1%
SSGA Tax Free Money Market Fund........ 56,558 56,558
-----------
Total Short-Term Investment Securities
(cost $5,741,558)..................... 5,741,558
-----------
TOTAL INVESTMENTS --
(cost $56,092,297)(@)................. 104.5% 58,128,351
Liabilities in excess of other assets.... (4.5) (2,509,052)
---------- -----------
NET ASSETS -- 100.0% $55,619,299
========== ===========
- --------
@ 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 $47,977,039 or 86.3% of Net Assets.
(2)Variable rate security -- the rate reflected is as of September 30, 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 September 30, 2007.
See Notes to Financial Statements
61
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
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. 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
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
with particular reorganizations or mergers will convert automatically to
Class A shares approximately ten years after purchase and at such time will
be subject to the lower distribution fee applicable to Class A shares.
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.
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 of Trustee's ("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.
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.
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.
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
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 September 30, 2007, the following Funds held an undivided interest in
a joint repurchase agreement with State Street Bank & Trust Co.:
Percentage Principal
Fund Interest Amount
- ---- ---------- -----------
Strategic Bond. 2.96% $ 6,047,000
High Yield Bond 6.80 13,896,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
State Street Bank & Trust Co., dated September 28, 2007, bearing interest at
a rate of 3.70% per annum, with a principle amount of $204,370,000, a
repurchase price of $204,433,014 and a maturity date of October 1, 2007. The
repurchase agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ------------------ -------- -------- ----------- ------------
U.S. Treasury Bills 4.04% 03/13/08 $ 1,221,753 $ 1,246,188
U.S. Treasury Notes 3.75 05/15/08 99,202,846 101,186,903
U.S. Treasury Notes 4.63 02/29/08 18,813,661 19,195,500
U.S. Treasury Bonds 6.25 08/15/23 85,131,740 86,834,375
In addition, at September 30, 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 4.74% $29,653,000
GNMA...................... 6.76 42,227,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Securities LLC, dated September 28, 2007, bearing interest at a rate of
3.90% per annum, with a principal amount of $625,000,000 a repurchase price
of $625,203,125, and a maturity date of October 1, 2007. The repurchase
agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ------------------ -------- -------- ------------ ------------
U.S. Treasury Inflation Index Bonds 2.63% 07/15/17 $565,650,000 $576,963,081
U.S. Treasury Inflation Index Bonds 2.38 01/15/25 59,350,000 60,537,536
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders: Security transactions are recorded on a trade
date basis. Realized gains and losses on sales of investments are calculated
on the identified cost basis. Interest income, is accrued daily except when
collection is not expected. Dividend income is recorded on the ex-dividend
date except for certain dividends from foreign securities, which are
recorded as soon as the Fund is informed after the ex-dividend date. For
financial statement purposes, the Funds amortize all premiums and accrete
all discounts on fixed income securities. Funds which earn foreign income
and capital gains may be subject to foreign withholding taxes at various
rates. Under applicable foreign law, a withholding tax may be imposed on
interest, dividends, and capital gains at various rates.
Net investment income, other than class specific expenses, and realized and
unrealized gains and losses are allocated daily to each class of shares
based upon the relative net asset value of outstanding shares (or the value
of dividend-eligible shares, as appropriate) of each class of shares at the
beginning of the day (after adjusting for the current capital share activity
of the respective class).
Expenses common to all Funds, not directly related to individual Funds are
allocated among the Funds based on relative net assets or other appropriate
methods. In all other respects, expenses are charged to each Fund as
incurred on a specific identification basis. Interest earned on cash
balances held at the custodian are shown as custody credits on the Statement
of Operations.
Dividends from net investment income are accrued daily and paid monthly.
Capital gain distributions, if any, are paid annually. The Funds record
dividends and distributions to their shareholders on the ex-dividend date.
The Funds reserve the right to declare and pay dividends less frequently
than disclosed above, provided that the net realized capital gains and net
investment income, if any, are paid at least annually. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations, which may differ from accounting principles generally accepted
in the United States of America. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences
are permanent in nature, such amounts are reclassified within the capital
accounts at fiscal year end based on their federal tax-basis treatment;
temporary differences do not require reclassification. Net investment
income/loss, net realized gain/loss and net assets are not affected by these
reclassifications.
Each Fund intends to comply with the requirements of the Internal Revenue
Code, as amended, applicable to regulated investment companies and to
distribute all of their net income (taxable and tax exempt) to their
shareholders. Therefore, no federal tax provision is required. Each Fund is
considered a separate entity for tax purposes.
New Accounting Pronouncements: 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
Trust'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. Management has evaluated the implications of FIN 48 and
determined there is no impact to the financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards No, 157, "Fair Value
Measurements" ("FAS 157"). This standard clarifies the definition of fair
value for financial reporting, establishes a framework for measuring fair
value and requires additional disclosures about the use of fair value
measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. As of September 30, 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.
Reverse Repurchase Agreements During the period ended September 30, 2007,
U.S. Government Securities Fund and GNMA Fund entered into reverse
repurchase agreements. In a reverse repurchase agreement, the Fund sells a
security and agrees to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement.
The
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
Funds will enter into a reverse repurchase agreement only if the interest
income from the investment of the proceeds is expected to be greater than
the interest expense of the transaction and the proceeds are invested for a
period no longer than the term of the agreement. The Funds will use the
proceeds of a reverse repurchase agreement (which are considered to be
borrowings under the 1940 Act) to purchase other permitted securities either
maturing, or under an agreement to resell, at a date simultaneous with or
prior to the expiration of the reverse repurchase agreement. The agreements
are collateralized by cash or liquid securities in an amount at least equal
to 102% of its purchase obligations under these agreements (including
accrued interest). In the event that the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the buyer or
its trustee or receiver may receive an extension of time to determine
whether to enforce the Funds' repurchase obligation, and the Funds' use of
proceeds of the agreement may effectively be restricted pending such
decision.
At September 30, 2007, there were no reverse repurchase agreements
outstanding in the U.S. Government Securities Fund and 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 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 and the GNMA Fund
("Funds") 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
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
balance sheet risk to the extent of any future increases in market value of
the securities sold short. The ultimate liability for securities sold short
could exceed the liabilities recorded in the Statement of Assets and
Liabilities. The Fund bears the risk of potential inability of the broker to
meet their obligation to perform.
Mortgage-Backed Dollar Rolls: Certain Funds may enter into dollar roll
transactions using "to be announced" ("TBA") mortgage-backed securities
("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as
purchase/sale transactions. Any difference between the purchase and sale
price is recorded as a realized gain or loss on the date the transaction is
entered into. During the period ended September 30, 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
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
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
AIG SunAmerica has contractually agreed to waive fees and/or reimburse
expenses, to the extent necessary to cap the Funds' annual fund operating
expenses at the following percentages of each Fund's average net assets. The
contractual expense waivers and fee reimbursements will continue
indefinitely, subject to termination by the Trustees, including a majority
of the Trustees who are not interested persons of the Trust, AIG SunAmerica
or AIGGIC, within the meaning of the 1940 Act ("Disinterested Trustees").
Fund Percentage
- ---- ----------
U.S. Government Securities Class A 0.99%
U.S. Government Securities Class B 1.64
U.S. Government Securities 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
Further, 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 may be terminated at any time at
the option of AIG SunAmerica.
Fund Percentage
- ---- ----------
Tax Exempt Insured Fund Class C 1.95%
For the period ended September 30, 2007, pursuant to the contractual and
voluntary expense limitations in the above tables AIG SunAmerica has waived
and/or reimbursed expenses as follows:
Fund Amount
- ---- --------
U.S. Government Securities Class A $300,901
U.S. Government Securities Class B 36,986
U.S. Government Securities Class C 30,420
GNMA Class A...................... 220,839
GNMA Class B...................... 49,041
GNMA Class C...................... 31,853
High Yield Bond Class A........... 156,590
High Yield Bond Class B........... 39,590
High Yield Bond Class C........... 61,522
Tax Exempt Insured Class C........ 10,458
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 fee at the
annual rate of up to 0.25% of the aggregate average daily net assets of such
class of shares to compensate
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
the Distributor and securities firms for account maintenance activities.
Accordingly, for the period ended September 30, 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 period
ended September 30, 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 $ 22,797 $ 2,432 $ 16,364 $171 $11,703 $ 2,210
GNMA...................... 26,021 10,705 10,905 903 75,983 957
Strategic Bond............ 406,041 64,251 271,971 88 78,532 37,850
High Yield Bond........... 196,829 29,045 133,651 -- 56,308 14,241
Tax Exempt Insured........ 34,874 10,946 16,680 -- 2,348 125
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 period ended September 30, 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 September 30, 2007
- ---- -------- ------------------
US Government Securities Class A $171,658 $29,064
US Government Securities Class B 14,959 2,336
US Government Securities Class C 11,385 1,954
GNMA Class A.................... 342,725 57,432
GNMA Class B.................... 57,788 8,905
GNMA Class C.................... 31,308 4,864
Strategic Bond Class A.......... 533,363 89,903
Strategic Bond Class B.......... 60,111 9,544
Strategic Bond Class C.......... 261,495 44,720
High Yield Bond Class A......... 250,182 27,110
High Yield Bond Class B......... 52,037 7,648
High Yield Bond Class C......... 91,989 14,032
Tax Exempt Insured Class A...... 52,781 8,451
Tax Exempt Insured Class B...... 5,114 716
Tax Exempt Insured Class C...... 4,111 663
At September 30, 2007, affiliated funds of the SunAmerica Focused Series,
Inc. owned 4%, 14%, 38% and 59% of the outstanding Class A Shares of High
Yield Bond Fund, U.S. Government Securities Fund, GNMA Fund, and Strategic
Bond Fund, respectively.
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 period ended September 30, 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) $ 9,995,708 $ -- $489,638,103 $131,699,580 $14,130,374
Sales (excluding U.S. government securities).... 194,260 64,753 385,982,639 187,928,644 15,297,398
Purchases of U.S. government securities......... 307,434,349 636,932,141 131,513,857 -- --
Sales of U.S. government securities............. 288,797,243 659,763,382 96,559,511 -- --
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
Note 5. Federal Income Taxes
The following details the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of
distributable earnings differ from the amounts reflected in the Statement of
Assets and Liabilities by temporary book/tax differences primarily arising
from wash sales, Fund mergers, treatment of defaulted securities, deferred
directors compensation, amortization of premium/discount and derivative
transactions.
Distributable Earnings Tax Distributions
For the year ended March 31, 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......................................... $183,263,447 $440,745,646 $801,384,082 $272,552,624 $56,091,544
------------ ------------ ------------ ------------ -----------
Appreciation................................. 2,513,563 1,711,972 21,635,781 20,652,385 2,105,461
Depreciation................................. (2,256,917) (5,244,035) (16,670,825) (13,379,753) (68,654)
------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ 256,646 $ (3,532,063) $ 4,964,956 $ 7,272,632 $ 2,036,807
============ ============ ============ ============ ===========
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
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(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........ -- --
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each series were as follows:
U.S. Government Securities Fund
------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- --------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2007 year ended September 30, 2007 year ended
(unaudited) March 31, 2007 (unaudited) March 31, 2007
------------------------ ------------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold(1)(2)(3)(4) 4,262,682 $ 38,900,135 3,646,252 $ 33,613,249 121,731 $ 1,116,242 282,251 $ 2,588,038
Reinvested shares...... 274,434 2,514,386 526,641 4,833,737 20,087 184,040 49,844 457,468
Shares redeemed(1)(3).. (3,642,899) (33,442,926) (4,206,287) (38,554,728) (295,930) (2,707,446) (842,993) (7,715,872)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) 894,217 $ 7,971,595 (33,394) $ (107,742) (154,112) $(1,407,164) (510,898) $(4,670,366)
========== ============ ========== ============ ======== =========== ======== ===========
U.S. Government Securities Fund
--------------------------------------------------
Class C
--------------------------------------------------
For the
six months ended For the
September 30, 2007 year ended
(unaudited) March 31, 2007
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 377,728 $ 3,456,526 496,953 $ 4,562,238
Reinvested shares...... 14,135 129,372 27,739 254,466
Shares redeemed(2)(4).. (326,157) (2,984,725) (358,841) (3,275,190)
---------- ------------ ---------- ------------
Net increase (decrease) 65,706 $ 601,173 165,851 $ 1,541,514
========== ============ ========== ============
- --------
(1)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.
(2)For the year ended March 31, 2006, 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.
(3)For the six month period ended September 30, 2007, includes automatic
conversion of 65,598 shares of Class B shares in the amount of $470,925 to
65,631 shares of Class A shares in the amount of $470,925.
(4)For the six month period ended September 30, 2007, includes automatic
conversion of 7,231 shares of Class C shares in the amount of $66,035 to
7,226 shares of Class A shares in the amount of $66,035.
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
GNMA Fund
--------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------- -------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2007 year ended September 30, 2007 year ended
(unaudited) March 31, 2007 (unaudited) March 31, 2007
------------------------- -------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Shares sold(1)(3)(5)(7) 3,487,221 $ 37,933,146 5,070,934 $ 55,936,052 75,937 $ 836,989 202,312 $ 2,228,911
Reinvested shares...... 531,590 5,835,234 1,007,246 11,085,707 68,587 754,940 164,211 1,810,798
Shares redeemed(1)(5).. (2,977,109) (32,744,172) (5,652,486) (62,223,827) (835,284) (9,198,304) (2,138,731) (23,557,708)
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Net increase (decrease) 1,041,702 $ 11,024,208 425,694 $ 4,797,932 (690,760) $(7,606,375) (1,772,208) $(19,517,999)
=========== ============ =========== ============= ========== =========== ========== ============
GNMA Fund
-----------------------------------------------------
Class C
-----------------------------------------------------
For the
six months ended For the
September 30, 2007 year ended
(unaudited) March 31, 2007
------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ----------- -------------
Shares sold............ 134,724 $ 1,485,315 360,698 $ 3,979,813
Reinvested shares...... 36,598 403,257 88,961 982,412
Shares redeemed(3)(7).. (453,786) (5,002,251) (1,340,161) (14,773,461)
----------- ------------ ----------- -------------
Net increase (decrease) (282,464) $ (3,113,679) (890,502) $ (9,811,236)
=========== ============ =========== =============
Strategic Bond Fund
--------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------- -------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2007 year ended September 30, 2007 year ended
(unaudited) March 31, 2007 (unaudited) March 31, 2007
------------------------- -------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Shares sold(2)(4)(6)(8) 35,600,154 $127,981,605 102,882,348 $ 365,610,133 1,635,858 $ 5,881,497 5,637,811 $ 20,072,310
Reinvested shares...... 2,500,247 8,944,861 4,121,411 14,717,371 203,013 726,219 390,832 1,394,386
Shares redeemed(2)(6).. (21,831,529) (78,002,600) (29,208,072) (104,210,772) (2,275,445) (8,145,868) (3,782,125) (13,433,833)
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Net increase (decrease) 16,268,872 $ 58,923,866 77,795,687 $ 276,116,732 (436,574) $(1,538,152) 2,246,518 $ 8,032,863
=========== ============ =========== ============= ========== =========== ========== ============
Strategic Bond Fund
-----------------------------------------------------
Class C
-----------------------------------------------------
For the
six months ended For the
September 30, 2007 year ended
(unaudited) March 31, 2007
------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ----------- -------------
Shares sold............ 16,324,230 $ 58,916,898 38,346,566 $ 137,670,076
Reinvested shares...... 719,241 2,582,153 848,064 3,043,431
Shares redeemed(4)(8).. (6,792,809) (24,328,223) (6,961,530) (24,860,837)
----------- ------------ ----------- -------------
Net increase (decrease) 10,250,662 $ 37,170,828 32,233,100 $ 115,852,670
=========== ============ =========== =============
- --------
(1)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.
(2)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.
(3)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.
(4)For the six month period ended March 31, 2007, 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.
(5)For the six month period ended September 30, 2007, includes automatic
conversion of 148,441 shares of Class B shares in the amount of $1,512,142
to 148,829 shares of Class A shares in the amount of $1,512,142.
(6)For the six month period ended September 30, 2007, includes automatic
conversion of 512,800 shares of Class B shares in the amount of $1,682,712
to 512,800 shares of Class A shares in the amount of $1,682,712.
(7)For the year ended September 30, 2007, includes automatic conversion of 13
shares of Class C shares in the amount of $140 to 13 shares of Class A
shares in the amount of $140.
(8)Includes automatic conversion of $5,472 shares of Class C shares in the
amount of $19,864 to 5,502 shares of Class A shares in the
amount of $19,864.
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
High Yield Bond Fund
---------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ -------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2007 year ended September 30, 2007 year ended
(unaudited) March 31, 2007 (unaudited) March 31, 2007
-------------------------- -------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ----------- ---------- ------------
Shares
sold(1)(4).... 16,285,674 $ 76,452,472 38,615,170 $ 182,039,488 438,968 $ 2,068,470 2,939,699 $ 13,768,068
Reinvested
shares........ 1,062,417 4,963,074 1,677,533 7,908,201 135,426 633,466 333,914 1,571,933
Shares
redeemed(1)(4) (33,426,180) (153,377,470) (36,217,526) (168,508,994) (2,127,574) (9,930,901) (3,870,265) (18,168,508)
----------- ------------- ----------- ------------- ---------- ----------- ---------- ------------
Net
increase
(decrease).... (16,078,089) $ (71,961,924) 4,075,177 $ 21,438,695 (1,553,180) $(7,228,965) (596,652) $ (2,828,507)
=========== ============= =========== ============= ========== =========== ========== ============
High Yield Bond Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the
six months ended For the
September 30, 2007 year ended
(unaudited) March 31, 2007
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares
sold.......... 1,792,174 $ 8,471,361 8,874,645 $ 41,729,495
Reinvested
shares........ 241,977 1,135,621 542,788 2,569,206
Shares
redeemed...... (3,187,143) (14,858,440) (6,505,750) (30,858,084)
----------- ------------- ----------- -------------
Net
increase
(decrease).... (1,152,992) $ (5,251,458) 2,911,683 $ 13,440,617
=========== ============= =========== =============
Tax Exempt Insured Fund
---------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ -------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2007 year ended September 30, 2007 year ended
(unaudited) March 31, 2007 (unaudited) March 31, 2007
-------------------------- -------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ----------- ---------- ------------
Shares
sold(2)(3)(5). 177,724 $ 2,208,518 181,928 $ 2,305,652 25,662 $ 320,785 26,325 $ 335,141
Reinvested
shares........ 39,038 487,571 104,191 1,320,929 2,559 31,980 8,813 111,816
Shares
redeemed(2)(5) (346,641) (4,333,158) (846,556) (10,699,293) (113,253) (1,406,226) (163,672) (2,069,946)
----------- ------------- ----------- ------------- ---------- ----------- ---------- ------------
Net
increase
(decrease).... (129,879) $ (1,637,069) (560,437) $ (7,072,712) (85,032) $(1,053,461) (128,534) $ (1,622,989)
=========== ============= =========== ============= ========== =========== ========== ============
Tax Exempt Insured Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the
six months ended For the
September 30, 2007 year ended
(unaudited) March 31, 2007
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares
sold.......... 42,564 $ 529,306 51,686 $ 654,807
Reinvested
shares........ 2,493 31,165 6,918 87,817
Shares
redeemed(3)... (56,559) (706,488) (100,404) (1,273,870)
----------- ------------- ----------- -------------
Net
increase
(decrease).... (11,502) $ (146,017) (41,800) $ (531,246)
=========== ============= =========== =============
- --------
(1)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.
(2)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.
(3)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.
(4)For the six month period ended September 30, 2007, includes automatic
conversion of 507,206 shares of Class B shares in the amount of $2,318,169
to 507,983 shares of Class A shares in the amount of $2,318,169.
(5)For the six month period ended September 30, 2007, includes automatic
conversion of 63,333 shares of Class B shares in the amount of $785,110 to
63,334 shares of Class A shares in the amount of $785,110.
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(continued)
Note 7. Lines of Credit
The AIG SunAmerica Family of Mutual Funds has established $75 million
committed and $50 million uncommitted lines of credit with State Street Bank
and Trust Company, the Funds' custodian. Interest is currently payable at
the Federal Funds rate plus 50 basis points on the committed line and State
Street's discretionary bid rate on the uncommitted line of credit. There is
also a commitment fee of 10 basis points per annum on the daily unused
portion of the $75 million committed line of credit, which is included in
other expenses on the Statement of Operations. Borrowings under the line of
credit will commence when the Fund's cash shortfall exceeds $100,000. For
the period ended September 30, 2007, the following Funds had borrowings:
Weighted
Days Interest Average Average
Fund Outstanding Charges Debt Utilized Interest
- ---- ----------- -------- ------------- --------
Strategic Bond. 3 $ 1,828 $ 3,775,262 5.79%
High Yield Bond 27 44,361 10,182,634 5.76
At September 30, 2007, there were no borrowings outstanding.
Note 8. Interfund Lending Agreement
Pursuant to exemptive relief granted by the Securities and Exchange
Commission, the Portfolios are permitted to participate in an interfund
lending program among investment companies advised by AIG SunAmerica or an
affiliate. The interfund lending program allows the participating Funds to
borrow money from and loan money to each other for temporary or emergency
purposes. An interfund loan will be made under this facility only if the
participating Funds receive a more favorable interest rate than would
otherwise be available from a typical bank for a comparable transaction. For
the period ended September 30, 2007 none of the Funds participated in this
program.
Note 9. Trustees Retirement Plan
The Trustees of the SunAmerica Equity Funds 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 Funds") 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 of 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 10 birthdays after becoming a Participant and on
which he or she is both a Trustee and 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 statement 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%.
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2007 -- (unaudited)
(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 September 30, 2007
- ---- -----------------------------------------------
U.S. Government Securities $87,220 $1,229 $4,412
GNMA...................... 53,925 2,815 1,317
Strategic Bond............ 30,837 4,326 1,090
High Yield Bond........... 48,425 2,366 1,706
Tax Exempt Insured........ 27,399 438 1,250
Note 10. Unfunded Loan Commitments
On September 30, 2007, the Strategic Bond Fund and the High Yield Bond Fund
had the following unfunded loan commitment which could be extended at the
option of the borrower:
Maturity
Fund Name Type Date Amount
- ---- ---- ---- -------- --------
Strategic Bond. Triax Pharmaceuticals LLC Delayed Draw Term Loan 8/30/11 $146,400
High Yield Bond Triax Pharmaceuticals LLC Delayed Draw Term Loan 8/30/11 146,400
Note 11. Other Information
The matter related to AIG's settlement with the Securities and Exchange
Commission (the "Commission") and other governmental authorities that was
reported in recent shareholder reports has been resolved. With respect to
such matter, in September 2007, the Commission issued a permanent exemptive
order (the "Order") pursuant to Section 9(c) of the Investment Company Act
of 1940, as amended, to AIG and certain affiliated persons of AIG, including
AIG SunAmerica, AIGGIC and SACS. The Order permits each entity to continue
to provide advisory or distribution services to the Funds, as applicable.
There has been no adverse impact on the Funds or the Fund's shareholders.
76
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2007 -- (unaudited)
Approval of The Investment Advisory and Management Agreement and Subadvisory
Agreement
The Board, including, the "Disinterested Trustees", approved the continuation
of the Investment Advisory and Management Agreement between the Fund and AIG
SunAmerica (the "Advisory Agreement") for a one-year period ending August 31,
2008 at a meeting held on August 27, 2007. At this same meeting, the Board also
approved the continuation of the Subadvisory Agreement, as amended, between AIG
SunAmerica and AIGGIC (the "Subadvisory Agreement") with respect to the
SunAmerica Strategic Bond Fund ("Strategic Bond Fund), SunAmerica High Yield
Bond Fund ("High, Yield Bond Fund") and SunAmerica Tax Exempt Insured Fund
("Tax Exempt Fund") for a one-year period ending August 31, 2008.
In accordance with Section 15(c) of the 1940 Act, the Board requested and the
Adviser provided materials relating to the Board's consideration of whether to
approve the continuation of the Advisory Agreement and Subadvisory Agreement.
In determining whether to approve the continuation of the Advisory Agreement
and Subadvisory Agreement, the Board, including Disinterested Trustees,
considered the following information:
Nature, Extent and Quality of Services Provided by the Adviser and Subadviser
The Board, including the Disinterested Trustees, considered the nature, quality
and extent of services to be provided by AIG SunAmerica and AIGGIC. The Board
noted that the services include acting as investment manager and adviser to the
Funds, managing the daily business affairs of the Funds, and obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment policies. Additionally, the Board observed that AIG
SunAmerica would provide office space, accounting, legal, and compliance,
clerical and administrative services and has authorized any of its officers and
employees, if elected, to serve as officers or trustees of the Funds without
compensation. Finally, the Board noted that AIG SunAmerica is responsible for
monitoring and reviewing the activities of affiliated and unaffiliated
third-party service providers, including AIGGIC.
In connection with the services provided by AIG SunAmerica, the Board analyzed
the structure and duties of AIG SunAmerica's fund administration, accounting,
legal and compliance departments and concluded that they were adequate to meet
the needs of the Funds. The Board also reviewed the personnel responsible for
providing advisory services to the Funds and other key personnel of AIG
SunAmerica and concluded, based on their experience and interaction with AIG
SunAmerica, that: (i) AIG SunAmerica is able to retain quality portfolio
managers and other personnel; (ii) AIG SunAmerica exhibited a high level of
diligence and attention to detail in carrying out its advisory responsibilities
under the Advisory Agreement; (iii) AIG SunAmerica had been responsive to
requests of the Board; and (iv) AIG SunAmerica had kept the Board apprised of
developments relating to the Funds and the industry in general. The Board
concluded that the nature and extent of services provided under the Advisory
Agreement were reasonable and appropriate in relation to the management fee and
that the quality of services continues to be high.
The Board also considered AIG SunAmerica's reputation and long-standing
relationship with the Funds and considered the benefit to shareholders of
investing in funds that are part of a family of funds offering a variety of
types of mutual funds and shareholder services. The Board considered AIG
SunAmerica's experience in providing management and investment advisory and
administrative services to advisory clients and noted that as of July 31, 2007,
AIG SunAmerica managed, advised an/or administered approximately $56.2 billion
in assets. The Board also considered AIG SunAmerica's code of ethics, and that
it has developed internal procedures, adopted by the Board, for monitoring
compliance with the investment objectives, policies and restrictions of the
Funds as set forth in the Fund's prospectus. Additionally, the Board considered
AIG SunAmerica's compliance and regulatory history, and noted that with respect
to AIG's settlement with the Commission and other governmental authorities, AIG
SunAmerica applied for a permanent exemptive order granting relief from the
provisions of Section 9(a) of the 1940 Act./2/
With respect to the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt
Fund, for which AIG SunAmerica has delegated daily investment management
responsibilities to AIGGIC, the Board also considered the nature, quality and
extent of subadvisory
- --------
/1/ The Subadvisory Agreement was amended in order to comply with the
requirements of the exemptive rules relating to subadvisory affiliates
(Rules 17a-10, 10f-3, 12d3-1 and 17e-1 under the 1940 Act) so that the
Funds can rely on these provisions. These provisions permit certain
exemptions for transactions with subadvisory affiliates.
/2/ Please see Note 11 to the Financial Statements contained in this
Semi-annual Shareholder report for additional information regarding final
resolution of this matter.
77
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2007 -- (unaudited)
(continued)
services provided by AIGGIC. The Board observed that AIGGIC is responsible for
providing investment management services, including investment research, advice
and supervision, and determining which securities will be purchased or sold by
each of the Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Fund. The
Board reviewed AIGGIC's history, structure, size, visibility and resources,
which are needed to attract and retain highly qualified investment
professionals. The Board reviewed the personnel that are responsible for
providing subadvisory services to the Strategic Bond Fund, High Yield Bond Fund
and Tax Exempt Fund and concluded, based on their experience with AIGGIC, that:
(i) AIGGIC is able to retain high quality portfolio managers and other
investment personnel; (ii) AIGGIC exhibited a high level of diligence and
attention to detail in carrying out its responsibilities under the Subadvisory
Agreement; and (iii) AIGGIC had been responsive to requests of the Board and of
AIG SunAmerica. The Board considered that AIGGIC has developed internal
policies and procedures for monitoring compliance with the investment
objectives, policies and restrictions of the Strategic Bond Fund, High Yield
Bond Fund and Tax Exempt Fund as set forth in the Prospectus. The Board also
considered AIGGIC's code of ethics, compliance and regulatory history, and
noted that AIGGIC also applied for a permanent exemptive order from the
provisions of Section 9(a) of the 1940 Act with respect to AIG's settlement
with the SEC and other governmental authorities./1/ The Board concluded that
the nature and extent of services to be provided by AIGGIC under the
Subadvisory Agreement were reasonable and appropriate in relation to the
subadvisory fees and that the quality of services continues to be high.
Investment Performance
The Board, including the Disinterested Trustees, also considered the investment
performance of AIG SunAmerica and AIGGIC with respect to the Funds. In
connection with its review, the Board received and reviewed information
regarding the investment performance of the Funds as compared to each Fund's
peer universe ("Peer Universe") and/or peer group ("Peer Group") as determined
by Lipper, Inc. ("Lipper") and to an appropriate index or combination of
indices. The Board also noted that it regularly reviews the performance of the
Funds throughout the year.
In preparation for the August 27, 2007 meeting, the Board was provided with
reports independently prepared by Lipper. Based on the Lipper reports, the
Board reviewed each Fund's annualized total returns for the prior one-, two-,
three-, four-, five- and ten-year periods ended June 30, 2007. The Board also
received a report prepared by AIG SunAmerica that detailed the Funds'
performance for the three- and six-month periods ended June 30, 2007.
Specifically, the Board considered that while the SunAmerica GNMA Fund ("GNMA
Fund") had ranked in the fourth quintile of its Peer Universe for the prior
one- and two-year periods, it continued to have strong performance over longer
periods noting that it ranked in the first quintile for the prior five- and
ten-year periods. With respect to the SunAmerica U.S. Government Securities
Fund ("U.S. Government Fund") the Board considered that while it had ranked in
the third-quintile of its Peer Group for the past one-year period and the fifth
quintile for the prior two-year period it had generally provided good
performance over longer periods noting that it ranked in the second-quintile
for the prior three-, five- and ten-year periods.
In considering the performance of AIGGIC, the Board noted that the High Yield
Bond Fund and the Strategic Bond Fund had both ranked in the third quintile of
their respective Peer Groups for the prior one-year period and ranked in the
first-quintile in each of the three- and five-year periods. With respect to the
Tax Exempt Fund, the Board considered that the Fund ranked in the fourth
quintile of its Peer Group for the prior one-, three- and five-year periods.
While performance over the prior three-month period was in line with its
benchmark, the Board noted its continued concern with the Tax Exempt Fund's
underperformance.
The Board acknowledged AIG SunAmerica's commitment to enhance the Investments
Department, including the addition of a new fixed income analyst. The Board
noted, however, that the Tax Exempt Fund continued to underperform and that the
Board would continue to monitor performance of the Funds on an ongoing basis
and in connection with its consideration of the advisory agreements.
- --------
/1/ Please see Note 11 to the Financial Statements contained in this
Semi-Annual Shareholder report for additional information regarding final
resolution of this matter.
78
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2007 -- (unaudited)
(continued)
Consideration of the Management Fees and Subadvisory Fees and the Cost of the
Services and Profits to be Realized by the Adviser, Subadvisers and their
Affiliates from the Relationship with the Funds
The Board, including the Disinterested Trustees, received and reviewed
information regarding the fees to be paid by the Funds to AIG SunAmerica
pursuant to the Advisory Agreement and the fees paid by AIG SunAmerica to
AIGGIC pursuant to the Subadvisory Agreement. The Board examined this
information in order to determine the reasonableness of the fees in light of
the nature and quality of services to be provided and any potential additional
benefits to be received by AIG SunAmerica, AIGGIC or their affiliates in
connection with providing such services to the Funds.
To assist in analyzing the reasonableness of the management fee for each of the
Funds, the Board received reports independently prepared by Lipper. The reports
showed comparative fee information for each Fund's Peer Group and/or Peer
Universe. In considering the reasonableness of the management fee to be paid by
each Fund to AIG SunAmerica, the Board reviewed a number of expense
comparisons, including: (i) contractual and actual advisory fees; and
(ii) actual total operating expenses. In considering each Fund's total
operating expenses, the Board analyzed the level of fee waivers and expense
reimbursements and the net expense caps contractually agreed upon by AIG
SunAmerica with respect to each Fund except the Tax Exempt Fund. The Board
compared each Fund's net expense ratio to those of other funds within its Peer
Group and/or Peer Universe as a guide to help assess the reasonableness of the
Fund's management fee. The Board acknowledged that it was difficult to make
precise comparisons with other funds in the Peer Groups and Peer Universes
since the exact nature of services provided under the various fund agreements
is often not apparent. The Board noted, however, that the comparative fee
information provided by Lipper as a whole was useful in assessing whether AIG
SunAmerica was providing services at a cost that was competitive with other,
similar funds. The Board also considered advisory fees received by AIG
SunAmerica with respect to other mutual funds and accounts with similar
investment strategies to the Funds. The Board noted the advisory fee paid by
the Funds were reasonable as compared to the fees AIG SunAmerica was receiving
from other mutual funds and accounts for which it serves as adviser or
subadviser.
The Board also received and reviewed information regarding the fees paid by AIG
SunAmerica to AIGGIC pursuant to the Subadvisory Agreement. To assist in
analyzing the reasonableness of the subadvisory fees, the Board received a
report prepared independently by Lipper. The report showed comparative fee
information of each Fund's Peer Group that the Trustees used as a guide to help
assess the reasonableness of the subadvisory fees. The Trustees noted that Peer
Group information as a whole was useful in assessing whether AIGGIC was
providing services at a cost that was competitive with other similar funds. The
Trustees also considered that the subadvisory fees are paid by AIG SunAmerica
out of its management fee and not by the Funds, and that subadvisory fees may
vary widely within a Peer Group for various reasons, including market pricing
demands, existing relationships, experience and success, and individual client
needs. The Board further considered the amount of subadvisory fees paid out by
AIG SunAmerica and the amount of the management fees which it retained. The
Board also considered advisory fees received by AIGGIC with respect to other
mutual funds and accounts with similar investment strategies to the Strategic
Bond Fund, High Yield Bond Fund and Tax Exempt Fund. The Board noted that the
subadvisory fees paid by AIG SunAmerica to AIGGIC were reasonable as compared
to fees AIGGIC receives for other mutual funds and accounts for which it serves
as adviser or subadviser.
In addition, the Board received and reviewed financial statements relating to
AIG SunAmerica's financial condition and profitability with respect to the
services it provided the Funds and considered how profit margins could affect
AIG SunAmerica's ability to attract and retain high quality investment
professionals and other key personnel. The Board was also provided with a
profitability analysis that detailed the revenues earned and the expenses
incurred by AIG SunAmerica and its affiliates that provide services to the
Funds. In particular, the Board considered the profitability of AIG SunAmerica
under the Advisory Agreement, and considered the profitability of AIG
SunAmerica's affiliates under the Rule 12b-1 Plans, Service Agreements, and
Administrative and Shareholder Agreements. Additionally, the Board considered
whether AIG SunAmerica, AIGGIC and its affiliates received any indirect
benefits from the relationship with the Funds. Specifically, the Board observed
that AIG Federal Savings Bank, an affiliate of AIG SunAmerica and AIGGIC,
serves as custodian with respect to certain shareholder retirement accounts
that are administered by AIG SunAmerica and receives a fee payable by the
qualifying shareholders.
The Board also reviewed AIGGIC's financial statements and considered whether
AIGGIC had the financial resources necessary to attract and retain high quality
investment management personnel and to continue to provide the high quality of
services that it had provided to the Strategic Bond Fund, High Yield Bond Fund
and Tax Exempt Fund to date.
79
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2007 -- (unaudited)
(continued)
The Board concluded that AIG SunAmerica and AIGGIC had the financial resources
necessary to perform their obligations under the Advisory Agreement and
Subadvisory Agreement and to continue to provide the Funds with the high
quality services that they had provided in the past. The Board also concluded
that the management fee and subadvisory fees were reasonable in light of the
factors discussed above.
Economies of Scale
The Board, including the Disinterested Trustees, considered whether the
shareholders would benefit from economies of scale and whether there was
potential for future realization of economies with respect to the Funds. The
Board considered that the Funds in the AIG SunAmerica complex share common
resources and, as a result, an increase in the overall size of the complex
could permit each fund to incur lower expenses than they otherwise would
achieve as stand-alone entities. The Board also considered the anticipated
efficiencies in the processes of AIG SunAmerica as it adds labor and capital to
expand the scale of operations. The Board also took into account that each of
the Funds had management fee arrangements that included breakpoints that will
adjust the fee downward as the size of the Fund increases, thereby allowing the
shareholders to potentially participate in any economies of scale. The Board
further noted that, with the exception of the Tax Exempt Fund, AIG SunAmerica
has agreed to contractually cap the total annual operating expenses of each
class of the Funds, at certain levels. The Board observed that those expense
caps benefited shareholders by keeping total fees down even in the absence of
breakpoints or economies of scale. The Board concluded that the Funds'
management fee structure was reasonable and that it would continue to review
fees in connection with the renewal of the Advisory Agreement, including
whether the implementation of additional breakpoints would be appropriate in
the future due to an increase in asset size or otherwise.
The Board did not review specific information regarding whether there have been
economies of scale with respect to AIGGIC's management of the Funds because it
regards that information as less relevant at the subadviser level. Rather, the
Board considered information regarding economies of scale in the context of the
renewal of the Advisory Agreement.
Other Factors
In consideration of the Advisory Agreement and Subadvisory Agreement, the Board
also received information regarding AIG SunAmerica's and AIGGIC's brokerage and
soft dollar practices. The Board considered that AIG SunAmerica and AIGGIC are
responsible for decisions to buy and sell securities for the portfolios they
manage, selection of broker-dealers and negotiation of commission rates. The
Board also considered the benefits AIG SunAmerica and AIGGIC derive from their
soft dollar arrangements, including arrangements under which brokers provide
brokerage and/or research services to AIG SunAmerica and/or AIGGIC in return
for allocating brokerage. The Board further observed that when making purchases
of new issues with fixed underwriting fees, AIG SunAmerica or AIGGIC may
designate the use of broker-dealers who have agreed to provide certain
statistical, research and other information.
Conclusion
After a full and complete discussion, the Board approved the Advisory Agreement
and the Subadvisory Agreement with respect to the Strategic Bond Fund, High
Yield Bond Fund and Tax Exempt Fund, each for a one-year period ending
August 31, 2008. Based upon their evaluation of all these factors in their
totality, the Board, including the Disinterested Trustees, was satisfied that
the terms of the Advisory Agreement and Subadvisory Agreement were fair and
reasonable and in the best interests of the Funds and the Funds' shareholders.
In arriving at a decision to approve the Advisory Agreement and Subadvisory
Agreement, the Board did not identify any single factor or group of factors as
all-important or controlling, but considered all factors together. The
Disinterested Trustees were also assisted by the advice of independent counsel
in making this determination.
80
[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 and Chief Information, may be on the U.S. Securities
Executive Officer ob-tained without charge and Exchange Commis-sion
Donna M. Handel, upon request, by calling website at www.sec.gov.
Treasurer (800) 858-8850. The You can also review and
James Nichols, Vice in-formation is also obtain copies of the
President available from the EDGAR Forms N-Q at the U.S.
Timothy Pettee, Vice database on the U.S. Securities and Exchange
President Secu-rities and Exchange Commission Public
Michael Cheah, Vice Commission's website at Refer-ence Room in
President http://www.sec.gov. Washington DC
Cynthia Gibbons, Vice (information on the
President and Chief DELIVERY OF SHAREHOLDER operation of the Public
Compliance Officer DOCUMENTS Reference Room may be
Gregory N. Bressler, The Funds have adopted a ob-tained by calling
Chief Legal Officer policy that allows them 1-800-SEC-0330).
and Secretary to send only one copy of
Nori L. Gabert, Vice a Fund's prospectus, PROXY VOTING RECORD ON
President and proxy material, annual SUNAMERICA INCOME FUNDS
Assistant Secretary report and semi-annual Information regarding how
Kathleen Fuentes, report (the "shareholder the SunAmerica Income
Assistant Secretary documents") to Funds voted proxies
Gregory R. Kingston, shareholders with related to securities
Vice President and multiple accounts held in the SunAmerica
Assistant Treasurer residing at the same Income Funds during the
Chris Okeke, Assistant "household." This most recent twelve month
Treasurer practice is called period ended June 30 is
Matthew J. Hackethal, householding and reduces available, once filed
Anti-Money Laundering Fund expenses, which with the U.S. Securities
Compliance Officer benefits you and other and Exchange Commission,
shareholders. Unless the without charge, upon
Investment Adviser Funds receive request, by calling
instructions to the (800) 858-8850 or on the
AIG SunAmerica Asset Management Corp. con-trary, you will only U.S. Securities and
Harborside Financial receive one copy of the Exchange Commission's
Center shareholder documents. website at
3200 Plaza 5 The Funds will continue http://www.sec.gov.
Jersey City, NJ to household the
07311-4992 share-holder documents This report is submitted
indefinitely, until we solely for the general
Distributor are instructed otherwise. information of
AIG SunAmerica Capital If you do not wish to shareholders of the
Services, Inc. participate in Funds. Distribution of
Harborside Financial householding please this report to persons
Center contact Shareholder other than shareholders
3200 Plaza 5 Services at (800) of the Funds is
Jersey City, NJ 858-8850 ext. 6010 or authorized only in
07311-4992 send a written request con-nection with a
with your name, the name currently effective
Shareholder Servicing of your fund(s) and your pro-spectus, setting
Agent account number(s) to AIG forth details of the
AIG SunAmerica Fund SunAmerica Mutual Funds Funds, which must precede
Services, Inc. c/o BFDS, P.O. Box or accom-pany this report.
Harborside Financial 219186, Kansas City MO,
Center 64121-9186. We will The accompanying report
3200 Plaza 5 resume individual has not been audited by
Jersey City, NJ mailings for your account independent accountants
07311-4992 within thirty (30) days and accordingly no
of receipt of your opinion has been
Custodian and Transfer request. expressed thereon.
Agent
State Street Bank and
Trust Company
P.O. Box 419572
Kansas City, MO
64141-6572
81
Distributed by:
AIG SunAmerica Capital Services, Inc.
Investors should carefully consider the investment objectives, risks, charges
and expenses of any mutual fund before investing. This and other important
information is contained in the prospectus, which can be obtained from your
financial adviser or from the AIG SunAmerica Sales Desk at 800-858-8850, ext.
6003. Read the prospectus carefully before investing.
www.sunamericafunds.com
INSAN - 9/07
[LOGO]
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders
may recommend nominees to the Registrant's Board of Trustees that were
implemented after the registrant last provided disclosure in response
to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a-
101), or this Item 10.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures (as defined under Rule 30a-3(c)
under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))). Based
on that evaluation, the registrant's management, including the
President and Treasurer, concluded that the registrant's disclosure
controls and procedures are effective.
(b) There was no change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act
of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant's
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) Not applicable.
(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) 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: December 7, 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: December 7, 2007
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: December 7, 2007