-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UJ0h3Vsmn/pkavljmZmRhBUdktwWW4rOXj8j050ZsKpAxOVmIWMOev0x6wLtIJOq 3nQNldgkbP5RWNUMbfEpAg== 0001193125-04-210169.txt : 20041209 0001193125-04-210169.hdr.sgml : 20041209 20041209133101 ACCESSION NUMBER: 0001193125-04-210169 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041209 DATE AS OF CHANGE: 20041209 EFFECTIVENESS DATE: 20041209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNAMERICA INCOME FUNDS CENTRAL INDEX KEY: 0000795307 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04708 FILM NUMBER: 041192702 BUSINESS ADDRESS: STREET 1: HARBORSIDE FINANCIAL CENTER STREET 2: 3200 PLAZA 5 CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: 800-858-8850 MAIL ADDRESS: STREET 1: HARBORSIDE FINANCIAL CENTER STREET 2: 3200 PLAZA 5 CITY: JERSEY CITY STATE: NJ ZIP: 07311 FORMER COMPANY: FORMER CONFORMED NAME: SUNAMERICA INCOME PORTFOLIOS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED INCOME PORTFOLIOS DATE OF NAME CHANGE: 19900306 N-CSRS 1 dncsrs.txt SUNAMERICA INCOME FUNDS 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 811-04708 --------------------------------------------- SunAmerica Income Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent M. Marra Senior Vice President & Chief Operating Officer AIG SunAmerica Asset Management Corp. Harborside Financial Center, 3200 Plaza 5 Jersey City, NJ 07311 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (201) 324-6464 ----------------------------- Date of fiscal year end: March 31 -------------------------- Date of reporting period: September 30, 2004 ------------------------- Item 1. Reports to Stockholders SunAmerica Income Funds, Semiannual Report at September 30, 2004. [GRAPHIC] SunAmerica THE RETIREMENT SPECIALIST Income Funds 2004 SEMIANNUAL REPORT [LOGO] AIG Sun America Mutual Funds September 30, 2004 SEMIANNUAL REPORT SUNAMERICA INCOME FUNDS SunAmerica Core Bond Fund (NAIBX) SunAmerica U.S. Government Securities Fund (SGTAX) SunAmerica GNMA Fund (GNMAX) SunAmerica Strategic Bond Fund (SDIAX) SunAmerica High Yield Bond Fund (SHNAX) SunAmerica Tax Exempt Insured Fund (STEAX) Table of Contents SHAREHOLDER LETTER................. 2 EXPENSE EXAMPLE.................... 3 STATEMENT OF ASSETS AND LIABILITIES 5 STATEMENT OF OPERATIONS............ 7 STATEMENT OF CHANGES IN NET ASSETS. 9 FINANCIAL HIGHLIGHTS............... 12 PORTFOLIO OF INVESTMENTS........... 18 NOTES TO FINANCIAL STATEMENTS...... 60 TRUSTEE INFORMATION................ 77
Shareholder Letter Dear Shareholders: While yields ended the Funds' semiannual reporting period relatively unchanged, the intervening six months were very volatile for the fixed income market. Inflation fears fueled weakness early in the reporting period, but the U.S. Treasury market rallied in the third quarter as job growth and consumer spending slowed. The yield on the bell weather ten-year U.S. Treasury closed at 4.1%, little removed from its 3.9% level at the start of the period. In the interim, the Federal Reserve increased its federal funds rate by a total of 75 basis points to 1.75%. The second quarter opened with the March payroll report showing job growth averaging 200,000-300,000 jobs/month. This was significantly higher than expected, and spurred concerns that the Federal Reserve's generous monetary stimulus policy would soon end. Higher oil prices and a troublesome up-tick in core inflation added to investor pessimism. Core inflation--the Consumer Price Index (CPI) minus food and energy prices--rose from 1.5 to 1.8%. On June 30, the Federal Reserve boosted the federal funds rate 25 basis points. Initially, the credit markets faltered as investors reacted to the resultant decline in liquidity associated with such a change in policy. But evidence of a cooling of the economy surfaced early in the third quarter and the markets rallied. The June non-farm payrolls report showed job growth at a disappointing 100,000-150,000 jobs/month, and inflation indicators remained tepid. In the absence of global growth, escalating oil prices continued to dampen spending power. Despite signs that the uptick in inflation was transitory, the Federal Reserve again raised the fed fund rates another 25 basis points in early August and once again in mid-September. Investors shook off the hike, however, reading the Fed's measured approach as a signal that the strong environment for fixed income securities would remain. Throughout the six-month period fixed income investors were rewarded for risk. Buoyed by low volatility Treasuries, GNMAs and mortgage-backed securities (MBS) performed well. The third quarter witnessed a significant flattening of the yield curve as yields on 2-year and 10-year Treasury notes fell by 7 and 45 basis points, respectively. Nevertheless, lower rated credits outperformed. The high-yield market benefited the most, with the lower rated sectors exhibiting the best performance. Default rates remained at historic lows. Emerging market debt kept pace, bolstered by the stable dollar and strong commodity and oil markets. Investment grade corporate credits also benefited from strengthening balance sheets and reduced supply. Investment grade issuance declined across the board as companies turned to stock buybacks and demand overseas grew for US credit. The municipal market continued to provide an attractive after-tax alternative, outperforming Treasuries as a result of lower new issue supply and strong demand from Property and Casualty Insurance companies. With municipalities reaping higher tax revenues and improving budgets, the need to float new municipal issues is declining. The 10-year AAA Municipal yield, as a percent of the 10-year Treasury Note yield, finished the period at 84.1% as compared to 89.1% at the start. Thank you for your continued investment in our Funds and we encourage you to visit our website, www.sunamericafunds.com, for more information. Sincerely, The AIG SunAmerica Income Funds Investment Professionals AIG SunAmerica Asset Management Corp. AIG Global Investment Corp. Michael Cheah Greg Braun Steven Guterman Brian Tesseyman Hutch Bryan Rob Vandem Assem Brian Wiese
2 SunAmerica Income Funds EXPENSE EXAMPLE -- September 30, 2004 -- (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 on purchase payments, contingent deferred sales charges and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) on 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, 2004 and held until September 30, 2004. Actual Expenses The "Actual" section of the table provides information about your 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 Period" to estimate the expenses you paid on your account during this period. For shareholder accounts in classes other than Class I, Class X, and Class Z the "Expenses Paid During Period" 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" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Funds prospectus and/or the retirement plan document for full description of these fees. Had these fees been included, the "Expenses Paid During the Period" column and the "Expense Ratio" 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 the 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. For shareholder accounts in classes other than Class I, Class X, and Class Z the "Expenses Paid During Period" 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" column does not include administrative fees that may apply to qualified retirement plan accounts. See the Funds prospectus and/or the retirement plan document for full description of these fees. Had these fees been included, the "Expenses Paid During the Period" column and the "Expense Ratio" 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, 2004 -- (unaudited) (continued)
Actual Hypothetical ----------------------------------------------- ----------------------------------------------- Ending Account Ending Account Expenses Paid Value Using a Expenses Paid Value Using During the Hypothetical 5% During the Beginning Actual Return Period Ended Beginning Assumed Return Period Ended Account Value at September 30, September 30, Account Value at September 30, September 30, at April 1, 2004 2004 2004* at April 1, 2004 2004 2004* ---------------- ---------------- ------------- ---------------- ---------------- ------------- Core Bond Fund@ Class A #.................... $1,000.00 $1,007.18 $ 6.14 $1,000.00 $1,018.95 $ 6.17 Class B #.................... $1,000.00 $1,003.88 $ 9.39 $1,000.00 $1,015.69 $ 9.45 Class C #.................... $1,000.00 $1,003.90 $ 9.39 $1,000.00 $1,015.69 $ 9.45 Class I #.................... $1,000.00 $1,007.70 $ 5.64 $1,000.00 $1,019.45 $ 5.67 Class Z #.................... $1,000.00 $1,010.06 $ 3.28 $1,000.00 $1,021.81 $ 3.29 U.S. Government Securities Fund Class A #.................... $1,000.00 $ 999.11 $ 4.96 $1,000.00 $1,020.10 $ 5.01 Class B #.................... $1,000.00 $ 995.89 $ 8.21 $1,000.00 $1,016.85 $ 8.29 Class C #.................... $1,000.00 $ 994.82 $ 8.20 $1,000.00 $1,016.85 $ 8.29 GNMA Fund Class A #.................... $1,000.00 $1,005.59 $ 4.98 $1,000.00 $1,020.10 $ 5.01 Class B #.................... $1,000.00 $1,003.24 $ 8.24 $1,000.00 $1,016.85 $ 8.29 Class C #.................... $1,000.00 $1,003.25 $ 8.24 $1,000.00 $1,016.85 $ 8.29 Class X...................... $1,000.00 $1,007.59 $ 3.88 $1,000.00 $1,021.21 $ 3.90 Strategic Bond Fund@ Class A #.................... $1,000.00 $1,030.50 $ 7.28 $1,000.00 $1,017.90 $ 7.23 Class B #.................... $1,000.00 $1,027.18 $10.57 $1,000.00 $1,014.64 $10.50 Class C #.................... $1,000.00 $1,027.20 $10.57 $1,000.00 $1,014.64 $10.50 High Yield Bond Fund@ Class A #.................... $1,000.00 $1,045.28 $ 7.23 $1,000.00 $1,018.00 $ 7.13 Class B #.................... $1,000.00 $1,042.36 $10.55 $1,000.00 $1,014.74 $10.40 Class C #.................... $1,000.00 $1,041.92 $10.54 $1,000.00 $1,014.74 $10.40 Class Z #.................... $1,000.00 $1,050.87 $ 4.22 $1,000.00 $1,020.96 $ 4.15 Tax Exempt Insured Fund Class A...................... $1,000.00 $1,008.85 $ 6.29 $1,000.00 $1,018.80 $ 6.33 Class B...................... $1,000.00 $1,006.17 $ 9.76 $1,000.00 $1,015.34 $ 9.80 Class C #.................... $1,000.00 $1,006.10 $ 9.81 $1,000.00 $1,015.29 $ 9.85
Expense Ratio as of September 30, 2004* ------------- Core Bond Fund@ Class A #.................... 1.22% Class B #.................... 1.87% Class C #.................... 1.87% Class I #.................... 1.12% Class Z #.................... 0.65% U.S. Government Securities Fund Class A #.................... 0.99% Class B #.................... 1.64% Class C #.................... 1.64% GNMA Fund Class A #.................... 0.99% Class B #.................... 1.64% Class C #.................... 1.64% Class X...................... 0.77% Strategic Bond Fund@ Class A #.................... 1.43% Class B #.................... 2.08% Class C #.................... 2.08% High Yield Bond Fund@ Class A #.................... 1.41% Class B #.................... 2.06% Class C #.................... 2.06% Class Z #.................... 0.82% Tax Exempt Insured Fund Class A...................... 1.25% Class B...................... 1.94% Class C #.................... 1.95%
- -------- * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 183 days divided by 365 days. These ratios do not reflect transaction costs, including sales charges on purchase payments, contingent deferred sales charges, small account fees and administrative fees, if applicable to your account. Please refer to your Prospectus and/or qualified retirement plan document for more information. # During the stated period, the investment adviser either waived a portion of or all fees and assumed a portion of or all expenses for the Funds. As a result, the "Hypothetical Ending Account Value", the "Actual/Hypothetical Expenses Paid During the Period" and the "Expenses Ratios" would have been higher for a Fund that reimbursed or waived fees and expenses. @ Effective September 1, 2004, the following Funds had changes to their expense cap. Had the expense changes been in effect for the entire period, the Expense Example would have been as follows:
Actual Hypothetical ----------------------------------------------- ----------------------------------------------- Ending Account Ending Account Expenses Paid Value Using a Expenses Paid Value Using During the Hypothetical 5% During the Beginning Actual Return Period Ended Beginning Assumed Return Period Ended Account Value at September 30, September 30, Account Value at September 30, September 30, at April 1, 2004 2004 2004* at April 1, 2004 2004 2004* ---------------- ---------------- ------------- ---------------- ---------------- ------------- Core Bond Fund Class A........... $1,000.00 $1,007.18 $ 5.53 $1,000.00 $1,019.55 $ 5.57 Class B........... $1,000.00 $1,003.88 $ 8.79 $1,000.00 $1,016.29 $ 8.85 Class C........... $1,000.00 $1,003.90 $ 8.79 $1,000.00 $1,016.29 $ 8.85 Class I........... $1,000.00 $1,007.70 $ 5.03 $1,000.00 $1,020.05 $ 5.06 Class Z........... $1,000.00 $1,010.06 $ 2.67 $1,000.00 $1,022.41 $ 2.69 Strategic Bond Fund Class A........... $1,000.00 $1,030.50 $ 7.13 $1,000.00 $1,018.05 $ 7.08 Class B........... $1,000.00 $1,027.18 $10.42 $1,000.00 $1,014.79 $10.35 Class C........... $1,000.00 $1,027.20 $10.42 $1,000.00 $1,014.79 $10.35 High Yield Bond Fund Class A........... $1,000.00 $1,045.28 $ 6.97 $1,000.00 $1,018.25 $ 6.88 Class B........... $1,000.00 $1,042.36 $10.29 $1,000.00 $1,014.99 $10.15 Class C........... $1,000.00 $1,041.92 $10.29 $1,000.00 $1,014.99 $10.15 Class Z........... $1,000.00 $1,050.87 $ 4.06 $1,000.00 $1,021.11 $ 4.00
Expense Ratio as of September 30, 2004* ------------- Core Bond Fund Class A........... 1.10% Class B........... 1.75% Class C........... 1.75% Class I........... 1.00% Class Z........... 0.53% Strategic Bond Fund Class A........... 1.40% Class B........... 2.05% Class C........... 2.05% High Yield Bond Fund Class A........... 1.36% Class B........... 2.01% Class C........... 2.01% Class Z........... 0.79%
4 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2004 -- (unaudited)
U.S. Government Strategic Core Bond Securities GNMA Bond Fund Fund Fund Fund ------------ --------------- ------------ ------------ ASSETS: Investment securities, at value* (unaffiliated)............ $205,069,014 $221,199,275 $445,576,712 $ 99,933,068 Short term securities, at value*........................... 5,000,000 -- -- 353,000 Repurchase agreements (cost equals market)................. 4,274,000 45,064,000 237,540,000 549,000 Cash....................................................... 406,941 -- -- 2,945,479 Foreign cash*.............................................. -- -- -- 89,296 Deposit with broker for securities sold short.............. -- -- -- -- Receivable for: Shares of beneficial interest sold....................... 69,860 127,246 413,868 167,771 Dividends and interest................................... 2,073,945 1,264,556 1,723,567 1,674,376 Investments sold......................................... 3,996,204 6,036,583 15,412,877 1,405,779 Prepaid expenses and other assets.......................... 2,814 2,839 6,117 1,089 Due from investment adviser for expense reimbursements/fee waivers................................................... 21,310 68,696 82,376 4,537 ------------ ------------ ------------ ------------ Total assets............................................. 220,914,088 273,763,195 700,755,517 107,123,395 ------------ ------------ ------------ ------------ LIABILITIES: Payable for: Shares of beneficial interest redeemed................... 6,381,734 386,920 1,190,051 178,437 Investments purchased.................................... 9,295,243 43,121,073 168,365,938 2,689,513 Investment advisory and management fees.................. 102,748 123,781 200,280 56,351 Distribution and service maintenance fees................ 53,221 90,143 248,712 61,339 Transfer agent fees and expenses......................... 36,807 35,523 97,182 17,857 Dividends payable.......................................... 8,518 143,928 128,162 239,780 Trustees' fees and expenses................................ 29,888 110,132 46,617 26,439 Other accrued expenses..................................... 213,795 63,307 53,785 70,012 Securities sold short, at value#........................... -- -- -- -- Unrealized depreciation on forward foreign currency contracts................................................. -- -- -- 21,169 Due to custodian........................................... -- 186,273 457,731 -- ------------ ------------ ------------ ------------ Total liabilities........................................ 16,121,954 44,261,080 170,788,458 3,360,897 ------------ ------------ ------------ ------------ Net assets.............................................. $204,792,134 $229,502,115 $529,967,059 $103,762,498 ============ ============ ============ ============ NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value............. $ 197,830 $ 242,510 $ 469,961 $ 305,273 Paid-in capital............................................ 202,753,905 239,310,553 528,258,776 133,965,041 ------------ ------------ ------------ ------------ 202,951,735 239,553,063 528,728,737 134,270,314 Accumulated undistributed net investment income (loss)..... (281,380) (475,660) (919,603) 101,394 Accumulated undistributed net realized gain (loss) on investments, securities sold short and foreign exchange transactions.............................................. 623,784 (11,687,764) 479,563 (34,575,740) Unrealized appreciation (depreciation) on investments...... 1,497,995 2,112,476 1,678,362 3,981,282 Unrealized appreciation (depreciation) on securities sold short..................................................... -- -- -- -- Unrealized foreign exchange gain (loss) on other assets and liabilities............................................... -- -- -- (14,752) ------------ ------------ ------------ ------------ Net assets................................................. $204,792,134 $229,502,115 $529,967,059 $103,762,498 ============ ============ ============ ============ *Cost...................................................... Investment securities (unaffiliated)..................... $203,571,019 $219,086,799 $443,898,350 $ 95,951,786 ============ ============ ============ ============ Short-term securities.................................... $ 5,000,000 $ -- $ -- $ 353,000 ============ ============ ============ ============ Foreign cash............................................. $ -- $ -- $ -- $ 86,988 ============ ============ ============ ============ #Proceeds from securities sold short....................... $ -- $ -- $ -- $ -- ============ ============ ============ ============
High Yield Tax Exempt Bond Insured Fund Fund ------------- ----------- ASSETS: Investment securities, at value* (unaffiliated)............ $ 310,672,713 $73,744,753 Short term securities, at value*........................... -- 8,610,222 Repurchase agreements (cost equals market)................. 11,647,000 -- Cash....................................................... 792,859 -- Foreign cash*.............................................. 141,449 -- Deposit with broker for securities sold short.............. 188,384 -- Receivable for: Shares of beneficial interest sold....................... 1,449,705 9,308 Dividends and interest................................... 7,188,902 1,111,993 Investments sold......................................... 3,184,119 2,260,069 Prepaid expenses and other assets.......................... 3,297 1,038 Due from investment adviser for expense reimbursements/fee waivers................................................... 10,215 534 ------------- ----------- Total assets............................................. 335,278,643 85,737,917 ------------- ----------- LIABILITIES: Payable for: Shares of beneficial interest redeemed................... 459,650 52,400 Investments purchased.................................... 7,195,144 4,218,209 Investment advisory and management fees.................. 195,209 34,380 Distribution and service maintenance fees................ 133,624 34,003 Transfer agent fees and expenses......................... 51,283 19,414 Dividends payable.......................................... 764,157 75,722 Trustees' fees and expenses................................ 48,281 34,777 Other accrued expenses..................................... 29,021 60,388 Securities sold short, at value#........................... 180,733 -- Unrealized depreciation on forward foreign currency contracts................................................. -- -- Due to custodian........................................... -- -- ------------- ----------- Total liabilities........................................ 9,057,102 4,529,293 ------------- ----------- Net assets.............................................. $ 326,221,541 $81,208,624 ============= =========== NET ASSETS REPRESENTED BY: Shares of beneficial interest, $0.01 par value............. $ 768,196 $ 62,112 Paid-in capital............................................ 438,240,788 75,879,979 ------------- ----------- 439,008,984 75,942,091 Accumulated undistributed net investment income (loss)..... (1,681,237) (23,669) Accumulated undistributed net realized gain (loss) on investments, securities sold short and foreign exchange transactions.............................................. (114,759,280) 435,795 Unrealized appreciation (depreciation) on investments...... 3,652,124 4,854,407 Unrealized appreciation (depreciation) on securities sold short..................................................... 568 -- Unrealized foreign exchange gain (loss) on other assets and liabilities............................................... 382 -- ------------- ----------- Net assets................................................. $ 326,221,541 $81,208,624 ============= =========== *Cost...................................................... Investment securities (unaffiliated)..................... $ 307,020,589 $68,890,346 ============= =========== Short-term securities.................................... $ -- $ 8,610,222 ============= =========== Foreign cash............................................. $ 141,067 $ -- ============= =========== #Proceeds from securities sold short....................... $ 181,301 $ -- ============= ===========
See Notes to Financial Statements 5 SunAmerica Income Funds STATEMENT OF ASSETS AND LIABILITIES -- September 30, 2004 -- (unaudited) (continued)
U.S. Government Strategic Core Bond Securities GNMA Bond Fund Fund Fund Fund ------------ --------------- ------------ ----------- Class A (unlimited shares authorized): Net assets......................................................... $156,489,529 $187,139,493 $338,607,780 $45,953,392 Shares of beneficial interest issued and outstanding............... 15,119,621 19,774,712 30,058,834 13,528,119 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge)...................... $ 10.35 $ 9.46 $ 11.26 $ 3.40 Maximum sales charge (4.75% of offering price)..................... 0.52 0.47 0.56 0.17 ------------ ------------ ------------ ----------- Maximum offering price to public................................... $ 10.87 $ 9.93 $ 11.82 $ 3.57 ============ ============ ============ =========== Class B (unlimited shares authorized): Net assets......................................................... $ 5,094,145 $ 30,087,628 $116,385,836 $34,851,552 Shares of beneficial interest issued and outstanding............... 493,410 3,177,971 10,304,148 10,265,129 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 10.32 $ 9.47 $ 11.30 $ 3.40 ============ ============ ============ =========== Class C (unlimited shares authorized): Net assets......................................................... $ 4,736,111 $ 12,274,994 $ 65,476,697 $22,957,554 Shares of beneficial interest issued and outstanding............... 458,089 1,298,290 5,791,109 6,734,020 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 10.34 $ 9.45 $ 11.31 $ 3.41 ============ ============ ============ =========== Class I (unlimited shares authorized): Net assets......................................................... $ 1,846,430 $ -- $ -- $ -- Shares of beneficial interest issued and outstanding............... 178,175 -- -- -- Net asset value, offering and redemption price per share........... $ 10.36 $ -- $ -- $ -- ============ ============ ============ =========== Class Z (unlimited shares authorized): Net assets......................................................... $ 36,625,919 $ -- $ -- $ -- Shares of beneficial interest issued and outstanding............... 3,533,705 -- -- -- Net asset value, offering and redemption price per share........... $ 10.36 $ -- $ -- $ -- ============ ============ ============ =========== Class X (unlimited shares authorized): Net assets......................................................... $ -- $ -- $ 9,496,746 $ -- Shares of beneficial interest issued and outstanding............... -- -- 841,981 -- Net asset value, offering and redemption price per share........... $ -- $ -- $ 11.28 $ -- ============ ============ ============ ===========
High Yield Tax Exempt Bond Insured Fund Fund ------------ ----------- Class A (unlimited shares authorized): Net assets......................................................... $122,280,713 $64,855,620 Shares of beneficial interest issued and outstanding............... 28,845,767 4,960,983 Net asset value and redemption price per share (excluding any applicable contingent deferred sales charge)...................... $ 4.24 $ 13.07 Maximum sales charge (4.75% of offering price)..................... 0.21 0.65 ------------ ----------- Maximum offering price to public................................... $ 4.45 $ 13.72 ============ =========== Class B (unlimited shares authorized): Net assets......................................................... $ 66,535,909 $10,475,911 Shares of beneficial interest issued and outstanding............... 15,667,721 800,830 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 4.25 $ 13.08 ============ =========== Class C (unlimited shares authorized): Net assets......................................................... $ 55,643,428 $ 5,877,093 Shares of beneficial interest issued and outstanding............... 13,051,236 449,347 Net asset value, offering and redemption price per share (excluding any applicable contingent deferred sales charge).................. $ 4.26 $ 13.08 ============ =========== Class I (unlimited shares authorized): Net assets......................................................... $ -- $ -- Shares of beneficial interest issued and outstanding............... -- -- Net asset value, offering and redemption price per share........... $ -- $ -- ============ =========== Class Z (unlimited shares authorized): Net assets......................................................... $ 81,761,491 $ -- Shares of beneficial interest issued and outstanding............... 19,254,865 -- Net asset value, offering and redemption price per share........... $ 4.25 $ -- ============ =========== Class X (unlimited shares authorized): Net assets......................................................... $ -- $ -- Shares of beneficial interest issued and outstanding............... -- -- Net asset value, offering and redemption price per share........... $ -- $ -- ============ ===========
See Notes to Financial Statements 6 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the six months ended September 30, 2004 -- (unaudited)
Core U.S. Government Bond Fund Securities Fund GNMA Fund ----------- --------------- ----------- INVESTMENT INCOME: Income: Interest* (unaffiliated).......................... $ 5,237,316 $ 5,116,418 $10,535,696 Dividends* (unaffiliated)......................... -- -- -- ----------- ----------- ----------- Total investment income......................... 5,237,316 5,116,418 10,535,696 ----------- ----------- ----------- Expenses: Investment advisory and management fees........... 638,123 767,943 1,238,850 Distribution and service maintenance fees: Class A......................................... 255,687 336,977 588,335 Class B......................................... 25,995 163,100 615,230 Class C......................................... 24,427 64,208 370,270 Service fees -- Class I........................... 2,931 -- -- Transfer agent fees: Class A......................................... 160,717 217,231 381,560 Class B......................................... 8,208 41,072 140,765 Class C......................................... 7,021 16,753 82,850 Class I......................................... 2,579 -- -- Class Z......................................... -- -- -- Class X......................................... -- -- 9,850 Registration fees: Class A......................................... 26,783 15,205 49,365 Class B......................................... 3,660 4,392 10,230 Class C......................................... 5,573 3,518 13,541 Class I......................................... -- -- -- Class Z......................................... -- -- -- Class X......................................... -- -- -- Custodian fees.................................... 43,794 40,293 90,321 Reports to shareholders........................... -- 56,600 114,267 Audit and tax fees................................ 16,824 17,592 15,180 Legal fees........................................ 3,294 3,111 9,660 Trustees' fees and expenses....................... 9,633 7,345 19,032 Interest expense.................................. -- 282 172 Interest expense on securities sold short......... -- -- -- Other expenses.................................... 7,404 7,930 12,548 ----------- ----------- ----------- Total expenses before fee waivers, expense reimbursements and custody credits............. 1,242,653 1,763,552 3,762,026 Fees waived and expenses reimbursed by investment advisor............................. (64,664) (437,212) (446,861) Custody credits earned on cash balances......... (282) (111) (11) ----------- ----------- ----------- Net expenses.................................... 1,177,707 1,326,229 3,315,154 ----------- ----------- ----------- Net investment income (loss)...................... 4,059,609 3,790,189 7,220,542 ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................. (1,287,240) (1,657,738) 1,024,499 Net realized gain (loss) on securities sold short. -- -- -- Net realized foreign exchange gain (loss) on other assets and liabilities.................... -- -- -- ----------- ----------- ----------- Net realized gain (loss) on investments and foreign currencies................................ (1,287,240) (1,657,738) 1,024,499 ----------- ----------- ----------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)................... (1,540,385) (3,086,394) (6,254,294) Change in unrealized foreign exchange gain (loss) on other assets and liabilities.......... -- -- -- Change in unrealized appreciation (depreciation) on securities sold short........................ -- -- -- ----------- ----------- ----------- Net unrealized gain (loss) on investments and foreign currencies................................ (1,540,385) (3,086,394) (6,254,294) ----------- ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currencies................ (2,827,625) (4,744,132) (5,229,795) ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ $ 1,231,984 $ (953,943) $ 1,990,747 =========== =========== =========== *Net of foreign withholding taxes on interest and dividends of...................................... $ -- $ -- $ -- =========== =========== ===========
See Notes to Financial Statements 7 SunAmerica Income Funds STATEMENT OF OPERATIONS -- For the six months ended September 30, 2004 -- (unaudited) (continued)
Strategic High Yield Tax Exempt Bond Fund Bond Fund Insured Fund ----------- ----------- ------------ INVESTMENT INCOME: Income: Interest* (unaffiliated).......................... $ 4,073,973 $14,437,760 $1,856,170 Dividends* (unaffiliated)......................... 20,381 151,758 27 ----------- ----------- ---------- Total investment income......................... 4,094,354 14,589,518 1,856,197 ----------- ----------- ---------- Expenses: Investment advisory and management fees........... 335,925 1,125,745 213,823 Distribution and service maintenance fees: Class A......................................... 75,047 187,934 114,914 Class B......................................... 175,699 338,165 70,172 Class C......................................... 108,941 252,326 29,148 Service fees -- Class I........................... 4,436 -- -- Transfer agent fees: Class A......................................... 48,473 121,249 76,702 Class B......................................... 40,274 77,185 16,818 Class C......................................... 24,440 56,971 7,073 Class I......................................... 3,975 -- -- Class Z......................................... -- -- -- Class X......................................... -- -- -- Registration fees: Class A......................................... 9,105 10,468 5,721 Class B......................................... 6,433 4,941 3,284 Class C......................................... 4,789 4,758 3,389 Class I......................................... 3,740 -- -- Class Z......................................... -- -- -- Class X......................................... -- -- -- Custodian fees.................................... 53,429 54,065 28,586 Reports to shareholders........................... 15,586 30,030 8,427 Audit and tax fees................................ 12,598 20,618 17,237 Legal fees........................................ 4,165 2,562 2,071 Trustees' fees and expenses....................... 2,773 9,256 2,929 Interest expense.................................. -- 1,940 -- Interest expense on securities sold short......... -- 6,343 -- Other expenses.................................... 5,308 7,226 4,921 ----------- ----------- ---------- Total expenses before fee waivers, expense reimbursements and custody credits............. 935,136 2,311,782 605,215 Fees waived and expenses reimbursed by investment advisor............................. (5,467) (10,214) (1,708) Custody credits earned on cash balances......... (6,414) (6,255) (283) ----------- ----------- ---------- Net expenses.................................... 923,255 2,295,313 603,224 ----------- ----------- ---------- Net investment income (loss)....................... 3,171,099 12,294,205 1,252,973 ----------- ----------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (unaffiliated).................................. 1,815,043 4,859,527 (624,849) Net realized gain (loss) on securities sold short. -- 41,040 -- Net realized foreign exchange gain (loss) on other assets and liabilities.................... (41,158) 13,024 -- ----------- ----------- ---------- Net realized gain (loss) on investments and foreign currencies................................ 1,773,885 4,913,591 (624,849) ----------- ----------- ---------- Change in unrealized appreciation (depreciation) on investments (unaffiliated)................... (2,178,551) (4,228,346) (47,193) Change in unrealized foreign exchange gain (loss) on other assets and liabilities.......... 29,834 2,694 -- Change in unrealized appreciation (depreciation) on securities sold short........................ -- (5,617) -- ----------- ----------- ---------- Net unrealized gain (loss) on investments and foreign currencies................................ (2,148,717) (4,231,269) (47,193) ----------- ----------- ---------- Net realized and unrealized gain (loss) on investments and foreign currencies................ (374,832) 682,322 (672,042) ----------- ----------- ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ $ 2,796,267 $12,976,527 $ 580,931 =========== =========== ========== * Net of foreign withholding taxes on interest and dividends of.................................. $ (4,931) $ 5,173 $ -- =========== =========== ==========
See Notes to Financial Statements 8 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS
Core Bond Fund -------------------------- For the six months ended For the year September 30, ended 2004 March 31, (unaudited) 2004 ------------- ------------ Operations: Net investment income (loss).......................................................... $ 4,059,609 $ 8,609,219 Net realized gain (loss) on investments and foreign currencies........................ (1,287,240) 7,228,394 Net unrealized appreciation (depreciation) on investments and foreign currencies...... (1,540,385) (2,724,903) ------------ ------------ Increase (decrease) in net assets resulting from operations............................. 1,231,984 13,112,710 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (3,008,604) (1,752,869) Net investment income (Class B)....................................................... (90,045) (128,070) Net investment income (Class C)....................................................... (84,576) (100,070) Net investment income (Class I)....................................................... (49,406) (539,121) Net investment income (Class Z)....................................................... (1,306,438) (6,618,532) Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- -- Net realized gain on securities (Class B)............................................. -- -- Net realized gain on securities (Class C)............................................. -- -- Net realized gain on securities (Class I)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ------------ ------------ Decrease in net assets resulting from distributions to shareholders..................... (4,539,069) (9,138,662) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (18,948,424) (99,825,778) ------------ ------------ Total increase (decrease) in net assets................................................. (22,255,509) (95,851,730) NET ASSETS: Beginning of period..................................................................... 227,047,643 322,899,373 ------------ ------------ End of period+.......................................................................... $204,792,134 $277,047,643 ============ ============ +Includes accumulated undistributed net investment income (loss)........................ $ (281,380) $ 198,080 ============ ============
U.S. Government Securities Fund -------------------------- For the six months ended For the year September 30, ended 2004 March 31, (unaudited) 2004 ------------- ------------ Operations: Net investment income (loss).......................................................... $ 3,790,189 $ 8,037,454 Net realized gain (loss) on investments and foreign currencies........................ (1,657,738) 2,311,744 Net unrealized appreciation (depreciation) on investments and foreign currencies...... (3,086,394) (2,984,953) ------------ ------------ Increase (decrease) in net assets resulting from operations............................. (953,943) 7,364,245 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (3,458,333) (6,367,993) Net investment income (Class B)....................................................... (480,277) (1,202,312) Net investment income (Class C)....................................................... (188,986) (488,725) Net investment income (Class I)....................................................... -- -- Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- -- Net realized gain on securities (Class B)............................................. -- -- Net realized gain on securities (Class C)............................................. -- -- Net realized gain on securities (Class I)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ------------ ------------ Decrease in net assets resulting from distributions to shareholders..................... (4,127,596) (8,059,030) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (21,778,001) (40,708,822) ------------ ------------ Total increase (decrease) in net assets................................................. (26,859,540) (41,403,607) NET ASSETS: Beginning of period..................................................................... 256,361,655 297,765,262 ------------ ------------ End of period+.......................................................................... $229,502,115 $256,361,655 ============ ============ +Includes accumulated undistributed net investment income (loss)........................ $ (479,660) $ (138,253) ============ ============
See Notes to Financial Statements 9 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
GNMA Fund -------------------------- For the six months ended For the year September 30, ended 2004 March 31, (unaudited) 2004 ------------- ------------ Operations: Net investment income (loss).......................................................... $ 7,220,542 $ 12,805,080 Net realized gain (loss) on investments and foreign currencies........................ 1,024,499 1,476,272 Net unrealized appreciation (depreciation) on investments and foreign currencies...... (6,254,294) (1,054,237) ------------ ------------ Increase (decrease) in net assets resulting from operations............................. 1,990,747 13,227,115 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (5,421,132) (8,229,827) Net investment income (Class B)....................................................... (1,599,612) (3,268,894) Net investment income (Class C)....................................................... (970,208) (2,301,935) Net investment income (Class I)....................................................... -- (586) Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... (153,392) (187,234) Net realized gain on securities (Class A)............................................. -- (5,268,652) Net realized gain on securities (Class B)............................................. -- (2,564,269) Net realized gain on securities (Class C)............................................. -- (1,788,770) Net realized gain on securities (Class I)............................................. -- (487) Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- (115,741) ------------ ------------ Decrease in net assets resulting from distributions to shareholders..................... (8,144,344) (23,726,395) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (34,893,907) (4,226,113) ------------ ------------ Total increase (decrease) in net assets................................................. (41,047,504) (14,725,393) NET ASSETS: Beginning of period..................................................................... 571,014,563 585,739,956 ------------ ------------ End of period+.......................................................................... $529,967,059 $571,014,563 ============ ============ +Includes accumulated undistributed net investment income (loss)........................ $ (919,603) $ 4,199 ============ ============
Strategic Bond Fund -------------------------- For the six months ended For the year September 30, ended 2004 March 31, (unaudited) 2004 ------------- ------------ Operations: Net investment income (loss).......................................................... $ 3,171,099 $ 5,727,055 Net realized gain (loss) on investments and foreign currencies........................ 1,773,885 4,382,421 Net unrealized appreciation (depreciation) on investments and foreign currencies...... (2,148,717) 4,765,239 ------------ ------------ Increase (decrease) in net assets resulting from operations............................. 2,796,267 14,874,715 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (1,417,242) (2,573,307) Net investment income (Class B)....................................................... (1,047,016) (1,914,488) Net investment income (Class C)....................................................... (649,375) (1,049,774) Net investment income (Class I)....................................................... (116,760) (233,825) Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- -- Net realized gain on securities (Class B)............................................. -- -- Net realized gain on securities (Class C)............................................. -- -- Net realized gain on securities (Class I)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ------------ ------------ Decrease in net assets resulting from distributions to shareholders..................... (3,230,393) (5,771,394) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (1,542,222) 14,052,523 ------------ ------------ Total increase (decrease) in net assets................................................. (1,976,348) 23,155,844 NET ASSETS: Beginning of period..................................................................... 105,738,846 82,583,002 ------------ ------------ End of period+.......................................................................... $103,762,498 $105,738,846 ============ ============ +Includes accumulated undistributed net investment income (loss)........................ $ 101,394 $ 160,688 ============ ============
See Notes to Financial Statements 10 SunAmerica Income Funds STATEMENT OF CHANGES IN NET ASSETS -- (continued)
High Yield Bond Fund -------------------------- For the six months ended For the year September 30, ended 2004 March 31, (unaudited) 2004 ------------- ------------ Operations: Net investment income (loss).......................................................... $ 12,294,205 $ 22,245,096 Net realized gain (loss) on investments and foreign currencies........................ 4,913,591 16,147,344 Net unrealized appreciation (depreciation) on investments and foreign currencies...... (4,231,269) 22,647,739 ------------ ------------ Increase (decrease) in net assets resulting from operations............................. 12,976,527 61,040,179 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (4,500,516) (7,714,823) Net investment income (Class B)....................................................... (2,642,735) (5,797,385) Net investment income (Class C)....................................................... (1,954,762) (3,614,674) Net investment income (Class I)....................................................... (3,549,510) (1,687) Net investment income (Class Z)....................................................... -- (6,692,901) Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- -- Net realized gain on securities (Class B)............................................. -- -- Net realized gain on securities (Class C)............................................. -- -- Net realized gain on securities (Class I)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ------------ ------------ Decrease in net assets resulting from distributions to shareholders..................... (12,647,523) (23,821,470) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) 27,504,811 47,785,931 ------------ ------------ Total increase (decrease) in net assets................................................. 27,833,815 85,004,640 NET ASSETS: Beginning of period..................................................................... 298,387,726 213,383,086 ------------ ------------ End of period+.......................................................................... $326,221,541 $298,387,726 ============ ============ +Includes accumulated undistributed net investment income (loss)........................ $ (1,681,237) $ (1,327,919) ============ ============
Tax Exempt Insured Fund -------------------------- For the six months ended For the year September 30, ended 2004 March 31, (unaudited) 2004 ------------- ------------ Operations: Net investment income (loss).......................................................... $ 1,252,973 $ 2,635,731 Net realized gain (loss) on investments and foreign currencies........................ (624,849) 1,897,409 Net unrealized appreciation (depreciation) on investments and foreign currencies...... (47,193) (129,136) ------------ ------------ Increase (decrease) in net assets resulting from operations............................. 580,931 4,404,004 ------------ ------------ Distributions to shareholders from: Net investment income (Class A)....................................................... (1,027,602) (2,009,916) Net investment income (Class B)....................................................... (171,097) (366,880) Net investment income (Class C)....................................................... (70,994) (122,956) Net investment income (Class I)....................................................... -- -- Net investment income (Class Z)....................................................... -- -- Net investment income (Class X)....................................................... -- -- Net realized gain on securities (Class A)............................................. -- (2,345,579) Net realized gain on securities (Class B)............................................. -- (558,969) Net realized gain on securities (Class C)............................................. -- (187,274) Net realized gain on securities (Class I)............................................. -- -- Net realized gain on securities (Class Z)............................................. -- -- Net realized gain on securities (Class X)............................................. -- -- ------------ ------------ Decrease in net assets resulting from distributions to shareholders..................... (1,269,693) (5,591,574) ------------ ------------ Net increase (decrease) in net assets resulting from capital share transactions (Note 6) (9,635,050) (11,118,979) ------------ ------------ Total increase (decrease) in net assets................................................. (10,323,812) (12,306,549) NET ASSETS: Beginning of period..................................................................... 91,532,436 103,838,985 ------------ ------------ End of period+.......................................................................... $ 81,208,624 $ 91,532,436 ============ ============ +Includes accumulated undistributed net investment income (loss)........................ $ (23,669) $ (6,949) ============ ============
See Notes to Financial Statements 11 SunAmerica Income Funds FINANCIAL HIGHLIGHTS
CORE BOND FUND -------------- Net gain (loss) on Net investments Net Net Asset (both Dividends Asset Assets, Value, Net realized Total from from net Total Value, end of beginning investment and investment investment Return of Distri- end of Total period Period Ended of period income(1) unrealized) operations income capital butions period Return(2) (000's) - ----------------- --------- ---------- ----------- ---------- ---------- --------- ------- ------ --------- -------- Class A - - 11/01/98-10/31/99 $10.63 $0.66 $(0.77) $(0.11) $(0.67) $ -- $(0.67) $ 9.85 (1.08)% $ 3,507 11/01/99-10/31/00 9.85 0.62 (0.21) 0.41 (0.60) (0.06) (0.66) 9.60 4.35 3,858 11/01/00-10/31/01 9.60 0.55 0.65 1.20 (0.51) -- (0.51) 10.29 12.85 5,901 11/01/01-3/31/02# 10.29 0.20 (0.48) (0.28) (0.19) -- (0.19) 9.82 (2.77) 5,312 4/01/02-3/31/03 9.82 0.34 0.58 0.92 (0.42) -- (0.42) 10.32 9.58 21,260 4/01/03-3/31/04 10.32 0.24 0.20 0.44 (0.27) -- (0.27) 10.49 4.30 140,877 4/01/04-9/30/04+ 10.49 0.19 (0.12) 0.07 (0.21) -- (0.21) 10.35 0.72 156,490 Class B - - 11/01/98-10/31/99 $10.62 $0.59 $(0.75) $(0.16) $(0.61) $ -- $(0.61) $ 9.85 (1.56)% $ 4,295 11/01/99-10/31/00 9.85 0.58 (0.24) 0.34 (0.55) (0.05) (0.60) 9.59 3.70 4,937 11/01/00-10/31/01 9.59 0.48 0.64 1.12 (0.45) -- (0.45) 10.26 11.93 6,444 11/01/01-3/31/02# 10.26 0.17 (0.49) (0.32) (0.16) -- (0.16) 9.78 (3.14) 3,220 4/01/02-3/31/03 9.78 0.31 0.55 0.86 (0.36) -- (0.36) 10.28 8.90 7,198 4/01/03-3/31/04 10.28 0.18 0.19 0.37 (0.19) -- (0.19) 10.46 3.68 5,683 4/01/04-9/30/04+ 10.46 0.16 (0.12) 0.04 (0.18) -- (0.18) 10.32 0.39 5,094 Class C* - - 11/01/98-10/31/99 $10.62 $0.59 $(0.75) $(0.16) $(0.61) $ -- $(0.61) $ 9.85 (1.56)% $ 4,593 11/01/99-10/31/00 9.85 0.57 (0.23) 0.34 (0.55) (0.05) (0.60) 9.59 3.70 2,778 11/01/00-10/31/01 9.59 0.48 0.64 1.12 (0.45) -- (0.45) 10.26 11.93 4,541 11/01/01-3/31/02# 10.26 0.18 (0.49) (0.31) (0.16) -- (0.16) 9.79 (3.04) 3,772 4/01/02-3/31/03 9.79 0.31 0.56 0.87 (0.36) -- (0.36) 10.30 9.00 5,598 4/01/03-3/31/04 10.30 0.18 0.19 0.37 (0.19) -- (0.19) 10.48 3.68 5,352 4/01/04-9/30/04+ 10.48 0.16 (0.12) 0.04 (0.18) -- (0.18) 10.34 0.39 4,736 Class I - - 7/10/00-10/31/00@ $ 9.65 $0.19 $(0.02) $ 0.17 $(0.18) $(0.02) $(0.20) $ 9.62 1.85% $ 19,971 11/01/00-10/31/01 9.62 0.57 0.65 1.22 (0.52) -- (0.52) 10.32 13.01 22,782 11/01/01-3/31/02# 10.32 0.21 (0.52) (0.31) (0.19) -- (0.19) 9.82 (3.01) 21,707 2/01/02-3/31/03 9.82 0.40 0.55 0.95 (0.44) -- (0.44) 10.33 9.80 20,617 4/01/03-3/31/04 10.33 0.20 0.24 0.44 (0.27) -- (0.27) 10.50 4.35 3,092 4/01/04-9/30/04+ 10.50 0.20 (0.12) 0.08 (0.22) -- (0.22) 10.36 0.77 1,846 Class Z* - - 7/10/00-10/31/00@ $ 9.64 $0.19 $(0.03) $ 0.16 $(0.18) $(0.02) $(0.20) $ 9.60 1.81% $317,842 11/01/00-10/31/01 9.60 0.59 0.65 1.24 (0.55) -- (0.55) 10.29 13.37 323,570 11/01/01-3/31/02# 10.29 0.21 (0.47) (0.26) (0.21) -- (0.21) 9.82 (2.57) 297,081 4/01/02-3/31/03 9.82 0.47 0.53 1.00 (0.49) -- (0.49) 10.33 10.38 268,226 4/01/03-3/31/04 10.33 0.32 0.18 0.50 (0.33) -- (0.33) 10.50 4.92 72,043 4/01/04-9/30/04+ 10.50 0.24 (0.14) 0.10 (0.24) -- (0.24) 10.36 1.01 36,626
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 1.25%(4) 4.775%(4) 43% 1.29(4) 6.45(4) 94 1.31(4) 5.51(4) 215 1.33(3)(4) 5.03(3)(4) 94 1.33(4) 3.72(4) 179 1.25(4) 2.50(4) 229 1.22(3)(4) 3.67(3)(4) 91 1.90%(4) 5.71%(4) 43% 1.95(4) 5.95(4) 94 1.97(4) 4.88(4) 215 1.98(3)(4) 4.36(3)(4) 94 1.98(4) 3.15(4) 179 1.92(4) 1.75(4) 229 1.87(3)(4) 3.02(3)(4) 91 1.90%(4) 5.70%(4) 43% 1.95(4) 5.84(4) 94 1.97(4) 4.79(4) 215 1.98(3)(4) 4.39(3)(4) 94 1.98(4) 3.13(4) 179 1.93(4) 1.77(4) 229 1.87(3)(4) 3.02(3)(4) 91 1.16%(3) 6.18%(3) 94% 1.22(4) 5.68(4) 215 1.23(3)(4) 5.12(3)(4) 94 1.24(4) 3.98(4) 179 1.23(4) 2.39(4) 229 1.12(3)(4) 3.75(3)(4) 91 0.95%(3)(4) 6.39%(3)(4) 94% 0.97(4) 5.97(4) 215 0.74(3)(4) 5.62(3)(4) 94 0.67 4.56 179 0.66(4) 2.97(4) 229 0.65(3)(4) 4.22(3)(4) 91
- -------- * In conjunction with the reorganization on November 16, 2001, Class C was redesignated as Class II and Class II was redesignated as Class Z. Effective February 23, 2004, Class II was redesignated to Class C. @ Inception date of class. # Effective November 16, 2001, the SunAmerica Core Bond, a newly created portfolio of the SunAmerica Income Funds, acquired all the assets and liabilities of the North American Core Bond Fund. + 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)Annualized (4)Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
10/31/99 10/31/00 10/31/01 3/31/02(3) 3/31/03 3/31/04 9/30/04(3)+ -------- -------- -------- ---------- ------- ------- ----------- Core Bond Fund Class A.................. 0.45% 0.49% 0.04% 0.19% 0.11% 0.10% 0.06% Core Bond Fund Class B.................. 0.49 0.50 0.03 0.32 0.23 0.15 0.26 Core Bond Fund Class C.................. 0.48 0.54 0.04 0.32 0.18 0.14 0.32 Core Bond Fund Class I.................. -- -- 0.03 0.13 0.05 0.05 0.02 Core Bond Fund Class Z.................. -- 0.01(3) 0.03 0.02 -- 0.02 0.02
See Notes to Financial Statements 12 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
U.S. GOVERNMENT SECURITIES FUND ------------------------------- Net gain (loss) on Net investments Net Net Asset (both Dividends Asset Assets, Ratio of Value, Net realized Total from from net Total Value, end of expenses beginning investment and investment investment Distri- end of Total period to average Period Ended of period income(1) unrealized) operations income butions period Return(2) (000's) net assets - ---------------- --------- ---------- ----------- ---------- ---------- ------- ------ --------- -------- ---------- Class A - - 3/31/00 $8.65 $0.44 $(0.37) $ 0.07 $(0.41) $(0.41) $8.31 0.89% $150,975 1.51% 3/31/01 8.31 0.45 0.60 1.05 (0.45) (0.45) 8.91 13.06 169,524 1.49 3/31/02 8.91 0.37(5) (0.08) 0.29 (0.40) (0.40) 8.80 3.25 187,615 1.42 3/31/03 8.80 0.37 0.86 1.23 (0.40) (0.40) 9.63 14.14 210,848 1.12(4) 3/31/04 9.63 0.30 0.01 0.31 (0.30) (0.30) 9.64 3.29 204,618 0.99(4) 4/01/04-9/30/04+ 9.64 0.16 (0.17) (0.01) (0.17) (0.17) 9.46 (0.09) 187,139 0.99(3)(4) Class B - - 3/31/00 $8.65 $0.40 $(0.38) $ 0.02 $(0.36) $(0.36) $8.31 0.23% $ 42,273 2.18% 3/31/01 8.31 0.39 0.61 1.00 (0.40) (0.40) 8.91 12.29 32,085 2.17 3/31/02 8.91 0.31(5) (0.08) 0.23 (0.34) (0.34) 8.80 2.55 38,878 2.09(4) 3/31/03 8.80 0.30 0.87 1.17 (0.33) (0.33) 9.64 13.51 62,595 1.76(4) 3/31/04 9.64 0.24 0.01 0.25 (0.24) (0.24) 9.65 2.62 36,605 1.64(4) 4/01/04-9/30/04+ 9.65 0.13 (0.17) (0.04) (0.14) (0.14) 9.47 (0.41) 30,088 1.64(3)(4) Class C* - - 6/01/99-3/31/00@ $8.49 $0.31 $(0.20) $ 0.11 $(0.28) $(0.28) $8.32 1.30% $ 907 2.20%(3)(4) 3/31/01 8.32 0.37 0.61 0.98 (0.39) (0.39) 8.91 12.10 3,303 2.20(4) 3/31/02 8.91 0.29(5) (0.09) 0.20 (0.32) (0.32) 8.79 2.40 12,209 2.10(4) 3/31/03 8.79 0.30 0.87 1.17 (0.33) (0.33) 9.63 13.52 24,322 1.75(4) 3/31/04 9.63 0.24 0.01 0.25 (0.24) (0.24) 9.64 2.62 15,139 1.64(4) 4/01/04-9/30/04+ 9.64 0.13 (0.18) (0.05) (0.14) (0.14) 9.45 (0.52) 12,275 1.64(3)(4)
Ratio of net investment income to average Portfolio net assets Turnover - ---------- --------- 5.33% 717% 5.27 1,561 4.12(5) 570 3.88(4) 614 3.14(4) 256 3.31(3)(4) 144 4.69% 717% 4.59 1,561 3.42(4)(5) 570 3.20(4) 614 2.45(4) 256 2.66(3)(4) 144 4.50%(3)(4) 717% 4.48(4) 1,561 3.33(4)(5) 570 3.18(4) 614 2.45(4) 256 2.66(3)(4) 144
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. @ Inception date of class. + 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) Annualized (4) Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
3/31/00 3/31/01 3/31/02 3/31/03 3/31/04 9/30/04(3)+ ------- ------- ------- ------- ------- ----------- U.S. Government Securities Fund Class A. -- % -- % -- % 0.21% 0.37% 0.36% U.S. Government Securities Fund Class B. -- -- 0.01 0.23 0.37 0.40 U.S. Government Securities Fund Class C. 0.86(3) 1.18 0.16 0.27 0.38 0.43
(5)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The per share effect of this change for the year ended March 31, 2002 on investment income and realized and unrealized gains and losses was less than $0.01 per share for all classes of shares. The effect of this change was to decrease the ratio of net investment income to average net assets by 0.11% for all classes of shares. Per share data and ratios for periods prior to March 31, 2002 have not been restated to reflect this change in accounting policy. See Notes to Financial Statements 13 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
GNMA FUND --------- Net gain (loss) on Net investments Net Net Asset (both Dividends Distributions Asset Assets, Value, Net realized Total from from net from net Total Value, end of beginning investment and investment investment realized Distri- end of Total period Period Ended of period income(1) unrealized) operations income gains butions period Return(2) (000's) - ---------------- --------- ---------- ----------- ---------- ---------- ------------- ------- ------ --------- -------- Class A - - 3/31/00 $10.68 $0.53 $(0.29) $0.24 $(0.50) $ -- $(0.50) $10.42 2.40% $ 44,155 3/31/01 10.42 0.61 0.72 1.33 (0.62) (0.01) (0.63) 11.12 13.10 72,092 3/31/02 11.12 0.51(6) (0.03) 0.48 (0.51) (0.32) (0.83) 10.77 4.45 118,440 3/31/03 10.77 0.37 0.93 1.30 (0.42) (0.11) (0.53) 11.54 12.29 255,096 3/31/04 11.54 0.28 0.07 0.35 (0.31) (0.20) (0.51) 11.38 3.06 337,467 4/01/04-9/30/04+ 11.38 0.16 (0.10) 0.06 (0.18) -- (0.18) 11.26 0.56 338,608 Class B - - 3/31/00 $10.72 $0.46 $(0.30) $0.16 $(0.44) $ -- $(0.44) $10.44 1.55% $ 22,376 3/31/01 10.44 0.53 0.74 1.27 (0.55) (0.01) (0.56) 11.15 12.45 38,190 3/31/02 11.15 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.80 3.78 90,011 3/31/03 10.80 0.30 0.93 1.23 (0.35) (0.11) (0.46) 11.57 11.54 189,323 3/31/04 11.57 0.21 0.06 0.27 (0.23) (0.20) (0.43) 11.41 2.39 136,923 4/01/04-9/30/04+ 11.41 0.13 (0.10) 0.03 (0.14) -- (0.14) 11.30 0.32 116,386 Class C* - - 6/01/99-3/31/00@ $10.52 $0.37 $(0.09) $0.28 $(0.34) $ -- $(0.34) $10.46 2.72% $ 1,406 3/31/01 10.46 0.49 0.77 1.26 (0.55) (0.01) (0.56) 11.16 12.33 15,851 3/31/02 11.16 0.44(6) (0.03) 0.41 (0.44) (0.32) (0.76) 10.81 3.78 36,258 3/31/03 10.81 0.29 0.94 1.23 (0.35) (0.11) (0.46) 11.58 11.53 137,173 3/31/04 11.58 0.20 0.07 0.27 (0.23) (0.20) (0.43) 11.42 2.39 88,184 4/01/04-9/30/04+ 11.42 0.13 (0.10) 0.03 (0.14) -- (0.14) 11.31 0.32 65,477 Class X - - 3/19/02-3/31/02@ $10.80 $0.02(6) $(0.01) $0.01 $(0.02) $ -- $(0.02) $10.79 0.08% $ 106 3/31/03 10.79 0.36 0.95 1.31 (0.44) (0.11) (0.55) 11.55 12.36 4,107 3/31/04 11.55 0.32 0.06 0.38 (0.34) (0.20) (0.54) 11.39 3.31 8,441 4/01/04-9/30/04+ 11.39 0.17 (0.09) 0.08 (0.19) -- (0.19) 11.28 0.76 9,497
Ratio of net Ratio of investment expenses income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 1.37% 5.06% 910% 0.99(5) 5.78(5) 833 0.99(4)(5) 4.61(4)(5)(6) 537 0.99(5) 3.36(5) 421 0.99(5) 2.51(5) 213 0.99(3)(5) 2.88%(3)(5) 114 2.03% 4.41% 910% 1.64(5) 5.11(5) 833 1.64(4)(5) 3.96(4)(5)(6) 537 1.64(5) 2.71(5) 421 1.64(5) 1.77(5) 213 1.64(3)(5) 2.26(3)(5) 114 2.10%(3)(5) 4.34%(3)(5) 910% 1.64(5) 4.99(5) 833 1.64(4)(5) 3.96(4)(5)(6) 537 1.64(5) 2.59(5) 421 1.64(5) 1.74(5) 213 1.64(3)(5) 2.28(3)(5) 114 0.89%(3)(4)(5) 3.84%(3)(4)(5)(6) 537% 0.78(5) 3.31(5) 421 0.75(5) 2.88(5) 213 0.77(3) 3.09(3) 114
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. @ Inception date of class. + 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)Annualized (4)The ratios reflect an expense cap of 0.99%, 1.64% and 1.64% for Class A, Class B and Class C, respectively, which are net of custody credits of 0.01% for Class A, Class B, and Class C or waivers/reimbursements if applicable. Custody credits for Class X are less than 0.01%. (5)Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
3/31/00 3/31/01 3/31/02 3/31/03 3/31/04 9/30/04(3)+ ------- ------- ------- ------- ------- ----------- GNMA Fund Class A -- % 0.30% 0.19% 0.13% 0.18% 0.17% GNMA Fund Class B -- 0.33 0.19 0.14 0.16 0.16 GNMA Fund Class C 1.98(3) 0.62 0.21 0.13 0.16 0.17 GNMA Fund Class X -- -- 56.17(3) 0.37 0.03 --
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The per share effect of this change for the year ended March 31, 2002 on investment income and realized and unrealized gains and losses was less than $0.01 per share on all classes of shares. The effect of this change was to decrease the ratio of net investment income to average net assets by 0.03% for all classes of shares. Per share data and ratios for periods prior to March 31, 2002 have not been restated to reflect this change in accounting policy. See Notes to Financial Statements 14 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
STRATEGIC BOND FUND** --------------------- Net gain (loss) on Net investments Dividends Net Asset (both Dividends from net Asset Value, Net realized Total from from net realized Total Value, beginning investment and investment investment gain on Return of Distri- end of Total Period Ended of period+ income(1)+ unrealized)+ operations+ income+ investments+ capital+ butions period+ Return(2) - ----------------- ---------- ---------- ------------ ----------- ---------- ------------ --------- ------- ------- --------- Class A - - 11/01/98-10/31/99 $3.52 $0.28 $(0.20) $0.08 $(0.29) $(0.02) $ -- $(0.31) $3.29 2.10% 11/01/99-10/31/00 3.29 0.28 (0.14) 0.14 (0.26) -- (0.04) (0.30) 3.13 4.09 11/01/00-10/31/01 3.13 0.28 (0.09) 0.19 (0.28) -- -- (0.28) 3.04 6.48 11/01/01-3/31/02 3.04 0.11(6) (0.03) 0.08 (0.12) -- -- (0.12) 3.00 2.46 4/01/02-3/31/03 3.00 0.20 0.06 0.26 (0.18) -- -- (0.18) 3.08 9.07(7) 4/01/03-3/31/04 3.08 0.21 0.33 0.54 (0.21) -- -- (0.21) 3.41 18.04 4/01/04-9/30/04++ 3.41 0.11 (0.01) 0.10 (0.11) -- -- (0.11) 3.40 3.05 Class B - - 11/01/98-10/31/99 $3.53 $0.26 $(0.21) $0.05 $(0.26) $(0.02) $ -- $(0.28) $3.30 1.56% 11/01/99-10/31/00 3.30 0.26 (0.14) 0.12 (0.24) -- (0.04) (0.28) 3.14 3.33 11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- -- (0.26) 3.05 5.65 11/01/01-3/31/02 3.05 0.10(6) (0.04) 0.06 (0.11) -- -- (0.11) 3.00 2.05 4/01/02-3/31/03 3.00 0.18 0.06 0.24 (0.16) -- -- (0.16) 3.08 8.36(7) 4/01/03-3/31/04 3.08 0.19 0.33 0.52 (0.19) -- -- (0.19) 3.41 17.29 4/01/04-9/30/04++ 3.41 0.10 (0.01) 0.09 (0.10) -- -- (0.10) 3.40 2.72 Class C* - - 11/01/98-10/31/99 $3.53 $0.26 $(0.20) $0.06 $(0.26) $(0.02) $ -- $(0.28) $3.31 1.56% 11/01/99-10/31/00 3.31 0.26 (0.16) 0.10 (0.24) -- (0.03) (0.27) 3.14 3.32 11/01/00-10/31/01 3.14 0.26 (0.09) 0.17 (0.26) -- -- (0.26) 3.05 5.65 11/01/01-3/31/02 3.05 0.10(6) (0.03) 0.07 (0.11) -- -- (0.11) 3.01 2.25 4/01/02-3/31/03 3.01 0.19 0.05 0.24 (0.16) -- -- (0.16) 3.09 8.47(7) 4/01/03-3/31/04 3.09 0.19 0.34 0.53 (0.20) -- -- (0.20) 3.42 17.43 4/01/04-9/30/04++ 3.42 0.10 (0.01) 0.09 (0.10) -- -- (0.10) 3.41 2.72
Ratio Net of net Assets, Ratio of investment end of expense income to period to average average Portfolio (000's) net assets net assets Turnover - ------- ---------- ---------- --------- $ 8,997 1.50%(5) 8.21%(5) 119% 6,439 1.55(5) 8.70(5) 46 8,478 1.57(5) 9.07(5) 49 35,365 1.52(3)(4)(5) 8.09(3)(4)(5)(6) 99 37,136 1.62(8) 6.93(8) 65 43,840 1.55(5)(9) 6.41(9) 69 45,953 1.43(4)(5)(8) 6.49(4)(5)(8) 106 $21,340 2.15%(5) 7.58%(5) 119% 15,131 2.20(5) 8.00(5) 46 9,964 2.21(5) 8.41(5) 49 26,892 2.19(3)(4)(5) 7.48(3)(4)(5)(6) 99 27,879 2.28(8) 6.26(8) 65 36,110 2.19(5)(9) 5.76(5)(9) 69 34,852 2.08(4)(5)(8) 5.85(4)(5)(8) 106 $20,749 2.15%(5) 7.57%(5) 119% 13,056 2.20(5) 8.04(5) 46 11,461 2.22(5) 8.41(5) 49 14,289 2.22(3)(4)(5) 7.34(3)(4)(5)(6) 99 14,423 2.17(5)(8) 6.37(5)(8) 65 22,064 2.16(5)(9) 5.78(5)(9) 69 22,958 2.08(4)(5)(8) 5.89(4)(5)(8) 106
- -------- * In conjunction with the reorganization on November 16, 2001, Class C was redesignated as Class II. Effective February 23, 2004, Class II was redesignated to Class C. ** The financial information for the fiscal periods prior to November 16, 2001 reflect the financial information of the North American Strategic Income Fund, which was reorganized in SunAmerica Strategic Bond Fund on that date. + Prior to the fund merger, the North American Strategic Income Fund issued a stock split. The per share information for all periods prior to the stock split have been restated. For amounts reflecting activity subsequent to November 16, 2001, no restatement was necessary. ++ Unaudited (1)Calculated based upon average shares outstanding. (2)Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3)The ratios reflect an expense cap of 2.22%, for Class C, which is net of custody credits of 0.02% for Class C. Class A and Class B are gross of custody credits of 0.03% for the period ended March 31, 2002. (4)Annualized (5)Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
10/31/99 10/31/00 10/31/01 03/31/02(4) 3/31/03 3/31/04 9/30/04(4)++ -------- -------- -------- ----------- ------- ------- ------------ Strategic Bond Fund Class A............. 0.17% 0.32% 0.17% 0.01% -- % 0.02% 0.01% Strategic Bond Fund Class B............. 0.17 0.32 0.18 0.01 -- 0.02 0.01 Strategic Bond Fund Class C............. 0.17 0.32 0.17 0.08 0.11 0.02 0.01
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The effect of this change for the year ended March 31, 2002 on net investment income and realized and unrealized gains and losses was less than $0.01 per share for all classes. The effect of this change on the ratio of net investment income to average net asset was less than 0.01% for all classes. Per share data and ratios for the periods prior to March 31, 2002 have not been restated to reflect this change in accounting policy. (7)Total return for each class was increased by less than 0.01% from reimbursements for losses realized on the disposal of investments in violation of investment restrictions. (8)Net of custody credits of 0.01%. (9)Gross of custody credits of 0.02%. See Notes to Financial Statements 15 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
HIGH YIELD BOND FUND** ---------------------- Net gain (loss) on Net investments Net Asset (both Dividends Asset Net Assets, Value, Net realized Total from from net Total Value, end of beginning investment and investment investment Distri- end of Total period Period Ended of period+ income(1)+ unrealized)+ operations+ income+ butions period+ Return(2) (000's) - ----------------- ---------- ---------- ------------ ----------- ---------- ------- ------- --------- ----------- Class A - - 11/01/98-10/31/99 $5.63 $0.46 $(0.32) $ 0.14 $(0.46) $(0.46) $5.31 2.28% $ 34 11/01/99-10/31/00 5.31 0.50 (0.49) 0.01 (0.50) (0.50) 4.82 0.04 286 11/01/00-10/31/01 4.82 0.44 (0.55) (0.11) (0.46) (0.46) 4.25 (2.23) 722 11/01/01-3/31/02 4.25 0.18(6) (0.11) 0.07 (0.19) (0.19) 4.13 1.67 59,075 4/01/02-3/31/03 4.13 0.37 (0.49) (0.12) (0.35) (0.35) 3.66 (2.45) 66,521 4/01/03-3/31/04 3.66 0.33 0.60 0.93 (0.36) (0.36) 4.23 26.05 93,818 4/01/04-9/30/04++ 4.23 0.16 0.03 0.19 (0.18) (0.18) 4.24 4.53 122,281 Class B - - 11/01/98-10/31/99 $5.64 $0.42 $(0.32) $ 0.10 $(0.42) $(0.42) $5.32 1.53% $ 652 11/01/99-10/31/00 5.32 0.46 (0.50) (0.04) (0.46) (0.46) 4.82 (0.83) 1,594 11/01/00-10/31/01 4.82 0.41 (0.54) (0.13) (0.43) (0.43) 4.26 (2.84) 2,911 11/01/01-3/31/02 4.26 0.16(6) (0.11) 0.05 (0.18) (0.18) 4.13 1.23 67,599 4/01/02-3/31/03 4.13 0.35 (0.49) (0.14) (0.33) (0.33) 3.66 (3.06) 57,596 4/01/03-3/31/04 3.66 0.31 0.60 0.91 (0.33) (0.33) 4.24 25.55 73,751 4/01/04-9/30/04++ 4.24 0.16 0.01 0.17 (0.16) (0.16) 4.25 4.24 66,536 Class C* - - 8/21/00-10/31/00@ $5.09 $0.11 $(0.28) $(0.17) $(0.09) $(0.09) $4.83 (3.29)% $ 545 11/01/00-10/31/01 4.83 0.40 (0.52) (0.12) (0.44) (0.44) 4.27 (2.84) 2,274 11/01/01-3/31/02 4.27 0.17(6) (0.11) 0.06 (0.18) (0.18) 4.15 1.43 20,670 4/01/02-3/31/03 4.15 0.34 (0.48) (0.14) (0.33) (0.33) 3.68 (2.97) 27,814 4/01/03-3/31/04 3.68 0.30 0.60 0.90 (0.33) (0.33) 4.25 25.14 52,868 4/01/04-9/30/04++ 4.25 0.16 0.01 0.17 (0.16) (0.16) 4.26 4.19 55,643 Class Z* - - 11/01/98-10/31/99 $5.64 $0.49 $(0.32) $ 0.17 $(0.49) $(0.49) $5.32 2.74% $ 62,506 11/01/99-10/31/00 5.32 0.54 (0.51) 0.03 (0.52) (0.52) 4.83 0.30 62,702 11/01/00-10/31/01 4.83 0.47 (0.57) (0.10) (0.48) (0.48) 4.25 (2.07) 61,451 11/01/01-3/31/02 4.25 0.19(6) (0.11) 0.08 (0.20) (0.20) 4.13 1.98 62,245 4/01/02-3/31/03 4.13 0.39 (0.49) (0.10) (0.37) (0.37) 3.66 (1.84) 61,439 4/01/03-3/31/04 3.66 0.36 0.59 0.95 (0.38) (0.38) 4.23 26.83 77,951 4/01/04-9/30/04++ 4.23 0.22 (0.01) 0.21 (0.19) (0.19) 4.25 5.09 81,761
Ratio of net Ratio of investment expense income to to average average Portfolio net assets net assets Turnover - ---------- ---------- --------- 1.25%(5) 5.69%(5) 72% 1.38(5) 10.13(5) 57 1.57(5) 9.73(5) 83 1.48(3)(4) 9.56(3)(4)(6) 61 1.56 10.26 117 1.49 8.15 126 1.41(4)(5) 8.13(4)(5) 46 2.00%(5) 7.30%(5) 72% 2.10(5) 9.41(5) 57 2.21(5) 9.17(5) 83 2.12(3)(4) 8.91(3)(4)(6) 61 2.18 9.63 117 2.14 7.52 126 2.06(4)(5) 7.56(4)(5) 46 2.07%(4) 9.10%(4) 57% 2.21(5) 9.02(5) 83 2.17(3)(4)(5) 8.86(3)(4)(5)(6) 61 2.15(5) 9.67(5) 117 2.11(5) 7.53(5) 126 2.06(4)(5) 7.54(4)(5) 46 0.88%(5) 8.84%(5) 72% 0.96(5) 10.41(5) 57 1.15(5) 10.45(5) 83 0.93(3)(4)(5) 10.04(3)(4)(5)(6) 61 0.92(5) 10.90(5) 117 0.88(5) 8.80(5) 126 0.82(4)(5) 8.80(4)(5) 46
- -------- * In conjunction with the reorganization on November 16, 2001, Class C was redesignated as Class II and Class II was redesignated as Class Z. Effective February 23, 2004, Class II was redesignated to Class C. ** The financial information for the fiscal periods prior to November 16, 2001 reflect the financial information of the North American High Yield Bond Fund, which was reorganized in SunAmerica High Yield Bond Fund on that date. + Prior to the fund merger, the North American High Yield Bond Fund issued a stock split. The per share information for all periods prior to the stock split have been restated. For amounts subsequent to November 16, 2001, no restatement was necessary. See Note 2 for further discussion. ++ Unaudited @ Inception date of class. (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)Gross of custody credits of 0.01%. (4)Annualized (5)Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
10/31/99 10/31/00 10/31/01 3/31/02(4) 3/31/03 3/31/04 9/30/04(4)+ -------- -------- -------- ---------- ------- ------- ----------- High Yield Bond Fund Class A............ 0.76% 0.43% 0.18% -- % -- % -- % 0.01% High Yield Bond Fund Class B............ 0.37 0.42 0.18 -- -- -- 0.01 High Yield Bond Fund Class C............ -- -- 0.18 0.01 0.10 0.01 0.01 High Yield Bond Fund Class Z............ 0.47 0.60 0.18 0.03 0.03 0.00 0.01
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The effect of this change for the year ended March 31, 2002 on net investment income and realized and unrealized gains and losses was less than $0.01 per share for all classes. The effect of this change on the ratio of net investment income to average net assets was less than 0.01%. Per share data and ratios for the years prior to March 31, 2002 have not been restated to reflect this change in accounting policy. See Notes to Financial Statements 16 SunAmerica Income Funds FINANCIAL HIGHLIGHTS -- (continued)
TAX EXEMPT INSURED FUND ----------------------- Net gain (loss) on Net investments Asset (both Dividends Value, Net realized Total from from net Distributions Total beginning investment and investment investment from net Distri- Period Ended of period income(1) unrealized) operations income realized gains butions - ------------------------------------------------- --------- ---------- ----------- ---------- ---------- -------------- ------- Class A ------- 3/31/00 $13.07 $0.55 $(0.71) $(0.16) $(0.54) $ -- $(0.54) 3/31/01 12.37 0.56 0.66 1.22 (0.57) -- (0.57) 3/31/02 13.02 0.52(6) (0.30) 0.22 (0.52) -- (0.52) 3/31/03 12.72 0.41 0.73 1.14 (0.43) (0.09) (0.52) 3/31/04 13.34 0.39 0.24 0.63 (0.37) (0.44) (0.81) 4/01/04-9/30/04+ 13.16 0.20 (0.09) 0.11 (0.20) -- (0.20) Class B ------- 3/31/00 $13.07 $0.47 $(0.71) $(0.24) $(0.46) $ -- $(0.46) 3/31/01 12.37 0.47 0.66 1.13 (0.48) -- (0.48) 3/31/02 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43) 3/31/03 12.72 0.32 0.73 1.05 (0.34) (0.09) (0.43) 3/31/04 13.34 0.30 0.23 0.53 (0.27) (0.44) (0.71) 4/01/04-9/30/04+ 13.16 0.16 (0.08) 0.08 (0.16) -- (0.16) Class C* -------- 6/01/99-3/31/00@ $12.83 $0.37 $(0.47) $(0.10) $(0.36) $ -- $(0.36) 3/31/01 12.37 0.47 0.66 1.13 (0.48) -- (0.48) 3/31/02 13.02 0.41(6) (0.28) 0.13 (0.43) -- (0.43) 3/31/03 12.72 0.31 0.74 1.05 (0.34) (0.09) (0.43) 3/31/04 13.34 0.30 0.24 0.54 (0.28) (0.44) (0.72) 4/01/04-9/30/04+ 13.16 0.15 (0.07) 0.08 (0.16) -- (0.16)
Ratio Net Net of net Asset Assets, Ratio of investment Value, end of expenses income to end of Total period to average average Portfolio Period Ended period Return(2) (000's) net assets net assets Turnover - ------------------------------------------------- ------ --------- ------- ---------- ---------- --------- 3/31/00 $12.37 (1.20)% $68,650 1.28% 4.41% 33% 3/31/01 13.02 10.08 72,394 1.26 4.41 24 3/31/02 12.72 1.70 75,071 1.29(3) 3.99(3)(6) 140 3/31/03 13.34 9.08 78,358 1.24 3.12 195 3/31/04 13.16 4.86 69,098 1.26 2.90 131 4/01/04-9/30/04+ 13.07 0.89 64,856 1.25(4) 3.09(4) 89 3/31/00 $12.37 (1.83)% $16,269 1.92% 3.77% 33% 3/31/01 13.02 9.31 16,302 1.97 3.71 24 3/31/02 12.72 0.95 18,090 2.04(3) 3.22(3)(6) 140 3/31/03 13.34 8.30 19,031 1.97 2.39 195 3/31/04 13.16 4.10 16,632 1.96 2.20 131 4/01/04-9/30/04+ 13.08 0.62 10,476 1.94(4) 2.40(4) 89 6/01/99-3/31/00@ $12.37 (0.76)% $ 577 1.95%(4)(5) 3.82%(4)(5) 33% 3/31/01 13.02 9.32 721 1.95(5) 3.73(5) 24 3/31/02 12.72 0.99 4,095 1.95(3)(5) 3.21(3)(5)(6) 140 3/31/03 13.34 8.32 6,451 1.95(5) 2.40(5) 195 3/31/04 13.16 4.14 5,803 1.95(5) 2.21(5) 131 4/01/04-9/30/04+ 13.08 0.61 5,877 1.95(4)(5) 2.39(4)(5) 89
- -------- * Effective February 23, 2004, Class II was redesignated to Class C. @ Inception date of class. + Unaudited (1) Calculated based upon average shares outstanding. (2) Total return is not annualized and does not reflect sales load, but does include expense reimbursements. (3) The ratios for Class C reflects an expense cap of 1.95%, which is net of custody credits of 0.01%. Ratios for Class A and Class B are gross of custody credits of 0.01%. (4) Annualized (5) Net of the following expense reimbursements and custody credits, if applicable (based on average net assets):
3/31/00(4) 3/31/01 3/31/02 3/31/03 3/31/04 9/30/04(4)+ ---------- ------- ------- ------- ------- ----------- Tax Exempt Insured Fund Class C......... 5.20% 1.59% 0.56% 0.00% 0.12% 0.06%
(6)The Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The effect of this change for the year ended March 31, 2002 on net investment income and net realized and unrealized gains and losses was less than $0.01 per share for all classes. The effect of this change on the ratio of net investment income to average net assets was less than 0.01%. Per share date and ratios for the years prior to March 31, 2002 have not been restated to reflect this change in accounting policy. See Notes to Financial Statements 17 SunAmerica Core Bond Fund PORTFOLIO PROFILE -- September 30, 2004 -- (unaudited) Industry Allocation* Federal National Mortgage Association... 20.9% Federal Home Loan Mortgage Corporation.. 20.3% Financial Services...................... 17.3% Utilities............................... 6.4% Telecommunications...................... 4.5% Banks................................... 4.2% Broadcasting & Media.................... 4.0% U.S. Treasury Bonds..................... 3.5% Leisure & Tourism....................... 2.5% Foreign Government Agency............... 2.4% Repurchase Agreement.................... 2.1% Energy Sources.......................... 1.6% Insurance............................... 1.6% Retail Stores........................... 1.4% Automotive.............................. 1.3% Forest Products......................... 1.1% Metals & Mining......................... 1.1% Pharmaceuticals......................... 1.0% Chemicals............................... 0.8% Aerospace & Military Technology......... 0.7% Food, Beverage & Tobacco................ 0.7% Communication Equipment................. 0.6% Federal Farm Credit Bank................ 0.6% Transportation.......................... 0.6% Business Services....................... 0.5% Computes & Business Equipment........... 0.5% Federal Home Loan Bank.................. 0.5% Health Services......................... 0.5% Real Estate Investment Trusts........... 0.5% Conglomerate............................ 0.4% Government National Mortgage Association 0.2% Household Products...................... 0.2% Energy Services......................... 0.1% Machinery............................... 0.1% ----- 104.7% =====
Credit Quality+# Government -- Treasury 3.5% Government -- Agency.. 41.9% AAA................... 5.2% AA.................... 2.1% A..................... 12.9% BBB................... 18.4% BB.................... 4.2% B..................... 5.3% CCC................... 3.0% Not Rated@............ 3.5% ----- 100.0% =====
* Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 18 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ BONDS & NOTES -- 41.8% Aerospace & Military Technology -- 0.7% Goodrich Corp. Sr. Notes 6.45% due 12/15/07........................ $ 289,000 $ 312,010 Northrop Grumman Corp. Notes 4.08% due 11/16/06........................ 663,000 673,537 Northrop Grumman Corp. Guaranteed Sr. Notes 7.13% due 02/15/11........................ 171,000 196,558 Raytheon Co. Notes 4.85% due 01/15/11........................ 208,000 213,527 ---------- 1,395,632 ---------- Automotive -- 1.4% Ford Motor Co. Notes 7.45% due 07/16/31........................ 1,114,000 1,092,310 General Motors Corp. Notes 7.20% due 01/15/11........................ 373,000 395,032 General Motors Corp. Sr. Debentures 8.25% due 07/15/23........................ 284,000 298,741 Hertz Corp. Sr. Notes 4.70% due 10/02/06........................ 517,000 526,925 Hertz Corp. Notes 6.35% due 06/15/10........................ 272,000 281,820 Hertz Corp. Notes 6.90% due 08/15/14........................ 190,000 197,968 ---------- 2,792,796 ---------- Banks -- 4.3% American Express Centurion Bank Notes 4.38% due 07/30/09........................ 272,000 277,911 Bank of America Corp. Notes 4.25% due 10/01/10........................ 500,000 501,299 BankBoston Capital Trust IV Guaranteed Capital Securities 2.45% due 12/08/04(6)..................... 622,000 599,323 Downey Financial Corp. Notes 6.50% due 07/01/14........................ 576,000 603,205 Dresdner Funding Trust I Silent Partnership Certificate 8.15% due 06/30/31*....................... 603,000 728,766 Emigrant Capital Trust Guaranteed Notes 4.43% due 12/10/04(6)*.................... 959,000 950,808 First Maryland Capital II Guaranteed Sub. Capital Income Securities 2.54% due 11/01/04(6)..................... 508,000 493,082
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ Banks (continued) Huntington National Bank Sr. Notes 4.65% due 06/30/09.................. $ 272,000 $ 279,142 Key Bank NA Sr. Notes 4.10% due 06/30/05.................. 232,000 235,147 Key Bank NA Sub. Notes 7.00% due 02/01/11.................. 249,000 278,973 KeyCorp Notes 2.75% due 02/27/07.................. 579,000 573,279 National City Bank Notes 2.50% due 04/17/06.................. 534,000 532,867 PNC Funding Corp. Guaranteed Sr. Notes 5.75% due 08/01/06.................. 565,000 591,947 RBS Capital Trust IV Trust Preferred Securities 2.78% due 12/30/04(6)............... 275,000 276,919 US Bank NA Notes 3.70% due 08/01/07.................. 543,000 548,543 Wachovia Corp. Sub. Debentures 7.50% due 04/15/35.................. 366,000 456,336 Washington Mutual Bank FA Sub. Notes 5.65% due 08/15/14.................. 76,000 78,783 Wells Fargo & Co. Sub. Notes 5.13% due 09/01/12.................. 382,000 392,628 World Savings Bank FSB Sr. Notes 4.50% due 06/15/09.................. 327,000 335,040 ---------- 8,733,998 ---------- Broadcasting & Media -- 3.6% Cablevision Systems Corp. Sr. Notes 8.00% due 04/15/12*................. 375,000 391,875 Charter Communications Holdings, LLC Sr. Sub. Notes 11.13% due 01/15/11................. 975,000 789,750 Clear Channel Communications, Inc. Sr. Notes 5.75% due 01/15/13.................. 354,000 363,600 Clear Channel Communications, Inc. Sr. Notes 6.00% due 11/01/06.................. 272,000 285,615 Comcast Cable Commerce, Inc. Sr. Notes 6.88% due 06/15/09.................. 159,000 176,723 Cox Communications, Inc. Tranche Trust 6.85% due 01/15/18.................. 285,000 289,685 Cox Communications, Inc. Notes 7.75% due 08/15/06.................. 408,000 437,662
19 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------- BONDS & NOTES (continued) Broadcasting & Media (continued) CSC Holdings, Inc. Sr. Notes, Series B 7.63% due 04/01/11.............. $ 25,000 $ 26,344 CSC Holdings, Inc. Sr. Debentures 7.88% due 02/15/18.............. 225,000 232,312 Insight Communications Co., Inc. Sr. Sub. Disc. Notes 12.25% due 02/15/11(5).......... 1,250,000 1,168,750 Liberty Media Corp. Sr. Notes 3.38% due 12/15/04(6)........... 579,000 585,201 News America Holdings, Inc. Guaranteed Sr. Notes 7.75% due 12/01/45.............. 264,000 312,832 News America, Inc. Guaranteed Sr. Debentures 7.63% due 11/30/28.............. 422,000 493,202 TCI Communications, Inc. Notes 6.88% due 02/15/06.............. 271,000 284,139 TCI Communications, Inc. Sr. Debentures 8.75% due 08/01/15.............. 391,000 487,367 Time Warner, Inc. Guaranteed Sr. Notes 6.13% due 04/15/06.............. 321,000 335,602 Time Warner, Inc. Guaranteed Sr. Notes 6.88% due 06/15/18.............. 165,000 180,292 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 10.00% due 03/01/11............. 450,000 463,500 ---------- 7,304,451 ---------- Business Services -- 0.5% Allied Waste North America, Inc. Guaranteed Sr. Secures Notes 5.75% due 02/15/11.............. 344,000 326,800 USA Waste Services, Inc. Sr. Notes 7.00% due 07/15/28.............. 331,000 366,312 Waste Management, Inc. Guaranteed Sr. Notes 7.38% due 05/15/29.............. 246,000 282,565 ---------- 975,677 ---------- Chemicals -- 0.8% Huntsman, LLC Sr. Sec. Notes 11.63% due 10/15/10............. 450,000 520,875 ICI North America, Inc. Debentures 8.88% due 11/15/06.............. 42,000 46,411 Lubrizol Corp. Sr. Debenture 6.50% due 10/01/34.............. 362,000 353,137 Rohm & Haas Co. Sr. Debentures 7.85% due 07/15/29.............. 394,000 501,900
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- Chemicals (continued) RPM International, Inc. Sr. Notes 4.45% due 10/15/09*.................. $ 281,000 $ 279,387 ---------- 1,701,710 ---------- Communication Equipment -- 0.6% Pacific Bell Notes 6.63% due 10/15/34................... 620,000 630,444 Rural Cellular Corp. Sr. Sub. Notes 9.75% due 01/15/10................... 700,000 609,000 ---------- 1,239,444 ---------- Computers & Business Equipment -- 0.5% Computer Sciences Corp. Notes 6.75% due 06/15/06................... 321,000 340,876 International Business Machines Corp. Sr. Debentures 6.22% due 08/01/27................... 309,000 331,816 Xerox Corp. Sr. Notes 6.88% due 08/15/11................... 350,000 365,750 ---------- 1,038,442 ---------- Conglomerate -- 0.3% Tyco International Group SA Participation Certificates 4.44% due 06/15/07*.................. 544,000 555,914 ---------- Energy Services -- 0.2% Hanover Compressor Co. Sub. Notes zero coupon due 03/31/07............. 375,000 316,875 ---------- Energy Sources -- 1.5% Amerada Hess Corp. Notes 6.65% due 08/15/11................... 488,000 538,801 Chesapeake Energy Corp. Guaranteed Sr. Notes 7.75% due 01/15/15................... 550,000 599,500 Conoco, Inc. Sr. Notes 6.95% due 04/15/29................... 424,000 489,215 Devon Energy Corp. Sr. Notes 2.75% due 08/01/06................... 470,000 466,818 Enterprise Products Operating LP Sr. Notes 6.65% due 10/15/34*.................. 362,000 362,925 Pemex Project Funding Master Trust Guaranteed Notes 8.63% due 02/01/22................... 363,000 412,731 Pennzoil Co. Debentures 10.25% due 11/01/05.................. 132,000 141,283 ---------- 3,011,273 ----------
20 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- BONDS & NOTES (continued) Financial Services -- 8.9% American Honda Finance Corp. Notes 4.50% due 05/26/09*...................... $302,000 $309,339 Athena Neurosciences Finance, LLC Guaranteed Sr. Notes 7.25% due 02/21/08....................... 325,000 329,063 Bunge Ltd. Finance Corp. Guaranteed Notes 4.38% due 12/15/08....................... 237,000 238,696 Chukchansi Economic Development Authority Sr. Notes 4.50% due 06/15/09*...................... 500,000 625,000 CIT Group, Inc. Sr. Notes 5.13% due 09/30/14....................... 385,000 384,540 CIT Group, Inc. Sr. Note 7.75% due 04/02/12....................... 272,000 321,900 Citicorp Capital I Guaranteed Capital Securities 7.93% due 02/15/27....................... 514,000 568,290 Citigroup Inc. Global Sub. Note 6.00% due 10/31/33....................... 346,000 350,764 Citigroup, Inc. Sub. Notes 5.00% due 09/15/14*...................... 351,775 352,213 Consolidated Communications Holdings Sr. Notes 9.75% due 04/01/12*...................... 375,000 384,375 Duke Capital LLC Notes 5.67% due 08/15/14....................... 545,000 555,868 Duke Capital LLC Sr. Notes, Series A 6.25% due 07/15/05....................... 199,000 204,258 Ford Motor Credit Co. Notes 7.38% due 10/28/09....................... 503,000 550,954 FPL Group Capital, Inc. Notes 3.25% due 04/11/06....................... 528,000 531,315 General Electric Capital Corp. Notes 2.80% due 01/15/07....................... 579,000 575,445 General Electric Capital Corp. Bonds 4.75% due 09/15/14....................... 730,000 725,608 General Electric Capital Corp. Notes 6.13% due 02/22/11....................... 541,000 596,554 General Motors Acceptance Corp. Tranche Trust 3.08% due 12/23/04(6).................... 568,000 567,721 General Motors Acceptance Corp. Notes 4.50% due 07/15/06....................... 462,000 469,236
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------------------- Financial Services (continued) Goldman Sachs Group, Inc. Sr. Notes 6.13% due 02/15/33................................ $1,021,000 $1,025,520 Household Finance Corp. Notes 3.38% due 02/21/06................................ 415,000 418,429 Household Finance Corp. Notes 4.75% due 05/15/09................................ 265,000 273,511 iPCS Escrow Co. Sr. Notes 11.50% due 05/01/12*.............................. 900,000 945,000 J.P. Morgan Chase & Co. Notes 5.25% due 05/30/07................................ 541,000 568,515 J.P. Morgan Chase & Co. Global Sub. Notes 6.63% due 03/15/12................................ 428,000 480,402 J.P. Morgan Chase Capital XIII Capital Securities 2.88% due 12/30/04(6)............................. 440,000 435,563 Lehman Brothers Holdings, Inc. Notes 6.63% due 01/18/12................................ 348,000 389,240 Morgan Stanley Global Sub. Notes 4.75% due 04/01/14................................ 654,000 633,122 Morgan Stanley Dean Witter & Co. Bonds 6.75% due 04/15/11................................ 321,000 359,698 National Rural Utilities Cooperative Finance Corp. Secured Collateral Trust Bonds 3.88% due 02/15/08................................ 448,000 451,993 NGC Corp. Capital Trust I Guaranteed Sub. Notes, Series B 8.32% due 06/01/27................................ 750,000 600,000 NiSource Finance Corp. Guaranteed Sr. Notes 7.63% due 11/15/05................................ 322,000 338,356 Pricoa Global Funding I Secured Notes 4.35% due 06/15/08*............................... 289,000 296,152 Principal Life Global Funding Secured Notes 5.13% due 06/28/07*............................... 482,000 504,093 Qwest Capital Funding, Inc. Guaranteed Notes 7.90% due 08/15/10................................ 625,000 576,562 TIAA Global Markets Notes 4.13% due 11/15/07*............................... 321,000 328,310 Unilever Capital Corp. Guaranteed Bonds 5.90% due 11/15/32................................ 386,000 399,985
21 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) Washington Mutual Finance Corp. Sr. Notes 6.25% due 05/15/06..................... $529,000 $ 557,781 ----------- 18,223,371 ----------- Food, Beverage & Tobacco -- 0.8% Anheuser-Busch Cos., Inc. Sr. Debentures 5.95% due 01/15/33..................... 386,000 407,294 Coca-Cola Enterprises, Inc. Debentures 8.50% due 02/01/22..................... 480,000 633,658 PepsiCo, Inc. Notes 3.20% due 05/15/07..................... 526,000 528,201 ----------- 1,569,153 ----------- Forest Products -- 0.9% Crown Cork & Seal Co., Inc. Notes 8.00% due 04/15/23..................... 850,000 790,500 Georgia-Pacific Corp. Sr. Notes 8.00% due 01/15/24..................... 275,000 312,813 Weyerhaeuser Co. Notes 5.50% due 03/15/05..................... 158,000 160,075 Weyerhaeuser Co. Notes 6.13% due 03/15/07..................... 532,000 566,312 ----------- 1,829,700 ----------- Health Services -- 0.5% HCA, Inc. Sr. Notes 6.95% due 05/01/12..................... 575,000 620,864 IASIS Healthcare Capital Corp. Sr. Sub. Notes 8.75% due 06/15/14*.................... 65,000 68,087 Tenet Healthcare Corp. Sr. Notes 6.50% due 06/01/12..................... 350,000 313,250 ----------- 1,002,201 ----------- Household Products -- 0.2% Procter & Gamble Co. Notes 5.80% due 08/15/34..................... 417,000 435,835 ----------- Insurance -- 1.0% Assurant, Inc. Sr. Notes 5.63% due 02/15/14..................... 263,000 269,874 ING Security Life Institutional Funding Notes 2.70% due 02/15/07*.................... 578,000 573,980 Kingsway America Inc. Guaranteed Sr. Notes 7.50% due 02/01/14..................... 319,000 330,802
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- Insurance (continued) Ohio Casualty Corp. Notes 7.30% due 06/15/14............... $ 521,000 $ 549,812 Prudential Financial, Inc. Tranche Trust 5.10% due 09/20/14............... 275,000 275,237 ---------- 1,999,705 ---------- Leisure & Tourism -- 2.5% American Airlines, Inc. Pass-Thru Certificates, Series 2001-1, Class A2 6.82% due 05/23/11............... 1,225,000 1,086,482 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-2 6.88% due 01/02/11............... 474,617 443,011 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class B 7.63% due 07/02/16............... 950,432 674,460 Atlas Air, Inc. Pass-Thru Certificates, Series 2000-1, Class A 8.71% due 07/02/21............... 433,097 426,189 Bally Total Fitness Holding Corp. Sr. Notes 10.50% due 07/15/11.............. 140,000 133,000 Continental Airlines, Inc. Pass-Thru Certificates, Series 1998-1, Class A 6.65% due 09/15/17............... 59,208 55,420 Continental Airlines, Inc. Pass-Thru Certificates, Series 1997-4, Class A 6.90% due 01/02/18............... 82,608 79,538 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-1, Class C 6.95% due 08/02/09............... 327,278 249,056 Continental Airlines, Inc. Pass-Thru Certificates, Series 1998-3, Class C1 7.08% due 11/01/04............... 11,204 11,098 Continental Airlines, Inc. Pass-Thru Certificates, Series 2004, Class J 9.56% due 09/01/19............... 575,704 572,353 Delta Air Lines, Inc. Sr. Notes 10.00% due 08/15/08.............. 140,000 42,000 Hilton Hotels Corp. Sr. Notes 7.50% due 12/15/17............... 318,000 364,110 MGM Mirage, Inc. Sr. Notes 5.88% due 02/27/14............... 650,000 625,625 Riviera Holdings Corp. Guaranteed Sr. Notes 11.00% due 06/15/10.............. 125,000 137,500
22 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- BONDS & NOTES (continued) Leisure & Tourism (continued) Six Flags, Inc. Sr. Notes 9.75% due 04/15/13.................. $175,000 $ 165,375 United Airlines, Inc. Pass-Thru Certificates, Series 2000-2, Class A1 7.03% due 10/01/10(8)............... 7,840 6,564 ---------- 5,071,781 ---------- Metals & Mining -- 0.3% Alcoa, Inc. Notes 6.75% due 01/15/28.................. 287,000 329,200 Owens-Brockway Glass Container, Inc. Guaranteed Sr. Secured Notes 8.88% due 02/15/09.................. 300,000 326,250 ---------- 655,450 ---------- Pharmaceuticals -- 1.0% Merck & Co., Inc. Debenture 5.95% due 12/01/28.................. 319,000 334,379 Pfizer, Inc. Global Notes 2.50% due 03/15/07.................. 578,000 571,959 Schering-Plough Co. Sr. Notes 6.50% due 12/01/33.................. 367,000 397,375 Wyeth Notes 6.45% due 02/01/24.................. 325,000 333,301 Wyeth Notes 6.70% due 10/15/04.................. 320,000 355,836 ---------- 1,992,850 ---------- Real Estate Investment Trusts -- 0.5% CarrAmerica Realty Corp. Notes 5.13% due 09/01/11.................. 248,000 250,813 Omega Healthcare Investors, Inc. Sr. Notes 7.00% due 04/01/14*................. 425,000 431,375 Vornado Realty LP Notes 4.50% due 08/15/09.................. 305,000 305,646 ---------- 987,834 ---------- Retail Stores -- 1.3% Fortune Brands, Inc Notes 2.88% due 12/01/06.................. 541,000 538,636 May Department Stores Co. Notes 3.95% due 07/15/07*................. 543,000 547,230 Rent-Way, Inc. Sr. Notes 11.88% due 06/15/10................. 225,000 245,250
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------- Retail Stores (continued) Safeway, Inc. Notes 2.50% due 11/01/05................ $ 441,000 $ 439,326 Wal-Mart Stores, Inc. Sr. Notes 6.88% due 08/10/09................ 729,000 826,766 ---------- 2,597,208 ---------- Telecommunications -- 3.4% American Cellular Corp. Sr. Notes, Series B 10.00% due 08/01/11............... 740,000 599,400 Bell Atlantic Pennsylvania, Inc. Debentures 8.75% due 08/15/31................ 471,000 620,166 Citizens Communications Co. Sr. Notes 9.00% due 08/15/31................ 357,000 364,586 FairPoint Communications, Inc. Sr. Sub. Notes, Series B 9.50% due 05/01/08................ 700,000 700,000 Iridium, LLC Guaranteed Sr. Notes, Series C 11.25% due 07/15/05(1)+........... 25,000 2,313 LCI International, Inc. Sr. Notes 7.25% due 06/15/07................ 905,000 821,288 Nextel Communications, Inc. Sr. Notes 5.95% due 03/15/14................ 125,000 122,500 Nextel Communications, Inc. Sr. Notes 7.38% due 08/01/15................ 750,000 806,250 Qwest Corp. Debentures 7.13% due 11/15/43................ 750,000 622,500 Sprint Capital Corp. Guaranteed Sr. Notes 6.13% due 11/15/08................ 396,000 427,434 Telecom Italia Capital SA Guaranteed Sr. Notes 6.00% due 09/30/34*............... 638,000 623,170 Verizon Communications, Inc. Debentures 7.90% due 02/01/27................ 680,000 746,293 Verizon New York, Inc. Sr. Debentures, Series B 7.38% due 04/01/32................ 437,000 486,228 ---------- 6,942,128 ---------- Transportation -- 0.6% Burlington Northern Santa Fe Corp. Debentures 8.13% due 04/15/20................ 937,000 1,172,861 ---------- Utilities -- 5.9% AES Corp. Sr. Notes 7.75% due 03/01/14................ 1,100,000 1,135,750
23 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------- BONDS & NOTES (continued) Utilities (continued) Alabama Power Co. Sr. Notes 2.80% due 12/01/06................ $441,000 $ 438,607 Appalachian Power Co. Sr. Notes, Series G 3.60% due 05/15/08................ 348,000 345,720 Appalachian Power Co. Sr. Notes, Series E 4.80% due 06/15/05................ 278,000 281,771 CenterPoint Energy Resources Corp. Debentures 8.90% due 12/15/06................ 579,000 643,258 Connecticut Light & Power Co. 1st Mtg. Bonds, Series B 5.75% due 09/15/34................ 383,000 385,116 Constellation Energy Group, Inc. Notes, Series A 7.88% due 04/01/05................ 257,000 263,737 Consumers Energy Co. 1st Mtg. Bonds, Series F 4.00% due 05/15/10................ 267,000 262,538 Duke Energy Co. 1st Mtg. Bonds 5.30% due 10/01/15................ 632,000 650,625 Dynegy Holdings, Inc. Sr. Notes 8.75% due 02/15/12................ 700,000 728,000 Edison Mission Energy Sr. Notes 9.88% due 04/15/11................ 875,000 1,019,375 El Paso Production Holding Co. Guaranteed Sr. Notes 7.75% due 06/01/13................ 450,000 451,125 Georgia Power Co. Sr. Notes, Series G 6.20% due 02/01/06................ 318,000 332,431 Indianapolis Power & Light Co. 1st Mtg. Bonds 6.60% due 01/01/34*............... 228,000 237,339 Kinder Morgan Energy Partners, LP Notes 7.75% due 03/15/32................ 347,000 410,747 Old Dominion Electric Cooperative 1st Mtg. Bond, Series A 5.68% due 12/01/28................ 289,000 302,054 Pacific Gas & Electric Co. 1st Mortgage Bond 6.05% due 03/01/34................ 373,000 379,640 PNPP II Funding Corp. Collateral Lease Bond 9.12% due 05/30/16................ 323,000 381,250 Progress Energy, Inc. Sr. Notes 6.75% due 03/01/06................ 533,000 559,731 Reliant Resources, Inc. Notes 9.50% due 07/15/13................ 575,000 624,594
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- Utilities (continued) Southern California Edison Co. 1st Mtg. Bonds 8.00% due 02/15/07.......................... $ 644,000 $ 712,837 TECO Energy, Inc. Sr. Notes 7.50% due 06/15/10.......................... 48,000 51,840 Virginia Electric & Power Co. Notes 4.10% due 12/15/08.......................... 381,000 378,474 Virginia Electric & Power Co. Sr. Notes, Series A 5.75% due 03/31/06.......................... 416,000 432,788 Westar Energy, Inc. 1st Mtg. Bonds 7.88% due 05/01/07.......................... 267,000 295,978 Williams Cos, Inc. Notes 7.88% due 09/01/21.......................... 400,000 444,000 ----------- 12,149,325 ----------- Total Bonds & Notes (cost $85,108,454).......................... 85,695,614 ----------- ASSET-BACKED SECURITIES -- 5.1% Financial Services - 5.1% Bear Steams Commercial Mtg. Securities, Inc. Commercial Mtg. \ Certificates, Series 2001-Top4, Class A3 5.61% due 11/15/33&&........................ 100,000 106,541 Bear Steams Commercial Mtg. Securities, Inc. Commercial Mtg. Certificates, Series 1999-C1, Class A2 6.02% due 2/14/31&&......................... 525,000 568,909 DLJ Commercial Mtg. Corp. Commercial Mtg. Certificates, Series 1999-CG3, Class A1B 7.34% due 10/10/32&&........................ 1,000,000 1,146,129 Honda Auto Receivables Owner Trust Asset Backed Notes, Series 2002-4, Class A4 2.70% due 3/17/08........................... 2,000,000 1,999,458 Honda Auto Receivables Owner Trust Asset Backed Notes, Series 2003-3, Class A4 2.77% due 11/21/08.......................... 1,000,000 996,834 Morgan Stanley Dean Witter Capital I Commercial Mtg. Certificates, Series 2002-Top1, Class A4 6.66% due 2/15/33(9)........................ 1,850,600 2,081,302 Morgan Stanley Dean Witter Capital I Commercial Mtg. Certificates, Series 2000-LIF2, Class A2 7.20% due 10/15/33(9)....................... 2,125,000 2,432,736 Residential Funding Mtg. Securities II Series 2004 HI1, Class A3 3.06% due 7/25/16........................... 1,100,000 1,086,438 ----------- Total Asset-Backed Securities (cost $10,265,009).......................... 10,418,347 -----------
24 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------- FOREIGN BONDS & NOTES (continued) FOREIGN BONDS & NOTES -- 7.3% Broadcasting & Media -- 0.4% Telenet Group Holding NV Sr. Disc. Notes 11.50% due 06/15/14(5)*.................. $1,000,000 $ 735,000 ---------- Business Services -- 0.0% SCL Terminal Aereo Santiago SA Sr. Secured Notes 6.95% due 07/01/12*...................... 80,991 87,220 ---------- Conglomerate -- 0.1% Tyco International Group SA Guaranteed Notes 6.38% due 10/15/11....................... 260,000 287,539 ---------- Energy Sources -- 0.1% Gazprom International SA Guaranteed Sr. Notes 7.20% due 02/01/20*...................... 275,000 278,437 ---------- Financial Services -- 0.8% Canadian Oil Sands Ltd. Sr. Notes 4.80% due 08/10/09*...................... 108,000 109,532 Deutsche Telekom International Finance BV Guaranteed Bonds 8.75% due 06/15/30....................... 383,000 495,057 Ford Motor Credit Co. Euro MTN Notes 2.07% due 12/13/04(6).................... 566,000 555,752 Nationwide Building Society Sr. Notes 2.63% due 01/30/07*...................... 578,000 569,990 ---------- 1,730,331 ---------- Forest Products -- 0.2% Abitibi-Consolidated, Inc. Debenture 8.55% due 08/01/10....................... 225,000 241,312 Norske Skogindustrier ASA Bonds 7.13% due 10/15/33*...................... 102,000 107,634 ---------- 348,946 ---------- Government Agency -- 2.4% China Development Bank Notes 4.75% due 10/08/14(2).................... 534,000 518,407 Italian Government Bonds 3.75% due 12/14/07....................... 544,000 550,531 United Mexican States Notes 6.75% due 09/27/34....................... 606,000 582,063 United Mexican States Notes 7.50% due 04/08/33....................... 700,000 735,700 Quebec Province Canada Notes 5.00% due 07/17/09....................... 643,000 675,848
Principal Value Security Description Amount (Note 2) ---------------------------------- Government Agency (continued) Quebec Province Canada Debentures 7.50% due 09/15/29.............. $ 625,000 $ 809,772 Russia Government International Bonds 5.00% due 03/31/07*............. 325,000 312,813 United Kingdom Notes 2.25% due 07/08/08*............. 749,000 724,775 ---------- 4,909,909 ---------- Insurance -- 0.6% Fairfax Financial Holdings, Ltd. Notes 7.38% due 04/15/18.............. 175,000 141,750 Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.............. 675,000 614,250 XL Capital Ltd. Sr. Notes 5.25% due 09/15/14.............. 496,000 497,855 ---------- 1,253,855 ---------- Machinery -- 0.1% Atlas Copco AB Notes 6.50% due 04/01/08*............. 232,000 251,065 ---------- Metals & Mining -- 0.8% Alcan, Inc. Bonds 6.13% due 12/15/33.............. 163,000 169,222 Noranda, Inc. Notes 6.00% due 10/15/15.............. 1,002,000 1,068,703 Noranda, Inc. Debentures 7.00% due 07/15/05.............. 285,000 294,313 ---------- 1,532,238 ---------- Retail Stores -- 0.1% Jean Coutu Group, Inc. Sr. Sub. Notes 8.50% due 08/01/14*............. 200,000 198,500 ---------- Telecommunications -- 1.1% France Telecom SA Sr. Notes 8.50% due 03/01/11.............. 536,000 641,635 Koninklijke KPN NV Sr. Notes 7.50% due 10/01/05.............. 339,000 355,058 Koninklijke KPN NV Notes 8.00% due 10/01/10.............. 441,000 524,425 Telus Corp. Notes 7.50% due 06/01/07.............. 544,000 596,527
25 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------ Telecommunications (continued) Telus Corp. Notes 8.00% due 06/01/11................ $ 161,000 $ 188,650 ----------- 2,306,295 ----------- Utilities -- 0.5% Calpine Canada Energy Finance, ULC Guaranteed Sr. Notes 8.50% due 05/01/08................ 1,000,000 690,000 Great Lakes Power, Inc. Sr. Notes 8.30% due 03/01/05................ 267,000 272,483 ----------- 962,483 ----------- Total Foreign Bonds & Notes (cost $14,852,077)................ 14,881,818 ----------- U.S. GOVERNMENT OBLIGATIONS -- 3.5% U.S. Treasury Bonds -- 2.2% 5.38% due 02/15/31................. 3,075,000 3,294,094 6.88% due 08/15/25................. 199,000 249,815 7.25% due 08/15/22................. 726,000 934,782 ----------- 4,478,691 ----------- U.S. Treasury Notes -- 1.3% 2.00% due 01/15/14................. 753,478 771,520 2.25% due 02/15/07................. 67,000 66,285 4.25% due 08/15/13................. 2,000 2,030 4.25% due 08/15/14................. 319,000 322,340 4.75% due 05/15/14................. 370,000 388,385 5.00% due 08/15/11................. 136,000 146,163 5.50% due 05/15/09................. 850,000 930,949 ----------- 2,627,672 ----------- Total U.S. Government Obligations (cost $7,085,739)................. 7,106,363 ----------- U.S. GOVERNMENT AGENCY -- 42.5% Federal Home Loan Bank -- 0.5% 4.50% due 09/16/13................. 985,000 983,879 ----------- Federal Home Loan Mortgage Corporation -- 20.3% 2.50% due 12/04/06................ 1,450,000 1,437,740 2.63% due 09/17/07................ 856,000 843,211 3.00% due 10/27/06................ 1,103,000 1,103,636 3.38% due 08/23/07................ 633,000 633,096 4.50% due 11/01/18................ 3,062,268 3,059,417 4.50% due 02/01/19................ 2,258,257 2,252,319 5.00% due 10/01/33................ 62,384 61,969 5.00% due 10/01/34................ 3,800,159 3,767,317 5.00% due 03/01/34................ 3,175,711 3,148,266 5.00% due 06/01/34................ 4,769,965 4,728,742 5.50% due 02/01/18................ 2,278,518 2,357,116 5.50% due 10/01/18................ 1,753,152 1,813,627 5.50% due 10/01/33................ 1,737,275 1,764,866 5.50% due 07/01/34................ 2,794,186 2,835,948 6.00% due 02/01/32................ 58,525 60,559 6.00% due 11/01/33................ 3,971,250 4,107,577 6.50% due 08/01/16................ 19,250 20,377 6.50% due 06/01/32................ 1,247,647 1,309,839 6.50% due 08/01/32................ 2,482,663 2,606,456 6.50% due 02/01/33................ 192,862 202,479 6.50% due 09/01/33................ 747,283 784,690 7.00% due 03/01/12(7)............. 15,260 16,185 7.00% due 11/01/16(7)............. 94,184 99,900 7.50% due 04/01/31(7)............. 648,070 695,588 7.50% due 12/01/31(7)............. 1,304,455 1,400,102
Principal Value Security Description Amount (Note 2) ------------------------------- Federal National Mortgage Association (continued) 8.00% due 10/01/29(7)......... $ 23,861 $ 25,965 8.00% due 07/01/30(7)......... 8,496 9,240 8.00% due 08/01/30(7)......... 33,490 36,420 8.00% due 10/01/30(7)......... 68,222 74,192 8.00% due 11/01/30(7)......... 69,954 76,075 8.00% due 12/01/30(7)......... 138,707 150,844 8.00% due 01/01/31(7)......... 128,705 139,967 ----------- 41,623,725 ----------- Federal National Mortgage Association -- 20.9% 2.77% due 08/25/06............ 1,392,000 1,391,869 3.25% due 06/28/06............ 648,000 649,304 4.50% due 06/01/18............ 881,866 881,365 5.00% due 06/01/18............ 2,449,449 2,493,781 5.00% due 09/01/18............ 830,301 845,328 5.00% due 10/01/18............ 1,668,427 1,698,623 5.00% due 11/01/18............ 1,331,119 1,355,211 5.00% due 11/01/33............ 61,717 61,225 5.00% due 03/01/34............ 3,985,074 3,948,143 5.50% due 12/01/33............ 8,677,439 8,811,355 5.50% due 03/01/34............ 1,094,974 1,110,832 5.50% due 07/01/34............ 3,196,553 3,242,848 5.50% due 09/01/34............ 999,900 1,014,381 6.00% due 12/01/16............ 1,222,018 1,282,244 6.00% due 05/01/17............ 219,695 230,514 6.00% due 03/01/34............ 1,053,895 1,091,701 6.00% due 08/01/34............ 3,552,052 3,678,455 6.00% TBA due Oct............. 4,700,000 4,860,092 6.18% due 07/01/08............ 18,438 19,796 6.27% due 11/01/07............ 50,576 53,908 6.31% due 02/01/08............ 183,403 192,648 6.34% due 01/01/08............ 17,535 18,759 6.43% due 01/01/08............ 18,356 19,696 6.50% due 03/01/17............ 631,858 669,343 6.50% due 04/01/29............ 80,652 84,757 6.50% due 02/01/32............ 682,946 716,866 6.50% due 07/01/32............ 310,490 325,911 6.85% due 06/01/07............ 6,653 7,004 7.00% due 09/01/10(7)......... 2,783 2,954 7.00% due 07/01/11(7)......... 888 942 7.00% due 11/01/11(7)......... 2,128 2,259 7.00% due 05/01/12(7)......... 3,543 3,759 7.00% due 06/01/12(7)......... 5,285 5,610 7.00% due 09/01/12(7)......... 2,820 2,993 7.00% due 10/01/12(7)......... 1,655 1,756 7.00% due 07/01/13(7)......... 3,278 3,480 7.00% due 04/01/28(7)......... 18,372 19,522 7.00% due 10/01/28(7)......... 2,467 2,622 7.00% due 09/01/31(7)......... 1,468,422 1,558,161 7.04% due 03/01/07............ 18,351 19,581 7.50% due 10/01/10(7)......... 156,886 167,088 7.50% due 11/01/14(7)......... 9,022 9,609 7.50% due 05/01/15(7)......... 6,077 6,470 7.50% due 06/01/15(7)......... 91,293 97,186 7.50% due 07/01/15(7)......... 38,796 41,300 7.50% due 08/01/15(7)......... 16,867 17,956 ----------- 42,719,207 ----------- Government National Mortgage Association -- 0.2% 6.50% due 06/15/29............ 142,283 150,484 7.00% due 12/15/22(7)......... 96,142 103,095 7.00% due 08/15/29(7)......... 95,254 101,674 8.00% due 04/15/30............ 35,831 39,117 ----------- 394,370 -----------
26 SunAmerica Core Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Amount/ Value Security Description Shares/Warrants (Note 2) --------------------------------------- Federal Farm Credit Bank -- 0.6% 2.38% due 10/02/06................... $1,257,000 $ 1,244,698 ------------ Total U.S. Government Agency (cost $86,194,887)................... 86,965,879 ------------ COMMON STOCK -- 0.0% Machinery -- 0.0% Manitowoc Co., Inc. (cost $261)....... 28 993 ------------ PREFERRED STOCK -- 0.0% Machinery -- 0.0% Fairfield Manufacturing Co., Inc.(2)(3)(4) (cost $24,592)....................... 28 0 ------------ WARRANTS -- 0.0% Communication Equipment -- 0.0% Concentric Network Corp.(2)(4)........ 5 0 ------------ Telecommunications -- 0.0% KMC Telecom Holdings, Inc.(2)(4)...... 50 0 ------------ Total Warrants (cost $0)............................ 0 ------------ Total Investment Securities -- 100.2% (cost $203,571,019).................. 205,069,014 ------------ SHORT-TERM SECURITIES -- 2.4% UBS Finance 1.88% due 10/01/04(7)..... $5,000,000 5,000,000 ------------ REPURCHASE AGREEMENT -- 2.1% Agreement with State Street Bank & Trust Co., bearing interest at 1.67% dated 09/30/04 to be repurchased 10/01/04 in the amount of $4,274,198 and collateralized by $3,755,000 of Federal National Mtg. Association Notes, bearing interest at 7.25% due 01/15/10 having an approximate value of $4,402,738 (cost $4,274,000)(7)................. 4,274,000 4,274,000 ------------ TOTAL INVESTMENTS -- (cost $212,845,019)@................. 104.7% 214,343,014 Liabilities in excess of other assets... (4.7) (9,550,880) ---------- ------------ NET ASSETS -- 100.0% $204,792,134 ========== ============
- -------- * Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no rights to demand registration of these securities. At September 30, 2004, the aggregate value of these securities was $12,870,304 representing 6.04% of net assets. Unless otherwise indicated, these securities are not considered to be illiquid. + Non-income producing security. @ See Note 5 for cost of investments on a tax basis. TBA -- Securitiespurchased on a forward commitments basis with an approximate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. (1) Bond in default. (2) Fair valued security. (3) PIK ("Payment-in-kind") bond. Payments made with additional securities in lieu of cash. (4) Illiquid security (5) Security is a "step-up" bond where the coupon rate increases or steps up at a predetermined rate. Rate shown reflects the increased rate. (6) Security is a "floating rate" bond where the coupon rate fluctuates. The rate steps up or down for each rate downgrade or upgrade. The rate reflected is as of September 30, 2004. (7) The security or a portion thereof represents collateral for TBA securities. (8) Company has filed Chapter 11 bankruptcy. (9) Commercial mortgaged backed security. See Notes to Financial Statements 27 SunAmerica U.S. Government Securities Fund PORTFOLIO PROFILE -- September 30, 2004 -- (unaudited) Industry Allocation* Government National Mortgage Association 51.5% Repurchase Agreements................... 19.6% U.S. Treasury Notes..................... 13.2% Federal Farm Credit Bank................ 11.5% U.S. Treasury Bonds..................... 10.9% U.S. Government Agencies................ 6.4% Federal Home Loan Mortgage Corporation.. 1.6% Federal National Mortgage Association... 1.3% ----- 116.0% =====
Credit Quality+# Government -- Agency.. 73.9% Government -- Treasury 25.0% Not Rated@............ 1.1% ----- 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. 28 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ U.S. GOVERNMENT OBLIGATIONS -- 24.1% U.S Treasury Bonds -- 10.9% 5.38% due 02/15/31(1)............. $23,250,000 $24,906,562 ----------- U.S. Treasury Notes -- 13.2% 4.25% due 08/15/14................ 30,000,000 30,314,070 ----------- Total U.S. Government Obligations (cost $55,335,938)............... 55,220,632 ----------- U.S. GOVERNMENT AGENCIES -- 72.3% Federal Home Loan Mortgage Corporation -- 1.6% 6.00% due 11/01/13................ 1,152,362 1,210,778 6.00% due 10/01/16................ 386,094 404,908 6.50% due 09/01/16................ 339,454 359,325 7.00% due 11/01/31................ 363,993 386,327 7.50% due 06/01/25................ 68,833 74,119 8.00% due 06/01/08................ 21,959 22,720 8.25% due 07/01/06................ 4,544 4,627 8.50% due 05/01/08................ 6,066 6,112 9.50% due 04/01/20................ 193,740 218,084 10.00% due 08/01/21............... 847,532 941,096 39.36% due 10/01/04(3)............ 21,318 21,494 ----------- 3,649,590 ----------- Federal National Mortgage Association -- 1.3% 6.53% due 05/25/30................ 2,346,067 2,474,006 7.50% due 07/01/26................ 144,734 155,844 8.00% due 12/01/22................ 133,140 145,718 8.00% due 01/01/23................ 175,814 192,544 8.00% due 01/01/23................ 14,208 15,550 11.00% due 02/01/15............... 37 42 11.50% due 09/01/19............... 25,356 28,703 ----------- 3,012,407 ----------- Government National Mortgage Association -- 51.5% 4.50% due 05/15/18................. 1,783,946 1,791,567 4.50% due 08/15/18................. 2,570,189 2,581,168 4.50% due 09/15/18................. 7,067,016 7,097,206 4.50% due 10/15/18................. 6,389,635 6,416,931 4.50% due 09/15/33................. 6,623,742 6,432,869 5.00% due 04/15/18................. 7,888,086 8,098,721 5.00% due 08/15/33................. 5,392,881 5,379,525 5.00% due 09/15/33................. 1,456,754 1,453,147 5.00% due 10/15/33................. 562,244 560,851 5.00% TBA due Nov.................. 1,000,000 991,562 5.50% due 11/15/32................. 24,652 25,148 5.50% due 03/15/33................. 936,204 954,407 5.50% due 04/15/33................. 1,325,433 1,351,204 5.50% due 05/15/33................. 2,687,000 2,739,245 5.50% due 06/15/33................. 12,721,328 12,968,674 5.50% due 07/15/33................. 3,452,780 3,519,913 5.50% due 10/15/33................. 3,411,256 3,477,582 5.50% due 12/15/33................. 702,383 716,039 5.50% due 01/15/34................. 2,974,962 3,031,224 5.50% due 02/15/34................. 3,675,260 3,744,765 6.00% due 03/15/29................. 108,580 112,918 6.00% due 04/15/29................. 74,849 77,839 6.00% due 05/15/29................. 172,040 178,913 6.00% due 12/15/31................. 652,144 677,566 6.00% TBA due Nov.................. 35,000,000 36,181,250 6.50% due 02/15/29................. 41,377 43,762 6.50% due 05/15/31................. 74,135 78,309 6.50% due 06/15/31................. $ 117,257 $ 123,859 6.50% due 07/15/31................. 180,790 190,969
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- Government National Mortgage Association (continued) 6.50% due 08/15/31..................... 214,861 226,958 6.50% due 09/15/31..................... 355,907 375,947 6.50% due 10/15/31..................... 805,648 851,010 6.50% due 11/15/31..................... 35,043 37,016 6.50% due 12/15/31..................... 62,986 66,532 6.50% due 01/15/32..................... 85,534 90,336 6.50% due 02/15/32..................... 1,946,584 2,055,867 6.50% due 06/15/32..................... 435,317 459,756 7.00% due 07/15/23..................... 90,256 96,694 7.00% due 10/15/23..................... 178,048 190,749 7.00% due 09/15/25..................... 449,269 481,046 7.00% due 03/20/29..................... 46,053 49,043 7.00% due 06/20/29..................... 8,070 8,594 7.00% due 11/20/30..................... 203,587 216,801 7.50% due 04/15/17..................... 17,950 19,423 7.50% due 08/15/23..................... 371,607 402,314 7.50% due 09/15/23..................... 1,179,295 1,276,742 7.50% due 10/15/23..................... 26,842 29,060 8.00% due 11/15/06..................... 1,650 1,712 8.00% due 02/15/08..................... 2,438 2,589 9.00% due 12/15/16..................... 137,822 154,877 11.00% due 08/20/15.................... 388 437 11.00% due 09/20/15.................... 830 937 11.50% due 03/15/13.................... 26,466 30,200 11.50% due 06/15/13.................... 26,124 29,713 11.50% due 05/20/15.................... 4,281 4,880 12.50% due 09/15/14.................... 8,612 9,930 13.00% due 01/15/11.................... 4,178 4,797 13.00% due 02/15/11.................... 7,082 8,130 13.00% due 03/15/11.................... 322 370 13.00% due 04/15/11.................... 676 776 13.00% due 09/15/13.................... 5,801 6,706 13.00% due 10/20/14.................... 4,439 5,110 13.00% due 11/15/14.................... 929 1,077 13.00% due 02/20/15.................... 1,638 1,880 13.50% due 02/15/13.................... 13,396 15,604 15.00% due 01/15/12.................... 567 670 15.00% due 02/15/12.................... 1,320 1,561 15.00% due 06/15/12.................... 14,240 16,840 15.00% due 09/15/12.................... 771 911 15.50% due 08/15/11.................... 5,699 6,730 15.50% due 09/15/11.................... 42,754 50,489 16.00% due 11/15/11.................... 7,275 8,599 ----------- 118,296,546 ----------- Federal Farm Credit Bank -- 11.5% 2.50% due 03/15/06..................... 5,000,000 4,992,445 3.88% due 12/15/04(1).................. 20,000,000 20,080,400 5.64% due 04/04/11..................... 500,000 542,953 6.00% due 03/07/11..................... 200,000 220,741 6.30% due 12/03/13..................... 500,000 565,796 ----------- 26,402,335 ----------- International Bank for Reconstruction and Development -- 0.2% 5.00% due 03/28/06..................... 350,000 362,605 ----------- Private Export Funding Corp. -- 4.7% 5.87% due 07/31/08..................... 10,000,000 10,850,930 ----------- Small Business Administration -- 1.5% 6.30% due 06/01/18..................... 3,173,002 3,404,230 -----------
29 SunAmerica U.S. Government Securities Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- U.S. GOVERNMENT AGENCY (continued) Total U.S. Government Agency (cost $163,750,861)................ $165,978,643 ------------ Total Investment Securities -- 96.4% (cost $219,086,799)................ 221,199,275 ------------ REPURCHASE AGREEMENTS -- 19.6% State Street Bank & Trust Co. Joint Repurchase Agreement(1)(2)......... $ 5,064,000 5,064,000 UBS Warburg, LLC Joint Repurchase Agreement(1)(2).................... 40,000,000 40,000,000 ------------ Total Repurchase Agreements (cost $45,064,000)................. 45,064,000 ------------ TOTAL INVESTMENTS -- (cost $264,150,799)@............... 116.0% 266,263,275 Liabilities in excess of other assets. (16.0) (36,761,160) ----------- ------------ NET ASSETS -- 100.0% $229,502,115 =========== ============
- -------- TBA --Securities purchased on a forward commitment basis with an approximate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. @ See Note 5 for cost of investments on a tax basis. (1) The security or a portion thereof represents collateral for TBA securities. (2) See Note 2 for details of Joint Repurchase Agreement. (3) Variable rate security -- the rate reflected is as of September 30, 2004; maturity date reflects next reset date. See Notes to Financial Statements 30 SunAmerica GNMA Fund PORTFOLIO PROFILE -- September 30, 2004 -- (unaudited) Industry Allocation* Government National Mortgage Association 81.0% Repurchase Agreements................... 44.8% Federal Farm Credit Bank................ 2.8% Small Business Administration........... 0.2% Federal Home Loan Mortgage Corporation.. 0.1% ----- 128.9% =====
Credit Quality+# Government -- Agency 100.0% ----- 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. 31 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- U.S. GOVERNMENT AGENCIES -- 84.1% Federal Home Loan Mortgage Corporation -- 0.1% 7.50% due 5/01/24............... $ 58,089 $ 62,619 7.50% due 6/01/25............... 23,596 25,408 10.00% due 01/01/17............. 254,225 279,922 ------------ 367,949 ------------ Federal National Mortgage Association -- 0.0% 7.00% due 9/01/10............... 158,349 168,086 ------------ Government National Mortgage Association -- 81.0% 4.50% due 05/15/18............... 3,567,892 3,583,133 4.50% due 08/15/18............... 1,687,803 1,695,013 4.50% due 09/15/18............... 5,339,802 5,362,613 4.50% due 10/15/18............... 7,380,723 7,412,252 4.50% due 08/15/33............... 4,957,532 4,814,674 4.50% due 09/15/33............... 5,278,292 5,126,191 5.00% due 03/15/18............... 1,185,412 1,217,066 5.00% due 04/15/18............... 12,824,373 13,166,821 5.00% due 05/15/18............... 18,371,986 18,862,572 5.00% due 01/15/33............... 24,212 24,152 5.00% due 05/15/33............... 21,052 20,999 5.00% due 08/15/33............... 22,692,597 22,636,398 5.00% due 09/15/33............... 7,924,658 7,905,032 5.00% due 10/15/33............... 28,965,554 28,893,820 5.00% TBA due Nov................ 103,000,000 102,130,886 5.50% due 06/15/29............... 11,490 11,745 5.50% due 12/15/32............... 1,516,587 1,547,140 5.50% due 01/15/33............... 821,627 837,602 5.50% due 02/15/33............... 3,817,669 3,891,898 5.50% due 03/15/33............... 2,295,186 2,339,812 5.50% due 04/15/33............... 12,655,723 12,901,793 5.50% due 05/15/33............... 15,105,385 15,399,085 5.50% due 06/15/33............... 13,814,072 14,082,664 5.50% due 06/15/33............... 1,720,669 1,755,148 5.50% due 07/15/33............... 871,004 887,939 5.50% due 08/15/33............... 5,433,601 5,539,249 5.50% due 09/15/33............... 753,944 768,603 5.50% due 10/15/33............... 13,290,352 13,548,762 5.50% due 12/15/33............... 14,044,076 14,317,141 5.50% due 01/15/34............... 22,430,986 22,855,193 5.50% due 02/15/34............... 2,775,283 2,827,768 5.50% TBA due Nov................ 40,000,000 40,562,480 6.00% due 11/15/23............... 11,139 11,643 6.00% due 01/15/24............... 13,629 14,229 6.00% due 12/15/28............... 436,290 454,077 6.00% due 01/15/29............... 1,433,632 1,490,903 6.00% due 02/15/29............... 1,391,326 1,446,907 6.00% due 03/15/29............... 1,069,268 1,111,984 6.00% due 04/15/29............... 2,289,019 2,380,462 6.00% due 04/15/29............... 459,723 478,401 6.00% due 05/15/29............... 329,854 343,031 6.00% due 06/15/29............... 801,649 833,674 6.00% due 07/15/29............... 475,561 494,559 6.00% due 08/15/29............... 48,725 50,671 6.00% due 10/15/29............... 243,680 253,414 6.00% due 04/15/31............... 41,525 43,144 6.00% due 07/15/31............... 60,972 63,349 6.00% due 10/15/31............... 157,272 163,403 6.00% due 11/15/31............... 2,524,462 2,622,873 6.00% due 12/15/31............... 479,609 498,305 6.00% due 07/15/32............... 250,116 259,721
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- Government National Mortgage Association (continued) 6.00% due 02/15/33................... $ 4,950,664 $ 5,140,307 6.00% due 02/15/34................... 1,844,095 1,914,281 6.00% due 04/15/34................... 5,140,498 5,336,148 6.00% due 07/15/34................... 4,777,212 4,959,034 6.00% TBA due Nov.................... 10,000,000 10,337,500 6.50% due 03/15/28................... 56,004 59,291 6.50% due 08/15/28................... 123,758 130,968 6.50% due 12/15/28................... 2,661 2,815 6.50% due 01/15/29................... 11,738 12,414 6.50% due 02/15/29................... 4,263 4,508 6.50% due 03/15/29................... 246,448 260,652 6.50% due 04/15/29................... 3,518 3,721 6.50% due 05/15/29................... 27,284 28,868 6.50% due 05/15/29................... 4,040 4,275 6.50% due 06/15/29................... 89,370 94,521 6.50% due 07/15/29................... 12,375 13,088 6.50% due 10/15/29................... 10,307 10,901 6.50% due 08/15/31................... 610,134 644,488 6.50% due 09/15/31................... 40,379 42,653 6.50% due 10/15/31................... 699,603 738,994 6.50% due 11/15/31................... 544,326 574,975 6.50% due 12/15/31................... 607,178 641,365 6.50% due 02/15/32................... 1,013,427 1,070,322 6.50% due 05/15/32................... 3,714,988 3,923,551 6.50% due 06/15/32................... 263,909 278,726 7.00% due 03/15/23................... 220,657 236,398 7.00% due 01/20/24................... 1,719 1,838 7.00% due 03/20/24................... 1,700 1,817 7.00% due 07/20/25................... 9,251 9,883 7.00% due 09/15/25................... 195,108 208,908 7.00% due 01/20/29................... 100,185 106,688 7.00% due 02/20/29................... 20,777 22,126 7.00% due 06/20/29................... 40,018 42,616 7.00% due 07/20/29................... 151,533 161,369 7.00% due 09/20/29................... 13,942 14,847 7.00% due 10/20/29................... 28,775 30,643 7.00% due 11/20/29................... 10,218 10,882 7.00% due 03/20/30................... 11,881 12,652 7.00% due 06/20/30................... 26,804 28,543 7.00% due 08/20/30................... 80,041 85,236 7.00% due 09/20/30................... 62,811 66,887 7.00% due 10/20/30................... 89,159 94,946 8.00% due 11/15/26................... 549,369 602,724 8.00% due 12/15/29................... 36,987 40,396 8.00% due 01/15/30................... 1,725 1,883 8.00% due 04/15/30................... 55,406 60,489 8.00% due 05/15/30................... 10,117 11,045 8.00% due 08/15/30................... 111,541 121,772 8.50% due 03/15/17................... 46,581 51,597 8.50% due 05/15/21................... 92,073 102,005 8.50% due 12/15/22................... 157,676 174,613 8.50% due 01/15/23................... 170,438 188,640 8.50% due 09/15/24................... 92,793 102,477 9.00% due 07/15/16................... 117,881 132,468 9.00% due 10/15/16................... 29,767 33,450 ------------ 428,928,598 ------------ Small Business Administration -- 0.2% 6.30% due 06/01/18................... 1,057,667 1,134,744 ------------
32 SunAmerica GNMA Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------- U.S. GOVERNMENT AGENCIES (continued) Federal Farm Credit Bank -- 2.8% 2.50% due 03/15/06(1)............... $ 15,000,000 $ 14,977,335 ------------- Total Investment Securities (cost $443,898,350)................ 445,576,712 ------------- REPURCHASE AGREEMENTS -- 44.8% State Street Bank & Trust Co. Joint Repurchase Agreement(1)(2)......... 117,540,000 117,540,000 UBS Warburg, LLC Joint Repurchase Agreement(1)(2).................... 120,000,000 120,000,000 ------------- Total Repurchase Agreements (cost $237,540,000)................ 237,540,000 ------------- TOTAL INVESTMENTS -- (cost $681,438,350)@............... 128.9% 683,116,712 Liabilities in excess of other assets. (28.9) (153,149,653) ------------ ------------- NET ASSETS -- 100.0% $ 529,967,059 ============ =============
- -------- TBA --Securities Purchased on a forward commitment basis with an approximate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement date. @ See Note 5 for cost of investments on a tax basis. (1) The security or a portion thereof represents collateral for TBA securities. (2) See Note 2 for details of Joint Repurchase Agreement. See Notes to Financial Statements 33 SunAmerica Strategic Bond Fund PORTFOLIO PROFILE -- September 30, 2004 -- (unaudited) Industry Allocation* Foreign Government Agency............... 34.0% Financial Services...................... 10.2% Federal National Mortgage Association... 7.1% Telecommunications...................... 6.6% Broadcasting & Media.................... 5.4% Leisure & Tourism....................... 4.8% Utilities............................... 4.2% Energy Sources.......................... 2.8% Retail Stores........................... 2.0% Chemicals............................... 1.7% Forest Products......................... 1.4% Bank.................................... 1.4% Pharmaceuticals......................... 1.3% Energy Services......................... 1.2% Federal Home Loan Mortgage Corporation.. 1.2% Insurance............................... 1.2% U.S. Treasury Notes..................... 1.1% Automotive.............................. 0.9% Health Services......................... 0.9% Metals & Mining......................... 0.8% Real Estate Investment Trusts........... 0.8% U.S. Treasury Bonds..................... 0.8% Business Services....................... 0.6% Conglomerate............................ 0.6% Food, Beverage & Tobacco................ 0.6% Machinery............................... 0.5% Repurchase Agreement.................... 0.5% Communication Equipment................. 0.4% Restaurant.............................. 0.4% Time Deposit............................ 0.3% Medical Products........................ 0.3% Computes & Business Equipment........... 0.2% Electronics............................. 0.2% Government National Mortgage Association 0.2% Transportation.......................... 0.2% Aerospace & Military Technology......... 0.1% Education............................... 0.1% Entertainment Products.................. 0.1% Apparel & Textiles...................... 0.1% ---- 97.2% ====
Credit Quality+# Government -- Treasury 1.9% Government -- Agency.. 8.3% AAA................... 5.9% AA.................... 5.9% A..................... 2.4% BBB................... 10.3% BB.................... 22.7% B..................... 20.8% CCC................... 10.5% CC.................... 0.2% C..................... 0.1% BELOW C............... 0.2% Not Rated@............ 10.8% ----- 100.0% =====
* Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 34 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- BONDS & NOTES -- 42.3% Aerospace & Military Technology -- 0.1% Condor Systems, Inc. Guaranteed Sr. Sub. Notes, Series B 11.88% due 05/01/09+(1)(2)(5)(9).... $ 25,000 $ 1,750 DeCrane Aircraft Holdings, Inc. Guaranteed Sr. Sub. Notes, Series B 12.00% due 09/30/08................. 175,000 113,750 -------- 115,500 -------- Apparel & Textiles -- 0.1% Warnaco, Inc. Sr. Notes 8.88% due 06/15/13.................. 50,000 55,625 -------- Automotive -- 0.9% BREED Technologies, Inc. Guaranteed Sr. Sub. Notes 9.25% due 04/15/08(1)(2)............ 500,000 0 Collins & Aikman Prods Co. Sr. Sub. Notes 12.88% due 08/15/12*................ 50,000 46,125 Diamond Triumph Auto Glass, Inc. Guaranteed Sr. Sub. Notes 9.25% due 04/01/08.................. 100,000 96,000 Exide Corp. Term Loan 10.00% due 04/15/05+(2)(5).......... 225,000 0 Ford Motor Co. Notes 7.45% due 07/16/31.................. 494,000 484,382 Hertz Corp. Notes 6.35% due 06/15/10.................. 295,000 305,650 -------- 932,157 -------- Banks -- 0.4% Emigrant Capital Trust Guaranteed Notes 4.43% due 12/10/04(3)*.............. 395,000 391,626 RBS Capital Trust IV Trust Preferred Securities 2.78% due 09/29/49(3)............... 33,000 33,230 -------- 424,856 -------- Broadcasting & Media -- 4.6% Affinity Group, Inc. Sr. Sub. Notes 9.00% due 02/15/12.................. 150,000 160,500 American Lawyer Media, Inc. Guaranteed Sr. Notes, Series B 9.75% due 12/15/07.................. 175,000 175,219 Charter Communications Holdings, LLC Sr. Sub. Notes 9.63% due 11/15/09.................. 925,000 728,437 Charter Communications Holdings, LLC Sr. Sub. Disc. Notes 9.92% due 04/01/11(4)............... 125,000 96,250 Charter Communications Holdings, LLC Sr. Notes 10.00% due 05/15/11................. 75,000 57,750
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------- Broadcasting & Media (continued) Charter Communications Holdings, LLC Sr. Sub. Notes 10.25% due 01/15/10................. $ 25,000 $ 20,063 Charter Communications Holdings, LLC Sr. Sub. Notes 10.75% due 10/01/09................. 450,000 369,000 Charter Communications Holdings, LLC Sr. Sub. Notes 11.13% due 01/15/11................. 300,000 243,000 Cinemark, Inc. Sr. Disc. Notes 9.75% due 03/15/14(4)............... 225,000 154,687 Clear Channel Communications, Inc. Sr. Notes 5.75% due 01/15/13.................. 70,000 71,898 Clear Channel Communications, Inc. Sr. Notes 6.00% due 11/01/06.................. 590,000 619,532 Coleman Cable, Inc. Sr. Notes 9.88% due 10/01/12*................. 75,000 76,219 Cox Communications, Inc. Sr. Notes 6.85% due 01/15/18.................. 35,000 35,575 CSC Holdings, Inc. Sr. Notes 6.75% due 04/15/12*................. 75,000 75,375 CSC Holdings, Inc. Sr. Notes, Series B 7.63% due 04/01/11.................. 50,000 52,688 CSC Holdings, Inc. Sr. Debentures 7.63% due 07/15/18.................. 125,000 127,500 Fisher Communications, Inc. Sr. Notes 8.63% due 09/15/14*................. 100,000 104,000 Haights Cross Operating Co. Guaranteed Sr. Notes 11.75% due 08/15/11................. 100,000 110,000 Insight Communications Co., Inc. Sr. Sub. Disc. Notes 12.25% due 02/15/11(4).............. 475,000 444,125 NextMedia Operating, Inc. Guaranteed Sr. Sub. Notes 10.75% due 07/01/11................. 75,000 84,469 Paxson Communications Corp. Guaranteed Sr. Sub. Notes 12.25% due 01/15/09(4).............. 275,000 235,812 Rogers Cable, Inc. Sr. Notes 5.50% due 03/15/14.................. 125,000 115,000 Rogers Cable, Inc. Sr. Notes 6.25% due 06/15/13.................. 50,000 49,000 Rogers Cable, Inc. Bonds 8.75% due 05/01/32.................. 50,000 54,500
35 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Broadcasting & Media (continued) Salem Communications Holding Corp. Guaranteed Sr. Sub. Notes 7.75% due 12/15/10.................. $ 50,000 $ 52,750 TCI Communications, Inc. Sr. Debentures 8.75% due 08/01/15.................. 47,000 58,584 Telex Communications, Inc. Sr. Sec. Notes 11.50% due 10/15/08................. 50,000 54,000 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 8.75% due 01/15/14.................. 75,000 72,000 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 10.00% due 03/01/11................. 250,000 257,500 ---------- 4,755,433 ---------- Business Services -- 0.6% Allied Waste North America, Inc. Guaranteed Sr. Notes 7.38% due 04/15/14.................. 125,000 120,313 HydroChem Industrial Services, Inc. Guaranteed Sr. Sub. Notes, Series B 10.38% due 08/01/07................. 150,000 151,125 Mobile Mini, Inc. Sr. Notes 9.50% due 07/01/13.................. 100,000 111,000 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 09/01/10*................ 225,000 245,250 ---------- 627,688 ---------- Chemicals -- 1.7% Associated Materials, Inc. Sr. Disc. Notes 11.25% due 03/01/14(4)*............. 275,000 200,062 Equistar Chemicals LP Sr. Notes 10.63% due 05/01/11................. 175,000 199,500 Foamex LP/Foamex Capital Corp. Guaranteed Sr. Sec. Notes 10.75% due 04/01/09................. 50,000 47,000 Huntsman International, LLC Guaranteed Sr. Notes 9.88% due 03/01/09.................. 225,000 248,062 Huntsman International, LLC Sr. Sub Notes 10.13% due 07/01/09................. 150,000 157,500 Huntsman, LLC Sr. Sec. Notes 11.63% due 10/15/10................. 125,000 144,687 Lubrizol Corp. Sr. Debenture 6.50% due 10/01/34.................. 131,000 127,793 Lyondell Chemical Co. Guaranteed Sr. Sec. Notes 9.50% due 12/15/08.................. 50,000 54,563
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- Chemicals (continued) Phosphate Resource Partners LP Sr. Notes 7.00% due 02/15/08................. $125,000 $ 132,500 Rhodia SA Sr. Sub. Notes 8.88% due 06/01/11................. 200,000 174,000 Rockwood Specialties, Inc. Sr. Sub. Notes 10.63% due 05/15/11................ 150,000 165,000 RPM International, Inc. Sr. Notes 4.45% due 10/15/09*................ 33,000 32,811 Westlake Chemical Corp. Sr. Notes 8.75% due 07/15/11................. 81,000 90,923 ---------- 1,774,401 ---------- Communication Equipment -- 0.4% Rural Cellular Corp. Sr. Sub. Notes 9.63% due 05/15/08................. 250,000 231,250 Rural Cellular Corp. Sr. Sub. Notes 9.75% due 01/15/10................. 250,000 217,500 ---------- 448,750 ---------- Computers & Business Equipment -- 0.2% Seagate Technology HDD Holdings Guaranteed Sr. Notes 8.00% due 05/15/09................. 50,000 53,250 Xerox Corp. Sr. Notes 6.88% due 08/15/11................. 125,000 130,625 ---------- 183,875 ---------- Conglomerate -- 0.6% Tyco International Group SA Participation Certificates 4.44% due 06/15/07*................ 590,000 602,921 ---------- Education -- 0.1% KinderCare Learning Centers, Inc. Sr. Sub. Notes, Series B 9.50% due 02/15/09................. 57,000 57,784 ---------- Electronics -- 0.2% Freescale Semiconductor, Inc. Sr. Notes 7.13% due 07/15/14*................ 125,000 130,000 ON Semiconductor Corp. Sr. Notes 12.00% due 03/15/10................ 49,000 56,350 ---------- 186,350 ---------- Energy Services -- 1.2% ENI Coordination Center Notes 5.25% due 12/27/07................. GBP 205,000 373,264
36 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------- BONDS & NOTES (continued) Energy Services (continued) Hanover Compressor Co. Sub. Notes zero coupon due 03/31/07........ $375,000 $ 316,875 Oslo Seismic Services, Inc. 1st Mtg. Notes 8.28% due 06/01/11.............. 172,883 185,931 Pride International, Inc. Sr. Notes 7.38% due 07/15/14*............. 50,000 55,500 Seitel, Inc. Sr. Notes 11.75% due 07/15/11*............ 100,000 102,500 Trico Marine Services, Inc. Sr. Notes 8.88% due 05/15/12(1)(9)........ 500,000 220,000 ---------- 1,254,070 ---------- Energy Sources -- 2.8% Belden & Blake Corp. Sr. Sec. Notes 8.75% due 07/15/12*............. 25,000 26,625 Chesapeake Energy Corp. Sr. Notes 6.88% due 01/15/16.............. 50,000 52,250 Chesapeake Energy Corp. Sr. Notes 7.50% due 09/15/13.............. 50,000 54,750 Chesapeake Energy Corp. Guaranteed Sr. Notes 7.75% due 01/15/15.............. 25,000 27,250 Chesapeake Energy Corp. Guaranteed Sr. Notes 9.00% due 08/15/12.............. 25,000 28,562 CITGO Petroleum Corp. Sr. Notes 11.38% due 02/01/11............. 100,000 117,750 Colorado Interstate Gas Co. Sr. Debentures 6.85% due 06/15/37.............. 150,000 156,000 Costilla Energy, Inc. Sr. Notes 10.25% due 10/01/06+(1)(2)...... 500,000 0 Encore Acquisition Co. Sr. Sub. Notes 6.25% due 04/15/14.............. 50,000 50,000 Encore Acquisition Co. Guaranteed Sr. Notes 8.38% due 06/15/12.............. 75,000 83,625 Enterprise Products Operating LP Sr. Notes 6.65% due 10/15/34*............. 132,000 132,337 EXCO Resources, Inc. Guaranteed Sr. Notes 7.25% due 01/15/11.............. 75,000 79,500 Frontier Oil Corp. Sr. Notes 6.63% due 10/01/11*............. 50,000 50,625
Principal Value Security Description Amount** (Note 2) -------------------------------------------------------------------- Energy Sources (continued) KCS Energy, Inc. Sr. Notes 7.13% due 04/01/12.......................... $ 125,000 $ 130,625 Mission Energy Holding Co. Sr. Sec. Notes 13.50% due 07/15/08......................... 1,125,000 1,423,125 North American Energy Partners, Inc. Sr. Notes 8.75% due 12/01/11*......................... 100,000 98,000 Pacific Energy Partners LP Sr. Notes 7.13% due 06/15/14*......................... 125,000 135,313 Roseton Danskammer Guaranteed Pass-Thru Certificates, Series B 7.67% due 11/08/16.......................... 150,000 139,500 Southern Natural Gas Co. Sr. Notes 8.88% due 03/15/10.......................... 125,000 140,625 ---------- 2,926,462 ---------- Entertainment Products -- 0.1% Steinway Musical Instruments, Inc. Guaranteed Sr. Notes 8.75% due 04/15/11.......................... 75,000 81,750 ---------- Financial Services -- 6.7% Alamosa Delaware, Inc. Guaranteed Sr. Disc. Notes 12.00% due 07/31/09(4)...................... 93,000 95,790 Arch Western Finance, LLC Guaranteed Sr. Notes 7.25% due 01/01/05*......................... 125,000 134,375 Athena Neurosciences Finance, LLC Guaranteed Sr. Notes 7.25% due 02/21/08.......................... 325,000 329,062 Bear Island Paper Co., LLC Sr. Sec. Notes, Series B 10.00% due 12/01/07......................... 250,000 245,000 Bluewater Finance, Ltd. Guaranteed Sr. Notes 10.25% due 02/15/12......................... 175,000 189,875 Borden United States Finance Corp. Sr. Sec. Notes 9.00% due 07/15/14*......................... 75,000 78,750 Chukchansi Economic Development Authority Sr. Notes 14.50% due 06/15/09*........................ 600,000 750,000 CIT Group, Inc. Sr. Notes 5.13% due 09/30/14.......................... 46,000 45,945 Citicorp Capital I Guaranteed Capital Securities 7.93% due 02/15/27.......................... 590,000 652,317 Citigroup, Inc. Sub. Notes 5.00% due 09/15/14*......................... 48,398 48,458
37 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) Consolidated Communications Holdings Sr. Notes 9.75% due 04/01/12*.................... 200,000 205,000 Duke Capital LLC Notes 5.67% due 08/15/14..................... 75,000 76,496 ESI Tractebel Acquisition Corp. Guaranteed Bonds, Series B 7.99% due 12/30/11..................... 233,000 240,573 General Electric Capital Corp. Bonds 4.75% due 09/15/14..................... 40,000 39,759 Goldman Sachs Group, Inc. Sr. Notes 6.13% due 02/15/33..................... 232,000 233,027 H & E Equipment Services, LLC Guaranteed Sr. Sec. Notes 11.13% due 06/15/12.................... 125,000 128,750 Hilcorp Energy I LP/Hilcorp Finance Co. Sr. Notes 10.50% due 09/01/10*................... 250,000 276,875 Huntsman Advanced Materials, LLC Sr. Sec. Notes 11.00% due 07/15/10*................... 175,000 203,000 iPCS Escrow Co. Sr. Notes 11.50% due 05/01/12*................... 175,000 183,750 iPCS, Inc. 14.00% due 07/15/10+(1)(2)............. 2,075,000 0 J.P. Morgan Chase Capital XIII Capital Securities 2.88% due 09/30/34(3).................. 53,000 52,466 Labranche & Co., Inc. Sr. Notes 11.00% due 05/15/12*................... 75,000 77,063 Madison River Capital, LLC/ Madison River Finance Corp. Sr. Notes, Series B 13.25% due 03/01/10.................... 500,000 530,000 MedCath Holdings Corp. Notes 9.88% due 07/15/12*.................... 75,000 78,375 Muzak, LLC/ Muzak Finance Corp. Guaranteed Sr. Sub. Notes 9.88% due 03/15/09..................... $ 225,000 $165,375 Nexstar Finance Holdings, LLC Guaranteed Sr. Disc. Notes 11.38% due 04/01/13(4)................. 300,000 229,875 NGC Corp. Capital Trust I Guaranteed Sub. Notes, Series B 8.32% due 06/01/27..................... 800,000 640,000 PCA, LLC Sr. Notes 11.88% due 08/01/09.................... 175,000 187,250 Px Escrow Corp. Sr. Sub. Disc. Notes 9.63% due 02/01/06(4).................. 125,000 106,250
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------ Financial Services (continued) Qwest Capital Funding, Inc. Guaranteed Notes 6.88% due 07/15/28........... 25,000 17,938 Qwest Capital Funding, Inc. Guaranteed Notes 7.90% due 08/15/10........... 325,000 299,812 Rainbow National Services LLC Guaranteed Sr. Sub. Notes 10.38% due 09/01/14*......... 75,000 78,563 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 11.50% due 06/01/10.......... 250,000 282,500 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 12.88% due 10/15/08.......... 75,000 93,000 ---------- 6,995,269 ---------- Food, Beverage & Tobacco -- 0.5% Coca-Cola Enterprises, Inc. Debentures 8.50% due 02/01/22........... 78,000 102,969 Doane Pet Care Co. Sr. Sub. Notes 9.75% due 05/15/07........... 50,000 47,875 Doane Pet Care Co. Guaranteed Sr. Notes 10.75% due 03/01/10.......... 50,000 53,375 Wornick Co. Sr. Sec. Notes 10.88% due 07/15/11*......... 250,000 267,500 ---------- 471,719 ---------- Forest Products -- 1.3% Caraustar Industries, Inc. Notes 7.38% due 06/01/09........... 25,000 25,875 Caraustar Industries, Inc. Guaranteed Sr. Sub. Notes 9.88% due 04/01/11........... $ 75,000 $ 80,250 Constar International, Inc. Sr. Sub. Notes 11.00% due 12/01/12.......... 100,000 94,500 Crown Cork & Seal Co., Inc. Notes 8.00% due 04/15/23........... 350,000 325,500 FiberMark, Inc. Sr. Notes 10.75% due 04/15/11(1)(5)(9). 125,000 78,750 Georgia-Pacific Corp. Debentures 7.75% due 11/15/29........... 25,000 26,875 Georgia-Pacific Corp. Sr. Notes 8.00% due 1/15/24............ 200,000 227,500 Graham Packaging Co., Inc. Sr. Notes 8.50% due 10/15/12*.......... 25,000 25,500
38 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- BONDS & NOTES (continued) Forest Products (continued) Pliant Corp. Sr. Sec. Notes 11.13% due 09/01/09.......................... 75,000 78,000 Speciality Paperboard, Inc. Sr. Notes 9.38% due 10/15/06(1)(9)..................... 550,000 346,500 ---------- 1,309,250 ---------- Health Services -- 0.9% Concentra Operating Corp. Guaranteed Sr. Sub. Notes 9.13% due 06/01/12*.......................... 50,000 54,750 HCA, Inc. Sr. Notes 6.95% due 05/01/12........................... 200,000 215,953 IASIS Healthcare Capital Corp. Sr. Sub. Notes 8.75% due 06/15/14*.......................... 125,000 130,937 Pediatric Services of America, Inc. Guaranteed Sr. Sub. Notes 10.00% due 04/15/08(2)....................... 25,000 25,250 Psychiatric Solutions, Inc. Guaranteed Sr. Sub. Notes 10.63% due 06/15/13.......................... 100,000 113,000 Team Health, Inc. Sr. Sub. Notes 9.00% due 04/01/12*.......................... 125,000 124,375 Tenet Healthcare Corp. Sr. Notes 5.00% due 07/01/07........................... 100,000 99,250 Tenet Healthcare Corp. Sr. Notes 6.50% due 06/01/12........................... 125,000 111,875 Triad Hospitals, Inc. Sr. Notes 7.00% due 05/15/12........................... 25,000 26,125 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13........................... 75,000 76,313 ---------- 977,828 ---------- Insurance -- 0.8% Crum & Forster Holdings Corp. Sr. Notes 10.38% due 06/15/13.......................... $125,000 $ 133,437 LNR Property Corp. Sr. Sub. Notes 7.63% due 07/15/13........................... 75,000 82,125 Ohio Casualty Corp. Notes 7.30% due 06/15/14........................... 590,000 622,628 Prudential Financial, Inc. Tranche Trust 00005 5.10% due 09/20/14........................... 33,000 33,028 ---------- 871,218 ---------- Leisure & Tourism -- 4.5% American Airlines, Inc. Pass-Thru Certificates, Series 2001-1, Class A2 6.82% due 05/23/11........................... 100,000 88,693
Principal Value Security Description Amount** (Note 2) ---------------------------------------------------------------------- Leisure & Tourism (continued) American Airlines, Inc. Pass-Thru Certificates, Series 2001-2, Class C 7.80% due 04/01/08.............................. 300,000 249,510 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A- 2 6.88% due 07/02/09.............................. 299,758 279,796 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class B 7.63% due 01/02/15.............................. 751,504 533,294 Atlas Air, Inc. Pass-Thru Certificates, Series 2000-1 8.71% due 07/02/21.............................. 281,513 277,023 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class C 8.77% due 01/02/11.............................. 62,428 26,197 Atlas Air, Inc. Pass-Thru Certificates Series 2000-1, Class B 9.06% due 07/02/17.............................. 157,740 117,854 Bally Total Fitness Holding Corp. Sr. Notes 10.50% due 07/15/11............................. 100,000 95,000 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-1, Class C 6.95% due 08/02/09.............................. 146,833 111,739 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-2, Class C1 7.73% due 03/15/11.............................. 46,804 33,284 Continental Airlines, Inc. Secured Pass-Thru Certificates, Series 2000-2, Class B 8.31% due 10/02/19.............................. 134,914 110,325 Continental Airlines, Inc. Pass-Thru Certificates, Series 2004, Class J 9.56% due 09/01/19.............................. 586,641 583,226 Courtyard by Marriott II Sr. Sec. Notes, Series B 10.75% due 02/01/08............................. 150,000 150,750 Delta Air Lines, Inc. Pass-Thru Certificates, Series 2002-1, Class C 7.78% due 01/02/12.............................. 166,968 64,078 Delta Air Lines, Inc. Sr. Notes 10.00% due 08/15/08............................. $175,000 $ 52,500 Eldorado Resorts, LLC Sr. Notes 9.00% due 01/15/14(2)(5)........................ 425,000 425,000 Hilton Hotels Corp. Sr. Notes 7.50% due 12/15/17.............................. 38,000 43,510 Hollywood Casino Shreveport/ Shreveport Capital Corp. Guaranteed Sr. Sec. Notes 13.00% due 08/01/06+(1)......................... 400,000 338,500 Riviera Holdings Corp. Guaranteed Sr. Notes 11.00% due 06/15/10............................. 135,000 148,500
39 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Leisure & Tourism (continued) Six Flags, Inc. Sr. Notes 9.75% due 04/15/13.................. 375,000 354,375 True Temper Sports, Inc. Guaranteed Sr. Sub. Notes 8.38% due 09/15/11.................. 150,000 139,500 Waterford Gaming, LLC Sr. Notes 8.63% due 09/15/12*................. 182,000 192,920 Worldspan LP Sr. Notes 9.63% due 06/15/11.................. 250,000 226,875 ---------- 4,642,449 ---------- Machinery -- 0.3% Dresser, Inc. Guaranteed Sr. Sub. Notes 9.38% due 04/15/11.................. 75,000 82,500 Navistar International Corp. Sr. Notes 7.50% due 06/15/11.................. 50,000 53,375 Stanadyne Corp. Sr. Sub. Notes 10.00% due 08/15/14*................ 125,000 130,000 Venture Holdings Co., LLC Guaranteed Sr. Sub. Notes 11.00% due 06/01/07+(1)(9).......... 100,000 4,500 ---------- 270,375 ---------- Medical Products -- 0.3% Encore Medical IHC, Inc. Sr. Sub. Notes 9.75% due 10/01/12*................. 75,000 74,063 Inverness Medical Innovations, Inc. Sr. Sub. Notes 8.75% due 02/15/12*................. 125,000 125,625 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11................. 125,000 126,875 ---------- 326,563 ---------- Metals & Mining -- 0.7% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11.................. $ 75,000 $ 79,875 CSN Islands VII Corp. Guaranteed Notes 10.75% due 09/12/08*................ 150,000 167,250 CSN Islands VIII Corp. Guaranteed Sr. Notes 9.75% due 12/16/13*................. 200,000 200,500 Eagle-Picher, Inc. Sr. Notes 9.75% due 09/01/13.................. 175,000 178,500 Renco Metals, Inc. Guaranteed Sr. Notes 11.50% due 07/01/03(1)(2)(5)(9)(12). 500,000 0
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------- Metals & Mining (continued) Ryerson Tull, Inc. Notes 9.13% due 07/15/06................ 75,000 79,125 -------- 705,250 -------- Pharmaceuticals -- 0.6% Curative Health Services, Inc. Sr. Notes 10.75% due 05/01/11............... 150,000 137,250 Merck & Co., Inc. Debenture 5.95% due 12/01/28................ 116,000 121,591 NeighborCare, Inc. Guaranteed Sr. Sub. Notes 6.88% due 11/15/13................ 225,000 234,000 Schering-Plough Co. Sr. Notes 6.50% due 12/01/33................ 58,000 62,801 Wyeth Notes 6.95% due 03/15/11................ 58,000 64,495 -------- 620,137 -------- Real Estate Investment Trusts -- 0.6% CarrAmerica Realty Corp. Notes 5.13% due 09/01/11................ 35,000 35,397 National Health Investors, Inc. Notes 7.30% due 07/16/07................ 200,000 204,751 Omega Healthcare Investors, Inc. Sr. Notes 6.95% due 08/01/07................ 50,000 51,750 Omega Healthcare Investors, Inc. Sr. Notes 7.00% due 04/01/14*............... 75,000 76,125 Senior Housing Properties Trust Sr. Notes 8.63% due 01/15/12................ 202,000 224,725 Vornado Realty LP Notes 4.50% due 08/15/09................ $ 46,000 $ 46,097 -------- 638,845 -------- Restaurants -- 0.4% Advantica Restaurant Group, Inc. Sr. Notes 11.25% due 01/15/08............... 175,000 181,563 Denny's Holdings, Inc. Sr. Notes 10.00% due 10/01/12*.............. 250,000 250,937 Sbarro, Inc. Sr. Notes 11.00% due 09/15/09............... 19,000 17,765 -------- 450,265 --------
40 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Retail Stores -- 1.7% Alderwoods Group, Inc. Sr. Notes 7.75% due 09/15/12*................. 50,000 52,875 Blockbuster, Inc. Sr. Sub. Notes 9.00% due 09/01/12*................. 50,000 51,875 Collins & Aikman Floor Cover Guaranteed Sr. Sub. Notes 9.75% due 02/15/10.................. 75,000 79,500 J.C. Penney Co., Inc. Notes 6.88% due 10/15/15.................. 150,000 159,750 Jostens Holding Corp. Sr. Disc. Notes 10.25% due 12/01/13(4).............. 190,000 130,625 May Department Stores Co. Notes 3.95% due 07/15/07*................. 590,000 594,596 Rent-Way, Inc. Sr. Notes 11.88% due 06/15/10................. 175,000 190,750 Rite Aid Corp. Debentures 6.88% due 08/15/13.................. 50,000 43,750 Saks, Inc. Guaranteed Notes 7.00% due 12/01/13.................. 125,000 127,500 Saks, Inc. Guaranteed Notes 9.88% due 10/01/11.................. 100,000 119,000 Stater Bros. Holdings, Inc. Sr. Notes 8.13% due 06/15/12*................. 175,000 183,313 ---------- 1,733,534 ---------- Telecommunications -- 4.9% AirGate PCS, Inc. Sr. Sub. Sec. Notes 9.38% due 09/01/09.................. 198,300 201,275 Alaska Communications Holdings, Inc. Guaranteed Sr. Sub. Notes 9.38% due 05/15/09.................. $275,000 $ 259,875 American Cellular Corp. Sr. Notes, Series B 10.00% due 08/01/11................. 325,000 263,250 Bell Atlantic Pennsylvania, Inc. Debentures 8.75% due 08/15/31.................. 70,000 92,169 Cincinnati Bell, Inc. Notes 7.25% due 06/15/23.................. 25,000 23,406 Cincinnati Bell, Inc. Guaranteed Sr. Sub. Notes 8.38% due 01/15/14.................. 25,000 22,813 Citizens Communications Co. Sr. Notes 9.00% due 08/15/31.................. 590,000 602,537
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------------- Telecommunications (continued) FairPoint Communications, Inc. Sr. Sub. Notes, Series B 9.50% due 05/01/08....................... 325,000 325,000 FairPoint Communications, Inc. Sr. Sub. Notes 12.50% due 05/01/10...................... 250,000 267,500 IWO Holdings, Inc. Guaranteed Sr. Notes 14.00% due 01/15/11+(1).................. 1,625,000 715,000 LCI International, Inc. Sr. Notes 7.25% due 06/15/07....................... 1,100,000 998,250 Nextel Communications, Inc. Sr. Notes 5.95% due 03/15/14....................... 100,000 98,000 Qwest Corp. Debentures 7.13% due 11/15/43....................... 300,000 249,000 Qwest Corp. Debentures 7.25% due 10/15/35....................... 450,000 385,875 Qwest Corp. Debentures 8.88% due 06/01/31....................... 50,000 49,375 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 8.75% due 11/15/11....................... 75,000 51,000 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 9.38% due 02/01/11....................... 545,000 391,038 TSI Telecommunications Services, Inc. Guaranteed Sr. Sub. Notes 12.75% due 02/01/09...................... 50,000 56,000 ---------- 5,051,363 ---------- Transportation -- 0.2% Burlington Northern Santa Fe Corp. Debentures 8.13% due 04/15/20....................... $ 162,000 $ 202,778 Petroleum Helicopters, Inc. Guaranteed Sr. Notes, Series B 9.38% due 05/01/09....................... 50,000 53,750 ---------- 256,528 ---------- Utilities -- 3.9% AES Corp. Sr. Sub. Debentures 8.88% due 11/01/27....................... 150,000 144,188 AES Drax Energy, Ltd. Guaranteed Sr. Sub. Sec. Notes, Series B 11.50% due 08/30/10+(1).................. 725,000 3,625 Appalachian Power Co. Sr. Notes, Series G 3.60% due 05/15/08....................... 42,000 41,725 CenterPoint Energy Resources Corp. Debentures 8.90% due 12/15/06....................... 565,000 627,704
41 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Utilities (continued) Cincinnati Bell Telephone Co. Notes 7.18% due 12/15/23................. 50,000 47,813 Cincinnati Bell Telephone Co. Guaranteed Notes 7.20% due 11/29/23................. 225,000 215,156 Connecticut Light & Power Co. 1st Mtg. Bonds, Series B 5.75% due 09/15/34................. 139,000 139,768 Dynegy Holdings, Inc. Sr. Notes 8.75% due 02/15/12................. 100,000 104,000 Edison Mission Energy Sr. Notes 9.88% due 04/15/11................. 150,000 174,750 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22................. 450,000 495,000 El Paso Production Holding Co. Guaranteed Sr. Notes 7.75% due 06/01/13................. 325,000 325,813 Ferrellgas LP Sr. Notes 6.75% due 05/01/14................. 225,000 229,500 Kinder Morgan Energy Partners, LP Notes 7.75% due 03/15/32................. 115,000 136,126 Mirant Corp. Sr. Notes 7.90% due 07/15/09(1)*............. 1,125,000 711,562 Reliant Resources, Inc. Notes 9.50% due 7/15/13.................. 125,000 135,781 Tiverton/Rumford Power Assoc., Ltd. Guaranteed Notes 9.00% due 07/15/18*................ 124,172 90,645 Williams Cos, Inc. Notes 7.88% due 09/01/21................. $ 425,000 $ 471,750 ----------- 4,094,906 ----------- Total Bonds & Notes (cost $43,290,087)................. 43,843,121 ----------- ASSET-BACKED SECURITIES -- 3.3% Financial Services -- 3.3% Commercial Mtg. Asset Trust Commercial Mtg. Certificates, Series 1999-C1, Class C 7.35% due 10/18/04(11)............. 1,200,000 1,422,857 DLJ Commercial Mtg. Corp. Commercial Mtg. Certificates, Series 1998-CG1, Class S 0.64% due 10/01/04(6)(7)(11)....... 8,040,462 187,347 DLJ Commercial Mtg. Corp. Commercial Mtg. Certificates Series 1998-CG1, Class S 1.00% due 10/12/04(6)(7)(11)....... 6,735,506 206,119
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------------- Financial Services (continued) Mid-State Trust Asset Backed Notes, Series 6, Class A1 7.34% due 7/01/35........ 843,679 907,513 PNC Mtg. Securities Corp. Mtg. Certificates, Series 1999-1, Class CB2 6.80% due 10/01/04(7)10).................... 333,338 332,892 PNC Mtg. Securities Corp. Mtg. Certificates, Series 1992-2, Class DB3 6.91% due 04/25/29(7)(10)................... 359,542 365,478 --------- Total Asset-Backed Securities (cost $3,093,720)........................... 3,422,206 --------- FOREIGN BONDS & NOTES -- 37.6% Broadcasting & Media -- 0.5% CF Cable TV, Inc. Guaranteed Sr. Notes 9.13% due 07/15/07.......................... 50,000 52,187 Telenet Group Holding NV Sr. Disc. Notes 11.50% due 06/15/14(1)(4)*.................. 625,000 459,375 --------- 511,562 --------- Financial Services -- 0.2% Deutsche Telekom International Finance BV Guaranteed Bonds 8.25% due 12/15/04.......................... 139,000 179,668 --------- Food, Beverage & Tobacco -- 0.1% Vitro Envases Norteamerica SA Sr. Sec. Notes 10.75% due 07/23/11*........................ 150,000 144,917 --------- Forest Products -- 0.1% Abitibi-Consolidated, Inc. Debenture 8.55% due 08/01/10.......................... 100,000 107,250 --------- Government Agency -- 33.9% Australia Commonwealth Bonds 6.75% due 11/15/06.......................... AUD1,100,000 825,919 Canadian Government Bond 4.25% due 09/01/08.......................... CAD 175,000 140,965 Canadian Government Bonds 5.75% due 06/01/29.......................... CAD 420,000 362,583 Canadian Government Bonds 5.75% due 09/01/06.......................... CAD 735,000 610,054 Deutsche Bundesrepublik Bonds 5.63% due 01/04/28.......................... EUR 200,000 283,349 Dutch Government Bonds 5.25% due 07/15/08.......................... 205,000 274,493 Federal Republic of Brazil Bonds 3.13% due 04/15/12(3)....................... 1,905,886 1,765,422 Federal Republic of Brazil Bonds 8.00% due 04/15/14.......................... 1,334,606 1,319,659
42 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ----------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Government Agency (continued) Federal Republic of Brazil Bonds 8.88% due 04/15/24............ $ 145,000 $ 138,910 Federal Republic of Brazil Bonds 10.13% due 05/15/27........... 245,000 259,700 Federal Republic of Brazil Notes 10.25% due 06/17/13........... 580,000 641,770 Federal Republic of Brazil Bonds 11.00% due 08/17/40........... 2,260,000 2,533,460 Federal Republic of Brazil Bonds 12.00% due 04/15/10........... 150,000 178,725 Federal Republic of Brazil Notes 14.50% due 10/15/09........... 250,000 322,500 Federal Republic of Brazil Notes 11.00% due 01/11/12........... 600,000 688,500 Government of Japan Bonds 1.10% due 06/20/05............ JPY107,000,000 979,990 Italian Government Bonds 3.75% due 12/14/07............ 590,000 597,084 Kingdom of Denmark Bonds 7.00% due 11/15/07............ DKK 2,500,000 467,052 Kingdom of Sweden Bonds 5.00% due 01/28/09............ SEK 3,000,000 433,899 Kingdom of Sweden Bonds 5.50% due 10/08/12............ SEK 4,245,000 634,082 Kingdom of Sweden Bonds 6.75% due 05/05/14............ SEK 3,000,000 489,898 Republic of Colombia Notes 8.25% due 12/22/14............ 125,000 123,437 Republic of Colombia Notes 10.75% due 01/15/13........... 470,000 538,620 Republic of Colombia Bonds 11.75% due 02/25/20........... 300,000 366,750 Republic of Ecuador Bonds 8.00% due 08/15/05(4)......... 730,000 591,300 Republic of Greece Sr. Notes 4.65% due 04/19/07............ EUR 300,000 389,749 Republic of Greece 5.25% due 05/18/12............ EUR 310,000 419,301
Principal Value Security Description Amount** (Note 2) -------------------------------------------------- Government Agency (continued) Republic of Italy Bonds 5.25% due 12/15/05........ EUR 695,000 $892,923 Republic of Italy Bonds 5.25% due 11/01/29........ EUR 333,000 442,940 Republic of Panama Bonds 9.38% due 01/16/23........ $ 25,000 27,250 Republic of Panama Bonds 9.63% due 02/08/11........ 400,000 459,000 Republic of Peru Bonds 5.00% due 03/01/07(7)..... 176,000 161,920 Republic of Peru Bonds 8.38% due 05/03/16........ 260,000 270,400 Republic of Peru Guaranteed Global Bonds 9.13% due 02/21/12........ 305,000 341,600 Republic of Peru Notes 9.88% due 02/06/15........ 75,000 86,250 Republic of Peru Bonds 4.50% due 03/07/05(7)..... 100,000 88,750 Republic of Philippines Bonds 8.25% due 01/15/14........ 300,000 294,750 Republic of Philippines Bonds 9.00% due 02/15/13........ 120,000 123,600 Republic of Philippines Bonds 10.63% due 03/16/25....... 380,000 405,650 Republic of Turkey Notes 7.25% due 03/15/15........ 125,000 123,216 Republic of Turkey Notes 9.00% due 06/30/11........ 330,000 366,919 Republic of Turkey Notes 9.50% due 01/15/14........ 130,000 147,550 Republic of Turkey Notes 11.00% due 01/14/13....... 355,000 435,319 Republic of Turkey Bonds 11.75% due 06/15/10....... 625,000 775,000 Republic of Turkey Sr. Bonds 11.88% due 01/15/30....... 390,000 538,200 Republic of Uruguay Bonds 7.50% due 03/15/15........ 225,000 199,125
43 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) ------------------------------------------------------------ FOREIGN BONDS & NOTES (continued) Government Agency (continued) Republic of Venezuela Debentures 2.75% due 12/18/07(3).......... $ 416,650 $ 414,567 Republic of Venezuela Bonds 8.50% due 10/08/14............. 250,000 246,375 Republic of Venezuela Bonds 9.25% due 09/15/27............. 1,520,000 1,497,960 Russia Government International Bonds 5.00% due 03/31/30(4)*......... 650,000 625,625 Russian Federation Debentures 3.00% due 05/14/08............. 925,000 837,125 Russian Federation Bonds 8.25% due 03/31/10............. 520,000 565,500 Russian Federation Bonds 5.00% due 03/31/30(4).......... 2,890,000 2,779,891 Spanish Government Bonds 5.15% due 07/30/09............. EUR 238,000 320,402 Spanish Government Bonds 6.15% due 01/31/13............. EUR 196,000 282,959 United Kingdom Bonds 7.50% due 12/07/06............. GBP 152,000 291,387 United Mexican States Notes 5.88% due 01/15/14............. 200,000 203,000 United Mexican States Notes 6.38% due 01/16/13............. 475,000 500,175 United Mexican States Notes 6.63% due 03/03/15............. 825,000 874,500 United Mexican States Notes 7.50% due 01/14/12............. 525,000 591,675 United Mexican States Bonds 8.00% due 12/24/08............. MXN 12,395,000 1,033,370 United Mexican States Bonds 8.13% due 12/30/19............. 445,000 510,638 United Mexican States Bonds 8.30% due 08/15/31............. 325,000 369,688 United Mexican States Notes 8.38% due 01/14/11............. 525,000 615,562 ----------- 35,117,932 -----------
Principal Amount/ Value Security Description Shares** (Note 2) ----------------------------------------------------------- Insurance -- 0.4% Fairfax Financial Holdings, Ltd. Notes 7.38% due 04/15/18................ $ 75,000 $ 60,750 Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15................ 300,000 273,000 XL Capital Ltd. Sr. Notes 5.25% due 09/15/14................ 70,000 70,262 ---------- 404,012 ---------- Leisure & Tourism -- 0.1% Grupo Posadas S A De CV Sr. Notes 8.75% due 10/04/11*............... 125,000 127,500 ---------- Metals & Mining -- 0.1% Noranda, Inc. Notes 6.00% due 10/15/15................ 81,000 86,392 Vitro SA de CV Notes 11.75% due 11/01/13*.............. 50,000 46,375 ---------- 132,767 ---------- Pharmaceuticals - 0.7% Abbott Japan Guaranteed Bonds 1.05% due 11/06/08................ 76,000,000 700,364 ---------- Retail Stores -- 0.2% Jean Coutu Group, Inc. Sr. Sub. Notes 8.50% due 08/01/14*............... 250,000 248,125 ---------- Telecommunications -- 0.8% Empresa Brasileira De Telcom Guaranteed Sr. Notes, Series B 11.00% due 12/15/08............... 25,000 27,687 Kyivstar GSM Loan Participation Notes 10.38% due 08/17/09*.............. 100,000 106,500 Telecom Italia Capital SA Guaranteed Sr. Notes 6.00% due 9/30/34*................ 232,000 226,607 Telus Corp. Notes 7.50% due 06/01/07................ 590,000 646,969 ---------- 1,007,763 ---------- Utilities -- 0.3% Calpine Canada Energy Finance, ULC Guaranteed Sr. Notes 8.50% due 05/01/08................ 300,000 207,000 Cia de Saneamento Basico do Estado de Sao Paulo Notes 12.00% due 06/20/08*.............. 75,000 80,437 ---------- 287,437 ----------
44 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Amount/ Value Security Description Shares** (Note 2) -------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS (continued) Total Foreign Bonds & Notes (cost $35,803,549)........................ 38,969,297 ----------- U.S. GOVERNMENT OBLIGATIONS -- 1.9% U.S Treasury Bonds -- 0.8% 5.38% due 02/15/31......................... 761,000 815,221 ----------- U.S. Treasury Notes -- 1.1% 2.00% due 08/31/05......................... $ 500,000 $ 499,239 4.75% due 05/15/14......................... 86,000 90,273 7.00% due 07/15/06......................... 495,000 533,517 ----------- 1,123,029 ----------- Total U.S. Government Obligations (cost $1,928,580)......................... 1,938,250 ----------- U.S. GOVERNMENT AGENCY -- 8.5% Federal Home Loan Mortgage Corporation -- 1.2% 5.00% due 05/01/34........................ 1,165,534 1,155,461 6.50% due 05/01/29........................ 18,328 19,264 7.00% due 06/01/29........................ 30,605 32,511 8.50% due 05/01/08........................ 45,916 49,195 10.00% due 05/15/20(10)................... 38,454 38,495 11.57% due 10/15/04(6)(10)................ 25,638 501 ----------- 1,295,427 ----------- Federal National Mortgage Association -- 7.1% 0.45% due 10/18/04(6)(7)(10).............. 4,255,382 59,761 0.54% due 10/18/04(6)(7)(10).............. 1,657,720 16,663 0.83% due 10/01/04(6)(7)(10).............. 3,636,582 153,202 1.33% due 10/01/04(6)(7)(10).............. 1,970,238 62,459 4.50% due 06/01/19........................ 759,614 757,854 5.00% due 06/01/19........................ 765,548 778,764 5.50% due 07/01/19........................ 753,147 779,329 6.00% due 05/01/34........................ 1,091,276 1,130,423 6.50% due 04/01/34........................ 908,439 953,685 7.50% due 09/01/30........................ 13,647 14,627 8.00% due 11/01/28........................ 56,621 62,031 8.80% due 01/25/19(10).................... 74,544 81,809 10.40% due 04/25/19(10)................... 13,420 14,683 13.00% due 11/15/15....................... 14,181 16,240 5.50% due 01/01/29........................ 15,540 15,848 5.50% due 06/01/29........................ 222,355 226,344 7.50% due 01/01/30........................ 22,835 24,483 5.50% due 06/01/34........................ 1,938,151 1,966,220 6.00% due 02/01/32........................ 230,437 238,860 ----------- 7,353,285 ----------- Government National Mortgage Association -- 0.2% 7.50% due 07/15/27........................ 32,014 34,532 7.50% due 10/15/27........................ 120,624 130,110 7.50% due 10/15/27........................ 10,716 11,559 ----------- 176,201 ----------- Total U.S. Government Agency (cost $8,950,443)......................... 8,824,913 ----------- COMMON STOCK -- 2.3% Automotive -- 0.0% Exide Technologies, Inc.+.................. 1,088 17,245 ----------- Banks -- 1.0% iPCS, Inc.+................................ 59,130 1,079,122 ----------- Broadcasting & Media -- 0.1% Cablevision Systems Corp., Class A+........ 5,620 113,974 -----------
Principal Amount/ Value Security Description Shares** (Note 2) --------------------------------------------------------------------- COMMON STOCK (continued) Financial Services -- 0.0% Ono Finance, PLC(2)(5)*....................... $ 100 $ 0 ---------- Leisure & Tourism -- 0.2% John Q. Hammons Hotels, Inc.+................. 2,875 31,481 MGM Mirage, Inc.+............................. 4,275 212,254 ---------- 243,735 ---------- Machinery -- 0.2% NES Rentals Holding, Inc.+.................... 19,435 145,762 ---------- Real Estate Investment Trusts -- 0.2% Meristar Hospitality Corp.+................... 31,820 173,419 ---------- Telecommunications -- 0.6% AirGate PCS, Inc.+............................ 5,600 109,760 AirGate PCS, Inc.(2).......................... 15,419 302,213 Dobson Communications Corp.+.................. 270 359 IMPSAT Fiber Networks, Inc.+.................. 4,019 20,939 Telewest Global, Inc.+........................ 16,202 188,267 ---------- 621,538 ---------- Total Common Stock (cost $2,432,898)............................ 2,394,795 ---------- PREFERRED STOCK -- 0.4% Broadcasting & Media -- 0.2% Paxson Communications Corp. 13.50%(8)......... 24 180,000 ---------- Financial Services -- 0.0% TCR Holdings, Class B(2)...................... 570 6 TCR Holdings, Class C(2)...................... 314 3 TCR Holdings, Class D(2)...................... 827 8 TCR Holdings, Class E(2)...................... 1,711 17 ---------- 34 ---------- Retail Stores -- 0.1% General Nutrition Centers, Inc. 12.00%(2)(5)*. 100 106,000 Rent-Way, Inc.(2)(5)(13)...................... 4 35,000 ---------- 141,000 ---------- Telecommunications -- 0.1% Alamosa Holdings, Inc. 7.50%.................. 208 122,767 ---------- Total Preferred Stock (cost $414,914).............................. 443,801 ---------- RIGHTS -- 0.1% Government Agency -- 0.1% United Mexico States Series C(2).............. 1,400,000 26,600 United Mexico States Series E(2).............. 1,400,000 29,400 United Mexico States Series D(2).............. 1,400,000 32,200 ---------- 88,200 ---------- Total Rights (cost $0).................................... 88,200 ---------- WARRANTS -- 0.0% Automotive -- 0.0% Exide Technologies, Inc. Expires 05/15/11..... 2,720 8,108 ---------- Broadcasting & Media -- 0.0% Knology Holdings, Inc. Expires 10/22/07(2)(5)*.............................. 1,500 375 ----------
45 SunAmerica Strategic Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount** (Note 2) --------------------------------------------------------------- WARRANTS (continued) Telecommunications -- 0.0% GT Group Telecom, Inc. Expires 02/01/10(2)(5)*...................... $ 150 $ 2 Leap Wireless International, Inc. Expires 04/15/10(2)(5)*.............. 500 0 Leap Wireless International, Inc. Expires 04/15/10(2)(5)*.............. 350 0 ------------ 2 ------------ Total Warrants (cost $37,595)....................... 8,485 ------------ Total Investment Securities -- 96.3% (cost $95,951,786)................... 99,933,068 ------------ SHORT-TERM SECURITIES -- 0.3% Time Deposits -- 0.3% Time Deposit with State Street Bank & Trust Co............................. 353,000 353,000 ------------ REPURCHASE AGREEMENT -- 0.5% State Street Bank & Trust Co. Joint Repurchase Agreement (Note 2)........ 549,000 549,000 ------------ TOTAL INVESTMENTS -- (cost $96,853,786)@.................. 97.2% 100,835,068 Other assets less liabilities........... 2.8 2,927,430 -------- ------------ NET ASSETS -- 100.0% $103,762,498 ======== ============
- -------- * Security exempt from registration under Rule 144A of the Security Act of 1993. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no rights to demand registration of these securities. At September 30, 2004, the aggregate value of these securities was $10,598,896 representing 10.5% of net assets. Unless otherwise indicated, these securities are not considered to be illiquid. ** In United States dollars unless otherwise indicated. AUD --Australian Dollar CAD --Canadian Dollar DKK --Danisk Krone EUR --Euro GBP --Pound Sterling JPY --Japanese Yen MXN --Mexican Peso SEK --Swedish Krona + Non-income producing security. @ See Note 5 for cost of investments on a tax basis. (1) Bond in default. (2) Fair Valued Security; See Note 2. (3) Security is a "floating rate" bond where the coupon rate fluctuates. The rate steps up or down for each rate downgrade or upgrade. The rate reflected is as of September 30, 2004. (4) Security is a "step-up" bond where the coupon rate increases or steps up at a predetermined rate. Rate shown reflects the increased rate. (5) Illiquid Security (6) Interest only (7) Variable rate security -- the rate reflected is as of September 30, 2004; maturity date reflects next reset date. (8) PIK ("Payment-in-kind") payment made with additional securities in lieu of cash. (9) Company has filed Chapter 11 bankruptcy. (10) Collateralized Mortgaged Obligation (11) Commercial Mortgaged Backed Security (12) Security is subject to litigation, the outcome of which is still to be determined. (13) To the extent permitted by the Statement of Additional Information, The Strategic Bond Fund may invest in restricted securities. This restricted security is 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 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 market exists. As of September 30, 2004, the Strategic Bond Fund held the following restricted securities:
Acquisition Acquisition Market % of Net Name Date Shares Cost Value Assets ---- ----------- ------ ----------- ------- -------- Rent-Way, Inc. Preferred Stock 05/29/03 3 $25,000 $25,000 0.02% Rent-Way, Inc. Preferred Stock 05/19/04 1 10,000 10,000 0.01%
Allocation of investment by country as a percentage of net assets as of September 30, 2004.
Country Percentage ------- ---------- United States. 59.3% Brazil........ 7.7 Mexico........ 4.8 Russia........ 4.6 Canada........ 2.8 Venezuela..... 2.1 Italy......... 1.9 Turkey........ 1.9 Japan......... 1.6 Sweden........ 1.5 Columbia...... 0.9 Peru.......... 0.9 Australia..... 0.8 Belgium....... 0.8 Greece........ 0.8 Philippines... 0.7 Spain......... 0.6 Ecuador....... 0.6 Panama........ 0.5 Denmark....... 0.4 Germany....... 0.4 Netherlands... 0.4 United Kingdom 0.3 Cayman Islands 0.2 France........ 0.2 Luxembourg.... 0.2 Uruguay....... 0.2 Czech Republic 0.1 ---- 97.2% ====
Open Forward Foreign Currency Contracts
Contract In Delivery Unrealized to Deliver Exchange For Date Depreciation ----------------- EUR 1,270,000 USD 1,557,820 11/05/2004 $(21,169) ========
- -------- EUR -- Euro USD -- UnitedStates Dollar See Notes to Financial Statements 46 SunAmerica High Yield Bond Fund PORTFOLIO PROFILE -- September 30, 2004 -- (unaudited) Industry Allocation* Financial Services............. 13.0% Telecommunications............. 12.1% Broadcasting & Media........... 11.3% Utilities...................... 11.0% Leisure & Tourism.............. 9.7% Energy Sources................. 6.4% Chemicals...................... 3.8% Repurchase Agreements.......... 3.6% Retail Stores.................. 3.3% Forest Products................ 3.1% Health Services................ 2.4% Energy Services................ 2.1% Bank........................... 1.9% Metals & Mining................ 1.8% Food, Beverage & Tobacco....... 1.6% Real Estate Investment Trusts.. 1.6% Business Services.............. 1.4% Communication Equipment........ 1.3% Insurance...................... 1.3% Restaurant..................... 1.1% Machinery...................... 1.0% Medical Products............... 0.8% Pharmaceuticals................ 0.8% Automotive..................... 0.4% Computes & Business Equipment.. 0.4% Electronics.................... 0.4% Aerospace & Military Technology 0.3% Household Products............. 0.3% Entertainment Products......... 0.2% Apparel & Textiles............. 0.1% Education...................... 0.1% Transportation................. 0.1% ---- 98.7% ====
Credit Quality+# BBB....... 1.6% BB........ 13.6% B......... 38.0% CCC....... 28.7% CC........ 0.6% C......... 0.2% BELOW C... 0.6% Not Rated@ 16.7% ----- 100.0% =====
* Calculated as a percentage of net assets. @ Represents debt issues that either have no rating or the rating is unavailable from the data source. + Source Standard and Poors. # Calculated as a percentage of total debt issues, excluding short-term securities. 47 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- BONDS & NOTES -- 82.1% Aerospace & Military Technology -- 0.3% Condor Systems, Inc. Guaranteed Sr. Sub. Notes, Series B 11.88% due 05/01/09+(1)(3)(6)(9).... $ 500,000 $ 35,000 DeCrane Aircraft Holdings, Inc. Guaranteed Sr. Sub. Notes, Series B 12.00% due 09/30/08................. 1,700,000 1,105,000 ---------- 1,140,000 ---------- Apparel & Textiles -- 0.1% Warnaco, Inc. Sr. Notes 8.88% due 06/15/13.................. 350,000 389,375 ---------- Automotive -- 0.4% Collins & Aikman Products Corp. Sr. Sub. Notes 12.88% due 08/15/12*................ 400,000 369,000 Diamond Triumph Auto Glass, Inc. Guaranteed Sr. Sub. Notes 9.25% due 04/01/08.................. 820,000 787,200 Exide Corp. Term Loan 10.00% due 04/15/05+(3)(6).......... 1,650,000 0 ---------- 1,156,200 ---------- Broadcasting & Media -- 9.6% Affinity Group, Inc. Sr. Sub. Notes 9.00% due 02/15/12.................. 975,000 1,043,250 AMC Entertainment, Inc. Sr. Sub. Notes 8.00% due 03/01/14*................. 50,000 47,000 American Lawyer Media, Inc. Guaranteed Sr. Notes, Series B 9.75% due 12/15/07.................. 1,175,000 1,176,469 Cablevision Systems Corp. Sr. Notes 8.00% due 04/15/12*................. 1,300,000 1,355,250 Charter Communications Holdings, LLC Sr. Sub. Notes 9.63% due 11/15/09.................. 4,850,000 3,819,375 Charter Communications Holdings, LLC Sr. Sub. Disc. Notes 9.92% due 04/01/11(2)............... 3,375,000 2,598,750 Charter Communications Holdings, LLC Sr. Notes 10.00% due 05/15/11................. 450,000 346,500 Charter Communications Holdings, LLC Sr. Sub. Notes 10.25% due 01/15/10................. 375,000 300,937 Charter Communications Holdings, LLC Sr. Sub. Notes 10.75% due 10/01/09................. 2,075,000 1,701,500 Charter Communications Holdings, LLC Sr. Sub. Notes 11.13% due 01/15/11................. 4,875,000 3,948,750 Cinemark, Inc. Sr. Disc. Notes 9.75% due 03/15/14(2)............... 1,400,000 962,500
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- Broadcasting & Media (continued) Coleman Cable, Inc. Sr. Notes 9.88% due 10/01/12*................. $ 450,000 $ 461,250 CSC Holdings, Inc. Sr. Notes 6.75% due 04/15/12*................. 450,000 452,250 CSC Holdings, Inc. Sr. Notes, Series B 7.63% due 04/01/11.................. 25,000 26,344 CSC Holdings, Inc. Sr. Debentures 7.63% due 07/15/18.................. 525,000 535,500 Fisher Communications, Inc. Sr. Notes 8.63% due 09/15/14*................. 800,000 832,000 Haights Cross Operating Co. Guaranteed Sr. Notes 11.75% due 08/15/11................. 775,000 852,500 Insight Communications Co., Inc. Sr. Sub. Disc. Notes 12.25% due 02/15/11(2).............. 3,875,000 3,623,125 NextMedia Operating, Inc. Guaranteed Sr. Sub. Notes 10.75% due 07/01/11................. 450,000 506,813 Paxson Communications Corp. Guaranteed Sr. Sub. Notes 10.75% due 01/15/09(2).............. 2,425,000 2,079,437 Paxson Communications Corp. Guaranteed Sr. Sub. Notes 10.75% due 07/15/08................. 450,000 452,250 Rogers Cable, Inc. Sr. Sec. Notes 5.50% due 03/15/14.................. 525,000 483,000 Rogers Cable, Inc. Sr. Sec. Notes 6.25% due 06/15/13.................. 75,000 73,500 Rogers Cable, Inc. Bonds 8.75% due 05/01/32.................. 450,000 490,500 Telex Communications, Inc. Sr. Sec. Notes 11.50% due 10/15/08................. 300,000 324,000 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 8.75% due 01/15/14.................. 575,000 552,000 Young Broadcasting, Inc. Guaranteed Sr. Sub. Notes 10.00% due 03/01/11................. 2,300,000 2,369,000 ----------- 31,413,750 ----------- Business Services -- 1.4% Allied Waste North America, Inc. Guaranteed Sr. Notes 7.38% due 04/15/14.................. 775,000 745,937 HydroChem Industrial Services, Inc. Guaranteed Sr. Sub. Notes, Series B 10.38% due 08/01/07................. 950,000 957,125
48 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- BONDS & NOTES (continued) Business Services (continued) Mobile Mini, Inc. Sr. Notes 9.50% due 07/01/13................. $ 575,000 $ 638,250 Monitronics International, Inc. Sr. Sub. Notes 11.75% due 09/01/10*............... 1,950,000 2,125,500 ----------- 4,466,812 ----------- Chemicals -- 3.8% Associated Materials, Inc. Sr. Disc. Notes 11.25% due 03/01/14(2)*............ 1,550,000 1,127,625 Equistar Chemicals LP Sr. Notes 10.63% due 05/01/11................ 1,225,000 1,396,500 Foamex LP/Foamex Capital Corp. Guaranteed Sr. Sec. Notes 10.75% due 04/01/09................ 350,000 329,000 Huntsman International, LLC Guaranteed Sr. Notes 9.88% due 03/01/09................. 1,405,000 1,549,012 Huntsman International, LLC Sr. Sub. Notes 10.13% due 07/01/09................ 1,125,000 1,181,250 Huntsman, LLC Sr. Notes 11.50% due 07/15/12*............... 75,000 82,781 Huntsman, LLC Sr. Sec. Notes 11.63% due 10/15/10................ 850,000 983,875 Lyondell Chemical Co. Guaranteed Sr. Sec. Notes 9.50% due 12/15/08................. 2,175,000 2,373,469 Phosphate Resource Partners LP Sr. Notes 7.00% due 02/15/08................. 725,000 768,500 Rhodia SA Sr. Sub. Notes 8.88% due 06/01/11................. 1,600,000 1,392,000 Rockwood Specialties, Inc. Sr. Sub. Notes 10.63% due 05/15/11................ 750,000 825,000 Westlake Chemical Corp. Sr. Notes 8.75% due 07/15/11................. 471,000 528,698 ----------- 12,537,710 ----------- Communication Equipment -- 1.3% Rural Cellular Corp. Sr. Sub. Notes 9.63% due 05/15/08................. 2,850,000 2,636,250 Rural Cellular Corp. Sr. Sub. Notes 9.75% due 01/15/10................. 1,875,000 1,631,250 ----------- 4,267,500 ----------- Computers & Business Equipment -- 0.4% Seagate Technology HDD Holdings Guaranteed Sr. Notes 8.00% due 05/15/09................. 250,000 266,250
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- Computers & Business Equipment (continued) Xerox Corp. Sr. Notes 6.88% due 08/15/11..................... $ 925,000 $ 966,625 ---------- 1,232,875 ---------- Education -- 0.1% KinderCare Learning Centers, Inc. Sr. Sub. Notes, Series B 9.50% due 02/15/09..................... 365,000 370,019 ---------- Electronics -- 0.4% Freescale Semiconductor, Inc. Sr. Notes 7.13% due 07/15/14*.................... 800,000 832,000 ON Semiconductor Corp. Sr. Notes 12.00% due 03/15/10.................... 423,000 486,450 ---------- 1,318,450 ---------- Energy Services -- 2.1% Hanover Compressor Co. Sub. Notes zero coupon due 03/31/07............... 2,550,000 2,154,750 Oslo Seismic Services, Inc. 1st Mtg. Notes 8.28% due 06/01/11..................... 1,665,966 1,791,703 Pride International, Inc. Sr. Notes 7.38% due 07/15/14*.................... 350,000 388,500 Seitel, Inc. Sr. Notes 11.75% due 07/15/11*................... 725,000 743,125 Trico Marine Services, Inc. Sr. Notes 8.88% due 05/15/12+(1)(9).............. 4,200,000 1,848,000 ---------- 6,926,078 ---------- Energy Sources -- 6.4% Belden & Blake Corp. Sr. Sec. Notes 8.75% due 07/15/12*.................... 225,000 239,625 Chesapeake Energy Corp. Sr. Notes 6.88% due 01/15/16..................... 275,000 287,375 Chesapeake Energy Corp. Sr. Notes 7.50% due 09/15/13..................... 325,000 355,875 Chesapeake Energy Corp. Guaranteed Sr. Notes 7.75% due 01/15/15..................... 350,000 381,500 Chesapeake Energy Corp. Guaranteed Sr. Notes 9.00% due 08/15/12..................... 175,000 199,937 CITGO Petroleum Corp. Sr. Notes 11.38% due 02/01/11.................... 775,000 912,563 Colorado Interstate Gas Co. Sr. Debentures 6.85% due 06/15/37..................... 1,000,000 1,040,000
49 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) --------------------------------------------------------------------- BONDS & NOTES (continued) Energy Sources (continued) Encore Acquisition Co. Sr. Sub. Notes 6.25% due 04/15/14.......................... $ 300,000 $ 300,000 Encore Acquisition Co. Guaranteed Sr. Notes 8.38% due 06/15/12.......................... 550,000 613,250 EXCO Resources, Inc. Guaranteed Sr. Notes 7.25% due 01/15/11.......................... 525,000 556,500 Frontier Oil Corp. Sr. Notes 6.63% due 10/01/11*......................... 400,000 405,000 KCS Energy, Inc. Sr. Notes 7.13% due 04/01/12.......................... 675,000 705,375 Mission Energy Holding Co. Sr. Sec. Notes 13.50% due 07/15/08......................... 9,100,000 11,511,500 North American Energy Partners, Inc. Sr. Notes 8.75% due 12/01/11*......................... 550,000 539,000 Pacific Energy Partners LP Sr. Notes 7.13% due 06/15/14*......................... 850,000 920,125 Roseton Danskammer Guaranteed Pass-Thru Certificates, Series B 7.67% due 11/08/16.......................... 1,125,000 1,046,250 Southern Natural Gas Co. Sr. Notes 8.88% due 03/15/10.......................... 725,000 815,625 ----------- 20,829,500 ----------- Entertainment Products -- 0.2% Steinway Musical Instruments, Inc. Guaranteed Sr. Notes 8.75% due 04/15/11.......................... 475,000 517,750 ----------- Financial Services -- 13.0% Alamosa Delaware, Inc. Guaranteed Sr. Disc. Notes 12.00% due 07/31/09(2)...................... 584,000 601,520 Arch Western Finance, LLC Guaranteed Sr. Notes 7.25% due 01/01/05*......................... 900,000 967,500 Athena Neurosciences Finance, LLC Guaranteed Sr. Notes 7.25% due 02/21/08.......................... 2,175,000 2,202,187 Bear Island Paper Co., LLC Sr. Sec. Notes, Series B 10.00% due 12/01/07......................... 1,950,000 1,911,000 Bluewater Finance, Ltd. Guaranteed Sr. Notes 10.25% due 02/15/12......................... 1,075,000 1,166,375 Borden United States Finance Corp. Sr. Sec. Notes 9.00% due 07/15/14*......................... 800,000 840,000 Chukchansi Economic Development Authority Sr. Notes 14.50% due 06/15/09*........................ 3,225,000 4,031,250
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- Financial Services (continued) Consolidated Communications Holdings Sr. Notes 9.75% due 04/01/12*.................... $ 1,400,000 $1,435,000 ESI Tractebel Acquisition Corp. Guaranteed Bonds, Series B 7.99% due 12/30/11..................... 799,000 824,968 H & E Equipment Services, LLC Guaranteed Sr. Sec. Notes 11.13% due 06/15/12.................... 950,000 978,500 Hilcorp Energy I LP/Hilcorp Finance Co. Sr. Notes 10.50% due 09/01/10*................... 1,925,000 2,131,937 Huntsman Advanced Materials, LLC Sr. Sec. Notes 11.00% due 07/15/10*................... 1,175,000 1,363,000 iPCS Escrow Co. Sr. Notes 11.50% due 05/01/12*................... 1,025,000 1,076,250 iPCS, Inc. 14.00% due 07/15/10+(1)(3)(6).......... 11,825,000 0 Jostens IH Corp. Sr. Sub. Notes 7.63% due 10/01/12*.................... 25,000 25,125 Labranche & Co., Inc. Sr. Notes 11.00% due 05/15/12*................... 575,000 590,813 Madison River Capital, LLC/ Madison River Finance Corp. Sr. Notes, Series B 13.25% due 03/01/10.................... 3,475,000 3,683,500 MedCath Holdings Corp. Notes 9.88% due 07/15/12*.................... 475,000 496,375 Muzak, LLC/ Muzak Finance Corp. Guaranteed Sr. Sub. Notes 9.88% due 03/15/09..................... 1,650,000 1,212,750 Nexstar Finance Holdings, LLC Guaranteed Sr. Disc. Notes 11.38% due 04/01/13(2)................. 2,675,000 2,049,719 NGC Corp. Capital Trust I Guaranteed Sub. Notes, Series B 8.32% due 06/01/27..................... 7,325,000 5,860,000 PCA, LLC Sr. Notes 11.88% due 08/01/09.................... 1,275,000 1,364,250 PX Escrow Corp. Sr. Sub. Disc. Notes 9.63% due 02/01/06(2).................. 725,000 616,250 Qwest Capital Funding, Inc. Guaranteed Notes 6.88% due 07/15/28..................... 275,000 197,312 Qwest Capital Funding, Inc. Guaranteed Notes 7.90% due 08/15/10..................... 2,800,000 2,583,000 Rainbow National Services LLC Guaranteed Sr. Sub. Notes 10.38% due 09/01/14*................... 625,000 654,688
50 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------- BONDS & NOTES (continued) Financial Services (continued) Terra Capital, Inc. Guaranteed Sr. Sec. Notes 11.50% due 06/01/10........... $1,725,000 $ 1,949,250 Terra Capital, Inc. Guaranteed Sr. Sec. Notes 12.88% due 10/15/08........... 1,125,000 1,395,000 ----------- 42,207,519 ----------- Food, Beverage & Tobacco -- 1.3% Del Monte Corp. Sr. Sub. Notes 8.63% due 12/15/12............ 450,000 500,625 Doane Pet Care Co. Sr. Sub. Notes 9.75% due 05/15/07............ 200,000 191,500 Doane Pet Care Co. Guaranteed Sr. Notes 10.75% due 03/01/10........... 500,000 533,750 Smithfield Foods, Inc. Sr. Notes, Series B 7.75% due 05/15/13............ 550,000 596,750 Wornick Co. Sr. Sec. Notes 10.88% due 07/15/11*.......... 2,150,000 2,300,500 ----------- 4,123,125 ----------- Forest Products -- 2.9% Caraustar Industries, Inc. Notes 7.38% due 06/01/09............ 300,000 310,500 Caraustar Industries, Inc. Guaranteed Sr. Sub. Notes 9.88% due 04/01/11............ 650,000 695,500 Constar International, Inc. Sr. Sub. Notes 11.00% due 12/01/12........... 650,000 614,250 Crown Cork & Seal Co., Inc. Notes 8.00% due 04/15/23............ 2,625,000 2,441,250 FiberMark, Inc. Sr. Notes 10.75% due 04/15/11+(1)(6)(9). 750,000 472,500 Georgia-Pacific Corp. Debentures 7.75% due 11/15/29............ 675,000 725,625 Georgia-Pacific Corp. Sr. Notes 8.00% due 01/15/24............ 1,100,000 1,251,250 Graham Packaging Co., Inc. Sr. Notes 8.50% due 10/15/12*........... 225,000 229,500 Pliant Corp. Sr. Sec. Notes 11.13% due 09/01/09........... 575,000 598,000 Speciality Paperboard, Inc. Sr. Notes 9.38% due 10/15/06+(1)(9)..... 3,275,000 2,063,250 ----------- 9,401,625 -----------
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- Health Services -- 2.4% Concentra Operating Corp. Guaranteed Sr. Sub. Notes 9.13% due 06/01/12*................ $ 375,000 $ 410,625 Genesis Healthcare Corp. Sr. Sub. Notes 8.00% due 10/15/13................. 350,000 381,500 HCA, Inc. Sr. Notes 6.95% due 05/01/12................. 1,450,000 1,565,656 IASIS Healthcare Capital Corp. Sr. Sub. Notes 8.75% due 06/15/14*................ 850,000 890,375 Pediatric Services Of America, Inc. Guaranteed Sr. Sub. Notes 10.00% due 04/15/08(3)(6).......... 200,000 202,000 Psychiatric Solutions, Inc. Guaranteed Sr. Sub. Notes 10.63% due 06/15/13................ 650,000 734,500 Team Health, Inc. Sr. Sub. Notes 9.00% due 04/01/12*................ 1,250,000 1,243,750 Tenet Healthcare Corp. Sr. Notes 5.00% due 07/01/07................. 725,000 719,562 Tenet Healthcare Corp. Sr. Notes 6.50% due 06/01/12................. 1,025,000 917,375 Triad Hospitals, Inc. Sr. Notes 7.00% due 05/15/12................. 325,000 339,625 Triad Hospitals, Inc. Sr. Sub. Notes 7.00% due 11/15/13................. 575,000 585,063 ---------- 7,990,031 ---------- Household Products -- 0.3% Vitro Envases Norteamerica SA Sr. Sec. Term Loan 10.25% due 09/24/06(6)............. 1,000,000 1,002,500 ---------- Insurance -- 0.4% Crum & Forster Holdings Corp. Sr. Notes 10.38% due 06/15/13................ 775,000 827,313 LNR Property Corp. Sr. Sub. Notes 7.63% due 07/15/13................. 500,000 547,500 ---------- 1,374,813 ---------- Leisure & Tourism -- 8.8% American Airlines, Inc. Pass-Thru Certificates, Series 2001-1, Class A2 6.82% due 05/23/11................. 625,000 554,327 American Airlines, Inc. Pass-Thru Certificates, Series 2001-2, Class C 7.80% due 04/01/08................. 2,425,000 2,016,875 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class A-2 6.88% due 07/02/09................. 2,947,623 2,751,329
51 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------ BONDS & NOTES (continued) Leisure & Tourism (continued) Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class B 7.63% due 01/02/15.................. $5,437,354 $3,858,538 Atlas Air, Inc. Pass-Thru Certificates, Series 2000-1, Class A 8.71% due 07/02/21.................. 2,490,308 2,450,587 Atlas Air, Inc. Pass-Thru Certificates, Series 1999-1, Class C 8.77% due 01/02/11.................. 574,341 241,017 Atlas Air, Inc. Pass-Thru Certificates Series 2000-1, Class B 9.06% due 07/02/17.................. 1,084,465 810,247 Bally Total Fitness Holding Corp. Sr. Notes 10.50% due 07/15/11................. 575,000 546,250 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-1, Class C 6.95% due 08/02/09.................. 760,699 578,887 Continental Airlines, Inc. Pass-Thru Certificates, Series 1999-2, Class C1 7.73% due 03/15/11.................. 351,029 249,627 Continental Airlines, Inc. Secured Pass-Thru Certificates, Series 2000-2, Class B 8.31% due 10/02/19.................. 1,349,135 1,103,256 Courtyard by Marriott II Sr. Sec. Notes, Series B 10.75% due 02/01/08................. 1,000,000 1,005,000 Delta Air Lines, Inc. Pass-Thru Certificates, Series 2002-1, Class C 7.78% due 01/02/12.................. 980,938 376,456 Delta Air Lines, Inc. Sr. Notes 10.00% due 08/15/08................. 1,600,000 480,000 Eldorado Resorts, LLC Sr. Notes 9.00% due 04/15/14(3)(6)............ 2,675,000 2,675,000 Hollywood Casino Shreveport/Shreveport Capital Corp. Guaranteed Sr. Sec. Notes 13.00% due 08/01/06+(1)............. 2,311,000 1,955,684 Riviera Holdings Corp. Guaranteed Sr. Notes 11.00% due 06/15/10................. 800,000 880,000 Six Flags, Inc. Sr. Notes 9.75% due 04/15/13.................. 2,625,000 2,480,625 True Temper Sports, Inc. Guaranteed Sr. Sub. Notes 8.38% due 09/15/11.................. 1,050,000 976,500
Principal Value Security Description Amount (Note 2) -------------------------------------------------------------- Leisure & Tourism (continued) Waterford Gaming, LLC Sr. Notes 8.63% due 09/15/12(6)*............... $1,067,000 $ 1,131,020 Worldspan LP Sr. Notes 9.63% due 06/15/11................... 1,725,000 1,565,437 ----------- 28,686,662 ----------- Machinery -- 0.7% Anthony Crane Rental LP Guaranteed Sr. Secured Notes 9.38% due 02/01/08+(1)(3)(4)(6)...... 1,261,659 126 Briggs & Stratton Corp. Guaranteed Sr. Notes 8.88% due 03/15/11................... 475,000 567,031 Dresser, Inc. Guaranteed Sr. Sub. Notes 9.38% due 04/15/11................... 500,000 550,000 Navistar International Corp. Sr. Notes 7.50% due 06/15/11................... 425,000 453,688 Stanadyne Corp. Sr. Sub. Notes 10.00% due 08/15/14*................. 700,000 728,000 Venture Holdings Co., LLC Guaranteed Sr. Sub. Notes 11.00% due 06/01/07+(1)(9)........... 550,000 24,750 ----------- 2,323,595 ----------- Medical Products -- 0.8% Encore Medical IHC, INC. Sr. Sub. Notes 9.75% due 10/01/12*.................. 625,000 617,187 Inverness Medical Innovations, Inc. Sr. Sub. Notes 8.75% due 02/15/12*.................. 875,000 879,375 Universal Hospital Services, Inc. Sr. Notes 10.13% due 11/01/11.................. 1,000,000 1,015,000 ----------- 2,511,562 ----------- Metals & Mining -- 1.6% Allegheny Technologies, Inc. Notes 8.38% due 12/15/11................... 600,000 639,000 CSN Islands VII Corp. Guaranteed Notes 10.75% due 09/12/08*................. 925,000 1,031,375 CSN Islands VIII Corp. Guaranteed Sr. Notes 9.75% due 12/16/13*.................. 1,400,000 1,403,500 Eagle-Picher, Inc. Sr. Notes 9.75% due 09/01/13................... 1,525,000 1,555,500 Renco Metals, Inc. Guaranteed Sr. Notes 11.50% due 07/01/03+(1)(3)(6)(9)(10). 2,150,000 0
52 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------- BONDS & NOTES (continued) Metals & Mining (continued) Ryerson Tull, Inc. Notes 9.13% due 07/15/06................ $ 525,000 $ 553,875 ---------- 5,183,250 ---------- Pharmaceuticals -- 0.8% Curative Health Services, Inc. Sr. Notes 10.75% due 05/01/11............... 1,125,000 1,029,375 NeighborCare, Inc. Guaranteed Sr. Sub. Notes 6.88% due 11/15/13................ 1,600,000 1,664,000 ---------- 2,693,375 ---------- Real Estate Investment Trusts -- 1.2% National Health Investors, Inc. Notes 7.30% due 07/16/07................ 1,120,000 1,146,606 Omega Healthcare Investors, Inc. Sr. Notes 6.95% due 08/01/07................ 225,000 232,875 Omega Healthcare Investors, Inc. Sr. Notes 7.00% due 04/01/14*............... 600,000 609,000 Senior Housing Properties Trust Sr. Notes 8.63% due 01/15/12(5)............. 1,625,000 1,807,812 ---------- 3,796,293 ---------- Restaurants -- 1.1% Advantica Restaurant Group, Inc. Sr. Notes 11.25% due 01/15/08............... 1,475,000 1,530,312 Denny's Holdings, Inc. Sr. Notes 10.00% due 10/01/12*.............. 2,025,000 2,032,594 Sbarro, Inc. Sr. Notes 11.00% due 09/15/09............... 150,000 140,250 ---------- 3,703,156 ---------- Retail Stores -- 2.6% Alderwoods Group, Inc. Sr. Notes 7.75% due 09/15/12*............... 425,000 449,438 Blockbuster, Inc. Sr. Sub. Notes 9.00% due 09/01/12*............... 425,000 440,938 Collins & Aikman Floor Cover Guaranteed Sr. Sub. Notes 9.75% due 02/15/10................ 480,000 508,800 J.C. Penney Co., Inc. Notes 6.88% due 10/15/15................ 1,175,000 1,251,375 Jostens Holding Corp. Sr. Disc. Notes 10.25% due 12/01/13(2)............ 1,275,000 876,562 Rent-Way, Inc. Sr. Notes 11.88% due 06/15/10............... 1,175,000 1,280,750
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------- Retail Stores (continued) Rite Aid Corp. Debentures 6.88% due 08/15/13.................. $ 400,000 $ 350,000 Saks, Inc. Guaranteed Notes 7.00% due 12/01/13.................. 950,000 969,000 Saks, Inc. Guaranteed Notes 9.88% due 10/01/11.................. 725,000 862,750 Stater Bros. Holdings, Inc. Sr. Notes 8.13% due 06/15/12*................. 1,275,000 1,335,562 ---------- 8,325,175 ---------- Telecommunications -- 10.2% AirGate PCS, Inc. Sr. Sub. Sec. Notes 9.38% due 09/01/09(6)............... 1,258,300 1,277,175 Alaska Communications Holdings, Inc. Guaranteed Sr. Sub. Notes 9.38% due 05/15/09.................. 1,125,000 1,063,125 American Cellular Corp. Sr. Notes, Series B 10.00% due 08/01/11................. 3,125,000 2,531,250 Cincinnati Bell, Inc. Notes 7.25% due 06/15/23.................. 225,000 210,656 Cincinnati Bell, Inc. Guaranteed Sr. Sub. Notes 8.38% due 01/15/14.................. 300,000 273,750 Dobson Communications Corp. Sr. Notes 10.88% due 07/01/10................. 25,000 18,000 Excelcomindo Finance Co. Sr. Notes 8.00% due 01/27/09*................. 175,000 172,813 FairPoint Communications, Inc. Sr. Sub. Notes, Series B 9.50% due 05/01/08.................. 4,175,000 4,175,000 FairPoint Communications, Inc. Sr. Sub. Notes 12.50% due 05/01/10................. 175,000 187,250 IWO Holdings, Inc. Guaranteed Sr. Notes 14.00% due 01/15/11+(1)............. 11,075,000 4,873,000 LCI International, Inc. Sr. Notes 7.25% due 06/15/07.................. 10,425,000 9,460,687 Nextel Communications, Inc. Sr. Notes 5.95% due 03/15/14.................. 1,000,000 980,000 Qwest Corp. Debentures 7.13% due 11/15/43.................. 2,150,000 1,784,500 Qwest Corp. Debentures 7.25% due 10/15/35.................. 2,275,000 1,950,812
53 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------ BONDS & NOTES (continued) Telecommunications (continued) Qwest Corp. Debentures 8.88% due 06/01/31....................... $ 550,000 $ 543,125 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 8.75% due 11/15/11....................... 1,375,000 935,000 Triton PCS, Inc. Guaranteed Sr. Sub. Notes 9.38% due 02/01/11....................... 3,475,000 2,493,313 TSI Telecommunications Services, Inc. Guaranteed Sr. Sub. Notes 12.75% due 02/01/09...................... 400,000 448,000 US West Communications, Inc. Secured Debentures 7.50% due 06/15/23....................... 50,000 45,500 ----------- 33,422,956 ----------- Transportation -- 0.1% Petroleum Helicopters, Inc. Guaranteed Sr. Notes, Series B 9.38% due 05/01/09....................... 275,000 295,625 ----------- Utilities -- 7.4% AES Corp. Sr. Sub. Debentures 8.88% due 11/01/27....................... 1,350,000 1,297,688 AES Drax Energy, Ltd. Guaranteed Sr. Sub. Sec. Notes, Series B 11.50% due 08/30/10+(1).................. 4,460,000 22,300 Calpine Corp. 1st Priority Secured Notes 9.63% due 09/30/14*...................... 1,400,000 1,375,500 Cincinnati Bell Telephone Co. Notes 7.18% due 12/15/23....................... 375,000 358,594 Cincinnati Bell Telephone Co. Guaranteed Notes 7.20% due 11/29/23....................... 1,525,000 1,458,281 Dynegy Holdings, Inc. Sr. Notes 8.75% due 02/15/12....................... 875,000 910,000 Edison Mission Energy Sr. Notes 9.88% due 04/15/11....................... 1,400,000 1,631,000 El Paso Natural Gas Co. Debentures 8.63% due 01/15/22....................... 2,900,000 3,190,000 El Paso Production Holding Co. Guaranteed Sr. Notes 7.75% due 06/01/13....................... 2,425,000 2,431,062 Ferrellgas L P Sr. Notes 6.75% due 05/01/14....................... 1,500,000 1,530,000 Mirant Corp. Sr. Notes 7.90% due 07/15/09(1)*................... 7,325,000 4,633,062 Reliant Resources, Inc. Notes 9.50% due 07/15/13....................... 1,075,000 1,167,719 Tiverton/Rumford Power Assoc., Ltd. Guaranteed Notes 9.00% due 07/15/18*...................... 1,092,712 797,680
Principal Value Security Description Amount (Note 2) ---------------------------------------------------------------- Utilities (continued) Williams Cos, Inc. Notes 7.88% due 09/01/21.................... $3,025,000 $ 3,357,750 ------------ 24,160,636 ------------ Total Bonds & Notes (cost $260,495,947)................... 267,767,917 ------------ FOREIGN BONDS & NOTES -- 7.4% Broadcasting & Media -- 1.1% CF Cable TV, Inc. Guaranteed Sr. Notes 9.13% due 07/15/07.................... 400,000 417,495 Telenet Group Holding NV Sr. Disc. Notes 11.50% due 06/15/14(2)*............... 4,425,000 3,252,375 ------------ 3,669,870 ------------ Food, Beverage & Tobacco -- 0.3% Vitro Envases Norteamerica SA Sr. Sec. Notes 10.75% due 07/23/11*.................. 950,000 917,805 ------------ Forest Products -- 0.2% Abitibi-Consolidated, Inc. Debenture 8.55% due 08/01/10.................... 725,000 777,563 ------------ Insurance -- 0.9% Fairfax Financial Holdings, Ltd. Notes 7.38% due 04/15/18.................... 600,000 486,000 Fairfax Financial Holdings, Ltd. Notes 8.25% due 10/01/15.................... 2,500,000 2,275,000 ------------ 2,761,000 ------------ Leisure & Tourism -- 0.3% Grupo Posadas SA de CV Sr. Notes 8.75% due 10/04/11*................... 900,000 918,000 ------------ Metals & Mining -- 0.2% International Utility Structures, Inc. Sr. Sub. Notes 10.75% due 02/01/08(1)(3)(6).......... 2,150,000 279,500 Vitro SA de CV Notes 11.75% due 11/01/13*.................. 500,000 463,750 ------------ 743,250 ------------ Retail Stores -- 0.5% Jean Coutu Group, Inc. Sr. Sub. Notes 8.50% due 08/01/14*................... 1,725,000 1,712,062 ------------ Telecommunications -- 0.3% Empresa Brasileira de Telcom Guaranteed Sr. Notes, Series B 11.00% due 12/15/08................... 150,000 166,125 Kyivstar GSM Loan Participation Notes 10.38% due 08/17/09*.................. 825,000 878,625 ------------ 1,044,750 ------------
54 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Amount/ Value Security Description Shares (Note 2) -------------------------------------------------------------------- FOREIGN BONDS & NOTES (continued) Utilities -- 3.6% Calpine Canada Energy Finance, ULC Guaranteed Sr. Notes 8.50% due 05/01/08........................ $16,000,000 $11,040,000 Cia de Saneamento Basico do Estado de Sao Paulo Notes 12.00% due 06/20/08*...................... 550,000 589,875 ----------- 11,629,875 ----------- Total Foreign Bonds & Notes (cost $26,831,506)........................ 24,174,175 ----------- COMMON STOCK -- 4.8% Automotive -- 0.0% Exide Technologies, Inc.+.................. 7,980 126,483 ----------- Banks -- 1.9% iPCS, Inc.+................................ 336,972 6,149,739 ----------- Broadcasting & Media -- 0.2% Cablevision Systems Corp., Class A+........ 38,484 780,455 ----------- Energy Sources -- 0.0% Tri-Union Development Corp.(3)(6).......... 1,061 11 Tribo Petroleum Corp.(3)(6)................ 1,800 18 ----------- 29 ----------- Financial Services -- 0.0% Ono Finance, PLC*(3)(6).................... 500 0 ----------- Leisure & Tourism -- 0.6% Capital Gaming International, Inc.(3)(6)+.. 77 0 John Q. Hammons Hotels, Inc.+.............. 18,550 203,123 MGM Mirage, Inc.+.......................... 35,225 1,748,921 ----------- 1,952,044 ----------- Machinery -- 0.3% NES Rentals Holding, Inc.+................. 150,124 1,125,930 ----------- Real Estate Investment Trusts -- 0.4% Meristar Hospitality Corp.+................ 209,550 1,142,047 ----------- Telecommunications -- 1.4% AirGate PCS, Inc.+......................... 38,200 748,720 AirGate PCS, Inc.(3)....................... 104,631 2,050,768 Dobson Communications Corp.+............... 147,082 195,619 Telewest Global, Inc.+..................... 126,210 1,466,560 ----------- 4,461,667 ----------- Total Common Stock (cost $16,348,370)........................ 15,738,394 ----------- PREFERRED STOCK -- 0.9% Broadcasting & Media -- 0.4% Paxson Communications Corp. 14.25%(4)(6).............................. 170 1,275,000 ----------- Retail Stores -- 0.3% General Nutrition Centers, Inc. 12.00%*(3). 725 768,500 Rent-Way, Inc.(3)(6)(11)................... 13 130,000 ----------- 898,500 ----------- Telecommunications -- 0.2% Alamosa Holdings, Inc. 7.50%............... 1,176 694,104 ----------- Total Preferred Stock (cost $2,820,774)......................... 2,867,604 -----------
Warrants/ Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- WARRANTS -- 0.0%+ Automotive -- 0.0% Exide Technologies, Inc. Expires 05/05/11.. 19,950 $ 59,471 ------------ Broadcasting & Media -- 0.0% Knology Holdings, Inc. Expires 10/22/07*(3)(6)........................... 4,500 1,125 XM Satellite Radio, Inc. Expires 03/15/01*. 1,000 64,000 ------------ 65,125 ------------ Telecommunications -- 0.0% GT Group Telecom, Inc. Expires 02/01/10*(3)(6)........................... 2,650 27 KMC Telecom Holdings, Inc. Expires 01/31/08(3)(6)............................ 3,650 0 Leap Wireless International, Inc. Expires 04/15/10*(3)(6)........................... 2,250 0 Leap Wireless, Inc. Expires 04/15/10*(3)(6)........................... 1,950 0 ------------ 27 ------------ Total Warrants (cost $523,992)........................... 124,623 ------------ Total Investment Securities -- 95.2% (cost $307,020,589)....................... 310,672,713 ------------ REPURCHASE AGREEMENTS -- 3.6% State Street Bank & Trust Co. Joint Repurchase Agreement(8)................... $ 647,000 647,000 UBS Warburg, LLC Joint Repurchase Agreement Account(8)...................... 11,000,000 11,000,000 ------------ Total Repurchase Agreements (cost $11,647,000)........................ 11,647,000 ------------ TOTAL INVESTMENTS -- (cost $318,667,589)@...................... 98.8% 322,319,713 Other assets less liabilities................ 1.2 3,901,828 ----------- ------------ NET ASSETS -- 100.0% $326,221,541 =========== ============ PREFERRED STOCK SOLD SHORT -- (0.1%) Value Shares (Note 2) ----------- ------------ Retail Stores -- (0.1%) Fedders Corp. 8.6% Series A (Proceeds $181,301)....................... (7,642) (180,733) ----------- ------------
- -------- * Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no rights to demand registration of these securities. At September 30, 2004, the aggregate value of these securities was $56,041,407 representing 15.75% of net assets. Unless otherwise indicated these securities are not considered to be illiquid. + Non-income producing security. @ See Note 5 for cost of investments on a tax basis. (1)Bond in default. (2)Security is a "step-up" bond where the coupon rate increases or steps up at a predetermined rate. Rate shown reflects the increased rate. (3)Fair valued security. (4)PIK ("Payment-in-kind") bonds. Payments made with additional securities in lieu of cash. (5)The security or a portion thereof represents collateral for securities sold short. (6)Illiquid security. (7)Security is a "floating rate" bond where the coupon rate fluctuates. The rate steps up or down for each rate downgrade or upgrade. The rate reflected is as of September 30, 2004. (8)See Note 2 for details of Joint Repurchase Agreement. (9)Company has filed Chapter 11 Bankruptcy. (10)Security is subject to litigation, the outcome of which is still to be determined. 55 SunAmerica High Yield Bond Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued) (11)To the extent permitted by the Statement of Additional Information, The High Yield Bond Fund may invest in restricted securities. This restricted security is 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 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 market exists. As of September 30, 2004, the High Yield Bond Fund held the following restricted securities:
----------------------------------------------------------------- Acquisition Acquisition Market % of Net Name Date Shares Cost Value Assets ----------------------------------------------------------------- Rent-Way, Inc. Preferred Stock 05/29/03 10 $100,000 $100,000 0.03% Rent-Way Inc. Preferred Stock 05/19/04 3 30,000 30,000 0.01%
See Notes to Financial Statements 56 SunAmerica Tax Exempt Insured Bond Fund PORTFOLIO PROFILE -- September 30, 2004 -- (unaudited) State Allocation* Ohio........................... 16.0% California..................... 14.9% Missouri....................... 9.3% Massachusetts.................. 8.9% New York....................... 8.1% Illinois....................... 7.4% Texas.......................... 6.8% Alabama........................ 6.3% New Jersey..................... 5.5% New Mexico..................... 4.7% Indiana........................ 4.6% South Dakota................... 3.0% Colorado....................... 2.8% Virginia....................... 2.7% Georgia........................ 0.2% Tennessee...................... 0.1% Registered Investment Companies 0.1% ----- 101.4% =====
Credit Quality+# AAA 84.6% AA. 11.7% BBB 3.7% ----- 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. 57 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited)
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------ MUNICIPAL BONDS -- 90.8% Alabama -- 6.3% Jefferson County, Alabama Sewer, Capital Improvement, Series D, 5.25% due 02/01/26(1).......................... $4,500,000 $ 5,133,690 ----------- California -- 14.8% California State, Variable Purpose, 5.50% due 04/01/28............................. 2,500,000 2,674,250 Metropolitan Water District Southern California Waterworks, Series C, 5.00% due 07/01/27(1).......................... 3,000,000 3,205,560 San Ramon Valley, California Unified School District, General Obligation, 5.00% due 08/01/23(1).......................... 4,000,000 4,183,560 University of California Revenues, Limited Project Series A, 4.75% due 05/15/27(1).......................... 2,000,000 1,986,420 ----------- 12,049,790 ----------- Colorado -- 2.8% Highlands Ranch Metropolitan District No. 2, General Obligation, 6.50% due 06/15/09(1).......................... 1,960,000 2,277,206 ----------- Georgia -- 0.2% Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/09(1).......................... 60,000 69,275 Georgia Municipal Electric Authority, Power Revenue, Series Y, 6.40% due 01/01/13(1).......................... 85,000 101,776 ----------- 171,051 ----------- Illinois -- 4.6% Illinois Health Facilities Authority Revenue, Lutheran General Health Systems, Series C, 7.00% due 04/01/08(1).......................... 3,400,000 3,704,844 ----------- Indiana -- 4.6% Indiana Transportation Finance Authority Highway Revenue, Series A, 5.25% due 06/01/26(1).......................... 3,500,000 3,716,055 ----------- Massachusetts -- 8.9% Massachusetts State Water Resources Authority, Series A, 5.00% due 08/01/24(1).......................... 3,910,000 4,093,536 University Massachusetts Building Authority Project Revenue, Series 4, 5.25% due 11/01/27(1).......................... 3,000,000 3,164,310 ----------- 7,257,846 ----------- Missouri -- 7.2% Sikeston, Missouri, Electric Revenue, 6.20% due 06/01/10(1).......................... 5,000,000 5,817,300 ----------- New Jersey -- 5.5% New Jersey Economic Development Authority, School Facilities Construction, Series C, 5.00% due 06/15/12(1).......................... 4,000,000 4,459,320 -----------
Principal Value Security Description Amount (Note 2) ------------------------------------------------------------------------- New Mexico -- 4.7% New Mexico Finance Authority Transportation, Senior Lien Series A, 5.25% due 06/15/21(1)........................... $3,500,000 $ 3,835,300 ----------- New York -- 5.7% New York, New York, Series A, 6.00% due 05/15/30(1)........................... 2,865,000 3,344,515 Niagara Falls, New York, Public Improvement, General Obligation, 7.50% due 03/01/14(1)........................... 555,000 728,282 Niagara Falls, New York, Public Improvement, General Obligation, 7.50% due 03/01/13(1)........................... 445,000 573,076 ----------- 4,645,873 ----------- Ohio -- 16.0% Cincinnati, Ohio City School District, Classroom Facilities Construction & Improvement, 5.00% due 12/01/24(1)........................... 3,000,000 3,123,630 Cuyahoga County, Ohio Revenue, Cleveland Clinic Health Systems, Series A, 5.75% due 01/01/24.............................. 2,000,000 2,143,460 Franklin County, Ohio Hospital Revenue, OhioHealth Corp., Series C, 5.25% due 05/15/23.............................. 3,000,000 3,084,000 Olentangy Local School District Ohio, School Facilities Construction & Improvement Series A, 5.25% due 12/01/27(1)........................... 3,250,000 3,429,725 Woodridge, Ohio Local School District, General Obligation, 6.80% due 12/01/14(1)........................... 1,000,000 1,206,200 ----------- 12,987,015 ----------- South Dakota -- 3.0% South Dakota State Health & Educational Facilities Revenue, McKennan Hospital, 6.25% due 07/01/10(1)........................... 2,120,000 2,462,211 ----------- Texas -- 3.7% Harris County, Texas Hospital District, Mtg. Revenue, 7.40% due 02/15/10(1)........................... 1,290,000 1,467,207 San Antonio Texas Hotel Occupancy Texas, Unrefunded Capital Appreciation Gonzalez, zero coupon due 08/15/17(1)(2).................. 2,700,000 1,538,737 ----------- 3,005,944 ----------- Virginia -- 2.7% Fairfax County, Virginia Water Authority Revenue, 5.00% due 04/01/27.............................. 2,155,000 2,221,308 ----------- Total Investment Securities (cost $68,888,286).............................. 73,744,753 ----------- SHORT-TERM INVESTMENTS -- 10.6% Illinois -- 2.8% Illinois Development Finance Authority Revenue, Jewish Federal Metropolitan Chicago Projects, 0.98% due 04/08/04(1)(3)........................ 2,300,000 2,300,000 -----------
58 SunAmerica Tax Exempt Insured Fund PORTFOLIO OF INVESTMENTS -- September 30, 2004 -- (unaudited) (continued)
Principal Value Security Description Amount (Note 2) ----------------------------------------------------------------------- SHORT-TERM INVESTMENTS (continued) Missouri -- 2.1% Missouri Higher Education Loan, Student Loan Revenue, Series B, 1.10% due 04/07/04(1)(3).................... $1,200,000 $ 1,200,000 Wright City, Missouri Industrial Revenue, Watlow Process Systems, Inc., 0.95% due 09/04/03(3)....................... 530,000 530,000 ----------- 1,730,000 ----------- New York -- 2.4% New York City, NY Municipal Water Finance Authority Revenue, Series G, 0.99% due 09/03/04(1)(3).................... 1,900,000 1,900,000 ----------- Tennessee -- 0.1% Metropolitan Government Nashville & Davidson County, Tennessee, H & Facilities Board Revenue, Timberlake Project, 1.65% due 10/06/04(1)(3).................... 100,000 100,000 ----------- Texas -- 3.1% State of Texas Transportation, Tax & Revenue Anticipation Notes 3.00% due 08/31/05....... 2,500,000 2,531,730 ----------- Registered Investment Companies -- 0.1% SSGA Municipal Money Market Fund Tax Free Money Market Fund........................... 48,492 48,492 ----------- Total Short-Term Investments (cost $8,610,222)........................... 8,610,222 ----------- TOTAL INVESTMENTS -- (cost $77,498,508)@......................... 101.4% 82,354,975 Liabilities in excess of other assets.......... (1.4) (1,146,351) ---------- ----------- NET ASSETS -- 100.0% $81,208,624 ========== ===========
- -------- @ See Note 5 for cost of investments on a tax basis. (1) All or part of this security is insured by the Financial Security Assurance ("FSA"), Financial Guaranteed Insurance Corp. ("FGIC"), Municipal Bond Insurance Association ("MBIA"), or American Municipal Bond Assurance Corp. ("AMBAC") ($68,952,459 or 84.0% of Net Assets). (2) Represents a zero coupon bond which will convert to an interest-bearing security at a later date. (3) Variable rate security -- the rate reflected is as of September 30, 2004; maturity date reflects next reset date. See Notes to Financial Statements 59 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) Note 1. Organization SunAmerica Income Funds is an open-end diversified management investment company organized as a Massachusetts business trust (the "Trust"). It currently consists of six different investment 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 "SAAMCo"), an indirect wholly-owned subsidiary of American International Group, Inc. ("AIG"). An investor may invest in one or more of the following Funds: SunAmerica Core Bond Fund, 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 for each of the Funds are as follows: Core Bond Fund seeks a high level of current income consistent with relative safety of capital by the active trading of investment-grade fixed-income securities, or in securities issued or guaranteed by the U.S. Government and mortgage-backed or asset-backed securities without regard to the maturities of such securities. Under normal market conditions, at least 80% of the Fund's assets plus borrowing for investment purposes will be invested in bonds. U.S. Government Securities Fund seeks high current income consistent with relative safety of capital by the active trading of securities of high credit quality, issued or guaranteed by the U.S. government, or any agency or instrumentality thereof without regard to the maturities of such securities. Under normal market conditions, at least 80% of the Fund's assets plus borrowing for investment purposes will be invested in such securities. GNMA Fund seeks current income, with capital appreciation as a secondary objective by the active trading of mortgage-backed securities of high credit quality issued or guaranteed by the Government National Mortgage Association (GNMA) without regard to the maturities of such securities. Under normal market conditions, at least 80% of the Fund's assets plus borrowing for investment purposes will be invested in such securities. Strategic Bond Fund seeks a high level of total return by the active trading of a broad range of bonds, including both investment grade and non-investment grade bonds (which may include "junk bonds"), U.S. Government and agency obligations, and mortgage-backed securities, without regard to the maturities of such securities. Under normal market conditions, at least 80% of the Fund's assets plus borrowing for investment purposes will be invested in bonds. High Yield Bond Fund seeks a high level of total return by the active trading of below-investment grade U.S. and foreign junk bonds (rated below Baa by Moody's and below BBB by S&P) without regard to the maturities of such securities and bank debt. For purposes of this policy, bonds include fixed-income securities other than short-term commercial paper and preferred stock. Under normal market conditions, at least 80% of the Funds assets plus borrowing for investment purposes will be invested in such securities. Tax Exempt Insured Fund seeks as high a level of current income exempt from federal income taxes as is consistent with preservation of capital by investing, under normal market conditions, at least 80% of its assets in municipal bonds, 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 bonds 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, any purchases of Class A shares in excess of $1,000,000 will be purchased at net asset value but will be subject to a contingent deferred sales charge on redemptions made within two years of purchase. Class B shares are offered without an initial sales charge, although a declining contingent deferred sales charge may be imposed on redemptions made within six years of purchase. Class B shares of each Fund convert automatically to Class A shares on the first business day of the month following the eighth anniversary of the issuance of such Class B shares and at such time will be subject to the lower distribution fee applicable to Class A shares. 60 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) 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. Effective February 23, 2004, Class II shares were redesignated to Class C shares. Class I, Class Z, and Class X are offered at net asset value per share. These classes are offered exclusively to participants in certain employee retirement plans and other programs. Effective December 29, 2003, Class I shares of the GNMA Fund and High Yield Bond Fund are no longer being offered for sale. Effective September 24, 2004, Class I shares of the Strategic Bond Fund are no longer being offered for sale. Each class of shares bears the same voting, dividend, liquidation and other rights and conditions and each (other than Class I, Class X and Class Z) makes distribution and account maintenance and service fee payments under a distribution plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") except that Class B and Class C shares are subject to higher distribution fee rates. There are no distribution payments applicable to Class I, Class X and Class Z. Indemnifications: Under the Funds' organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Funds. In addition, in the normal course of business the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds' maximum exposure under these arrangements are unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds expect the risk of loss to be remote. Note 2. Significant Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 or, for listed securities having no sale reported and for unlisted securities, upon last-reported bid prices. Securities listed on the NASDAQ stock market are valued using the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the last sale price unless the reported trade for the securities 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. Nonconvertible bonds, debentures, other long-term debt securities, and short-term securities with original or remaining maturities in excess of 60 days are valued at prices obtained for the day of valuation from a bond pricing service of a major dealer in bonds when such prices are available; however, in circumstances where the investment adviser deems it appropriate to do so, an over-the-counter or exchange quotation at the mean of representative bid or asked prices may be used. 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. Securities traded primarily on securities 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 foreign exchange, a fund 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 the 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 the 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 Trustees to reflect what it believes to be the fair value of the securities as of the close of regular trading on the New York Stock Exchange. A Fund may also fair value securities in other situations, for example, when a particular foreign market is closed but the Fund is open. For foreign equity securities, the Fund uses an outside pricing service to provide it with closing market prices and information used for adjusting those prices Short-term securities with 60 days or less to maturity are amortized to maturity based on their cost to the Trust if acquired within 60 days of maturity or, if already held by the Trust on the 60th day, are amortized to maturity based on the value determined on the 61st day. Securities for which quotations are not readily available or if a development/event occurs that may significantly impact the value of the securities, then these securities may be fair valued as determined pursuant to procedures adopted in good faith under the direction of the Trust's Trustees. 61 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) 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, 2004, the following Funds held a percentage of an undivided interest in a joint repurchase agreement with State Street Bank & Trust Co.:
Fund Percentage Interest Principal Amount - ---- ------------------- ---------------- U.S. Government Securities Fund 2.78% $ 5,064,000 GNMA Fund...................... 64.45 117,540,000 Strategic Bond Fund............ 0.30 549,000 High Yield Bond Fund........... 0.35 647,000
As of such date, the repurchase agreement in that joint account and the collateral thereof were as follows: State Street Bank & Trust Co., dated September 30, 2004, bearing interest at a rate of 1.58% per annum, with a principal amount of $182,364,000, a repurchase price of $182,372,004 and a maturity date of October 1, 2004. The repurchase agreement is collateralized by the following:
Interest Rate/ Type of collateral Discount Yield Maturity Date Principal Amount Market Value - ------------------ -------------- ------------- ---------------- ------------ U.S. Treasury Notes 4.75% 05/15/14 $ 2,364,000 $ 2,412,225 U.S. Treasury Bonds 7.50 11/15/16 180,000,000 183,631,282
In addition, at September 30, 2004, the following Funds held a percentage of an undivided interest in a joint repurchase agreement with UBS Warburg, LLC:
Fund Percentage Interest Principal Amount - ---- ------------------- ---------------- U.S. Government Securities Fund 16.00% $ 40,000,000 GNMA Fund...................... 48.00 120,000,000 High Yield Bond Fund........... 4.40 11,000,000
As of such date, the repurchase agreement in that joint account and the collateral therefore were as follows: UBS Warburg, LLC, dated September 30, 2004, bearing interest at a rate of 1.73% per annum, with a principal amount of $250,000,000, a repurchase price of $250,012,014 and a maturity date of October 1, 2004. The repurchase agreement is collateralized by the following:
Interest Rate/ Type of collateral Discount Yield Maturity Date Principal Amount Market Value - ------------------ -------------- ------------- ---------------- ------------ U.S. Treasury Notes 1.88% 07/15/13 $51,348,000 $52,375,000 U.S. Treasury Notes 3.00 07/15/12 57,230,000 58,375,000 U.S. Treasury Bonds 2.38 01/15/25 51,041,000 52,062,500 U.S. Treasury Bonds 3.38 04/15/32 17,342,000 17,689,451 U.S. Treasury Bonds 3.63 04/15/28 73,039,000 74,500,000
62 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) Securities Transactions, Investment Income, Expenses, Dividends and Distributions to Shareholders: Securities 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 Trust 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. 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. 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). 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 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. Each Fund intends to comply with the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute all of their net income (taxable and tax exempt) to their shareholders. Therefore, no federal tax provision is required. Each Fund is considered a separate entity for tax purposes. Investment Securities Loaned: During the period ended September 30, 2004, U.S. Government Securities Fund and GNMA Fund participated in securities lending with qualified brokers. In lending portfolio securities to brokers the Funds receive cash as collateral against the loaned securities, which must be maintained at not less than 102% of the market value of the loaned securities during the period of the loan. The Funds may use the cash collateral received to invest in short-term investments which earn interest income or to cover bank overdrafts. Any interest earned from the investment of the collateral is recorded by the Funds net of the portion of interest that is rebated to the borrowing broker. If the amounts are used to cover bank overdrafts, the broker rebates incurred are reflected as interest expense on the Statement of Operations. During the period ended September 30, 2004, $282 and $172 of broker rebates were reclassified to interest expense for the U.S. Government and GNMA funds, respectively. As with other extensions of credit, should the borrower of the securities fail financially, the Funds may bear the risk of delay in recovery or may be subject to replacing the loaned securities by purchasing them with the cash collateral held, which may be less than 100% of the market value of such securities at the time of replacement. At September 30, 2004 there were no loaned securities outstanding in the U.S. Government Securities Fund or the GNMA Fund. Forward Foreign Currency Contracts: Certain Portfolios may enter into forward foreign currency contracts ("forward contracts") to attempt to protect securities and related receivables and payables against changes in future foreign exchange rates or to enhance return. A forward contract is an agreement between two parties to buy or sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily using the forward rate and the change in market value is recorded by the Portfolio as unrealized gain or loss. On the settlement date, the Portfolio records either realized gains or losses when the contract is closed equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Forward contracts involve elements of risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Trust bears the risk of an unfavorable change in the foreign exchange rate underlying the forward contract. 63 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Assets and liabilities denominated in foreign currencies and commitments under forward foreign currency contracts are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of securities held at the end of the period. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the changes in the market prices of portfolio securities sold during the year. Realized foreign exchange gains and losses on other assets and liabilities and change in unrealized foreign exchange gains and losses on other assets and liabilities include foreign exchange gains and losses from currency gains or losses realized between the trade and settlement dates of securities transactions, the difference between the amounts of interest, dividends and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid and changes in the unrealized foreign exchange gains and losses relating to other assets and liabilities arising as a result of changes in the exchange rate. Short Sales: The High Yield Bond Fund ("Fund") may sell a security it does not own in anticipation of a decline in the market value of that security (short sales). To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing it at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. Until the Fund replaces a borrowed security, the Fund will maintain daily a segregated account, containing cash or liquid securities, at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short. Liabilities for securities sold short are reported at market value in the financial statements. Such liabilities are subject to off balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short could exceed the liabilities recorded in the Statement of Assets and Liabilities. The Fund bears the risk of potential inability of the broker to meet their obligation to perform. Mortgage-Backed Dollar Rolls: During the period ended September 30, 2004, the Core Bond Fund, U.S. Government Securities Fund and the GNMA Fund entered into dollar rolls using "to be announced" ("TBA") mortgage-backed securities ("TBA Rolls"). The Funds' policy is to record the components of TBA Rolls as purchase/sale transactions. Any difference between the purchase and sale price is recorded as a realized gain or loss on the date the transaction is entered into. The Core Bond Fund, U.S. Government Securities Fund and the GNMA Fund had TBA Rolls outstanding at period-end, which are included in receivable for investments sold and payable for investments purchased in the Statement of Assets and Liabilities. 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 SAAMCo. Under the Agreement, SAAMCo provides continuous supervision of a Fund's portfolio and administers its corporate affairs, subject to general review by the Trustees. In connection therewith, SAAMCo 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 SAAMCo and its affiliates. 64 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) The Funds pay SAAMCo 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 --------------------------- ---------- Core Bond Fund................. $0 - $200 million 0.600% (greater than) $300 million 0.525 (greater than) $500 million 0.475 U.S. Government Securities Fund $0 - $200 million 0.650 (greater than) $200 million 0.620 (greater than) $400 million 0.550 GNMA Fund...................... $0 - $25 million 0.550 (greater than) $25 million 0.500 (greater than) $50 million 0.450 Strategic Bond Fund............ $0 - $350 million 0.650 (greater than) $350 million 0.600 High Yield Bond Fund........... $0 - $200 million 0.750 (greater than) $200 million 0.720 (greater than) $400 million 0.550 Tax Exempt Insured Fund........ $0 - $350 million 0.500 (greater than) $350 million 0.450
The Core Bond Fund, 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 SAAMCo. AIGGIC is an indirect wholly-owned subsidiary of AIG and an affiliate of SAAMCo. AIGGIC receives the following fees from SAAMCo., based upon each Fund's average daily net assets:
Sub-advisory Fees ----------------------------------------------- Core Bond Strategic Bond High Yield Tax Exempt Assets Fund Fund Bond Fund Insured Fund - ------ --------- -------------- ---------- ------------ $0 - $200 million............ 0.25% 0.35% 0.45% 0.25% (greater than) $200 million 0.20 0.25 0.35 0.22 (greater than) $500 million 0.15 0.20 0.30 0.15
Effective September 1, 2004, SAAMCo has contractually agreed to waive fees and/or reimburse expenses, if necessary, so that the total net expense ratios for the following classes do not exceed the amounts set forth below.
Fund Percentage ---- ---------- Core Bond Class A...... 1.10% Core Bond Class B...... 1.75 Core Bond Class C...... 1.75 Core Bond Class I...... 1.00 Core Bond Class Z...... 0.53 Strategic Bond Class A. 1.40 Strategic Bond Class B. 2.05 Strategic Bond Class C. 2.05 Strategic Bond Class I. 1.30 High Yield Bond Class A 1.36 High Yield Bond Class B 2.01 High Yield Bond Class C 2.01 High Yield Bond Class Z 0.79
Effective September 1, 2004, SAAMCo is voluntarily waiving fees and/or reimbursing expenses, if necessary, so that the total net expense ratios for the following classes do not exceed the amounts set forth below.
Fund Percentage ---- ---------- U.S. Government Securities Fund Class A 0.99% U.S. Government Securities Fund Class B 1.64 U.S. Government Securities Fund Class C 1.64 GNMA Fund Class A...................... 0.99 GNMA Fund Class B...................... 1.64 GNMA Fund Class C...................... 1.64 GNMA Fund Class X...................... 0.89 Tax Exempt Insured Fund Class C........ 1.95
65 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) Prior to September 1, 2004 the contractual expense caps were as follows:
Fund Percentage ---- ---------- Core Bond Class A...... 1.24% Core Bond Class B...... 1.89 Core Bond Class C...... 1.89 Core Bond Class I...... 1.14 Core Bond Class Z...... 0.67 Strategic Bond Class A. N/A Strategic Bond Class B. N/A Strategic Bond Class I. 1.44 High Yield Bond Class A N/A High Yield Bond Class B N/A
Prior to September 1, 2004 the voluntarily expense caps were as follows:
Fund Percentage ---- ---------- GNMA Class A........... 0.99 GNMA Class B........... 1.64 GNMA Class C........... 1.64 GNMA Class X........... 0.89 Strategic Bond Class C. 2.22 High Yield Bond Class C 2.18 High Yield Bond Class Z 0.95
For the six months ended September 30, 2004, expenses were reimbursed to the Funds as follows:
SAAMCO -------- Core Bond Class A...................... $ 44,991 Core Bond Class B...................... 6,751 Core Bond Class C...................... 7,778 Core Bond Class I...................... 222 Core Bond Class Z...................... 4,922 U.S. Government Securities Fund Class A 344,981 U.S. Government Securities Fund Class B 64,475 U.S. Government Securities Fund Class C 27,756 GNMA Fund Class A...................... 285,067 GNMA Fund Class B...................... 97,571 GNMA Fund Class C...................... 64,223 GNMA Fund Class X...................... -- Strategic Bond Class A................. 1,734 Strategic Bond Class B................. 1,365 Strategic Bond Class C................. 906 Strategic Bond Class I................. 1,462 High Yield Bond Class A................ 3,879 High Yield Bond Class B................ 2,053 High Yield Bond Class C................ 1,695 High Yield Bond Class Z................ 2,587 Tax Exempt Insured Fund Class A........ -- Tax Exempt Insured Fund Class B........ -- Tax Exempt Insured Fund Class C........ 1,708
66 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (unaudited) (continued) The Trust, on behalf of each Fund, has a Distribution Agreement with AIG SunAmerica Capital Services, Inc. ("SACS" or "Distributor"), an affiliate of the Adviser. Each Fund, has adopted a Distribution Plan (the "Plan") in accordance with the provisions of Rule 12b-1 under the 1940 Act. Rule 12b-1 under the 1940 Act permits an investment company directly or indirectly to pay expenses associated with the distribution of its shares ("distribution expenses") in accordance with a plan adopted by the investment company's board of trustees and approved by its shareholders. Pursuant to such rule, the Trustees and the shareholders of each class of shares of each Fund have adopted Distribution 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 Plan would benefit the Trust and the shareholders of the respective class. The sales charge and distribution fees of a particular class will not be used to subsidize the sale of shares of any other class. Under the Class A Plan, Class B Plan and Class C Plan, the Distributor receives payments from the Funds at an annual rate of up to 0.10%, 0.75% and 0.75%, respectively, of average daily net assets of such Fund's Class A, Class B and Class C shares to compensate the Distributor and certain securities firms for providing sales and promotional activities for distributing that class of shares. The distribution costs for which the Distributor may be compensated for, include fees paid to broker-dealers that have sold Fund shares, commissions, and other expenses such as those incurred for sales literature, prospectus printing and distribution and compensation to wholesalers. It is possible that in any given year the amount paid to the Distributor under the Class A Plan, Class B Plan or Class C Plan may exceed the Distributor's distribution costs as described above. The Distribution Plans provide that each class of shares of each Fund may also pay the Distributor an account maintenance and service fee at the annual rate of up to 0.25% of the aggregate average daily net assets of such class of shares for payments to broker-dealers for providing continuing account maintenance. Accordingly, for the period ended September 30, 2004, SACS received fees (see the Statement of Operations) based upon the aforementioned rates. In addition, AIG SunAmerica Capital Services, Inc. is paid a fee of 0.25% of average daily net assets of Class I shares in compensation for providing additional shareholder services to Class I shareholders. 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, 2004, the proceeds received from Class A sales (and paid out to affiliated and non-affiliated broker-dealers) and Class A, Class B and Class C redemptions were as follows:
Class A Class B -------------------------------------- -------------- Contingent Sales Affiliated Non-affiliated Deferred Sales Fund Charges Broker-dealers Broker-dealers Charges - ---- -------- -------------- -------------- -------------- U.S. Government Securities $ 19,950 $ 9,709 $ 6,868 $ 80,232 GNMA...................... 113,548 46,045 46,025 383,575 Strategic Bond............ 93,238 16,274 60,470 145,780 High Yield Bond........... 152,270 20,974 106,141 119,159 Core Bond................. 12,743 3,351 7,252 8,884 Tax Exempt Insured........ 39,794 16,268 16,694 18,577
Class C -------------- Contingent Deferred Sales Fund Charges - ---- -------------- U.S. Government Securities $10,753 GNMA...................... 66,061 Strategic Bond............ 14,413 High Yield Bond........... 45,831 Core Bond................. 2,221 Tax Exempt Insured........ 3,076
67 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (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 six months ended September 30, 2004 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 Expenses September 30, 2004 -------- ------------------ Core Bond Fund Class A................. 160,717 $28,098 Core Bond Fund Class B................. 5,719 929 Core Bond Fund Class C................. 5,374 862 Core Bond Fund Class I................. 2,579 339 Core Bond Fund Class Z................. -- -- U.S. Government Securities Fund Class A 211,814 34,370 U.S. Government Securities Fund Class B 35,882 5,585 U.S. Government Securities Fund Class C 14,126 2,217 GNMA Fund Class A...................... 369,811 61,465 GNMA Fund Class B...................... 135,351 21,182 GNMA Fund Class C...................... 81,459 12,027 GNMA Fund Class X...................... 9,839 1,723 Strategic Bond Class A................. 47,173 7,975 Strategic Bond Class B................. 38,654 6,485 Strategic Bond Class C................. 23,967 4,087 High Yield Bond Class A................ 118,130 21,659 High Yield Bond Class B................ 74,396 12,010 High Yield Bond Class C................ 55,512 9,808 High Yield Bond Class Z................ -- -- Tax Exempt Insured Fund Class A........ 72,232 11,764 Tax Exempt Insured Fund Class B........ 15,438 2,292 Tax Exempt Insured Fund Class C........ 6,412 1,071
At September 30, 2004, AIGGIC, an indirect wholly owned subsidiary of AIG, owned 100% of the outstanding Class Z shares of Core Bond Fund and High Yield Bond Fund. Affiliate funds of the SunAmerica Focused Funds, Inc. owned 45%, 8%, 5% and 92% of the outstanding Class A Shares of GNMA Fund, U.S. Government Securities Fund, High Yield Bond Fund, and Core Bond Fund, respectively. Note 4. Purchases and Sales of Investment Securities The aggregate cost of purchases and proceeds from sales and maturities of long-term investments during the period ended September 30, 2004 were as follows:
U.S. Government High Tax Exempt Core Bond Securities GNMA Strategic Yield Bond Insured Fund Fund Fund Bond Fund Fund Fund ------------ --------------- ------------ ----------- ------------ ----------- Purchases (excluding U.S. government securities)......... $116,098,032 $ -- $ -- $90,064,527 $163,096,878 $65,174,811 Sales (excluding U.S. government securities).................... 104,472,733 -- -- 78,373,762 132,073,309 67,654,725 Purchases of U.S. government securities..................... 77,824,769 338,201,019 568,156,396 23,201,982 -- 2,206,820 Sales of U.S. government securities..................... 95,480,221 380,452,053 718,398,499 25,631,302 -- 2,248,680
68 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (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, post October losses, Fund mergers, treatment of defaulted securities and derivative transactions.
Distributable Earnings Tax Distributions For the year ended March 31, 2004 For the year ended March 31, 2004 ----------------------------------------- ------------------------------------ Long-term Unrealized Ordinary Gains/Capital Appreciation Ordinary Long-term Income Loss Carryforward (Depreciation) Income Capital Gains Tax Exempt -------- ----------------- -------------- ----------- ------------- ---------- Core Bond Fund................. $225,952 $ 2,408,211 $2,541,194 $ 9,138,662 $ -- $ -- U.S. Government Securities Fund 188,740 (9,473,697) 4,567,615 8,059,030 -- -- GNMA Fund...................... 195,646 (333,039) 7,809,721 21,435,452 2,290,943 -- Strategic Bond Fund............ 527,492 (36,270,706) 6,068,759 5,771,394 -- -- High Yield Bond Fund........... 290,774 (119,235,552) 7,471,117 23,821,470 -- -- Tax Exempt Insured Fund........ 644,786 516,899 4,908,813 4,169,977 1,421,597 2,499,752
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 Core Bond Securities Strategic High Yield Insured Fund Fund GNMA Fund Bond Fund Bond Fund Fund ------------ ------------ ------------ ----------- ------------ ----------- Cost......................................... $213,342,205 $264,782,054 $681,561,285 $96,946,318 $319,080,815 $77,493,355 ============ ============ ============ =========== ============ =========== Appreciation................................. 2,728,449 2,887,017 2,432,817 7,174,511 20,009,446 4,877,881 Depreciation................................. (1,727,640) (1,405,796) (877,390) (3,285,761) (16,770,548) (16,261) ------------ ------------ ------------ ----------- ------------ ----------- Unrealized appreciation (depreciation) -- net $ 1,000,809 $ 1,481,221 $ 1,555,427 $ 3,888,750 $ 3,238,898 $ 4,861,620 ============ ============ ============ =========== ============ ===========
For Federal income tax purposes, the Fund's indicated below have capital loss carryforwards, which expire in the year indicated, as of March 31, 2004, which are available to offset future capital gains, if any:
Capital Loss Carryforward ----------------------------------------------------------------------------------------- Fund 2005 2006 2007 2008 2009 2010 2011 2012 - ---- ---------- ---------- ---------- ----------- ----------- ----------- ----------- -------- U.S. Government Securities Fund.... $1,212,612 $ -- $ 997,836 $ 7,263,249 $ -- $ -- $ -- $ -- GNMA Fund........... -- -- -- -- -- -- -- 333,039 Strategic Bond Fund. -- 3,866,240 5,489,442 4,808,434 5,601,470 6,464,175 10,040,945 -- High Yield Bond Fund -- 332,457 8,018,288 18,397,433 11,242,842 32,249,552 48,994,980 --
Included in the capital loss carryforward amounts at March 31, 2004 are the amounts of losses acquired from the following acquired Funds as a result of the reorganizations of the North American Funds ("NA Funds") on November 7, 2001. North American U.S. Government Securities Fund $ 997,836 North American Strategic Income Fund.......... 9,347,515 North American High Yield Bond Fund........... 13,574,972 North American Municipal Bond Fund............ --
As a result of reorganizations into some of these portfolios during the period ended March 31, 2002, certain capital loss carryforwards may be subject to limitations on use pursuant to applicable U.S. Federal Income Tax Law. Therefore, it is possible not all of these capital losses will be available for use. 69 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (continued) The Fund's indicated below utilized capital loss carryforwards, which offset net taxable gains realized in the year ended March 31, 2004:
Capital Loss Fund Utilized - ---- ------------ Core Bond Fund................. $ 4,465,152 U.S. Government Securities Fund 1,647,446 Strategic Bond Fund............ 3,757,332 High Yield Bond Fund........... 14,023,345
As of March 31, 2004, Strategic Bond Fund had $14,474,804 of capital loss carryforwards that expired. As of March 31, 2004, GNMA Fund had post October 31, 2003 capital loss deferrals of $50,562. The High Yield Bond Fund had post October 31, 2003 currency loss deferrals of $8,548. Note 6. Capital Share Transactions Transactions in capital shares of each class of each series were as follows:
Core Bond Fund --------------------------------------------------------------------------------------------------------- Class A Class B --------------------------------------------------- --------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------ ------------------------- ---------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Shares sold......... 2,591,833* $ 26,394,403* 12,157,837** $126,019,538** 37,698 $ 385,444 230,410 $ 2,390,630 Reinvested shares... 292,736 2,989,490 166,183 1,724,538 6,254 63,695 9,326 96,502 Shares redeemed..... (1,195,170) (12,126,812) (954,192) (9,874,674) (93,554)* (951,520)* (396,722)** (4,094,764)** ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Net increase (decrease)......... 1,689,399 $ 17,257,081 11,369,828 $117,869,402 (49,602) $ (502,381) (156,986) $ (1,607,632) ========== ============ ========== ============ ======== =========== ========== ============ Core Bond Fund --------------------------------------------------------------------------------------------------------- Class C+ Class I --------------------------------------------------- --------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------ ------------------------- ---------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Shares sold......... 37,968 $ 385,796 311,782 $ 3,235,617 22,609 $ 230,661 794,446 $ 8,247,779 Reinvested shares... 7,075 72,138 8,152 84,453 4,848 49,474 48,795 505,629 Shares redeemed..... (97,805) (998,118) (352,835) (3,659,430) (143,650) (1,451,626) (2,544,683) (26,520,623) ---------- ------------ ---------- ------------ -------- ----------- ---------- ------------ Net increase (decrease)......... (52,762) $ (540,184) (32,901) $ (339,360) (116,193) $(1,171,491) (1,701,442) $(17,767,215) ========== ============ ========== ============ ======== =========== ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 4,559 shares of Class B shares in the amount of $46,282 to 4,547 shares of Class A shares in the amount of $46,282. ** Includes automatic conversion of 11,101 shares of Class B shares in the amount of $115,303 to 11,069 shares of Class A shares in the amount of $115,303. 70 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (continued)
Core Bond Fund ----------------------------------------------------- Class Z ----------------------------------------------------- For the six months ended For the September 30, 2004 year ended (unaudited) March 31, 2004 ------------------------ --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Shares sold.... -- $ -- -- $ -- Reinvested shares........ 128,182 1,308,551 638,407 6,619,027 Shares redeemed (3,452,872) (35,300,000) (19,744,617) (204,600,000) ---------- ------------ ----------- ------------- Net increase (decrease).... (3,324,690) $(33,991,449) (19,106,210) $(197,980,973) ========== ============ =========== ============= 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, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------ --------------------------- ---------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ----------- ------------- -------- ----------- ---------- ------------ Shares sold.... 1,315,241* $ 12,229,937* 8,249,574** $ 79,163,236** 134,741 $ 1,255,239 604,504 $ 5,811,186 Reinvested shares........ 277,314 2,588,182 485,614 4,631,195 38,511 359,481 95,405 911,700 Shares redeemed (3,034,470) (28,304,611) (9,407,755) (89,858,298) (789,130)* (7,373,566)* (3,402,329)** (32,359,944)** ---------- ------------ ----------- ------------- -------- ----------- ---------- ------------ Net increase (decrease).... (1,441,915) $(13,486,492) (672,567) $ (6,063,867) (615,878) $(5,758,846) (2,702,420) $(25,637,058) ========== ============ =========== ============= ======== =========== ========== ============ U.S. Government Securities Fund ----------------------------------------------------- Class C+ ----------------------------------------------------- For the six months ended For the September 30, 2004 year ended (unaudited) March 31, 2004 ------------------------ --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Shares sold.... 156,170 $ 1,469,108 769,814 $ 7,424,108 Reinvested shares........ 15,359 143,159 40,198 383,624 Shares redeemed (444,222) (4,144,930) (1,765,228) (16,815,629) ---------- ------------ ----------- ------------- Net increase (decrease).... (272,693) $ (2,532,663) (955,216) $ (9,007,897) ========== ============ =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 80,609 shares of Class B shares in the amount of $752,738 to 80,651 shares of Class A shares in the amount of $752,738. ** Includes automatic conversion of 246,879 shares of Class B shares in the amount of $2,357,940 to 246,951 shares of Class A shares in the amount of $2,357,940. 71 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (continued)
GNMA Fund -------------------------------------------------------------------------------------------------------------- Class A Class B ----------------------------------------------------- ------------------------------------------------------ For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------ --------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Shares sold.... 4,495,804* $ 49,890,665* 20,547,588** $ 235,257,794** 285,011 $ 3,182,018 2,951,236 $ 34,058,784 Reinvested shares........ 437,949 4,859,041 1,035,426 11,718,293 101,115 1,124,040 377,158 4,280,751 Shares redeemed (4,537,605) (50,439,716) (14,030,583) (159,555,489) (2,085,234)* (23,165,800)* (7,691,285)** (87,771,353)** ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Net increase (decrease).... 396,148 $ 4,309,990 7,552,431 $ 87,420,598 (1,699,108) $(18,859,742) (4,362,891) $(49,431,818) ========== ============ =========== ============= ========== ============ ========== ============ GNMA Fund -------------------------------------------------------------------------------------------------------------- Class C+ Class I ----------------------------------------------------- ------------------------------------------------------ For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------ --------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Shares sold.... 500,288 $ 5,599,759 3,729,057 $ 43,094,583 -- $ -- (126) $ (1,423) Reinvested shares........ 62,323 693,279 274,348 3,116,823 -- -- 78 877 Shares redeemed (2,494,139) (27,758,143) (8,127,227) (92,785,359) -- -- (3,502) (39,640) ---------- ------------ ----------- ------------- ---------- ------------ ---------- ------------ Net increase (decrease).... (1,931,528) $(21,465,105) (4,123,822) $ (46,573,953) -- $ -- (3,550) $ (40,186) ========== ============ =========== ============= ========== ============ ========== ============ GNMA Fund ----------------------------------------------------- Class X ----------------------------------------------------- For the six months ended For the September 30, 2004 year ended (unaudited) March 31, 2004 ------------------------ --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Shares sold.... 141,626 $ 1,575,468 407,941 $ 4,654,916 Reinvested shares........ 13,787 153,270 26,729 302,771 Shares redeemed (54,439) (607,788) (49,150) (558,441) ---------- ------------ ----------- ------------- Net increase (decrease).... 100,974 $ 1,120,950 385,520 $ 4,399,246 ========== ============ =========== =============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 56,121 shares of Class B shares in the amount of $625,323 to 56,272 shares of Class A shares in the amount of $625,323. ** Includes automatic conversion of 149,977 shares of Class B in the amount of $1,707,937 to 149,914 shares of Class A shares in the amount of $1,707,937. 72 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (continued)
Strategic Bond Fund ---------------------------------------------------------------------------------------------------------- Class A Class B -------------------------------------------------- ----------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ----------------------- ------------------------- ------------------------ -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------ Shares sold.... 2,422,390* $ 8,085,010* 4,819,218** $ 15,918,204** 1,510,174 $ 5,012,342 4,759,644 $ 15,630,339 Reinvested shares........ 251,739 838,522 467,498 1,542,884 183,119 609,449 333,984 1,103,198 Shares redeemed (1,994,952) (6,622,078) (4,479,867) (14,659,821) (2,015,665)* (6,726,299)* (3,552,293)** (11,726,594)** ---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------ Net increase (decrease).... 679,177 $ 2,301,454 806,849 $ 2,801,267 (322,372) $(1,104,508) 1,541,335 $ 5,006,943 ========== =========== ========== ============ ========== =========== ========== ============ Strategic Bond Fund ---------------------------------------------------------------------------------------------------------- Class C+ Class I -------------------------------------------------- ----------------------------------------------------- For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ----------------------- ------------------------- ------------------------ -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------ Shares sold.... 1,174,333 $ 3,935,211 3,749,967 $ 12,469,971 -- $ -- -- $ -- Reinvested shares........ 111,263 371,970 188,761 626,355 29,881 99,113 70,772 233,826 Shares redeemed (1,000,436) (3,328,060) (2,151,437) (7,085,839) (1,122,765) (3,817,402) -- -- ---------- ----------- ---------- ------------ ---------- ----------- ---------- ------------ Net increase (decrease).... 285,160 $ 979,121 1,787,291 $ (6,010,487) (1,092,884) $(3,718,289) 70,772 $ 233,826 ========== =========== ========== ============ ========== =========== ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 119,673 shares of Class B shares in the amount of $399,625 to 119,673 shares of Class A shares in the amount of $399,625. ** Includes automatic conversion of 426,671 shares of Class B shares in the amount of $1,417,374 to 424,151 shares of Class A shares in the amount of $1,417,374. 73 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (continued)
High Yield Bond Fund -------------------------------------------------------------------------------------------------------------- Class A Class B ----------------------------------------------------- ------------------------------------------------------ For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------- -------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------ Shares sold.... 22,465,486* $ 94,123,148* 24,186,781** $ 97,119,896** 1,564,253 $ 6,560,918 8,482,068 $ 34,228,906 Reinvested shares........ 623,552 2,616,002 1,176,656 4,828,068 274,131 1,150,471 657,839 2,698,352 Shares redeemed (16,434,574) (68,168,872) (21,361,447) (86,944,156) (3,578,904)* (14,937,069)* (7,449,571)** (30,359,369)** ----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------ Net increase... (decrease)..... 6,654,464 $ 28,570,278 4,001,990 $ 15,003,808 (1,740,520) $ (7,225,680) 1,690,336 $ 6,567,889 =========== ============ =========== ============ ========== ============ ========== ============ High Yield Bond Fund -------------------------------------------------------------------------------------------------------------- Class C+ Class I ----------------------------------------------------- ------------------------------------------------------ For the For the six months ended For the six months ended For the September 30, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 ------------------------- -------------------------- ------------------------- -------------------------- Shares Amount Shares Amount Shares Amount Shares Amount ----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------ Shares sold.... 3,321,932 $ 14,006,916 10,265,844 $ 41,606,962 -- $ -- 50,125 $ 199,923 Reinvested shares........ 236,289 989,622 460,883 1,902,362 -- -- 227 905 Shares redeemed (2,940,239) (12,383,976) (5,858,398) (23,969,331) -- -- (54,097) (219,345) ----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease).... 617,982 $ 2,612,562 4,868,329 $ 19,539,993 -- $ -- (3,745) $ (18,517) =========== ============ =========== ============ ========== ============ ========== ============ High Yield Bond Fund ----------------------------------------------------- Class Z ----------------------------------------------------- For the six months ended For the September 30, 2004 year ended (unaudited) March 31, 2004 ------------------------- -------------------------- Shares Amount Shares Amount ----------- ------------ ----------- ------------ Shares sold.... -- $ -- -- $ -- Reinvested shares........ 845,232 3,547,651 1,634,144 6,692,758 Shares redeemed -- -- -- -- ----------- ------------ ----------- ------------ Net increase (decrease).... 845,232 $ $3,547,651 1,634,144 $ 6,692,758 =========== ============ =========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 380,444 shares of Class B shares in the amount of $1,603,426 to 381,349 of shares of Class A shares in the amount of $1,603,426. ** Includes automatic conversion of 702,453 shares of Class B shares in the amount of $2,892,417 to 704,002 shares of Class A shares in the amount of $2,892,417. 74 SunAmerica Income Funds NOTES TO FINANCIAL STATEMENTS -- September 30, 2004 -- (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, 2004 year ended September 30, 2004 year ended (unaudited) March 31, 2004 (unaudited) March 31, 2004 --------------------- ------------------------- ---------------------- ----------------------- Shares Amount Shares Amount Shares Amount Shares Amount -------- ----------- ---------- ------------ -------- ----------- -------- ----------- Shares sold.... 116,321* $ 1,506,845* 682,967** $ 9,118,210** 18,240 $ 238,010 114,501 $ 1,538,768 Reinvested shares........ 48,215 620,817 223,173 2,932,244 7,505 96,614 43,442 569,970 Shares redeemed (455,528) (5,852,913) (1,529,607) (20,408,255) (488,522)* (6,344,415)* (321,289)** (4,281,374)** -------- ----------- ---------- ------------ -------- ----------- -------- ----------- Net increase (decrease).... (290,992) $(3,725,251) (623,467) $ (8,357,801) (462,777) $(6,009,791) (163,346) $(2,172,636) ======== =========== ========== ============ ======== =========== ======== =========== Tax Exempt Insured Fund ------------------------------------------------ Class C+ ------------------------------------------------ For the six months ended For the September 30, 2004 year ended (unaudited) March 31, 2004 --------------------- ------------------------- Shares Amount Shares Amount -------- ----------- ---------- ------------ Shares sold.... 48,112 $ 612,807 138,250 $ 1,836,415 Reinvested shares........ 3,080 39,695 15,551 204,119 Shares redeemed (42,663) (552,510) (196,573) (2,629,076) -------- ----------- ---------- ------------ Net increase (decrease).... 8,529 $ 99,992 (42,772) $ (588,542) ======== =========== ========== ============
+ Effective February 23, 2004, Class II shares were redesignated to Class C shares. * Includes automatic conversion of 29,593 shares of Class B shares in the amount of $383,328 to 29,607 shares of Class A shares in the amount of $383,328. ** Includes automatic conversion of 85,689 shares of Class B shares in the amount of $1,140,500 to 85,710 shares of Class A shares in the amount of $1,140,500. Note 7. Lines of Credit The AIG SunAmerica Family of Mutual Funds has established $75 million committed and $50 million uncommitted lines of credit with State Street Bank and Trust Company, the Funds' custodian. Interest is currently payable at the Federal Funds rate plus 50 basis points on the committed line and State Street's discretionary bid rate on the uncommitted line of credit. There is also a commitment fee of 10 basis points per annum on the daily unused portion of the $75 million committed line of credit, which is included in other expenses on the Statement of Operations. Borrowings under the line of credit will commence when the Fund's cash shortfall exceeds $100,000. For the six months ended September 30, 2004, the following Funds had borrowings:
Weighted Days Interest Average Debt Average Fund Outstanding Charges Utilized Interest - ---- ----------- -------- ------------ -------- High Yield Bond Fund 10 $1,940 $4,040,317 1.69%
Note 8. Interfund Lending Agreement The Funds, pursuant to exemptive relief granted by the Securities and Exchange Commission are permitted to participate in an interfund lending program among investment companies advised by SAAMCo or an affiliate. The interfund lending program allows the participating Funds to borrow money from and loan money to each other for temporary or emergency purposes. An interfund loan will be made under this facility only if the participating Funds receive a more favorable interest rate than would otherwise be available from a typical bank for a comparable transaction. For the six months ended September 30, 2004 none of the Funds participated in this program. Note 9. Trustees Retirement Plan The Trustees of the SunAmerica Income Funds have adopted the AIG SunAmerica Disinterested Trustees' and Directors' Retirement Plan (the "Retirement Plan") effective January 1, 1993 for the unaffiliated Trustees. The Retirement Plan provides generally that if an unaffiliated Trustee who has at least 10 years of consecutive service as a Disinterested Trustee of any of the SunAmerica mutual funds (an "Eligible Trustee") retires after reaching age 60 but before age 70, or who has at least 5 years of 75 SunAmerica Income Funds TRUSTEE INFORMATION -- September 30, 2004 -- (unaudited) consecutive service after reaching age 65 but before age 70, or dies while a Trustee, such person will be eligible to receive a retirement or death benefit from each AIG SunAmerica mutual fund with respect to which he or she is an Eligible Trustee. As of each birthday, prior to the 70th birthday, but in no event for a period greater than 10 years, each Eligible Trustee will be credited with an amount equal to 50% of his or her regular fees (excluding committee fees) for services as a Disinterested Trustee of each AIG SunAmerica mutual fund for the calendar year in which such birthday occurs. In addition, an amount equal to 8.5% of any amounts credited under the preceding clause during prior years is added to each Eligible Trustee's Account until such Eligible Trustee reaches his or her 70th birthday. An Eligible Trustee may receive any benefits payable under the Retirement Plan, at his or her election, either in one lump sum or in up to fifteen annual installments. Any undistributed amounts shall continue to accrue interest at 8.50%. The following amounts of the Retirement Plan liability are included in the Trustees fees and expenses line on the Statement of Assets and Liabilities and the amount for the Retirement Plan expenses are included in the Trustees' fees on the Statement of Operations.
Retirement Retirement Retirement Plan Plan Plan Liability Expense Payments ---------- ---------- ---------- As of September 30, 2004 -------------------------------- Core Bond Fund................. $ 21,035 $1,673 $ 432 U.S. Government Securities Fund 108,541 1,855 5,440 GNMA Fund...................... 43,582 4,025 1,175 Strategic Bond Fund............ 26,052 708 1,236 High Yield Bond Fund........... 46,235 2,192 1,862 Tax Exempt Insured Fund........ 32,801 674 1,523
76 The following table contains basic information regarding the Trustees that oversee operations of the Funds and other investment companies within the Fund complex.
Number of Position Term of Funds in Name, Held With Office and Fund Complex Address and SunAmerica Length of Principal Occupations Overseen by Other Directorships Date of Birth* Complex Time Served(4) During Past 5 Years Trustee(1) Held by Trustee(2) - ---------------------- ---------- -------------- ----------------------------- ------------ ----------------------------- Jeffrey S. Burum Trustee 2004-present Founder and CEO of 32 None DOB: February 27, 1963 National Housing Development Corp. Dr. Judith L. Craven Trustee 2001-present Retired. 73 Director, A.G. Belo DOB: October 6, 1945 Corporation (1992 to present); Director, Sysco Corporation (1996 to present); Director, Luby's Inc. (1998 to present); Director, University of Texas Board of Regents (2001-Present). William F. Devin Trustee 2001-present Retired. 73 Member of the Board of DOB: December 30, 1938 Governors, Boston Stock Exchange (1985-Present). Samuel M. Eisenstat Chairman 1986-present Attorney, solo practitioner. 46 Director, North European Oil DOB: March 7, 1940 of the Royalty Trust. Board Stephen J. Gutman Trustee 1986-present Partner and Member of 46 None DOB: May 10, 1943 Managing Directors, Beau Brummell-Soho, LLC (licensing of menswear specialty retailing and other activities) (June 1988 to present). Peter A. Harbeck(3) Trustee 1995-present President, CEO and Director, 82 None DOB: January 23, 1954 AIG SunAmerica Asset Management Corp. ("SAAMCo") (August 1995 to present); Director, AIG SunAmerica Capital Services, Inc. ("SACS") (August 1993 to present).
- -------- * The business address for each Trustee is the Harborside Financial Center, 3200 Plaza 5, Jersey City, NJ 07311-4992. (1) The "Fund Complex" consists of all registered investment company portfolios for which SAAMCo serves as investment adviser or business manager. The "Fund Complex" includes the SunAmerica Money Market Funds (2 funds), SunAmerica Equity Funds (9 funds), SunAmerica Income Funds (6 funds), SunAmerica Focused Series, Inc. (15 portfolios), Anchor Series Trust (9 portfolios), SunAmerica Senior Floating Rate Fund, Inc. (1 fund), SunAmerica Series Trust (32 portfolios), VALIC Company I (21 portfolios), VALIC Company II (15 funds), Seasons Series Trust (19 portfolios) and AIG Series Trust (4 funds). (2) Directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e. "public companies") or other investment companies registered under the Investment Company Act of 1940. (3) Interested trustee, as defined within the Investment Company Act of 1940. (4) Trustees serve until their successors are duly elected and qualified, subject to the Trustee's retirement plan discussed in Note 9 of the financial statements. Additional information concerning the Trustees is contained in the Statement of Additional Information and is available without charge by calling (800) 858-8850. 77 SunAmerica Income Funds TRUSTEE INFORMATION -- September 30, 2004 -- (unaudited) [LOGO] AIG Sun America Mutual Funds Harborside Financial Center 3200 Plaza 5 Jersey City, NJ 07311-4992 Directors/Trustees Investment Adviser DISCLOSURE OF QUARTERLY Samuel M. Eisenstat PORTFOLIO HOLDINGS Peter A. Harbeck AIG SunAmerica Asset Management Corp. The Trust is required to Dr. Judith L. Craven Harborside Financial file its com-plete William F. Devin Center schedule of portfolio Stephen J. Gutman 3200 Plaza 5 holdings with the SEC for Jeffrey S. Burum Jersey City, NJ its first and third 07311-4992 fis-cal quarters on Form Officers N-Q for fiscal quarters Robert M. Zakem, Distributor ending after July 9, President AIG SunAmerica Capital 2004. Once filed, the Donna M. Handel, Services, Inc. Trust's Form N-Q will be Treasurer Harborside Financial available without charge Michael Cheah, Vice Center on the SEC's website at President 3200 Plaza 5 www.sec.gov. You can also J. Steven Neamtz, Vice Jersey City, NJ obtain copies of Form N-Q President 07311-4992 by (i) visiting the SEC's Joseph P. Kelly, Public Reference Room in Secretary Shareholder Servicing Washington DC Stacey V. Morrison, Agent (information on the Assistant Secretary AIG SunAmerica Fund operation of the Public Gregory R. Kingston, Services, Inc. Reference Room may be Vice President and Harborside Financial obtained by calling Assistant Treasurer Center 1-800-SEC-0330); (ii) Robert A. Chopyak, 3200 Plaza 5 sending your request and Assistant Treasurer Jersey City, NJ a duplicating fee to the 07311-4992 SEC's Public Reference Room, Washington, DC Custodian and Transfer 20549-0102 or (iii) Agent sending your request State Street Bank and electronically to Trust Company publicinfo.sec.gov. P.O. Box 419572 Kansas City, MO PROXY VOTING RECORD ON 64141-6572 FUND PORTFOLIO SECURITIES Information regarding how VOTING PROXIES ON FUND the Trust voted proxies PORTFOLIO SECURITIES related to securities A description of the held in the Fund's during policies and proce-dures the six month period that the Trust uses to ended September 30, 2004 determine how to vote is available (i) without proxies relating to charge, upon request, by secu-rities held in the calling (800) 858-8850 or Fund's portfolio which is (ii) on the SEC's website available in the Trust's at http://www.sec.gov. State-ment of Additional Information, may be This report is submitted obtained without charge solely for the general upon re-quest, by calling information of (800) 858-8850. The shareholders of the Fund. information is also Distribution of this available from the EDGAR report to persons other database on the than shareholders of the Securities and Exchange Fund is authorized only Commission's website at in connection with a http://www.sec.gov. currently effective propsectus, setting forth details of the Fund, which must precede or accompany this report. The accompanying report has not been audited by independent accountants and accordingly no opinion has been expressed thereon.
78 [LOGO] AIG Sun America Mutual Funds Distributed by: AIG SunAmerica Capital Services, Inc. INSAN-9/04 Item 2. Code of Ethics. Not applicable. Item 3. Audit Committee Financial Expert. Not applicable. Item 4. Principal Accountant Fees and Services. Not applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable. Item 10. 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. 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) that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a) (1) Not applicable. (2) Certification pursuant to Rule 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2) attached hereto as Exhibit 99.CERT. (3) Not applicable. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SunAmerica Income Funds By: /s/ Vincent M. Marra Vincent M. Marra President Date: December 9, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Vincent M. Marra Vincent M. Marra President Date: December 9, 2004 By: /s/ Donna M. Handel Donna M. Handel Treasurer Date: December 9, 2004 EX-99.CERT 2 dex99cert.txt CERTIFICATION PURSUANT TO SECTION 302 Exhibit 99.CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Robert M. Zakem, certify that: 1. I have reviewed this report on Form N-CSR of SunAmerica Income Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 17, 2004 /s/ Robert M. Zakem Robert M. Zakem President CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT I, Donna M. Handel, certify that: 1. I have reviewed this report on Form N-CSR of SunAmerica Income Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 17, 2004 /s/ Donna M. Handel Donna M. Handel Treasurer EX-99.906CERT 3 dex99906cert.txt CERTIFICATION PURSUANT TO SECTION 906 Exhibit 99.906.CERT CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Robert M. Zakem, President, and Donna M. Handel, Treasurer of SunAmerica Income Funds (the "Registrant"), each certify to the best of his or her knowledge that: 1. The attached Form N-CSR report of the Registrant fully complies with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in such N-CSR report fairly represents, in all material respects, the financial conditions and results of operations of the Registrant as of, and for, the periods presented in the report. Dated: November 17, 2004 /s/ Robert M. Zakem Robert M. Zakem President /s/ Donna M. Handel Donna M. Handel Treasurer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----