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)
John T. Genoy
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) 324-6414
-----------------------------
Date of fiscal year end: March 31
--------------------------
Date of reporting period: March 31, 2008
-------------------------
Item 1. Reports to Stockholders
[PHOTO]
ANNUAL REPORT 2008
SUNAMERICA
Income Funds
[LOGO]
www.sunamericafunds.com
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March 31, 2008 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............................... 63
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..... 78
TRUSTEE AND OFFICER INFORMATION............................. 79
SHAREHOLDER TAX INFORMATION................................. 83
COMPARISONS: PORTFOLIOS vs. INDICES......................... 85
Shareholder Letter
Dear Shareholder:
Enclosed is the annual report for the SunAmerica Income Funds for the 12-month
period ended March 31, 2008. This annual period will certainly go down in
history as one of the most interesting and challenging times for the fixed
income markets.
While the annual period started relatively calmly, the markets were roiled over
the summer as the deterioration in the housing market created concern in the
subprime mortgage markets. This concern spread throughout the credit markets
and a credit crunch began to take hold. Liquidity became scarce, and there was
a flight to quality as a general de-leveraging began to take place throughout
the U.S. economy. The period also has been marked by a declining U.S. dollar
and increasing food and oil prices, which created the specter of renewed
inflation over the markets.
The Federal Reserve acted in an aggressive fashion, cutting interest rates six
times during the fiscal period, as the Federal Funds rate ended the fiscal
period at 2.25%, down 300 basis points year-over-year. The Federal Reserve also
cut the discount rate and activated other innovative mechanisms to enhance
confidence and improve liquidity. In addition, the Federal government responded
with a variety of proposals to assist homeowners and to update and improve the
regulation of the financial system.
The question of whether the U.S. economy is in a recession, or is heading
towards one, remains unanswered. While the credit markets appear to be
improving, no one knows what future credit events may lie ahead. In such
uncertain times, it is important to talk with your financial adviser and review
your asset allocation, investment goals and risk profile.
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. Be sure 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
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 -- March 31, 2008 -- (unaudited)
Disclosure of Portfolio Expenses in Shareholder Reports
As a shareholder of a fund (each, a "Fund" and collectively the "Funds") in the
SunAmerica Income Funds (the "Trust"), you may incur two types of costs: (1)
transaction costs, including sales charges (loads) on purchase payments,
contingent deferred sales charges and (2) ongoing costs, including management
fees; distribution and service fees; and other Fund expenses. The example set
forth below is intended to help you understand your ongoing costs (in dollars)
of investing in the Funds and to compare these costs with the ongoing costs of
investing in other mutual funds. The Example is based on an investment of
$1,000 invested at October 1, 2007 and held until March 31, 2008.
Actual Expenses
The "Actual" section of the table provides information about actual account
values and actual expenses. You may use the information in these columns,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the column under the heading entitled "Expenses Paid During the Six
Months Ended March 31, 2008" to estimate the expenses you paid on your account
during this period. The "Expenses Paid During the Six Months Ended March 31,
2008" column does not include small account fees that may be charged if your
account balance is below $500 ($250 for retirement plan accounts). In addition,
the "Expenses Paid During the Six Months Ended March 31, 2008" column does not
include administrative fees that may apply to qualified retirement plan
accounts. See the Trust's prospectus and/or your retirement plan document for a
full description of these fees. Had these fees been included, the "Expenses
Paid During the Six Months Ended March 31, 2008" column would have been higher
and the "Ending Account Value" would have been lower.
Hypothetical Example for Comparison Purposes
The "Hypothetical" section of the table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in these Funds and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds. The "Expenses Paid During the Six Months
Ended March 31, 2008" column does not include small account fees that may be
charged if your account balance is below $500 ($250 for retirement plan
accounts). In addition, the "Expenses Paid During the Six Months Ended March
31, 2008" column does not include administrative fees that may apply to
qualified retirement plan accounts. See the Fund's prospectus and/or your
retirement plan document for a full description of these fees. Had these fees
been included, the "Expenses Paid During the Six Months Ended March 31, 2008"
column would have been higher and the "Ending Account Value" would have been
lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, including sales
charges on purchase payments, contingent deferred sales charges; small account
fees and administrative fees, if applicable to your account. Please refer to
your prospectus and/or qualified retirement plan document for more information.
Therefore, the "Hypothetical" example is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transaction costs and other fees were
included, your costs would have been higher.
3
SunAmerica Income Funds
EXPENSE EXAMPLE -- March 31, 2008 -- (unaudited) (continued)
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending Account
Ending Account Expenses Paid Value Using Expenses Paid
Value Using During the a Hypothetical During the Expense
Beginning Actual Six Months Beginning 5% Assumed Six Months Ratio
Account Value Return at Ended Account Value Return at Ended as of
at October 1, March 31, March 31, at October 1, March 31, March 31, March 31,
Fund 2007 2008 2008* 2007 2008 2008* 2008*
- ---- ------------- -------------- ------------- ------------- -------------- ------------- ---------
U.S. Government Securities
Class A#................ $1,000.00 $1,068.80 $ 5.12 $1,000.00 $1,020.05 $ 5.00 0.99%
Class B#................ $1,000.00 $1,065.35 $ 8.47 $1,000.00 $1,016.80 $ 8.27 1.64%
Class C#................ $1,000.00 $1,065.41 $ 8.47 $1,000.00 $1,016.80 $ 8.27 1.64%
GNMA
Class A#................ $1,000.00 $1,065.86 $ 5.11 $1,000.00 $1,020.05 $ 5.00 0.99%
Class B#................ $1,000.00 $1,062.32 $ 8.46 $1,000.00 $1,016.80 $ 8.27 1.64%
Class C#................ $1,000.00 $1,062.28 $ 8.46 $1,000.00 $1,016.80 $ 8.27 1.64%
Strategic Bond
Class A................. $1,000.00 $1,009.37 $ 6.43 $1,000.00 $1,018.60 $ 6.46 1.28%
Class B................. $1,000.00 $1,006.05 $ 9.68 $1,000.00 $1,015.35 $ 9.72 1.93%
Class C................. $1,000.00 $1,003.38 $ 9.72 $1,000.00 $1,015.30 $ 9.77 1.94%
High Yield Bond
Class A#................ $1,000.00 $ 940.30 $ 6.60 $1,000.00 $1,018.20 $ 6.86 1.36%
Class B#................ $1,000.00 $ 939.49 $ 9.75 $1,000.00 $1,014.95 $10.13 2.01%
Class C#................ $1,000.00 $ 937.67 $ 9.74 $1,000.00 $1,014.95 $10.13 2.01%
Tax Exempt Insured
Class A................. $1,000.00 $1,003.43 $ 6.51 $1,000.00 $1,018.50 $ 6.56 1.30%
Class B................. $1,000.00 $ 999.95 $10.45 $1,000.00 $1,014.55 $10.53 2.09%
Class C#................ $1,000.00 $1,000.36 $ 9.75 $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 March 31,
2008" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2008
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
ASSETS:
Long-term investment securities, at market value* (unaffiliated)..................... $223,166,187 $414,723,011 $745,030,719
Short term investment securities, at market value* (unaffiliated).................... 8,000,000 35,000,000 27,163,000
Repurchase agreements (cost approximates market value)............................... 1,500,000 1,818,000 31,121,000
------------ ------------ ------------
Total investments.................................................................. 232,666,187 451,541,011 803,314,719
------------ ------------ ------------
Cash................................................................................. 554 977 679,051
Foreign cash*........................................................................ -- -- 3,660,741
Receivable for:
Shares of beneficial interest sold................................................. 583,995 595,395 3,029,226
Dividends and interest............................................................. 1,635,255 1,984,967 12,712,519
Investments sold................................................................... -- 30,275,521 10,253,818
Prepaid Expenses and other assets.................................................... 504 1,125 2,593
Due from investment adviser for expense reimbursements/fee waivers................... 47,571 62,303 --
------------ ------------ ------------
Total assets......................................................................... 234,934,066 484,461,299 833,652,667
------------ ------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed............................................. 572,978 472,972 1,567,023
Investments purchased.............................................................. 10,364,583 70,969,792 27,482,342
Investment advisory and management fees............................................ 122,255 159,365 420,994
Distribution and service maintenance fees.......................................... 83,748 166,212 410,904
Transfer agent fees and expenses................................................... 54,949 94,941 164,254
Trustees' fees and expenses........................................................ 85,392 57,817 39,231
Other accrued expenses............................................................. 118,908 149,157 280,687
Dividends payable.................................................................. 123,724 200,437 1,035,225
Due to custodian..................................................................... -- -- --
Commitments (Note 11)................................................................ -- -- --
------------ ------------ ------------
Total liabilities.................................................................... 11,526,537 72,270,693 31,400,660
------------ ------------ ------------
Net assets........................................................................... $223,407,529 $412,190,606 $802,252,007
============ ============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value....................................... $ 230,862 $ 357,353 $ 2,289,865
Paid-in capital...................................................................... 220,184,556 402,314,049 837,693,680
------------ ------------ ------------
220,415,418 402,671,402 839,983,545
Accumulated undistributed net investment income (loss)............................... 24,694 201,906 6,775,150
Accumulated undistributed net realized gain (loss) on investments, futures contracts,
securities sold short and foreign exchange transactions............................. (4,327,579) 1,282,873 (28,535,306)
Unrealized appreciation (depreciation) on investment................................. 7,294,996 8,034,425 (16,248,810)
Unrealized appreciation (depreciation) on foreign exchange transactions.............. -- -- 277,428
------------ ------------ ------------
Net assets........................................................................... $223,407,529 $412,190,606 $802,252,007
============ ============ ============
*Cost
Long-term investment securities (unaffiliated)..................................... $215,871,191 $406,688,586 $761,279,529
============ ============ ============
Short-term securities (unaffiliated)............................................... $ 8,000,000 $ 35,000,000 $ 27,163,000
============ ============ ============
Foreign cash....................................................................... $ -- $ -- $ 3,562,813
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
------------ -----------
ASSETS:
Long-term investment securities, at market value* (unaffiliated)..................... $196,144,065 $52,121,490
Short term investment securities, at market value* (unaffiliated).................... -- 1,611,534
Repurchase agreements (cost approximates market value)............................... 5,281,000 --
------------ -----------
Total investments.................................................................. 201,425,065 53,733,024
------------ -----------
Cash................................................................................. -- --
Foreign cash*........................................................................ -- --
Receivable for:
Shares of beneficial interest sold................................................. 2,100,412 55,964
Dividends and interest............................................................. 4,965,991 797,294
Investments sold................................................................... 1,302,145 --
Prepaid Expenses and other assets.................................................... 73,259 166
Due from investment adviser for expense reimbursements/fee waivers................... 14,521 --
------------ -----------
Total assets......................................................................... 209,881,393 54,586,448
------------ -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed............................................. 461,046 37,630
Investments purchased.............................................................. 3,132,084 --
Investment advisory and management fees............................................ 129,541 22,830
Distribution and service maintenance fees.......................................... 113,948 19,971
Transfer agent fees and expenses................................................... 53,462 14,472
Trustees' fees and expenses........................................................ 50,328 26,913
Other accrued expenses............................................................. 164,248 83,314
Dividends payable.................................................................. 397,933 45,908
Due to custodian..................................................................... 124,082 --
Commitments (Note 11)................................................................ -- --
------------ -----------
Total liabilities.................................................................... 4,626,672 251,038
------------ -----------
Net assets........................................................................... $205,254,721 $54,335,410
============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value....................................... $ 492,576 $ 44,368
Paid-in capital...................................................................... 317,289,296 53,260,546
------------ -----------
317,781,872 53,304,914
Accumulated undistributed net investment income (loss)............................... (1,882,760) (54,332)
Accumulated undistributed net realized gain (loss) on investments, futures contracts,
securities sold short and foreign exchange transactions............................. (91,048,274) (110,829)
Unrealized appreciation (depreciation) on investment................................. (19,596,117) 1,195,657
Unrealized appreciation (depreciation) on foreign exchange transactions.............. -- --
------------ -----------
Net assets........................................................................... $205,254,721 $54,335,410
============ ===========
*Cost
Long-term investment securities (unaffiliated)..................................... $215,740,182 $50,925,833
============ ===========
Short-term securities (unaffiliated)............................................... $ -- $ 1,611,534
============ ===========
Foreign cash....................................................................... $ -- $ --
============ ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- March 31, 2008 -- (continued)
U.S. Government Strategic High Yield
Securities GNMA Bond Bond
Fund Fund Fund Fund
--------------- ------------ ------------ ------------
Class A (unlimited shares authorized):
Net assets.............................................................. $191,056,902 $330,202,296 $483,819,822 $109,219,362
Shares of beneficial interest issued and outstanding.................... 19,742,472 28,644,517 138,270,204 26,260,314
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)...................................... $ 9.68 $ 11.53 $ 3.50 $ 4.16
Maximum sales charge (4.75% of offering price).......................... 0.48 0.57 0.17 0.21
------------ ------------ ------------ ------------
Maximum offering price to public........................................ $ 10.16 $ 12.10 $ 3.67 $ 4.37
============ ============ ============ ============
Class B (unlimited shares authorized):
Net assets.............................................................. $ 15,353,723 $ 46,389,280 $ 52,528,008 $ 34,911,277
Shares of beneficial interest issued and outstanding.................... 1,585,903 4,013,955 15,016,144 8,381,254
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)...................................... $ 9.68 $ 11.56 $ 3.50 $ 4.17
============ ============ ============ ============
Class C (unlimited shares authorized):
Net assets.............................................................. $ 16,996,904 $ 35,599,030 $265,904,177 $ 61,124,082
Shares of beneficial interest issued and outstanding.................... 1,757,802 3,076,796 75,700,195 14,616,003
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)...................................... $ 9.67 $ 11.57 $ 3.51 $ 4.18
============ ============ ============ ============
Tax Exempt
Insured
Fund
-----------
Class A (unlimited shares authorized):
Net assets.............................................................. $46,843,293
Shares of beneficial interest issued and outstanding.................... 3,825,543
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)...................................... $ 12.24
Maximum sales charge (4.75% of offering price).......................... 0.61
-----------
Maximum offering price to public........................................ $ 12.85
===========
Class B (unlimited shares authorized):
Net assets.............................................................. $ 3,350,631
Shares of beneficial interest issued and outstanding.................... 273,245
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)...................................... $ 12.26
===========
Class C (unlimited shares authorized):
Net assets.............................................................. $ 4,141,486
Shares of beneficial interest issued and outstanding.................... 337,992
Net asset value and redemption price per share (excluding any applicable
contingent deferred sales charge)...................................... $ 12.25
===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the year ended March 31, 2008
U.S. Government
Securities GNMA
Fund Fund
--------------- -----------
INCOME:
Dividends (unaffiliated)................................................................. $ -- $ --
Interest (unaffiliated).................................................................. 9,321,588 20,430,660
----------- -----------
Total investment income*............................................................... 9,321,588 20,430,660
----------- -----------
EXPENSES:
Investment advisory and management fees.................................................. 1,256,875 1,826,963
Distribution and service maintenance fees:
Class A................................................................................ 587,514 1,114,860
Class B................................................................................ 138,450 500,830
Class C................................................................................ 119,046 290,439
Transfer agent fees:
Class A................................................................................ 409,785 729,103
Class B................................................................................ 36,716 124,163
Class C................................................................................ 30,214 71,785
Registration fees:
Class A................................................................................ 24,227 25,014
Class B................................................................................ 11,653 14,955
Class C................................................................................ 13,372 15,569
Custodian and accounting fees............................................................ 92,429 205,622
Reports to shareholders.................................................................. 59,568 85,145
Audit and tax fees....................................................................... 40,091 39,742
Legal fees............................................................................... 13,975 7,345
Trustees' fees and expenses.............................................................. 15,133 31,379
Interest expense......................................................................... -- --
Interest expense on securities sold short................................................ -- --
Other expenses........................................................................... 14,555 19,818
----------- -----------
Total expenses before fee waivers, reimbursements, and custody credits................. 2,863,603 5,102,732
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (778,516) (651,523)
Custody credits earned on cash balances................................................ (966) (67)
----------- -----------
Net expenses........................................................................... 2,084,121 4,451,142
----------- -----------
Net investment income (loss).............................................................. 7,237,467 15,979,518
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 1,008,787 6,905,478
Net realized foreign exchange gain (loss) on other assets and liabilities................. -- --
Net realized gains (loss) on securities sold short........................................ -- --
----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ 1,008,787 6,905,478
----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ 8,877,258 10,107,965
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... -- --
----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... 8,877,258 10,107,965
----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 9,886,045 17,013,443
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $17,123,512 $32,992,961
=========== ===========
- --------
* Net of foreign withholding taxes on interest and dividends of.......................... $ -- $ --
----------- -----------
Strategic High Yield
Bond Bond
Fund Fund
------------ ------------
INCOME:
Dividends (unaffiliated)................................................................. $ 386,287 $ 519,370
Interest (unaffiliated).................................................................. 51,882,486 25,985,637
------------ ------------
Total investment income*............................................................... 52,268,773 26,505,007
------------ ------------
EXPENSES:
Investment advisory and management fees.................................................. 4,936,399 2,223,971
Distribution and service maintenance fees:
Class A................................................................................ 1,720,656 630,960
Class B................................................................................ 536,315 428,998
Class C................................................................................ 2,483,190 773,776
Transfer agent fees:
Class A................................................................................ 1,117,778 428,013
Class B................................................................................ 128,434 103,801
Class C................................................................................ 562,793 180,617
Registration fees:
Class A................................................................................ 86,055 42,937
Class B................................................................................ 16,729 17,511
Class C................................................................................ 59,049 22,001
Custodian and accounting fees............................................................ 214,699 115,110
Reports to shareholders.................................................................. 163,468 96,743
Audit and tax fees....................................................................... 44,401 44,401
Legal fees............................................................................... 29,485 20,215
Trustees' fees and expenses.............................................................. 61,545 25,746
Interest expense......................................................................... 2,121 62,252
Interest expense on securities sold short................................................ -- 168,768
Other expenses........................................................................... 26,146 18,517
------------ ------------
Total expenses before fee waivers, reimbursements, and custody credits................. 12,189,263 5,404,337
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... -- (525,466)
Custody credits earned on cash balances................................................ (123,211) (9,572)
------------ ------------
Net expenses........................................................................... 12,066,052 4,869,299
------------ ------------
Net investment income (loss).............................................................. 40,202,721 21,635,708
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 6,681,808 (3,861,306)
Net realized foreign exchange gain (loss) on other assets and liabilities................. 344,687 7,339
Net realized gains (loss) on securities sold short........................................ -- 53,931
------------ ------------
Net realized gain (loss) on investments and foreign currencies............................ 7,026,495 (3,800,036)
------------ ------------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (31,264,862) (36,531,660)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... 197,320 (4,510)
------------ ------------
Net unrealized gain (loss) on investments and foreign currencies.......................... (31,067,542) (36,536,170)
------------ ------------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (24,041,047) (40,336,206)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 16,161,674 $(18,700,498)
============ ============
- --------
* Net of foreign withholding taxes on interest and dividends of.......................... $ 131,642 $ --
------------ ------------
Tax Exempt
Insured
Fund
-----------
INCOME:
Dividends (unaffiliated)................................................................. $ --
Interest (unaffiliated).................................................................. 2,605,432
-----------
Total investment income*............................................................... 2,605,432
-----------
EXPENSES:
Investment advisory and management fees.................................................. 279,493
Distribution and service maintenance fees:
Class A................................................................................ 167,414
Class B................................................................................ 42,064
Class C................................................................................ 38,596
Transfer agent fees:
Class A................................................................................ 117,715
Class B................................................................................ 11,920
Class C................................................................................ 10,960
Registration fees:
Class A................................................................................ 15,094
Class B................................................................................ 10,146
Class C................................................................................ 11,039
Custodian and accounting fees............................................................ 29,937
Reports to shareholders.................................................................. 10,358
Audit and tax fees....................................................................... 39,185
Legal fees............................................................................... 8,716
Trustees' fees and expenses.............................................................. 4,651
Interest expense......................................................................... --
Interest expense on securities sold short................................................ --
Other expenses........................................................................... 13,172
-----------
Total expenses before fee waivers, reimbursements, and custody credits................. 810,460
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (11,901)
Custody credits earned on cash balances................................................ (967)
-----------
Net expenses........................................................................... 797,592
-----------
Net investment income (loss).............................................................. 1,807,840
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... (110,884)
Net realized foreign exchange gain (loss) on other assets and liabilities................. --
Net realized gains (loss) on securities sold short........................................ --
-----------
Net realized gain (loss) on investments and foreign currencies............................ (110,884)
-----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (1,245,963)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... --
-----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (1,245,963)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (1,356,847)
-----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 450,993
===========
- --------
* Net of foreign withholding taxes on interest and dividends of.......................... $ --
-----------
See Notes to Financial Statements
7
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS
U.S. Government
Securities Fund
--------------------------
For the year For the year
ended ended
March 31, March 31,
2008 2007
------------ ------------
Operations:
Net investment income (loss)............................... $ 7,237,467 $ 6,828,045
Net realized gain (loss) on investments and foreign
currencies............................................... 1,008,787 (68,459)
Net unrealized gain (loss) on investments and foreign
currencies............................................... 8,877,258 1,657,175
------------ ------------
Increase (decrease) in net assets resulting from operations. 17,123,512 8,416,761
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)............................ (6,695,513) (6,264,372)
Net investment income (Class B)............................ (464,501) (608,171)
Net investment income (Class C)............................ (392,650) (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......................... (7,552,664) (7,185,444)
------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)........................ 37,000,481 (3,236,594)
------------ ------------
Total increase (decrease) in net assets..................... 46,571,329 (2,005,277)
NET ASSETS:
Beginning of period......................................... 176,836,200 178,841,477
------------ ------------
End of period+.............................................. $223,407,529 $176,836,200
============ ============
- --------
+Includes accumulated undistributed net investment income
(loss)..................................................... $ 24,694 $ 56,621
============ ============
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund Strategic Bond Fund
-------------------------- --------------------------
For the year For the year For the year For the year
ended ended ended ended
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Operations:
Net investment income (loss)............................... $ 15,979,518 $ 16,306,209 $ 40,202,721 $ 25,776,555
Net realized gain (loss) on investments and foreign
currencies............................................... 6,905,478 (171,039) 7,026,495 3,735,857
Net unrealized gain (loss) on investments and foreign
currencies............................................... 10,107,965 4,010,650 (31,067,542) 13,298,249
------------ ------------ ------------ ------------
Increase (decrease) in net assets resulting from operations. 32,992,961 20,145,820 16,161,674 42,810,661
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (Class A)............................ (13,925,153) (13,350,095) (29,257,025) (18,128,377)
Net investment income (Class B)............................ (1,870,179) (2,448,583) (2,805,432) (2,175,396)
Net investment income (Class C)............................ (1,078,120) (1,311,888) (13,185,521) (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......................... (16,873,452) (17,110,566) (45,247,978) (26,453,510)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)........................ (2,267,507) (24,531,303) 103,961,925 400,002,265
------------ ------------ ------------ ------------
Total increase (decrease) in net assets..................... 13,852,002 (21,496,049) 74,875,621 416,359,416
NET ASSETS:
Beginning of period......................................... 398,338,604 419,834,653 727,376,386 311,016,970
------------ ------------ ------------ ------------
End of period+.............................................. $412,190,606 $398,338,604 $802,252,007 $727,376,386
============ ============ ============ ============
- --------
+Includes accumulated undistributed net investment income
(loss)..................................................... $ 201,906 $ 327,903 $ 6,775,150 $ (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 year For the year For the year For the year
ended ended ended ended
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
------------- ------------ ------------ ------------
Operations:
Net investment income (loss).......................... $ 21,635,708 $ 20,209,713 $ 1,807,840 $ 1,996,138
Net realized gain (loss) on investments and foreign
currencies.......................................... (3,800,036) 6,213,051 (110,884) 481,567
Net unrealized gain (loss) on investments and foreign
currencies.......................................... (36,536,170) 6,288,956 (1,245,963) 281,498
------------- ------------ ----------- -----------
Increase (decrease) in net assets resulting from
operations............................................ (18,700,498) 32,711,720 450,993 2,759,203
------------- ------------ ----------- -----------
Distributions to shareholders from:
Net investment income (Class A)....................... (12,979,716) (13,055,050) (1,606,491) (1,775,224)
Net investment income (Class B)....................... (2,908,997) (3,241,816) (99,116) (149,453)
Net investment income (Class C)....................... (5,292,760) (5,181,540) (105,563) (115,967)
Net realized gain on securities (Class A)............. -- -- (396,574) (365,409)
Net realized gain on securities (Class B)............. -- -- (32,437) (39,551)
Net realized gain on securities (Class C)............. -- -- (34,730) (31,739)
------------- ------------ ----------- -----------
Total distributions to shareholders.................... (21,181,473) (21,478,406) (2,274,911) (2,477,343)
------------- ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)................... (134,674,504) 32,050,805 (2,960,840) (9,226,947)
------------- ------------ ----------- -----------
Total increase (decrease) in net assets................ (174,556,475) 43,284,119 (4,784,758) (8,945,087)
NET ASSETS:
Beginning of period.................................... 379,811,196 336,527,077 59,120,168 68,065,255
------------- ------------ ----------- -----------
End of period+......................................... $ 205,254,721 $379,811,196 $54,335,410 $59,120,168
============= ============ =========== ===========
- --------
+Includes accumulated undistributed net investment
income (loss)......................................... $ (1,882,760) $ (2,773,841) $ (54,332) $ (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
- -
03/31/04 $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
03/31/08 9.24 0.35 0.46 0.81 (0.37) -- (0.37) 9.68 9.03 191,057 0.99
Class B
- -
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
03/31/08 9.24 0.30 0.45 0.75 (0.31) -- (0.31) 9.68 8.33 15,354 1.64
Class C*
- -
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
03/31/08 9.23 0.29 0.46 0.75 (0.31) -- (0.31) 9.67 8.34 16,997 1.64
-
Ratio
of net
investment
income to
average Portfolio
net assets(3) Turnover
- ------------- --------- -
-
3.14% 267%(4)
3.26 253(4)
3.80 357
4.05 243
3.83 343
-
2.45% 267%(4)
2.61 253(4)
3.14 357
3.40 243
3.20 343
-
2.45% 267%(4)
2.61 253(4)
3.14 357
3.40 243
3.14 343
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08
-------- -------- -------- -------- --------
U.S. Government Securities Fund Class A. 0.37% 0.39% 0.36% 0.38% 0.39%
U.S. Government Securities Fund Class B. 0.37 0.43 0.43 0.43 0.48
U.S. Government Securities Fund Class C. 0.38 0.48 0.57 0.43 0.50
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2004 2005
---- ----
U.S. Government Securities Fund......... 256% 246%
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets(3)
- -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- -------------
Class A
- -
03/31/04 $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
03/31/08 11.08 0.46 0.48 0.94 (0.49) -- (0.49) 11.53 8.69 330,202 0.99
Class B
- -
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
03/31/08 11.11 0.40 0.47 0.87 (0.42) -- (0.42) 11.56 7.98 46,389 1.64
Class C*
- -
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
03/31/08 11.13 0.39 0.47 0.86 (0.42) -- (0.42) 11.57 7.88 35,599 1.64
Ratio
of net
investment
income to
average Portfolio
net assets(3) Turnover
- ------------- ---------
2.51% 225%(4)
2.73 204(4)
3.17 138
4.19 142
4.15 354
1.77% 225%(4)
2.10 204(4)
2.50 138
3.53 142
3.52 354
1.74% 225%(4)
2.11 204(4)
2.49 138
3.53 142
3.49 354
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08
-------- -------- -------- -------- --------
GNMA Fund Class A............. 0.18% 0.17% 0.13% 0.15% 0.15%
GNMA Fund Class B............. 0.16 0.18 0.17 0.18 0.19
GNMA Fund Class C............. 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:
2004 2005
---- ----
GNMA Fund............................... 213% 204%
See Notes to Financial Statements
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND
-------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expense
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period+ Return(2) (000's) net assets
- -------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------- --------- -------- ----------
Class A
- -
03/31/04 $3.08 $0.21 $ 0.33 $0.54 $(0.21) $-- $(0.21) $3.41 18.04% $ 43,840 1.55%(3)(4)
03/31/05 3.41 0.20 0.11 0.31 (0.23) -- (0.23) 3.49 9.36 59,279 1.40(3)(4)
03/31/06 3.49 0.17 0.05 0.22 (0.18) -- (0.18) 3.53 6.54 167,072 1.34(4)
03/31/07 3.53 0.16 0.12 0.28 (0.18) -- (0.18) 3.63 8.07 453,893 1.31(6)
03/31/08 3.63 0.19 (0.11) 0.08 (0.21) -- (0.21) 3.50 2.29 483,820 1.28(6)
Class B
- -
03/31/04 $3.08 $0.19 $ 0.33 $0.52 $(0.19) $-- $(0.19) $3.41 17.29% $ 36,110 2.19%(3)(4)
03/31/05 3.41 0.18 0.10 0.28 (0.21) -- (0.21) 3.48 8.35 37,250 2.05(3)(4)
03/31/06 3.48 0.16 0.05 0.21 (0.16) -- (0.16) 3.53 6.14 46,294 2.00(3)(4)
03/31/07 3.53 0.15 0.10 0.25 (0.15) -- (0.15) 3.63 7.36 55,728 1.99(6)
03/31/08 3.63 0.16 (0.10) 0.06 (0.19) -- (0.19) 3.50 1.61 52,528 1.96(6)
Class C*
- -
03/31/04 $3.09 $0.19 $ 0.34 $0.53 $(0.20) $-- $(0.20) $3.42 17.43% $ 22,064 2.16%(3)(4)
03/31/05 3.42 0.18 0.11 0.29 (0.21) -- (0.21) 3.50 8.65 36,867 2.05(3)(4)
03/31/06 3.50 0.15 0.05 0.20 (0.16) -- (0.16) 3.54 5.84 97,651 1.99(3)(4)
03/31/07 3.54 0.14 0.12 0.26 (0.16) -- (0.16) 3.64 7.36 217,755 1.98(6)
03/31/08 3.64 0.17 (0.11) 0.06 (0.19) -- (0.19) 3.51 1.64 265,904 1.94(6)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
6.41%(3)(4) 71%(5)
5.94(3)(4) 190(5)
5.19(4) 119
4.79(6) 131
5.30(6) 151
5.76%(3)(4) 71%(5)
5.32(3)(4) 190(5)
4.51(3)(4) 119
4.12(6) 131
4.63(6) 151
5.78%(3)(4) 71%(5)
5.29(3)(4) 190(5)
4.54(3)(4) 119
4.12(6) 131
4.65(6) 151
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 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............. 0.02 0.03 0.00
(4)Net of custody credits of:
03/31/04 03/31/05 03/31/06
-------- -------- --------
Strategic Bond Fund..................... 0.02% 0.01% 0.07%
(5)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was as
follows:
2004 2005
- ---- ----
Strategic Bond Fund 69% 188%
(6)Gross of custody credits of:
03/31/07 03/31/08
-------- --------
Strategic Bond Fund..................... 0.05% 0.02%
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
- -
03/31/04 $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)
03/31/08 4.77 0.36 (0.63) (0.27) (0.34) -- (0.34) 4.16 (5.92) 109,219 1.36(3)
Class B
- -
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)
03/31/08 4.78 0.31 (0.60) (0.29) (0.32) -- (0.32) 4.17 (6.50) 34,911 2.01(3)
Class C*
- -
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)
03/31/08 4.80 0.31 (0.61) (0.30) (0.32) -- (0.32) 4.18 (6.67) 61,125 2.01(3)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
8.15% 126%(4)
7.59(3) 85(4)
7.20(3)(5) 91
6.44(3) 86
7.49(3) 72
7.52% 126%(4)
7.04(3) 85(4)
6.71(3)(5) 91
5.82(3) 86
6.80(3) 72
7.53%(3) 126%(4)
6.97(3) 85(4)
6.67(3)(5) 91
5.80(3) 86
6.75(3) 72
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08
-------- -------- -------- -------- --------
High Yield Bond Fund Class A............ -- % 0.08% 0.11% 0.09% 0.17%
High Yield Bond Fund Class B............ -- 0.07 0.14 0.11 0.20
High Yield Bond Fund Class C............ 0.01 0.09 0.12 0.10 0.18
(4)Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydown on securities and was as
follows:
2004 2005
---- ----
High Yield Bond Fund 126% 85%
(5)Net of custody credits of 0.01%.
See Notes to Financial Statements
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
beginning investment and investment investment gains on Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ------- ----------
Class A
- -
03/31/04 $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
03/31/08 12.65 0.42 (0.31) 0.11 (0.42) (0.10) (0.52) 12.24 0.91 46,843 1.32
Class B
- -
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
03/31/08 12.65 0.31 (0.31) (0.00) (0.29) (0.10) (0.39) 12.26 0.06 3,351 2.21
Class C*
- -
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)
03/31/08 12.66 0.34 (0.31) 0.03 (0.34) (0.10) (0.44) 12.25 0.29 4,141 1.95(3)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
2.90% 131%
3.14 153
3.14 81
3.28 84
3.35 57
2.20% 131%
2.44 153
2.48 81
2.44 84
2.46 57
2.21%(3) 131%
2.44(3) 153
2.48(3) 81
2.60(3) 84
2.71(3) 57
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08
-------- -------- -------- -------- --------
Tax Exempt Insured Fund Class C......... 0.12% 0.09% 0.20% 0.09% 0.31%
See Notes to Financial Statements
15
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- March 31, 2008 -- (unaudited)
Industry Allocation*
United States Treasury Notes...................... 45.6%
Government National Mtg. Assoc.................... 38.3
United States Treasury Bonds...................... 10.2
Private Export Funding............................ 4.5
U.S. Government Agencies.......................... 3.6
Repurchase Agreements............................. 0.7
Small Business Administration..................... 0.6
Federal Farm Credit Bank.......................... 0.6
-----
104.1%
=====
Credit Quality+#
Government -- Treasury 55.9%
Government -- Agency.. 39.6
AA.................... 4.5
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
16
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 44.0%
Federal Farm Credit Bank -- 0.6%
5.64% due 04/04/11................... $ 500,000 $ 541,734
6.00% due 03/07/11................... 200,000 218,323
6.30% due 12/03/13................... 500,000 572,022
-----------
1,332,079
-----------
Federal Home Loan Mtg. Corp. -- 0.0%
8.00% due 06/01/08.................... 40 43
-----------
Federal National Mtg. Assoc. -- 0.0%
8.00% due 01/01/23.................... 32,538 35,398
11.00% due 02/01/15................... 29 35
11.50% due 09/01/19................... 8,446 9,780
-----------
45,213
-----------
Private Export Funding Corp. -- 4.5%
5.87% due 07/31/08.................... 10,000,000 10,113,690
-----------
Government National Mtg. Assoc. -- 38.3%
4.50% due 05/15/18.................... 821,993 825,165
4.50% due 08/15/18.................... 1,273,095 1,278,008
4.50% due 09/15/18.................... 3,832,464 3,847,253
4.50% due 10/15/18.................... 3,663,351 3,677,487
4.50% due 09/15/33.................... 4,380,842 4,260,884
5.00% due 04/15/18.................... 3,817,188 3,881,659
5.00% due 04/15/33.................... 27,250 27,301
5.00% due 08/15/33.................... 1,682,281 1,685,540
5.00% due 09/15/33.................... 762,569 764,002
5.00% due 10/15/33.................... 537,322 538,332
5.00% due 04/15/34.................... 26,517 26,560
5.00% due 11/15/34.................... 180,443 180,731
5.00% due 02/15/35.................... 24,808 24,841
5.00% due 03/15/35.................... 499,719 500,400
5.00% due 04/15/35.................... 57,704 57,782
5.00% due 05/15/35.................... 1,933,223 1,935,858
5.00% due 09/15/35.................... 854,894 856,059
5.00% due 10/15/35.................... 145,422 145,620
5.00% due 12/15/35.................... 92,801 92,927
5.00% due 03/15/36.................... 884,226 885,315
5.00% due 05/15/36.................... 1,327,663 1,329,297
5.00% due 06/15/36.................... 912,075 913,199
5.00% due 09/15/36.................... 2,046,960 2,048,238
5.00% due 10/15/36.................... 500,495 501,112
5.00% due 11/15/36.................... 54,093 54,160
5.00% due 12/15/36.................... 377,573 378,038
5.00% due 01/15/37.................... 4,580,414 4,586,303
5.00% due 02/15/37.................... 2,068,650 2,071,308
5.00% due 03/15/37.................... 1,662,440 1,664,576
5.00% due 04/15/37.................... 1,767,131 1,769,403
5.50% due 11/15/32.................... 13,405 13,707
5.50% due 03/15/33.................... 418,826 428,150
5.50% due 04/15/33.................... 499,162 510,277
5.50% due 05/15/33.................... 1,150,373 1,176,021
5.50% due 06/15/33.................... 5,459,790 5,581,350
5.50% due 07/15/33.................... 1,476,576 1,509,451
5.50% due 10/15/33.................... 1,535,997 1,570,196
5.50% due 12/15/33.................... 314,896 321,907
5.50% due 01/15/34.................... 3,337,953 3,410,864
5.50% due 02/15/34.................... 1,879,576 1,920,631
6.00% due 01/15/28.................... 2,374 2,463
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
6.00% due 04/15/28....................... $ 1,166,672 $ 1,210,473
6.00% due 05/15/28....................... 1,350 1,401
6.00% due 10/15/28....................... 3,527 3,659
6.00% due 03/15/29....................... 32,684 33,909
6.00% due 04/15/29....................... 35,507 36,837
6.00% due 05/15/29....................... 65,719 68,181
6.00% due 06/15/29....................... 25,195 26,139
6.00% due 04/15/31....................... 23,926 24,806
6.00% due 05/15/31....................... 40,748 42,246
6.00% due 11/15/31....................... 162,126 168,086
6.00% due 12/15/31....................... 334,375 346,666
6.00% due 01/15/32....................... 148,554 153,934
6.00% due 02/15/32....................... 35,337 36,616
6.00% due 03/15/32....................... 7,613 7,889
6.00% due 08/15/32....................... 233,220 241,666
6.00% due 11/15/32....................... 36,730 38,060
6.00% due 12/15/32....................... 5,689 5,895
6.00% due 01/15/33....................... 18,025 18,669
6.00% due 02/15/33....................... 53,181 55,079
6.00% due 03/15/33....................... 74,393 77,049
6.00% due 04/15/33....................... 291,690 302,102
6.00% due 07/15/33....................... 215,014 222,689
6.00% due 08/15/33....................... 2,171,544 2,250,542
6.00% due 09/15/33....................... 310,536 321,620
6.00% due 10/15/33....................... 1,138,571 1,179,216
6.00% due 11/15/33....................... 124,203 128,636
6.00% due 12/15/33....................... 663,129 686,799
6.00% due 02/15/34....................... 292,829 303,053
6.00% due 05/15/34....................... 35,183 36,411
6.00% due 06/15/34....................... 38,366 39,706
6.00% due 07/15/34....................... 1,270,017 1,314,361
6.00% due 08/15/34....................... 169,175 175,082
6.00% due 09/15/34....................... 1,025,085 1,060,878
6.00% due 10/15/34....................... 4,034,407 4,175,278
6.00% due 12/15/34....................... 311,698 322,582
6.00% due 06/15/35....................... 213,826 221,087
6.00% due 08/15/35....................... 260,194 269,029
6.00% due April TBA...................... 10,000,000 10,318,750
6.50% due 02/15/29....................... 13,251 13,857
6.50% due 05/15/31....................... 10,817 11,305
6.50% due 06/15/31....................... 47,570 49,716
6.50% due 07/15/31....................... 35,980 37,604
6.50% due 08/15/31....................... 67,939 71,003
6.50% due 09/15/31....................... 186,188 194,587
6.50% due 10/15/31....................... 244,693 255,731
6.50% due 11/15/31....................... 12,191 12,741
6.50% due 12/15/31....................... 18,866 19,717
6.50% due 01/15/32....................... 30,010 31,322
6.50% due 02/15/32....................... 471,340 491,949
6.50% due 06/15/32....................... 50,267 52,465
7.00% due 07/15/23....................... 28,762 30,811
7.00% due 10/15/23....................... 41,384 44,333
7.00% due 09/15/25....................... 210,221 225,245
7.00% due 03/20/29....................... 15,760 16,834
7.00% due 06/20/29....................... 2,484 2,653
7.00% due 11/20/30....................... 62,226 66,434
7.50% due 04/15/17....................... 9,791 10,508
17
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
7.50% due 08/15/23....................... $ 174,161 $ 187,769
7.50% due 09/15/23....................... 509,577 549,395
9.00% due 12/15/16....................... 35,939 39,234
11.00% due 08/20/15...................... 122 143
11.00% due 09/20/15...................... 371 437
11.50% due 05/20/15...................... 3,414 4,088
12.50% due 09/15/14...................... 4,788 5,702
13.00% due 01/15/11...................... 793 912
13.00% due 02/15/11...................... 1,920 2,108
13.00% due 03/15/11...................... 118 136
13.00% due 04/15/11...................... 325 374
13.00% due 09/15/13...................... 4,258 5,054
13.00% due 10/20/14...................... 972 1,150
13.00% due 11/15/14...................... 593 709
13.00% due 02/20/15...................... 571 671
13.50% due 02/15/13...................... 7,556 9,052
15.00% due 01/15/12...................... 325 393
15.00% due 02/15/12...................... 845 1,022
15.00% due 06/15/12...................... 8,951 10,825
15.00% due 09/15/12...................... 517 626
15.50% due 09/15/11...................... 27,171 32,106
------------
85,668,177
------------
Small Business Administration -- 0.6%
6.30% due 06/01/18....................... 1,376,682 1,428,932
------------
Total U.S. Government Agencies
(cost $97,509,400)...................... 98,588,134
------------
U.S. GOVERNMENT TREASURIES -- 55.8%
United States Treasury Bonds -- 10.2%
4.75% due 02/15/37....................... 17,000,000 18,284,299
5.00% due 05/15/37....................... 4,000,000 4,474,688
------------
22,758,987
------------
United States Treasury Notes -- 45.6%
2.00% due 02/28/10....................... 4,000,000 4,027,812
2.75% due 02/28/13....................... 20,000,000 20,275,000
2.88% due 01/31/13....................... 14,000,000 14,270,158
3.38% due 11/30/12....................... 10,000,000 10,417,970
3.50% due 02/15/18....................... 8,000,000 8,046,248
4.25% due 11/15/17....................... 20,000,000 21,339,060
4.50% due 05/15/17....................... 16,000,000 17,387,504
5.13% due 06/30/08....................... 6,000,000 6,055,314
------------
101,819,066
------------
Total U.S. Government Treasuries
(cost $118,361,791)..................... 124,578,053
------------
Total Long-Term Investment Securities
(cost $215,871,191)..................... 223,166,187
------------
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 3.6%
U.S. Government Agencies -- 3.6%
Federal Home Loan Bank
Discount Notes
1.50% due 04/01/08
(cost $8,000,000).................... $8,000,000 $ 8,000,000
------------
REPURCHASE AGREEMENT -- 0.7%
UBS Securities, LLC Joint Repurchase
Agreement(1)
(cost $1,500,000).................... 1,500,000 1,500,000
------------
TOTAL INVESTMENTS --
(cost $225,371,191)(2)............... 104.1% 232,666,187
Liabilities in excess of other assets... (4.1) (9,258,658)
---------- ------------
NET ASSETS -- 100.0% $223,407,529
========== ============
- --------
(1) See Note 2 for details of Joint Repurchase Agreements.
(2) 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 definitive maturity date. The actual principal
and maturity date will be determined upon settlement date.
See Notes to Financial Statements
18
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- March 31, 2008 -- (unaudited)
Industry Allocation*
Government National Mtg. Assoc. 81.6%
United States Treasury Notes... 16.0
U.S. Government Agencies....... 8.5
United States Treasury Bonds... 2.9
Repurchase Agreements.......... 0.4
Small Business Administration.. 0.1
-----
109.5%
=====
Credit Quality+#
Government -- Agency.. 82.7%
Government -- Treasury 17.3
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
19
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 81.7%
Government National Mtg. Assoc. -- 81.6%
4.50% due 05/15/18.................... $ 1,643,985 $ 1,650,329
4.50% due 08/15/18.................... 815,652 818,800
4.50% due 09/15/18.................... 2,884,541 2,895,672
4.50% due 10/15/18.................... 4,379,684 4,396,584
4.50% due 08/15/33.................... 2,483,951 2,415,935
4.50% due 09/15/33.................... 3,112,887 3,027,649
5.00% due 03/15/18.................... 527,880 536,795
5.00% due 04/15/18.................... 5,929,045 6,029,185
5.00% due 05/15/18.................... 8,407,396 8,549,392
5.00% due 01/15/33.................... 17,435 17,468
5.00% due 05/15/33.................... 11,489 11,516
5.00% due 08/15/33.................... 2,554,800 2,559,605
5.00% due 09/15/33.................... 2,252,234 2,256,469
5.00% due 10/15/33.................... 5,377,672 5,387,785
5.00% due 04/15/34.................... 53,048 53,133
5.00% due 05/15/34.................... 144,082 144,312
5.00% due 11/15/34.................... 617,373 618,359
5.00% due 12/15/34.................... 615,986 616,970
5.00% due 09/15/35.................... 20,281 20,308
5.00% due 10/15/35.................... 122,033 122,199
5.00% due 11/15/35.................... 124,215 124,385
5.00% due 12/15/35.................... 68,419 68,513
5.00% due 02/15/36.................... 141,826 142,001
5.00% due 04/15/36.................... 476,046 476,633
5.00% due 06/15/36.................... 1,489,234 1,491,069
5.00% due 07/15/36.................... 488,186 488,787
5.00% due 08/15/36.................... 26,253 26,285
5.00% due 09/15/36.................... 870,849 871,117
5.00% due 10/15/36.................... 26,150 26,182
5.00% due 11/15/36.................... 483,879 484,475
5.00% due 12/15/36.................... 1,192,363 1,193,831
5.00% due 01/15/37.................... 821,363 822,418
5.00% due 02/15/37.................... 883,461 884,596
5.00% due 04/15/37.................... 9,733,343 9,745,852
5.50% due 06/15/29.................... 5,228 5,349
5.50% due 01/15/32.................... 42,676 43,638
5.50% due 12/15/32.................... 670,597 685,717
5.50% due 01/15/33.................... 449,916 459,933
5.50% due 02/15/33.................... 1,750,894 1,789,876
5.50% due 03/15/33.................... 1,031,755 1,054,726
5.50% due 04/15/33.................... 5,372,418 5,492,033
5.50% due 05/15/33.................... 6,306,203 6,447,150
5.50% due 06/15/33.................... 6,972,045 7,127,436
5.50% due 07/15/33.................... 361,699 369,752
5.50% due 08/15/33.................... 2,140,199 2,187,850
5.50% due 09/15/33.................... 359,657 367,665
5.50% due 10/15/33.................... 5,984,289 6,117,528
5.50% due 12/15/33.................... 6,712,889 6,862,351
5.50% due 01/15/34.................... 8,551,312 8,738,097
5.50% due 02/15/34.................... 1,227,669 1,254,486
5.50% due 04/15/35.................... 1,951,036 1,993,533
5.50% due 07/15/35.................... 2,289,830 2,339,706
5.50% due 09/15/35.................... 22,849,852 23,347,559
5.50% due 10/15/35.................... 14,519,968 14,836,237
5.50% due 11/15/35.................... 28,080,112 28,691,742
5.50% due 12/15/35.................... 17,923,365 18,313,766
5.50% due 02/15/36.................... 2,505,786 2,559,398
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Government National Mtg. Assoc. (continued)
5.50% due 03/15/36....................... $9,496,452 $9,699,631
5.50% due 04/15/36....................... 437,025 446,376
5.50% due 05/15/36....................... 3,222,502 3,291,448
6.00% due 11/15/23....................... 3,823 3,974
6.00% due 01/15/24....................... 5,403 5,614
6.00% due 07/15/28....................... 4,016 4,167
6.00% due 11/15/28....................... 293,880 304,909
6.00% due 12/15/28....................... 261,836 271,662
6.00% due 01/15/29....................... 591,371 613,526
6.00% due 02/15/29....................... 694,498 720,514
6.00% due 03/15/29....................... 535,423 555,482
6.00% due 04/15/29....................... 1,374,034 1,425,521
6.00% due 05/15/29....................... 59,834 62,074
6.00% due 06/15/29....................... 541,313 561,599
6.00% due 07/15/29....................... 158,659 164,603
6.00% due 08/15/29....................... 19,876 20,620
6.00% due 10/15/29....................... 103,739 107,626
6.00% due 04/15/31....................... 16,449 17,053
6.00% due 07/15/31....................... 15,050 15,603
6.00% due 10/15/31....................... 82,785 85,828
6.00% due 11/15/31....................... 1,329,149 1,378,008
6.00% due 12/15/31....................... 548,837 569,011
6.00% due 01/15/32....................... 637,429 660,513
6.00% due 02/15/32....................... 47,132 48,839
6.00% due 03/15/32....................... 412,767 427,716
6.00% due 07/15/32....................... 98,169 101,724
6.00% due 08/15/32....................... 1,443,007 1,495,848
6.00% due 09/15/32....................... 974,621 1,009,918
6.00% due 10/15/32....................... 191,636 198,577
6.00% due 11/15/32....................... 6,136 6,359
6.00% due 12/15/32....................... 167,111 173,163
6.00% due 01/15/33....................... 1,452,583 1,504,433
6.00% due 02/15/33....................... 1,480,958 1,533,818
6.00% due 03/15/33....................... 1,133,209 1,173,657
6.00% due 04/15/33....................... 1,162,383 1,203,874
6.00% due 05/15/33....................... 1,245,937 1,290,409
6.00% due 06/15/33....................... 892,586 924,446
6.00% due 08/15/33....................... 1,389,459 1,439,251
6.00% due 10/15/33....................... 440,865 456,601
6.00% due 11/15/33....................... 1,505,870 1,559,627
6.00% due 12/15/33....................... 2,662,409 2,757,443
6.00% due 01/15/34....................... 1,521,090 1,574,202
6.00% due 02/15/34....................... 9,221,184 9,543,159
6.00% due 03/15/34....................... 241,138 249,558
6.00% due 04/15/34....................... 3,061,029 3,167,909
6.00% due 05/15/34....................... 259,440 268,499
6.00% due 06/15/34....................... 314,152 325,120
6.00% due 07/15/34....................... 3,181,378 3,292,461
6.00% due 08/15/34....................... 4,699,226 4,863,174
6.00% due 09/15/34....................... 190,039 196,664
6.00% due 10/15/34....................... 662,749 685,890
6.00% due 11/15/34....................... 1,470,152 1,521,485
6.00% due 12/15/34....................... 58,127 60,157
6.00% due 01/15/35....................... 96,050 99,311
6.00% due 02/15/35....................... 886,912 917,030
6.00% due 04/15/35....................... 59,440 61,458
6.00% due 05/15/35....................... 92,506 95,647
6.00% due 06/15/35....................... 396,576 410,044
20
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
6.00% due 11/15/35....................... $ 20,197 $ 20,883
6.00% due 12/15/35....................... 1,446,482 1,499,847
6.00% due 01/15/36....................... 954,769 986,821
6.00% due 02/15/36....................... 1,872,706 1,935,572
6.00% due 03/15/36....................... 1,662,761 1,718,580
6.00% due 04/15/36....................... 4,557,093 4,710,073
6.00% due 05/15/36....................... 5,591,453 5,779,156
6.00% due 06/15/36....................... 2,905,199 3,002,727
6.00% due 07/15/36....................... 1,506,644 1,557,222
6.00% due 08/15/36....................... 20,698 21,401
6.00% due 09/15/36....................... 209,391 216,421
6.00% due 10/15/36....................... 1,606,603 1,660,801
6.00% due 11/15/36....................... 2,643,107 2,731,835
6.00% due April TBA...................... 40,000,000 41,275,000
6.50% due 03/15/28....................... 22,494 23,540
6.50% due 08/15/28....................... 38,695 40,476
6.50% due 01/15/29....................... 4,063 4,249
6.50% due 02/15/29....................... 1,443 1,509
6.50% due 03/15/29....................... 108,585 113,552
6.50% due 04/15/29....................... 1,510 1,579
6.50% due 05/15/29....................... 11,076 11,585
6.50% due 06/15/29....................... 37,119 38,816
6.50% due 07/15/29....................... 4,018 4,202
6.50% due 10/15/29....................... 3,405 3,560
6.50% due 08/15/31....................... 232,993 243,503
6.50% due 09/15/31....................... 10,766 11,252
6.50% due 10/15/31....................... 244,693 255,731
6.50% due 11/15/31....................... 141,355 147,732
6.50% due 12/15/31....................... 160,336 167,569
6.50% due 02/15/32....................... 168,780 176,159
6.50% due 05/15/32....................... 1,245,098 1,299,537
6.50% due 06/15/32....................... 95,160 99,321
7.00% due 03/15/23....................... 86,763 92,945
7.00% due 01/20/24....................... 568 608
7.00% due 03/20/24....................... 595 636
7.00% due 07/20/25....................... 2,874 3,076
7.00% due 09/15/25....................... 91,295 97,819
7.00% due 01/20/29....................... 33,875 36,183
7.00% due 02/20/29....................... 6,633 7,085
7.00% due 06/20/29....................... 12,318 13,157
7.00% due 07/20/29....................... 45,906 49,034
7.00% due 09/20/29....................... 4,614 4,929
7.00% due 10/20/29....................... 9,574 10,227
7.00% due 11/20/29....................... 3,007 3,211
7.00% due 03/20/30....................... 4,424 4,724
7.00% due 06/20/30....................... 6,924 7,392
7.00% due 08/20/30....................... 25,214 26,919
7.00% due 09/20/30....................... 23,691 25,293
7.00% due 10/20/30....................... 27,162 28,999
8.00% due 11/15/26....................... 153,872 168,776
8.00% due 12/15/29....................... 15,831 17,367
8.00% due 04/15/30....................... 33,887 37,191
8.00% due 05/15/30....................... 4,836 5,308
8.00% due 08/15/30....................... 35,120 38,544
8.50% due 03/15/17....................... 15,204 16,693
8.50% due 05/15/21....................... 47,938 52,858
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
8.50% due 12/15/22....................... $ 44,133 $ 48,713
8.50% due 01/15/23....................... 111,737 123,443
8.50% due 09/15/24....................... 23,010 25,439
9.00% due 07/15/16....................... 51,776 56,523
9.00% due 10/15/16....................... 5,259 5,741
------------
336,452,014
------------
Small Business Administration -- 0.1%
6.30% due 06/01/18....................... 458,894 476,310
------------
Total U.S. Government Agencies
(cost $331,249,836)..................... 336,928,324
------------
U.S. GOVERNMENT TREASURIES -- 18.9%
United States Treasury Bonds -- 2.9%
4.75% due 02/15/37....................... 6,000,000 6,453,282
5.00% due 05/15/37....................... 5,000,000 5,593,360
------------
12,046,642
------------
United States Treasury Notes -- 16.0%
2.88% due 01/31/13....................... 25,000,000 25,482,425
3.50% due 02/15/18....................... 30,000,000 30,173,430
5.13% due 06/30/08....................... 10,000,000 10,092,190
------------
65,748,045
------------
Total U.S. Government Treasuries
(cost $75,438,750)...................... 77,794,687
------------
Total Long-Term Investment Securities
(cost $406,688,586)..................... 414,723,011
------------
SHORT-TERM INVESTMENT SECURITIES -- 8.5%
U.S. Government Agencies -- 8.5%
Federal Home Loan Bank
Discount Notes
1.50% due 04/01/08
(cost $35,000,000)...................... 35,000,000 35,000,000
------------
REPURCHASE AGREEMENT -- 0.4%
UBS Securities, LLC Joint Repurchase
Agreement(1)
(cost $1,818,000)......................... 1,818,000 1,818,000
------------
TOTAL INVESTMENTS
(cost $443,506,586)(2).................. 109.5% 451,541,011
Liabilities in excess of other assets...... (9.5) (39,350,405)
----------- ------------
NET ASSETS 100.0% $412,190,606
=========== ============
- --------
(1) See Note 2 for details of Joint Repurchase Agreements.
(2) See Note 5 for cost of investments on a tax basis.
TBA --Securities purchased on a forward commitment basis with an approximate
principle amount and no definite maturity date. The actual principal and
maturity date will be determined upon settlement date.
See Notes to Financial Statements
21
SunAmerica Strategic Bond Fund
PORTFOLIO OF PROFILE -- March 31, 2008
Industry Allocation*
Foreign Government Agencies........... 24.7%
Federal Home Loan Mtg. Corp........... 9.0
Federal National Mtg. Assoc........... 8.4
Repurchase Agreements................. 3.9
Diversified Financial Services........ 3.5
Time Deposits......................... 3.4
United States Treasury Notes.......... 2.8
Oil Companies-Exploration & Production 2.4
Electric-Integrated................... 2.3
Special Purpose Entities.............. 2.0
Medical-Hospitals..................... 1.7
Telephone-Integrated.................. 1.7
Pipelines............................. 1.5
Cellular Telecom...................... 1.3
Chemicals-Specialty................... 1.3
Finance-Auto Loans.................... 1.1
Finance-Investment Banker/Broker...... 1.1
Medical-Drugs......................... 1.1
Cable TV.............................. 1.0
Diversified Manufacturing Operations.. 0.9
Electric-Generation................... 0.9
Telecom Services...................... 0.9
Paper & Related Products.............. 0.7
Transport-Air Freight................. 0.7
Television............................ 0.7
Casino Hotels......................... 0.7
Steel-Producers....................... 0.7
Containers-Metal/Glass................ 0.6
Metal-Diversified..................... 0.5
Multimedia............................ 0.5
Independent Power Producers........... 0.5
Medical Products...................... 0.5
Electronic Components-Semiconductors.. 0.5
Banks-Commercial...................... 0.5
Agricultural Chemicals................ 0.5
United States Treasury Bonds.......... 0.5
Investment Management/Advisor Services 0.5
Non-Hazardous Waste Disposal.......... 0.4
Retail-Drug Store..................... 0.4
Theaters.............................. 0.4
Real Estate Investment Trusts......... 0.4
Satellite Telecom..................... 0.4
Auto-Cars/Light Trucks................ 0.4
Publishing-Periodicals................ 0.4
Oil-Field Services.................... 0.4
Airlines.............................. 0.3
Office Automation & Equipment......... 0.3
Broadcast Services/Program............ 0.3
Rental Auto/Equipment................. 0.3
Gambling (Non-Hotel).................. 0.3
Banks-Super Regional.................. 0.3
Physicians Practice Management........ 0.3
Funeral Services & Related Items...... 0.3
Computer Services..................... 0.3
Building & Construction Products-Misc. 0.2
Transport-Rail........................ 0.2
Containers-Paper/Plastic.............. 0.2
Food-Meat Products.................... 0.2
Metal-Aluminum........................ 0.2
Insurance Brokers..................... 0.2
Data Processing/Management............ 0.2
Retail-Restaurants................... 0.2%
Medical-HMO.......................... 0.2
Travel Services...................... 0.2
Agricultural Operations.............. 0.2
Recycling............................ 0.2
Aerospace/Defense-Equipment.......... 0.2
Savings & Loans/Thrifts.............. 0.2
Consumer Products-Misc............... 0.2
Hotels/Motels........................ 0.2
Food-Misc............................ 0.2
Direct Marketing..................... 0.2
Beverages-Wine/Spirits............... 0.2
Printing-Commercial.................. 0.2
Insurance-Life/Health................ 0.2
Electronic Components-Misc........... 0.2
Storage/Warehousing.................. 0.2
Home Furnishings..................... 0.2
Auto/Truck Parts & Equipment-Original 0.1
Oil Companies-Integrated............. 0.1
Medical Information Systems.......... 0.1
Retail-Petroleum Products............ 0.1
Transactional Software............... 0.1
Government National Mtg. Assoc....... 0.1
Insurance-Multi-line................. 0.1
Commercial Services-Finance.......... 0.1
Energy-Alternate Sources............. 0.1
Electronics-Military................. 0.1
Casino Services...................... 0.1
Food-Retail.......................... 0.1
Building Products-Wood............... 0.1
Banks-Money Center................... 0.1
Medical-Nursing Homes................ 0.1
Metal Processors & Fabrication....... 0.1
Oil Refining & Marketing............. 0.1
Medical-Generic Drugs................ 0.1
Electric-Transmission................ 0.1
Home Decoration Products............. 0.1
Industrial Automated/Robotic......... 0.1
Finance-Consumer Loans............... 0.1
Aerospace/Defense.................... 0.1
Rubber-Tires......................... 0.1
Federal Home Loan Bank............... 0.1
Finance-Mortgage Loan/Banker......... 0.1
Retail-Regional Department Stores.... 0.1
Electronic Measurement Instruments... 0.1
Poultry.............................. 0.1
Quarrying............................ 0.1
Research & Development............... 0.1
Retail-Discount...................... 0.1
Transport-Services................... 0.1
Applications Software................ 0.1
Finance-Commercial................... 0.1
Decision Support Software............ 0.1
Transport-Marine..................... 0.1
Chemicals-Diversified................ 0.1
Computers-Memory Devices............. 0.1
-----
100.1%
=====
- --------
* Calculated as a percentage of net assets
22
SunAmerica Strategic Bond Fund
PORTFOLIO OF PROFILE -- March 31, 2008 -- (continued)
Country Allocation*
United States. 65.9%
Switzerland... 4.9
Brazil........ 3.6
Australia..... 2.1
Norway........ 2.1
Mexico........ 2.0
Turkey........ 1.9
Russia........ 1.7
Canada........ 1.5
Japan......... 1.6
Germany....... 1.5
Luxembourg.... 0.9
Colombia...... 1.0
Philippines... 0.9
Denmark....... 0.8
Sweden........ 0.7
United Kingdom 0.9
Indonesia..... 0.7
Uruguay....... 0.7
Venezuela..... 0.6
Netherlands... 0.5
Ireland....... 0.4
Bermuda....... 0.4
Peru.......... 0.4
Greece........ 0.3
Argentina..... 0.3
Cayman Islands 0.4
Spain......... 0.3
South Africa.. 0.2
France........ 0.1
Poland........ 0.2
Ukrainian SSR. 0.2
Belgium....... 0.1
Pakistan...... 0.1
Ecuador....... 0.1
Liberia....... 0.1
-----
100.1%
=====
- --------
* Calculated as a percentage of net assets
Credit Quality +#
Government -- Treasury 3.5%
Government -- Agency.. 18.7
AAA................... 12.7
AA.................... 2.8
A..................... 6.8
BBB................... 10.8
BB.................... 18.7
B..................... 17.4
CCC................... 6.9
BELOW C............... 0.1
Not Rated@............ 1.6
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
23
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
ASSET BACKED SECURITIES -- 2.7%
Diversified Financial Services -- 2.7%
Banc of America Funding Corp.
Series 2007-C, Class 5A1
5.40% due 05/20/36(1)(2)..................... $1,531,802 $ 1,504,764
Banc of America Funding Corp.
Series 2006-J, Class 2A1
5.89% due 01/20/47(1)(2)..................... 1,541,255 1,303,403
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2007-PW15, Class A2
5.21% due 02/11/44(1)........................ 825,000 795,220
Chase Mtg. Finance Corp.
Series 2007-A2, Class 1A1
4.67% due 07/25/37(1)(2)..................... 2,328,794 2,219,906
Commercial Mtg. Pass Through Certs.
Series CN2A, Class A2FL
3.31% due 02/05/19*(1)(3).................... 1,575,000 1,460,686
Commercial Mtg. Pass Through Certs.
Series 2004-LB2A, Class A3
4.22% due 03/10/39(1)........................ 86,000 83,950
Commercial Mtg. Pass Through Certs.,
Series 2004-LB4A, Class A3,
4.41% due 10/15/37(1)........................ 1,500,000 1,459,032
Countrywide Asset-Backed Certs.
Series 2006-S6, Class A3
5.66% due 03/25/34........................... 1,596,000 957,600
Countrywide Asset-Backed Certs.,
Series 2006-S4, Class A3
5.80% due 10/25/36........................... 2,800,000 1,680,000
CS First Boston Mtg. Securities Corp.
Series 2002-CKN2, Class A3
6.13% due 04/15/37(1)........................ 2,250,000 2,327,486
Deutsche ALT-A Securities, Inc.,
Series 2006-AB2, Class A5A,
6.09% due 06/25/36(1)........................ 600,000 555,267
Ocwen Advance Receivables Backed Notes
Series 2006-1A
5.34% due 11/24/15*(4)....................... 830,000 730,400
Swift Master Auto Receivables Trust
Series 2007-2, Class A
3.47% due 10/15/12(3)........................ 2,957,126 2,848,168
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR17, Class A2
5.84% due 10/25/36(1)........................ 2,916,429 2,792,161
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR12, Class 2A1
6.10% due 09/25/36(1)(2)..................... 685,828 645,544
-----------
Total Asset Backed Securities
(cost $23,972,551)........................... 21,363,587
-----------
CONVERTIBLE BONDS & NOTES -- 0.1%
Electronic Components-Semiconductors -- 0.1%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*.......................... 50,000 31,438
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
Electronic Components-Semiconductors
(continued)
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*.............. $1,270,000 $ 569,912
----------
601,350
----------
Medical-Biomedical/Gene -- 0.0%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12............... 125,000 96,562
----------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(4)(5)(6)...... 275,000 236,500
----------
Total Convertible Bonds & Notes
(cost $1,504,612)................ 934,412
----------
CORPORATE BONDS & NOTES -- 37.4%
Aerospace/Defense -- 0.1%
Lockheed Martin Corp.
Senior Notes
4.12% due 03/14/13............... 610,000 610,876
----------
Aerospace/Defense-Equipment -- 0.2%
United Technologies Corp.
Senior Notes
4.88% due 05/01/15............... 1,564,000 1,591,625
----------
Agricultural Chemicals -- 0.5%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18............... 320,000 326,400
Terra Capital, Inc.
Company Guar. Notes
7.00% due 02/01/17............... 1,250,000 1,232,812
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*.............. 345,000 369,150
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*.............. 1,855,000 1,994,125
----------
3,922,487
----------
Agricultural Operations -- 0.2%
Archer-Daniels-Midland Co.
Senior Notes
5.45% due 03/15/18............... 440,000 442,317
Archer-Daniels-Midland Co.
Senior Notes
6.45% due 01/15/38............... 438,000 444,905
Cargill, Inc.
Notes
5.00% due 11/15/13*.............. 720,000 717,519
----------
1,604,741
----------
24
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Airlines -- 0.3%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11........................ $1,675,000 $1,578,687
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A
6.55% due 02/02/19........................ 636,957 612,676
Delta Air Lines, Inc.
Pass Through Certs.
Series 2000-1, Class A-2
7.57% due 11/18/10........................ 275,000 274,142
Northwest Airlines, Inc.
Pass Through Certs.
Series 2002-1 Class G2
6.26% due 11/20/21........................ 274,767 271,676
United AirLines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08........................ 54,435 54,299
----------
2,791,480
----------
Applications Software -- 0.1%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13....................... 530,000 526,025
----------
Auto-Cars/Light Trucks -- 0.4%
Ford Motor Co.
Debentures
6.38% due 02/01/29........................ 1,965,000 1,179,000
General Motors Corp.
Debentures
8.25% due 07/15/23........................ 1,930,000 1,351,000
General Motors Corp.
Senior Bonds
8.38% due 07/15/33........................ 618,000 435,690
----------
2,965,690
----------
Auto/Truck Parts & Equipment-Original -- 0.1%
Lear Corp.
Senior Notes
8.75% due 12/01/16........................ 800,000 683,000
Visteon Corp.
Senior Notes
8.25% due 08/01/10........................ 610,000 498,675
----------
1,181,675
----------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(4)(5)................ 225,000 0
----------
Banks-Commercial -- 0.3%
Colonial Bank NA
Sub. Notes
6.38% due 12/01/15........................ 451,000 388,609
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Banks-Commercial (continued)
PNC Bank NA
Sub. Notes
6.88% due 04/01/18............... $ 600,000 $ 610,178
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13............... 340,000 343,846
SouthTrust Corp.
Sub. Notes
5.80% due 06/15/14............... 470,000 495,186
SunTrust Bank
Sub. Notes
7.25% due 03/15/18............... 280,000 286,350
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16............... 330,000 322,322
----------
2,446,491
----------
Banks-Fiduciary -- 0.0%
The Bank of New York Mellon Corp.
Senior Notes
4.95% due 11/01/12............... 292,000 299,177
----------
Banks-Super Regional -- 0.2%
Banc One Corp.
Sub. Debentures
8.00% due 04/29/27............... 135,000 152,470
Fifth Third Bancorp
Sub. Notes
8.25% due 03/01/38............... 510,000 519,677
Fleet Capital Trust V
3.76% due 12/18/28(3)............ 590,000 448,109
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08............... 198,000 201,432
Wells Fargo Bank NA
Sub. Notes
6.45% due 02/01/11............... 550,000 585,000
----------
1,906,688
----------
Beverages-Non-alcoholic -- 0.0%
Cott Beverages USA, Inc.
Company Guar. Notes
8.00% due 12/15/11............... 350,000 283,500
----------
Broadcast Services/Program -- 0.3%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14............... 1,290,000 1,302,900
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14............... 650,000 559,812
Nexstar Finance, Inc.
Senior Notes
11.38% due 04/01/13(8)........... 250,000 242,813
----------
2,105,525
----------
25
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Building & Construction Products-Misc. -- 0.2%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12......................... $ 965,000 $ 936,050
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14......................... 770,000 735,350
NTK Holdings, Inc.
Senior Notes
10.75% due 03/01/14(8)..................... 650,000 315,250
----------
1,986,650
----------
Building Products-Wood -- 0.1%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15........................ 1,088,000 750,720
----------
Building-Residential/Commercial -- 0.0%
D.R. Horton, Inc.
Company Guar. Notes
5.00% due 01/15/09......................... 266,000 256,025
----------
Cable TV -- 1.0%
CCH II LLC/CCH II Capital Corp.
Senior Notes, Series B
10.25% due 09/15/10........................ 115,000 104,362
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13........................ 4,117,000 3,530,327
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
11.00% due 10/01/15........................ 2,402,000 1,651,375
CCO Holdings LLC/CCO Holdings Capital Corp.
Senior Notes
8.75% due 11/15/13......................... 285,000 243,675
Charter Communications, Inc.
Senior Notes
8.75% due 09/15/14*........................ 775,000 763,375
Comcast Cable Communications LLC
Senior Notes
7.13% due 06/15/13......................... 347,000 368,655
Comcast Corp.
Company Guar. Notes
5.88% due 02/15/18......................... 727,000 708,125
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11......................... 625,000 617,969
----------
7,987,863
----------
Casino Hotels -- 0.7%
Circus & Eldorado Joint Venture
1st Mtg. Notes
10.13% due 03/01/12........................ 575,000 579,312
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(5)(9).................. 946,489 941,757
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(4)(5)................... 425,000 425,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14......................... 2,125,000 1,816,875
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Casino Hotels (continued)
Station Casinos, Inc.
Senior Sub. Notes
6.63% due 03/15/18.................... $ 350,000 $ 194,250
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*................... 1,450,000 1,384,750
----------
5,341,944
----------
Casino Services -- 0.1%
Indianapolis Downs LLC
Sec. Notes
11.00% due 11/01/12*.................. 975,000 848,250
----------
Cellular Telecom -- 1.0%
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13................... 1,036,000 963,480
Centennial Communications Corp.
Senior Notes
10.13% due 06/15/13................... 1,050,000 1,036,875
Centennial Communications Corp.
Senior Notes
10.48% due 01/01/13(3)................ 1,020,000 887,400
Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11.................... 1,406,000 1,529,319
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14.................... 1,775,000 1,633,000
Nextel Communications, Inc.
Company Guar. Notes
5.95% due 03/15/14.................... 600,000 444,000
Rural Cellular Corp.
Senior Sub. Notes
6.08% due 06/01/13(3)................. 850,000 850,000
Rural Cellular Corp.
Senior Notes
8.99% due 11/01/12(3)................. 275,000 275,000
----------
7,619,074
----------
Chemicals-Diversified -- 0.1%
E.I. Du Pont de Nemours & Co.
Senior Notes
5.00% due 01/15/13.................... 405,000 421,707
----------
Chemicals-Specialty -- 1.3%
Huntsman International LLC
Senior Sub. Notes
7.38% due 01/01/15.................... 1,380,000 1,428,300
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14.................... 2,180,000 2,310,800
Johnsondiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12.................... 950,000 935,750
Lubrizol Corp.
Senior Notes
4.63% due 10/01/09.................... 1,300,000 1,304,732
26
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Chemicals-Specialty (continued)
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16.................. $3,145,000 $ 2,394,131
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12................... 2,485,000 2,124,675
-----------
10,498,388
-----------
Commercial Services -- 0.0%
DI Finance/DynCorp International
Senior Sub. Notes
9.50% due 02/15/13................... 277,000 283,233
-----------
Commercial Services-Finance -- 0.1%
Credit Suisse/New York NY
Sub. Notes
5.75% due 02/15/18................... 292,000 291,303
The Western Union Co.
Senior Notes
5.40% due 11/17/11................... 672,000 688,362
-----------
979,665
-----------
Computer Services -- 0.3%
Compucom Systems, Inc.
Senior Sub. Notes
12.50% due 10/01/15*................. 1,470,000 1,374,450
Computer Sciences Corp.
Senior Notes
3.50% due 04/15/08................... 150,000 149,965
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13................... 485,000 489,850
-----------
2,014,265
-----------
Computers -- 0.0%
Hewlett-Packard Co.
Senior Notes
4.50% due 03/01/13................... 320,000 324,636
-----------
Computers-Integrated Systems -- 0.0%
Activant Solutions, Inc.
Company Guar. Notes
9.50% due 05/01/16................... 225,000 189,000
-----------
Consumer Products-Misc. -- 0.2%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12................... 806,000 719,355
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12................... 325,000 313,625
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13................... 125,000 116,875
Visant Holding Corp.
Senior Notes
10.25% due 12/01/13(8)............... 458,000 428,230
-----------
1,578,085
-----------
Containers-Metal/Glass -- 0.4%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23................... 1,410,000 1,311,300
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Containers-Metal/Glass (continued)
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13........................... $1,633,000 $1,690,155
----------
3,001,455
----------
Containers-Paper/Plastic -- 0.2%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12........................... 520,000 468,650
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17........................... 1,630,000 1,369,200
----------
1,837,850
----------
Cosmetics & Toiletries -- 0.0%
Avon Products, Inc.
Senior Notes
5.75% due 03/01/18........................... 230,000 234,161
----------
Data Processing/Management -- 0.2%
Fiserv, Inc.
Company Guar. Notes
6.80% due 11/20/17........................... 490,000 506,368
Seitel, Inc.
Senior Notes
9.75% due 02/15/14........................... 1,370,000 1,154,225
----------
1,660,593
----------
Decision Support Software -- 0.1%
Vangent, Inc.
Senior Sub. Notes
9.63% due 02/15/15........................... 625,000 501,563
----------
Direct Marketing -- 0.2%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12........................... 1,114,000 1,029,057
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12........................... 500,000 486,250
----------
1,515,307
----------
Diversified Financial Services -- 0.3%
American Express Travel Related Services Co.,
Inc. Senior Notes
5.25% due 11/21/11*.......................... 305,000 305,720
General Electric Capital Corp.
Senior Notes
5.65% due 06/09/14........................... 850,000 880,774
General Electric Capital Corp.
Senior Notes
5.88% due 01/14/38........................... 675,000 650,604
General Electric Capital Corp.
Notes
6.75% due 03/15/32........................... 279,000 298,003
----------
2,135,101
----------
Diversified Manufacturing Operations -- 0.7%
Cooper US, Inc.
Senior Notes
5.45% due 04/01/15........................... 640,000 645,894
Danaher Corp.
Senior Notes
5.63% due 01/15/18........................... 459,000 476,948
27
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Diversified Manufacturing Operations (continued)
Dover Corp.
Senior Notes
5.45% due 03/15/18........................... $ 203,000 $ 205,011
Dover Corp.
Senior Notes
6.60% due 03/15/38........................... 448,000 462,290
General Electric Co.
Senior Notes
5.25% due 12/06/17........................... 750,000 748,965
Harland Clarke Holdings Corp.
Notes
7.82% due 05/15/15(3)........................ 425,000 263,500
Harland Clarke Holdings Corp.
Notes
9.50% due 05/15/15........................... 1,150,000 839,500
Honeywell International, Inc.
Senior Notes
4.25% due 03/01/13........................... 313,000 316,169
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14.......................... 600,000 489,000
Sally Holdings LLC
Company Guar. Notes
10.50% due 11/15/16.......................... 825,000 763,125
----------
5,210,402
----------
Diversified Operations -- 0.0%
Capmark Financial Group, Inc.
Company Guar. Notes
5.88% due 05/10/12*.......................... 255,000 161,562
----------
Electric-Generation -- 0.9%
Bruce Mansfield Unit
Pass Through Certs.
6.85% due 06/01/34........................... 649,000 681,365
Edison Mission Energy
Senior Notes
7.20% due 05/15/19........................... 475,000 469,063
Edison Mission Energy
Senior Notes
7.63% due 05/15/27........................... 950,000 893,000
Edison Mission Energy
Senior Notes
7.75% due 06/15/16........................... 775,000 798,250
Reliant Energy Mid-Atlantic Power
Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17........................... 143,337 149,787
The AES Corp.
Senior Notes
7.75% due 10/15/15........................... 1,275,000 1,284,563
The AES Corp.
Senior Notes
8.00% due 10/15/17........................... 1,725,000 1,746,562
The AES Corp.
Sec. Notes
8.75% due 05/15/13*.......................... 583,000 606,320
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
Electric-Generation (continued)
The AES Corp.
Senior Notes
8.88% due 02/15/11............ $ 675,000 $ 707,063
----------
7,335,973
----------
Electric-Integrated -- 2.2%
Centerpoint Energy, Inc.
Senior Notes
5.88% due 06/01/08............ 150,000 150,228
Commonwealth Edison Co.
1st Mtg. Bonds
5.95% due 08/15/16............ 1,290,000 1,310,262
Consumers Energy Co.
1st Mtg. Bonds
Series C
4.25% due 04/15/08............ 180,000 179,999
Dominion Resources, Inc.
Senior Notes
5.69% due 05/15/08(8)......... 836,000 837,681
Dominion Resources, Inc.
Jr. Sub. Notes
6.30% due 09/30/11(10)........ 374,000 342,034
DTE Energy Co.
Senior Notes
7.05% due 06/01/11............ 512,000 547,570
Duke Energy Corp.
Senior Notes
4.20% due 10/01/08............ 305,000 306,072
Duke Energy Indiana, Inc.
Debentures
5.00% due 09/15/13............ 500,000 503,113
Energy Future Holdings Corp.
Company Guar. Notes
10.88% due 11/01/17*.......... 1,100,000 1,111,000
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10............ 195,000 194,543
FirstEnergy Corp.
Senior Notes
6.45% due 11/15/11............ 455,080 476,359
Florida Power & Light Co.
1st Mtg. Notes
5.55% due 11/01/17............ 660,000 690,912
Illinois Power Co.
Senior Sec. Notes
6.13% due 11/15/17*........... 280,000 276,879
Mackinaw Power LLC
Sec. Notes
6.30% due 10/31/23*........... 642,147 671,869
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11............ 1,250,000 1,275,000
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21............ 1,005,000 912,038
Nisource Finance Corp.
Company Guar. Notes
5.25% due 09/15/17............ 430,000 391,491
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric-Integrated (continued)
Pacific Gas & Electric Co.
Senior Notes
4.80% due 03/01/14......................... $ 275,000 $ 277,383
Pepco Holdings, Inc.
Senior Notes
6.45% due 08/15/12......................... 940,000 1,001,599
Potomac Electric Power Co.
Senior Notes
6.50% due 11/15/37......................... 590,000 576,093
PSEG Power LLC
Company Guar. Notes
5.00% due 04/01/14......................... 653,000 635,542
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11......................... 50,000 53,871
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15......................... 633,000 620,207
Sierra Pacific Power Co.
Senior Sec Bonds
6.75% due 07/01/37......................... 1,071,000 1,027,068
Southern California Edison Co.
1st Mtg. Bonds
5.75% due 04/01/35......................... 80,000 78,041
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(4)(5)(6)............... 1,550,000 0
Southern Power Co.
Senior Notes
4.88% due 07/15/15......................... 289,000 277,252
Texas Competitive Electric Holdings Co. LLC
Company Guar. Notes
10.25% due 11/01/15*....................... 1,575,000 1,569,094
Texas Competitive Electric Holdings Co. LLC
Company Guar. Notes
10.25% due 11/01/15*....................... 375,000 373,594
Texas Competitive Electric Holdings Co. LLC
Senior Notes
10.50% due 11/01/16*....................... 650,000 637,000
-----------
17,303,794
-----------
Electronic Components-Semiconductors -- 0.4%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12......................... 515,000 417,150
Amkor Technology, Inc.
Senior Notes
7.75% due 05/15/13......................... 750,000 684,375
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16......................... 640,000 616,000
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14......................... 975,000 711,750
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16........................ 530,000 357,750
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Electronic Components-Semiconductors (continued)
National Semiconductor Corp.
Senior Notes
6.60% due 06/15/17........................... $ 590,000 584,725
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*......................... 180,000 109,800
---------
3,481,550
---------
Electronic Measurement Instruments -- 0.1%
Agilent Technologies, Inc.
Senior Notes
6.50% due 11/01/17........................... 576,000 577,994
---------
Electronics-Military -- 0.1%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13........................... 825,000 806,437
L-3 Communications Corp.
Company Guar. Notes
6.38% due 10/15/15........................... 175,000 171,063
---------
977,500
---------
Energy-Alternate Sources -- 0.1%
VeraSun Energy Corp.
Senior Notes
9.38% due 06/01/17*.......................... 300,000 205,500
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12........................... 835,000 772,375
---------
977,875
---------
Finance-Auto Loans -- 1.1%
Ford Motor Credit Co. LLC
Senior Notes
5.80% due 01/12/09........................... 58,000 55,256
Ford Motor Credit Co. LLC
Senior Notes
7.38% due 10/28/09........................... 5,115,000 4,660,445
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10........................... 1,000,000 871,937
GMAC LLC
Senior Notes
6.00% due 12/15/11........................... 500,000 373,746
GMAC LLC
Senior Notes
6.88% due 09/15/11........................... 4,118,000 3,151,769
GMAC LLC
Senior Notes
6.88% due 08/28/12........................... 30,000 22,798
---------
9,135,951
---------
Finance-Commercial -- 0.1%
Caterpillar Financial Services Corp.
Notes
4.70% due 03/15/12........................... 463,000 473,106
Transamerica Finance Corp.
Senior Notes
6.40% due 09/15/08........................... 36,000 36,550
---------
509,656
---------
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Finance-Consumer Loans -- 0.1%
John Deere Capital Corp.
Senior Notes
4.50% due 04/03/13................... $ 334,000 $ 333,452
John Deere Capital Corp.
Senior Notes
5.35% due 04/03/18................... 291,000 290,110
----------
623,562
----------
Finance-Investment Banker/Broker -- 1.0%
Citigroup, Inc.
Senior Notes
5.00% due 09/15/14................... 320,000 301,576
Citigroup, Inc.
Senior Notes
5.85% due 07/02/13................... 580,000 588,484
Citigroup, Inc.
Global Sub. Notes
6.00% due 10/31/33................... 280,000 239,229
JP Morgan Chase & Co.
Sub. Notes
5.75% due 01/02/13................... 451,000 471,145
JP Morgan Chase & Co.
Senior Notes
6.00% due 01/15/18................... 539,000 562,081
JP Morgan Chase & Co.
Senior Notes
5.38% due 01/15/14................... 520,000 532,802
Lehman Brothers Holdings, Inc.
Sub. Notes
6.50% due 07/19/17................... 1,986,000 1,885,997
Lehman Brothers Holdings, Inc.
Senior Notes
8.80% due 03/01/15................... 470,000 505,970
Merrill Lynch & Co., Inc.
Notes
5.45% due 02/05/13................... 668,000 657,218
Morgan Stanley
Senior Bonds
6.60% due 04/01/12................... 320,000 331,769
Morgan Stanley
Senior Notes
6.63% due 04/01/18................... 504,000 504,177
Schwab Capital Trust I
7.50% due 11/15/17(10)............... 138,000 128,268
The Bear Stearns Cos., Inc.
Notes
4.50% due 10/28/10................... 40,000 37,697
The Goldman Sachs Group, Inc.
Senior Notes
6.15% due 04/01/18................... 780,000 778,843
The Goldman Sachs Group, Inc.
Senior Notes
6.75% due 10/01/37................... 802,000 746,127
----------
8,271,383
----------
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Finance-Mortgage Loan/Banker -- 0.1%
Countrywide Financial Corp.
Company Guar. Notes
5.80% due 06/07/12................... $ 9,000 $ 8,154
Countrywide Financial Corp.
Sub. Notes
6.25% due 05/15/16................... 113,000 91,686
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09................... 90,000 81,087
Residential Capital LLC
Company Guar. Notes
6.50% due 04/17/13................... 532,000 258,020
Residential Capital LLC
Company Guar. Notes
6.38% due 06/30/10................... 285,000 143,212
----------
582,159
----------
Food-Meat Products -- 0.0%
Smithfield Foods, Inc.
Senior Notes
7.00% due 08/01/11................... 75,000 73,875
Smithfield Foods, Inc.
Senior Notes
7.75% due 07/01/17................... 275,000 268,125
----------
342,000
----------
Food-Misc. -- 0.2%
Kellogg Co.
Senior Notes
4.25% due 03/06/13................... 305,000 304,053
Kraft Foods, Inc.
Senior Notes
6.13% due 02/01/18................... 850,000 849,462
Wornick Co.
Sec. Notes
10.88% due 07/15/11+(7)(11).......... 600,000 378,000
----------
1,531,515
----------
Funeral Services & Related Items -- 0.3%
Service Corp. International
Senior Notes
6.75% due 04/01/16................... 1,225,000 1,185,188
Service Corp. International
Senior Notes
7.00% due 06/15/17................... 635,000 612,775
Service Corp. International
Senior Notes
7.38% due 10/01/14................... 225,000 225,281
----------
2,023,244
----------
Gambling (Non-Hotel) -- 0.3%
Downstream Development Authority
of the Quapaw Tribe of Oklahoma
Senior Notes
12.00% due 10/15/15*................. 1,000,000 790,000
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Gambling (Non-Hotel) (continued)
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*..................... $ 960,000 $ 873,600
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/14*...................... 622,000 594,010
----------
2,257,610
----------
Home Decoration Products -- 0.1%
Newell Rubbermaid, Inc.
Senior Notes
5.50% due 04/15/13....................... 640,000 643,507
----------
Home Furnishings -- 0.2%
Simmons Co.
Company Guar. Notes
7.88% due 01/15/14....................... 275,000 225,500
Simmons Co.
Senior Notes
10.00% due 12/15/14(8)................... 1,529,000 986,205
----------
1,211,705
----------
Hotels/Motels -- 0.2%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14....................... 695,000 604,650
Gaylord Entertainment Co.
Company Guar. Notes
8.00% due 11/15/13....................... 700,000 649,250
Starwood Hotels & Resorts Worldwide, Inc.
Senior Notes
6.25% due 02/15/13....................... 310,000 309,612
----------
1,563,512
----------
Human Resources -- 0.0%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13...................... 400,000 384,000
----------
Independent Power Producers -- 0.4%
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16....................... 2,400,000 2,352,000
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10...................... 250,000 273,125
Reliant Energy, Inc.
Senior Notes
7.88% due 12/31/17....................... 950,000 945,250
----------
3,570,375
----------
Industrial Automated/Robotic -- 0.1%
Rockwell Automation, Inc.
Debentures
5.65% due 12/01/17....................... 113,000 118,919
Rockwell Automation, Inc.
Debentures
6.25% due 12/01/37....................... 493,000 505,778
----------
624,697
----------
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Insurance Brokers -- 0.2%
Marsh & McLennan Cos., Inc.
Senior Notes
5.15% due 09/15/10.................... $ 200,000 $ 199,540
Marsh & McLennan Cos., Inc.
Senior Notes
7.13% due 06/15/09.................... 170,000 173,055
USI Holdings Corp.
Senior Notes
6.94% due 11/15/14*(3)................ 525,000 379,313
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*................... 1,275,000 921,187
----------
1,673,095
----------
Insurance-Life/Health -- 0.2%
Americo Life, Inc.
Notes
7.88% due 05/01/13*................... 38,000 39,642
Cigna Corp.
Senior Notes
6.35% due 03/15/18.................... 610,000 619,074
Lincoln National Corp.
Senior Notes
5.65% due 08/27/12.................... 391,000 398,667
Monumental Global Funding II
Notes
5.65% due 07/14/11*................... 174,000 182,289
----------
1,239,672
----------
Insurance-Property/Casualty -- 0.0%
The Travelers Cos., Inc.
Senior Notes
6.25% due 06/15/37.................... 114,000 105,667
----------
Investment Management/Advisor Services --
0.5%
Ameriprise Financial, Inc.
Senior Notes
5.35% due 11/15/10.................... 81,000 83,008
LVB Acquisition Merger Sub, Inc.
Senior Notes
10.00% due 10/15/17*.................. 625,000 654,688
LVB Acquisition Merger Sub, Inc.
Senior Notes
10.38% due 10/15/17*.................. 1,800,000 1,867,500
LVB Acquisition Merger Sub, Inc.
Senior Sub. Notes
11.63% due 10/15/17*.................. 1,035,000 1,035,000
----------
3,640,196
----------
Medical Information Systems -- 0.1%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12................... 1,325,000 1,106,375
----------
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Medical Products -- 0.5%
Baxter International, Inc.
Senior Notes
5.90% due 09/01/16................ $1,001,000 $1,056,567
ReAble Therapeutics Finance LLC/
ReAble Therapeutics Finance Corp.
Senior Notes
10.88% due 11/15/14*.............. 70,000 65,800
ReAble Therapeutics Finance LLC/
ReAble Therapeutics Finance Corp.
Company Guar. Notes
11.75% due 11/15/14............... 1,040,000 910,000
Universal Hospital Services, Inc.
Senior Sec. Notes
8.29% due 06/01/15(3)............. 575,000 511,750
Universal Hospital Services, Inc.
Sec. Bonds
8.50% due 06/01/15................ 1,575,000 1,575,000
----------
4,119,117
----------
Medical-Drugs -- 0.2%
Abbott Laboratories
Notes
6.15% due 11/30/37................ 215,000 222,151
American Home Products Corp.
Notes
6.95% due 03/15/11................ 361,000 390,214
Schering-Plough Corp.
Senior Notes
6.55% due 09/15/37................ 239,000 230,167
Wyeth
Bonds
5.50% due 02/01/14................ 1,074,000 1,112,456
----------
1,954,988
----------
Medical-HMO -- 0.2%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*.............. 1,425,000 1,303,875
UnitedHealth Group, Inc.
Senior Notes
6.88% due 02/15/38................ 336,000 321,033
----------
1,624,908
----------
Medical-Hospitals -- 1.7%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15................ 3,810,000 3,824,287
HCA, Inc.
Senior Notes
6.25% due 02/15/13................ 945,000 822,150
HCA, Inc.
Senior Notes
8.75% due 09/01/10................ 225,000 225,000
HCA, Inc.
Senior Notes
9.13% due 11/15/14................ 965,000 993,950
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
Medical-Hospitals (continued)
HCA, Inc.
Senior Notes
9.25% due 11/15/16........................ $4,865,000 $ 5,047,437
HCA, Inc.
Senior Notes
9.63% due 11/15/16........................ 1,205,000 1,250,188
IASIS Healthcare LLC / IASIS Capital Corp.
Bank Guar. Notes
8.75% due 06/15/14........................ 1,185,000 1,179,075
-----------
13,342,087
-----------
Medical-Nursing Homes -- 0.1%
Sun Healthcare Group, Inc.
Senior Notes
9.13% due 04/15/15........................ 750,000 723,750
-----------
Metal Processors & Fabrication -- 0.1%
Commercial Metals Co.
Senior Notes
6.50% due 07/15/17........................ 515,000 531,956
Timken Co.
Notes
5.75% due 02/15/10........................ 162,000 167,727
-----------
699,683
-----------
Metal-Aluminum -- 0.2%
Alcoa, Inc.
Notes
6.00% due 01/15/12........................ 612,000 635,397
Alcoa, Inc.
Bonds
6.50% due 06/15/18........................ 634,000 661,292
-----------
1,296,689
-----------
Metal-Diversified -- 0.5%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15........................ 550,000 580,250
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17........................ 1,725,000 1,830,656
Noranda Aluminium Acquisition Corp.
Senior Notes
8.74% due 05/15/15*(3).................... 1,950,000 1,530,750
Noranda Aluminium Holding Corp.
Senior Notes
10.49% due 11/15/14*(3)................... 500,000 370,000
-----------
4,311,656
-----------
Multimedia -- 0.5%
Belo Corp.
Senior Notes
6.75% due 05/30/13........................ 145,000 139,300
COX Enterprises, Inc.
Notes
7.88% due 09/15/10*....................... 578,000 620,950
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Multimedia (continued)
Haights Cross Operating Co.
Company Guar. Senior Notes
11.75% due 08/15/11................ $ 125,000 $ 122,500
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28................. 1,074,000 1,138,179
Time Warner Cos, Inc.
Company Guar. Notes
7.25% due 10/15/17................. 432,000 447,297
Time Warner Entertainment Co. LP
Senior Notes
8.38% due 07/15/33................. 411,000 462,450
Viacom, Inc.
Senior Notes
6.88% due 04/30/36................. 1,074,000 1,034,215
----------
3,964,891
----------
Networking Products -- 0.0%
Cisco Systems, Inc.
Senior Notes
5.50% due 02/22/16................. 347,000 359,009
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(4)(5)(12)(13). 500,000 0
----------
Non-Hazardous Waste Disposal -- 0.4%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17................. 1,825,000 1,788,500
Allied Waste North America, Inc.
Senior Notes
7.88% due 04/15/13................. 490,000 504,087
Waste Management, Inc.
Company Guar. Notes
6.88% due 05/15/09................. 985,000 1,010,490
Waste Services, Inc.
Senior Sub. Notes
9.50% due 04/15/14................. 85,000 81,388
----------
3,384,465
----------
Office Automation & Equipment -- 0.3%
IKON Office Solutions, Inc.
Senior Notes
7.75% due 09/15/15................. 1,610,000 1,529,500
IKON Office Solutions, Inc.
Senior Notes
9.93% due 01/01/12*(3)............. 25,000 24,031
Pitney Bowes, Inc.
Notes
5.25% due 01/15/37................. 680,000 673,006
Pitney Bowes, Inc.
Notes
5.75% due 09/15/17................. 553,000 562,656
----------
2,789,193
----------
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Oil Companies-Exploration & Production -- 1.7%
Atlas Energy Resources LLC
Senior Notes
10.75% due 02/01/18*....................... $ 650,000 $ 658,125
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... 175,000 175,438
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14......................... 950,000 817,000
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15......................... 895,000 778,650
Chaparral Energy, Inc.
Company Guar. Notes
8.88% due 02/01/17......................... 150,000 130,125
Chesapeake Energy Corp.
Senior Notes
6.25% due 01/15/18......................... 300,000 286,500
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16......................... 1,650,000 1,617,000
Costilla Energy, Inc.
Senior Notes
10.25% due 10/01/06+(4)(5)................. 500,000 0
Dune Energy, Inc.
Senior Sec. Notes
10.50% due 06/01/12........................ 1,120,000 974,400
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15......................... 950,000 855,000
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14......................... 175,000 162,750
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14......................... 1,025,000 845,625
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11......................... 1,430,000 1,390,675
Hilcorp Energy I LP/Hilcorp Finance Co.
Senior Notes
7.75% due 11/01/15*........................ 1,465,000 1,373,437
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16......................... 275,000 265,375
Sabine Pass LNG LP
Company Guar. Senior Notes
7.25% due 11/30/13......................... 400,000 386,000
Sabine Pass LNG LP
Sec. Notes
7.50% due 11/30/16......................... 2,950,000 2,846,750
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10........................ 375,000 292,500
-----------
13,855,350
-----------
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil Companies-Integrated -- 0.1%
Hess Corp.
Bonds
7.88% due 10/01/29................. $ 461,000 $ 547,088
Marathon Oil Corp.
Senior Notes
5.90% due 03/15/18................. 290,000 291,508
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29................. 286,000 322,469
----------
1,161,065
----------
Oil Refining & Marketing -- 0.1%
The Premcor Refining Group, Inc.
Company Guar. Notes
6.75% due 05/01/14................. 666,000 699,060
----------
Oil-Field Services -- 0.2%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14................. 610,000 555,100
Helix Energy Solutions Group, Inc.
Senior Notes
9.50% due 01/15/16*................ 600,000 600,000
Key Energy Services, Inc.
Senior Notes
8.38% due 12/01/14*................ 425,000 423,937
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11................. 133,304 141,989
----------
1,721,026
----------
Paper & Related Products -- 0.3%
Bowater, Inc.
Notes
6.50% due 06/15/13................. 700,000 462,000
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09................. 650,000 442,000
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*................ 920,000 862,500
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*................ 350,000 323,750
NewPage Corp.
Sec. Notes
10.00% due 05/01/12................ 150,000 152,250
NewPage Corp.
Senior Notes
10.00% due 05/01/12*............... 375,000 380,625
----------
2,623,125
----------
Physicians Practice Management -- 0.3%
US Oncology, Inc.
Senior Sub. Notes
10.75% due 08/15/14................ 2,140,000 2,113,250
----------
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
Pipelines -- 1.4%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15................ $ 525,000 $ 534,188
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11................ 1,215,000 1,312,601
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16................ 1,345,000 1,392,075
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11................ 747,000 789,124
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12................ 965,000 991,537
Dynegy-Roseton Danskammer
Pass Through Certs. Series B
7.67% due 11/08/16................ 1,890,000 1,893,553
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14................ 925,000 945,812
El Paso Natural Gas Co.
Senior Notes
5.95% due 04/15/17................ 575,000 563,989
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14................ 255,000 240,975
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16................ 550,000 554,125
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27................ 1,045,000 896,088
Panhandle Eastern Pipeline Co.
Senior Notes
6.20% due 11/01/17................ 382,000 374,430
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21................ 605,000 655,669
-----------
11,144,166
-----------
Poultry -- 0.1%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17................ 649,000 571,120
-----------
Printing-Commercial -- 0.1%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15................ 790,000 649,775
-----------
Publishing-Newspapers -- 0.0%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29................ 205,000 120,171
-----------
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Publishing-Periodicals -- 0.4%
Dex Media West LLC/Dex Media Finance Co.
Senior Notes
8.50% due 08/15/10...................... $ 925,000 $ 899,562
Idearc, Inc.
Company Guar. Notes
8.00% due 11/15/16...................... 1,225,000 793,188
R.H. Donnelley Corp.
Senior Notes
6.88% due 01/15/13...................... 400,000 244,000
R.H. Donnelley Corp.
Senior Notes
8.88% due 10/15/17*..................... 700,000 437,500
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*..................... 1,505,000 1,004,587
----------
3,378,837
----------
Quarrying -- 0.1%
Vulcan Materials
Senior Notes
5.60% due 11/30/12...................... 550,000 558,735
----------
Radio -- 0.0%
Chancellor Media Corp.
Company Guar. Notes
8.00% due 11/01/08...................... 148,000 152,744
----------
Real Estate Investment Trusts -- 0.4%
Health Care Property Investors, Inc.
Senior Notes
5.65% due 12/15/13...................... 845,000 753,797
Liberty Property LP
Senior Notes
5.63% due 10/01/17...................... 310,000 294,420
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14...................... 1,400,000 1,344,000
PPF Funding, Inc.
Bonds
5.35% due 04/15/12*..................... 270,000 264,138
Reckson Operating Partnership LP
Senior Notes
6.00% due 03/31/16...................... 86,000 73,569
Simon Property Group LP
Notes
5.38% due 08/28/08...................... 124,000 124,116
Vornado Realty LP
Notes
4.50% due 08/15/09...................... 210,000 205,674
----------
3,059,714
----------
Recycling -- 0.2%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14...................... 1,250,000 912,500
Aleris International, Inc.
Company Guar. Notes
10.00% due 12/15/16..................... 1,090,000 692,150
----------
1,604,650
----------
Rental Auto/Equipment -- 0.3%
Erac USA Finance Co.
Company Guar. Notes
7.00% due 10/15/37*..................... 585,000 480,911
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Rental Auto/Equipment (continued)
Erac USA Finance Co.
Notes
7.35% due 06/15/08*................... $ 620,000 $ 624,367
Rental Service Corp.
Notes
9.50% due 12/01/14.................... 775,000 647,125
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13.................... 940,000 766,100
----------
2,518,503
----------
Research & Development -- 0.1%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15................... 965,000 545,225
----------
Retail-Discount -- 0.1%
Target Corp.
Senior Notes
7.00% due 01/15/38.................... 516,000 530,375
----------
Retail-Drug Store -- 0.4%
CVS Caremark Corp.
Senior Notes
6.25% due 06/01/27.................... 274,000 273,062
CVS Caremark Corp.
Pass Through Certs.
6.94% due 01/10/30*................... 361,953 382,711
CVS Lease Pass Through Trust
Pass Through Certs.
6.04% due 12/10/28*................... 1,039,966 990,724
Rite Aid Corp.
Senior Notes
9.25% due 06/01/13.................... 225,000 185,625
Rite Aid Corp.
Senior Notes
9.50% due 06/15/17.................... 1,925,000 1,511,125
----------
3,343,247
----------
Retail-Major Department Stores -- 0.0%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11.................... 375,000 375,000
----------
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 -- 0.1%
Neiman-Marcus Group, Inc.
Company Guar. Notes
9.00% due 10/15/15.................... 525,000 525,000
Neiman-Marcus Group, Inc.
Senior Sub. Notes
10.38% due 10/15/15................... 55,000 55,000
----------
580,000
----------
Retail-Restaurants -- 0.2%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14................... 420,000 382,200
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Retail-Restaurants (continued)
McDonald's Corp.
Senior Notes
6.30% due 03/01/38..................... $ 510,000 $ 521,780
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14..................... 800,000 724,000
----------
1,627,980
----------
Rubber-Tires -- 0.1%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14..................... 800,000 606,000
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(4)(5)(12)(13)..... 100,000 10
----------
Savings & Loans/Thrifts -- 0.2%
Independence Community Bank Corp.
Sub. Notes
3.50% due 06/20/08(10)................. 172,000 170,970
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10..................... 405,000 400,670
Washington Mutual Preferred Funding III
6.90% due 06/15/12*(3)(14)............. 600,000 336,000
Washington Mutual, Inc.
Senior Notes
5.50% due 08/24/11..................... 380,000 326,800
Western Financial Bank
Senior Debentures
9.63% due 05/15/12..................... 333,000 353,144
----------
1,587,584
----------
Soap & Cleaning Preparation -- 0.0%
Johnsondiversey Holdings, Inc.
Notes
10.67% due 05/15/13(8)................. 75,000 72,000
----------
Special Purpose Entities -- 1.7%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12(8)................. 565,000 457,650
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15.................... 125,000 132,813
Axcan Intermediate Holdings, Inc.
Senior Notes
9.25% due 03/01/15*.................... 675,000 668,250
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*.................... 1,065,000 1,079,318
Buffalo Thunder Development Authority
Senior Notes
9.38% due 12/15/14*.................... 750,000 562,500
Capital One Capital IV
6.75% due 02/17/32(10)................. 255,000 182,084
CCM Merger, Inc.
Notes
8.00% due 08/01/13*.................... 1,000,000 840,000
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Special Purpose Entities (continued)
Chukchansi Economic Development Authority
Senior Notes
8.00% due 11/15/13*...................... $2,050,000 $ 1,845,000
Consolidated Communications
Illinois/Texas Holdings, Inc.
Senior Notes
9.75% due 04/01/12....................... 632,000 662,810
Goldman Sachs Capital III
3.85% due 09/01/12(3)(14)................ 750,000 472,500
Hawker Beechcraft Acquisition Co.
LLC / Hawker Beechcraft Notes Co.
Senior Notes
8.88% due 04/01/15....................... 200,000 204,500
Hawker Beechcraft Acquisition Co.
LLC / Hawker Beechcraft Notes Co.
Senior Notes
9.75% due 04/01/17....................... 910,000 905,450
Hexion U.S. Finance Corp.
Company Guar. Notes
9.75% due 11/15/14....................... 950,000 1,018,875
ING USA Global Funding Trust
Notes
4.50% due 10/01/10....................... 268,000 277,587
KAR Holdings, Inc.
Senior Notes
7.24% due 05/01/14(3).................... 425,000 350,625
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14....................... 305,000 271,450
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*...................... 600,000 480,750
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12....................... 129,000 134,805
MXEnergy Holdings, Inc.
Senior Notes
10.69% due 08/01/11(3)................... 650,000 585,000
Norbord Delaware GP I
Company Guar. Notes
6.45% due 02/15/17*...................... 193,000 155,075
PNA Intermediate Holding Corp.
Senior Notes
10.07% due 02/15/13(3)................... 350,000 272,125
Pricoa Global Funding I
Notes
5.30% due 09/27/13*...................... 320,000 338,449
Principal Life Global Funding I Sec.
Notes
5.25% due 01/15/13*...................... 296,000 301,763
Snoqualmie Entertainment Authority
Senior Sec. Notes
6.94% due 02/01/14*(3)................... 75,000 61,125
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*...................... 1,475,000 1,261,125
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16....................... 400,000 384,000
-----------
13,905,629
-----------
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Specified Purpose Acquisitions -- 0.0%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11................. $ 176,000 $ 179,821
----------
Steel-Producers -- 0.5%
International Steel Group, Inc.
Senior Notes
6.50% due 04/15/14................. 540,000 555,970
Reliance Steel & Aluminum Co.
Company Guar. Notes
6.85% due 11/15/36................. 1,070,000 1,019,775
Ryerson, Inc.
Senior Sec. Notes
10.61% due 11/01/14*(3)............ 875,000 787,500
Ryerson, Inc.
Senior Sec. Notes
12.00% due 11/01/15*............... 1,200,000 1,134,000
Steel Dynamics, Inc.
Company Guar. Notes
6.75% due 04/01/15................. 15,000 14,700
United States Steel Corp.
Senior Notes
7.00% due 02/01/18................. 215,000 210,011
----------
3,721,956
----------
Steel-Specialty -- 0.0%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 75,000 79,688
----------
Storage/Warehousing -- 0.2%
Mobile Mini, Inc.
Notes
6.88% due 05/01/15................. 725,000 601,750
Mobile Services Group, Inc.
Company Guar. Notes
9.75% due 08/01/14................. 655,000 612,425
----------
1,214,175
----------
Telecom Services -- 0.8%
Bellsouth Telecommunications, Inc.
Debentures
7.00% due 12/01/95................. 462,000 453,342
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23................. 50,000 43,000
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23................. 225,000 193,500
Fairpoint Communications, Inc.
Senior Notes
13.13% due 04/01/18*............... 1,075,000 1,032,000
MasTec, Inc.
Senior Notes
7.63% due 02/01/17................. 356,000 309,720
PAETEC Holding Corp.
Company Guar. Notes
9.50% due 07/15/15................. 1,650,000 1,518,000
Qwest Corp.
Senior Notes
6.50% due 06/01/17................. 500,000 451,250
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Telecom Services (continued)
Qwest Corp.
Senior Notes
7.50% due 10/01/14...................... $1,440,000 $ 1,404,000
Verizon Global Funding Corp.
Senior Notes
6.88% due 06/15/12...................... 750,000 808,549
-----------
6,213,361
-----------
Telephone-Integrated -- 1.3%
AT&T Corp.
Senior Notes
7.30% due 11/15/11...................... 1,003,000 1,086,380
BellSouth Corp.
Senior Notes
6.00% due 10/15/11...................... 1,300,000 1,360,085
Cincinnati Bell, Inc.
Company Guar. Notes
7.00% due 02/15/15...................... 350,000 316,750
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23...................... 25,000 21,500
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14...................... 990,000 928,125
Citizens Communications Co.
Senior Notes
7.13% due 03/15/19...................... 300,000 262,500
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31...................... 1,102,000 964,250
GTE Northwest, Inc.
Debentures
5.55% due 10/15/08...................... 55,000 55,480
Pacific Bell Telephone Co.
Company Guar. Notes
7.13% due 03/15/26...................... 570,000 590,030
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14...................... 2,725,000 2,561,500
Sprint Capital Corp.
Company Guar. Bonds
6.38% due 05/01/09...................... 825,000 812,625
Sprint Capital Corp.
Company Guar. Notes
6.90% due 05/01/19...................... 787,000 619,763
Verizon New York, Inc.
Debentures
6.88% due 04/01/12...................... 751,000 789,829
-----------
10,368,817
-----------
Television -- 0.7%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12...................... 1,175,000 1,151,500
Bonten Media Acquisition Co.
Company Guar. Notes
9.00% due 06/01/15*..................... 250,000 192,500
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13...................... 960,000 890,400
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Television (continued)
Paxson Communication Corp.
Senior Notes
7.51% due 01/15/12*(3).......... $ 650,000 $ 526,500
Paxson Communication Corp.
Sec. Senior Notes
10.51% due 01/15/13*(3)......... 2,300,000 1,725,000
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14.............. 380,000 224,200
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11............. 1,035,000 649,462
----------
5,359,562
----------
Theaters -- 0.4%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14.............. 2,195,000 1,860,262
Cinemark, Inc.
Senior Notes
9.75% due 03/15/14(8)........... 1,585,000 1,426,500
----------
3,286,762
----------
Transactional Software -- 0.1%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*............. 1,345,000 1,042,375
----------
Transport-Air Freight -- 0.7%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-2
6.88% due 01/02/11.............. 192,193 188,349
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19.............. 1,415,836 1,394,598
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15.............. 1,701,936 1,872,130
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20.............. 310,806 303,035
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11.............. 62,428 61,804
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17.............. 1,346,314 1,602,114
----------
5,422,030
----------
Transport-Rail -- 0.1%
BNSF Funding Trust I
6.61% due 01/15/26(10).......... 580,000 526,850
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
Transport-Rail (continued)
CSX Corp.
Senior Notes
6.25% due 03/15/18................. $ 603,000 $ 595,086
------------
1,121,936
------------
Transport-Services -- 0.1%
Bristow Group, Inc.
Senior Notes
7.50% due 09/15/17................. 250,000 251,250
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................. 300,000 275,250
------------
526,500
------------
Travel Services -- 0.2%
Travelport LLC
Company Guar. Notes
9.88% due 09/01/14................. 375,000 328,125
Travelport LLC
Company Guar. Notes
11.88% due 09/01/16................ 1,510,000 1,283,500
------------
1,611,625
------------
Vitamins & Nutrition Products -- 0.0%
General Nutrition Centers, Inc.
Company Guar. Notes
7.20% due 03/15/14(3).............. 325,000 271,375
------------
Total Corporate Bonds & Notes
(cost $320,663,224)................ 300,425,556
------------
FOREIGN CORPORATE BONDS & NOTES -- 6.1%
Banks-Commercial -- 0.2%
Barclays Bank PLC
Jr. Sub. Notes
7.43% due 12/15/17*(3)(14)......... 455,000 411,358
BOI Capital Funding
6.11% due 02/04/16*(3)(14)......... 330,000 251,178
Caisse Nationale des Caisses
d'Epargne et de Prevoyance
Notes
3.86% due 12/30/09(3)(14).......... 141,000 82,573
Landsbanki Islands HF
Jr. Sub. Notes
7.43% due 10/19/17*(3)(14)......... 370,000 309,752
Royal Bank of Scotland Group PLC
6.99% due 10/05/17*(3)(14)......... 660,000 560,274
------------
1,615,135
------------
Banks-Money Center -- 0.0%
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Bonds
8.38% due 04/27/09(14)............. 175,000 173,989
------------
Beverages-Wine/Spirits -- 0.2%
Diageo Capital PLC
Company Guar. Notes
5.75% due 10/23/17................. 650,000 665,688
Diageo Finance BV
Company Guar. Notes
3.88% due 04/01/11................. 779,000 781,722
------------
1,447,410
------------
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25....................... $ 496,000 $ 495,579
----------
Building & Construction-Misc. -- 0.0%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11....................... 275,000 272,250
----------
Building Products-Doors & Windows -- 0.0%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15...................... 117,000 79,560
----------
Cellular Telecom -- 0.2%
Mobile Telesystems Finance SA
Company Guar. Senior Notes
8.38% due 10/14/10....................... 1,650,000 1,711,050
----------
Computers-Memory Devices -- 0.1%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16....................... 435,000 414,337
----------
Containers-Metal/Glass -- 0.2%
Vitro SAB de CV
Senior Notes
9.13% due 02/01/17....................... 2,040,000 1,693,200
Vitro SAB de CV
Senior Notes
11.75% due 11/01/13...................... 250,000 253,125
----------
1,946,325
----------
Cruise Lines -- 0.1%
Royal Caribbean Cruises, Ltd.
Senior Notes
7.00% due 06/15/13....................... 400,000 374,049
----------
Diversified Financial Services -- 0.5%
TNK-BP Finance SA
Company Guar. Notes
6.13% due 03/20/12....................... 1,380,000 1,301,202
TNK-BP Finance SA
Company Guar. Notes
6.88% due 07/18/11....................... 350,000 342,440
TNK-BP Finance SA
Company Guar. Notes
7.88% due 03/13/18....................... 1,360,000 1,258,000
TNK-BP Finance SA
Company Guar. Notes
7.88% due 03/13/18*...................... 1,300,000 1,200,875
----------
4,102,517
----------
Diversified Manufacturing Operations -- 0.3%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*...................... 1,390,000 1,431,700
Siemens Financieringsmaatschappij NV
Notes
6.13% due 08/17/26*...................... 540,000 527,285
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
Diversified Manufacturing Operations (continued)
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13........................... $ 310,000 $ 311,291
----------
2,270,276
----------
Diversified Operations -- 0.0%
Hutchison Whampoa Finance, Ltd.
Company Guar. Notes
7.50% due 08/01/27*.......................... 150,000 150,235
----------
Electric-Integrated -- 0.1%
Enel Finance International SA
Company Guar. Notes
6.25% due 09/15/17*.......................... 748,000 776,051
----------
Electric-Transmission -- 0.1%
EEB International, Ltd.
Company Guar. Notes
8.75% due 10/31/14*.......................... 640,000 659,200
----------
Electronic Components-Misc. -- 0.2%
NXP BV / NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15........................... 1,480,000 1,217,300
----------
Food-Meat Products -- 0.2%
JBS SA
Company Guar. Notes
9.38% due 02/07/11........................... 850,000 847,875
JBS SA
Senior Notes
10.50% due 08/04/16*......................... 650,000 627,250
----------
1,475,125
----------
Food-Retail -- 0.1%
Delhaize Group SA
Notes
6.50% due 06/15/17........................... 855,000 882,961
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(5)(7)................... 725,000 725
----------
Insurance-Multi-line -- 0.1%
Aegon NV
Sub. Bonds
4.57% due 07/15/14(3)(14).................... 201,000 112,761
AXA SA
Sub. Notes
6.38% due 12/14/36*(3)(14)................... 285,000 229,730
ING Groep NV
Sub. Notes
5.78% due 12/08/15(3)(14).................... 765,000 651,760
----------
994,251
----------
Investment Companies -- 0.0%
Xstrata Finance Canada, Ltd.
Notes
6.90% due 11/15/37*.......................... 266,000 257,103
----------
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Medical-Drugs -- 0.6%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
6.83% due 12/01/13(3)............. $1,390,000 $1,063,350
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14................ 400,000 244,000
AstraZeneca PLC
Senior Notes
5.90% due 09/15/17................ 630,000 665,950
Elan Finance PLC
Company Guar. Notes
7.07% due 11/15/11(3)............. 2,430,000 2,187,000
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11................ 895,000 832,350
----------
4,992,650
----------
Metal-Aluminum -- 0.1%
Alcan, Inc.
Notes
6.13% due 12/15/33................ 403,000 385,162
----------
Multimedia -- 0.0%
Quebecor Media, Inc.
Senior Notes
7.75% due 03/15/16*............... 375,000 342,188
----------
Oil Companies-Exploration & Production -- 0.4%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13................ 965,000 923,987
OPTI Canada, Inc.
Senior Notes
7.88% due 12/15/14................ 1,800,000 1,759,500
OPTI Canada, Inc.
Senior Notes
8.25% due 12/15/14................ 625,000 618,750
----------
3,302,237
----------
Oil-Field Services -- 0.0%
Weatherford International, Ltd.
Senior Notes
7.00% due 03/15/38................ 218,000 221,302
----------
Paper & Related Products -- 0.4%
Abitibi-Consolidated Co. of Canada
Senior Notes
13.75% due 04/01/11*.............. 1,275,000 1,303,687
Abitibi-Consolidated Finance LP
Company Guar. Bonds
7.88% due 08/01/09................ 775,000 651,000
Abitibi-Consolidated, Inc.
Notes
6.00% due 06/20/13................ 300,000 145,500
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10................ 1,655,000 951,625
Bowater Canada Finance Corp.
Company Guar. Notes
7.95% due 11/15/11................ 200,000 137,000
----------
3,188,812
----------
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Pipelines -- 0.1%
Enbridge, Inc.
Bonds
5.80% due 06/15/14...................... $ 931,000 $ 943,955
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16...................... 183,000 173,392
----------
1,117,347
----------
Printing-Commercial -- 0.1%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*+(11)(24)............ 1,580,000 750,500
----------
Real Estate Operations & Development -- 0.0%
Brascan Corp.
Notes
8.13% due 12/15/08...................... 76,000 78,039
----------
Satellite Telecom -- 0.4%
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16..................... 480,000 486,600
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(8)................... 2,930,000 2,490,500
----------
2,977,100
----------
Sovereign -- 0.2%
Credit Suisse First Boston International
for City of Kiev Ukraine
Bonds
8.00% due 11/06/15...................... 1,600,000 1,548,838
----------
Special Purpose Entities -- 0.2%
Hellas Telecommunications
Luxembourg II
Sub. Notes
10.01% due 01/15/15*(3)................. 1,155,000 825,825
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(14).................. 338,000 229,840
Rio Tinto Finance USA, Ltd.
Notes
2.63% due 09/30/08...................... 165,000 163,815
SMFG Preferred Capital, Ltd.
6.08% due 01/25/17*(3)(14).............. 373,000 292,432
SovRisc BV
Notes
4.63% due 10/31/08*..................... 133,000 135,074
----------
1,646,986
----------
Steel-Producer -- 0.2%
Severstal
Notes
8.63% due 02/24/09...................... 1,550,000 1,587,153
----------
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Telecom Services -- 0.1%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14............... $ 525,000 $ 519,750
Wind Acquisition Finance SA
Company Guar. Bonds
10.75% due 12/01/15*.............. 175,000 178,500
-----------
698,250
-----------
Telephone-Integrated -- 0.4%
British Telecom PLC
Senior Notes
5.15% due 01/15/13................ 750,000 739,087
British Telecommunications PLC
Bonds
9.13% due 12/15/30................ 600,000 745,186
Telecom Italia Capital SA
Company Guar. Bonds
6.20% due 07/18/11................ 1,000,000 992,050
Telefonica Emisones SAU
Company Guar. Notes
6.42% due 06/20/16................ 685,000 702,071
-----------
3,178,394
-----------
Transport-Marine -- 0.1%
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14................ 525,000 472,500
-----------
Transport-Rail -- 0.1%
Canadian National Railway Co.
Notes
6.38% due 10/15/11................ 750,000 809,215
-----------
Total Foreign Corporate Bonds & Notes
(cost $53,620,846)................ 48,612,101
-----------
FOREIGN GOVERNMENT AGENCIES -- 23.5%
Sovereign -- 23.5%
Federal Republic of Brazil
Bonds
6.00% due 01/17/17................ 4,720,000 4,812,040
Federal Republic of Brazil
Bonds
7.13% due 01/20/37................ 3,020,000 3,255,560
Federal Republic of Brazil
Notes
8.00% due 01/15/18................ 3,790,000 4,244,800
Federal Republic of Brazil
Bonds
8.25% due 01/20/34................ 2,185,000 2,611,075
Federal Republic of Brazil
Notes
8.75% due 02/04/25................ 2,525,000 3,093,125
Federal Republic of Brazil
Bonds
8.88% due 10/14/19................ 2,110,000 2,605,850
Federal Republic of Brazil
Notes
8.88% due 04/15/24................ 495,000 613,800
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
Sovereign (continued)
Federal Republic of Brazil
Notes
11.00% due 08/17/40........ $ 4,870,000 $ 6,520,930
Federal Republic of Germany
Bonds
4.00% due 01/04/18......... EUR 2,510,000 3,994,281
Federal Republic of Germany
Bonds
4.25% due 07/04/14......... EUR 844,000 1,371,279
Federal Republic of Germany
Bonds
4.50% due 01/04/13......... EUR 1,505,000 2,468,563
Federal Republic of Germany
Bonds
5.25% due 07/04/10......... EUR 760,000 1,244,831
Federal Republic of Germany
Bonds
5.50% due 01/04/31......... EUR 500,000 891,472
Government of Australia
Bonds
5.75% due 06/15/11......... AUD 9,180,000 8,295,946
Government of Australia
Bonds
7.50% due 09/15/09......... AUD 1,960,000 1,820,883
Government of France
Bonds
4.75% due 04/25/35......... EUR 690,000 1,104,642
Government of Japan
Bonds
1.40% due 06/20/12......... JPY 175,000,000 1,806,011
Government of Japan
Bonds
1.40% due 12/20/15......... JPY 1,080,000,000 11,191,619
Government of Norway
Bonds
6.00% due 05/16/11......... NOK 5,620,000 1,149,140
Government of Switzerland
Bonds
3.50% due 08/07/10......... CHF 9,800,000 10,092,194
Kingdom of Denmark
Bonds
4.00% due 08/15/08......... DKK 9,975,000 2,109,902
Kingdom of Denmark
Bonds
5.00% due 11/15/13......... DKK 19,800,000 4,421,733
Kingdom of Norway
Bonds
5.50% due 05/15/09......... NOK 20,470,000 4,035,983
Kingdom of Norway
Bonds
6.50% due 05/15/13......... NOK 57,750,000 12,436,774
Kingdom of Spain
Bonds
5.75% due 07/30/32......... EUR 405,000 731,939
Kingdom of Sweden
Bonds
4.00% due 12/01/09......... SEK 8,760,000 1,477,532
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Kingdom of Sweden
Bonds
4.50% due 08/12/15..... SEK6,810,000 $1,188,972
Kingdom of Sweden
Bonds
5.00% due 01/28/09..... SEK20,430,000 3,460,328
Poland Government Bond
Bonds
4.75% due 04/25/12..... PLN3,100,000 1,322,121
Republic of Argentina
Notes
5.25% due 12/31/38(8).. 5,349,761 1,925,914
Republic of Argentina
Notes
8.28% due 12/31/33..... 1,037,729 850,938
Republic of Colombia
Bonds
7.38% due 09/18/37..... 4,565,000 4,895,962
Republic of Colombia
Bonds
12.00% due 10/22/15.... COP 3,760,000,000 2,146,253
Republic of Columbia
Bonds
8.13% due 05/21/24..... 710,000 825,730
Republic of Ecuador
Bonds
10.00% due 08/15/30(8). 550,000 532,125
Republic of Greece
Senior Notes
4.50% due 09/20/37..... EUR1,365,000 1,952,035
Republic of Indonesia
Bonds
6.63% due 02/17/37..... 2,980,000 2,775,381
Republic of Indonesia
Bonds
6.88% due 01/17/18*.... 1,080,000 1,131,300
Republic of Indonesia
Bonds
7.50% due 01/15/16..... 470,000 512,094
Republic of Indonesia
Notes
8.50% due 10/12/35..... 1,300,000 1,472,929
Republic of Pakistan
Bonds
6.88% due 06/01/17*.... 810,000 696,600
Republic of Peru
Notes
7.35% due 07/21/25..... 1,860,000 2,092,500
Republic of Peru
Bonds
8.75% due 11/21/33..... 720,000 936,000
Republic of Philippines
Bonds
7.75% due 01/14/31..... 2,985,000 3,331,857
Republic of Philippines
Notes
8.00% due 01/15/16..... 1,430,000 1,630,200
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------
Sovereign (continued)
Republic of Philippines
Notes
8.88% due 03/17/15...... EUR 1,430,000 $1,687,400
Republic of Philippines
Senior Notes
9.50% due 02/02/30...... 630,000 822,150
Republic of South Africa
Bonds
5.88% due 05/30/22...... 1,880,000 1,768,380
Republic of Turkey
Notes
6.88% due 03/17/36...... 1,660,000 1,472,420
Republic of Turkey
Notes
7.00% due 06/05/20...... 2,120,000 2,088,200
Republic of Turkey
Notes
7.25% due 03/15/15...... 2,680,000 2,820,700
Republic of Turkey
Notes
7.25% due 03/05/38...... 1,500,000 1,421,250
Republic of Turkey
Notes
7.38% due 02/05/25...... 730,000 724,525
Republic of Turkey
Notes
8.00% due 02/14/34...... 740,000 758,500
Republic of Turkey
Notes
9.50% due 01/15/14...... 1,840,000 2,141,300
Republic of Turkey
Senior Notes
11.88% due 01/15/30..... 1,870,000 2,760,588
Republic of Uruguay
Notes
7.63% due 03/21/36...... 1,400,000 1,417,500
Republic of Uruguay
Bonds
8.00% due 11/18/22...... 3,120,000 3,338,400
Republic of Uruguay
Notes
9.25% due 05/17/17...... 400,000 473,000
Republic of Venezuela
Bonds
5.75% due 02/26/16...... 1,170,000 918,450
Republic of Venezuela
Bonds
6.00% due 12/09/20...... 540,000 383,400
Republic of Venezuela
Bonds
7.00% due 12/01/18...... 700,000 567,000
Republic of Venezuela
Notes
8.50% due 10/08/14...... 790,000 732,725
Republic of Venezuela
Bonds
9.25% due 09/15/27...... 930,000 883,500
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Republic of Venezuela
Bonds
9.38% due 01/13/34................. EUR 1,640,000 $ 1,508,800
Russian Federation
Bonds
7.50% due 03/31/30(8).............. 11,711,650 13,485,965
Ukrainian Soviet Socialist Republic
Bonds
6.75% due 11/14/17*................ 1,300,000 1,280,500
United Mexican States
Notes
5.63% due 01/15/17................. 6,560,000 6,894,560
United Mexican States
Notes
6.05% due 01/11/40................. 600,000 598,500
United Mexican States
Notes
6.75% due 09/27/34................. 3,190,000 3,558,445
United Mexican States
Bonds
7.50% due 04/08/33................. 1,210,000 1,467,125
United Mexican States
Bonds
8.30% due 08/15/31................. 650,000 854,750
------------
Total Foreign Government Agencies
(cost $180,468,043)................ 188,909,176
------------
FOREIGN GOVERNMENT TREASURIES -- 0.9%
Sovereign -- 0.9%
New South Wales Treasury Corp.
Government Guar. Notes
6.00% due 05/01/12
(cost $7,659,385).................. AUD 8,480,000 7,513,111
------------
LOANS -- 0.2% (5)(6)(17)(18)
Leisure Products -- 0.0%
AMC Entertainment Holdings, Inc.
First Lien
7.80% due 06/15/12................. 432,723 367,815
------------
Medical-Drugs -- 0.2%
Triax Pharmaceuticals LLC
14.70% due 08/30/11(4)(21)(22)..... 1,515,279 1,362,702
------------
Total Loans
(cost $1,804,179).................. 1,730,517
------------
U.S. GOVERNMENT AGENCIES -- 17.6%
Federal Home Loan Bank -- 0.1%
4.50% due 09/08/08.................. 600,000 605,455
------------
Federal Home Loan Mtg. Corp. -- 9.0%
4.13% due 07/12/10.................. 300,000 311,470
4.35% due 06/02/08.................. 600,000 601,929
4.50% due 02/01/20.................. 185,816 185,065
4.50% due 08/01/20.................. 375,142 373,625
4.50% due 01/15/34.................. 4,055,000 3,950,057
4.75% due 01/18/11.................. 310,000 327,373
5.00% due 09/01/18.................. 425,290 431,585
5.00% due 07/01/20.................. 686,149 694,565
5.00% due 11/15/28.................. 730,000 746,490
5.00% due 09/15/31.................. 935,000 943,628
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Federal Home Loan Mtg. Corp. (continued)
5.00% due 02/01/34.................... $ 429,819 $ 426,837
5.00% due 05/01/34.................... 273,335 271,251
5.00% due 10/15/34.................... 4,050,000 3,938,250
5.00% due 02/01/35.................... 620,321 615,591
5.00% due 07/01/35.................... 1,046,085 1,037,440
5.00% due 08/01/35.................... 915,355 907,791
5.00% due 10/01/35.................... 5,574,530 5,528,465
5.00% due 04/01/36.................... 534,350 529,934
5.00% due 05/01/36.................... 375,976 372,671
5.00% due 08/01/36.................... 450,585 446,624
5.00% due 11/01/37.................... 4,521,938 4,481,759
5.32% due 12/01/35(3)................. 398,030 403,654
5.47% due 03/01/36(3)................. 267,914 269,335
5.50% due 11/15/25.................... 6,000,000 6,248,005
5.50% due 06/15/31.................... 1,724,000 1,771,277
5.50% due 07/01/35.................... 2,338,777 2,366,135
5.50% due 05/01/37.................... 5,768,794 5,830,825
5.50% due 06/01/37.................... 436,919 441,618
5.50% due 10/01/37.................... 11,167,698 11,287,782
5.50% due 11/01/37.................... 2,004,252 2,025,803
5.50% due 12/01/37.................... 1,425,000 1,440,322
5.79% due 01/01/37(3)................. 762,328 777,264
5.81% due 01/01/37(3)................. 176,616 178,484
5.96% due 10/01/36(3)................. 1,057,574 1,076,998
6.00% due 10/01/37.................... 8,398,599 8,620,152
6.19% due 09/01/36(3)................. 594,752 607,018
6.50% due 05/01/29.................... 6,056 6,346
6.50% due 02/01/35.................... 209,233 217,792
6.88% due 09/15/10.................... 1,156,000 1,275,853
7.00% due 06/01/29.................... 13,510 14,353
Federal Home Loan Mtg. Corp.
REMIC
Series 41, Class F
10.00% due 05/15/20(1)............... 12,527 13,258
Series 1103, Class N
11.57% due 06/15/21(1)(15)........... 8,528 1,867
-----------
71,996,541
-----------
Federal National Mtg. Assoc. -- 8.4%
2.50% due 04/09/10.................... 4,000,000 4,015,888
4.47% due 02/01/34(3)................. 429,786 431,673
4.50% due 06/01/19.................... 476,022 475,213
4.68% due 10/01/35(3)................. 207,734 210,270
4.75% due 12/15/10.................... 375,000 396,032
4.86% due 01/01/35(3)................. 853,910 867,183
5.00% due 06/01/19.................... 229,768 232,748
5.00% due 01/01/23.................... 2,490,419 2,516,413
5.00% due 11/25/30.................... 900,000 906,516
5.00% due 03/01/34.................... 280,268 278,010
5.00% due 05/01/35.................... 127,541 126,420
5.00% due 10/01/35.................... 2,609,454 2,586,517
5.00% due 02/01/37.................... 264,747 262,283
5.00% due 04/01/37.................... 1,721,265 1,704,977
5.00% due 05/01/37.................... 2,057,810 2,038,338
5.00% due 06/01/37.................... 781,628 774,233
5.00% due 07/01/37.................... 281,876 279,209
5.25% due 08/01/12.................... 300,000 314,595
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal National Mtg. Assoc. (continued)
5.47% due 01/01/37(3)................. $ 3,734,523 $ 3,799,279
5.50% due 11/01/19.................... 1,383,122 1,417,122
5.50% due 08/01/20.................... 317,058 324,540
5.50% due 11/01/22.................... 927,304 947,421
5.50% due 01/01/29.................... 7,845 7,963
5.50% due 02/01/35.................... 512,921 518,820
5.50% due 12/01/35.................... 689,740 697,674
5.50% due 02/01/36(3)................. 320,696 327,321
5.50% due 11/01/36.................... 538,818 544,584
5.50% due 12/01/36.................... 759,480 767,606
5.50% due 04/01/37.................... 451,513 456,213
5.50% TBA due April................... 11,380,000 11,486,687
6.00% due 02/01/32.................... 101,775 105,008
6.00% due 05/01/34.................... 18,398 18,912
6.00% due 10/01/34.................... 484,622 498,164
6.00% due 06/01/35.................... 176,516 181,143
6.00% due 07/01/37.................... 3,298,991 3,382,489
6.00% due 10/01/37.................... 705,342 723,195
6.00% TBA due April................... 4,620,000 4,732,612
6.50% due 04/01/34.................... 213,019 221,335
6.50% due 02/01/35.................... 78,527 81,485
6.50% due 07/01/37.................... 4,153,411 4,305,193
6.50% due 10/01/37.................... 2,767,652 2,868,792
6.50% due 11/01/37.................... 10,350,000 10,728,229
7.50% due 01/01/30.................... 14,488 15,665
7.50% due 09/01/30.................... 3,407 3,677
8.00% due 11/01/28.................... 20,503 22,345
13.00% due 11/01/15................... 4,291 4,952
Federal National Mtg. Assoc.
REMIC
Series D, Class 10
8.80% due 01/25/19(1)................ 34,179 37,566
Series E, Class 11
10.40% due 04/25/19(1)............... 4,958 5,422
------------
67,647,932
------------
Government National Mtg. Assoc. -- 0.1%
6.00% TBA due April................... 890,000 918,369
7.50% due 07/15/27.................... 16,231 17,512
7.50% due 10/15/27.................... 64,546 69,639
------------
1,005,520
------------
Total U.S. Government Agencies
(cost $139,225,476).................. 141,255,448
------------
U.S. GOVERNMENT TREASURIES -- 3.2%
United States Treasury Bonds -- 0.4%
3.63% due 04/15/28 TIPS(23)........... 1,252,656 1,624,343
4.75% due 02/15/37.................... 450,000 483,996
5.00% due 05/15/37.................... 1,192,000 1,333,457
6.25% due 08/15/23.................... 166,000 204,323
------------
3,646,119
------------
United States Treasury Notes -- 2.8%
2.13% due 01/31/10.................... 8,750,000 8,824,515
2.75% due 02/28/13.................... 305,000 309,194
2.88% due 01/31/13.................... 535,000 545,324
3.50% due 02/15/18.................... 264,000 265,526
Principal Market
Amount**/ Value
Security Description Shares (Note 2)
-------------------------------------------------------------------
United States Treasury Notes (continued)
3.88% due 05/15/10......................... $ 175,000 $ 183,230
3.88% due 09/15/10......................... 7,000 7,375
4.00% due 02/15/15......................... 7,000,000 7,527,184
4.25% due 11/15/17......................... 525,000 560,150
4.38% due 12/15/10......................... 101,000 108,141
4.50% due 02/15/16......................... 669,000 736,422
4.50% due 05/15/17......................... 2,150,000 2,336,446
4.63% due 12/31/11......................... 500,000 545,938
4.75% due 05/31/12......................... 300,000 329,063
-----------
22,278,508
-----------
Total U.S. Government Treasuries
(cost $24,664,991)........................ 25,924,627
-----------
COMMON STOCK -- 0.5%
Casino Services -- 0.0%
Shreveport Gaming Holdings, Inc.+(4)(5)(6). 2,441 55,850
-----------
Cellular Telecom -- 0.2%
iPCS, Inc.(4)(5)(6)........................ 60,413 1,410,644
-----------
Independent Power Producers -- 0.1%
Calpine Corp.+............................. 32,976 607,418
Mirant Corp.+.............................. 1,929 70,196
-----------
677,614
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC+(4)(5)(6)(20).... 128,418 53,936
-----------
Medical-Hospitals -- 0.1%
MedCath Corp.+............................. 30,367 552,679
-----------
Medical-Outpatient/Home Medical -- 0.0%
Critical Care Systems International,
Inc.+(4)(5)(6)............................ 4,107 41
-----------
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+........... 5,460 4,914
-----------
Oil-Field Services -- 0.1%
Trico Marine Services, Inc.+............... 22,008 857,652
-----------
Total Common Stock
(cost $2,301,260)......................... 3,613,330
-----------
PREFERRED STOCK -- 0.6%
Banks-Money Center -- 0.1%
Santander Finance Preferred SA
4.00%..................................... 32,800 557,600
-----------
Banks-Super Regional -- 0.0%
Wachovia Capital Trust IX
6.38%..................................... 12,800 273,152
-----------
Diversified Financial Services -- 0.0%
General Electric Capital Corp.
8.00%(8).................................. 16,000 384,480
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC,
Class C(4)(5)(6)(20)...................... 39,177 78,353
-----------
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Shares/ Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
PREFERRED STOCK (continued)
Medical-Generic Drugs -- 0.1%
Mylan, Inc.
6.50%...................................... 800 $ 691,488
------------
Oil Companies-Exploration & Production -- 0.3%
EXCO Resources, Inc. Convertible
Series A-1
7.00%(4)(6)(9)............................. 190 2,109,000
Transmeridian Exploration, Inc. Convertible
15.00%(4)(9)............................... 3,852 154,080
------------
2,263,080
------------
Special Purpose Entity -- 0.1%
Structured Repackaged Asset-Backed
Trust Securities
3.00%(3)................................... 29,200 499,320
------------
Total Preferred Stock
(cost $5,355,702).......................... 4,747,473
------------
WARRANTS -- 0.0%+
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (strike price $4.31)(4)... 13,811 1,381
------------
Telecom Services -- 0.0%
Leap Wireless International, Inc.
Expires 04/15/10 (strike price
$96.80) *(4)(5)............................ 500 0
------------
Total Warrants
(cost $39,260)............................. 1,381
------------
Total Long-Term Investment Securities
(cost $761,279,529)........................ 745,030,719
------------
SHORT-TERM INVESTMENT SECURITIES -- 3.4%
Time Deposits -- 3.4%
Euro Time Deposit with State Street
Bank & Trust Co.
0.60% due 04/01/08......................... $ 382,000 382,000
Euro Time Deposit with State Street
Bank & Trust Co.
1.50% due 04/01/08......................... 26,781,000 26,781,000
------------
Total Short-Term Investment Securities
(cost $27,163,000)......................... 27,163,000
------------
REPURCHASE AGREEMENTS -- 3.9%
State Street Bank & Trust Co. Joint
Repurchase Agreement(19)................... 2,471,000 2,471,000
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
REPURCHASE AGREEMENTS (continued)
UBS Securities, LLC Joint
Repurchase Agreement(19).......... $28,650,000 $ 28,650,000
------------
Total Repurchase Agreements
(cost $31,121,000)................ 31,121,000
------------
TOTAL INVESTMENTS --
(cost $819,563,529)(16)........... 100.1% 803,314,719
Liabilities in excess of other assets (0.1) (1,062,712)
----------- ------------
NET ASSETS -- 100.0% $802,252,007
=========== ============
- --------
* 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 March 31, 2008, the
aggregate value of these securities was $65,030,167 representing 8.1% 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 March 31, 2008,
maturity date reflects the stated maturity date.
(3) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of March 31, 2008.
(4) Fair valued security; see Note 2
(5) Illiquid security
(6) To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are
valued pursuant to Note 2. Restricted securities held by a Fund may not be
sold except in exempt transactions or in a public offering registered
under the Securities Act of 1933. The risk of investing in such securities
is generally greater than the risk of investing in the securities of
widely held, publicly traded companies. Lack of a secondary market and
resale restrictions may result in the inability of a Fund to sell a
security at a fair price and may substantially delay the sale of the
security. In addition, these securities may exhibit greater price
volatility than securities for which secondary markets exist. As of
March 31, 2008, the Strategic Bond Fund held the following restricted
securities:
Market
Acquisi- Principal Acquisi- Value % of
tion Amount/ tion Market per Net
Name Date Shares Cost Value Share Assets
---- ---------- --------- -------- -------- ------ ------
AMC Entertainment
Holdings, Inc.
7.80% due
06/15/12............ 06/08/2007 $400,000 $390,000
09/27/2007 11,051 11,051
12/20/2007 11,014 11,014
03/19/2008 10,658 11,918
-------- --------
432,723 423,983 $367,815 $85.00 0.05%
Critical Care Systems
International, Inc.
Common Stock........ 07/20/2006 4,107 37,181 41 0.01 0.00
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Acquisi- Principal Acquisi- Value % of
tion Amount/ tion Market per Net
Name Date Shares Cost Value Share Assets
---- ---------- ---------- ---------- ---------- --------- ------
EXCO
Resources,
Inc.
Convertible
Preferred
Stock Series
A-1, 7.00%..... 03/29/2007 $ 37 $ 370,000
09/20/2007 153 1,530,000
---------- ----------
190 1,900,000 $2,109,000 11,100.00 0.26
ICO North
America, Inc.
7.50% due
08/15/09....... 08/11/2005 200,000 200,000
04/19/2006 65,000 80,925
03/05/2008 10,000 10,000
---------- ----------
275,000 290,925 236,500 86.00 0.03
iPCS, Inc.
Common
Stock.......... 07/28/2005 1,283 0
07/20/2004 59,130 916,511
---------- ----------
60,413 916,511 1,410,644 23.35 0.18
Shreveport
Gaming
Holdings, Inc.
Common
Stock.......... 07/29/2005 2,047 47,128
07/21/2005 394 9,073
---------- ----------
2,441 56,201 55,850 22.88 0.01
Southern
Energy, Inc.
7.90% due
07/15/09....... 01/25/2006 1,125,000 0
06/06/2006 425,000 0
---------- ----------
1,550,000 0 0 0.00 0.00
Triax
Pharmaceuticals
14.70% due
08/30/11....... 08/31/2007 1,500,000 1,348,961
10/31/2007 3,875 3,875
01/10/2008 11,404 11,404
---------- ----------
1,515,279 1,364,240 1,362,702 90.00 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
========== ====
$5,674,841 0.72%
========== ====
(7) Bond in default
(8) "Step-up" security where the rate increases ("steps-up") at a
predetermined rate. Rate shown reflects the increased rate.
(9) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(10) Variable Rate Security -- the rate reflected is as of March 31, 2008,
maturity date reflects next reset date.
(11) Company has filed Chapter 11 bankruptcy protection.
(12) Bond is in default and did not pay principal at maturity
(13) Company has filed Chapter 7 bankruptcy.
(14) Perpetual maturity -- maturity date reflects the next call date.
(15) Interest Only
(16) See Note 5 for cost of investments on a tax basis.
(17) 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.
(18) 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.
(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 11 for details
(23) Principal amount of security is adjusted for inflation.
(24) Bond is in default in country of issuance.
REMIC --Real Estate Mortgage Investment Conduit
TIPS --Treasury Inflation Protected Security
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
COP-- Columbian Peso
DKK-- Danish Krone
EUR-- Euro
JPY-- Japanese Yen
NOK-- Norwegian Krone
PLN-- Polish Zloty
SEK-- Swedish Krona
See Notes to Financial Statements
46
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- March 31, 2008 -- (unaudited)
Industry Allocation*
Oil Companies-Exploration & Production.. 5.9%
Medical-Hospitals....................... 5.7
Special Purpose Entities................ 5.1
Cellular Telecom........................ 4.2
Transport-Air Freight................... 4.0
Casino Hotels........................... 3.1
Telecom Services........................ 2.7
Repurchase Agreements................... 2.6
Paper & Related Products................ 2.5
Chemicals-Specialty..................... 2.5
Pipelines............................... 2.5
Finance-Auto Loans...................... 2.4
Electric-Generation..................... 2.4
Cable TV................................ 2.3
Electric-Integrated..................... 2.3
Oil-Field Services...................... 2.1
Metal-Diversified....................... 1.9
Medical-Drugs........................... 1.9
Television.............................. 1.8
Investment Management/Advisor Services.. 1.5
Diversified Manufacturing Operations.... 1.5
Containers-Metal/Glass.................. 1.4
Independent Power Producers............. 1.3
Auto-Cars/Light Trucks.................. 1.3
Publishing-Periodicals.................. 1.3
Electronic Components-Semiconductors.... 1.2
Telephone-Integrated.................... 1.2
Diversified Financial Services.......... 1.1
Satellite Telecom....................... 1.1
Medical Products........................ 1.0
Agricultural Chemicals.................. 1.0
Physicians Practice Management.......... 0.9
Food-Meat Products...................... 0.9
Gambling (Non-Hotel).................... 0.9
Computer Services....................... 0.9
Casino Services......................... 0.9
Travel Services......................... 0.8
Retail-Drug Store....................... 0.8
Rental Auto/Equipment................... 0.8
Insurance Brokers....................... 0.7
Containers-Paper/Plastic................ 0.7
Recycling............................... 0.7
Direct Marketing........................ 0.7
Printing-Commercial..................... 0.6
Medical-HMO............................. 0.6
Consumer Products-Misc.................. 0.6
Real Estate Investment Trusts........... 0.6
Non-Hazardous Waste Disposal............ 0.6
Steel-Producers......................... 0.6
Theaters................................ 0.5
Storage/Warehousing..................... 0.5
Retail-Restaurants...................... 0.5
Electronic Components-Misc.............. 0.5
Medical Information Systems............. 0.5
Office Automation & Equipment........... 0.5
Airlines................................ 0.4
Electric Products-Misc.................. 0.4
Data Processing/Management.............. 0.4
Hotels/Motels........................... 0.4
Building-Residential/Commercial......... 0.4
Transactional Software.................. 0.4
Human Resources......................... 0.4%
Home Furnishings........................ 0.3
Building & Construction Products-Misc... 0.3
Beverages-Non-alcoholic................. 0.3
Medical-Generic Drugs................... 0.3
Auto/Truck Parts & Equipment-Original... 0.3
Medical-Nursing Homes................... 0.3
Multimedia.............................. 0.3
Food-Misc............................... 0.3
Finance-Mortgage Loan/Banker............ 0.3
Research & Development.................. 0.3
Broadcast Services/Program.............. 0.3
Leisure Products........................ 0.3
Rubber-Tires............................ 0.3
Building & Construction-Misc............ 0.3
Energy-Alternate Sources................ 0.3
Decision Support Software............... 0.2
Funeral Services & Related Items........ 0.2
Poultry................................. 0.2
Retail-Petroleum Products............... 0.2
Building Products-Wood.................. 0.2
Applications Software................... 0.2
Transport-Services...................... 0.2
Medical-Biomedical/Gene................. 0.1
Building Products-Doors & Windows....... 0.1
Vitamins & Nutrition Products........... 0.1
----
98.1%
====
Credit Quality+#
BBB....... 0.5%
BB........ 18.5
B......... 48.4
CCC....... 24.0
Below C... 0.5
Not Rated@ 8.1
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
See Notes to Financial Statements
47
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.5%
Electronic Components-Semiconductors -- 0.4%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*....................... $ 50,000 $ 31,437
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*....................... 1,845,000 827,944
----------
859,381
----------
Medical-Biomedical/Gene -- 0.1%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12........................ 250,000 193,125
----------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(1)(2)(3)............... 78,000 67,080
----------
Total Convertible Bonds & Notes
(cost $1,885,160)......................... 1,119,586
----------
CORPORATE BONDS & NOTES -- 73.8%
Agricultural Chemicals -- 1.0%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18........................ 405,000 413,100
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*....................... 1,475,000 1,585,625
----------
1,998,725
----------
Airlines -- 0.5%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11........................ 800,000 754,000
United AirLines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08........................ 176,914 176,471
----------
930,471
----------
Applications Software -- 0.2%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13....................... 375,000 372,188
----------
Auto-Cars/Light Trucks -- 1.3%
Ford Motor Co.
Debentures
6.38% due 02/01/29........................ 1,615,000 969,000
General Motors Corp.
Debentures
8.25% due 07/15/23........................ 2,310,000 1,617,000
----------
2,586,000
----------
Auto/Truck Parts & Equipment-Original -- 0.3%
Lear Corp.
Senior Notes
8.75% due 12/01/16........................ 735,000 627,506
----------
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
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 -- 0.1%
Cott Beverages USA, Inc.
Company Guar. Notes
8.00% due 12/15/11........................... 290,000 234,900
----------
Broadcast Services/Program -- 0.3%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14........................... 376,000 379,760
Nexstar Finance, Inc.
Senior Notes
11.38% due 04/01/13(4)....................... 200,000 194,250
----------
574,010
----------
Building & Construction Products-Misc. -- 0.3%
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14........................... 250,000 238,750
NTK Holdings, Inc.
Senior Notes
10.75% due 03/01/14(4)....................... 875,000 424,375
----------
663,125
----------
Building Products-Wood -- 0.2%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15.......................... 552,000 380,880
----------
Cable TV -- 2.3%
CCH II LLC/CCH II Capital Corp.
Senior Notes, Series B
10.25% due 09/15/10.......................... 900,000 816,750
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13.......................... 1,597,000 1,369,428
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
11.00% due 10/01/15.......................... 2,861,000 1,966,937
CCO Holdings LLC/CCO Holdings
Capital Corp.
Senior Notes
8.75% due 11/15/13........................... 295,000 252,225
Charter Communications, Inc.
Senior Notes
10.88% due 09/15/14*......................... 400,000 394,000
----------
4,799,340
----------
Casino Hotels -- 3.1%
Eldorado Casino Corp.
Sec. Bonds
10.00% due 08/01/12(2)(5).................... 1,721,177 1,712,571
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........................... 900,000 769,500
48
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Casino Hotels (continued)
MGM Mirage, Inc.
Senior Notes
6.63% due 07/15/15.................... $ 250,000 $ 217,500
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*................... 1,025,000 978,875
----------
6,353,446
----------
Casino Services -- 0.3%
Indianapolis Downs LLC
Sec. Notes
11.00% due 11/01/12*.................. 830,000 722,100
----------
Cellular Telecom -- 2.0%
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13................... 1,034,000 961,620
Centennial Communications Corp.
Senior Notes
10.13% due 06/15/13................... 150,000 148,125
Centennial Communications Corp.
Senior Notes
8.45% due 01/01/13(6)................. 785,000 682,950
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14.................... 1,395,000 1,283,400
Rural Cellular Corp.
Senior Sub. Notes
6.08% due 06/01/13(6)................. 1,000,000 1,000,000
----------
4,076,095
----------
Chemicals-Specialty -- 2.5%
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14.................... 1,040,000 1,102,400
Johnsondiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12.................... 150,000 147,750
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16................... 2,765,000 2,104,856
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12.................... 2,100,000 1,795,500
----------
5,150,506
----------
Computer Services -- 0.5%
Compucom Systems, Inc.
Senior Sub. Notes
12.50% due 10/01/15*.................. 1,000,000 935,000
----------
Consumer Products-Misc. -- 0.6%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12.................... 262,000 233,835
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Consumer Products-Misc. (continued)
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13....................... $ 140,000 $ 130,900
Visant Holding Corp.
Senior Notes
10.25% due 12/01/13(4)................... 955,000 892,925
----------
1,257,660
----------
Containers-Metal/Glass -- 0.6%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23....................... 1,000,000 930,000
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13....................... 305,000 315,675
----------
1,245,675
----------
Containers-Paper/Plastic -- 0.7%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12....................... 545,000 491,181
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17....................... 1,205,000 1,012,200
----------
1,503,381
----------
Data Processing/Management -- 0.4%
Seitel, Inc.
Senior Notes
9.75% due 02/15/14....................... 1,075,000 905,688
----------
Decision Support Software -- 0.2%
Vangent, Inc.
Senior Sub. Notes
9.63% due 02/15/15....................... 575,000 461,438
----------
Direct Marketing -- 0.7%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12....................... 1,500,000 1,385,625
----------
Diversified Manufacturing Operations -- 1.0%
Harland Clarke Holdings Corp.
Notes
7.82% due 05/15/15(6).................... 500,000 310,000
Harland Clarke Holdings Corp.
Notes
9.50% due 05/15/15....................... 725,000 529,250
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14...................... 575,000 468,625
Sally Holdings LLC
Company Guar. Notes
10.50% due 11/15/16...................... 785,000 726,125
----------
2,034,000
----------
49
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric-Generation -- 2.4%
Edison Mission Energy
Senior Notes
7.20% due 05/15/19......................... $1,420,000 $1,402,250
Edison Mission Energy
Senior Notes
7.63% due 05/15/27......................... 590,000 554,600
Reliant Energy Mid-Atlantic Power
Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17......................... 329,676 344,511
The AES Corp.
Senior Notes
7.75% due 10/15/15......................... 1,185,000 1,193,888
The AES Corp.
Senior Notes
8.00% due 10/15/17......................... 1,345,000 1,361,812
----------
4,857,061
----------
Electric-Integrated -- 2.3%
Energy Future Holdings Corp.
Company Guar. Notes
10.88% due 11/01/17*....................... 925,000 934,250
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11......................... 1,055,000 1,076,100
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21......................... 740,000 671,550
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(1)(2)(3)............... 3,525,000 0
Texas Competitive Electric Holdings Co. LLC
Senior Notes
10.25% due 11/01/15*(2)(3)................. 1,280,000 1,275,200
Texas Competitive Electric Holdings Co. LLC
Senior Notes
10.25% due 11/01/15*....................... 215,000 214,194
Texas Competitive Electric Holdings Co. LLC
Senior Notes
10.50% due 11/01/16*....................... 595,000 583,100
----------
4,754,394
----------
Electronic Components-Semiconductors -- 0.8%
Amkor Technology, Inc.
Senior Notes
7.75% due 05/15/13......................... 395,000 360,438
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16......................... 320,000 308,000
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14......................... 635,000 463,550
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16........................ 545,000 367,875
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*....................... 115,000 70,150
----------
1,570,013
----------
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Energy-Alternate Sources -- 0.3%
VeraSun Energy Corp.
Senior Notes
9.38% due 06/01/17*.................. $ 265,000 $ 181,525
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12................... 370,000 342,250
----------
523,775
----------
Finance-Auto Loans -- 2.4%
Ford Motor Credit Co. LLC
Senior Notes
7.38% due 10/28/09................... 2,740,000 2,496,504
GMAC LLC
Senior Notes
6.88% due 09/15/11................... 3,145,000 2,407,070
----------
4,903,574
----------
Finance-Mortgage Loan/Banker -- 0.3%
Residential Capital LLC
Company Guar. Notes
6.38% due 06/30/10................... 1,185,000 595,463
----------
Food-Misc. -- 0.3%
Wornick Co.
Sec. Notes
10.88% due 07/15/11+(8)(9)........... 950,000 598,500
----------
Funeral Services & Related Items -- 0.2%
Service Corp. International
Senior Notes
7.00% due 06/15/17................... 470,000 453,550
----------
Gambling (Non-Hotel) -- 0.9%
Downstream Development Authority
Senior Notes
12.00% due 10/15/15*................. 800,000 632,000
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*................. 600,000 546,000
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/14*.................. 691,000 659,905
----------
1,837,905
----------
Home Furnishings -- 0.4%
Simmons Co.
Company Guar. Notes
7.88% due 01/15/14................... 265,000 217,300
Simmons Co.
Senior Notes
10.00% due 12/15/14(4)............... 785,000 506,325
----------
723,625
----------
Hotel/Motel -- 0.4%
Gaylord Entertainment Co.
Company Guaranteed Notes
8.00% due 11/15/13................... 950,000 881,125
----------
50
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Human Resources -- 0.4%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13........................ $ 800,000 $ 768,000
----------
Independent Power Producers -- 1.0%
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16......................... 1,205,000 1,180,900
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10........................ 300,000 327,750
Reliant Energy, Inc.
Senior Notes
7.88% due 12/31/17......................... 570,000 567,150
----------
2,075,800
----------
Insurance Brokers -- 0.7%
USI Holdings Corp.
Senior Notes
6.94% due 11/15/14*(6)..................... 725,000 523,813
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*........................ 1,375,000 993,437
----------
1,517,250
----------
Investment Management/Advisor Services -- 1.5%
LVB Acquisition Merger Sub, Inc.
Senior Notes
10.00% due 10/15/17*....................... 635,000 665,163
LVB Acquisition Merger Sub, Inc.
Senior Notes
10.38% due 10/15/17*....................... 1,545,000 1,602,937
LVB Acquisition Merger Sub, Inc.
Senior Sub. Notes
11.63% due 10/15/17*....................... 875,000 875,000
----------
3,143,100
----------
Medical Information Systems -- 0.5%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12........................ 1,175,000 981,125
----------
Medical Products -- 1.0%
ReAble Therapeutics Finance LLC
Senior Notes
10.88% due 11/15/14*....................... 70,000 65,800
ReAble Therapeutics Finance LLC
Company Guar. Notes
11.75% due 11/15/14........................ 830,000 726,250
Universal Hospital Services, Inc.
Senior Notes
8.29% due 06/01/15(6)...................... 685,000 609,650
Universal Hospital Services, Inc.
Senior Bonds
8.50% due 06/01/15......................... 715,000 715,000
----------
2,116,700
----------
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Medical-HMO -- 0.6%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*.................... $1,375,000 $1,258,125
----------
Medical-Hospitals -- 4.5%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15...................... 2,720,000 2,730,200
HCA, Inc.
Senior Notes
6.25% due 02/15/13...................... 710,000 617,700
HCA, Inc.
Senior Notes
8.75% due 09/01/10...................... 165,000 165,000
HCA, Inc.
Senior Notes
9.13% due 11/15/14...................... 545,000 561,350
HCA, Inc.
Senior Notes
9.25% due 11/15/16...................... 3,075,000 3,190,312
HCA, Inc.
Senior Notes
9.63% due 11/15/16...................... 950,000 985,625
IASIS Healthcare LLC/IASIS Capital Corp.
Bank Guar. Notes
8.75% due 06/15/14...................... 965,000 960,175
----------
9,210,362
----------
Medical-Nursing Homes -- 0.3%
Sun Healthcare Group, Inc.
Senior Notes
9.13% due 04/15/15...................... 650,000 627,250
----------
Metal Processors & Fabrication -- 0.0%
International Utility Structures
Senior Sub Notes
10.75% due 02/01/08+(1)(2)(8)(10)....... 2,150,000 43,000
----------
Metal-Diversified -- 1.9%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17...................... 1,830,000 1,942,087
Noranda Aluminium Acquisition Corp.
Senior Notes
8.74% due 05/15/15*(6).................. 1,845,000 1,448,325
Noranda Aluminium Holding Corp.
Senior Notes
10.49% due 11/15/14*(6)................. 750,000 555,000
----------
3,945,412
----------
Multimedia -- 0.2%
Haights Cross Operating Co.
Senior Notes
11.75% due 08/15/11..................... 325,000 318,500
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(1)(2)(11)(12)...... 2,150,000 0
----------
51
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Non-Hazardous Waste Disposal -- 0.6%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17......................... $ 705,000 $ 690,900
Allied Waste North America, Inc.
Senior Notes
7.88% due 04/15/13......................... 415,000 426,931
Waste Services, Inc.
Senior Sub. Notes
9.50% due 04/15/14......................... 75,000 71,813
----------
1,189,644
----------
Office Automation & Equipment -- 0.5%
IKON Office Solutions, Inc.
Senior Notes
7.69% due 01/01/12*(6)..................... 1,000,000 961,250
----------
Oil Companies-Exploration & Production -- 3.3%
Atlas Energy Resources LLC
Senior Notes
10.75% due 02/01/18*....................... 575,000 582,187
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12......................... 190,000 190,475
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14......................... 675,000 580,500
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15*........................ 760,000 661,200
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16......................... 875,000 857,500
Dune Energy, Inc.
Senior Sec. Notes
10.50% due 06/01/12........................ 400,000 348,000
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15......................... 365,000 328,500
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14......................... 820,000 676,500
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*........................ 850,000 796,875
Sabine Pass LNG LP
Sec. Notes
7.50% due 11/30/16......................... 1,395,000 1,346,175
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10........................ 650,000 507,000
----------
6,874,912
----------
Oil-Field Services -- 0.9%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14......................... 580,000 527,800
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Oil-Field Services (continued)
Helix Energy Solutions Group, Inc.
Senior Notes
9.50% due 01/15/16*................ $ 475,000 $ 475,000
Key Energy Services, Inc.
Senior Notes
8.38% due 12/01/14*................ 375,000 374,063
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11................. 457,043 486,818
----------
1,863,681
----------
Paper & Related Products -- 1.1%
Bowater, Inc.
Notes
6.50% due 06/15/13................. 570,000 376,200
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09................. 610,000 414,800
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*................ 685,000 642,187
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*................ 365,000 337,625
NewPage Corp.
Sec. Notes
10.00% due 05/01/12................ 125,000 126,875
NewPage Corp.
Senior Notes
10.00% due 05/01/12*............... 365,000 370,475
----------
2,268,162
----------
Physicians Practice Management -- 0.9%
US Oncology, Inc.
Senior Sub. Notes
10.75% due 08/15/14................ 1,900,000 1,876,250
----------
Pipelines -- 2.5%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15................. 610,000 620,675
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16................. 925,000 957,375
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12................. 25,000 25,688
Dynegy-Roseton Danskammer
Pass Through Certs. Series B
7.67% due 11/08/16................. 1,375,000 1,377,585
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14................. 685,000 700,412
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14................. 570,000 538,650
NGC Corp Capital Trust
Bonds
8.32% due 06/01/27................. 1,050,000 900,375
----------
5,120,760
----------
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Poultry -- 0.2%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17.................... $ 495,000 $ 435,600
----------
Printing-Commercial -- 0.2%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15.................... 610,000 501,725
----------
Publishing-Periodicals -- 0.9%
Idearc, Inc.
Company Guar. Notes
8.00% due 11/15/16.................... 850,000 550,375
R.H. Donnelley Corp.
Senior Notes
8.88% due 10/15/17*................... 545,000 340,625
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*................... 1,320,000 881,100
----------
1,772,100
----------
Real Estate Investment Trusts -- 0.6%
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14.................... 1,280,000 1,228,800
----------
Recycling -- 0.7%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14.................... 1,245,000 908,850
Aleris International, Inc.
Company Guar. Notes
10.00% due 12/15/16................... 835,000 530,225
----------
1,439,075
----------
Rental Auto/Equipment -- 0.6%
Rental Service Corp.
Notes
9.50% due 12/01/14.................... 760,000 634,600
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13.................... 745,000 607,175
----------
1,241,775
----------
Research & Development -- 0.3%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15................... 1,030,000 581,950
----------
Retail-Drug Store -- 0.8%
Rite Aid Corp.
Senior Notes
9.50% due 06/15/17.................... 2,055,000 1,613,175
----------
Retail-Petroleum Products -- 0.2%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14.................... 445,000 433,875
----------
Retail-Regional Department Stores -- 0.0%
Neiman-Marcus Group, Inc.
Senior Sub. Notes
10.38% due 10/15/15................... 55,000 55,000
----------
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Retail-Restaurants -- 0.5%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14....................... $ 365,000 $ 332,150
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14........................ 830,000 751,150
----------
1,083,300
----------
Rubber-Tires -- 0.3%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14........................ 710,000 537,825
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(1)(2)(11)(12)........ 550,000 55
----------
Special Purpose Entities -- 4.8%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12(4).................... 1,100,000 891,000
Axcan Intermediate Holdings, Inc.
Senior Notes
9.25% due 03/01/15*....................... 550,000 544,500
Buffalo Thunder Development Authority
Senior Notes
9.38% due 12/15/14*....................... 610,000 457,500
CCM Merger, Inc.
Notes
8.00% due 08/01/13*....................... 850,000 714,000
Chukchansi Economic Development Authority
Senior Notes
8.00% due 11/15/13*....................... 1,100,000 990,000
Consolidated Communications Illinois/Texas
Holdings, Inc.
Senior Notes
9.75% due 04/01/12........................ 810,000 849,488
Hawker Beechcraft Acquisition Co. LLC/
Hawker Beechcraft Notes Co.
Senior Notes
9.75% due 04/01/17........................ 725,000 721,375
Hexion US Fin Corp.
Company Guar. Notes
9.75% due 11/15/14........................ 910,000 975,975
KAR Holdings, Inc.
Senior Notes
7.24% due 05/01/14(6)..................... 500,000 412,500
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14........................ 290,000 258,100
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*....................... 545,000 436,681
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12........................ 646,000 675,070
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
MXEnergy Holdings, Inc.
Senior Notes
10.69% due 08/01/11(6).................. $ 900,000 $ 810,000
PNA Intermediate Holding Corp.
Senior Notes
10.07% due 02/15/13(6).................. 300,000 233,250
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*..................... 625,000 534,375
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16...................... 300,000 288,000
----------
9,791,814
----------
Steel-Producer -- 0.6%
Ryerson, Inc.
Senior Sec. Notes
12.00% due 11/01/15*.................... 1,215,000 1,148,175
----------
Storage/Warehousing -- 0.5%
Mobile Mini, Inc.
Notes
6.88% due 05/01/15...................... 555,000 460,650
Mobile Services Group, Inc.
Company Guar. Notes
9.75% due 08/01/14...................... 685,000 640,475
----------
1,101,125
----------
Telecom Services -- 1.8%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23...................... 375,000 322,500
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23...................... 1,525,000 1,311,500
Fair point Communications, Inc.
Senior Notes
13.13% due 04/01/18*.................... 850,000 816,000
PAETEC Holding Corp.
Company Guaranteed Notes
9.50% due 07/15/15...................... 1,370,000 1,260,400
----------
3,710,400
----------
Telephone-Integrated -- 1.2%
Cincinnati Bell, Inc.
Company Guar. Notes
7.00% due 02/15/15...................... 375,000 339,375
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23...................... 225,000 193,500
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31...................... 16,000 14,000
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14...................... 1,320,000 1,240,800
Sprint Capital Corp.
Company Guar. Bonds
6.38% due 05/01/09...................... 650,000 640,250
----------
2,427,925
----------
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Television -- 1.8%
ION Media Networks, Inc.
Senior Notes
5.69% due 01/15/12*(6)............ $ 125,000 $ 101,250
ION Media Networks, Inc.
Sec. Senior Notes
10.51% due 01/15/13*(6)........... 2,525,000 1,893,750
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13................ 1,025,000 950,687
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14................ 685,000 404,150
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11............... 710,000 445,525
------------
3,795,362
------------
Theater -- 0.5%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................ 1,310,000 1,110,225
------------
Transactional Software -- 0.4%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*............... 1,000,000 775,000
------------
Transport-Air Freight -- 4.0%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................ 5,437,354 5,981,089
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20*............... 768,209 749,004
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20................ 19,499 19,012
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................ 1,301,358 1,548,616
------------
8,297,721
------------
Transport-Services -- 0.2%
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................ 365,000 334,888
------------
Travel Service -- 0.4%
Travelport LLC
Company Guar. Notes
11.88% due 09/01/16............... 1,025,000 871,250
------------
Vitamins & Nutrition Products -- 0.1%
General Nutrition Centers, Inc.
Company Guar. Notes
7.20% due 03/15/14(6)............. 140,000 116,900
------------
Total Corporate Bonds & Notes
(cost $167,203,382)............... 151,461,067
------------
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES -- 8.1%
Building & Construction-Misc. -- 0.3%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11......................... $ 535,000 $ 529,650
----------
Building Products-Doors & Windows -- 0.1%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15........................ 223,000 151,640
----------
Containers-Metal/Glass -- 0.8%
Vitro SAB de CV
Senior Notes
9.13% due 02/01/17......................... 1,865,000 1,547,950
----------
Diversified Manufacturing Operations -- 0.5%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*........................ 1,045,000 1,076,350
----------
Electronic Components-Misc. -- 0.5%
NXP BV/NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15......................... 1,305,000 1,073,362
----------
Food-Meat Products -- 0.9%
JBS SA
Company Guar. Notes
9.38% due 02/07/11......................... 1,075,000 1,072,312
JBS SA
Senior Notes
10.50% due 08/04/16*....................... 825,000 796,125
----------
1,868,437
----------
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 -- 1.1%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
6.83% due 12/01/13(6)...................... 1,005,000 768,825
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14......................... 520,000 317,200
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11......................... 1,320,000 1,227,600
----------
2,313,625
----------
Multimedia -- 0.1%
Quebecor Media, Inc.
Senior Notes
7.75% due 03/15/16*........................ 325,000 296,563
----------
Oil Companies-Exploration & Production -- 0.7%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13......................... 825,000 789,937
OPTI Canada, Inc.
Senior Notes
7.88% due 12/15/14......................... 685,000 669,588
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Oil Companies-Exploration & Production
(continued)
OPTI Canada, Inc.
Senior Notes
8.25% due 12/15/14..................... $ 25,000 $ 24,750
-----------
1,484,275
-----------
Paper & Related Products -- 0.9%
Abitibi-Consolidated Co. of Canada
Senior Notes
13.75% due 04/01/11*................... 900,000 920,250
Abitibi-Consolidated Finance LP
Company Guar. Bonds
7.88% due 08/01/09..................... 215,000 180,600
Abitibi-Consolidated, Inc.
Notes
6.00% due 06/20/13..................... 275,000 133,375
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10..................... 1,245,000 715,875
-----------
1,950,100
-----------
Printing-Commercial -- 0.4%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16+(9)(10)............. 1,605,000 762,375
-----------
Satellite Telecom -- 1.1%
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16.................... 500,000 506,875
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(4).................. 2,035,000 1,729,750
-----------
2,236,625
-----------
Special Purpose Entity -- 0.3%
Hellas Telecommunications
Luxembourg II
Sub. Notes
8.46% due 01/15/15*(6)................. 900,000 643,500
-----------
Telecom Services -- 0.4%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14.................... 635,000 628,650
Wind Acquisition Finance SA
Company Guar. Bonds
10.75% due 12/01/15*................... 125,000 127,500
-----------
756,150
-----------
Total Foreign Corporate Bonds & Notes
(cost $21,886,434)..................... 16,695,062
-----------
LOANS(13)(14) -- 7.7%
Beverages-Non-alcoholic -- 0.2%
Le-Natures, Inc.
9.39% due 03/01/11+(2)(3)(8)(9)........ 1,200,000 426,000
-----------
Building-Residential/Commercial -- 0.4%
TOUSA, Inc.
13.13% due 07/31/13(2)(3)(5)........... 1,071,107 816,719
-----------
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
LOANS (continued)
Casino Services -- 0.3%
Herbst Gaming, Inc.
Strip-Term B
7.13% due 12/02/11(2)(3).............. $ 110,637 $ 79,327
Herbst Gaming, Inc.
Delayed Draw-Term B
9.22% due 12/02/11(2)(3).............. 388,103 278,270
Herbst Gaming. Inc.
Delayed Draw-Term B-1
9.22% due 12/02/11(2)(3).............. 180,434 129,371
Herbst Gaming, Inc.
Tranche 3
9.22% due 12/02/11(2)(3).............. 91,523 65,622
Herbst Gaming, Inc.
Tranche 2
9.33% due 12/02/11(2)(3).............. 52,022 37,300
Herbst Gaming, Inc.
9.33% due 12/02/11(2)(3).............. 2,207 1,583
Herbst Gaming, Inc.
Tranche1
9.64% due 12/02/11(2)(3).............. 173,813 124,624
----------
716,097
----------
Computer Services -- 0.4%
CompuCom Systems, Inc.
6.63% due 08/30/14(2)(3).............. 995,000 870,625
----------
Diversified Financial Services -- 1.1%
Wind Acquisition Holdings Finance S.A.
12.61% due 12/21/11(2)(3)(5).......... 2,625,508 2,287,473
----------
Electric Products-Misc. -- 0.4%
Texas Competitive Electric
6.60% due 10/10/14(2)................. 880,833 804,261
Texas Competitive Electric
6.48% due 10/10/14(2)................. 114,167 103,949
----------
908,210
----------
Leisure Products -- 0.3%
AMC Entertainment Holdings, Inc.
7.80% due 06/15/12(2)(3).............. 649,085 551,722
----------
Medical-Drugs -- 0.7%
Triax Pharmaceuticals LLC
14.70% due 08/30/11(1)(2)(3)(15)(16).. 1,515,279 1,362,702
----------
Medical-Hospitals -- 1.0%
Capella Healthcare, Inc.
13.00% due 02/29/16(2)(3)............. 1,000,000 1,000,000
Iasis Healthcare Corp.
8.49% due 06/15/14(2)(3).............. 1,082,746 985,299
----------
1,985,299
----------
Oil-Field Services -- 0.9%
Stallion Oilfield Service
7.61% due 07/30/12(2)(3).............. 2,000,000 1,780,000
----------
Paper & Related Products -- 0.5%
Boise Paper Holdings LLC
9.63% due 02/22/15.................... 1,000,000 942,500
----------
Shares/ Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Publishing-Periodicals -- 0.4%
R.H. Donnelley Corp.
4.58% due 06/30/11(2)(3)................... $1,000,000 $ 932,375
-----------
Rental Auto/Equipment -- 0.2%
Neff Corp.
8.40% due 11/30/14(2)(3)................... 500,000 345,834
-----------
Telecom Services -- 0.5%
Telesat Canada
Senior Sub Bridge Loan
9.00% due 10/31/08(2)...................... 1,000,000 955,000
-----------
Travel Service -- 0.4%
Travelport Holdngs Ltd
10.10% due 03/27/12(2)(3)(5)............... 1,120,229 784,160
-----------
Total Loans
(cost $17,863,952)......................... 15,664,716
-----------
COMMON STOCK -- 3.2%
Casino Services -- 0.2%
Capital Gaming International, Inc.+(1)...... 77 0
Shreveport Gaming Holdings, Inc.+(1)(2)(3).. 14,150 323,752
-----------
Cellular Telecom -- 2.2%
iPCS, Inc.+(1)(2)(3)........................ 190,810 4,455,414
-----------
Independent Power Producers -- 0.3%
Calpine Corp................................ 29,312 539,927
Mirant Corp.+............................... 4,388 159,679
-----------
699,606
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC+(1)(2)(3)(17)..... 128,418 53,936
-----------
Medical-Hospitals -- 0.2%
MedCath Corp.+.............................. 27,601 502,338
-----------
Medical-Outpatient/Home Medical -- 0.0%
Critical Care Systems International,
Inc.+(1)(2)(3)............................. 69,700 697
-----------
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+............ 40 36
-----------
Oil-Field Services -- 0.3%
Trico Marine Services, Inc.+................ 15,745 613,583
-----------
Total Common Stock
(cost $2,800,677).......................... 6,649,362
-----------
PREFERRED STOCK -- 2.2%
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC,
Class C
15.00%(1)(2)(3)(17)........................ 39,177 78,353
-----------
Medical-Generic Drugs -- 0.3%
Mylan, Inc.
6.50%...................................... 750 648,270
-----------
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Shares/ Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
PREFERRED STOCK (continued)
Oil Companies-Exploration & Production -- 1.9%
EXCO Resources, Inc.
Convertible Series A-1
7.00%(1)(3)(5)............................. 318 $ 3,529,800
Transmeridian Exploration, Inc.
Convertible
15.00%(1)(5)............................... 7,334 293,360
------------
3,823,160
------------
Total Preferred Stock
(cost $4,664,067).......................... 4,549,783
------------
WARRANTS -- 0.0%+
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10
(strike price $4.31)(1).................... 44,885 4,489
------------
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
------------
Total Warrants
(cost $138,277)............................ 4,489
------------
Total Long-Term Investment Securities
(cost $215,740,182)........................ 196,144,065
------------
REPURCHASE AGREEMENT -- 2.6%
State Street Bank & Trust Co. Joint
Repurchase Agreement(18)
(cost $5,281,000).......................... $5,281,000 5,281,000
------------
TOTAL INVESTMENTS --
(cost $221,021,182)(7)..................... 98.1% 201,425,065
Other assets less liabilities................. 1.9 3,829,656
---------- ------------
NET ASSETS -- 100.0% $205,254,721
========== ============
- --------
* 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 March 31, 2008, the aggregate value of
these securities was $38,103,190 representing 18.56% 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 March 31, 2008, the High
Yield Bond Fund held the following restricted securities:
Market
Acquisi- Acquisi- Value % of
tion Principal/ tion Market per Net
Name Date Shares Cost Value Share Assets
---- ---------- ---------- ---------- ---------- ---------- ------
AMC Entertai
nment
Holdings
7.80% due
06/15/12
Loan
Agreement..... 06/08/2007 $ 600,000 $ 585,000
09/17/2007 16,576 16,576
12/20/2007 16,521 16,521
03/19/2008 15,988 15,988
---------- ----------
649,085 634,085 $ 551,722 $ 85.00 0.27%
Capella
Healthcare,
Inc. 13.00%
due
02/29/16
Loan
Agreement..... 3/3/2008 1,000,000 990,000 1,000,000 100.00 0.49%
CompuCom
Systems,
Inc. 6.63%
due
08/30/14
Loan
Agreement..... 3/31/2008 995,000 955,193 870,625 88.00 0.42%
Critical Care
Systems
International,
Inc.
Common
Stock......... 07/20/2006 69,700 606,739 697 0.01 0.00%
EXCO
Resources,
Inc. 7.00%,
Series A-1
Preferred
Stock......... 03/29/2007 318 3,180,000 3,529,800 11,100.00 1.72%
Herbst
Gaming,
Inc. 7.13%
due
12/02/11
Loan
Agreement..... 2/21/2008 $ 110,637 90,496 79,327 72.00 0.04%
Herbst
Gaming,
Inc. 9.22%
due
12/02/11
Delayed
Draw Term
B Loan
Agreement..... 2/21/2008 388,103 318,245 278,270 72.00 0.14%
57
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Acquisi- Acquisi- Value % of
tion Principal/ tion Market per Net
Name Date Shares Cost Value Share Assets
---- ---------- ---------- ---------- ---------- ------ ------
Herbst Gaming,
Inc. 9.22% due
12/02/11
Delayed Draw
Term B-1 Loan
Agreement...... 3/26/2008 $ 180,434 $ 128,559 $ 129,371 $72.00 0.06%
Herbst Gaming,
Inc. 9.22% due
12/02/11
Tranche 3 Loan
Agreement...... 3/26/2008 91,523 65,210 65,622 72.00 0.03%
Herbst Gaming,
Inc. 9.33% due
12/02/11
Tranche 2 Loan
Agreement...... 3/26/2008 52,022 37,066 37,300 72.00 0.02%
Herbst Gaming,
Inc. 9.33% due
12/02/11 Loan
Agreement...... 3/26/2008 2,207 1,572 1,583 72.00 0.00%
Herbst Gaming,
Inc. 9.64% due
12/02/11
Tranche 1 Loan
Agreement...... 3/26/2008 173,813 123,842 124,624 72.00 0.06%
Iasis Healthcare
Corp. 8.49%
due 06/15/14
Loan
Agreement...... 4/13/2007 1,000,000 985,000
7/26/2007 26,516 26,516
10/31/2007 27,834 27,834
1/31/2008 28,396 28,397
---------- ----------
1,082,746 1,067,747 985,299 91.00 0.48%
ICO North
America, Inc.
7.50% due
08/15/09....... 08/11/2005 75,000 75,000
03/05/2008 3,000 3,000
---------- ----------
78,000 78,000 67,080 86.00 0.03%
iPCS, Inc.
Common
Stock.......... 07/20/2004 183,497 2,998,963
07/28/2005 7,313 0
---------- ----------
190,810 2,998,963 4,455,414 23.35 2.17%
Market
Acquisi- Acquisi- Value % of
tion Principal/ tion Market per Net
Name Date Shares Cost Value Share Assets
---- ---------- ---------- ---------- ---------- ------ ------
Le-Natures, Inc.
9.39% due
03/01/11 Loan
Agreement....... 9/26/2006 $1,200,000 $1,200,000 $ 426,000 $36.00 0.21%
Neff Corp. 8.40%
due 11/30/14
Loan
Agreement....... 5/22/2007 500,000 500,000 345,834 69.00 0.17%
R.H.Donnelley
Corp. 4.58%
due 06/30/11
Loan
Agreement....... 2/28/2008 1,000,000 92,890 932,375 93.00 0.45%
Shreveport
Gaming
Holdings, Inc.
Common
Stock........... 07/21/2005 2,321 53,448
07/29/2005 11,829 272,336
---------- ----------
14,150 325,784 323,752 22.88 0.16%
Southern Energy,
Inc. 7.90% due
07/15/09........ 01/10/2006 $3,525,000 0 0 0.00 0.00%
Stallion Oilfield
Service 7.61%
due 07/30/12
Loan
Agreement....... 07/18/2007 1,000,000 980,000
12/04/2007 1,000,000 950,000
---------- ----------
2,000,000 1,930,000 1,780,000 89.00 0.87%
Texas
Competitive
Electric
10.25% due
11/01/15........ 10/24/2007 1,280,000 1,348,084 1,275,200 99.63 0.62%
TOUSA,Inc.
13.13% due
07/31/13 Loan
Agreement....... 10/11/2007 1,022,829 920,511
1/16/2008 11,293 11,293
3/6/2008 10,700 10,700
3/31/2008 26,285 26,285
---------- ----------
1,071,107 968,789 816,719 76.00 0.40%
58
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Market
Acquisi- Acquisi- Value % of
tion Principal/ tion Market per Net
Name Date Shares Cost Value Share Assets
- ---- ---------- ---------- ---------- ----------- ------ ------
Travelport Holdings,
Ltd. 10.10% due
03/27/12 Loan
Agreement........... 03/30/2007 $1,000,000 $ 970,000
06/29/2007 32,390 32,389
09/28/2007 32,255 32,255
12/31/2007 33,909 33,909
02/29/2008 21,675 21,675
---------- ----------
1,120,229 1,090,228 $ 784,160 $70.00 0.38%
Triax
Pharmaceuticals
LLC 14.70% due
08/30/11
Class C Loan
Agreement........... 08/30/2007 1,500,000 1,348,961
10/31/2007 3,875 3,875
01/10/2008 11,404 11,404
---------- ----------
1,515,279 1,364,240 1,362,702 90.00 0.66%
Triax Pharmaceuticals
LLC Common
Stock............... 08/31/2007 128,418 53,936 53,936 0.42 0.03%
Triax Pharmaceuticals
LLC, Class C
15.00% Preferred
Stock............... 08/31/2007 39,177 78,353 78,353 2.00 0.04%
Wind Acquisition
Holdings Finance
S.A.12.61% due
12/21/11 Loan
Agreement........... 02/27/2007 206,306 205,512
03/06/2007 206,305 205,020
03/15/2007 515,763 513,799
03/19/2007 309,459 307,530
06/21/2007 412,748 415,000
08/15/2007 16,438 16,438
07/18/2007 6,575 6,575
07/18/2007 6,575 6,575
07/18/2007 9,863 9,863
11/05/2007 54,462 54,462
11/09/2007 800,000 801,854
01/31/2008 81,014 81,014
---------- ----------
2,625,508 2,623,642 2,287,473 87.00 1.10%
---------- ---------- ----------- -----
$22,643,238 11.02%
=========== =====
(4)"Step-up" security where the rate increases ("steps-up") at a predetermined
rate. Rate shown reflects the increased rate.
(5)PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(6)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of March 31, 2008.
(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)Company has filed bankruptcy in country of issuance.
(11)Bond is in default and did not pay principal at maturity.
(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)A portion of the interest is paid in the form of additional bonds.
(16)Loan is subject to an unfunded loan commitment. See Note 11 for details
(17)Consist of more than one class of securities traded together as a unit.
(18)See Note 2 for details of Joint Repurchase Agreement.
See Notes to Financial Statements
59
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- March 31, 2008 -- (unaudited)
Allocation by States*
Ohio........................... 18.6%
New York....................... 14.8
Massachusetts.................. 13.6
Georgia........................ 7.3
Indiana........................ 7.2
New Jersey..................... 5.2
Connecticut.................... 5.1
Alabama........................ 4.9
New Mexico..................... 4.9
South Dakota................... 4.2
North Carolina................. 3.7
South Carolina................. 3.7
Michigan....................... 3.5
California..................... 1.2
Idaho.......................... 0.7
Pennsylvania................... 0.2
Registered Investment Companies 0.1
----
98.9%
====
Credit Quality Allocation+#
AAA....... 80.3%
AA........ 13.4
A......... 4.0
Not Rated@ 2.3
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or, the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
60
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 95.9%
Alabama -- 4.9%
Auburn University General Fee Revenue,
Series A
5.00% due 06/01/33(1)......................... $1,000,000 $ 997,090
State of Alabama
Series A
5.00% due 08/01/17(1)......................... 1,500,000 1,655,055
----------
2,652,145
----------
Connecticut -- 5.1%
State of Connecticut
Refunded, Series B,
5.00% due 06/01/14(1)......................... 2,500,000 2,746,775
----------
Georgia -- 7.3%
Augusta Georgia Water & Sewer Revenue,
Refunding
5.00% due 10/01/30(1)......................... 1,500,000 1,512,135
Douglas County Georgia School District,
General Obligation
5.00% due 04/01/24(1)......................... 2,240,000 2,318,736
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/09(1)......................... 60,000 62,075
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/13(1)......................... 85,000 94,185
----------
3,987,131
----------
Indiana -- 7.2%
Indiana Transportation Finance
Authority Highway Revenue,
Series A,
5.25% due 06/01/26(1)......................... 3,500,000 3,896,095
----------
Massachusetts -- 13.6%
Massachusetts State Water Resources Authority,
Revenue,
Series A,
5.00% due 08/01/24(1)......................... 3,910,000 3,988,317
University Massachusetts Building
Authority Project Revenue,
Series 04-1,
5.25% due 11/01/27(1)......................... 3,000,000 3,379,170
----------
7,367,487
----------
Michigan -- 3.5%
Detroit Michigan Sewer Disposal Revenue,
3.77% due 07/01/32(1)(2)...................... 2,445,000 1,919,325
----------
New Jersey -- 5.2%
Garden State New Jersey Preservation
Trust Open Space And Farmland Preservation,
Series A,
5.80% due 11/01/17(1)......................... 2,500,000 2,844,100
----------
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
New Mexico -- 4.9%
New Mexico Finance Authority Transportation,
Series A,
5.25% due 06/15/21(1)......................... $2,500,000 $2,675,600
----------
New York -- 14.4%
City of Niagara Falls New York,
General Obligation
7.50% due 03/01/13(1)......................... 410,000 488,490
City of Niagara Falls New York,
General Obligation
7.50% due 03/01/13(1)......................... 35,000 42,337
City of Niagara Falls New York,
General Obligation
7.50% due 03/01/14(1)......................... 45,000 55,727
City of Niagara Falls New York,
General Obligation
7.50% due 03/01/14(1)......................... 510,000 620,186
New York State Thruway Authority,
Series H
5.00% due 01/01/19(1)......................... 1,000,000 1,080,820
New York State Thruway Authority,
Series G,
5.25% due 01/01/27(1)......................... 1,500,000 1,545,405
Sales Tax Asset Receivables Corp.,
Series A,
5.25% due 10/15/27(1)......................... 2,000,000 2,066,900
Triborough Bridge & Tunnel Authority,
General Purpose
4.75% due 11/15/30............................ 2,000,000 1,940,540
----------
7,840,405
----------
North Carolina -- 3.7%
University of North Carolina Revenue,
5.00% due 12/01/31............................ 2,000,000 2,013,580
----------
Ohio -- 18.2%
Cuyahoga County, Ohio Revenue,
Series A,
5.75% due 01/01/24............................ 2,000,000 2,077,620
Franklin County, Ohio Hospital Revenue,
Series C,
5.25% due 05/15/23............................ 3,000,000 3,056,340
Olentangy Local School District Ohio,
Series A,
5.25% due 12/01/27(1)......................... 3,250,000 3,627,422
Woodridge, Ohio, Woodmore Local
School District,
6.80% due 12/01/14(1)......................... 1,000,000 1,118,820
----------
9,880,202
----------
South Carolina -- 3.7%
South Carolina State Public Service Authority,
Series A
5.00% due 01/01/32(1)......................... 2,000,000 2,011,100
----------
61
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- March 31, 2008 -- (continued)
Principal Market
Amount/ Value
Security Description Shares (Note 2)
--------------------------------------------------------------------
MUNICIPAL BONDS & NOTES (continued)
South Dakota -- 4.2%
South Dakota State Health &
Educational Facilities Revenue,
Refunding,
6.25% due 07/01/10(1)..................... $2,120,000 $ 2,287,545
-----------
Total Long-Term Investment Securities
(cost $50,925,833)........................ 52,121,490
-----------
SHORT-TERM INVESTMENT SECURITIES -- 3.0%
California -- 1.2%
California Housing Finance Agency Revenue,
Bonds Series J
3.00% due 08/01/08(1)(3).................. 650,000 650,000
-----------
Idaho -- 0.7%
Idaho Health Facilities Authority Revenue,
St. Lukes Regional Medical Center Project
1.20% due 04/01/08(1)(3).................. 400,000 400,000
-----------
New York -- 0.4%
City of New York NY,
General Obligation
1.01% due 04/01/08(3)..................... 200,000 200,000
-----------
Ohio -- 0.4%
Ohio Housing Finance Agency Mtg. Revenue,
Residential Mtg.
1.95% due 09/01/08(3)..................... 200,000 200,000
-----------
Pennsylvania -- 0.2%
Pittsburgh PA Water & Sewer Authority,
Series B-2
1.75% due 04/02/08(1)(3).................. 100,000 100,000
-----------
Registered Investment Company -- 0.1%
SSgA Tax Free Money Market Fund............ 61,534 61,534
-----------
Total Short-Term Investment Securities
(cost $1,611,534)......................... 1,611,534
-----------
TOTAL INVESTMENTS --
(cost $52,537,367)(4)..................... 98.9% 53,733,024
Other assets less liabilities................ 1.1 602,386
---------- -----------
NET ASSETS -- 100.0% $54,335,410
========== ===========
- --------
(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 $44,183,410 or 81.3% of
Net Assets.
(2) Floating rate security where the rate fluctuates. The rate moves up or
down at each reset date. The rate reflected is as of March 31, 2008.
(3) Variable Rate Security -- the rate reflected is as of March 31, 2008,
maturity date reflects next reset date.
(4) See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
62
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008
Note 1. Organization
The SunAmerica Income Funds is an open-end diversified management investment
company organized as a Massachusetts business trust (the "Trust"). It
currently consists of five different series (each, a "Fund" and
collectively, the "Funds"). Each Fund is a separate series of the Trust with
distinct investment objectives and/or strategies. Each Fund is managed by
AIG SunAmerica Asset Management Corp. (the "Adviser" or "AIG SunAmerica"),
an indirect wholly-owned subsidiary of American International Group, Inc.
("AIG"). An investor may invest in one or more of the following Funds:
SunAmerica U.S. Government Securities Fund, SunAmerica GNMA Fund, SunAmerica
Strategic Bond Fund, SunAmerica High Yield Bond Fund and SunAmerica Tax
Exempt Insured Fund. The Funds are considered to be separate entities for
financial and tax reporting purposes. 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 net assets plus any
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 net assets plus
any 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 U.S. and foreign 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 net assets plus any
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 net 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 the
active trading of municipal bonds and other municipal securities. Under
normal market conditions, at least 80% of Fund's net assets plus any
borrowing for investment purposes will be invested in municipal bonds and
other municipal securities, the income of which is exempt from federal
income taxes, and that are insured as to the scheduled payment of principal
and interest for as long as such securities are held by the Fund, without
regard to the maturities of such securities.
Each Fund offers multiple classes of shares. The classes within each Fund
are presented in the Statement of Assets and Liabilities. The cost structure
for each class is as follows:
Class A shares are offered at net asset value per share plus an initial
sales charge. Additionally, purchases of Class A shares in amounts of
$1,000,000 or more 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 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.
63
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
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 by using the average of at least two independent
quotes obtained from brokers.
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.
Investments in open-end and closed-end registered investment companies that
do not trade on an exchange are valued at the end of day net asset value per
share. Investments in open-end and closed-end registered investment
companies that trade on an exchange are valued at the last sales price or
official closing price as of the close of the customary trading session on
the exchange where the security is principally traded.
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.
64
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (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 March 31, 2008, 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. 1.46% $2,471,000
High Yield Bond 3.12 5,281,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
State Street Bank & Trust Co., dated March 31, 2008, bearing interest at a
rate of 0.80% per annum, with a principal amount of $169,381,000, a
repurchase price of $169,384,764 and a maturity date of April 1, 2008. The
repurchase agreement is collateralized by the following:
Interest Maturity Principal
Type of Collateral Rate Date Amount Market Value
- ------------------ -------- -------- ----------- ------------
U.S. Treasury Bonds 6.25% 08/15/23 $93,628,724 $95,501,775
U.S. Treasury Bonds 8.00 11/15/21 15,573,722 15,885,196
U.S. Treasury Bonds 8.75 08/15/20 60,178,554 61,382,125
In addition, at March 31, 2008, 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 1.50% $ 1,500,000
GNMA...................... 1.82 1,818,000
Strategic Bond............ 28.65 28,650,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Securities LLC, dated March 31, 2008, bearing interest at a rate of
1.40% per annum, with a principal amount of $100,000,000 a repurchase price
of $100,003,889, and a maturity date of April 1, 2008. The repurchase
agreement is collateralized by the following:
Interest Maturity Principal
Type of Collateral Rate Date Amount Market Value
- ------------------ -------- -------- ------------ ------------
U.S. Treasury Inflation Index Bonds 3.44% 07/15/14 $100,000,000 $102,000,201
65
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (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. Each Fund files U.S. federal
and certain state income tax returns. With few exceptions, each Fund is no
longer subject to U.S. federal and state tax examinations by tax authorities
for tax returns ending before 2004.
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. The management of the Trust 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 March 31, 2008, 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.
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
Investment Securities Loaned: During the year ended March 31, 2008, U.S.
Government Securities Fund and GNMA Fund participated in securities lending
with qualified brokers. In lending portfolio securities to brokers the Funds
receive cash as collateral against the loaned securities, which must be
maintained at not less than 102% of the market value of the loaned
securities during the period of the loan. The Funds may use the cash
collateral received to invest in short-term investments which earn interest
income or to cover bank overdrafts. Any interest earned from the investment
of the collateral is recorded by the Funds net of the portion of interest
that is rebated to the borrowing broker. If the amounts are used to cover
bank overdrafts, the broker rebates incurred are reflected as interest
expense on the Statement of Operations. As with other extensions of credit,
should the borrower of the securities fail financially, the Funds may bear
the risk of delay in recovery or may be subject to replacing the loaned
securities by purchasing them with the cash collateral held, which may be
less than 100% of the market value of such securities at the time of
replacement.
At March 31, 2008, there were no loaned securities outstanding in the U.S.
Government Securities Fund or 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 occurs when a Fund to the extent that it
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 Funds 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
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
equal the current value of the security sold short and (ii) the amount
deposited in the segregated account plus the amount deposited with the
broker as collateral will not be less than the market value of the security
at the time it was sold short. Liabilities for securities sold short are
reported at market value in the financial statements. Such liabilities are
subject to off balance sheet risk to the extent of any future increases in
market value of the securities sold short. The ultimate liability for
securities sold short could exceed the liabilities recorded in the Statement
of Assets and Liabilities. The Fund bears the risk of potential inability of
the broker to meet their obligation to perform.
Mortgage-Backed Dollar Rolls: Certain Funds may enter into dollar roll
transactions using "to be announced" ("TBA") mortgage-backed securities
("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as
purchase/sale transactions. Any difference between the purchase and sale
price is recorded as a realized gain or loss on the date the transaction is
entered into. During the year ended March 31, 2008 the U.S. Government
Securities Fund and the GNMA Fund entered into 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
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
The Strategic Bond Fund, High Yield Bond Fund and Tax Exempt Insured Fund
are subadvised by AIG Global Investment Corp. ("AIGGIC") pursuant to a
subadvisory agreement with AIG SunAmerica. AIGGIC is an indirect
wholly-owned subsidiary of AIG and an affiliate of AIG SunAmerica. AIGGIC
receives the following fees from AIG SunAmerica, based upon each Fund's
average daily net assets:
Sub-advisory Fees
-------------------------------------
Strategic Bond High Yield Tax Exempt
Assets Fund Bond Fund Insured Fund
- ------ -------------- ---------- ------------
$0 - $200 million............ 0.35% 0.45% 0.25%
(greater than) $200 million 0.25 0.35 0.22
(greater than) $500 million 0.20 0.30 0.15
AIG SunAmerica has contractually agreed to waive fees and/or reimburse
expenses, 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 year ended March 31, 2008, 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 $652,650
U.S. Government Securities Class B 66,277
U.S. Government Securities Class C 59,589
GNMA Class A...................... 490,764
GNMA Class B...................... 96,691
GNMA Class C...................... 64,068
High Yield Bond Class A........... 301,230
High Yield Bond Class B........... 85,589
High Yield Bond Class C........... 138,647
Tax Exempt Insured Class C........ 11,901
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
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 the Distributor and securities firms for
account maintenance activities. Accordingly, for the year ended March 31,
2008, SACS received fees (see the Statement of Operations) based upon the
aforementioned rates.
SACS receives sales charges on each Fund's Class A shares, portions of which
are reallowed to affiliated broker-dealers and non-affiliated
broker-dealers. SACS also receives the proceeds of contingent deferred sales
charges paid by investors in connection with certain redemptions of Class A,
Class B and Class C shares. SACS has advised the Funds that for the year
ended March 31, 2008, 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 $ 61,647 $ 9,810 $ 41,122 $ 4,009 $ 17,041 $12,878
GNMA...................... 74,375 23,110 38,672 930 126,267 1,207
Strategic Bond............ 703,081 101,208 483,952 6,448 137,639 79,709
High Yield Bond........... 301,614 36,407 213,933 11,571 115,700 21,748
Tax Exempt Insured........ 68,027 28,753 25,945 -- 6,014 208
The Trust has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent in connection with the services that it offers to
the shareholders of the Funds. The Service Agreement permits the Funds to
compensate SAFS for services rendered, based upon an annual rate of 0.22% of
average daily net assets, which is approved annually by the Trustees. For
the year ended March 31, 2008, the Funds incurred the following expenses
which are included in transfer agent fees and expenses in the Statement of
Operations to compensate SAFS pursuant to the terms of the Service Agreement:
Payable at
Fund Expenses March 31, 2008
- ---- ---------- --------------
US Government Securities Class A $ 369,295 $35,620
US Government Securities Class B 30,459 2,842
US Government Securities Class C 26,190 3,115
GNMA Class A.................... 700,769 61,218
GNMA Class B.................... 110,183 8,686
GNMA Class C.................... 63,897 6,455
Strategic Bond Class A.......... 1,081,555 90,048
Strategic Bond Class B.......... 117,989 9,711
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
Payable at
Fund Expenses March 31, 2008
- ---- -------- --------------
Strategic Bond Class C.... $546,302 $49,171
High Yield Bond Class A... 396,603 19,940
High Yield Bond Class B... 94,379 6,511
High Yield Bond Class C... 170,231 11,579
Tax Exempt Insured Class A 105,232 8,695
Tax Exempt Insured Class B 9,254 625
Tax Exempt Insured Class C 8,491 725
At March 31, 2008, affiliated funds of the SunAmerica Focused Series, Inc.
owned 13%, 56%, 38% and 4% of the outstanding Class A Shares of U.S.
Government Securities Fund, GNMA Fund, Strategic Bond Fund and High Yield
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 year ended March 31, 2008 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)........................... $ -- $ -- $980,134,206 $209,245,402 $30,099,409
Sales (excluding U.S. government
securities)........................... -- -- 903,160,745 305,307,388 30,794,753
Purchases of U.S. government securities 650,392,168 1,391,487,376 289,307,377 -- --
Sales of U.S. government securities.... 572,579,982 1,411,376,237 239,897,212 -- --
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, treatment of defaulted securities, deferred directors
compensation, amortization of premium/discount and derivative transactions.
Distributable Earnings Tax Distributions
For the year ended March 31, 2008 For the year ended March 31, 2008
--------------------------------------- ------------------------------------
Long-term
Gains/Capital Unrealized
Ordinary Loss Appreciation Ordinary Long-term
Fund Income CarryForward (Depreciation) Income Capital Gains Tax Exempt
- ---- ---------- ------------- -------------- ----------- ------------- ----------
U.S. Government Securities $ 347,953 $ (3,955,247) $ 6,869,931 $ 7,552,664 $ -- $ --
GNMA...................... 2,547,462 -- 7,480,875 16,873,452 -- --
Strategic Bond............ 9,909,714 (23,200,320) (18,247,085) 45,247,978 -- --
High Yield Bond........... 2,070,302 (90,679,638) (20,106,872) 21,181,473 -- --
Tax Exempt Insured........ 17,597* (110,179) 1,195,869 103,254 360,487 1,811,170
Tax Distributions
For the year ended March 31, 2007
------------------------------------
Ordinary Long-term
Fund Income Capital Gains Tax Exempt
- ---- ----------- ------------- ----------
U.S. Government Securities $ 7,185,444 $ -- $ --
GNMA...................... 17,110,566 -- --
Strategic Bond............ 26,453,510 -- --
High Yield Bond........... 21,478,406 -- --
Tax Exempt Insured........ -- 436,699 2,040,644
- --------
* Tax exempt distributable earnings.
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
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......................................... $225,796,256 $444,060,136 $821,815,430 $221,531,937 $52,537,155
============ ============ ============ ============ ===========
Appreciation................................. 7,251,290 8,204,327 18,299,956 8,745,528 2,064,013
Depreciation................................. (381,359) (723,452) (36,800,667) (28,852,400) (868,144)
------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net $ 6,869,931 $ 7,480,875 $(18,500,711) $(20,106,872) $ 1,195,869
============ ============ ============ ============ ===========
As of March 31, 2008, 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 2009 2010 2011 2012 2013 2014 2015 2016
- ---- ---------- ----------- ----------- ---- ---- -------- ---------- ----------
U.S. Government Securities $ -- $ -- $ -- $ -- $ -- $271,576 $3,683,671 $ --
GNMA...................... -- -- -- -- -- -- -- --
Strategic Bond............ 5,601,470 6,464,175 10,040,945 -- -- -- -- 1,093,730
High Yield Bond........... 5,383,683 32,249,552 48,994,980 -- -- -- -- 4,051,423
Tax Exempt Insured Fund... -- -- -- -- -- -- -- 110,179
The Funds indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended March 31, 2008:
Capital Loss Capital Loss
Carryforward Carryforward
Fund Utilized Expired
- ---- ------------- ------------
U.S. Government Securities Fund $ 651,350 $6,611,899
GNMA Fund...................... 4,166,987.00 --
Strategic Bond Fund............ -- 1,298,736
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, 2008, the Funds elected to defer capital losses
as follows:
Deferred Deferred
Post-October Post-October
Fund Capital Loss Currency Loss
- ---- ------------ -------------
U.S. Government Securities $ 61,459 $ --
GNMA...................... 251,195 --
Strategic Bond............ 4,185,371 --
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
For the period ended March 31, 2008, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily
due to net paydown adjustments, expiration of capital loss carry forward
amounts and treatment of foreign currency to the components of net assets as
follows:
Accumulated Accumulated
Undistributed Undistributed
Net Investment Net Realized Capital
Income (Loss) Gain (Loss) Paid-in
-------------- ------------- -----------
U.S. Government Securities $ 283,270 $ 6,328,561 $(6,611,831)
GNMA...................... 767,937 (767,937) --
Strategic Bond............ 12,775,086 (11,476,350) (1,298,736)
High Yield Bond........... 436,846 (436,846) --
Tax Exempt Insured........ (52) 52 --
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 For the For the
year ended year ended year ended year ended
March 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007
------------------------ ------------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold(1)(2)(3)... 9,490,829 $ 88,581,997 3,646,252 $ 33,613,249 455,993 $ 4,311,869 282,251 $ 2,588,038
Reinvested shares...... 544,377 5,081,275 526,641 4,833,737 37,519 349,840 49,844 457,468
Shares redeemed(1)(2).. (6,776,630) (63,242,348) (4,206,287) (38,554,728) (500,368) (4,646,557) (842,993) (7,715,872)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) 3,258,576 $ 30,420,924 (33,394) $ (107,742) (6,856) $ 15,152 (510,898) $(4,670,366)
========== ============ ========== ============ ======== =========== ======== ===========
U.S. Government Securities Fund
--------------------------------------------------
Class C
--------------------------------------------------
For the For the
year ended year ended
March 31, 2008 March 31, 2007
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 1,530,061 $ 14,467,476 496,953 $ 4,562,238
Reinvested shares...... 28,676 267,675 27,739 254,466
Shares redeemed(3)..... (871,773) (8,170,746) (358,841) (3,275,190)
---------- ------------ ---------- ------------
Net increase (decrease) 686,964 $ 6,564,405 165,851 $ 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, 2008, includes automatic conversion of 108,807
shares of Class B shares in the amount of $760,717 to 108,851 shares of
Class A shares in the amount of $760,717
(3)For the year ended March 31, 2008, includes automatic conversion of 11,097
shares of Class C shares in the amount of $102,964 to 11,090 shares of Class
A shares in the amount of $102,964.
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
GNMA Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007
-------------------------- -------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares
sold(1)(3)(5)(7) 6,310,957 $ 70,104,250 5,070,934 $ 55,936,052 229,129 $ 2,590,101 202,312 $ 2,228,911
Reinvested
shares.......... 1,044,195 11,665,053 1,007,246 11,085,707 125,700 1,405,978 164,211 1,810,798
Shares
redeemed(1)(5).. (6,724,233) (75,305,388) (5,652,486) (62,223,827) (1,490,358) (16,623,314) (2,138,731) (23,557,708)
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net
increase
(decrease)...... 630,919 $ 6,463,915 425,694 $ 4,797,932 (1,135,529) $(12,627,235) (1,772,208) $(19,517,999)
=========== ============= =========== ============= ========== ============ ========== ============
GNMA Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the For the
year ended year ended
March 31, 2008 March 31, 2007
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares sold...... 1,042,164 $ 11,890,901 360,698 $ 3,979,813
Reinvested
shares.......... 71,319 799,761 88,961 982,412
Shares
redeemed(3)(7).. (787,761) (8,794,849) (1,340,161) (14,773,461)
----------- ------------- ----------- -------------
Net
increase
(decrease)...... 325,722 $ 3,895,813 (890,502) $ (9,811,236)
=========== ============= =========== =============
Strategic Bond Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007
-------------------------- -------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares
sold(2)(4)(6)(8) 54,454,486 $ 194,890,790 102,882,348 $ 365,610,133 3,096,751 $ 11,052,278 5,637,811 $ 20,072,310
Reinvested
shares.......... 6,083,610 21,672,951 4,121,411 14,717,371 501,399 1,784,869 390,832 1,394,386
Shares
redeemed(2)(6).. (47,409,808) (168,605,626) (29,208,072) (104,210,772) (3,950,315) (14,098,342) (3,782,125) (13,433,833)
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)...... 13,128,288 $ 47,958,115 77,795,687 $ 276,116,732 (352,165) $ (1,261,195) 2,246,518 $ 8,032,863
=========== ============= =========== ============= ========== ============ ========== ============
Strategic Bond Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the For the
year ended year ended
March 31, 2008 March 31, 2007
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares sold...... 29,322,990 $ 105,186,765 38,346,566 $ 137,670,076
Reinvested
shares.......... 1,920,377 6,862,329 848,064 3,043,431
Shares
redeemed(4)(8).. (15,350,229) (54,784,089) (6,961,530) (24,860,837)
----------- ------------- ----------- -------------
Net
increase
(decrease)...... 15,893,138 $ 57,265,005 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 year 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 year ended March 31, 2008, includes automatic conversion of 200,853
shares of Class B shares in the amount of $1,902,244 to 201,376 shares of
Class A shares in the amount of $1,902,244.
(6)For the year ended March 31, 2008, includes automatic conversion of 783,363
shares of Class B shares in the amount of $2,389,267 to 783,205 shares of
Class A shares in the amount of $2,389,267.
(7)For the year ended March 31, 2008, includes automatic conversion of 4,799
shares of Class C shares in the amount of $54,501 to 4,819 shares of Class A
shares in the amount of $54,501.
(8)Includes automatic conversion of 5,731 shares of Class C shares in the
amount of $20,785 to 8,762 shares of Class A shares in the
amount of $20,785.
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
High Yield Bond Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007
-------------------------- -------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares
sold(1)(4)(6)... 21,291,423 $ 98,716,860 38,615,170 $ 182,039,488 835,493 $ 3,802,244 2,939,699 $ 13,768,068
Reinvested
shares.......... 1,906,335 8,688,722 1,677,533 7,908,201 321,980 1,456,523 333,914 1,571,933
Shares
redeemed(1)(4).. (47,531,258) (215,847,758) (36,217,526) (168,508,994) (3,540,260) (16,200,779) (3,870,265) (18,168,508)
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net
increase
(decrease)...... (24,333,500) $(108,442,176) 4,075,177 $ 21,438,695 (2,382,787) $(10,942,012) (596,652) $ (2,828,507)
=========== ============= =========== ============= ========== ============ ========== ============
High Yield Bond Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the For the
year ended year ended
March 31, 2008 March 31, 2007
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares
sold............ 3,568,020 $ 16,513,470 8,874,645 $ 41,729,495
Reinvested
shares.......... 598,038 2,714,045 542,788 2,569,206
Shares
redeemed(6)..... (7,623,260) (34,517,831) (6,505,750) (30,858,084)
----------- ------------- ----------- -------------
Net
increase
(decrease)...... (3,457,202) $ (15,290,316) 2,911,683 $ 13,440,617
=========== ============= =========== =============
Tax Exempt Insured Fund
----------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------------------ --------------------------------------------------
For the For the For the For the
year ended year ended year ended year ended
March 31, 2008 March 31, 2007 March 31, 2008 March 31, 2007
-------------------------- -------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Shares
sold(2)(3)(5)(7) 314,629 $ 3,914,692 181,928 $ 2,305,652 42,191 $ 526,453 26,325 $ 335,141
Reinvested
shares.......... 101,332 $ 1,260,224 104,191 1,320,929 6,362 79,132 8,813 111,816
Shares
redeemed(2)(5).. (545,959) (6,802,151) (846,556) (10,699,293) (177,944) (2,214,363) (163,672) (2,069,946)
----------- ------------- ----------- ------------- ---------- ------------ ---------- ------------
Net
increase
(decrease)...... (129,998) $ (1,627,235) (560,437) $ (7,072,712) (129,391) $ (1,608,778) (128,534) $ (1,622,989)
=========== ============= =========== ============= ========== ============ ========== ============
Tax Exempt Insured Fund
------------------------------------------------------
Class C
------------------------------------------------------
For the For the
year ended year ended
March 31, 2008 March 31, 2007
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Shares
sold............ 155,729 $ 1,935,925 51,686 $ 654,807
Reinvested
shares.......... 6,235 77,637 6,918 87,817
Shares
redeemed(3)(7).. (139,213) (1,738,389) (100,404) (1,273,870)
----------- ------------- ----------- -------------
Net
increase
(decrease)...... 22,751 $ 275,173 (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 year ended March 31, 2008, includes automatic conversion of 640,153
shares of Class B shares in the amount of $2,774,734 to 640,228 shares of
Class A shares in the amount of $2,774,734.
(5)For the year ended March 31, 2008, includes automatic conversion of 81,330
shares of Class B shares in the amount of $836,922 to 81,332 shares of Class
A shares in the amount of $836,922.
(6)For the year ended March 31, 2008, includes automatic conversion of 48
shares of Class C shares in the amount of $218 to 49 shares of Class A
shares in the amount of $218.
(7)For the year ended March 31, 2008, includes automatic conversion of 431
shares of Class C shares in the amount of $5,299 to 432 shares of Class A
shares in the amount of $5,299.
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (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 year ended March 31, 2008, the following Funds had borrowings:
Average Weighted
Days Interest Debt Average
Fund Outstanding Charges Utilized Interest
- ---- ----------- -------- ---------- --------
Strategic Bond. 5 $ 2,121 $2,847,803 4.91%
High Yield Bond 77 62,252 5,299,126 5.11
At March 31, 2008, there were no borrowings outstanding.
Note 8. Interfund Lending Agreement
Pursuant to exemptive relief granted by the Securities and Exchange
Commission, the Funds are permitted to participate in an interfund lending
program among investment companies advised by AIG SunAmerica or an
affiliate. The interfund lending program allows the participating funds to
borrow money from and loan money to each other for temporary or emergency
purposes. An interfund loan will be made under this facility only if the
participating funds receive a more favorable interest rate than would
otherwise be available from a typical bank for a comparable transaction. For
the year ended March 31, 2008 none of the Funds participated in this program.
Note 9. Trustees Retirement Plan
The Trustees of the Trust 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%.
76
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- March 31, 2008 -- (continued)
The following amounts of the Retirement Plan liabilities are included in the
Trustees fees and expenses line on the Statement of Assets and Liabilities
and the amount for the Retirement Plan expenses are included in the
Trustees' fees and expenses line on the Statement of Operations.
Retirement Plan Retirement Plan Retirement Plan
Liability Expense Payments
--------------- --------------- ---------------
Fund As of March 31, 2008
- ---- -----------------------------------------------
U.S. Government Securities $85,379 $ 3,761 $8,705
GNMA...................... 57,788 7,996 2,640
Strategic Bond............ 39,270 13,868 2,231
High Yield Bond........... 50,303 5,949 3,402
Tax Exempt Insured........ 26,909 1,187 2,468
Note 10. Security Transactions with Affiliated Funds
The funds are permitted to transfer securities by purchasing from and/or
selling to other affiliated funds under certain conditions approved by the
board of directors. The affiliated funds involved in such transaction must
have common investment adviser or investment advisers which are affiliated
persons of each other, common directors, and/or common officers in
compliance with Rule 17a-7 of the 1940 Act. Pursuant to the Act, such
transaction must be either a purchase or a sale, for no consideration other
than cash payment against prompt delivery of the security at the current
market price. No brokerage commission or fee (except for customary transfer
fees), or other remuneration is paid in connection with such transaction.
For the period ended March 31, 2008, the following fund engaged in
securities transactions with affiliated funds:
Cost of Proceeds Realized
Fund Purchases from sales Gain/Loss
- ---- --------- ---------- ---------
High Yield Bond $-- $6,067,272 $(556,774)
Note 11. Unfunded Loan Commitments
On March 31, 2008, 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
77
SunAmerica Income Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of SunAmerica Income Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of each of the five
funds constituting SunAmerica Income Funds (the "Funds") at March 31, 2008, the
results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31, 2008 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Houston, Texas
May 27, 2008
78
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2008 -- (unaudited)
The following table contains basic information regarding the Trustees and
Officers who oversee operations of the Funds and other investment companies
within the Fund Complex.
Number of
Term of Funds in
Position(s) Office and Fund Complex
Name, Address Held With Length of Principal Occupation(s) Overseen by Other Trusteeship(s)
and Date of Birth* the Fund Time Served(4) During Past 5 years Trustee(1) Held by Trustee(2)
- -------------------- ----------- -------------- ---------------------------- ------------ --------------------------
Disinterested
Trustees
Jeffrey S. Burum Trustee 2004- Founder and Chairman of 38 None
DOB: February 27, present the Board, National
1963 Community Renaissance
(1992-present); Founder,
Owner and Partner of
Colonies Crossroads, Inc.
(2000-present); Owner and
Managing Member of
Diversified Pacific
Development Group, LLC
(1998-present).
Dr. Judith L. Craven Trustee 2001- Retired. 87 Director, Belo Corporation
DOB: October 6, 1945 present (1992-present); Director,
Sysco Corporation (1996-
present); Director, Luby's
Inc. (1998-present).
William F. Devin Trustee 2001- Retired. 88 Director, Boston Options
DOB: December 30, present Exchange (2001-present).
1938
Samuel M. Eisenstat Chairman 1986- Attorney, solo practitioner. 48 Director, North European
DOB: March 7, 1940 of the present Oil Royal Trust.
Board
Stephen J. Gutman Trustee 1984- Senior Associate, Corcoran 48 None
DOB: May 10, 1943 present Group (Real Estate) (2003-
present); President and
Member of Managing
Directors, Beau Brummell
Soho LLC (licensing of
menswear specialty retailing
and other activities) (1988-
present).
William J. Shea Trustee 2004- Managing Partner, DLB 48 Director, Boston Private
DOB: February 9, present Capital, LLC (Private Financial Holdings (2004-
1948 Equity) (2006-present); present).
President and CEO,
Conseco, Inc. (Financial
Services) (2001-2004);
Chairman of the Board of
Centennial Technologies,
Inc. (1998-2001).
79
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2008 -- (unaudited)
(continued)
Number of
Term of Funds in
Position(s) Office and Fund Complex
Name, Address Held With Length of Principal Occupation(s) Overseen by Other Trusteeship(s)
and Date of Birth* the Fund Time Served(4) During Past 5 years Trustee(1) Held by Trustee(2)
- ------------------- ----------- -------------- --------------------------- ------------ --------------------
Interested Trustee
Peter A. Harbeck(3) Trustee 1994- President, CEO and 96 None
DOB: January 23, present Director, AIG SunAmerica,
1954 (1995-present); Director,
AIG SunAmerica Capital
Services, Inc. ("AIG
SACS") (1993-present);
President and CEO, AIG
Advisor Group, Inc. (2004-
present).
Officers
John T. Genoy** President December Chief Financial Officer, N/A N/A
DOB: November 8, 2007- AIG- SunAmerica (2002-
1968 present present); Senior Vice
President, AIG SunAmerica
(2003-present); Chief
Operating Officer, AIG
SunAmerica (2006-present).
Donna M. Handel Treasurer 2002- Senior Vice President, AIG N/A N/A
DOB: June 25, 1966 present SunAmerica (2004-present);
Vice President, AIG
SunAmerica (1997-2004).
Gregory N. Bressler Secretary 2005- Senior Vice President and N/A N/A
DOB: November 17, present General Counsel, AIG
1966 SunAmerica (2005-present);
Vice President and Director
of U.S. Asset Management
Compliance, Goldman
Sachs Asset Management
L.P. (2004-2005); Deputy
General Counsel, Credit
Suisse Asset Management
(2002-2004); Counsel,
Credit Suisse Asset
Management (2000-2002).
- --------
** On December 10, 2007, John T. Genoy was elected President and Chief
Executive Officer of the Funds.
80
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2008 -- (unaudited)
(continued)
Number of
Term of Funds in
Position(s) Office and Fund Complex
Name, Address Held With the Length of Principal Occupation(s) Overseen by Other Trusteeship(s)
and Date of Birth* Fund Time Served(4) During Past 5 years Trustee(1) Held by Trustee(2)
- -------------------- ------------- -------------- ---------------------------- ------------ --------------------
Timothy Pettee Vice 2004- Chief Investment Officer, N/A N/A
DOB: April 7, 1958 President present AIG SunAmerica (2003-
present); Executive Vice
President and Global
Director of Research,
Schroder Investment
Management (2000-2003).
Michael Cheah Vice 2000- Senior Vice President, AIG N/A N/A
DOB: January 4, 1960 President present SunAmerica (1999-present).
James Nichols Vice 2006- Director, President and N/A N/A
DOB: April 7, 1966 President present CEO, AIG SACS (2006-
present); Senior Vice
President, AIG SACS
(2002-2006); Vice
President, AIG SunAmerica
(1995-2002).
Cynthia Gibbons Chief 2002- Vice President, AIG N/A N/A
DOB: December 6, Compliance present SunAmerica (2007-
1967 Officer present); Chief Compliance
("CCO") Officer, AIG SunAmerica
(2002-2007); Securities
Compliance Manager,
American General
Corporation (2000-2002).
Gregory R. Kingston Vice 2002- Vice President, AIG N/A N/A
DOB: January 18, President present SunAmerica (2001-
1966 and present); Vice President,
Assistant American General
Treasurer Corporation (1999-2001).
Nori L. Gabert Vice 2002- Vice President and Deputy N/A N/A
DOB: August 15, 1953 President present General Counsel, AIG
and SunAmerica (2001-
Assistant present); Vice President and
Secretary Secretary, AIG Retirement
Co. I and AIG Retirement
Co. II (2000-present);
Associate General Counsel,
American General
Corporation (1997-2001).
81
SunAmerica Income Funds
TRUSTEE AND OFFICER INFORMATION -- March 31, 2008 -- (unaudited)
(continued)
Number of
Term of Funds in
Position(s) Office and Fund Complex
Name, Address Held With the Length of Principal Occupation(s) Overseen by Other Trusteeship(s)
and Date of Birth* Fund Time Served(4) During Past 5 years Trustee(1) Held by Trustee(2)
- -------------------- ------------- -------------- ------------------------- ------------ --------------------
Matthew J. Hackethal Anti- 2006- Senior Compliance N/A N/A
DOB: December 31, Money present Manager, AIG SunAmerica
1971 Laundering (2006-present); Vice
Compliance President, Credits Suisse
Officer Asset Management, LLC
(2001-2006); CCO, Credit
Suisse Alternative Funds
(2005-2006); CCO, Credit
Suisse Asset Management
Securities, Inc. (2004-
2005).
- --------
* The business address for each Trustee and Officer is Harborside Financial
Center, 3200 Plaza 5, Jersey City, NJ 07311-4992.
(1) The term "Fund Complex" means two or more registered investment companies
that hold themselves out to investors as related companies for purposes of
investment services or have a common investment adviser or an investment
adviser that is an affiliated person of the investment adviser. The "Fund
Complex" includes the Trust (5 funds), SunAmerica Equity Funds (9 funds),
SunAmerica Focused Series, Inc. (18 portfolios), SunAmerica Focused Alpha
Growth Fund, Inc. (1 fund), SunAmerica Focused Alpha Large-Cap Fund, Inc.
(1 fund), SunAmerica Money Market Funds, Inc. (2 funds); Anchor Series
Trust (9 portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1 fund),
SunAmerica Series Trust (35 portfolios), AIG Retirement Company I (33
portfolios), AIG Retirement Company II (15 portfolios), Seasons Series
Trust (24 portfolios) and AIG Series Trust (3 portfolios), AIG Strategic
Hedge Fund of Funds (1 fund) and Brazos Mutual Funds (4 funds).
(2) Trusteeships of companies required to report to the Commission under the
Securities Exchange Act of 1934 (i.e. "public companies") or other
investment companies regulated under the 1940 Act.
(3) Mr. Harbeck is an "interested person" of the Funds, as defined within the
1940 Act, because he is an officer and a director of the Adviser and a
director of the principal underwriter of, the Trust.
(4) Trustees serve until their successors are duly elected and qualified,
subject to the Trustees' retirement plan as discussed in Note 6 of the
financial statements. Each officer will hold office for an indefinite term,
until the date he or she resigns or retires or until his/her successor is
duly elected and qualifies.
Additional information concerning the Trustees and Officers is contained in the
Statement of Additional Information and is available without charge by calling
(800) 858-8850.
82
SunAmerica Income Funds
SHAREHOLDER TAX INFORMATION -- March 31, 2008 -- (unaudited)
Certain tax information regarding the SunAmerica Income Funds is required to be
provided to shareholders based upon each Fund's income and distributions for
the taxable periods ended March 31, 2008. The information and distributions
reported herein may differ from the information and distributions taxable to
the shareholders for the calendar year ending December 31, 2008. The
information necessary to complete your income tax returns will be included with
your Form 1099-DIV to be received under separate cover in January 2009.
During the year ended March 31, 2008 the Funds paid the following dividends per
share along with the percentage of ordinary income dividends that qualified for
the 70% dividends received deductions for corporations.
Net Net Net Long-
Total Investment Short-Term Term
Dividends Income Capital Gains Capital Gains
--------- ---------- ------------- -------------
U.S. Government Securities Fund Class A . . . . . . . . . . . . ............... $0.37 $0.37 $ -- $ --
U.S. Government Securities Fund Class B . . . . . . . . . . . . ............... 0.31 0.31 -- --
U.S. Government Securities Fund Class C . . . . . . . . . . . . ............... 0.31 0.31 -- --
GNMA Fund Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.49 0.49 -- --
GNMA Fund Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.42 0.42 -- --
GNMA Fund Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 0.42 0.42 -- --
Strategic Bond Fund Class A . . . . . . . . . . . . . . . . . . . . . . . ..... 0.21 0.21 -- --
Strategic Bond Fund Class B . . . . . . . . . . . . . . . . . . . . . . . ..... 0.19 0.19 -- --
Strategic Bond Fund Class C . . . . . . . . . . . . . . . . . . . . . . . ..... 0.19 0.19 -- --
High Yield Bond Fund Class A . . . . . . . . . . . . . . . . . . . . . . ...... 0.34 0.34 -- --
High Yield Bond Fund Class B . . . . . . . . . . . . . . . . . . . . . . ...... 0.32 0.32 -- --
High Yield Bond Fund Class C . . . . . . . . . . . . . . . . . . . . . . ...... 0.32 0.32 -- --
Tax-Exempt Insured Fund Class A . . . . . . . . . . . . . . . . . . ........... 0.52 0.42* 0.02 0.08
Tax-Exempt Insured Fund Class B . . . . . . . . . . . . . . . . . . ........... 0.39 0.29* 0.02 0.08
Tax-Exempt Insured Fund Class C . . . . . . . . . . . . . . . . . . ........... 0.44 0.34* 0.02 0.08
Qualifying % for the
70% Dividends
Received Deduction
--------------------
U.S. Government Securities Fund Class A . . . . . . . . . . . . ............... -- %
U.S. Government Securities Fund Class B . . . . . . . . . . . . ............... --
U.S. Government Securities Fund Class C . . . . . . . . . . . . ............... --
GNMA Fund Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
GNMA Fund Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
GNMA Fund Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... --
Strategic Bond Fund Class A . . . . . . . . . . . . . . . . . . . . . . . ..... 0.67
Strategic Bond Fund Class B . . . . . . . . . . . . . . . . . . . . . . . ..... 0.67
Strategic Bond Fund Class C . . . . . . . . . . . . . . . . . . . . . . . ..... 0.67
High Yield Bond Fund Class A . . . . . . . . . . . . . . . . . . . . . . ...... 2.27
High Yield Bond Fund Class B . . . . . . . . . . . . . . . . . . . . . . ...... 2.27
High Yield Bond Fund Class C . . . . . . . . . . . . . . . . . . . . . . ...... 2.27
Tax-Exempt Insured Fund Class A . . . . . . . . . . . . . . . . . . ........... --
Tax-Exempt Insured Fund Class B . . . . . . . . . . . . . . . . . . ........... --
Tax-Exempt Insured Fund Class C . . . . . . . . . . . . . . . . . . ........... --
- --------
* Tax exempt interest dividends
For the year ended March 31, 2008, certain dividends paid by the Strategic Bond
Fund and High Yield Bond Fund may be subject to a maximum tax rate of 15%, as
provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the
distributions paid during the fiscal year, the following represents the maximum
amount that may be considered qualified dividend income:
Portfolio Amount
--------- --------
Strategic Bond Fund. $386,287
High Yield Bond Fund 519,370
83
(THIS PAGE INTENTIONALLY LEFT BLANK)
84
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited)
The following graphs compare the performance of a $10,000 investment in the
SunAmerica Income Funds' portfolios to a similar investment in an index. Please
note that "inception", as used herein, reflects the date on which a specific
class of shares commenced operations. It is important to note that the
SunAmerica Income Funds are professionally managed mutual funds, while the
indices are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only. The graphs present the performance of the
largest class of that particular Fund. The performance of the other classes
will vary based upon the difference in sales charges and fees assessed to
shareholders of that class.
85
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
The SunAmerica U.S. Government Securities Fund
The SunAmerica U.S. Government Securities Fund Class A returned 9.03% (before
maximum sales charge) for the annual period ended March 31, 2008,
underperforming its benchmark, the Lehman Brothers U.S. Government Index*,
which returned 11.45% during the same period.
Due to events such as the subprime mortgage crisis and housing correction,
growing concern about an economic slowdown, and the drying up of liquidity in
the credit markets, the Federal Reserve cut interest rates six times during the
fiscal period. As a result, the Federal Funds rate finished the fiscal period
at 2.25%, down 300 basis points year-over-year. At the same time, the 10-year
Treasury note traded within the 5.30% to 3.31% range, and finished the period
at 3.41%, down 124 basis points year-over-year.
The easing cycle began in September, as the Federal Open Market Committee
lowered the Federal Funds target rate from 5.25% to 4.75% as the tightening of
credit conditions had the potential to restrict economic growth and intensify
the housing correction. Another round of cuts occurred during the third fiscal
quarter as subprime mortgage problems deteriorated further and major financial
institutions posted massive write-downs; and the damage continued into the
first quarter of this year.
The Fund continued to benefit from having minimal exposure to Freddie Mac and
Fannie Mae securities. This became more beneficial as the market became
increasingly concerned with the credit risks of government-sponsored
enterprises. In aggregate, the portfolio held less than 1% of its total assets
in Freddie Mac and Fannie Mae Securities as of March 31, 2008. The Fund also
benefited from its duration, which was longer than the benchmark, and ended the
annual period with a duration that was 10-months longer than its benchmark.
- --------
Past performance is no guarantee of future results.
U.S. Government guarantee applies only to the underlying securities of the
Fund's portfolio and not to the Fund shares.
* The Lehman Brothers U.S. Government Index is a broad market value-weighted
index of U.S. Treasury securities with maturities of one year or more,
securities issued by U.S. Government agencies and quasi-federal corporations,
and corporate or foreign debt guaranteed by the U.S. Government. Indices are
not managed and an investor cannot invest directly into an index.
Securities listed may or may not be a part of current Fund construction.
86
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
Over the past ten years, $10,000 invested in U.S. Government Securities Fund
Class A shares would have increased to $16,288. The same amount invested in
securities mirroring the performance of the Lehman Brothers U.S. Government
Index would be valued at $18,221.
[CHART]
U.S. Government Lehman Brothers
Securities Fund Class A/#/ Government Bond Index**
-------------------------- -----------------------
3/31/1998 $ 9,527 $10,000
4/30/1998 9,559 10,045
5/31/1998 9,647 10,148
6/30/1998 9,711 10,264
7/31/1998 9,715 10,279
8/31/1998 9,888 10,547
9/30/1998 10,061 10,831
10/31/1998 10,020 10,794
11/30/1998 10,073 10,798
12/31/1998 10,098 10,822
1/31/1999 10,120 10,885
2/28/1999 9,979 10,626
3/31/1999 9,994 10,668
4/30/1999 10,023 10,692
5/31/1999 9,937 10,598
6/30/1999 9,860 10,576
7/31/1999 9,841 10,561
8/31/1999 9,882 10,561
9/30/1999 9,968 10,647
10/31/1999 9,996 10,664
11/30/1999 9,990 10,649
12/31/1999 9,978 10,580
1/31/2000 9,902 10,595
2/29/2000 9,981 10,746
3/31/2000 10,083 10,934
4/30/2000 10,091 10,904
5/31/2000 10,097 10,911
6/30/2000 10,250 11,106
7/31/2000 10,320 11,213
8/31/2000 10,450 11,379
9/30/2000 10,532 11,412
10/31/2000 10,657 11,521
11/30/2000 10,845 11,747
12/31/2000 11,132 11,981
1/31/2001 11,202 12,102
2/28/2001 11,302 12,240
3/31/2001 11,402 12,283
4/30/2001 11,290 12,158
5/31/2001 11,310 12,198
6/30/2001 11,391 12,254
7/31/2001 11,670 12,548
8/31/2001 11,794 12,704
9/30/2001 11,994 12,925
10/31/2001 12,222 13,258
11/30/2001 11,931 12,961
12/31/2001 11,778 12,848
1/31/2002 11,892 12,931
2/28/2002 12,045 13,051
3/31/2002 11,794 12,767
4/30/2002 12,091 13,071
5/31/2002 12,191 13,150
6/30/2002 12,371 13,334
7/31/2002 12,607 13,626
8/31/2002 12,857 13,896
9/30/2002 13,162 14,222
10/31/2002 13,141 14,108
11/30/2002 13,062 13,986
12/31/2002 13,347 14,325
1/31/2003 13,323 14,289
2/28/2003 13,499 14,520
3/31/2003 13,460 14,478
4/30/2003 13,511 14,546
5/31/2003 13,845 14,923
6/30/2003 13,756 14,845
7/31/2003 12,997 14,231
8/31/2003 13,124 14,311
9/30/2003 13,591 14,727
10/31/2003 13,392 14,517
11/30/2003 13,405 14,534
12/31/2003 13,528 14,663
1/31/2004 13,648 14,784
2/29/2004 13,798 14,961
3/31/2004 13,903 15,093
4/30/2004 13,451 14,639
5/31/2004 13,396 14,585
6/30/2004 13,481 14,644
7/31/2004 13,610 14,780
8/31/2004 13,868 15,068
9/30/2004 13,891 15,099
10/31/2004 14,002 15,219
11/30/2004 13,891 15,038
12/31/2004 14,003 15,173
1/31/2005 14,115 15,268
2/28/2005 14,048 15,160
3/31/2005 13,988 15,109
4/30/2005 14,244 15,352
5/31/2005 14,366 15,530
6/30/2005 14,408 15,617
7/31/2005 14,253 15,429
8/31/2005 14,462 15,656
9/30/2005 14,279 15,471
10/31/2005 14,124 15,362
11/30/2005 14,189 15,432
12/31/2005 14,380 15,575
1/31/2006 14,370 15,548
2/28/2006 14,403 15,573
3/31/2006 14,223 15,433
4/30/2006 14,117 15,390
5/31/2006 14,089 15,393
6/30/2006 14,124 15,436
7/31/2006 14,317 15,620
8/31/2006 14,543 15,841
9/30/2006 14,673 15,982
10/31/2006 14,757 16,065
11/30/2006 14,920 16,228
12/31/2006 14,798 16,116
1/31/2007 14,754 16,096
2/28/2007 15,012 16,344
3/31/2007 14,969 16,348
4/30/2007 15,038 16,430
5/31/2007 14,880 16,301
6/30/2007 14,801 16,294
7/31/2007 15,003 16,526
8/31/2007 15,189 16,776
9/30/2007 15,271 16,882
10/31/2007 15,396 17,006
11/30/2007 15,797 17,473
12/31/2007 15,797 17,512
1/31/2008 16,115 17,931
2/29/2008 16,209 18,101
3/31/2008 16,288 18,221
U.S. Government Securities Fund
Class A Class B Class C
U.S. ------------------ ------------------ ------------------
Government Average Average Average
Securities Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return 3.86% 9.03% 4.33% 8.33% 7.34% 8.34%
- -------------------------------------------------------------------------
5 Year Return 2.88% 21.01% 2.86% 17.15% 3.22% 17.15%
- -------------------------------------------------------------------------
10 Year Return 5.00% 70.97% 4.95% 62.19% NA NA
- -------------------------------------------------------------------------
Since Inception* 5.25% 120.41% 6.04% 264.80% 5.08% 54.91%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/1/93; Class B: 03/3/86; Class C: 06/1/99.
# For the purpose of the graph, it has been assumed that the maximum sales
charge of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2008, the SunAmerica U.S. Government
Securities Fund Class A returned 3.86%, compared to 11.45% for the Lehman
Brothers U.S. Government Index. (The performance data and graph do not reflect
the deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
** The Lehman Brothers U.S. Government Index is a broad market value-weighted
index of U.S. Treasury securities with maturities of one year or more,
securities issued by U.S. Government agencies and quasi-federal
corporations, and corporate or foreign debt guaranteed by the U.S.
Government. Indicies are not managed and an investor cannot invest directly
into an index.
87
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
The SunAmerica GNMA Fund
The SunAmerica GNMA Fund Class A returned 8.69% (before maximum sales charge)
for the annual period ended March 31, 2008, outperforming the Fund's benchmark,
the Citigroup Mortgage GNMA Index*, which returned 8.09% over the same period.
This past year was challenging for the economy and the markets given the
subprime mortgage crisis and housing correction, the drying up of liquidity in
the credit markets, major financial institutions taking write-downs and
obtaining capital infusions, and growing concern over the breadth and depth of
the economic slowdown. The Federal Reserve responded by cutting interest rates
six times, ending the fiscal year with the Federal Funds rate at 2.25%, down
300 basis points year-over-year. During the annual period, the 10-year Treasury
note traded within the 5.30% to 3.31% range, and finished the period at 3.41%,
down 124 basis points, year-over-year.
During the first quarter of the fiscal period, Treasury and mortgage rates rose
as the Federal Open Market Committee held the Federal Funds target rate to
5.25% at their meetings for May and June. The easing cycle began in September
when the Federal Open Market Committee lowered the Federal Funds target rate
from 5.25% to 4.75%, as the tightening of credit conditions had the potential
to intensify the housing correction and restrict economic growth. Another round
of cuts occurred during the third fiscal quarter as sub-prime mortgage problems
deteriorated further and major financial institutions posted massive
write-downs.
The final quarter of the fiscal year ended March 31, 2008 provided more
disappointing reports regarding economic activity, liquidity concerns and the
housing market. In response, the Federal Reserve not only dramatically reduced
the Federal Funds Rate to 2.25% and utilized the discount window, but activated
other innovative mechanisms in an attempt to improve liquidity and increase
confidence.
The Fund benefited from the duration of its holdings, which was longer than the
benchmark, and ended the annual period with a duration that was 10-months
longer than its benchmark. The Fund also benefited from taking an overweight
position in intermediate-maturity Treasury securities, as compared to the
benchmark.
- --------
Past performance is no guarantee of future results.
U.S. Government guarantee applies only to the underlying securities of the
Fund's portfolio and not to the Fund shares.
* The Citigroup Mortgage GNMA Index is a market capitalization-weighted index
of 15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA). Indices are not managed and
an investor cannot invest directly into an index.
Securities listed may or may not be a part of current Fund construction.
88
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
Over the past ten years, $10,000 invested in GNMA Fund Class A shares would
have increased to $16,831. The same amount invested in securities mirroring the
performance of the Citigroup Mortgage GNMA Index would be valued at $17,908.
[CHART]
GNMA Fund Class A/#/ Citigroup Mortgage GNMA Index/**/
------------------ ---------------------------------
3/31/1998 $ 9,525 $10,000
4/30/1998 9,564 10,058
5/31/1998 9,665 10,128
6/30/1998 9,739 10,169
7/31/1998 9,760 10,221
8/31/1998 9,932 10,304
9/30/1998 10,119 10,424
10/31/1998 10,104 10,416
11/30/1998 10,169 10,468
12/31/1998 10,212 10,514
1/31/1999 10,243 10,588
2/28/1999 10,087 10,566
3/31/1999 10,126 10,628
4/30/1999 10,156 10,681
5/31/1999 10,073 10,630
6/30/1999 10,006 10,591
7/31/1999 9,996 10,519
8/31/1999 10,007 10,512
9/30/1999 10,124 10,692
10/31/1999 10,174 10,749
11/30/1999 10,199 10,755
12/31/1999 10,205 10,726
1/31/2000 10,107 10,641
2/29/2000 10,209 10,775
3/31/2000 10,368 10,942
4/30/2000 10,363 10,931
5/31/2000 10,418 10,980
6/30/2000 10,585 11,182
7/31/2000 10,634 11,237
8/31/2000 10,785 11,404
9/30/2000 10,886 11,519
10/31/2000 10,962 11,602
11/30/2000 11,124 11,763
12/31/2000 11,352 11,927
1/31/2001 11,523 12,122
2/28/2001 11,643 12,179
3/31/2001 11,728 12,248
4/30/2001 11,678 12,274
5/31/2001 11,714 12,373
6/30/2001 11,750 12,399
7/31/2001 12,088 12,622
8/31/2001 12,188 12,716
9/30/2001 12,415 12,888
10/31/2001 12,658 13,055
11/30/2001 12,336 12,946
12/31/2001 12,202 12,911
1/31/2002 12,334 13,051
2/28/2002 12,531 13,175
3/31/2002 12,272 13,053
4/30/2002 12,583 13,277
5/31/2002 12,667 13,369
6/30/2002 12,818 13,471
7/31/2002 13,016 13,622
8/31/2002 13,189 13,733
9/30/2002 13,394 13,848
10/31/2002 13,436 13,892
11/30/2002 13,415 13,898
12/31/2002 13,608 14,037
1/31/2003 13,640 14,081
2/28/2003 13,775 14,157
3/31/2003 13,780 14,153
4/30/2003 13,853 14,186
5/31/2003 14,047 14,194
6/30/2003 14,016 14,234
7/31/2003 13,268 14,009
8/31/2003 13,431 14,092
9/30/2003 13,884 14,309
10/31/2003 13,746 14,277
11/30/2003 13,732 14,334
12/31/2003 13,897 14,460
1/31/2004 14,007 14,532
2/29/2004 14,119 14,628
3/31/2004 14,202 14,689
4/30/2004 13,830 14,458
5/31/2004 13,778 14,418
6/30/2004 13,897 14,550
7/31/2004 14,047 14,675
8/31/2004 14,266 14,897
9/30/2004 14,281 14,927
10/31/2004 14,397 15,052
11/30/2004 14,349 15,011
12/31/2004 14,444 15,121
1/31/2005 14,530 15,213
2/28/2005 14,448 15,163
3/31/2005 14,401 15,124
4/30/2005 14,560 15,282
5/31/2005 14,652 15,395
6/30/2005 14,691 15,446
7/31/2005 14,626 15,395
8/31/2005 14,758 15,523
9/30/2005 14,658 15,456
10/31/2005 14,571 15,383
11/30/2005 14,603 15,420
12/31/2005 14,773 15,626
1/31/2006 14,809 15,670
2/28/2006 14,826 15,703
3/31/2006 14,715 15,594
4/30/2006 14,644 15,537
5/31/2006 14,588 15,499
6/30/2006 14,600 15,505
7/31/2006 14,803 15,726
8/31/2006 15,008 15,985
9/30/2006 15,117 16,080
10/31/2006 15,216 16,196
11/30/2006 15,340 16,355
12/31/2006 15,301 16,333
1/31/2007 15,275 16,332
2/28/2007 15,495 16,537
3/31/2007 15,485 16,567
4/30/2007 15,556 16,649
5/31/2007 15,433 16,558
6/30/2007 15,335 16,456
7/31/2007 15,493 16,591
8/31/2007 15,681 16,797
9/30/2007 15,791 16,937
10/31/2007 15,970 17,111
11/30/2007 16,344 17,452
12/31/2007 16,360 17,475
1/31/2008 16,622 17,775
2/29/2008 16,761 17,863
3/31/2008 16,831 17,908
GNMA Fund
Class A Class B Class C
------------------- ------------------- -------------------
Average Average Average
GNMA Annual Cummulative Annual Cummulative Annual Cummulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ----------- ------- ----------- ------- -----------
1 Year Return 3.55% 8.69% 3.98% 7.98% 6.88% 7.88%
- ----------------------------------------------------------------------------
5 Year Return 3.07% 22.14% 3.06% 18.24% 3.41% 18.24%
- ----------------------------------------------------------------------------
10 Year Return 5.34% 76.71% 5.17% 65.52% NA NA
- ----------------------------------------------------------------------------
Since Inception* 5.84% 138.73% 7.40% 492.82% 5.33% 58.19%
- ----------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 10/11/93; Class B: 04/25/83; Class C: 06/1/99.
# For the purpose of the graph, it has been assumed that the maximum sales
charge of 4.75% of offering, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2008, the SunAmerica GNMA Fund Class A
returned 3.55%, compared to 8.09% for the Citigroup Mortgage GNMA Index. (The
performance data and graph do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
**The Citigroup Mortgage GNMA Index is a market capitalization-weighted index
of 15 and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA). Indicies are not managed and
an investor cannot invest directly into an index.
89
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
The SunAmerica Strategic Bond Fund
The SunAmerica Strategic Bond Fund Class A returned 2.29% (before maximum sales
charge) for the fiscal year ended March 31, 2008, underperforming its
benchmark, the Lehman Brothers U.S. Aggregate Bond Index*, which returned 7.67%
in the annual period.
In the second half of 2007, the U.S. economy began to show signs of slowing as
commodity prices moved higher, the dollar continued to deteriorate, and
inflation concerns mounted. At the same time, the credit market deteriorated
rapidly due to fallout associated with the private equity binge, the weak
housing market and difficulties in the subprime mortgage market. A primary
source of the market dislocation was the liquidity crisis that unfolded due to
the inability of certain conduits and structured investment vehicles to
refinance their outstanding commercial paper. This inability to refinance
served to heighten risk aversion and put severe strain on the companies that
rely on the short-term market for funding needs, primarily those in the
financial sector. Banks were forced to take large write-downs and their credit
lending standards became increasingly tight.
Economic data continued to trend negative as we moved into 2008, pointing
toward a rapidly-deteriorating environment. Liquidity concerns persisted and
losses related to the mortgage market continued to mount. In addition, non-farm
payrolls shrunk, consumer confidence dropped and manufacturing contracted as
the consumer segment of the market, which had kept the economy afloat for the
past few years, finally pulled back on spending.
All investment classes were impacted by the confluence of negative events that
triggered significant leverage concerns in the fixed income markets. The
high-grade and high-yield portions of the Fund were severely impacted by the
lack of liquidity and deteriorating health of the financial system.
Furthermore, earnings reports and large write-downs in the financial sector
caused credit spreads to widen. In March 2008, credit spreads, as measured by
the option-adjusted spread of the Lehman Brothers U.S. Credit Index**, reached
an all-time high. The securitized product market was under pressure because of
concern surrounding the commercial real estate sector, credit market
instability, and weak economic data. A relative bright spot for the Fund was
its exposure to emerging markets and non-dollar high-grade securities. Emerging
markets benefited from a steady flow of investment funds and improved credit
fundamentals. The non-dollar segment benefited from a succession of rate cuts
by the Federal Open Market Committee which served to further depress the value
of the dollar. However, as March came to a close, the term-lending facility
established by the Federal Reserve Bank and the effective bail-out of Bear
Stearns combined to dramatically improve market sentiment.
In the high-grade market, the Fund's exposure to the financial sector detracted
from performance as did an allocation to lower-rated credits. Exposure to
high-quality, non-dollar denominated credits also contributed to performance.
Exposure to Venezuela and Argentina, through government bonds, had a negative
impact on the Fund's returns. However, positions held in higher-yielding
currencies such as the Canadian and Australian dollar benefited the Fund.
Government bonds issued by Canada, Japan and Norway were the best performing
bonds in the portfolio during the period.
- --------
Past performance is no guarantee of future results.
Interest rates and bond prices typically move inversely to each other;
therefore, as with any bond fund, the value of an investment in this Fund may
go up or down in response to changes in interest rates.
* The Lehman Brothers U.S. Aggregate Bond Index represents securities that are
SEC-registered, taxable and dollar denominated. The index covers the U.S.
investment-grade fixed-rate bond market, with index components for
government and corporate securities, mortgage pass-through securities and
asset-backed securities. Indices are not managed and an investor cannot
invest directly into an index.
** The Lehman Brothers U.S. Credit Index is a broad-based index composed of
government and corporate debt issues that are investment grade (rated
Baa/BBB or higher). Indices are not managed and an investor cannot invest
directly into an index.
Securities listed may or may not be a part of current Fund construction.
90
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
Over the past ten years, $10,000 invested in Strategic Bond Fund Class A shares
would have increased to $17,523. The same amount invested in securities
mirroring the performance of the Lehman Brothers U.S. Aggregate Bond Index
would be valued at $17,968.
[CHART]
Lehman Brothers U.S.
Strategic Bond Fund Class A/#/ Aggregate Bond Index /+/
------------------------------ ------------------------
3/31/1998 $ 9,523 $10,000
4/30/1998 9,546 10,052
5/31/1998 9,541 10,147
6/30/1998 9,519 10,234
7/31/1998 9,555 10,255
8/31/1998 8,902 10,422
9/30/1998 9,169 10,666
10/31/1998 9,114 10,610
11/30/1998 9,351 10,670
12/31/1998 9,367 10,702
1/31/1999 9,332 10,778
2/28/1999 9,275 10,590
3/31/1999 9,417 10,648
4/30/1999 9,595 10,682
5/31/1999 9,385 10,588
6/30/1999 9,355 10,554
7/31/1999 9,304 10,510
8/31/1999 9,199 10,504
9/30/1999 9,290 10,626
10/31/1999 9,305 10,666
11/30/1999 9,419 10,665
12/31/1999 9,495 10,613
1/31/2000 9,488 10,578
2/29/2000 9,560 10,706
3/31/2000 9,621 10,848
4/30/2000 9,484 10,816
5/31/2000 9,417 10,811
6/30/2000 9,641 11,036
7/31/2000 9,778 11,136
8/31/2000 9,952 11,298
9/30/2000 9,904 11,369
10/31/2000 9,686 11,444
11/30/2000 9,539 11,631
12/31/2000 9,798 11,848
1/31/2001 10,188 12,041
2/28/2001 10,254 12,146
3/31/2001 10,118 12,206
4/30/2001 9,991 12,155
5/31/2001 10,095 12,228
6/30/2001 10,084 12,275
7/31/2001 10,151 12,549
8/31/2001 10,324 12,694
9/30/2001 10,074 12,841
10/31/2001 10,314 13,109
11/30/2001 10,471 12,929
12/31/2001 10,431 12,846
1/31/2002 10,509 12,950
2/28/2002 10,571 13,076
3/31/2002 10,567 12,858
4/30/2002 10,767 13,108
5/31/2002 10,720 13,219
6/30/2002 10,456 13,333
7/31/2002 10,257 13,494
8/31/2002 10,524 13,722
9/30/2002 10,499 13,944
10/31/2002 10,584 13,881
11/30/2002 10,816 13,877
12/31/2002 11,060 14,164
1/31/2003 11,232 14,176
2/28/2003 11,428 14,372
3/31/2003 11,525 14,361
4/30/2003 11,965 14,479
5/31/2003 12,335 14,749
6/30/2003 12,439 14,720
7/31/2003 12,126 14,225
8/31/2003 12,307 14,320
9/30/2003 12,721 14,699
10/31/2003 12,791 14,562
11/30/2003 12,976 14,597
12/31/2003 13,317 14,745
1/31/2004 13,544 14,864
2/29/2004 13,530 15,025
3/31/2004 13,604 15,137
4/30/2004 13,313 14,743
5/31/2004 13,140 14,684
6/30/2004 13,374 14,767
7/31/2004 13,531 14,914
8/31/2004 13,812 15,198
9/30/2004 14,019 15,239
10/31/2004 14,269 15,367
11/30/2004 14,559 15,245
12/31/2004 14,961 15,385
1/31/2005 14,994 15,481
2/28/2005 15,120 15,390
3/31/2005 14,836 15,311
4/30/2005 14,902 15,518
5/31/2005 15,055 15,686
6/30/2005 15,247 15,772
7/31/2005 15,311 15,628
8/31/2005 15,547 15,828
9/30/2005 15,525 15,665
10/31/2005 15,328 15,541
11/30/2005 15,437 15,610
12/31/2005 15,645 15,758
1/31/2006 15,857 15,759
2/28/2006 15,962 15,812
3/31/2006 15,851 15,657
4/30/2006 15,964 15,628
5/31/2006 15,762 15,611
6/30/2006 15,738 15,645
7/31/2006 16,081 15,856
8/31/2006 16,335 16,099
9/30/2006 16,403 16,240
10/31/2006 16,608 16,348
11/30/2006 16,859 16,537
12/31/2006 16,884 16,441
1/31/2007 16,858 16,435
2/28/2007 17,061 16,688
3/31/2007 17,130 16,689
4/30/2007 17,292 16,779
5/31/2007 17,268 16,651
6/30/2007 17,099 16,602
7/31/2007 16,884 16,741
8/31/2007 16,957 16,946
9/30/2007 17,360 17,074
10/31/2007 17,641 17,228
11/30/2007 17,472 17,538
12/31/2007 17,544 17,587
1/31/2008 17,523 17,882
2/29/2008 17,495 17,907
3/31/2008 17,523 17,968
Strategic Bond Fund
Class A Class B Class C
------------------ ------------------ ------------------
Strategic Average Average Average
Bond Annual Cumulative Annual Cumulative Annual Cumulative
Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -2.54% 2.29% -2.24% 1.61% 0.67% 1.64%
- -------------------------------------------------------------------------
5 Year Return 7.71% 52.04% 7.73% 47.13% 8.06% 47.35%
- -------------------------------------------------------------------------
10 Year Return 5.77% 84.00% 5.71% 74.27% 5.62% 72.73%
- -------------------------------------------------------------------------
Since Inception* 6.72% 168.02% 7.24% 166.00% 6.97% 156.93%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/1/93; Class B: 04/1/94; Class C: 04/1/94.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2008, the SunAmerica Strategic Bond
Fund Class A returned -2.54%, compared to 7.67% for the Lehman Brothers U.S.
Aggregate Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers U.S. Aggregate Bond Index represents securities that
are SEC-registered, taxable and dollar denominated. The index covers the U.S.
investment-grade fixed-rate bond market, with index components for government
and corporate securities, mortgage pass-through securities and asset-backed
securities. Indices are not managed and an investor cannot invest directly
into an index.
91
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
The SunAmerica High Yield Bond Fund
The SunAmerica High Yield Bond Fund Class A returned -5.92% (before maximum
sales charge) for the annual period ended March 31, 2008, underperforming its
benchmark, the Citigroup High Yield Market Index*, which returned -3.58%.
The high-yield market finished the year down as option-adjusted spreads widened
537 basis points to close out the fiscal year at 830 basis points off of
Treasuries. A deteriorating economic backdrop and subprime concerns triggered
one of the deepest and longest sell-offs in five years. Treasury spreads
tightened 123 basis points in the period as investors' appetite for risk
dwindled. The primary market was exceptionally light over the second half of
the year as the credit crunch forced a number of companies to rework or cancel
their deals. The investment banks continue to work down the approximately $180
billion of bridge financings, a method of financing used by companies prior to
their initial public offering, to obtain cash from operations. The Federal
Reserve cut the discount rate 300 basis points during the fiscal year in an
effort to shore up the financial markets which were plagued with subprime
mortgage issues, asset backed market problems and overall economic concerns.
For the fiscal year ended March 31, 2008, sector selection was the primary
positive contributor to the Fund's performance. Notable contributors were our
underweight positions within the publishing and finance groups, as these
sectors underperformed relative to the index. Our overweight position within
healthcare was also a positive contributor as the sector outperformed the index.
Security selection was the primary negative contributor to the Fund's
performance for the period. The primary detractor was our holding in iPCS, Inc.
within the wireless sector. To a lesser extent, Aleris International Inc. and
Travelport LLC, within the metals and mining and services sectors,
respectively, were negative contributors to performance for the period. On the
positive side, Eldorado Resorts, Atlas Air Inc. and Calpine Corp within the
gaming, transportation and utilities sectors, respectively, were the primary
contributors to performance for the period.
- --------
Past performance is no guarantee of future results.
High-yield bonds tend to have lower interest-rate risk than higher-quality
bonds of similar maturity but carry greater credit and default risk.
Interest rates and bond prices typically move inversely to each other:
therefore, as with any bond fund, the value of an investment in this Fund may
go up or down in response to changes in interest rates.
* The Citigroup High Yield Market Index is a broad-based, unmanaged index of
high-yield securities. Indices are not managed and an investor cannot invest
directly into an index.
Securities listed may or may not be a part of current Fund construction.
92
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
Since inception*, $10,000 invested in High Yield Bond Fund Class A shares would
have increased to $15,733. The same amount invested in securities mirroring the
performance of the Citigroup High Yield Market Index would be valued at $17,072.
[CHART]
High Yield Bond Citigroup High
Fund Class A/#/ Yield Market Index
------------- ------------------
11/2/1998 $ 9,524 $10,000
11/30/1998 9,666 10,502
12/31/1998 9,625 10,494
1/31/1999 9,774 10,652
2/28/1999 9,814 10,562
3/31/1999 9,999 10,651
4/30/1999 10,279 10,874
5/31/1999 10,043 10,703
6/30/1999 10,018 10,680
7/31/1999 10,063 10,703
8/31/1999 9,928 10,575
9/30/1999 9,866 10,495
10/31/1999 9,741 10,424
11/30/1999 9,909 10,587
12/31/1999 10,015 10,676
1/31/2000 9,923 10,588
2/29/2000 9,925 10,613
3/31/2000 9,710 10,397
4/30/2000 9,785 10,439
5/31/2000 9,725 10,293
6/30/2000 9,900 10,524
7/31/2000 9,945 10,639
8/31/2000 10,139 10,718
9/30/2000 10,044 10,603
10/31/2000 9,745 10,289
11/30/2000 9,224 9,868
12/31/2000 9,356 10,070
1/31/2001 10,021 10,748
2/28/2001 10,155 10,877
3/31/2001 9,877 10,679
4/30/2001 9,679 10,522
5/31/2001 9,817 10,691
6/30/2001 9,591 10,397
7/31/2001 9,631 10,593
8/31/2001 9,756 10,737
9/30/2001 9,345 9,964
10/31/2001 9,533 10,295
11/30/2001 9,752 10,687
12/31/2001 9,689 10,618
1/31/2002 9,678 10,663
2/28/2002 9,497 10,547
3/31/2002 9,692 10,828
4/30/2002 9,784 11,006
5/31/2002 9,620 10,869
6/30/2002 8,904 9,912
7/31/2002 8,521 9,464
8/31/2002 8,568 9,824
9/30/2002 8,464 9,631
10/31/2002 8,384 9,598
11/30/2002 8,849 10,330
12/31/2002 8,953 10,456
1/31/2003 9,207 10,845
2/28/2003 9,274 10,990
3/31/2003 9,454 11,361
4/30/2003 10,016 12,066
5/31/2003 10,195 12,146
6/30/2003 10,533 12,524
7/31/2003 10,479 12,339
8/31/2003 10,610 12,465
9/30/2003 10,983 12,835
10/31/2003 11,174 13,133
11/30/2003 11,364 13,316
12/31/2003 11,743 13,657
1/31/2004 12,142 13,894
2/29/2004 11,988 13,818
3/31/2004 11,917 13,904
4/30/2004 11,939 13,857
5/31/2004 11,737 13,617
6/30/2004 12,058 13,820
7/31/2004 12,145 13,997
8/31/2004 12,286 14,253
9/30/2004 12,456 14,447
10/31/2004 12,747 14,747
11/30/2004 13,201 14,916
12/31/2004 13,596 15,131
1/31/2005 13,675 15,110
2/28/2005 13,914 15,337
3/31/2005 13,497 14,906
4/30/2005 13,275 14,701
5/31/2005 13,538 15,003
6/30/2005 13,871 15,255
7/31/2005 14,236 15,475
8/31/2005 14,535 15,540
9/30/2005 14,430 15,384
10/31/2005 14,241 15,270
11/30/2005 14,401 15,309
12/31/2005 14,597 15,445
1/31/2006 14,914 15,687
2/28/2006 14,952 15,766
3/31/2006 15,064 15,879
4/30/2006 15,276 15,966
5/31/2006 15,262 15,955
6/30/2006 15,212 15,886
7/31/2006 15,398 16,058
8/31/2006 15,721 16,326
9/30/2006 15,907 16,552
10/31/2006 16,132 16,790
11/30/2006 16,253 17,069
12/31/2006 16,445 17,274
1/31/2007 16,529 17,437
2/28/2007 16,709 17,679
3/31/2007 16,723 17,705
4/30/2007 16,947 17,945
5/31/2007 16,998 18,080
6/30/2007 16,763 17,735
7/31/2007 16,172 17,154
8/31/2007 16,330 17,362
9/30/2007 16,731 17,821
10/31/2007 16,867 17,935
11/30/2007 16,554 17,539
12/31/2007 16,594 17,592
1/31/2008 15,973 17,370
2/29/2008 15,682 17,145
3/31/2008 15,733 17,072
High Yield Bond Fund
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
Annual Cumulative Annual Cumulative Annual Cumulative
High Yield Bond Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -10.43% -5.92% -9.99% -6.50% -7.54% -6.67%
- -------------------------------------------------------------------------
5 Year Return 9.66% 66.41% 9.80% 61.59% 9.99% 61.01%
- -------------------------------------------------------------------------
10 Year Return NA NA NA NA NA NA
- -------------------------------------------------------------------------
Since Inception* 4.93% 65.19% 5.67% 67.97% 5.37% 48.89%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, the return would be lower.
* Inception Date - Class A: 11/2/98; Class B: 11/2/98; Class C: 08/21/00.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2008, the SunAmerica High Yield Bond
Fund Class A returned -10.43%, compared to -3.58% for the Citigroup High Yield
Market Index. (The performance data and graph do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Citigroup High Yield Market Index is a broad-based, unmanaged index of
high-yield securities. Indices are not managed and an investor cannot invest
directly into an index.
93
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
The SunAmerica Tax Exempt Insured Fund
The SunAmerica Tax Exempt Insured Fund Class A returned 0.91% (before maximum
sales charge) for the annual period ended March 31, 2008. The Fund's benchmark,
the Lehman Brothers Municipal Bond Index*, returned 1.90% over the same period.
The economy slowed dramatically in the last quarter of 2007 and the first
quarter of 2008 as a result of uncertainty surrounding the credit crisis and
continued concerns about the housing market. Beginning in September 2007, the
Federal Reserve aggressively reduced the Federal Funds rate by 300 basis points
to 2.25% during the year ended March 31, 2008, with the outlook toward lower
growth.
As of March 31, 2008, the municipal market underperformed taxable alternatives
as several of the monoline bond insurers were downgraded, which caused forced
selling. As a result, yields on municipal bonds rose and prices fell.
Specifically, the 10-year AAA municipal yield, as a percentage of the 10-year
Treasury note, ended the annual period at over 108%, as compared to a one-year
average of 87%.
The municipal yield curve steepened significantly, ending the year at a 267
basis point spread between the 2- and 30-year yields. The steepening was caused
by shorter-maturity yields declining as the yield of longer-maturity bonds
rose. By comparison, the 2- to 30-year municipal yield curve slope was 58 basis
points at the beginning of the annual period. In addition, credit spreads
generally widened as the bond insurers' participation rate declined in the new
issue market.
The Fund's performance was helped by security selection in the 15-year and
shorter maturity ranges; these yields declined as the yield curve steepened,
which resulted in outperformance. Conversely, bonds maturing beyond 15-years
detracted from performance. Nevertheless, pre-refunded holdings helped to
offset some of the losses because of narrowing spreads that resulted from
increased investor demand for U.S. Treasury-escrowed securities. State of
Alabama and State of New York Thruway Authority bonds in the 10-year maturity
range, which have outperformed since the time of purchase, also had a positive
impact on Fund performance.
Conversely, the Fund's performance was hurt by the purchase of Douglas County,
Georgia and Augusta, Georgia Water and Sewer bonds in the 15- to 20-year
maturity range, which have underperformed since the time of purchase as
municipal yields rose in this maturity range.
- --------
Past performance is no guarantee of future results.
Interest rates and bond prices typically move inversely to each other,
therefore, as with any bond fund, the value of an investment in this Fund may
go up or down in response to changes in interest rates.
* The Lehman Brothers Municipal Bond Index is a market value-weighted index for
the tax-exempt bond market. Indices are not managed and an investor cannot
invest directly into an index.
Securities listed may or may not be a part of current Fund construction.
94
SunAmerica Income Funds
COMPARISONS: PORTFOLIOS vs. INDICES -- (unaudited) (continued)
Over the past ten years, $10,000 invested in Tax Exempt Insured Fund Class A
shares would have increased to $13,897. The same amount invested in securities
mirroring the performance of the Lehman Brothers Municipal Bond Index would be
valued at $16,276.
[CHART]
Tax Exempt Lehman Brothers
Insured Fund Municipal Bond
Class A/#/ Index/+/
--------------- ---------------
3/31/1998 $ 9,525 $10,000
4/30/1998 9,449 9,955
5/31/1998 9,631 10,112
6/30/1998 9,650 10,152
7/31/1998 9,661 10,178
8/31/1998 9,815 10,335
9/30/1998 9,953 10,464
10/31/1998 9,903 10,464
11/30/1998 9,921 10,500
12/31/1998 9,970 10,527
1/31/1999 10,086 10,652
2/28/1999 9,993 10,605
3/31/1999 9,958 10,620
4/30/1999 9,977 10,647
5/31/1999 9,882 10,585
6/30/1999 9,709 10,433
7/31/1999 9,750 10,470
8/31/1999 9,661 10,387
9/30/1999 9,648 10,391
10/31/1999 9,534 10,278
11/30/1999 9,647 10,388
12/31/1999 9,612 10,310
1/31/2000 9,519 10,265
2/29/2000 9,651 10,385
3/31/2000 9,838 10,612
4/30/2000 9,773 10,549
5/31/2000 9,690 10,494
6/30/2000 9,944 10,772
7/31/2000 10,087 10,922
8/31/2000 10,221 11,090
9/30/2000 10,160 11,033
10/31/2000 10,264 11,153
11/30/2000 10,334 11,237
12/31/2000 10,634 11,515
1/31/2001 10,717 11,629
2/28/2001 10,757 11,666
3/31/2001 10,831 11,771
4/30/2001 10,635 11,643
5/31/2001 10,765 11,768
6/30/2001 10,863 11,847
7/31/2001 11,028 12,023
8/31/2001 11,203 12,221
9/30/2001 11,155 12,180
10/31/2001 11,286 12,325
11/30/2001 11,132 12,221
12/31/2001 10,993 12,105
1/31/2002 11,152 12,315
2/28/2002 11,314 12,464
3/31/2002 11,034 12,219
4/30/2002 11,258 12,458
5/31/2002 11,322 12,534
6/30/2002 11,431 12,666
7/31/2002 11,611 12,829
8/31/2002 11,766 12,983
9/30/2002 12,071 13,268
10/31/2002 11,742 13,048
11/30/2002 11,648 12,994
12/31/2002 11,915 13,268
1/31/2003 11,841 13,234
2/28/2003 12,040 13,419
3/31/2003 12,036 13,427
4/30/2003 12,135 13,516
5/31/2003 12,407 13,833
6/30/2003 12,326 13,774
7/31/2003 11,872 13,292
8/31/2003 12,009 13,391
9/30/2003 12,356 13,785
10/31/2003 12,265 13,715
11/30/2003 12,376 13,858
12/31/2003 12,481 13,973
1/31/2004 12,530 14,053
2/29/2004 12,731 14,264
3/31/2004 12,630 14,215
4/30/2004 12,333 13,878
5/31/2004 12,268 13,828
6/30/2004 12,300 13,878
7/31/2004 12,441 14,061
8/31/2004 12,679 14,342
9/30/2004 12,732 14,419
10/31/2004 12,835 14,543
11/30/2004 12,713 14,423
12/31/2004 12,878 14,599
1/31/2005 13,014 14,735
2/28/2005 12,967 14,686
3/31/2005 12,851 14,594
4/30/2005 13,045 14,824
5/31/2005 13,148 14,929
6/30/2005 13,211 15,021
7/31/2005 13,113 14,953
8/31/2005 13,247 15,104
9/30/2005 13,137 15,002
10/31/2005 13,037 14,911
11/30/2005 13,070 14,983
12/31/2005 13,180 15,112
1/31/2006 13,187 15,153
2/28/2006 13,281 15,254
3/31/2006 13,163 15,149
4/30/2006 13,146 15,144
5/31/2006 13,184 15,212
6/30/2006 13,125 15,154
7/31/2006 13,267 15,335
8/31/2006 13,463 15,562
9/30/2006 13,553 15,670
10/31/2006 13,645 15,768
11/30/2006 13,768 15,900
12/31/2006 13,701 15,844
1/31/2007 13,653 15,803
2/28/2007 13,819 16,011
3/31/2007 13,771 15,972
4/30/2007 13,788 16,019
5/31/2007 13,707 15,948
6/30/2007 13,636 15,866
7/31/2007 13,731 15,989
8/31/2007 13,704 15,920
9/30/2007 13,850 16,155
10/31/2007 13,883 16,227
11/30/2007 13,987 16,331
12/31/2007 14,032 16,376
1/31/2008 14,094 16,583
2/29/2008 13,531 15,823
3/31/2008 13,897 16,276
Tax Exempt Insured Fund
Class A Class B Class C
------------------ ------------------ ------------------
Average Average Average
Tax Exempt Annual Cumulative Annual Cumulative Annual Cumulative
Insured Fund Return Return+ Return Return+ Return Return+
- ---------------- ------- ---------- ------- ---------- ------- ----------
1 Year Return -3.87% 0.91% -3.81% 0.06% -0.68% 0.29%
- -------------------------------------------------------------------------
5 Year Return 1.91% 15.47% 1.79% 11.09% 2.26% 11.80%
- -------------------------------------------------------------------------
10 Year Return 3.35% 45.91% 3.27% 38.02% NA NA
- -------------------------------------------------------------------------
Since Inception* 5.29% 232.33% 3.89% 73.84% 3.27% 32.84%
- -------------------------------------------------------------------------
+ Cumulative returns do not include sales load. If sales load had been
included, return would be lower.
* Inception Date - Class A: 11/22/85; Class B: 10/4/93; Class C: 06/1/99.
# For the purposes of the graph, it has been assumed that the maximum sales
charge, of 4.75% of offering price, was deducted from the initial $10,000
investment in the Fund.
For the 12-month period ending March 31, 2008, SunAmerica Tax Exempt Insured
Fund Class A returned -3.87%, compared to 1.90% for the Lehman Brothers
Municipal Bond Index. (The performance data and graph do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.)
- --------
Performance data quoted represents past performance and is no guarantee of
future results. Maximum Sales Charge: Class A: 4.75%, Class B: 4.00% Contingent
Deferred Sales Charge (CDSC), Class C: 1.00% CDSC. Class B shares of the Fund
convert automatically to Class A shares approximately eight years after
purchase. The fund's daily net asset values are not guaranteed and shares are
not insured by the FDIC, the Federal Reserve Board or any other agency. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be higher or lower than the original
cost. Current performance may be higher or lower than that shown. Performance
as of the most recent month end is available at www.sunamericafunds.com.
+ The Lehman Brothers Municipal Bond Index is a market value-weighted index
for the tax-exempt bond market. Indices are not managed and an investor
cannot invest directly into an index.
95
[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 and third fiscal quarters
Officers is available in the on Form N-Q. The Trust's
John T. Genoy, President Trust's Statement of Forms N-Q are available
Donna M. Handel, Additional Information, on the U.S. Securities
Treasurer may be ob-tained without and Exchange Commis-sion
James Nichols, Vice charge upon request, by website at www.sec.gov.
President calling (800) 858-8850. You can also review and
Timothy Pettee, Vice The in-formation is also obtain copies of the
President available from the EDGAR Forms N-Q at the U.S.
Michael Cheah, Vice database on the U.S. Securities and Exchange
President Secu-rities and Exchange Commission Public
Cynthia Gibbons, Vice Commission's website at Refer-ence Room in
President and Chief http://www.sec.gov. Washington DC
Compliance Officer (information on the
Gregory N. Bressler, DELIVERY OF SHAREHOLDER operation of the Public
Chief Legal Officer DOCUMENTS Reference Room may be
and Secretary The Funds have adopted a ob-tained by calling
Nori L. Gabert, Vice policy that allows them 1-800-SEC-0330).
President and to send only one copy of
Assistant Secretary a Fund's prospectus, PROXY VOTING RECORD ON
Kathleen Fuentes, proxy material, annual SUNAMERICA INCOME FUNDS
Assistant Secretary report and semi-annual Information regarding how
John E. McLean, report (the "shareholder the Funds voted proxies
Assistant Secretary documents") to relating to securities
Richard J. Barton, shareholders with held in the Funds during
Assistant Secretary multiple accounts the most recent twelve
Gregory R. Kingston, residing at the same month period ended June
Vice President and "household." This 30 is available, once
Assistant Treasurer practice is called filed with the U.S.
Christopher A. Okeke, householding and reduces Securities and Exchange
Assistant Treasurer Fund expenses, which Commission, without
Matthew J. Hackethal, benefits you and other charge, upon request, by
Anti-Money Laundering shareholders. Unless the calling (800) 858-8850 or
Compliance Officer Funds receive on the U.S. Securities
instructions to the and Exchange Commission's
Investment Adviser con-trary, you will only website at
receive one copy of the http://www.sec.gov.
AIG SunAmerica Asset Management Corp. shareholder documents.
Harborside Financial The Funds will continue This report is submitted
Center to household the solely for the general
3200 Plaza 5 share-holder documents information of
Jersey City, NJ indefinitely, until we shareholders of the
07311-4992 are instructed otherwise. Funds. Distribution of
If you do not wish to this report to persons
Distributor participate in other than shareholders
AIG SunAmerica Capital householding please of the Funds is
Services, Inc. contact Shareholder authorized only in
Harborside Financial Services at (800) con-nection with a
Center 858-8850 ext. 6010 or currently effective
3200 Plaza 5 send a written request pro-spectus, setting
Jersey City, NJ with your name, the name forth details of the
07311-4992 of your fund(s) and your Funds, which must precede
account number(s) to AIG or accom-pany this report.
Shareholder Servicing SunAmerica Mutual Funds
Agent c/o BFDS, P.O. Box
AIG SunAmerica Fund 219186, Kansas City MO,
Services, Inc. 64121-9186. We will
Harborside Financial resume individual
Center mailings for your account
3200 Plaza 5 within thirty (30) days
Jersey City, NJ of receipt of your
07311-4992 request.
Custodian and Transfer
Agent
State Street Bank and
Trust Company
P.O. Box 419572
Kansas City, MO
64141-6572
96
Distributed by:
AIG SunAmerica Capital Services, Inc.
Investors should carefully consider a Fund's investment objectives, risks,
charges and expenses before investing. The prospectus, containing this and
other important information, can be obtained from your financial adviser, the
AIG SunAmerica Sales Desk at 800-858-8850, ext. 6003, or at
www.sunamericafunds.com. Read the prospectus carefully before investing.
www.sunamericafunds.com
INANN - 3/08
[LOGO] AIG
Sun America
Mutual Funds
live longer retire stronger/sm/
Item 2. Code of Ethics.
The SunAmerica Income Funds (the "registrant") has adopted a Code of
Ethics applicable to its Principal Executive and Principal Accounting
Officers pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that William J. Shea,
the Chairman of the registrant's Audit Committee, qualifies as an audit
committee financial expert, as defined in the instructions to Item
3(b) of Form N-CSR. Mr. Shea is considered to be "independent" for
purposes of Item 3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)--(d) Aggregate fees billed to the registrant for the last two
fiscal years for services rendered by the registrant's principal
accountant were as follows:
2008 2007
(a) Audit Fees ....................$ 144,643 $ 135,755
(b) Audit-Related Fees ............$ 0 $ 0
(c) Tax Fees ......................$ 54,874 $ 54,670
(d) All Other Fees ................$ 0 $ 0
Audit Fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
principal accountant in connection with statutory and regulatory
filings. Tax Fees principally include tax compliance, tax advice, tax
planning and preparation of tax returns.
Aggregate fees billed to the investment adviser and Adviser Affiliates
(as defined below in Item 4(e)) that are required to be pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X for
the last two fiscal years for services rendered by the Registrant's
principal accountant were as follows:
2008 2007
(b) Audit-Related Fees ............$ 0 $ 0
(c) Tax Fees ......................$ 0 $ 0
(d) All Other Fees ................$ 0 $ 0
(e) (1) The registrant's audit committee pre-approves all audit services
provided by the registrant's principal accountant for the registrant
and all non-audit services provided by the registrant's principal
accountant for the registrant, its investment adviser and any entity
controlling, controlled by, or under common control with the
investment adviser ("Adviser Affiliates") that provides ongoing
services to the registrant, if the engagement by the investment
adviser or Adviser Affiliates relates directly to the operations and
financial reporting of the registrant. The audit committee has not
presently established any pre-approval policies and procedures that
permit the pre-approval of the above services other than by the full
audit committee. Certain de minimis exceptions are allowed for non-
audit services in accordance with Rule 2-01(c)(7)(i)(C) of Regulation
S-X as set forth in the Registrant's audit committee charter.
(2) No services included in (b)-(d) above in connection with fees
billed to the registrant or the investment adviser or Adviser
Affiliates were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-
01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal year and the
preceding fiscal year by the registrant's principal accountant for
non-audit services rendered to the registrant, its investment adviser,
and Adviser Affiliates that provides ongoing services to the registrant
for 2008 and 2007 were $521,528 and $537,120, respectively.
(h) Non-audit services rendered to the registrant's investment adviser and
any Adviser Affiliate that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X were considered by the registrant's audit
committee as to whether they were compatible with maintaining the
principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
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) Code of Ethics applicable to its Principal Executive and
Principle Accounting Officers pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.406.
Code of Ethics.
(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the Sarbanes-
Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Income Funds
By: /s/ John T. Genoy
-------------------
John T. Genoy
President
Date: June 6, 2008
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/ John T. Genoy
-------------------
John T. Genoy
President
Date: June 6, 2008
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: June 6, 2008