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: September 30, 2008
-------------------------
Item 1. Reports to Stockholders
[PHOTO]
SEMI-ANNUAL REPORT 2008
SUNAMERICA
Income Funds
www.sunamericafunds.com
September 30, 2008 SEMI-ANNUAL REPORT
SUNAMERICA INCOME FUNDS
SunAmerica U.S. Government Securities Fund (SGTAX)
SunAmerica GNMA Fund (GNMAX)
SunAmerica Strategic Bond Fund (SDIAX)
SunAmerica High Yield Bond Fund (SHNAX)
SunAmerica Tax Exempt Insured Fund (STEAX)
Table of Contents
SHAREHOLDER LETTER.......................................... 2
EXPENSE EXAMPLE............................................. 3
STATEMENT OF ASSETS AND LIABILITIES......................... 5
STATEMENT OF OPERATIONS..................................... 7
STATEMENT OF CHANGES IN NET ASSETS.......................... 8
FINANCIAL HIGHLIGHTS........................................ 11
PORTFOLIO OF INVESTMENTS.................................... 16
NOTES TO FINANCIAL STATEMENTS............................... 67
APPROVAL OF ADVISORY AGREEMENTS............................. 83
Shareholder Letter
Dear Shareholder:
Enclosed is the semi-annual report for the SunAmerica Income Funds for the
six-month period ended September 30, 2008.
The semi-annual period was a turbulent one for the fixed income market and
presented many challenges. Two of the events that defined the period included a
credit crunch that hit the markets in August and the deterioration in the
housing market which created concerns regarding the subprime mortgage market.
Fear spread throughout the credit markets and created great uncertainty as the
era of seemingly endless liquidity came to an end. Banks tightened lending
standards and investors migrated to short-term Treasury securities, thereby
reducing yields. The period was also marked by rising oil prices and a
declining dollar which raised the specter of inflation in some circles. The
state of the economy hung in the balance as the equity markets sold off and
credit markets weakened.
The ten-year Treasury note reflected the uncertainty surrounding the future
direction of the economy. Starting the semi-annual period at a yield of 3.41%,
it hit a high of 4.27% and a low of 3.39% ending the month of September at
3.83%. Although there was a 0.25% reduction in the Federal Funds rate during
the semi-annual period, there was growing consensus that the central bank would
take further action to stave off the recessionary pressures.
While not unscathed, the fixed income market offered some solace to investors.
As expected there was a flight to quality in the face of uncertainty as
evidenced by the semi-annual returns of Lipper Fixed Income categories. The
U.S. Government category returned -1.20% for the six-month period, while the
High Yield and High Yield Municipal categories returned -6.60% and -5.57%,
respectively. Moreover, money market funds faced extreme pressure as a
long-standing money market mutual fund dropped below the traditional $1.00 Net
Asset Value (NAV). This triggered widespread panic in what has been a
relatively stable and quiet corner of the markets.
While the immediate pressure on the fixed income markets has been reduced, we
are not out of the woods yet. In light of the period's events, we recommend
that investors meet with their financial adviser to review their portfolios and
make sure they are diversified, with the appropriate level of risk.
Thank you for your investment in the SunAmerica Income Funds. We continue to
work diligently to preserve and grow your capital consistent with each Fund's
individual objectives. We also encourage you to visit our website,
www.sunamericafunds.com, for more information.
Sincerely,
The SunAmerica Income Funds Investment Professionals
Michael Cheah Matthew Meyer Robert Vanden Assem
Andrew Doulos J. Hutchison Bryan Bryan Petermann
Raphael Davis Geoffrey Cornell
John Yovanovic Anthony King
Peter Stevenson Tim Lindvall
Rajeev Mittal
- --------
Past performance is no guarantee of future results.
2
SunAmerica Income Funds
EXPENSE EXAMPLE -- September 30, 2008 -- (unaudited)
Disclosure of Portfolio Expenses in Shareholder Reports
As a shareholder of a fund in the SunAmerica Income Funds (the "Trust"), you
may incur two types of costs: (1) transaction costs, including sales charges
(loads) on purchase payments, contingent deferred sales charges and (2) ongoing
costs, including management fees; distribution and service fees; and other Fund
expenses. The example set forth below is intended to help you understand your
ongoing costs (in dollars) of investing in the Funds and to compare these costs
with the ongoing costs of investing in other mutual funds. The Example is based
on an investment of $1,000 invested at April 1, 2008 and held until September
30, 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 September 30, 2008" to estimate the expenses you paid on your
account during this period. The "Expenses Paid During the Six Months Ended
September 30, 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
September 30, 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 September 30,
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 September 30, 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
September 30, 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 September 30,
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 -- September 30, 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 April 1, September 30, September 30, at April 1, September 30, September 30, September 30,
Fund 2008 2008 2008* 2008 2008 2008* 2008*
- ---- ------------- -------------- ------------- ------------- -------------- ------------- -------------
U.S. Government Securities
Class A#................. $1,000.00 $ 999.75 $ 4.96 $1,000.00 $1,020.10 $ 5.01 0.99%
Class B#................. $1,000.00 $ 996.49 $ 8.21 $1,000.00 $1,016.85 $ 8.29 1.64%
Class C#................. $1,000.00 $ 996.47 $ 8.21 $1,000.00 $1,016.85 $ 8.29 1.64%
GNMA
Class A#................. $1,000.00 $1,005.93 $ 4.98 $1,000.00 $1,020.10 $ 5.01 0.99%
Class B#................. $1,000.00 $1,002.69 $ 8.23 $1,000.00 $1,016.85 $ 8.29 1.64%
Class C#................. $1,000.00 $1,002.70 $ 8.23 $1,000.00 $1,016.85 $ 8.29 1.64%
Strategic Bond
Class A.................. $1,000.00 $ 938.50 $ 6.22 $1,000.00 $1,018.65 $ 6.48 1.28%
Class B.................. $1,000.00 $ 935.32 $ 9.46 $1,000.00 $1,015.29 $ 9.85 1.95%
Class C.................. $1,000.00 $ 935.68 $ 9.37 $1,000.00 $1,015.39 $ 9.75 1.93%
High Yield Bond
Class A#................. $1,000.00 $ 928.80 $ 6.58 $1,000.00 $1,018.25 $ 6.88 1.36%
Class B#................. $1,000.00 $ 926.02 $ 9.70 $1,000.00 $1,014.99 $10.15 2.01%
Class C#................. $1,000.00 $ 926.26 $ 9.71 $1,000.00 $1,014.99 $10.15 2.01%
Tax Exempt Insured
Class A#................. $1,000.00 $ 977.79 $ 5.90 $1,000.00 $1,019.10 $ 6.02 1.19%
Class B#................. $1,000.00 $ 972.51 $10.73 $1,000.00 $1,014.19 $10.96 2.17%
Class C#................. $1,000.00 $ 974.63 $ 8.96 $1,000.00 $1,015.99 $ 9.15 1.81%
- --------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 183 days divided by 365
days. These ratios do not reflect transaction costs, including sales charges
on purchase payments, contingent deferred sales charges, small account fees
and administrative fees, if applicable to your account. Please refer to your
Prospectus and/or qualified retirement plan document for more information.
# During the stated period, the investment adviser either waived a portion of
or all fees and assumed a portion of or all expenses for the Funds. As a
result, if these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended September 30,
2008" and the "Expenses Ratios" would have been higher.
4
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2008 -- (unaudited)
U.S. Government
Securities GNMA
Fund Fund
--------------- ------------
ASSETS:
Long-term investment securities, at market value* (unaffiliated)...................... $227,869,348 $376,369,240
Short term investment securities, at market value* (unaffiliated)..................... -- --
Repurchase agreements (cost approximates market value)................................ 16,763,000 50,161,000
------------ ------------
Total investments................................................................... 244,632,348 426,530,240
------------ ------------
Cash.................................................................................. 260 903
Foreign cash*......................................................................... -- --
Receivable for:
Shares of beneficial interest sold.................................................. 690,240 3,361,878
Dividends and interest.............................................................. 1,552,517 1,763,918
Investments sold.................................................................... -- --
Prepaid expenses and other assets..................................................... 2,066 2,066
Due from investment adviser for expense reimbursements/fee waivers.................... 44,820 13,235
Unrealized appreciation on forward foreign currency contracts......................... -- --
------------ ------------
Total assets.......................................................................... 246,922,251 431,672,240
------------ ------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.............................................. 436,295 673,813
Investments purchased............................................................... 30,626,712 41,221,250
Investment advisory and management fees............................................. 112,470 146,397
Distribution and service maintenance fees........................................... 76,779 154,201
Transfer agent fees and expenses.................................................... 51,375 86,847
Trustees' fees and expenses......................................................... 82,455 58,730
Other accrued expenses.............................................................. 89,676 103,663
Dividends payable..................................................................... 122,203 179,183
Commitments (Note 11)................................................................. -- --
Unrealized depreciation on forward foreign currency contracts......................... -- --
------------ ------------
Total liabilities..................................................................... 31,597,965 42,624,084
------------ ------------
Net assets............................................................................ $215,324,286 $389,048,156
============ ============
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value........................................ $ 226,150 $ 341,662
Paid-in capital....................................................................... 215,907,035 384,772,699
------------ ------------
216,133,185 385,114,361
Accumulated undistributed net investment income (loss)................................ (60,609) (29,119)
Accumulated undistributed net realized gain (loss) on investments, futures contracts,
securities sold short and foreign exchange transactions.............................. (4,690,922) 2,625,764
Unrealized appreciation (depreciation) on investments................................. 3,942,632 1,337,150
Unrealized appreciation (depreciation) on foreign exchange transactions............... -- --
------------ ------------
Net assets............................................................................ $215,324,286 $389,048,156
============ ============
*Cost
Long-term investment securities (unaffiliated)...................................... $223,926,716 $375,032,090
============ ============
Short-term securities (unaffiliated)................................................ $ -- $ --
============ ============
Foreign cash........................................................................ $ -- $ --
============ ============
Strategic High Yield Tax Exempt
Bond Bond Insured
Fund Fund Fund
------------ ------------ -----------
ASSETS:
Long-term investment securities, at market value* (unaffiliated)...................... $670,694,603 $171,921,601 $50,388,619
Short term investment securities, at market value* (unaffiliated)..................... 17,882,000 -- 5,385,764
Repurchase agreements (cost approximates market value)................................ 14,768,000 406,000 --
------------ ------------ -----------
Total investments................................................................... 703,344,603 172,327,601 55,774,383
------------ ------------ -----------
Cash.................................................................................. 855,435 34,949 --
Foreign cash*......................................................................... 179,148 -- --
Receivable for:
Shares of beneficial interest sold.................................................. 1,578,421 226,740 228,347
Dividends and interest.............................................................. 12,747,911 4,858,135 737,872
Investments sold.................................................................... 6,237,953 7,348,998 --
Prepaid expenses and other assets..................................................... 2,674 68,203 2,066
Due from investment adviser for expense reimbursements/fee waivers.................... -- -- 16,818
Unrealized appreciation on forward foreign currency contracts......................... 1,008,395 -- --
------------ ------------ -----------
Total assets.......................................................................... 725,954,540 184,864,626 56,759,486
------------ ------------ -----------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed.............................................. 3,321,031 668,974 19,344
Investments purchased............................................................... 21,336,543 6,259,536 1,987,500
Investment advisory and management fees............................................. 381,532 120,144 23,089
Distribution and service maintenance fees........................................... 378,843 104,007 21,115
Transfer agent fees and expenses.................................................... 148,778 47,114 12,145
Trustees' fees and expenses......................................................... 42,438 49,906 26,113
Other accrued expenses.............................................................. 244,404 115,243 54,798
Dividends payable..................................................................... 1,160,043 406,248 50,695
Commitments (Note 11)................................................................. -- -- --
Unrealized depreciation on forward foreign currency contracts......................... 657,119 -- --
------------ ------------ -----------
Total liabilities..................................................................... 27,670,731 7,771,172 2,194,799
------------ ------------ -----------
Net assets............................................................................ $698,283,809 $177,093,454 $54,564,687
============ ============ ===========
NET ASSETS REPRESENTED BY:
Shares of beneficial interest, $0.01 par value........................................ $ 2,188,001 $ 473,918 $ 46,365
Paid-in capital....................................................................... 803,781,935 310,390,088 55,698,660
------------ ------------ -----------
805,969,936 310,864,006 55,745,025
Accumulated undistributed net investment income (loss)................................ 7,180,406 276,158 (33,856)
Accumulated undistributed net realized gain (loss) on investments, futures contracts,
securities sold short and foreign exchange transactions.............................. (38,312,849) (94,636,029) (51,904)
Unrealized appreciation (depreciation) on investments................................. (76,740,148) (39,410,681) (1,094,578)
Unrealized appreciation (depreciation) on foreign exchange transactions............... 186,464 -- --
------------ ------------ -----------
Net assets............................................................................ $698,283,809 $177,093,454 $54,564,687
============ ============ ===========
*Cost
Long-term investment securities (unaffiliated)...................................... $747,434,751 $211,332,282 $51,483,197
============ ============ ===========
Short-term securities (unaffiliated)................................................ $ 17,882,000 $ -- $ 5,385,764
============ ============ ===========
Foreign cash........................................................................ $ 186,263 $ -- $ --
============ ============ ===========
See Notes to Financial Statements
5
SunAmerica Income Funds
STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2008 --
(unaudited) (continued)
U.S. Government Strategic
Securities GNMA Bond
Fund Fund Fund
--------------- ------------ ------------
Class A (unlimited shares authorized):
Net assets.......................................................................... $183,328,823 $306,718,255 $405,834,776
Shares of beneficial interest issued and outstanding................................ 19,253,665 26,953,517 127,334,878
Net asset value and redemption price per share (excluding any applicable contingent
deferred sales charge)............................................................. $ 9.52 $ 11.38 $ 3.19
Maximum sales charge (4.75% of offering price)...................................... 0.47 0.57 0.16
------------ ------------ ------------
Maximum offering price to public.................................................... $ 9.99 $ 11.95 $ 3.35
============ ============ ============
Class B (unlimited shares authorized):
Net assets.......................................................................... $ 15,173,458 $ 42,279,682 $ 47,183,570
Shares of beneficial interest issued and outstanding................................ 1,593,079 3,706,073 14,807,991
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge).................................................. $ 9.52 $ 11.41 $ 3.19
============ ============ ============
Class C (unlimited shares authorized):
Net assets.......................................................................... $ 16,822,005 $ 40,050,219 $245,265,463
Shares of beneficial interest issued and outstanding................................ 1,768,241 3,506,579 76,657,192
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge).................................................. $ 9.51 $ 11.42 $ 3.20
============ ============ ============
High Yield Tax Exempt
Bond Insured
Fund Fund
----------- -----------
Class A (unlimited shares authorized):
Net assets.......................................................................... $94,766,930 $44,892,183
Shares of beneficial interest issued and outstanding................................ 25,411,389 3,815,195
Net asset value and redemption price per share (excluding any applicable contingent
deferred sales charge)............................................................. $ 3.73 $ 11.77
Maximum sales charge (4.75% of offering price)...................................... 0.19 0.59
----------- -----------
Maximum offering price to public.................................................... $ 3.92 $ 12.36
=========== ===========
Class B (unlimited shares authorized):
Net assets.......................................................................... $29,234,658 $ 3,266,937
Shares of beneficial interest issued and outstanding................................ 7,825,720 277,338
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge).................................................. $ 3.74 $ 11.78
=========== ===========
Class C (unlimited shares authorized):
Net assets.......................................................................... $53,091,866 $ 6,405,567
Shares of beneficial interest issued and outstanding................................ 14,154,699 543,956
Net asset value, offering and redemption price per share (excluding any applicable
contingent deferred sales charge).................................................. $ 3.75 $ 11.78
=========== ===========
See Notes to Financial Statements
6
SunAmerica Income Funds
STATEMENT OF OPERATIONS -- For the six months ended September 30, 2008
-- (unaudited)
U.S. Government
Securities GNMA
Fund Fund
--------------- -----------
INCOME:
Dividends (unaffiliated)................................................................. $ -- $ --
Interest (unaffiliated).................................................................. 4,377,989 9,185,418
----------- -----------
Total investment income*............................................................... 4,377,989 9,185,418
----------- -----------
EXPENSES:
Investment advisory and management fees.................................................. 679,378 905,176
Distribution and service maintenance fees:
Class A................................................................................ 313,697 550,851
Class B................................................................................ 74,342 220,711
Class C................................................................................ 76,631 175,149
Transfer agent fees:
Class A................................................................................ 218,773 361,141
Class B................................................................................ 19,909 54,974
Class C................................................................................ 19,615 42,646
Registration fees:
Class A................................................................................ 16,241 7,833
Class B................................................................................ 3,649 2,018
Class C................................................................................ 7,722 3,981
Custodian and accounting fees............................................................ 40,075 75,324
Reports to shareholders.................................................................. 58 3,904
Audit and tax fees....................................................................... 25,607 26,109
Legal fees............................................................................... 3,965 1,666
Trustees' fees and expenses.............................................................. 8,648 16,134
Interest expense......................................................................... -- --
Interest expense on securities sold short................................................ -- --
Other expenses........................................................................... 9,639 11,065
----------- -----------
Total expenses before fee waivers, reimbursements, and custody credits................. 1,517,949 2,458,682
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (383,035) (251,290)
Custody credits earned on cash balances................................................ (5) (60)
----------- -----------
Net expenses........................................................................... 1,134,909 2,207,332
----------- -----------
Net investment income (loss).............................................................. 3,243,080 6,978,086
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... (363,343) 1,342,891
Net realized foreign exchange gain (loss) on other assets and liabilities................. -- --
Net realized gain (loss) on securities sold short......................................... -- --
----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ (363,343) 1,342,891
----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (3,352,364) (6,697,275)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... -- --
----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (3,352,364) (6,697,275)
----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (3,715,707) (5,354,384)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ (472,627) $ 1,623,702
=========== ===========
- --------
* Net of foreign withholding taxes on interest and dividends of.......................... $ -- $ --
=========== ===========
Strategic High Yield
Bond Bond
Fund Fund
------------ ------------
INCOME:
Dividends (unaffiliated)................................................................. $ 138,648 $ 220,074
Interest (unaffiliated).................................................................. 27,982,052 11,034,578
------------ ------------
Total investment income*............................................................... 28,120,700 11,254,652
------------ ------------
EXPENSES:
Investment advisory and management fees.................................................. 2,442,110 818,769
Distribution and service maintenance fees:
Class A................................................................................ 817,144 211,387
Class B................................................................................ 260,261 172,473
Class C................................................................................ 1,328,993 319,185
Transfer agent fees:
Class A................................................................................ 531,757 145,295
Class B................................................................................ 62,542 42,018
Class C................................................................................ 301,681 74,551
Registration fees:
Class A................................................................................ 7,486 4,852
Class B................................................................................ 2,455 1,776
Class C................................................................................ 6,334 2,308
Custodian and accounting fees............................................................ 171,474 46,661
Reports to shareholders.................................................................. 48,652 6,277
Audit and tax fees....................................................................... 26,810 25,229
Legal fees............................................................................... 4,361 9,081
Trustees' fees and expenses.............................................................. 32,150 9,083
Interest expense......................................................................... 1,075 9,710
Interest expense on securities sold short................................................ -- 10,354
Other expenses........................................................................... 15,593 11,663
------------ ------------
Total expenses before fee waivers, reimbursements, and custody credits................. 6,060,878 1,920,672
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... -- (110,063)
Custody credits earned on cash balances................................................ (2,098) (987)
------------ ------------
Net expenses........................................................................... 6,058,780 1,809,622
------------ ------------
Net investment income (loss).............................................................. 22,061,920 9,445,030
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... (17,434,901) (3,649,255)
Net realized foreign exchange gain (loss) on other assets and liabilities................. 7,657,358 --
Net realized gain (loss) on securities sold short......................................... -- 61,500
------------ ------------
Net realized gain (loss) on investments and foreign currencies............................ (9,777,543) (3,587,755)
------------ ------------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (60,491,338) (19,814,564)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... (90,964) --
------------ ------------
Net unrealized gain (loss) on investments and foreign currencies.......................... (60,582,302) (19,814,564)
------------ ------------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (70,359,845) (23,402,319)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $(48,297,925) $(13,957,289)
============ ============
- --------
* Net of foreign withholding taxes on interest and dividends of.......................... $ 19,468 $ --
============ ============
Tax Exempt
Insured
Fund
-----------
INCOME:
Dividends (unaffiliated)................................................................. $ --
Interest (unaffiliated).................................................................. 1,269,001
-----------
Total investment income*............................................................... 1,269,001
-----------
EXPENSES:
Investment advisory and management fees.................................................. 138,681
Distribution and service maintenance fees:
Class A................................................................................ 82,622
Class B................................................................................ 16,830
Class C................................................................................ 24,469
Transfer agent fees:
Class A................................................................................ 57,724
Class B................................................................................ 4,722
Class C................................................................................ 6,513
Registration fees:
Class A................................................................................ 4,670
Class B................................................................................ 5,353
Class C................................................................................ 7,485
Custodian and accounting fees............................................................ 15,141
Reports to shareholders.................................................................. 286
Audit and tax fees....................................................................... 22,107
Legal fees............................................................................... 5,538
Trustees' fees and expenses.............................................................. 2,303
Interest expense......................................................................... --
Interest expense on securities sold short................................................ --
Other expenses........................................................................... 8,844
-----------
Total expenses before fee waivers, reimbursements, and custody credits................. 403,288
Fees waived and expenses reimbursed by investment advisor (Note 3)..................... (41,904)
Custody credits earned on cash balances................................................ (22)
-----------
Net expenses........................................................................... 361,362
-----------
Net investment income (loss).............................................................. 907,639
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated).................................... 58,925
Net realized foreign exchange gain (loss) on other assets and liabilities................. --
Net realized gain (loss) on securities sold short......................................... --
-----------
Net realized gain (loss) on investments and foreign currencies............................ 58,925
-----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated)............ (2,290,235)
Change in unrealized foreign exchange gain (loss) on other assets and liabilities......... --
-----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (2,290,235)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (2,231,310)
-----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $(1,323,671)
===========
- --------
* 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
six months
ended For the year
September 30, ended
2008 March 31,
(unaudited) 2008
------------- ------------
Operations:
Net investment income (loss)............................... $ 3,243,080 $ 7,237,467
Net realized gain (loss) on investments and foreign
currencies............................................... (363,343) 1,008,787
Net unrealized gain (loss) on investments and foreign
currencies............................................... (3,352,364) 8,877,258
------------ ------------
Increase (decrease) in net assets resulting from operations. (472,627) 17,123,512
------------ ------------
Distributions to shareholders from:
Net investment income (Class A)............................ (2,932,585) (6,695,513)
Net investment income (Class B)............................ (194,952) (464,501)
Net investment income (Class C)............................ (200,846) (392,650)
Net realized gain on securities (Class A).................. -- --
Net realized gain on securities (Class B).................. -- --
Net realized gain on securities (Class C).................. -- --
------------ ------------
Total distributions to shareholders......................... (3,328,383) (7,552,664)
------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)........................ (4,282,233) 37,000,481
------------ ------------
Total increase (decrease) in net assets..................... (8,083,243) 46,571,329
NET ASSETS:
Beginning of period......................................... 223,407,529 176,836,200
------------ ------------
End of period+.............................................. $215,324,286 $223,407,529
============ ============
- --------
+Includes accumulated undistributed net investment income
(loss)..................................................... $ (60,609) $ 24,694
============ ============
See Notes to Financial Statements
8
SunAmerica Income Funds
STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund Strategic Bond Fund
-------------------------- ---------------------------
For the For the
six months six months
ended For the year ended For the year
September 30, ended September 30, ended
2008 March 31, 2008 March 31,
(unaudited) 2008 (unaudited) 2008
------------- ------------ ------------- ------------
Operations:
Net investment income (loss)............................... $ 6,978,086 $ 15,979,518 $ 22,061,920 $ 40,202,721
Net realized gain (loss) on investments and foreign
currencies............................................... 1,342,891 6,905,478 (9,777,543) 7,026,495
Net unrealized gain (loss) on investments and foreign
currencies............................................... (6,697,275) 10,107,965 (60,582,302) (31,067,542)
------------ ------------ ------------- ------------
Increase (decrease) in net assets resulting from operations. 1,623,702 32,992,961 (48,297,925) 16,161,674
------------ ------------ ------------- ------------
Distributions to shareholders from:
Net investment income (Class A)............................ (5,965,868) (13,925,153) (13,497,950) (29,257,025)
Net investment income (Class B)............................ (693,255) (1,870,179) (1,331,019) (2,805,432)
Net investment income (Class C)............................ (549,988) (1,078,120) (6,827,695) (13,185,521)
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......................... (7,209,111) (16,873,452) (21,656,664) (45,247,978)
------------ ------------ ------------- ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)........................ (17,557,041) (2,267,507) (34,013,609) 103,961,925
------------ ------------ ------------- ------------
Total increase (decrease) in net assets..................... (23,142,450) 13,852,002 (103,968,198) 74,875,621
NET ASSETS:
Beginning of period......................................... 412,190,606 398,338,604 802,252,007 727,376,386
------------ ------------ ------------- ------------
End of period+.............................................. $389,048,156 $412,190,606 $ 698,283,809 $802,252,007
============ ============ ============= ============
- --------
+Includes accumulated undistributed net investment income
(loss)..................................................... $ (29,119) $ 201,906 $ 7,180,406 $ 6,775,150
============ ============ ============= ============
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 For the
six months six months
ended For the year ended For the year
September 30, ended September 30, ended
2008 March 31, 2008 March 31,
(unaudited) 2008 (unaudited) 2008
------------- ------------- ------------- ------------
Operations:
Net investment income (loss).......................... $ 9,445,030 $ 21,635,708 $ 907,639 $ 1,807,840
Net realized gain (loss) on investments and foreign
currencies.......................................... (3,587,755) (3,800,036) 58,925 (110,884)
Net unrealized gain (loss) on investments and foreign
currencies.......................................... (19,814,564) (36,536,170) (2,290,235) (1,245,963)
------------ ------------- ----------- -----------
Increase (decrease) in net assets resulting from
operations............................................ (13,957,289) (18,700,498) (1,323,671) 450,993
------------ ------------- ----------- -----------
Distributions to shareholders from:
Net investment income (Class A)....................... (4,189,781) (12,979,716) (781,711) (1,606,491)
Net investment income (Class B)....................... (1,086,280) (2,908,997) (40,221) (99,116)
Net investment income (Class C)....................... (2,010,051) (5,292,760) (65,231) (105,563)
Net realized gain on securities (Class A)............. -- -- -- (396,574)
Net realized gain on securities (Class B)............. -- -- -- (32,437)
Net realized gain on securities (Class C)............. -- -- -- (34,730)
------------ ------------- ----------- -----------
Total distributions to shareholders.................... (7,286,112) (21,181,473) (887,163) (2,274,911)
------------ ------------- ----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)................... (6,917,866) (134,674,504) 2,440,111 (2,960,840)
------------ ------------- ----------- -----------
Total increase (decrease) in net assets................ (28,161,267) (174,556,475) 229,277 (4,784,758)
NET ASSETS:
Beginning of period.................................... 205,254,721 379,811,196 54,335,410 59,120,168
------------ ------------- ----------- -----------
End of period+......................................... $177,093,454 $ 205,254,721 $54,564,687 $54,335,410
============ ============= =========== ===========
- --------
+Includes accumulated undistributed net investment
income (loss)......................................... $ 276,158 $ (1,882,760) $ (33,856) $ (54,332)
============ ============= =========== ===========
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
09/30/08+ 9.68 0.15 (0.15) 0.00 (0.16) -- (0.16) 9.52 (0.03) 183,329 0.99(5)
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
09/30/08+ 9.68 0.12 (0.16) (0.04) (0.12) -- (0.12) 9.52 (0.35) 15,173 1.64(5)
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
09/30/08+ 9.67 0.12 (0.16) (0.04) (0.12) -- (0.12) 9.51 (0.35) 16,822 1.64(5)
-
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
3.19(5) 34
-
2.45% 267%(4)
2.61 253(4)
3.14 357
3.40 243
3.20 343
2.54(5) 34
-
2.45% 267%(4)
2.61 253(4)
3.14 357
3.40 243
3.14 343
2.54(5) 34
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08 09/30/08(5)+
-------- -------- -------- -------- -------- ------------
U.S. Government Securities Fund Class A. 0.37% 0.39% 0.36% 0.38% 0.39% 0.35%
U.S. Government Securities Fund Class B. 0.37 0.43 0.43 0.43 0.48 0.41
U.S. Government Securities Fund Class C. 0.38 0.48 0.57 0.43 0.50 0.45
(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%
(5)Annualized
See Notes to Financial Statements
11
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND
---------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets(3)
- --------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- -------------
Class A
- -
03/31/04 $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
09/30/08+ 11.53 0.21 (0.14) 0.07 (0.22) -- (0.22) 11.38 0.59 306,718 0.99(5)
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
09/30/08+ 11.56 0.17 (0.14) 0.03 (0.18) -- (0.18) 11.41 0.27 42,280 1.64(5)
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
09/30/08+ 11.57 0.17 (0.14) 0.03 (0.18) -- (0.18) 11.42 0.27 40,050 1.64(5)
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
3.67(5) 27
1.77% 225%(4)
2.10 204(4)
2.50 138
3.53 142
3.52 354
3.02(5) 27
1.74% 225%(4)
2.11 204(4)
2.49 138
3.53 142
3.49 354
3.02(5) 27
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08 09/30/08(5)+
-------- -------- -------- -------- -------- ------------
GNMA Fund Class A............. 0.18% 0.17% 0.13% 0.15% 0.15% 0.12%
GNMA Fund Class B............. 0.16 0.18 0.17 0.18 0.19 0.14
GNMA Fund Class C............. 0.16 0.18 0.19 0.17 0.22 0.15
(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%
(5)Annualized
See Notes to Financial Statements
12
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND
-------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expense
Period beginning investment and investment investment gains on Distri- end of Total period to average
Ended of period income(1) unrealized) operations income investments butions period+ Return(2) (000's) net assets
- --------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------- --------- -------- ----------
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)
09/30/08+ 3.50 0.10 (0.31) (0.21) (0.10) -- (0.10) 3.19 (6.15) 405,835 1.28(7)
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)
09/30/08+ 3.50 0.09 (0.31) (0.22) (0.09) -- (0.09) 3.19 (6.47) 47,184 1.95(7)
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)
09/30/08+ 3.51 0.09 (0.31) (0.22) (0.09) -- (0.09) 3.20 (6.43) 245,265 1.93(7)
Ratio
of net
investment
income to
average Portfolio
net assets Turnover
- ---------- ---------
6.41%(3)(4) 71%(5)(8)
5.94(3)(4) 196(5)(8)
5.19(4) 118(8)
4.79(6) 134(8)
5.30(6) 162(8)
5.89(7) 61
5.76%(3)(4) 71%(5)(8)
5.32(3)(4) 196(5)(8)
4.51(3)(4) 118(8)
4.12(6) 134(8)
4.63(6) 162(8)
5.22(7) 61
5.78%(3)(4) 71%(5)(8)
5.29(3)(4) 196(5)(8)
4.54(3)(4) 118(8)
4.12(6) 134(8)
4.65(6) 162(8)
5.24(7) 61
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 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%
(7)Annualized
(8)Portfolio turnover includes "to be announced" ("TBA") transactions.
Previously, portfolio turnover was calculated excluding TBA transactions and
was as follows:
2004 2005 2006 2007 2008
- ---- ---- ---- ---- ----
Strategic Bond Fund. 71% 190% 119% 131% 151%
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)
09/30/08+ 4.16 0.19 (0.47) (0.28) (0.15) -- (0.15) 3.73 (7.12) 94,767 1.36(3)(6)
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)
09/30/08+ 4.17 0.17 (0.47) (0.30) (0.13) -- (0.13) 3.74 (7.40) 29,235 2.01(3)(6)
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)
09/30/08+ 4.18 0.17 (0.47) (0.30) (0.13) -- (0.13) 3.75 (7.37) 53,092 2.01(3)(6)
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
8.91(3)(6) 39
7.52% 126%(4)
7.04(3) 85(4)
6.71(3)(5) 91
5.82(3) 86
6.80(3) 72
8.26(3)(6) 39
7.53%(3) 126%(4)
6.97(3) 85(4)
6.67(3)(5) 91
5.80(3) 86
6.75(3) 72
8.27(3)(6) 39
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08 09/30/08(6)+
-------- -------- -------- -------- -------- ------------
High Yield Bond Fund Class A............ -- % 0.08% 0.11% 0.09% 0.17% 0.10%
High Yield Bond Fund Class B............ -- 0.07 0.14 0.11 0.20 0.11
High Yield Bond Fund Class C............ 0.01 0.09 0.12 0.10 0.18 0.09
(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%.
(6)Annualized
See Notes to Financial Statements
14
SunAmerica Income Funds
FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND
-----------------------
Net gain
(loss) on
Net investments Distributions Net Net
Asset (both Dividends from net Asset Assets, Ratio of
Value, Net realized Total from from net realized Total Value, end of expenses
beginning investment and investment investment gains on Distri- end of Total period to average
Period Ended of period income(1) unrealized) operations income investments butions period Return(2) (000's) net assets
- ------------ --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- ------- ----------
Class A
- -
03/31/04 $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
09/30/08+ 12.24 0.21 (0.48) (0.27) (0.20) -- (0.20) 11.77 (2.22) 44,892 1.19(3)(4)
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
09/30/08+ 12.26 0.15 (0.48) (0.33) (0.15) -- (0.15) 11.78 (2.75) 3,267 2.17(3)(4)
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)
09/30/08+ 12.25 0.16 (0.47) (0.31) (0.16) -- (0.16) 11.78 (2.54) 6,406 1.81(3)(4)
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
3.39(3)(4) 49
2.20% 131%
2.44 153
2.48 81
2.44 84
2.46 57
2.40(3)(4) 49
2.21%(3) 131%
2.44(3) 153
2.48(3) 81
2.60(3) 84
2.71(3) 57
2.77(3)(4) 49
- --------
* Effective February 23, 2004, Class II was redesignated to Class C.
+ Unaudited
(1)Calculated based upon average shares outstanding.
(2)Total return is not annualized and does not reflect sales load, but does
include expense reimbursements.
(3)Net of the following expense reimbursements, if applicable (based on average
net assets):
03/31/04 03/31/05 03/31/06 03/31/07 03/31/08 09/30/08(4)+
-------- -------- -------- -------- -------- ------------
Tax Exempt Insured Fund Class A......... --% --% --% --% --% 0.12%
Tax Exempt Insured Fund Class B......... -- -- -- -- -- 0.12
Tax Exempt Insured Fund Class C......... 0.12 0.09 0.20 0.09 0.31 0.45
(4)Annualized
See Notes to Financial Statements
15
SunAmerica U.S. Government Securities Fund
PORTFOLIO PROFILE -- September 30, 2008 -- (unaudited)
Industry Allocation*
United States Treasury Notes.... 48.3%
Government National Mtg. Assoc.. 45.9
United States Treasury Bonds.... 10.5
Repurchase Agreements........... 7.8
Federal Farm Credit Bank........ 0.6
Small Business Administration... 0.5
-----
113.6%
=====
Credit Quality+#
Government -- Treasury. 55.6%
Government -- Agency... 44.4
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
16
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 47.0%
Federal Farm Credit Bank -- 0.6%
5.64% due 04/04/11..................... $ 500,000 $ 526,189
6.00% due 03/07/11..................... 200,000 211,755
6.30% due 12/03/13..................... 500,000 546,651
----------
1,284,595
----------
Federal National Mtg. Assoc. -- 0.0%
8.00% due 01/01/23..................... 31,757 34,580
11.00% due 02/01/15.................... 28 32
11.50% due 09/01/19.................... 7,924 8,879
----------
43,491
----------
Government National Mtg. Assoc. -- 45.9%
4.50% due 05/15/18..................... 772,478 769,326
4.50% due 08/15/18..................... 1,166,555 1,161,794
4.50% due 09/15/18..................... 3,473,224 3,459,051
4.50% due 10/15/18..................... 3,350,477 3,336,804
4.50% due 09/15/33..................... 4,150,036 3,970,288
5.00% due 04/15/18..................... 3,413,921 3,473,162
5.00% due 04/15/33..................... 26,968 26,517
5.00% due 08/15/33..................... 1,612,904 1,586,158
5.00% due 09/15/33..................... 721,297 709,215
5.00% due 10/15/33..................... 506,708 498,221
5.00% due 04/15/34..................... 24,999 24,569
5.00% due 11/15/34..................... 170,907 167,964
5.00% due 02/15/35..................... 23,014 22,611
5.00% due 03/15/35..................... 493,928 485,269
5.00% due 04/15/35..................... 54,644 53,686
5.00% due 05/15/35..................... 1,507,979 1,481,543
5.00% due 09/15/35..................... 838,637 823,934
5.00% due 10/15/35..................... 136,531 134,138
5.00% due 12/15/35..................... 86,938 85,414
5.00% due 03/15/36..................... 826,279 811,535
5.00% due 05/15/36..................... 1,264,314 1,241,754
5.00% due 06/15/36..................... 868,109 852,618
5.00% due 09/15/36..................... 1,969,007 1,933,999
5.00% due 10/15/36..................... 496,331 487,475
5.00% due 11/15/36..................... 45,269 44,461
5.00% due 12/15/36..................... 358,892 352,487
5.00% due 01/15/37..................... 4,312,428 4,234,805
5.00% due 02/15/37..................... 2,012,208 1,975,987
5.00% due 03/15/37..................... 1,583,065 1,554,569
5.00% due 04/15/37..................... 1,721,767 1,690,774
5.00% due 08/15/38..................... 9,984,958 9,805,229
5.50% due 11/15/32..................... 12,097 12,150
5.50% due 03/15/33..................... 405,017 406,554
5.50% due 04/15/33..................... 468,936 470,714
5.50% due 05/15/33..................... 1,062,998 1,067,074
5.50% due 06/15/33..................... 5,109,352 5,128,726
5.50% due 07/15/33..................... 1,382,596 1,387,838
5.50% due 10/15/33..................... 1,422,888 1,428,283
5.50% due 12/15/33..................... 289,878 290,977
5.50% due 01/15/34..................... 3,212,837 3,223,513
5.50% due 02/15/34..................... 1,783,076 1,789,001
6.00% due 01/15/28..................... 2,338 2,385
6.00% due 04/15/28..................... 1,055,837 1,079,547
6.00% due 05/15/28..................... 1,333 1,360
6.00% due 10/15/28..................... 3,485 3,555
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
6.00% due 03/15/29........................ $ 32,293 $ 32,920
6.00% due 04/15/29........................ 34,856 35,532
6.00% due 05/15/29........................ 62,681 63,899
6.00% due 06/15/29........................ 22,062 22,490
6.00% due 04/15/31........................ 22,241 22,659
6.00% due 05/15/31........................ 40,281 41,038
6.00% due 11/15/31........................ 159,178 162,169
6.00% due 12/15/31........................ 323,654 329,736
6.00% due 01/15/32........................ 139,146 141,717
6.00% due 02/15/32........................ 34,470 35,108
6.00% due 03/15/32........................ 7,150 7,282
6.00% due 08/15/32........................ 218,051 222,080
6.00% due 11/15/32........................ 33,931 34,558
6.00% due 12/15/32........................ 5,630 5,734
6.00% due 01/15/33........................ 17,081 17,391
6.00% due 02/15/33........................ 45,241 46,063
6.00% due 03/15/33........................ 68,240 69,480
6.00% due 04/15/33........................ 288,814 294,060
6.00% due 07/15/33........................ 209,206 213,007
6.00% due 08/15/33........................ 2,000,248 2,038,451
6.00% due 09/15/33........................ 296,085 301,464
6.00% due 10/15/33........................ 1,029,684 1,048,397
6.00% due 11/15/33........................ 118,911 121,072
6.00% due 12/15/33........................ 563,067 573,296
6.00% due 02/15/34........................ 239,135 243,329
6.00% due 05/15/34........................ 31,816 32,374
6.00% due 06/15/34........................ 33,939 34,535
6.00% due 07/15/34........................ 1,140,635 1,160,644
6.00% due 08/15/34........................ 152,637 155,315
6.00% due 09/15/34........................ 943,879 960,437
6.00% due 10/15/34........................ 3,689,255 3,753,971
6.00% due 12/15/34........................ 263,982 268,612
6.00% due 06/15/35........................ 212,312 215,837
6.00% due 08/15/35........................ 113,467 115,351
6.00% due November TBA.................... 20,000,000 20,250,000
6.50% due 02/15/29........................ 12,079 12,441
6.50% due 05/15/31........................ 10,696 11,010
6.50% due 06/15/31........................ 47,117 48,499
6.50% due 07/15/31........................ 21,853 22,493
6.50% due 08/15/31........................ 59,514 61,260
6.50% due 09/15/31........................ 119,890 123,406
6.50% due 10/15/31........................ 235,586 242,497
6.50% due 11/15/31........................ 12,050 12,403
6.50% due 12/15/31........................ 18,707 19,255
6.50% due 01/15/32........................ 29,711 30,564
6.50% due 02/15/32........................ 438,512 451,101
6.50% due 06/15/32........................ 48,671 50,068
7.00% due 07/15/23........................ 22,228 23,513
7.00% due 10/15/23........................ 37,955 40,148
7.00% due 09/15/25........................ 179,635 189,883
7.00% due 03/20/29........................ 14,716 15,408
7.00% due 06/20/29........................ 2,346 2,457
7.00% due 11/20/30........................ 53,524 55,998
7.50% due 04/15/17........................ 9,354 10,061
7.50% due 08/15/23........................ 168,365 181,744
7.50% due 09/15/23........................ 444,151 479,443
17
SunAmerica U.S. Government Securities Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 --
(unaudited) (continued)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
9.00% due 12/15/16........................ $ 34,567 $ 37,785
11.00% due 08/20/15....................... 117 132
11.00% due 09/20/15....................... 321 363
11.50% due 05/20/15....................... 3,258 3,722
12.50% due 09/15/14....................... 4,488 5,218
13.00% due 01/15/11....................... 159 177
13.00% due 02/15/11....................... 1,623 1,736
13.00% due 03/15/11....................... 71 79
13.00% due 04/15/11....................... 260 290
13.00% due 09/15/13....................... 3,973 4,596
13.00% due 10/20/14....................... 922 1,068
13.00% due 11/15/14....................... 530 622
13.00% due 02/20/15....................... 530 606
13.50% due 02/15/13....................... 6,959 8,114
15.00% due 01/15/12....................... 277 324
15.00% due 02/15/12....................... 754 882
15.00% due 06/15/12....................... 7,935 9,283
15.00% due 09/15/12....................... 469 548
15.50% due 09/15/11....................... 24,150 27,628
------------
98,803,867
------------
Small Business Administration -- 0.5%
6.30% due 06/01/18........................ 1,071,024 1,093,497
------------
Total U.S. Government Agencies
(cost $101,329,744)...................... 101,225,450
------------
U.S. GOVERNMENT TREASURIES -- 58.8%
United States Treasury Bonds -- 10.5%
4.75% due 02/15/37........................ 17,000,000 18,184,696
5.00% due 05/15/37........................ 4,000,000 4,449,688
------------
22,634,384
------------
United States Treasury Notes -- 48.3%
2.00% due 02/28/10........................ 4,000,000 4,003,124
2.88% due 01/31/13........................ 14,000,000 14,036,092
3.13% due 08/31/13........................ 20,000,000 20,153,120
3.38% due 11/30/12........................ 10,000,000 10,240,620
3.50% due 02/15/18........................ 8,000,000 7,845,000
4.00% due 08/15/18........................ 10,000,000 10,142,190
4.25% due 11/15/17........................ 20,000,000 20,728,120
4.50% due 05/15/17........................ 16,000,000 16,861,248
------------
104,009,514
------------
Total U.S. Government Treasuries
(cost $122,596,972)...................... 126,643,898
------------
Total Long-Term Investment Securities
(cost $223,926,716)...................... 227,869,348
------------
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.8%
State Street Bank & Trust Co. Joint
Repurchase Agreement(1)
(cost $16,763,000).................. $16,763,000 $ 16,763,000
------------
TOTAL INVESTMENTS --
(cost $240,689,716)(2).............. 113.6% 244,632,348
Liabilities in excess of other assets.. (13.6) (29,308,062)
----------- ------------
NET ASSETS -- 100.0% $215,324,286
=========== ============
- --------
(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 definite maturity date. The actual principal and
maturity date will be determined upon settlement date
See Notes to Financial Statements
18
SunAmerica GNMA Fund
PORTFOLIO PROFILE -- September 30, 2008 -- (unaudited)
Industry Allocation*
Government National Mtg. Assoc.. 79.5%
United States Treasury Notes.... 14.0
Repurchase Agreements........... 12.9
United States Treasury Bonds.... 3.1
Small Business Administration... 0.1
-----
109.6%
=====
Credit Quality+#
Government -- Agency... 82.3%
Government -- Treasury. 17.7
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
19
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 79.6%
Government National Mtg. Assoc. -- 79.5%
4.50% due 05/15/18..................... $ 1,544,956 $ 1,538,652
4.50% due 08/15/18..................... 758,830 755,733
4.50% due 09/15/18..................... 2,638,555 2,627,788
4.50% due 10/15/18..................... 3,932,858 3,916,809
4.50% due 08/15/33..................... 2,349,657 2,247,887
4.50% due 09/15/33..................... 3,031,193 2,899,905
5.00% due 03/15/18..................... 507,588 516,397
5.00% due 04/15/18..................... 5,521,930 5,617,752
5.00% due 05/15/18..................... 7,612,867 7,744,972
5.00% due 01/15/33..................... 17,060 16,774
5.00% due 05/15/33..................... 10,834 10,665
5.00% due 08/15/33..................... 2,422,201 2,381,630
5.00% due 09/15/33..................... 2,147,816 2,111,839
5.00% due 10/15/33..................... 5,050,123 4,965,533
5.00% due 04/15/34..................... 48,750 47,911
5.00% due 05/15/34..................... 136,631 134,279
5.00% due 11/15/34..................... 584,748 574,680
5.00% due 12/15/34..................... 577,988 568,036
5.00% due 09/15/35..................... 19,322 18,983
5.00% due 10/15/35..................... 112,073 110,108
5.00% due 11/15/35..................... 111,174 109,225
5.00% due 12/15/35..................... 60,935 59,867
5.00% due 02/15/36..................... 140,605 138,097
5.00% due 04/15/36..................... 445,490 437,542
5.00% due 06/15/36..................... 1,456,052 1,430,071
5.00% due 07/15/36..................... 484,488 475,843
5.00% due 08/15/36..................... 26,052 25,587
5.00% due 09/15/36..................... 823,867 809,248
5.00% due 10/15/36..................... 25,958 25,495
5.00% due 11/15/36..................... 380,164 373,380
5.00% due 12/15/36..................... 1,162,745 1,141,997
5.00% due 01/15/37..................... 777,064 763,076
5.00% due 02/15/37..................... 876,595 860,816
5.00% due 04/15/37..................... 9,334,757 9,166,732
5.50% due 06/15/29..................... 4,752 4,792
5.50% due 01/15/32..................... 41,777 41,962
5.50% due 12/15/32..................... 616,604 619,327
5.50% due 01/15/33..................... 413,207 414,774
5.50% due 02/15/33..................... 1,642,359 1,648,585
5.50% due 03/15/33..................... 968,048 971,721
5.50% due 04/15/33..................... 4,916,034 4,934,671
5.50% due 05/15/33..................... 5,918,956 5,942,051
5.50% due 06/15/33..................... 6,517,240 6,542,151
5.50% due 07/15/33..................... 336,208 337,482
5.50% due 08/15/33..................... 2,005,750 2,013,355
5.50% due 09/15/33..................... 355,285 356,632
5.50% due 10/15/33..................... 5,543,613 5,564,633
5.50% due 12/15/33..................... 6,127,803 6,151,036
5.50% due 01/15/34..................... 7,986,855 8,013,394
5.50% due 02/15/34..................... 1,148,938 1,152,756
5.50% due 04/15/35..................... 1,826,743 1,831,956
5.50% due 07/15/35..................... 2,086,866 2,092,822
5.50% due 09/15/35..................... 21,121,330 21,181,613
5.50% due 10/15/35..................... 13,276,759 13,314,653
5.50% due 11/15/35..................... 26,009,394 26,083,630
5.50% due 12/15/35..................... 16,824,162 16,872,181
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
5.50% due 02/15/36........................ $2,305,228 $2,311,087
5.50% due 03/15/36........................ 8,790,963 8,813,307
5.50% due 04/15/36........................ 386,910 387,893
5.50% due 05/15/36........................ 2,983,735 2,991,319
6.00% due 11/15/23........................ 3,710 3,806
6.00% due 01/15/24........................ 5,301 5,415
6.00% due 07/15/28........................ 2,833 2,890
6.00% due 11/15/28........................ 289,814 295,622
6.00% due 12/15/28........................ 233,662 238,346
6.00% due 01/15/29........................ 554,759 565,532
6.00% due 02/15/29........................ 585,645 597,017
6.00% due 03/15/29........................ 514,755 524,751
6.00% due 04/15/29........................ 1,265,401 1,290,366
6.00% due 05/15/29........................ 45,418 46,300
6.00% due 06/15/29........................ 472,577 481,902
6.00% due 07/15/29........................ 155,999 159,028
6.00% due 08/15/29........................ 19,556 19,936
6.00% due 10/15/29........................ 102,535 104,526
6.00% due 04/15/31........................ 16,242 16,547
6.00% due 07/15/31........................ 14,910 15,190
6.00% due 10/15/31........................ 81,637 83,171
6.00% due 11/15/31........................ 1,132,460 1,153,740
6.00% due 12/15/31........................ 497,184 506,528
6.00% due 01/15/32........................ 577,779 588,455
6.00% due 02/15/32........................ 46,595 47,456
6.00% due 03/15/32........................ 380,072 387,096
6.00% due 07/15/32........................ 85,889 87,476
6.00% due 08/15/32........................ 1,316,629 1,342,338
6.00% due 09/15/32........................ 890,523 906,979
6.00% due 10/15/32........................ 182,721 186,098
6.00% due 11/15/32........................ 4,335 4,415
6.00% due 12/15/32........................ 164,964 168,013
6.00% due 01/15/33........................ 1,271,654 1,294,756
6.00% due 02/15/33........................ 1,290,858 1,314,309
6.00% due 03/15/33........................ 1,098,290 1,118,242
6.00% due 04/15/33........................ 1,085,107 1,104,820
6.00% due 05/15/33........................ 1,137,789 1,158,459
6.00% due 06/15/33........................ 827,269 842,297
6.00% due 08/15/33........................ 1,207,334 1,229,504
6.00% due 10/15/33........................ 425,931 433,668
6.00% due 11/15/33........................ 1,449,395 1,475,720
6.00% due 12/15/33........................ 2,492,578 2,537,857
6.00% due 01/15/34........................ 1,429,745 1,454,827
6.00% due 02/15/34........................ 8,653,549 8,805,347
6.00% due 03/15/34........................ 187,866 191,161
6.00% due 04/15/34........................ 2,797,931 2,847,011
6.00% due 05/15/34........................ 257,386 261,900
6.00% due 06/15/34........................ 290,034 295,121
6.00% due 07/15/34........................ 3,143,596 3,198,740
6.00% due 08/15/34........................ 4,163,567 4,235,401
6.00% due 09/15/34........................ 183,441 186,607
6.00% due 10/15/34........................ 565,006 574,917
6.00% due 11/15/34........................ 1,267,670 1,289,907
6.00% due 12/15/34........................ 57,626 58,637
6.00% due 01/15/35........................ 78,114 79,411
6.00% due 02/15/35........................ 743,406 755,750
20
SunAmerica GNMA Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 --
(unaudited) (continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Government National Mtg. Assoc. (continued)
6.00% due 04/15/35........................ $ 53,867 $ 54,761
6.00% due 05/15/35........................ 69,574 70,729
6.00% due 06/15/35........................ 367,368 373,468
6.00% due 11/15/35........................ 20,009 20,341
6.00% due 12/15/35........................ 1,401,823 1,426,085
6.00% due 01/15/36........................ 863,502 877,828
6.00% due 02/15/36........................ 1,770,643 1,800,021
6.00% due 03/15/36........................ 1,302,266 1,323,874
6.00% due 04/15/36........................ 4,263,122 4,333,854
6.00% due 05/15/36........................ 5,310,689 5,398,801
6.00% due 06/15/36........................ 2,643,345 2,687,202
6.00% due 07/15/36........................ 1,392,368 1,415,470
6.00% due 08/15/36........................ 18,576 18,868
6.00% due 09/15/36........................ 192,192 195,380
6.00% due 10/15/36........................ 1,456,117 1,479,651
6.00% due 11/15/36........................ 2,385,668 2,425,248
6.00% due October TBA..................... 40,000,000 40,587,520
6.50% due 03/15/28........................ 20,811 21,416
6.50% due 08/15/28........................ 38,201 39,370
6.50% due 01/15/29........................ 3,605 3,713
6.50% due 02/15/29........................ 1,298 1,337
6.50% due 03/15/29........................ 99,674 102,661
6.50% due 04/15/29........................ 1,457 1,501
6.50% due 05/15/29........................ 10,136 10,431
6.50% due 06/15/29........................ 33,121 34,114
6.50% due 07/15/29........................ 3,226 3,323
6.50% due 10/15/29........................ 3,349 3,449
6.50% due 08/15/31........................ 229,590 236,325
6.50% due 09/15/31........................ 10,674 10,987
6.50% due 10/15/31........................ 235,587 242,497
6.50% due 11/15/31........................ 121,665 125,233
6.50% due 12/15/31........................ 140,762 144,891
6.50% due 02/15/32........................ 165,807 170,567
6.50% due 05/15/32........................ 1,090,045 1,121,338
6.50% due 06/15/32........................ 92,643 95,303
7.00% due 03/15/23........................ 83,878 88,723
7.00% due 01/20/24........................ 479 503
7.00% due 03/20/24........................ 527 553
7.00% due 07/20/25........................ 2,339 2,457
7.00% due 09/15/25........................ 78,012 82,462
7.00% due 01/20/29........................ 32,355 33,878
7.00% due 02/20/29........................ 5,890 6,168
7.00% due 06/20/29........................ 11,634 12,182
7.00% due 07/20/29........................ 40,809 42,730
7.00% due 09/20/29........................ 4,209 4,407
7.00% due 10/20/29........................ 8,430 8,827
7.00% due 11/20/29........................ 2,748 2,878
7.00% due 03/20/30........................ 4,088 4,277
7.00% due 06/20/30........................ 5,405 5,655
7.00% due 08/20/30........................ 22,918 23,978
7.00% due 09/20/30........................ 19,654 20,562
7.00% due 10/20/30........................ 24,697 25,838
8.00% due 11/15/26........................ 133,368 146,396
8.00% due 12/15/29........................ 15,494 17,004
8.00% due 04/15/30........................ 29,253 32,113
8.00% due 05/15/30........................ 2,841 3,119
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
Government National Mtg. Assoc. (continued)
8.00% due 08/15/30........................ $ 29,226 $ 32,082
8.50% due 03/15/17........................ 14,073 15,479
8.50% due 05/15/21........................ 31,644 34,930
8.50% due 12/15/22........................ 43,312 47,850
8.50% due 01/15/23........................ 108,921 120,417
8.50% due 09/15/24........................ 21,121 23,363
9.00% due 07/15/16........................ 48,508 53,025
9.00% due 10/15/16........................ 5,023 5,490
------------
309,541,303
------------
Small Business Administration -- 0.1%
6.30% due 06/01/18........................ 357,008 364,499
------------
Total U.S. Government Agencies
(cost $309,584,746)...................... 309,905,802
------------
U.S. GOVERNMENT TREASURIES -- 17.1%
United States Treasury Bonds -- 3.1%
4.75% due 02/15/37........................ 6,000,000 6,418,128
5.00% due 05/15/37........................ 5,000,000 5,562,110
------------
11,980,238
------------
United States Treasury Notes -- 14.0%
2.88% due 01/31/13........................ 25,000,000 25,064,450
3.50% due 02/15/18........................ 30,000,000 29,418,750
------------
54,483,200
------------
Total U.S. Government Treasuries
(cost $65,447,344)....................... 66,463,438
------------
Total Long-Term Investment Securities
(cost $375,032,090)...................... 376,369,240
------------
REPURCHASE AGREEMENT -- 12.9%
State Street Bank & Trust Co. Joint
Repurchase Agreement(1)
(cost $50,161,000)....................... 50,161,000 50,161,000
------------
TOTAL INVESTMENTS --
(cost $425,193,090)(2)................... 109.6% 426,530,240
Liabilities in excess of other assets....... (9.6) (37,482,084)
----------- ------------
NET ASSETS -- 100.0% $389,048,156
=========== ============
- --------
(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 definite maturity date. The actual principal and
maturity date will be determined upon settlement date
See Notes to Financial Statements
21
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- September 30, 2008 -- (unaudited)
Industry Allocation*
Foreign Government Agencies............ 17.1%
Federal Home Loan Mtg. Corp............ 12.6
Federal National Mtg. Assoc............ 6.7
United States Treasury Notes........... 4.8
Diversified Financial Services......... 3.7
Oil Companies-Exploration & Production. 3.1
Electric-Integrated.................... 2.9
Time Deposits.......................... 2.6
Special Purpose Entities............... 2.5
Telephone-Integrated................... 2.2
Pipelines.............................. 2.2
Repurchase Agreements.................. 2.1
Medical-Hospitals...................... 1.8
Cable TV............................... 1.5
Chemicals-Specialty.................... 1.1
Medical-Drugs.......................... 1.1
Electric-Generation.................... 1.0
Cellular Telecom....................... 1.0
Medical Products....................... 1.0
Steel-Producers........................ 0.9
Finance-Investment Banker/Broker....... 0.9
United States Treasury Bonds........... 0.9
Banks-Commercial....................... 0.9
Paper & Related Products............... 0.9
Telecom Services....................... 0.9
Containers-Metal/Glass................. 0.8
Transport-Air Freight.................. 0.7
Electronic Components-Semiconductors... 0.7
Casino Hotels.......................... 0.7
Oil-Field Services..................... 0.7
Diversified Manufacturing Operations... 0.7
Medical-HMO............................ 0.6
Satellite Telecom...................... 0.6
Finance-Auto Loans..................... 0.6
Banks-Super Regional................... 0.5
Television............................. 0.5
Computer Services...................... 0.5
Theaters............................... 0.5
Independent Power Producers............ 0.5
Multimedia............................. 0.5
Physicians Practice Management......... 0.4
Metal-Diversified...................... 0.4
Office Automation & Equipment.......... 0.4
Publishing-Periodicals................. 0.4
Funeral Services & Related Items....... 0.4
Airlines............................... 0.3
Direct Marketing....................... 0.3
Broadcast Services/Program............. 0.3
Non-Hazardous Waste Disposal........... 0.3
Real Estate Investment Trusts.......... 0.3
Hotels/Motels.......................... 0.3
Transport-Rail......................... 0.3
Gambling (Non-Hotel)................... 0.3
Auto-Cars/Light Trucks................. 0.3
Insurance Brokers...................... 0.3
Food-Misc.............................. 0.3
Food-Meat Products..................... 0.3
Building & Construction Products-Misc.. 0.3
Mining................................. 0.3
Recycling.............................. 0.3
Casino Services........................ 0.3
Containers-Paper/Plastic............... 0.3
Agricultural Chemicals................. 0.3%
Seismic Data Collection................ 0.3
Retail-Petroleum Products.............. 0.2
Consumer Products-Misc................. 0.2
Electronics-Military................... 0.2
Home Furnishings....................... 0.2
Printing-Commercial.................... 0.2
Computers-Memory Devices............... 0.2
Retail-Drug Store...................... 0.2
Aerospace/Defense-Equipment............ 0.2
Insurance-Multi-line................... 0.2
Metal-Aluminum......................... 0.2
Finance-Commercial..................... 0.2
Insurance-Reinsurance.................. 0.2
Auto/Truck Parts & Equipment-Original.. 0.2
Storage/Warehousing.................... 0.2
Insurance-Life/Health.................. 0.2
Transactional Software................. 0.2
Insurance-Property/Casualty............ 0.2
Telecommunication Equipment............ 0.2
Real Estate Operations & Development... 0.1
Oil Companies-Integrated............... 0.1
Energy-Alternate Sources............... 0.1
Decision Support Software.............. 0.1
Rental Auto/Equipment.................. 0.1
Vitamins & Nutrition Products.......... 0.1
Savings & Loans/Thrifts................ 0.1
Human Resources........................ 0.1
Chemicals-Diversified.................. 0.1
Oil Refining & Marketing............... 0.1
Medical Information Systems............ 0.1
Electronic Components-Misc............. 0.1
Import/Export.......................... 0.1
Food-Retail............................ 0.1
Beverages-Wine/Spirits................. 0.1
Rubber-Tires........................... 0.1
Banks-Fiduciary........................ 0.1
Computers.............................. 0.1
Retail-Restaurants..................... 0.1
Diversified Operations................. 0.1
Commercial Services-Finance............ 0.1
Research & Development................. 0.1
Brewery................................ 0.1
Medical-Generic Drugs.................. 0.1
Medical-Nursing Homes.................. 0.1
Applications Software.................. 0.1
Transport-Services..................... 0.1
Water.................................. 0.1
Finance-Mortgage Loan/Banker........... 0.1
Investment Management/Advisor Services. 0.1
Transport-Marine....................... 0.1
Electronic Measurement Instruments..... 0.1
Medical-Wholesale Drug Distribution.... 0.1
Banks-Money Center..................... 0.1
Federal Home Loan Bank................. 0.1
Finance-Other Services................. 0.1
Retail-Major Department Stores......... 0.1
Cruise Lines........................... 0.1
Networking Products.................... 0.1
-----
100.7%
=====
- --------
* Calculated as a percentage of net assets
22
SunAmerica Strategic Bond Fund
PORTFOLIO PROFILE -- September 30, 2008 -- (unaudited) (continued)
Country Allocation*
United States........ 76.6%
Brazil............... 3.4
Turkey............... 2.0
Canada............... 1.9
Russia............... 1.3
Mexico............... 1.1
Luxembourg........... 1.1
Indonesia............ 0.9
United Kingdom....... 0.8
Philippines.......... 0.8
Australia............ 0.8
Ireland.............. 0.7
Colombia............. 0.7
Uruguay.............. 0.6
Japan................ 0.6
Cayman Islands....... 0.6
Norway............... 0.5
Denmark.............. 0.5
Venezuela............ 0.5
Peru................. 0.5
Sweden............... 0.5
Bermuda.............. 0.5
South Africa......... 0.4
Germany.............. 0.4
Argentina............ 0.4
Netherlands.......... 0.4
Switzerland.......... 0.4
Ukrainian SSR........ 0.3
Ecuador.............. 0.3
Hungary.............. 0.3
Greece............... 0.3
Spain................ 0.1
Panama............... 0.1
Belgium.............. 0.1
France............... 0.1
United Arab Emirates. 0.1
Liberia.............. 0.1
-----
100.7%
=====
Credit Quality+#
Government -- Treasury. 6.0%
Government -- Agency... 20.1
AAA.................... 7.0
AA..................... 1.9
A...................... 6.6
BBB.................... 11.4
BB..................... 15.7
B...................... 19.9
CCC.................... 7.9
CC..................... 0.2
Below C................ 0.1
Not Rated@............. 3.2
-----
100.0%
=====
- --------
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
23
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
ASSET BACKED SECURITIES -- 3.1%
Diversified Financial Services -- 3.1%
Banc of America Commercial Mtg., Inc.
Series 2006-6, Class AM
5.39% due 10/10/45(1)................... $ 145,000 $ 115,257
Banc of America Funding Corp.
Series 2007-C, Class 5A1
5.39% due 05/20/36(1)(2)................ 1,457,812 1,163,951
Banc of America Funding Corp.,
Series 2006-J, Class 2A1
5.89% due 01/20/47(1)(2)................ 1,434,268 1,008,450
Bear Stearns Commercial Mtg.
Securities, Inc.,
Series 2007-PW15, Class A2
5.21% due 02/11/44(1)................... 825,000 783,656
Chase Mtg. Finance Corp.,
Series 2007-A2, Class 1A1
5.02% due 07/25/37(1)(2)................ 1,700,420 1,550,798
Citigroup Commercial Mtg. Trust
Series 2008-C7, Class AM
6.10% due 12/01/49(1)(2)................ 285,000 226,457
Commercial Mtg. Asset Trust,
Series 1999-C1, Class D
7.35% due 01/17/32(1)................... 360,000 369,131
Commercial Mtg. Pass Through Certs.
Series 2006-CN2A, Class A2FL
2.71% due 02/05/19*(1)(3)............... 1,575,000 1,495,286
Commercial Mtg. Pass Through Certs.,
Series 2004-LB2A, Class A3
4.22% due 03/10/39(1)................... 86,000 83,211
Commercial Mtg. Pass Through Certs.,
Series 2004-LB4A, Class A3,
4.41% due 10/15/37(1)................... 1,500,000 1,441,074
CS First Boston Mtg. Securities Corp.
Series 2002-CKN2, Class A3
6.13% due 04/15/37(1)................... 2,250,000 2,225,837
Deutsche ALT-A Securities, Inc.,
Series 2006-AB2, Class A5A,
6.09% due 06/25/36(1)................... 600,000 390,994
GE Capital Commercial Mtg. Corp.,
Series 2004-C2, Class A4
4.89% due 03/10/40(1)................... 1,320,000 1,210,525
GMAC Commercial Mtg. Securities, Inc.,
Series 2003-C2, Class A2
5.67% due 05/10/40(1)(2)................ 50,000 47,648
Goldman Sachs Mtg. Securities Trust
Series 2007-GG10, Class A4
5.99% due 08/10/45(1)(2)................ 3,700,000 3,158,864
JP Morgan Chase Commercial Mtg.
Securities Corp.,
Series 2006-LDP9, Class AM
5.37% due 05/15/47(1)................... 413,000 326,094
LB Commercial Conduit Mtg. Trust,
Series 1998-C1, Class E
7.00% due 02/18/30(1)................... 205,000 207,391
Ocwen Advance Receivables Backed Notes,
Series 2006-1A
5.34% due 11/24/15*(4).................. 830,000 664,000
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Diversified Financial Services (continued)
Swift Master Auto Receivables Trust,
Series 2007-2, Class A
3.14% due 10/15/12(3)..................... $2,957,126 $ 2,719,624
Wells Fargo Mtg. Backed Securities Trust,
Series 2006-AR17, Class A2
5.83% due 10/25/36(1)..................... 2,607,184 2,100,710
Wells Fargo Mtg. Backed Securities Trust,
Series 2006-AR12, Class 2A1
6.10% due 09/25/36(1)(2).................. 619,080 516,315
-----------
Total Asset Backed Securities
(cost $24,810,088)........................ 21,805,273
-----------
CONVERTIBLE BONDS & NOTES -- 0.1%
Drug Delivery Systems -- 0.0%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12........................ 125,000 62,969
-----------
Electronic Components-Semiconductors -- 0.1%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*....................... 50,000 24,313
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*....................... 1,270,000 534,987
-----------
559,300
-----------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(4)(5)(6)............... 286,000 200,200
-----------
Total Convertible Bonds & Notes
(cost $1,527,181)......................... 822,469
-----------
CORPORATE BONDS & NOTES -- 42.0%
Aerospace/Defense-Equipment -- 0.2%
United Technologies Corp.
Senior Notes
4.88% due 05/01/15........................ 1,029,000 1,013,461
United Technologies Corp.
Notes
6.13% due 07/15/38........................ 300,000 289,850
-----------
1,303,311
-----------
Agricultural Chemicals -- 0.3%
Monsanto Co.
Company Guar. Bonds
5.88% due 04/15/38........................ 285,000 258,285
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18........................ 330,000 327,681
Terra Capital, Inc.
Company Guar. Notes
7.00% due 02/01/17........................ 1,270,000 1,206,500
-----------
1,792,466
-----------
24
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(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......................... $1,743,000 $1,359,540
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A
6.55% due 02/02/19......................... 633,221 538,238
Delta Air Lines, Inc.
Pass Through Certs.
Series 2000-1, Class A-2
7.57% due 11/18/10......................... 275,000 248,875
Northwest Airlines, Inc.
Pass Through Certs.
Series 2002-1, Class G2
6.26% due 11/20/21......................... 272,779 240,727
United AirLines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 12/31/49......................... 31,423 30,481
----------
2,417,861
----------
Applications Software -- 0.1%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13........................ 530,000 551,200
----------
Auto-Cars/Light Trucks -- 0.3%
Ford Motor Co.
Senior Notes
6.38% due 02/01/29......................... 2,390,000 884,300
General Motors Corp.
Senior Notes
7.13% due 07/15/13......................... 2,648,000 1,218,080
----------
2,102,380
----------
Auto/Truck Parts & Equipment-Original -- 0.2%
Johnson Controls, Inc.
Senior Notes
5.25% due 01/15/11......................... 460,000 465,292
Lear Corp.
Senior Notes
8.75% due 12/01/16......................... 1,125,000 781,875
----------
1,247,167
----------
Auto/Truck Parts & Equipment-Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(4)(6)................. 225,000 0
----------
Banks-Commercial -- 0.3%
CoBank ACB
Senior Sub. Notes
7.88% due 04/16/18*........................ 122,000 117,489
Colonial Bank NA
Sub. Notes
6.38% due 12/01/15......................... 451,000 336,115
Credit Suisse New York
Senior Notes
5.00% due 05/15/13......................... 370,000 342,876
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
Banks-Commercial (continued)
KeyBank NA
Sub. Notes
5.45% due 03/03/16................ $ 372,000 $ 215,840
KeyBank NA
Sub. Notes
7.41% due 10/15/27................ 128,000 105,305
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13................ 281,000 209,705
SouthTrust Corp.
Sub. Notes
5.80% due 06/15/14................ 470,000 288,401
Sovereign Bank
Sub. Notes
8.75% due 05/30/18................ 442,000 302,128
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16................ 330,000 298,458
----------
2,216,317
----------
Banks-Fiduciary -- 0.1%
State Street Capital Trust IV
Company Guar.
3.82% due 06/15/37(3)............. 590,000 389,157
The Bank of New York Mellon Corp.
Senior Notes
5.13% due 08/27/13................ 366,000 348,923
----------
738,080
----------
Banks-Super Regional -- 0.5%
Banc One Corp.
Sub. Debentures
8.00% due 04/29/27................ 135,000 129,708
Bank of America Corp.
Senior Notes
4.90% due 05/01/13................ 396,000 358,240
Bank of America Corp.
Sub. Notes
7.25% due 10/15/25................ 652,000 544,489
Capital One Financial Corp.
Sub. Notes
6.15% due 09/01/16................ 255,000 191,372
Huntington Capital Trust I
Company Guar.
4.12% due 02/01/27(3)............. 495,000 195,255
JP Morgan Chase Bank NA
Sub. Notes
6.00% due 07/05/17................ 1,030,000 940,613
JP Morgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08................ 198,000 198,273
PNC Preferred Funding Trust I
Senior Notes
6.11% due 03/15/12*(3)(8)......... 390,000 268,433
Wells Fargo & Co.
Senior Notes
4.38% due 01/31/13................ 314,000 288,636
25
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Banks-Super Regional (continued)
Wells Fargo & Co.
Senior Notes
5.25% due 10/23/12.......................... $ 542,000 $ 520,239
----------
3,635,258
----------
Beverages-Non-alcoholic -- 0.0%
Cott Beverages USA, Inc.
Company Guar. Notes
8.00% due 12/15/11.......................... 332,000 232,400
----------
Broadcast Services/Program -- 0.3%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14.......................... 1,365,000 1,371,825
Nexstar Broadcasting, Inc.
Senior Sub. Notes
7.00% due 01/15/14.......................... 680,000 510,000
----------
1,881,825
----------
Building & Construction Products-Misc. -- 0.3%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12.......................... 965,000 950,525
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14.......................... 970,000 960,300
----------
1,910,825
----------
Building Products-Wood -- 0.0%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15(23)..................... 1,088,000 304,640
----------
Building-Residential/Commercial -- 0.0%
D.R. Horton, Inc.
Company Guar. Notes
5.00% due 01/15/09.......................... 266,000 259,350
----------
Cable TV -- 1.5%
CCH I LLC/CCH I Capital Corp.
Senior Notes
11.00% due 10/01/15......................... 3,134,000 2,037,100
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
Series B
10.25% due 09/15/10......................... 696,000 622,920
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 09/15/10......................... 3,389,000 3,050,100
CCO Holdings LLC/CCO Holdings Capital Corp.
Senior Notes
8.75% due 11/15/13.......................... 966,000 840,420
Charter Communications Operating LLC
Senior Notes
10.88% due 09/15/14*........................ 94,000 91,180
Comcast Corp.
Company Guar. Notes
5.85% due 11/15/15.......................... 934,000 860,494
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
Cable TV (continued)
Comcast Corp.
Notes
6.95% due 08/15/37......................... $ 303,000 $ 258,445
COX Communications, Inc.
Bonds
6.95% due 06/01/38*........................ 212,000 188,599
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11......................... 900,000 864,000
CSC Holdings, Inc.
Senior Notes
8.13% due 07/15/09......................... 700,000 693,000
DirecTV Holdings LLC/DirecTV Financing Co.
Senior Notes
7.63% due 05/15/16*........................ 755,000 683,275
-----------
10,189,533
-----------
Casino Hotels -- 0.7%
Circus & Eldorado Joint Venture
1st Mtg. Notes
10.13% due 03/01/12........................ 575,000 488,750
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(6)(9).................. 946,489 913,362
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(4)(6)................... 425,000 425,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14......................... 2,200,000 1,589,500
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*........................ 1,660,000 1,510,600
-----------
4,927,212
-----------
Casino Services -- 0.1%
Indianapolis Downs LLC & Capital Corp.
Sec. Notes
11.00% due 11/01/12*....................... 1,285,000 873,800
-----------
Cellular Telecom -- 0.4%
Centennial Communications Corp.
Senior Notes
8.54% due 01/01/13(3)...................... 727,000 661,570
Centennial Communications Corp.
Senior Notes
10.13% due 06/15/13........................ 259,000 256,410
Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11......................... 1,406,000 1,480,152
Nextel Communications, Inc.
Company Guar. Notes
5.95% due 03/15/14......................... 315,000 211,050
-----------
2,609,182
-----------
26
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Chemicals-Diversified -- 0.1%
E.I. Du Pont de Nemours & Co.
Senior Notes
6.00% due 07/15/18.................... $ 330,000 $ 322,121
ICI Wilmington, Inc.
Company Guar. Notes
5.63% due 12/01/13.................... 550,000 560,167
----------
882,288
----------
Chemicals-Specialty -- 1.1%
Huntsman International LLC
Senior Sub. Notes
7.38% due 01/01/15.................... 1,380,000 1,159,200
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14.................... 2,610,000 2,244,600
Johnsondiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12.................... 950,000 947,625
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16................... 3,795,000 2,580,600
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12.................... 3,110,000 1,026,300
----------
7,958,325
----------
Commercial Services-Finance -- 0.1%
The Western Union Co.
Senior Notes
5.40% due 11/17/11.................... 672,000 677,948
----------
Computer Services -- 0.5%
Compucom Systems, Inc.
Senior Sub. Notes
12.50% due 10/01/15*.................. 1,495,000 1,375,400
Electronic Data Systems Corp.
Senior Notes
6.00% due 08/01/13.................... 660,000 672,927
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13.................... 1,595,000 1,435,500
----------
3,483,827
----------
Computers -- 0.1%
International Business Machines Corp.
Senior Notes
5.70% due 09/14/17.................... 727,000 704,229
----------
Computers-Integrated Systems -- 0.0%
Activant Solutions, Inc.
Company Guar. Notes
9.50% due 05/01/16.................... 225,000 166,500
----------
Consumer Products-Misc. -- 0.2%
American Achievement Corp.
Company Guar. Notes
8.25% due 04/01/12*................... 821,000 806,632
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Consumer Products-Misc. (continued)
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12........................ $ 325,000 $ 308,750
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13........................ 125,000 114,688
Visant Holding Corp.
Senior Notes
10.25% due 12/01/13(10)................... 458,000 414,490
----------
1,644,560
----------
Containers-Metal/Glass -- 0.5%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23........................ 1,410,000 1,184,400
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13........................ 2,093,000 2,082,535
----------
3,266,935
----------
Containers-Paper/Plastic -- 0.3%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12........................ 550,000 459,250
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17........................ 1,760,000 1,372,800
----------
1,832,050
----------
Cosmetics & Toiletries -- 0.0%
Avon Products, Inc.
Senior Notes
5.75% due 03/01/18........................ 146,000 139,061
----------
Decision Support Software -- 0.1%
Vangent, Inc.
Senior Sub. Notes
9.63% due 02/15/15........................ 1,175,000 957,625
----------
Direct Marketing -- 0.3%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12........................ 1,494,000 1,105,560
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12........................ 1,390,000 1,275,325
----------
2,380,885
----------
Diversified Financial Services -- 0.3%
American Express Travel Related
Services Co., Inc.
Senior Notes
5.25% due 11/21/11*....................... 305,000 291,102
General Electric Capital Corp.
Senior Notes
5.65% due 06/09/14........................ 850,000 802,826
27
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Diversified Financial Services (continued)
General Electric Capital Corp.
Senior Notes
5.88% due 01/14/38............................. $ 989,000 $ 729,140
General Electric Capital Corp.
Notes
6.75% due 03/15/32............................. 279,000 232,877
----------
2,055,945
----------
Diversified Manufacturing Operations -- 0.5%
Cooper U.S., Inc.
Senior Notes
5.45% due 04/01/15............................. 1,003,000 1,013,646
General Electric Co.
Senior Notes
5.25% due 12/06/17............................. 750,000 656,274
Harland Clarke Holdings Corp.
Notes
6.90% due 05/15/15(3).......................... 425,000 272,000
Harland Clarke Holdings Corp.
Notes
9.50% due 05/15/15............................. 1,150,000 805,000
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14............................ 600,000 288,000
Sally Holdings LLC
Company Guar. Notes
10.50% due 11/15/16............................ 99,000 94,050
----------
3,128,970
----------
Diversified Operations -- 0.0%
Capmark Financial Group, Inc.
Company Guar. Notes
5.88% due 05/10/12............................. 161,000 80,258
----------
Electric-Generation -- 1.0%
Bruce Mansfield Unit
Pass Through Certs.
6.85% due 06/01/34............................. 649,000 675,061
Edison Mission Energy
Senior Notes
7.20% due 05/15/19............................. 515,000 453,200
Edison Mission Energy
Senior Notes
7.63% due 05/15/27............................. 950,000 769,500
Edison Mission Energy
Senior Notes
7.75% due 06/15/16............................. 775,000 728,500
Reliant Energy Mid-Atlantic Power Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17............................. 132,625 143,235
Reliant Energy Mid-Atlantic Power Holdings LLC
Pass Through Certs., Series C
9.68% due 07/02/26............................. 675,000 715,500
Sithe/Independence Funding Corp.
Senior Notes
9.00% due 12/30/13............................. 448,627 452,252
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
Electric-Generation (continued)
The AES Corp.
Senior Notes
8.00% due 10/15/17................ $845,000 $ 762,612
The AES Corp.
Senior Notes
8.00% due 06/01/20*............... 625,000 546,875
The AES Corp.
Sec. Notes
8.75% due 05/15/13*............... 947,000 951,735
The AES Corp.
Senior Notes
8.88% due 02/15/11................ 755,000 743,675
----------
6,942,145
----------
Electric-Integrated -- 2.9%
Baltimore Gas & Electric Co.
Senior Notes
6.13% due 07/01/13................ 540,000 533,380
Centerpoint Energy, Inc.
Senior Notes
6.50% due 05/01/18................ 159,000 135,414
Consumers Energy Co.
1st Mtg. Bonds
6.13% due 03/15/19................ 500,000 470,573
Dominion Resources, Inc.
Jr. Sub Notes
6.30% due 09/30/66(3)............. 374,000 329,195
DTE Energy Co.
Senior Notes
6.38% due 04/15/33................ 422,000 352,775
DTE Energy Co.
Senior Notes
7.05% due 06/01/11................ 195,000 198,481
Duke Energy Carolinas LLC
Senior Notes
4.20% due 10/01/08................ 305,000 305,000
Duke Energy Indiana, Inc.
1st Mtg. Bonds
6.35% due 08/15/38................ 630,000 592,510
Energy Future Holdings Corp.
Company Guar. Notes
10.88% due 11/01/17*.............. 700,000 631,750
Entergy Arkansas, Inc.
1st Mtg. Bonds
5.40% due 08/01/13................ 462,000 453,780
Entergy Gulf States Louisiana LLC
1st Mtg. Bonds
6.00% due 05/01/18*............... 600,000 551,269
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10................ 195,000 195,038
Exelon Corp.
Senior Notes
6.75% due 05/01/11................ 460,000 463,459
Florida Power Corp.
1st. Mtg. Bonds
6.40% due 06/15/38................ 277,000 262,300
28
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric-Integrated (continued)
Mackinaw Power LLC
Sec. Notes
6.30% due 10/31/23*......................... $ 633,625 $ 608,355
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11.......................... 970,000 933,625
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21.......................... 1,005,000 778,875
Nisource Finance Corp.
Company Guar. Notes
5.25% due 09/15/17.......................... 430,000 355,942
Oncor Electric Delivery Co.
1st Mtg. Bonds
7.50% due 09/01/38*......................... 218,000 218,027
PacifiCorp
1st. Mtg. Bonds
6.35% due 07/15/38.......................... 1,074,000 981,002
Pepco Holdings, Inc.
Senior Notes
6.13% due 06/01/17.......................... 702,000 652,837
Pepco Holdings, Inc.
Senior Notes
6.45% due 08/15/12.......................... 940,000 935,920
PSEG Power LLC
Company Guar. Notes
5.00% due 04/01/14.......................... 653,000 592,186
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11.......................... 50,000 51,877
Public Service Co. of Colorado
1st Mtg. Bonds
5.80% due 08/01/18.......................... 270,000 260,672
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15.......................... 633,000 557,122
Sierra Pacific Power Co.
1st Mtg. Bonds
5.45% due 09/01/13.......................... 458,000 444,069
Sierra Pacific Power Co.
Senior Notes
6.75% due 07/01/37.......................... 1,071,000 959,618
Southern California Edison Co.
1st Mtg. Bonds
5.75% due 04/01/35.......................... 80,000 71,104
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.......................... 289,000 262,430
Texas Competitive Electric Holdings Co. LLC
Senior Notes
10.50% due 11/01/16*........................ 1,445,000 1,224,638
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------------
Electric-Integrated (continued)
Texas Competitive Electric Holdings Co. LLC,
Series A
Senior Notes
10.25% due 11/01/15*......................... $3,415,000 $ 3,082,037
Texas Competitive Electric Holdings Co. LLC,
Series B
Senior Notes
10.25% due 11/01/15*......................... 1,370,000 1,236,425
Union Electric Co.
1st. Mtg. Bonds
6.70% due 02/01/19........................... 540,000 521,441
-----------
20,203,126
-----------
Electronic Components-Misc. -- 0.0%
Sanmina-SCI Corp.
Company Guar. Notes
6.75% due 03/01/13........................... 175,000 153,125
-----------
Electronic Components-Semiconductors -- 0.6%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12........................... 495,000 381,150
Amkor Technology, Inc.
Senior Notes
7.75% due 05/15/13........................... 1,475,000 1,261,125
Freescale Semiconductor, Inc.
Company Guar. Notes
9.13% due 12/15/14........................... 975,000 614,250
National Semiconductor Corp.
Senior Notes
6.60% due 06/15/17........................... 590,000 553,563
Spansion LLC
Senior Sec. Notes
5.94% due 06/01/13*(3)....................... 2,455,000 1,473,000
Spansion LLC
Senior Notes
11.25% due 01/15/16*......................... 180,000 103,500
-----------
4,386,588
-----------
Electronic Measurement Instruments -- 0.1%
Agilent Technologies, Inc.
Senior Notes
6.50% due 11/01/17........................... 504,000 459,455
-----------
Electronics-Military -- 0.2%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13........................... 1,375,000 1,278,750
L-3 Communications Corp.
Company Guar. Notes
6.38% due 10/15/15........................... 195,000 179,400
-----------
1,458,150
-----------
Energy-Alternate Sources -- 0.1%
VeraSun Energy Corp.
Company Guar. Notes
9.38% due 06/01/17(7)(22).................... 300,000 118,500
29
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Energy-Alternate Sources (continued)
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12(7)(22)............. $1,235,000 $ 889,200
----------
1,007,700
----------
Finance-Auto Loans -- 0.6%
Ford Motor Credit Co. LLC
Senior Notes
5.80% due 01/12/09.................... 58,000 55,070
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10.................... 479,000 365,634
GMAC LLC
Senior Notes
4.05% due 05/15/09(3)................. 648,000 468,919
GMAC LLC
Senior Notes
6.00% due 12/15/11.................... 2,600,000 1,156,061
GMAC LLC
Senior Notes
6.63% due 05/15/12.................... 575,000 243,437
GMAC LLC
Senior Bonds
6.88% due 09/15/11.................... 3,353,000 1,496,065
GMAC LLC
Senior Bonds
6.88% due 08/28/12.................... 260,000 103,344
----------
3,888,530
----------
Finance-Commercial -- 0.2%
Caterpillar Financial Services Corp.
Senior Notes
4.90% due 08/15/13.................... 660,000 624,935
Textron Financial Corp.
Senior Notes
5.40% due 04/28/13.................... 640,000 644,448
----------
1,269,383
----------
Finance-Credit Card -- 0.0%
FIA Card Services NA
Senior Notes
7.13% due 11/15/12*................... 298,000 292,258
----------
Finance-Investment Banker/Broker -- 0.9%
Citigroup, Inc.
Senior Notes
5.00% due 09/15/14.................... 792,000 607,236
Citigroup, Inc.
Senior Notes
5.30% due 10/17/12.................... 396,000 352,529
Citigroup, Inc.
Senior Notes
5.85% due 07/02/13.................... 622,000 545,612
Citigroup, Inc.
Senior Sub. Notes
5.88% due 02/22/33.................... 644,000 422,009
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
Finance-Investment Banker/Broker (continued)
Citigroup, Inc.
Jr. Sub.
8.40% due 04/30/18(3)(8)................... $ 355,000 $ 241,634
JP Morgan Chase & Co.
Sub. Notes
4.89% due 09/01/15......................... 451,000 445,137
JP Morgan Chase & Co.
Senior Notes
5.38% due 01/15/14......................... 520,000 507,280
Lehman Brothers Holdings Capital Trust VII
Notes
5.86% due 05/31/12+(7)(8)(11).............. 222,000 22
Lehman Brothers Holdings, Inc.
Sub. Notes
6.75% due 12/28/17+(7)(11)................. 280,000 350
Lehman Brothers Holdings, Inc.
Sub. Notes
7.50% due 05/11/38+(7)(11)................. 361,000 451
Lehman Brothers Holdings, Inc.
Senior Notes
8.80% due 03/01/15+(7)(11)................. 517,000 64,625
Merrill Lynch & Co., Inc.
Sub. Notes
6.22% due 09/15/26......................... 350,000 262,378
Morgan Stanley
Senior Notes
5.38% due 10/15/15......................... 340,000 210,730
Morgan Stanley
Notes
5.45% due 01/09/17......................... 317,000 196,638
Morgan Stanley
Senior Notes
5.75% due 10/18/16......................... 451,000 279,674
Morgan Stanley
Senior Notes
6.00% due 04/28/15......................... 1,000,000 680,227
Schwab Capital Trust I
Company Guar.
7.50% due 11/15/37(3)...................... 138,000 113,918
The Bear Stearns Cos., Inc.
Notes
4.50% due 10/28/10......................... 407,000 395,255
The Bear Stearns Cos., Inc.
Senior Notes
5.70% due 11/15/14......................... 734,000 686,208
The Goldman Sachs Group, Inc.
Senior Notes
6.75% due 10/01/37......................... 653,000 435,936
----------
6,447,849
----------
Finance-Mortgage Loan/Banker -- 0.1%
Countrywide Financial Corp.
Sub. Notes
6.25% due 05/15/16......................... 635,000 452,070
30
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Finance-Mortgage Loan/Banker (continued)
Countrywide Home Loans, Inc.
Notes
4.13% due 09/15/09.................... $ 90,000 $ 82,773
----------
534,843
----------
Finance-Other Services -- 0.1%
TIAA Global Markets, Inc.
Notes
5.13% due 10/10/12*................... 385,000 392,050
----------
Food-Meat Products -- 0.0%
Smithfield Foods, Inc.
Senior Notes
7.00% due 08/01/11.................... 75,000 65,250
Smithfield Foods, Inc.
Senior Notes
7.75% due 05/15/13.................... 275,000 231,000
----------
296,250
----------
Food-Misc. -- 0.2%
Kraft Foods, Inc.
Senior Bonds
5.63% due 11/01/11.................... 318,000 319,186
Kraft Foods, Inc.
Senior Notes
6.50% due 08/11/17.................... 305,000 293,472
Kraft Foods, Inc.
Senior Notes
6.88% due 01/26/39.................... 553,000 503,693
McCormick & Co., Inc.
Notes
5.25% due 09/01/13.................... 610,000 610,701
----------
1,727,052
----------
Funeral Services & Related Items -- 0.4%
Service Corp. International
Senior Notes
6.75% due 04/01/16.................... 1,255,000 1,073,025
Service Corp. International
Senior Notes
7.00% due 06/15/17.................... 635,000 542,925
Service Corp. International
Senior Notes
7.38% due 10/01/14.................... 225,000 204,750
Service Corp. International
Debentures
7.88% due 02/01/13.................... 650,000 650,000
----------
2,470,700
----------
Gambling (Non-Hotel) -- 0.3%
Downstream Development Authority
Senior Notes
12.00% due 10/15/15*.................. 1,200,000 870,000
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*+(7)(11).......... 1,045,000 721,050
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Gambling (Non-Hotel) (continued)
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/14*....................... $ 583,000 $ 550,935
----------
2,141,985
----------
Home Furnishings -- 0.2%
Simmons Co.
Company Guar. Notes
7.88% due 01/15/14........................ 905,000 678,750
Simmons Co.
Senior Disc. Notes
10.00% due 12/15/14(10)................... 1,331,000 745,360
----------
1,424,110
----------
Hotels/Motels -- 0.3%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14........................ 1,680,000 1,411,200
Gaylord Entertainment Co.
Company Guar. Notes
8.00% due 11/15/13........................ 700,000 609,000
Starwood Hotels & Resorts Worldwide, Inc.
Notes
6.75% due 05/15/18........................ 280,000 250,318
----------
2,270,518
----------
Human Resources -- 0.1%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13....................... 853,000 884,988
----------
Independent Power Producers -- 0.5%
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16........................ 2,485,000 2,236,500
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10....................... 250,000 242,500
Reliant Energy, Inc.
Senior Notes
7.88% due 12/31/17........................ 1,020,000 754,800
----------
3,233,800
----------
Insurance Brokers -- 0.3%
Marsh & McLennan Cos., Inc.
Senior Notes
5.15% due 09/15/10........................ 200,000 195,030
Marsh & McLennan Cos., Inc.
Senior Notes
7.13% due 06/15/09........................ 170,000 170,640
USI Holdings Corp.
Senior Notes
6.68% due 11/15/14*(3).................... 490,000 372,400
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*....................... 1,740,000 1,322,400
----------
2,060,470
----------
31
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Insurance-Life/Health -- 0.2%
Americo Life, Inc.
Notes
7.88% due 05/01/13*.............. $ 38,000 $ 37,642
Lincoln National Corp.
Senior Notes
5.65% due 08/27/12............... 391,000 384,402
Monumental Global Funding II
Notes
5.65% due 07/14/11*.............. 174,000 180,033
Pricoa Global Funding I
Notes
5.30% due 09/27/13*.............. 320,000 317,790
Prudential Financial, Inc.
Jr. Sub. Bonds
8.88% due 06/15/38(3)............ 270,000 254,121
----------
1,173,988
----------
Insurance-Multi-line -- 0.1%
MetLife, Inc.
Senior Notes
6.82% due 08/15/18............... 561,000 530,820
----------
Insurance-Mutual -- 0.0%
Liberty Mutual Group, Inc.
Company Guar. Bonds
10.75% due 06/15/58*(3).......... 370,000 266,400
----------
Insurance-Property/Casualty -- 0.2%
ACE INA Holdings, Inc.
Company Guar. Notes
5.60% due 05/15/15............... 536,000 507,193
Chubb Corp.
Senior Notes
6.50% due 05/15/38............... 597,000 539,995
----------
1,047,188
----------
Insurance-Reinsurance -- 0.2%
Berkshire Hathaway Finance Corp.
Company Guar. Notes
5.00% due 08/15/13*.............. 612,000 610,389
PartnerRe Finance A LLC
Company Guar. Notes
6.88% due 06/01/18............... 680,000 658,981
----------
1,269,370
----------
Investment Management/Advisor Services -- 0.1%
Ameriprise Financial, Inc.
Senior Notes
5.35% due 11/15/10............... 507,000 498,096
----------
Medical Information Systems -- 0.1%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12.............. 1,575,000 850,500
----------
Medical Products -- 1.0%
Baxter International, Inc.
Senior Notes
5.90% due 09/01/16............... 1,001,000 1,004,781
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
Medical Products (continued)
Johnson & Johnson
Senior Notes
5.85% due 07/15/38................ $ 764,000 $ 742,896
Johnson & Johnson
Notes
5.95% due 08/15/37................ 525,000 519,243
LVB Acquisition Holding LLC
Senior Notes
10.38% due 10/15/17............... 1,800,000 1,782,000
Universal Hospital Services, Inc.
Senior Sec. Notes
6.30% due 06/01/15(3)............. 1,505,000 1,324,400
Universal Hospital Services, Inc.
Senior Sec. Bonds
8.50% due 06/01/15................ 1,575,000 1,468,688
----------
6,842,008
----------
Medical-Drugs -- 0.3%
GlaxoSmithKline Capital, Inc.
Company Guar. Notes
6.38% due 05/15/38................ 344,000 322,944
Schering-Plough Corp.
Senior Notes
6.55% due 09/15/37................ 239,000 218,903
Wyeth
Bonds
5.50% due 02/01/14................ 1,074,000 1,064,624
Wyeth
Notes
6.95% due 03/15/11................ 361,000 380,901
----------
1,987,372
----------
Medical-HMO -- 0.6%
Aetna, Inc.
Senior Notes.
6.75% due 12/15/37................ 219,000 199,949
Humana, Inc.
Bonds
8.15% due 06/15/38................ 315,000 297,867
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*.............. 2,475,000 2,425,500
UnitedHealth Group, Inc.
Senior Notes
5.25% due 03/15/11................ 325,000 323,112
UnitedHealth Group, Inc.
Senior Notes
6.88% due 02/15/38................ 336,000 295,810
WellPoint, Inc.
Notes
5.00% due 01/15/11................ 195,000 193,869
WellPoint, Inc.
Senior Notes
5.95% due 12/15/34................ 315,000 262,119
----------
3,998,226
----------
32
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Medical-Hospitals -- 1.7%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15......................... $2,125,000 $ 2,018,750
HCA, Inc.
Senior Notes
6.25% due 02/15/13......................... 1,020,000 851,700
HCA, Inc.
Senior Notes
8.75% due 09/01/10......................... 225,000 221,625
HCA, Inc.
Senior Notes
9.13% due 11/15/14......................... 965,000 938,463
HCA, Inc.
Senior Notes
9.25% due 11/15/16......................... 5,005,000 4,867,362
HCA, Inc.
Senior Notes
9.63% due 11/15/16......................... 1,630,000 1,548,500
IASIS Healthcare LLC / IASIS Capital Corp.
Company Guar. Notes
8.75% due 06/15/14......................... 1,495,000 1,412,775
-----------
11,859,175
-----------
Medical-Nursing Homes -- 0.1%
Sun Healthcare Group, Inc.
Senior Notes
9.13% due 04/15/15......................... 635,000 606,425
-----------
Medical-Wholesale Drug Distribution -- 0.1%
Cardinal Health, Inc.
Senior Notes
5.50% due 06/15/13......................... 476,000 455,441
-----------
Metal Processors & Fabrication -- 0.0%
Timken Co.
Notes
5.75% due 02/15/10......................... 162,000 158,042
-----------
Metal-Aluminum -- 0.2%
Alcoa, Inc.
Notes
6.00% due 01/15/12......................... 416,000 417,997
Alcoa, Inc.
Bonds
6.50% due 06/15/18......................... 577,000 545,995
Noranda Aluminum Holding Corp.
Senior Notes
8.35% due 11/15/14(3)...................... 500,000 330,000
-----------
1,293,992
-----------
Metal-Diversified -- 0.3%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15......................... 1,925,000 1,891,313
-----------
Mining -- 0.3%
Noranda Aluminum Acquisition Corp.
Company Guar. Notes
6.83% due 11/15/14(3)...................... 2,510,000 1,907,600
-----------
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Multimedia -- 0.4%
COX Enterprises, Inc.
Notes
7.88% due 09/15/10*......................... $ 578,000 $ 599,725
Haights Cross Operating Co.
Senior Notes
11.75% due 08/15/11......................... 125,000 116,250
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28.......................... 1,074,000 991,134
Time Warner Cos., Inc.
Company Guar. Notes
7.25% due 10/15/17.......................... 432,000 396,493
Time Warner Entertainment Co. LP
Senior Notes
8.38% due 07/15/33.......................... 411,000 390,720
----------
2,494,322
----------
Networking Products -- 0.1%
Cisco Systems, Inc.
Senior Notes
5.50% due 02/22/16.......................... 347,000 333,440
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(4)(6)(12)(13).......... 500,000 0
----------
Non-Hazardous Waste Disposal -- 0.3%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17.......................... 1,825,000 1,697,250
Waste Management, Inc.
Company Guar. Notes
6.38% due 11/15/12.......................... 520,000 520,790
Waste Services, Inc.
Senior Sub. Notes
9.50% due 04/15/14.......................... 90,000 88,200
----------
2,306,240
----------
Office Automation & Equipment -- 0.4%
IKON Office Solutions, Inc.
Senior Notes
7.75% due 09/15/15.......................... 1,610,000 1,682,450
Pitney Bowes, Inc.
Notes
5.25% due 01/15/37.......................... 680,000 625,872
Xerox Corp.
Senior Notes
6.35% due 05/15/18.......................... 280,000 255,948
----------
2,564,270
----------
Oil Companies-Exploration & Production -- 2.4%
Atlas Energy Resources LLC
Senior Notes
10.75% due 02/01/18*........................ 975,000 892,125
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12.......................... 175,000 159,250
33
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil Companies-Exploration & Production (continued)
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14................. $1,195,000 $ 997,825
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15................. 895,000 707,050
Chesapeake Energy Corp.
Senior Notes
6.25% due 01/15/18................. 775,000 662,625
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16................. 1,650,000 1,480,875
Chesapeake Energy Corp.
Senior Notes
7.25% due 12/15/18................. 900,000 828,000
Costilla Energy, Inc.
Senior Notes
10.25% due 10/01/06+(4)(6)......... 500,000 0
Dune Energy, Inc.
Senior Sec. Notes
10.50% due 06/01/12................ 1,120,000 840,000
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15................. 950,000 755,250
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14................. 175,000 144,375
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14................. 1,025,000 753,375
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11................. 1,430,000 1,351,350
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*................ 1,160,000 997,600
Hilcorp Energy I LP
Senior Notes
9.00% due 06/01/16*................ 150,000 136,500
Linn Energy LLC
Senior Notes
9.88% due 07/01/18*................ 900,000 783,000
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16................. 275,000 224,125
Quicksilver Resources, Inc.
Senior Notes
7.75% due 08/01/15................. 1,275,000 1,166,625
Sabine Pass LNG LP
Senior Sec. Notes
7.50% due 11/30/16................. 4,090,000 3,190,200
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10................ 375,000 345,000
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------
Oil Companies-Exploration & Production (continued)
XTO Energy, Inc.
Senior Notes
6.50% due 12/15/18................... $ 270,000 $ 250,443
-----------
16,665,593
-----------
Oil Companies-Integrated -- 0.1%
Hess Corp.
Notes
7.13% due 03/15/33................... 320,000 280,881
Hess Corp.
Bonds
7.88% due 10/01/29................... 461,000 450,608
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29................... 286,000 288,483
-----------
1,019,972
-----------
Oil Field Machinery & Equipment -- 0.0%
Cameron International Corp.
Senior Notes
7.00% due 07/15/38................... 316,000 264,825
-----------
Oil Refining & Marketing -- 0.1%
The Premcor Refining Group, Inc.
Company Guar. Notes
6.75% due 05/01/14................... 666,000 674,262
Valero Energy Corp.
Senior Notes
6.63% due 06/15/37................... 206,000 177,763
-----------
852,025
-----------
Oil-Field Services -- 0.5%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14................... 800,000 720,000
Halliburton Co.
Senior Notes
6.70% due 09/15/38................... 580,000 558,269
Helix Energy Solutions Group, Inc.
Senior Notes
9.50% due 01/15/16*.................. 1,090,000 1,019,150
Key Energy Services, Inc.
Company Guar. Notes
8.38% due 12/01/14................... 810,000 777,600
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11................... 118,878 123,196
-----------
3,198,215
-----------
Paper & Related Products -- 0.5%
Bowater, Inc.
Notes
6.50% due 06/15/13................... 745,000 286,825
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09................... 650,000 539,500
34
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Paper & Related Products (continued)
Georgia-Pacific LLC
Company Guar. Notes
7.00% due 01/15/15*................. $ 245,000 $ 222,950
Georgia-Pacific LLC
Company Guar. Notes
7.13% due 01/15/17*................. 365,000 325,763
International Paper Co.
Notes
7.95% due 06/15/18.................. 434,000 426,453
NewPage Corp.
Senior Notes
9.05% due 05/01/12(3)............... 317,000 283,715
NewPage Corp.
Sec. Notes
10.00% due 05/01/12................. 785,000 702,575
NewPage Corp.
Senior Sub. Notes
12.00% due 05/01/13................. 883,000 772,625
----------
3,560,406
----------
Physicians Practice Management -- 0.4%
US Oncology, Inc.
Senior Sub. Notes
10.75% due 08/15/14................. 3,045,000 3,060,225
----------
Pipelines -- 2.1%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15.................. 725,000 667,000
Atlas Pipeline Partners LP
Senior Notes
8.75% due 06/15/18*................. 2,400,000 2,256,000
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11.................. 1,215,000 1,248,315
Copano Energy LLC / Copano Energy
Finance Corp.
Company Guar. Notes
8.13% due 03/01/16.................. 1,835,000 1,679,025
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11.................. 747,000 750,855
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12.................. 965,000 911,925
Dynegy-Roseton Danskammer
Pass Through Certs.,
Series B
7.67% due 11/08/16.................. 3,295,000 2,990,213
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14.................. 925,000 864,875
El Paso Natural Gas Co.
Senior Notes
5.95% due 04/15/17.................. 575,000 508,768
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Pipelines (continued)
MarkWest Energy Partners LP / MarkWest
Energy Finance Corp.
Senior Notes
6.88% due 11/01/14....................... $ 255,000 $ 229,500
MarkWest Energy Partners LP / MarkWest
Energy Finance Corp.
Company Guar. Notes
8.50% due 07/15/16....................... 550,000 519,750
MarkWest Energy Partners LP / MarkWest
Energy Finance Corp.
Senior Notes
8.75% due 04/15/18....................... 525,000 498,750
NGC Corp. Capital Trust
Company Guar. Bonds
8.32% due 06/01/27....................... 1,290,000 961,050
Panhandle Eastern Pipeline Co.
Senior Notes
6.20% due 11/01/17....................... 382,000 344,457
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21....................... 440,000 440,000
-----------
14,870,483
-----------
Poultry -- 0.0%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17....................... 511,000 240,170
-----------
Printing-Commercial -- 0.1%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15....................... 1,090,000 752,100
-----------
Publishing-Newspapers -- 0.0%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29....................... 205,000 72,004
-----------
Publishing-Periodicals -- 0.4%
Dex Media West LLC/Dex Media Finance Co.
Senior Notes
8.50% due 08/15/10....................... 87,000 76,778
Idearc, Inc.
Company Guar. Notes
8.00% due 11/15/16....................... 2,425,000 660,812
R.H. Donnelley Corp.
Senior Notes
8.88% due 10/15/17....................... 19,000 6,460
R.H. Donnelley Corp.
Senior Notes
11.75% due 05/15/15*..................... 884,000 539,240
The Reader's Digest Association, Inc.
Company Guar. Notes
9.00% due 02/15/17....................... 2,115,000 1,210,837
-----------
2,494,127
-----------
Real Estate Investment Trusts -- 0.3%
Health Care Property Investors, Inc.
Senior Notes
5.65% due 12/15/13....................... 845,000 744,016
35
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Real Estate Investment Trusts (continued)
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14..................... $1,400,000 $1,288,000
PPF Funding, Inc.
Bonds
5.35% due 04/15/12*.................... 270,000 266,168
----------
2,298,184
----------
Recycling -- 0.3%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14..................... 3,060,000 1,866,600
----------
Rental Auto/Equipment -- 0.1%
ERAC USA Finance Co.
Company Guar. Notes
7.00% due 10/15/37*.................... 165,000 116,212
Rental Service Corp.
Notes
9.50% due 12/01/14..................... 1,075,000 814,312
----------
930,524
----------
Research & Development -- 0.1%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15.................... 1,015,000 639,450
----------
Retail-Discount -- 0.0%
Wal-Mart Stores, Inc.
Senior Notes
6.20% due 04/15/38..................... 295,000 269,099
----------
Retail-Drug Store -- 0.2%
CVS Caremark Corp.
Senior Notes
6.13% due 08/15/16..................... 274,000 264,711
Rite Aid Corp.
Senior Notes
9.50% due 06/15/17..................... 2,060,000 1,081,500
----------
1,346,211
----------
Retail-Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11..................... 375,000 378,750
----------
Retail-Petroleum Products -- 0.2%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14..................... 664,000 541,160
Ferrellgas Partners LP
Senior Notes
6.75% due 05/01/14*.................... 625,000 509,375
Inergy LP/Inergy Finance Corp.
Company Guar. Notes
8.25% due 03/01/16..................... 725,000 667,000
----------
1,717,535
----------
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Retail-Restaurants -- 0.1%
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14.................... $ 845,000 $ 692,900
----------
Rubber-Tires -- 0.1%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14.................... 1,220,000 768,600
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(4)(6)(11)(12).... 100,000 10
----------
Satellite Telecom -- 0.2%
Telesat Canada/Telesat LLC
Senior Notes
11.00% due 11/01/15*.................. 1,475,000 1,239,000
----------
Savings & Loans/Thrifts -- 0.1%
Independence Community Bank Corp.
Sub. Notes
5.26% due 06/20/13(3)................. 172,000 124,599
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10.................... 405,000 319,727
Western Financial Bank
Debentures
9.63% due 05/15/12.................... 495,000 461,508
----------
905,834
----------
Seismic Data Collection -- 0.3%
Seitel, Inc.
Senior Notes
9.75% due 02/15/14.................... 2,135,000 1,740,025
----------
Soap & Cleaning Preparation -- 0.0%
Johnsondiversey Holdings, Inc.
Notes
10.67% due 05/15/13(10)............... 75,000 72,750
----------
Special Purpose Entities -- 2.1%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12*(10).............. 565,000 553,700
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15................... 125,000 130,938
Axcan Intermediate Holdings, Inc.
Senior Notes
9.25% due 03/01/15*................... 1,150,000 1,138,500
Axcan Intermediate Holdings, Inc.
Senior Notes
12.75% due 03/01/16*.................. 550,000 560,750
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*................... 568,000 530,093
Buffalo Thunder Development Authority
Senior Notes
9.38% due 12/15/14*................... 1,450,000 609,000
36
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
CCM Merger, Inc.
Notes
8.00% due 08/01/13*....................... $1,000,000 $ 812,500
Chukchansi Economic Development Authority
Senior Notes
8.00% due 11/15/13*....................... 1,845,000 1,476,000
FireKeepers Development Authority
Senior Notes
13.88% due 05/15/15*...................... 1,300,000 1,144,000
Fox Acquisition Sub LLC
Senior Notes
13.38% due 07/15/16*...................... 1,000,000 895,000
Hawker Beechcraft Acquisition Co.
LLC / Hawker Beechcraft Notes Co.
Company Guar. Notes
9.75% due 04/01/17........................ 868,000 776,860
Hexion US Finance Corp.
Company Guar. Notes
9.75% due 11/15/14........................ 950,000 750,500
ING USA Global Funding Trust
Notes
4.50% due 10/01/10........................ 268,000 269,064
John Hancock Global Funding II
Notes
7.90% due 07/02/10*....................... 294,000 314,013
KAR Holdings, Inc.
Company Guar. Notes
6.80% due 05/01/14(3)..................... 465,000 365,025
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14........................ 1,380,000 1,124,700
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*....................... 917,000 596,050
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12........................ 129,000 134,160
MXEnergy Holdings, Inc.
Senior Notes
10.63% due 08/01/11(3).................... 650,000 442,000
Norbord Delaware GP I
Company Guar. Notes
6.45% due 02/15/17*....................... 193,000 139,925
Principal Life Global Funding I
Sec. Notes
5.25% due 01/15/13*....................... 296,000 290,172
Snoqualmie Entertainment Authority
Senior Sec. Notes
6.88% due 02/01/14*(3).................... 75,000 54,000
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*....................... 1,525,000 1,101,812
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16........................ 400,000 367,000
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Special Purpose Entities (continued)
The Goldman Sachs Capital III
Company Guar.
3.58% due 09/01/12(3)(8)............ $ 942,000 $ 332,875
-----------
14,908,637
-----------
Specified Purpose Acquisitions -- 0.0%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11.................. 163,000 164,630
-----------
Steel-Producers -- 0.5%
ArcelorMittal USA
Senior Notes
6.50% due 04/15/14.................. 540,000 548,425
Reliance Steel & Aluminum Co.
Company Guar. Notes
6.85% due 11/15/36.................. 1,070,000 1,020,048
Ryerson, Inc.
Senior Sec. Notes
10.18% due 11/01/14*(3)............. 910,000 741,650
Ryerson, Inc.
Senior Sec. Notes
12.00% due 11/01/15*................ 1,222,000 1,038,700
Steel Dynamics, Inc.
Company Guar. Notes
6.75% due 04/01/15.................. 15,000 12,900
United States Steel Corp.
Senior Notes
7.00% due 02/01/18.................. 215,000 194,093
-----------
3,555,816
-----------
Steel-Specialty -- 0.0%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11.................. 75,000 79,717
-----------
Storage/Warehousing -- 0.2%
Mobile Mini, Inc.
Notes
6.88% due 05/01/15.................. 725,000 630,750
Mobile Services Group, Inc.
Company Guar. Notes
9.75% due 08/01/14.................. 655,000 609,150
-----------
1,239,900
-----------
Telecom Services -- 0.7%
Bellsouth Telecommunications, Inc.
Debentures
7.00% due 12/01/95.................. 462,000 378,318
Cincinnati Bell Telephone Co. LLC
Company Guar. Notes
7.18% due 12/15/23.................. 50,000 37,500
Cincinnati Bell Telephone Co. LLC
Company Guar. Notes
7.20% due 11/29/23.................. 225,000 168,750
Fairpoint Communications, Inc.
Senior Notes
13.13% due 04/01/18*................ 902,000 820,820
37
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Telecom Services (continued)
PAETEC Holding Corp.
Company Guar. Notes
9.50% due 07/15/15....................... $1,735,000 $1,188,475
Qwest Corp.
Senior Notes
6.50% due 06/01/17....................... 500,000 400,000
Qwest Corp.
Senior Notes
7.88% due 09/01/11....................... 325,000 312,000
Qwest Corp.
Notes
8.88% due 03/15/12....................... 725,000 710,500
Verizon Global Funding Corp.
Senior Notes
6.88% due 06/15/12....................... 750,000 763,297
----------
4,779,660
----------
Telephone-Integrated -- 2.0%
AT&T Corp.
Senior Notes
7.30% due 11/15/11....................... 1,003,000 1,041,605
BellSouth Corp.
Senior Notes
6.00% due 10/15/11....................... 1,300,000 1,302,600
Cincinnati Bell, Inc.
Company Guar. Notes
7.00% due 02/15/15....................... 266,000 223,440
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23....................... 25,000 19,750
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14....................... 990,000 861,300
Pacific Bell Telephone Co.
Company Guar. Notes
7.13% due 03/15/26....................... 570,000 531,160
Qwest Communications International, Inc.
Senior Notes
7.50% due 02/15/14....................... 216,000 186,840
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14....................... 1,575,000 1,362,375
Sprint Capital Corp.
Company Guar. Bonds
6.38% due 05/01/09....................... 825,000 808,500
Sprint Capital Corp.
Company Guar. Notes
6.90% due 05/01/19....................... 901,000 698,275
Sprint Capital Corp.
Company Guar. Notes
7.63% due 01/30/11....................... 525,000 477,750
Sprint Capital Corp.
Company Guar. Bonds
8.38% due 03/15/12....................... 2,130,000 1,917,000
Sprint Capital Corp.
Company Guar. Bonds
8.75% due 03/15/32....................... 3,248,000 2,533,440
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------
Telephone-Integrated (continued)
Verizon New York, Inc.
Notes
6.88% due 04/01/12............ $ 751,000 $ 750,970
Windstream Corp.
Company Guar. Notes
8.63% due 08/01/16............ 975,000 899,438
-----------
13,614,443
-----------
Television -- 0.5%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12............ 1,175,000 1,004,625
Belo Corp.
Senior Notes
6.75% due 05/30/13............ 145,000 127,381
Bonten Media Acquisition Co.
Company Guar. Notes
9.00% due 06/01/15*........... 178,000 105,020
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13............ 1,015,000 791,700
Paxson Communications Corp.
Senior Sec. Notes
9.04% due 01/15/13*(3)........ 2,477,924 1,338,079
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14............ 380,000 55,100
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11........... 1,075,000 155,875
-----------
3,577,780
-----------
Theaters -- 0.5%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14............ 1,649,000 1,418,140
AMC Entertainment, Inc.
Senior Sub Notes
11.00% due 02/01/16........... 539,000 530,915
Cinemark, Inc.
Senior Notes
9.75% due 03/15/14(10)........ 1,585,000 1,523,581
-----------
3,472,636
-----------
Transactional Software -- 0.2%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*........... 1,675,000 1,088,750
-----------
Transport-Air Freight -- 0.7%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-2
6.88% due 01/02/11............ 192,193 172,974
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19............ 1,490,446 1,296,688
38
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transport-Air Freight (continued)
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................. $1,724,036 $ 1,689,555
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20................. 446,294 408,359
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11................. 62,428 57,746
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................. 1,346,314 1,400,167
------------
5,025,489
------------
Transport-Rail -- 0.2%
CSX Corp.
Senior Notes
6.25% due 04/01/15................. 615,000 585,875
CSX Corp.
Senior Notes
6.25% due 03/15/18................. 603,000 545,772
------------
1,131,647
------------
Transport-Services -- 0.1%
Bristow Group, Inc.
Senior Notes
7.50% due 09/15/17................. 250,000 222,500
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................. 360,000 318,600
------------
541,100
------------
Travel Services -- 0.0%
Travelport LLC
Company Guar. Notes
11.88% due 09/01/16................ 256,000 183,680
------------
Vitamins & Nutrition Products -- 0.1%
General Nutrition Centers, Inc.
Company Guar. Notes
7.58% due 03/15/14(3).............. 1,095,000 911,588
------------
Total Corporate Bonds & Notes
(cost $342,196,878)................ 293,022,606
------------
FOREIGN CORPORATE BONDS & NOTES -- 7.4%
Banks-Commercial -- 0.5%
Barclays Bank PLC
Sub. Notes
5.93% due 12/15/16*(3)(8).......... 630,000 438,114
Caisse Nationale des Caisses
d'Epargne et de Prevoyance
Notes
4.15% due 12/30/09(3)(8)........... 141,000 86,010
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
Banks-Commercial (continued)
Credit Agricole SA
Jr. Sub. Notes
6.64% due 05/31/17*(3)(8).............. $ 494,000 $ 333,092
HBOS PLC
Sub. Notes
5.92% due 10/01/15*(3)(8).............. 320,000 188,725
Kazkommerts International BV
Company Guar. Notes
8.00% due 11/03/15..................... 820,000 467,474
Landsbanki Islands HF
Jr. Sub. Notes
7.43% due 10/19/17*(3)(8).............. 370,000 204,505
NIB Capital Bank
Bonds
5.82% due 12/11/13*(3)(8).............. 612,000 322,214
RSHB Capital SA
Notes
7.75% due 05/29/18*.................... 810,000 614,952
VTB Capital SA
Notes
6.88% due 05/29/18*.................... 900,000 691,875
----------
3,346,961
----------
Banks-Money Center -- 0.0%
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Bonds
8.38% due 04/27/09(8).................. 175,000 150,196
----------
Beverages-Wine/Spirits -- 0.1%
Diageo Finance BV
Company Guar. Notes
3.88% due 04/01/11..................... 779,000 771,067
----------
Brewery -- 0.1%
FBG Finance, Ltd.
Senior Notes
5.13% due 06/15/15*.................... 290,000 271,957
SABMiller PLC
Senior Notes
6.50% due 07/15/18*.................... 370,000 350,496
----------
622,453
----------
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25..................... 496,000 435,482
----------
Building Products-Doors & Windows -- 0.0%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15(23)................ 117,000 29,250
----------
Cellular Telecom -- 0.4%
Mobile Telesystems Finance SA
Company Guar. Senior Notes
8.38% due 10/14/10..................... 520,000 490,152
VIP Finance Notes
9.13% due 04/30/18*.................... 2,090,000 1,622,402
39
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Cellular Telecom (continued)
VIP Finance Ireland Ltd.
Notes
9.13% due 04/30/18........................ $ 710,000 $ 525,578
Vodafone Group PLC
Senior Notes
7.75% due 02/15/10........................ 325,000 334,971
----------
2,973,103
----------
Computers-Memory Devices -- 0.2%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16........................ 1,565,000 1,369,375
----------
Containers-Metal/Glass -- 0.3%
Rexam PLC
Bonds
6.75% due 06/01/13*....................... 430,000 429,569
Vitro SAB de CV
Senior Notes
9.13% due 02/01/17........................ 2,620,000 1,703,000
Vitro SAB de CV
Senior Notes
11.75% due 11/01/13....................... 250,000 215,000
----------
2,347,569
----------
Cruise Lines -- 0.1%
Royal Caribbean Cruises, Ltd.
Senior Notes
7.00% due 06/15/13........................ 400,000 344,000
----------
Diversified Financial Services -- 0.2%
TNK-BP Finance SA
Company Guar. Notes
6.13% due 03/20/12........................ 880,000 696,485
TNK-BP Finance SA
Company Guar. Notes
7.88% due 03/13/18........................ 1,360,000 972,400
----------
1,668,885
----------
Diversified Manufacturing Operations -- 0.2%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*....................... 1,210,000 1,197,900
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13........................ 310,000 303,766
----------
1,501,666
----------
Diversified Operations -- 0.1%
Hutchison Whampoa Finance, Ltd.
Company Guar. Notes
7.50% due 08/01/27*....................... 150,000 140,561
Noble Group, Ltd.
Senior Notes
8.50% due 05/30/13*....................... 540,000 459,000
----------
599,561
----------
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------
Electric-Generation -- 0.1%
Abu Dhabi National Energy Co.
Senior Notes
7.25% due 08/01/18*.............. $ 365,000 $ 355,368
----------
Electric-Integrated -- 0.0%
TransAlta Corp.
Senior Notes
6.65% due 05/15/18............... 219,000 206,740
----------
Electronic Components-Misc. -- 0.1%
NXP BV/NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15............... 1,347,000 693,705
----------
Food-Meat Products -- 0.2%
JBS SA
Company Guar. Notes
9.38% due 02/07/11............... 1,585,000 1,426,500
JBS SA
Senior Notes
10.50% due 08/04/16*............. 250,000 192,500
----------
1,619,000
----------
Food-Retail -- 0.1%
Delhaize Group SA
Senior Notes
6.50% due 06/15/17............... 855,000 809,819
----------
Import/Export -- 0.1%
Marfrig Overseas, Ltd.
Company Guar. Bonds
9.63% due 11/16/16............... 954,000 810,900
----------
Independent Power Producers -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(6)(7)(15)... 725,000 725
----------
Insurance-Multi-line -- 0.1%
Aegon NV
Sub. Bonds
4.63% due 07/15/17(3)(8)......... 201,000 76,380
XL Capital Finance (Europe) PLC
Company Guar. Notes
6.50% due 01/15/12............... 279,000 267,919
XL Capital, Ltd.
Senior Notes
5.25% due 09/15/14............... 488,000 422,105
----------
766,404
----------
Investment Companies -- 0.0%
Xstrata Finance Canada, Ltd.
Notes
6.90% due 11/15/37*.............. 266,000 226,115
----------
Medical-Drugs -- 0.6%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
6.56% due 12/01/13(3)............ 1,410,000 1,015,200
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14............... 340,000 198,900
40
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Medical-Drugs (continued)
Elan Finance PLC
Company Guar. Notes
6.80% due 11/15/11(3)....................... $2,430,000 $2,187,000
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11.......................... 955,000 864,275
----------
4,265,375
----------
Metal-Diversified -- 0.2%
Vedanta Resources PLC
Senior Notes
8.75% due 01/15/14*......................... 1,000,000 891,800
Vedanta Resources PLC
Senior Notes
8.75% due 01/15/14.......................... 240,000 206,400
----------
1,098,200
----------
Multimedia -- 0.1%
Quebecor Media, Inc.
Senior Notes
7.75% due 03/15/16.......................... 375,000 328,125
Thomson Reuters Corp.
Company Guar. Notes
5.95% due 07/15/13.......................... 371,000 370,562
----------
698,687
----------
Oil Companies-Exploration & Production -- 0.4%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13.......................... 765,000 671,287
OPTI Canada, Inc.
Senior Notes
7.88% due 12/15/14.......................... 1,880,000 1,663,800
OPTI Canada, Inc.
Senior Notes
8.25% due 12/15/14.......................... 625,000 559,375
----------
2,894,462
----------
Oil-Field Services -- 0.2%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11.......................... 1,160,000 1,067,200
----------
Paper & Related Products -- 0.4%
Abitibi-Consolidated Co. of Canada
Notes
6.00% due 06/20/13.......................... 300,000 79,500
Abitibi-Consolidated Co. of Canada
Senior Notes
13.75% due 04/01/11*........................ 1,355,000 1,348,225
Abitibi-Consolidated Co. of Canada
Senior Notes
15.50% due 07/15/10*........................ 658,000 463,890
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10.......................... 1,587,000 603,060
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------------------
Paper & Related Products (continued)
Bowater Canada Finance Corp.
Company Guar. Notes
7.95% due 11/15/11........................... $ 200,000 $ 92,000
----------
2,586,675
----------
Pipelines -- 0.1%
Enbridge, Inc.
Senior Notes
5.80% due 06/15/14........................... 205,000 195,004
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16........................... 183,000 157,380
----------
352,384
----------
Printing-Commercial -- 0.1%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*+(7)(15).................. 1,640,000 656,000
----------
Property Trust -- 0.0%
Westfield Capital Corp., Ltd./ WT
Finance Australia Property, Ltd.
Company Guar. Notes
4.38% due 11/15/10*.......................... 340,000 331,024
----------
Real Estate Operations & Development -- 0.1%
Agile Property Holdings, Ltd.
Company Guar. Notes
9.00% due 09/22/13........................... 1,470,000 951,065
Brookfield Asset Management., Inc.
Notes
8.13% due 12/15/08........................... 76,000 76,350
----------
1,027,415
----------
Satellite Telecom -- 0.4%
Intelsat Subsidiary Holding Co., Ltd.
Senior Notes
8.50% due 01/15/13*.......................... 2,224,000 2,057,200
Intelsat Subsidiary Holding Co., Ltd.
Senior Notes
8.88% due 01/15/15*.......................... 685,000 626,775
----------
2,683,975
----------
Sovereign -- 0.1%
Credit Suisse First Boston International for
City of Kiev Ukraine
Bonds
8.00% due 11/06/15........................... 1,100,000 811,250
----------
Special Purpose Entities -- 0.3%
Hellas Telecommunications Luxembourg II
Sub. Notes
8.54% due 01/15/15*(3)....................... 1,330,000 804,650
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(8)........................ 338,000 202,800
Independencia International, Ltd.
Company Guar. Notes
9.88% due 05/15/15*.......................... 930,000 789,619
41
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
SMFG Preferred Capital, Ltd.
Bonds
6.08% due 01/25/17*(3)(8)......... $ 373,000 $ 266,340
SovRisc BV
Notes
4.63% due 10/31/08*............... 133,000 133,326
----------
2,196,735
----------
Steel-Producers -- 0.4%
Evraz Group SA
Notes
8.88% due 04/24/13*............... 1,360,000 1,088,000
Evraz Group SA
Notes
8.88% due 04/24/13................ 1,270,000 1,066,800
Severstal SA
Notes
9.75% due 07/29/13*............... 950,000 779,000
----------
2,933,800
----------
Telecom Services -- 0.1%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14............... 950,000 855,000
Wind Acquisition Finance SA
Company Guar. Bonds
10.75% due 12/01/15*.............. 175,000 171,500
----------
1,026,500
----------
Telecommunication Equipment -- 0.2%
Nortel Networks, Ltd.
Company Guar. Notes
10.75% due 07/15/16*.............. 1,680,000 1,029,000
----------
Telephone-Integrated -- 0.3%
Telecom Italia Capital SA
Company Guar. Notes
4.95% due 09/30/14................ 495,000 417,419
Telecom Italia Capital SA
Company Guar. Bonds
6.20% due 07/18/11................ 1,000,000 1,000,290
Telefonica Emisones SAU
Company Guar. Notes
6.42% due 06/20/16................ 685,000 643,153
----------
2,060,862
----------
Transport-Marine -- 0.1%
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14................ 525,000 477,750
----------
Transport-Rail -- 0.2%
Canadian National Railway Co.
Notes
6.38% due 10/15/11................ 750,000 775,350
Canadian Pacific Railway Co.
Notes
6.50% due 05/15/18................ 350,000 330,049
----------
1,105,399
----------
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
Water -- 0.1%
Veolia Environnement
Notes
6.75% due 06/01/38................. $ 560,000 $ 535,803
-----------
Total Foreign Corporate Bonds & Notes
(cost $63,261,896).................. 51,486,840
-----------
FOREIGN GOVERNMENT AGENCIES -- 16.5%
Sovereign -- 16.5%
Federal Republic of Brazil
Bonds
6.00% due 01/17/17................. 2,650,000 2,557,250
Federal Republic of Brazil
Bonds
7.13% due 01/20/37................. 1,040,000 1,068,600
Federal Republic of Brazil
Bonds
7.77% due 01/05/16................. BRL 2,420,000 1,319,433
Federal Republic of Brazil
Notes
8.00% due 01/15/18................. 2,220,000 2,380,950
Federal Republic of Brazil
Bonds
8.25% due 01/20/34................. 2,625,000 2,972,813
Federal Republic of Brazil
Notes
8.75% due 02/04/25................. 2,075,000 2,438,125
Federal Republic of Brazil
Bonds
8.88% due 10/14/19................. 1,410,000 1,653,225
Federal Republic of Brazil
Notes
11.00% due 08/17/40................ 3,290,000 4,128,950
Federal Republic of Brazil
Bonds
12.50% due 01/05/16................ BRL 3,380,000 1,842,845
Federal Republic of Germany
Bonds
4.00% due 01/04/18................. EUR 570,000 803,778
Federal Republic of Germany
Bonds
4.25% due 07/04/14................. EUR 469,000 674,262
Federal Republic of Germany
Bonds
4.50% due 01/04/13................. EUR 595,000 860,333
Federal Republic of Germany
Bonds
5.50% due 01/04/31................. EUR 500,000 781,512
Government of Australia
Bonds
6.00% due 02/15/17................. AUD 2,540,000 2,094,932
Government of Hungary
Bonds
6.00% due 10/24/12................. HUF 152,000,000 787,743
Government of Hungary
Bonds
6.75% due 04/12/10................. HUF 200,000,000 1,115,561
42
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
---------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Government of Japan
Bonds
1.40% due 12/20/15........ JPY 420,000,000 $4,007,575
Government of Netherlands
Bonds
3.25% due 07/15/15........ EUR 400,000 534,091
Government of Switzerland
Bonds
4.00% due 06/10/11........ CHF 3,050,000 2,880,161
Kingdom of Denmark
Bonds
5.00% due 11/15/13........ DKK 9,370,000 1,834,225
Kingdom of Denmark
Bonds
6.00% due 11/15/11........ DKK 9,480,000 1,888,654
Kingdom of Norway
Bonds
6.00% due 05/16/11........ NOK 7,100,000 1,255,390
Kingdom of Norway
Bonds
6.50% due 05/15/13........ NOK 13,630,000 2,523,105
Kingdom of Sweden
Bonds
4.00% due 12/01/09........ SEK 3,860,000 558,780
Kingdom of Sweden
Bonds
4.50% due 08/12/15........ SEK 18,020,000 2,712,187
Republic of Argentina
Notes
5.25% due 12/31/38(10).... 4,494,761 1,107,959
Republic of Argentina
Bonds
7.00% due 09/12/13........ 820,000 559,650
Republic of Argentina
Bonds
8.28% due 12/31/33........ 2,374,606 1,356,494
Republic of Colombia
Bonds
7.38% due 09/18/37........ 1,745,000 1,746,745
Republic of Colombia
Bonds
12.00% due 10/22/15....... COP 4,877,000,000 2,332,708
Republic of Columbia
Bonds
8.13% due 05/21/24........ 710,000 777,450
Republic of Ecuador
Bonds
10.00% due 08/15/30(10)... 2,670,000 1,935,750
Republic of Georgia
Notes
7.50% due 04/15/13........ 2,280,000 1,886,700
Republic of Greece
Senior Notes
4.50% due 09/20/37........ EUR 775,000 949,395
Republic of Indonesia
Bonds
6.63% due 02/17/37........ 3,650,000 2,915,930
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------
Sovereign (continued)
Republic of Indonesia
Bonds
6.88% due 01/17/18*...... $ 1,080,000 $ 982,800
Republic of Indonesia
Bonds
6.88% due 01/17/18....... 620,000 570,258
Republic of Indonesia
Bonds
7.50% due 01/15/16....... 870,000 856,367
Republic of Indonesia
Notes
8.50% due 10/12/35....... 800,000 794,263
Republic of Pakistan
Bonds
6.88% due 06/01/17*...... 570,000 270,750
Republic of Panama
Bonds
6.70% due 01/26/36....... 660,000 623,700
Republic of Panama
Notes
7.25% due 03/15/15....... 253,000 262,488
Republic of Peru
Bonds
6.55% due 03/14/37....... 700,000 644,000
Republic of Peru
Notes
7.35% due 07/21/25....... 1,860,000 1,850,700
Republic of Peru
Bonds
8.75% due 11/21/33....... 720,000 856,800
Republic of Philippines
Bonds
7.75% due 01/14/31....... 1,000,000 1,050,000
Republic of Philippines
Notes
8.00% due 01/15/16....... 880,000 926,200
Republic of Philippines
Notes
8.88% due 03/17/15....... 1,130,000 1,259,950
Republic of Philippines
Senior Notes
9.50% due 02/02/30....... 1,140,000 1,413,600
Republic of Philippines
Notes
10.63% due 03/16/25...... 895,000 1,191,469
Republic of South Africa
Bonds
5.88% due 05/30/22....... 1,130,000 977,450
Republic of South Africa
Bonds
13.00% due 08/31/10...... ZAR 16,800,000 2,150,903
Republic of Turkey
Notes
6.88% due 03/17/36....... 1,985,000 1,746,800
Republic of Turkey
Notes
7.00% due 06/05/20....... 2,120,000 1,990,150
43
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Republic of Turkey
Notes
7.25% due 03/15/15...... $2,290,000 $2,272,825
Republic of Turkey
Notes
7.25% due 03/05/38...... 1,250,000 1,130,200
Republic of Turkey
Notes
7.38% due 02/05/25...... 1,030,000 988,800
Republic of Turkey
Notes
8.00% due 02/14/34...... 1,910,000 1,905,225
Republic of Turkey
Notes
9.50% due 01/15/14...... 2,160,000 2,378,808
Republic of Turkey
Senior Bonds
11.88% due 01/15/30..... 1,260,000 1,809,738
Republic of Ukraine
Bonds
6.75% due 11/14/17...... 2,840,000 2,008,192
Republic of Uruguay
Notes
7.63% due 03/21/36...... 2,220,000 2,109,000
Republic of Uruguay
Bonds
8.00% due 11/18/22...... 2,260,000 2,260,000
Republic of Venezuela
Bonds
7.65% due 04/21/25...... 355,000 215,663
Republic of Venezuela
Bonds
9.00% due 05/07/23...... 1,100,000 745,250
Republic of Venezuela
Bonds
9.25% due 09/15/27...... 2,100,000 1,566,600
Republic of Venezuela
Bonds
9.25% due 05/07/28...... 1,100,000 753,500
Republic of Venezuela
Bonds
9.38% due 01/13/34...... 1,560,000 1,084,200
Russian Federation
Bonds
7.50% due 03/31/30(10).. 6,433,700 6,586,500
United Mexican States
Notes
6.05% due 01/11/40...... 600,000 537,600
United Mexican States
Notes
6.75% due 09/27/34...... 1,425,000 1,432,125
United Mexican States
Bonds
7.50% due 04/08/33...... 840,000 917,700
United Mexican States
Notes
8.13% due 12/30/19...... 1,240,000 1,436,540
Market
Principal Value
Security Description Amount** (Note 2)
--------------------------------------------------------------
Sovereign (continued)
United Mexican States
Bonds
8.30% due 08/15/31................. $ 970,000 $ 1,147,025
------------
Total Foreign Government Agencies
(cost $124,426,415)................ 114,947,400
------------
FOREIGN GOVERNMENT TREASURIES -- 0.5%
Sovereign -- 0.5%
New South Wales Treasury Corp.
Notes
6.00% due 05/01/12................. 3,148,000 2,496,146
Queensland Treasury Corp.
Government Guar. Notes
5.50% due 05/14/10................. 350,000 275,093
United Kingdom Treasury
Bonds
4.75% due 06/07/10................. 505,000 908,400
------------
Total Foreign Government Treasuries
(cost $4,177,392).................. 3,679,639
------------
LOANS(16)(17) -- 0.4%
Casino Services -- 0.1%
Holding Gaming Borrower LP
Term Loan B
8.81% due 02/19/13(5)(6)........... 1,000,000 945,000
------------
Leisure Products -- 0.1%
AMC Entertainment Holdings, Inc.
First Lien
7.82% due 06/15/12(5)(6)........... 449,929 314,950
------------
Medical-Drugs -- 0.2%
Triax Pharmaceuticals LLC
15.54% due 08/30/11(4)(5)(6)(20)... 1,537,967 1,383,105
------------
Total Loans
(cost $2,800,413).................. 2,643,055
------------
U.S. GOVERNMENT AGENCIES -- 19.4%
Federal Home Loan Bank -- 0.1%
3.13% due 06/10/11................. 400,000 394,084
------------
Federal Home Loan Mtg. Corp. -- 12.6%
4.13% due 07/12/10................. 300,000 305,062
4.50% due 02/01/20................. 172,307 168,481
4.50% due 08/01/20................. 363,184 355,120
4.50% due 03/01/23................. 952,247 927,531
5.00% due 09/01/18................. 390,565 391,168
5.00% due 07/01/20................. 642,212 639,190
5.00% due 02/01/34................. 406,046 396,798
5.00% due 03/01/34................. 3,192,469 3,116,769
5.00% due 05/01/34................. 258,138 252,017
5.00% due 02/01/35................. 591,631 577,602
5.00% due 07/01/35................. 995,830 971,594
5.00% due 08/01/35................. 875,797 854,482
5.00% due 10/01/35................. 1,178,511 1,149,829
5.00% due 04/01/36................. 510,445 498,023
5.00% due 05/01/36................. 360,896 351,887
5.00% due 08/01/36................. 430,929 420,172
5.00% due 11/01/37................. 4,410,322 4,298,853
5.33% due 12/01/35(3).............. 358,412 359,473
44
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
----------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal Home Loan Mtg. Corp. (continued)
5.47% due 03/01/36(3)................. $ 238,755 $ 238,947
5.50% due 07/01/35.................... 2,221,469 2,212,823
5.50% due 05/01/37.................... 1,894,958 1,886,398
5.50% due 06/01/37.................... 410,237 408,384
5.50% due 09/01/37.................... 6,900,004 6,868,837
5.50% due 10/01/37.................... 8,055,191 8,018,805
5.50% due 11/01/37.................... 1,928,734 1,920,021
5.50% due 12/01/37.................... 1,358,431 1,352,295
5.50% due 01/01/38.................... 3,481,583 3,466,400
5.50% due October TBA................. 3,080,000 3,063,639
5.78% due 01/01/37(3)................. 694,238 707,827
5.81% due 01/01/37(3)................. 160,755 162,572
5.95% due 10/01/36(3)................. 3,823,223 3,905,184
6.00% due 10/01/37.................... 7,728,667 7,831,057
6.00% due October TBA................. 6,000,000 6,073,128
6.19% due 09/01/36(3)................. 591,138 608,161
6.50% due 05/01/29.................... 5,646 5,845
6.50% due 02/01/35.................... 200,289 206,223
6.50% due 11/01/37.................... 6,393,602 6,563,069
6.88% due 09/15/10.................... 1,156,000 1,235,073
7.00% due 06/01/29.................... 13,350 14,058
Federal Home Loan Mtg. Corp. REMIC
Series 3026, Class PC
4.50% due 01/15/34(1)................. 4,055,000 3,762,621
Series 3102, Class PG
5.00% due 11/15/28(1)................. 730,000 734,297
Series 3317, Class PD
5.00% due 09/15/31(1)................. 935,000 930,223
Series 3116, Class PD
5.00% due 10/15/34(1)................. 4,050,000 3,907,951
Series 3312, Class LB
5.50% due 11/15/25(1)................. 4,000,000 3,951,399
Series 3349, Class HB
5.50% due 06/15/31(1)................. 1,724,000 1,738,504
Series 3159, Class TD
5.50% due 05/15/34(1)................. 250,000 244,329
Series 41, Class F
10.00% due 05/15/20(1)................ 11,786 12,370
Series 1103, Class N
11.57% due 06/15/21(1)(14)............ 7,315 1,903
-----------
88,066,394
-----------
Federal National Mtg. Assoc. -- 6.7%
2.50% due 04/09/10.................... 4,000,000 3,960,644
4.46% due 02/01/34(3)................. 383,846 386,528
4.50% due 06/01/19.................... 441,668 433,792
4.50% due 11/01/22.................... 878,222 859,818
4.50% due 06/01/23.................... 1,000,001 975,295
4.69% due 10/01/35(3)................. 192,758 194,873
4.75% due 12/15/10.................... 375,000 387,574
4.86% due 01/01/35(3)................. 775,470 780,136
5.00% due 06/01/19.................... 214,125 214,160
5.00% due 01/01/23.................... 2,293,863 2,279,906
5.00% due 03/01/34.................... 268,981 262,687
5.00% due 05/01/35.................... 121,879 118,951
5.00% due 10/01/35.................... 54,396 53,089
Market
Principal Value
Security Description Amount** (Note 2)
-----------------------------------------------------------------
Federal National Mtg. Assoc. (continued)
5.00% due 02/01/37.................... $ 253,767 $ 247,485
5.00% due 04/01/37.................... 1,695,289 1,653,141
5.00% due 05/01/37.................... 381,838 372,344
5.00% due 06/01/37.................... 29,106 28,382
5.00% due 07/01/37.................... 263,800 257,242
5.00% due October TBA................. 9,000,000 8,769,375
5.47% due 02/01/38.................... 1,876,257 1,897,431
5.48% due 01/01/37(3)................. 3,530,155 3,593,835
5.50% due 11/01/19.................... 1,179,428 1,195,472
5.50% due 08/01/20.................... 284,438 287,507
5.50% due 11/01/22.................... 864,364 872,157
5.50% due 01/01/29.................... 6,821 6,865
5.50% due 02/01/35.................... 482,642 481,970
5.50% due 12/01/35.................... 658,907 657,989
5.50% due 02/01/36(3)................. 285,346 289,861
5.50% due 12/01/36.................... 695,742 694,447
5.50% due 04/01/37.................... 422,921 422,110
5.50% due 03/01/38.................... 39,094 39,015
6.00% due 02/01/32.................... 99,975 101,862
6.00% due 05/01/34.................... 17,038 17,312
6.00% due 10/01/34.................... 452,103 459,365
6.00% due 06/01/35.................... 161,867 164,189
6.00% due 10/01/36.................... 854,049 866,031
6.00% due 07/01/37.................... 3,169,286 3,213,570
6.00% due 08/01/37.................... 4,324,474 4,384,900
6.00% due 10/01/37.................... 639,541 648,477
6.00% due 03/01/38.................... 1,483,677 1,504,492
6.50% due 04/01/34.................... 211,122 217,350
6.50% due 02/01/35.................... 78,009 80,140
6.50% due 11/01/37.................... 1,440,980 1,479,127
7.50% due 01/01/30.................... 14,262 15,434
7.50% due 09/01/30.................... 3,379 3,650
8.00% due 11/01/28.................... 19,104 20,829
13.00% due 11/01/15................... 3,519 3,937
Federal National Mtg. Assoc. REMIC
Series 2005-12, Class BE
5.00% due 11/25/30(1)................. 900,000 896,091
Series 1989-2, Class D
8.80% due 01/25/19(1)................. 32,419 33,949
Series 1989-17, Class E
10.40% due 04/25/19(1)................ 4,225 4,562
------------
46,789,348
------------
Government National Mtg. Assoc. -- 0.0%
7.50% due 07/15/27.................... 9,618 10,383
7.50% due 10/15/27.................... 63,272 68,305
------------
78,688
------------
Total U.S. Government Agencies
(cost $135,694,167)................... 135,328,514
------------
U.S. GOVERNMENT TREASURIES -- 5.7%
United States Treasury Bonds -- 0.9%
3.63% due 04/15/28.................... 1,305,360 1,501,776
4.38% due 02/15/38.................... 677,000 685,621
4.50% due 05/15/38.................... 386,000 398,485
4.75% due 02/15/37.................... 2,450,000 2,620,735
45
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Principal Market
Amount/ Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
U.S. GOVERNMENT TREASURIES (continued)
United States Treasury Bonds (continued)
5.00% due 05/15/37........................ $ 874,000 $ 972,257
6.25% due 08/15/23........................ 166,000 199,317
-----------
6,378,191
-----------
United States Treasury Notes -- 4.8%
2.13% due 01/31/10........................ 10,250,000 10,278,024
2.75% due 02/28/13........................ 305,000 303,427
2.88% due 01/31/13........................ 535,000 536,379
3.38% due 07/31/13........................ 1,130,000 1,150,569
3.63% due 12/31/12........................ 800,000 827,750
3.88% due 05/15/10........................ 175,000 180,742
3.88% due 09/15/10........................ 7,000 7,271
3.88% due 05/15/18........................ 162,000 163,063
4.00% due 02/15/15........................ 9,500,000 9,976,482
4.00% due 08/15/18........................ 1,171,000 1,187,650
4.25% due 08/15/15........................ 198,000 209,308
4.25% due 11/15/17........................ 3,525,000 3,653,331
4.38% due 12/15/10........................ 101,000 106,153
4.50% due 02/15/16........................ 1,669,000 1,779,051
4.50% due 05/15/17........................ 2,150,000 2,265,730
4.63% due 12/31/11........................ 500,000 533,399
4.75% due 05/31/12........................ 300,000 322,383
-----------
33,480,712
-----------
Total U.S. Government Treasuries
(cost $39,238,418)........................ 39,858,903
-----------
COMMON STOCK -- 0.6%
Casino Services -- 0.0%
Shreveport Gaming Holdings, Inc.+(4)(5)(6). 2,441 47,136
-----------
Cellular Telecom -- 0.2%
iPCS, Inc.+(5)(6).......................... 60,413 1,345,397
-----------
Food-Misc. -- 0.0%
Wornick Co.+(4)............................ 4,592 229,600
-----------
Independent Power Producers -- 0.0%
Calpine Corp.+............................. 4,763 61,919
Mirant Corp.+.............................. 1,929 35,281
-----------
97,200
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC(4)(5)(6)(19)..... 128,418 53,936
-----------
Medical-Hospitals -- 0.1%
MedCath Corp.+............................. 34,684 621,537
-----------
Medical-Outpatient/Home Medical -- 0.0%
Critical Care Systems International,
Inc.(4)(5)(6)............................. 4,107 41
-----------
Oil Companies-Exploration & Production -- 0.2%
EXCO Resources, Inc.+...................... 99,999 1,631,984
Transmeridian Exploration, Inc.+........... 5,460 1,638
-----------
1,633,622
-----------
Market
Value
Security Description Shares (Note 2)
-------------------------------------------------------------------
Oil-Field Services -- 0.1%
Trico Marine Services, Inc.+................. 21,747 $ 371,439
------------
Total Common Stock
(cost $5,049,045)........................... 4,399,908
------------
PREFERRED STOCK -- 0.4%
Banks-Commercial -- 0.1%
CoBank ACB
11.00%*..................................... 12,063 606,914
------------
Banks-Money Center -- 0.0%
Santander Finance Preferred SA
4.00%....................................... 32,800 263,056
------------
Banks-Super Regional -- 0.0%
Wachovia Capital Trust IX
6.38%....................................... 12,800 142,208
------------
Diversified Financial Services -- 0.1%
General Electric Capital Corp.
8.00%(10)................................... 16,000 304,800
------------
Finance-Mortgage Loan/Banker -- 0.0%
Freddie Mac
8.38%....................................... 11,300 18,419
------------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC, Class C
14.70%(4)(5)(6)(19)......................... 39,177 78,353
------------
Medical-Generic Drugs -- 0.1%
Mylan, Inc.
6.50%....................................... 782 613,870
------------
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
15.00%(4)(9)................................ 3,851 269,570
------------
Special Purpose Entity -- 0.1%
Structured Repackaged Asset-Backed
Trust Securities
3.00%(3).................................... 29,200 402,668
------------
Total Preferred Stock
(cost $4,213,597)........................... 2,699,858
------------
WARRANTS -- 0.0%+
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10
(strike price $4.31)(4)..................... 13,811 138
------------
Telecom Services -- 0.0%
Leap Wireless International, Inc.
Expires 04/15/10
(strike price $96.80)*(4)(6)................ 500 0
------------
Total Warrants
(cost $39,261).............................. 138
------------
Total Long-Term Investment Securities
(cost $747,434,751)......................... 670,694,603
------------
46
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount** (Note 2)
------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 2.5%
Time Deposits -- 2.5%
Euro Time Deposit with State Street
Bank & Trust Co.
0.50% due 10/01/08.................. $ 818,000 $ 818,000
Euro Time Deposit with State Street
Bank & Trust Co.
0.85% due 10/01/08.................. 1,168,000 1,168,000
Euro Time Deposit with State Street
Bank & Trust Co.
1.35% due 10/01/08.................. 15,896,000 15,896,000
------------
Total Short-Term Investment Securities
(cost $17,882,000).................. 17,882,000
------------
REPURCHASE AGREEMENT -- 2.1%
State Street Bank & Trust Co. Joint
Repurchase Agreement(18)
(cost $14,768,000).................. $14,768,000 $ 14,768,000
------------
TOTAL INVESTMENTS --
(cost $780,084,751)(21)............. 100.7% 703,344,603
Liabilities in excess of other assets.. (0.7) (5,060,794)
----------- ------------
NET ASSETS -- 100.0% $698,283,809
=========== ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At September 30, 2008, the aggregate value
of these securities was $74,499,054 representing 10.7% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
** Denominated in United States Dollars unless otherwise indicated.
+ Non-income producing security
(1)Collateralized Mortgage Obligation
(2)Variable Rate Security -- the rate reflected is as of September 30, 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 September 30, 2008.
(4)Fair valued security; see Note 2
(5)To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are valued
pursuant to Note 2. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of September 30, 2008, the
Strategic Bond Fund held the following restricted securities:
Market
Principal Value % of
Acquisition Amount/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ---------- ------ ------
AMC
Entertainment
Holdings,
Inc. 7.82%
due 06/15/12
Loan
Agreement....... 6/8/2007 $ 400,000 $ 390,000
9/27/2007 11,051 11,051
12/20/2007 11,014 11,014
3/19/2008 10,658 11,918
6/23/2008 8,532 8,943
9/26/2008 8,674 9,108
---------- ----------
449,929 442,034 $ 314,950 $70.00 0.05%
Critical Care
Systems
International,
Inc.
Common
Stock........... 7/20/2006 4,107 37,181 41 0.01 0.00
Holding
Gaming
Borrower LP
9.25% due
02/19/13
Loan
Agreement....... 9/09/2008 1,000,000 940,000 945,000 94.50 0.14
ICO North
America, Inc.
7.50% due
08/15/09........ 8/11/2005 200,000 200,000
4/19/2006 65,000 80,925
3/5/2008 10,000 10,000
9/11/2008 11,000 11,000
---------- ----------
286,000 301,925 200,200 70.00 0.03
iPCS, Inc.
Common
Stock........... 7/28/2005 1,283 0
7/20/2004 59,130 916,511
---------- ----------
60,413 916,511 1,345,397 22.27 0.19
Shreveport
Gaming
Holdings,
Inc.
Common
Stock........... 7/29/2005 2,047 47,128
7/21/2005 394 9,062
---------- ----------
2,441 56,190 47,136 19.31 0.01
Southern
Energy, Inc.
7.90% due
07/15/09........ 1/25/2006 1,125,000 0
6/6/2006 425,000 0
---------- ----------
1,550,000 0 0 0.00 0.00
Triax
Pharmaceuticals
LLC 15.54%
due 08/30/11
Loan
Agreement 8/31/2007 1,500,000 1,379,795
10/31/2007 3,875 3,875
1/10/2008 11,404 11,404
4/4/2008 11,239 11,238
7/3/2008 11,449 11,449
---------- ----------
1,537,967 1,417,761 1,383,105 89.93 0.20
47
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value % of
Acquisition Amount/ Acquisition Market per Net
Name Date Shares Cost Value Share Assets
---- ----------- --------- ----------- ---------- ------ ------
Triax
Pharmaceuticals
LLC
Common
Stock........... 8/31/2007 $128,418 $53,936 $ 53,936 $0.42 0.01%
Triax
Pharmaceuticals
LLC
Preferred
Stock........... 8/31/2007 39,177 78,353 78,353 2.00 0.01
---------- ----
$4,368,118 0.64%
========== ====
(6) Illiquid security. At September 30, 2008, the aggregate value of these
securities was $5,707,215 representing 0.8% of net assets.
(7) Bond in default
(8) Perpetual maturity -- maturity date reflects the next call date.
(9) PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(10) "Step-up" security where the rate increases ("steps-up") at a
predetermined rate. Rate shown reflects the increased rate.
(11) Company has filed for Chapter 11 bankruptcy protection.
(12) Bond is in default and did not pay principal at maturity
(13) Company has filed for Chapter 7 bankruptcy.
(14) Interest Only
(15) Company has filed for bankruptcy in country of issuance.
(16) Senior Loans in the Fund's Portfolio are generally subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment
conditions and because there may be significant economic incentives for a
borrower to prepay, prepayments may occur. As a result, the actual
remaining maturity may be substantially less than the stated maturities
shown.
(17) The Fund invests in Senior Loans which generally pay interest at rates
which are periodically re-determined by reference to a base lending rate
plus a premium. These base lending rates are generally either the lending
rate offered by one or more major United States banks, or the certificate
of deposit rate. Senior Loans are generally considered to be restrictive
in that the Fund is ordinarily contractually obligated to receive approval
from the Agent Bank and/or borrower prior to the disposition of a Senior
Loan.
(18) See Note 2 for details of Joint Repurchase Agreement.
(19) Consists of more than one class of securities traded together as a unit.
(20) A portion of the interest is paid in the form of additional bonds.
(21) See Note 5 for cost of investments on a tax basis.
(22) Company has filed for Chapter 11 bankruptcy protection subsequent to
September 30, 2008.
(23) Bond is in default subsequent to September 30, 2008.
REMIC --Real Estate Mortgage Investment Conduit
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
BRL --Brazilian Real
CHF --Swiss Franc
COP --Columbian Peso
DKK --Danish Krone
EUR --Euro Dollar
HUF --Hungarian Forint
JPY --Japanese Yen
MXN --Mexican Peso
NOK --Norwegian Krone
SEK --Swedish Krona
USD --United States Dollar
ZAR --South African Rand
48
SunAmerica Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Open Forward Foreign Currency Contracts
-------------------------------------------------------------------------
Gross
Contract to In Exchange Delivery Unrealized
Deliver For Date Appreciation
--------------------- -------------------- ----------------- ------------
*AUD 8,760,000 USD 7,923,420 11/07/2008 $1,008,395
----------
Gross
Contract to In Exchange Delivery Unrealized
Deliver For Date Depreciation
--------------------- -------------------- ----------------- ------------
*USD 7,572,144 AUD 8,760,000 11/07/2008 (657,119)
----------
Net Unrealized Appreciation (Depreciation) $ 351,276
==========
- --------
* Represents open forward currency contracts and offsetting or partially
offsetting open forward foreign currency contracts that do not have
additional market risk but have continued counterparty settlement risk.
AUD --Australian Dollar
USD --United States Dollar
See Notes to Financial Statements
49
SunAmerica High Yield Bond Fund
PORTFOLIO PROFILE -- September 30, 2008 -- (unaudited)
Industry Allocation*
Oil Companies-Exploration & Production. 8.7%
Special Purpose Entities............... 6.1
Medical-Hospitals...................... 4.5
Transport-Air Freight.................. 4.2
Pipelines.............................. 3.5
Casino Hotels.......................... 3.2
Paper & Related Products............... 2.9
Cable TV............................... 2.8
Telephone-Integrated................... 2.7
Oil-Field Services..................... 2.6
Electric-Integrated.................... 2.6
Telecom Services....................... 2.5
Chemicals-Specialty.................... 2.4
Medical-Drugs.......................... 2.2
Electric-Generation.................... 1.9
Containers-Metal/Glass................. 1.7
Finance-Auto Loans..................... 1.6
Computer Services...................... 1.5
Electronic Components-Semiconductors... 1.4
Satellite Telecom...................... 1.4
Diversified Financial Services......... 1.4
Gambling (Non-Hotel)................... 1.4
Casino Services........................ 1.3
Television............................. 1.3
Medical Products....................... 1.3
Independent Power Producers............ 1.2
Diversified Manufacturing Operations... 1.1
Physicians Practice Management......... 1.1
Insurance Brokers...................... 1.0
Cellular Telecom....................... 1.0
Medical-HMO............................ 0.9
Food-Meat Products..................... 0.9
Publishing-Periodicals................. 0.9
Hotels/Motels.......................... 0.8
Auto-Cars/Light Trucks................. 0.7
Mining................................. 0.7
Containers-Paper/Plastic............... 0.7
Consumer Products-Misc................. 0.7
Real Estate Investment Trusts.......... 0.7
Theaters............................... 0.7
Seismic Data Collection................ 0.7
Non-Hazardous Waste Disposal........... 0.7
Retail-Petroleum Products.............. 0.6
Storage/Warehousing.................... 0.6
Direct Marketing....................... 0.6
Steel-Producers........................ 0.6
Recycling.............................. 0.6
Printing-Commercial.................... 0.6
Computers-Memory Devices............... 0.5
Retail-Drug Store...................... 0.5
Funeral Services & Related Items....... 0.5
Telecommunication Equipment............ 0.5
Metal-Diversified...................... 0.5
Human Resources........................ 0.5
Electric Products-Misc................. 0.5
Beverages-Non-alcoholic................ 0.5
Decision Support Software.............. 0.4
Airlines............................... 0.4
Building-Residential/Commercial........ 0.4
Retail-Restaurants..................... 0.4
Transactional Software................. 0.4
Medical Information Systems............ 0.4%
Rental Auto/Equipment.................. 0.4
Rubber-Tires........................... 0.4
Electronic Components-Misc............. 0.4
Auto/Truck Parts & Equipment-Original.. 0.3
Multimedia............................. 0.3
Research & Development................. 0.3
Home Furnishings....................... 0.3
Medical-Generic Drugs.................. 0.3
Medical-Nursing Homes.................. 0.3
Metal-Aluminum......................... 0.3
Leisure Products....................... 0.3
Repurchase Agreements.................. 0.2
Agricultural Chemicals................. 0.2
Applications Software.................. 0.2
Vitamins & Nutrition Products.......... 0.2
Broadcast Services/Program............. 0.2
Energy-Alternate Sources............... 0.2
Food-Misc.............................. 0.2
Transport-Services..................... 0.2
Poultry................................ 0.1
Building Products-Wood................. 0.1
Drug Delivery Systems.................. 0.1
Travel Services........................ 0.1
Building & Construction Products-Misc.. 0.1
----
97.3%
====
Credit Quality+#
BBB........ 1.5%
BB......... 18.2
B.......... 45.7
CCC........ 21.5
CC......... 0.8
C.......... 0.1
Below C.... 0.2
Not Rated@. 12.0
-----
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
50
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.6%
Drug Delivery Systems -- 0.1%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12............................ $ 250,000 $ 125,937
----------
Electronic Components-Semiconductors -- 0.5%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*........................... 50,000 24,313
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*........................... 1,845,000 777,206
----------
801,519
----------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(1)(2)(3)................... 81,000 56,700
----------
Total Convertible Bonds & Notes
(cost $1,905,094)............................. 984,156
----------
CORPORATE BONDS & NOTES -- 74.7%
Agricultural Chemicals -- 0.2%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18............................ 405,000 402,154
----------
Airlines -- 0.4%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11............................ 775,000 604,500
United AirLines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 12/31/49............................ 102,126 99,062
----------
703,562
----------
Applications Software -- 0.2%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13........................... 375,000 390,000
----------
Auto-Cars/Light Trucks -- 0.7%
Ford Motor Co.
Senior Notes
6.38% due 02/01/29............................ 1,565,000 579,050
General Motors Corp.
Senior Notes
7.13% due 07/15/13............................ 1,543,000 709,780
----------
1,288,830
----------
Auto/Truck Parts & Equipment-Original -- 0.3%
Lear Corp.
Senior Notes
8.75% due 12/01/16............................ 860,000 597,700
----------
Auto/Truck Parts & Equipment- Replacement --0.0%
Exide Corp.
Notes
10.00% due 04/15/05+(1)(2).................... 1,650,000 0
----------
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Beverages-Non-alcoholic -- 0.1%
Cott Beverages USA, Inc.
Company Guar. Notes
8.00% due 12/15/11.......................... $ 264,000 $ 184,800
----------
Broadcast Services/Program -- 0.2%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14.......................... 376,000 377,880
----------
Building & Construction Products-Misc. -- 0.1%
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14.......................... 125,000 123,750
----------
Building Products-Wood -- 0.1%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15(21)..................... 552,000 154,560
----------
Cable TV -- 2.8%
CCH I LLC/CCH I Capital Corp.
Senior Notes
11.00% due 10/01/15*........................ 2,276,000 1,479,400
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
Series B
10.25% due 09/15/10......................... 1,090,000 975,550
CCO Holdings LLC/CCO Holdings Capital Corp.
Senior Notes
8.75% due 11/15/13.......................... 633,000 550,710
Charter Communications Operating LLC
Senior Notes
10.88% due 09/15/14*........................ 287,000 278,390
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11.......................... 700,000 672,000
CSC Holdings, Inc.
Senior Notes
8.13% due 07/15/09.......................... 475,000 470,250
DirecTV Holdings LLC/DirecTV Financing Co.
Senior Notes
7.63% due 05/15/16*......................... 570,000 515,850
----------
4,942,150
----------
Casino Hotels -- 3.2%
Eldorado Casino Corp. (Shreveport)
Sec. Bonds
10.00% due 08/01/12(2)(5)................... 1,721,177 1,660,936
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.......................... 800,000 578,000
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*......................... 750,000 682,500
----------
5,596,436
----------
51
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Casino Services -- 0.3%
Indianapolis Downs LLC & Capital Corp.
Sec. Notes
11.00% due 11/01/12*................... $ 800,000 $ 544,000
----------
Cellular Telecom -- 0.3%
Centennial Communications Corp.
Senior Notes
9.63% due 01/01/13(6).................. 505,000 459,550
----------
Chemicals-Specialty -- 2.4%
Huntsman International LLC
Senior Sub. Notes
7.38% due 01/01/15..................... 80,000 67,200
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14*.................... 1,890,000 1,625,400
Johnsondiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12..................... 150,000 149,625
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16.................... 2,490,000 1,693,200
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12..................... 2,100,000 693,000
----------
4,228,425
----------
Computer Services -- 0.9%
Compucom Systems, Inc.
Senior Sub. Notes
12.50% due 10/01/15*................... 900,000 828,000
Sungard Data Systems, Inc.
Senior Notes
5.13% due 02/28/14*.................... 875,000 824,687
----------
1,652,687
----------
Consumer Products-Misc. -- 0.7%
American Achievement Corp.
Company Guar. Notes
8.25% due 04/01/12*.................... 262,000 257,415
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13..................... 140,000 128,450
Visant Holding Corp.
Senior Notes
10.25% due 12/01/13(4)................. 955,000 864,275
----------
1,250,140
----------
Containers-Metal/Glass -- 1.0%
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23..................... 1,000,000 840,000
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13..................... 1,005,000 999,975
----------
1,839,975
----------
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
Containers-Paper/Plastic -- 0.7%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12............................. $ 470,000 $ 392,450
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17............................. 1,105,000 861,900
----------
1,254,350
----------
Decision Support Software -- 0.4%
Vangent, Inc.
Senior Sub. Notes
9.63% due 02/15/15............................. 875,000 713,125
----------
Direct Marketing -- 0.6%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12............................. 1,500,000 1,110,000
----------
Diversified Manufacturing Operations -- 0.7%
Harland Clarke Holdings Corp.
Notes
7.55% due 05/15/15(6).......................... 500,000 320,000
Harland Clarke Holdings Corp.
Notes
9.50% due 05/15/15............................. 725,000 507,500
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14............................ 575,000 276,000
Sally Holdings LLC
Company Guar. Notes
10.50% due 11/15/16............................ 69,000 65,550
----------
1,169,050
----------
Electric-Generation -- 1.9%
Edison Mission Energy
Senior Notes
7.20% due 05/15/19............................. 1,155,000 1,016,400
Edison Mission Energy
Senior Notes
7.63% due 05/15/27............................. 590,000 477,900
Reliant Energy Mid-Atlantic Power Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17............................. 305,037 329,440
Reliant Energy Mid-Atlantic Power Holdings LLC
Pass Through Certs., Series C
9.68% due 07/02/26............................. 125,000 132,500
Sithe/Independence Funding Corp.
Senior Notes
9.00% due 12/30/13............................. 291,610 293,966
The AES Corp.
Senior Notes
8.00% due 10/15/17............................. 430,000 388,075
The AES Corp.
Senior Notes
8.00% due 06/01/20*............................ 425,000 371,875
52
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric-Generation (continued)
The AES Corp.
Senior Notes
8.88% due 02/15/11........................... $ 430,000 $ 423,550
----------
3,433,706
----------
Electric-Integrated -- 2.6%
Energy Future Holdings Corp.
Company Guar. Notes
10.88% due 11/01/17*......................... 475,000 428,688
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11........................... 405,000 389,813
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21........................... 740,000 573,500
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(1)(2)(3)................. 3,525,000 0
Texas Competitive Electric Holdings Co. LLC,
Series A
Senior Notes
10.25% due 11/01/15*......................... 1,905,000 1,719,262
Texas Competitive Electric Holdings Co. LLC,
Series B
Senior Notes
10.25% due 11/01/15*......................... 190,000 171,475
Texas Competitive Electric Holdings Co. LLC
Senior Notes
10.50% due 11/01/16*......................... 1,545,000 1,309,387
----------
4,592,125
----------
Electronic Components-Misc. -- 0.1%
Sanmina-SCI Corp. Company Guar.
Notes
6.75% due 03/01/13........................... 125,000 109,375
----------
Electronic Components-Semiconductors -- 1.0%
Amkor Technology, Inc.
Senior Notes
7.75% due 05/15/13........................... 395,000 337,725
Freescale Semiconductor, Inc.
Company Guar. Notes
9.13% due 12/15/14........................... 635,000 400,050
Spansion LLC
Senior Sec. Notes
5.94% due 06/01/13*(6)....................... 1,575,000 945,000
Spansion LLC
Senior Notes
11.25% due 01/15/16*......................... 115,000 66,125
----------
1,748,900
----------
Energy-Alternate Sources -- 0.2%
VeraSun Energy Corp.
Company Guar. Notes
9.38% due 06/01/17(8)(19).................... 265,000 104,675
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12(8)(19).................... 370,000 266,400
----------
371,075
----------
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Finance-Auto Loans -- 1.6%
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10.................... $ 347,000 $ 264,874
GMAC LLC
Senior Notes
4.05% due 05/15/09*(6)................ 458,000 331,427
GMAC LLC
Senior Notes
6.00% due 12/15/11.................... 1,775,000 789,234
GMAC LLC
Senior Notes
6.63% due 05/15/12.................... 1,075,000 455,121
GMAC LLC
Senior Bonds
6.88% due 09/15/11.................... 2,245,000 1,001,690
GMAC LLC
Senior Bonds
6.88% due 08/28/12.................... 175,000 69,559
----------
2,911,905
----------
Food-Meat Products -- 0.2%
Smithfield Foods, Inc.
Senior Notes
7.75% due 05/15/13.................... 400,000 336,000
----------
Funeral Services & Related Items -- 0.5%
Service Corp. International
Senior Notes
7.00% due 06/15/17.................... 545,000 465,975
Service Corp. International
Debentures
7.88% due 02/01/13.................... 425,000 425,000
----------
890,975
----------
Gambling (Non-Hotel) -- 0.8%
Downstream Development Authority
Senior Notes
12.00% due 10/15/15*.................. 725,000 525,625
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*+(8)(9)........... 489,000 337,410
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/14*................... 648,000 612,360
----------
1,475,395
----------
Home Furnishings -- 0.3%
Simmons Co.
Company Guar. Notes
7.88% due 01/15/14.................... 465,000 348,750
Simmons Co.
Senior Disc. Notes
10.00% due 12/15/14(4)................ 385,000 215,600
----------
564,350
----------
53
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Hotels/Motels -- 0.8%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14................ $ 750,000 $ 630,000
Gaylord Entertainment Co.
Company Guar. Notes
8.00% due 11/15/13................ 950,000 826,500
----------
1,456,500
----------
Human Resources -- 0.5%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13............... 817,000 847,638
----------
Independent Power Producers -- 1.2%
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16................ 1,465,000 1,318,500
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10............... 300,000 291,000
Reliant Energy, Inc.
Senior Notes
7.88% due 12/31/17................ 590,000 436,600
----------
2,046,100
----------
Insurance Brokers -- 1.0%
USI Holdings Corp.
Senior Notes
6.68% due 11/15/14*(6)............ 677,000 514,520
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*............... 1,625,000 1,235,000
----------
1,749,520
----------
Medical Information Systems -- 0.4%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12............... 1,175,000 634,500
----------
Medical Products -- 1.3%
LVB Acquisition Holding LLC
Senior Notes
10.38% due 10/15/17............... 995,000 985,050
Universal Hospital Services, Inc.
Senior Sec. Notes
6.30% due 06/01/15(6)............. 685,000 602,800
Universal Hospital Services, Inc.
Senior Sec. Bonds
8.50% due 06/01/15................ 715,000 666,737
----------
2,254,587
----------
Medical-HMO -- 0.9%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*.............. 1,650,000 1,617,000
----------
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Medical-Hospitals -- 3.1%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15......................... $1,000,000 $ 950,000
HCA, Inc.
Senior Notes
6.25% due 02/15/13......................... 635,000 530,225
HCA, Inc.
Senior Notes
8.75% due 09/01/10......................... 165,000 162,525
HCA, Inc.
Senior Notes
9.13% due 11/15/14......................... 545,000 530,012
HCA, Inc.
Senior Notes
9.25% due 11/15/16......................... 1,450,000 1,410,125
HCA, Inc.
Senior Notes
9.63% due 11/15/16......................... 950,000 902,500
IASIS Healthcare LLC / IASIS Capital Corp.
Company Guar. Notes
8.75% due 06/15/14......................... 1,085,000 1,025,325
----------
5,510,712
----------
Medical-Nursing Homes -- 0.3%
Sun Healthcare Group, Inc.
Senior Notes
9.13% due 04/15/15......................... 550,000 525,250
----------
Metal-Aluminum -- 1.00%
Noranda Aluminum Holding Corp.
Senior Notes
8.58% due 11/15/14(6)...................... 750,000 495,000
Noranda Aluminum Acquisition Corp.
Company Guar. Notes
6.83% due 11/15/14(6)...................... 1,695,000 1,288,200
----------
1,783,200
----------
Metal-Diversified -- 0.5%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15......................... 900,000 884,250
----------
Multimedia -- 0.2%
Haights Cross Operating Co.
Senior Notes
11.75% due 08/15/11........................ 325,000 302,250
----------
Non-Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(1)(2)(11)(12)......... 2,150,000 0
----------
Non-Hazardous Waste Disposal -- 0.6%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17......................... 1,155,000 1,074,150
54
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Non-Hazardous Waste Disposal (continued)
Waste Services, Inc.
Senior Sub. Notes
9.50% due 04/15/14.......................... $ 75,000 $ 73,500
-----------
1,147,650
-----------
Oil Companies-Exploration & Production -- 5.8%
Atlas Energy Resources LLC
Senior Notes
10.75% due 02/01/18*........................ 825,000 754,875
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12*......................... 565,000 514,150
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14.......................... 775,000 647,125
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15.......................... 760,000 600,400
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16.......................... 1,850,000 1,660,375
Dune Energy, Inc.
Senior Sec. Notes
10.50% due 06/01/12......................... 400,000 300,000
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15.......................... 765,000 608,175
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14.......................... 820,000 602,700
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*......................... 775,000 666,500
Hilcorp Energy I LP
Senior Notes
9.00% due 06/01/16*......................... 100,000 91,000
Linn Energy LLC
Senior Notes
9.88% due 07/01/18*......................... 650,000 565,500
Quicksilver Resources, Inc.
Senior Notes
7.75% due 08/01/15.......................... 625,000 571,875
Sabine Pass LNG LP
Senior Sec. Notes
7.50% due 11/30/16.......................... 2,705,000 2,109,900
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10......................... 650,000 598,000
-----------
10,290,575
-----------
Oil-Field Services -- 1.0%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14.......................... 530,000 477,000
Helix Energy Solutions Group, Inc.
Senior Notes
9.50% due 01/15/16*......................... 560,000 523,600
Market
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
Oil-Field Services (continued)
Key Energy Services, Inc.
Company Guar. Notes
8.38% due 12/01/14.................. $ 375,000 $ 360,000
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11.................. 407,580 422,387
----------
1,782,987
----------
Paper & Related Products -- 1.5%
Bowater, Inc.
Notes
6.50% due 06/15/13.................. 495,000 190,575
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09.................. 610,000 506,300
Georgia-Pacific LLC
Company Guar. Notes
7.00% due 01/15/15*................. 163,000 148,330
Georgia-Pacific LLC
Company Guar. Notes
7.13% due 01/15/17*................. 365,000 325,763
International Paper Co.
Notes
7.95% due 06/15/18.................. 333,000 327,209
NewPage Corp.
Senior Notes
9.05% due 05/01/12(6)............... 228,000 204,060
NewPage Corp.
Sec. Notes
10.00% due 05/01/12................. 540,000 483,300
NewPage Corp.
Senior Sub. Notes
12.00% due 05/01/13................. 647,000 566,125
----------
2,751,662
----------
Physicians Practice Management -- 1.1%
US Oncology, Inc.
Senior Sub. Notes
10.75% due 08/15/14................. 1,900,000 1,909,500
----------
Pipelines -- 3.5%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15.................. 385,000 354,200
Atlas Pipeline Partners LP
Senior Notes
8.75% due 06/15/18*................. 1,525,000 1,433,500
Copano Energy LLC/Copano Energy
Finance Corp.
Company Guar. Notes
8.13% due 03/01/16.................. 950,000 869,250
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12.................. 445,000 420,525
Dynegy-Roseton Danskammer
Pass Through Certs., Series B
7.67% due 11/08/16.................. 1,250,000 1,134,375
55
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Pipelines (continued)
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14.................... $ 570,000 $ 513,000
MarkWest Energy Partners LP/
MarkWest Energy Finance Corp.
Senior Notes
8.75% due 04/15/18.................... 350,000 332,500
NGC Corp. Capital Trust
Company Guar. Bonds
8.32% due 06/01/27.................... 1,425,000 1,061,625
----------
6,118,975
----------
Poultry -- 0.1%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17.................... 391,000 183,770
----------
Printing-Commercial -- 0.2%
Valassis Communications, Inc.
Senior Notes
8.25% due 03/01/15.................... 610,000 420,900
----------
Publishing-Periodicals -- 0.9%
Dex Media West LLC/Dex Media
Finance Co.
Senior Notes
8.50% due 08/15/10.................... 33,000 29,123
Idearc, Inc.
Company Guar. Notes
8.00% due 11/15/16.................... 1,825,000 497,313
R.H. Donnelley Corp.
Senior Notes
8.88% due 10/15/17.................... 15,000 5,100
R.H. Donnelley, Inc.
Senior Notes
11.75% due 05/15/15*.................. 443,000 270,230
The Reader's Digest Association, Inc.
Company Guar. Notes
9.00% due 02/15/17.................... 1,295,000 741,387
----------
1,543,153
----------
Real Estate Investment Trusts -- 0.7%
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14.................... 1,280,000 1,177,600
----------
Recycling -- 0.6%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14.................... 1,795,000 1,094,950
----------
Rental Auto/Equipment -- 0.4%
Rental Service Corp.
Notes
9.50% due 12/01/14.................... 835,000 632,513
----------
Research & Development -- 0.3%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15................... 930,000 585,900
----------
Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Retail-Drug Store -- 0.5%
Rite Aid Corp.
Senior Notes
9.50% due 06/15/17.................... $1,725,000 $ 905,625
----------
Retail-Petroleum Products -- 0.6%
Ferrellgas Partners LP
Senior Notes
6.75% due 05/01/14*................... 425,000 346,375
Inergy LP/Inergy Finance Corp.
Company Guar. Notes
8.25% due 03/01/16.................... 850,000 782,000
----------
1,128,375
----------
Retail-Restaurants -- 0.4%
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14.................... 805,000 660,100
----------
Rubber-Tires -- 0.3%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14.................... 985,000 620,550
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(1)(2)(9)(11)..... 550,000 55
----------
Seismic Data Collection -- 0.7%
Seitel, Inc.
Senior Notes
9.75% due 02/15/14.................... 1,425,000 1,161,375
----------
Special Purpose Entities -- 5.8%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12*(4)............... 1,100,000 1,078,000
Axcan Intermediate Holdings, Inc.
Senior Notes
9.25% due 03/01/15*................... 850,000 841,500
Axcan Intermediate Holdings, Inc.
Senior Notes
12.75% due 03/01/16*.................. 375,000 382,329
Buffalo Thunder Development Authority
Senior Notes
9.38% due 12/15/14*................... 1,010,000 424,200
CCM Merger, Inc.
Notes
8.00% due 08/01/13*................... 850,000 690,625
Chukchansi Economic Development
Authority
Senior Notes
8.00% due 11/15/13*................... 1,275,000 1,020,000
FireKeepers Development Authority
Senior Notes
13.88% due 05/15/15*.................. 875,000 770,000
Fox Acquisition Sub LLC
Senior Notes
13.38% due 07/15/16*.................. 725,000 648,875
56
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
Hawker Beechcraft Acquisition Co.
LLC/Hawker Beechcraft Notes Co.
Company Guar. Notes
9.75% due 04/01/17................. $ 608,000 $ 544,160
Hexion US Finance Corp.
Company Guar. Notes
9.75% due 11/15/14................. 835,000 659,650
KAR Holdings, Inc.
Company Guar. Notes
6.80% due 05/01/14(6).............. 475,000 372,875
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14................. 590,000 480,850
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*................ 545,000 354,250
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12................. 646,000 671,840
MXEnergy Holdings, Inc.
Senior Notes
10.63% due 08/01/11(6)............. 900,000 612,000
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*................ 550,000 397,375
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16................. 300,000 275,250
-----------
10,223,779
-----------
Steel-Producers -- 0.6%
Ryerson, Inc.
Senior Sec. Notes
12.00% due 11/01/15*............... 1,300,000 1,105,000
-----------
Storage/Warehousing -- 0.6%
Mobile Mini, Inc.
Notes
6.88% due 05/01/15................. 555,000 482,850
Mobile Services Group, Inc.
Company Guar. Notes
9.75% due 08/01/14................. 685,000 637,050
-----------
1,119,900
-----------
Telecom Services -- 2.0%
Cincinnati Bell Telephone Co. LLC
Company Guar. Notes
7.18% due 12/15/23................. 375,000 281,250
Cincinnati Bell Telephone Co. LLC
Company Guar. Notes
7.20% due 11/29/23................. 1,525,000 1,143,750
Fairpoint Communications, Inc.
Senior Notes
13.13% due 04/01/18*............... 590,000 536,900
PAETEC Holding Corp.
Company Guar. Notes
9.50% due 07/15/15................. 1,370,000 938,450
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------
Telecom Services (continued)
Qwest Corp.
Senior Notes
7.88% due 09/01/11.......... $ 225,000 $ 216,000
Qwest Corp.
Notes
8.88% due 03/15/12.......... 475,000 465,500
----------
3,581,850
----------
Telephone-Integrated -- 2.7%
Cincinnati Bell, Inc.
Company Guar. Notes
7.00% due 02/15/15.......... 252,000 211,680
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23.......... 225,000 177,750
Sprint Capital Corp.
Company Guar. Bonds
6.38% due 05/01/09.......... 650,000 637,000
Sprint Capital Corp.
Company Guar. Notes
6.90% due 05/01/19.......... 604,000 468,100
Sprint Capital Corp.
Company Guar. Bonds
8.38% due 03/15/12.......... 1,598,000 1,438,200
Sprint Capital Corp.
Company Guar. Bonds
8.75% due 03/15/32.......... 2,426,000 1,892,280
----------
4,825,010
----------
Television -- 1.3%
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13.......... 1,025,000 799,500
Paxson Communications Corp.
Senior Sec. Notes
9.04% due 01/15/13*......... 2,513,591 1,357,339
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14.......... 685,000 99,325
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11......... 635,000 92,075
----------
2,348,239
----------
Theaters -- 0.7%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14.......... 984,000 846,240
AMC Entertainment, Inc.
Senior Sub Notes
11.00% due 02/01/16......... 327,000 322,095
----------
1,168,335
----------
Transactional Software -- 0.4%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*......... 1,000,000 650,000
----------
57
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transport-Air Freight -- 4.2%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15........................ $5,437,354 $ 5,328,607
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20*....................... 757,878 693,458
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/20........................ 18,979 17,366
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17........................ 1,301,358 1,353,412
------------
7,392,843
------------
Transport-Services -- 0.2%
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13........................ 340,000 300,900
------------
Travel Services -- 0.1%
Travelport LLC
Company Guar. Notes
11.88% due 09/01/16....................... 175,000 125,563
------------
Vitamins & Nutrition Products -- 0.2%
General Nutrition Centers, Inc.
Company Guar. Notes
7.58% due 03/15/14(6)..................... 465,000 387,113
------------
Total Corporate Bonds & Notes
(cost $158,088,862)....................... 132,373,184
------------
FOREIGN CORPORATE BONDS & NOTES -- 9.7%
Building Products-Doors & Windows -- 0.0%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15(21)................... 223,000 55,750
------------
Computers-Memory Devices -- 0.5%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16........................ 1,100,000 962,500
------------
Containers-Metal/Glass -- 0.7%
Vitro SAB de CV
Senior Notes
9.13% due 02/01/17........................ 1,865,000 1,212,250
------------
Diversified Manufacturing Operations -- 0.5%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*....................... 860,000 851,400
------------
Electronic Components-Misc. -- 0.3%
NXP BV/NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15........................ 985,000 507,275
------------
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Food-Meat Products -- 0.7%
JBS SA
Company Guar. Notes
9.38% due 02/07/11.......................... $1,075,000 $ 967,500
JBS SA
Senior Notes
10.50% due 08/04/16*........................ 325,000 250,250
----------
1,217,750
----------
Independent Power Producers -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(2)(8)(10).............. 4,460,000 4,460
----------
Medical-Drugs -- 1.4%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
6.56% due 12/01/13(6)....................... 980,000 705,600
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14.......................... 370,000 216,450
Elan Finance PLC / Elan Finance Corp.
Company Guar. Bonds
7.75% due 11/15/11.......................... 1,670,000 1,511,350
----------
2,433,400
----------
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
----------
Multimedia -- 0.2%
Quebecor Media, Inc.
Senior Notes
7.75% due 03/15/16.......................... 325,000 284,375
----------
Oil Companies-Exploration & Production -- 1.1%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13.......................... 510,000 447,525
OPTI Canada, Inc.
Senior Notes
7.88% due 12/15/14.......................... 1,585,000 1,402,725
OPTI Canada, Inc.
Senior Notes
8.25% due 12/15/14.......................... 25,000 22,375
----------
1,872,625
----------
Oil-Field Services -- 0.4%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11.......................... 835,000 768,200
----------
Paper & Related Products -- 0.8%
Abitibi-Consolidated Co. of Canada
Notes
6.00% due 06/20/13.......................... 275,000 72,875
Abitibi-Consolidated Co. of Canada
Senior Notes
13.75% due 04/01/11*........................ 900,000 895,500
58
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Paper & Related Products (continued)
Abitibi-Consolidated Co. of Canada
Senior Notes
15.50% due 07/15/10..................... $ 182,000 $ 128,310
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10*..................... 1,059,000 402,420
-----------
1,499,105
-----------
Printing-Commercial -- 0.4%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*+(8)(10)............. 1,555,000 622,000
-----------
Satellite Telecom -- 1.4%
Intelsat Subsidiary Holding Co., Ltd.
Senior Notes
8.50% due 01/15/13*..................... 1,300,000 1,202,500
Intelsat Subsidiary Holding Co., Ltd.
Senior Notes
8.88% due 01/15/15*..................... 350,000 320,250
Telesat Canada/Telesat LLC
Senior Notes
11.00% due 11/01/15*.................... 1,175,000 987,000
-----------
2,509,750
-----------
Special Purpose Entity -- 0.4%
Hellas Telecommunications Luxembourg II
Sub. Notes
8.54% due 01/15/15*(6).................. 1,025,000 620,125
-----------
Telecom Services -- 0.4%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14..................... 735,000 661,500
Wind Acquisition Finance SA
Company Guar. Bonds
10.75% due 12/01/15*.................... 125,000 122,500
-----------
784,000
-----------
Telecommunication Equipment -- 0.5%
Nortel Networks, Ltd.
Company Guar. Notes
10.75% due 07/15/16*.................... 1,450,000 888,125
-----------
Total Foreign Corporate Bonds & Notes
(cost $26,425,394)...................... 17,136,090
-----------
LOANS(13)(14) -- 8.3%
Beverages-Non-alcoholic -- 0.4%
Le-Natures, Inc.
9.39% due 03/01/11+(2)(3)(8)(9)......... 1,200,000 654,000
-----------
Building-Residential/Commercial -- 0.4%
TOUSA, Inc.
14.00% due 07/31/13(2)(3)(5)............ 1,108,610 679,911
-----------
Casino Services -- 0.9%
Herbst Gaming, Inc.
Tranche 1
9.75% due 12/02/11(2)(3)(20)............ 172,698 107,936
Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Casino Services (continued)
Herbst Gaming, Inc.
Delayed Draw- Term B, Tranche 2
9.75% due 12/02/11(2)(3)(20)........... $ 161,664 $ 101,040
Herbst Gaming, Inc.
Tranche 2
9.75% due 12/02/11(2)(3)(20)........... 2,201 1,376
Herbst Gaming. Inc.
Delayed Draw-Term B
9.75% due 12/02/11(2)(3)(20)........... 565,258 353,286
Herbst Gaming, Inc.
Tranche 3
9.75% due 12/02/11(2)(3)(20)........... 90,617 56,636
Holding Gaming Borrower LP
Term Loan B
8.81% due 02/19/13(2)(3)(20)........... 1,000,000 945,000
----------
1,565,274
----------
Computer Services -- 0.5%
CompuCom Systems, Inc.
5.97% due 08/30/14(2)(3)............... 990,000 910,800
----------
Diversified Financial Services -- 1.4%
Wind Acquisition Holdings Finance S.A.
10.04% due 12/21/11(2)(3)(5)........... 2,767,982 2,477,344
----------
Electric Products-Misc. -- 0.5%
Texas Competitive Electric
5.99% due 10/10/14(2)(3)............... 94,167 79,789
Texas Competitive Electric
6.17% due 10/10/14(2)(3)............... 7,500 6,355
Texas Competitive Electric
6.30% due 10/10/14(2)(3)............... 888,333 752,704
----------
838,848
----------
Gambling (Non-Hotel) -- 0.5%
Greektown Holdings LLC
Delayed Draw Loan
9.75% due 11/11/09(2)(3)(18)........... 708,962 707,190
Greektown Holdings LLC
9.75% due 06/01/09(2)(3)(18)........... 201,404 200,900
Greektown Holdings LLC
Delayed Draw Loan
9.75% due 06/09/09(2)(3)(18)........... 89,634 89,410
----------
997,500
----------
Leisure Products -- 0.3%
AMC Entertainment Holdings, Inc.
First Lien
7.82% due 06/15/12(2)(3)............... 674,893 472,425
----------
Medical-Drugs -- 0.8%
Triax Pharmaceuticals LLC
15.54% due 08/30/11(1)(2)(3)(15)....... 1,537,967 1,383,105
----------
Medical-Hospitals -- 1.1%
Capella Healthcare, Inc.
13.00% due 02/29/16(2)(3).............. 1,000,000 905,000
Iasis Healthcare Corp.
8.04% due 06/15/14(2)(3)............... 1,129,074 1,014,284
----------
1,919,284
----------
59
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Shares/ Market
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
LOANS (continued)
Oil-Field Services -- 1.0%
Stallion Oilfield Service
8.05% due 07/30/12(2)(3).................. $2,000,000 $ 1,820,000
-----------
Paper & Related Products -- 0.5%
Boise Paper Holdings LLC
11.00% due 02/22/15(2)(3)................. 1,000,000 905,000
-----------
Total Loans
(cost $16,702,649)........................ 14,623,491
-----------
COMMON STOCK -- 3.2%
Casino Services -- 0.2%
Capital Gaming International, Inc.+(1)..... 77 0
Shreveport Gaming Holdings, Inc.+(1)(2)(3). 14,150 273,236
-----------
273,236
-----------
Cellular Telecom -- 0.7%
iPCS, Inc.+(2)(3).......................... 56,810 1,265,159
-----------
Food-Misc. -- 0.2%
Wornick Co.+(1)............................ 7,270 363,500
-----------
Independent Power Producers -- 0.1%
Calpine Corp.+............................. 4,233 55,029
Mirant Corp. +............................. 4,388 80,257
-----------
135,286
-----------
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC+(1)(2)(3)(16).... 128,418 53,936
-----------
Medical-Hospitals -- 0.3%
MedCath Corp.+............................. 31,553 565,430
-----------
Medical-Outpatient/Home Medical -- 0.0%
Critical Care Systems International,
Inc.+(1)(2)(3)............................ 69,700 697
-----------
Oil Companies-Exploration & Production -- 1.5%
EXCO Resources, Inc.+...................... 167,367 2,731,429
Transmeridian Exploration, Inc.+........... 40 12
-----------
2,731,441
-----------
Oil-Field Services -- 0.2%
Trico Marine Services, Inc.+............... 15,559 265,748
-----------
Total Common Stock
(cost $6,636,252)......................... 5,654,433
-----------
Shares/ Market
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
PREFERRED STOCK -- 0.6%
Medical-Drugs -- 0.0%
Triax Pharmaceuticals LLC, Class C
14.70%(1)(2)(3)(16)........................ 39,177 $ 78,353
------------
Medical-Generic Drugs -- 0.3%
Mylan, Inc.
6.50%...................................... 711 558,135
------------
Oil Companies-Exploration & Production -- 0.3%
Transmeridian Exploration, Inc.
Convertible 15.00%(1)(5)................... 7,333 513,310
------------
Total Preferred Stock
(cost $1,445,027)........................... 1,149,798
------------
WARRANTS -- 0.0%+
Oil Companies-Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (strike price $4.31)(1)... 44,885 449
------------
Telecom Services -- 0.0%
Leap Wireless International, Inc.
Expires 04/15/10 (strike price $96.80)*(1). 2,250 0
------------
Total Warrants
(cost $129,004)............................ 449
------------
Total Long-Term Investment Securities
(cost $211,332,282)........................ 171,921,601
------------
REPURCHASE AGREEMENT -- 0.2%
State Street Bank & Trust Co.
Joint Repurchase Agreement(17)
(cost $406,000)............................ 406,000 406,000
------------
TOTAL INVESTMENTS --
(cost $211,738,282)(7)..................... 97.3% 172,327,601
Other assets less liabilities................. 2.7 4,765,853
------- ------------
NET ASSETS 100.0% $177,093,454
======= ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At September 30, 2008, the aggregate value
of these securities was $37,549,572 representing 21.2% 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. At September 30, 2008, the aggregate value of these
securities was $19,469,864 representing 11.0% of net assets.
60
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
(3)To the extent permitted by the Statement of Additional Information, the High
Yield Bond Fund may invest in restricted securities. The Fund has no right
to demand registration of these securities. The securities are valued
pursuant to Note 2. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of September 30, 2008, the
High Yield Bond Fund held the following restricted securities:
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- -------- ------ ------
AMC Entertainment
Holdings 7.82%
due 06/15/12
Loan Agreement 6/8/2007 $ 600,000 $585,000
9/17/2007 16,576 16,576
12/20/2007 16,521 16,521
3/19/2008 15,988 15,988
6/23/2008 12,798 12,798
9/25/2008 13,010 16,168
---------- --------
674,893 663,051 $472,425 $70.00 0.27%
Boise Paper
Holdings LLC
11.00% due
02/22/15 Loan
Agreement 2/20/2008 1,000,000 926,745 905,000 90.50 0.51
Capella Healthcare,
Inc. 13.00% due
02/29/16 Loan
Agreement 3/3/2008 1,000,000 990,000 905,000 90.50 0.51
CompuCom
Systems, Inc.
5.97% due
08/30/14 Loan
Agreement 3/31/2008 990,000 954,626 910,800 92.00 0.51
Critical Care
Systems
International,
Inc. Common
Stock 7/20/2006 69,700 0 697 0.01 0.00
Greektown
Holdings LLC
9.75% due
11/11/09
Delayed Draw
Loan 6/6/2008 483,315 478,482
Loan
Agreement........ 225,647 223,675
---------- --------
708,962 702,157 707,190 99.75 0.40
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- -------- ------ ------
Greektown
Holdings LLC
9.75% due
06/01/09 Loan
Agreement 6/6/2008 $ 82,642 $ 82,642
8/11/2008 118,762 118,762
---------- --------
201,404 201,404 $200,900 $99.75 0.11%
Greektown
Holdings LLC
Delayed Draw
Loan 9.75% due
06/01/09 Loan
Agreement 6/6/2008 89,634 88,938 89,410 99.75 0.05
Herbst Gaming,
Inc. Tranche 1
9.75% due
12/02/11 Loan
Agreement 3/26/2008 172,698 125,827 107,936 62.50 0.06
Herbst Gaming,
Inc. Delayed
Draw-Term B,
Tranche 2 9.75%
due 12/02/11
Loan Agreement 3/26/2008 51,027 37,838
8/5/2008 110,637 92,849
---------- --------
161,664 130,687 101,040 62.50 0.06
Herbst Gaming,
Inc. Tranche 2
9.75% due
12/02/11 Loan
Agreement 3/26/2008 2,201 1,606 1,376 62.52 0.00
Herbst Gaming,
Inc. Delayed
Draw Term B
9.75% due
12/02/11 Loan
Agreement 3/26/2008 177,155 131,312
8/5/2008 388,103 325,704
---------- --------
565,258 457,016 353,286 62.50 0.20
Herbst Gaming,
Inc. Tranche 3
9.75% due
12/02/11 Loan
Agreement 3/26/2008 90,617 65,983 56,636 62.50 0.03
Holding Gaming
Borrower LP
Term Loan B
8.81% due
02/19/13 Loan
Agreement 8/19/2008 1,000,000 940,000 945,000 94.50 0.53
61
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ---------- ------ ------
Iasis Healthcare
Corp. 8.04%
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
5/1/2008 23,503 23,502
8/5/2008 22,825 24,979
---------- ----------
1,129,074 1,116,228 $1,014,284 $89.83 0.57%
ICO North
America, Inc.
7.50% due
08/15/09 8/11/2005 75,000 75,000
3/5/2008 3,000 3,000
3,000 3,000
---------- ----------
81,000 81,000 56,700 70.00 0.03
iPCS, Inc.
Common
Stock 7/20/2004 49,497 861,848
7/28/2005 7,313 0
---------- ----------
56,810 861,848 1,265,159 22.27 0.71
Le-Natures, Inc.
9.39% due
03/01/11 Loan
Agreement 9/26/2006 1,200,000 1,200,000 654,000 54.50 0.37
Shreveport
Gaming
Holdings, Inc.
Common
Stock 7/21/2005 2,321 53,443
7/29/2005 11,829 272,336
---------- ----------
14,150 325,779 273,236 19.31 0.15
Southern Energy,
Inc. 7.90% due
07/15/09 1/10/2006 3,525,000 0 0 0.00 0.00
Stallion Oilfield
Service 8.05%
due 07/30/12
Loan
Agreement 7/18/2007 1,000,000 993,216
12/4/2007 1,000,000 950,000
---------- ----------
2,000,000 1,943,216 1,820,000 91.00 1.03
Texas
Competitive
Electric 5.99%
due 10/10/14
Loan
Agreement 10/31/2007 94,167 94,167 79,789 84.73 0.05
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ---------- ------ ------
Texas
Competitive
Electric 6.17%
due 10/10/14
Loan
Agreement 8/11/2008 $ 7,500 $ 7,500 $ 6,355 $84.73 0.00%
Texas
Competitive
Electric 6.30%
due 10/10/14
Loan
Agreement 10/31/2007 880,833 880,833
8/15/2008 7,500 7,500
---------- ----------
888,333 888,333 752,704 84.73 0.43
TOUSA, Inc.
14.00% due
07/31/13 Loan
Agreement 10/11/2007 1,022,829 930,660
1/16/2008 11,293 11,293
3/6/2008 10,700 10,700
3/31/2008 26,285 26,285
7/24/2008 37,503 37,503
---------- ----------
1,108,610 1,016,441 679,911 61.33 0.38
Triax
Pharmaceuticals
LLC 15.54%
due 08/30/11
Loan
Agreement 8/30/2007 1,500,000 1,379,794
10/31/2007 3,875 3,875
1/10/2008 11,404 11,404
4/4/2008 11,239 11,239
7/3/2008 11,449 11,449
---------- ----------
1,537,967 1,417,761 1,383,105 89.93 0.78
Triax
Pharmaceuticals
LLC Common
Stock 8/31/2007 128,418 53,936 53,936 0.42 0.03
Triax
Pharmaceuticals
LLC, Class C
14.70%
Preferred
Stock 8/31/2007 39,177 78,353 78,353 2.00 0.04
62
SunAmerica High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Value % of
Acquisition Principal/ Acquisition Market Per Net
Name Date Shares Cost Value Share Assets
---- ----------- ---------- ----------- ----------- ------ ------
Wind
Acquisition
Holdings
Finance S.A. 2/27/2007 206,305 209,657
10.04% due
12/21/11 3/06/2007 206,305 205,020
Loan
Agreement.. 3/15/2007 $ 515,763 $ 513,799
3/19/2007 309,459 307,530
6/21/2007 412,748 415,000
8/15/2007 16,438 16,438
7/18/2007 6,575 6,575
7/18/2007 6,575 6,575
7/18/2007 9,863 9,863
11/05/2007 54,462 54,462
11/09/2007 800,000 801,854
1/31/2008 81,014 81,014
4/29/2008 74,340 74,340
2/5/2008 68,135 68,135
---------- ----------
2,767,982 2,770,262 $ 2,477,344 $89.50 1.40%
---------- ---------- ----------- ----
$16,351,572 9.23%
=========== ====
(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 September 30, 2008.
(7)See Note 5 for cost of investments on a tax basis.
(8)Security in default
(9)Company has filed for Chapter 11 bankruptcy protection.
(10)Company has filed for 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)Consists of more than one class of securities traded together as a unit.
(17)See Note 5 for details of Joint Repurchase Agreement.
(18)Loan is subject to an unfunded loan commitment. See Note 11 for details.
(19)Company has filed for Chapter 11 bankruptcy protection subsequent to
September 30, 2008.
(20)As of October 1, 2008, the issuer was not in default with respect to
interest and/or principal payments concerning the securities noted. The
issuer, however, disclosed in filings with the Securities and Exchange
Commission that it entered into a forbearance and standstill agreement (the
"Forbearance Agreement") with respect to an amended credit agreement (the
"Credit Agreement") under which the issuer is currently in default due to,
among others, a "going concern" qualification in its auditors' report on
its annual financial statements, and failure to comply with financial ratio
covenants. The Forbearance Agreement amends the Credit Agreement and
provides that the issuer's lenders will forbear from exercising certain
rights and remedies under the amended Credit Agreement and other loan
documents as a result of existing and possible defaults. Issuer currently
is in negotiations to restructure its indebtners. If successful, Issuer has
reported it will likely be required to seek protection under Chapter 11 of
the U.S. Bankruptcy Code.
(21)Security is in default subsequent to September 30, 2008.
See Notes to Financial Statements
63
SunAmerica Tax Exempt Insured Fund
PORTFOLIO PROFILE -- September 30, 2008 -- (unaudited)
Allocation by States*
New York...................... 15.5%
Ohio.......................... 13.3
Massachusetts................. 13.1
New Jersey.................... 8.8
Texas......................... 6.4
California.................... 6.0
Connecticut................... 4.9
New Mexico.................... 4.7
Alabama....................... 4.6
South Dakota.................. 4.1
Missouri...................... 4.1
Georgia....................... 3.8
North Carolina................ 3.6
Arkansas...................... 3.4
Arizona....................... 3.3
Illinois...................... 2.6
Registered Investment Company. 0.0
-----
102.2%
=====
Credit Quality Allocation+#
AAA........ 77.2%
AA......... 16.7
Not Rated@. 6.1
-----
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.
64
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 92.3%
Alabama -- 4.6%
Auburn University General Fee Revenue,
Series A
5.00% due 06/01/33(1)........................... $1,000,000 $ 926,870
State of Alabama
Series A
5.00% due 08/01/17(1)........................... 1,500,000 1,597,920
----------
2,524,790
----------
Arizona -- 3.3%
Arizona Health Facilities Authority Revenue,
Revenue Bonds
5.50% due 01/01/31.............................. 2,000,000 1,819,340
----------
Arkansas -- 3.4%
Little Rock Arkansas Sewer Revenue,
Series C
5.00% due 10/01/37(1)........................... 2,000,000 1,877,880
----------
California -- 5.8%
Bay Area Toll Authority California,
Toll Bridge Revenue,
5.00% due 04/01/39.............................. 1,000,000 918,190
Los Angeles California Unified School District,
Series G
4.75% due 07/01/27(1)........................... 2,500,000 2,229,725
----------
3,147,915
----------
Connecticut -- 4.9%
State of Connecticut,
Refunded,
Series B,
5.00% due 06/01/14(1)........................... 2,500,000 2,667,125
----------
Georgia -- 3.8%
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/09(1)........................... 60,000 60,600
Georgia Municipal Electric Authority,
Power Revenue,
Series Y,
6.40% due 01/01/13(1)........................... 85,000 92,474
Gwinnett County Georgia School District,
General Obligation
5.00% due 02/01/36.............................. 2,000,000 1,924,920
----------
2,077,994
----------
Massachusetts -- 13.1%
Massachusetts State Water Resources Authority,
Revenue Bonds,
Series A,
5.00% due 08/01/24(1)........................... 3,910,000 3,859,248
University Massachusetts Building
Authority Project Revenue,
Series 04-1,
5.25% due 11/01/27(1)........................... 3,000,000 3,269,670
----------
7,128,918
----------
Market
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
Missouri -- 3.5%
Missouri State Health & Educational Facilities
Authority,
Series 2003-B
5.50% due 11/15/32(1).......................... $2,000,000 $1,930,000
----------
New Jersey -- 8.8%
Garden State New Jersey Preservation
Trust Open Space And Farmland Preservation,
Series A,
5.80% due 11/01/17(1).......................... 2,500,000 2,741,025
New Jersey Economic Development
Authority Revenue Bond,
School Facility Construction
5.00% due 03/01/09(1)(2)....................... 2,000,000 2,070,200
----------
4,811,225
----------
New Mexico -- 4.7%
New Mexico Finance Authority Transportation,
Series A,
5.25% due 06/15/21(1).......................... 2,500,000 2,535,425
----------
New York -- 15.5%
City of New York NY,
General Obligation
5.00% due 10/01/24(1).......................... 2,000,000 1,889,960
City of Niagara Falls New York,
General Obligation
7.50% due 03/01/13(1).......................... 410,000 468,552
City of Niagara Falls New York,
General Obligation Prerefunded,
7.50% due 03/01/13(1).......................... 35,000 41,066
City of Niagara Falls New York,
General Obligation
7.50% due 03/01/14(1).......................... 510,000 592,288
City of Niagara Falls New York,
General Obligation Prerefunded,
7.50% due 03/01/14(1).......................... 45,000 53,998
New York State Thruway Authority,
Series H
5.00% due 01/01/19(1).......................... 1,000,000 1,034,350
New York State Thruway Authority,
Series G,
5.25% due 01/01/27(1).......................... 1,500,000 1,496,385
Port Authority New York & New Jersey,
Revenue Bonds
4.75% due 07/15/31............................. 1,000,000 906,790
Sales Tax Asset Receivables Corp.,
Series A,
5.25% due 10/15/27(1).......................... 2,000,000 1,983,320
----------
8,466,709
----------
Ohio -- 13.3%
Franklin County, Ohio Hospital Revenue,
Series C,
5.25% due 05/15/23............................. 815,000 801,088
Ohio State Higher Educational Facility
Commission,
Revenue Bonds
5.25% due 01/01/29............................. 2,000,000 1,796,840
65
SunAmerica Tax Exempt Insured Fund
PORTFOLIO OF INVESTMENTS -- September 30, 2008 -- (unaudited)
(continued)
Market
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES (continued)
Ohio (continued)
Olentangy Local School District Ohio,
Series A,
5.25% due 12/01/27(1).......................... $3,250,000 $ 3,544,872
Woodridge, Ohio, Woodmore Local
School District,
6.80% due 12/01/14(1).......................... 1,000,000 1,093,390
-----------
7,236,190
-----------
South Dakota -- 4.1%
South Dakota State Health & Educational
Facilities Revenue,
Refunding,
6.25% due 07/01/10(1).......................... 2,120,000 2,241,328
-----------
Texas -- 3.5%
Dallas Texas Area Rapid Transportation,
Sales Tax Revenue
5.25% due 12/01/38............................. 2,000,000 1,923,780
-----------
Total Long-Term Investment Securities
(cost $51,483,197)............................. 50,388,619
-----------
SHORT-TERM INVESTMENT SECURITIES -- 9.9%
California -- 0.2%
California Transportation Finance Authority,
Revenue Bonds
7.75% due 10/07/08(1)(2)....................... 115,000 115,000
-----------
Illinois -- 2.6%
Chicago Illinois Board of Education
Series C
7.25% due 10/02/08(1)(2)....................... 1,400,000 1,400,000
-----------
Missouri -- 0.6%
Missouri State Health & Educational Facilities
Authority,
Series C-1
5.50% due 10/02/08(1)(2)....................... 300,000 300,000
-----------
Principal Market
Amount/ Value
Security Description Shares (Note 2)
----------------------------------------------------------------------
North Carolina -- 3.6%
New Hanover County North Carolina Hospital
Revenue,
Refunding,
9.65% due 10/03/08(1)(2)................... $1,965,000 $ 1,965,000
-----------
Texas -- 2.9%
Harris County Texas Health Facilities
Development Corp,
Series B
4.25% due 10/01/08(1)...................... 1,600,000 1,600,000
-----------
Registered Investment Company -- 0.0%
SSGA Tax Free Money Market Fund............. 5,764 5,764
-----------
Total Short-Term Investment Securities
(cost $5,385,764).......................... 5,385,764
-----------
TOTAL INVESTMENTS --
(cost $56,868,961)(3)...................... 102.2% 55,774,383
Liabilities in excess of other assets......... (2.2) (1,209,696)
---------- -----------
NET ASSETS -- 100.0% $54,564,687
========== ===========
- --------
(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 $45,677,671 or 83.7% of Net Assets.
(2)Variable Rate Security -- the rate reflected is as of September 30, 2008,
maturity date reflects next reset date.
(3)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
66
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
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.
67
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(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.
68
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Securities for which market quotations are not readily available or where a
development/significant event occurs that may significantly impact the value
of the security, are fair valued, as determined pursuant to procedures
adopted in good faith by the Board of Trustees. There is no single standard
for making fair value determinations, which may result in prices that vary
from those of other funds.
Repurchase Agreements: The Funds, along with other affiliated registered
investment companies, pursuant to exemptive relief granted by the Securities
and Exchange Commission, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Treasury or federal agency
obligations. For repurchase agreements and joint repurchase agreements, the
Funds' custodian takes possession of the collateral pledged for investments
in such repurchase agreements. The underlying collateral is valued daily on
a mark to market basis to ensure that the value, at the time the agreement
is entered into, is equal to at least 102% of the repurchase price,
including accrued interest. In the event of default of the obligation to
repurchase, a Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by
the Fund may be delayed or limited.
As of September 30, 2008, the following Funds held an undivided interest in
a joint repurchase agreement with State Street Bank & Trust Co.:
Percentage Principal
Fund Interest Amount
- ---- ---------- -----------
U.S. Government. 4.64% $16,763,000
GNMA............ 13.88 50,161,000
Strategic Bond.. 4.09 14,768,000
High Yield Bond. 0.11 406,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
State Street Bank & Trust Co., dated September 30, 2008, bearing interest at
a rate of 0.05% per annum, with a principal amount of $361,501,000, a
repurchase price of $361,501,502, and a maturity date of October 1, 2008.
The repurchase agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ------------------ -------- -------- ------------ ------------
U.S. Treasury Bills. 0.25% 12/11/08 $239,917,132 $244,717,580
U.S. Treasury Bills. 0.33 12/04/08 121,583,868 124,015,546
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.
69
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Dividends from net investment income are accrued daily and paid monthly.
Capital gain distributions, if any, are paid annually. The Funds record
dividends and distributions to their shareholders on the ex-dividend date.
The Funds reserve the right to declare and pay dividends less frequently
than disclosed above, provided that the net realized capital gains and net
investment income, if any, are paid at least annually. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations, which may differ from accounting principles generally accepted
in the United States of America. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences
are permanent in nature, such amounts are reclassified within the capital
accounts at fiscal year end based on their federal tax-basis treatment;
temporary differences do not require reclassification. Net investment
income/loss, net realized gain/loss and net assets are not affected by these
reclassifications.
Each Fund intends to comply with the requirements of the Internal Revenue
Code, as amended, applicable to regulated investment companies and to
distribute all of their net income (taxable and tax exempt) to their
shareholders. Therefore, no federal tax provision is required. Each Fund is
considered a separate entity for tax purposes. 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: In March 2008, the Financial Accounting
Standards (FASB) issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand
their effects on an entity's financial position and financial performance.
It is effective for financial statements issued for fiscal years beginning
after November 15, 2008. Management is currently in the process of
determining the impact of the standard on the Fund's disclosures in 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. Various inputs are used in determining the value of the
Portfolios' investments. These inputs are summarized in the three broad
levels listed below:
Level 1 -- Quoted prices in active markets for identical securities
Level 2 -- Other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, quoted
prices in inactive markets, etc.)
Level 3 -- Significant unobservable inputs (including the Portfolios' own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Portfolios' net
assets as of September 30, 2008:
U.S Government Securities Fund GNMA Fund
------------------------------ ------------------------------
Valuation Investments in Other Financial Investments in Other Financial
Inputs Securities Instruments* Securities Instruments*
- --------- -------------- --------------- -------------- ---------------
Level
1 -- Quoted
Prices.......... $126,643,898 $ -- $ 66,463,438 $--
Level
2 -- Other
Significant
Observable
Inputs.......... 117,988,450 -- 360,066,802 --
Level
3 -- Significant
Unobservable
Inputs.......... -- -- -- --
------------ -------- ------------ ---
Total............ $244,632,348 $ -- $426,530,240 $--
============ ======== ============ ===
Strategic Bond Fund High-Yield Bond Portfolio
------------------------------ ------------------------------
Valuation Investments in Other Financial Investments in Other Financial
Inputs Securities Instruments* Securities Instruments*
- --------- -------------- --------------- -------------- ---------------
Level
1 -- Quoted
Prices.......... $ 46,280,033 $351,276 $ 5,521,199 $--
Level
2 -- Other
Significant
Observable
Inputs.......... 653,387,239 -- 148,638,434 --
Level
3 -- Significant
Unobservable
Inputs.......... 3,677,331 -- 18,167,968 --
------------ -------- ------------ ---
Total............ $703,344,603 $351,276 $172,327,601 $--
============ ======== ============ ===
70
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Tax Exempt Insured Fund
------------------------------
Valuation Investments in Other Financial
Inputs Securities Instruments*
- --------- -------------- ---------------
Level
1 -- Quoted
Prices............ $ 5,764 $--
Level
2 -- Other
Significant
Observable
Inputs............ 55,768,619 --
Level
3 -- Significant
Unobservable
Inputs............ -- --
----------- ---
Total.............. $55,774,383 $--
=========== ===
- --------
* Other financial instruments are derivative instruments not reflected
in the Portfolio of Investments, such as future, forward, swap and
written contracts, which are valued at the unrealized
appreciation/depreciation on the instrument.
The following is a reconciliation of Level 3 assets for which
significant unobservable inputs were used to determine fair value:
Strategic Bond Fund High-Yield Bond Portfolio
------------------------------ ------------------------------
Investments in Other Financial Investments in Other Financial
Securities Instruments* Securities Instruments*
- - -------------- --------------- -------------- ---------------
Balance
as of
03/31/08.......... $ 1,975,892 $-- $ 4,537,495 $--
Accrued
discounts/premiums 16,341 -- 51,144 --
Realized
gain
(loss)............ (7) -- (7,701) --
Change in
unrealized
appreciation
(depreciation).... (492,041) -- (971,405) --
Net
purchases
(sales)........... 1,572,831 -- 3,564,307 --
Transfers
in
and/or
out of
Level 3........... 604,315 -- 10,994,128 --
----------- --- ----------- ---
Balance
as of
09/30/08.......... $ 3,677,331 $-- $18,167,968 $--
=========== === =========== ===
- --------
* Other financial instruments are derivative instruments not reflected
in the Portfolio of Investments, such as future, forward, swap and
written contracts, which are valued at the unrealized
appreciation/depreciation on the instrument.
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
71
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
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 against the box occurs when a Fund contemporaneously owns, or has the
right to obtain without payment, securities identical to those sold short.
In addition, the High Yield Bond Fund and the GNMA Fund may sell a security
it does not own in anticipation of a decline in the market value of that
security. 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 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" mortgage-backed securities ("TBA
Rolls"). The Funds' policy is to record the components of TBA Rolls as
purchase/sale transactions. Any difference between the purchase and sale
price is recorded as a realized gain or loss on the date the transaction is
entered into. During the period ended September 30, 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.
72
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
The Funds pay AIG SunAmerica a monthly investment advisory and management
fee calculated daily at the following annual percentages of each Fund's
average daily net assets:
Management
Assets Fees
---------------------------- ----------
U.S. Government Securities Fund. $0 - $200 million 0.650%
(greater than) $200 million 0.620
(greater than) $400 million 0.550
GNMA Fund....................... $0 - $25 million 0.550
(greater than) $25 million 0.500
(greater than) $50 million 0.450
Strategic Bond Fund............. $0 - $350 million 0.650
(greater than) $350 million 0.600
High Yield Bond Fund............ $0 -$200 million 0.750
(greater than) $200 million 0.720
(greater than) $400 million 0.550
Tax Exempt Insured Fund*........ $0 -$350 million 0.500
(greater than) $350 million 0.450
- --------
* Pursuant to a Fee Waiver Agreement, effective July 29,2008, AIG SunAmerica
is contractually obligated to waive its advisory fee with respect to the Tax
Exempt Insured Fund so that the advisory fee payable by the Fund to AIG
SunAmerica under the agreement equals 0.15% of average daily net assets.
This fee waiver 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").
For the period ended September 30, 2008, the amount of the investment
advisor fee waived was $34,183 for the Tax Exempt Insured Fund. The amount
is reflected in the Statement of Operations.
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
- --------
* Pursuant to a Subadvisory Fee Waiver Agreement, effective July 29,2008,
AIGGIC is contractually obligated to waive its subadvisory fee with respect
to the Tax Exempt Insured Fund so that the subadvisory fee payable by AIG
SunAmerica to AIGGIC under the subadvisory agreement equals 0.075% of
average daily net assets. The Subadvisory Fee Waiver Agreement will continue
in effect as long as the Fee Waiver Agreement remains in effect.
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.
Annual fund operating expenses shall not include extraordinary expenses, as
determined under generally accepted accounting principles or acquired fund
fees and expenses. The contractual expense waivers and fee reimbursements
will continue indefinitely, subject to termination by the Trustees,
including a majority of the 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
73
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Further, AIG SunAmerica is voluntarily waiving fees and/or reimbursing
expenses, if necessary, so that the total net expense ratios for the
following classes do not exceed the amounts set forth below. The voluntary
fee waivers and/or expense reimbursements may be terminated at any time at
the option of AIG SunAmerica.
Fund Percentage
- ---- ----------
Tax Exempt Insured Fund Class C. 1.95%
For the period ended September 30, 2008, pursuant to the contractual and
voluntary expense limitations in the above tables, AIG SunAmerica has waived
and/or reimbursed expense as follows:
Other Expenses
Fund Reimbursed
- ---- -------------------
U.S. Government Securities......... $ 97,641
Class Specific
Fund Expenses Reimbursed
- ---- -------------------
U.S. Government Securities Class A. $234,684
U.S. Government Securities Class B. 23,548
U.S. Government Securities Class C. 27,162
GNMA Class A....................... 192,201
GNMA Class B....................... 32,202
GNMA Class C....................... 26,887
High Yield Class A................. 61,341
High Yield Class B................. 18,622
High Yield Class C................. 30,100
Tax Exempt Insured Class C......... 7,721
At September 30, 2008, expenses previously waived or reimbursed by SAAMCo
that are subject to recoupment are as follows:
Other Expenses
Fund Reimbursed
- ---- -------------------
U.S. Government Securities......... $466,690
Class Specific
Fund Expenses Reimbursed
- ---- -------------------
U.S. Government Securities Class A. $861,376
U.S. Government Securities Class B. 98,712
U.S. Government Securities Class C. 87,034
GNMA Class A....................... 907,153
GNMA Class B....................... 178,898
GNMA Class C....................... 116,260
74
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
The Trust, on behalf of each Fund, has entered into a Distribution Agreement
with 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 period ended September
30, 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 period
ended September 30, 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. $ 36,503 $12,976 $ 17,777 $1,003 $ 7,353 $ 4,211
GNMA....................... 70,956 21,148 39,321 2,120 26,729 21,472
Strategic Bond............. 259,253 37,451 179,173 1,388 52,298 22,454
High Yield Bond............ 124,248 13,288 89,675 494 46,051 4,226
Tax Exempt Insured......... 43,784 13,260 23,571 1,322 248 1,171
-----
+ Effective November 15, 2008, AIG SunAmerica Capital Services, Inc. changed
its name to SunAmerica Capital Services, Inc.
75
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
The Trust has entered into a Service Agreement with AIG SunAmerica Fund
Services, Inc. ("SAFS"), an affiliate of the Adviser. Under the Service
Agreement, SAFS performs certain shareholder account functions by assisting
the Funds' transfer agent in connection with the services that it offers to
the shareholders of the Funds. The Service Agreement permits the Funds to
compensate SAFS for services rendered, based upon an annual rate of 0.22% of
average daily net assets, which is approved annually by the Trustees. For
the period ended September 30, 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 September 30, 2008
---- -------- ------------------
US Government Securities Class A. $197,181 $32,719
US Government Securities Class B. 16,355 2,691
US Government Securities Class C. 16,859 2,748
GNMA Class A..................... 346,249 55,600
GNMA Class B..................... 48,557 7,753
GNMA Class C..................... 38,533 6,711
Strategic Bond Class A........... 513,633 78,887
Strategic Bond Class B........... 57,257 9,011
Strategic Bond Class C........... 292,379 46,724
High Yield Bond Class A.......... 132,872 19,033
High Yield Bond Class B.......... 37,944 5,753
High Yield Bond Class C.......... 70,221 10,467
Tax Exempt Insured Class A....... 51,934 8,483
Tax Exempt Insured Class B....... 3,703 610
Tax Exempt Insured Class C....... 5,383 1,066
At September 30, 2008, affiliated funds of the SunAmerica Focused Series,
Inc. owned 11%, 53%, 36% and 6% of the outstanding Class A Shares of U.S.
Government Securities Fund, GNMA Fund, Strategic Bond Fund and High Yield
Bond Fund, respectively.
On September 22, 2008, American International Group, Inc. ("AIG") the
ultimate parent of AIG SunAmerica, SACS, SAFS and AIGGIC, entered into a
revolving credit facility (the "Credit Facility") and a Guarantee and Pledge
Agreement with the Federal Reserve Bank of New York under the terms of which
AIG will issue a new series of perpetual, non-redeemable Convertible
Participating Serial Preferred Stock (the "Preferred Stock") to a trust that
will hold the Preferred Stock for the benefit of the United States Treasury.
On October 3, 2008, AIG announced that it plans to retain its U.S. property
and casualty and foreign general insurance businesses, and to retain a
continuing ownership interest in its foreign life insurance operations, and
that it is exploring divestiture opportunities for its remaining
high-quality businesses and assets.
Note 4. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments during the period ended September 30, 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)................................. $ -- $ -- $370,758,765 $79,196,003 $26,274,018
Sales (excluding U.S. government securities). -- -- 393,921,978 79,068,217 25,717,354
Purchases of U.S. government securities...... 77,653,906 105,109,777 85,470,331 -- --
Sales of U.S. government securities.......... 70,149,990 126,588,207 68,508,214 -- --
76
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Note 5. Federal Income Taxes
The following details the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of
distributable earnings differ from the amounts reflected in the Statement of
Assets and Liabilities by temporary book/tax differences primarily arising
from wash sales, 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 exempt distributable earnings.
The amounts of aggregate unrealized gain (loss) and the cost of investment
securities for federal tax purposes, including short-term securities and
repurchase agreements, were as follows:
U.S.
Government Tax Exempt
Securities GNMA Strategic High Yield Insured
Fund Fund Bond Fund Bond Fund Fund
------------ ------------ ------------ ------------ -----------
Cost.......................................... $241,132,207 $425,750,833 $782,465,877 $212,249,037 $56,868,175
============ ============ ============ ============ ===========
Appreciation.................................. 4,712,706 3,794,587 3,381,684 5,597,164 866,759
Depreciation.................................. (1,212,565) (3,015,180) (82,502,958) (45,518,600) (1,960,551)
------------ ------------ ------------ ------------ -----------
Unrealized appreciation (depreciation) -- net. $ 3,500,141 $ 779,407 $(79,121,274) $(39,921,436) $(1,093,792)
============ ============ ============ ============ ===========
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
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 --
77
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Note 6. Capital Share Transactions
Transactions in capital shares of each class of each series were as follows:
U.S. Government Securities Fund
------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- --------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2008 year ended September 30, 2008 year ended
(unaudited) March 31, 2008 (unaudited) March 31, 2008
------------------------ ------------------------ --------------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Shares sold(1)(3)(5)(7). 2,561,953 $ 24,388,910 9,490,829 $ 88,581,997 244,903 $ 2,325,420 455,993 $ 4,311,869
Reinvested shares....... 237,303 2,239,230 544,377 5,081,275 15,203 143,532 37,519 349,840
Shares redeemed(1)(5)... (3,288,063) (31,133,717) (6,776,630) (63,242,348) (252,930) (2,391,264) (500,368) (4,646,557)
---------- ------------ ---------- ------------ -------- ----------- -------- -----------
Net increase (decrease). (488,807) $ (4,505,577) 3,258,576 $ 30,420,924 7,176 $ 77,688 (6,856) $ 15,152
========== ============ ========== ============ ======== =========== ======== ===========
U.S. Government Securities Fund
--------------------------------------------------
Class C
--------------------------------------------------
For the
six months ended For the
September 30, 2008 year ended
(unaudited) March 31, 2008
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............. 588,481 $ 5,611,622 1,530,061 $ 14,467,476
Reinvested shares....... 13,377 126,159 28,676 267,675
Shares redeemed(3)(7)... (591,419) (5,592,125) (871,773) (8,170,746)
---------- ------------ ---------- ------------
Net increase (decrease). 10,439 $ 145,656 686,964 $ 6,564,405
========== ============ ========== ============
GNMA Fund
---------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------- -----------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2008 year ended September 30, 2008 year ended
(unaudited) March 31, 2008 (unaudited) March 31, 2008
------------------------ ------------------------ --------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Shares sold(2)(4)(6)(8). 1,957,258 $ 22,250,037 6,310,957 $ 70,104,250 187,706 $ 2,139,796 229,129 $ 2,590,101
Reinvested shares....... 438,669 4,959,240 1,044,195 11,665,053 46,673 528,958 125,700 1,405,978
Shares redeemed(2)(6)... (4,086,927) (46,198,227) (6,724,233) (75,305,388) (542,261) (6,159,684) (1,490,358) (16,623,314)
---------- ------------ ---------- ------------ -------- ----------- ---------- ------------
Net increase (decrease). (1,691,000) $(18,988,950) 630,919 $ 6,463,915 (307,882) $(3,490,930) (1,135,529) $(12,627,235)
========== ============ ========== ============ ======== =========== ========== ============
GNMA Fund
--------------------------------------------------
Class C
--------------------------------------------------
For the
six months ended For the
September 30, 2008 year ended
(unaudited) March 31, 2008
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............. 978,817 $ 11,180,178 1,042,164 $ 11,890,901
Reinvested shares....... 33,608 381,500 71,319 799,761
Shares redeemed(4)(8)... (582,642) (6,638,839) (787,761) (8,794,849)
---------- ------------ ---------- ------------
Net increase (decrease). 429,783 $ 4,922,839 325,722 $ 3,895,813
========== ============ ========== ============
- --------
(1)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.
(2)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.
(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 11,091 shares of Class
A shares in the amount of $102,964.
(4)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.
(5)For the six month period ended September 30, 2008, includes automatic
conversion of 19,390 shares of Class B shares in the amount of $59,086 to
19,404 shares of Class A shares in the amount of $59,086.
(6)For the six month period ended September 30, 2008, includes automatic
conversion of 35,096 shares of Class B shares in the amount of $204,519 to
35,189 shares of Class A shares in the amount of $204,519.
(7)For the six month period ended September 30, 2008, includes automatic
conversion of 6,538 shares of Class C shares in the amount of $61,484 to
6,534 shares of Class A shares in the amount of $61,484.
(8)For the six month period ended September 30, 2008, includes automatic
conversion of 1,661 shares of Class C shares in the amount of $18,550 to
1,667 shares of Class A shares in the amount of $18,550.
78
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 --
(unaudited) (continued)
Strategic Bond Fund
--------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------- -------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2008 year ended September 30, 2008 year ended
(unaudited) March 31, 2008 (unaudited) March 31, 2008
------------------------- -------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Shares
sold(1)(3)(5)(7) 15,097,101 $ 52,194,385 54,454,486 $ 194,890,790 1,404,595 $ 4,840,403 3,096,751 $ 11,052,278
Reinvested
shares.......... 2,867,226 9,785,082 6,083,610 21,672,951 247,473 843,846 501,399 1,784,869
Shares
redeemed(1)(5).. (28,899,653) (98,802,674) (47,409,808) (168,605,626) (1,860,221) (6,358,393) (3,950,315) (14,098,342)
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Net increase
(decrease)...... (10,935,326) $(36,823,207) 13,128,288 $ 47,958,115 (208,153) $ (674,144) (352,165) $ (1,261,195)
=========== ============ =========== ============= ========== =========== ========== ============
Strategic Bond Fund
-----------------------------------------------------
Class C
-----------------------------------------------------
For the
six months ended For the
September 30, 2008 year ended
(unaudited) March 31, 2008
------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ----------- -------------
Shares
sold............ 10,713,153 $ 37,102,925 29,322,990 $ 105,186,765
Reinvested
shares.......... 1,035,824 3,546,963 1,920,377 6,862,329
Shares
redeemed(3)(7).. (10,791,980) (37,166,146) (15,350,229) (54,784,089)
----------- ------------ ----------- -------------
Net
increase
(decrease)...... 956,997 $ 3,483,742 15,893,138 $ 57,265,005
=========== ============ =========== =============
High Yield Bond Fund
--------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------- -------------------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2008 year ended September 30, 2008 year ended
(unaudited) March 31, 2008 (unaudited) March 31, 2008
------------------------- -------------------------- ----------------------- ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Shares
sold(2)(4)(6)(8) 10,923,315 $ 46,348,328 21,291,423 $ 98,716,860 536,923 $ 2,246,303 835,493 $ 3,802,244
Reinvested
shares.......... 611,017 2,524,664 1,906,335 8,688,722 136,348 563,148 321,980 1,456,523
Shares
redeemed(2)(6).. (12,383,257) (51,871,273) (47,531,258) (215,847,758) (1,228,805) (5,087,089) (3,540,260) (16,200,779)
----------- ------------ ----------- ------------- ---------- ----------- ---------- ------------
Net
increase
(decrease)...... (848,925) $(2,998,281) (24,333,500) $(108,442,176) (555,534) $(2,277,638) (2,382,787) $(10,942,012)
=========== ============ =========== ============= ========== =========== ========== ============
High Yield Bond Fund
-----------------------------------------------------
Class C
-----------------------------------------------------
For the
six months ended For the
September 30, 2008 year ended
(unaudited) March 31, 2008
------------------------- --------------------------
Shares Amount Shares Amount
----------- ------------ ----------- -------------
Shares
sold............ 3,419,221 $ 14,602,555 3,568,020 $ 16,513,470
Reinvested
shares.......... 247,910 1,029,887 598,038 2,714,045
Shares
redeemed(4)(8).. (4,128,435) (17,274,389) (7,623,260) (34,517,831)
----------- ------------ ----------- -------------
Net
increase
(decrease)...... (461,304) $ (1,641,947) (3,457,202) $ (15,290,316)
=========== ============ =========== =============
- --------
(1)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.
(2)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.
(3)For the year ended March 31, 2008, includes automatic conversion of 5,731
shares of Class C shares in the amount of $20,785 to 5,762 shares of Class A
shares in the amount of $20,785.
(4)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.
(5)For the six month period ended September 30, 2008, includes automatic
conversion of 165,114 shares of Class B shares in the amount of $381,980 to
164,968 shares of Class A shares in the amount of $381,980.
(6)For the six month period ended September 30, 2008, includes automatic
conversion of 115,905 shares of Class B shares in the amount of $392,707 to
116,038 shares of Class A shares in the amount of $392,707.
(7)For the six month period ended September 30, 2008, includes automatic
conversion of 845 shares of Class C shares in the amount of $2,979 to 849
shares of Class A shares in the amount of $2,979.
(8)For the six month period ended September 30, 2008, includes automatic
conversion of 157 shares of Class C shares in the amount of $638 to 157
shares of Class A shares in the amount of $638.
79
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Tax Exempt Insured Fund
--------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------- ----------------------------------------
For the For the
six months ended For the six months ended For the
September 30, 2008 year ended September 30, 2008 year ended
(unaudited) March 31, 2008 (unaudited) March 31, 2008
--------------------- --------------------- ----------------- ---------------------
Shares Amount Shares Amount Shares Amount Shares Amount
-------- ----------- -------- ----------- ------ --------- -------- -----------
Shares
sold(1)(2)(3)(4) 135,575 $ 1,669,675 314,629 $ 3,914,692 11,754 $ 145,784 42,191 $ 526,453
Reinvested
shares.......... 39,028 $ 477,418 101,332 $ 1,260,224 2,071 25,366 6,362 79,132
Shares
redeemed(1)(3).. (184,951) (2,276,501) (545,959) (6,802,151) (9,732) (119,610) (177,944) (2,214,363)
-------- ----------- -------- ----------- ------ --------- -------- -----------
Net
increase
(decrease)...... (10,348) $ (129,408) (129,998) $(1,627,235) 4,093 $ 51,540 (129,391) $(1,608,778)
======== =========== ======== =========== ====== ========= ======== ===========
Tax Exempt Insured Fund
--------------------------------------------
Class C
--------------------------------------------
For the
six months ended For the
September 30, 2008 year ended
(unaudited) March 31, 2008
--------------------- ---------------------
Shares Amount Shares Amount
-------- ----------- -------- -----------
Shares
sold............ 275,595 $ 3,371,682 155,729 $ 1,935,925
Reinvested
shares.......... 2,870 35,114 6,235 77,637
Shares
redeemed(2)(4).. (72,501) (888,817) (139,213) (1,738,389)
-------- ----------- -------- -----------
Net
increase
(decrease)...... 205,964 $ 2,517,979 22,751 $ 275,173
======== =========== ======== ===========
- --------
(1)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.
(2)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.
(3)For the six month period ended September 30, 2008, includes automatic
conversion of 2,967 shares of Class B shares in the amount of $36,439 to
2,971 shares of Class A shares in the amount of $36,439.
(4)For the six month period ended September 30, 2008, includes automatic
conversion of 104 shares of Class C shares in the amount of $1,284 to 104
shares of Class A shares in the amount of $1,284.
Note 7. Lines of Credit
The AIG SunAmerica Family of Mutual Funds has established $75 million
committed and $50 million uncommitted lines of credit with State Street Bank
and Trust Company, the Funds' custodian. Interest is currently payable at
the Federal Funds rate plus 50 basis points on the committed line and State
Street's discretionary bid rate on the uncommitted line of credit. There is
also a commitment fee of 10 basis points per annum on the daily unused
portion of the $75 million committed line of credit, which is included in
other expenses on the Statement of Operations. Borrowings under the line of
credit will commence when the Fund's cash shortfall exceeds $100,000. For
the period ended September 30, 2008, the following Funds had borrowings:
Average Weighted
Days Interest Debt Average
Fund Outstanding Charges Utilized Interest
- ---- ----------- -------- ---------- --------
Strategic Bond.. 23 $1,075 $ 625,008 2.77%
High Yield Bond. 21 9,710 6,132,080 2.68
At September 30, 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 period ended September 30, 2008 none of the Funds participated in this
program.
80
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
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%.
The following amounts of the Retirement Plan liabilities are included in the
Trustees fees and expenses line on the Statement of Assets and Liabilities
and the amount for the Retirement Plan expenses are included in the
Trustees' fees and expenses line on the Statement of Operations.
Retirement Plan Retirement Plan Retirement Plan
Liability Expense Payments
--------------- --------------- ---------------
Fund As of September 30, 2008
- ---- -----------------------------------------------
U.S. Government Securities. $82,835 $1,631 $4,175
GNMA....................... 59,590 3,140 1,338
Strategic Bond............. 44,428 6,351 1,193
High Yield Bond............ 50,504 1,888 1,687
Tax Exempt Insured......... 26,157 434 1,186
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 September 30, 2008, the following fund engaged in
securities transactions with affiliated funds:
Cost of Proceeds Realized
Fund Purchases from sales Gain/Loss
- ---- --------- ---------- ---------
Strategic Bond. $6,925,968 $-- $--
81
SunAmerica Income Funds
NOTES TO FINANCIAL STATEMENTS -- September 30, 2008 -- (unaudited)
(continued)
Note 11. Unfunded Loan Commitments
On September 30, 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
- ---- ---- ---- -------- --------
High Yield Bond. Greektown Holdings, LLC Delayed Draw Term Loan 10/15/15 $483,315
82
3
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2008 -- (unaudited)
Approval of the Investment Advisory and Management Agreement and Subadvisory
Agreement
The Board of Trustees (the "Board," the members of which are referred to as
"Trustees") of the Trust, including the Disinterested Trustees, approved the
continuation of the Agreement between the Trust, on behalf of the Funds, and
AIG SunAmerica for a one-year period ending August 31, 2009 at an in-person
meeting held on August 26-27, 2008. The Trust currently consists of five
separate Funds, including the GNMA Fund, High Yield Bond Fund, Strategic Bond
Fund, Tax Exempt Insured Fund and U.S. Government Securities Fund. At this same
meeting, the Board also approved the continuation of the Subadvisory Agreement
between AIG SunAmerica and AIGGIC (the "Subadvisory Agreement") with respect to
the High Yield Bond Fund, Strategic Bond Fund and Tax Exempt Insured Fund for a
one-year period ending August 31, 2009.
In accordance with Section 15(c) of the 1940 Act, the Board requested and AIG
SunAmerica and AIGGIC, where applicable, provided materials relating to the
Board's consideration of whether to approve the continuation of the Advisory
Agreement and Subadvisory Agreement. These materials included (a) a summary of
the services provided by AIG SunAmerica and its affiliates to the Funds;
(b) information independently compiled and prepared by Lipper, Inc. ("Lipper")
on Fund fees and expenses, and the investment performance of the Fund as
compared with a peer group of funds; (c) information on the profitability of
AIG SunAmerica, AIGGIC and their affiliates, a discussion of any indirect
benefits; (d) a report on economies of scale; (e) a discussion on general
compliance policies and procedures; (f) a summary of brokerage and soft dollar
practices; (g) a discussion of the key personnel of AIG SunAmerica, AIGGIC and
their affiliates; and (h) an internal comparison of management fees received
for other mutual funds and accounts with similar investment objectives and
strategies for which AIG SunAmerica and AIGGIC serve as adviser or subadviser,
as applicable.
In determining whether to approve the continuation of the Advisory Agreement
and Subadvisory Agreement, the Board, including Disinterested Trustees,
considered the following information:
Nature, Extent and Quality of Services Provided by AIG SunAmerica and AIGGIC
The Board, including the Disinterested Trustees, considered the nature, quality
and extent of services to be provided by AIG SunAmerica and AIGGIC. The Board
noted that the services include acting as investment manager and adviser to the
Funds, managing the daily business affairs of the Funds, and obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment policies. Additionally, the Board observed that AIG
SunAmerica would provide office space, accounting, legal, and compliance,
clerical and administrative services and has authorized any of its officers and
employees, if elected, to serve as officers or trustees of the Funds without
compensation. Finally, the Board noted that AIG SunAmerica is responsible for
monitoring and reviewing the activities of affiliated and unaffiliated
third-party service providers, including AIGGIC. In addition to the quality of
the advisory services, the Board considered the quality of the administrative
and non-investment advisory services provided to the Funds pursuant to the
Advisory Agreement and noted that such services include (i) preparing
disclosure documents, such as the prospectus, the statement of additional
information and shareholder reports; (ii) assisting with daily accounting and
pricing; (iii) organizing Board meetings and preparing the materials for such
Board meetings; (iv) providing legal and compliance support; and (v) performing
other administrative functions necessary for the operation of the Funds, such
as tax reporting and fulfilling regulatory filing requirements.
In connection with the services provided by AIG SunAmerica, the Board analyzed
the structure and duties of AIG SunAmerica's fund administration, accounting,
legal and compliance departments and concluded that they were adequate to meet
the needs of the Funds. The Board also reviewed the personnel responsible for
providing advisory services to the Funds and other key personnel of AIG
SunAmerica and concluded, based on their experience and interaction with AIG
SunAmerica, that: (i) AIG SunAmerica is able to retain quality portfolio
managers, analysts and other personnel; (ii) AIG SunAmerica exhibited a high
level of diligence and attention to detail in carrying out its advisory and
other responsibilities under the Advisory Agreement; (iii) AIG SunAmerica had
been responsive to requests of the Board; and (iv) AIG SunAmerica had kept the
Board apprised of developments relating to the Funds and the industry in
general. The Board concluded that the nature and extent of services provided
under the Advisory Agreement were reasonable and appropriate in relation to the
management fee and that the quality of services continues to be high.
The Board also considered AIG SunAmerica's reputation and long-standing
relationship with the Funds and considered the benefit to shareholders of
investing in funds that are part of a family of funds offering a variety of
types of mutual funds and shareholder services. The Board considered AIG
SunAmerica's experience in providing management and investment advisory and
administrative
83
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2008 -- (unaudited)
(continued)
services to advisory clients and noted that as of June 30, 2008, AIG SunAmerica
managed, advised an/or administered approximately $49.7 billion in assets. The
Board also considered AIG SunAmerica's code of ethics, and that it has
developed internal procedures, adopted by the Board, for monitoring compliance
with the investment objectives, policies and restrictions of the Funds as set
forth in the Fund's prospectus. Additionally, the Board considered AIG
SunAmerica's compliance and regulatory history.
With respect to the High Yield Bond Fund, Strategic Bond Fund and Tax Exempt
Insured Fund, for which AIG SunAmerica has delegated daily investment
management responsibilities to AIGGIC, the Board considered the nature, quality
and extent of subadvisory services provided by AIGGIC. The Board observed that
AIGGIC is responsible for providing investment management services, including
investment research, advice and supervision, and determining which securities
will be purchased or sold by each of the High Yield Bond Fund, Strategic Bond
Fund and Tax Exempt Insured Fund, subject to the oversight and review of AIG
SunAmerica. The Board reviewed AIGGIC's history, structure, size, visibility
and resources, which are needed to attract and retain highly qualified
investment professionals. The Board reviewed the personnel that are responsible
for providing subadvisory services to the High Yield Bond Fund, Strategic Bond
Fund and Tax Exempt Insured Fund and concluded, based on their experience with
AIGGIC, that: (i) AIGGIC is able to retain high quality portfolio managers and
other investment personnel; (ii) AIGGIC exhibited a high level of diligence and
attention to detail in carrying out its responsibilities under the Subadvisory
Agreement; and (iii) AIGGIC had been responsive to requests of the Board and of
AIG SunAmerica. The Board considered that AIGGIC has developed internal
policies and procedures for monitoring compliance with the investment
objectives, policies and restrictions of the High Yield Bond Fund, Strategic
Bond Fund and Tax Exempt Insured Fund as set forth in the Prospectus. The Board
also considered AIGGIC's code of ethics, compliance and regulatory history. The
Board concluded that the nature and extent of services to be provided by AIGGIC
under the Subadvisory Agreement were reasonable and appropriate in relation to
the subadvisory fees and that the quality of services continues to be high.
Investment Performance
The Board, including the Disinterested Trustees, also considered the investment
performance of AIG SunAmerica and AIGGIC with respect to the Funds. In
connection with its review, the Board received and reviewed information
regarding the investment performance of the Funds as compared to each Fund's
peer group ("Peer Group") and/or peer universe ("Peer Universe") as
independently determined by Lipper and to an appropriate index or combination
of indices, including the Funds' benchmarks. The Board was provided with a
description of the methodology used by Lipper to select the funds in the Peer
Groups and Universes. The Board also noted that it regularly reviews the
performance of the Funds throughout the year. The Board noted that, while it
monitors performance of the Funds closely, it generally attaches more
importance to performance over relatively long periods of time, typically three
to five years.
In preparation for the August 26-27, 2008 meeting, the Board was provided with
reports independently prepared by Lipper. Based on the Lipper reports, the
Board reviewed each Fund's annualized total returns for the prior one-, two-,
three-, four-, five- and ten-year periods ended May 31, 2008. The Board noted
that it was also provided with a supplemental Lipper performance report for the
periods ended June 30, 2008. In addition, the Board received a report prepared
by AIG SunAmerica that detailed the Funds' performance for the three- and
six-month periods ended June 30, 2008.
Specifically, the Board considered that while the U.S. Government Securities
Fund ranked in the fourth and third quintiles of its Peer Group for the three-
and five-year periods ended May 31, 2008, respectively, the Fund ranked in the
first quintile for the four- and ten-year periods and in the second quintile
for the one- and two-year periods. The Board noted that it was generally
pleased with the Fund's short- and long-term performance. The Board considered
that the GNMA Fund ranked in the fourth quintile of its Peer Group for the
three- and five-year periods ended May 31, 2008 and ranked in the second
quintile for the one-, two- and four-year periods. The Board noted that the
GNMA Fund was ranked in the first quintile of its Peer Universe for the
ten-year period ended May 31, 2008. The Board noted that it was generally
pleased with the Fund's performance.
The Board then considered the performance of the Funds subadvised by AIGGIC,
the High Yield Bond Fund, Strategic Bond Fund and Tax Exempt Insured Fund. The
Board considered that while the High Yield Bond Fund ranked in the fourth
quintile of its Peer Group for the one-year period ended May 31, 2008, the Fund
ranked in the first quintile for the three-, four- and five-year periods ended
May 31, 2008. The Board noted that the High Yield Bond Fund was the top-ranked
fund in its Peer Group since the Fund's inception date. The Board then
considered that while the Strategic Bond Fund ranked in the fourth quintile of
its Peer Group for the one-year period ended May 31, 2008, the Fund ranked in
the second quintile for the three-year period and ranked in the first quintile
84
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2008 -- (unaudited)
(continued)
for the four- and five-year periods ended May 31, 2008. The Board noted that
the Strategic Bond Fund was the top-ranked fund in its quintile since the
Fund's inception date. The Board noted that it was pleased with the High Yield
Bond and Strategic Funds' strong performance results for the periods ended
May 31, 2008. The Board considered that the Tax Exempt Insured Fund ranked in
the third quintile for the one-, two- and five-year periods ended May 31, 2008;
however, the Fund ranked in the first quintile of its Peer Universe for the
one- and two-year periods ended May 31, 2008.
Consideration of the Management Fees and Subadvisory Fees and the Cost of the
Services and Profits to be Realized by AIG SunAmerica and AIGGIC and their
Affiliates from the Relationship with the Funds
The Board, including the Disinterested Trustees, received and reviewed
information regarding the fees to be paid by the Funds to AIG SunAmerica
pursuant to the Advisory Agreement and the fees paid by AIG SunAmerica to
AIGGIC pursuant to the Subadvisory Agreement. The Board examined this
information in order to determine the reasonableness of the fees in light of
the nature and quality of services to be provided and any potential additional
benefits to be received by AIG SunAmerica, AIGGIC or their affiliates in
connection with providing such services to the Funds.
To assist in analyzing the reasonableness of the management fee for each of the
Funds, the Board received reports independently prepared by Lipper. The reports
showed comparative fee information for each Fund's Peer Group and/or Peer
Universe. In considering the reasonableness of the management fee to be paid by
each Fund to AIG SunAmerica, the Board reviewed a number of expense
comparisons, including: (i) contractual and actual management fees; and
(ii) actual total operating expenses. In considering each Fund's total
operating expenses, the Board analyzed the level of fee waivers and expense
reimbursements and the net expense caps contractually agreed upon by AIG
SunAmerica with respect to each Fund except the Tax Exempt Insured Fund. The
Board compared each Fund's net expense ratio to those of other funds within its
Peer Group and/or Peer Universe as a guide to help assess the reasonableness of
the management fee for certain Funds. The Board acknowledged that it was
difficult to make precise comparisons with other funds in the Peer Groups and
Peer Universes since the exact nature of services provided under the various
fund agreements is often not apparent. The Board noted, however, that the
comparative fee information provided by Lipper as a whole was useful in
assessing whether AIG SunAmerica was providing services at a cost that was
competitive with other, similar funds. The Board also considered management
fees received by AIG SunAmerica with respect to other mutual funds and accounts
with similar investment strategies to the Funds. The Board noted the management
fee paid by the Funds were reasonable as compared to the fees AIG SunAmerica
was receiving from other mutual funds and accounts for which it serves as
adviser or subadviser.
The Board also received and reviewed information regarding the fees paid by
AIG SunAmerica to AIGGIC pursuant to the Subadvisory Agreement. To assist in
analyzing the reasonableness of the subadvisory fees, the Board received a
report independently prepared by Lipper. The report showed comparative fee
information of each Fund's Peer Group that the Trustees used as a guide to help
assess the reasonableness of the subadvisory fees. The Trustees noted that Peer
Group information as a whole was useful in assessing whether AIGGIC was
providing services at a cost that was competitive with other similar funds. The
Trustees also considered that the subadvisory fees are paid by AIG SunAmerica
out of its management fee and not by the Funds, and that subadvisory fees may
vary widely within a Peer Group for various reasons, including market pricing
demands, existing relationships, experience and success, and individual client
needs. The Board further considered the amount of subadvisory fees paid out by
AIG SunAmerica and the amount of the management fees which it retained. The
Board also considered advisory fees received by AIGGIC with respect to other
mutual funds and accounts with similar investment strategies to the High Yield
Bond Fund, Strategic Bond Fund and Tax Exempt Insured Fund. The Board noted
that the subadvisory fees paid by AIG SunAmerica to AIGGIC were reasonable as
compared to fees AIGGIC receives for other mutual funds and accounts for which
it serves as adviser or subadviser.
The Board also considered AIG SunAmerica's profitability and the benefits AIG
SunAmerica and its affiliates received from its relationship with the Funds.
The Board received and reviewed financial statements relating to AIG
SunAmerica's financial condition and profitability with respect to the services
it provided the Funds and considered how profit margins could affect
AIG SunAmerica's ability to attract and retain high quality investment
professionals and other key personnel. The Board was also provided with a
profitability analysis that detailed the revenues earned and the expenses
incurred by AIG SunAmerica and its affiliates that provide services to the
Funds on a Fund by Fund basis.
The Board considered the profitability of AIG SunAmerica under the Advisory
Agreement, and considered the profitability of AIG SunAmerica's affiliates
under the Rule 12b-1 Plans, Service Agreements, and Administrative and
Shareholder Agreements. Additionally, the Board considered whether AIG
SunAmerica, AIGGIC and its affiliates received any indirect benefits from the
85
SunAmerica Income Funds
APPROVAL OF ADVISORY AGREEMENTS -- September 30, 2008 -- (unaudited)
(continued)
relationship with the Funds. Specifically, the Board observed that AIG Federal
Savings Bank, an affiliate of AIG SunAmerica and AIGGIC, serves as custodian
with respect to certain shareholder retirement accounts that are administered
by AIG SunAmerica and receives a fee payable by the qualifying shareholders.
The Board further considered whether there were any collateral or "fall-out"
benefits that AIG SunAmerica and its affiliates may derive as a result of their
relationship with the Funds. The Board noted that AIG SunAmerica believes that
any such benefits are de minimis and do not impact the reasonableness of the
management fees.
The Board also reviewed AIGGIC's financial statements and considered whether
AIGGIC had the financial resources necessary to attract and retain high quality
investment management personnel and to continue to provide the high quality of
services that it had provided to the High Yield Bond Fund, Strategic Bond Fund
and Tax Exempt Insured Fund to date.
The Board concluded that AIG SunAmerica and AIGGIC had the financial resources
necessary to perform their obligations under the Advisory Agreement and
Subadvisory Agreement and to continue to provide the Funds with the high
quality services that they had provided in the past. The Board also concluded
that the management fee and subadvisory fees were reasonable in light of the
factors discussed above.
Economies of Scale
The Board, including the Disinterested Trustees, considered whether the
shareholders would benefit from economies of scale and whether there was
potential for future realization of economies with respect to the Funds. The
Board considered that as a result of being part of the AIG SunAmerica fund
complex, the Funds share common resources and may share certain expenses, and
if the size of the complex increases, each Fund could incur lower expenses than
they otherwise would achieve as stand-alone entities. The Board also considered
the anticipated efficiencies in the processes of AIG SunAmerica as it adds
labor and capital to expand the scale of operations. The Board also took into
account that each of the Funds had management fee arrangements that included
breakpoints that will adjust the fee downward as the size of the Fund
increases, thereby allowing the shareholders to potentially participate in any
economies of scale. The Board further noted that, with the exception of the Tax
Exempt Insured Fund, AIG SunAmerica has agreed to contractually cap the total
annual operating expenses of the Funds, at certain levels. The Board observed
that those expense caps benefited shareholders by keeping total fees down even
in the absence of breakpoints or economies of scale. The Board concluded that
the Funds' management fee structure was reasonable and that it would continue
to review fees in connection with the renewal of the Advisory Agreement,
including whether the implementation of additional breakpoints would be
appropriate in the future due to an increase in asset size or otherwise.
The Board did not review specific information regarding whether there have been
economies of scale with respect to AIGGIC's management of the Funds because it
regards that information as less relevant at the subadviser level. Rather, the
Board considered information regarding economies of scale in the context of the
renewal of the Advisory Agreement.
Other Factors
In consideration of the Advisory Agreement and Subadvisory Agreement, the Board
also received information regarding AIG SunAmerica's and AIGGIC's brokerage and
soft dollar practices. The Board considered that AIG SunAmerica and AIGGIC are
responsible for decisions to buy and sell securities for the portfolios they
manage, selection of broker-dealers and negotiation of commission rates. The
Board noted that they receive reports from AIG SunAmerica and from an
independent third party that included information on brokerage commissions and
execution throughout the year and that commissions paid had generally been
reasonable and the quality of brokerage execution had generally been high. The
Board also considered the benefits AIG SunAmerica and AIGGIC derive from their
soft dollar arrangements, including arrangement under which brokers provide
brokerage and/or research services to AIG SunAmerica and/or AIGGIC in return
for allocating brokerage. The Board further observed that when making purchases
of new issues with fixed underwriting fees, AIG SunAmerica or AIGGIC may
designate the use of broker-dealers who have agreed to provide certain
statistical, research and other information.
Conclusion
After a full and complete discussion, the Board approved the Advisory Agreement
and the Subadvisory Agreement with respect to the High Yield Bond Fund,
Strategic Bond Fund and Tax Exempt Insured Fund, each for a one-year period
ending August 31, 2009. Based upon their evaluation of all these factors in
their totality, the Board, including the Disinterested Trustees, was satisfied
that the terms of the Advisory Agreement and Subadvisory Agreement were fair
and reasonable and in the best interests of the Funds and the Funds'
shareholders. In arriving at a decision to approve the Advisory Agreement and
Subadvisory Agreement, the Board did not identify any single factor or group of
factors as all-important or controlling, but considered all factors together.
The Disinterested Trustees were also assisted by the advice of independent
counsel in making this determination.
86
[LOGO]
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 A. Skrehot, 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 Secretaryn documents") to relating to securities
Gregory R. Kingston, shareholders with held in the Funds during
Vice President and multiple accounts the most recent twelve
Assistant Treasurer residing at the same month period ended June
Christopher A. Okeke, "household." This 30 is available, once
Assistant Treasurer practice is called filed with the U.S.
Matthew J. Hackethal, householding and reduces Securities and Exchange
Anti-Money Laundering Fund expenses, which Commission, without
Compliance Officer benefits you and other charge, upon request, by
shareholders. Unless the calling (800) 858-8850 or
Investment Adviser Funds receive on the U.S. Securities
instructions to the and Exchange Commission's
AIG SunAmerica Asset Management Corp. con-trary, you will only website at
Harborside Financial receive one copy of the http://www.sec.gov.
Center shareholder documents.
3200 Plaza 5 The Funds will continue This report is submitted
Jersey City, NJ to household the solely for the general
07311-4992 share-holder documents information of
indefinitely, until we shareholders of the
Distributor are instructed otherwise. Funds. Distribution of
SunAmerica Capital If you do not wish to this report to persons
Services, Inc. participate in other than shareholders
Harborside Financial householding please of the Funds is
Center contact Shareholder authorized only in
3200 Plaza 5 Services at (800) con-nection with a
Jersey City, NJ 858-8850 ext. 6010 or currently effective
07311-4992 send a written request pro-spectus, setting
with your name, the name forth details of the
Shareholder Servicing of your fund(s) and your Funds, which must precede
Agent account number(s) to AIG or accom-pany this report.
AIG SunAmerica Fund SunAmerica Mutual Funds
Services, Inc. c/o BFDS, P.O. Box The accompanying report
Harborside Financial 219186, Kansas City MO, has not been audited by
Center 64121-9186. We will independent accountants
3200 Plaza 5 resume individual and accordingly no
Jersey City, NJ mailings for your account opinion has been
07311-4992 within thirty (30) days expressed thereon.
of receipt of your
Custodian and Transfer request.
Agent
State Street Bank and
Trust Company
P.O. Box 419572
Kansas City, MO
64141-6572
87
Funds distributed by SunAmerica Capital Services, Inc., an affiliate of
AIG SunAmerica Asset Management Corp.
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
SunAmerica Sales Desk at 800-858-8850, ext. 6003, or at
www.sunamericafunds.com. Read the prospectus carefully before investing.
www.sunamericafunds.com
INSAN - 9/08
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of trustees that were
implemented after the registrant last provided disclosure in response
to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by 22(b)(15)) of Schedule 14A (17 CFR 240.14a-
101), or this Item 10.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer, of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as (defined under Rule 30a-3(c)
under the Investment Company Act of 1940 (17 CFR 270.30a-3(c))). Based
on that evaluation, the registrant's management, including the
President and Treasurer, concluded that the registrant's disclosure
controls and procedures are effective.
(b) There was no change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act
of 1940 (17 CFR 270.30a-3(d))) that occurred during the registrant's
last fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal contro1 over financial reporting.
Item 12. Exhibits.
(a) (1) Not applicable.
(2) Certifications pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit
99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the Sarbanes-
Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SunAmerica Income Funds
By: /s/ John T. Genoy
-------------------
John T. Genoy
President
Date: December 8, 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: December 8, 2008
By: /s/ Donna M. Handel
-------------------
Donna M. Handel
Treasurer
Date: December 8, 2008